China XD Plastics Announces Record Third Quarter Revenue

HARBIN, China, Nov. 16 /PRNewswire-Asia-FirstCall/ -- China XD PlasticsCompany Ltd. ("China XD Plastics" or the "Company"), (OTC BulletinBoard: CXDC), engaged in the development, manufacture, and distribution ofmodified plastics primarily for use in automotive applications in China, todayreports financial results for the 2009 third quarter ended on September 30,2009.

Third Quarter 2009 Highlights -- Revenue was $36.2 million, an increase of 62.1% from the third quarter of 2008 -- Gross profit was $8.4 million, an increase of 45.9% from the third quarter of 2008 -- Gross profit margin was 23.3%, compared to 25.8% in the third quarter of 2008 -- Net income was $4.0 million, compared to $4.2 million in the third quarter of 2008 -- Diluted earnings per share was $0.10, compared to $0.13 for the second quarter of 2009 -- Adjusted non-GAAP earnings per diluted share were $0.17 compared with $0.14 in 2Q09 -- Total volume shipped was 17,914 metric tons, up 78.0% from 10,063 metric tons in the third quarter of 2008

"We are pleased with our execution as well as our strong results for thequarter," said Mr. Jie Han, Chairman and Chief Executive Officer of China XDPlastics. "During the quarter we continued to rapidly grow our sales, byadding new products, acquiring new customers and penetrating new markets tobroaden our presence in the modified plastics market in China. We are alsohonored that our success in growing and strengthening our business created theconditions for listing our shares on the NASDAQ Global Market. We believe thiswill further strengthen our business and allow us to accelerate our growth andcreate value for our shareholders."

Third Quarter 2009 Results

Revenue for the third quarter 2009 was up 62.1% to $36.2 million, comparedto $22.3 million in the same period of 2008. The increase in revenue isprimarily attributable to the increase sales volume driven by an improvedproduct mix as well as the expansion of the Company's customer base.

Gross profit for the third quarter 2009 was $8.4 million, up 45.9% from$5.8 million in the third quarter 2008. Gross margin was 23.3% compared to25.8% in the same period last year, and 20.9% in the second quarter 2009. Theyear-over-year decrease in gross margin was due to lower value mix associatedwith the surge in demand for economy vehicle models in China in recent months.The sequential improvement is related to the Company's successful efforts tolaunch new higher value-added products to penetrate new segments of theautomotive modified plastics market in China.

Selling expenses for the third quarter 2009 were $0.12 million, comparedto $0.2 million in the same period last year as the Company shut down itsChangchun office and increased its use of distributors. General andadministrative (G&A) expenses were $3.6 million, up 449.6% from $0.66 millionfor the same period of last year. The year-over-year increase in G&A expenseswas mainly attributed to the increased stock based compensation expense aswell as other expenses related to being a public company. Research andDevelopment ("R&D") expenses were $0.37 million compared to $0.24 million inthe same period last year. The increase in research and development expensewas primarily due to the upgrade of the research and development center andcontinued efforts to launch new products during the third quarter 2009.

Operating income for the third quarter 2009 was $4.3 million, compared to$4.7 million in the same period a year ago. Operating margin was 11.9%compared to 21.0% in the third quarter of 2008. The year-over-year reductionin operating margin is primarily due to the increase in operating expensesassociated with becoming a public company, including stock based compensation,legal and reporting expenses, among others.

Net Interest expense in the third quarter 2009 was $0.34 million, comparedto $0.32 million in the third quarter of 2008.

EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization)for the third quarter of 2009 was $7.6 million, up 57.1% from $4.9 million inthe third quarter of 2008. For a detailed reconciliation of adjusted EBITDA, aNon-GAAP measure, to its nearest GAAP equivalent, please see the financialtables at the end of this release.

Net income in the third quarter 2009 was $4.0 million, down 6.8% from $4.2million in the same period last year. Fully diluted earnings per share for thethird quarter 2009 were $0.10.

