China XD Plastics Announces Record Second Quarter Revenue
HARBIN, China, Aug. 13, 2009 /PRNewswire-Asia-FirstCall/ -- China XD Plastics Company Ltd. ("China XD Plastics" or the "Company"), (OTC:CXDC) (BULLETIN BOARD: CXDC) , as the largest Chinese manufacturer engaged in the development, manufacture, and distribution of modified plastics primarily for use in automotive applications, today reported financial results for the second quarter of 2009.
Second Quarter 2009 Highlights
-- Revenue was $31.9 million, an increase of 38.2% from the second
quarter of 2008
-- Gross profit was $6.7 million, an increase of 15.1% from the second
quarter of 2008
-- Gross profit margin was 20.9%, compared to 25.1% in the second
quarter of 2008
-- EBITDA (Earnings before Interest, Taxes, Depreciation, and
Amortization) for the second quarter of 2009 was $6.2 million, an
increase of 12.5% from the second quarter of 2008
-- Net income was $5.0 million, while non-GAAP net income excluding the
non-cash stock-based compensation was $5.4 million, an increase of
6.5% from the second quarter of 2008
-- Diluted earnings per share was $0.13 and non-GAAP diluted earnings
per share was $0.14, up 22.7% and 35.9%, respectively, from the
first quarter of 2009
-- Total volume sold was 14,404 metric tons, up 27.2% from 11,328
metric tons in the second quarter of 2008
"We are extremely pleased to report another quarter of record revenue, underlying the resilience of our business model and the ongoing potential for the profitable growth of our business driven by the continuous healthy growth in China's automobile sector," said Mr. Jie Han, Chairman and Chief Executive Officer of China XD Plastics. "During the quarter we made solid progress across all areas of our business, as we obtained new customers, and expanded our distribution network beyond northeast region of China to the more expansive northern China market. We remain optimistic about our business prospect and look forward to reporting positive financial results for the quarters to come. In addition, we are pleased to announce to have acquired 7 additional product certifications for automotive applications during the second quarter of 2009 and will begin shipments in the third and fourth quarter of 2009."
Second Quarter 2009 Results
Revenues for the second quarter 2009 were $31.9 million, up 38.2% from $23.1 million in the same period of 2008, and 20.9% from the first quarter 2009. The increase in revenue is primarily attributable to the increase in sales volume and selling prices driven by increasing demand for modified plastics for automotive applications in China.
Gross profit for the second quarter 2009 was $6.7 million, up 15.1% from $5.8 million in the second quarter 2008. Gross margin was 20.9% compared to 25.1% in the same period last year, and 21.8% in the first quarter 2009 due to the product mix change during second quarter 2009 associated with a volume increase of lower margin products sold for use in economy cars as a result of the on-going sales tax cut and government subsidies to stimulate demand of automobiles in China.
Selling expenses for the second quarter 2009 were $0.06 million, up 102.2% from $0.03 million in the same period last year as the Company invested to grow its customer base and to expand its geographic reach into the North China market. General and administrative (G&A) expenses were $1.1 million, up 417.1% from $0.2 million for the same period of last year, and up 6.6% from the first quarter 2009. The year-over-year increase in G&A expenses reflects increased stock based compensation, depreciation expense and other expenses related to becoming a public company in the U.S. stock market. Research and Development ("R&D") expenses were $0.2 million compared to $0.3 million in the same period last year. The slight decrease of research and development expense was primary due to installation of new equipment at the research and development center during the second quarter 2009, where some of the new product development activities were postponed to the third quarter, still on time as we planned.
Operating income for the second quarter 2009 was $5.3 million, unchanged from the $5.3 million in the same period a year ago, and up 20.8% from $4.4 million in the first quarter 2009. Operating margin was 16.6% compared to 22.9% in the second quarter of 2008 and 16.6% in the first quarter 2009. The year-over-year reduction in operating margin is primarily due to the increase in operating expenses associated with becoming a public company, but also reflects lower gross margin related to product mix.
Interest expense in the second quarter 2009 was $0.3 million, compared to $0.2 million in the second quarter of 2008.
EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization) for the second quarter of 2009 was $6.2 million, up 12.5% from $5.5 million in the second quarter of 2008. For a detailed reconciliation of adjusted EBITDA, please see the financial tables at the end of this release.
