– Revenue of $1,448.2 million –
HARBIN, China, June 1, 2020 /PRNewswire/ -- China XD Plastics
Company Limited (NASDAQ: CXDC) ("China XD Plastics" or the
"Company"), one of China's leading
specialty chemical companies engaged in the development,
manufacture and sale of polymer composite materials primarily for
automotive applications, today announced its financial results for
the fourth quarter and fiscal year ended December 31, 2019.
Fourth Quarter 2019 Financial Highlights
- Revenue was $310.5 million, a decrease of 11.2% YoY and a
decrease of 16.8% sequentially
- Gross profit was $43.7 million, a decrease of 30.0% YoY
and a decrease of 27.3% sequentially
- Gross margin of 14.1%, a decrease of 370 basis points YoY and a
decrease of 200 basis points sequentially
- Net loss was $65.0 million, compared to net income
$13.0 million in the same period last
year and net income of $17.0
sequentially
- EBITDA was negative $27.3
million, a decrease of 171.1% YoY and a decrease of 150.0%
sequentially. A description of the adjustments from GAAP net loss
to EBITDA is detailed in the table captioned "Reconciliation of
GAAP and Non-GAAP Results" following this press release.
- Total volume shipped was 67,018 metric tons, down 46.3%
YoY and a decrease of 27.2% sequentially
Full Year 2019 Financial Summary
- Revenue was $1,448.2 million, an
increase of 13.6% from $1,274.8
million for the full year 2018
- Gross profit was $219.4 million,
a decrease of 0.1% from $219.6
million for the full year 2018
- Gross profit margin of 15.1%, a decrease of 210 basis points
from 17.2% for the full year 2018
- Net income was $3.1million, a
decrease of 95.5% from $68.3
million for the full year 2018
- EBITDA was $145.0 million, a
decrease of 16.3% YoY from $173.3
million for the full year 2018. A description of the
adjustments from GAAP net income to EBITDA is detailed in the table
captioned "Reconciliation of GAAP and Non-GAAP Results" following
this press release.
- Total volume shipped was 360,072 metric tons, a decrease of
18.8% from 443,443 metric tons for the full year 2018
"Our fiscal 2019 results were consistent with the overall slow
recovery of China auto industry,'
said Jie Han, Chairman of the Board
of Directors and Chief Executive Officer. 'The trade tension
between China and United States, the stricter environmental
protection standard, and larger reduction of subsidies on new
energy vehicles, have generated a lot of pressure on the entire
auto industry in China, resulting
in depressed domestic demand. China XD has taken proactive measures
to respond these changes. Since the second quarter of 2019, we have
achieved revenues by increased sales of new categories
of higher-end products of PA66 and PA6 produced with
high-priced raw materials with higher selling price in domestic
market; and sales of high-priced semi-finished goods in domestic
market to accelerate inventory turnover and replenish operating
funds. We are pleased to see an overall increase of 45.9% in the
average RMB selling price of our products, partially offset the
decreased sales volume of 18.8% for the year ended December 31, 2019. At the same time, the Company
has achieved a rapid increase of customer orders in non-automobile
applications, evidenced by our stable sales growth in several
domestic regions."
"For 2020, the COVID-19 has caused a sharp fall in
production and sales of the Chinese automotive industry, with the
risk of supply disruption of some parts of the domestic automobile
industry increased. As a result, China XD has responded to start
producing raw materials for PPE such as goggles and masks, to help
alleviate the pandemic to our communities and mitigate the negative
impact of world pandemic on Chinese auto industry."
"We are committed to complete industrial project for upgrading
existing equipment for 100,000 metric tons of engineering plastics
by the end of second quarter of 2020, and our Qinling Road Project
and Jiangnan Road Project for equipment upgrade and factory
revamping by the end of the third quarter of 2020, thus bringing
the production capacity in Heilongjiang Campus back to 390,000 MT.
At the same time, we expect to complete additional 10 production
lines our Sichuan plant by the end
of the third quarter of 2020, thus to bring the total capacity of
Sichuan base to 300,000
MT. Together with the production capacity ramp up in
Dubai, we will continue to remain
our ability to make further inroads into more specialized high-end
products for various important new markets"
"We will continue to optimize our management structure and
enhance our operating efficiency. And we are confident, through our
cooperation with Chinese big banks to succeed Company's
expansion strategy in multiple regions and sectors, and to be
confident with our core market positioning and expanded platform
for growth." Mr. Han concluded.
Fourth Quarter 2019 Results
Revenues were $310.5 million for
the fourth quarter of 2019, compared to $349.8 million for the same period of 2018,
representing a decrease of $39.3
million, or 11.2%. The year-over-year decrease was primarily
as a combined result of a 46.3% decrease in sales volume, a
depreciation of RMB against US dollars by 4.2%,and partially offset
by a 69.5% increase in average RMB selling price of our products,
as compared with those of last year.
(i) Domestic market
For the three-month period ended December
31, 2019, revenues from domestic market decreased by
US$41.5 million or 12.4% compared
with that in the same period of last year, as a combined result of:
i) a decrease of 47.0% in sales volume; ii) a depreciation of RMB
against US dollars by 4.2%, and partially offset by iii) an
increase of 69.5% in the average RMB selling price of our products,
as compared with those of last year.
According to the China Association of Automobile Manufacturers,
during the fourth quarter of 2019, the decline in China's auto production and sales continues to
narrow, but the overall market rebound is slow, witnessed by the
increase of 0.03% in auto production, and decrease of 0.03% in auto
sales, respectively, compared to the same periods in 2018. Though
the Company kept its positive efforts to expand our marketing areas
and customer bases and to meet their new requirements in domestic
markets, the Company has achieved sales growth of 232.1% in
South China and 6.7% in
Central China, we still had sales
decrease of 30.3% in Northeast
China, 18.7% in North
China, 16.1% in Southwest
China and 9.5% in East China.
