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Specialty Chemical Company China XD Plastics Announces Fourth Quarter and Fiscal Year 2016 Financial Results

2017-03-16 20:30
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-- Revenue of $1.2 Billion and Net Income of $101.6 Million for Fiscal Year 2016 In Line with Guidance ---- Provides Fiscal 2017 Guidance of $1.2 - $1.3 Billion in Revenue, $85.0 - $100.0 Million in Net Income --HARBIN, China, Mar. 16, 2017 /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, 2016.

Fourth Quarter 2016 Financial Highlights

  • Revenue was $377.8 million, an increase of 38.5% YoY and an increase of 13.9% sequentially
  • Gross profit was $82.3 million, an increase of 58.3% YoY and an increase of 18.2% sequentially
  • Gross margin of 21.8%, an increase of 270 basis points YoY and 80 basis points sequentially
  • Net income was $36.7 million, an increase of 36.9% YoY and an increase of 81.7% sequentially
  • EBITDA was $58.2 million, an increase of 13.7% YoY and an increase of 26.2% sequentially
  • Total volume shipped was 125,525 metric tons, up 30.4% YoY and an increase of 15.5% sequentially

Full Year 2016 Financial Summary

  • Revenue was $1,201.7 million, an increase of 20.3% from $999.2 million for the full year 2015
  • Gross profit was $247.0 million, an increase of 36.2% from $181.4 million for the full year 2015
  • Gross profit margin of 20.6%, an increase of 240 basis points from the full year 2015
  • Net income was $101.6 million, an increase of 21.4% from $83.7 million for the full year 2015
  • EBITDA was $194.7 million, an increase of 13.1% YoY from $172.2 million for the full year 2015
  • Total volume shipped was 400,316 metric tons, up 20.5% from 332,144 metric tons for the full year 2015

"We are pleased to have met our revenue and net income guidance for 2016 abetted by strong customer demand from new growth regions in the fourth quarter. Our robust financial results for the fourth quarter of the year and solid results for fiscal year 2016 are consistent with our expectations of a steady recovery throughout China's automotive supply chain," said Jie Han, Chairman of the Board of Directors and Chief Executive Officer. "According to the China Association of Automobile Manufacturers, automobile production in China increased by 14.5% in 2016 as compared to 2015. An improved macroeconomic environment has improved business conditions and helped us to generate stronger profit margins."

"We are particularly pleased to see major revenue contributions from major new growth frontiers, fostered in large part by the commissioning of our Sichuan manufacturing facility in July 2016, a key milestone in our corporate development. The Sichuan facility will ultimately add 300,000 metric tons of annual production to our domestic capacity for a total domestic capacity of 690,000 metric tons. The new facility also extends our geographical reach beyond our established Northeast base, generating strong growth from the South and Central China regions, in addition to our continued and steady business development in Southwest and East China. We installed 50 production lines with 60,000 metric tons of annual production in the second half of 2016 and construction at the complex is expected to be completed by the end of 2017."

"The Sichuan facility substantially expands the footprint of our auto business in China and while we expect that automotive applications will continue to be our core business, the new facility includes precision equipment which will enable us to diversify our product platform into such high-growth verticals as ships, high-speed rail, airplanes, bio-degradable materials, medical-grade materials, food packaging, electronic equipment, electrical products, alternative energy applications and power devices, which will help to propel the Company's growth."

"Our new facility in Dubai also extends our specialized high-tech products into an important new market. We are planning to complete installing 45 production lines with 12,000 metric tons of annual production capacity by the end of July 2017, and an additional 50 production lines with 13,000 metric tons of annual production capacity by the end of January 2018. This will bring the total installed production capacity in our Dubai facility to 25,000 metric tons. The Dubai facility will target high-end products for the overseas market and will ultimately enable more active inroads into the markets of Europe, the Middle East, Russia and other international regions."

"China XD continues to value our deep working relationships with our customers above all, and is committed to creating value with our culture of hard work and innovation. We anticipate that the continued execution of our strategic plan driven by an increase in our production capacity, our entry into new markets, a diversified customer base and an escalation in international sales will help to generate business growth for years to come. For fiscal 2017, we are providing financial guidance of between $1.2 billion and $1.3 billion in revenue and between $85 million and $100 million in net income," Mr. Han concluded.

