UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
6-K
REPORT
OF FOREIGN PRIVATE ISSUER
PURSUANT TO
RULE 13a-16 OR 15d-16
UNDER
THE
SECURITIES EXCHANGE ACT OF 1934
For March
31, 2009
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
¨
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, competition
in the BOPET film industry; growth of, and risks inherent in, the BOPET film
industry in China; changes in the international market; the increase of the
price of energy (mainly power) and the sometimes inadequate energy supply in the
area where Shandong Fuwei locates, which may result in the increase of
production cost, decrease of sales, and negatively influence the Company’s
financial performance; uncertainty of various kinds of international barriers;
uncertainty as to future profitability and its ability to obtain adequate
financing for its planned capital expenditure requirements; uncertainty as to
the Company’s ability to successfully obtain financing and consequently continue
the operation of the third BOPET production line, the construction of which has
already commenced; uncertainty as to the Company’s ability to continuously
develop new BOPET film products and keep up with changes in BOPET film
technology; instability of power and energy supply; risks associated with
possible defects and errors in its products; 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 and the potential impact resulting from the pending criminal
litigation and related new developments to the major
shareholders. The Company’s expectations are as of the date this Form
6-K is filed, and the Company does not intend to update any of the
forward-looking statements after the date this Report on Form 6-K is filed to
confirm these statements to actual results, unless required by law.
On May
12, 2009, the Company announced its unaudited consolidated financial results for
the three months period ended March 31, 2009.
FUWEI
FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
AS
OF MARCH 31, 2009 AND DECEMBER 31, 2008
(amounts
in thousands except share and per share value)
|
|
As
of Mar. 31, 2009
|
|
|
|
|
|
|
(Unaudited)
|
|
|
As of Dec. 31, 2008
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
|
22,764
|
|
|
|
3,325
|
|
|
|
15,823
|
|
Restricted
cash
|
|
|
7,764
|
|
|
|
1,134
|
|
|
|
10,411
|
|
Accounts
receivable, net
|
|
|
27,628
|
|
|
|
4,036
|
|
|
|
38,579
|
|
Inventory
|
|
|
33,222
|
|
|
|
4,853
|
|
|
|
30,589
|
|
Advance
to suppliers
|
|
|
2,813
|
|
|
|
411
|
|
|
|
6,846
|
|
Prepayments
and other receivables
|
|
|
1,528
|
|
|
|
223
|
|
|
|
1,857
|
|
Deferred
tax assets - current
|
|
|
1,379
|
|
|
|
201
|
|
|
|
457
|
|
Total
current assets
|
|
|
97,098
|
|
|
|
14,183
|
|
|
|
104,562
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant
and equipment, net
|
|
|
252,377
|
|
|
|
36,867
|
|
|
|
259,235
|
|
Construction
in progress
|
|
|
321,613
|
|
|
|
46,981
|
|
|
|
319,408
|
|
Lease
prepayments, net
|
|
|
22,376
|
|
|
|
3,269
|
|
|
|
22,507
|
|
Advanced
to suppliers - Long Term
|
|
|
4,613
|
|
|
|
675
|
|
|
|
4,308
|
|
Goodwill
|
|
|
10,276
|
|
|
|
1,501
|
|
|
|
10,276
|
|
Deposit
|
|
|
18,808
|
|
|
|
2,747
|
|
|
|
17,613
|
|
Deferred
tax assets - non current
|
|
|
3,566
|
|
|
|
521
|
|
|
|
1,995
|
|
Total
assets
|
|
|
730,727
|
|
|
|
106,744
|
|
|
|
739,904
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
borrowings
|
|
|
152,500
|
|
|
|
22,277
|
|
|
|
164,764
|
|
Accounts
payables
|
|
|
23,257
|
|
|
|
3,397
|
|
|
|
23,301
|
|
Advance
from customers
|
|
|
17,866
|
|
|
|
2,610
|
|
|
|
8,781
|
|
Accrued
expenses and other payables
|
|
|
5,652
|
|
|
|
826
|
|
|
|
7,460
|
|
Total
current liabilities
|
|
|
199,275
|
|
|
|
29,110
|
|
|
|
204,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
loan
|
|
|
15,000
|
|
|
|
2,191
|
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
214,275
|
|
|
|
31,301
|
|
|
|
209,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’
equity
|
|
|
|
|
|
|
|
|
|
|
|
Registered
capital (US$0.129752 par value; 20,000,000 shares authorized; 13,062,500
shares issued and outstanding)
|
|
|
13,323
|
|
|
|
1,946
|
|
|
|
13,323
|
|
Additional
paid-in capital
|
|
|
311,907
|
|
|
|
45,563
|
|
|
|
311,907
|
|
Statutory
reserve
|
|
|
29,338
|
|
|
|
4,286
|
|
|
|
29,338
|
|
Retained
earnings
|
|
|
160,835
|
|
|
|
23,495
|
|
|
|
174,970
|
|
Cumulative
translation adjustment
|
|
|
1,049
|
|
|
|
153
|
|
|
|
1,061
|
|
Total
shareholders’ equity
|
|
|
516,452
|
|
|
|
75,443
|
|
|
|
530,599
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and shareholders’ equity
|
|
|
730,727
|
|
|
|
106,744
|
|
|
|
739,904
|
|
The accompanying notes are an integral
part of these unaudited condensed consolidated statements.
FUWEI
FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
FOR
THE THREE MONTH PERIOD ENDED MARCH 31, 2009 AND 2008
(amounts
in thousands except share and per share value)
(UNAUDITED)
|
|
Three Month Period ended Mar.