As for the RMB selling price, the increase of 69.5% was mainly
due to: i) increased sales of new categories of higher-end
products of PA66 and PA6 produced with high-priced raw materials
with higher selling price in domestic market; and ii) sales of
high-priced semi-finished goods in domestic market during the
three-month period ended December 31,
2019.
(ii) Overseas market
Overseas sales were $16.9 million,
accounting for 5.4% of total sales for the fourth quarter of 2019,
as compared to $15.0 million and
accounting for 4.3% of total sales for the same period of 2018.
After a successful trial production at our production base in
Dubai in November 2018, the Company has
established business relationships with new customers in UAE
and India, and shipped products to
the end users in Europe and
Southeast Asia. We are optimistic about the prospect of our
business expansion overseas.
Premium products (PA66, PA6, POM, PPO, Plastic Alloy and PLA) in
total accounted for 90.6% of revenues from sales of finished goods
in the fourth quarter of 2019, compared to 78.3% in the prior year
period. The Company continued to shift its production mix from
traditional lower-end products to higher-end products such as PA66
and PA6, primarily due to (i) greater growth potential of advanced
modified plastics in luxury automobile models in China, (ii) the stronger demand as a result of
promotion by the Chinese government for clean energy vehicles
and (iii) better quality from end consumer recognition of
higher-end cars made by automotive manufacturers from Chinese and
Germany joint ventures,
and U.S. and Japanese joint ventures, which
manufacturers tend to use more and higher-end modified
plastics in quantity per vehicle in China.
Gross profit was $43.7 million for
the fourth quarter of 2019, compared to $62.4 million for the same period of 2018,
representing a decrease of $18.7
million, or 30.0%. Gross margin was 14.1% compared to 17.8%
in the fourth quarter of 2018, primarily due to the implementation
of low price strategy on higher-end products to penetrate the new
markets.
General and administrative (G&A) expenses were $14.8 million for the fourth quarter of 2019,
compared to $8.6 million for the same
period of 2018, representing an increase of $6.2 million, or 72.1%. The increase was
primarily due to the increase of professional fees, salary and
welfare, travelling and transportation and miscellaneous
expenses.
Provision for doubtful accounts were US$62.8 million for the fourth quarter of 2019,
compared to nil for the same period of 2018. As of December 31, 2019, our main UAE customer had
US$62.8 million of overdue accounts
receivable and the customer failed to make payments within the
extended period under the agreed extended repayment plan. Based on
its assessment of the collectability of the amounts due from the
customer, the Company provided an allowance for doubtful accounts
of US$62.8 million for the fourth
quarter of 2019.
Research and development (R&D) expenses were $10.8 million for the fourth quarter of 2019,
compared to $26.9 million for the
same period of 2018, representing a decrease of US$16.1 million, or 59.9%. The decrease was
mainly due to a decrease of US$15.9
million in raw materials consumption. As of December 31, 2019, the number of ongoing research
and development projects was 357.
Operating loss was $45.3 million
for the fourth quarter of 2019, compared to $24.1 million of operating income for the same
period of 2018, representing a decrease of US$69.4 million, or 288.0%. This substantial
decrease is primarily due to the decreased gross profit by 30%, a
provision of doubtful accounts of US$62.8
million for a UAE customer, and higher G&A expenses,
partially offset by the lower selling expenses and R&D
expenses.
Net interest expense was $20.5
million for the fourth quarter of 2019, compared to net
interest expense of $13.1 million for
the same period of 2018, representing an increase of $7.4 million or 56.5%, primarily due to (i) the
increase of interest expense due to the increase of the average
short-term and long-term loan balance in the amount of $965.7 million for the three-month period ended
December 31, 2019 compared to
$933.3 million for the same period in
2018, and the average loan interest rate increased to 5.1% for the
three-month period ended December 31,
2019 compared 4.6% of the same period in 2018; (ii) the
decrease of interest income resulting from the decrease of weighed
average deposit balance in the amount of US$145.2 million for the three-month period ended
December 31, 2019 compared to
US$270.2 million for the same period
in 2018, and the average interest rate decreased to 0.4% for the
three-month period ended December 31,
2019 compared to 0.5% of the same period in 2018
Income tax expense was US$2.2
million for the fourth quarter of 2019, representing an
effective income tax rate of negative 3.5%, compared to income tax
benefit of US$0.5 million in the same
period of 2018, representing an effective income tax rate of
negative 3.6%. The increase of effective income tax rate was
primarily due to the increased operating loss in Dubai Xinda.
Net loss was US$65.0 million for
the fourth quarter of 2019, compared to net income of US$13.0 million for the same period of 2018,
representing a decrease of US$78.0
million, or 600.0%. Basic and diluted losses per share for
the fourth quarter of 2019 were both US$0.97, compared to US$0.20 earnings per share per share for the same
period of 2018.
The average number of shares used in the computation of basic
and diluted losses per share for the three months ended
December 31, 2019 was 66.9 million,
compared to 50.5 million shares for earnings per share in the prior
year period.
Earnings before interest, tax, depreciation and amortization
(EBITDA) was negative $27.3 million
for the fourth quarter of 2019, compared of $38.4 million for the same period of 2018,
representing a decrease of $65.7
million, or 171.1%. For a detailed reconciliation of EBITDA,
a non-GAAP measure, to its nearest GAAP equivalent, please see the
financial tables at the end of this release.
