Form 6-K
Table of Contents

 

 

FORM 6-K

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

REPORT OF FOREIGN ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 OF THE

SECURITIES EXCHANGE ACT OF 1934

For the month of November 2008

Commission File Number: 001-33863

 

 

XINYUAN REAL ESTATE CO., LTD.

 

 

27/F, China Central Place, Tower II

79 Jianguo Road, Chaoyang District

Beijing 100025

People’s Republic of China

(Address of principal executive offices)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F  þ            Form 40-F  ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ¨

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes  ¨            No  þ

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):

82-     N/A    

 

 

 


Table of Contents

XINYUAN REAL ESTATE CO., LTD.

Form 6-K

TABLE OF CONTENTS

 

     Page

Signature

   4

Exhibit 99.1 – Press Release Announcing Financial Results for Third Quarter 2008

   5

 

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Table of Contents

Appointment of Executive Officer

The Company appointed Mr. Meng Du as its chief operating officer, replacing Ms. Yuyan Yang effective November 21, 2008. Mr. Du will be involved in managing the Company’s operations, including its real estate development projects. Mr. Du has 10 years of executive-level experience from several property developers in the People’s Republic of China and has been involved in projects representing a combined gross floor area of approximately 3 million square meters. Mr. Du holds a masters degree in business administration from the Renmin University of China. Ms. Yang will remain on the Company’s board of directors, and has transitioned back to her prior position with the Company as assistant to the chief executive officer.

 

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Xinyuan Real Estate Co., Ltd.

By:

 

/s/ Yong Zhang

Name:

  Yong Zhang

Title:

  Chief Executive Officer

Date: November 25, 2008

 

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Exhibit 99.1

Xinyuan Real Estate Co., Ltd. Announces Financial Results for the Third Quarter and

First Nine Months of 2008

Company achieves total revenue and net income growth for the first nine months

of 2008 of 35.5% and 43.8%, respectively

BEIJING, China, November 25, 2008 – Xinyuan Real Estate Co., Ltd. (“Xinyuan” or “the Company”) (NYSE:XIN), a fast-growing residential real estate developer with a focus on strategically selected Tier II cities in China, today announced its unaudited financial results for the third quarter and nine months ended September 30, 2008.

 

 

Total revenues for the third quarter of 2008 decreased 5.4% to US$83.0 million from US$87.7 million for the second quarter of 2008.

 

 

Total revenues for the nine months ended September 30, 2008 increased 35.5% to US$295.8 million from US$218.3 million for the same period in 2007.

 

 

Net income for the third quarter of 2008 decreased 40.9% to US$7.8 million from US$13.2 million for the second quarter of 2008.

 

 

Net income for the nine months ended September 30, 2008 increased 43.8% to US$53.9 million from US$37.5 million for the same period in 2007.

 

 

Diluted earnings per share were US$0.05 for the third quarter of 2008, equivalent to US$0.10 per American Depositary Share (“ADS”), compared to US$0.08 diluted earnings per share or US$0.16 per ADS for the second quarter of 2008.

 

 

Diluted earnings per share were US$0.27 for the nine months ended September 30, 2008, equivalent to US$0.54 per ADS, compared to US$0.31 diluted earnings per share or US$0.62 per ADS for the same period in 2007.

 

 

During the third quarter of 2008, the Company launched the first phase of a new project with total developable gross floor area (“GFA”) of 509,851 square meters in Kunshan, and completed construction of total GFA of approximately 67,600 square meters for one ongoing project in Zhengzhou.

 

 

As of September 30, 2008, the Company had land reserves representing approximately 2.2 million square meters of developable GFA, all of which is either under construction or in the planning stage. This represents future sales of 2 to 3 years of development activity, and is consistent with the Company’s business plan.

