Notes to Consolidated Financial Statements
(amounts in thousands, except share and
per share data)
(1) Principal Activities and Reorganization
Fuwei Films (Holdings) Co., Ltd and its
subsidiaries (the “Company” or the “Group”) are principally engaged in the production and distribution
of BOPET film, a high quality plastic film widely used in packaging, imaging, electronics, electrical and magnetic products in
the People’s Republic of China (the “PRC”). The Company is a holding company incorporated in the Cayman Islands,
established on August 9, 2004 under the Cayman Islands Companies Law as an exempted company with limited liability. The Company
was established for the purpose of acquiring shares in Fuwei (BVI) Co., Ltd (“Fuwei (BVI)”), an intermediate holding
company established for the purpose of acquiring all of the ownership interest in Fuwei Films (Shandong) Co., Ltd.
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.
On August 14, 2013, the Company announced
that it had received the first notice from the its controlling shareholder, the Weifang State-owned Assets Operation Administration
Company, a wholly-owned subsidiary of Weifang State-owned Asset Management and Supervision Committee (collectively, the “Administration
Company”) indicating that the Administration Company had determined to place control over 6,912,503 (or 52.9%) of its outstanding
ordinary shares up for sale at a public auction to be held in China. Four public auctions were held in Jinan, Shandong Province,
China. The Company learned that they failed due to a lack of bidders registered for the auction. On March 25, 2014, the fifth public
auction was held in Jinan, Shandong Province, China. The beneficial ownership of 6,912,503 ordinary shares of the Company previously
owned by the Administration Company through Apex Glory Holdings Limited, a British Virgin Islands corporation, was bid by Shandong
SNTON Optical Materials Technology Co., Ltd (“Shandong SNTON”) through the public auction. Shandong SNTON got 6,912,503
(or 52.9%) of the Company’s outstanding ordinary shares at a price of RMB101,800 (approximately US$16,573) or approximately
US$2.40 per ordinary share.
On May 12,
2014, the Company announced that it had learned that the successful bidder, Shandong SNTON in the fifth public auction of 6,912,503
(or 52.9%) of the Company’s outstanding ordinary shares (the “Shares”) held on March 25, 2014, was entrusted
by Hongkong Ruishang International Trade Co., Ltd., a Hong Kong corporation, (“Hongkong Ruishang”) to handle all the
formalities and procedure in connection with the public auction. As a result of the entrusted arrangement, the Company believes
Hongkong Ruishang is the party controlling the Shares acquired in the fifth public auction.
According to publicly available information in the People’s Republic of China, Shandong
SNTON is a wholly owned subsidiary of Shandong SNTON Group Co., Ltd. (the “SNTON Group”). Mr. Xiusheng Wang, the chairman
of the Board of Directors of Shandong SNTON Group Co., Ltd., is also Hongkong Ruishang’s chairman.
On May 14, 2014, the Company announced
that it received a notification from Shandong Fuhua Investment Company Limited. (“Shandong Fuhua”) with respect to
an entire ownership transfer of the Company’s 12.55% outstanding ordinary shares from the Administration Company to Shandong
Fuhua. The Administration Company originally held these shares indirectly through an intermediate holding company, Easebright Investments
Limited (“Easebright”). As a result of this transfer, Shandong Fuhua indirectly owns 12.55% of the outstanding ordinary
shares of the Company through Easebright. Mr. Jingang Yang has been appointed as the director of Easebright.
(2) Basis of Presentation
The Group’s consolidated financial
statements are presented in accordance with accounting principles generally accepted in the United States of America (“U.S.
GAAP”), as set forth in the Financial Accounting Standards Board’s (FASB) Accounting Standards Codification (ASC) and
we consider the various staff accounting bulletins and other applicable guidance issued by the United States Securities and Exchange
Commission (SEC).
This basis of accounting differs in certain
material respects from that used in the preparation of the books of account of Shandong Fuwei, the Company’s principal subsidiary,
which are prepared in accordance with the accounting principles and the relevant financial regulations applicable to enterprises
limited by shares as established by the Ministry of Finance of the PRC (“PRC GAAP”), the accounting standards used
in the country of its domicile. The accompanying consolidated financial statements reflect necessary adjustments not recorded in
the books of account of the Company’s subsidiaries to present them in conformity with U.S. GAAP.
(3) Summary of Significant Accounting Policies and Practices
(a) Principles of Consolidation
The consolidated financial statements include
the financial statements of the Company and its three subsidiaries, inluding, Fuwei Films (BVI) Co., Ltd., Fuwei Films (Shandong)
Co., Ltd., and Fuwei Films USA, LLC. All significant intercompany balances and transactions have been eliminated in consolidation.
(b) Foreign Currency Transactions
The Group’s reporting currency is the Chinese Yuan (“Renminbi”
or “RMB”).
The Company and Fuwei (BVI) operate in
Hong Kong as investment holding companies and their financial records are maintained in Hong Kong dollars, being the functional
currency of these two entities. Fuwei US company, a 60% owned subsidiary of the company, their financial records are maintained
in US dollars. Assets and liabilities are translated into RMB at the exchange rates at the balance sheet date, equity accounts
are translated at historical exchange rates and income, expenses, and cash flow items are translated using the average rate for
the period. The translation adjustments are recorded in accumulated other comprehensive income in the statements of equity.
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 operations.
Commencing from July 21, 2005, the PRC
government moved the RMB into a managed floating exchange rate regime based on market supply and demand with reference to a basket
of currencies.
For the convenience of the readers, the
RMB amounts for the year of 2015 included in the accompanying consolidated financial statements in our annual report has been translated
into U.S. dollars at the rate of US$1.00 = RMB 6.4778, being the noon buy rate for U.S. dollars in effect on December 31, 2015
in the City of New York for cable transfer in RMB per U.S. dollar as certified for custom purposes by the Federal Reserve Bank.
No representation is made that the RMB amounts could have been, or could be, converted into U.S. dollar at that rate or at any
other certain rate on December 31, 2015, or at any other date.
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.
(c) Cash and Cash Equivalents and Restricted Cash
For statements of cash flow purposes, the
Company considers all cash on hand and in banks, including certificates of deposit and other highly-liquid investments with maturities
of three months or less, when purchased, to be cash and cash equivalents.
As of December 31, 2015 and 2014, there
were cash and cash equivalents of RMB14,355 (US$2,216) and RMB9,020, respectively.
As of December 31, 2015 and 2014, there
were restricted cash of RMB43,215 (US$6,671) and RMB48,085, respectively, as deposit in bank for letters of credit and banker’s
acceptance bill.
(d) Trade Accounts Receivable
Trade accounts receivable are recorded
at the invoiced amount after deduction of trade discounts, value added taxes and allowances, if any, and do not bear interest.
The allowance for doubtful accounts is the Group’s best estimate of the amount of probable credit losses in the Group’s
existing accounts receivable. The Group determines the allowance based on historical write-off experience, customer specific facts
and economic conditions.
The Group reviews its allowance for doubtful
accounts monthly. Past due balances over 90 days and over a specified amount are reviewed individually for collectibility. 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 allowance for doubtful
accounts as of December 31, 2015 was RMB747 (US$115) and RMB825, respectively.
(e) Inventories
Inventories
are stated at the lower of cost or market value as of balance sheet date. Inventory valuation and cost-flow is determined using
Moving Weighted Average Method basis. The Group estimates excess and slow moving inventory based upon assumptions of future demands
and market conditions. If actual market conditions are less favorable than projected by management, additional inventory write-downs
may be required. Cost of work in progress and finished goods comprises direct material, direct production cost and an allocated
portion of production overheads based on normal operating capacity.
(f) Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated
depreciation and allowance for fixed assets 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 as follows:
|
|
Years
|
Buildings and improvements
|
|
25 – 30
|
Plant and equipment
|
|
10 – 15
|
Computer equipment
|
|
5
|
Furniture and fixtures
|
|
5
|
Motor vehicles
|
|
5
|
Depreciation related to abnormal amounts
from idle capacity is charged to administrative expenses for the period incurred. Total depreciations for the years ended December
31, 2015, 2014 and 2013 were RMB44,515 (US$6,872), RMB47,701 and RMB48,161 respectively, of which 56.5%, 85.4% and 86.7% was recorded
in cost of goods sold and 43.5%, 14.6% and 13.3% was recorded in administrative and selling expenses, respectively.
Construction in progress represented capital
expenditure in respect of the BOPET productions line. No depreciation is provided in respect of construction in progress.
(g) Leased Assets
An arrangement, comprising a transaction
or a series of transactions, is or contains a lease if the Group determines that the arrangement conveys a right to use a specific
asset or assets for an agreed period of time in return for a payment or a series of payments. Such a determination is made based
on an evaluation of the substance of the arrangement and is regardless of whether the arrangement takes the legal form of a lease.
Classification of assets leased to the
Group. Assets that are held by the Group under leases which transfer to the Group substantially all the risks and rewards of ownership
are classified as being held under capital leases. Leases which do not transfer substantially all the risks and rewards of ownership
to the Group are classified as operating leases.