Full Year 2019 Financial Results
Revenue was $1,448.2 million in
fiscal 2019, compared to $1,274.8
million in fiscal 2018, representing an increase of
US$173.4 million or 13.6%. The
year-over-year increase was primarily due to the combined result
of: (i) an increase of 45.9% in the average RMB selling price of
our products, partially offset by (ii) the decrease of 18.8% in the
sales volume; and (iii) a depreciation of RMB against US dollars by
6.0%, as compared with those of last year.
(i) Domestic market
Revenue from domestic market increased by 10.1% or US$127.2 million, as a result of (i) an increase
of 43.6% in the average RMB selling price of our products; and
partially offset by (ii) a decrease of 20.0% in sales volume;
and (iii) a depreciation of RMB against US dollars by
6.0% as compared with those of last year.
According to the China Association of Automobile Manufacturers,
automobile production and sales in China decreased by 7.5% and 8.2%,
respectively, for twelve months of 2019 as compared to the same
period of 2018. The weakening in macroeconomic conditions since
summer of 2018 continued to exacerbate automobile business
environment, but thanks to our positive efforts to expand our
marketing areas and customer bases and to meet their new
requirements, the Company has achieved sales growth of 30.2% in
Northeast China, 22.0% in
South China, 18.0% in Central China, and 9.0% in North China, partially offset by the sales
decrease of 6.4% in East China and 2.4% in Southwest China.
As for the RMB selling price, the increase of 43.6% was mainly
due to: (i) increased sales of new categories of higher-end
products of PA66 and PA6 produced with high-priced raw materials
with higher selling price in domestic market; and (ii) sales of
high-priced semi-finished goods in domestic market during the year
ended December 31, 2019.
(ii) Overseas market
Overseas sales were US$61.2
million in the year ended December
31, 2019 as compared to US$15.0
million in prior year.
After a successful trial production at our production base in
Dubai in November 2018, the Company has
established business relationships with new customers in UAE
and India, and shipped products to
the end users in Europe and
Southeast Asia.
We have experienced a delay in cash collection from a major
customer in UAE. As of December 31,
2019, we provided an allowance of US$62.8 million for the overdue accounts
receivable from the major customer in UAE, as the customer failed
to make payments within the extended period under the agreed
extended repayment plan.
Premium products (PA66, PA6, Plastic Alloy, PLA, POM and PPO) in
total accounted for 85.6% of revenues from sales of finished goods
in 2019, compared to 79.1% for the same period of 2018. The Company
continued to shift production mix from traditional lower-end
products such as PP to higher-end products such as PA66, PA6, and
PPO, primarily due to (i) greater growth potential of advanced
modified plastics in luxury automobile models in China, (ii) the stronger demand as a result of
promotion by the Chinese government for clean energy vehicles
and (iii) better quality demand from and consumer recognition of
higher-end cars made by automotive manufacturers from Chinese and
Germany joint ventures, Sino-U.S.
and Sino-Japanese joint ventures, which manufacturers tend to
use more and higher-end modified plastics in quantity per vehicle
in China.
The Company also sold high-priced semi-finished goods with
discounted price in domestic markets during the twelve-month period
ended December 31, 2019 in order to
accelerate inventory turnover and replenish operating funds.
Gross profit was US$219.4 million
in 2019, as compared to US$219.6
million in 2018, representing a decrease of US$0.2 million, or 0.1%, Our gross margin
decreased to 15.1% during 2019 from 17.2% in 2018, primarily due to
the adoption of discounted-priced strategy on sales of
semi-finished goods in domestic market in order to accelerate
inventory turnover and replenish operating funds for the year ended
December 31, 2019.
General and administrative (G&A) expenses were US$35.4 million in 2019 compared to US$37.0 million in 2018, representing a decrease
of 4.3%, or US$1.6 million. The
decrease was primarily due to our approach to optimize management
structure and enhancing efficiency and partially offset by the
increase of professional fee.
Provision for doubtful accounts was US$62.8 million in 2019 compared to nil in 2018.
As of December 31, 2019, our main UAE
customer had US$62.8 million of
overdue accounts receivable and the customer failed to make
payments within the extended period under the agreed extended
repayment plan. Based on its assessment of the collectability of
the amounts due from the customer, the Company provided an
allowance for doubtful accounts of US$62.8
million for the year ended December
31, 2019.
Research and development expenses were US$50.3 million in 2019 compared with
US$60.6 million in 2018, representing
a decrease of US$10.3 million, or
17.0%. This decrease was due to (i) a decrease of US$6.5 million in raw materials consumption, (ii)
a decrease of US$3.6 million in
salary and welfare for R&D personnel, and (iii) a decrease of
US$0.2 million in depreciation. As of
December 31, 2019, the number of
ongoing research and development projects was 357.
Total operating income was US$69.4
million in 2019 compared to US$112.0
million in 2018, representing a decrease of 38.0% or
US$42.6 million. The decrease in 2019
was primarily due to the provision for doubtful accounts of
$62.8 million made for a UAE
customer, the slightly lower gross profit for the year ended
December 31, 2019, and partially
offset by the lower selling expenses, G&A expenses and R&D
expenses.
Net interest expense was US$65.8
million in 2019, compared to net interest expense of
US$47.0 million in 2018, representing
an increase of 40.0% or US$18.8
million, primarily due to (i) the increase of
the average short-term and long-term loan balance in the
amount of US$912.8 million for the
year ended December 31, 2019,
compared to US$861.0 million of the
same period in 2018; (ii) the increase of the average loan interest
rate of 5.5% for the year ended December 31,
2019 compared to 4.6% of the same period in 2018; (iii) the
decrease of interest income resulting from the average interest
rate decreased to 0.6% for the year ended December 31, 2019 compared to 0.9% of the same
period in 2018, and (iv) the decrease of average deposit balance in
the amount of US$222.1 million for
the year ended December 31, 2019
compared to US$449.5 million for the
same period in 2018.
