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. In December 2016, Fuwei Films USA, LLC was
written off.
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, including, 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 2016 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 6.9430, being the noon buy rate for U.S. dollars in effect on December 31, 2016
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, 2016, 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, 2016 and 2015, there
were cash and cash equivalents of RMB13,343 (US$1,922) and RMB14,355, respectively.
As of December 31, 2016 and 2015, there
were restricted cash of RMB73,421 (US$10,575) and RMB43,215, 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, 2016 and 2015 was RMB3,213 (US463) and RMB747, 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, 2016, 2015 and 2014 were RMB43,193 (US$6,221), RMB44,515 and RMB47,701 respectively, of which 37.9%, 56.5% and 85.4% was recorded
in cost of goods sold and 62.1%, 43.5% and 14.6% 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 accumulated loss on impairment of assets
during 2016 and 2015 was zero and RMB7,219 (US$1,114), 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 RMB3,577 (US$515), RMB3,619 and RMB8,005 for the year
ended December 31, 2016, 2015 and 2014 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 2016 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.
On December 5, 2016, we held an extraordinary
general meeting of shareholders pursuant to which a 1-for-4 reverse stock split of our authorized ordinary shares, accompanied
by a corresponding decrease in our issued and outstanding ordinary shares and an increase of the par value of each ordinary share
from $0.129752 to US$0.519008 (the “Reverse Stock Split”), was approved by our shareholders of record. All references
made to share or per share amounts in the accompanying consolidated financial statements and applicable disclosures have been retroactively
adjusted to reflect the 1-for-4 reverse stock split.
(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) Non-controlling interest
Non-controlling interest represents the
portion of equity that is not attributable to the Company. The net income (loss) attributable to noncontrolling interests are separately
presented in the accompanying statements of income and other comprehensive income. Losses attributable to noncontrolling interests
in a subsidiary may exceed the interest in the subsidiary’s equity. The related noncontrolling interest continues to be attributed
its share of losses even if that attribution results in a deficit of the noncontrolling interest balance. In December 2016, Fuwei
USA was written off. The non-controlling interest percent of entity Fuwei USA was 40%, with the deficit amount of zero and RMB(834)
as of December 31, 2016 and 2015, 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 2016 and 2015 consolidated financial statements to conform to the fiscal 2016 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, 2016, the Company had a working capital deficiency of RMB170,128 (US$24,504)
and accumulated deficit of RMB54,483 (US$7,847) from net losses incurred during the year of 2016. 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
Revenue
Recognition:
In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers
(Topic 606) (ASU 2014-09), which amends the existing accounting standards for revenue recognition. In August 2015, the FASB issued
ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which delays the effective
date of ASU 2014-09 by one year. The FASB also agreed to allow entities to choose to adopt the standard as of the original effective
date. In March 2016, the FASB issued Accounting Standards Update No. 2016-08, Revenue from Contracts with Customers (Topic 606):
Principal versus Agent Considerations (Reporting Revenue Gross versus Net) (ASU 2016-08) which clarifies the implementation guidance
on principal versus agent considerations. The guidance includes indicators to assist an entity in determining whether it controls
a specified good or service before it is transferred to the customers. The new revenue recognition standard will be effective for
us in the first quarter of 2018, with the option to adopt it in the first quarter of 2017. We currently anticipate adopting the
new standard effective January 1, 2018. The new standard also permits two methods of adoption: retrospectively to each prior reporting
period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance
recognized at the date of initial application (the modified retrospective method). We currently anticipate adopting the standard
using the modified retrospective method. We are still in the process of completing our analysis on the impact this guidance will
have on our consolidated financial statements and related disclosures. The adoption of this ASU is not expected to have a material
impact on the Company's consolidated financial statements.
Financial
Instrument
In
January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement
of Financial Assets and Financial Liabilities” (“ASU 2016-01”). The standard addresses certain aspects of recognition,
measurement, presentation, and disclosure of financial instruments. ASU 2016-01 is effective for fiscal years, and interim periods
within those years, beginning after December 15, 2017, and early adoption is not permitted. Accordingly, the standard is effective
for us on September 1, 2018. The Company is currently evaluating the impact that the standard will have on the Company’s
consolidated financial statements.
Leases
In
February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-2”), which provides guidance on lease
amendments to the FASB Accounting Standard Codification. This ASU will be effective for us beginning in May 1, 2019. The Company
is currently in the process of evaluating the impact of the adoption of ASU 2016-2 on the Company’s consolidated financial
statements.
Stock-based
Compensation
In
March 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based
Payment Accounting (ASU 2016-09). ASU 2016-09 changes how companies account for certain aspects of stock-based awards to employees,
including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in
the statement of cash flows. ASU 2016-09 is effective for us in the first quarter of 2018, and earlier adoption is permitted. We
are still evaluating the effect that this guidance will have on our consolidated financial statements and related disclosures.
