PART I. FINANCIAL INFORMATION
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
We make forward-looking statements in this report, in other materials we file with the Securities and Exchange Commission (the “SEC”) or otherwise release to the public, and on our website. In addition, our senior management might make forward-looking statements orally to analysts, investors, the media and others. Statements concerning our future operations, prospects, strategies, financial condition, future economic performance (including growth and earnings) and demand for our products and services, and other statements of our plans, beliefs, or expectations, including the statements contained in this Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operation,” regarding our future plans, strategies and expectations are forward-looking statements. In some cases these statements are identifiable through the use of words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “target,” “can,” “could,” “may,” “should,” “will,” “would” and similar expressions. We intend such forward-looking statements to be covered by the safe harbor provisions contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and in Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). You are cautioned not to place undue reliance on these forward-looking statements because these forward-looking statements we make are not guarantees of future performance and are subject to various assumptions, risks, and other factors that could cause actual results to differ materially from those suggested by these forward-looking statements. Thus, our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations and future prospects include, but are not limited to, changes in: economic conditions generally and the automotive modified plastics market specifically, legislative or regulatory changes that affect our business, including changes in regulation, the availability of working capital, the introduction of competing products, and other risk factors described herein. These risks and uncertainties, together with the other risks described from time-to-time in reports and documents that we filed with the SEC should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Indeed, it is likely that some of our assumptions will prove to be incorrect. Our actual results and financial position will vary from those projected or implied in the forward-looking statements and the variances may be material. We expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Overview
China XD Plastics Company Limited (“China XD“, “we“, and the “Company“, and “us“ or “our“ shall be interpreted accordingly) is one of the leading specialty chemical companies engaged in the research, development, manufacture and sale of polymer composite materials primarily for automotive applications in China. Through our wholly-owned operating subsidiaries in China, we develop polymer composite materials using our proprietary technology, manufacture and sell our products primarily for use in the fabrication of automobile parts and components. We have 300 certifications from manufacturers in the automobile industry as of June 30, 2014. We are the only company certified as a National Enterprise Technology Center in modified plastics industry in Heilongjiang province. Our Research and Development (“R&D“) team consists of 237 professionals and 2 consultants. As a result of the integration of our academic and technological expertise, we have a portfolio of 115 patents, 2 of which we have obtained the patent rights and the remaining 113 of which we have applications pending in China as of June 30, 2014.
Our products include eleven categories: Modified Polypropylene (PP), Modified Acrylonitrile Butadiene Styrene (ABS), Modified Polyamide 66 (PA66), Modified Polyamide 6 (PA6), Modified Polyoxymethylenes (POM), Modified Polyphenylene Oxide (PPO), Plastic Alloy, Modified Polyphenylene Sulfide (PPS), Modified Polyimide (PI), Modified Polylactic acid (PLA) and Polyether Ether Ketone (PEEK). As we have successfully developed more new products to grow our business, we have re-categorized our product types as presented above in order to present more updated breakdown of polymer composite materials we produce since the beginning of 2014. We believe the current categorization better reflects the nature and characteristics of our products and the way that our management currently views and analyzes our products. In conformity with this new categorization, we have adjusted comparable product information in applicable prior periods. Since not all the categories have achieved sales in the second quarter of 2014, we only presented the categories which achieved sales.
Our products are primarily used in the production of exterior and interior trim and functional components of 24 automobile brands and more than 80 automobile models manufactured in China, including Audi, Mercedes Benz, Buick, Chevrolet, VW Passat, Golf and Jetta, BMW, Mazda, and Toyota. Our research center is dedicated to the research and development of modified plastics, and benefits from its cooperation with well-known scientists from prestigious universities in China. We operate three manufacturing bases in Harbin, Heilongjiang in the PRC, with the construction of our plant in Sichuan underway. As of June 30, 2014, we had approximately 390,000 metric tons of production capacity across 83 automatic production lines utilizing German twin-screw extruding systems, automatic weighing systems and Taiwan conveyer systems. In December 2013, we broke ground on the construction of our fourth production base in Nanchong City, Sichuan Province, with additional 300,000 metric tons of annual production capacity, expecting to bring total installed production capacity to 690,000 metric tons with additional 70 new production lines at the completion of the construction of our fourth production base. In addition, during the three months ended June 30, 2014, we started the construction of Al Composites plant in UAE with additional 4,000 metric tons targeting on high-end products for the overseas markets, which will be completed by the end of first quarter of 2015.