Assets acquired under capital leases. Where
the Group acquires the use of assets under capital leases, the amounts representing the fair value of the leased asset, or, if
lower, the present value of the minimum lease payments, of such assets are included in property, plant and equipment and the corresponding
liabilities, net of finance charges, are recorded as obligations under capital leases. Depreciation is provided at rates which
write off the cost or valuation of the assets over the term of the relevant lease or, where it is likely the Group will obtain
ownership of the asset, the life of the asset. Finance charges implicit in the lease payments are charged to the consolidated income
statement over the period of the leases so as to produce an approximately constant periodic rate of charge on the remaining balance
of the obligations for each accounting period. Contingent rentals are charged to the consolidated income statement in the accounting
period in which they are incurred.
Operating lease charges. Where the Group
has the use of assets held under operating leases, payments made under the leases are charged to the consolidated income statement
in equal installments over the accounting periods covered by the lease term, except where an alternative basis is more representative
of the pattern of benefits to be derived from the leased asset. Lease incentives received are recognized in the consolidated income
statement as an integral part of the aggregate net lease payments made. Contingent rentals are charged to the consolidated income
statement in the accounting period in which they are incurred.
Sale and leaseback transactions. Gains
or losses on equipment sale and leaseback transactions which result in capital leases are deferred and amortized over the terms
of the related leases. Gains or losses on equipment sale and leaseback transactions which result in operating leases are recognized
immediately if the transactions are established at fair value. Any loss on the sale perceived to be a real economic loss is recognized
immediately. However, if a loss is compensated for by future rentals at a below-market price, then the artificial loss is deferred
and amortized over the period that the equipment is expected to be used. If the sale price is above fair value, then any gain is
deferred and amortized over the useful life of the assets.
(h) 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.
(i) Goodwill
Goodwill represents the excess of purchase
price and related costs over the value assigned to the net tangible and identifiable intangible assets of businesses acquired. Goodwill
is not amortized but is tested for impairment annually, or when circumstances indicate a possible impairment may exist. Impairment
testing is performed at a reporting unit level. An impairment loss generally would be recognized when the carrying amount
of the reporting unit exceeds the fair value of the reporting unit, with the fair value of the reporting unit determined using
a discounted cash flow (DCF) analysis. A number of significant assumptions and estimates are involved in the application of
the DCF analysis to forecast operating cash flows, including the discount rate, the internal rate of return, and projections of
realizations and costs to produce. Management considers historical experience and all available information at the time the
fair values of its reporting units are estimated. Goodwill was determined to be fully impaired during the year ended December 31,
2012.
(j) Impairment of Long-lived Assets
The Company recognizes an impairment loss
when circumstances indicate that the carrying value of long-lived assets with finite lives may not be recoverable. Management’s
policy in determining whether an impairment indicator exists, a triggering event, comprises measurable operating performance criteria
at an asset group level as well as qualitative measures. If an analysis is necessitated by the occurrence of a triggering event,
the Company uses assumptions, which are predominately identified from the Company’s strategic long-range plans, in determining
the impairment amount. In the calculation of the fair value of long-lived assets, the Company compares the carrying amount of the
asset group with the estimated future cash flows expected to result from the use of the assets. If the carrying amount of the asset
group exceeds the estimated expected undiscounted future cash flows, the Company measures the amount of the impairment by comparing
the carrying amount of the asset group with their estimated fair value. We estimate the fair value of assets based on market prices
(i.e., the amount for which the asset could be bought by or sold to a third party), when available. When market prices are not
available, we estimate the fair value of the asset group using discounted expected future cash flows at the Company’s weighted-average
cost of capital. Management believes its policy is reasonable and is consistently applied. Future expected cash flows are based
upon estimates that, if not achieved, may result in significantly different results. The loss on impairment of assets during 2015
and 2014 was RMB7,219 (US$1,114) and 0, respectively..
(k) Revenue Recognition
Sales of plastic flexible packaging materials
are reported, net of value added taxes (“VAT”), sales returns, trade discounts. The standard terms and conditions under
which the Group generally delivers allow a customer the right to return product for refund only if the product does not conform
to product specifications; the non-conforming product is initially identified by customer, and the customer notifies the Group
about the situation. After receiving the Group’s permission, the non-conforming product may be returned for replacement or
refund. The Group recognizes revenue when products are delivered and the customer takes ownership and assumes risk of loss, collection
of the relevant receivable is probable, persuasive evidence of an arrangement exists and the sale price is fixed or determinable.
In the PRC, VAT of 17% on invoice amount
is collected in respect of the sales of goods on behalf of tax authorities. The VAT collected is not revenue of the Group; instead,
the amount is recorded as a liability on the consolidated balance sheet until such VAT is paid to the authorities.
(l) Research and Development Costs
Research and development expenditures are
expensed as incurred. Research and development costs amounted to RMB3,619 (US$559), RMB8,005 and RMB10,906 for the year ended December
31, 2015, 2014 and 2013 and such costs were recorded in administrative expenses.
(m) Income Taxes
Income taxes are accounted for under the asset and liability method. Under guidance contained in FASB
ASC 740-10, 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 carryforwards. 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. We follow the
recognition and disclosure provisions under guidance contained in FASB ASC 740-10-25. Under this guidance, tax positions are evaluated
for recognition using a more-likely-than-not threshold, and those tax positions requiring recognition are measured as the largest
amount of tax benefit that is greater than fifty percent likely of being realized upon ultimate settlement with a taxing authority
that has full knowledge of all relevant information.
We
only recognized deferred tax assets for the loss of 2015 after considering the possibility of realizing the benefits under the
conservatism principle.
(n) Loss per Share
Basic earnings (loss) per share is computed
by dividing net earnings (loss) by the weighted average number of ordinary shares outstanding during the year. Diluted earnings
(loss) per share is calculated by dividing net earnings (loss) 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.
(o) Use of Estimates
The preparation of the consolidated financial
statements in accordance with U.S. GAAP requires management of the Group to make a number of estimates and assumptions relating
to the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ
from those estimates. On an ongoing basis, management reviews its estimates and assumptions including those related to the recoverability
of the carrying amount and the estimated useful lives of long-lived assets, valuation allowances for accounts receivable and realizable
values for inventories. Changes in facts and circumstances may result in revised estimates.
(p) Noncontrolling interest
Non-controlling interest represents the
portion of equity that is not attributable to the Company. The net income (loss) attributable to non-controlling interests are
separately presented in the accompanying statements of income and other comprehensive income. Losses attributable to non-controlling
interests in a subsidiary may exceed the interest in the subsidiary’s equity. The related non-controlling interest continues
to be attributed its share of losses even if that attribution results in a deficit of the non-controlling interest balance. The
non-contolling interest % of entity Fuwei USA was 40%, with the deficit amount of RMB(834) (-US$129) and RMB(794), respectively.
(q) Segment Reporting
The Group uses the “management approach”
in determining reportable operating segments. The management approach considers the internal organization and reporting used by
the Group’s chief operating decision maker for making operating decisions and assessing performance as the source for determining
the Group’s reportable segments. Management, including the chief operating decision maker, reviews operating results solely
by monthly revenue of BOPET film (but not by sub-product type or geographic area) and operating results of Shandong Fuwei, the
operating subsidiary in the PRC. As such, the Group has determined that the Group has a single operating segment.
(r) Contingencies
In the normal course of business, the Group
is subject to contingencies, including legal proceedings and claims arising out of the business that relate to a wide range of
matters, including among others, product liability. The Group recognizes a liability for such contingency if it determines it is
probable that a loss has occurred and a reasonable estimate of the loss can be made. The Group may consider many factors in making
these assessments including past history and the specifics of each matter.
(s) Reclassification
Certain reclassifications have been made
to the fiscal year 2015 and 2014 consolidated financial statements to conform to the fiscal 2015 consolidated financial statement
presentation. These reclassifications had no effect on net loss or cash flows as previously reported.
(t) Going Concern Matters
The accompanying consolidated
financial statements have been prepared in conformity with generally accepted accounting principles which contemplate
continuation of the company as a going concern. However, as of December 31, 2015, the Company had a working capital
deficiency of RMB151,599 (US$23,403) and accumulated deficit of RMB69,068 (US$10,662) from net losses incurred during the year
of 2015. Confronted with the fierce competition in the BOPET industry in China, the Company may still witness losses over the
next twelve months. The ability of the Company to operate as a going concern depends upon its ability to obtain
outside sources of working capital and/or generate positive cash flow from operations. The Company may not have sufficient
working capital to meet its planned operating activities over the next twelve months. These conditions raise substantial
doubt about the Company’s ability to continue as a going concern. Management’s plans regarding these matters are
described as per follows: The Company accordingly has developed an outside financing plan to meet the need of working capital
for our operation or debts. At the same time, the Company will continue implementing cost reductions on both manufacturing
costs and operating expenses to improve profit margins. The accompanying consolidated financial statements do not include any
adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of
liabilities that might result should the Company be unable to continue as a going concern.
