UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For June 30, 2015
Commission File No. 001-33176
Fuwei Films
(Holdings) Co., Ltd.
No. 387 Dongming Road
Weifang Shandong
People’s Republic of China, Postal
Code: 261061
(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 x
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 the
registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant
to Rule 12g3-2(b) under the Securities Exchange Act of 1934:
Yes ¨ No
x
If “Yes” marked, indicate below
the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-________
EXPLANATORY NOTE
This Report of Foreign Private Issuer on
Form 6-K (this “Form 6-K”) contains forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These statements relate to future events or the future financial
performance of Fuwei Films (Holdings) Co., Ltd. (the “Company”). The Company has attempted to identify forward-looking
statements by terminology, including, but not limited to, “anticipates”, “believes”, “expects”,
“can”, “continue”, “could”, “estimates”, “intends”, “may”,
“plans”, “potential”, “predicts”, “should” or “will” or the negative
of these terms or other comparable terminology.
The
forward-looking statements included in this Form 6-K are subject to risks, uncertainties and assumptions about
the Company’s businesses and business environments. These statements reflect the Company’s current views with
respect to future events and are not a guarantee of future results, operations, levels of activity, performance or
achievements. Actual results of the Company’s results, operations, levels of activity, performance or achievements may
differ materially from information contained in the forward-looking statements as a result of risk factors. They
include, among other things, trends affecting the global economy, including the devaluation of the RMB by China in August 2015,
significant competition in the BOPET film industry, especially the significant oversupply of BOPET films resulting from the
rapid growth of the Chinese BOPET industry capacity, changes in the international market and trade barriers, especially the
adverse impact of the antidumping investigation and imposition of an anti-dumping duty on imports of the BOPET films
originating from the People’s Republic of China (“China”) conducted by certain main importing countries;
fluctuations of RMB exchange rate, the reduce in demand for the Company’s products or the loss of main customers which
may result in the decrease of sales, and negatively influencing the Company’s financial performance, uncertainty as to
the future profitability, uncertainty as to the Company’s ability to successfully obtain additional funds to meet the
working capital needs of the new BOPET production line, uncertainty as to the Company’s ability to continuously develop
new BOPET film products to be produced by the third production line and keep up with changes in BOPET film technology,
risks associated with possible defects and errors in its products including complaints and claims from clients, uncertainty
as to its ability to protect and enforce its intellectual property rights, uncertainty as to its ability to attract and
retain qualified executives and personnel, and uncertainty in acquiring raw materials on time and on acceptable terms,
particularly in light of the volatility in the prices of petroleum products in recent years, instability of power and energy
supply, and the uncertainty regarding the future operation of the Company in connection with the changes in the labor law in
China, the measures taken by the Chinese government to save energy and reduce emissions, and the complaints from nearby
residents and local government about the noise caused by our production as well as the uncertainty of the impact of major
shareholder transfer that have substantial influence over the Company and the Company’s business operation
including possible overlap of our BOPET products, customers and market orientation with an BOPET film manufacturer,
which is controlled by the same individual who has control over the shares of our major shareholder.
The Company’s expectations are as of the date of filing of this Form 6-K, and the Company does not intend to update any
of the forward-looking statements after the date this Form 6-K is filed to confirm these statements to actual results,
unless required by law.
On August 20, 2015, the Company announced
its unaudited consolidated financial results for the six-month period ended June 30, 2015.
FUWEI FILMS (HOLDINGS) CO., LTD. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2015 AND DECEMBER 31,
2014
(amounts in thousands except share and per
share value)
(Unaudited)
| |
Notes | |
June 30, 2015 | | |
December 31, 2014 | |
| |
| |
RMB | | |
US$ | | |
RMB | |
ASSETS | |
| |
| | | |
| | | |
| | |
Current assets | |
| |
| | | |
| | | |
| | |
Cash and cash equivalents | |
| |
| 10,871 | | |
| 1,753 | | |
| 9,020 | |
Restricted cash | |
| |
| 42,220 | | |
| 6,810 | | |
| 48,085 | |
Accounts and bills receivable, net | |
3 | |
| 16,229 | | |
| 2,618 | | |
| 9,867 | |
Inventories | |
4 | |
| 28,244 | | |
| 4,555 | | |
| 24,034 | |
Advance to suppliers | |
| |
| 5,160 | | |
| 832 | | |
| 7,512 | |
Prepayments and other receivables | |
| |
| 20,706 | | |
| 3,340 | | |
| 18,772 | |
Deferred tax assets - current | |
| |
| 1,802 | | |
| 291 | | |
| 2,794 | |
Total current assets | |
| |
| 125,232 | | |
| 20,199 | | |
| 120,084 | |
| |
| |
| | | |
| | | |
| | |
Property, plant and equipment, net | |
5 | |
| 459,549 | | |
| 74,121 | | |
| 482,534 | |
Construction in progress | |
6 | |
| 1,096 | | |
| 177 | | |
| 366 | |
Lease prepayments, net | |
7 | |
| 18,144 | | |
| 2,926 | | |
| 18,406 | |
Advance to suppliers - long term, net | |
| |
| 1,272 | | |
| 205 | | |
| 722 | |
Long-term deposit | |
8 | |
| - | | |
| - | | |
| 16,760 | |
Other Assets | |
9 | |
| 12,054 | | |
| 1,944 | | |
| 12,500 | |
Deferred tax assets - non current | |
| |
| 21,414 | | |
| 3,454 | | |
| 21,573 | |
| |
| |
| | | |
| | | |
| | |
Total assets | |
| |
| 638,761 | | |
| 103,026 | | |
| 672,945 | |
| |
| |
| | | |
| | | |
| | |
LIABILITIES AND EQUITY | |
| |
| | | |
| | | |
| | |
Current liabilities | |
| |
| | | |
| | | |
| | |
| |
| |
| | | |
| | | |
| | |
Long-term loan, current portion | |
10 | |
| 3,350 | | |
| 540 | | |
| 3,350 | |
Due to related parties | |
11 | |
| 139,734 | | |
| 22,538 | | |
| 125,938 | |
Accounts payables | |
| |
| 27,046 | | |
| 4,362 | | |
| 29,484 | |
Notes payable | |
12 | |
| 81,626 | | |
| 13,165 | | |
| 95,539 | |
Advance from customers | |
| |
| 6,236 | | |
| 1,006 | | |
| 3,392 | |
Accrued expenses and other payables | |
|
|
| 7,467 | | |
| 1,204 | | |
| 6,095 | |
Obligations under capital leases-current | |
13 | |
| 4,196 | | |
| 677 | | |
| 8,259 | |
Total current liabilities | |
| |
| 269,655 | | |
| 43,492 | | |
| 272,057 | |
| |
| |
| | | |
| | | |
| | |
Obligations under capital leases | |
13 | |
| - | | |
| - | | |
| 303 | |
Long-term loan | |
10 | |
| 4,975 | | |
| 802 | | |
| 6,650 | |
Deferred tax liabilities | |
| |
| 5,709 | | |
| 921 | | |
| 5,816 | |
| |
| |
| | | |
| | | |
| | |
Total liabilities | |
| |
| 280,339 | | |
| 45,215 | | |
| 284,826 | |
| |
| |
| | | |
| | | |
| | |
Equity | |
| |
| | | |
| | | |
| | |
Shareholders’ equity | |
| |
| | | |
| | | |
| | |
Registered capital(of US$0.129752 par value; 20,000,000 shares authorized; 13,062,500 issued and outstanding) | |
| |
| 13,323 | | |
| 2,149 | | |
| 13,323 | |
Additional paid-in capital | |
| |
| 311,907 | | |
| 50,308 | | |
| 311,907 | |
Statutory reserve | |
| |
| 37,441 | | |
| 6,039 | | |
| 37,441 | |
(Accumulated deficit) retained earnings | |
| |
| (4,605 | ) | |
| (743 | ) | |
| 25,043 | |
Cumulative translation adjustment | |
| |
| 1,150 | | |
| 186 | | |
| 1,199 | |
Total shareholders’ equity | |
| |
| 359,216 | | |
| 57,939 | | |
| 388,913 | |
Non-controlling interest | |
| |
| (794 | ) | |
| (128 | ) | |
| (794 | ) |
Total equity | |
| |
| 358,422 | | |
| 57,811 | | |
| 388,119 | |
Total liabilities and equity | |
| |
| 638,761 | | |
| 103,026 | | |
| 672,945 | |
The accompanying notes are an integral part
of these unaudited condensed consolidated statements.
FUWEI FILMS (HOLDINGS) CO., LTD. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
FOR THE THREE- AND SIX-MONTH PERIODS
ENDED JUNE 30, 2015 AND 2014
(amounts in thousands except share and per
share value)
(Unaudited)
| |
| | |
The Three-Month
Period Ended June 30, | | |
The Six-Month
Period Ended June 30, | |
| |
Notes | | |
2015 | | |
2014 | | |
2015 | | |
2014 | |
| |
| | |
RMB | | |
US$ | | |
RMB | | |
RMB | | |
US$ | | |
RMB | |
Net sales | |
| | | |
| 66,709 | | |
| 10,760 | | |
| 69,984 | | |
| 119,485 | | |
| 19,272 | | |
| 140,689 | |
Cost of sales | |
| | | |
| 66,422 | | |
| 10,713 | | |
| 79,482 | | |
| 127,023 | | |
| 20,488 | | |
| 150,256 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Gross margin (loss) | |
| | | |
| 287 | | |
| 47 | | |
| (9,498 | ) | |
| (7,538 | ) | |
| (1,216 | ) | |
| (9,567 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Operating expenses | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Selling expenses | |
| | | |
| 3,157 | | |
| 509 | | |
| 3,430 | | |
| 6,353 | | |
| 1,025 | | |
| 6,789 | |
Administrative expenses | |
| | | |
| 9,877 | | |
| 1,593 | | |
| 7,004 | | |
| 15,490 | | |
| 2,498 | | |
| 14,058 | |
Total operating expenses | |
| | | |
| 13,034 | | |
| 2,102 | | |
| 10,434 | | |
| 21,843 | | |
| 3,523 | | |
| 20,847 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Operating loss | |
| | | |
| (12,747 | ) | |
| (2,055 | ) | |
| (19,932 | ) | |
| (29,381 | ) | |
| (4,739 | ) | |
| (30,414 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Other income (expense) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
- Interest income | |
| | | |
| 218 | | |
| 35 | | |
| 260 | | |
| 738 | | |
| 119 | | |
| 640 | |
- Interest expense | |
| | | |
| (2,082 | ) | |
| (336 | ) | |
| (3,256 | ) | |
| (4,413 | ) | |
| (712 | ) | |
| (6,424 | ) |
- Others income (expense),
net | |
| | | |
| (32 | ) | |
| (5 | ) | |
| 25 | | |
| 4,452 | | |
| 718 | | |
| (63 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total other income
(expense) | |
| | | |
| (1,896 | ) | |
| (306 | ) | |
| (2,971 | ) | |
| 777 | | |
| 125 | | |
| (5,847 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Loss before provision
for income taxes | |
| | | |
| (14,643 | ) | |
| (2,361 | ) | |
| (22,903 | ) | |
| (28,604 | ) | |
| (4,614 | ) | |
| (36,261 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Income tax benefit
(expense) | |
| 14 | | |
| (8 | ) | |
| (1 | ) | |
| (79 | ) | |
| (1,044 | ) | |
| (168 | ) | |
| 20 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net loss | |
| | | |
| (14,651 | ) | |
| (2,362 | ) | |
| (22,982 | ) | |
| (29,648 | ) | |
| (4,782 | ) | |
| (36,241 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net (loss) income attributable
to noncontrolling interests | |
| | | |
| - | | |
| - | | |
| (1 | ) | |
| - | | |
| - | | |
| (1 | ) |
Net loss attributable
to the Company | |
| | | |
| (14,651 | ) | |
| (2,362 | ) | |
| (22,981 | ) | |
| (29,648 | ) | |
| (4,782 | ) | |
| (36,240 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Other comprehensive income (loss) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
- Foreign currency
translation adjustments
attributable to noncontrolling interest | |
| | | |
| - | | |
| - | | |
| 1 | | |
| - | | |
| - | | |
| (19 | ) |
- Foreign currency
translation adjustments
attributable to the Company | |
| | | |
| (25 | ) | |
| (4 | ) | |
| (7 | ) | |
| (49 | ) | |
| (8 | ) | |
| (55 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Comprehensive income
(loss) attributable to
non-controlling interest | |
| | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (20 | ) |
Comprehensive loss
attributable to the Company | |
| | | |
| (14,676 | ) | |
| (2,366 | ) | |
| (22,988 | ) | |
| (29,697 | ) | |
| (4,790 | ) | |
| (36,295 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Loss per share,
Basic and diluted | |
| 15 | | |
| (1.12 | ) | |
| (0.18 | ) | |
| (1.76 | ) | |
| (2.27 | ) | |
| (0.37 | ) | |
| (2.77 | ) |
Weighted average
number ordinary shares, Basic and diluted | |
| | | |
| 13,062,500 | | |
| 13,062,500 | | |
| 13,062,500 | | |
| 13,062,500 | | |
| 13,062,500 | | |
| 13,062,500 | |
The accompanying
notes are an integral part of these unaudited condensed consolidated statements.