Financial
Instruments - Credit Losses
In
June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): The amendments in this Update require
a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected
to be collected. The amendments broaden the information that an entity must consider in developing its expected credit loss estimate
for assets measured either collectively or individually. The use of forecasted information incorporates more timely information
in the estimate of expected credit loss, which will be more decision useful to users of the financial statements. ASU 2016-13 is
effective for the Company for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.
Early adoption is allowed as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal
years. The Company is still evaluating the effect that this guidance will have on the Company’s consolidated financial statements
and related disclosures.
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, 2016
|
|
|
December 31, 2015
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
Accounts receivable
|
|
|
17,052
|
|
|
|
2,456
|
|
|
|
7,861
|
|
Less: Allowance for doubtful accounts
|
|
|
(3,213
|
)
|
|
|
(463
|
)
|
|
|
(747
|
)
|
|
|
|
13,839
|
|
|
|
1,993
|
|
|
|
7,114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bills receivable
|
|
|
15,614
|
|
|
|
2,249
|
|
|
|
2,932
|
|
|
|
|
29,453
|
|
|
|
4,242
|
|
|
|
10,046
|
|
An analysis of the allowance for doubtful accounts for 2016,
2015 and 2014 is as follows:
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
|
December 31, 2014
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
RMB
|
|
Balance at beginning of year
|
|
|
747
|
|
|
|
108
|
|
|
|
825
|
|
|
|
795
|
|
Bad debt (recovery) expense
|
|
|
2,466
|
|
|
|
355
|
|
|
|
(78
|
)
|
|
|
30
|
|
Write-offs
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
|
3,213
|
|
|
|
463
|
|
|
|
747
|
|
|
|
825
|
|
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, 2016
|
|
|
December 31, 2015
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
Raw materials
|
|
|
21,463
|
|
|
|
3,091
|
|
|
|
16,819
|
|
Work-in-progress
|
|
|
1,072
|
|
|
|
154
|
|
|
|
1,667
|
|
Finished goods
|
|
|
6,796
|
|
|
|
979
|
|
|
|
15,483
|
|
Consumables and spare parts
|
|
|
602
|
|
|
|
87
|
|
|
|
611
|
|
Allowance for obsolescence
|
|
|
(4,780
|
)
|
|
|
(688
|
)
|
|
|
(5,006
|
)
|
|
|
|
25,153
|
|
|
|
3,623
|
|
|
|
29,574
|
|
(6) Prepayments and Other Receivables
Prepayments and other receivables consisted
of the following:
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
Lease prepayments, current portion
|
|
|
524
|
|
|
|
76
|
|
|
|
524
|
|
Other receivables
|
|
|
5,965
|
|
|
|
859
|
|
|
|
19,810
|
|
|
|
|
6,489
|
|
|
|
935
|
|
|
|
20,334
|
|
(7) Property,
Plant and Equipment
Property, plant and equipment consisted
of the following:
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
Buildings
|
|
|
68,319
|
|
|
|
9,840
|
|
|
|
68,261
|
|
Plant and equipment
|
|
|
799,067
|
|
|
|
115,088
|
|
|
|
774,546
|
|
Computer equipment
|
|
|
2,484
|
|
|
|
358
|
|
|
|
2,449
|
|
Furniture and fixtures
|
|
|
14,668
|
|
|
|
2,113
|
|
|
|
13,730
|
|
Motor vehicles
|
|
|
2,094
|
|
|
|
302
|
|
|
|
2,094
|
|
|
|
|
886,632
|
|
|
|
127,701
|
|
|
|
861,080
|
|
Less: accumulated depreciation
|
|
|
(468,759
|
)
|
|
|
(67,515
|
)
|
|
|
(422,840
|
)
|
Impairment of plant and equipment
|
|
|
(7,219
|
)
|
|
|
(1,040
|
)
|
|
|
(7,219
|
)
|
|
|
|
410,654
|
|
|
|
59,146
|
|
|
|
431,021
|
|
All of the Group’s buildings are
located in the PRC. As of December 31, 2016 and 2015, property, plant plus land use rights with carrying value totaling RMB57,144
(US$8,230) and RMB18,398 respectively were pledged to banks as collateral for credit limits and loans(see Note 12).
As of December 31, 2016, the mortgaged
floor area of facilities and land use right to the bank is 46,196 square meters and 74,251 square meters, respectively.
(8) Lease Prepayments
The balance represents the lease prepayments of land use rights
of the Group as follows:
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
Non-current portion
|
|
|
17,358
|
|
|
|
2,500
|
|
|
|
17,882
|
|
Current portion - amount charged to expense next year
|
|
|
524
|
|
|
|
76
|
|
|
|
524
|
|
|
|
|
17,882
|
|
|
|
2,576
|
|
|
|
18,406
|
|
As of December 31, 2016, part 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, 2016, 2015 and 2014 were RMB524 (US$75), RMB524 and RMB524, respectively.