(u) Recently Issued Accounting Standards
Simplifying the Measurement of Inventory:
In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory, which modifies existing requirements regarding
measuring inventory at the lower of cost or market. Under existing standards, the market amount requires consideration of replacement
cost, net realizable value (NRV), and NRV less an approximately normal profit margin. The new ASU replaces market with NRV, defined
as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.
This eliminates the need to determine and consider replacement cost or NRV less an approximately normal profit margin when measuring
inventory. This standard is effective prospectively beginning January 1, 2017, with early adoption permitted. The Company is evaluating
the impact that this new guidance will have on its consolidated financial statements.
Simplifying
the Presentation of Debt Issuance Costs:
In April 2015, the FASB issued ASU 2015-03-Simplifying the Presentation
of Debt Issuance Costs. This standard amends existing guidance to require the presentation of debt issuance costs in the balance
sheet as a deduction from the carrying amount of the related debt liability instead of a deferred charge. It is effective for annual
reporting periods beginning after December 15, 2015, but early adoption is permitted.
The
Company is currently evaluating the effect that the adoption of this standard will have on its financial statements.
Amendments
to the Consolidation Analysis:
In February 2015,
the FASB issued ASU No. 2015-02, “Consolidation (Topic 810) — Amendments to the Consolidation Analysis.”
ASU No. 2015-02 eliminates the deferral of the requirements of ASU No. 2009-17, “Consolidations (Topic 810)
— Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities” for certain interests
in investment funds and provides a scope exception from Topic 810 for certain investments in money market funds. The ASU also
makes several modifications to the consolidation guidance for VIEs and general partners’ investments in limited partnerships,
as well as modifications to the evaluation of whether limited partnerships are VIEs or voting interest entities. ASU No. 2015-02
is effective for interim and annual reporting periods beginning after December 15, 2015. Early adoption is permitted. The
Company is currently evaluating the effect that the adoption of this standard will have on its financial statements.
Income
Statement-Extraordinary and Unusual Items
: In January 2015, the Financial Accounting Standards Board (FASB) issued Accounting
Standards Update No. 2015-01 about Income Statement-Extraordinary and Unusual Items (Subtopic 225-20). ASU 2015-01 addresses
the elimination from U.S. GAAP the concept of extraordinary items. Presently, an event or transaction is presumed to be an ordinary
and usual activity of the reporting entity unless evidence clearly supports its classification as an extraordinary item. If an
event or transaction meets the criteria for extraordinary classification, an entity is required to segregate the extraordinary
item from the results of ordinary operations and show the item separately in the income statement, net of tax, after income from
continuing operations. This amended guidance will prohibit separate disclosure of extraordinary items in the income statement.
This amendment is effective for years, and interim periods within those years, beginning after December 15, 2015. Entities
may apply the amendment prospectively or retrospectively to all prior periods presented in the financial statements. Early adoption
is permitted provided that the guidance is applied from the beginning of the year of adoption. The Company intends to adopt the
accounting standard during the first quarter of 2016, as required, with no material impact.
Stock
Based Compensation
:
In June 2014, the FASB issued
ASU No. 2014-12 (ASU 2014-12),
Compensation – Stock Compensation (Topic 718): Accounting for Share-Based Payments
When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period.
ASU
No. 2014-12 requires that a performance target that affects vesting and that could be achieved after the requisite service
period should be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718 as it relates
to awards with performance conditions that affect vesting to account for such awards. As such, the performance target should not
be reflected in estimating the grant-date fair value of the award. ASU 2014-12 is effective for annual periods and interim periods
within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. The Company is currently evaluating
the effect that the adoption of this standard will have on its financial statements.
Disclosure
of Going Concern Uncertainties
: In August 2014, the Financial Accounting Standards Board (FASB)
issued Accounting Standards Update No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue
as a Going Concern (ASU 2014-15), to provide guidance on management’s responsibility in evaluating whether there is
substantial doubt about a company’s ability to continue as a going concern and to provide related footnote disclosures. ASU
2014-15 is effective for us in our fourth quarter of fiscal 2017 with early adoption permitted. We do not believe the impact of
our pending adoption of ASU 2014-15 on the Company’s financial statements will be material.
Revenue
Recognition
: In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue
from Contracts with Customers: Topic 606 (ASU 2014-09), to supersede nearly all existing revenue recognition guidance under
U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers
in an amount that reflects the consideration that is expected to be received for those goods or services. ASU 2014-09 defines a
five step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within
the revenue recognition process than are required under existing U.S. GAAP, including identifying performance obligations in the
contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price
to each separate performance obligation. ASU 2014-09 is effective for us in our first quarter of fiscal 2018 using either of two
methods: (i) retrospective to each prior reporting period presented with the option to elect certain practical expedients
as defined within ASU 2014-09; or (ii) retrospective with the cumulative effect of initially applying ASU 2014-09 recognized
at the date of initial application and providing certain additional disclosures as defined per ASU 2014-09. The adoption of this
ASU is not expected to have a material impact on the Company's consolidated financial statements.
Other pronouncements issued
by the FASB or other authoritative accounting standards group with future effective dates are either not applicable or not significant
to the consolidated financial statements of the Company.
(4) Accounts and Bills Receivable, net
Accounts receivable consisted of the following:
|
|
December 31, 2015
|
|
|
December 31, 2014
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
Accounts receivable
|
|
|
7,861
|
|
|
|
1,214
|
|
|
|
8,168
|
|
Less: Allowance for doubtful accounts
|
|
|
(747
|
)
|
|
|
(116
|
)
|
|
|
(825
|
)
|
|
|
|
7,114
|
|
|
|
1,098
|
|
|
|
7,343
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bills receivable
|
|
|
2,932
|
|
|
|
453
|
|
|
|
2,524
|
|
|
|
|
10,046
|
|
|
|
1,551
|
|
|
|
9,867
|
|
An analysis of the allowance for doubtful accounts for 2015,
2014 and 2013 is as follows:
|
|
December 31, 2015
|
|
|
December 31, 2014
|
|
|
December 31, 2013
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
RMB
|
|
Balance at beginning of year
|
|
|
825
|
|
|
|
127
|
|
|
|
795
|
|
|
|
1,196
|
|
Bad debt (recovery) expense
|
|
|
(78
|
)
|
|
|
(12
|
)
|
|
|
30
|
|
|
|
(401
|
)
|
Write-offs
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
|
747
|
|
|
|
115
|
|
|
|
825
|
|
|
|
795
|
|
The Group has a credit policy in place
and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers requiring credit
over a certain amount. These receivables are due within 7 to 90 days from the date of billing. Normally, the Group does not obtain
collateral from customers.
(5) Inventories
Inventories consisted of the following:
|
|
December 31,2015
|
|
|
December 31,2014
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
Raw materials
|
|
|
16,819
|
|
|
|
2,596
|
|
|
|
13,221
|
|
Work-in-progress
|
|
|
1,667
|
|
|
|
258
|
|
|
|
1,873
|
|
Finished goods
|
|
|
15,483
|
|
|
|
2,390
|
|
|
|
14,429
|
|
Consumables and spare parts
|
|
|
611
|
|
|
|
94
|
|
|
|
622
|
|
Allowance for obsolescence
|
|
|
(5,006
|
)
|
|
|
(773
|
)
|
|
|
(6,111
|
)
|
|
|
|
29,574
|
|
|
|
4,565
|
|
|
|
24,034
|
|
(6) Prepayments and Other Receivables
Prepayments and other receivables consisted
of the following:
|
|
December 31,2015
|
|
|
December 31,2014
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
Lease prepayments, current portion
|
|
|
524
|
|
|
|
81
|
|
|
|
524
|
|
Other receivables
|
|
|
19,810
|
|
|
|
3,058
|
|
|
|
18,248
|
|
|
|
|
20,334
|
|
|
|
3,139
|
|
|
|
18,772
|
|
(7) Property,
Plant and Equipment
Property, plant and equipment consisted
of the following:
|
|
December 31, 2015
|
|
|
December 31,2014
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
Buildings
|
|
|
78,769
|
|
|
|
12,160
|
|
|
|
77,828
|
|
Plant and equipment
|
|
|
764,038
|
|
|
|
117,946
|
|
|
|
764,093
|
|
Computer equipment
|
|
|
2,449
|
|
|
|
378
|
|
|
|
2,459
|
|
Furniture and fixtures
|
|
|
13,730
|
|
|
|
2,120
|
|
|
|
13,444
|
|
Motor vehicles
|
|
|
2,094
|
|
|
|
323
|
|
|
|
2,094
|
|
|
|
|
861,080
|
|
|
|
132,927
|
|
|
|
859,918
|
|
Less: accumulated depreciation
|
|
|
(422,840
|
)
|
|
|
(65,275
|
)
|
|
|
(377,384
|
)
|
Impairment of plant and equipment
|
|
|
(7,219
|
)
|
|
|
(1,114
|
)
|
|
|
-
|
|
|
|
|
431,021
|
|
|
|
66,538
|
|
|
|
482,534
|
|
All of the Group’s buildings are
located in the PRC. As of December 31, 2015 and 2014, property, plant plus land use rights with carrying value totaling RMB18,398
(US$2,840) and RMB100,659 respectively were pledged to banks as collateral for credit limits and loans(see Note 12).