FUWEI FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
FOR THE SIX-MONTH PERIODS ENDED JUNE
30, 2015AND 2014
(amounts in thousands except share and per
share value)
(Unaudited)
| |
The Six-Month Period Ended June 30, | |
| |
2015 | | |
2014 | |
| |
RMB | | |
US$ | | |
RMB | |
Cash flow from operating activities | |
| | | |
| | | |
| | |
Net loss | |
| (29,648 | ) | |
| (4,782 | ) | |
| (36,241 | ) |
Adjustments to reconcile net loss to net cash | |
| | | |
| | | |
| | |
used in operating activities | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | |
- Depreciation of property, plant and equipment | |
| 23,076 | | |
| 3,722 | | |
| 24,031 | |
- Amortization of intangible assets | |
| 262 | | |
| 42 | | |
| 262 | |
- Deferred income taxes | |
| 1,044 | | |
| 168 | | |
| (20 | ) |
- Bad debt recovery | |
| (4,135 | ) | |
| (667 | ) | |
| (115 | ) |
Changes in operating assets and liabilities | |
| | | |
| | | |
| | |
- Accounts and bills receivable | |
| (6,634 | ) | |
| (1,070 | ) | |
| 1,150 | |
- Inventories | |
| (4,210 | ) | |
| (679 | ) | |
| 5,942 | |
- Advance to suppliers | |
| 2,518 | | |
| 406 | | |
| 109 | |
- Prepaid expenses and other current assets | |
| 12 | | |
| 2 | | |
| (814 | ) |
- Accounts payable | |
| (2,439 | ) | |
| (393 | ) | |
| 2,418 | |
- Accrued expenses and other payables | |
| 1,377 | | |
| 222 | | |
| 1,116 | |
- Advance from customers | |
| 2,844 | | |
| 459 | | |
| (7,551 | ) |
- Tax payable | |
| (1,499 | ) | |
| (242 | ) | |
| 2,236 | |
| |
| | | |
| | | |
| | |
Net cash used in operating activities | |
| (17,432 | ) | |
| (2,812 | ) | |
| (7,477 | ) |
| |
| | | |
| | | |
| | |
Cash flow from investing activities | |
| | | |
| | | |
| | |
Purchases of property, plant and equipment | |
| (91 | ) | |
| (15 | ) | |
| (4,823 | ) |
Restricted cash related to trade finance | |
| 5,865 | | |
| 946 | | |
| (357 | ) |
Advanced to suppliers - non current | |
| (550 | ) | |
| (89 | ) | |
| (811 | ) |
Amount change in construction in progress | |
| (730 | ) | |
| (118 | ) | |
| 265 | |
Return of long-term deposit | |
| 21,000 | | |
| 3,387 | | |
| - | |
| |
| | | |
| | | |
| | |
Net cash provided by (used in) investing activities | |
| 25,494 | | |
| 4,111 | | |
| (5,726 | ) |
| |
| | | |
| | | |
| | |
Cash flow from financing activities | |
| | | |
| | | |
| | |
Principal payments of bank loans | |
| (1,675 | ) | |
| (270 | ) | |
| (105,000 | ) |
Proceeds from short-term bank loans | |
| - | | |
| - | | |
| - | |
Proceeds from related party | |
| 13,796 | | |
| 2,225 | | |
| 120,000 | |
Payment of capital lease obligation | |
| (4,366 | ) | |
| (704 | ) | |
| (4,090 | ) |
Change in notes payable | |
| (13,913 | ) | |
| (2,244 | ) | |
| (3,790 | ) |
Proceeds from sale-leaseback equipment | |
| - | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | |
Net cash provided by (used in) financing activities | |
| (6,158 | ) | |
| (993 | ) | |
| 7,120 | |
| |
| | | |
| | | |
| | |
Effect of foreign exchange rate changes | |
| (53 | ) | |
| (7 | ) | |
| (17 | ) |
| |
| | | |
| | | |
| | |
Net increase (decrease) in cash and cash equivalent | |
| 1,851 | | |
| 299 | | |
| (6,100 | ) |
| |
| | | |
| | | |
| | |
Cash and cash equivalent | |
| | | |
| | | |
| | |
At beginning of period | |
| 9,020 | | |
| 1,454 | | |
| 11,578 | |
At end of period | |
| 10,871 | | |
| 1,753 | | |
| 5,478 | |
| |
| | | |
| | | |
| | |
SUPPLEMENTARY DISCLOSURE: | |
| | | |
| | | |
| | |
Interest paid | |
| 4,413 | | |
| 712 | | |
| 6,424 | |
Income tax paid | |
| - | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | |
SUPPLEMENTARY SCHEDULE OF NONCASH INVESTING AND FINANCIAL ACTIVITIES: | | |
Account payable for plant and equipment: | |
| 2,215 | | |
| 357 | | |
| 7,883 | |
Obligations for acquired equipment under capital lease: | |
| 4,196 | | |
| 677 | | |
| 12,787 | |
The accompanying notes are an integral part
of these unaudited condensed consolidated statements.
FUWEI FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands except share and per share value)
(Unaudited)
NOTE 1 – BACKGROUND
Fuwei Films (Holdings) Co., Ltd. and its
subsidiaries (the “Company” or the “Group”) are principally engaged in the production and distribution
of BOPET film, a high quality plastic film widely used in packaging, imaging, electronics, electrical and magnetic products in
the People’s Republic of China (the “PRC”). The Company is a holding company incorporated in the Cayman Islands,
established on August 9, 2004 under the Cayman Islands Companies Law as an exempted company with limited liability. The Company
was established for the purpose of acquiring shares in Fuwei (BVI) Co., Ltd. (“Fuwei (BVI)”), an intermediate holding
company established for the purpose of acquiring all of the ownership interest in Fuwei Films (Shandong) Co., Ltd. (“Shandong
Fuwei”).
On August 20, 2004, the Company was allotted
and issued one ordinary share of US$1.00 in Fuwei (BVI) (being the entire issued share capital of Fuwei (BVI)), thereby establishing
Fuwei (BVI) as the intermediate investment holding company of the Company.
On April 23, 2009, Fuwei Films USA, LLC
was set up and co-invested by Fuwei Films (Holdings) Co., Ltd. and Newell Finance Management Co., Ltd. Fuwei Films USA, LLC
has a registered capital of US$10 and total investment amount of US$100. Fuwei Films (Holdings) Co., Ltd. and Newell Finance Management
Co., Ltd. own 60% and 40% of the total shares of Fuwei Films USA, LLC, respectively.
NOTE 2 - BASIS OF PRESENTATION AND SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Principles
The accompanying unaudited condensed consolidated
financial statements have been prepared by the Company, pursuant to the rules and regulations of the U.S. Securities and Exchange
Commission (the “SEC”) as applicable to smaller reporting companies, and generally accepted accounting principles for
interim financial reporting. The information furnished herein reflects all adjustments (consisting of normal recurring accruals
and adjustments) which are, in the opinion of management, necessary to fairly present the operating results for the respective
periods. Certain information and footnote disclosures normally presented in annual consolidated financial statements prepared in
accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted
pursuant to such rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction
with the audited consolidated financial statements and footnotes included in the Company’s Annual Report on Form 20-F for
the year ended December 31, 2014 filed on April 9, 2015 with the SEC. The results of the six-month period ended June 30, 2015 are
not necessarily indicative of the results to be expected for the full year ended December 31, 2015.
Principles of Consolidation
The condensed consolidated financial statements
include the financial statements of the Company and its three subsidiaries. All significant inter-company balances and transactions
have been eliminated in consolidation.
FUWEI FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands except share and per share value)
(Unaudited)
Use of Estimates
The preparation of the condensed consolidated
financial statements in accordance with U.S. GAAP requires management of the Company to make a number of estimates and assumptions
relating to the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date
of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results
could differ from those estimates. On an ongoing basis, management reviews its estimates and assumptions, including those related
to the recoverability of the carrying amount and the estimated useful lives of long-lived assets, valuation allowances for accounts
receivable and realizable values for inventories. Changes in facts and circumstances may result in revised estimates.
Foreign Currency Transactions
The Company’s reporting currency
is Chinese Yuan (Renminbi or “RMB”).
Fuwei Films (Holdings) Co., Ltd. and Fuwei
(BVI) operate in Hong Kong as investment holding companies and their financial records are maintained in Hong Kong dollars,
being the functional currency of these two entities. The financial records of Fuwei Films USA, LLC, a 60% owned subsidiary of the
Company, are maintained in US dollars. Assets and liabilities are translated into RMB at the exchange rates at the balance sheet
date, equity accounts are translated at historical exchange rates and income, expenses, and cash flow items are translated using
the average rate for the period. The translation adjustments are recorded in accumulated other comprehensive income in the statements
of equity. The changes in the translation adjustments for the current period were reported as the line items of other comprehensive
income in the consolidated statements of comprehensive income.
Transactions denominated in currencies
other than RMB are translated into RMB at the exchange rates quoted by the People’s Bank of China (the “PBOC”)
prevailing at the dates of transactions. Monetary assets and liabilities denominated in foreign currencies are translated into
RMB using the applicable exchange rates quoted by the PBOC at the balance sheet dates. The resulting exchange differences are recorded
in the consolidated statements of comprehensive income.
RMB is not fully convertible into foreign
currencies. All foreign exchange transactions involving RMB must take place either through the PBOC or other institutions authorized
to buy and sell foreign currency. The exchange rate adopted for the foreign exchange transactions are the rates of exchange quoted
by the PBOC which are determined largely by supply and demand.
Commencing from July 21, 2005, the PRC
government moved the RMB into a managed floating exchange rate regime based on market supply and demand with reference to a basket
of currencies.
For the convenience of the readers, the
second quarter of 2015 RMB amounts included in the accompanying condensed consolidated financial statements in our quarterly report
have been translated into U.S. dollars at the rate of US$1.00 = RMB6.2000, on the last trading day of second quarter of 2015 (June
30, 2015) as set forth in the H.10 statistical release of the U.S. Federal Reserve Board. No representation is made that the RMB
amounts could have been, or could be, converted into U.S. dollar at that rate or at any other certain rate on June 30, 2015, or
at any other date.
Cash and Cash Equivalents and Restricted
Cash
For statements of cash flow purposes, the
Company considers all cash on hand and in banks, including accounts in book overdraft positions, certificates of deposit and other
highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents.
FUWEI FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands except share and per share value)
(Unaudited)
Restricted cash refers to the cash balance
held by bank as deposit for Letters of Credit and Bank Acceptance Bill. The Company has restricted cash of RMB42,220 (US$6,810)
and RMB48,085 as of June 30, 2015 and December 31, 2014, respectively.
Trade Accounts Receivable
Trade accounts receivable are recorded
at the invoiced amount after deduction of trade discounts, value added taxes and allowances, if any, and do not bear interest.
The allowance for doubtful accounts is the Group’s best estimate of the amount of probable credit losses in the Group’s
existing accounts receivable. The Group determines the allowance based on historical write-off experience, customer specific facts
and economic conditions.
The Group reviews its allowance for doubtful
accounts monthly. Past due balances over 90 days and over a specified amount are reviewed individually for collectability. All
other balances are reviewed on a pooled basis by aging of such balances. Account balances are charged off against the allowance
after all means of collection have been exhausted and the potential for recovery is considered remote.
Inventories
Inventories are stated at the lower of
cost or market value as of balance sheet date. Inventory valuation and cost-flow is determined using Moving Weighted Average Method
basis. The Group estimates excess and slow moving inventory based upon assumptions of future demands and market conditions. If
actual market conditions are less favorable than projected by management, additional inventory write-downs may be required. Cost
of work in progress and finished goods comprises direct material, direct production cost and an allocated portion of production
overheads based on normal operating capacity.
Property, Plant and Equipment
Property, plant and equipment are stated
at cost less accumulated depreciation and impairment. Depreciation on property, plant and equipment is calculated on the straight-line
method (after taking into account their respective estimated residual values) over the estimated useful lives of the assets. They
are as follows:
| |
Years |
Buildings and improvements | |
25 - 30 |
Plant and equipment | |
10 - 15 |
Computer equipment | |
5 |
Furniture and fixtures | |
5 |
Motor vehicles | |
5 |
Depreciation of property, plant and equipment
attributable to manufacturing activities is capitalized as part of the inventory, and expensed to cost of goods sold when inventory
is sold. Depreciation related to abnormal amounts from idle capacity is charged to general and administrative expenses for the
period incurred.
FUWEI FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands except share and per share value)
(Unaudited)
Construction in progress represents capital
expenditures in respect to the BOPET production line. No depreciation is provided in respect to construction in progress.
Leased Assets
An arrangement, comprising a transaction
or a series of transactions, is or contains a lease if the Group determines that the arrangement conveys a right to use a specific
asset or assets for an agreed period of time in return for a payment or a series of payments. Such a determination is made based
on an evaluation of the substance of the arrangement and is regardless of whether the arrangement takes the legal form of a lease.
