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 September
30, 2010
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
o
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):
o
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):
o
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
o
No
o
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,
fluctuations of RMB exchange rate, 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 our wholly owned
subsidiary, Fuwei Films (Shandong) Co., Ltd. ( “Fuwei Shandong”) is located,
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 come to an agreement with the new production line vendor to
consequently continue the operation of the third BOPET production line;
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 and our raw materials in recent years and the potential
impact resulting from the pending criminal litigation and related developments
to the major shareholders; uncertainty in the adverse effect resulting from the
pending shareholders class action suit filed in the United States District Court
for the Southern District of New York. 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
November 15, 2010, the Company announced its unaudited consolidated financial
results for the nine-month period ended September 30, 2010.
FUWEI
FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
AS
OF SEPTEMBER 30, 2010 AND DECEMBER 31, 2009
(amounts
in thousands except share and per share value)
|
|
|
|
|
September
30, 2010
|
|
|
December
31, 2009
|
|
|
|
Notes
|
|
|
(Unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
Current
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
|
|
|
|
93,362
|
|
|
|
13,939
|
|
|
|
26,804
|
|
Restricted
cash
|
|
|
|
|
|
8,583
|
|
|
|
1,281
|
|
|
|
12,541
|
|
Accounts
and bills receivable, net
|
|
|
3
|
|
|
|
42,659
|
|
|
|
6,369
|
|
|
|
28,785
|
|
Inventories
|
|
|
4
|
|
|
|
32,028
|
|
|
|
4,782
|
|
|
|
45,039
|
|
Advance
to suppliers
|
|
|
|
|
|
|
16,191
|
|
|
|
2,417
|
|
|
|
3,956
|
|
Prepayments
and other receivables
|
|
|
|
1,759
|
|
|
|
263
|
|
|
|
957
|
|
Deferred
tax assets - current
|
|
|
|
|
|
|
2,569
|
|
|
|
384
|
|
|
|
1,198
|
|
Total
current assets
|
|
|
|
|
|
|
197,152
|
|
|
|
29,435
|
|
|
|
119,282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant,
properties and equipment, net
|
|
|
5
|
|
|
|
294,372
|
|
|
|
43,949
|
|
|
|
318,600
|
|
Construction
in progress
|
|
|
6
|
|
|
|
235,955
|
|
|
|
35,227
|
|
|
|
237,118
|
|
Lease
prepayments, net
|
|
|
7
|
|
|
|
21,155
|
|
|
|
3,158
|
|
|
|
21,548
|
|
Advanced
to suppliers - Long Term
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,367
|
|
Goodwill
|
|
|
|
|
|
|
10,276
|
|
|
|
1,534
|
|
|
|
10,276
|
|
Deposit
|
|
|
8
|
|
|
|
16,760
|
|
|
|
2,502
|
|
|
|
21,000
|
|
Deferred
tax assets - non current
|
|
|
|
|
|
|
1,963
|
|
|
|
293
|
|
|
|
5,318
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
|
|
|
|
|
777,633
|
|
|
|
116,098
|
|
|
|
735,509
|
|
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
borrowings
|
|
|
9
|
|
|
|
137,000
|
|
|
|
20,454
|
|
|
|
153,179
|
|
Accounts
payables
|
|
|
|
|
|
|
22,229
|
|
|
|
3,319
|
|
|
|
25,898
|
|
Advance
from customers
|
|
|
|
|
|
|
42,251
|
|
|
|
6,308
|
|
|
|
12,608
|
|
Accrued
expenses and other payables
|
|
|
|
14,056
|
|
|
|
2,098
|
|
|
|
6,981
|
|
|
|
|
|
|
|
|
215,536
|
|
|
|
32,179
|
|
|
|
198,666
|
|
Long-term
loan
|
|
|
9
|
|
|
|
35,000
|
|
|
|
5,225
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
|
|
|
|
250,536
|
|
|
|
37,404
|
|
|
|
223,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registered
capital(of US$0.129752 par value; 20,000,000 shares authorized; 13,062,500
issued and outstanding)
|
|
|
|
|
|
|
13,322
|
|
|
|
1,989
|
|
|
|
13,323
|
|
Additional
paid-in capital
|
|
|
|
|
|
|
311,896
|
|
|
|
46,565
|
|
|
|
311,907
|
|
Statutory
reserve
|
|
|
|
|
|
|
29,338
|
|
|
|
4,380
|
|
|
|
29,338
|
|
Retained
earnings
|
|
|
|
|
|
|
171,251
|
|
|
|
25,567
|
|
|
|
156,006
|
|
Cumulative
translation adjustment
|
|
|
|
|
|
|
1,109
|
|
|
|
166
|
|
|
|
993
|
|
Total
shareholders’ equity
|
|
|
|
|
|
|
526,916
|
|
|
|
78,667
|
|
|
|
511,567
|
|
Non-controlling
interest
|
|
|
|
|
|
|
182
|
|
|
|
27
|
|
|
|
276
|
|
Total
equity
|
|
|
|
|
|
|
527,098
|
|
|
|
78,694
|
|
|
|
511,843
|
|
Total
liabilities and equity
|
|
|
|
|
|
|
737,633
|
|
|
|
116,098
|
|
|
|
735,509
|
|
The
accompanying notes are an integral part of these unaudited condensed
consolidated statements.
FUWEI
FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
FOR
THE THREE AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2010 AND 2009
(amounts
in thousands except share and per share value)
(UNAUDITED)
|
|
The
Three Months
|
|
|
The
Nine Months
|
|
|
|
Period
Ended September 30,2010
|
|
|
Period
Ended September 30,2009
|
|
|
Period
Ended September 30,2010
|
|
|
Period
Ended September 30,2009
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
Net
sales
|
|
|
129,174
|
|
|
|
19,285
|
|
|
|
89,603
|
|
|
|
327,948
|
|
|
|
48,961
|
|
|
|
236,691
|
|
Cost
of sales
|
|
|
(88,658
|
)
|
|
|
(13,236
|
)
|
|
|
(81,749
|
)
|
|
|
(254,996
|
)
|
|
|
(38,070
|
)
|
|
|
(222,490
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
40,515
|
|
|
|
6,049
|
|
|
|
7,854
|
|
|
|
72,952
|
|
|
|
10,891
|
|
|
|
14,201
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling
expenses
|
|
|
(4,389
|
)
|
|
|
(655
|
)
|
|
|
(2,868
|
)
|
|
|
(11,944
|
)
|
|
|
(1,783
|
)
|
|
|
(10,499
|
)
|
Administrative
expenses
|
|
|
(17,992
|
)
|
|
|
(2,686
|
)
|
|
|
(4,170
|
)
|
|
|
(38,417
|
)
|
|
|
(5,736
|
)
|
|
|
(20,241
|
)
|
Total
operating expenses
|
|
|
(22,381
|
)
|
|
|
(3,341
|
)
|
|
|
(7,038
|
)
|
|
|
(50,361
|
)
|
|
|
(7,519
|
)
|
|
|
(30,740
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income/(loss)
|
|
|
18,134
|
|
|
|
2,707
|
|
|
|
816
|
|
|
|
22,591
|
|
|
|
3,373
|
|
|
|
(16,539
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income/(expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Interest income
|
|
|
42
|
|
|
|
6
|
|
|
|
5
|
|
|
|
214
|
|
|
|
32
|
|
|
|
148
|
|
-
Interest expense
|
|
|
(2,337
|
)
|
|
|
(349
|
)
|
|
|
(2,091
|
)
|
|
|
(6,624
|
)
|
|
|
(989
|
)
|
|
|
(6,210
|
)
|
-
Others income, net
|
|
|
(245
|
)
|
|
|
(37
|
)
|
|
|
3,547
|
|
|
|
(381
|
)
|
|
|
(57
|
)
|
|
|
(335
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other income/(expense)
|
|
|
(2,540
|
)
|
|
|
(379
|
)
|
|
|
1,461
|
|
|
|
(6,791
|
)
|
|
|
(1,014
|
)
|
|
|
(6,398
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before income tax benefit/(expense)
|
|
|
15,594
|
|
|
|
2,328
|
|
|
|
2,277
|
|
|
|
15,800
|
|
|
|
2,359
|
|
|
|
(22,937
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax benefit/(expense)
|
|
|
(578
|
)
|
|
|
(86
|
)
|
|
|
(264
|
)
|
|
|
(555
|
)
|
|
|
(83
|
)
|
|
|
3,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income/(loss)
|
|
|
(15,017)
|
|
|
|
(2,242
|
)
|
|
|
2,013
|
|
|
|
15,245
|
|
|
|
2,276
|
|
|
|
(19,497
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income/(loss) attributable to noncontrolling interests
|
|
|
(26
|
)
|
|
|
(4
|
)
|
|
|
(5
|
)
|
|
|
(95
|
)
|
|
|
(14
|
)
|
|
|
(5
|
)
|
Net
income/(loss) attributable to the Company
|
|
|
15,043
|
|
|
|
2,246
|
|
|
|
2,018
|
|
|
|
15,340
|
|
|
|
2,290
|
|
|
|
(19,492
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Foreign currency translation adjustments
|
|
|
132
|
|
|
|
19
|
|
|
|
2
|
|
|
|
116
|
|
|
|
17
|
|
|
|
614
|
|
Comprehensive
income
|
|
|
15,174
|
|
|
|
2,265
|
|
|
|
2,020
|
|
|
|
15,456
|
|
|
|
2,307
|
|
|
|
(18,878
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share, basic and diluted
|
|
|
1.15
|
|
|
|
0.17
|
|
|
|
0.15
|
|
|
|
1.17
|
|
|
|
0.18
|
|
|
|
(1.49
|
)
|
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 NINE -MONTH PERIOD ENDED SEPTEMBER 30, 2010 AND 2009
(amounts
in thousands except share and per share value)
(UNAUDITED)
|
|
Period
Ended September 30, 2010
|
|
|
Period
Ended September 30, 2009
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
Cash
flow from operating activities
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
15,245
|
|
|
|
2,276
|
|
|
|
(19,492
|
)
|
Adjustments
to reconcile net income to net cash
|
|
|
|
|
|
|
|
|
|
|
|
|
(used
in)/provided by operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Depreciation of property, plant and equipment
|
|
|
26,763
|
|
|
|
3,996
|
|
|
|
25,732
|
|
-
Amortization of intangible assets
|
|
|
340
|
|
|
|
51
|
|
|
|
340
|
|
-
Deferred income taxes
|
|
|
1,942
|
|
|
|
290
|
|
|
|
-
|
|
-
Bad debt expense/(recovery)
|
|
|
9,138
|
|
|
|
1,364
|
|
|
|
3,767
|
|
-
Accounts receivable
|
|
|
(15,138
|
)
|
|
|
(2,260
|
)
|
|
|
11,751
|
|
-
Inventories
|
|
|
13,011
|
|
|
|
1,942
|
|
|
|
(9,922
|
)
|
-
Advance to suppliers
|
|
|
(16,236
|
)
|
|
|
(2,424
|
)
|
|
|
(1,070
|
)
|
-
Prepaid expenses and other current assets
|
|
|
(487
|
)
|
|
|
(73
|
)
|
|
|
(6,437
|
)
|
-
Accounts payable
|
|
|
(3,656
|
)
|
|
|
(546
|
)
|
|
|
5,707
|
|
-
Accrued expenses and other payables
|
|
|
7,235
|
|
|
|
1,080
|
|
|
|
(1,352
|
)
|
-
Advance from customers
|
|
|
29,643
|
|
|
|
4,426
|
|
|
|
7,791
|
|
-
Tax payable
|
|
|
(38
|
)
|
|
|
(6
|
)
|
|
|
(6,101
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by operating activities
|
|
|
67,762
|
|
|
|
10,117
|
|
|
|
10,716
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flow from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases
of property, plant and equipment
|
|
|
(2,482
|
)
|
|
|
(371
|
)
|
|
|
(93,092
|
)
|
Restricted
cash related to trade finance
|
|
|
3,952
|
|
|
|
590
|
|
|
|
(400
|
)
|
Advanced
to suppliers - non current
|
|
|
2,367
|
|
|
|
353
|
|
|
|
-
|
|
Addition
to construction in progress
|
|
|
1,163
|
|
|
|
174
|
|
|
|
83,469
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in) investing activities
|
|
|
5,000
|
|
|
|
746
|
|
|
|
(10,023