As of December 31, 2016, 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 RMB16,081 or US$2,316. 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,
2016 and 2015, the current portion of advance to suppliers was RMB6,043 (US$870) and RMB5,640, respectively. The noncurrent portion
of advance to suppliers was RMB1,861 (US$268) and RMB1,440, respectively.
(10) Other assets
Other assets represent loss on sale-leaseback
arrangement with International Far Eastern Leasing Co., Ltd. The loss is treated as compensation for the future rentals paid by
Shandong Fuwei at a below-market price. The artificial loss should be deferred and amortized in proportion to the amortization
of the related leased assets. As of February 2016, the Company has fulfilled all the obligations under the sale-leaseback arrangement
and related additional supplemental agreements between the Company and International Far Eastern Leasing Co., Ltd. As a result,
International Far Eastern Leasing Co., Ltd. has transferred the ownership of objects under the sale-leaseback arrangement to the
Company. The balance of deferred loss should be reversed based on the facts. As of December 31, 2016 and 2015, the total amount
of the other assets was zero and RMB11,607, respectively.
(11) Short-Term
Borrowings and Long-Term Loan
Short-term borrowings and long-term loan consisted of the following:
Lender
|
|
Interest
rate per
annum
|
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
|
|
|
|
|
RMB
|
|
|
|
US$
|
|
|
|
RMB
|
|
BANK LOANS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank of SPD.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- November 16, 2016 to November16, 2017
|
|
|
5.22
|
%
|
|
|
15000
|
|
|
|
2,160
|
|
|
|
-
|
|
Bank of Weifang.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- July 15, 2016 to July 15, 2017
|
|
|
7.5
|
%
|
|
|
19,500
|
|
|
|
2,809
|
|
|
|
-
|
|
- July 15, 2016 to July 15, 2017
|
|
|
7.5
|
%
|
|
|
15,000
|
|
|
|
2,160
|
|
|
|
-
|
|
- July 20, 2016 to July 20, 2017
|
|
|
7.5
|
%
|
|
|
6,400
|
|
|
|
922
|
|
|
|
-
|
|
- July 20, 2016 to July 20, 2017
|
|
|
7.5
|
%
|
|
|
1,800
|
|
|
|
259
|
|
|
|
-
|
|
- July 20, 2016 to July 20, 2017
|
|
|
7.5
|
%
|
|
|
2,300
|
|
|
|
331
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weifang Dongfang State-owned Assets Management Co., Ltd.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- October 19, 2009 to October 18, 2017
|
|
|
4.41
|
%
|
|
|
3,300
|
|
|
|
475
|
|
|
|
6,650
|
|
|
|
|
|
|
|
|
63,300
|
|
|
|
9,117
|
|
|
|
6,650
|
|
Less: amounts classified as short-term loan
|
|
|
|
|
|
|
(60,000
|
)
|
|
|
(8,642
|
)
|
|
|
-
|
|
Less: long-term loan, current portion;
|
|
|
|
|
|
|
(3,300
|
)
|
|
|
(475
|
)
|
|
|
(3,350
|
)
|
Long-term Loan
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,300
|
|
Notes:
The principal amounts of the above 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$532) due in 2017.
The annual interest rate for the loan is the benchmark interest rate for over five-year loans announced by the People’s Bank
of China reduced by 10% and the applicable annual interest rate for the period ended December 31, 2016 is 4.41%. The loan is guaranteed
by Shandong Deqin Investment& Guarantee Co., Ltd. and is used for our projects.
In April 2014, the Company obtained a loan
for a total amount of RMB105,000 from Shandong SNTON Optical Materials Technology Co., Ltd (“Shandong SNTON”) to pay
off five short-term loans to Bank of Communications Co., Ltd. In May, 2014 and 2015, we obtained loans for the amount of RMB15,000
and RMB10,000 from SNTON Group solely for the purpose of purchasing raw materials. The interest rate of both loans shall be calculated
at the benchmark rate, plus an additional 20% of the said benchmark rate, for the loan of the same term announced by the People’s
Bank of China which was exactly the same interest rate calculation method when we paid off the loans to Bank of Communications.
In August 2016, the Company returned the principle of RMB25,000 together with the interest of RMB1,970 to SNTON Group.
Bank loans outstanding, which are all denominated
in Renminbi, are secured and guaranteed as follows:
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
|
December 31, 2014
|
|
Secured by:
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
RMB
|
|
Property plant and equipment, Land use right
|
|
|
60,000
|
|
|
|
8,642
|
|
|
|
|
|
|
|
|
|
Bills receivable
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Guarantee company
|
|
|
3,300
|
|
|
|
475
|
|
|
|
6,650
|
|
|
|
10,000
|
|
Restricted cash
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
63,330
|
|
|
|
9,117
|
|
|
|
6,650
|
|
|
|
10,000
|
|
Long-term bank loans maturity for the next five years after
December 31, 2016 are as follows:
|
|
RMB
|
|
|
US$
|
|
Fiscal 2017
|
|
|
3,300
|
|
|
|
475
|
|
(12) Notes Payable
The credit lines amounting to RMB45,000
(US$6,950) and RMB45,000, respectively granted by SPD bank and Bank of Weifang were secured by a pledge of plant and land use right.