Classification of assets leased to the
Group. Assets that are held by the Group under leases which transfer to the Group substantially all the risks and rewards of
ownership are classified as being held under capital leases. Leases which do not transfer substantially all the risks and rewards
of ownership to the Group are classified as operating leases.
Assets acquired under capital leases.
Where the Group acquires the use of assets under capital leases, the amounts representing the fair value of the leased asset, or,
if lower, the present value of the minimum lease payments, of such assets are included in property, plant and equipment and the
corresponding liabilities, net of finance charges, are recorded as obligations under capital leases. Depreciation is provided at
rates which write off the cost or valuation of the assets over the term of the relevant lease or, where it is likely the Group
will obtain ownership of the asset, the life of the asset. Finance charges implicit in the lease payments are charged to the consolidated
income statement over the period of the leases so as to produce an approximately constant periodic rate of charge on the remaining
balance of the obligations for each accounting period. Contingent rentals are charged to the consolidated income statement in the
accounting period in which they are incurred.
Operating lease charges. Where the
Group has the use of assets held under operating leases, payments made under the leases are charged to the consolidated income
statement in equal installments over the accounting periods covered by the lease term, except where an alternative basis is more
representative of the pattern of benefits to be derived from the leased asset. Lease incentives received are recognized in the
consolidated income statement as an integral part of the aggregate net lease payments made. Contingent rentals are charged to the
consolidated income statement in the accounting period in which they are incurred.
Sale and leaseback transactions. Gains
or losses on equipment sale and leaseback transactions which result in capital leases are deferred and amortized over the terms
of the related leases. Gains or losses on equipment sale and leaseback transactions which result in operating leases are recognized
immediately if the transactions are established at fair value. Any loss on the sale perceived to be a real economic loss is recognized
immediately. However, if a loss is compensated for by future rentals at a below-market price, then the artificial loss is deferred
and amortized over the period that the equipment is expected to be used. If the sale price is above fair value, then any gain is
deferred and amortized over the useful life of the assets.
Lease Prepayments
Lease prepayments represent the costs of
land use rights in the PRC. Land use rights are carried at cost and charged to expense on a straight-line basis over the respective
periods of rights of 30 years. The non-current portion and current portion of lease prepayments have been reported in Lease Prepayments,
Prepayments and Other Receivables in the balance sheets, respectively.
FUWEI FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands except share and per share value)
(Unaudited)
Goodwill
Goodwill represents the excess of purchase
price and related costs over the value assigned to the net tangible and identifiable intangible assets of businesses acquired. Goodwill
is not amortized but is tested for impairment annually, or when circumstances indicate a possible impairment may exist. Impairment
testing is performed at a reporting unit level. An impairment loss generally would be recognized when the carrying amount
of the reporting unit exceeds the fair value of the reporting unit, with the fair value of the reporting unit determined using
a discounted cash flow (“DCF”) analysis. A number of significant assumptions and estimates are involved in the
application of the DCF analysis to forecast operating cash flows, including the discount rate, the internal rate of return, and
projections of realizations and costs to produce. Management considers historical experience and all available information
at the time the fair values of its reporting units are estimated. Goodwill was determined to be fully impaired during the year
ended December 31, 2012.
Impairment of Long-lived Assets
The Company recognizes an impairment loss
when circumstances indicate that the carrying value of long-lived assets with finite lives may not be recoverable. Management’s
policy in determining whether an impairment indicator exists, a triggering event, comprises measurable operating performance criteria
at an asset group level as well as qualitative measures. If an analysis is necessitated by the occurrence of a triggering event,
the Company uses assumptions, which are predominately identified from the Company’s strategic long-range plans, in determining
the impairment amount. In the calculation of the fair value of long-lived assets, the Company compares the carrying amount of the
asset group with the estimated future cash flows expected to result from the use of the assets. If the carrying amount of the asset
group exceeds the estimated expected undiscounted future cash flows, the Company measures the amount of the impairment by comparing
the carrying amount of the asset group with their estimated fair value. We estimate the fair value of assets based on market prices
(i.e., the amount for which the asset could be bought by or sold to a third party), when available. When market prices are not
available, we estimate the fair value of the asset group using discounted expected future cash flows at the Company’s weighted-average
cost of capital. Management believes its policy is reasonable and is consistently applied. Future expected cash flows are based
upon estimates that, if not achieved, may result in significantly different results.
Revenue Recognition
Sales of plastic films are reported, net
of value added taxes (“VAT”), sales returns, and trade discounts. The standard terms and conditions under which the
Company generally delivers allow a customer the right to return product for refund only if the product does not conform to product
specifications; the non-conforming product is identified by the customer; and the customer rejects the non-conforming product and
notifies the Company within 30 days of receipt for both PRC and overseas customers. The Company recognizes revenue when products
are delivered and the customer takes ownership and assumes risk of loss, collection of the relevant receivable is probable, persuasive
evidence of an arrangement exists and the sales price is fixed or determinable.
In the PRC, VAT of 17% on the invoice amount
is collected in respect to the sales of goods on behalf of tax authorities. The VAT collected is not revenue of the Company; instead,
the amount is recorded as a liability on the consolidated balance sheet until such VAT is paid to the authorities.
FUWEI FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands except share and per share value)
(Unaudited)
Income Taxes
Income taxes are accounted for under the
asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases
and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected
to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment
date.
Earnings Per Share
Basic earnings per share is computed by
dividing net earnings by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share
is calculated by dividing net earnings by the weighted average number of ordinary and dilutive potential ordinary shares outstanding
during the year. Diluted potential ordinary shares consist of shares issuable pursuant to the Company’s stock option plan.
Share-Based Payments
The Company accounts for share based payments
under the modified-prospective transition method, which requires companies to measure and recognize the cost of employee services
received in exchange for an award of equity instruments based on the grant-date fair value.
Non-controlling interest
Non-controlling interest represents the
portion of equity that is not attributable to the Company. The net income (loss) attributable to non-controlling interests are
separately presented in the accompanying statements of income and other comprehensive income. Losses attributable to non-controlling
interests in a subsidiary may exceed the interest in the subsidiary’s equity. The related non-controlling interest continues
to be attributed its share of losses even if that attribution results in a deficit of the non-controlling interest balance.
Contingencies
In the normal course of business, the Company
is subject to contingencies, including legal proceedings and claims arising out of the business that relate to a wide range of
matters, including among others, product liability. The Company recognizes a liability for such contingency if it determines it
is probable that a loss has occurred and a reasonable estimate of the loss can be made. The Company may consider many factors in
making these assessments including past history and the specifics of each matter.
Reclassification
For comparative purposes, the prior year’s
consolidated financial statements have been reclassified to conform to reporting classifications of the current year periods. These
reclassifications had no effect on net loss or total net cash flows as previously reported.
FUWEI FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands except share and per share value)
(Unaudited)
Going Concern Matters
The accompanying condensed consolidated
financial statements have been prepared in conformity with generally accepted accounting principles which contemplate continuation
of the company as a going concern. However, as of June 30, 2015 and 2014, the Company had a working capital deficiency of RMB144,423
(US$23,293) and RMB138,699 and accumulated deficit of RMB29,648 (US$4,782) and RMB36,241 from net losses incurred during the first
half year of 2015 and 2014. Confronted with the fierce competition in the BOPET industry in China, the Company may still witness
losses over the next twelve months. The ability of the Company to operate as a going concern depends upon its ability to obtain
loans from related party of working capital and/or generate positive cash flow from operations. The Company accordingly has obtained
loans from related party to meet the need of working capital for our operation or debts. At the same time, the Company will continue
implementing strict cost reductions on both manufacturing costs and operating expenses to improve profit margins. The accompanying
consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying
amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.
Recently Issued Accounting Standards
Income Statement-Extraordinary and
Unusual Items: In January 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2015-01
about Income Statement-Extraordinary and Unusual Items (Subtopic 225-20). ASU 2015-01 addresses the elimination from U.S. GAAP
the concept of extraordinary items. Presently, an event or transaction is presumed to be an ordinary and usual activity of the
reporting entity unless evidence clearly supports its classification as an extraordinary item. If an event or transaction meets
the criteria for extraordinary classification, an entity is required to segregate the extraordinary item from the results of ordinary
operations and show the item separately in the income statement, net of tax, after income from continuing operations. This amended
guidance will prohibit separate disclosure of extraordinary items in the income statement. This amendment is effective for years,
and interim periods within those years, beginning after December 15, 2015. Entities may apply the amendment prospectively
or retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance
is applied from the beginning of the year of adoption. The Company intends to adopt the accounting standard during the first quarter
of 2016, as required, with no material impact.
Disclosure
of Going Concern Uncertainties: In August 2014, the Financial Accounting Standards Board (FASB)
issued Accounting Standards Update No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue
as a Going Concern (ASU 2014-15), to provide guidance on management’s responsibility in evaluating whether there is
substantial doubt about a company’s ability to continue as a going concern and to provide related footnote disclosures. ASU
2014-15 is effective for us in our fourth quarter of fiscal 2017 with early adoption permitted. We do not believe the impact of
our pending adoption of ASU 2014-15 on the Company’s financial statements will be material.
Revenue
Recognition: In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue
from Contracts with Customers: Topic 606 (ASU 2014-09), to supersede nearly all existing revenue recognition guidance under
U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers
in an amount that reflects the consideration that is expected to be received for those goods or services. ASU 2014-09 defines a
five step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within
the revenue recognition process than are required under existing U.S. GAAP, including identifying performance obligations in the
contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price
to each separate performance obligation. ASU 2014-09 is effective for us in our first quarter of fiscal 2018 using either of two
methods: (i) retrospective to each prior reporting period presented with the option to elect certain practical expedients
as defined within ASU 2014-09; or (ii) retrospective with the cumulative effect of initially applying ASU 2014-09 recognized
at the date of initial application and providing certain additional disclosures as defined per ASU 2014-09. The adoption of this
ASU is not expected to have a material impact on the Company's consolidated financial statements.
FUWEI FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands except share and per share value)
(Unaudited)
Other pronouncements issued by the FASB
or other authoritative accounting standards group with future effective dates are either not applicable or not significant to the
consolidated financial statements of the Company.
NOTE 3 - ACCOUNTS AND BILLS RECEIVABLES
Accounts and bills receivables consisted of
the following:
| |
June 30, 2015 | | |
December 31, 2014 | |
| |
RMB | | |
US$ | | |
RMB | |
Accounts receivable | |
| 12,036 | | |
| 1,941 | | |
| 8,168 | |
Less: Allowance for doubtful accounts | |
| (1,097 | ) | |
| (177 | ) | |
| (825 | ) |
| |
| 10,939 | | |
| 1,764 | | |
| 7,343 | |
Bills receivable | |
| 5,290 | | |
| 854 | | |
| 2,524 | |
| |
| 16,229 | | |
| 2,618 | | |
| 9,867 | |
The Group has a credit policy in place
and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers requiring credit
over a certain amount. These receivables are due within 7 to 90 days from the date of billing. Generally, the Group does not obtain
collateral from customers. Bills receivable are banker’s acceptance bills, which are guaranteed by the bank.
NOTE 4 - INVENTORIES
Inventories consisted
of the following:
| |
June 30, 2015 | | |
December 31, 2014 | |
| |
RMB | | |
US$ | | |
RMB | |
Raw materials | |
| 15,181 | | |
| 2,449 | | |
| 13,221 | |
Work-in-progress | |
| 5,372 | | |
| 866 | | |
| 1,873 | |
Finished goods | |
| 13,180 | | |
| 2,126 | | |
| 14,429 | |
Consumables and spare parts | |
| 622 | | |
| 100 | | |
| 622 | |
Inventory reserve | |
| (6,111 | ) | |
| (986 | ) | |
| (6,111 | ) |
| |
| 28,244 | | |
| 4,555 | | |
| 24,034 | |
FUWEI FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands except share and per share value)
(Unaudited)
NOTE 5 - PROPERTY, PLANT AND
EQUIPMENT, NET
Property, plant and equipment consisted
of the following:
| |
June 30, 2015 | | |
December 31, 2014 | |
| |
RMB | | |
US$ | | |
RMB | |
Buildings | |
| 78,300 | | |
| 12,629 | | |
| 77,828 | |
Plant and equipment | |
| 764,070 | | |
| 123,237 | | |
| 764,093 | |
Computer equipment | |
| 2,498 | | |
| 403 | | |
| 2,459 | |
Furniture and fixtures | |
| 13,519 | | |
| 2,180 | | |
| 13,444 | |
Motor vehicles | |
| 2,093 | | |
| 338 | | |
| 2,094 | |
| |
| 860,480 | | |
| 138,787 | | |
| 859,918 | |
Less: accumulated depreciation | |
| (400,931 | ) | |
| (64,666 | ) | |
| (377,384 | ) |
| |
| 459,549 | | |
| 74,121 | | |
| 482,534 | |
Total depreciation for the six-month periods
ended June 30, 2015 and 2014 was RMB23,076 (US$3,722) and RMB24,031, respectively. For the three-month periods ended June 30, 2015
and 2014, depreciation expenses were RMB11,188 (US$1,804) and RMB11,962, respectively.