During the third quarter 2009, the Company incurred a non-cash charge of$2.8 million associated with stock-based compensation. Adjusting for thisnon-cash charge, non-GAAP net income for the third quarter of 2009 was $6.7million, or $0.17 per basic and fully-diluted share. For a detailedreconciliation of adjusted net income, a non-GAAP measure, to net income,please see the financial tables at the end of this release.

Nine Months Results

For the first nine months of 2009, total revenue was $94.5 million, up69.3% from the first nine months of 2008. Total volume shipped during thefirst nine months was 50,327 metric tons compared to 27,769 metric tons in thecomparable period of last year. Gross profit for the first nine months of 2009was $20.8 million, up 49.7% from gross profit of $13.9 million in thecomparable period a year ago. Gross margin was 22.1% and 24.9% for the firstnine months of 2009 and 2008, respectively. Income from operations was $14.0million, up 16.3% from $12.0 million in the first nine months of 2008. EBITDAwas $18.7 million in the first nine months of 2009, up 47.9% from $12.6million in first nine months of 2008. Net income for the first nine months of2009 was $13.0 million, up 13.4% from $11.4 million in the first nine monthsof 2008. Earnings per basic share were $0.54 and earnings per fully dilutedshare were $0.33 for the first nine months of 2009. Adjusting for non-cashcharges associated with stock-based compensation, adjusted net income, anon-GAAP measure, was $16.2 million or $0.68 basic earnings per share and$0.41 fully diluted earnings per share.

Financial Condition

As of September 30, 2009, China XD plastics had $5.1 million in cash andcash equivalents, $20.3 million in working capital and a current ratio of 1.9.Shareholder's equity as of September 30, 2009 stood at $40.2 million comparedto $24.1 million at the end of 2008.

Recent Events

On November 6, 2009, China XD Plastics announced the engagement of Ernst &Young to assist the Company in the implementation of Section 404 of theSarbanes-Oxley Act of 2002.

On November 2, 2009, China XD Plastics engaged Moore Stephens Hong Kong asits new independent auditor. Moore Stephens replaced Bagell Josephs Levine &Company, LLC, which was dismissed on the same day.

On September 24, 2009, China XD Plastics announced that during the thirdquarter of 2009 the Company was granted eight product certifications,including three high-end modified nylon compounds for its newly launchedproducts by the FAW Group Corporation, one of the leading automobilemanufacturers and vanguard of automobile industry in China with sales of overone million vehicles in the first seven months of 2009.

On August 31, 2009, China XD Plastics announced that the Company enteredinto a long-term non-exclusive agreement with Changchun Wanbofeng PlasticsCompany Limited ("Wanbofeng") to distribute carbon fiber reinforced nyloncomposite ("CFRNC"), a product newly developed by the Company.

On July 30, 2009, China XD Plastics announced that the Company'sinformation is now made available via Standard & Poor's Market Access Program,an information distribution service that enables subscribing publicly tradedcompanies 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-yearprovisional agreement with Tianjin Huapu Company to distribute its specializedmodified plastics for automotive applications in Northern China.

Business Outlook and Guidance

During the first nine months of 2009, vehicle sales in China reached 9.7million units, up 34 percent from a year earlier and on target to top 12million units by the end of 2009. In October, the 2009 China automobile outputhas reached over 10 million units for the first time in history, a milestonethat only United States and Japan have achieved previously. The stimulus planimplemented by the government in China continues to have strong effect on thedemand of the automobiles in China. In addition, as the Chinese economyrecovers from the global recession, sales of high-end automobiles are expectedto expand at a faster pace, allowing China XD Plastics to continue its pushtowards higher value added products.

For 2009, the Company reaffirms its guidance for annual revenues in therange of $110 million to $130 million, and annual adjusted net income,non-cash charges resulting from stock compensation expense, in the range of$17 million to $20 million.

"We are on target to achieve our targets for 2009, and as we look to 2010,we continue to see tremendous opportunities for the continued rapid growth ofour business which will position China XD Plastics as a leader in the modifiedplastics industry in China," said Mr. Jie Han, Chairman and Chief ExecutiveOfficer of China XD Plastics. "We will continue to pursue our strategy toinvest in technology development targeting high margin products, win newproduct certifications from auto OEMs, and expand our capacity to expand ourmarket share as we participate in the growth of the automotive industry inChina."