31
|
|
|
|
2009
|
|
|
2008
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
Revenue
|
|
|
74,517
|
|
|
|
10,885
|
|
|
|
104,034
|
|
Cost
of revenue
|
|
|
(74,444
|
)
|
|
|
(10,874
|
)
|
|
|
(82,409
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
73
|
|
|
|
11
|
|
|
|
21,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling
expenses
|
|
|
(4,897
|
)
|
|
|
(715
|
)
|
|
|
(3,438
|
)
|
Administrative
expenses
|
|
|
(11,462
|
)
|
|
|
(1,675
|
)
|
|
|
(7,724
|
)
|
Total
operating expenses
|
|
|
(16,359
|
)
|
|
|
(2,390
|
)
|
|
|
(11,163
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income/(loss)
|
|
|
(16,286
|
)
|
|
|
(2,379
|
)
|
|
|
10,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income/(expense)
|
|
|
|
|
|
|
|
|
|
|
|
-
Interest income
|
|
|
101
|
|
|
|
15
|
|
|
|
16
|
|
-
Interest expense
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,790
|
)
|
-
Other, net
|
|
|
(445
|
)
|
|
|
(65
|
)
|
|
|
2,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other income/(expense)
|
|
|
(344
|
)
|
|
|
(50
|
)
|
|
|
(1,533
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(loss)
before income tax expense
|
|
|
(16,630
|
)
|
|
|
(2,429
|
)
|
|
|
8,930
|
|
Income
tax benefit/(expense)
|
|
|
2,494
|
|
|
|
364
|
|
|
|
(993
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income/(loss)
|
|
|
(14,136
|
)
|
|
|
(2,065
|
)
|
|
|
7,937
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
-Foreign
currency translation adjustments
|
|
|
(11
|
)
|
|
|
(2
|
)
|
|
|
620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income
|
|
|
(14,147
|
)
|
|
|
(2,067
|
)
|
|
|
8,557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share, basic and diluted
|
|
|
(1.08
|
)
|
|
|
(0.16
|
)
|
|
|
0.61
|
|
Weighted
average number ordinary shares, basic and diluted
|
|
|
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 THREE MONTH PERIOD ENDED MARCH 31, 2009 AND 2008
(amounts
in thousands except share and per share value)
(UNAUDITED)
|
|
Period Ended Mar. 31, 2009
|
|
|
Period Ended Mar. 31, 2008
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Net
income/(loss)
|
|
|
(14,136
|
)
|
|
|
(2,065
|
)
|
|
|
7,937
|
|
Adjustments
to reconcile net income to net cash provided by operating
activities
|
|
|
|
|
|
|
|
|
|
|
|
-
Depreciation of property, plant and equipment
|
|
|
7,284
|
|
|
|
1,064
|
|
|
|
5,909
|
|
-
Amortization of intangible assets
|
|
|
113
|
|
|
|
17
|
|
|
|
149
|
|
-
Deferred income taxes
|
|
|
(2,493
|
)
|
|
|
(364
|
)
|
|
|
-
|
|
-
Bad debt expense/(recovery)
|
|
|
6,148
|
|
|
|
898
|
|
|
|
73
|
|
Changes
in operating assets and liabilities, net of
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
capital contribution - rental and interest paid by
shareholders
|
|
|
|
|
|
|
|
|
|
|
2,756
|
|
-
Accounts receivable
|
|
|
9,534
|
|
|
|
1,393
|
|
|
|
856
|
|
-
Inventories
|
|
|
(2,632
|
)
|
|
|
(385
|
)
|
|
|
(8,020
|
)
|
-
Advance to suppliers
|
|
|
3,728
|
|
|
|
545
|
|
|
|
-
|
|
-
Prepaid expenses and other current assets
|
|
|
(5,579
|
)
|
|
|
(815
|
)
|
|
|
(18,859
|
)
|
-
Accounts payable
|
|
|
(44
|
)
|
|
|
(6
|
)
|
|
|
1,695
|
|
-
Accrued expenses and other payables
|
|
|
(361
|
)
|
|
|
(53
|
)
|
|
|
11,667
|
|
-
Advance from customers
|
|
|
9,086
|
|
|
|
1,327
|
|
|
|
-
|
|
-
Tax payable
|
|
|
(1,445
|
)
|
|
|
(211
|
)
|
|
|
-
|
|
Net
cash provided by operating activities
|
|
|
9,203
|
|
|
|
1,344
|
|
|
|
4,162
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases
of property, plant and equipment
|
|
|
(427
|
)
|
|
|
(62
|
)
|
|
|
(946
|
)
|
Restricted
cash related to trade finance
|
|
|
2,647
|
|
|
|
387
|
|
|
|
33,464
|
|
Addition
to construction in progress
|
|
|
(2,205
|
)
|
|
|
(322
|
)
|
|
|
(25,673
|
)
|
Deposit
for purchase
|
|
|
-
|
|
|
|
-
|
|
|
|
(21,000
|
)
|
Net
cash (used in)/provided by investing activities
|
|
|
15
|
|
|
|
2
|
|
|
|
(19,155
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOW FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
proceeds from issuance of share capital
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal
payments of short-term bank loans
|
|
|
(12,264
|
)
|
|
|
(1,792
|
)
|
|
|
(12,869
|
)
|
Proceeds
from short-term bank loans
|
|
|
10,000
|
|
|
|
1,461
|
|
|
|
11,139
|
|
Net
cash provided by financing activities
|
|
|
(2,264
|
)
|
|
|
(331
|
)
|
|
|
(1,730
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of foreign exchange rate changes
|
|
|
(13
|
)
|
|
|
1
|
|
|
|
(2,770
|
)
|
Net
increase/(decrease) in cash and cash equivalent
|
|
|
6,941
|
|
|
|
1,017
|
|
|
|
(19,493
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalent
|
|
|
|
|
|
|
|
|
|
|
|
|
At
beginning of period/year
|
|
|
15,823
|
|
|
|
2,308
|
|
|
|
30,909
|
|
At
end of period/year
|
|
|
22,764
|
|
|
|
3,325
|
|
|
|
11,416
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash
flow information
|
|
|
|
|
|
|
|
|
|
|
|
|
-Interest
paid
|
|
|
1,777
|
|
|
|
260
|
|
|
|
2,966
|
|
-Income
taxes paid
|
|
|
-
|
|
|
|
-
|
|
|
|
802
|
|
The
accompanying notes are an integral part of these unaudited condensed
consolidated statements.
FUWEI
FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts
in thousands except share and per share value)
NOTE
1 - BACKGROUND
Fuwei
Films (Holdings) Co., Ltd. (the “Company”) and its subsidiaries (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
Group.
The Group
was established by certain members of the former management team and employees
(the “Group Founders”) of Shandong Neo-Luck Plastics Co., Ltd (“Shandong
Neo-Luck”), a company owned 59% by a PRC state-owned enterprise. Prior to filing
for bankruptcy protection on September 24, 2004, Shandong Neo-Luck was engaged
in the business of BOPET film production. Certain production-related assets of
Shandong Neo-Luck, which had previously been mortgaged to the Bank of China,
Weifang City branch (the “Mortgagee Bank”) as security for several loans
extended to Shandong Neo-Luck’s affiliates, were acquired through public auction
by Shandong Fuwei on October 9, 2003 for RMB156,000 as a result of the
borrower’s default on various bank loans. Shandong Fuwei, established in the PRC
on January 28, 2003 as a limited liability company, commenced its operations in
July 2003. The principal activities of Shandong Fuwei are those relating to the
design, production and distribution of plastic films. Shandong Neo-Luck was
subsequently declared bankrupt by the Weifang Municipal People’s Court in the
PRC on September 24, 2004.
Through
its intermediate holding company, Fuwei (BVI), the Company acquired a 100%
ownership interest in Shandong Fuwei on October 27, 2004 for a purchase price of
RMB91,093. Shandong Fuwei thereafter became a wholly-owned subsidiary of Fuwei
(BVI) effective October 27, 2004. On December 25, 2004, Shandong Fuwei acquired
additional production-related assets that were formerly owned by Shandong
Neo-Luck for RMB119,280 through a public auction. Shandong Fuwei converted into
a wholly-foreign owned enterprise in the PRC on January 5, 2005, with a
registered capital of US$11,000 which increased to US$42,700 on December 31,
2006.
NOTE
2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Unaudited
Interim Financial Information
The
accompanying unaudited consolidated financial statements have been prepared by
the Company,
pursuant to the rules
and regulations of the Securities and Exchange Commission (the
“SEC”)
on Form 10-Q 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 consolidated financial statements
should be read in conjunction with the audited consolidated financial statements
and footnotes for the year ended December 31, 2008 included in the Company’s
Annual Report on Form 20-F. The results of the three month period ended March
31, 2009 are not necessarily indicative of the results to be expected for the
full year ending December 31, 2009.