Net income in the second quarter 2009 was $5.0 million, down 2.0% from $5.1 million in the same period last year and up 24.4% from the first quarter 2009. Fully diluted earnings per share for the second quarter 2009 were $0.13, a sequential increase of 22.7% over the first quarter 2009.
During the second quarter 2009, the Company incurred a non-cash charge of $0.4 million associated with stock-based compensation. Adjusting for this non-cash charge, non-GAAP net income for the second quarter of 2009 was $5.4 million, or $0.17 basic earnings per share and $0.14 fully diluted earnings per share. For a detailed reconciliation of non-GAAP net income to GAAP net income, please see the financial tables at the end of this release.
Six Months Results
For the first six months of 2009, total revenue was $58.3 million, up 74.2% from the first six months of 2008. Total volume sold during the first six months was 32,303 metric tons compared to 17,656 metric tons in the comparable period of last year. Gross profit for the first six months of 2009 was $12.4 million, up 52.4% from gross profit of $8.2 million in the comparable period a year ago. Gross margin was 21.3% and 24.3% for the first six months of 2009 and 2008, respectively. Income from operations was $9.7 million, up 31.7% from $7.3 million in the first six months of 2008. EBITDA was $11.0 million in the first six months of 2009, up 42.2% from $7.7 million in first six months of 2008. Net income for the first six months of 2009 was $9.0 million, up 25.3% from $7.2 million in the first six months of 2008. Basic earnings per share were $0.56 and fully diluted earnings per share were $0.23 for the first six months of 2009. Adjusting for non-cash charges associated with stock-based compensation, non-GAAP net income for the first six months of 2009 was $9.4 million or $0.59 basic earnings per share and $0.24 fully diluted earnings per share.
Financial Condition
As of June 30, 2009, China XD plastics had $1.5 million in cash and cash equivalents, $13.7 million in working capital and a current ratio of 1.4. Shareholder's equity as of June 30, 2009 stood at $33.5 million compared to $24.1 million at the end of 2008.
Business Outlook and Guidance
During the second quarter China XD Plastics expanded its production capacity to 70,000 tons from 40,000 tons at the end of 2008, and strengthened its northeast sales office and its distribution network in the Northeast and North China region to take advantage of growth opportunities in those markets.
The automotive industry environment in China remains healthy, despite the economic slowdown worldwide. During the first half of 2009, total number of vehicles sold in China topped 6 million units, according to China Association of Automobile Manufacturers. The on-going stimulus plan implemented by the government in China reduced the sales tax on vehicles with an engine capacity of less than 1.6 liters by half to 5% and provided subsidies to farmers for replacing three-wheeled vehicles or outdated trucks with small fuel efficient vehicles. These measures are expected to continue to support the continued growth of the auto industry in China, which is expected to contribute to a further increase in the demand for China XD Plastics' products.
For 2009, the Company reaffirms its guidance for annual revenues in the range of $110.0 million to $130.0 million, and annual net income in the range of $17.0 million to $20.0 million. This guidance is based on non-GAAP results and excludes non-cash charges resulting from stock compensation expense.
"As we enter the third quarter we remain well positioned to achieve our goals for 2009, and to position China XD Plastics as a leader in the modified plastics industry in China," said Mr. Jie Han, Chairman and Chief Executive Officer of China XD Plastics. "Going forward, our priority remains to invest in technology development, certify additional products with the automotive OEMs, add high margin products, and gradually expand our capacity to drive future growth in our core business."
Recent Events
On July 30, 2009, China XD Plastics announced that the Company's information is now made available via Standard & Poor's Market Access Program, an information distribution service that enables subscribing publicly traded companies to have their company information disseminated to users of Standard & Poor's Advisor Insight.
On July 13, 2009, China XD Plastics announced it has signed a half-year provisional agreement with Tianjin Huapu Company to distribute its specialized modified plastics for automotive applications in Northern China.
On June 4, 2009, China XD Plastics announced that during the first quarter of 2009, the Company obtained five product certifications from the FAW Group Corporation, one of the leading automobile manufacturers and vanguard of automobile industry in China.
On June 2, 2009, China XD Plastics announced the appointment of four new directors and establishment the Audit, Compensation and Nominating Committees. Mr. Lawrence W. Leighton serves as Chairman of the audit committee while Mr. Cosimo J. Pattiand and Mr. Linyuan Zhai serve as Chairman of the compensation and nomination committees, respectively.
On May 1, 2009, China XD Plastics announced the appointment of Taylor Zhang as Chief Financial Officer effective immediately.