Conference Call

China XD Plastics will host a conference call at 8:00 a.m. ET on Monday,November 16, 2009, to discuss the 2009 third quarter financial results. Toparticipate in the conference call, please dial the following number five toten minutes prior to the scheduled conference call time: 888-419-5570.International callers should dial +1-617-896-9871. The pass code for the callis 47688055. If you are unable to participate in the call at this time, areplay will be available for 14 days starting on Monday, November 16, 2009 at10:00 a.m. ET. To access the replay, dial 888-286-8010. International callersshould dial +1-617-801-6888. The conference pass code is 21636927.

About China XD Plastics Company Ltd.

China XD Plastics Company Ltd., through its wholly owned subsidiary HarbinXinda Macromolecule Material ("Xinda"), develops, manufactures, anddistributes modified plastics, primarily for automotive applications. TheCompany's specialized plastics are used in the exterior and interior trim andin the functional components of more than 30 automobile brands manufactured inChina including Audi, Red Flag, Volkswagen and Mazda. The Company'swholly-owned research institute is dedicated to the research and developmentof modified plastics, and benefits from the cooperation with well-knownscientists from prestigious universities in China. As of the end of September30, 2009, 137 products that Xinda manufactured have been certified for use byone or more of the automobile manufacturers in China. For more informationplease visit http://www.chinaxd.net .