NOTE 6 - CONSTRUCTION IN PROGRESS
Construction-in-progress represents capital
expenditure in respect to the BOPET production line. Construction in progress was RMB1,096 (US$177) ended June 30, 2015, and RMB366
ended December 31, 2014, respectively.
NOTE 7 - LEASE PREPAYMENTS
Lease prepayments represent the costs of
land use rights in the PRC. Land use rights are carried at cost and charged to expense on a straight-line basis over the respective
periods of rights of 30 years. The current portion of lease prepayments has been included in prepayments and other receivables
in the balance sheet.
Lease prepayments consisted of the following:
| |
June 30, 2015 | | |
December 31, 2014 | |
| |
RMB | | |
US$ | | |
RMB | |
Lease prepayment - non current | |
| 18,144 | | |
| 2,926 | | |
| 18,406 | |
Lease prepayment - current | |
| 524 | | |
| 85 | | |
| 524 | |
| |
| 18,668 | | |
| 3,011 | | |
| 18,930 | |
Amortization of land use rights for the
six months ended June 30, 2015 and 2014 was RMB262 (US$42) and RMB262, respectively. Amortization of land use rights for the three
months ended June 30, 2015 and 2014 was RMB131 (US$21) and RMB131, respectively.
FUWEI FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands except share and per share value)
(Unaudited)
Estimated amortization expenses for the
next five years after June 30, 2015 are as follows:
| |
RMB | | |
US$ | |
1 year after | |
| 524 | | |
| 85 | |
2 years after | |
| 524 | | |
| 85 | |
3 years after | |
| 524 | | |
| 85 | |
4 years after | |
| 524 | | |
| 85 | |
5 years after | |
| 524 | | |
| 85 | |
Thereafter | |
| 16,048 | | |
| 2,588 | |
As of June 30, 2015, the amount of RMB524
(US$84) will be charged into amortization expenses within one year, and is classified as current asset under the separate line
item captioned as Prepayments and Other Receivables on balance sheets.
NOTE 8 – LONG-TERM DEPOSIT
On January 20, 2008, Shandong Fuwei signed
a “Letter of Intent of Joyinn Capital Increase and Share Expansion” (“LOI”) with Joyinn Hotel Investment
& Management Co., Ltd. (“Joyinn”) and shareholders of Joyinn. Joyinn is a legal company of limited liability that
registered on May 19, 2006 in Beijing, with registered capital of RMB50,000 (US$6,236).
Pursuant to the terms of the LOI, Shandong
Fuwei deposited RMB26,000 (half of the would-be added registered capital of RMB52,000), to Joyinn as a prepayment as of June 30,
2008. The prepayment to Joyinn will be regarded as investment payment after all parties enter into the final capital increase and
shares expansion agreement during the effective term of this LOI. A share pledge agreement was entered into subsequently on April
9, 2008 between Shandong Fuwei and Shandong Xinmeng Investment Co., Ltd (“Pledger”), which holds 97.6% shares of Joyinn.
The Pledger agreed to pledge its 52% interest in Joyinn, as a guarantee to the prepayment on the newly increased register capital
made by Shandong Fuwei to Joyinn. Based on the mutual supplementary agreement signed in June 2008, the prepayment was decreased
by RMB5,000 and returned to the Company on June 18, 2008.
On June 23, 2009, Shandong Fuwei and the
Pledger, the major shareholder of Joyinn, agreed that the Pledger would pledge another 19% of its interest in Joyinn in addition
to the previous pledge of 52% interest in Joyinn as a guarantee to the prepayment on the newly increased register capital made
by Shandong Fuwei to Joyinn. As a result, the Pledger’s percentage of pledged interest in Joyinn increased from 52% to 71%.
In the year 2010, the Company impaired the deposit amount by RMB4,240 (US$683). The impairment was determined based on an independent
appraisal study.
On July 14, 2009, Shandong Fuwei and Joyinn
entered into a Supplementary Agreement of Letter of Intent of Joyinn Capital Increase and Share Expansion (the “Supplementary
Agreement”), which extends the duration of former agreement to two (2) years granting Shandong Fuwei the option to determine
whether to continue or withdraw the investment prior to January 14, 2010, the expiration date of the Supplementary Agreement.
Upon the expiration of the Supplementary
Agreement on January 14, 2010, Shandong Fuwei and the Pledger entered into an agreement pursuant to which the Pledger agreed to
transfer a 71% interest in Joyinn to Shandong Fuwei. The transaction is subject to the approval of the authority body of both parties.
On March 9, 2012, Shandong Fuwei and the
Pledger agreed that prior to the approval of the foregoing share transfer, all the related agreements and share pledge terms and
conditions will remain in full force and effect.
FUWEI FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands except share and per share value)
(Unaudited)
On November 8, 2012, the Pledger’s
ownership of Joyinn was transferred to Weifang State-Owned Assets Operation Administration Company (the “Administration Company”)
pursuant to a court order. On December 10, 2012, Shandong Fuwei entered into a Share Pledge Agreement with the Administration Company,
as the major shareholder of Joyinn, in which the Administration Company agreed to all the terms and conditions in the LOI and the
Supplementary Agreement. The Administration Company, as the new Pledger, agreed to increase the pledged interest by 16.8% to 87.8%.
On January 12, 2015, Shandong Fuwei received
a notice issued by the Administration Company and Joyinn stating that all the agreements previously entered into by the relevant
parties have been terminated. Joyinn agreed to return RMB21,000 to Shandong Fuwei which was a prepayment of capital increase invested
by Shandong Fuwei and Shandong Fuwei agreed to handle the relevant procedures with respect to terminating the related share pledge
agreement upon receipt of such prepayment. Upon consideration, the Board of Directors of Fuwei Films approved to carry out the
procedures as stipulated by the notice. On January 22, 2015, Shandong Fuwei received the refund of RMB21,000 from Joyinn.
As of June 30, 2015 and December 31, 2014
the total amount of the deposit was zero and RMB16,760, respectively.
NOTE 9 – OTHER ASSETS
Other assets represent loss on sale-leaseback
arrangement with International Far Eastern Leasing Co., Ltd. The loss is treated as compensation for the future rentals paid by
Shandong Fuwei at a below-market price. The artificial loss should be deferred and amortized in proportion to the amortization
of the related leased assets. As of June 30, 2015 and December 31, 2014, the total amount of the other assets was RMB12,054 (US$1,944)
and RMB12,500, respectively.
NOTE 10 - LONG-TERM LOAN
Long-term loan consisted of the following:
Lender | |
Interest
rate per
annum | | |
June 30, 2015 | | |
December 31, 2014 | |
| |
| | |
RMB | | |
US$ | | |
RMB | |
BANK LOANS | |
| | | |
| | | |
| | | |
| | |
Weifang Dongfang State-owned Assets Management Co., Ltd. | |
| | | |
| | | |
| | | |
| | |
- October 19, 2009 to October 18, 2017 | |
4.860% | | |
| 8,325 | | |
| 1,342 | | |
| 10,000 | |
| |
| | | |
| 8,325 | | |
| 1,342 | | |
| 10,000 | |
Less: long-term loan, current portion | |
| | | |
| (3,350 | ) | |
| (540 | ) | |
| (3,350 | ) |
Long-term Loan | |
| | | |
| 4,975 | | |
| 802 | | |
| 6,650 | |
FUWEI FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands except share and per share value)
(Unaudited)
On November 20, 2009, the Company signed
a long-term loan agreement in the amount of RMB10,000 (US$1,613) with Weifang Dongfang State-owned Assets Management Co., Ltd.,
with an eight-year loan term, which became effective on October 19, 2009 and will expire on October 18, 2017. From 2015 to 2016,
the Company will make principal installment payments of RMB3,350 (US$540) per year with the remaining principal balance of RMB3,300 (US$532)
due in 2017. The annual interest rate for the loan is the benchmark interest rate for over five-year loans announced by the People’s
Bank of China reduced by 10% and the applicable annual interest rate for the period ended June 30, 2015 is 4.860%. The loan is
guaranteed by Shandong Deqin Investment& Guarantee Co., Ltd. and is used for the Company's projects.
Long-term bank loans maturity for the
next three years after June 30, 2015 are as follows:
| |
RMB | | |
US$ | |
1 year after | |
| 3,350 | | |
| 540 | |
2 years after | |
| 3,350 | | |
| 540 | |
3 years after | |
| 1,625 | | |
| 262 | |
NOTE 11 - RELATED PARTY TRANSACTIONS
Due to related parties
In April 2014, the Company obtained a loan
for a total amount of RMB105,000 from Shandong SNTON Optical Materials Technology Co., Ltd. (the “Shandong SNTON”)
to pay off certain short-term loans due to Bank of Communications Co., Ltd. The interest shall be calculated at the benchmark rate,
plus an additional 20% of the said benchmark rate, for the loan of the same term announced by the People’s Bank of China.
The interest must be paid quarterly and settled in full at the end of the year. As of December 31, 2014, the principle of this
loan and the interest have not been paid. In March 2015, the Company entered into a supplemental agreement with Shandong SNTON
pursuant to which the parties agreed that the Company will pay off the principle of this loan plus interest upon availability of
new loans from banks or other financial institutions.
As of June 30, 2015, the principle of this
loan from Shandong SNTON was RMB104,717 and the interest was RMB8,864.
In May 2014, the Company borrowed RMB15,000
from Shandong SNTON Group Co., Ltd. (the “SNTON Group”) solely to purchase raw materials. The interest shall be calculated
at the benchmark rate, plus an additional 20% of the said benchmark rate, for the loan of the same term announced by the People’s
Bank of China. The interest shall be paid quarterly and settled in full at the end of the year. The Company has agreed to repay
this loan prior to December 31, 2014. As of December 31, 2014, the principle of this loan and the interest have not been paid.
In March 2015, the Company entered into a supplemental agreement with SNTON Group pursuant to which that the Company agreed to
pay off the principle of this loan plus interest upon availability of new loans from banks or other financial institutions.
In March 2015, SNTON Group provided the
Company with a second loan for the amount of RMB2,000. In April 2015, SNTON Group provided the Company with a third loan for the
amount of RMB18,000. The Company returned the total amount of RMB20,000 in April 2015.
In May 2015, SNTON Group provided the Company
with a fourth loan for the amount of RMB10,000.
As of June 30, 2015, the total principle
of loans from SNTON Group was RMB25,000 and the interest payable was RMB1,153.
FUWEI FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands except share and per share value)
(Unaudited)
As of June 30, 2015, the total principle
of loans from related party was RMB129,717 and the interest payable was RMB10,017.
NOTE 12 - NOTES PAYABLE
As of June 30, 2015 and December 31, 2014,
Shandong Fuwei had banker’s acceptances opened with a maturity from three to six months totaling RMB81,626 (US$13,165) and
RMB95,539 for payment in connection with raw materials on a total deposit of RMB41,909 (US$6,760) at SPD Bank.
NOTE 13 – OBLIGATIONS UNDER CAPITAL
LEASES
The Group has commitments under capital
lease agreements as for a part of new third production line and associated equipment. The leases have terms of 3 years expiring
by the end of February 2016. As of June 30, 2015, future payments under these capital leases are as follows:
| |
June 30, 2015 | | |
December 31, 2014 | |
| |
RMB | | |
US$ | | |
RMB | | |
US$ | | |
RMB | | |
US$ | | |
RMB | | |
RMB | | |
RMB | |
| |
Present value of
the minimum
lease payments | | |
Total minimum
lease payments | | |
Interest | | |
Present
value of
the
minimum
lease
payments | | |
Total
minimum
lease
payments | | |
Interest | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Within 1 year | |
| 4,196 | | |
| 677 | | |
| 4,264 | | |
| 688 | | |
| 68 | | |
| 11 | | |
| 8,259 | | |
| 8,555 | | |
| 296 | |
After 1 year but within 2 years | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 303 | | |
| 306 | | |
| 3 | |
After 2 years but within 3 years | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
After 3 years | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| 4,196 | | |
| 677 | | |
| 4,264 | | |
| 688 | | |
| 68 | | |
| 11 | | |
| 8,562 | | |
| 8,861 | | |
| 299 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Less: balance due within one year classified as current liabilities | |
| (4,196 | ) | |
| (677 | ) | |
| | | |
| | | |
| | | |
| | | |
| (8,259 | ) | |
| | | |
| | |
| |
| - | | |
| - | | |
| | | |
| | | |
| | | |
| | | |
| 303 | | |
| | | |
| | |
FUWEI FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands except share and per share value)
(Unaudited)
Details of obligations under capital leases
are as follows:
| |
June 30, 2015 | | |
December 31, 2014 | |
| |
RMB | | |
RMB | |
| |
| | |
| |
RMB denominated obligations | |
| | | |
| | |
Fixed interest rate of 6.49% per annum | |
| 4,196 | | |
| 8,562 | |
| |
| | | |
| | |
| |
| 4,196 | | |
| 8,562 | |
Guarantee deposit of RMB800 (US$129) over
the capital leased assets concerned and relevant insurance policies were provided to the lessor as collateral and security. In
addition, as is customary in the case of capital leases, the Group’s obligations are guaranteed by Weifang State-Owned Assets
Operation Administration Company, Beijing Shiweitong Technology Development Co., Ltd., Fuwei Films (Holdings) Co., Ltd., and Fuwei
Films (BVI) Co., Ltd. In August 2014, Shandong SNTON Group Co., Ltd. accepted the responsibility of guarantee for the Group's obligation
from Beijing Shiweitong Technology Development Co., Ltd.