As of December 31, 2015, the mortgaged
floor area of facilities and land use right to the bank is 17,180 square meters and 43,878 square meters, respectively.
(8) Lease Prepayments
The balance represents the lease prepayments of land use rights
of the Group as follows:
|
|
December 31,2015
|
|
|
December 31,2014
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
Non-current portion
|
|
|
17,882
|
|
|
|
2,761
|
|
|
|
18,406
|
|
Current portion - amount charged to expense next year
|
|
|
524
|
|
|
|
81
|
|
|
|
524
|
|
|
|
|
18,406
|
|
|
|
2,842
|
|
|
|
18,930
|
|
As of December 31, 2015, parts of prepaid
land use rights were pledged to banks as collateral for credit limit in bank (see Note 12).
Land use rights amortization
for the year ended December 31, 2015, 2014 and 2013 were RMB524 (US$81), RMB524 and RMB454, respectively.
As of December 31, 2015, prepaid land use
rights of the Group included certain parcels of land located in Weifang City, Shandong Province, the PRC, with a net book value
of RMB18,406(US$2,842). The land use rights for land with area of approximately 43,878 square meters, 5,279 square meters and 25,094
square meters will expire in November 2050, May 2053 and February 2055, respectively.
(9) Advance to suppliers
Historically, we have significant working
capital commitments because suppliers of PET resin and additives -based raw materials require us to make prepayments in advance
of shipment. Besides, we may make prepayments related to some equipment purchases based on arrangement of contract. Our prepayments
to suppliers were recorded either as advances to suppliers, if they are expected to be utilized within 12 months as of balance
sheet date, or as long-term prepayments, which was included in the line item “advance to suppliers –long term”
in our consolidated balance sheet, if they represented the portion expected to be utilized after 12 months. As of December 31,
2015 and 2014, the current portion of advance to suppliers was RMB5,640 (US$871) and RMB7,512, respectively. The noncurrent portion
of advance to suppliers was RMB1,440 (US$222) and RMB722, respectively.
(10) Long-term Deposit
On January 20, 2008, Shandong Fuwei signed
a “Letter of Intent of Joyinn Capital Increase and Share Expansion” (“LOI”) with Joyinn Hotel Investment
& Management Co., Ltd. (“Joyinn”) and 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 (US$6,236).
According to the LOI, Shandong Fuwei deposited
RMB 26,000 (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 23, 2009, Shandong Fuwei and the
Pledger, the major shareholder of Joyinn, agreed that the Pledger would pledge another 19% of its interest in Joyinn in addition
to the previous pledge of 52% interest in Joyinn as a guarantee to the prepayment on the newly increased register capital made
by Shandong Fuwei to Joyinn. As a result, the Pledger’s percentage of pledged interest in Joyinn increased from 52% to 71%.
In the year 2010, the Company impaired the deposit amount by RMB4,240 (US$681). The impairment was determined based on an independent
appraisal study.
On July 14, 2009, Shandong Fuwei and Joyinn
signed “Supplementary Agreement of Letter of Intent of Joyinn Capital Increase and Share Expansion” which extends the
duration of former agreement to two (2) years that is, Fuwei has the option right to determine to continue or withdraw the investment
prior to January 14, 2010, the expiration date of the agreement.
Upon the expiration of the Supplementary
Agreement on January 14, 2010, Shandong Fuwei and the Pledger entered into an agreement pursuant to which the Pledger agreed to
transfer a 71% interest in Joyinn to Shandong Fuwei. The transaction is subject to the approval of the authority body of both parties.
On March 9, 2012, Shandong Fuwei and the
Pledger agreed that prior to the approval of the foregoing share transfer, all the related agreements and share pledge terms and
conditions will remain in full force and effect.
The Pledger’s percentage of Joyinn
was transferred to Weifang State-Owned Assets Operation Administration Company (the “Administration Company”) according
to the court order. On December 10, 2012, Shandong Fuwei entered into a Share Pledge Agreement with the major shareholder of Joyinn
– the Administration Company, in which the Administration Company agreed all the terms and conditions in LOI and its Supplementary
Agreement. The Administration Company, as the new Pledger, agreed to increase the pledged interest by 71% to 87.8%.
On January 12, 2015, Shandong Fuwei received a notice issued
by the Administration Company and Joyinn stating that all the agreements previously entered into by the relevant parties have been
terminated. Joyinn agreed to return RMB21,000 to Shandong Fuwei which was a prepayment of capital increase invested by Shandong
Fuwei and Shandong Fuwei agreed to handle the relevant procedures with respect to terminating the related share pledge agreement
upon receipt of such prepayment. Upon consideration, the Board of Directors of Fuwei Films approved to carry out the procedures
as stipulated by the notice. On January 22, 2015, Shandong Fuwei received the refund of RMB21,000 from Joyinn.
As of December 31, 2015 and December 31, 2014 the total amount
of the deposit was zero and RMB16,760, respectively.
(11) Other assets
Other assets represent loss on sale-leaseback arrangement with
International Far Eastern Leasing Co., Ltd. The loss is treated as compensation for the future rentals paid by Shandong Fuwei at
a below-market price. The artificial loss should be deferred and amortized in proportion to the amortization of the related leased
assets. As of December 31, 2015 and 2014, the total amount of the other assets was RMB11,607 (US$1,792) and RMB12,500, respectively.
(12) Long-term Bank Loans
|
|
Interest
rate per
|
|
|
12-31-2015
|
|
|
12-31-2014
|
|
Lender
|
|
annum
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM LOANS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weifang Dongfang State-owned Assets Management Co., Ltd.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- October 19, 2009 to October 18, 2017
|
|
|
4.41
|
%
|
|
|
6,650
|
|
|
|
1,026
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
6,650
|
|
|
|
1,026
|
|
|
|
10,000
|
|
Less: amounts classified as short-term loan
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Less: long-term loan, current portion
|
|
|
|
|
|
|
(3,350
|
)
|
|
|
(517
|
)
|
|
|
(3,350
|
)
|
Long-term Loan
|
|
|
|
|
|
|
3,300
|
|
|
|
509
|
|
|
|
6,650
|
|
Notes:
The principal amounts of the above long-term
loans are repayable at the end of the loan period.
On November 20, 2009, we signed a
long-term loan agreement of RMB10,000 (US$1,612) with Weifang Dongfang State-owned Assets Management Co., Ltd., with an
eight-year loan term, which became effective on October 19, 2009 and will expire on October 18, 2017. From 2015 to 2016, the
Company will make principal installment payments of RMB3,350 (US$540) per year with the remaining principal balance of
RMB3,300 (US$532) due in 2017. The annual interest rate for the loan is the benchmark interest rate for over five-year
loans announced by the People’s Bank of China reduced by 10% and the applicable annual interest rate for the period
ended December 31, 2015 is 4.41%. The loan is guaranteed by Shandong Deqin Investment& Guarantee Co., Ltd. and is used
for our projects.
In April 2014, the Company obtained a loan
for a total amount of RMB105,000 from Shandong SNTON Optical Materials Technology Co., Ltd (“Shandong SNTON”) to pay
off five short-term loans to Bank of Communications Co., Ltd. In May, 2014 and 2015, we obtained loans for the amount of RMB15,000
and RMB10,000 from SNTON Group solely for the purpose of purchasing raw materials. The interest rate of both loans shall be calculated
at the benchmark rate, plus an additional 20% of the said benchmark rate, for the loan of the same term announced by the People’s
Bank of China which was exactly the same interest rate calculation method when we paid off the loans to Bank of Communications.
Bank loans outstanding, which are all denominated
in Renminbi, are secured and guaranteed as follows:
|
|
December 31,2015
|
|
|
December 31,2014
|
|
|
December 31,2013
|
|
Secured by:
|
|
|
RMB
|
|
|
|
US$
|
|
|
|
RMB
|
|
|
|
RMB
|
|
Property plant and equipment, Land use right
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
105,000
|
|
Bills receivable
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Guarantee company
|
|
|
6,650
|
|
|
|
1,026
|
|
|
|
10,000
|
|
|
|
10,000
|
|
Restricted cash
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
|
6,650
|
|
|
|
1,026
|
|
|
|
10,000
|
|
|
|
115,000
|
|
Long-term bank loans maturity for the next five years after
December 31, 2015 are as follows:
|
|
RMB
|
|
|
US$
|
|
Fiscal 2016
|
|
|
3,350
|
|
|
|
517
|
|
Fiscal 2017
|
|
|
3,300
|
|
|
|
509
|
|
Fiscal 2018
|
|
|
-
|
|
|
|
-
|
|
Fiscal 2019
|
|
|
-
|
|
|
|
-
|
|
Fiscal 2010
|
|
|
-
|
|
|
|
-
|
|
(13) Notes Payable
The credit line amounting to RMB45,000
(US$6,950) granted by SPD bank was pledged part of property, plant, land use right and equipment and lease prepayments as security.
The use time limit of this credit line was from December 19, 2014 to December 19, 2017. As of December 31, 2015, the used credit
line amount was RMB41,250. The balance was RMB3,750.