On April 23, 2009, China XD Plastics announced that the Company expects to increase its annual production capacity to 70,000 tons with the addition of 7 production lines acquired at the end of 2008.
On April 17, 2009, China XD Plastics announced the Company's wholly owned subsidiary, Harbin Xinda Macromolecule Material Research Institute ("Xinda Research Institute"), is collaborating with Harbin Institute of Technology on the pre-research of pre-foamed modified polypropylene ("PP") and has successfully completed a small trial testing.
On April 14, 2009, China XD Plastics announced it was recertified for the ISO/TS16949:2002 certification of quality management system
Conference Call
China XD Plastics will host a conference call at 9:00 a.m. EDT on Thursday, August 13, 2009, to discuss the 2009 second quarter financial results. To participate in the conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 1-866-800-8648. International callers should dial +1-617-614-2702. The pass code for the call is 67523688. If you are unable to participate in the call at this time, a replay will be available for 14 days starting on Thursday August 13, 2009 at 11:00 a.m. EDT. To access the replay, dial 1-888-286-8010. International callers should dial +1-617-801-6888. The conference pass code is 43304415.
About China XD Plastics Company Ltd.
China XD Plastics Company Ltd., through its wholly owned subsidiary Harbin Xinda Macromolecule Material ("Xinda"), develops, manufactures, and distributes modified plastics, primarily for automotive applications. The Company's specialized plastics are used in the exterior and interior trim and in the functional components of more than 30 automobile brands manufactured in China including Audi, Red Flag, Volkswagen and Mazda. The Company's wholly owned research institute is dedicated to the research and development of modified plastics and benefits from technology collaboration with well-known scientists from leading Universities in China. As of the end of June 30, 2009, 129 of China XD Plastics' modified plastic products have been certified for use by one or more of the automobile manufacturers in China. For more information please visit http://www.chinaxd.net/ .
Safe Harbor Statement
This announcement contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact in this announcement are forward-looking statements, including but not limited to, the Company's ability to raise additional capital to finance the company's activities; the effectiveness, profitability, and the marketability of its products; legal and regulatory risks associated with the share exchange; the Company's ability to successfully expand its production capacity; the future trading of the common stock of the company; the Company's ability to operate as a public company; the period of time for which its current liquidity will enable the company to fund its operations; the company's ability to protect its proprietary information; general economic and business conditions; the volatility of the company's operating results and financial condition; the company's ability to attract or retain qualified senior management personnel and research and development staff; and other risks detailed in the company's filings with the Securities and Exchange Commission and available on its website at http://www.sec.gov/. These forward-looking statements involve known and unknown risks and uncertainties and are based on current expectations, assumptions, estimates and projections about the companies and the industry. The company undertakes no obligation to update forward-looking statements to reflect subsequent occurring events or circumstances, or to changes in its expectations, except as may be required by law. Although the company believes that the expectations expressed in these forward looking statements are reasonable, they cannot assure you that their expectations will turn out to be correct, and investors are cautioned that actual results may differ materially from the anticipated results.
-Financial Tables Follow-
CHINA XD PLASTICS COMPANY LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
(UNAUDITED)
For the Three Months Ended For the Six Months
June 30, Ended June 30,
2009 2008 2009 2008
Sales $31,912,267 $23,094,734 $58,304,156 $33,477,156
Cost of Sales (25,243,756) (17,302,099) (45,879,331) (25,325,675)
Gross Profit 6,668,511 5,792,635 12,424,825 8,151,481
Operating Expenses
Research and
development
expenses 208,818 252,416 497,973 320,640
Selling expenses 60,593 29,972 106,243 47,795
General and
administrative
expenses 1,115,123 215,659 2,161,053 445,937
Total Operating
Expenses 1,384,534 498,047 2,765,269 814,372
Operating Income 5,283,977 5,294,588 9,659,556 7,337,109
Other Income
(Expenses)
Interest income
(expenses) (337,113) (190,083) (692,719) (163,267)
Other income 62,654 11 62,542 25,180
Other expense (9,352) -- (9,885) --
Total Other Expense (283,811) (190,072) (640,062) (138,087)
Income before Income
Taxes 5,000,166 5,104,516 9,019,494 7,199,022
Provision for Income
Taxes 3,775 6,229 6,461 6,229
Net Income $4,996,391 $5,098,287 $9,013,033 $7,192,793
Other Comprehensive
Income (Loss)
Foreign Currency
Translation
Adjustment 10,220 414,587 (27,396) 810,743
Comprehensive Income $5,006,611 $5,512,874 $8,985,637 $8,003,536
Basic and Diluted
Income per Common
Share
Basic $0.16 $12.56 $0.56 $17.72
Diluted $0.13 $12.56 $0.23 $17.72
Weighted Average
Common Share
Outstanding
Basic 31,167,002 405,802 16,070,273 405,802
Diluted 39,552,722 405,802 39,298,420 405,802
Reconciliation of Net Income to Adjusted Net Income
GAAP results for the three months and six months ended June 30, 2009 include non-cash stock based compensation expense. To supplement the Company's condensed consolidated financial statements presented on a GAAP basis, the Company has provided non-GAAP financial information excluding the impact of this item in this release. The Company's management believes that this non-GAAP measure provides investors with a better understanding of how the results relate to the Company's historical performance. A reconciliation of the adjustments to GAAP results appears in the table accompanying this press release. This additional non-GAAP information is not meant to be considered in isolation or as a substitute for GAAP financials. The non-GAAP financial information that the Company provides also may differ from the non-GAAP information provided by other companies.