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flow from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal
payments of short-term bank loans
|
|
|
(16,179
|
)
|
|
|
(2,415
|
)
|
|
|
(11,585
|
)
|
Proceeds
from short-term bank loans
|
|
|
10,000
|
|
|
|
1,493
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash (used in) financing activities
|
|
|
(6,179
|
)
|
|
|
(923
|
)
|
|
|
(1,585
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of foreign exchange rate changes
|
|
|
(26
|
)
|
|
|
72
|
|
|
|
892
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalent
|
|
|
66,557
|
|
|
|
10,013
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalent
|
|
|
|
|
|
|
|
|
|
|
|
|
At
beginning of period
|
|
|
26,804
|
|
|
|
3,926
|
|
|
|
15,823
|
|
At
end of period
|
|
|
93,362
|
|
|
|
13,939
|
|
|
|
15,822
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTARY
DISCLOSURE:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
|
6,624
|
|
|
|
989
|
|
|
|
5,991
|
|
Income
tax paid
|
|
|
3,966
|
|
|
|
592
|
|
|
|
-
|
|
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)
(UNAUDITED)
NOTE
1 - BACKGROUND
Fuwei
Films (Holdings) Co., Ltd. and its subsidiaries (the “Company”) 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
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”) 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. The results of the nine-month period ended September 30,
2010 are not necessarily indicative of the results to be expected for the full
year ended December 31, 2010.
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.
Use of
Estimates
The
preparation of the 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.
FUWEI
FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts
in thousands except share and per share value)
(UNAUDITED)
NOTE
2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Foreign Currency
Transactions
The
Company’s reporting currency is the Renminbi (“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. 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.
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.
Restricted
cash refers to the cash balance held by bank as deposit for Letters of Credit.
The Company has restricted cash of RMB8,583 (US$1,281) and RMB12,541 (US$1,837)
as of September 30, 2010 and December 31, 2009, respectively.
FUWEI
FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts
in thousands except share and per share value)
(UNAUDITED)
NOTE
2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
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
Company’s existing accounts receivable. The Company determines the allowance
based on historical write-off experience, customer specific facts and economic
conditions.
The
Company 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
Company does not have any off-balance-sheet credit exposure related to its
customers.
The
Company 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 Company 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. Any inventory markdown
is classified in the income statement as a component of cost of goods
sold.
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:
|
|
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.
FUWEI
FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts
in thousands except share and per share value)
(UNAUDITED)
NOTE
2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Construction
in progress represents capital expenditures in respect to the new BOPET
production line. No depreciation is provided in respect to 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 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
more frequently 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.
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 Company
generally delivers allow a customer 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. 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 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 UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts
in thousands except share and per share value)
(UNAUDITED)
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 Company 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 Benefits
Contributions
to retirement schemes (which are defined as 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 are 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.
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.
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. As the Company has not become aware of
any product liability claim since operations commenced, the Company has not
recognized a liability for any product liability claims.
Recently Issued Accounting
Standards
In
January 2010, the FASB issued an amendment to ASC 505, Equity, where entities
that declare dividends to shareholders that may be paid in cash or shares at the
election of the shareholders are considered to be a share issuance that is
reflected prospectively in EPS, and is not accounted for as a stock dividend.
This standard is effective for interim and annual periods ended on or after
December 15, 2009 and is to be applied on a retrospective basis. The adoption of
this standard does not have a significant impact on the Company’s 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)
(UNAUDITED)
NOTE
2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
In
January 2010, the FASB issued an amendment to ASC 820, Fair Value Measurements
and Disclosure, to require reporting entities to separately disclose the amounts
and business rationale for significant transfers in and out of Level 1 and Level
2 fair value measurements and separately present information regarding purchase,
sale, issuance, and settlement of Level 3 fair value measures on a gross basis.
This standard is effective for interim and annual reporting periods beginning
after December 15, 2009 with the exception of disclosures regarding the
purchase, sale, issuance, and settlement of Level 3 fair value measures which
are effective for fiscal years beginning after December 15, 2010. The adoption
of this standard does not have a significant impact on the Company’s
consolidated financial statements.
In July
2010, the FASB issued Accounting Standards Update (ASU) No. 2010-20,
“Disclosures about the Credit Quality of Financing Receivables and the Allowance
for Credit Losses.” ASU No. 2010-20 amends the guidance with ASC Topic 310,
“Receivables” to facilitate financial statement users’ evaluation of
(1) the nature of credit risk inherent in the entity’s portfolio of
financing receivables; (2) how that risk is analyzed and assessed in
arriving at the allowance for credit losses; and (3) the changes and
reasons for those changes in the allowance for credit losses. The amendments in
ASU No. 2010-20 also require an entity to provide additional disclosures
such as a rollforward schedule of the allowance for credit losses on a portfolio
segment basis, credit quality indicators of financing receivables and the aging
of past due financing receivables. The adoption of this standard does not have a
significant impact on the Company’s consolidated financial
statements.
The
Company has implemented all new accounting pronouncements that are in effect and
that may impact its financial statements and does not believe that there are any
other new accounting pronouncements that have been issued that might have a
material impact on its consolidated financial statements.
NOTE
3 - ACCOUNTS RECEIVABLES, NET
Accounts
receivables as of September 30, 2010 and December 31, 2009 consist of the
following:
|
|
September
30, 2010
(Unaudited)
|
|
|
December
31, 2009
(Audited)
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
Accounts
receivable
|
|
|
16,924
|
|
|
|
2,527
|
|
|
|
22,289
|
|
Less:
Allowance for doubtful accounts
|
|
|
(3,512
|
)
|
|
|
(524
|
)
|
|
|
(2,259
|
)
|
|
|
|
13,412
|
|
|
|
2,002
|
|
|
|
20,030
|
|
Bills
receivable
|
|
|
29,248
|
|
|
|
4,367
|
|
|
|
8,755
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,659
|
|
|
|
6,369
|
|
|
|
28,785
|
|
Bill
receivables are bank’s acceptance bills, which are guaranteed by
bank.
FUWEI
FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts
in thousands except share and per share value)
(UNAUDITED)
NOTE
4-INVENTORIES
Inventories
as of September 30, 2010 and December 31, 2009 consist of the
following:
|
|
September 30, 2010
(Unaudited)
|
|
|
December 31, 2009
(Audited)
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
Raw
materials
|
|
|
21,389
|
|
|
|
3,194
|
|
|
|
28,756
|
|
Work-in-progress
|
|
|
1,668
|
|
|
|
249
|
|
|
|
2,274
|
|
Finished
goods
|
|
|
12,381
|
|
|
|
1,848
|
|
|
|
17,617
|
|
Consumables
and spare parts
|
|
|
832
|
|
|
|
124
|
|
|
|
633
|
|
Inventory—impairment
|
|
|
(4,242
|
)
|
|
|
(633
|
)
|
|
|
(4,242
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,028
|
|
|
|
4,782
|
|
|
|
45,039
|
|
NOTE
5-PROPERTY, PLANT AND EQUIPMENT, NET
Property,
plant and equipment consist of the following:
|
|
September
30, 2010
(Unaudited)
|
|
|
December
31, 2009
(Audited)
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
Buildings
|
|
|
44,171
|
|
|
|
6,594
|
|
|
|
43,273
|
|
Plant
and equipment
|
|
|
418,007
|
|
|
|
62,407
|
|
|
|
416,143
|
|
Computer
equipment
|
|
|
1,680
|
|
|
|
251
|
|
|
|
1,421
|
|
Furniture
and fixtures
|
|
|
6,020
|
|
|
|
899
|
|
|
|
5,929
|
|
Motor
vehicles
|
|
|
1,979
|
|
|
|
295
|
|
|
|
1,739
|
|
|
|
|
471,856
|
|
|
|
70,446
|
|
|
|
468,505
|
|
Less:
accumulated depreciation
|
|
|
(177,484
|
)
|
|
|
(26,497
|
)
|
|
|
(149,905
|
)
|
|
|
|
294,372
|
|
|
|
43,949
|
|
|
|
318,600
|
|
Total
depreciation for the nine-month periods ended September 30, 2010 and 2009 was
RMB26,763 (US$3,996) and RMB25,732 (US$3,770), respectively. For the three-month
periods ended September 30, 2010 and 2009, depreciation expenses were RMB8,822
(US$1,317) and RMB9,684 (US$1,419), respectively.