Fourth Quarter 2016 Results

Revenues were $377.8 million for the fourth quarter of 2016, compared to $272.8 million for the same period of 2015, representing an increase of $105.0 million, or 38.5%. The year-over-year increase was primarily due to a 30.4% increase in sales volume and an 11.7% increase in the average RMB selling price of our products.

The increase in revenues in the fourth quarter of 2016 was driven by growth in demand for our products in the domestic China market, our aggressive efforts to expand our customer base attributable to our new plant in Sichuan and our efforts to expand overseas sales. We recorded sales increases of 422.0% in South China, 121.0% in Central China, 39.2% in East China and 16.7% in Southwest China. Overseas sales were $37.7 million for the fourth quarter of 2016, accounting for 10.0% of total sales, reflecting the Company's resumed sales to overseas markets in fiscal 2016.

Premium products (PA66, PA6, Plastic Alloy, PLA, POM and PPO) in total accounted for 82.8% of revenues in the fourth quarter of 2016, compared to 81.1% in the prior year period. The Company continued to shift its production mix from traditional polymer materials to higher-end products due to (i) the 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, where manufacturers tend to use more and higher-end modified plastics in quantity per vehicle in China.

Gross profit was $82.3 million for the fourth quarter of 2016, compared to $52.0 million for the same period of 2015, representing an increase $30.3 million, or 58.3%. Gross margin was 21.8% compared to 19.1% in the fourth quarter of 2015, primarily due to a higher contribution of higher-margin products sold overseas.

General and administrative (G&A) expenses were $9.9 million for the fourth quarter of 2016, compared to $6.5 million for the same period of 2015, representing an increase of $3.4 million, or 52.3%. This increase was primarily due to the increases in salary, including bonus and welfare expenses, due to the increase in the number of management and general staff from various supporting departments. On a percentage basis, G&A expenses in the fourth quarter of 2016 were 2.6% compared to 2.4% for the same period of 2015.

Research and development (R&D) expenses were $29.3 million for the fourth quarter of 2016, compared to $2.8 million for the same period of 2015, representing an increase of $26.5 million, or 946.4%. This increase was primarily due to (i) elevated R&D activities to meet the higher quality requirements of potential customers from Europe which resulted in an increase amount of $15.3 million, (ii) increased R&D efforts directed towards applications in new electrical equipment, electronics, alternative energy applications, power devices, aviation equipment and ocean engineering in addition to other new products primarily for advanced industrialized applications in the automobile sector and in new verticals such as ships, airplanes, high-speed rail, 3D printing materials, biodegradable plastics and medical devices which resulted in an increase amount of $10.0 million, and (iii) increased depreciation expenses after the reclassification of construction in progress (CIP) for R&D purposes to fixed assets in Sichuan Enterprise Group Company Limited ("Sichuan Xinda") which resulted in an increase of $0.09 million. As of December 31, 2016, the number of ongoing research and development projects was 212.

Operating income was $42.6 million for the fourth quarter of 2016, compared to $42.3 million for the same period of 2015, representing an increase of $0.3 million, or 0.7%. This increase was primarily due to the higher gross margin, partially offset by higher research and development expenses.

Net interest expense was $7.6 million for the fourth quarter of 2016, compared to net interest expense of $9.3 million for the same period of 2015, primarily due to (i) a decrease in interest expense of $1.7 million, due to a decrease in the average interest rate to 4.5% in the fourth quarter of 2016 compared to 5.2% for the same period of 2015, (ii) a very slight increase in interest income due to an increase in the average deposit balance to $282.6 million for the fourth quarter of 2016 compared to $265.0 million for the same period of 2015, partially offset by (iii) an increase in the average short-term and long-term loan balance to $727.4 million for the fourth quarter of 2016 compared to $416.2 million for the same period of 2015, and (iv) a decrease in the average interest rate to 1.9% for the fourth quarter of 2016 compared to 2.2% for the same period of 2015.