FUWEI
FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts
in thousands except share and per share value)
NOTE
2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Principles of
Consolidation
The
condensed consolidated financial statements include the financial statements of
the Company and its two subsidiaries. All significant inter-company balances and
transactions have been eliminated in consolidation.
Use
of Estimates
The
preparation of the consolidated financial statements in accordance with U.S.
GAAP requires management of the Group 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
Group’s reporting currency is the Renminbi (“RMB”).
The
Company 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. 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
shareholders’ equity and comprehensive income.
FUWEI
FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands except share and
per share value)
NOTE
2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
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 statements
of 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.
Exchange
Rate Information
Foreign
Currency - The Company’s principal country of operations is in the People’s
Republic of China. The financial position and results of operations of the
Company are determined using the local currency (“Renminbi”) as the functional
currency. The results of operations denominated in foreign currency are
translated at the average rate of exchange during the reporting
period.
Unless
otherwise noted, all translations from Renminbi to U.S. dollars in reporting of
assets and liabilities denominated in foreign currencies at the balance sheet
date are translated at the market rate of exchange prevailing on that date. The
registered equity capital denominated in the functional currency is translated
at the historical rate of exchange at the time of capital contribution. All
translation adjustments resulting from the translation of the financial
statements into the reporting currency (“US Dollars”) are dealt with as a
separate component within shareholders’ equity. We make no representation that
any Renminbi or U.S. dollar amounts could have been, or could be, converted into
U.S. dollars or Renminbi, as the case may be, at any particular rate, the rates
stated above, or at all.
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 UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands except share and
per share value)
NOTE
2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Restricted
cash refers to the cash balance held by bank as deposit for Letters of Credit.
The Company has restricted cash of RMB7,764 million (US$1,134 million) and
RMB10,411 (US$1,519) as of March 31, 2009 and December 31, 2008,
respectively.
Trade Accounts
Receivable
Trade
accounts receivable are recorded at the invoiced amount after deduction of trade
discounts, 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. The Group does not have any off-balance-sheet credit exposure related to
its customers.
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 60 days from
the date of billing. Normally, the Group does not obtain collateral from
customers.
Inventories
Inventories
are stated at the lower of cost or market value. Cost is determined using the
average-weighted cost method. Cost of work in progress and finished goods
comprises of 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. There are as
follows:
FUWEI
FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts
in thousands except share and per share value)
NOTE
2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
|
|
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 cost of goods sold for the period incurred.
Construction
in progress represented capital expenditure in respect of the new BOPET
production line and the trial production line. No depreciation is provided in
respect of construction in progress.
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.
Goodwill
Goodwill
represents the excess of purchased cost over fair value of net assets of
Shandong Fuwei’s acquired business. Goodwill is evaluated for impairment
annually. The Company evaluates the carrying value of goodwill during the fourth
quarter of each year and between annual evaluations if events occur or
circumstances change that would more likely than not reduce the fair value of
the reporting unit below its carrying amount. Such circumstances could include,
but are not limited to: (1) a significant adverse change in legal factors or in
business climate, (2) unanticipated competition, or (3) an adverse action or
assessment by a regulator. When evaluating whether goodwill is impaired, the
Company compares the fair value of the reporting unit to which the goodwill is
assigned to the
reporting
unit’s carrying amount, including goodwill. The fair value of the reporting unit
is estimated using a combination of the income, or discounted cash flows,
approach and the market approach, which utilizes comparable companies’ data. If
the carrying amount of a reporting unit exceeds its fair value, then the amount
of the impairment loss must be measured. The impairment loss would be calculated
by comparing the implied fair value of reporting unit goodwill to its carrying
amount. In calculating the implied fair value of reporting unit goodwill, the
fair value of the reporting unit is allocated to all of the other assets and
liabilities of that unit based on their fair values. The excess of the fair
value of a reporting unit over the amount assigned to its other assets and
liabilities is the implied fair value of goodwill. An impairment loss would be
recognized when the carrying amount of goodwill exceeds its implied fair value.
The Company’s evaluation of goodwill resulted in no impairment
losses.
FUWEI
FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts
in thousands except share and per share value)
NOTE
2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Impairment of
Long-lived Assets
Long-lived
assets, other than goodwill, including property, plant, and equipment and
intangible assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable.
Recoverability
of assets to be held and used is measured by a comparison of the carrying amount
of an asset to the estimated undiscounted future cash flows expected to be
generated by the asset. If the carrying amount of an asset exceeds its estimated
future cash flows, an impairment charge is recognized by the amount in which the
carrying amount of the asset exceeds the fair value of the asset.
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 Group
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 Group within 7 days and 30 days of
receipt for sales to customers in the PRC and overseas, respectively. The Group
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 invoice amount is collected in respect of the sales of goods
on behalf of tax authorities. The VAT collected is not revenue of the Group;
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 UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts
in thousands except share and per share value)
NOTE 2 - BASIS OF
PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Government
Grants
Government
grants are recognized in the consolidated balance sheet initially as deferred
income when they have been received. Grants that compensate the Group for
expenses incurred are recognized as a reduction of expenses in the consolidated
statement of income in the same period in which the related expenses are
incurred.
Retirement and Other Post-retirement
Ben
efits
Contributions
to retirement schemes (which are defined contribution plans) are charged to
expense as and when the related employee service is provided.
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 are 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 stock option plan.
Contingencies
In the
normal course of business, the Group 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 Group
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 Group
may consider many factors in making these assessments including past history and
the specifics of each matter. As
the Group
has not become aware of any product liability claim since operations commenced,
the Group has not recognized a liability for any product liability
claims.
FUWEI
FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts
in thousands except share and per share value)
NOTE
2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Recently
Issued Accounting Standards
In
December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
Consolidated Financial Statements”. This Statement amends ARB 51 to establish
accounting and reporting standards for the non-controlling (minority) interest
in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a
non-controlling interest in a subsidiary is an ownership interest in the
consolidated entity that should be reported as equity in the consolidated
financial statements. SFAS No. 160 is effective for the Company’s fiscal year
beginning October 1, 2009. Management does not expect the impact of the adoption
of this accounting standard to be material on the consolidated financial
statements.
In
December 2007, the FASB issued SFAS No. 141(R), “Business Combinations”. This
Statement replaces SFAS No. 141, Business Combinations. This Statement retains
the fundamental requirements in Statement 141 that the acquisition method of
accounting (which Statement 141 called the purchase method) be used for all
business combinations and for an acquirer to be identified for each business
combination. This Statement also establishes principles and requirements for how
the acquirer: a) recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, and any non-controlling
interest in the acquired; b) recognizes and measures the goodwill acquired in
the business combination or a gain from a bargain purchase; and c) determines
what information to disclose to enable users of the financial statements to
evaluate the nature and financial effects of the business combination. SFAS No.
141(R) will apply prospectively to business combinations for which the
acquisition date is on or after Company’s fiscal year beginning October 1, 2009.
The Company will be required to expense costs related to any acquisitions after
January 1, 2009.