 

     Three
months
ended
9/30/07
   Three
months
ended
9/30/08
   Nine
months
ended
9/30/07
   Nine
months
ended
9/30/08

Total revenue (US$000)

   120,595    82,951    218,300    295,811

Net income (US$000)

   16,049    7,785    37,484    53,909

Diluted earnings per share (US$)

   0.13    0.05    0.31    0.27

“The third quarter of 2008 continued a challenging period within China’s real estate sector,” said Mr. Yong Zhang, Xinyuan’s chairman and chief executive officer. “Government policies introduced during the second half of last year to cool a rapidly growing housing market continued to weigh heavily on consumer demand and have created a ‘wait-and-see’ attitude amongst consumers. While home prices have remained relatively stable in the markets in which we operate, sales volumes have decreased across much of the industry. Despite these challenges, Xinyuan has delivered solid results for the first nine months of 2008.”

 

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Mr. Zhang continued, “Recently, China’s central and municipal governments eased their monetary and fiscal policies in a combined effort to stimulate the real estate sector and promote growth. In addition, on November 9, 2008, China’s State Council announced a US$586 billion economic stimulus package aimed at encouraging domestic consumption. These are encouraging signs, and although it may take some time for these policies to demonstrate measurable results, we believe our quick asset turnover business model and strong cash position will allow us to take advantage of the pent-up demand generated by China’s rapid urbanization and growing middle class. Looking to the remainder of 2008 and into 2009, we plan to modify our production schedule and slow construction to enhance our capital efficiency and effectively monitor our cash flow until markets and demand stabilize. Although visibility remains difficult in the near-term, we remain confident in the long-term prospects of the real estate sector in China.”

Mr. Frank Ng, Xinyuan’s chief financial officer added, “As part of our ongoing strategy during this period of softer consumer demand, we continue to focus on improving our position within the six cities we currently operate. During the third quarter we launched the first phase of our Kunshan International City Garden project which has a total developable GFA of 509,851 square meters and we completed construction of approximately 67,600 square meters of GFA in our Zhengzhou Commercial Plaza project. Our strong balance sheet and good cash position of approximately US$184 million as of September 30, 2008 provide us with sufficient funding to finance the development of existing projects to completion and allow us room to gear up for business expansion once demand increases and new market opportunities are presented.”

Financial Results for the Third Quarter and Nine Months ended September 30, 2008

Revenues

Total revenues were US$83.0 million for the third quarter of 2008, compared to US$87.7 million and US$120.6 million for the second quarter of 2008 and third quarter of 2007, respectively, representing decreases of 5.4% and 31.2% from the second quarter of 2008 and third quarter of 2007, respectively. Third quarter total revenues included a favorable adjustment of approximately US$1.7 million, which was caused by the inclusion of certain excluded costs in management’s cost estimate for two projects.

Total GFA recognized for revenue was approximately 93.9 thousand square meters for the third quarter of 2008, compared to 101.0 thousand square meters and 191.1 thousand square meters for the second quarter of 2008 and third quarter of 2007, respectively. The average selling price per square meter recognized for revenue was approximately Renminbi (“RMB”) 6,260 for the third quarter of 2008, compared to RMB6,300 and RMB5,050 for the second quarter of 2008 and third quarter of 2007, respectively.

The quarter-over-quarter decrease in revenue was primarily due to decreased revenue of US$15.5 million from Suzhou Lake Splendid, Suzhou Colorful Garden and Suzhou International City Garden, as a result of weaker market conditions in the third quarter of 2008 compared to the second quarter of 2008, and was partially offset by increased revenue of US$10.8 million from Jinan International City Garden and Zhengzhou Xinyuan Colorful Garden, which launched pre-sales in the second quarter of 2008.

The year-over-year decrease in revenue was primarily attributable to decreased revenue of US$67.3 million from Jinan Elegant Scenery and Suzhou Lake Splendid compared to the third quarter of 2007. These two projects launched pre-sales in April and May 2007, respectively, and enjoyed strong sales performance in the third quarter of 2007. The decreased revenue was partially offset by increased revenue of US$43.5 million from Jinan International City Garden and Zhengzhou Xinyuan Colorful Garden, which launched pre-sales in November 2007 and April 2008, respectively.

 

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For the nine months ended September 30, 2008, total revenues were US$295.8 million, an increase of 35.5% from US$218.3 million for the same period in 2007. Total GFA recognized for revenue was approximately 356.1 thousand square meters for the nine months ended September 30, 2008, compared to 363.5 thousand square meters for the same period in 2007. The average selling price per square meter recognized for revenue was approximately RMB6,100 for the nine months ended September 30, 2008, compared to RMB4,800 for the same period in 2007.