Income tax expense was $2.3 million for the fourth quarter of 2016, representing an effective income tax rate of 6.0%, compared to an effective income tax rate of 19.2% for the same period of 2015. The decrease of the effective tax rate was primarily due to a greater contribution to consolidated Company profit by AL Composites Materials FZE ("Dubai Xinda") which was exempted from income taxes. The effective income tax rate for the fourth quarter of 2016 differs from the People's Republic of China (PRC) statutory income tax rate of 25% primarily due to (i) the effect of the preferential tax rate of Dubai Xinda not subject to PRC income tax, (ii) the preferential tax rate of Sichuan Xinda, and (iii) the deduction of higher R&D expenses, partially offset by (iv) the increase of valuation allowances against deferred income tax assets of certain subsidiaries which were at a cumulative loss position, and (v) the effect of non-deductible expenses.

Net income was $36.7 million for the fourth quarter of 2016, compared to $26.8 million for the same period of 2015, representing an increase of $9.9 million, or 36.9%. Basic and diluted earnings per share were $0.56, compared to $0.41 per basic and diluted share in the fourth quarter of 2015.

The average number of shares used in the computation of basic and diluted earnings per share for the three months ended December 31, 2016 was 49.5 million, compared to 49.3 million shares for basic and diluted earnings per share in the prior year period.

Earnings before interest, tax, depreciation and amortization (EBITDA) was $58.2 million for the fourth quarter of 2016, compared to EBITDA of $51.2 million for the same period of 2015, representing an increase of $7.0 million, or 13.7%. 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 2016 Financial Results

Revenues were $1,201.7 million in fiscal 2016, compared to $999.2 million in fiscal 2015, representing an increase of $202.5 million, or 20.3%. The year-over-year increase was primarily due to a 20.5% increase in sales volume and a 4.8% increase in the average RMB selling price of our products.

The increase in revenues in fiscal 2016 was driven by growth in demand for our products in the domestic China market, our aggressive efforts to expand our customer base attributable to our new plant in Sichuan and our efforts to expand overseas sales. We recorded sales increases of 196.7% in South China, 112.4% in Central China, 39.4% in Southwest China and 35.6% in East China. Overseas sales were $110.2 million in fiscal 2016, accounting for 9.2% of total sales, representing an increase of $38.6 million, or 53.9%. This increase reflects our efforts to reduce our concentration of sales in the domestic China market.

Premium products (PA66, PA6, Plastic Alloy, PLA, POM and PPO) in total accounted for 81.3% of revenues in fiscal 2016, compared to 79.1% in fiscal 2015. The Company continued to shift its production mix from traditional polymer materials to higher-end products due to (i) the 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) end consumer recognition of better quality 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. In addition, the Company sold primarily higher-end Plastic Alloy to the customer overseas.

Gross profit was $247.0 million in fiscal 2016, compared to $181.4 million in fiscal 2015, representing an increase of $65.6 million, or 36.2%. Our gross margin increased to 20.6% during the year of 2016 from 18.2% for fiscal 2015, primarily due to higher contribution of higher-margin product sales from the overseas market.

General and administrative (G&A) expenses were $30.0 million in fiscal 2016, compared to $23.8 million for fiscal 2015, representing an increase of $6.2 million, or 26.1%. This increase is primarily due to the increase of (i) $5.8 million in salary, including bonus and welfare expenses, due to the increase in the number of management and general staff from various supporting departments, (ii) $0.8 million in travelling and transportation expenses, (iii) $0.4 million in professional fees, and (iv) $0.4 million in rental fees, partially offset by (v) a decrease of $1.5 million in non-income taxation expenses.

Research and development expenses were $48.0 million in fiscal 2016 compared with $21.1 million in fiscal 2015, an increase of $26.9 million, or 127.5%. This increase was primarily due to (i) elevated activities to meet the higher quality requirements of potential customers from Europe which resulted in an increase of $15.3 million, (ii) increased efforts directed towards applications in new electrical equipment and electronics, alternative energy applications, power devices, aviation equipment and ocean engineering, in addition to other new products primarily for advanced industrialized applications in the automobile sector and in new verticals such as ships, airplanes, high-speed rail, 3D printing materials, biodegradable plastics and medical devices, which resulted in an increase of $10.0 million, and (iii) an increase in depreciation expenses after additional R&D equipment was put into use at Sichuan Xinda which resulted in an increase of $0.09 million. As of December 31, 2016, the number of ongoing research and development projects was 212.