The credit lines were used to purchase raw materials. The term of the credit line granted by SPD bank is from December 19, 2014
to December 19, 2017. And the term of the credit line granted by Bank of Weifang is from July 2016 to July 2017. As of December
31, 2016, the amount of credit line granted by SPD bank used was RMB42,710 and the remaining balance was RMB2,290. The amount of
credit line granted by Bank of Weifang was all used.
As of December 31, 2016, Shandong Fuwei
had banker’s acceptances opened with a maturity from three to six months totaling RMB100,888 (US$14,531) for payment in connection
with raw materials on a total deposits of RMB43,453 (US$6,259) and RMB29,968 (US$4,316) at SPD Bank and Bank of Weifang, respectively.
Notes payable consisted of the following:
Issuing bank
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
SPD Bank
|
|
|
70,920
|
|
|
|
10,215
|
|
|
|
85,780
|
|
Bank of Weifang
|
|
|
29,968
|
|
|
|
4,316
|
|
|
|
0
|
|
|
|
|
100,888
|
|
|
|
14,531
|
|
|
|
85,780
|
|
(13) Accrued Expenses and Other Payables
Accrued expenses and other payables consisted of the following:
|
|
December 31,2016
|
|
|
December 31,2015
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
Other payables
|
|
|
5,204
|
|
|
|
750
|
|
|
|
8,682
|
|
Predicted liability
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
5,204
|
|
|
|
750
|
|
|
|
8,682
|
|
(14) Obligations Under Capital Leases
|
|
31-Dec-16
|
|
|
31-Dec-15
|
|
|
|
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
payment
|
|
|
Total
minimum
lease
payments
|
|
|
Interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Within 1 year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
302
|
|
|
|
304
|
|
|
|
2
|
|
After 1 year but within 2 years -
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
After 2 years but within 3 years -
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
After 3 years
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
302
|
|
|
|
304
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: balance due within one year classified as current liabilities -
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Details of obligations under capital leases are as follows:
|
|
December 31,2016
|
|
|
December 31,2015
|
|
|
|
RMB
|
|
|
RMB
|
|
|
|
|
|
|
|
|
RMB denominated obligations
|
|
|
|
|
|
|
|
|
Fixed interest rate of 6.49% per annum
|
|
|
-
|
|
|
|
302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
302
|
|
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.
(15) 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,
2016, net revenues were RMB253,926 (US$36,573), compared to RMB248,862 during the same period in 2015, representing a decrease
of RMB5,064 or 2.0%, mainly due to the reduction of average sales price by 2.6% caused by the decrease in the price of main raw
materials. For further analysis of the factors causing revenue decrease, the reduction of average sales price caused a decrease
of RMB6,840 and sales volume factor made an increase of RMB11,904.
The following table shows the distribution
of the Company’s revenue by the geographical location of customers, whereas all the Company’s assets are located in
the PRC:
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
|
December 31, 2014
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
RMB
|
|
Sales in China
|
|
|
212,129
|
|
|
|
30,553
|
|
|
|
194,226
|
|
|
|
241,446
|
|
Sales in other countries (principally Europe, Asia and North America)
|
|
|
41,797
|
|
|
|
6,020
|
|
|
|
54,636
|
|
|
|
43,018
|
|
|
|
|
253,926
|
|
|
|
36,573
|
|
|
|
248,862
|
|
|
|
284,464
|
|
Overseas sales were RMB41,797 (US$6,020,)
or 16.5% of total revenues, compared with RMB54,636 or 22.0% of total revenues in 2015. For further analysis of the factors causing
revenue decrease, the reduction of average sales price caused a decrease of RMB4,080 and sales volume factor made a decrease of
RMB8,759.
The Company’s revenue by significant types of films for
2016, 2015 and 2014 was as follows:
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
|
December 31, 2014
|
|
|
|
RMB
|
|
|
US$
|
|
|
% of Total
|
|
|
RMB
|
|
|
% of Total
|
|
|
RMB
|
|
|
% of Total
|
|
Stamping and transfer film
|
|
|
95,705
|
|
|
|
13,785
|
|
|
|
37.8
|
%
|
|
|
103,520
|
|
|
|
41.6
|
%
|
|
|
118,560
|
|
|
|
41.7
|
%
|
Printing film
|
|
|
20,366
|
|
|
|
2,933
|
|
|
|
8.0
|
%
|
|
|
29,605
|
|
|
|
11.9
|
%
|
|
|
32,987
|
|
|
|
11.6
|
%
|
Metallized film
|
|
|
7,391
|
|
|
|
1,065
|
|
|
|
2.9
|
%
|
|
|
9,010
|
|
|
|
3.6
|
%
|
|
|
6,397
|
|
|
|
2.2
|
%
|
Specialty film
|
|
|
96,091
|
|
|
|
13,840
|
|
|
|
37.8
|
%
|
|
|
73,851
|
|
|
|
29.7
|
%
|
|
|
79,609
|
|
|
|
28.0
|
%
|
Base film for other applications
|
|
|
34,373
|
|
|
|
4,950
|
|
|
|
13.5
|
%
|
|
|
32,876
|
|
|
|
13.2
|
%
|
|
|
46,911
|
|
|
|
16.5
|
%
|
|
|
|
253,926
|
|
|
|
36,573
|
|
|
|
100.0
|
%
|
|
|
248,862
|
|
|
|
100.0
|
%
|
|
|
284,464
|
|
|
|
100.0
|
%
|
In 2016, sales of specialty films were
RMB96,091 (US$13,840) and 37.8% of our total revenues as compared to RMB73,851 and 29.7% in 2015, which was an increase of RMB2,224,
or 30.1%, as compared to the same period in 2015. The increase was largely attributable to the increase in sales volumes for dry
films and coated films.