Highlights for the three months ended June 30, 2014 include:
● Revenues were $264.2 million, an increase of 30.7% from $202.2 million in the second quarter of 2013
● Gross profit was $52.3 million, an increase of 40.6% from $37.2 million in the second quarter of 2013
● Gross profit margin was 19.8%, compared to 18.4% in the second quarter of 2013
● Net income was $19.8 million, compared to $20.8 million in the second quarter of 2013
● Total volume shipped was 81,284 metric tons, up 16.3% from 69,915 metric tons in the second quarter of 2013
Results of Operations
The following table sets forth, for the periods indicated, statements of income data in millions of USD:
(in millions, except percentage)
|
|
Three Month Period Ended
|
|
|
|
|
|
Six Month Period Ended
|
|
|
|
|
|
|
June 30,
|
|
|
Change
|
|
|
June 30,
|
|
|
Change
|
|
|
|
2014
|
|
|
2013
|
|
|
%
|
|
|
2014
|
|
|
2013
|
|
|
%
|
|
Revenues
|
|
|
264.2
|
|
|
|
202.2
|
|
|
|
30.7
|
%
|
|
|
487.8
|
|
|
|
373.1
|
|
|
|
30.7
|
%
|
Cost of revenues
|
|
|
(211.9
|
)
|
|
|
(165.0
|
)
|
|
|
28.4
|
%
|
|
|
(388.9
|
)
|
|
|
(306.8
|
)
|
|
|
26.8
|
%
|
Gross profit
|
|
|
52.3
|
|
|
|
37.2
|
|
|
|
40.6
|
%
|
|
|
98.9
|
|
|
|
66.3
|
|
|
|
49.2
|
%
|
Total operating expenses
|
|
|
(18.0
|
)
|
|
|
(8.7
|
)
|
|
|
106.9
|
%
|
|
|
(30.6
|
)
|
|
|
(17.2
|
)
|
|
|
77.9
|
%
|
Operating income
|
|
|
34.3
|
|
|
|
28.5
|
|
|
|
20.4
|
%
|
|
|
68.3
|
|
|
|
49.1
|
|
|
|
39.1
|
%
|
Income before income taxes
|
|
|
24.7
|
|
|
|
27.9
|
|
|
|
(11.5
|
)%
|
|
|
53.8
|
|
|
|
47.3
|
|
|
|
13.7
|
%
|
Income tax expense
|
|
|
(4.9
|
)
|
|
|
(7.1
|
)
|
|
|
(31.0
|
)%
|
|
|
(12.0
|
)
|
|
|
(12.0
|
)
|
|
|
(0.0
|
)%
|
Net income
|
|
|
19.8
|
|
|
|
20.8
|
|
|
|
(4.8
|
)%
|
|
|
41.8
|
|
|
|
35.3
|
|
|
|
18.4
|
%
|
Three months ended June 30, 2014 compared to three months ended June 30, 2013
Revenues
Revenues were US$264.2 million in the second quarter ended June 30, 2014, an increase of US$62.0 million, or 30.7%, compared to US$202.2 million in the same period of last year, due to approximately 16.3% increase in sales volume and
13.6% increase
in the average RMB selling price of our products.
The increase of sales volume was driven by the strong demand of polymer composite materials in the PRC and Asian markets, the higher penetration of our business in our existing markets supported as well as the marketing efforts to develop new customers. Such increase in demand was driven by increasing demand for middle and high-end automobiles by Chinese consumers, continuing substitution of imported polymer composite materials by domestic suppliers, as well as the increase of plastic content on the per-vehicle-basis in China with even higher adoption rate in higher-end automobile models than lower-end ones. The increase of average RMB selling price was mainly due to the shift of product mix towards higher-end products.
During the second quarter ended June 30, 2014, the Company sold US$20.0 million products to the Korean market, mainly PA66 and plastic alloy, accounting 7.6% of the total revenues for second quarter of 2014.
The following table summarizes the breakdown of revenues by categories in millions of US$:
(in millions, except percentage)
|
|
Revenues
For the Three-Month Period Ended June 30,
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|
Change in
Amount
|
|
|
Change in
%
|
|
Modified Polyamide 66 (PA66)
|
|
|
53.3
|
|
|
|
20.2
|
%
|
|
|
36.9
|
|
|
|
18.3
|
%
|
|
|
16.4
|
|
|
|
44.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Modified Polyamide 6 (PA6)
|
|
|
62.6
|
|
|
|
23.7
|
%
|
|
|
39.9
|
|
|
|
19.7
|
%
|
|
|
22.7
|
|
|
|
56.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plastic Alloy
|
|
|
79.0
|
|
|
|
29.9
|
%
|
|
|
53.2
|
|
|
|
26.3
|
%
|
|
|
25.8
|
|
|
|
48.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Modified Polypropylene (PP)
|
|
|
55.6
|
|
|
|
21.1
|
%
|
|
|
60.8
|
|
|
|
30.1
|
%
|
|
|
(5.2
|
)
|
|
|
(8.6
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Modified Acrylonitrile butadiene styrene (ABS)
|
|
|
9.6
|
|
|
|
3.6
|
%
|
|
|
9.5
|
|
|
|
4.7
|
%
|
|
|
0.1
|
|
|
|
1.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Polyoxymethylenes (POM)
|
|
|
0.9
|
|
|
|
0.3
|
%
|
|
|
1.4
|
|
|
|
0.7
|
%
|
|
|
(0.5
|
)
|
|
|
(35.7
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Polyphenylene Oxide (PPO)
|
|
|
3.2
|
|
|
|
1.2
|
%
|
|
|
-
|
|
|
|
0.0
|
%
|
|
|
3.2
|
|
|
|
N/
|
A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
264.2
|
|
|
|
100.0
|
%
|
|
|
201.7
|
|
|
|
99.8
|
%
|
|
|
62.5
|
|
|
|
31.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service revenue
|
|
|
-
|
|
|
|
0.0
|
%
|
|
|
0.5
|
|
|
|
0.2
|
%
|
|
|
(0.5
|
)
|
|
|
(100.0
|
)%
|
Total Revenues
|
|
|
264.2
|
|
|
|
100
|
%
|
|
|
202.2
|
|
|
|
100
|
%
|
|
|
62.0
|
|
|
|
30.7
|
%
|
The following table summarizes the breakdown of metric tons (MT) by product mix:
(in MTs, except percentage)
|
|
Sales Volume
For the Three-Month Period Ended June 30,
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
MT
|
|
|
%
|
|
|
MT
|
|
|
%
|
|
|
Change in
MT
|
|
|
Change in
%
|
|
Modified Polyamide 66 (PA66)
|
|
|
9,448
|
|
|
|
11.6
|
%
|
|
|
7,232
|
|
|
|
10.3
|
%
|
|
|
2,216
|
|
|
|
30.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Modified Polyamide 6 (PA6)
|
|
|
12,481
|
|
|
|
15.4
|
%
|
|
|
7,940
|
|
|
|
11.4
|
%
|
|
|
4,541
|
|
|
|
57.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plastic Alloy
|
|
|
25,426
|
|
|
|
31.3
|
%
|
|
|
20,606
|
|
|
|
29.5
|
%
|
|
|
4,820
|
|
|
|
23.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Modified Polypropylene (PP)
|
|
|
29,500
|
|
|
|
36.3
|
%
|
|
|
30,337
|
|
|
|
43.4
|
%
|
|
|
(837
|
)
|
|
|
(2.8
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Modified Acrylonitrile butadiene styrene (ABS)
|
|
|
3,727
|
|
|
|
4.6
|
%
|
|
|
3,350
|
|
|
|
4.8
|
%
|
|
|
377
|
|
|
|
11.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Polyoxymethylenes (POM)
|
|
|
271
|
|
|
|
0.3
|
%
|
|
|
450
|
|
|
|
0.6
|
%
|
|
|
(179
|
)
|
|
|
(39.8
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Polyphenylene Oxide (PPO)
|
|
|
431
|
|
|
|
0.5
|
%
|
|
|
-
|
|
|
|
0.0
|
%
|
|
|
431
|
|
|
|
N/
|
A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Sales Volume
|
|
|
81,284
|
|
|
|
100
|
%
|
|
|
69,915
|
|
|
|
100
|
%
|
|
|
11,369
|
|
|
|
16.3
|
%
|
The Company has shifted product mix from traditional Modified Polypropylene (PP) to higher-end products such as Modified Polyamide (PA66 and PA6) and plastic alloy, primarily due to (i) the increasing demand of advanced modified plastics in luxury automobile models in China and Korea market, (ii) the stronger demand as a result of promotion by the Chinese government for clean energy vehicles and (iii) increased sales of higher-end cars made by automotive manufacturers from China and Germany and U.S. and Japanese joint ventures, which manufacturers tend to use more and higher-end modified plastics in quantity per vehicle in China.
Gross Profit and Gross Profit Margin
|
Three-Month Period Ended June 30,
|
|
Change
|
|
(in millions, except percentage)
|
2014
|
|
2013
|
|
Amount
|
|
%
|
|
Gross Profit
|
|
$
|
52.3
|
|
|
$
|
37.2
|
|
|
$
|
15.1
|
|
|
|
40.6
|
%
|
Gross Profit Margin
|
|
|
19.8
|
%
|
|
|
18.4
|
%
|
|
|
|
|
|
|
1.4
|
%
|
Gross profit was US$52.3 million in the second quarter ended June 30, 2014
compared to US$37.2 million in the same period of 2013, representing an increase of 40.6%. Our gross margin increased to 19.8% during the quarter ended June 30, 2014 from 18.4% during the same quarter of 2013 primarily due to (i) higher-end product sales accounting for 75.3%
of our total revenues for the second quarter ended June 30, 2014 as compared to 65.1% of that of the prior year; (ii) sales to Korean market accounted for 7.6% mainly with products of high-end modified PA66 and plastic alloys; (iii) the average 1.5% of sales discount off the original prices to lower-end products modified PP and modified ABS for the second quarter ended June 30, 2014 as compared to an average 6.4% discount off the original prices during the second quarter of 2013.
General and Administrative Expenses
|
Three-Month Period Ended June 30,
|
|
Change
|
|
(in millions, except percentage)
|
2014
|
|
2013
|
|
Amount
|
|
%
|
|
General and Administrative Expenses
|
|
$
|
4.5
|
|
|
$
|
2.9
|
|
|
$
|
1.6
|
|
|
|
55.2
|
%
|
as a percentage of revenues
|
|
|
1.8
|
%
|
|
|
1.4
|
%
|
|
|
|
|
|
|
0.4
|
%
|
General and administrative (G&A) expenses were US$4.5 million in the quarter ended June 30, 2014 compared to US$2.9 million in the same period in 2013, representing an increase of 55.2%, or US$1.6 million. This increase is primarily due to 1) US$1 million increase of payroll; 2) US$0.2 million increase of office and communication expense; and 3) US$0.3 million increase of rental fee due to the expansion of the business.
Research and Development Expenses
|
Three–Month Period Ended June 30,
|
|
Change
|
|
(in millions, except percentage)
|
2014
|
|
2013
|
|
Amount
|
|
%
|
|
Research and Development Expenses
|
|
$
|
13.4
|
|
|
$
|
5.8
|
|
|
$
|
7.6
|
|
|
|
131.0
|
%
|
as a percentage of revenues
|
|
|
5.1
|
%
|
|
|
2.9
|
%
|
|
|
|
|
|
|
2.2
|
%
|
Research and development expenses were US$13.4 million during the quarter ended June 30, 2014 compared with US5.8 million during the same period in 2013, an increase of US$7.6 million, or 131.0%, reflecting increased research and development activities on new products primarily in consumption of raw materials for various experiments for automotive applications from automobile manufacturers as well as other non-automotive applications. As of June 30, 2014, the number of ongoing research and development projects
was 151.