Operating income was $167.7 million in fiscal 2016 compared to $135.0 million for fiscal 2015, representing an increase of $32.7 million, or 24.2%. This increase was due to the higher gross margin, partially offset by higher general and administration expenses and higher research and development expenses.

Income tax expense was $17.4 million in fiscal 2016, representing an effective income tax rate of 14.6%, compared to an effective income tax rate of 17.9% in fiscal 2015. The decrease of the effective income tax rate in fiscal 2016 is primarily due to the greater contribution to consolidated Company profit generated by Dubai Xinda, which was exempted from income taxes. The effective income tax rate in fiscal 2016 differs from the PRC statutory income tax rate of 25% primarily due to (i) the effect of the preferential tax rate of Dubai Xinda which is not subject to PRC income tax, (ii) the preferential tax rate of Sichuan Xinda, and (iii) the deduction of higher R&D expenses, partially offset by (vi) the loss generated by the debt extinguishment of Favor Sea Limited, a British Virgin Islands entity that is not subject to PRC income tax, (iv) the increase of valuation allowances against deferred income tax assets of certain subsidiaries which were at a cumulative loss position, and (v) the effect of non-deductible expenses.

Net income was $101.6 million in fiscal 2016, compared to $83.7 million for fiscal 2015, representing an increase of $17.9 million, or 21.4%. Basic and diluted earnings per share were $1.54 in fiscal 2016, compared to basic and diluted earnings per share of $1.27 for fiscal 2015.

The average number of shares used in the computation of basic and diluted earnings per share for the fiscal year 2016 was 49.4 million, compared to 49.2 million shares for fiscal 2015.

Earnings before interest, tax, depreciation and amortization (EBITDA) was $194.7 million for the fiscal year 2016 as compared to EBITDA of $172.2 million for fiscal 2015, representing an increase of $22.5 million, or 13.1%. 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.

Financial Condition

As of December 31, 2016, the Company had $168.1 million in cash and cash equivalents, $184.8 million in time deposits with commercial banks, $239.5 million in working capital (current assets minus current liabilities) and a current ratio (current assets divided by current liabilities) of 1.2. Stockholders' equity as of December 31, 2016 was $634.3 million, an increase of 9.7% as compared to $578.0 million as of December 31, 2015.

Inventory decreased by 4.7% to $280.9 million as of fiscal year end 2016 as compared to fiscal year end 2015 due to the Company's ability to increase sales. Property, plant and equipment, net, increased by 41.1% to $806.4 million as of fiscal year end 2016 as compared to fiscal year end 2015 mainly due to the delivery of equipment to Dubai Xinda at the beginning of 2016. Prepayment to equipment suppliers decreased by 92.2% to $14.2 million as of year-end fiscal 2016 as compared to fiscal year end 2015 mainly due to the delivery of equipment to Dubai Xinda. The aggregate short-term and long-term bank loans increased by 77.2% to $694.3 million as of fiscal year end 2016 as compared to fiscal year end 2015 due to the utilization of existing lines of credit and our taking out a $180 million syndicated loan to redeem our 11.75% guaranteed senior notes due February 4, 2019. We believe our current debt level is manageable. We define the manageable debt level as the sum of aggregate short-term and long-term loans, and notes payable, over total assets.

On August 29, 2016, the Company fully redeemed all of its 11.75% guaranteed senior notes due on February 4, 2019 (the "Senior Notes"), plus accrued and unpaid interest to the redemption date. The aggregate amount paid to redeem the Senior Notes was $166.6 million, plus accrued and unpaid interest to the redemption date, which resulted in a one-time, non-operating charge of $19.0 million as loss on debt extinguishment in the third quarter of 2016. On August 22, 2016, a wholly-owned subsidiary of the Company, Xinda Holding (HK) Company Limited, entered into an agreement for a loan facility in an aggregate amount of $180.0 million with a consortium of banks and financial institutions led by Standard Chartered Bank (Hong Kong) Limited ("Standard Chartered"). Pursuant to the agreement with Standard Chartered, the proceeds of the loan facility was applied primarily to the redemption of the Senior Notes.