NOTE
6 - CONSTRUCTION IN PROGRESS
Construction-in-progress
represents capital expenditure in respect to the BOPET production line.
Construction in progress was RMB235,955 (US$35,227) ended September 30, 2010,
and RMB237,118 (US$34,732) ended December 31, 2009, respectively.
NOTE
7 - LEASE PREPAYMENTS
As of
September 30, 2010 and December 31, 2009, lease prepayments, net of amortization
were RMB21,155 (US$3,158) and RMB21,548 (US$3,156),
respectively.
Amortization
of land use rights for the nine-month periods ended September 30, 2010 and 2009
were RMB340 (US$51) and RMB340 (US$50), respectively. Amortization of land use
rights for the three months ended September 30, 2010 and 2009 was RMB113 (US$17)
and RMB113 (US$17), respectively.
Amortization
expenses for the next five years after September 30, 2010 are as
follows:
FUWEI
FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts
in thousands except share and per share value)
(UNAUDITED)
NOTE 7 - LEASE PREPAYMENTS
(continued)
|
|
RMB
|
|
|
US$
|
|
1
year after
|
|
|
454
|
|
|
|
68
|
|
2
year after
|
|
|
454
|
|
|
|
68
|
|
3
year after
|
|
|
454
|
|
|
|
68
|
|
4
year after
|
|
|
454
|
|
|
|
68
|
|
5
year after
|
|
|
454
|
|
|
|
68
|
|
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 RMB50,000. In order to grow, Joyinn plans to increase its
registered capital by RMB52,000 to a total of RMB102,000, and plans to accept
Shandong Fuwei as a new shareholder to invest and buy its shares.
According
to the LOI, Shandong Fuwei deposited RMB26,000 (half of the would-be added
register capital of RMB52,000), to Joyinn as the 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 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 RMB5,000 and returned to the Company on June 18, 2008.
On June
30, 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%.
On July
14, 2009, Shandong Fuwei and Joyinn entered into a “Supplementary Agreement of
Letter of Intent of Joyinn Capital Increase and Share Expansion” which extended
the duration of former agreement to two (2) years that is, the expiration date
of the agreement extended to January 14, 2010. On May 23, 2010, the Pledger and
Shandong Fuwei signed a second Supplementary Agreement to the Share Pledging
Agreement which provides that the Share Pledging Agreement will remain effective
until the share transfer documents and all stipulated processes are all
completed. The transaction shall be subject to approval from Board of Directors
and Shareholder Meeting of Joyinn. As of September 30, 2010, the total amount of
the deposit was RMB16,760 (US$2,502).
FUWEI
FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts
in thousands except share and per share value)
(UNAUDITED)
NOTE
9 - SHORT-TERM AND LONG-TERM BANK LOANS
Lender
|
|
Interest
rate
per
annum
|
|
|
September 30, 2010
(Unaudited)
|
|
|
December 31, 2009
(Audited)
|
|
|
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
SHORT-TERM
LOANS
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank
of Communications Co., Ltd.
|
|
|
|
|
|
|
|
|
|
|
|
|
-
June 9, 2009 to June 8, 2010
|
|
|
5.84
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
70,000
|
|
-
June 9, 2009 to June 8, 2010
|
|
|
5.84
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
70,000
|
|
-
June 8, 2010 to June 7, 2011
|
|
|
5.84
|
%
|
|
|
67,000
|
|
|
|
10,003
|
|
|
|
-
|
|
-
June 7, 2010 to June 6, 2011
|
|
|
5.84
|
%
|
|
|
70,000
|
|
|
|
10,451
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank
of Weifang
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
January 13, 2009 to January 12, 2010
|
|
|
0.00
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank
of China
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
March 13, 2008 to March 13, 2009
|
|
|
5.45
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
(80
|
)
|
-
June 4, 2009 to June 4, 2010
|
|
|
1.38
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
3,259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM
LOANS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank
of Weifang
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
December 2, 2008 to December 2, 2011
|
|
|
0.00
|
%
|
|
|
5,000
|
|
|
|
746
|
|
|
|
5,000
|
|
-
January 16, 2009 to January 12, 2012
|
|
|
0.00
|
%
|
|
|
10,000
|
|
|
|
1,493
|
|
|
|
10,000
|
|
-
January 13, 2010 to January 12, 2012
|
|
|
0.00
|
%
|
|
|
10,000
|
|
|
|
1,493
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weifang
Dongfang State-owned Assets Management Co., Ltd.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
October 19, 2009 to October 18, 2017
|
|
|
5.35
|
%
|
|
|
10,000
|
|
|
|
1,493
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
172,000
|
|
|
|
25,679
|
|
|
|
178,179
|
|
Notes:
The
Company has entered into several loan agreements with commercial banks with
terms ranging from one year to eight years to finance its working capital,
R&D investment, construction, and foreign trade. None of the loan agreements
require the Company to comply with financial covenants. The weighted average
interest rate of short-term bank loans outstanding as of September 30, 2010 and
December 31, 2009 was 5.64% per annum.
The
principal amounts of the above short-term loans are repayable at the end of the
loan period, and are secured by property, plant and equipment, lease prepayments
and receivables.
The
Company obtained two short-term loans on June 7, 2010 and June 8, 2010 for
RMB70,000 (US$10,451) and RMB67,000 (US$10,003) from Bank of Communications Co.,
Ltd., respectively, which replaced the two short-term loans from Bank of
Communications Co., Ltd. that matured on June 8, 2010, each in the amount of
RMB70,000. The annual interest rate of 5.31% is determined by the People’s Bank
of China. As of September 30, 2010, the effective interest rate is
5.841%.
In
addition, we entered into three interest free loan agreements with Bank of
Weifang (formerly known as Weifang City Commercial Bank) for the amount of
(i) RMB10,000 (US$1,493), effective on January 13, 2010, with a maturity date of
January 12, 2012; (ii) RMB10,000 (US$1,493), effective on January 16, 2009, with
a maturity date of January 12, 2012; and (iii) RMB 5,000 (US$746), effective on
December 2, 2008, with a maturity date of December 2, 2011. These Loan
agreements are interest-free loans from the local government who entrust the
Bank of Weifang to provide
FUWEI
FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts
in thousands except share and per share value)
(UNAUDITED)
NOTE
9 - SHORT-TERM AND LONG-TERM BANK LOANS (continued)
to
enterprises which is called the industrial development fund loan administrated
by the local government of Shandong Province, for the local high-and–new tech
enterprises, with the purpose of enhancing their independent ability of
innovation and technical research and development so as to support their
development. All proceeded from these loans has been invested in the
construction of the trial production line for the R&D center, the assets of
which secure theses loans.
On June
4, 2009, Shandong Fuwei entered into a one-year foreign currency loan agreement
with Bank of China Weifang Branch for US$477 which was secured by a deposit of
RMB3,259 with an interest rate of 1.38%, 0.2% down float by trading day’s LIBOR
interest, in order to reduce the currency translation cost of Shandong Fuwei.
Proceed of the loan of US$477 was paid off on June 4, 2010.
On
November 20, 2009, we signed a long-term loan agreement of RMB10,000 (US$1,493)
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$500) per year with the remaining principal
balance of RMB3,300 (US$493) due in 2017. The annual interest rate is
5.35%. The loan is guaranteed by Shandong Deqin Investment& Guarantee Co.,
Ltd. and is used for the Company's key projects.
Long-term
bank loans maturity for the next five years after September 30, 2010 are as
follows:
|
|
RMB
|
|
|
US$
|
|
1
year after
|
|
|
5,000
|
|
|
|
746
|
|
2
years after
|
|
|
20,000
|
|
|
|
2986
|
|
3
years after
|
|
|
—
|
|
|
|
—
|
|
4
years after
|
|
|
—
|
|
|
|
—
|
|
5
years after
|
|
|
10,000
|
|
|
|
1,493
|
|
NOTE
10-INCOME TAX
The
Company is registered in Cayman Islands and has operations primarily in two tax
jurisdictions, the PRC and Cayman Islands.
The
provision for income taxes consists of the following for the nine-month periods
ended September 30, 2010 and 2009:
|
|
September 30, 2010
|
|
|
September 30, 2009
|
|
|
|
(RMB)
|
|
|
(US$)
|
|
|
(RMB)
|
|
Cayman
Islands Current Income Tax Expense (Benefit)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
PRC
Current Income Expense (Benefit)
|
|
|
(2,539
|
)
|
|
|
(379
|
)
|
|
|
-
|
|
Deferred
Tax Expense (Benefit)
|
|
|
(1,984
|
)
|
|
|
(296
|
)
|
|
|
3,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Provision for Income Tax
|
|
|
(555
|
)
|
|
|
(83
|
)
|
|
|
3,440
|
|
The
following is a reconciliation of the provision for income taxes at the
respective income tax rate to the income reflected in the Statement of
Operations:
|
|
September
30, 2010
|
|
|
September
30, 2009
|
|
Tax
expense (credit) – Cayman Islands
|
|
|
0
|
%
|
|
|
0
|
%
|
Foreign
income tax – PRC
|
|
|
15
|
%
|
|
|
15
|
%
|
Exempt
from income tax due to tax holidays
|
|
|
(0
|
%)
|
|
|
(0
|
%)
|
Tax
expense at actual rate
|
|
|
15
|
%
|
|
|
15
|
%
|
FUWEI
FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts
in thousands except share and per share value)
(UNAUDITED)
NOTE
10-INCOME TAX (continued)
Cayman Islands
Tax
Under the
current law of Cayman Islands, the Company is not subject to tax on income or
capital gain. In addition, upon payments of dividends by the Company to its
shareholders, no Cayman Islands withholding tax is imposed.