(16) Depreciation
and Amortization
Depreciation of property, plant and equipment and amortization
of intangible asset is included in the following captions:
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
|
December 31, 2014
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
RMB
|
|
Cost of goods sold
|
|
|
16,354
|
|
|
|
2,355
|
|
|
|
25,139
|
|
|
|
40,728
|
|
Selling expenses
|
|
|
20
|
|
|
|
3
|
|
|
|
22
|
|
|
|
28
|
|
Administrative expenses
|
|
|
26,819
|
|
|
|
3,863
|
|
|
|
19,354
|
|
|
|
6,945
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,193
|
|
|
|
6,221
|
|
|
|
44,515
|
|
|
|
47,701
|
|
(17) 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, 2016, 2015 and 2014, freight costs included in cost of goods sold were
RMB3,406 (US$491), RMB2,938 and RMB3,603, respectively, and RMB8,177 (US$1,178), RMB7,713, and RMB10,196, respectively, were included
in selling expenses.
(18) Interest Expense
The Group capitalizes interest expense
as a component of the cost of construction in progress. The following is a summary of interest cost incurred during the year ended
December 31, 2016, 2015 and 2014:
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
|
December 31, 2014
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
RMB
|
|
Interest cost capitalized
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Interest cost charged to expense
|
|
|
7,865
|
|
|
|
1,133
|
|
|
|
8,333
|
|
|
|
12,486
|
|
|
|
|
7,865
|
|
|
|
1,133
|
|
|
|
8,333
|
|
|
|
12,486
|
|
Interest expense in 2016 was lower than
that in 2015, which was mainly due to lower expense on discount for cash.
(19) 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. In 2016, Shandong Fuwei was designated as a High-and-New Tech Enterprise
and as a result, it is entitled to preferential tax treatment at an EIT rate of 15% for the years ended December 31, 2016, 2017
and 2018.
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:
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
RMB
|
|
Cayman Islands
|
|
|
(1,352
|
)
|
|
|
(195
|
)
|
|
|
(2,379
|
)
|
|
|
(2,267
|
)
|
British Virgin Islands
|
|
|
(5
|
)
|
|
|
(1
|
)
|
|
|
(3
|
)
|
|
|
(3
|
)
|
PRC
|
|
|
(47,796
|
)
|
|
|
(6,883
|
)
|
|
|
(59,677
|
)
|
|
|
(69,772
|
)
|
U.S.A
|
|
|
(13
|
)
|
|
|
(2
|
)
|
|
|
(9
|
)
|
|
|
(42
|
)
|
|
|
|
(49,166
|
)
|
|
|
(7,081
|
)
|
|
|
(62,068
|
)
|
|
|
(72,084
|
)
|
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, 2016, 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. In 2016, Shandong Fuwei was designated as High-and-new
Tech Enterprise. Accordingly, the deferred taxes as of December 31, 2016 have been calculated employing the statutory rate of Shandong
Fuwei of 15%.
Income tax benefit (expense) consists of:
|
|
Current
|
|
|
Deferred
|
|
|
Total
|
|
PRC Income tax
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
Year ended December 31, 2014
|
|
|
1,043
|
|
|
|
(303
|
)
|
|
|
740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2015
|
|
|
-
|
|
|
|
(7,000
|
)
|
|
|
(7,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2016
|
|
|
-
|
|
|
|
(5,317
|
)
|
|
|
(5,317
|
)
|
Year ended December 31, 2016 (US$)
|
|
|
-
|
|
|
|
(766
|
)
|
|
|
(766
|
)
|
Income tax expenses reported in the consolidated
statements of income differs from the income tax expense amount computed by applying the PRC income tax rate of 25%, 15%, 15% (the
statutory tax rate of the Company’s principal subsidiary) for the year ended December 31, 2016, 2015 and 2014 for the following
reasons:
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
RMB
|
|
Income (loss) before income taxes
|
|
|
(49,166
|
)
|
|
|
(7,081
|
)
|
|
|
(62,068
|
)
|
|
|
(72,084
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Computed “expected” tax expense
|
|
|
(218
|
)
|
|
|
(31
|
)
|
|
|
(218
|
)
|
|
|
(218
|
)
|
Non-deductible expenses
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Non-taxable income
|
|
|
131
|
|
|
|
19
|
|
|
|
218
|
|
|
|
218
|
|
Tax holiday
|
|
|
87
|
|
|
|
12
|
|
|
|
-
|
|
|
|
-
|
|
Tax effect of deferred tax and tax rates differential
|
|
|
(5,317
|
)
|
|
|
(766
|
)
|
|
|
(7,000
|
)
|
|
|
740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual income tax benefit (expense)
|
|
|
(5,317
|
)
|
|
|
(766
|
)
|
|
|
(7,000
|
)
|
|
|
740
|
|
Tax effects of temporary differences that
give rise to significant portions of the deferred tax assets (liabilities) as of December 31, 2016 and 2015 are presented below.