Income tax expense was US$14.0
million for fiscal 2019, representing an effective income
tax rate of 82.1%, compared to income tax expense of US$7.7 million in fiscal 2018, representing an
effective income tax rate of 10.1%. The increase of effective
income tax rate in 2019 was primarily due to the increased
operating loss in Dubai Xinda. The effective income tax rate for
the year ended December 31, 2019
differs from the PRC statutory income tax rate of 25% primarily due
to the continuous operating loss occurred in overseas subsidiaries
such as Dubai Xinda and Xinda Holding (HK), and partially offset by
the R&D expenses additional deduction of the major PRC
operating entities, the reversal of the unrecognized tax benefits
accrued in 2013, and Sichuan Xinda's preferential income tax
rate.
Net income was US$3.1 million in
fiscal 2019, as compared to US$68.3
million in fiscal 2018, representing a decrease of
$65.2 million, or 95.5 %. Earnings
per share were $0.05 in fiscal 2019,
compared to earnings per share of $1.03 in fiscal 2018.
The average number of shares used in the computation of basic
and diluted earnings per share for the fiscal year 2019 was 55.2
million, compared to 50.3 million shares for fiscal 2018.
Earnings before interest, tax, depreciation and amortization
(EBITDA) was $145.0 million for the
fiscal year 2019 as compared to EBITDA of $173.3 million for fiscal 2018, representing a
decrease of $28.3 million, or 16.3%.
For a detailed reconciliation of EBITDA, a non-GAAP measure, to its
nearest GAAP equivalent, please see the financial tables at the end
of this release.
Financial Condition
As of December 31, 2019, the
Company had US$228.4 million in the
total amount of cash and cash equivalents and restricted cash, a
decrease of US$138.6 million or 37.8%
as compared to US$367.0 million as of
December 31, 2018. Working capital
was negative US$14.1 million (current
assets minus current liabilities) and the current ratio (current
assets divided by current liabilities) was 1.0, as compared to the
current ratio of 0.9 as of December 31,
2018. Stockholders' equity as of December 31, 2019 was $836.4 million, an increase of 11.7% as compared
to $748.9 million as of December 31, 2018 mainly due to the conversion of
Series D Preferred Stock into common stock on September 26, 2019.
Inventories increased by 3.6% as a result of more purchases of
the raw materials for the upcoming orders. Accounts receivable
decreased by 24.6% mainly due to the provision of doubtful accounts
of US$62.8 million for a UAE
customer's as a result of estimated probable collection issue.
Prepaid expenses and other current assets increased by 30.0% or
US$39.6 million primarily because (i)
advances to suppliers for purchasing raw materials increased by
US$61.9 million; (ii) value added
taxes receivables increased by US$1.5
million, partially offset by (iii) other prepaid expenses
decreased by US$10.8 million, which
mainly included prepaid miscellaneous service fee, staff advance
and interest receivable; and (iv) consideration for sales of
Shanghai Sales decreased by US$7.3
million. Property, plant and equipment increased by 7.0% as
the equipment for upgrading existing 100,000 metric tons of
engineering plastics facilities was partially delivered in 2019.
The aggregate short-term and long-term bank loans increased by
19.2% due to using the line of credits to support operating and
investing activities in HLJ Xinda Group and Sichuan Xinda. We
define the manageable debt level as the sum of aggregate short-term
and long-term loans over total assets.
Recent Development
On May 8, 2020, the Board of
Directors (the "Board") of the Company received a preliminary
nonbinding proposal letter from Mr. Han, the Chairman and Chief
Executive Officer, XD. Engineering Plastics Company Limited
(together with Mr. Han, the "Buyer Group"), a company incorporated
in the British Virgin Islands and
wholly owned by Mr. Han, proposing to acquire all of the
outstanding shares of common stock of the Company not already
beneficially owned by the Buyer Group in a "going-private"
transaction for US$1.1 per share of
common stock of the Company in cash, subject to certain conditions.
The proposal letter states that the Buyer Group expects that the
Board will appoint a special committee of independent and
disinterested directors to consider the proposal and make a
recommendation to the Board. As of the date of the proposal letter,
the Buyer Group beneficially owns the Shares representing
approximately 70% of the voting power and approximately 50.1% of
the share capital of the Company. The Board has established a
special committee (the "Special Committee"), consisting of the
following independent directors of the Company: Mr. Linyuan Zhai, Mr. Huiyi
Chen and Mr. Guanbao Huang, with Mr. Huiyi Chen serving as chairperson of the Special
Committee. The Special Committee will be responsible for
evaluating, negotiating and recommending to the Board any proposals
involving a strategic transaction by the Company with one or more
third parties. On May 15, 2020,
the Special Committee has retained Duff & Phelps, LLC as its
financial advisor and Hogan Lovells as its legal counsel to assist
it in its review and evaluation of the proposed
transaction. There can be no assurance that any definitive
offer will be made, that any agreement will be executed or that a
transaction with the Buyer Group or any other transaction will be
approved or consummated.
Financial Guidance and Business Outlook
As a result of the outbreak of COVID-19 in the PRC, China Auto
Industry production and sales drastically decreased by 33.4% and
31.14% for the first four months of 2020, according to
the China Association of Automobile Manufacturers. It has a
ripple effect and impact throughout China auto supply chain, including the
Company.
Due to the fact that the Company had temporarily closed its
manufacturing facilities and offices in the PRC in accordance with
the requirement of the PRC government, the occurrence of the
ongoing COVID-19 pandemic has had a material adverse effect
on our business operations. In
light of these circumstances and continuing uncertainties, the
Company will not be able to forecast our financial guidance for
fiscal 2020 until further notice.