The geographic breakdown of revenues from real estate sales were as follows:

 

     Revenue (US$ ‘000)  
     2007Q3     2008Q2     2008Q3  
City    amount    %     amount    %     amount    %  

Suzhou

   54,686    46 %   31,664    36 %   16,213    20 %

Zhengzhou

   26,750    22 %   10,987    13 %   21,763    27 %

Hefei

   17,906    15 %   11,885    14 %   10,388    13 %

Jinan

   20,360    17 %   32,540    37 %   30,156    36 %

Kunshan*

   —      0 %   —      0 %   1,913    2 %

Chengdu*

   —      0 %   —      0 %   1,418    2 %
                                 
   119,702    100 %   87,076    100 %   81,851    100 %
                                 

 

* Pre-sales results for phase one of Kunshan International City Garden and phase one of Chengdu Xinyuan Splendid One consisted of the sales period from September 20-30, 2008.

Gross Profit

Gross profit for the third quarter of 2008 was US$18.4 million, compared to US$20.7 million and US$31.7 million for the second quarter of 2008 and third quarter of 2007, respectively. For the nine months ended September 30, 2008, gross profit was US$75.7 million, an increase of 6.1% from US$71.3 million for the same period in 2007.

The gross margin percentage for the third quarter of 2008 was 22.2%, compared to 23.6% and 26.3% for the second quarter of 2008 and third quarter of 2007, respectively. The quarter-over-quarter decrease in gross margin percentage was mainly attributed to the third quarter 2008 sale of projects of Suzhou International City Garden and Zhengzhou Xinyuan Colorful Garden which generated lower gross margins due to higher land acquisition costs and construction costs. The year-over-year decrease in gross margin percentage was attributed to the third quarter 2007 sale of Zhengzhou Central Garden West and Zhengzhou Central Garden East which generated higher gross margins due to lower land acquisition costs and construction costs. Similarly, due to lower margins on newly launched projects of Suzhou International City Garden and Zhengzhou Xinyuan Colorful Garden, for the nine months ended September 30, 2008 the gross margin percentage was 25.6%, compared to 32.7% for the same period in 2007.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were US$13.5 million for the third quarter of 2008, compared to US$12.4 million and US$5.7 million for the second quarter of 2008 and third quarter of 2007, respectively. As a percentage of total revenue, the selling, general and administrative expenses for the third quarter of 2008 were 16.3%, compared to 14.2% and 4.8% for the second quarter of 2008 and third quarter of 2007, respectively. The quarter-over-quarter increase in total selling, general and administrative expenses was due to increased selling and marketing activities to promote new projects. The year-over-year increase in total selling, general and administrative expenses was due to increased selling and marketing activities to promote new projects, salaries and other expenses associated with the addition of new employees, stock-based compensation amortization, and professional fees associated

 

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with maintenance as a listed company on the New York Stock Exchange and compliance with the rules and regulations of the Securities and Exchange Commission. Similarly, for the nine months ended September 30, 2008, selling, general and administrative expenses were US$36.8 million, compared to US$13.7 million for the same period in 2007. As a percentage of total revenue, the selling, general and administrative expenses for the nine months ended September 30, 2008 were 12.4%, compared to 6.3% for the same period in 2007.

Operating Margin

The operating margin percentage for the third quarter of 2008 was 5.9%, compared to 9.4% and 21.5% for the second quarter of 2008 and third quarter of 2007, respectively. For the nine months ended September 30, 2008, the operating margin percentage was 13.1%, compared to 26.4% for the same period in 2007. The quarter-over-quarter and year-over-year decrease in operating margin was due to reduced gross margins of property developments for the third quarter of 2008 and increased selling and marketing activities to promote new projects, salaries and other expenses associated with the addition of new employees, stock-based compensation amortization, and professional fees. Excluding share-based compensation expenses (non-GAAP), operating margin for the third quarter was 7.8%, compared to 12.3% and 21.6% in the second quarter of 2008 and third quarter of 2007, respectively.

