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TAI'AN CITY, China, April 2 /PRNewswire-Asia-FirstCall/ -- ShengdaTech Inc. ("ShengdaTech" or "The Company") (Nasdaq: SDTH), a leading manufacturer of nano precipitated calcium carbonate ("NPCC"), today reported financial results for the fourth quarter ended December 31, and full-year 2008.

    Fourth Quarter 2008 Highlights

       month chemical segment revenue

       per diluted share

       increased 104.6% year-over-year to $18.5 million

       accounting firm

       during the fourth quarter

    Full-Year 2008 Highlights

       million, to $134 million

       total revenue

       exceeding guidance of $33 million, to $35 million
    -- EBITDA increased 80.1% to $57.1 million

       paints

       2007

The Company is reporting pro forma financial statements for the fourth quarter and full-year 2008 because such presentation reflects ShengdaTech's historical GAAP results adjusted to remove (1) the impact of $3.9 million in expenses recorded in the fourth quarter associated with the impairment of property, plant and equipment related to the cessation of production at Shandong Bangsheng Chemical Co., Ltd. ("Bangsheng Chemical"), the Company's sole manufacturing facility in Tai'an City, effective October 31, 2008 pursuant to a notice from the local government; as of December 31, 2008, management had plans to continue the Bangsheng Chemical operations through the acquisition of Jinan Fertilizer Co., Ltd. ("Jinan Fertilizer"), therefore concluded that the Company did not satisfy the criteria for discontinued operations reporting; in addition, management had not yet determined its plan for Bangsheng Chemical's equipment, therefore, the equipment is still considered as being held for use, (2) the impact of a $9.0 million pretax gain related to the repurchases of $19.8 million face value of the Company's 6.0% convertible senior notes during the fourth quarter, (3) the impact of $0.7 million charges in compensation to employees as the result of the cessation of production at the Bangsheng Chemical facility. The Company believes these pro forma results provide investors with useful information in analyzing the Company's year-over-year financial performance directly related to operations.

					
    Pro forma highlights for fourth quarter 2008
    -- Pro forma operating income for the fourth quarter, excluding $3.9
       million in expenses associated with the impairment of property and
       equipment and $0.7 million in compensation to staff related to the
       cessation of production at the chemical facility, increased 54.5%
       year-over-year to $13.0 million and pro forma operating profit margin
       was 41.0%
    -- Pro forma net income for the fourth quarter, excluding the gain related
       to the repurchase of the Company's convertible senior notes, increased
       12.3% year-over-year to $8.7 million, or $0.13 per diluted share with
       pro forma net margin of 27.5%

					
Fourth Quarter 2008 Results

ShengdaTech's revenue for the fourth quarter of 2008 increased to $31.8 million, up 11.0% from $28.6 million in the fourth quarter of 2007. The strong revenue growth was attributable to higher average selling prices and increased demand for NPCC products. The Company added 60,000 metric tons of NPCC capacity in April 2008, which was operating at 100% utilization rate during the quarter to meet the market demand. At quarter end, total annual NPCC production capacity was 190,000 metric tons compared with 130,000 metric tons a year ago. The NPCC segment contributed 76.7% of total revenue in the quarter and the chemical segment contributed the remaining 23.3%, compared with 48.2% and 51.8%, respectively, in the same period a year ago. The chemical segment's contribution to total revenue declined significantly during the fourth quarter as the Company ceased production at Bangsheng Chemical effective October 31, 2008, pursuant to a notice from the local government, resulting in zero revenue produced from the segment in the last two months of the quarter. The Company is currently seeking strategic investment opportunities to continue its chemical operations.

"We are excited to report another year of strong financial performance despite the fact that we ceased production at our Bangsheng Chemical facility mid way through the quarter. We continue to generate ever-increasing interest in NPCC from domestic and international companies. We are working closely with our potential customers to develop and test a wide range of applications using NPCC that will improve their products and reduce their production costs.

"In 2008, we successfully met our capacity expansion plan to reach 190,000 metric tons of annual NPCC production. All NPCC facilities are currently operating at full capacity as we expand and increase our market penetration," commented Mr. Xiangzhi Chen, President and CEO of ShengdaTech. "During 2008, we added 47 domestic and international customers, including 12 tire manufacturers, 4 PVC producers, 14 PE producers, 4 in latex and adhesives, 1 ink manufacturer, 9 coating manufacturers, 1 in automobile undercoating paint, and 2 paper manufacturers."

Revenue from NPCC products increased 76.7% to $24.4 million in the fourth quarter of 2008 from $13.8 million in the fourth quarter of 2007. The increase in year-over-year revenue was due to the growing demand for NPCC products as an increasing number of companies integrated the NPCC technology into their production processes. The additional 60,000 metric tons of NPCC capacity added in April 2008, which, operating at 100% utilization starting in the third quarter, supported the Company in meeting the increased demand as compared to the fourth quarter of 2007. Total volume of NPCC sold during the fourth quarter of 2008 was 49,143 metric tons, up 15,438 metric tons, or 37.7%, from 35,680 metric tons in the fourth quarter of 2007. NPCC for use in tires and PVC represented the majority of NPCC sales at 43.1% and 30.0% of total NPCC revenue, respectively. NPCC used in ink increased to 11.0% of total NPCC revenue, an increase of 8.0% compared with the fourth quarter 2007. Sales from the NPCC product for use in paper, increased to 8.8% of total NPCC revenue during the fourth quarter. NPCC used in PE, adhesives, latex, and paint, combined to generate 8.4% of NPCC revenue.