On March
19, 2008, the FASB issued FASB Statement No. 161, Disclosures about Derivative
Instruments and Hedging Activities. The new standard is intended to improve
financial reporting about derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand their
effects on an entity’s financial position, financial performance, and cash
flows. It is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008, with early application
encouraged. "Use and complexity of derivative instruments and hedging activities
have increased significantly over the past several years. This has led to
concerns among investors that the existing disclosure requirements in FASB
Statement No. 133, Accounting for Derivative Instruments and Hedging Activities,
do not provide enough information about how these instruments and activities
affect the entity’s financial position and performance," explained Kevin
Stoklosa, project manager. "By requiring additional information about how and
why derivative
instruments
are being used, the new standard gives investors better information upon which
to base their decisions." The new standard also improves transparency about the
location and amounts of derivative instruments in an entity’s financial
statements; how derivative instruments and related hedged items are accounted
for under Statement 133; and how derivative instruments and related hedged items
affect its financial position, financial performance, and cash flows. FASB
Statement No. 161 achieves these improvements by requiring disclosure of the
fair values of derivative instruments and their gains and losses in a tabular
format. It also provides more information about an entity’s liquidity by
requiring disclosure of derivative features that are credit risk-related.
Finally, it requires cross-referencing within footnotes to enable financial
statement users to locate important information about derivative instruments.
Management does not expect the impact of the adoption of this accounting
standard to be material on the consolidated financial
statements.
FUWEI
FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts
in thousands except share and per share value)
NOTE
2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
In May of
2008, FSAB issued SFASB No.162, The Hierarchy of Generally Accepted Accounting
Principles. The pronouncement mandates the GAAP hierarchy reside in the
accounting literature as opposed to the audit literature. This has the practical
impact of elevating FASB Statements of Financial Accounting Concepts in the GAAP
hierarchy. This pronouncement will become effective 60 days following SEC
approval. The Company does not believe this pronouncement will impact its
financial statements.
In May of
2008, FASB issued SFASB No. 163, Accounting for Financial Guarantee Insurance
Contracts-an interpretation of FASB Statement No. 60. The scope of the statement
is limited to financial guarantee insurance (and reinsurance) contracts. The
pronouncement is effective for fiscal years beginning after December 31, 2008.
The Company does not believe this pronouncement will impact its financial
statements.
On
January 12, 2009, FASB issued FSP EITF 99-20-01, “Amendment to the Impairment
Guidance of EITF Issue No. 99-20”. This FSP amends the impairment guidance in
EITF Issue No. 99-20, “Recognition of Interest Income and Impairment on
Purchased Beneficial Interests and Beneficial Interests That Continue to be Held
by a Transferor in Securitized Financial Assets,” to achieve more consistent
determination of whether an other-than-temporary impairment has occurred. The
FSP also retains and emphasizes the objective of an other-than-temporary
impairment assessment and the related disclosure requirements in FASB Statement
No. 115, Accounting for Certain Investments in Debt and Equity Securities, and
other related guidance. The FSP will be effective for interim and annual
reporting periods ending after December 15, 2008, and will be applied
prospectively. Retrospective application to a prior interim or annual
reporting period is not permitted. The Company does not believe this
pronouncement will impact its financial statements.
FUWEI
FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts
in thousands except share and per share value)
NOTE
3 - ACCOUNTS RECEIVABLES, NET
Accounts
receivables at March 31, 2009 and December 31, 2008 consist of the
following:
|
|
3-31-2009
|
|
|
12-31-2008
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
|
(Unaudited)
|
|
|
|
|
Accounts
receivable
|
|
|
31,621
|
|
|
|
4,619
|
|
|
|
41,245
|
|
Less:
Allowance for doubtful accounts
|
|
|
(5,491
|
)
|
|
|
(802
|
)
|
|
|
(4,074
|
)
|
|
|
|
26,130
|
|
|
|
3,817
|
|
|
|
37,171
|
|
Bills
receivable
|
|
|
1,498
|
|
|
|
219
|
|
|
|
1,408
|
|
|
|
|
27,628
|
|
|
|
4,035
|
|
|
|
38,579
|
|
Bill
receivables are bank’s acceptance bills, which are guaranteed by
bank.
NOTE
4-INVENTORIES
Inventories
at March 31, 2009 and December 31, 2008 consist of the following:
|
|
3-31-2009
|
|
|
12-31-2008
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
|
(Unaudited)
|
|
|
|
|
Raw
materials
|
|
|
15,752
|
|
|
|
2,301
|
|
|
|
11,239
|
|
Work-in-progress
|
|
|
1,238
|
|
|
|
181
|
|
|
|
1,527
|
|
Finished
goods
|
|
|
16,711
|
|
|
|
2,441
|
|
|
|
17,285
|
|
Consumables
and spare parts
|
|
|
577
|
|
|
|
84
|
|
|
|
539
|
|
Inventory—impairment
|
|
|
(1,056
|
)
|
|
|
(154
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,222
|
|
|
|
4,853
|
|
|
|
30,589
|
|
NOTE 5-PROPERTY, PLANT AND EQUIPMENT,
NET
Property,
plant and equipment consist of the following:
|
|
3-31-2009
|
|
|
12-31-2008
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
|
(Unaudited)
|
|
|
|
|
Buildings
|
|
|
38,022
|
|
|
|
5,554
|
|
|
|
34,807
|
|
Plant
and equipment
|
|
|
327,317
|
|
|
|
47,814
|
|
|
|
330,106
|
|
Computer
equipment
|
|
|
1,389
|
|
|
|
203
|
|
|
|
1,387
|
|
Furniture
and fixtures
|
|
|
5,799
|
|
|
|
847
|
|
|
|
5,799
|
|
Motor
vehicles
|
|
|
1,739
|
|
|
|
254
|
|
|
|
1,739
|
|
|
|
|
374,266
|
|
|
|
54,672
|
|
|
|
373,838
|
|
Less:
accumulated depreciation
|
|
|
(121,888
|
)
|
|
|
(17,805
|
)
|
|
|
(114,604
|
)
|
|
|
|
252,377
|
|
|
|
36,867
|
|
|
|
259,235
|
|
FUWEI
FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts
in thousands except share and per share value)
NOTE
5-PROPERTY, PLANT AND EQUIPMENT, NET (continued)
Total
depreciation for the three month periods ended March 31, 2009 and 2008 was
RMB7,284 (US$1,064) and RMB5,909 (US$825), respectively. For the periods three
months ended March 31, 2009 and 2008, depreciation expenses were RMB6,852
(US$1,001) and RMB5,752 (US$868), respectively.
NOTE 6 - CONSTRUCTION IN
PROGRESS
Construction-in-progress
represents capital expenditure in respect of the BOPET production line and the
trial production line. Construction in progress was RMB 321,613 (US$ 46,981)
ended March 31, 2009, and RMB319,408 (US$46,600) ended December 31, 2008,
respectively.
Interest
expense capitalized during the three month period ended March 31, 2009 was
RMB2,107 (US$308).
NOTE 7 - LEASE
PREPAYMENTS
As of
March 31, 2009 and December 31, 2008, lease prepayments, net of amortization
were RMB 22,376 (US$3,269) and RMB 22,507 (US$3,284),
respectively.
Amortization
of land use rights for the three-month period ended March 31,2009 and 2008 were
RMB113 (US$17) and RMB 149 (US$22), respectively.