Share of Income in an Equity Investee and Exchange Gains

In the third quarter of 2008, the Company recognized income in the amount of US$3.2 million from its equity investment in a 45% owned project company, Zhengzhou Jiantou Xinyuan Real Estate Co., Ltd., compared to income in the amount of US$3.7 million and US$2.2 million in the second quarter of 2008 and third quarter of 2007, respectively. Similarly, for the nine months ended September 30, 2008, the Company recognized income in the amount of US$10.5 million, compared to US$5.8 million for the same period in 2007.

In addition, the Company recognized unrealized foreign exchange gain of US$0.7 million in the third quarter of 2008, which resulted from the appreciation of Renminbi against U.S. dollar, as the Company translated certain U.S. dollar-denominated long-term debts into Renminbi for the third quarter of 2008 using the exchange rate at September 30, 2008. A US$1.5 million and US$0.8 million foreign exchange gain of the same nature was recognized in the second quarter of 2008 and third quarter of 2007, respectively. For the nine months ended September 30, 2008, the Company recognized unrealized foreign exchange gain of US$4.4 million, compared to US$1.5 million for the same period in 2007.

Change in Fair Value of Derivative Liabilities

In the third quarter of 2008, the Company recognized a gain of US$2.0 million arising from a decrease in fair value of the warrants issued with floating rate notes, compared to a gain of US$2.8 million arising from a decrease in fair value of the warrants in the second quarter of 2008 and an expense of US$1.8 million arising from an increase in fair value of the warrants in the third quarter of 2007. For the nine months ended September 30, 2008, the Company recognized a gain of US$16.1 million arising from a decrease in fair value of the warrants, compared to a loss of US$6.2 million for the same period in 2007.

Income Taxes

Income tax expense for the third quarter of 2008 was US$3.5 million, compared to US$4.3 million and US$9.7 million for the second quarter of 2008 and third quarter of 2007, respectively. The quarter-over-quarter and year-over-year decrease was primarily attributable to decreased gross profit recognized and increased selling, general and administrative expenses charged in the third quarter of 2008, as compared to the second quarter of 2008 and third quarter of 2007. For the nine months ended September 30, 2008, the income tax expense was US$18.8 million, compared to US$20.6 million for the same period in 2007.

 

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Net Income

Net income for the third quarter of 2008 was US$7.8 million, compared to US$13.2 million and US$16.0 million for the second quarter of 2008 and third quarter of 2007, respectively. For the nine months ended September 30, 2008, net income was US$53.9 million, compared to US$37.5 million for the same period in 2007. The Company reported basic and diluted earnings per share of US$0.05 and US$0.05, or earnings per ADS of US$0.10 and US$0.10 for the third quarter of 2008, respectively. For the nine months ended September 30, 2008, basic and diluted earnings per share were US$0.36 and US$0.27, respectively, or earnings per ADS of US$0.72 and US$0.54, respectively. Each ADS represents two common shares.

Appointment of Executive Officer

The Company recently appointed Mr. Meng Du as its chief operating officer, replacing Ms. Yuyan Yang. Mr. Du brings with him more than 10 years of executive-level experience from several respected property developers and has been involved in projects representing a combined GFA of approximately 3 million square meters. Mr. Du holds a masters degree in business administration from the Renmin University of China.

“We are delighted to welcome Mr. Meng Du to our senior management team,” said Mr. Zhang. “Mr. Du’s outstanding project execution track record and extensive experience within the real estate industry provides us with a tremendous asset as we complete our existing projects and look for new opportunities in the market.”

Ms. Yang remains on the Company’s board of directors and is rotating back to the position she previously held with the Company as assistant to the chief executive officer.

Outlook

Given the highly volatile and difficult credit and financial market conditions experienced at the end of the third and into the fourth quarter, along with the impact on the economy and real estate industry from slowdowns in consumer spending, business investment and the general labor market, the Company has determined that near-term revenue visibility remains limited and providing forward guidance is not prudent at this time. With a strong balance sheet, including a cash balance of approximately US$184 million and a net gearing ratio of 37% as of September 30, 2008, a disciplined land acquisition strategy and an intense focus on capital management, Xinyuan remains well positioned to capitalize on opportunities as they arise.