As of December 31, 2015, Shandong Fuwei
had banker’s acceptances opened with a maturity from three to six months totaling RMB85,780 (US$13,242) for payment in connection
with raw materials on a total deposits of RMB42,890 (US$6,621) at SPD Bank.
Notes payable consisted of the following:
Issuing bank
|
|
December 31, 2015
|
|
|
December 31, 2014
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
SPD Bank
|
|
|
85,780
|
|
|
|
13,242
|
|
|
|
95,539
|
|
|
|
|
85,780
|
|
|
|
13,242
|
|
|
|
95,539
|
|
(14) Accrued Expenses and Other Payables
Accrued expenses and other payables consisted of the following:
|
|
December 31,2015
|
|
|
December 31,2014
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
Other payables
|
|
|
8,682
|
|
|
|
1,340
|
|
|
|
6,095
|
|
Predicted liability
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
8,682
|
|
|
|
1,340
|
|
|
|
6,095
|
|
(15) Obligations under capital leases
The Group has commitments under capital
lease agreements as for a part of new third production line and associated equipment. The lease has terms of 3 years expiring by
the end of December, 2015. As of December 31, 2015, future payments under these capital leases are as follows:
|
|
December 31,2015
|
|
|
December 31,2014
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
|
Present value of the
minimum lease
payments
|
|
|
Total minimum lease
payments
|
|
|
Interest
|
|
|
Present
value of
the
minimum
lease
payments
|
|
|
Total
minimum
lease
payments
|
|
|
Interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Within 1 year
|
|
|
302
|
|
|
|
47
|
|
|
|
304
|
|
|
|
47
|
|
|
|
2
|
|
|
|
-
|
|
|
|
8,259
|
|
|
|
8,555
|
|
|
|
296
|
|
After 1 year but within 2 years
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
303
|
|
|
|
306
|
|
|
|
3
|
|
After 2 years but within 3 years
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
After 3 years
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
302
|
|
|
|
47
|
|
|
|
304
|
|
|
|
47
|
|
|
|
2
|
|
|
|
-
|
|
|
|
8,562
|
|
|
|
8,861
|
|
|
|
299
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: balance due within
one year classified as current liabilities
|
|
|
(302
|
)
|
|
|
(47
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,259
|
)
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
303
|
|
|
|
|
|
|
|
|
|
Details of obligations under capital leases are as follows:
|
|
December 31,2015
|
|
|
December 31,2014
|
|
|
|
RMB
|
|
|
RMB
|
|
|
|
|
|
|
|
|
RMB denominated obligations
|
|
|
|
|
|
|
|
|
Fixed interest rate of 6.49% per annum as of December 31, 2015
|
|
|
302
|
|
|
|
8,562
|
|
|
|
|
|
|
|
|
|
|
|
|
|
302
|
|
|
|
8,562
|
|
Guarantee deposit of RMB800 (US$129) over the capital leased
assets concerned and relevant insurance policies were provided to the lessor as collateral and security. In addition, as is customary
in the case of capital leases, the Group’s obligations are guaranteed by Weifang State-Owned Assets Operation Administration
Company, Beijing Shiweitong Technology Development Co., Ltd., Fuwei Films (Holdings) Co., Ltd., and Fuwei Films (BVI) Co., Ltd.
In August 2014, Shandong SNTON Group Co., Ltd. accepted the responsibility of guarantee for the Group's obligation from Beijing
Shiweitong Technology Development Co., Ltd.
(16) Revenues
The Company’s revenue is primarily
derived from the manufacture and sale of plastic flexible packaging materials.
During the fiscal year ended December 31,
2015, net revenues were RMB248,862 (US$38,418), compared to RMB284,464 during the same period in 2014, representing a decrease
of RMB35,602 or 12.5%, mainly due to the reduction of average sales price by 13.5% caused by the decrease in the price of main
raw materials. For further analysis of the factors causing revenue decrease, the reduction of average sales price caused a decrease
of RMB38,826 and sales volume factor made an increase of RMB3,224.
The following table shows the distribution
of the Company’s revenue by the geographical location of customers, whereas all the Company’s assets are located in
the PRC:
|
|
December 31, 2015
|
|
|
December 31, 2014
|
|
|
December 31, 2013
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
RMB
|
|
Sales in China
|
|
|
194,226
|
|
|
|
29,984
|
|
|
|
241,446
|
|
|
|
263,076
|
|
Sales in other countries (principally Europe, Asia and North America)
|
|
|
54,636
|
|
|
|
8,434
|
|
|
|
43,018
|
|
|
|
41,874
|
|
|
|
|
248,862
|
|
|
|
38,418
|
|
|
|
284,464
|
|
|
|
304,950
|
|
Overseas sales were RMB54,636 (US$8,434,)
or 22.0% of total revenues, compared with RMB43,018 or 15.1% of total revenues in 2014. The increase in overseas sales was mainly
due to the increased sales volume.
The Company’s revenue by significant types of films for
2015, 2014 and 2013 was as follows:
|
|
December 31,2015
|
|
|
December 31,2014
|
|
|
December 31,2013
|
|
|
|
RMB
|
|
|
US$
|
|
|
% of Total
|
|
|
RMB
|
|
|
% of Total
|
|
|
RMB
|
|
|
% of Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stamping and transfer film
|
|
|
103,520
|
|
|
|
15,982
|
|
|
|
41.6
|
%
|
|
|
118,560
|
|
|
|
41.7
|
%
|
|
|
142,309
|
|
|
|
46.7
|
%
|
Printing film
|
|
|
29,605
|
|
|
|
4,570
|
|
|
|
11.9
|
%
|
|
|
32,987
|
|
|
|
11.6
|
%
|
|
|
27,852
|
|
|
|
9.1
|
%
|
Metallized film
|
|
|
9,010
|
|
|
|
1,391
|
|
|
|
3.6
|
%
|
|
|
6,397
|
|
|
|
2.2
|
%
|
|
|
17,686
|
|
|
|
5.8
|
%
|
Specialty film
|
|
|
73,851
|
|
|
|
11,400
|
|
|
|
29.7
|
%
|
|
|
79,609
|
|
|
|
28.0
|
%
|
|
|
89,382
|
|
|
|
29.3
|
%
|
Base film for other applications
|
|
|
32,876
|
|
|
|
5,075
|
|
|
|
13.2
|
%
|
|
|
46,911
|
|
|
|
16.5
|
%
|
|
|
27,721
|
|
|
|
9.1
|
%
|
|
|
|
248,862
|
|
|
|
38,418
|
|
|
|
100.0
|
%
|
|
|
284,464
|
|
|
|
100.0
|
%
|
|
|
304,950
|
|
|
|
100.0
|
%
|
In 2015, sales of specialty films were
RMB73,851 (US$11,400) and 29.7% of our total revenues as compared to RMB79,609 and 28.0% in 2014, which was a decrease of RMB5,758,
or 7.2%, as compared to the same period in 2014. The decrease was largely attributable to the reduction in sales price for dry
films and coated films due to the entrances of new competitors..
(17) Depreciation
and Amortization
Depreciation of property, plant and equipment and amortization
of intangible asset is included in the following captions:
|
|
December 31,2015
|
|
|
December 31,2014
|
|
|
December 31,2013
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
RMB
|
|
Cost of goods sold
|
|
|
25,139
|
|
|
|
3,881
|
|
|
|
40,728
|
|
|
|
41,771
|
|
Selling expenses
|
|
|
22
|
|
|
|
3
|
|
|
|
28
|
|
|
|
33
|
|
Administrative expenses
|
|
|
19,354
|
|
|
|
2,988
|
|
|
|
6,945
|
|
|
|
6,357
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
44,515
|
|
|
|
6,872
|
|
|
|
47,701
|
|
|
|
48,161
|
|
(18) Freight Costs
The Group records freight costs related
to the transporting of the raw materials to the Group’s warehouse in cost of raw materials and all other outbound freight
costs in selling expenses. For the year ended December 31, 2015, 2014 and 2013, freight costs included in cost of goods sold were
RMB2,938 (US$454), RMB3,603 and RMB3,738 , respectively, and RMB7,713 (US$1,191), RMB10,196, and RMB11,770, respectively, were
included in selling expenses.
(19) Interest Expense
The Group capitalizes interest expense
as a component of the cost of construction in progress. The following is a summary of interest cost incurred during the year ended
December 31, 2015, 2014 and 2013:
|
|
December 31,2015
|
|
|
December 31,2014
|
|
|
December 31,2013
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
RMB
|
|
Interest cost capitalized
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,059
|
|
Interest cost charged to expense
|
|
|
8,333
|
|
|
|
1,286
|
|
|
|
12,486
|
|
|
|
10,094
|
|
|
|
|
8,333
|
|
|
|
1,286
|
|
|
|
12,486
|
|
|
|
12,153
|
|
Interest expense in 2015 was lower than
that in 2014, which was mainly due to lower interest rate.
(20) Income
Taxes
Cayman Islands Tax
Under the current Cayman Island laws, 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.