Amortization
expenses for the next five years after March 31, 2009 are as
follows:
|
|
RMB
|
|
US$
|
1
year after
|
|
|
454
|
|
66
|
2
year after
|
|
|
454
|
|
66
|
3
year after
|
|
|
454
|
|
66
|
4
year after
|
|
|
454
|
|
66
|
5
year after
|
|
|
454
|
|
66
|
NOTE
8 – 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 the Shareholder of Joyinn. Joyinn is a legal
company of limited liability that registered on May 19, 2006 in Beijing, with
registered capital of RMB 50,000. In order to grow, Joyinn plans to increase its
registered capital by RMB 52,000 to a total of RMB 102,000, and plans to accept
Shandong Fuwei as a new shareholder to invest and buy its
shares.
FUWEI
FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts
in thousands except share and per share value)
NOTE
8 – DEPOSIT (continued)
According
to the LOI, Shandong Fuwei deposited RMB 26,000 (half of the would-be added
register capital of RMB 52,000), to Joyinn as the prepayment as of March 31,
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 pledging 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 RMB 5,000 and returned to the Company on June 18,
2008. As of March 31, 2009, the total amount of the deposit was RMB 18,808
(US$2,747) after net of reserve.
NOTE 9 - SHORT-TERM
AND LONG-TERM BANK LOANS
|
|
Interest
rate
per
|
|
|
3-31-2009
|
|
|
12-31-2008
|
|
Lender
|
|
Annum
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
SHORT-TERM
LOANS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank
of Communications Co., Ltd.
|
|
|
|
|
|
|
|
|
|
|
|
|
-
July 16, 2008 to June 10, 2009
|
|
|
5.841
|
%
|
|
|
82,580
|
|
|
|
12,063
|
|
|
|
82,580
|
|
-
July 18, 2008 to June 23, 2009
|
|
|
5.841
|
%
|
|
|
60,000
|
|
|
|
8,765
|
|
|
60,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weifang
Commercial Bank
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
January 24, 2008 to January 12, 2009
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
10,000
|
|
-
January 30, 2008 to January 18, 2009
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
-
January 13, 2009 to January 12, 2010
|
|
|
0.00
|
%
|
|
|
10,000
|
|
|
|
1,461
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank
of China
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
March 13, 2008 to March 13, 2009
|
|
|
5.45
|
%
|
|
|
(80
|
)
|
|
|
(12
|
)
|
|
|
2,184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM
LOANS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
December 2, 2008 to December 2, 2011
|
|
|
0.00
|
%
|
|
|
5,000
|
|
|
|
730
|
|
|
5,000
|
|
-
January 16, 2009 to January 12, 2012
|
|
|
0.00
|
%
|
|
|
10,000
|
|
|
|
1,461
|
|
|
|
-
|
|
|
|
|
|
|
|
167,500
|
|
|
|
24,468
|
|
|
|
169,764
|
|
Shandong
Fuwei is operating a rental BOPET production line with Shandong Weifang Legang
Food Co., Ltd. (“Legang”) for a term of three years, which began in April 2007.
The operating leases also include, among other things, the Company’s rental of a
warehouse, offices and staff quarters. The term of these leases typically ranges
from 1 to 3 years, and are renewable, subject to renegotiation of terms, upon
expiration. Due to the global financial crisis, the sales price kept declining
which result in great loss in the first quarter of 2009. In March 2009 Shandong
Fuwei stopped leasing the production line. The two parties agreed
that the Leasing Agreement would be terminated in April 2009 and Shandong Fuwei
is not required to pay any rental fees for the leasing production line from then
on.
Contingencies
In 2006,
Shandong Fuwei received correspondence relating to an arbitration proceeding
initiated by DMT S. A. (“DMT”) against Shandong Neo-Luck in the ICC
International Court of Arbitration (the “ICC”) in which DMT sought monetary
damages against Shandong Neo-Luck of approximately US$1,250 plus interest
relating to a claim of partial non-payment for the DMT production line Shandong
Fuwei acquired from Beijing Baorui in 2005. In early 2007, the ICC determined
that despite arguments made to the ICC that Company should not be a party to the
proceeding, the arbitration should proceed with Fuwei as the respondent pending
adjudication of issues relating to jurisdiction and liability.
A hearing
was held by the ICC in November 2007. Subsequent to the hearing, at the
invitation of Weifang Neoluck (Group) Co., Ltd (“Neoluck Group”), the original
majority shareholder of Shandong Neo-Luck, the Neoluck Group and DMT engaged in
efforts to achieve a settlement of the pending arbitration on January 18, 2008.
Shandong Fuwei joined these discussions later as an interested party and in
order to support a resolution of the pending dispute and to achieve resolution
of certain outstanding service and spare part issues.
FUWEI
FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts
in thousands except share and per share value)
NOTE
13 - COMMITMENTS AND CONTINGENCIES (continued)
After
several weeks of negotiations among the parties, in March 2008, the parties
entered into two agreements, a Service and Technical Assistance Agreement (the
“Service Agreement”), between DMT and Shandong Fuwei, and a Settlement Agreement
(the “Settlement Agreement”) between DMT and the Neoluck Group. Under the
Service Agreement, Shandong Fuwei would pay an amount of US$180 in two
installments with respect to service and spare parts. The Company made its first
payment in April 2008. As of March 31, 2009, US$90 was still left
unpaid. As agreed by the Service Agreement, the remaining US$90 must be paid
within 60 days after the commencement of services described in the Service
Agreement.
Under the
Settlement Agreement, the Neoluck Group was obligated to pay an amount equal to
US$900 in RMB by delivery of a bank draft to DMT. In late April, the Neoluck
Group had not performed its obligation under the Settlement Agreement, and, the
Neoluck Group and DMT entered into a Supplemental Agreement pursuant to which
the Neoluck Group would pay the amount owed to DMT in two
installments. The Neoluck Group paid the first installment equal to US$ 450 in
April 2008. As agreed between Neoluck Group and DMT, the remaining US$450 was to
be paid in installments by the end of December 2008. As of March 31, 2009,
Neoluck Group has paid US$ 250 and still has US$200 outstanding to
DMT.
In the
event the arbitration proceedings continue as a result of non-performance of the
payment obligation, it is possible for the arbitral tribunal for the ICC
International Court of Arbitration to rule in favor of DMT, which might result
in a liability for Fuwei for the amount claimed plus interest. However, any
possible liability regarding DMT’s claim should be reduced by the amount
previously paid to DMT in connection with the above-described settlement. It
should be noted further in such event that Fuwei might have sustainable claims
for damages as against the Neoluck Group for its failure to perform
its obligations under the Settlement Agreement.
HKG
Arbitration
At
December 31, 2007, Hampden Kent Group LLC had threatened the Company with
an arbitration, seeking a penalty fee in the amount of US$ 3,800, relating to
services allegedly performed by HKG in attempting to provide financing to Fuwei
pursuant to an August 19, 2006 letter agreement (the "Letter
Agreement") between the parties. Pursuant to the Letter Agreement,
any dispute between the parties would be arbitrated by the American Arbitration
Association (“AAA”) in accordance with its Commercial Arbitration Rules.
Pursuant to these rules, a demand for arbitration must be filed with the AAA
regional office together with a filing fee by the claimant, in this case,
HKG.