The breakdown of saleable GFA in the future is as follows:

 

City

   Total GFA
(sq.m)
   Sold GFA as of
September 30, 2008
(sq.m)
   Saleable GFA
in the future
(sq.m)

Suzhou

   481,789    245,205    236,584

Zhengzhou

   534,826    98,322    436,504

Hefei

   145,452    145,173    279

Jinan

   348,424    256,859    91,565

Chengdu

   450,374    2,503    447,871

Kunshan

   509,851    5,060    504,791
              
   2,470,716    753,122    1,717,594
              

 

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Non-GAAP Measures

This release contains non-GAAP financial measures, as such term is defined by the U. S. Securities and Exchange Commission. These non-GAAP financial measures, which are identified in this release, are used by management as measures of the Company’s performance, and should be considered in addition to, not in isolation or as a substitute for, measures of the Company’s financial performance prepared in accordance with United States Generally Accepted Accounting Principles (“GAAP”). The Company’s non-GAAP financial measures may be defined differently than similar terms used by other companies. Accordingly, care should be exercised in understanding how the Company defines its non-GAAP financial measures.

Reconciliations of the Company’s non-GAAP measures to the nearest GAAP measures are set forth in the section below titled “Reconciliation of GAAP to Non-GAAP Results.” These non-GAAP measures include non-GAAP gross profit, non-GAAP operating expenses, non-GAAP income from operations, and non-GAAP net income.

The Company’s management uses certain non-GAAP financial measures to gain an understanding of the Company’s comparative operating performance (when comparing such results with previous periods or forecasts) and future prospects. The Company’s non-GAAP financial measures exclude certain items, including stock-based compensation charges, unrealized foreign exchange gain or loss, amortization of intangible assets, amortization of convertible debt issuance cost and charges arising from changes in fair value of derivative warrant liabilities, from its internal financial statements for purposes of its internal budgets. Non-GAAP financial measures are used by the Company’s management in their financial and operating decision-making, because management believes they reflect the Company’s ongoing business in a manner that allows meaningful period-to-period comparisons. The Company computes its non-GAAP financial measures using the same consistent methods from quarter to quarter. The Company’s management believes that these non-GAAP financial measures can provide useful information to investors and others in the following ways: 1) in understanding and evaluating the Company’s current operating performance and future prospects in the same manner as management does, if they so choose, and 2) in comparing in a consistent manner the Company’s current financial results with the Company’s past financial results. The Company’s management further believes the non-GAAP financial measures can provide useful information to both management and investors by excluding certain expenses, gains and losses (i) that are not expected to result in future cash settlement or (ii) that are non-recurring in nature or may not be indicative of its core operating results and business outlook.

The Company’s management believes excluding stock-based compensation from its non-GAAP financial measures is useful for itself and investors as such expense will not result in future cash payment and is otherwise unrelated to the Company’s core operating results. The Company’s management believes excluding the non-cash stock-based compensation charges, unrealized foreign exchange gain, amortization expense of intangible assets and charges resulting from changes in fair value of derivative warrant liabilities from its non-GAAP financial measure of net income are useful for itself and investors because they enable a more meaningful comparison of the Company’s cash performance between reporting periods. In addition, such charges will not result in cash settlement in the future.

Conference Call Information

Xinyuan’s management will host an earnings conference call on November 25, 2008 at 8 a.m. U.S. Eastern Standard Time (9 p.m. Beijing/Hong Kong Time).

Dial-in details for the earnings conference call are as follows:

US: +1-617-614-3472

Hong Kong: +852-3002-1672

Please dial-in 10 minutes before the call is scheduled to begin and provide the passcode to join the call.

 

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The passcode is “Xinyuan Earnings Call.”

A replay of the conference call may be accessed by phone at the following number until December 25, 2008:

 

International:

   +1-617-801-6888

Passcode:

   52247075

Additionally, a live and archived webcast of the conference call will be available on the Investor Relations section of Xinyuan’s website at http://ir.xyre.com.

About Xinyuan Real Estate Co., Ltd.