The consumption of raw materials for these projects accounted for 93% of total R&D expenses for the quarter ended June 30, 2014.
We expect to complete and commence to realize economic benefits on approximately 25% of the projects in the near term. The remaining projects are expected to be carried out for a longer period. The majority of the projects are in the field of modified plastics in automotive applications and the rest are in advanced fields such as ships, airplanes, high-speed rail and medical devices.
Operating Income
Total operating income was US$34.3 million in the second quarter ended June 30, 2014 compared to US$28.5 million in the same period of 2013, representing an increase of 20.4% or US$5.8 million. This increase is primarily due to higher gross profit, partially offset by higher general & administrative expenses, and research & development expenses.
Interest Income (Expenses)
|
|
Three-Month Period Ended June 30,
|
|
|
Change
|
|
(in millions, except percentage)
|
|
2014
|
|
|
2013
|
|
|
Amount
|
|
|
%
|
|
Interest Income
|
|
$
|
3.5
|
|
|
$
|
1.5
|
|
|
$
|
2.0
|
|
|
|
133.3
|
%
|
Interest Expenses
|
|
|
(11.7
|
)
|
|
|
(3.4
|
)
|
|
|
(8.3
|
)
|
|
|
244.1
|
%
|
Net Interest Expenses
|
|
$
|
(8.2
|
)
|
|
$
|
(1.9
|
)
|
|
$
|
(6.3
|
)
|
|
|
331.6
|
%
|
as a percentage of revenues
|
|
|
(3.1
|
)%
|
|
|
(1.0
|
)%
|
|
|
|
|
|
|
(2.1
|
)%
|
Net interest expense was US$8.2 million for the three-month period ended June 30, 2014, compared to net interest expense of US$1.9 million in the same period of 2013, primarily due to (i) an increase of US$4.7 million interest expenses resulting from the Notes issued on February 4, 2014; and (ii) an increase of US$3.5 million interest expenses increase resulting from the increase of bank loans to meet the need of our future capacity expansion in Southwest China and Dubai. The average short and long-term loan balance for the three months ended June 30, 2014 was US$93.6 million as compared to US$51.4 million for the three months ended June 30, 2013, leading to US$3.5 million more interest expense, partially offset by (iii) an increase of US$2.0 million interest income. The average deposit balance for the three months ended June 30, 2014 was US$110.6 million as compared to US$51.6 million as of that of the prior year, leading to the increase of interest income.
Losses on foreign currency forward contracts
|
Three–Month Period Ended June 30,
|
|
Change
|
|
(in millions, except percentage)
|
2014
|
|
2013
|
|
Amount
|
|
%
|
|
Losses on foreign currency forward contracts
|
|
$
|
(0.9
|
)
|
|
$
|
-
|
|
|
$
|
(0.9
|
)
|
|
|
N/
|
A
|
as a percentage of revenues
|
|
|
(0.4
|
)%
|
|
|
-
|
|
|
|
|
|
|
|
(0.4
|
)%
|
During the three-month period ended June 30, 2014, the Company settled the foreign currency forward contract which was entered into to manage its exposure to foreign currency risks with a notional amount of US$80M. Due to the appreciation of US dollars against Chinese Yuan during the three-month period ended June 30, 2014, the Company had a loss of US$0.9 million on foreign currency forward contracts.
Income Taxes
|
Three–Month Period Ended June 30,
|
|
Change
|
|
(in millions, except percentage)
|
2014
|
|
2013
|
|
Amount
|
|
%
|
|
Income before Income Taxes
|
|
$
|
24.7
|
|
|
$
|
27.9
|
|
|
$
|
(3.2
|
)
|
|
|
(11.5
|
)%
|
Income Tax Expense
|
|
|
(4.9
|
)
|
|
|
(7.1
|
)
|
|
|
2.2
|
|
|
|
(31.0
|
)%
|
Effective income tax rate
|
|
|
19.8
|
%
|
|
|
25.4
|
%
|
|
|
|
|
|
|
(5.6
|
)%
|
The effective income tax rates for the three-month periods ended June 30, 2014 and 2013 were 19.8% and 25.4%, respectively. The effective income tax rate for the three-month period ended June 30, 2014 differs from the PRC statutory income tax rate of 25% primarily due to (i) Sichuan Xinda Group’s preferential income tax rate and exemption of income tax for the income earned by Al Composites, (ii)
increase of valuation allowances against deferred income tax assets of certain subsidiaries, which were at cumulative loss position, partially offsetting by (iii) effect of tax rate differential on entities not subject to PRC income tax, and (iv) effect of non-deductible expenses.
Our PRC subsidiaries have US$489.1 million of cash and cash equivalents, restricted cash and time deposits as of June 30, 2014, which are planned to be indefinitely reinvested in the PRC. The distributions from our PRC subsidiaries are subject to U.S. federal income tax at 34%, less any applicable foreign tax credits. Due to our policy of indefinitely reinvesting our earnings in our PRC business, we have not provided for deferred income tax liabilities on undistributed earnings of our PRC subsidiaries.
Net Income
As a result of the above factors, we had a net income of US$19.8 million in the second quarter of 2014 compared to a net income of US$20.8 million in the same quarter of 2013.