In
December 2007, HKG filed a demand for arbitration with the International Centre
for Dispute Resolution of the AAA (“AAA/ICDR”). On January 28, 2008, the
AAA/ICDR informed us that an arbitration process would commence in
accordance with its rules. On February 18, 2008, HKG submitted an
Amended Demand for Arbitration and Statement of
Claim.
FUWEI
FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts
in thousands except share and per share value)
NOTE
13 - COMMITMENTS AND CONTINGENCIES (continued)
On March
14, 2008, the Company submitted its answering statement and counterclaim in
response to HKG's Amended Demand for Arbitration and Statement of Claim. The
Company denied HKG's claims for breach of contract and breach of the covenant of
good faith and fair dealing as legally and factually without merit and asserted
various defenses. The Company also asserted a counterclaim against HKG for
breach of the Letter Agreement, seeking to recover the over US$300 in fees and
costs paid to HKG and other consequential damages.
On March
27, 2008, HKG submitted a letter in reply to the Company's counterclaim,
generally denying the allegations and claims made by the Company.
At the
request of HKG, the Company had agreed to attempt to resolve this dispute
through mediation. A neutral mediator was appointed by the AAA/ICDR. On April
24, 2008, HKG unilaterally cancelled the mediation and sought to proceed with
the arbitration. A panel of three arbitrators (the “Panel”) was
appointed, and a hearing on the parties’ respective claims was
scheduled to commence on September 22, 2008. By orders dated
September 9, 2008 and September 15, 2008, the Panel suspended the hearing
pending receipt of a full deposit of the outstanding fees. On
November 7, 2008, the Panel advised that if payment of the outstanding fees was
not remitted on or before February 6, 2009, the case would be terminated for
nonpayment on that date. This deadline was twice extended. By order
dated February 23, 2009, the Panel directed that if payment of the full deposit
was not remitted to the ICDR on or before March 23, 2009, the case would be
terminated for nonpayment, and no further extensions would be contemplated
by the Panel.
On March
27, 2009, the Panel issued an order that this arbitration proceeding was
terminated for nonpayment of the deposits due in accordance with Sections R-52
and R-54 of the Commercial Arbitration Rules of the American Arbitration
Association. The Company has not been ordered to pay any amount to
HKG.
Class
Action
On
October 19, 2007, the Company became aware that a class action lawsuit had been
filed in the United States District Court for the Southern District of New York,
on behalf of all purchasers of the Company’s stock from the date of the
Company’s IPO on December 19, 2006 through October 16, 2007. The complaint
alleged that the Company and certain of its present and former officers,
directors, and shareholders violated the Securities Act of
1933.
FUWEI
FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts
in thousands except share and per share value)
NOTE
13 - COMMITMENTS AND CONTINGENCIES (continued)
On
November 21, 2007, the Company was given notice that a second class action
lawsuit had been filed in the United States District Court for the Southern
District of New York, commenced on behalf of all purchasers of the Company’s
stock pursuant or traceable to the Registration Statement and Prospectus issued
in connection with the Company’s IPO on December 19, 2006 through November 12,
2007. The complaint alleged that the Company, its underwriters, and certain of
its executives violated Sections 11, 12(a)(2), and 15 of the Securities Act of
1933 by misrepresenting or omitting material information regarding the Company
and its business operations.
On
January 24, 2008, the Court consolidated into a single action the putative
securities class actions pending against the Company and certain of its
officers, directors, and shareholders. The Court appointed Ninyat Tonyaz
as lead plaintiff, appointed the Rosen Law Firm, P.A. as lead counsel, and
granted plaintiffs leave to file a consolidated amended class action
complaint. The consolidated action is styled, In re Fuwei
Films Securities Litigation, Case No. 07-CV-9416
(RJS).
On March
14, 2008, plaintiffs filed a consolidated amended class action
complaint (the "Amended Complaint") naming as defendants the Company,
Xiaoan He, Mark Stulga, Jun Yin, Tongju Zhou, Duo Wang, and the
Company's IPO underwriters (the “Underwriter Defendants”) — Maxim
Group LLC, WR Hambrecht + Co., and Chardan Capital Markets, LLC.
The Amended Complaint asserts claims for violation of Sections 11,
12(a)(2), and 15 of the Securities Act of 1933. The Company, Messrs. He
and Stulga, and the Underwriter Defendants were served with the Amended
Complaint and, as described below, have moved to dismiss the claims asserted
against them.
Pursuant
to a scheduling order entered by the Court on February 19, 2008, the parties
named as defendants in the consolidated class action were required to answer or
otherwise respond to the Amended Complaint on or before April 30,
2008. The Court subsequently extended defendants’ time to respond to
the Amended Complaint to May 14, 2008.
The
Company and Messrs. He and Stulga filed a motion to dismiss the Amended
Complaint in its entirety. The Underwriter Defendants separately
moved to dismiss the Amended Complaint. Both motions have been fully
briefed, and the parties await the Court's
decision.
On
November 3, 2008, Plaintiffs filed proofs of service with the Court, indicating
that Messrs. Yin, Wang, and Zhou were served with the Amended Complaint on or
about August 14, 2008, and that they had 90 days after such date to serve an
answer to the Amended Complaint or a motion pursuant to Rule 12 of the Federal
Rules of Civil Procedure.
FUWEI
FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts
in thousands except share and per share value)
NOTE
13 - COMMITMENTS AND CONTINGENCIES (continued)
As
discussed in Note 16, on March 10, 2009, the Company became aware of the initial
verdict issued by the Jinan Intermediate People’s Court in the city of Jinan,
Shandong Province, concerning the Company’s three major shareholders, Messrs.
Jun Yin, Duo Wang, and Tongju Zhou. The verdict finds the three major
shareholders guilty of the crime of misappropriation of state-owned assets
relating to tens of millions of RMBs’ worth of assets during the reorganization
of Shandong Neoluck Plastics Co., Ltd. The court sentenced Mr. Yin to death,
with a stay of execution for two years. Messrs. Zhou and Wang each
received a sentence of life imprisonment. All of the personal
property of these three shareholders will be confiscated by the Chinese
government. They all challenged the verdict and appealed to it at present.
Messrs. Yin, Wang, and Zhou have no involvement in Fuwei’s day-to-day
operations.
By letter
dated March 17, 2009, Plaintiffs apprised the Court of Fuwei’s March 10, 2009
Press Release disclosing the initial verdict against Messrs. Yin, Wang, and
Zhou, and requested that the Court take judicial notice of this press
release in adjudicating the pending motions to dismiss. Plaintiffs
argued that the initial verdict supports their claim that the DMT and Bruckner
production lines were wrongfully transferred from Shandong Neo-Luck Plastics
Co., Ltd. to the Company. By letter dated March 24, 2009, counsel for
the Company and Messrs. He and Stulga submitted a response in opposition to
Plaintiffs’ March 17, 2009 letter. To date, the Court has not ruled
on the pending motions to dismiss. All discovery is stayed pending
such ruling.
The
Company’s management believes that the allegations are without merit. The
Company intends to defend itself vigorously against the claims and has engaged a
law firm in this regard. However, the
Company's management is currently unable to reasonably estimate
the amount or range of possible losses that will result from the ultimate
resolution of this matter. As of March 31, 2009, the Company has
not accrued any liability in connection with these litigations except for the
defense expenses.