CHINA XD PLASTICS COMPANY LIMITED
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008
Three Months Ended Three Months Ended
June 30, 2009 June 30, 2008
Net Basic Diluted Net Basic Diluted
Income EPS EPS Income EPS EPS
Adjusted Net
Income
- Non GAAP $5,430,484 $0.17 $0.14 $5,098,287 $12.56 $12.56
Non-Cash
Stock-based
compensation (1) $434,093 $0.01 $0.01 -- -- --
Net Income - GAAP $4,996,391 $0.16 $0.13 $5,098,287 $12.56 $12.56
Six Months Ended Six Months Ended
June 30, 2009 June 30, 2008
Net Basic Diluted Net Basic Diluted
Income EPS EPS Income EPS EPS
Adjusted Net Income
Net Income (Loss)
Diluted EPS
Adjusted Net
Income $9,447,126 $0.59 $0.24 $7,192,793 $17.72 $17.72
- Non GAAP
Non-Cash
Stock-based
compensation (1) $434,093 $0.03 $0.01 -- -- --
Net Income - GAAP $9,013,033 $0.56 $0.23 $7,192,793 $17.72 $17.72
(1) the adjustment to Non-GAAP net income to GAAP net income is related
to the non-cash stock compensation
Reconciliation of Net Income to Adjusted EBITDA
Adjusted EBITDA is a financial measure that is not defined by US GAAP. Adjusted EBITDA was derived by calculating earnings before interest, taxes, depreciation, stock-based compensation and amortization. The Company's management believes that the presentation of Adjusted EBITDA provides useful information regarding China XD Plastics' results of operations because it assists in analyzing and benchmarking the performance and value of China XD Plastics' business. The Company's calculation of Adjusted EBITDA may not be consistent with similarly titled measures of other companies. The table below provides a reconciliation of EBITDA to net income, the most comparable GAAP measure.
CHINA XD PLASTICS COMPANY LIMITED
Reconciliation of Net Income to EBITDA
(Amounts expressed in United States dollars)
Three Months Ended Six Months Ended
June 30, June 30,
2009 2008 2009 2008
Net Income $4,996,391 $5,098,287 $9,013,033 $7,192,793
Interest Expense $337,113 $190,083 $692,719 $163,267
Provision for $3,775 $6,229 $6,461 $6,229
Income Taxes
Stock-based
compensation $434,093 -- $434,093 --
Depreciation and
amortization $453,236 $239,153 $899,126 $407,535
EBITDA $6,224,608 $5,533,752 $11,045,432 $7,769,824
YoY Growth 12.5% 42.2%
CHINA XD PLASTICS COMPANY LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2009 2008
(Unaudited) (Audited)
ASSETS
Current assets:
Cash and cash equivalents $1,466,634 $3,869,035
Restricted cash 3,923,469 3,664,346
Notes receivable 53,801 303,437
Accounts receivable - net of
allowance for bad debts of
$99,550 and $99,669, respectively 9,731,911 11,234,507
Other receivables 138,673 21,917
Inventory 14,873,718 12,438,782
Advance to employees 5,037 92,329
Advance to suppliers 14,514,312 13,131,074
Tax receivable 174,712 --
Prepaid expenses 704 --
Total current assets 44,882,971 44,755,427
Property, plant and equipment, net 19,124,324 19,332,712
Other assets:
Deferred charges 425,195 378,073
Intangible assets, net 244,600 247,681
Total other assets 669,795 625,754
Total Assets $64,677,090 $64,713,893
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short term loans $20,202,937 $20,520,337
Bank acceptance notes payable 9,808,672 8,061,561
Accounts payable 16,595 113,232
Other payable 150,429 106,232
Accrued expenses 8,784 820,625
Taxes payable -- 17,777
Due to related party 391,815 7,542,950
Deferred revenue 616,745 3,469,796
Total current liabilities 31,195,977 40,652,510