Recent Events

On February 17, 2017, the Company issued a press release announcing that its Board of Directors (the "Board") has received a preliminary non-binding proposal letter, dated February 16, 2017, from its Chairman and Chief Executive Officer, Mr. Jie Han ("Mr. Han"), XD Engineering Plastics Company Limited ("XD Engineering"), a company incorporated in the British Virgin Islands and wholly owned by Mr. Han, and MSPEA Modified Plastics Holding Limited, an affiliate of Morgan Stanley Private Equity Asia III, Inc. (collectively, the "Buyer Consortium"), to acquire all of the outstanding shares of common stock of the Company not already beneficially owned by the Buyer Consortium in a "going-private" transaction (the "Transaction") for $5.21 per share of common stock in cash. The proposal letter states that the Buyer Consortium expects that the Board will appoint a special committee of independent directors to consider the proposal and make a recommendation to the Board. The proposal letter also states that the Buyer Consortium will not move forward with the proposed Transaction unless it is approved by such a special committee, and the proposed Transaction will be subject to a non-waivable condition requiring approval by majority shareholder vote of shareholders other than the Buyer Consortium members. The Buyer Consortium currently beneficially owns approximately 74% of the issued and outstanding shares of common stock of the Company on a fully diluted and as-converted basis.

The Board has established a special committee (the "Special Committee") of disinterested directors to consider the proposal. The Special Committee is composed of the following independent directors of the Company: Mr. Lawrence W. Leighton, Mr. Feng Li, and Mr. Linyuan Zha, with Mr. Leighton 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. The Special Committee intends to retain advisors, including an independent financial advisor, to assist in the evaluation of the proposal and any additional proposals that may be made by the Buyer Consortium.

The Special Committee cautions the Company's shareholders and others considering trading in its securities that the Special Committee has not made any decisions with respect to the Company's response to the proposal. There can be no assurance that any definitive offer will be made by the Buyer Consortium or any other person, that any definitive agreement will be executed relating to the proposed Transaction, or that this or any other transaction will be approved or consummated.

After initial approval by the Board of Directors and the Company's major investor on December 8, 2016, Sichuan Xinda entered into a strategic investment agreement with Shunqing Government, Nanchong City, Sichuan Province, on December 12, 2016. Due to the uncertainty of securing the necessary land use rights for the project, the Company waited until March 13, 2017 and entered into a "Land Use Right Transfer Agreement" with the government agency. The Company expects to sign the official and definitive investment agreement pertaining to the production of 300,000 metric tons of bio-composite materials and additive manufacturing used composites (3D printing materials) and 20,000 metric tons of functional masterbatch with Shunqing Government, Nanchong City, Sichuan Province on March 17, 2017. The Company will make necessary and appropriate disclosure in accordance with required rules and regulations so that further details of the definitive investment agreement will be forthcoming.

Financial Guidance and Business Outlook

The Company met its financial guidance for fiscal 2016, with revenue of $1.2 billion, surpassing its forecasted revenue estimate range of $1.0 billion and $1.1 billion, and net income of $101.6 million, in line with the forecasted net income estimate range of $100.0 million to $110.0 million.

In light of an anticipated contribution from additional production capacity, our entry to new markets, a further diversified customer base and an escalation of sales overseas, the Company projects revenue for fiscal 2017 to range between $1.2 billion and $1.3 billion. Gross margin in fiscal 2017 is expected to remain stable as compared to that of fiscal 2016. In order to support the Company's long-term and sustainable growth, it is expected that general and administrative, research and development, and selling expenses could increase by $14.5 million. Also, our interest expense could increase by 30%, or approximately $20 million, mainly to replace short-term debt with long-term loans to improve our capital structure and fund our growth projects. Therefore, the Company projects net income to range between $85.0 million to $100.0 million. This is based on the anticipation of a continued recovery throughout the Chinese automotive supply chain and a stabilization of crude oil pricing and its impact on polymer composite materials in 2017. This forecast also assumes contributions from the Sichuan plant and the Dubai second phase project, both of which will start production in the second half of 2017. It also assumes the average exchange rate of the US dollar to RMB at 6.8. This financial guidance reflects the Company's preliminary view of its business outlook for fiscal 2017 and is subject to revision based on changing market conditions at any time.