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
Current
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
482
|
|
|
|
69
|
|
|
|
187
|
|
Other receivables
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Inventory impairment
|
|
|
717
|
|
|
|
104
|
|
|
|
1,251
|
|
Estimated Loss due to Product Warranty
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
1,199
|
|
|
|
173
|
|
|
|
1,438
|
|
Non-current
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, principally due to differences in depreciation
|
|
|
917
|
|
|
|
132
|
|
|
|
1,763
|
|
Construction in progress, principally due to capitalized interest
|
|
|
(2,656
|
)
|
|
|
(382
|
)
|
|
|
(4,819
|
)
|
Lease prepayments, principally due to differences in charges
|
|
|
(341
|
)
|
|
|
(49
|
)
|
|
|
(587
|
)
|
Allowance for advanced to supplier-long term
|
|
|
16
|
|
|
|
2
|
|
|
|
27
|
|
Net loss carryforward
|
|
|
7,099
|
|
|
|
1,022
|
|
|
|
13,729
|
|
|
|
|
5,035
|
|
|
|
725
|
|
|
|
10,113
|
|
Net deferred income tax assets
|
|
|
6,234
|
|
|
|
898
|
|
|
|
11,551
|
|
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 2016 after considering the possibility of realizing the
benefits under the conservatism principle.
(20) 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.
(
“Shandong SNTON”)
|
|
Subsidiary of Shandong SNTON Group Co., Ltd.(“SNTON Group”)
|
Due to related parties
In April 2014, we 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 principal 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 principal of this loan plus interest upon availability of new loans
from banks or other financial institutions.
As of December 31, 2016, the principal
of this loan from Shandong SNTON was RMB104,708 and the interest was RMB17,373. The interest expense of the loans from Shandong
SNTON for the year ended 2016, 2015 and 2014 are RMB5,477, RMB11,800 and RMB17,373, respectively.
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 principal 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 principal 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.
In August 2016, the Company returned the principal of RMB25,000
together with the interest of RMB1,970 to SNTON Group.
As of December 31, 2016, the total principal of loans from SNTON
Group was zero and the interest payable was zero.
The interest expense of the loans from SNTON Group for the year
ended 2016, 2015 and 2014 are RMB669, RMB1,572 and zero, respectively.
As of December 31, 2016, the total balance of principal of loans
from related party was RMB104,708 and the interest payable was RMB17,373.
In 2016, we did not purchase any raw materials
or final products from SNTON Group.
In 2015, we purchased 76 Metric Tons of
raw materials from SNTON Group for a total amount of RMB414.
In 2014, we purchased 760 Metric Tons of
raw materials from SNTON Group for a total amount of RMB4,657 and 58 Metric Tons of final products of BOPET for a total amount
of RMB489.
In 2016, we purchased 566 Metric Tons of
final products of BOPET from Shandong SNTON for a total amount of RMB4,870 and 1.1 Metric Ton of raw materials for a total amount
of RMB 5.
In 2015, we purchased 1,740 Metric Tons
of raw materials from Shandong SNTON for a total amount of RMB9,116 and 780 Metric Tons of final products of BOPET for a total
amount of RMB7,041.
In 2014, we did not purchase any raw materials
or final products from Shandong SNTON.
The related accounts payable as of December
31, 2016 and 2015 was RMB132 and RMB156, respectively.
During the years ended 2016, 2015 and 2014,
we paid approximately RMB68 (USD$10), RMB112 and RMB144, respectively, to Fuhua Industrial Material Management Co., Ltd. as rental
payments in connection with living quarters for our staff.
(21) 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 RMB1,384 (US$199), RMB1,238 and RMB1,097 for the year ended December 31, 2016, 2015 and 2014 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.
(22) 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, 2016.
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.
(23) 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, 2016, 2015 and 2014.