Stockholders' equity
Common Stock, $0.0001 par value,
100,000,000 shares authorized,
40,789,874 and 805,802 shares
issued and outstanding as of
June 30, 2009 and December 31,
2008, respectively 4,079 81
Series A Preferred Stock, $0.0001
par value, 10,000,000 shares
authorized, - 0 - and 1,000,000
shares issued and outstanding as
of June 30, 2009 and December 31,
2008, respectively -- 100
Series B Preferred Stock, $0.0001
par value, 10,000,000 shares
authorized, 1,000,000 shares
issued and outstanding as of June
30, 2009 and December 31, 2008 100 100
Additional Paid-in-Capital 2,912,981 2,482,786
Retained earnings 29,064,174 20,051,141
Accumulated other comprehensive
income 1,499,779 1,527,175
Total Stockholders' equity 33,481,113 24,061,383
Total Liabilities And
Stockholders' Equity $64,677,090 $64,713,893
CHINA XD PLASTICS COMPANY LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Six Months ended
June 30,
2009 2008
Cash flows from operating activities
Net income $9,013,033 $7,192,793
Adjustments to reconcile net
income to net cash provided by
(used in) Operating activities:
Depreciation & amortization 899,126 407,535
Stock-based compensation expense 434,093 --
Changes in assets and liabilities:
(Increase) decrease in -
Restricted cash (263,424) 1,346,505
Accounts receivable and
other receivables 1,371,850 (13,814,699)
Inventories (2,448,993) (3,105,029)
Prepaid expenses (702) 21,393
Notes receivables 249,185 (376,656)
Advance to employees 87,148 --
Advances to suppliers (1,398,493) (3,230,094)
Deferred charge (47,560) --
Increase (decrease) in -
Accounts payable and
other payable (52,123) 5,109,230
Accrued expenses (810,573) 140,159
Tax payable (192,399) (1,333,736)
Deferred revenue (2,847,892) 24,321
Net cash provided by (used in)
operating activities 3,992,276 (7,618,278)
Cash flows from investing activities
Purchase of fixed assets (711,153) (4,984,561)
Collection on due from
related party -- 105,537
Net cash used in investing
activities (711,153) (4,879,024)
Cash flows from financing activities
Repayment to short term loan (292,694) --
Proceeds from short term loan -- 16,269,921
Proceeds from bank acceptance
notes payable 1,756,161 --
Repayment of bank acceptance
notes payable -- (2,680,824)
Repayment to related
party loan (7,141,606) --
Proceeds from related
party loan -- 82,518
Net cash provided by (used in)
financing activities (5,678,139) 13,671,615
Effect of exchange rate changes on cash
and cash equivalents (5,385) 189,832
Net increase(decrease) in cash and cash
equivalents (2,402,401) 1,364,145
Cash and cash equivalents, beginning of
period 3,869,035 87,455
Cash and cash equivalents, end of period $1,466,634 $1,451,600
Supplemental disclosures of cash flow
information:
Interest paid $720,826 $261,078
Income taxes paid $-- $--
Non-cash investing and financing
activities:
Warrants issued for consulting service $46,260 $--
Common stock issued for services $5,370,000 $--
For more information, please contact:
China XD Plastics Company Ltd.
Mr. Taylor Zhang, Chief Financial Officer
Phone: +1-212-747-1118 (New York)
Mr. Allan Lao, IR Director
Phone: +86-451-8434-6600 (China)
Email: cxdc@chinaxd.net
Web: http://www.chinaxd.net/
CCG Investor Relations
Mr. Crocker Coulson, President
Phone: +1-646-213-1915 (New York)
Mr. Ed Job, CFA
Phone: +1-646-213-1914 (New York)
Email: ed.job@ccgir.com
Web: http://www.ccgirasia.com/