PRC
Tax
Shandong Fuwei, being a Hi-Tech Enterprise
in the Weifang Hi-Tech Industrial Zone in Shandong, the PRC, has been granted preferential tax treatments by the Tax Bureau of
the PRC. According to the PRC Income Tax Law and various approval documents issued by the Tax Bureau, Shandong Fuwei’s profit
was taxed at a rate of 15%. In 2014, Fuwei Films failed to be designated as a Hi-Tech Enterprise and it became subject to a standard
enterprise income tax at a rate of 25% in 2014 and 2015.
If our subsidiary Shandong Fuwei was not
entitled to a reduced enterprise income tax, or EIT, rate of 15% for the year ended December 31, 2013, 2012 and 2011, it would
have had an EIT rate of 25%, net income and basic and diluted earnings per share would be reduced by the following amounts:
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
RMB
|
|
Net income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,499
|
)
|
Earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Basic
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(0.19
|
)
|
- Diluted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(0.19
|
)
|
The Group had minimal operations in jurisdictions
other than the PRC. Net (loss) income before income taxes consists of:
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
RMB
|
|
Cayman Islands
|
|
|
(2,379
|
)
|
|
|
(367
|
)
|
|
|
(2,267
|
)
|
|
|
(2,144
|
)
|
British Virgin Islands
|
|
|
(3
|
)
|
|
|
(1
|
)
|
|
|
(3
|
)
|
|
|
(3
|
)
|
PRC
|
|
|
(59,677
|
)
|
|
|
(9,212
|
)
|
|
|
(69,772
|
)
|
|
|
(66,860
|
)
|
U.S.A
|
|
|
(9
|
)
|
|
|
(1
|
)
|
|
|
(42
|
)
|
|
|
48
|
|
|
|
|
(62,068
|
)
|
|
|
(9,581
|
)
|
|
|
(72,084
|
)
|
|
|
(68,959
|
)
|
The Company has no material unrecognized
tax benefit which would favorably affect the income taxes in future periods and does not believe there will be any significant
increases or decreases within the next twelve months. No interest or penalties have been accrued at the date of adoption. As of
December 31, 2015, we do not have any accrued liability for uncertain tax positions.
Shandong Fuwei was designated as a High-and-New
Tech Enterprise in December 2008 and retained its status as a high-tech enterprise for three years commencing from 2011 enjoying
a favorable corporate tax rate during the term from January 1, 2011 to December 31, 2013 pursuant to the Enterprise Income Tax
Law. In 2014, Fuwei Films failed to be designated as High-and-New Tech Enterprise. Accordingly, the deferred taxes as of December
31, 2015 have been calculated employing the statutory rate of Shandong Fuwei of 25%.
Income tax benefit (expense) consists of:
|
|
Current
|
|
|
Deferred
|
|
|
Total
|
|
PRC Income tax
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
Year ended December 31, 2013
|
|
|
-
|
|
|
|
10,007
|
|
|
|
10,007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2014
|
|
|
1,043
|
|
|
|
(303
|
)
|
|
|
740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2015
|
|
|
-
|
|
|
|
(7,000
|
)
|
|
|
(7,000
|
)
|
Year ended December 31, 2015 (US$)
|
|
|
-
|
|
|
|
(1,081
|
)
|
|
|
(1,081
|
)
|
Income tax expenses reported in the consolidated
statements of income differs from the income tax expense amount computed by applying the PRC income tax rate of 25%, 15%, 15% (the
statutory tax rate of the Company’s principal subsidiary) for the year ended December 31, 2015, 2014 and 2013 for the following
reasons:
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
RMB
|
|
Income (loss) before income taxes
|
|
|
(62,068
|
)
|
|
|
(9,581
|
)
|
|
|
(72,084
|
)
|
|
|
(68,959
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Computed “expected” tax expense
|
|
|
(218
|
)
|
|
|
(34
|
)
|
|
|
(218
|
)
|
|
|
(218
|
)
|
Non-deductible expenses
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Non-taxable income
|
|
|
218
|
|
|
|
34
|
|
|
|
218
|
|
|
|
131
|
|
Tax holiday
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
87
|
|
Tax effect of deferred tax and tax rates differential
|
|
|
(7,000
|
)
|
|
|
(1,081
|
)
|
|
|
740
|
|
|
|
10,007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual income tax benefit (expense)
|
|
|
(7,000
|
)
|
|
|
(1,081
|
)
|
|
|
740
|
|
|
|
10,007
|
|
Tax effects of temporary differences that
give rise to significant portions of the deferred tax assets (liabilities) as of December 31, 2015 and 2014 are presented below.
|
|
December
31,2015
|
|
|
December
31,2014
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
187
|
|
|
|
29
|
|
|
|
206
|
|
Other receivables
|
|
|
-
|
|
|
|
-
|
|
|
|
1,060
|
|
Inventory impairment
|
|
|
1,251
|
|
|
|
193
|
|
|
|
1,528
|
|
Estimated Loss due to Product Warranty
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
1,438
|
|
|
|
222
|
|
|
|
2,794
|
|
Non-current
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, principally due
to differences in depreciation
|
|
|
1,763
|
|
|
|
272
|
|
|
|
1,998
|
|
Construction in progress, principally due to
capitalized interest
|
|
|
(4,819
|
)
|
|
|
(743
|
)
|
|
|
(5,212
|
)
|
Lease prepayments, principally due to differences
in charges
|
|
|
(587
|
)
|
|
|
(91
|
)
|
|
|
(604
|
)
|
Allowance for advanced to supplier-long term
|
|
|
27
|
|
|
|
4
|
|
|
|
68
|
|
Net loss carryforward
|
|
|
13,729
|
|
|
|
2,119
|
|
|
|
19,507
|
|
|
|
|
10,113
|
|
|
|
1,561
|
|
|
|
15,757
|
|
Net deferred income tax assets
|
|
|
11,551
|
|
|
|
1,783
|
|
|
|
18,551
|
|
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.
Considering the level of historical performance of Shandong Fuwei, we only recognized deferred tax assets for the loss of
2015 after considering the possibility of realizing the benefits under the conservatism principle.
(21) Related Party Transactions
Name of party
|
|
Relationship
|
|
|
|
Hongkong Ruishang International Trade Co., Ltd. (the “Hongkong Ruishang”)
|
|
Shareholder of the
Company(52.9%)
|
Shandong Fuhua Investment Company Limited.
(“Shandong Fuhua”)
|
|
Shareholder of the Company(12.54%)
|
Hongkong Ruishang International Trade Co., Ltd. (the “Hongkong Ruishang”)
|
|
Subsidiary of Shandong SNTON Group Co.,Ltd.(“SNTON Group”)
|
Shandong SNTON Optical Materials Technology Co., Ltd.( SNTON Optical)
|
|
Subsidiary of Shandong SNTON Group Co.,Ltd.(“SNTON Group”)
|
Due to related parties
In April 2014, the Company obtained a loan
for a total amount of RMB105,000 from Shandong SNTON Optical Materials Technology Co., Ltd. (the “Shandong SNTON”)
to pay off certain short-term loans due to Bank of Communications Co., Ltd. The interest shall be calculated at the benchmark rate,
plus an additional 20% of the said benchmark rate, for the loan of the same term announced by the People’s Bank of China.
The interest must be paid quarterly and settled in full at the end of the year. As of December 31, 2014, the principle of this
loan and the interest have not been paid. In March 2015, the Company entered into a supplemental agreement with Shandong SNTON
pursuant to which the parties agreed that the Company will pay off the principle of this loan plus interest upon availability of
new loans from banks or other financial institutions.
As of December 31, 2015, the principle
of this loan from Shandong SNTON was RMB104,707 and the interest was RMB11,800.
In May 2014, the Company borrowed RMB15,000
from Shandong SNTON Group Co., Ltd. (the “SNTON Group”) solely to purchase raw materials. The interest shall be calculated
at the benchmark rate, plus an additional 20% of the said benchmark rate, for the loan of the same term announced by the People’s
Bank of China. The interest shall be paid quarterly and settled in full at the end of the year. The Company has agreed to repay
this loan prior to December 31, 2014. As of December 31, 2014, the principle of this loan and the interest have not been paid.
In March 2015, the Company entered into a supplemental agreement with SNTON Group pursuant to which that the Company agreed to
pay off the principle of this loan plus interest upon availability of new loans from banks or other financial institutions.
In May 2015, SNTON Group provided the Company
with a loan for the amount of RMB10,000.
As of December 31, 2015, the total principle
of loans from SNTON Group was RMB25,000 and the interest payable was RMB1,572.
As of December 31, 2015, the total balance
of principle of loans from related party was RMB129,707 and the interest payable was RMB13,372.
In 2015, we purchased 915 Metric Tons of
final products of BOPET for a total amount of 8.03 million. The purchase price was based on market price.
During the years ended 2015, 2014 and 2013,
we paid approximately RMB112 (USD$17), RMB144 and RMB164, respectively, to Fuhua Industrial Material Management
Co., Ltd. as rental payments in connection with living quarters for our staff.