Revenue from the chemical segment for the fourth quarter of 2008 was $7.4 million, a decrease of 50.1% from $14.8 million in the fourth quarter of 2007. Bangsheng Chemical was in operation for only 30 days during the fourth quarter of 2008 before the Company ceased production. Sales of liquid ammonia and ammonia bicarbonate represented the majority of sales in the chemical segment with 41.4% and 25.9% for the fourth quarter 2008, respectively. Methanol and melamine represented 18.2% and 14.4% respectively of the chemical segment's revenue during the quarter.

The Company's gross profit for the fourth quarter of 2008 was $13.7 million, up 33.3% from $10.3 million in the fourth quarter 2007. Gross margin for the quarter was 43.0% compared with 35.8% for the same period in 2007. The chemical segment benefited from strong pricing for liquid ammonia, methanol, and melamine in the quarter resulting in gross margin of 49.5%, up 20 percentage points from 29.5% in the same period in 2007. The significant increase in gross margin of the chemical segment during the quarter was primarily due to increased prices of chemical products in the month of October. Later in the quarter, the coal-based chemical industry experienced significantly lower margins due to pressure on selling prices of coal-based chemical products and the increased cost of raw materials. Gross margin for the NPCC segment was 41.1% in the fourth quarter compared to gross margin of 42.6% in the same quarter last year. The average selling price of the Company's NPCC products increased to $480 per MT, an increase of 13.5% from $423 per MT in the fourth quarter of 2007, which partially offset the increase in cost of coal used in the manufacturing process and an increase in transportation costs related to raw material procurement.

Selling expenses for the fourth quarter of 2008 were $0.6 million, or 1.9% of revenue, up from $0.5 million, or 1.7% of revenue, in the same period last year due to higher sales commissions and related expenses in proportion with increased sales volume. Selling expenses also increased as a result of increases in freight and other costs in relation to the growth in NPCC exports during the fourth quarter of 2008. General and administrative (G&A) expenses were $0.7 million, or 2.2% of revenue, down from $1.3 million, or 4.6% of revenue for the same period last year. The decrease in G&A expenses was mainly attributable to reduced office, business, and entertainment fees, as well as the cessation of production at Bangsheng Chemical. This was partially offset by increases in R&D expenses, a higher service fee paid to the newly engaged leading global independent auditing firm, and a one-time compensation expense of $0.7 million paid to employees who worked at Bangsheng Chemical prior to the cessation of production. During the quarter, the Company reported a $3.9 million impairment of property and equipment expense in order to depreciate the fixed assets related to the chemical business to their estimated net realizable value at December 31, 2008.

Operating income for the fourth quarter of 2008 was $8.4 million, unchanged from the same period a year ago. Operating margin was 26.5% compared to 29.5% in the fourth quarter of 2007.

Fourth quarter interest expense of $2.5 million was directly associated with the Company's long-term convertible notes issued in June 2008. No such expense was recorded in the fourth quarter of 2007. During the quarter, the Company reported a pretax gain of $9.0 million in other income as a result of repurchasing $19.8 million in face value of the Company's 6.0% convertible senior notes during the fourth quarter of 2008. No such gain was recorded during the fourth quarter of 2007.

Provision for income tax in the fourth quarter of 2008 was $2.3 million up from $0.7 million in the fourth quarter of 2007 due primarily to an increase in taxable income and US tax on the gain from the repurchase of long-term convertible notes.

EBITDA for the fourth quarter of 2008 increased 104.6% year-over-year to $18.5 million from $9.1 million in the fourth quarter of 2007.

Net income in the fourth quarter of 2008 was $12.7 million, up 62.8% from $7.8 million in the same period last year. Fully diluted earnings per share for the fourth quarter of 2008 were $0.11, compared with fully diluted earnings per share of $0.15 in the fourth quarter of 2007. Fully diluted weighted average shares outstanding were 69,343,542 in the fourth quarter of 2008, up from 54,193,667 in the same quarter last year, due to the Company's 6.0% convertible senior notes issued in May and June 2008.

					
    Full-Year 2008 Results
    -- Pro forma income from operations for the full-year 2008 was $48.9
       million, up 65.3% from reported income from operations for full-year
       2007
    -- Pro forma net income for full-year 2008 was $36.4 million, up 34.8%
       from reported net income for full-year 2007. Fully diluted pro forma
       earnings per share were $0.64 per compared to $0.50 in 2007.

Revenue for the full-year 2008 increased 48.5% to a record $149.4 million compared with $100.7 million in 2007. Revenue from the chemical business was $67.0 million, up 24.2% from $53.9 million in 2007, representing 44.8% of total revenue. The NPCC business generated the remaining 55.2% of revenue at $82.4 million in 2008, up 76.4% from $46.7 million in 2007. Gross profit was $55.1 million, up 59.5% from $34.6 million for the full-year 2007. Gross margin was 36.9% in 2008 compared to 34.3% in 2007. Income from operations was $44.2 million in 2008, up 49.7% from $29.6 million in 2007. EBITDA was $57.1 million in 2008, up 80.1% from $31.7 million in 2007. Net income increased 48.1% to $40.0 million from $27.0 million in 2007. Fully diluted earnings per share for 2008 were $0.60 compared to $0.50 for the full-year 2007.

Pro forma gross profit for the full-year 2008 was $55.1 million, increased 59.5% from reported gross profit a year ago. Pro forma gross margin was 36.9% for the full-year of 2008 compared with reported gross margin of 34.3% for the full-year 2007. Pro forma income from operations for the full-year 2008 was $48.9 million, up 65.3% from reported income from operations for full-year 2007. Pro forma net income for full-year 2008 was $36.4 million, up 34.8% from reported net income for full-year 2007. Fully diluted pro forma earnings per share were $0.64 per diluted share for the full-year of 2008 compared to reported fully diluted earnings per share of $0.50 in 2007.

					
Financial Condition

As of December 31, 2008

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