Conference Call

China XD Plastics' senior management will host a conference call at 9:00 am Eastern Time on Thursday, March 16, 2017, to discuss its fourth quarter and fiscal 2016 financial results. The conference call can be accessed by dialing +1 (855) 298-3404 (for callers in the U.S.), +86-4001-200-539 (for Mainland China callers) or +852 5808 3202 (for Hong Kong callers) and entering pass code 9251507.

A recording of the conference call will be available through March 23, 2017, by calling +1 (866) 846-0868 (for callers in the U.S.) and entering pass code 9251507.

A live webcast and replay of the conference call will be available on the investor relations page of the Company's website at http://www.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 29 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, 2016, 402 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://www.chinaxd.net, 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 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 its the ongoing mix shift to more advanced products; the prospect of the Company's Dubai facility, and the associated expansion into Middle East, Europe and other parts of Asia; the prospect of the Company's Southwest China facility, and its penetration into Southwest China; the Company's projections of its revenues for performance in fiscal 2017. 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 could further impair the automotive industry and limit demand for our products; fluctuations in automotive sales and production could have a material adverse effect on our results of operations and liquidity; our financial performance may be affected by the prospect of our Dubai facility and the associated expansion into Middle East, Europe and other parts of Asia; the withdrawal of preferential government policies and the tightening control over the Chinese automotive industry and automobile purchase restrictions imposed in certain major cities may limit market demand for our products; the slowing of Chinese automotive industry's growth; the concentration of our 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.

Contacts:

China XD Plastics
Mr. Taylor Zhang, CFO (New York)
Phone: +1 (212) 747-1118
Email: cxdc@chinaxd.net

Investor Relations: Citigate Dewe Rogerson
Ms. Vivian Chen, Managing Director
US: +1 (347) 481-3711
Email: Vivian.chen@citigatedr.com

- Financial Tables Follow -

CHINA XD PLASTICS COMPANY LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS



December 31,




2016



2015




US$



US$


ASSETS







Current assets:







Cash and cash equivalents



168,086,445




119,928,485


Restricted cash



103,489,402




50,852,327


Time deposits



184,806,112




237,626,806


Accounts receivable, net of allowance for doubtful accounts



410,049,559




234,542,739


Amounts due from a related party



229,624




244,836


Inventories



280,939,008




294,665,195


Prepaid expenses and other current assets



125,310,309




15,675,848


Total current assets



1,272,910,459




953,536,236


Property, plant and equipment, net



806,363,692




571,746,507


Land use rights, net



22,536,397




24,506,837


Long-term prepayments to equipment and construction suppliers



14,167,702




183,226,006


Other non-current assets



10,521,949




18,966,622


Total assets



2,126,500,199




1,751,982,208











LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCKS AND STOCKHOLDERS' EQUITY


Current liabilities:









Short-term bank loans, including current portion of long-term bank loans



444,757,476




284,339,089


Bills payable



148,392,677




33,522,287


Accounts payable



320,013,040




257,417,000


Amounts due to a related party



11,548




8,439


Income taxes payable



897,625




6,881,946


Accrued expenses and other current liabilities



119,339,366




140,988,712


Total current liabilities



1,033,411,732




723,157,473


Long-term bank loans, excluding current portion



249,520,615




107,481,709


Notes payable



-




145,634,996


Deferred income



69,311,102




62,039,050


Other non-current liabilities



42,420,619




38,046,917


Total liabilities



1,394,664,068




1,076,360,145











Redeemable Series D convertible preferred stock (redemption amount of US$212,212,300 and US$184,461,800 as of December 31, 2016 and 2015, respectively)