Six Months Ended June 30, 2014 compared to six months ended June 30, 2013
Revenues
Revenues were US$487.8 million for the six months ended June 30, 2014, an increase of US$114.7 million, or 30.7%, compared to US$373.1 million in the same period of last year, due to approximately 14.6% increase in sales volume and 13.7% increase in the average RMB selling price of our products
.
The increase of sales volume was mainly driven by the strong demand of polymer composite materials in the PRC market and higher penetration of our business in our existing markets supported. Such increase in demand was driven by increasing demand for middle and high-end automobiles by Chinese consumers, continuing substitution of imported polymer composite materials by domestic suppliers, as well as the increase of plastic content on the per-vehicle-basis in China with even higher adoption rate in higher-end automobile models than lower-end ones. The increase of average RMB selling price was mainly due to the shift of product mix towards higher-end products.
In addition, the Company initiated its marketing efforts to develop new customers, in particular those in the Korean market. During the six months ended June 30, 2014, the Company sold US$20.0 million products to the Korean market, mainly PA 66 and plastic alloy, accounting 4.1% of total revenue for the six months ended June 30, 2014.
Product Mix
The following table summarizes the breakdown of revenues by product mix in millions of US$:
(in millions, except percentage)
|
|
Revenues
For the Six-Month Period Ended June 30,
|
|
|
|
|
|
|
2014
|
|
2013
|
|
|
|
|
|
|
Amount
|
|
|
%
|
|
Amount
|
|
|
%
|
|
Change in
Amount
|
|
Change in
%
|
Modified Polyamide 66 (PA66)
|
|
112.2
|
|
|
23.0%
|
|
69.7
|
|
|
18.7%
|
|
42.5
|
|
61.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Modified Polyamide 6 (PA6)
|
|
114.7
|
|
|
23.5%
|
|
70.1
|
|
|
18.8%
|
|
44.6
|
|
63.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plastic Alloy
|
|
130.5
|
|
|
26.8%
|
|
97.7
|
|
|
26.2%
|
|
32.8
|
|
33.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Modified Polypropylene (PP)
|
|
104.9
|
|
|
21.5%
|
|
118.2
|
|
|
31.6%
|
|
(13.3)
|
|
(11.3)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Modified Acrylonitrile butadiene styrene (ABS)
|
|
19.2
|
|
|
3.9%
|
|
14.4
|
|
|
3.9%
|
|
4.8
|
|
33.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Polyoxymethylenes (POM)
|
|
2.1
|
|
|
0.4%
|
|
2.0
|
|
|
0.5%
|
|
0.1
|
|
5.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Polyphenylene Oxide (PPO)
|
|
4.2
|
|
|
0.9%
|
|
-
|
|
|
0.0%
|
|
4.2
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
487.8
|
|
|
100.0%
|
|
372.1
|
|
|
99.7%
|
|
115.7
|
|
31.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service revenue
|
|
-
|
|
|
0.0%
|
|
1.0
|
|
|
0.3%
|
|
(1.0
|
)
|
(100.0%)
|
Total Revenues
|
|
487.8
|
|
|
100%
|
|
373.1
|
|
|
100%
|
|
114.7
|
|
30.7%
|
The following table summarizes the breakdown of metric tons (MT) by product mix:
(in MTs, except percentage)
|
|
Sales Volume
For the Six-month period ended June 30,
|
|
|
|
|
|
|
2014
|
|
2013
|
|
|
|
|
|
|
MT
|
|
|
%
|
|
MT
|
|
|
%
|
|
Change in
MT
|
|
Change in
%
|
Modified Polyamide 66 (PA66)
|
|
19,759
|
|
|
13.2%
|
|
13,877
|
|
|
10.6%
|
|
5,882
|
|
42.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Modified Polyamide 6 (PA6)
|
|
22,814
|
|
|
15.2%
|
|
14,159
|
|
|
10.8%
|
|
8,655
|
|
61.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plastic Alloy
|
|
45,824
|
|
|
30.5%
|
|
38,026
|
|
|
29.0%
|
|
7,798
|
|
20.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Modified Polypropylene (PP)
|
|
53,559
|
|
|
35.6%
|
|
59,209
|
|
|
45.2%
|
|
(5,650)
|
|
(9.5)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Modified Acrylonitrile butadiene styrene (ABS)
|
|
7,100
|
|
|
4.7%
|
|
5,120
|
|
|
3.9%
|
|
1,980
|
|
38.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Polyoxymethylenes (POM)
|
|
601
|
|
|
0.4%
|
|
670
|
|
|
0.5%
|
|
(69
|
)
|
(10.3)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Polyphenylene Oxide (PPO)
|
|
571
|
|
|
0.4%
|
|
-
|
|
|
0.0%
|
|
571
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Sales Volume
|
|
150,228
|
|
|
100%
|
|
131,061
|
|
|
100%
|
|
19,167
|
|
14.6%
|
The Company has shifted product mix from traditional Modified Polypropylene (PP) to higher-end products such as Modified Polyamide (PA66 and PA6), primarily due to (i) the increasing demand of advanced modified plastics in luxury automobile models in China, (ii) the stronger demand as a result of promotion by the Chinese government for clean energy vehicles and (iii) increased sales of higher-end cars made by automotive manufacturers from China and Germany joint ventures, and U.S. and Japanese joint ventures, which manufacturers tend to use more and higher-end modified plastics in quantity per vehicle in China.