Obligations under sale-leaseback transaction
amounting to RMB300 (US$46) were guaranteed by Weifang State-Owned Assets Operation Administration Company, Beijing Shiweitong
Technology Development Co., Ltd., Fuwei Films (Holdings) Co., Ltd., and Fuwei Films (BVI) Co., Ltd., respectively. In August 2014,
Shandong SNTON Group Co., Ltd. accepted the responsibility of guarantee for the Group's obligation from Beijing Shiweitong Technology
Development Co., Ltd.
(22) Pension Plan
Pursuant to the relevant PRC regulations,
the Group is required to make contributions at a rate of 20% of employees’ salaries and wages to a defined contribution retirement
scheme organized by the local Social Bureau in respect of the retirement benefits for the Group’s employees in the PRC. The
total amount of contributions of RMB1,238 (US$191), RMB1,097 and RMB1,047 for the year ended December 31, 2015, 2014 and 2013 respectively,
was charged to administrative expenses in the accompanying consolidated statements of income. The Group has no other obligation
to make payments in respect of retirement benefits of the employees.
(23) Fair Value of Financial Instruments
Our accounting for Fair Value Measurement
and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an
exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants
on the measurement date. This topic also establishes a fair value hierarchy which requires classification based on observable and
unobservable inputs when measuring fair value. The fair value hierarchy distinguishes between assumptions based on market data
(observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels:
Level one — Quoted market prices
in active markets for identical assets or liabilities;
Level two — Inputs other than level
one inputs that are either directly or indirectly observable; and
Level three — Unobservable inputs
developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market
participant would use.
Determining which category an asset or
liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each quarter.
The measurement basis used in the preparation of the consolidated financial statements is the historical cost basis except that
the following assets and liabilities are stated at their fair value, such as derivative financial instruments and available-for-sale
equity securities. The Company had no assets and liabilities measured at fair value on December 31, 2015.
The carrying amount of cash and cash equivalents,
trade accounts receivable, prepayments and other receivables, amounts due from related parties, amounts due to related parties,
and accrued liabilities and other payables, approximate their fair values because of the short maturity of these instruments.
The carrying amount of bank loans approximate
the fair value based on the borrowing rates currently available for bank loans with similar terms and maturity.
(24) Business and Credit Concentrations
(a) Almost all of the Group’s customers
are located in the PRC. There is no individual customer with gross revenue more than 10% of total gross revenue during the year
ended December 31, 2015, 2014 and 2013.
Each amount due from the following
customers represented more than 10% of the outstanding accounts receivable on December 31, 2015 and 2014.
|
|
Percentage of accounts receivable outstanding (%)
December 31, 2015
|
|
Zhuhai City Nengdong Technolgogy Optical Materials Co., Ltd.
|
|
|
19.3
|
%
|
Yunnan Dexin Zhiye Co., Ltd.
|
|
|
18.3
|
%
|
CELPLAST METALLIZED PRODUCTS LIMITED
|
|
|
13.9
|
%
|
Eternal Electronic Material (Guangzhou) Co., Ltd.
|
|
|
11.9
|
%
|
|
|
Percentage of accounts receivable outstanding (%)
December 31, 2014
|
|
Eternal Electronic Material (Guangzhou) Co., Ltd.
|
|
|
23.2
|
%
|
LG HAUSYS LTD
|
|
|
11.1
|
%
|
Eternal Photo Electronic Materials (Guangzhou) Co., Ltd.
|
|
|
11.1
|
%
|
Yunnan Dexin Zhiye Co., Ltd.
|
|
|
10.3
|
%
|
(b) The Group purchased a significant portion
of PET resin required for the production of BOPET film from Sinopec Yizheng Chemical Fibre Company Limited (“Sinopec Yizheng”)
during the year ended December 31, 2015, 2014 and 2013. The Group believes that there are a limited number of suppliers in the
PRC with the ability to consistently supply PET resin that meets the Group’s quality standards and requirements. Currently,
the Group has an annual supply agreement with Sinopec Yizheng pursuant to which Sinopec Yizheng has agreed to supply fixed quantities
of PET resin to the Group on a monthly basis at the prevailing market prices. The terms of such supply agreement are reviewed annually.
Although the Group believes that it maintains a good relationship with its major suppliers, there can be no assurance that Sinopec
Yizheng will continue to sell to the Group under normal commercial terms as and when needed.
The following are the vendors that supplied 10% or more of
our raw materials for each of the year ended December 31, 2015, 2014 and 2013:
|
|
|
|
Percentage of total purchases (%)
|
|
Supplier
|
|
Item
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
Sinopec Yizheng Chemical Fibre Company Limited
|
|
PET resin and Additives
|
|
|
52.0
|
%
|
|
|
60.0
|
%
|
|
|
56.7
|
%
|
Jiangyin Huaxing Compound Co., Ltd.
|
|
PET resin
|
|
|
-
|
|
|
|
-
|
|
|
|
4.1
|
%
|
The balance of advance to supplier to Sinopec Yizheng and Jiangyin
Huaxing was RMB3,301 (US$787) and zero as of December 31, 2015, respectively.
The balance of advance to supplier to Sinopec
Yizheng and Jiangyin Huaxing was RMB3,468 (US$ 559) and RMB23 as of December 31, 2014, respectively.
The balance of advance to supplier to Sinopec Yizheng and Jiangyin
Huaxing was RMB1,928 and RMB23 as of December 31, 2013, respectively.
(c) Financial instruments that potentially
subject the Company to concentrations of credit risk are cash and cash equivalents, accounts receivable and other receivables arising
from its normal business activities. The Company places its cash and cash equivalents in what it believes to be credit-worthy financial
institutions. The Company maintains large sums of cash in two major banks in China. The aggregate balance in such accounts as of
December 31, 2015 was RMB 11,650(US $1,798). There is no insurance securing these deposits in China. The Company has a diversified
customer base, most of which are in China.
(25) Commitments and Contingencies
(a) Operating lease commitments
Future minimum lease payments under non-cancelable
operating leases as of December 31, 2015 are as follows:
|
|
December 31, 2015
|
|
|
|
RMB
|
|
|
US$
|
|
Operating lease commitments
|
|
|
288
|
|
|
$
|
44
|
|
The Company leases warehouses, staff quarters
and offices under operating leases. The leases duration is typically for one to three years, with an option to renew. None of the
leases includes contingent rentals.
For the year ended December 31, 2015, 2014
and 2013, total rental expenses for non-cancelable operating leases were RMB206 (US$32), RMB436 and RMB410, respectively.
(b) Capital commitments
Capital commitments for purchase of property,
plant and equipment as of December 31, 2015 were RMB1,005 (US$155).
(c) Outstanding bills receivable discounted
As of December 31, 2015, the Company had
not retained any recourse obligation in respect of bills receivable discounted with and sold to banks.
(d) Legal Proceedings
From time to time, we may be subject to
legal actions and other claims arising in the ordinary course of business. Shandong Fuwei is currently a party to three legal proceedings
in China.
On July 9, 2012, a client filed a lawsuit
in Beijing Daxing District People’s Court against Shandong Fuwei claiming RMB953 plus interest over disputes arising from
a Procurement Contract between the parties. Shandong Fuwei raised a jurisdictional objection upon filing its plea, and Beijing
Daxing District People’s Court overruled the objection. Shandong Fuwei filed an appeal against the judgment in the First
Intermediate People’s Court of Beijing. The appeal was dismissed on January 23, 2013. On May 15, 2013, Beijing Daxing District
People’s Court heard the case and adjourned the hearing due to the fact that plaintiff failed to provide sufficient evidence.
On June 25, 2013, the case was heard in Beijing Daxing District People’s Court again and it was further adjourned due to
plaintiff’s failure to provide sufficient evidence. The case was then scheduled to be heard on August 7, 2013. However, on
the day prior to re-scheduled hearing, Shandong Fuwei was informed by Beijing Daxing District People’s Court that the hearing
was adjourned further for the same reason that plaintiff failed to provide sufficient evidence. On April 21, 2014, the case was
heard, and the plaintiff failed to provide sufficient evidence and the hearing was further adjourned. On May 28, 2014, the case
was heard and the plaintiff provided some evidence. On August 25, 2014, the case was heard again. On November 5, 2014, the court
accepted the withdrawal application from the plaintiff. On November 26, 2014, the plaintiff filed a second lawsuit in Beijing Daxing
District People’s Court against Shandong Fuwei over disputes arising from the Procurement Contract between the parties claiming
RMB618 plus interest as a result of non- payment. The case was heard on January 26, 2015, where the two parties testified over
the relevant evidence. The case was heard on March 3, 2015 and October 26, 2015. To date, the case has not been decided. We are
unable to predict the outcome of this lawsuit and therefore cannot determine the likelihood of loss nor estimate a range of possible
loss.
On January 21, 2014, Shandong Fuwei received
a complaint from Zeng Wenhong, a Hong Kong citizen, plaintiff against Shandong Fuwei with a claim for a refund of US$500 (approximately
RMB4,138) and related interest of RMB2,332. The plaintiff alleged that Shandong Fuwei has agreed to sell to the plaintiff ordinary
shares of the Company pursuant to an oral agreement between the plaintiff and Shandong Fuwei in June 2005, and as a result the
plaintiff transferred US$500 to Wellplus Investments (Hong Kong) Limited to be used for acquiring the ordinary shares of the Company.