About Non-GAAP Financial Measure
To supplement the Company's consolidated financial results
presented in accordance with United States Generally Accepted
Accounting Principles ("GAAP"), the Company uses in this press
release the following measure defined as non-GAAP financial
measures by the United States Securities and Exchange Commission:
EBITDA. The presentation of the non-GAAP financial information is
not intended to be considered in isolation or as a substitute for
the financial information prepared and presented in accordance with
GAAP. For more information on this non-GAAP financial measure,
please see the table captioned "Reconciliation of GAAP and non-GAAP
Results" set forth at the end of this press release. The
Company's management believes that this adjusted measure provides
investors with a better understanding of how the results relate to
the Company's historical performance. This adjusted measure should
not be considered an alternative to net income (loss), or any other
measure of financial performance presented in accordance with U.S.
GAAP, and is not necessarily comparable to a similarly titled
measure of any other company. The accompanying tables have
more details on the reconciliation between non-GAAP financial
measure and its most directly comparable GAAP financial
measure.
Conference Call
China XD Plastics' senior management will host a conference call
at 8:00 am Eastern Time on Monday,
June 1, 2020, to discuss its fourth quarter and full year 2019
financial results.
Due to the outbreak of COVID-19, operator assisted conference
calls are not available at the moment. All participants must
preregister online prior to the call to receive the dial-in
details.
Participants can register for the conference call by navigating
to http://apac.directeventreg.com/registration/event/2497299.
Once preregistration has been completed, participants will receive
dial-in numbers, an event passcode, and a unique registrant ID.
To join the conference, please dial the number you receive,
enter the event passcode followed by your unique registrant ID, and
you will be joined to the conference instantly.
A recording of the conference call will be available
through June 8th, 2020 by calling +1-855-452-5696 (for
callers in the U.S.), +61 2 8199 0299 (for International callers)
and entering passcode 2497299.
A live webcast and replay of the conference call will be
available on the investor relations page of the Company's website
at http://chinaxd.net/.
About China XD Plastics Company
Limited
China XD Plastics Company Limited, through its wholly-owned
subsidiaries, develops, manufactures and sells polymer composites
materials, primarily for automotive applications. The Company's
products are used in the exterior and interior trim and in the
functional components of 31 automobile brands manufactured in
China, including without
limitation, Audi, Mercedes Benz,
BMW, Toyota, Buick, Chevrolet, Mazda, Volvo, Ford, Citroen, Jinbei
and VW Passat, Golf, Jetta, etc. The Company's wholly-owned
research center is dedicated to the research and development of
polymer composites materials and benefits from its cooperation with
well-known scientists from prestigious universities in China. As of December
31, 2019, 633 of the Company's products have been certified
for use by one or more of the automobile manufacturers in
China. For more information,
please visit the Company's English website at
http://chinaxd.irpass.com/, and the Chinese website at
http://www.xdholding.com.
Safe Harbor Statement
This announcement contains forward-looking statements within the
meaning of the safe harbor provisions of the U.S. 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 growth potential in international markets; the
effectiveness and profitability of the Company's product
diversification strategy; the impact of the Company's product mix
shift to more advanced products and related pricing policies; the
effectiveness, profitability, and the marketability of the
Company's ongoing mix shift to more advanced products; the prospect
of the Company's facilities in various regions. These
forward-looking statements can be identified by terminology such as
"will," "expect," "project," "anticipate," "forecast," "plan,"
"believe," "estimate" and similar statements. Forward-looking
statements involve inherent risks and uncertainties and are based
on current expectations, assumptions, estimates and projections
about the Company and the industry. A number of important factors
could cause actual results to differ materially from those
contained in any forward-looking statement. Potential risks and
uncertainties include, but are not limited to, the global economic
uncertainty, the fluctuation in automotive sales and productions,
the development of Company's expansion plans, the slowdown of
China's automotive industry, the
concentration of the Company's distributors, customers and