Safe Harbor Statement

This announcement contains forward-looking statements within the meaningof the safe harbor provisions of the Private Securities Litigation Reform Actof 1995. All statements other than statements of historical fact in thisannouncement are forward-looking statements, including but not limited to, theCompany's ability to raise additional capital to finance the company'sactivities; the effectiveness, profitability, and the marketability of itsproducts; legal and regulatory risks associated with the share exchange; theCompany's ability to successfully expand its production capacity; the futuretrading of the common stock of the company; the Company's ability to operateas a public company; the period of time for which its current liquidity willenable the company to fund its operations; the company's ability to protectits proprietary information; general economic and business conditions; thevolatility of the company's operating results and financial condition; thecompany's ability to attract or retain qualified senior management personneland research and development staff; and other risks detailed in the company'sfilings with the Securities and Exchange Commission and available on itswebsite at http://www.sec.gov. These forward-looking statements involve knownand 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 toreflect subsequent occurring events or circumstances, or to changes in itsexpectations, except as may be required by law. Although the company believesthat the expectations expressed in these forward looking statements arereasonable, they cannot assure you that their expectations will turn out to becorrect, and investors are cautioned that actual results may differ materiallyfrom 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 Nine Months Ended September 30, September 30, 2009 2008 2009 2008 Sales $36,194,459 $22,324,847 $94,498,615 $55,802,003 Cost of sales (27,777,237) (16,555,094) (73,656,568) (41,880,768) Gross profit 8,417,222 5,769,753 20,842,047 13,921,235 Operating expenses Research and development expenses 370,279 237,106 868,252 557,746 Selling expenses 118,018 194,029 224,261 241,823 General and administrative expenses 3,606,997 656,322 5,768,050 1,102,261 Total operating expenses 4,095,294 1,087,457 6,860,563 1,901,830 Operating income 4,321,928 4,682,296 13,981,484 12,019,405 Other income (expenses) Interest income (expenses) (340,464) (318,608) (1,033,183) (481,875) Other income 407 485 62,949 25,665 Other expense (1,052) (100,881) (10,937) (100,881) Total other expense (341,109) (419,004) (981,171) (557,091) Income before income taxes 3,980,819 4,263,292 13,000,313 11,462,314 Provision for income taxes 24,179 18,182 30,641 24,411 Net income $3,956,640 $4,245,110 $12,969,672 $11,437,903 Other comprehensive income (loss) Foreign currency translation adjustment (19,210) 220,337 (46,606) 1,031,080 Comprehensive income $3,937,430 $4,465,447 $12,923,066 $12,468,983 Basic and diluted earnings per common share Basic $0.10 $10.46 $0.54 $28.19 Diluted $0.10 $10.46 $0.33 $28.19 Weighted average common share outstanding Basic 39,140,751 405,802 23,797,701 405,802 Diluted 39,188,824 405,802 39,206,884 405,802 CHINA XD PLASTICS COMPANY LIMITED CONDENSED CONSOLIDATED BALANCE SHEETS September 30, December 31, 2009 2008 (Unaudited) ASSETS Current assets: Cash and cash equivalents $5,065,380 $3,869,035 Restricted cash -- 3,664,346 Notes receivable 118,951 303,437 Accounts receivable - net of allowance for bad debts of $99,614 and $99,669, respectively 11,977,316 11,234,507 Other receivables 268,638 21,917 Inventories 15,276,568 12,438,782 Due from related parties 48,551 -- Advance to employees 435,516 92,329 Advance to suppliers 9,832,879 13,131,074 Taxes receivable 223,680 -- Prepaid expenses 34,796 -- Total current assets 43,282,275 44,755,427 Property, plant and equipment, net 19,675,869 19,332,712 Other assets: Deferred charges -- 378,073 Intangible assets, net 243,362 247,681 Total other assets 243,362 625,754 Total assets $63,201,506 $64,713,893 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short term loans $20,215,841 $20,520,337 Bank acceptance notes payable -- 8,061,561 Accounts payable 626,766 113,232 Other payable 147,871 106,232 Accrued expenses 303,970 820,625 Taxes payable 16,219 17,777 Due to related parties 777,462 7,542,950 Deferred revenue 937,499 3,469,796 Total current liabilities 23,025,628 40,652,510 Commitments and contingencies Stockholders' equity Common Stock, $0.0001 par value, 500,000,000 shares authorized, 40,809,898 and 805,802 shares issued and outstanding as of September 30, 2009 and December 31, 2008, respectively 4,081 81 Series A Preferred Stock, $0.0001 par value, 50,000,000 shares authorized, - 0 - and 1,000,000 shares issued and outstanding as of September 30, 2009 and December 31 2008, respectively -- 100 Series B Preferred Stock, $0.0001 par value, 50,000,000 shares authorized, 1,000,000 shares issued and outstanding as of September 30, 2009 and December 31, 2008 100 100 Additional paid-in-capital 5,670,316 2,482,786 Retained earnings 33,020,813 20,051,142 Accumulated other comprehensive income 1,480,568 1,527,174 Total stockholders' equity 40,175,878 24,061,383 Total liabilities and stockholders' equity $63,201,506 $64,713,893 CHINA XD PLASTICS COMPANY LIMITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Nine Months ended September 30, 2009 2008 Cash flows from operating activities Net income $12,969,672 $11,437,903 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Loss in disposal of property, plant and equipment 45,342 -- Depreciation & amortization 1,457,983 685,860 Stock-based compensation expense 3,191,430 -- Changes in assets and liabilities: (Increase) decrease in - Restricted cash 3,659,063 1,403,171 Accounts receivable and other receivables (995,004) (14,010,629) Tax receivable (223,483) -- Inventory (2,842,260) (4,649,965) Prepaid expenses (34,796) 22,344 Notes receivables 184,153 (804,096) Due from related parties (50,389) -- Advance to employees (341,056) -- Advances to suppliers 3,287,927 (6,900,409) Deferred charge 377,528 -- Increase (decrease) in - Accounts payable and other payable 554,807 3,894,526 Accrued expenses (515,740) 644,019 Tax payable (1,536) (1,378,125) Deferred revenue (2,528,120) 168,341 Net cash provided by (used in) operating activities 18,195,521 (9,487,060) Cash flows from investing activities Purchase of property, plant and equipment (1,842,306) (5,103,516) Net cash used in investing activities (1,842,306) (5,103,516) Cash flows from financing activities Repayment to short term loans (292,725) -- Proceeds from short term loans -- 19,758,944 Repayment of bank acceptance notes payable (8,049,938) (3,865,880) Repayment to related party Loans (7,328,683) -- Proceeds from related party Loan 562,511 730,228 Net cash (used in) provided by financing activities (15,108,835) 16,623,292 Effect of exchange rate changes on cash and cash equivalents (48,035) 46,845 Net increase in cash and cash equivalents 1,196,345 2,079,561 Cash and cash equivalents, beginning of period 3,869,035 87,455 Cash and cash equivalents, end of period $5,065,380 $2,167,016 Supplemental disclosures of cash flow information: Interest paid $1,033,183 $481,875 Income taxes paid $-- $-- Non-cash investing and financing activities: Warrants issued for consulting service $46,260 -- Common stock issued for services $5,487,541 --