Gross Profit and Gross Profit Margin
|
Six Month Period Ended June 30,
|
|
Change
|
|
(in millions, except percentage)
|
2014
|
|
2013
|
|
Amount
|
|
%
|
|
Gross Profit
|
|
$
|
98.9
|
|
|
$
|
66.3
|
|
|
$
|
32.6
|
|
|
|
49.2
|
%
|
Gross Profit Margin
|
|
|
20.3
|
%
|
|
|
17.8
|
%
|
|
|
|
|
|
|
2.5
|
%
|
Gross profit was US$98.9 million for the six months ended June 30, 2014 compared to US$66.3 million in the same period of 2013, representing an increase of 49.2%. Our gross margin increased to 20.3% during the six months ended June 30, 2014 from 17.8% during the same period of 2013,
primarily due to (i) higher-end product sales accounting for 74.6%
of our total revenues for the six months ended June 30, 2014 as compared to 64.4% of that of the prior year; and (ii) the average 0.8 % of sales discount off the original prices to the lower-end products, modified PP and ABS for the six months ended June 30, 2014 as compared to an average 6.7% discount off the original prices during the same period of 2013, as a result, revenues contribution from Eastern, Southwestern, and Northern China increased by 47.7%, 24.9% and 15.7%, respectively during the six-month period ended June 30, 2014 as compared to that of the prior year.
General and Administrative Expenses
|
Six Month Period Ended June 30,
|
|
Change
|
|
(in millions, except percentage)
|
2014
|
|
2013
|
|
Amount
|
|
%
|
|
General and Administrative Expenses
|
|
$
|
8.3
|
|
|
$
|
6.3
|
|
|
$
|
2.0
|
|
|
|
31.7
|
%
|
as a percentage of revenues
|
|
|
1.7
|
%
|
|
|
1.7
|
%
|
|
|
|
|
|
|
0.0
|
%
|
General and administrative (G&A) expenses were US$8.3 million for the six months ended June 30, 2014 compared to US$6.3 million in the same period in 2013, representing an increase of 31.7%, or US$2.0 million. This increase is primarily due to 1) US$1.3 million increase of payroll; 2) US$0.3 million increase of office and communication expense; 3) US$0.4 million increase of rental fee due to the expansion of the business. On a percentage basis, G&A expenses for the six months ended June 30, 2014 remained at 1.7% of revenues with the same period of 2013.
Research and Development Expenses
|
Six Month Period Ended June 30,
|
|
Change
|
|
(in millions, except percentage)
|
2014
|
|
2013
|
|
Amount
|
|
%
|
|
Research and Development Expenses
|
|
$
|
22.0
|
|
|
$
|
10.8
|
|
|
$
|
11.2
|
|
|
|
103.7
|
%
|
as a percentage of revenues
|
|
|
4.5
|
%
|
|
|
2.9
|
%
|
|
|
|
|
|
|
1.6
|
%
|
Research and development expenses were US$22.0 million for the six months ended June 30, 2014 compared with US$10.8 million during the same period in 2013, an increase of US$11.2 million, or 103.7%, reflecting increased research and development activities on new products primarily in consumption of raw materials for various experiments for automotive applications from automobile manufacturers as well as other non-automotive applications.
As of June 30, 2014, the number of ongoing research and development projects is 151. We expect to complete and commence to realize economic benefits on approximately 25% of the projects in the near term. The remaining projects are expected to be carried out for a longer period. The majority of the projects are in the field of modified plastics in automotive applications and the rest are in advanced fields such as ships, airplanes, high-speed rail, medical devices, etc.
Operating Income
Total operating income was US$68.3 million for the six months ended June 30, 2014 compared to US$49.1 million in the same period of 2013, representing an increase of 39.1% or US$19.2 million. This increase is primarily due to higher gross profit, partially offset by higher general & administrative expenses, and research & development expenses.
Interest Income (Expenses)
|
|
Six Month Period Ended June 30,
|
|
|
Change
|
|
(in millions, except percentage)
|
|
2014
|
|
|
2013
|
|
|
Amount
|
|
|
%
|
|
Interest Income
|
|
$
|
6.5
|
|
|
$
|
2.5
|
|
|
$
|
4.0
|
|
|
|
160.0
|
%
|
Interest Expenses
|
|
|
(20.2)
|
|
|
|
(6.3)
|
|
|
|
(13.9)
|
|
|
|
220.6
|
%
|
Net Interest Expenses
|
|
$
|
(13.7)
|
|
|
$
|
(3.8)
|
|
|
$
|
(9.9)
|
|
|
|
260.5
|
%
|
as a percentage of revenues
|
|
|
(2.9)%
|
|
|
|
(1.0)%
|
|
|
|
|
|
|
|
(1.9)
|
%
|
Net interest expense was US$13.7 million for the six-month period ended June 30, 2014, compared to net interest expense of US$3.8 million in the same period of 2013, primarily due to (i) an increase of US$7.5 million interest expenses resulting from the Notes issued on February 4, 2014; (ii) an increase of US$6.4 million interest expenses resulting from the increase of bank loans to meet the need of our future capacity expansion in Southwest China and Dubai. The average short and long-term loan balance for the six months ended June 30, 2014 was US$174.1 million as compared to US$93.3 million as of that of the prior year, leading to US$6.4 million more interest expense, partially offset by (iii) an increase of US$ 4.0 million interest income. The average deposit balance for the six months ended June 30, 2014 was US$210.8 million as compared to US$87.4 million as of that of the prior year, leading to the increase of interest income.