Each amount due
from the following customers represented more than 10% of the outstanding accounts receivable on December 31, 2016 and 2015.
|
|
Percentage of accounts receivable outstanding (%)
|
|
|
|
December 31, 2016
|
|
Zhuhai City Nengdong Technology Optical Materials Co., Ltd.
|
|
|
24.2
|
%
|
|
|
Percentage of accounts receivable outstanding (%)
|
|
|
|
December 31, 2015
|
|
Zhuhai City Nengdong Technology 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
|
%
|
(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, 2016, 2015 and 2014. 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, 2016, 2015 and 2014:
Supplier
|
|
Item
|
|
Percentage of total purchases (%)
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Sinopec Yizheng Chemical Fibre Company Limited
|
|
PET resin and Additives
|
|
|
60.3
|
%
|
|
|
52.0
|
%
|
|
|
60.0
|
%
|
Weifang Power Supply Company.
|
|
Electric power
|
|
|
12.3
|
%
|
|
|
12.8
|
%
|
|
|
11.4
|
%
|
The balance of advance to supplier to Sinopec Yizheng and Weifang
Power Supply Company was RMB2,692 (US$388) and zero as of December 31, 2016, respectively.
The balance of advance to supplier to Sinopec
Yizheng and Weifang Power Supply Company was RMB3,301 (US$787) and RMB0 as of December 31, 2015, respectively.
The balance of advance to supplier to Sinopec Yizheng and Weifang
Power Supply Company was RMB3,468 and RMB0 as of December 31, 2014, 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, 2016 was RMB10,460 (US $1,507). There is no insurance securing these deposits in China. The Company has a diversified
customer base, most of which are in China.
(24) Commitments and Contingencies
(a) Operating lease commitments
Future minimum lease payments under non-cancelable
operating leases as of December 31, 2016 are as follows:
|
|
December 31, 2016
|
|
|
|
RMB
|
|
|
US$
|
|
Operating lease commitments
|
|
|
143
|
|
|
|
21
|
|
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, 2016, 2015
and 2014, total rental expenses for non-cancelable operating leases were RMB291 (US$42), RMB206 and RMB436, respectively.
(b) Capital commitments
Capital commitments for purchase of property,
plant and equipment as of December 31, 2016 were RMB541 (US$78).
(c) Outstanding bills receivable discounted
As of December 31, 2016, 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 two 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, October 26, 2015 and May 11, 2016. 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, 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 and October 28, 2014. On September 25, 2015, Shandong Fuwei received a written judgment issued by the Intermediate
People’s Court of Weifang ordering Shandong Fuwei to refund US$500 together with its interest to the plaintiff. Shandong
Fuwei filed for an appeal to the High People’s Court’s of Shandong Province within the appeal period. On April 29,
2016 and June 7, 2016, the case was heard by the High People’s Court’s of Shandong Province for the first time. On
June 20, 2016, the High People’s Court’s of Shandong Province reversed the judgment issued by the Intermediate People’s
Court of Weifang and dismissed the lawsuit filed by Zeng Wenhong. The plaintiff, Zeng Wenhong, became responsible for the court
acceptance fees for first and second hearings. This was a final decision of High People’s Court of Shandong Province.
On
March 6, 2017, Shandong Fuwei received a notice of application for retrial
from The Supreme People’s Court of The
People’s Republic of China stating that
Zeng Wenhong
has filed
for an appeal to
The Supreme People’s Court of The People’s Republic of China regarding the decision
issued by the High People’s
Court’s of Shandong Province on June 20, 2016 requesting a retrial by
The Supreme People’s
Court of The People’s Republic of China
. Shandong Fuwei has submitted its written response to The
Supreme
People’s Court of The People’s Republic of China and the case is currently under review.
(25) Earnings (Loss) Per Share
Basic and diluted earnings per share for
the period/year ended December 31, 2016, 2015 and 2014 have been calculated as follows:
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
RMB
|
|
Net (loss) income available to ordinary shareholders
|
|
|
(54,483
|
)
|
|
|
(7,847
|
)
|
|
|
(69,065
|
)
|
|
|
(71,327
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares outstanding
|
|
|
3,265,837
|
|
|
|
3,265,837
|
|
|
|
13,062,500
|
|
|
|
13,062,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive effect of share options
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average number of ordinary shares outstanding
|
|
|
3,265,837
|
|
|
|
3,265,837
|
|
|
|
13,062,500
|
|
|
|
13,062,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings (loss) per share
|
|
|
(16.68
|
)
|
|
|
(2.40
|
)
|
|
|
(5.29
|
)
|
|
|
(5.46
|
)
|
(26) 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, 2016, an aggregate amount of RMB37,441 (US$5,393) has been
appropriated from retained earnings and set aside for statutory general reserve and public welfare fund, by Shandong Fuwei.
As of December 31, 2016, the amount of
restricted assets of Shandong Fuwei, which may not be transferred to the Company in the form of loans, advances or cash dividends
by the subsidiaries without the consent of a third party, was approximately 58.9% of the Company’s consolidated total assets
as discussed above. In addition, the current foreign exchange control policies applicable in the PRC also restrict the transfer
of assets or dividends outside the PRC.
The following presents condensed unaudited
unconsolidated financial information of the Parent Company only.