NOTE 14-INCOME TAX
Income tax expense was RMB1,044 (US$168)
and income tax benefit was RMB20 for the six months ended June 30, 2015 and 2014, respectively.
Income tax expense was RMB8 (US$1.0) and RMB79
for the three months ended June 30, 2015 and 2014, respectively.
NOTE 15 - LOSS PER SHARE
Basic and diluted net loss per share was
RMB2.27 (US$0.37) and RMB2.77 for the six months period ended June 30, 2015 and 2014.
Basic and diluted net loss per share was
RMB1.12 (US$0.18) and RMB1.76 for the three months period ended June 30, 2015 and 2014, respectively.
NOTE 16 - MAJOR CUSTOMERS AND VENDORS
There were no major customers who accounted
for more than 10% of the total net revenue for the six-month periods ended June 30, 2015 and 2014.
One vendor provided approximately 59.4%
and 61.1% of the Company’s purchases of raw materials, supplies and equipment for the six months ended June 30, 2015 and
2014, respectively. The Company had a RMB1,603 (US$259) advance to that vendor as of June 30, 2015. Another vendor provided approximately
13.3% and 11.5% of the Company’s purchases of raw materials, supplies and equipment for the six months ended June 30, 2015
and 2014.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References to "dollars" and "US$"
are to United States Dollars. References to "we", "us", the "Company" or "Fuwei Films"
include Fuwei Films (Holdings) Co., Ltd. and its subsidiaries, except where the context requires otherwise.
In the second quarter of 2015, we continued
to be adversely affected by enhanced competition and increased supply over demand in China’s BOPET market. In addition, fierce
competition from overseas as well as anti-dumping measures taken by the United States of America and South Korea caused orders
from international markets to decrease. The foregoing factors have contributed to significant decrease in sales prices, which resulted
in reduced total revenue compared with the second quarter of 2014.
We believe that in the coming quarters
of 2015, there will be growing capacity of BOPET films in China and stronger competition in the market. Our ability to retain effective
control over the pricing of our products on a timely basis is limited due to the enhanced competition in the BOPET market. As a
result, we may continue to witness losses in the short to medium term.
On August 14, 2013, the Company announced
that it had received the first notice from the its controlling shareholder, the Weifang State-owned Assets Operation Administration
Company, a wholly-owned subsidiary of Weifang State-owned Asset Management and Supervision Committee (collectively, the “Administration
Company”) indicating that the Administration Company had determined to place control over 6,912,503 (or 52.9%) of its outstanding
ordinary shares up for sale at a public auction to be held in China. Four public auctions were held in Jinan, Shandong Province,
China. The Company learned that they failed due to a lack of bidders registered for the auction. On March 25, 2014, the fifth public
auction was held in Jinan, Shandong Province, China .The beneficial ownership of 6,912,503 ordinary shares of the Company previously
owned by the Administration Company through Apex Glory Holdings Limited, a British Virgin Islands corporation, was bid by Shandong
SNTON Optical Materials Technology Co., Ltd (“Shandong SNTON”) through the public auction. Shandong SNTON got 6,912,503
(or 52.9%) of the Company’s outstanding ordinary shares at a price of RMB101, 800,000 (approximately US$16,572,787) or approximately
US$2.40 per ordinary share.
On May 12, 2014, the Company announced
that it had learned that the successful bidder, Shandong SNTON in the fifth public auction of 6,912,503 (or 52.9%) of the Company’s
outstanding ordinary shares (the “Shares”) held on March 25, 2014, was entrusted by Hongkong Ruishang International
Trade Co., Ltd., a Hong Kong corporation, (“Hongkong Ruishang”) to handle all the formalities and procedure in connection
with the public auction. As a result of the entrusted arrangement, the Company believes Hongkong Ruishang is the party controlling
the Shares acquired in the fifth public auction. According to publicly available information in the People’s Republic of
China, Shandong SNTON is a wholly owned subsidiary of Shandong SNTON Group Co., Ltd. (the “SNTON Group”). Mr. Xiusheng
Wang, the chairman of the Board of Directors of Shandong SNTON Group Co., Ltd., is also Hongkong Ruishang’s chairman.
On May 14, 2014, the Company announced
that it received a notification from Shandong Fuhua Investment Company Limited. (“Shandong Fuhua”) with respect to
an entire ownership transfer of the Company’s 12.55% outstanding ordinary shares from the Administration Company to Shandong
Fuhua. The Administration Company originally held these shares indirectly through an intermediate holding company, Easebright Investments
Limited (“Easebright”). As a result of this transfer, Shandong Fuhua indirectly owns 12.55% outstanding ordinary shares
of the Company through Easebright. Mr. Jingang Yang has been appointed as the director of Easebright.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of operations for the six-month
periods ended June 30, 2015 compared to June 30, 2014
The table below sets forth certain line items
from our Statement of Income as a percentage of revenue:
| |
Six-Month Period Ended | | |
Six-Month Period Ended | |
| |
June 30, 2015 | | |
June 30, 2014 | |
| |
(as % of Revenue) | |
Gross profit | |
| (6.3 | ) | |
| (6.8 | ) |
Operating expenses | |
| (18.3 | ) | |
| (14.8 | ) |
Operating income (loss) | |
| (24.6 | ) | |
| (21.6 | ) |
Other income (expense) | |
| 0.7 | | |
| (4.2 | ) |
Provision for income taxes | |
| (0.87 | ) | |
| 0.01 | |
Net income (loss) | |
| (24.8 | ) | |
| (25.8 | ) |
Revenue
Our revenue is primarily derived from the
manufacture and sale of plastic films.
Net sales during the six-month period
ended June 30, 2015 were RMB119.5million (US$19.3million), compared to RMB140.7 million in the same period in 2014,
representing a decrease of RMB21.2million or 15.1%, mainly due to the reduction of average sales price by 13.3% arising from
stronger competition in China and reduce in prices of main raw materials.
In the six-month period ended June 30,
2015, sales of specialty films were RMB36.3 million (US$5.9 million) or 30.4% of our total revenues as compared to RMB36.4 million
or 25.9% in the same period of 2014, which was a decrease of RMB0.1 million, or 0.2% as compared to the same period in 2014. The
reduction of average sales price caused a decrease of RMB3.4 million and the increase in the sales volume caused an increase of
RMB3.3 million.
The following is a breakdown of commodity
and specialty film sales (amounts in thousands):
| |
Six-Month Period Ended June 30, 2015 | | |
% of Total | | |
Six-Month Period Ended June 30, 2014 | | |
% of Total | |
| |
RMB | | |
US$ | | |
| | |
RMB | | |
| |
Stamping and transfer film | |
| 46,306 | | |
| 7,468 | | |
| 38.8 | % | |
| 59,922 | | |
| 42.6 | % |
Printing film | |
| 15,166 | | |
| 2,446 | | |
| 12.7 | % | |
| 17,179 | | |
| 12.2 | % |
Metallization film | |
| 3,365 | | |
| 543 | | |
| 2.8 | % | |
| 3,687 | | |
| 2.6 | % |
Specialty film | |
| 36,332 | | |
| 5,860 | | |
| 30.4 | % | |
| 36,370 | | |
| 25.9 | % |
Base film for other application | |
| 18,316 | | |
| 2,955 | | |
| 15.3 | % | |
| 23,531 | | |
| 16.7 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| 119,485 | | |
| 19,272 | | |
| 100.0 | % | |
| 140,689 | | |
| 100.0 | % |
Overseas sales during the six
months ended June 30, 2015 were RMB28.2 million or US$4.5 million, or 23.6% of total revenues, compared with RMB21.6 million
or 15.3% of total revenues in the same period in 2014. This was RMB6.6 million higher than the same period in 2014. The
decrease of average sales price caused a decrease of RMB5.2 million and the increase in sales volume resulted in an increase
of RMB11.8 million. The increase in overseas sales was mainly due to increase in sales volume.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a breakdown of PRC domestic
and overseas sales (amounts in thousands):
| |
Six-Month Period Ended June 30, 2015 | | |
| | |
Six-Month Period Ended June 30, 2014 | | |
| |
| |
RMB | | |
US$ | | |
% of Total | | |
RMB | | |
% of Total | |
Sales in China | |
| 91,285 | | |
| 14,723 | | |
| 76.4 | % | |
| 119,111 | | |
| 84.7 | % |
Sales in other countries | |
| 28,200 | | |
| 4,549 | | |
| 23.6 | % | |
| 21,578 | | |
| 15.3 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| 119,485 | | |
| 19,272 | | |
| 100.0 | % | |
| 140,689 | | |
| 100.0 | % |
Cost of Goods Sold
Our cost of goods sold comprises mainly
of material costs, factory overhead, power, packaging materials and direct labor. The breakdown of our cost of goods sold in percentage
is as follows:
| |
Six-Month Period Ended June 30, 2015 | | |
Six-Month Period Ended June 30, 2014 | |
| |
% of total | | |
% of total | |
Materials costs | |
| 65.1 | % | |
| 68.4 | % |
Factory overhead | |
| 16.0 | % | |
| 16.0 | % |
Energy expense | |
| 11.3 | % | |
| 10.1 | % |
Packaging materials | |
| 3.4 | % | |
| 2.7 | % |
Direct labor | |
| 4.2 | % | |
| 2.8 | % |
Cost of goods sold during the first six
months of 2015 totaled RMB127.0 million (US$20.5 million) as compared to RMB150.3 million in the same period of 2014. This was
RMB23.3 million or 15.5% lower than the same period in 2014, mainly due to the reduction of sales volume and the decrease in unit
cost largely caused by the price reduction of main raw materials. The decrease of unit cost of goods sold caused a decrease of
RMB20.2 million and the decrease in sales volumes caused a decrease of RMB3.1 million. The foregoing factors resulted in a total
decrease of RMB23.3 million in cost of goods sold.
Gross Loss
Our gross loss was RMB7.5 million (US$1.2
million) for the first six months ended June 30, 2015, representing a gross loss rate of 6.3%, as compared to a gross loss rate
of 6.8% for the same period in 2014. Correspondingly, gross loss rate decreased by 0.5 percentage points. Our average product sales
prices decreased by 13.3% compared to the same period last year while the average cost of goods sold decreased by 13.7% compared
to the same period last year. Consequently, the amount of decrease in cost of goods sold was larger than that in sales revenue
during the six months ended June 30, 2015 compared with the same period in 2014, which resulted in a decrease in our gross loss.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Operating Expenses
Operating expenses for the six months ended
June 30, 2015 were RMB21.8 million (US$3.5 million), compared to RMB20.8 million in the same period in 2014, which was RMB1.0 million
or 4.8% higher than the same period in 2014. This increase is mainly due to depreciation charged to general and administrative
expenses in the accounting period in which they are incurred as a result of lack of manufacturing from the third production line
in May and June 2015.
Other Expense
Total other expense is a combination result
of interest income, interest expense and others income (expense). Total other income during the first half of 2015 was RMB0.8
million (US$0.1 million), RMB5.0 million more than the same period in 2014. This is mainly attributed to the previously recognized
impairment losses relating to the long-term deposit reversed as a result of the refund of total long-term deposit from Joyinn.
Income Tax Benefit (Expense)
The income tax expense was RMB1.0 million
(US$0.2 million) during the six months ended June 30, 2015, compared to income tax benefit of RMB0.02 million during the same period
in 2014. This increase of the income tax expense was due to changes in deferred tax for the six months ended June 30, 2015.
Net Loss
Net loss attributable to the Company during
the first half of 2015 was RMB29.6 million (US$4.8 million) compared to net loss attributable to the Company of RMB36.2 million
during the same period in 2014, representing a decrease of RMB6.6 million from the same period in 2014 due to the factors described
above.