suppliers, 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. 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, it cannot assure you that its 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 AND SUBSIDIARIES
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CONSOLIDATED
BALANCE SHEETS
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|
December
31,
|
|
|
2019
|
|
2018
|
|
|
US$
|
|
US$
|
ASSETS
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
17,201,775
|
|
|
|
41,301,817
|
|
Restricted
cash
|
|
|
211,231,244
|
|
|
|
325,690,023
|
|
Accounts receivable,
net of allowance for doubtful accounts
|
|
|
222,072,053
|
|
|
|
294,688,288
|
|
Inventories
|
|
|
642,509,534
|
|
|
|
620,033,195
|
|
Prepaid expenses and
other current assets
|
|
|
171,848,122
|
|
|
|
132,218,528
|
|
Total current
assets
|
|
|
1,264,862,728
|
|
|
|
1,413,931,851
|
|
Property, plant and
equipment, net
|
|
|
830,319,716
|
|
|
|
775,941,280
|
|
Land use rights,
net
|
|
|
-
|
|
|
|
29,796,795
|
|
Long-term prepayments
to equipment and construction suppliers
|
|
|
495,570,421
|
|
|
|
530,636,319
|
|
Operating lease
right-of-use assets, net
|
|
|
44,149,955
|
|
|
|
-
|
|
Other non-current
assets
|
|
|
979,428
|
|
|
|
3,212,986
|
|
Total
assets
|
|
|
2,635,882,248
|
|
|
|
2,753,519,231
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES,
REDEEMABLE CONVERTIBLE
PREFERRED STOCK AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Short-term bank
loans, including current portion of long-term
bank loans
|
|
|
680,174,859
|
|
|
|
729,666,920
|
|
Bills
payable
|
|
|
400,671,063
|
|
|
|
618,166,453
|
|
Accounts
payable
|
|
|
57,458,673
|
|
|
|
84,958,469
|
|
Amounts due to
related parties
|
|
|
26,251,919
|
|
|
|
18,365,738
|
|
Income taxes
payable
|
|
|
26,458,837
|
|
|
|
15,975,367
|
|
Operating lease
liabilities, current
|
|
|
1,388,555
|
|
|
|
-
|
|
Accrued expenses and
other current liabilities
|
|
|
86,550,388
|
|
|
|
126,926,898
|
|
Total current
liabilities
|
|
|
1,278,954,294
|
|
|
|
1,594,059,845
|
|
Long-term bank loans,
excluding current portion
|
|
|
322,456,413
|
|
|
|
111,808,244
|
|
Deferred
income
|
|
|
92,639,620
|
|
|
|
99,583,477
|
|
Operating lease
liabilities, non-current
|
|
|
14,429,434
|
|
|
|
-
|
|
Other non-current
liabilities
|
|
|
91,028,376
|
|
|
|
101,573,772
|
|
Total
liabilities
|
|
|
1,799,508,137
|
|
|
|
1,907,025,338
|
|
|
|
|
|
|
|
|
|
|
Redeemable Series
D convertible preferred stock (redemption
amount of US$280,650,800 as of December 31, 2018)
|
|
|
-
|
|
|
|
97,576,465
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
Series B preferred
stock
|
|
|
100
|
|
|
|
100
|
|
Common stock,
US$0.0001 par value, 500,000,000 shares
authorized, 66,969,841 and 50,969,841 shares
issued, 66,948,841
and 50,948,841 shares outstanding as of December 31, 2019
and
2018, respectively
|
|
|
6,697
|
|
|
|
5,097
|
|
Treasury stock,
21,000 shares at cost
|
|
|
(92,694)
|
|
|
|
(92,694)
|
|
Additional paid-in
capital
|
|
|
184,208,447
|
|
|
|
86,633,582
|
|
Retained
earnings
|
|
|
720,159,368
|
|
|
|
717,103,890
|
|
Accumulated other
comprehensive loss
|
|
|
(67,907,807)
|
|
|
|
(54,732,547)
|
|
Total stockholders'
equity
|
|
|
836,374,111
|
|
|
|
748,917,428
|
|
Commitments and
contingencies
|
|
|
-
|
|
|
|
-
|
|
Total liabilities,
redeemable convertible preferred stock and
stockholders' equity
|
|
|
2,635,882,248
|
|
|
|
2,753,519,231
|
|
CHINA XD PLASTICS
COMPANY LIMITED AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
|
|
|
|
Years Ended
December 31,
|
|
Three-Month Period
Ended
December 31,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
1,448,204,826
|
|
1,274,833,282
|
|
310,505,848
|
|
349,825,989
|
Cost of
revenues
|
|
(1,228,809,155)
|
|
(1,055,220,493)
|
|
(266,815,104)
|
|
(287,461,458)
|
Gross
profit
|
|
219,395,671
|
|
219,612,789
|
|
43,690,744
|
|
62,364,531
|
|
|
|
|
|
|
|
|
|
Selling
expenses
|
|
(1,465,697)
|
|
(10,068,971)
|
|
(509,397)
|
|
(2,714,095)
|
General and
administrative expenses
|
|
(35,370,445)
|
|
(36,985,700)
|
|
(14,831,344)
|
|
(8,644,155)
|
Provision for
doubtful accounts
|
|
(62,811,125)
|
|
-
|
|
(62,811,125)
|
|
-
|
Research and
development expenses
|
|
(50,329,809)
|
|
(60,576,574)
|
|
(10,807,113)
|
|
(26,895,719)
|
Total operating
expenses
|
|
(149,977,076)
|
|
(107,631,245)
|
|
(88,958,979)
|
|
(38,253,969)
|
|
|
|
|
|
|
|
|
|
Operating income
(loss)
|
|
69,418,595
|
|
111,981,544
|
|
(45,268,635)
|
|
24,110,562
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
1,377,040
|
|
3,977,116
|
|
148,871
|
|
369,980
|
Interest
expense
|
|
(67,242,641)
|
|
(51,031,735)
|
|
(20,646,777)
|
|
(13,469,069)
|
Foreign currency
exchange gains (losses)
|
|
2,887,336
|
|
5,710,754
|
|
(2,088,301)
|
|
(353,574)
|
Losses on foreign
currency option contracts
|
|
-
|
|
(520,981)
|
|
-
|
|
-
|
Gains (losses) on
disposal of subsidiaries
|
|