Reconciliation of Net Income to Adjusted Net Income

GAAP results for the three months and nine months ended September 30, 2009include non-cash stock based compensation expense. To supplement theCompany's condensed consolidated financial statements presented on a GAAPbasis, the Company has provided non-GAAP financial information excluding theimpact of this item in this release. The Company's management believes thatthis non-GAAP measure provides investors with a better understanding of howthe results relate to the Company's historical performance. A reconciliationof the adjustments to GAAP results appears in the table accompanying thispress release. This additional non-GAAP information is not meant to beconsidered in isolation or as a substitute for GAAP financials. The non-GAAPfinancial information that the Company provides also may differ from thenon-GAAP information provided by other companies.

CHINA XD PLASTICS COMPANY LIMITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 Three Months Ended September 30, 2009 Net Income Basic EPS Diluted EPS Adjusted Net Income - Non GAAP $6,713,977 $0.17 $0.17 Non-Cash Stock-based compensation (1) $2,757,337 $0.07 $0.07 Net Income - GAAP $3,956,640 $0.10 $0.10 Adjusted Net Income Nine Months Ended September 30, 2009 Net Income (Loss) Diluted EPS Net Income Basic EPS Diluted EPS Adjusted Net Income - Non GAAP $16,161,103 $0.68 $0.41 Non-Cash Stock-based compensation (1) $3,191,430 $0.14 $0.08 Net Income - GAAP $12,969,672 $0.54 $0.33 Three Months Ended September 30, 2008 Net Income Basic EPS Diluted EPS Adjusted Net Income - Non GAAP $4,245,110 $10.46 $10.46 Non-Cash Stock-based compensation (1) -- -- -- Net Income - GAAP $4,245,110 $10.46 $10.46 Adjusted Net Income Nine Months Ended September 30, 2008 Net Income (Loss) Net Income Basic EPS Diluted EPS Diluted EPS Adjusted Net Income - Non GAAP $11,437,903 $28.19 $28.19 Non-Cash Stock-based compensation (1) -- -- -- Net Income - GAAP $11,437,903 $28.19 $28.19 (1) The adjustment to Non-GAAP 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'smanagement believes that the presentation of Adjusted EBITDA provides usefulinformation regarding China XD Plastics' results of operations because itassists in analyzing and benchmarking the performance and value of China XDPlastics' business. The Company's calculation of Adjusted EBITDA may not beconsistent with similarly titled measures of other companies. The table belowprovides a reconciliation of EBITDA to net income, the most comparable GAAPmeasure.

CHINA XD PLASTICS COMPANY LIMITED. Reconciliation of Net Income to EBITDA (Amounts expressed in United States dollars) Three Months Ended Nine Months Ended September 30, September 30, 2009 2008 2009 2008 Net Income $3,956,640 $4,245,110 $12,969,672 $11,437,903 Interest Expense $340,464 $318,608 $1,033,183 $481,875 Provision for $24,179 $18,182 $30,641 $24,411 Income Taxes Stock-based compensation $2,757,337 $0 $3,191,430 $0 Depreciation and amortization $558,857 $278,325 $1,457,983 $685,860 EBITDA $7,637,476 $4,860,225 $18,682,909 $12,630,048 YoY Growth 57.1 % 47.9 % 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: +86-451-84346600 (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

SOURCE China XD Plastics Company Ltd.