Results of operations for the three-month
periods ended June 30, 2015 compared to June 30, 2014
The table below sets forth certain line items
from our Statement of Income as a percentage of revenue:
| |
Three-Month Period Ended | | |
Three-Month Period Ended | |
| |
June 30, 2015 | | |
June 30, 2014 | |
| |
(as % of Revenue) | |
Gross profit | |
| 0.4 | | |
| (13.6 | ) |
Operating expenses | |
| (19.5 | ) | |
| (14.9 | ) |
Operating income (loss) | |
| (19.1 | ) | |
| (28.5 | ) |
Other income (expense) | |
| (2.8 | ) | |
| (4.2 | ) |
Provision for income taxes | |
| (0.01 | ) | |
| (0.11 | ) |
Net income (loss) | |
| (22.0 | ) | |
| (32.8 | ) |
Revenue
Net sales during the second quarter
ended June 30, 2015 were RMB66.7 million (US$10.8 million), compared to RMB70.0 million during the same period in 2014,
representing a decrease of RMB3.3 million or 4.7%, mainly due to the reduction of average sales price by 7.2% arising from
stronger competition in China and a 13.9% reduction in prices of main raw materials. The reduction of average sales price caused
a decrease of RMB5.2 million and the sales volume increase caused an increase of RMB1.9 million.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In the second quarter of 2015, sales of
specialty films were RMB21.3 million (US$3.4 million) or 31.9% of our total revenues as compared to RMB16.6 million or 23.7% in
the same period of 2014, which was an increase of RMB4.7 million, or 28.3% as compared to the same period in 2014. The reduction
of average sales price caused a decrease of RMB1.5 million and the increase in the sales volume caused an increase of RMB6.2 million.
The increase was largely attributable to the increase in sales volume.
The following is a breakdown of commodity
and specialty film sales (amounts in thousands):
| |
Three-Month Period Ended June 30, 2015 | | |
| | |
Three-Month Period Ended June 30, 2014 | | |
| |
| |
RMB | | |
US$ | | |
% of Total | | |
RMB | | |
% of Total | |
Stamping and transfer film | |
| 25,465 | | |
| 4,106 | | |
| 38.2 | % | |
| 28,796 | | |
| 41.2 | % |
Printing film | |
| 7,942 | | |
| 1,281 | | |
| 11.9 | % | |
| 9,238 | | |
| 13.2 | % |
Metallization film | |
| 1,680 | | |
| 271 | | |
| 2.5 | % | |
| 2,056 | | |
| 2.9 | % |
Specialty film | |
| 21,289 | | |
| 3,434 | | |
| 31.9 | % | |
| 16,590 | | |
| 23.7 | % |
Base film for other application | |
| 10,333 | | |
| 1,668 | | |
| 15.5 | % | |
| 13,304 | | |
| 19.0 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| 66,709 | | |
| 10,760 | | |
| 100.0 | % | |
| 69,984 | | |
| 100.0 | % |
Overseas sales were RMB15.1 million or
US$2.4 million, or 22.7% of total revenues, compared with RMB1.1 million or 15.9% of total revenues in the second quarter of 2014.
The decrease of average sales price caused a decrease of RMB2.1 million and the increase in sales volume resulted in an increase
of RMB6.1 million. The increase in overseas sales was mainly due to the increase in sales volume.
The following is a breakdown of PRC domestic
and overseas sales (amounts in thousands):
| |
Three-Month Period Ended June 30, 2015 | | |
| | |
Three-Month Period Ended June 30, 2014 | | |
| |
| |
RMB | | |
US$ | | |
% of Total | | |
RMB | | |
% of Total | |
Sales in China | |
| 51,589 | | |
| 8,321 | | |
| 77.3 | % | |
| 58,873 | | |
| 84.1 | % |
Sales in other countries | |
| 15,120 | | |
| 2,439 | | |
| 22.7 | % | |
| 11,111 | | |
| 15.9 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| 66,709 | | |
| 10,760 | | |
| 100.0 | % | |
| 69,984 | | |
| 100.0 | % |
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cost of Goods Sold
Our cost of goods sold comprises mainly
of material costs, factory overhead, power, packaging materials and direct labor. The breakdown of our cost of goods sold in percentage
is as follows:
| |
Three-Month Period Ended June 30, 2015 | | |
Three-Month Period Ended June 30, 2014 | |
| |
% of total | | |
% of total | |
Materials costs | |
| 70.5 | % | |
| 67.5 | % |
Factory overhead | |
| 11.2 | % | |
| 16.6 | % |
Energy expense | |
| 10.7 | % | |
| 10.7 | % |
Packaging materials | |
| 3.5 | % | |
| 2.6 | % |
Direct labor | |
| 4.1 | % | |
| 2.6 | % |
Cost of goods sold during the second quarter
of 2015 totaled RMB66.4 million (US$10.7 million) as compared to RMB79.5 million in the same period of 2014. This was RMB13.1 million
or 16.5% lower than the same period in 2014. The decrease in unit cost of goods sold caused a decrease of RMB15.2 million and the
increase in sales volume caused an increase of RMB2.1 million. The reduction was mainly due to the decrease in unit cost of goods
sold.
Gross Loss
Our gross profit was RMB0.3 million (US$0.04
million) for the second quarter ended June 30, 2015, representing a gross profit rate of 0.4%, as compared to a gross loss rate
of 13.6% for the same period in 2014. Correspondingly, gross profit rate increased by 14 percentage point compared to the same
period in 2014. Our average product sales prices decreased by 7.2% compared to the same period last year while the average cost
of goods sold decreased by 18.6% compared to the same period last year. Consequently, the amount of decrease in cost of goods sold
was larger than that in sales revenue during the second quarter ended June 30, 2015 compared with the same period in 2014, which
resulted in an increase in our gross profit.
Operating Expenses
Operating expenses for the second quarter
ended June 30, 2015 were RMB13.0 million (US$2.1 million), as compared to RMB10.4 million for the same period in 2014, which was
RMB2.6 million, or 25.0% higher than the same period in 2014. This increase was mainly due to depreciation charged to general and
administrativeexpenses in the accounting period in which they are incurred as a result of lack of manufacturing from the third
production line in May and June 2015.
Other Income (Expense)
Total other expense is a combination result
of interest income, interest expense and others income (expense). Total other expense during the second quarter ended June 30,
2015 was RMB1.9 million (US$0.3 million), RMB1.1 million lower than the same period in 2014, which mainly attributed to decreased
interest expense and bank discount expense. The decrease of interest expense is mainly due to the reduction of interest rate.
Income Tax Benefit (Expense)
The income tax expense was RMB0.008 million
(US$0.001 million) during the second quarter ended June 30, 2015, compared to income tax expense of RMB0.1 million during the same
period in 2014. This decrease was due to changes in deferred tax for the second quarter ended June 30, 2015.
Net Loss
Net loss attributable to the Company during
the second quarter ended June 30, 2015 was RMB14.7 million (US$2.4 million) compared to net loss attributable to the Company of
RMB23.0 million during the same period in 2014, representing a decrease of RMB8.3 million for the same period in 2014.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Our capital expenditures have been primarily
from cash generated from our operations and borrowings from related parties, financial institutions, including through sale-leaseback
transactions. The interest rates of borrowings from financial institutions during the period from the second quarter of 2014 to
the second quarter of 2015 ranged from 4.860% to 7.20%.
On December 21, 2012, Shandong Fuwei signed
a sale-leaseback contract with International Far Eastern Leasing Co., Ltd. (“Far Eastern Leasing”). Far Eastern Leasing
purchased certain equipment included in the third production line, and simultaneously leased them back to Shandong Fuwei. Shandong
Fuwei will pay rent totaling RMB21.94 million (including interest) to Far Eastern Leasing over the three years ended December 26,
2015. In March 2013, Shandong Fuwei signed another sale-leaseback contract with Far Eastern Leasing, pursuant to which it has agreed
to pay total rent of RMB5.48 million (including interest) to Far Eastern Leasing over the three years ended April 9, 2016. The
financed equipment mentioned above is covered by an insurance policy, the premium of which will be paid by Shandong Fuwei. The
contract was guaranteed by the following entities: Weifang State-owned Assets Operation Administration Company, Fuwei Films (Holdings)
Co., Ltd, Fuwei (BVI) Co., Ltd., and Beijing Shiweitong Science and Technology Co., Ltd. In August 2014, Shandong SNTON Group Co.,
Ltd. accepted the responsibility of guarantee for the Group's obligation from Beijing Shiweitong Technology Development Co., Ltd.
On November 20, 2009, we signed a long-term
loan agreement of RMB10.0 million (US$1.613 million) with Weifang Dongfang State-owned Assets Management Co., Ltd., with an eight-year
loan term, which became effective on October 19, 2009 and will expire on October 18, 2017. From 2015 to 2016, we will make principal
installment payments of RMB3.35 million (US$0.54 million) per year with the remaining principal balance of RMB3.30 million (US$0.532
million) due in 2017. The annual interest rate for the loan is the benchmark interest rate for over five-year loans announced by
the People’s Bank of China reduced by 10% and the applicable annual interest rate for the period ended June 30, 2015 is 4.860%.
The loan is guaranteed by Shandong Deqin Investment& Guarantee Co., Ltd. and is used for our projects.
In April 2014, we obtained a loan for a
total amount of RMB105million from Shandong SNTON Optical Materials Technology Co., Ltd. (the “Shandong SNTON”) to
pay off certain short-term loans due to Bank of Communications Co., Ltd. The interest shall be calculated at the benchmark rate,
plus an additional 20% of the said benchmark rate, for the loan of the same term announced by the People’s Bank of China.
The interest must be paid quarterly and settled in full at the end of the year. As of December 31, 2014, the principle of this
loan and the interest have not been paid. In March 2015, the Company entered into a supplemental agreement with Shandong SNTON
pursuant to which the parties agreed that the Company will pay off the principle of this loan plus interest upon availability of
new loans from banks or other financial institutions.
As of June 30, 2015, the principle of this
loan was RMB104.72 million and the interest was RMB8.86 million.
In May 2014, the Company borrowed RMB15
million from Shandong SNTON Group Co., Ltd. (the “SNTON Group”) solely to purchase raw materials. The interest shall
be calculated at the benchmark rate, plus an additional 20% of the said benchmark rate, for the loan of the same term announced
by the People’s Bank of China. The interest shall be paid quarterly and settled in full at the end of the year. The Company
has agreed to repay this loan prior to December 31, 2014. As of December 31, 2014, the principle of this loan and the interest
have not been paid. In March 2015, the Company entered into a supplemental agreement with SNTON Group pursuant to which that the
Company agreed to pay off the principle of this loan plus interest upon availability of new loans from banks or other financial
institutions.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In March 2015, SNTON Group provided the
Company with a second loan for the amount of RMB2 million. In April 2015, SNTON Group provided the Company with a third loan for
the amount of RMB18.0 million. The Company returned the total amount of RMB20.0 million in April, 2015.
In May 2015, SNTON Group provided the Company
with a fourth loan for the amount of RMB10.0 million.
As of June 30, 2015, the total principle
of loans from SNTON Group was RMB25.0 million and the interest payable was RMB1.15 million.
As of June 30, 2015, the total principle
of loans from related party was RMB129.7 million and the interest payable was RMB10.0 million.
We believe that, after taking into consideration
our present and potential future loans from related parties and banking facilities, existing cash and the expected cash flows to
be generated from our operations, we will have adequate sources of liquidity to meet our short-term obligations and our working
capital requirements.
Operating Activities
Net cash used in operating activities for
the six months ended June 30, 2015 was RMB17.4 million (US$2.8 million) compared to net cash used in operating activities of RMB7.5
million for the six months ended June 30, 2014. This increase in cash flows used in operating activities was primarily attributable
to the increase in cash outflows from inventories and increase in account receivable.
Investing Activities
Net cash flows provided by investing activities
for the six months ended June 30, 2015 was RMB25.5 million (US$4.1 million) compared to net cash flows used in investing activities
of RMB5.7 million for the six months ended June 30, 2014. This increase in cash flows provided by investing activities was primarily
attributable to the receipt of long-term deposit.
Financing Activities
Net cash flows used in financing activities
for the six months ended June 30, 2015 was RMB6.2 million (US$1.0 million) compared to net cash flows provided by financing activities
of RMB7.1 million for the six months ended June 30, 2014, which is a decrease in cash flows provided by financing activities of
RMB13.3 million (US$2.1 million). This decrease in cash flows provided by financing activities was primarily attributable to decreased
loans from related party.
Working Capital
As of June 30, 2015 and December 31, 2014,
we had a working capital deficit of RMB144.4 million (US$23.3 million) and RMB152.0 million, respectively. Working capital deficit
decreased by RMB7.6 million (US$1.2 million), or 5.0% compared to the amount as of December 31, 2014. Our main current liability
was loan from related party.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Contractual Obligations
The following table is a summary of our contractual
obligations as of June 30, 2015 (in thousands RMB):
| |
Payments due by period | |
| |
| | |
Less than | | |
1-3 | | |
3-5 | | |
More than | |
Contractual obligations | |
Total | | |
1 year | | |
years | | |
years | | |
5 years | |
| |
| | |
| | |
| | |
| | |
| |
Rental obligations | |
| 432 | | |
| 336 | | |
| 96 | | |
| - | | |
| - | |
Purchase commitment | |
| 2,215 | | |
| 2,215 | | |
| - | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total | |
| 2,647 | | |
| 2,551 | | |
| 96 | | |
| - | | |
| - | |
Third Production Line Update
The third production
line has been put into trial operation at the end of January 2013. As of September 2013, our third production line has been approved. A
sample diffusion film (a type of TFT-LCD optical film) was preliminarily accepted by four customers after being delivered to these
four customers for testing. We are supplying small batches of products according to one of the four customer’s purchase order.