Losses on foreign currency forward contracts
|
Six Month Period Ended June 30,
|
|
Change
|
|
(in millions, except percentage)
|
2014
|
|
2013
|
|
Amount
|
|
%
|
|
Forward contract losses
|
|
$
|
(0.9
|
)
|
|
$
|
-
|
|
|
$
|
(0.9
|
)
|
|
|
N/
|
A
|
as a percentage of revenues
|
|
|
(0.2
|
)%
|
|
|
-
|
|
|
|
|
|
|
|
(0.2
|
)%
|
During the six-month period ended June 30, 2014, the Company settled the foreign currency forward contract which was entered into to manage its exposure to foreign currency risks with a notional amount of US$80M. Due to the appreciation of US dollars against Chinese Yuan during the six-month period ended June 30, 2014, the Company had a loss of US$0.9 million on foreign currency forward contracts.
Income Taxes
|
Six Month Period Ended June 30,
|
|
Change
|
|
(in millions, except percentage)
|
2014
|
|
2013
|
|
Amount
|
|
%
|
|
Income before Income Taxes
|
|
$
|
53.8
|
|
|
$
|
47.3
|
|
|
$
|
6.5
|
|
|
|
13.7
|
%
|
Income Tax Expense
|
|
|
(12.0
|
)
|
|
|
(12.0
|
)
|
|
|
0.0
|
|
|
|
0.0
|
%
|
Effective income tax rate
|
|
|
22.3
|
%
|
|
|
25.5
|
%
|
|
|
|
|
|
|
(3.2
|
)%
|
The effective income tax rate for the six-month period ended June 30, 2014 differs from the PRC statutory income tax rate of 25% primarily due to (i) Sichuan Xinda Group’s preferential income tax rate
and exemption of income tax for the income earned by Al Composites, (ii) increase of valuation allowances against deferred income tax assets of certain subsidiaries, which were at cumulative loss position, partially offsetting by (iii) effect of tax rate differential on entities not subject to PRC income tax, and (iv) effect of non-deductible expenses.
Net Income
As a result of the above factors, we had a net income of US$41.8 million for the six months ended June 30, 2014 compared to net income of US$35.3 million in the same period of 2013.
Selected Balance Sheet Data as of June 30, 2014 and December 31, 2013:
|
|
June 30, 2014
|
|
|
December 31, 2013
|
|
|
Change
|
(
in millions, except percentage)
|
|
|
|
|
|
|
|
Amount
|
|
|
%
|
Cash and cash equivalents
|
|
|
132.8
|
|
|
|
95.5
|
|
|
|
37.3
|
|
|
|
39.1
|
%
|
Restricted cash
|
|
|
20.2
|
|
|
|
13.7
|
|
|
|
6.5
|
|
|
|
47.4
|
%
|
Time deposits
|
|
|
376.1
|
|
|
|
281.3
|
|
|
|
94.8
|
|
|
|
33.7
|
%
|
Accounts receivable, net of allowance for doubtful accounts
|
|
|
191.2
|
|
|
|
282.3
|
|
|
|
(91.1
|
)
|
|
|
(32.3)
|
%
|
Inventories
|
|
|
228.0
|
|
|
|
144.9
|
|
|
|
83.1
|
|
|
|
57.3
|
%
|
Property, plant and equipment, net
|
|
|
240.6
|
|
|
|
233.8
|
|
|
|
6.8
|
|
|
|
2.9
|
%
|
Land use rights, net
|
|
|
12.0
|
|
|
|
12.5
|
|
|
|
(0.5
|
)
|
|
|
(4.0)
|
%
|
Other non-current assets
|
|
|
48.6
|
|
|
|
3.2
|
|
|
|
45.4
|
|
|
|
1418.8
|
%
|
Total assets
|
|
|
1,261.7
|
|
|
|
1,075.9
|
|
|
|
185.8
|
|
|
|
17.3
|
%
|
Short-term loans, including current portion of long-term bank loans
|
|
|
184.1
|
|
|
|
314.7
|
|
|
|
(130.6
|
)
|
|
|
(41.5)
|
%
|
Bills payable
|
|
|
38.9
|
|
|
|
25.6
|
|
|
|
13.3
|
|
|
|
52.0
|
%
|
Accounts payable
|
|
|
130.5
|
|
|
|
122.5
|
|
|
|
8.0
|
|
|
|
6.5
|
%
|
Income taxes payable, including noncurrent portion
|
|
|
16.3
|
|
|
|
26.8
|
|
|
|
(10.5
|
)
|
|
|
(39.2)
|
%
|
Accrued expenses and other current liabilities
|
|
|
20.8
|
|
|
|
55.9
|
|
|
|
(35.1
|
)
|
|
|
(62.8)
|
%
|
Long-term bank loans, excluding current portion
|
|
|
162.4
|
|
|
|
-
|
|
|
|
162.4
|
|
|
|
N/A
|
|
Notes payable
|
|
|
148.5
|
|
|
|
-
|
|
|
|
148.5
|
|
|
|
N/A
|
|
Redeemable Series D convertible preferred stock
|
|
|
97.6
|
|
|
|
97.6
|
|
|
|
-
|
|
|
|
-
|
|
Stockholders’ equity
|
|
|
442.4
|
|
|
|
412.3
|
|
|
|
30.1
|
|
|
|
7.3
|
%
|
Our financial condition continues to improve as measured by an increase of 7.3% in stockholders’ equity as of June 30, 2014 compared to December 31, 2013. Restricted cash increased by 47.4% as a result of increase short-term bank deposits that are pledged as collateral for letter of credit and bills payable relating to purchase of raw materials, and short-term bank borrowings. Inventories increased by 57.3% due to the anticipation of the increase of customer demand in the following quarters. Short-term loans decreased by 41.5% due to the leverage of long-term bank loans of US$162.4 million to meet the need to support our future capacity expansion in Southwest China and Dubai. Bills payable increased by 52.0% due to the increase of purchases from our domestic raw material suppliers. As of June 30, 2014, notes payable was US$148.5 million due to the issuance of 11.75% guaranteed senior notes due in 2019, net of discount.