Xinyuan Real Estate Co., Ltd. (“Xinyuan”) (NYSE: XIN) is a fast-growing developer of large scale, high quality residential real estate projects aimed at providing middle-income consumers with a comfortable and convenient community lifestyle. Xinyuan focuses on China’s Tier II cities, characterized as larger, more developed urban areas with above average GDP and population growth rates. Xinyuan has expanded its network to cover a total population of over 34.5 million people in six strategically selected Tier II cities, comprising Hefei, Jinan, Kunshan, Suzhou, Zhengzhou and Chengdu. Xinyuan is the first real estate developer from China to be listed on the New York Stock Exchange. For more information, please visit http://www.xyre.com.

Safe Harbor Statement

This press release contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” “confident” and similar statements. Statements that are not historical facts, including statements concerning our beliefs, forecasts, estimates and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, including, but not limited to, the risk that: our financing costs are subject to changes in interest rates; our results of operations may fluctuate from period to period; we require substantial capital resources to fund our land use rights acquisition and property developments, which may not be available; PRC economic, political and social conditions as well as government policies can affect our business; the market price of our ADSs may be volatile; you may be subject to limitations on transfer of your ADSs, and other risks outlined in our public filings with the Securities and Exchange Commission, including our annual report on Form 20-F for the year ended December 31, 2007. All information provided in this press release is as of November 25, 2008. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.

Notes to Unaudited Financial Information

This release contains unaudited financial information which is subject to adjustment. In addition, we are in the process of conducting further evaluations of our internal control over financial reporting for compliance with the requirements of Section 404 under the Sarbanes-Oxley Act. We make no representation of management’s assessment regarding internal control over financial reporting or include an attestation report of the Company’s independent auditors due to a transition period established by rules of the Securities and Exchange Commission for newly public companies.

Adjustments to the financial statements may be identified when the audit work is completed, which could result in significant differences between our audited financial statements and this unaudited financial information.

 

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XINYUAN REAL ESTATE CO., LTD. AND ITS SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(All US$ amounts and number of shares data in thousands, except per share data)

 

     Three months ended  
     September 30,
2007
    June 30,
2008
    September 30,
2008
 

Revenue

   $ 120,595     $ 87,723     $ 82,951  

Cost of revenue

     (88,931 )     (66,997 )     (64,569 )
                        

Gross profit

     31,664       20,726       18,382  

Selling and distribution expenses

     (2,766 )     (4,153 )     (5,251 )

General and administrative expenses

     (2,979 )     (8,285 )     (8,249 )
                        

Operating income

     25,919       8,288       4,882  

Interest income

     419       1,205       559  

Interest expense

     (1,757 )     3       —    

Share of income in an equity investee

     2,220       3,716       3,186  

Exchange gains

     798       1,522       668  

Change in fair value of warrant liabilities

     (1,840 )     2,776       2,026  
                        

Income from operations before income taxes

     25,759       17,510       11,321  

Income taxes

     (9,710 )     (4,338 )     (3,536 )
                        

Net Income

     16,049       13,172       7,785  

Accretion of Series A convertible preference shares

     (722 )     —         —    
                        

Net income attributable to ordinary shareholders

   $ 15,327     $ 13,172       7,785  
                        

Earnings (loss) per share:

      

Basic

   $ 0.14     $ 0.09     $ 0.05  

Diluted(1)

   $ 0.13     $ 0.08     $ 0.05  

Shares used in computation:

      

Basic

     106,510       148,398       149,007  

Diluted

     117,256       160,467       160,200  

 

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Note (1) Diluted Earnings per Share for the three months ended September 30, 2007, June 30, 2008 and September 30, 2008

The diluted earnings per share for the three months ended September 30, 2007, June 30, 2008 and September 30, 2008 are calculated as follows:

(All US$ amounts and number of shares data in thousands, except per share data)

 

     Three Months Ended
     September 30,
2007
    June 30,
2008
   September 30,
2008

Numerator:

       

Net income

   $ 16,049     $ 13,172    $ 7,785

Accretion of Series A convertible redeemable preference shares

     (722 )        —  
                     

Net income attributable to ordinary shareholders – diluted

     15,327       13,172      7,785

Denominator:

       