In addition, a sample base film for solar backsheets has been delivered to a customer for initial testing. We received an initial
feedback from this customer and are taking measures based on the feedback accordingly.
Legal Proceedings
From time to time, we may be subject to
legal actions and other claims arising in the ordinary course of business. Shandong Fuwei is currently a party to four legal proceedings
in China.
On July 9, 2012, a client filed a lawsuit
in Beijing Daxing District People’s Court against Shandong Fuwei claiming RMB953,113 plus interest over disputes arising
from a Procurement Contract between the parties. Shandong Fuwei raised a jurisdictional objection upon filing its plea, and Beijing
Daxing District People’s Court overruled the objection. Shandong Fuwei filed an appeal against the judgment in the First
Intermediate People’s Court of Beijing. The appeal was dismissed on January 23, 2013. On May 15, 2013, Beijing Daxing District
People’s Court heard the case and adjourned the hearing due to the fact that plaintiff failed to provide sufficient evidence.
On June 25, 2013, the case was heard in Beijing Daxing District People’s Court again and it was further adjourned due to
plaintiff’s failure to provide sufficient evidence. The case was then scheduled to be heard on August 7, 2013. However, on
the day prior to re-scheduled hearing, Shandong Fuwei was informed by Beijing Daxing District People’s Court that the hearing
was adjourned further for the same reason that plaintiff failed to provide sufficient evidence. On April 21, 2014, the case was
heard, and the plaintiff failed to provide sufficient evidence and the hearing was further adjourned. On May 28, 2014, the case
was heard and the plaintiff provided some evidence. On August 25, 2014, the case was heard again. On November 5, 2014, the court
accepted the withdrawal application from the plaintiff. On November 26, 2014, the plaintiff filed a second lawsuit in Beijing Daxing
District People’s Court against Shandong Fuwei over disputes arising from the Procurement Contract between the parties claiming
RMB618,230 plus interest as a result of non- payment. The case was heard on January 26, 2015, and March 3, 2015, where the two
parties testified over the relevant evidence. To date, the case has not been decided.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
On January 21, 2014, Shandong Fuwei received
a complaint from Zeng Wenhong, a Hong Kong citizen, plaintiff against Shandong Fuwei with a claim for a refund of US$500,000 (approximately
RMB4,138,250) and related interest of RMB2,331,784. The plaintiff alleged that Shandong Fuwei has agreed to sell to the plaintiff
ordinary shares of the Company pursuant to an oral agreement between the plaintiff and Shandong Fuwei in June 2005, and as a result
the plaintiff transferred US$500,000 to Wellplus Investments (Hong Kong) Limited to be used for acquiring the ordinary shares of
the Company. However, the plaintiff never received such shares. The case was heard by the Intermediate People's Court of Weifang
on April 3, 2014. On October 28, 2014, the case was heard again and the plaintiff submitted additional evidence. The court is in
the process of reviewing the case and to date no judgment has been entered.
On June 28, 2014, an equipment supplier
filed a lawsuit in Weifang High-Tech District People’s Court against Shandong Fuwei over disputes arising from a Procurement
Contract between the parties with a claim for RMB844,000 plus interest of RMB134,000. The case has been settled between the two
parties. Pursuant to the terms of the settlement, Shandong Fuwei shall pay the plaintiff RMB750,000 through bank acceptance note
prior to February 7, 2015. The remaining balance of RMB94,000 shall be paid within two days of reaching resolution on the eight
remaining disputes between the two parties. Thereafter, neither party will bear any further liability. To date, Shandong Fuwei
has made a payment to the plaintiff in the amount of RMB750,000.
On September 26, 2014, a client filed a
lawsuit in Beijing Daxing District People’s Court against Shandong Fuwei over disputes arising from a Procurement Contract
between the two parties for an amount of RMB99,702.88. Shandong Fuwei raised an objection upon filing its plea. On April 9, 2015,
the Beijing Daxing District People’s Court overruled the objection. Shandong Fuwei filed an appeal against the judgment in
the Second Intermediate People’s Court of Beijing. The case has been settled between the two parties. Pursuant to the terms
of the settlement agreement, Shandong Fuwei shall provide the value-added tax invoice as required and in return the plaintiff shall
withdraw the case against Shandong Fuwei.
Exhibit Index
Exhibit No. | |
Description |
99.1 | |
Press Release dated August 20, 2015. |
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.
|
| |
Fuwei Films (Holdings) Co., Ltd. |
|
| |
|
|
By: | |
/s/ Zengyong Wang |
|
| |
Name: Zengyong Wang |
|
| |
Title: Chairman and Chief Executive Officer |
Dated: August 20, 2015
Exhibit 99.1
Fuwei Films Announces Its Unaudited
Financial Results for the Second Quarter of 2015
-Teleconference to be
Held on Friday, August 21, 2015 at 9:00 am EDT-
BEIJING, August 20, 2015 - Fuwei
Films (Holdings) Co., Ltd. (Nasdaq: FFHL) (“Fuwei Films” or the “Company”), a manufacturer and distributor
of high-quality BOPET plastic films in China, today announced its unaudited financial results for the second quarter ended June
30, 2015.
Second
Quarter 2015 Financial Highlights
| § | Net sales during the second quarter ended
June 30, 2015 were RMB66.7 million or US$10.8 million. |
| § | Sales of specialty films accounted for
31.9% of revenues. |
| § | Overseas sales accounted for 22.7% of
revenues. |
Mr. Zengyong Wang, Chairman and CEO of
Fuwei Films, commented, “We continue to face strong competition from emerging and incumbent players which has created oversupply
relative to demand in the marketplace. While this has impacted the Company’s quarterly financial results, we intend to capitalize
upon opportunities in international markets. We believe that our focus on continued innovation and R&D will enable the Company
to expand end-user applications and we are encouraged by this positive trend that we expect to enable us to weather different industry
and economic conditions in the periods ahead.”
Second Quarter of 2015 Financial
Results
Net sales during the second quarter
ended June 30, 2015 were RMB66.7 million or US$10.8 million, compared to RMB70.0 million during the same period in 2014,
representing a decrease of RMB3.3 million or 4.7%, mainly due to the reduction of average sales price by 7.2% arising from
stronger competition in China and a 13.9% reduction in prices of main raw materials. The reduction of average sales price caused a
decrease of RMB5.2 million and the sales volume increase caused an increase of RMB1.9 million.
In the second quarter of 2015, sales of
specialty films were RMB21.3 million or US$3.4 million representing 31.9% of our total revenues as compared to RMB16.6 million
or 23.7% in the same period of 2014, which was an increase of RMB4.7 million, or 28.3% as compared to the same period in 2014.
The reduction of average sales price caused a decrease of RMB1.5 million and the increase in the sales volume caused an increase
of RMB6.2 million. The increase was largely attributable to the increase in sales volume.
Overseas sales were RMB15.1 million or
US$2.4 million, or 22.7% of total revenues, compared with RMB1.1 million or 15.9% of total revenues in the second quarter of 2014.
The decrease of average sales price caused a decrease of RMB2.1 million and the increase in sales volume resulted in an increase
of RMB6.1 million. The increase in overseas sales was mainly due to the increase in sales volume.
The following is a breakdown of PRC domestic
and overseas sales (amounts in thousands):
| |
Three-Month Period Ended June 30, 2015 | | |
% of Total | | |
Three-Month
Period Ended June 30, 2014 | | |
% of Total | |
| |
RMB | | |
US$ | | |
| | |
RMB |
|
|
|
| |
Sales in China | |
| 51,589 | | |
| 8,321 | | |
| 77.3 | % | |
| 58,873 | | |
| 84.1 | % |
Sales in other countries | |
| 15,120 | | |
| 2,439 | | |
| 22.7 | % | |
| 11,111 | | |
| 15.9 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| 66,709 | | |
| 10,760 | | |
| 100.0 | % | |
| 69,984 | | |
| 100.0 | % |
Our gross profit was RMB0.3 million or
US$0.04 million for the second quarter ended June 30, 2015, representing a gross margin of 0.4%, as compared to a gross loss margin
of 13.6% for the same period in 2014. Correspondingly, gross margin increased by 14 percentage point compared to the same period
in 2014. Our average product sales prices decreased by 7.2% compared to the same period last year while the average cost of goods
sold decreased by 18.6% compared to the same period last year. Consequently, the amount of decrease in cost of goods sold was larger
than that in sales revenue during the second quarter ended June 30, 2015 compared with the same period in 2014, which resulted
in an increase in our gross profit.
Operating expenses for the second quarter
ended June 30, 2015 were RMB13.0 million or US$2.1 million, as compared to RMB10.4 million for the same period in 2014, which was
RMB2.6 million, or 25.0% higher than the same period in 2014. This increase was mainly due to depreciation charged to general and
administrative expenses in the accounting period in which they are incurred as a result of lack of manufacturing from the third
production line in May and June of2015.
Net loss attributable to the Company during
the second quarter ended June 30, 2015 was RMB14.7 million or US$2.4 million compared to net loss attributable to the Company of
RMB23.0 million during the same period in 2014, representing a decrease of RMB8.3 million for the same period in 2014.
Basic and diluted net loss per share was
RMB1.12 or US$0.18 and RMB1.76 for the three months period ended June 30, 2015 and 2014, respectively.
Total shareholders’ equity was RMB359.2
million or US$57.9 million as of June 30, 2015, compared with RMB388.9 million as of December 31, 2014.
As of June 30, 2015, the Company had 13,062,500
basic and diluted total ordinary shares outstanding.
Conference Call Information
The Company will host a teleconference
on Friday, August 21, 2015, at 9:00 a.m. EDT / 9:00 p.m. Beijing time to discuss the financial results. To participate in the call,
please dial +1-877-407-9205 in North America, or +1-201-689-8054 internationally, approximately 10 minutes prior to the scheduled
start time.
A replay of the call can also be accessed via telephone by calling
+1-877-660-6853 in North America, or +1-201-612-7415 internationally, and entering the following access codes: Account#: 286 and
Conference ID: 13617384. The replay will be available until September21, 2015, at 11:59 p.m. EDT.
About Fuwei Films
Fuwei Films conducts its business through
its wholly owned subsidiary, Fuwei Films (Shandong) Co., Ltd. (“Fuwei Shandong”). Fuwei Shandong develops, manufactures
and distributes high-quality plastic films using the biaxial oriented stretch technique, otherwise known as BOPET film (biaxially
oriented polyethylene terephthalate). Fuwei'sBOPET film is widely used to package food, medicine, cosmetics, tobacco, and alcohol,
as well as in the imaging, electronics, and magnetic products industries.
Safe Harbor
This press release contains information
that constitutes forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform
Act of 1995 and are subject to risks. Risk factors that could contribute to such differences include those matters more fully disclosed
in the Company's reports filed with the U.S. Securities and Exchange Commission which, among other things, include trends affecting
the global economy, including the devaluation of the RMB by China in August 2015; competition in the BOPET film industry; growth
of, and risks inherent in, the BOPET film industry in China; uncertainty as to future profitability and our ability to obtain adequate
financing for our planned capital expenditure requirements; uncertainty as to our ability to continuously develop new BOPET film
products and keep up with changes in BOPET film technology; risks associated with possible defects and errors in our products;
uncertainty as to our ability to protect and enforce our intellectual property rights; uncertainty as to our ability to attract
and retain qualified executives and personnel; and uncertainty in acquiring raw materials on time and on acceptable terms, particularly
in view of the volatility in the prices of petroleum products in recent years. The forward-looking information provided herein
represents the Company's estimates as of the date of the press release, and subsequent events and developments may cause the Company's
estimates to change. The Company specifically disclaims any obligation to update the forward-looking information in the future.
Therefore, this forward-looking information should not be relied upon as representing the Company's estimates of its future financial
performance as of any date subsequent to the date of this press release. Actual results of our operations may differ materially
from information contained in the forward-looking statements as a result of the risk factors.