However, the plaintiff never received such shares. The case was heard by the Intermediate People's Court of Weifang on April 3,
2014. On October 28, 2014, the case was heard again and the plaintiff submitted additional evidence. On September 25, 2015, Shandong
Fuwei received a written judgment issued by the Intermediate People’s Court of Weifang ordering Shandong Fuwei to refundUS$500
and its interest to the plaintiff. Shandong Fuwei has filed an appeal to the High People’s Court’s of Weifang within
the appeal period. We are unable to predict the outcome of this lawsuit and therefore cannot determine the likelihood of loss nor
estimate a range of possible loss.
On June 28, 2014, an equipment supplier
filed a lawsuit in Weifang High-Tech District People’s Court against Shandong Fuwei over disputes arising from a Procurement
Contract between the parties with a claim for RMB844 plus interest of RMB134. The case has been settled between the two parties.
Pursuant to the terms of the settlement, Shandong Fuwei shall pay the plaintiff RMB750 through bank acceptance note prior to February
7, 2015. The remaining balance of RMB94 shall be paid within two days of reaching resolution on the eight remaining disputes between
the two parties. Thereafter, neither party will bear any further liability. To date, Shandong Fuwei has made a payment to the
plaintiff in the amount of RMB750. The remaining disputes arising from the Procurement Contract are in the process of being resolved.
(26) Earnings (Loss) Per Share
Basic and diluted earnings per share for
the period/year ended December 31, 2015, 2014 and 2013 have been calculated as follows:
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
RMB
|
|
Net (loss) income available to ordinary shareholders
|
|
|
(69,065
|
)
|
|
|
(10,662
|
)
|
|
|
(71,327
|
)
|
|
|
(58,971
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares outstanding
|
|
|
13,062,500
|
|
|
|
13,062,500
|
|
|
|
13,062,500
|
|
|
|
13,062,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive effect of share options
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average number of ordinary shares outstanding
|
|
|
13,062,500
|
|
|
|
13,062,500
|
|
|
|
13,062,500
|
|
|
|
13,062,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings (loss) per share
|
|
|
(5.29
|
)
|
|
|
(0.82
|
)
|
|
|
(5.46
|
)
|
|
|
(4.51
|
)
|
(27) Fuwei Films (Holdings) Co., Ltd (Parent Company)
Under PRC regulations, the Company’s
operating subsidiary, Shandong Fuwei may pay dividends only out of its accumulated profits, if any, determined in accordance with
the accounting standards and regulations prevailing in the PRC (“PRC GAAP”). In addition, Shandong Fuwei is required
to set aside at least 10% of its accumulated profits each year, if any, to fund the statutory general reserve until the balance
of the reserve reaches 50% of its registered capital. The statutory general reserve is not distributable in the form of cash dividends
to the Company and can be used to make up cumulative prior year losses, if any, and may be converted into share capital by the
issue of new shares to shareholders in proportion to their existing shareholdings, or by increasing the par value of the shares
currently held by them, provided that the reserve balance after such issue is not less than 25% of the registered capital. Further,
Shandong Fuwei is also required to allocate 5% of the profit after tax, determined in accordance with PRC GAAP, to the statutory
public welfare fund which is restricted to be used for capital expenditures for staff welfare facilities owned by the Company.
The statutory public welfare fund is not available for distribution to equity owners (except in liquidation) and may not be transferred
in the form of loans, advances, or cash dividends. As of December 31, 2015, an aggregate amount of RMB37,441 (US$5,780) has been
appropriated from retained earnings and set aside for statutory general reserve and public welfare fund, by Shandong Fuwei.
As of December 31, 2015, the amount of restricted assets of Shandong Fuwei, which may not be transferred
to the Company in the form of loans, advances or cash dividends by the subsidiaries without the consent of a third party, was approximately
57.9% of the Company’s consolidated total assets
as discussed above. In addition, the current foreign exchange control policies applicable in the PRC also restrict the transfer
of assets or dividends outside the PRC.
The following presents condensed unaudited
unconsolidated financial information of the Parent Company only.
Condensed unaudited Balance Sheet as of December 31, 2015
and 2014
|
|
2015
|
|
|
2014
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
11
|
|
|
|
2
|
|
|
|
106
|
|
Other current assets
|
|
|
278,903
|
|
|
|
43,055
|
|
|
|
263,817
|
|
Investments in subsidiaries
|
|
|
389
|
|
|
|
60
|
|
|
|
369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
279,303
|
|
|
|
43,117
|
|
|
|
264,292
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
60,426
|
|
|
|
9,328
|
|
|
|
54,906
|
|
Total shareholders’ equity
|
|
|
218,877
|
|
|
|
33,789
|
|
|
|
209,386
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders’ equity
|
|
|
279,303
|
|
|
|
43,117
|
|
|
|
264,292
|
|
Condensed unaudited Statements of Operations (For the years
ended December 31, 2015, 2014 and 2013)
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
RMB
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income (expenses)
|
|
|
(12
|
)
|
|
|
(2
|
)
|
|
|
(11
|
)
|
|
|
(9
|
)
|
General and administrative expenses
|
|
|
(2,367
|
)
|
|
|
(365
|
)
|
|
|
(2,257
|
)
|
|
|
(2,135
|
)
|
Other income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Loss before equity in undistributed earnings of subsidiaries
|
|
|
(2,379
|
)
|
|
|
(367
|
)
|
|
|
(2,268
|
)
|
|
|
(2,144
|
)
|
Equity in earnings of subsidiaries
|
|
|
(66,689
|
)
|
|
|
(10,295
|
)
|
|
|
(69,076
|
)
|
|
|
(56,808
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
(69,068
|
)
|
|
|
(10,662
|
)
|
|
|
(71,344
|
)
|
|
|
(58,952
|
)
|
Condensed unaudited Statement of Cash Flows (For the year
ended December 31, 2015, 2014 and 2013)
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
RMB
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
(69,068
|
)
|
|
|
(10,662
|
)
|
|
|
(71,344
|
)
|
|
|
(58,952
|
)
|
Adjustment to reconcile net income (loss) to net cash from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Equity in earnings of subsidiaries
|
|
|
66,689
|
|
|
|
10,295
|
|
|
|
69,076
|
|
|
|
56,808
|
|
- Foreign exchange gain
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Other current assets
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
- Other current liabilities
|
|
|
34
|
|
|
|
5
|
|
|
|
-
|
|
|
|
(124
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
(2,345
|
)
|
|
|
(362
|
)
|
|
|
(2,268
|
)
|
|
|
(2,268
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments to related parties
|
|
|
2,249
|
|
|
|
347
|
|
|
|
2,310
|
|
|
|
2,272
|
|
Proceeds from related parties
|
|
|
(2
|
)
|
|
|
-
|
|
|
|
(3
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange
|
|
|
2
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
2,249
|
|
|
|
347
|
|
|
|
2,307
|
|
|
|
2,270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
(96
|
)
|
|
|
(15
|
)
|
|
|
39
|
|
|
|
2
|
|
Cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At beginning of year
|
|
|
106
|
|
|
|
16
|
|
|
|
67
|
|
|
|
65
|
|
At end of year
|
|
|
10
|
|
|
|
2
|
|
|
|
106
|
|
|
|
67
|
|
(28) Unaudited Quarterly Data
Quarter Ended
|
|
March
31
|
|
|
June
30
|
|
|
September
30
|
|
|
December
31
|
|
|
Total
|
|
Fiscal year 2015
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
52,776
|
|
|
|
8,514
|
|
|
|
66,709
|
|
|
|
10,760
|
|
|
|
65,670
|
|
|
|
10,333
|
|
|
|
63,707
|
|
|
|
9,835
|
|
|
|
248,862
|
|
|
|
38,418
|
|
Gross loss
|
|
|
(7,825
|
)
|
|
|
(1,262
|
)
|
|
|
287
|
|
|
|
47
|
|
|
|
3,794
|
|
|
|
597
|
|
|
|
3,740
|
|
|
|
578
|
|
|
|
(4
|
)
|
|
|
-
|
|
Net loss
|
|
|
(14,997
|
)
|
|
|
(2,419
|
)
|
|
|
(14,651
|
)
|
|
|
(2,362
|
)
|
|
|
(12,253
|
)
|
|
|
(1,927
|
)
|
|
|
(27,164
|
)
|
|
|
(4,192
|
)
|
|
|
(69,065
|
)
|
|
|
(10,662
|
)
|
Basic and diluted loss per share
|
|
|
(1.15
|
)
|
|
|
(0.19
|
)
|
|
|
(1.12
|
)
|
|
|
(0.18
|
)
|
|
|
(0.94
|
)
|
|
|
(0.15
|
)
|
|
|
(2.08
|
)
|
|
|
(0.32
|
)
|
|
|
(5.29
|
)
|
|
|
(0.82
|
)
|