97,576,465




97,576,465


Stockholders' equity:









Series B preferred stock



100




100


Common stock, US$0.0001 par value, 500,000,000 shares authorized, 49,532,541 shares and 49,344,284 shares issued, 49,511,541 shares and 49,323,284 shares outstanding as of December 31, 2016 and 2015, respectively



4,952




4,933


Treasury stock, 21,000 shares at cost



(92,694)




(92,694)


Additional paid-in capital



82,606,404




81,919,932


Retained earnings



617,168,735




515,555,985


Accumulated other comprehensive loss



(65,427,831)




(19,342,658)


Total stockholders' equity



634,259,666




578,045,598


Commitments and contingencies









Total liabilities, redeemable convertible preferred stocks and stockholders' equity



2,126,500,199




1,751,982,208


CHINA XD PLASTICS COMPANY LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME



Years
Ended December 31,



Three Months
Ended December 31,




2016



2015



2016



2015




US$



US$



US$



US$















Revenues



1,201,678,898




999,192,894




377,661,511,




272,752,694


Cost of revenues



(954,723,617)




(817,811,445)




(295,504,993)




(220,831,046)


Gross profit



246,955,281




181,381,449




82,156,518




51,921,648



















Selling expenses



(1,356,843)




(1,458,658)




(351,203)




(367,380)


General and administrative expenses



(29,952,304))




(23,816,148)




(9,917,384)




(6,495,472)


Research and development expenses



(47,989,665)




(21,061,345)




(29,308,647)




(2,756,980)


Total operating expenses



(79,298,812)




(46,336,151)




(39,577,234)




(9,619,832)



















Operating income



167,656,469




135,045,298




42,579,284




42,301,816



















Interest income



5,847,274




8,221,532




1,374,799




1,370,540


Interest expense



(41,370,432)




(42,704,097)




(8,966,648)




(10,712,778)


Foreign currency exchange gains (losses)



1,951,732




(2,237,541)




1,595,060




(1,214,553)


Gains on foreign currency forward contracts



-




653,569




-




-


Loss on debt extinguishment



(18,963,834)




-




-




-


Government grants



3,914,360




2,991,493




2,475,771




1,439,298


Total non-operating expenses, net



(48,620,900)




(33,075,044)




(3,521,018)




(9,117,493)



















Income before income taxes



119,035,569




101,970,254




39,058,266




33,184,323



















Income tax expense



(17,422,819)




(18,237,975)




(2,335,447)




(6,369,171)



















Net income



101,612,750




83,732,279




36,722,819




26,815,152



















Earnings per common share:

















Basic and diluted



1.54




1.27




0.56




0.41


Net Income



101,612,750




83,732,279




36,722,819




26,815,152



















Other comprehensive income

















Foreign currency translation adjustment, net of nil income taxes



(46,085,173)




(32,118,459)




(27,617,945)




(15,606,469)



















Comprehensive income



55,527,577




51,613,820




9,104,874




11,208,683


CHINA XD PLASTICS COMPANY LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS



Years Ended December 31,




2016



2015



2014




US$



US$



US$


Cash flows from operating activities:










Net income



101,612,750




83,732,279




120,776,369


Adjustments to reconcile net income to net cash provided by operating activities:













Net reversal for doubtful accounts



-




(69,281)




(35,849)


Depreciation and amortization



34,244,842




27,540,212




22,916,893


Stock-based compensation



686,491




1,044,162




1,003,040


Loss on change in fair value of warrants liability



-




-




1,871,074


Amortization of discount and issuance cost of the Notes



2,040,608




1,086,010




898,634


Loss on change in fair value of forward contract



-




-




2,435


Foreign currency exchange losses (gains)



(2,965,949)




2,720,131




2,051,596


Losses on disposals of property, plant and equipment



259,104




9,036




10,292


Deferred income tax benefit



(2,292,830)




(2,380,236)




(2,018,757)


Loss on debt extinguishment



18,963,834




-




-


Restricted cash



(27,269,199)




4,011,349




(6,427,562)


Accounts receivable



(190,860,210)




(40,614,289)




72,318,976


Amounts due from a related party



-




(35,937)