United States
Tax
The
Company’s subsidiary Fuwei Films USA LLC located in South Carolina, which was
established on April 23, 2009, did not record any income tax expenses due to net
losses during the period ended September 30, 2010. The actual tax benefit
differs from the expected tax benefit computed by applying the United States
aggregate corporate tax rate of 39% to loss before income taxes as follows for
the period ended September 30, 2010:
|
|
September
30, 2010
|
|
|
September
30, 2009
|
|
Expected
tax benefit
|
|
|
34
|
%
|
|
|
34
|
%
|
State
income taxes, net of federal benefit
|
|
|
5
|
%
|
|
|
5
|
%
|
Changes
in valuation allowance
|
|
|
(39
|
%)
|
|
|
(39
|
%)
|
Total
|
|
|
0
|
%
|
|
|
0
|
%
|
PRC Tax
Effective
January 1, 2008, the new Enterprise Income Tax (“EIT”) law of the PRC replaced
the existing tax laws for Domestic Enterprises (“DES”) and Foreign Invested
Enterprises (“FIEs”). The new EIT rate of 25% replaced the 33% rate that was
applicable to both DES and FIEs. The two year tax exemption and three year 50%
tax reduction tax holiday for production-oriented FIEs was also eliminated as of
that date. In addition, the PRC has designated a 15% tax rate for encouraged
“high-tech” companies. Shandong Fuwei was redesignated a high-tech company in
December 2008 and has been subject to an income tax rate of 15% pursuant to the
applicable EIT law of the PRC.
Income Tax Rate
Reconciliation
Income
tax benefit reported in the consolidated statements of income differs from the
income tax expense amount computed by applying the PRC income tax rate of 15%
(the statutory tax rate of the Company’s principal subsidiary) for the nine
months ended September 30, 2010 and 2009 for the following reasons:
|
|
September 30, 2010
|
|
|
September
30, 2009
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
Income
before income taxes
|
|
|
15,800
|
|
|
|
2,359
|
|
|
|
22,936
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Computed
“expected” tax expense
|
|
|
2,370
|
|
|
|
354
|
|
|
|
-
|
|
Changes
in deferred tax
|
|
|
(1,984
|
)
|
|
|
(296
|
)
|
|
|
3,440
|
|
Tax
rate differential of other tax jurisdictions
|
|
|
(944
|
)
|
|
|
(141
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual
income tax expenses
|
|
|
(555
|
)
|
|
|
(83
|
)
|
|
|
3,440
|
|
Deferred Income
Taxes
Tax
effects of temporary differences that give rise to significant portions of the
deferred tax assets/(liabilities) as of September 30, 2010 and December 31, 2009
are presented below.
FUWEI
FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts
in thousands except share and per share value)
(UNAUDITED)
NOTE
10-INCOME TAX (continued)
|
|
September
30, 2010
(Unaudited)
|
|
|
December
31, 2009
(Audited)
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
Current
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(165
|
)
|
|
|
(25
|
)
|
|
|
(353
|
)
|
Other
receivables
|
|
|
1,497
|
|
|
|
224
|
|
|
|
914
|
|
Inventory
impairment
|
|
|
636
|
|
|
|
95
|
|
|
|
636
|
|
Advance
to suppliers
|
|
|
600
|
|
|
|
90
|
|
|
|
-
|
|
|
|
|
2,569
|
|
|
|
384
|
|
|
|
1,198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current
|
|
|
|
|
|
|
|
|
|
|
|
|
Property,
plant and equipment, principally due to differences in
depreciation
|
|
|
2,241
|
|
|
|
334
|
|
|
|
2,134
|
|
Construction
in progress, principally due to capitalized interest
|
|
|
161
|
|
|
|
24
|
|
|
|
161
|
|
Lease
prepayments, principally due to differences in charges
Net
operating loss carryforward
|
|
|
(439
|
)
|
|
|
(65
|
)
|
|
|
(431
|
)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,454
|
|
|
|
|
1,963
|
|
|
|
293
|
|
|
|
5,318
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
deferred income tax assets
|
|
|
4,532
|
|
|
|
677
|
|
|
|
6,516
|
|
In
assessing the realizability of deferred tax assets, management considers whether
it is more likely than not that some portion or all of the deferred tax assets
will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning strategies in making this assessment. In order to fully realize
the deferred tax asset, Shandong Fuwei will need to generate future taxable
income of approximately RMB10,122 prior to 2031. Shandong Fuwei was under a tax
concession period from January 28, 2003 to December 31, 2006. The profit before
taxation for Shandong Fuwei for the years ended December 31, 2006, 2007 and 2008
was RMB69,933 (US$8,961), RMB51,941 (US$7,120) and RMB 10,122(US$ 3,082),
respectively.
Uncertainly in Income
Taxes
The
Company recognizes that virtually all tax positions in the PRC are not free of
some degree of uncertainty due to tax law and policy changes by the state.
However, the Company cannot reasonably quantify political risk factors and thus
must depend on guidance issued by current state officials.
Based on
all known facts and circumstances and current tax law, the Company believes that
the total amount of unrecognized tax benefits as of September 30, 2010 is not
material to its results of operations, financial condition or cash flows. The
Company also believes that the total amount of unrecognized tax benefits as of
September 30, 2010, if recognized, would not have a material effect on its
effective tax rate. The Company further believes that there are no tax positions
for which it is reasonably possible, based on current Chinese tax law and
policy, that the unrecognized tax benefits will significantly increase or
decrease over the next 12 months producing, individually or in the aggregate, a
material effect on the Company’s results of operations, financial condition or
cash flows.
FUWEI
FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts
in thousands except share and per share value)
(UNAUDITED)
NOTE
11- EARNINGS PER SHARE
The
Company uses the treasury stock method to compute dilution related to
outstanding stock options. Because the option price exceeded the market price
for common stock as of September 30, 2010, the options were anti-dilutive and
were not included when computing diluted earning per share.
Basic and
diluted earnings per share were RMB1.17 (US$0.18) for the nine-month period
ended September 30, 2010 and basic and diluted net loss per share were RMB1.49
(US$0.22) for the nine-month period ended September 30, 2009.
Basic and
diluted earnings per share were RMB1.15 (US$0.17) and RMB 0.15 (US$0.02) for the
three-month periods ended September 30, 2010 and 2009,
respectively.
NOTE
12 - STOCK OPTION PLAN
On
December 22, 2006, the Company granted 187,500 stock options to Maxim Group LLC
as part of the compensation for the provision of services relating to the
initial public offering, or IPO, of the Company. The stock options are
exercisable at an exercise price equal to US$10.35 per ordinary share and expire
on December 22, 2011. The stock options and ordinary shares underlying the stock
options may not be sold, transferred, assigned, pledged or hypothecated, or be
the subject of any hedging, short sale, derivative, put or call transaction that
would result in the effective disposition thereof by any person for a period of
six months from the effective date. The fair value of each option award is
estimated on the date of grant using the Black-Scholes pricing model based on
the following assumptions:
Fair
value of shares on measurement date
|
|
US$ 8.28 per share
|
|
Expected
volatility
|
|
|
57.26
|
|
Expected
dividends
|
|
|
0.00
|
|
Expected
term (in years)
|
|
|
5
|
|
Risk-free
rate
|
|
|
4.56
|
|
The fair
value of the Company’s shares was estimated based on the IPO price of US$8.28
per share. The expected volatility is estimated by reference to the historical
volatility of comparable companies listed on the Nasdaq Global Market. The
risk-free rate for periods within the contractual life of the options is based
on the U.S. government bond in effect at the time of grant. Expected dividend
yields are based on historical dividends. Changes in these subjective input
assumptions could materially affect the fair value estimates.
As of
September 30, 2010, there was no unrecognized compensation costs related to
unvested stock options.
The
following is a summary of the stock option activity:
|
|
Options
outstanding
|
|
|
Weighted
Average Exercise Price
|
|
|
Aggregate
Intrinsic Value
|
|
Outstanding,
December 31, 2009
|
|
|
187,500
|
|
|
$
|
10.35
|
|
|
|
-
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding,
September 30, 2010
|
|
|
187,500
|
|
|
$
|
10.35
|
|
|
|
|
|
The
following is a summary of the status of options outstanding on September 30,
2010:
FUWEI
FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts
in thousands except share and per share value)
(UNAUDITED)
NOTE
12 - STOCK OPTION PLAN (continued)
Outstanding
Options
|
|
Exercisable
Options
|
Exercise
Price
|
|
Number
|
Average
Remaining
Contractual
Life
|
|
Average
Exercise Price
|
|
Number
|
Average
Exercise Price
|
$
|
10.35
|
|
187,500
|
1.25
|
|
$
|
10.35
|
|
187,500
|
$
|
10.35
|
NOTE
13 - CONTINGENCIES
Contingencies
DMT
Arbitration
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 that proceeding, DMT sought
monetary damages against Shandong Neo-Luck for approximately US$1,250 plus
interest relating to a claim of partial non-payment for the DMT production line,
which Shandong Fuwei acquired from Beijing Baorui in 2005. In early 2007, the
ICC determined that despite arguments made to the ICC that Shandong Fuwei should
not be a party to the proceeding, the arbitration should proceed with Shandong
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, in order
to support a resolution of the pending dispute and to achieve resolution of
certain outstanding service and spare part issues.
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 September 30, 2010, Shandong Fuwei has
paid US$135 and US$45 remained unpaid.
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, 2008, 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 September 30, 2010, Neoluck
Group has paid US$320 and still has US$130 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 Shandong 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 that in such event Fuwei might have sustainable claims for damages
against the Neoluck Group for its failure to perform its obligations under the
Settlement Agreement.
FUWEI
FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts
in thousands except share and per share value)
(UNAUDITED)
NOTE
13 - CONTINGENCIES (continued)
On
January 18, 2010 the Company was advised by the Secretary of The International
Court of Arbitration of International Chamber of Commerce (ICC) the arbitration
was withdrawn due to DMT’s failure to pay the balance of the advance on
costs.
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 persons who purchased 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.