For more information, please contact:
In China:
Ms. Xiaoli Yu
Investor Relations
Officer
Phone: +86-133-615-59266
Email: fuweiIR@fuweifilms.com
In the U.S.:
Ms. Vivian Chen
Investor Relations
Grayling
Phone: +1-646-284-9427
Email: vivian.chen@grayling.com
Financial Tables to Follow
FUWEI FILMS (HOLDINGS) CO., LTD. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2015 AND DECEMBER 31,
2014
(amounts in thousands except share and per
share value)
(Unaudited)
| |
June 30, 2015 | | |
December 31, 2014 | |
| |
RMB | | |
US$ | | |
RMB | |
ASSETS |
Current assets | |
| | | |
| | | |
| | |
Cash and cash equivalents | |
| 10,871 | | |
| 1,753 | | |
| 9,020 | |
Restricted cash | |
| 42,220 | | |
| 6,810 | | |
| 48,085 | |
Accounts and bills receivable, net | |
| 16,229 | | |
| 2,618 | | |
| 9,867 | |
Inventories | |
| 28,244 | | |
| 4,555 | | |
| 24,034 | |
Advance to suppliers | |
| 5,160 | | |
| 832 | | |
| 7,512 | |
Prepayments and other receivables | |
| 20,706 | | |
| 3,340 | | |
| 18,772 | |
Deferred tax assets - current | |
| 1,802 | | |
| 291 | | |
| 2,794 | |
Total current assets | |
| 125,232 | | |
| 20,199 | | |
| 120,084 | |
| |
| | | |
| | | |
| | |
Property, plant and equipment, net | |
| 459,549 | | |
| 74,121 | | |
| 482,534 | |
Construction in progress | |
| 1,096 | | |
| 177 | | |
| 366 | |
Lease prepayments, net | |
| 18,144 | | |
| 2,926 | | |
| 18,406 | |
Advance to suppliers - long term, net | |
| 1,272 | | |
| 205 | | |
| 722 | |
Long-term deposit | |
| - | | |
| - | | |
| 16,760 | |
Other Assets | |
| 12,054 | | |
| 1,944 | | |
| 12,500 | |
Deferred tax assets - non current | |
| 21,414 | | |
| 3,454 | | |
| 21,573 | |
| |
| | | |
| | | |
| | |
Total assets | |
| 638,761 | | |
| 103,026 | | |
| 672,945 | |
| |
| | | |
| | | |
| | |
LIABILITIES AND EQUITY |
Current liabilities | |
| | | |
| | | |
| | |
Long-term loan, current portion | |
| 3,350 | | |
| 540 | | |
| 3,350 | |
Due to related parties | |
| 139,734 | | |
| 22,538 | | |
| 125,938 | |
Accounts payables | |
| 27,046 | | |
| 4,362 | | |
| 29,484 | |
Notes payable | |
| 81,626 | | |
| 13,165 | | |
| 95,539 | |
Advance from customers | |
| 6,236 | | |
| 1,006 | | |
| 3,392 | |
Accrued expenses and other payables | |
| 7,467 | | |
| 1,204 | | |
| 6,095 | |
Obligations under capital leases-current | |
| 4,196 | | |
| 677 | | |
| 8,259 | |
Total current liabilities | |
| 269,655 | | |
| 43,492 | | |
| 272,057 | |
| |
| | | |
| | | |
| | |
Obligations under capital leases | |
| - | | |
| - | | |
| 303 | |
Long-term loan | |
| 4,975 | | |
| 802 | | |
| 6,650 | |
Deferred tax liabilities | |
| 5,709 | | |
| 921 | | |
| 5,816 | |
| |
| | | |
| | | |
| | |
Total liabilities | |
| 280,339 | | |
| 45,215 | | |
| 284,826 | |
| |
| | | |
| | | |
| | |
Equity | |
| | | |
| | | |
| | |
Shareholders’ equity | |
| | | |
| | | |
| | |
Registered capital(of US$0.129752 par value; 20,000,000 shares authorized; 13,062,500 issued and outstanding) | |
| 13,323 | | |
| 2,149 | | |
| 13,323 | |
Additional paid-in capital | |
| 311,907 | | |
| 50,308 | | |
| 311,907 | |
Statutory reserve | |
| 37,441 | | |
| 6,039 | | |
| 37,441 | |
(Accumulated deficit) retained earnings | |
| (4,605 | ) | |
| (743 | ) | |
| 25,043 | |
Cumulative translation adjustment | |
| 1,150 | | |
| 186 | | |
| 1,199 | |
Total shareholders’ equity | |
| 359,216 | | |
| 57,939 | | |
| 388,913 | |
Non-controlling interest | |
| (794 | ) | |
| (128 | ) | |
| (794 | ) |
Total equity | |
| 358,422 | | |
| 57,811 | | |
| 388,119 | |
Total liabilities and equity | |
| 638,761 | | |
| 103,026 | | |
| 672,945 | |
FUWEI FILMS (HOLDINGS) CO., LTD. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (LOSS)
FOR THE THREE- AND SIX-MONTH PERIODS
ENDED JUNE 30, 2015 AND 2014
(amounts in thousands except share and per
share value)
(Unaudited)
| |
The Three-Month Period Ended June 30, | | |
The Six-Month Period Ended June 30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
| |
RMB | | |
US$ | | |
RMB | | |
RMB | | |
US$ | | |
RMB | |
Net sales | |
| 66,709 | | |
| 10,760 | | |
| 69,984 | | |
| 119,485 | | |
| 19,272 | | |
| 140,689 | |
Cost of sales | |
| 66,422 | | |
| 10,713 | | |
| 79,482 | | |
| 127,023 | | |
| 20,488 | | |
| 150,256 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Gross margin (loss) | |
| 287 | | |
| 47 | | |
| (9,498 | ) | |
| (7,538 | ) | |
| (1,216 | ) | |
| (9,567 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Operating expenses | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Selling expenses | |
| 3,157 | | |
| 509 | | |
| 3,430 | | |
| 6,353 | | |
| 1,025 | | |
| 6,789 | |
Administrative expenses | |
| 9,877 | | |
| 1,593 | | |
| 7,004 | | |
| 15,490 | | |
| 2,498 | | |
| 14,058 | |
Total operating expenses | |
| 13,034 | | |
| 2,102 | | |
| 10,434 | | |
| 21,843 | | |
| 3,523 | | |
| 20,847 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Operating loss | |
| (12,747 | ) | |
| (2,055 | ) | |
| (19,932 | ) | |
| (29,381 | ) | |
| (4,739 | ) | |
| (30,414 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Other income (expense) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
- Interest income | |
| 218 | | |
| 35 | | |
| 260 | | |
| 738 | | |
| 119 | | |
| 640 | |
- Interest expense | |
| (2,082 | ) | |
| (336 | ) | |
| (3,256 | ) | |
| (4,413 | ) | |
| (712 | ) | |
| (6,424 | ) |
- Others income (expense), net | |
| (32 | ) | |
| (5 | ) | |
| 25 | | |
| 4,452 | | |
| 718 | | |
| (63 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total other income (expense) | |
| (1,896 | ) | |
| (306 | ) | |
| (2,971 | ) | |
| 777 | | |
| 125 | | |
| (5,847 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Loss before provision for income taxes | |
| (14,643 | ) | |
| (2,361 | ) | |
| (22,903 | ) | |
| (28,604 | ) | |
| (4,614 | ) | |
| (36,261 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Income tax benefit (expense) | |
| (8 | ) | |
| (1 | ) | |
| (79 | ) | |
| (1,044 | ) | |
| (168 | ) | |
| 20 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net loss | |
| (14,651 | ) | |
| (2,362 | ) | |
| (22,982 | ) | |
| (29,648 | ) | |
| (4,782 | ) | |
| (36,241 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net (loss) income attributable to noncontrolling interests | |
| - | | |
| - | | |
| (1 | ) | |
| - | | |
| - | | |
| (1 | ) |
Net loss attributable to the Company | |
| (14,651 | ) | |
| (2,362 | ) | |
| (22,981 | ) | |
| (29,648 | ) | |
| (4,782 | ) | |
| (36,240 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Other comprehensive income (loss) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
- Foreign currency translation adjustments attributable to noncontrolling interest | |
| - | | |
| - | | |
| 1 | | |
| - | | |
| - | | |
| (19 | ) |
- Foreign currency translation adjustments attributable to the Company | |
| (25 | ) | |
| (4 | ) | |
| (7 | ) | |
| (49 | ) | |
| (8 | ) | |
| (55 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Comprehensive income (loss) attributable to non-controlling interest | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (20 | ) |
Comprehensive loss attributable to the Company | |
| (14,676 | ) | |
| (2,366 | ) | |
| (22,988 | ) | |
| (29,697 | ) | |
| (4,790 | ) | |
| (36,295 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Loss per share, Basic and diluted | |
| (1.12 | ) | |
| (0.18 | ) | |
| (1.76 | ) | |
| (2.27 | ) | |
| (0.37 | ) | |
| (2.77 | ) |
Weighted average number ordinary shares, Basic and diluted | |
| 13,062,500 | | |
| 13,062,500 | | |
| 13,062,500 | | |
| 13,062,500 | | |
| 13,062,500 | | |
| 13,062,500 | |
FUWEI FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
FOR THE SIX-MONTH PERIODS ENDED JUNE
30, 2015 AND 2014
(amounts in thousands except share and per
share value)
(Unaudited)
| |
The Six-Month Period Ended June 30, | |
| |
2015 | | |
2014 | |
| |
RMB | | |
US$ | | |
RMB | |
Cash flow from operating activities | |
| | | |
| | | |
| | |
Net loss | |
| (29,648 | ) | |
| (4,782 | ) | |
| (36,241 | ) |
Adjustments to reconcile net loss to net cash | |
| | | |
| | | |
| | |
used in operating activities | |
| | | |
| | | |
| | |
- Depreciation of property, plant and equipment | |
| 23,076 | | |
| 3,722 | | |
| 24,031 | |
- Amortization of intangible assets | |
| 262 | | |
| 42 | | |
| 262 | |
- Deferred income taxes | |
| 1,044 | | |
| 168 | | |
| (20 | ) |
- Bad debt recovery | |
| (4,135 | ) | |
| (667 | ) | |
| (115 | ) |
Changes in operating assets and liabilities | |
| | | |
| | | |
| | |
- Accounts and bills receivable | |
| (6,634 | ) | |
| (1,070 | ) | |
| 1,150 | |
- Inventories | |
| (4,210 | ) | |
| (679 | ) | |
| 5,942 | |
- Advance to suppliers | |
| 2,518 | | |
| 406 | | |
| 109 | |
- Prepaid expenses and other current assets | |
| 12 | | |
| 2 | | |
| (814 | ) |
- Accounts payable | |
| (2,439 | ) | |
| (393 | ) | |
| 2,418 | |
- Accrued expenses and other payables | |
| 1,377 | | |
| 222 | | |
| 1,116 | |
- Advance from customers | |
| 2,844 | | |
| 459 | | |
| (7,551 | ) |
- Tax payable | |
| (1,499 | ) | |
| (242 | ) | |
| 2,236 | |
| |
| | | |
| | | |
| | |
Net cash used in operating activities | |
| (17,432 | ) | |
| (2,812 | ) | |
| (7,477 | ) |
| |
| | | |
| | | |
| | |
Cash flow from investing activities | |
| | | |
| | | |
| | |
Purchases of property, plant and equipment | |
| (91 | ) | |
| (15 | ) | |
| (4,823 | ) |
Restricted cash related to trade finance | |
| 5,865 | | |
| 946 | | |
| (357 | ) |
Advanced to suppliers - non current | |
| (550 | ) | |
| (89 | ) | |
| (811 | ) |
Amount change in construction in progress | |
| (730 | ) | |
| (118 | ) | |
| 265 | |
Return of long-term deposit | |
| 21,000 | | |
| 3,387 | | |
| - | |
| |
| | | |
| | | |
| | |
Net cash provided by (used in) investing activities | |
| 25,494 | | |
| 4,111 | | |
| (5,726 | ) |
| |
| | | |
| | | |
| | |
Cash flow from financing activities | |
| | | |
| | | |
| | |
Principal payments of bank loans | |
| (1,675 | ) | |
| (270 | ) | |
| (105,000 | ) |
Proceeds from short-term bank loans | |
| - | | |
| - | | |
| - | |
Proceeds from related party | |
| 13,796 | | |
| 2,225 | | |
| 120,000 | |
Payment of capital lease obligation | |
| (4,366 | ) | |
| (704 | ) | |
| (4,090 | ) |
Change in notes payable | |
| (13,913 | ) | |
| (2,244 | ) | |
| (3,790 | ) |
Proceeds from sale-leaseback equipment | |
| - | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | |
Net cash provided by (used in) financing activities | |
| (6,158 | ) | |
| (993 | ) | |
| 7,120 | |
| |
| | | |
| | | |
| | |
Effect of foreign exchange rate changes | |
| (53 | ) | |
| (7 | ) | |
| (17 | ) |
| |
| | | |
| | | |
| | |
Net increase (decrease) in cash and cash equivalent | |
| 1,851 | | |
| 299 | | |
| (6,100 | ) |
| |
| | | |
| | | |
| | |
Cash and cash equivalent | |
| | | |
| | | |
| | |
At beginning of period | |
| 9,020 | | |
| 1,454 | | |
| 11,578 | |
At end of period | |
| 10,871 | | |
| 1,753 | | |
| 5,478 | |
| |
| | | |
| | | |
| | |
SUPPLEMENTARY DISCLOSURE: | |
| | | |
| | | |
| | |
Interest paid | |
| 4,413 | | |
| 712 | | |
| 6,424 | |
Income tax paid | |
| - | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | |
SUPPLEMENTARY SCHEDULE OF NONCASH INVESTING AND FINANCIAL ACTIVITIES: | | |
Account payable for plant and equipment: | |
| 2,215 | | |
| 357 | | |
| 7,883 | |
Obligations for acquired equipment under capital lease: | |
| 4,196 | | |
| 677 | | |
| 12,787 | |
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