-


Inventories



(3,764,167)




(58,103,919)




(109,198,972)


Prepaid expenses and other current assets



21,222,125




(4,542,796)




(3,719,794)


Other non-current assets



811,456




(371,872)




-


Bills payable



122,226,675




(8,119,365)




18,538,133


Accounts payable



82,085,904




116,133,982




32,823,457


Amounts due to a related party



3,792




8,167




-


Income taxes payable



(5,807,300)




3,889,710




(8,996,712)


Accrued expenses and other current liabilities



(75,664,932)




86,963,823




5,935,116


Deferred income



(304,465)




3,371,249




-


Other non-current liabilities



9,255,439




11,098,323




-


Net cash provided by operating activities



84,483,968




227,370,738




148,748,369


Cash flows from investing activities:













Purchase of time deposits



(475,315,245)




(474,254,312)




(626,994,741)


Proceeds from maturity of time deposits



515,088,058




463,771,799




663,216,581


Purchases of and deposits for property, plant and equipment



(210,840,098)




(267,427,681)




(334,092,742)


Purchase of land use rights



-




(13,931,804)




(1,460,754)


Government grant related to the construction of Sichuan plant



22,478,569




11,499,000




-


Net cash used in investing activities



(148,588,716)




(280,342,998)




(299,331,656)


Cash flows from financing activities:













Proceeds from bank borrowings



687,164,318




504,218,741




797,615,642


Repayment of bank borrowings



(537,809,334)




(339,528,477)




(831,932,534)


Redemption of notes payable



(165,366,000)




-




-


Proceeds from Syndicate loan facility



180,000,000










Proceeds from Senior Notes Payable



-




-




148,396,175


Payment of issuance costs of the Notes



-




-




(4,718,452)


Proceeds from exercise of Series A investor warrants



-




-




596,740


Proceeds from early exercise of options



-




121,725




-


Release of restricted cash as collateral for bank borrowings



31,375,326




-




10,022,398


Placement of restricted cash as collateral for bank borrowings



(66,757,459)




(33,077,094)




(20,612,868)


Payments of issuance cost of bank borrowings



(6,770,000)




-




-


Net cash provided by financing activities



121,836,851




131,734,895




99,367,101















Effect of foreign currency exchange rate changes on cash and cash equivalents



(9,574,143)




(4,290,762)




1,126,894


Net increase (decrease) in cash and cash equivalents



48,157,960




74,471,873




(50,089,292)


Cash and cash equivalents at beginning of year



119,928,485




45,456,612




95,545,904


Cash and cash equivalents at end of year



168,086,445




119,928,485




45,456,612


Supplemental disclosure of cash flow information:













Interest paid, net of US$ 2,562,026, US$ 231,356 and US$ 113,317 capitalized for the years ended December 31, 2016, 2015 and 2014, respectively



45,782,010




40,136,978




33,537,952


Income taxes paid



19,521,472




8,982,167




29,288,894


Non-cash investing and financing activities:













Government grant related to construction in the form of repayment of bank loans on behalf of the Company by the government (note 13)



-




38,118,231




-


Government grant related to the construction of Sichuan plant in the form of restricted cash (note 13)



-




11,117,817




-


Accrual for purchase of equipment



94,031,275




41,251,663




-


Accrual for issuance cost of the Notes



-




-




202,712


CHINA XD PLASTICS COMPANY LIMITED

Reconciliation of EBITDA to Net Income



Three Months Ended

Years Ended


December 31,

December 31,


2016

2015

2016

2015

EBITDA

58,232,039

51,151,220

194,650,843

172,214,563

Less: Interest expense

8,966,648

10,712,778

41,370,432

42,704,097

Income tax expense

2,335,447

6,369,171

17,422,819

18,237,975

Depreciation and amortization expense

10,207,125

7,254,119

34,244,842

27,540,212

Net income

$36,722,819

$26,815,152

$101,612,750

$83,732,279

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/specialty-chemical-company-china-xd-plastics-announces-fourth-quarter-and-fiscal-year-2016-financial-results-300424749.html

Source: China XD Plastics Company Limited

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