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 persons who purchased the
Company’s stock pursuant or traceable to the Registration Statement and
Prospectus issued in connection with the Company’s IPO, during the period from
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.
On 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.
On
November 3, 2008, Plaintiffs filed proofs of service with the Court, indicating
that Messrs. Yin, Wang, and Zhou had been 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.
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.
By the
Court’s Memorandum and Order dated July 10, 2009, the motions to dismiss of the
Company, Messrs. He and Stulga, and the Underwriter Defendants were granted in
part and denied in part. In ruling on the motion to dismiss, the Court was
required to assume that the facts alleged by the plaintiffs are true and to draw
all reasonable inferences in the plaintiffs’ favor. Applying that
standard, the motions to dismiss of the defendants were granted in part and
denied in
part by
the court. The Court dismissed plaintiffs’ claims to the extent they were based
upon Fuwei’s alleged failure to disclose the DMT arbitration
proceeding. The Court also dismissed certain of plaintiffs’ claims to
the extent they were brought on behalf of shareholders who did not purchase
their shares directly in the IPO.
FUWEI
FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts
in thousands except share and per share value)
(UNAUDITED)
NOTE
13 - CONTINGENCIES (continued)
The Court
sustained plaintiffs’ remaining claims. However, the Court noted that defendants
may be able to assert affirmative defenses provided by the federal securities
laws in a motion for summary judgment, which could resolve the case before
trial.
On
September 9, 2009, the Company and Messrs. He and Stulga filed their answer to
the Amended Complaint. On October 2, 2009, the Court entered a case management
plan and scheduling order, which set deadlines relating to pre-trial discovery,
mediation, and dispositive motions. Discovery thereafter proceeded.
On March
26, 2010, Fuwei, Messrs. He and Stulga, the Underwriter Defendants, and
Plaintiffs, through their respective attorneys, engaged in a mediation aimed at
resolving the litigation. On June 24, 2010, the parties reached a settlement in
principle. Subject to the Court’s approval, Plaintiffs have agreed to accept
US$2.15 million in full and final settlement of all claims they have or may have
against the Company, Messrs. He and Stulga, the Underwriter Defendants, and
Messrs. Yin, Wang, and Zhou. Fuwei has agreed to contribute US$1.0
million towards the settlement. The settlement papers were submitted to the
Court for approval on September 9, 2010.
The
Company’s management continues to believe that the plaintiffs’ allegations are
without merit. However, in recognition of the attendant risks and costs of
continued litigation, and the benefits of resolving the same, the Board of
Directors has unanimously consented to settle this case. As of
September 30, 2010, the Company accrued US$1.0 million liability in connection
with this litigation except for the defense expenses.
NOTE
14 – OTHER EVENTS
Fuwei
Shandong and Dornier had equipment an equipmenet purchase contract for the third
production line on January 2007. Fuwei Shandong made the prepayment to Dornier
for 3.1 million Euros, due to the fund shortage of Fuwei Shandong at that
time, Dornier terminated the initial contract with Fuwei Shandong. The two
parties have been in discussion on a renewed equipment purchase contract. The
prepayment made will be considered in the renewed contract together with
additional cost of 4.2 million Euros incurred by Dornier, which includes
financial cost, storage cost, and equipment modification cost. As of September
30, 2010, we have not entered into the renewed contract because of pending
provisions on payment.
In
November 2010, the Vice president of Fuwei Shandong, Mr. Hanyong Li resigned
from his position for personal reasons. He joined Fuwei since January
2008 and was responsible for research and development department.
NOTE
15 - MAJOR CUSTOMERS AND VENDORS
There
were no major customers who accounted over 10% of the total net revenue for the
nine-month periods ended September 30, 2010 and 2009.
One
vendor provided approximately 50.0% of the Company’s raw materials for the nine
months ended September 30, 2010. The Company had RMB7,723 (US$1,153) advance to
the vendor as of September 30, 2010. Two vendors provided approximately 60.1% of
the Company’s raw materials for the nine months ended September 30, 2009 with
each vendor accounting for about 47.7%, and 12.4% respectively.
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
References
to "dollars" and "US$" 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 nine-month period ended September 30, 2010 compared to
September 30, 2009
Since the
second quarter of 2010, the demand for BOPET films on domestic and foreign
markets has gradually increased, especially on the foreign markets. In the third
quarter, the demand for BOPET films in domestic market continued to expand which
resulted in significant increasing of the sales prices especially the sales
price of the commodity films. Although there has been intense competition on the
domestic BOPET film market, we still obtained sufficient orders, our revenues
sustained gowth and our gross profit was significantly higher than the previous
year.
We are
committed to improving our operating efficiency and increasing our
profitability, by optimizing our products structure, strictly controlling the
production and quality as well as cost control which resulted in positive effect
to the increase of our operating performance. Meanwhile we maintained a
comparative lower product cost during the first nine months of
2010.
However,
with the increase in markets demand, we are challenged with more competitors
whose capacities are enhanced with new production lines as well as new entrants
to the industry, which may lead to unprecedent supply expansion with increasing
demand. We predict that in the near future more severe competition is
forthcoming due to much more supply than demand on the market. These factors
will have an adverse effect on our sales and operation. Additionally, RMB
appreciates continuously against US dollar; some countries such as United States
of American are currently resorting to trade protection against Chinese
manufacturers, using reasons such as anti-dumping investigation, imposing
anti-dumping duties, which may adversely affect our export.
The table
below sets forth certain line items from our Statement of Income as a percentage
of revenue:
|
|
Nine-Month
Period Ended
September
30, 2010
|
|
|
Nine-Month
Period Ended
September
30, 2009
|
|
|
|
(as
% of Revenue)
|
|
Gross
profit
|
|
|
22.2
|
|
|
|
6.0
|
|
Operating
expenses
|
|
|
(15.4
|
)
|
|
|
(13.0
|
)
|
Operating
income/(loss)
|
|
|
6.9
|
|
|
|
(7.0
|
)
|
Other
income/(expense)
|
|
|
(2.1
|
)
|
|
|
(2.7
|
)
|
Income
tax benefit/(expense)
|
|
|
(0.2
|
)
|
|
|
1.5
|
|
Net
income/(loss)
|
|
|
4.6
|
|
|
|
(8.3
|
)
|
Revenue
The
Company’s revenue is primarily derived from the manufacture and sale of plastic
films.
Net sales
during the nine-month period ended September 30, 2010 were RMB327.9 million
(US$49.0 million), compared to RMB 236.7 million (US$34.6 million) during the
same period in 2009, representing a 38.6% increase.
The sales
of specialty films during the nine-month period ended September 30, 2010 were
RMB53.3 million (US$8.0 million), reflected 16.2% of total net sales as
compared to 9.2% in the same period of 2009, an increase of 144.2% compared to
the same period last year. The increased sales of specialty films were largely
attributed to the increase in demand for luxurious packagings.
The
following is a breakdown of commodity and specialty film sales (amounts in
thousands):
|
|
Nine-Month
Period Ended
September
30, 2010
|
|
|
%
of Total
|
|
|
Nine-Month
Period Ended
September
30, 2009
|
|
|
%
of Total
|
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
RMB
|
|
|
|
|
Printing
film
|
|
|
46,929
|
|
|
|
7,006
|
|
|
|
14.3
|
%
|
|
|
26,924
|
|
|
|
11.4
|
%
|
Stamping
film
|
|
|
190,217
|
|
|
|
28,399
|
|
|
|
58.0
|
%
|
|
|
121,863
|
|
|
|
51.5
|
%
|
Metallization
film
|
|
|
21,482
|
|
|
|
3,207
|
|
|
|
6.6
|
%
|
|
|
28,508
|
|
|
|
12.0
|
%
|
Specialty
films
|
|
|
53,269
|
|
|
|
7,953
|
|
|
|
16.2
|
%
|
|
|
21,818
|
|
|
|
9.2
|
%
|
Base
film for other application
|
|
|
16,051
|
|
|
|
2,396
|
|
|
|
4.9
|
%
|
|
|
37,578
|
|
|
|
15.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
327,948
|
|
|
|
48,961
|
|
|
|
100.0
|
%
|
|
|
236,691
|
|
|
|
100.0
|
%
|
Overseas
sales during the nine months ended September 30, 2010 were RMB67.6 million
(US$10.1 million), which accounted for 20.6% of our total net revenues, as
compared with RMB 24.5 million (US$3.6 million) and 10.3% in the same period in
2009, which is 176.4% higher than the same period last year. The increase in
export sales was mainly due to the increase in the overseas demand, especially
that from Europe, Korea, Southeast Asia regions and North America, and the
increase in sales prices.
The
following is a breakdown of PRC domestic and overseas sales (amounts in
thousands):
|
|
Nine-Month
Period Ended
September
30, 2010
|
|
|
% of Total
|
|
|
Nine-Month
Period Ended
September
30, 2009
|
|
|
% of Total
|
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
RMB
|
|
|
|
|
Sales
in China
|
|
|
260,348
|
|
|
|
38,869
|
|
|
|
79.4
|
%
|
|
|
212,229
|
|
|
|
89.7
|
%
|
Sales
in other countries
|
|
|
67,600
|
|
|
|
10,092
|
|
|
|
20.6
|
%
|
|
|
24,461
|
|
|
|
10.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
327,948
|
|
|
|
48,961
|
|
|
|
100.0
|
%
|
|
|
236,691
|
|
|
|
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:
|
|
Nine-
Month Period Ended
September
30, 2010
|
|
|
Nine-
Month Period Ended
September
30, 2009
|
|
|
|
%
of total
|
|
|
%
of total
|
|
Materials
costs
|
|
|
75.4
|
%
|
|
|
72.7
|
%
|
Factory
overhead
|
|
|
12.0
|
%
|
|
|
13.0
|
%
|
Power
|
|
|
8.1
|
%
|
|
|
9.5
|
%
|
Packaging
materials
|
|
|
3.2
|
%
|
|
|
3.0
|
%
|
Direct
labor
|
|
|
1.3
|
%
|
|
|
1.8
|
%
|
Cost of
goods sold during the nine months ended September 30, 2010 totaled RMB255.0
million (US$38.1 million ) as compared to RMB 222.5 million (US$32.6 million)
for the same period in the prior year. This was 14.6% higher than the same
period in 2009, mainly due to the increase in the purchase price of the raw
materials and increased sales volume in the first nine months of 2010 compared
to the same period in 2009.