Number of shares outstanding - basic

     106,510       148,398      149,007

Convertible subordinated notes

     9,597       9,597      9,597

Incremental shares of Burnham warrant

     1,149       —        —  

Stock options

     —         2,472      1,596
                     

Number of shares outstanding - diluted

     117,256       160,467      160,200
                     

Diluted earnings per share

   $ 0.13     $ 0.08    $ 0.05

 

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XINYUAN REAL ESTATE CO., LTD. AND ITS SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(All US$ amounts and number of shares data in thousands, except per share data)

 

     Nine months ended  
     September 30,
2007
    September 30,
2008
 

Revenue

   $ 218,300     $ 295,811  

Cost of revenue

     (146,990 )     (220,148 )
                

Gross profit

     71,310       75,663  

Selling and distribution expenses

     (5,957 )     (11,257 )

General and administrative expenses

     (7,737 )     (25,550 )
                

Operating income

     57,616       38,856  

Interest income

     736       2,805  

Interest expense

     (1,439 )     —    

Share of income in an equity investee

     5,819       10,487  

Exchange gains

     1,522       4,422  

Change in fair value of warrant liabilities

     (6,186 )     16,098  
                

Income from operations before income taxes

     58,068       72,668  

Income taxes

     (20,584 )     (18,759 )
                

Net Income

     37,484       53,909  

Accretion of Series A convertible preference shares

     (2,167 )     —    
                

Net income attributable to ordinary shareholders

   $ 35,317     $ 53,909  
                

Earnings (loss) per share:

    

Basic

     0.33       0.36  

Diluted

     0.31       0.27  

Shares used in computation:

    

Basic

     106,510       148,601  

Diluted

     113,360       160,680  

 

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XINYUAN REAL ESTATE CO., LTD. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS DATA

(U.S. Dollars in thousands)

 

     Audited    Unaudited
     December 31, 2007    September 30, 2008

ASSETS

     

Current assets

     

Cash and cash equivalents

   $ 309,315    $ 102,041

Restricted cash

     48,267      82,016

Short term investment

     —        —  

Accounts receivable

     257      9,405

Other receivables

     4,750      2,478

Other deposits and prepayments

     12,864      24,337

Advances to suppliers

     3,052      10,327

Real estate property development completed

     4,917      3,341

Real estate property under development

     379,142      725,480

Other current assets

     7,782      9,066
             

Total current assets

     770,346      968,491
             

Real estate property under development

     9,738      —  

Real estate properties held for lease, net

     6,811      13,147

Property and equipment, net

     4,649      4,950

Other long-term investment

     242      242

Interests in an equity investee

     9,344      20,818

Other assets

     6,065      6,368
             

TOTAL ASSETS

   $ 807,195    $ 1,014,016
             

 

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     Audited     Unaudited  
     December 31, 2007     September 30, 2008  

LIABILITIES AND SHAREHOLDERS’ EQUITY

    

Current liabilities

    

Accounts payable

   $ 45,490     $ 88,137  

Short-term bank loans

     49,284       75,497  

Customer deposits

     25,261       22,604  

Income tax payable

     5,406       6,164  

Deferred tax liabilities

     7,532       14,154  

Other payables and accrued liabilities

     18,296       21,552  

Payroll and welfare payable

     3,105       1,851  
                

Total current liabilities

     154,374       229,959  
                

Long-term bank loans

     137,858       190,088  

Warrant liabilities

     16,592       494  

Deferred tax liabilities

     4,776       6,932  

Unrecognized tax benefits

     11,925       12,775  

Other long-term debt

     91,771       96,231  
                

Total liabilities

     417,296       536,479  
                

Shareholders’ equity

    

Common shares

     15       15  

Additional paid-in capital

     490,361       497,854  

Statutory reserves

     12,145       12,145  

Accumulated deficit(2)

     (123,704 )     (69,794 )

Accumulated other comprehensive earnings

     11,082       37,317  
                

Total shareholders’ equity

     389,899       477,537  
                

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

   $ 807,195     $ 1,014,016  
                

Note (2) On November 13, 2007, the holders of the Company’s Series A convertible preference shares agreed to waive the contingent conversion option contained in the shares. The modification was deemed to be substantive and was treated for accounting purpose as an extinguishment of the Series A convertible preference shares. In connection with this, the Company recognized a dividend of approximately US$182.2 million to the Series A convertible preference shareholders, representing the difference between the fair value of the convertible preference shares immediately after the modification and the carrying value of the preference shares immediately prior to the modification. This deemed dividend did not affect the Company’s net income or cash flows. However, it reduced the net income attributable to ordinary shareholders and retained earnings for the year ended December 31, 2007 by the same amount.