518,491
|
|
(214,557)
|
|
-
|
|
(214,557)
|
Government
grants
|
|
10,133,355
|
|
6,124,393
|
|
5,021,918
|
|
2,122,647
|
Total non-operating
expenses, net
|
|
(52,326,419)
|
|
(35,955,010)
|
|
(17,564,289)
|
|
(11,544,573)
|
|
|
|
|
|
|
|
|
|
Income (loss) before
income taxes
|
|
17,092,176
|
|
76,026,534
|
|
(62,832,524)
|
|
12,565,989
|
|
|
|
|
|
|
|
|
|
Income tax (expense)
benefit
|
|
(14,036,698)
|
|
(7,713,113)
|
|
(2,169,243)
|
|
458,512
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
3,055,478
|
|
68,313,421
|
|
(65,001,767)
|
|
13,024,501
|
|
|
|
|
|
|
|
|
|
Earnings (losses)
per common share:
|
|
|
|
|
|
|
|
|
Basic and
diluted
|
|
0.05
|
|
1.03
|
|
(0.97)
|
|
0.20
|
Net Income
(loss)
|
|
3,055,478
|
|
68,313,421
|
|
(65,001,767)
|
|
13,024,501
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income (loss)
|
|
|
|
|
|
|
|
|
Foreign currency
translation adjustment, net of nil
income taxes
|
|
(13,175,260)
|
|
(35,647,804)
|
|
11,557,283
|
|
2,493,897
|
|
|
|
|
|
|
|
|
|
Comprehensive
income (loss)
|
|
(10,119,782)
|
|
32,665,617
|
|
(53,444,484)
|
|
15,518,398
|
CHINA XD PLASTICS
COMPANY LIMITED AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF CHANGES IN EQUITY
|
|
|
|
Series B
Preferred Stock
|
|
Common
Stock
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
Number
of
Shares
|
|
Amount
|
|
Number
of
Shares
|
|
Amount
|
|
Treasury
Stock
|
|
Additional
Paid-in
Capital
|
|
Retained
Earnings
|
|
Other
Comprehensive
Loss
|
|
Total
Stockholders'
Equity
|
|
|
|
|
US$
|
|
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
Balance as of
January 1, 2018
|
|
|
1,000,000
|
|
|
|
100
|
|
|
|
49,727,731
|
|
|
|
4,975
|
|
|
|
(92,694)
|
|
|
|
83,159,893
|
|
|
|
648,790,469
|
|
|
|
(19,084,743)
|
|
|
|
712,778,000
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
68,313,421
|
|
|
|
—
|
|
|
|
68,313,421
|
|
Other
comprehensive lo
ss - Foreign
currency
translation
adjustment, net of nil
income taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(35,647,804)
|
|
|
|
(35,647,804)
|
|
Stock based
compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,353,811
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,353,811
|
|
Exercise of stock
options
|
|
|
—
|
|
|
|
—
|
|
|
|
500,000
|
|
|
|
50
|
|
|
|
—
|
|
|
|
119,950
|
|
|
|
—
|
|
|
|
—
|
|
|
|
120,000
|
|
Vesting of
unvested shares
|
|
|
—
|
|
|
|
—
|
|
|
|
721,110
|
|
|
|
72
|
|
|
|
—
|
|
|
|
(72)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Balance as of
December 31,
2018
|
|
|
1,000,000
|
|
|
|
100
|
|
|
|
50,948,841
|
|
|
|
5,097
|
|
|
|
(92,694)
|
|
|
|
86,633,582
|
|
|
|
717,103,890
|
|
|
|
(54,732,547)
|
|
|
|
748,917,428
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
3,055,478
|
|
|
|
—
|
|
|
|
3,055,478
|
|
Conversion of
Series D
Preferred Stock to
common stock
|
|
|
—
|
|
|
|
—
|
|
|
|
16,000,000
|
|
|
|
1,600
|
|
|
|
—
|
|
|
|
97,574,865
|
|
|
|
—
|
|
|
|
—
|
|
|
|
97,576,465
|
|
Other
comprehensive lo
ss - Foreign
currency
translation
adjustment, net of
nil income taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(13,175,260)
|
|
|
|
(13,175,260)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of
December 31,
2019
|
|
|
1,000,000
|
|
|
|
100
|
|
|
|
66,948,841
|
|
|
|
6,697
|
|
|
|
(92,694)
|
|
|
|
184,208,447
|
|
|
|
720,159,368
|
|
|
|
(67,907,807)
|
|
|
|
836,374,111
|
|
CHINA XD PLASTICS
COMPANY LIMITED AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
Years Ended
December 31,
|
|
|
2019
|
|
2018
|
|
|
US$
|
|
US$
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
|
Net income
|
|
|
3,055,478
|
|
|
|
68,313,421
|
|
Adjustments to
reconcile net income to net cash (used in) provided
by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
59,416,674
|
|
|
|
46,282,307
|
|
Amortization of ROU
assets
|
|
|
1,246,459
|
|
|
|
—
|
|
Stock-based
compensation
|
|
|
—
|
|
|
|
3,353,811
|
|
Provision for
doubtful accounts
|
|
|
62,811,125
|
|
|
|
—
|
|
Amortization of
issuance cost for syndicated loans
|
|
|
244,505
|
|
|
|
1,736,535
|
|
Gains on foreign
currency option contracts
|
|
|
—
|
|
|
|
(1,070,779)
|
|
Foreign currency
exchange gains
|
|
|
(2,959,910)
|
|
|
|
(5,425,545)
|
|
Losses (gains) on
disposals of property, plant and equipment
|
|
|
(536,500)
|
|
|
|
2,423,326
|
|
Losses (gains) on
disposal of subsidiaries
|
|
|
(518,491)
|
|
|
|
214,557
|
|
Deferred income tax
benefit
|
|
|
(2,017,823)
|
|
|
|
(1,917,993)
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
9,267,736
|
|
|
|
(5,147,409)
|
|
Inventories
|
|
|
(32,889,557)
|
|
|
|
(228,481,188)
|
|
Prepaid expenses and
other current assets
|
|
|
(35,220,965)
|
|
|
|
(39,949,682)
|
|
Value added tax in
long-term prepayments to equipment suppliers
|
|
|
(11,716,377)
|
|
|
|
(50,794,483)
|
|
Other non-current
assets
|
|
|
(177,474)
|
|
|
|
49,182
|
|
Bills
payable
|
|
|
(209,898,423)
|
|
|
|
391,738,736
|
|
Accounts
payable
|
|
|