Gross
Profit
Our gross
profit was RMB73.0 million (US$10.7 million) for the nine months ended September
30, 2010, representing a gross margin of 22.2%, as compared to a gross margin of
6.0% from the same period in 2009, an increase of 16.2%. This was mainly due to
an increase in the sales price per unit during the first nine months of 2010
compared with the same period in 2009.
Operating
expenses
Operating
expenses for the nine months ended September 30, 2010 were RMB50.4 million
(US$7.5 million), RMB30.7 million (US$4.5 million) or 63.8% higher than the same
period in 2009. This increase was mainly due to accrued compensation expense for
the class action litigation and related legal fees, and accounts receivables
allowances for doubtful accounts receivables and other receivables.
Interest
Expense
Interest
expense totaled RMB 6.6 million (US$1.0 million) during the nine months ended
September 30, 2010, 6.7% higher than the same period of 2009. The increase was
mainly due to the increased bank loan for RMB7.0 million (US$ 1.0
million).
Other
Income (Expense)
Our other
expense during the period ended September 30, 2010 amounted to RMB6.8
million (US$1.0 million), it increased RMB0.4 million compared to the
corresponding period of 2009, it’s mainly due to the increase of other
expenses.
Income
Tax Benefit/(expense)
During
the nine months ended September 30, 2010, the Company recorded an income tax
expense of RMB0.6 million (US$ 0.1 million) compared to a recorded income tax
benefit of RMB3.4 million (US$0.5 million) during the same period in 2009. This
increase was due to the increased operating income during the same period ended
September 30, 2010.
Net
Income/(Loss)
Net
income during the first nine months of 2010 was RMB15.2 million (US$2.3 million)
compared to net loss of RMB19.5 million (US$2.9 million) during the same period
in 2009, representing an increase of RMB34.7 million (US$5.2 million) from the
same period in 2009. The increase was mainly due to the increased revenue and
gross margin.
Results
of operations for the three-month period ended September 30, 2010 compared to
September 30, 2009
The table
below sets forth certain line items from our Statement of Income as a percentage
of revenue:
|
|
Three-Month
Period Ended
September
30, 2010
|
|
|
Three-Month
Period Ended
September
30, 2009
|
|
|
|
(as
% of Revenue)
|
|
Gross
profit
|
|
|
31.4
|
|
|
|
8.8
|
|
Operating
expenses
|
|
|
(17.3
|
)
|
|
|
(7.9
|
)
|
Operating
income/(loss)
|
|
|
14.0
|
|
|
|
0.9
|
|
Other
income/(expense)
|
|
|
(2.0
|
)
|
|
|
1.6
|
|
Income
tax benefit/(expense)
|
|
|
(0.4
|
)
|
|
|
(0.3
|
)
|
Net
income/(loss)
|
|
|
11.6
|
|
|
|
2.3
|
|
Revenue
Net sales
during the third quarter ended September 30, 2010 were RMB129.2 million (US$19.3
million), compared to RMB 89.6 million (US$13.1 million) during the same period
in 2009, representing a 44.2% increase.
The sales
of specialty films during the third quarter ended September 30, 2010 were
RMB28.5 million (US$4.3 million), reflected 22.1% of total net sales as compared
to 12.4% in the same period of 2009, an increase of 155.5%, compared to the same
period last year. The increased sales of specialty films were largely attributed
to the increase in demand for luxurious packagings.
The
following is a breakdown of commodity and specialty film sales (amounts in
thousands):
|
|
Three-Month
Period Ended
September
30, 2010
|
|
|
%
of Total
|
|
|
Three-Month
Period Ended
September
30, 2009
|
|
|
%
of Total
|
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
RMB
|
|
|
|
|
Printing
film
|
|
|
18,842
|
|
|
|
2,813
|
|
|
|
14.6
|
%
|
|
|
10,292
|
|
|
|
11.5
|
%
|
Stamping
film
|
|
|
67,636
|
|
|
|
10,098
|
|
|
|
52.4
|
%
|
|
|
53,441
|
|
|
|
59.6
|
%
|
Metallization
film
|
|
|
8,799
|
|
|
|
1,314
|
|
|
|
6.8
|
%
|
|
|
8,105
|
|
|
|
9.0
|
%
|
Specialty
film
|
|
|
28,489
|
|
|
|
4,253
|
|
|
|
22.1
|
%
|
|
|
11,149
|
|
|
|
12.4
|
%
|
Base
film for other application
|
|
|
5,408
|
|
|
|
807
|
|
|
|
4.1
|
%
|
|
|
6,616
|
|
|
|
7.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
129,174
|
|
|
|
19,285
|
|
|
|
100.0
|
%
|
|
|
89,603
|
|
|
|
100.0
|
%
|
Overseas
sales during the third quarter ended September 30, 2010 were RMB 30.9 million
(US$4.6 million), which accounted for 23.9% of our total net revenues, as
compared with RMB 6.0 million (US$0.9 million) and 6.7% in the same period in
2009, which is 411.8% higher than the same period last year. The increase in
oveseas sales was mainly due to the recovery of overseas demand, especially the
increase of demand in Europe, North America, Korea, Japan and Southeast Asia
regions and North America.
The
following is a breakdown of PRC domestic and overseas sales (amounts in
thousands):
|
|
Three-Month
Period Ended
September
30, 2010
|
|
|
% of Total
|
|
|
Three-Month
Period Ended
September
30, 2009
|
|
|
% of Total
|
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
RMB
|
|
|
|
|
Sales
in China
|
|
|
98,264
|
|
|
|
14,670
|
|
|
|
76.1
|
%
|
|
|
83,564
|
|
|
|
93.3
|
%
|
Sales
in other countries
|
|
|
30,910
|
|
|
|
4,615
|
|
|
|
23.9
|
%
|
|
|
6,039
|
|
|
|
6.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
129,174
|
|
|
|
19,285
|
|
|
|
100.0
|
%
|
|
|
89,603
|
|
|
|
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:
|
|
Three-Month
Period Ended
September
30,2010
|
|
|
Three-Month
Period Ended
September
30, 2009
|
|
|
|
%
of total
|
|
|
%
of total
|
|
Materials
costs
|
|
|
72.8
|
%
|
|
|
74.9
|
%
|
Factory
overhead
|
|
|
13.5
|
%
|
|
|
12.5
|
%
|
Power
|
|
|
8.8
|
%
|
|
|
8.3
|
%
|
Packaging
materials
|
|
|
3.4
|
%
|
|
|
2.9
|
%
|
Direct
labor
|
|
|
1.5
|
%
|
|
|
1.4
|
%
|
Cost of
goods sold during the third quarter ended September 30, 2010 was RMB88.7 million
(US$13.2 million) as compared to RMB81.7 million (US$12.0 million) for the same
period in the prior year. This was 8.5% higher than the same period in 2009,
mainly due to the increased sales volume and the increase of purchase prices of
raw materials in the third quarter ended September 30, 2010 compared to the same
period in 2009.
Gross
Profit
Our gross
profit was RMB40.5 million (US$6.0 million) for the third quarter ended
September 30, 2010, representing a gross margin of 31.4%, as compared to a gross
margin of 8.8% from the same period in 2009, an increase of 22.6%. This was
mainly due to a significant increase in average sales price of our products
during the third quarter ended September 30, 2010 compared with the same period
in 2009.
Operating
expenses
Operating
expenses for the third quarter ended September 30, 2010 were RMB22.4 million
(US$3.3 million), RMB15.3 million (US$2.3 million) or 218.0% higher than the
same period in 2009. This increase was mainly due to increased delivery cost of
overseas sales, allowances for doubtful account receivable and other
receivable.
Interest
Expense
Interest
expense totaled RMB2.3 million (US$0.3 million) during the third quarter ended
of 2010, 11.8% higher than the same period of 2009. The increase is mainly due
to the increased bank loan for RMB 7.0 million (US$ 1.0 million).
Other
Income (Expense)
Other
expenses during the third quarter ended September 30, 2010 were RMB2.5 million
(US$0.4 million), RMB4.0 million (US$0.6 million) higher than the same period in
2009, primarily due to the increase in other expenses.
Income
Tax Benefit/(expense)
During
the third quarter ended September 30, 2010, the Company recorded an income tax
expense of RMB0.6 million (US$0.1 million) compared to RMB0.3 million (US$0.04
million) in the same period in 2009. This increase was mainly due to higher
operating income in the third quarter of 2010 than the same period in
2009.
Net
Income/(Loss)
Net
income during the third quarter ended September 30, 2010 was RMB15.0 million
(US$2.2 million) compared to net income of RMB2.0 million (US$0.3 million)
during the same period in 2009, representing an increase of RMB13.0 million
(
US$1.9
million
)
from
the same period in 2009. The increase was mainly due to the increase of revenue
and gross margin.
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 2009
to September 30, 2010, our capital expenditures have been primarily financed
through short-term borrowings from financial institutions. The interest rates of
short-term borrowings from financial institutions during the periods from 2009
to September 30, 2010 ranged from 0% to 5.8%.
We
obtained two new short-term loans on June 7, 2010 and June 8, 2010, for
RMB70,000 (US$10,451) maturing on June 6, 2011, and for RMB67,000 (US$10,003)
maturing on June 7, 2011, respectively. The annual interest rate is 5.31%
that determined by the People’s Bank of China. As of September 30, 2010, the
effect interest rate is 5.84%.
We
entered into three interests free Loan Contracts with Bank of
Weifang (formerly known as Weifang City Commercial Bank) for the amount of
(i) RMB10,000 (US$1,493), effective on January 13, 2010, with a maturity date of
January 12, 2012; (ii) RMB10, 000 (US$1,493), effective on January 16, 2009,
with a maturity date of January 12, 2012; and (iii) RMB5,000 (US$746), effective
on December 2, 2008, with a maturity date of December 2, 2011.