 

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XINYUAN REAL ESTATE CO., LTD. AND ITS SUBSIDIARIES

RECONCILIATION OF GAAP to NON-GAAP RESULTS

(U.S. Dollar in thousands, except per share data)

 

     Three months ended
September 30, 2008
     GAAP     Adjustments     Non-GAAP
Results

Gross profit

     18,382       18,382

Operating expenses

     13,500 (a)   (1,537 )   11,878
          (b)   (85 )  

Operating income

     4,882 (a)   1,537     6,504
          (b)   85    

Net income

     7,785 (a)   1,621     6,797
          (b)   85    
          (c)   (2,026 )  
          (e)   (668 )  
     Three months ended
June 30, 2008
     GAAP     Adjustments     Non-GAAP
Results

Gross profit

     20,726       20,726

Operating expenses

     12,438 (a)   (2,441 )   9,912
          (b)   (85 )  

Operating income

     8,288 (a)   2,441     10,814
          (b)   85    

Net income

     13,172 (a)   2,560     11,519
          (b)   85    
          (c)   (2,776 )  
          (e)   (1,522 )  
     Three months ended
September 30, 2007
     GAAP     Adjustments     Non-GAAP
Results

Gross profit

     31,664       31,664

Operating expenses

     5,745 (b)   (85 )   5,660

Operating income

     25,919 (b)   85     26,004

Net income

     16,049 (b)   85     17,547
          (c)   1,840    
          (d)   371    
          (e)   (798 )  

 

(a) To adjust stock-based compensation charges
(b) To adjust amortization of property management rights
(c) To adjust changes in fair value of derivative warrant liabilities
(d) To adjust amortization of convertible debt issuance cost
(e) To adjust unrealized exchange gain

 

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XINYUAN REAL ESTATE CO., LTD. AND ITS SUBSIDIARIES

RECONCILIATION OF GAAP to NON-GAAP RESULTS

(U.S. Dollar in thousands, except per share data)

 

     Nine months ended
September 30, 2008
     GAAP     Adjustments     Non-GAAP
Results

Gross profit

   75,663       75,663

Operating expenses

   36,807 (a)   (7,153 )   29,399
        (b)   (255 )  

Operating income

   38,856 (a)   7,153     46,264
        (b)   255    

Net income

   53,909 (a)   7,525     41,169
        (b)   255    
        (c)   (16,098 )  
        (e)   (4,422 )  
     Nine months ended
September 30, 2007
     GAAP     Adjustments     Non-GAAP
Results

Gross profit

   71,310       71,310

Operating expenses

   13,694 (b)   (255 )   13,439

Operating income

   57,616 (b)   255     57,871

Net income

   37,484 (b)   255     43,145
        (c)   6,186    
        (d)   742    
        (e)   (1,522 )  

 

(a) To adjust stock-based compensation charges
(b) To adjust amortization of property management rights
(c) To adjust changes in fair value of derivative warrant liabilities
(d) To adjust amortization of convertible debt issuance cost
(e) To adjust unrealized exchange gain

CONTACTS

In China:

Mr. Frank Ng

Chief Financial Officer

Tel: +86 (10) 8588-9255

Email: frankng@xyre.com

Mr. Jacky Zhang

Deputy General Manager of Investor Relations

Tel: +86 (10) 8588-9262

Email: zhengang.zhang@xyre.com

 

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Mr. Derek Mitchell

Ogilvy Financial, Beijing

Tel: +86 (10) 8520-6284

Email: derek.mitchell@ogilvy.com

In the United States:

Mr. Thomas Smith

Ogilvy Financial, New York

Tel: +1 (212) 880-5269

Email: thomas.smith@ogilvypr.com

 

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