(26,818,422)
|
|
|
|
(148,839,736)
|
|
Income taxes
payable
|
|
|
10,508,217
|
|
|
|
(1,701,689)
|
|
Operating lease
liabilities, current
|
|
|
(1,010,019)
|
|
|
|
—
|
|
Accrued expenses and
other current liabilities
|
|
|
(1,030,675)
|
|
|
|
38,528,151
|
|
Deferred
income
|
|
|
(6,400,297)
|
|
|
|
(4,917,452)
|
|
Other non-current
liabilities
|
|
|
(5,283,500)
|
|
|
|
(3,000,815)
|
|
Net cash (used in) provided by
operating activities
|
|
|
(189,928,239)
|
|
|
|
61,393,255
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
|
Purchases of and
deposits for property, plant and equipment
|
|
|
(154,115,880)
|
|
|
|
(429,205,807)
|
|
Refund of prepayment
for property and equipment purchase
|
|
|
15,703,238
|
|
|
|
120,532,191
|
|
Net proceeds from
sales of subsidiaries
|
|
|
7,282,029
|
|
|
|
(41,631)
|
|
Government grant
related to construction of plant and equipment
|
|
|
1,007,410
|
|
|
|
10,281,222
|
|
Proceeds from
maturity of time deposits
|
|
|
—
|
|
|
|
540,066,526
|
|
Purchase of time
deposits
|
|
|
—
|
|
|
|
(255,518,597)
|
|
Proceeds from
disposal of property, plant and equipment
|
|
|
—
|
|
|
|
416,968
|
|
Deposits for
acquisition of equity
|
|
|
—
|
|
|
|
(3,506,048)
|
|
Refund of deposits
for acquisition of equity
|
|
|
—
|
|
|
|
15,299,214
|
|
Net cash used in investing
activities
|
|
|
(130,123,203)
|
|
|
|
(1,675,962)
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from bank
borrowings
|
|
|
2,230,043,190
|
|
|
|
1,238,947,716
|
|
Repayment of bank
borrowings
|
|
|
(2,048,519,876)
|
|
|
|
(1,255,214,637)
|
|
Proceeds from
interest-free advances from related parties
|
|
|
84,869,533
|
|
|
|
22,145,247
|
|
Repayment of
interest-free advances from related parties
|
|
|
(76,079,512)
|
|
|
|
(3,779,509)
|
|
Payments of issuance
cost for syndicated loans
|
|
|
(4,443,946)
|
|
|
|
—
|
|
Investment received
in advance from a related party
|
|
|
—
|
|
|
|
75,567,512
|
|
Refund investment
received in advance from a related party
|
|
|
—
|
|
|
|
(75,567,512)
|
|
Proceeds from
exercise of stock options
|
|
|
—
|
|
|
|
120,000
|
|
Net cash provided by financing
activities
|
|
|
185,869,389
|
|
|
|
2,218,817
|
|
Effect of foreign
currency exchange rate changes on cash and cash
equivalents and restricted cash
|
|
|
(4,376,768)
|
|
|
|
(15,035,935)
|
|
Net (decrease)
increase in cash, cash equivalents and restricted
cash
|
|
|
(138,558,821)
|
|
|
|
46,900,175
|
|
Cash, cash
equivalents and restricted cash at beginning of year
|
|
|
366,991,840
|
|
|
|
320,091,665
|
|
Cash, cash
equivalents and restricted cash at end of year
|
|
|
228,433,019
|
|
|
|
366,991,840
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
Interest paid, net of
US$3,751,573 and US$2,416,818 capitalized
for the years ended December 31, 2019 and 2018,
respectively
|
|
|
64,647,104
|
|
|
|
43,664,817
|
|
Income taxes
paid
|
|
|
10,446,472
|
|
|
|
17,982,507
|
|
Non-cash investing
and financing activities:
|
|
|
|
|
|
|
|
|
Conversion of Series
D preferred stock to common stock
|
|
|
97,576,465
|
|
|
|
—
|
|
Accrual for issuance
cost for syndicated loans
|
|
|
2,780,000
|
|
|
|
—
|
|
Accrual for purchase
of equipment and construction included in
accrued expenses and other current liabilities
|
|
|
1,302,739
|
|
|
|
6,188,847
|
|
Receivable for
disposal of property, plant and equipment
|
|
|
852,970
|
|
|
|
—
|
|
Consideration
receivable for the disposal of a subsidiary
|
|
|
—
|
|
|
|
7,285,231
|
|
The following table shows a reconciliation of cash, cash
equivalents and restricted cash on the consolidated balance sheets
to that presented in the above consolidated statements of cash
flows.
|
|
December
31,
|
|
|
2019
|
|
2018
|
|
|
US$
|
|
US$
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
17,201,775
|
|
|
|
41,301,817
|
|
Restricted
cash
|
|
|
211,231,244
|
|
|
|
325,690,023
|
|
Total cash, cash
equivalents, and restricted cash shown in the
statement of cash flows
|
|
|
228,433,019
|
|
|
|
366,991,840
|
|
CHINA XD PLASTICS
COMPANY LIMITED
|
RECONCILIATION OF
GAAP AND NON-GAAP RESULTS
|
(Amounts expressed
in United States Dollars)
|
|
|
Years
Ended
|
Three-Month Period
Ended
|
|
December
31,
|
December
31,
|
|
2019
|
2018
|
2019
|
2018
|
Net income (loss)
-GAAP
|
$
3,055,478
|
$
68,313,421
|
$
(65,001,767)
|
$
13,024,501
|
Interest
expense
|
67,242,641
|
51,031,735
|
20,646,777
|
13,469,069
|
Provision for income
taxes
|
14,036,698
|
7,713,113
|
2,169,243
|
(458,512)
|
Depreciation and
amortization
expense
|
59,416,674
|
46,282,307
|
14,132,077
|
12,333,626
|
Amortization of
operating lease
right-of-use assets
|
1,246,459
|
-
|
773,019
|
-
|
EBITDA
|
144,997,950
|
173,340,576
|
(27,280,651)
|
38,368,684
|
View original
content:http://www.prnewswire.com/news-releases/specialty-chemical-company-china-xd-plastics-announces-fourth-quarter-and-fiscal-year-2019-financial-results-301068382.html
SOURCE China XD Plastics Company Limited