Condensed unaudited Balance Sheet as of December 31, 2016
and 2015
|
|
2016
|
|
|
2015
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
226
|
|
|
|
33
|
|
|
|
11
|
|
Other current assets
|
|
|
298,188
|
|
|
|
42,948
|
|
|
|
278,903
|
|
Investments in subsidiaries
|
|
|
-
|
|
|
|
-
|
|
|
|
389
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
298,414
|
|
|
|
42,981
|
|
|
|
279,303
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
67,626
|
|
|
|
9,740
|
|
|
|
60,426
|
|
Total shareholders’ equity
|
|
|
230,788
|
|
|
|
33,241
|
|
|
|
218,877
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders’ equity
|
|
|
298,414
|
|
|
|
42,981
|
|
|
|
279,303
|
|
Condensed unaudited Statements of Operations (For the years
ended December 31, 2016, 2015 and 2014)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
RMB
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income (expenses)
|
|
|
(15
|
)
|
|
|
(2
|
)
|
|
|
(12
|
)
|
|
|
(11
|
)
|
General and administrative expenses
|
|
|
(2,662
|
)
|
|
|
(383
|
)
|
|
|
(2,367
|
)
|
|
|
(2,257
|
)
|
Other income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Loss before equity in undistributed earnings of subsidiaries
|
|
|
(2,677
|
)
|
|
|
(385
|
)
|
|
|
(2,379
|
)
|
|
|
(2,268
|
)
|
Equity in earnings of subsidiaries
|
|
|
(51,806
|
)
|
|
|
(7,462
|
)
|
|
|
(66,689
|
)
|
|
|
(69,076
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
(54,483
|
)
|
|
|
(7,847
|
)
|
|
|
(69,068
|
)
|
|
|
(71,344
|
)
|
Condensed unaudited Statement of Cash Flows (For the year
ended December 31, 2016, 2015 and 2014)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
RMB
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
(54,483
|
)
|
|
|
(7,847
|
)
|
|
|
(69,068
|
)
|
|
|
(71,344
|
)
|
Adjustment to reconcile net income (loss) to net cash from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Equity in earnings of subsidiaries
|
|
|
51,806
|
|
|
|
7,462
|
|
|
|
66,689
|
|
|
|
69,076
|
|
- Foreign exchange gain
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Other current assets
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
- Other current liabilities
|
|
|
142
|
|
|
|
20
|
|
|
|
34
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
(2,535
|
)
|
|
|
(365
|
)
|
|
|
(2,345
|
)
|
|
|
(2,268
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments to related parties
|
|
|
2,750
|
|
|
|
396
|
|
|
|
2,249
|
|
|
|
2,310
|
|
Proceeds from related parties
|
|
|
(10
|
)
|
|
|
(1
|
)
|
|
|
(2
|
)
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange
|
|
|
10
|
|
|
|
1
|
|
|
|
2
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
2,750
|
|
|
|
396
|
|
|
|
2,249
|
|
|
|
2,307
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
215
|
|
|
|
31
|
|
|
|
(95
|
)
|
|
|
39
|
|
Cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At beginning of year
|
|
|
11
|
|
|
|
2
|
|
|
|
106
|
|
|
|
67
|
|
At end of year
|
|
|
226
|
|
|
|
33
|
|
|
|
11
|
|
|
|
106
|
|
(27) Unaudited Quarterly Data
Quarter
Ended
|
|
March 31
|
|
|
June 30
|
|
|
September 30
|
|
|
December 31
|
|
|
Total
|
|
Fiscal year 2016
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
62,147
|
|
|
|
9,638
|
|
|
|
59,316
|
|
|
|
8,925
|
|
|
|
61,560
|
|
|
|
9,231
|
|
|
|
70,903
|
|
|
|
10,212
|
|
|
|
253,926
|
|
|
|
36,573
|
|
Gross loss
|
|
|
5,589
|
|
|
|
867
|
|
|
|
5,626
|
|
|
|
846
|
|
|
|
1,056
|
|
|
|
158
|
|
|
|
5,465
|
|
|
|
787
|
|
|
|
17,736
|
|
|
|
2,555
|
|
Net loss
|
|
|
(12,055
|
)
|
|
|
(1,868
|
)
|
|
|
(10,197
|
)
|
|
|
(1,536
|
)
|
|
|
(13,428
|
)
|
|
|
(2,014
|
)
|
|
|
(18,803
|
)
|
|
|
(2,709
|
)
|
|
|
(54,483
|
)
|
|
|
(7,847
|
)
|
Basic and diluted loss per share
|
|
|
(3.68
|
)
|
|
|
(0.56
|
)
|
|
|
(3.12
|
)
|
|
|
(0.48
|
)
|
|
|
(4.12
|
)
|
|
|
(0.60
|
)
|
|
|
(5.76
|
)
|
|
|
(0.83
|
)
|
|
|
(16.68
|
)
|
|
|
(2.40
|
)
|