On June
4, 2009, Shandong Fuwei entered into a one-year foreign currency loan agreement
with Bank of China Weifang Branch for US$477 which is secured by a deposit of
RMB3,259 with an interest rate of 1.38%, 0.2% down float by trading day’s LIBOR
interest, in order to reduce the currency translation cost of Shandong Fuwei.
Proceed of the loan of US$477 was paid off on June 4, 2010.
On
November 20, 2009, we signed a long-term loan agreement of RMB10,000 (US$1,493)
with Weifang Dongfang State-owned Assets Management Co., Ltd., with 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
RMB3,350 (US$500) per year with the remaining principal balance of RMB3,300
(US$493) paid in 2017. The annual interest rate is 5.35% which is a 5-year
interest rate announced by the People’s Bank of China. The loan is guaranteed by
Shandong Deqin Investment & Guarantee Co., Ltd. and is used for our key
projects.
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 nine months ended September 30,
2010 were RMB67.8 million (US$10.2 million) compared to net cash flows provided
by operating activities of RMB57.0 million (US$8.5 million) for the nine months
ended September 30, 2009, which is an increase of RMB62.4 million (US$9.4
million). This increase in cash flows from operating activities was attributable
primarily to the increased earnings, decrease of accounts receivables and
inventories, increase of advance payments.
Working
Capital
As of
September 30, 2010 and December 31, 2009, the Company had negative working
capital of RMB18.4 million (US$2.7 million) and RMB79.4 million (US$11.6
million), respectively. Working capital increased RMB61.0 million (US$9.0
million), or 76.8% compared to the same period in the prior year. Although we
have negative working capital, the short-term current liability is mainly the
short-term bank loans, which amounted to RMB137.0 million (US$20.5
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 for
financing in the expanded business.
Contractual
Obligations
The
following table is a summary of the Company's contractual obligations as of
September 30, 2010 (in thousands RMB):
|
|
Payments
due by period
|
|
|
|
Total
|
|
|
Less
than
1
|
|
|
1-3
|
|
|
3-5
|
|
|
More
than
5
|
|
Contractual
obligations
|
|
|
|
|
Year
|
|
|
Years
|
|
|
Years
|
|
|
Years
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental
obligation
|
|
|
191
|
|
|
|
191
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Purchase
obligations
|
|
|
148,267
|
|
|
|
148,267
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
148,458
|
|
|
|
148,458
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exhibit
Index
Exhibit
No.
|
|
Description
|
99.1
|
|
Press
Release dated November 15, 2010.
|
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:
|
|
|
|
|
Name:
Xiaoan He
|
|
|
|
Title:
Chairman, Chief Executive Officer
|
|
|
|
|
|
Dated:
November 16, 2010
Fuwei
Films Announces Its Unaudited Financial Results for the Third Quarter of
2010
-
|
Teleconference
to be Held on November 16, 2010 at 8:00 a.m. EST
–
|
BEIJING, November 15, 2010
–
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 third quarter
and first nine months of 2010.
Highlights
§
|
Net
sales for the third quarter were RMB 129.2 million (US$19.3 million),
compared with RMB 89.6 million in the same period of
2009;
|
§
|
Gross
profit for the third quarter was RMB 40.5 million (US$6.0 million),
compared with RMB 7.9 million in the same period of
2009;
|
§
|
Net
sales during the first nine months were RMB 327.9 million (US$49.0
million), compared with RMB 236.7 million in the same period of
2009;
|
§
|
Net
income for the first nine months was RMB 15.3 million (US$2.3 million),
compared with a net loss of RMB 19.5 million in the same nine-month
period of 2009;
|
§
|
Basic
and diluted earnings per share for the first nine months were RMB 1.17
(US$0.18), compared with basic and diluted net loss per share of RMB 1.49
in the same period of 2009;
|
§
|
Sales
of Specialty films for the first nine months were RMB 53.3 million (US$8.0
million) compared to RMB 21.8 million in the same period of
2009;
|
§
|
Overseas
sales during the first nine months were RMB 67.6 million (US$10.1 million)
compared to RMB 24.5 million in the same period of
2009.
|
Mr.
Xiaoan He, Chairman and CEO of Fuwei Films, said, “We are very pleased with our
third quarter and nine months financial results. The demand for BOPET films in
domestic and foreign markets has continued to increase, especially in the
foreign markets. In the third quarter we also saw the demand in the domestic
market continued to expand which resulted in the significant increase of sales
prices especially in the commodity films area. In spite of rising competition,
we saw significant revenue growth this quarter and our gross profit was
significantly higher than the previous year.”
Third Quarter of 2010
Results
Net sales
during the third quarter ended September 30, 2010 were RMB 129.2 million
(US$19.3 million), compared to RMB 89.6 million (US$13.1 million), during the
same period in 2009, representing a 44.2% increase.
The sales
of specialty films during the third quarter ended September 30, 2010 were
RMB28.5 million (US$4.3 million), reflecting 22.1% of total net sales as
compared to 12.4% in the same period of 2009. The increase was largely
attributable to the increase in demand for packaging for luxury
goods.
The
following is a breakdown of commodity and specialty film sales for the
three-month periods ended September 30, 2010 and 2009 (amounts in
thousands):
|
|
Three-Month
Period Ended
September
30, 2010
|
|
|
%
of Total
|
|
|
Three-Month
Period Ended
September
30, 2009
|
|
|
%
of Total
|
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
RMB
|
|
|
|
|
Printing
film
|
|
|
18,842
|
|
|
|
2,813
|
|
|
|
14.6
|
%
|
|
|
10,292
|
|
|
|
11.5
|
%
|
Stamping
film
|
|
|
67,636
|
|
|
|
10,098
|
|
|
|
52.4
|
%
|
|
|
53,441
|
|
|
|
59.6
|
%
|
Metallization
film
|
|
|
8,799
|
|
|
|
1,314
|
|
|
|
6.8
|
%
|
|
|
8,105
|
|
|
|
9.0
|
%
|
Specialty
film
|
|
|
28,489
|
|
|
|
4,253
|
|
|
|
22.1
|
%
|
|
|
11,149
|
|
|
|
12.4
|
%
|
Base
film for other application
|
|
|
5,408
|
|
|
|
807
|
|
|
|
4.2
|
%
|
|
|
6,616
|
|
|
|
7.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
129,174
|
|
|
|
19,285
|
|
|
|
100.0
|
%
|
|
|
89,603
|
|
|
|
100.0
|
%
|
Overseas
sales during the third quarter ended September 30, 2010 were RMB30.9 million
(US$4.6 million), which accounted for 23.9% of our total net revenues, as
compared with RMB 6.0 million (US$0.9 million) and 6.7% in the same period in
2009, which is 411.8% higher than the same period last year. The increase in
overseas sales was mainly due to the recovery of overseas demand, especially the
increase of demand in Europe, North America, Korea, Japan and Southeast
Asia.
The
following is a breakdown of domestic and overseas sales for the three-month
periods ended September 30, 2010 and 2009 (amounts in thousands):
|
|
|
Three-Month
Period Ended
September
30, 2010
|
|
|
|
|
|
|
|
Three-Month
Period Ended
September
30, 2009
|
|
|
|
%
of Total
|
|
Sales
in China
|
|
|
98,264
|
|
|
|
14,670
|
|
|
|
76.1
|
%
|
|
|
83,564
|
|
|
|
93.3
|
%
|
Sales
in other countries
|
|
|
30,910
|
|
|
|
4,615
|
|
|
|
23.9
|
%
|
|
|
6,039
|
|
|
|
6.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
129,174
|
|
|
|
19,285
|
|
|
|
100.0
|
%
|
|
|
89,603
|
|
|
|
100.0
|
%
|
Gross
profit was RMB40.5 million (US$6.0 million) for the third quarter ended
September 30, 2010, representing a gross margin of 31.4%, as compared to a gross
margin of 8.8% from the same period in 2009. This was mainly due to a
significant increase in the average sales price of our products during the third
quarter compared with the same period in 2009.
Operating
expenses for the third quarter ended September 30, 2010 were RMB 22.4 million
(US$3.3 million), which was RMB 15.3 million (US$2.3 million) or 218.0% higher
than the same period in 2009. This increase was mainly due to increased delivery
costs of overseas sales, allowances for doubtful account receivables and other
receivables.
Net
income during the third quarter ended September 30, 2010 was RMB 15.0 million
(US$2.2 million) compared to net income of RMB2.0 million (US$0.3 million)
during the same period in 2009, representing an increase in net income of RMB
13.0 million
(
US$1.9
million
)
from
the same period in 2009. The increase was mainly due to the increase of revenue
and gross margin.
Net cash
flows provided by operating activities for the nine months ended September 30,
2010 was RMB 67.8 million (US$ 10.2 million) compared to net cash flows provided
by operating activities of RMB10.7 (US$1.6 million) for the nine months ended
September 30, 2009, which is an increase of RMB 57.0 million (US$8.5 million).
This increase in cash flows from operating activities was attributable primarily
to the increased earnings, decrease of accounts receivables and inventories, and
increase of advance payments.
Total
shareholders’ equity was RMB526.9 million (US$78.7 million) as of September 30,
2010, compared with RMB 511.6 million as of December 31, 2009.
As of
September 30, 2010, the Company had 13,062,500 basic and diluted total ordinary
shares outstanding.
Conference
Call Information
The
Company will host a teleconference on Tuesday, November 16, 2010, at 8:00 a.m.
EDT / 9:00 p.m. Beijing time to discuss the quarterly 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: 360959. The replay will be
available until December 16, 2010, 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 Films' BOPET 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 is 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 both the short and long-term effects of the global
financial crisis on the Company and the BOPET film industry; 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.
Maggie Huang
Investor
Relations Manager
Phone:
+86-10-6852-2612
Email:
fuweiIR@fuweifilms.com
In the
U.S.:
Ms.