NOTE
14 - MAJOR CUSTOMERS AND VENDORS
There
were no major customers which accounted over 10% of the total net revenue for
the three months period ended March 31, 2009 and 2008.
One
vendor provided approximately 45.2% of the Company’s raw materials for the three
months ended March 31, 2009. The Company had RMB2,184 (US$319) advance to the
vendor as of March 31, 2009. Two vendors provided approximately 63.6% of the
Company’s raw materials for the three months ended March 31, 2009 with each
vendor individually accounting for about 48.0% and 15.5%,
respectively.
FUWEI
FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts
in thousands except share and per share value)
NOTE
15 - OTHER EVENT, SUBSEQUENT EVENT AND LITIGATION PREVIOUSLY
REPORTED
At March
10, 2009, the Company became aware of the initial verdict issued by the Jinan
Intermediate People's Court in the city of Jinan, Shandong Province, concerning
the Company's three major shareholders, Messrs. Jun Yin, Duo Wang, and Tongju
Zhou. The verdict finds the three major shareholders guilty of the
crime of misappropriation of state-owned assets relating to tens of millions of
RMBs' worth of assets during the reorganization of Shandong Neoluck Plastics
Co., Ltd. The court sentenced Mr. Yin to death, with a stay of
execution for two years. The other two defendants, Messrs. Zhou and
Wang, each received a sentence of life imprisonment. All of the
personal property of the three individuals will be confiscated by the Chinese
government. They all challenged the verdict and appealed to it at
present. None of these individuals is currently involved in Fuwei's
day-to-day operations.
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
References
to "dollars" and "US$" are to United States Dollars. References to "we", "us",
the "Company" or "Fuwei" include Fuwei Films (Holdings) Co., Ltd. and its
subsidiaries, except where the context requires otherwise.
Results
of operations for the three month period ended March 31, 2009 compared to March
31, 2008
We have
been adversely affected by the global financial crisis which began in the fourth
quarter of 2008, with the impact being more significant on us in the first
quarter of 2009. Our operating results has declined due to the
further decrease of demand in the domestic market especially the sharp decline
of demand for high value-added specialty films and the decrease of overseas
sales, as well as the greater competition in the marketplace. Our
operating results have also declined as a result of forced closing
our leased production line during the first quarter of 2009 due to significant
decline in its profitability. In the first quarter of 2009, we have
taken actions, including reducing the number of employees, reducing expenses and
closing office in Japan, in order to improve our profitability and lessen the
adverse effect on our business caused by the global financial
crisis. However, if the economy does not recover, we may continue to
face such declines. Due to the foregoing reasons, our operating
results in the first quarter of 2009 has significantly declined compared to the
same period of 2008. The Chinese government has taken actions to
stimulate industries vital to the country, such as increasing the export tax
rebate rate of BOPET polyester film from 5% to 11%.The increase in
the export tax rebate rate of BOPET film may play a positive role in
increasing our exports. However, the increase of our overseas sale
will depend on the general demand for products in the overseas markets. In
addition, some countries have adopted policies, such as trade protectionism
which may adversely affect our export.
The table
below sets forth certain line items from our Statement of Income as a percentage
of revenue:
|
|
Three Month Period Ended
March 31,2009
|
|
|
Three Month Period Ended
March 31, 2008
|
|
|
|
(as
% of Revenue)
|
|
Gross
profit
|
|
|
0.1
|
|
|
|
20.8
|
|
Operating
expenses
|
|
|
22.0
|
|
|
|
10.7
|
|
Operating
income/(loss)
|
|
|
(21.9
|
)
|
|
|
10.1
|
|
Other
income/(expense)
|
|
|
(0.5
|
)
|
|
|
(1.5
|
)
|
Income
tax benefit/(expense)
|
|
|
3.4
|
|
|
|
(1.0
|
)
|
Net
income/(loss)
|
|
|
(19.0
|
)
|
|
|
7.6
|
|
Revenue
The
Company’s revenue is primarily derived from the manufacture and sale of plastic
films.
Net sales
during the three months period ended March 31, 2009 were RMB 74.5 million
(US$10.9 million), compared to RMB 104.0 million (US$14.5 million) during the
same period in 2008, representing a 28.4% decrease.
The sales
of specialty films during the three month period ended March 31, 2009 were RMB
4.1 million (US$ 0.6million), a decrease of 87.7%, compared to the same
period last year. The decline was largely attributable to the decrease in demand
for luxurious packaging since the global financial crisis, which has caused a
significant decline in the demand for the specialty film.
The
following is a breakdown of commodity and specialty film sales (amounts in
thousands):
|
|
Three Month Period
Ended
March 31, 2009
|
|
|
|
|
|
Three Month Period
Ended
March 31, 2008
|
|
|
|
|
|
|
RMB
|
|
|
US$
|
|
|
% of Total
|
|
|
RMB
|
|
|
% of Total
|
|
Printing
film
|
|
|
7,128
|
|
|
|
1,041
|
|
|
|
9.6
|
|
|
|
19,230
|
|
|
|
18.5
|
|
Stamping
film
|
|
|
31,188
|
|
|
|
4,556
|
|
|
|
41.9
|
|
|
|
21,211
|
|
|
|
20.4
|
|
Metallization
film
|
|
|
12,273
|
|
|
|
1,793
|
|
|
|
16.5
|
|
|
|
2,901
|
|
|
|
2.8
|
|
Base
film for other applications
|
|
|
19,780
|
|
|
|
2,889
|
|
|
|
26.5
|
|
|
|
26,927
|
|
|
|
25.9
|
|
Special
film
|
|
|
4,148
|
|
|
|
606
|
|
|
|
5.6
|
|
|
|
33,765
|
|
|
|
32.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74,517
|
|
|
|
10,885
|
|
|
|
100.0
|
|
|
|
104,034
|
|
|
|
100.0
|
|
Overseas
sales during the three month ended March 31, 2009 were RMB 10.5 million
(US$1.5million), which accounted for 14.1% of our total net revenues, as
compared with RMB 24.1 million (US$3.4 million) and 23.2% in the same period in
2008, which is 56.6% lower than the same period last year. The decrease in
export sales was mainly due to the decline in the overseas market demand caused
by the global financial crisis, especially the decrease of demand in the United
States, Europe and South Korea.