Leslie Wolf-Creutzfeldt
Investor
Relations
Grayling
Phone:
+1-646-284-9472
Email:
leslie.wolf-creutzfeldt@us.grayling.com
FUWEI
FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
AS
OF SEPTEMBER 30, 2010 AND DECEMBER 31, 2009
(amounts
in thousands except share and per share value)
|
Notes
|
September
30, 2010
|
|
December
31, 2009
|
|
(Unaudited)
|
|
|
ASSETS
|
RMB
|
US$
|
|
RMB
|
Current
assets
|
|
|
|
|
|
Cash
and cash equivalents
|
|
93,362
|
13,939
|
|
26,804
|
Restricted
cash
|
|
8,583
|
1,281
|
|
12,541
|
Accounts
and bills receivable, net
|
3
|
42,659
|
6,369
|
|
28,785
|
Inventories
|
4
|
32,028
|
4,782
|
|
45,039
|
Advance
to suppliers
|
|
16,191
|
2,417
|
|
3,956
|
Prepayments
and other receivables
|
1,759
|
263
|
|
957
|
Deferred
tax assets - current
|
|
2,569
|
384
|
|
1,198
|
Total
current assets
|
|
197,152
|
29,435
|
|
119,282
|
|
|
|
|
|
|
Plant,
properties and equipment, net
|
5
|
294,372
|
43,949
|
|
318,600
|
Construction
in progress
|
6
|
235,955
|
35,227
|
|
237,118
|
Lease
prepayments, net
|
7
|
21,155
|
3,158
|
|
21,548
|
Advanced
to suppliers - Long Term
|
|
-
|
-
|
|
2,367
|
Goodwill
|
|
10,276
|
1,534
|
|
10,276
|
Deposit
|
8
|
16,760
|
2,502
|
|
21,000
|
Deferred
tax assets - non current
|
|
1,963
|
293
|
|
5,318
|
|
|
|
|
|
|
Total
assets
|
|
777,633
|
116,098
|
|
735,509
|
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
Current
liabilities
|
|
|
|
|
|
Short-term
borrowings
|
9
|
137,000
|
20,454
|
|
153,179
|
Accounts
payables
|
|
22,229
|
3,319
|
|
25,898
|
Advance
from customers
|
|
42,251
|
6,308
|
|
12,608
|
Accrued
expenses and other payables
|
14,056
|
2,098
|
|
6,981
|
|
|
215,536
|
32,179
|
|
198,666
|
Long-term
loan
|
9
|
35,000
|
5,225
|
|
25,000
|
|
|
|
|
|
|
Total
liabilities
|
|
250,536
|
37,404
|
|
223,666
|
|
|
|
|
|
|
Commitments
and contingencies
|
13
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
Shareholders’
equity
|
|
|
|
|
|
Registered
capital(of US$0.129752 par value; 20,000,000 shares authorized; 13,062,500
issued and outstanding)
|
|
13,322
|
1,989
|
|
13,323
|
Additional
paid-in capital
|
|
311,896
|
46,565
|
|
311,907
|
Statutory
reserve
|
|
29,338
|
4,380
|
|
29,338
|
Retained
earnings
|
|
171,251
|
25,567
|
|
156,006
|
Cumulative
translation adjustment
|
|
1,109
|
166
|
|
993
|
Total
shareholders’ equity
|
|
526,916
|
78,667
|
|
511,567
|
Non-controlling
interest
|
|
182
|
27
|
|
276
|
Total
equity
|
|
527,098
|
78,694
|
|
511,843
|
Total
liabilities and equity
|
|
777,633
|
116,098
|
|
735,509
|
FUWEI
FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
FOR THE THREE AND NINE-MONTH PERIODS
ENDED SEPTEMBER
30, 2010
AND 2009
(amounts
in thousands except share and per share value)
(UNAUDITED)
|
|
The
Three Months
|
|
The
Nine Months
|
|
|
Period
Ended September 30,2010
|
|
Period
Ended September 30,2009
|
|
Period
Ended September 30,2010
|
|
Period
Ended September 30,2009
|
|
|
RMB
|
US$
|
|
RMB
|
|
RMB
|
US$
|
|
RMB
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
129,174
|
19,285
|
|
89,603
|
|
327,948
|
48,961
|
|
236,691
|
Cost
of sales
|
|
(88,658)
|
(13,236)
|
|
(81,749)
|
|
(254,996)
|
(38,070)
|
|
(220,490)
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
40,515
|
6,049
|
|
7,854
|
|
72,952
|
10,891
|
|
14,201
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
Selling
expenses
|
|
(4,389)
|
(655)
|
|
(2,868)
|
|
(11,944)
|
(1,783)
|
|
(10,499)
|
Administrative
expenses
|
|
(17,992)
|
(2,686)
|
|
(4,170)
|
|
(38,417)
|
(5,736)
|
|
(20,241)
|
Total
operating expenses
|
|
(22,381)
|
(3,341)
|
|
(7,038)
|
|
(50,361)
|
(7,519
|
|
(30,740)
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income/(loss)
|
|
18,143
|
2,707
|
|
816
|
|
22,591
|
3,373
|
|
(16,539)
|
|
|
|
|
|
|
|
|
|
|
|
Other
income/(expense)
|
|
|
|
|
|
|
|
|
|
|
-
Interest income
|
|
42
|
6
|
|
5
|
|
214
|
32
|
|
148
|
-
Interest expense
|
|
(2,337)
|
(349)
|
|
(2,091)
|
|
(6,624)
|
(989)
|
|
(6,210)
|
-
Others income, net
|
|
(245)
|
(37)
|
|
3,547
|
|
(381)
|
(57)
|
|
(335)
|
|
|
|
|
|
|
|
|
|
|
|
Total
other income/(expense)
|
|
(2,540)
|
(379)
|
|
1,461
|
|
(6,791)
|
(1,014)
|
|
(6,398)
|
|
|
|
|
|
|
|
|
|
|
|
Income
before income tax benefit/(expense)
|
|
15,594
|
2,328
|
|
2,277
|
|
15,800
|
2,359
|
|
(22,937)
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax benefit/(expense)
|
|
(578)
|
(86)
|
|
(264)
|
|
(555)
|
(83)
|
|
3,440
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income/(loss)
|
|
15,017
|
2,242
|
|
2,013
|
|
15,245
|
2,276
|
|
(19,497)
|
|
|
|
|
|
|
|
|
|
|
|
Net
income/(loss) attributable to noncontrolling interests
|
|
(26)
|
(4)
|
|
(5)
|
|
(95)
|
(14)
|
|
(5)
|
Net
income/(loss) attributable to the Company
|
|
15,043
|
2,246
|
|
2,018
|
|
15,340
|
2,290
|
|
(19,492)
|
|
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
-
Foreign currency translation adjustments
|
|
132
|
19
|
|
2
|
|
116
|
17
|
|
614
|
Comprehensive
income
|
|
15,174
|
2,265
|
|
2,020
|
|
15,456
|
2,307
|
|
(18,877)
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share, basic and diluted
|
|
1.15
|
0.17
|
|
0.15
|
|
1.17
|
0.18
|
|
(1.49)
|
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 NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2010 AND 2009
(amounts in thousands
except share and per share value)
(UNAUDITED)
|
|
Periods
Ended September 30, 2010
|
|
Periods
Ended September 30, 2009
|
|
|
RMB
|
US$
|
|
RMB
|
Cash
flow from operating activities
|
|
|
|
|
|
Net
income
|
|
15,245
|
2,276
|
|
(19,492)
|
Adjustments
to reconcile net income to net cash
|
|
|
|
|
|
(used
in)/provided by operating activities
|
|
|
|
|
|
-
Depreciation of property, plant and equipment
|
|
26,763
|
3,996
|
|
25,732
|
-
Amortization of intangible assets
|
|
340
|
51
|
|
340
|
-
Deferred income taxes
|
|
1,942
|
290
|
|
-
|
-
Bad debt expense/(recovery)
|
|
9,138
|
1,364
|
|
3,767
|
-
Accounts receivable
|
|
(15,138)
|
(2,260)
|
|
11,751
|
-
Inventories
|
|
13,011
|
1,942
|
|
(9,922)
|
-
Advance to suppliers
|
|
(16,236)
|
(2,424)
|
|
(1,070)
|
-
Prepaid expenses and other current assets
|
|
(487)
|
(73)
|
|
(6,437)
|
-
Accounts payable
|
|
(3,656)
|
(546)
|
|
5,707
|
-
Accrued expenses and other payables
|
|
7,236
|
1,080
|
|
(1,352)
|
-
Advance from customers
|
|
29,643
|
4,426
|
|
7,791
|
-
Tax payable
|
|
(38)
|
(6)
|
|
(6,101)
|
|
|
|
|
|
|
Net
cash provided by operating activities
|
|
67,762
|
10,117
|
|
10,716
|
|
|
|
|
|
|
Cash
flow from investing activities
|
|
|
|
|
|
Purchases
of property, plant and equipment
|
|
(2,482)
|
(371)
|
|
(93,091)
|
Restricted
cash related to trade finance
|
|
3,952
|
590
|
|
(400)
|
Advanced
to suppliers - non current
|
|
2,367
|
353
|
|
-
|
Addition
to construction in progress
|
|
1,163
|
174
|
|
83,469
|
|
|
|
|
|
|
Net
cash used in investing activities
|
|
5,000
|
747
|
|
(10,023)
|
|
|
|
|
|
|
Cash
flow from financing activities
|
|
|
|
|
|
Principal
payments of short-term bank loans
|
|
(16,179)
|
(2,415)
|
|
(11,585)
|
Proceeds
from short-term bank loans
|
|
10,000
|
1,493
|
|
10,000
|
|
|
|
|
|
|
Net
cash (used in)/provided by financing activities
|
|
(6,179)
|
(923)
|
|
(1,585)
|
|
|
|
|
|
|
Effect
of foreign exchange rate changes
|
|
(26)
|
72
|
|
892
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalent
|
|
66,557
|
10,013
|
|
(1)
|
|
|
|
|
|
|
Cash
and cash equivalent
|
|
|
|
|
|
At
beginning of period/year
|
|
26,804
|
3,926
|
|
15,823
|
At
end of period/year
|
|
93,362
|
13,939
|
|
15,822
|
|
|
|
|
|
|
SUPPLEMENTARY DISCLOSURE:
|
|
|
|
|
|
Interest
paid
|
|
6,624
|
989
|
|
5,991
|
Income
tax paid
|
|
3,966
|
592
|
|
-
|