The
following is a breakdown of PRC domestic and overseas sales (amounts in
thousands):
|
|
Three Month Period
Ended
March 31, 2009
|
|
|
|
|
|
Three Month Period
Ended March 31, 2008
|
|
|
|
|
|
|
RMB
|
|
|
US$
|
|
|
% of Total
|
|
|
RMB
|
|
|
% of Total
|
|
Sales
in China
|
|
|
64,034
|
|
|
|
9,354
|
|
|
|
85.9
|
|
|
|
79,899
|
|
|
|
76.8
|
|
Sales
in other countries
|
|
|
10,483
|
|
|
|
1,531
|
|
|
|
14.1
|
|
|
|
24,135
|
|
|
|
23.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74,517
|
|
|
|
10,885
|
|
|
|
100.0
|
|
|
|
104,034
|
|
|
|
100.0
|
|
Cost of Goods
Sold
Our cost
of goods sold comprises mainly of material costs, factory overhead, packaging
materials and direct labor. The breakdown of our cost of goods sold in
percentage is as follows:
|
|
Three Month Period
Ended
March 31, 2009
|
|
|
Three Month Period
Ended
March 31, 2008
|
|
|
|
% of total
|
|
|
% of total
|
|
Materials
costs
|
|
|
71.4
|
|
|
|
78.4
|
|
Factory
overhead
|
|
|
11.6
|
|
|
|
9.3
|
|
Power
|
|
|
11.5
|
|
|
|
8.2
|
|
Packaging
materials
|
|
|
3.3
|
|
|
|
2.8
|
|
Direct
labor
|
|
|
2.2
|
|
|
|
1.3
|
|
Cost of
goods sold during the first three months of 2009 totaled RMB 74.4 million
(US$10.9 million) as compared to RMB 82.4 million (US$11.5 million) for the same
period in the prior year. This was 9.7% lower than the same period in 2008,
mainly due to the decline in the price of the raw materials in the first three
months of 2009 compared to the same period in 2008.
Gross
Profit
Our gross
profit was RMB 73 (US$11) for the first three months of 2009, representing a
gross margin of 0.10%, as compared to a gross profit of 20.8% from the same
period in 2008, a decrease of 99.7%. This was mainly due to a decrease in
average sales price of our products during the first three months of 2009
compared with the same period in 2008.
Operating
expenses
Operating
expenses for the three months ended March 31, 2009 were RMB16.4 million (US$2.4
million), as compared to RMB5.2 million (US$0.8 million) or 46.5% higher than
the same period in 2008. This increase was mainly due to increased delivery
costs and increased allowances for doubtful account receivable and other
receivables.
Other
Income /(Expense)
Interest
expense totaled RMB0 million (US$0 million) during the three months of 2009, net
of capitalized interest of RMB 2.1 million (US$ 0.3 million) for the period
ending Marh 31, 2009.
Other,
Net
Other,
Net from the period ending March 31, 2008 to the period ending March 31, 2009
changed primarily due to the inclusion of the sales of scrap material in the
period ending March 31, 2008, and there were no such sales in the period ending
March 31, 2009.
Income
Tax Benefit/(expense)
During
the first three months of 2009, the Company recorded an income tax benefit of
RMB 2.5 million (US$ 0.3 million) compared to income tax expense of RMB 1.0
million (US$0.1 million) during the same period in 2008. This decrease was due
to losses occurred in the first quarter of 2009 and the deferred income tax
benefit from interest capitalized, bad debt allowances and
depreciation.
Net
Income
/(Loss)
Net loss
during the first three months of 2009 was RMB 14.1 million (US$ 2.1 million)
compared to net income of RMB 7.9 million (US$1.1 million) during the same
period in 2008, representing a decrease of RMB 22.1 million from the same period
in 2008. The decrease was mainly due to the global financial crisis which led to
a decrease in both the demand for our products and sale prices at the same time
we are not able to transfer the increased cost caused by such increase in raw
materials effectively.
Liquidity
and Capital Resources
Since
inception, our sources of cash were mainly from cash generated from our
operations and borrowings from financial institutions and capital contributed by
our shareholders.
From 2008
to the first three months of 2009, our capital expenditures have been primarily
financed through short-term and long-term borrowings from financial institutions
and IPO funds. The interest rates of short-term and long-term borrowings from
financial institutions during the periods from first quarter of 2008 to the
first quarter of 2009 ranged from 0% to 8.22%.
We
obtained new short-term loans on July 16, 2008 and July 18, 2008 for RMB 82,580
and RMB 60,000, respectively. The maturity dates on July 16, 2008 and
July 18, 2008 loans are June 10, 2009 and June 23, 2009,
respectively. The annual interest rate is up by 10% compared with the
fixed benchmark interest rate announced by the People’s Bank of China. As of
March 31, 2009, the interest rate in effect is 5.841%.
We
entered into two interest free loan agreements with the Weifang Commercial Bank
for the amount of (i)RMB10,000, effective January 13, 2009, with a maturity date
of January 12, 2010; and (ii) RMB10,000, effective January 16, 2009, with the
maturity date of January 12, 2012. We obtained from Weifang Commercial Bank a
new loan of RMB5,000 on December 2, 2008, with a maturity date of December 2,
2011. All of the above loans are interest-free loans. These are
industrial development fund loans administrated by the local government of
Shandong Province, and made through the Weifang Commercial Bank, to be provided
to local high-and –new tech enterprises for the purpose of enhancing innovation
and technical research and development and to support their development. The
proceeds of these loans have been used for the construction of the trial
production line and for research and development.
On March
13, 2008, Shandong Fuwei recommended a foreign currency portfolio from Bank of
China Weifang branch, with an expectation to reduce the cost of foreign exchange
for Shandong Fuwei importing raw materials. The portfolio transactions are
guaranteed by RMB2,264 security deposit for one-year foreign currency loan
of US$319 with an interest rates of 5.45%. The outstanding US$319 was matured on
March 13, 2009.
We
believe that, after taking into consideration our present banking facilities,
existing cash and the expected cash flows to be generated from our operations,
we have adequate sources of liquidity to meet our short-term obligations and our
working capital.
Operating
Activities
Net cash
flows provided by operating activities for the three months ended March 31,
2009, was RMB 9.2 million (US$ 1.3 million) compared to net cash flows used by
operating activities of RMB 4.2 million (US0.6 million) for the three months
ended March 31, 2008, which is an increase of RMB5 million (US$0.7million). This
increase in cash flows from operating activities was attributable primarily to
the decrease of accounts receivable.
Working
Capital
As of
March 31, 2009 and December 31, 2008, the Company had negative working capital
of RMB 103.6 million (US$15.1 million) and RMB 100.2 million (US$14.6 million),
respectively. Although we have material negative working capital, the short-term
current liability is mainly due to the short-term bank loans, which amounted to
RMB152.5 million (US$22.3 million). We have entered into negotiations
with our lenders to extend the maturity date of these loans.
We
anticipate that we will have adequate working capital in the foreseeable future.
However, we may wish to borrow additional capital or sell our common stock to
realize additional funds in order to expand and grow our
operations.
Contractual
Obligations
The
following table is a summary of the Company's contractual obligations as of
March 31, 2009 (in thousands RMB):
|
|
Payments
due by period
|
|
|
|
|
|
Less than
1
|
|
|
|
1-3
|
|
|
|
3-5
|
|
More
than
5
|
Contractual
obligations
|
|
Total
|
|
|
year
|
|
|
Years
|
|
|
Years
|
|
years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental
obligations
|
|
|
243
|
|
|
|
243
|
|
|
|
|
|
|
|
|
|
|
Purchase
obligations
|
|
|
134,400
|
|
|
|
134,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
134,643
|
|
|
|
134,643
|
|
|
|
|
|
|
|
|
|
|
Exhibit
Index
Exhibit
No.
|
|
Description
|
99.1
|
|
Press
Release dated May 12,
2009.
|
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/ Xiaoan He
|
|
Name:
Xiaoan He
|
|
Title:
Chairman, Chief Executive
Officer
|
Dated:
May 13, 2009