LIQUIDITY AND CAPITAL RESOURCES
Historically, our primary uses of cash have been to finance working capital needs and capital expenditures for new production lines. We have financed these requirements primarily from cash generated from operations, short-term bank borrowings, and the issuance of our convertible preferred stocks and debt financings. As of June 30, 2014 and December 31, 2013, we had US$132.8 million and US$95.5 million, respectively, in cash and cash equivalents, which were primarily deposited with banks in China (including Hong Kong and Macau). As of June 30, 2014, we had US$184.1 million outstanding short-term loans (including the current portion of long-term bank loans), including US$85.4 million unsecured loans, US$88.7 million loans secured by accounts receivable, US$1.9 million loans secured by time deposits and US$8.1 million interest-free loan secured by the land use rights. We also had US$162.4 million outstanding long-term bank loans (excluding the current portion), including US$70.0 million loans secured by long-term deposits and US$92.4 million unsecured loan. These loans bear a weighted average interest rate of 5.8% per annum and do not contain any renewal terms. We have historically been able to make repayments when due. In addition, the Company has US$148.5 million of 11.75% guaranteed senior notes due in 2019.
A summary of lines of credit for the six-month period ended June 30, 2014 and the remaining line of credit as of June 30, 2014 is as below:
(in millions)
|
June 30, 2014
|
|
|
Lines of Credit, Obtained
|
|
|
Remaining Available
|
|
Name of Financial Institution
|
Date of Approval
|
|
RMB
|
|
|
USD
|
|
|
USD
|
|
Bank of Communications
|
March 26, 2014
|
|
|
245.0
|
|
|
|
39.5
|
|
|
|
8.1
|
|
Bank of Longjiang, Heilongjiang
|
March 10, 2014
|
|
|
300.0
|
|
|
|
48.4
|
|
|
|
-
|
|
Bank of China
|
April 30, 2014
|
|
|
1,110.0
|
|
|
|
178.9
|
|
|
|
31.9
|
|
HSBC
|
June 25, 2013
|
|
|
155.1
|
|
|
|
25.0
|
|
|
|
20.2
|
|
Industrial and Commercial Bank of China Limited
|
July 30, 2013
|
|
|
500.0
|
|
|
|
80.6
|
|
|
|
16.1
|
|
Agriculture Bank of China
|
September 10, 2013
|
|
|
280.0
|
|
|
|
45.1
|
|
|
|
29.0
|
|
China Construction Bank
|
December 25, 2013
|
|
|
300.0
|
|
|
|
48.4
|
|
|
|
24.2
|
|
China CITIC Bank
|
June 9, 2013
|
|
|
200.0
|
|
|
|
32.2
|
|
|
|
32.2
|
|
Societe Generale
|
July 9, 2013
|
|
|
100.0
|
|
|
|
16.1
|
|
|
|
16.1
|
|
China Construction Bank (Asia)
|
October 2, 2013
|
|
|
300.9
|
|
|
|
48.5
|
|
|
|
46.6
|
|
Total
|
|
|
|
3,491.0
|
|
|
|
562.7
|
|
|
|
224.4
|
|
We have historically been able to make repayments when due. In addition, as of June 30 2014, we have contractual obligations to pay (i) lease commitments in the amount of US$4.3 million, including US$1.1 million due in one year; (ii) equipment acquisition in the amount of US$56.4 million; (iii) long-term bank loan in the amount of US$177.0 million (including principals and interests); and (iv) notes payable in the amount of US$231.0 million (including principals and interests).
We expect that we will be able to meet our needs to fund operations, capital expenditures and other commitments in the next 12 months primarily with our cash and cash equivalents, operating cash flows and bank borrowings.
We may, however, require additional cash resources due to changes in business conditions or other future developments. If these sources are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity or equity-linked securities could result in additional dilution to stockholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financial covenants that would restrict operations. Financing may not be available in amounts or on terms acceptable to us, or at all.
The following table sets forth a summary of our cash flows for the periods indicated.
|
|
Six-Month Period Ended June 30,
|
|
(in millions US$)
|
|
2014
|
|
|
2013
|
|
Net cash provided by operating activities
|
|
|
61.3
|
|
|
|
38.9
|
|
Net cash used in investing activities
|
|
|
(188.6
|
)
|
|
|
(138.9
|
)
|
Net cash provided by financing activities
|
|
|
166.8
|
|
|
|
80.8
|
|
Effect of foreign currency exchange rate changes on cash and cash equivalents
|
|
|
(2.2
|
)
|
|
|
1.4
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
37.3
|
|
|
|
(17.8
|
)
|
Cash and cash equivalents at the beginning of period
|
|
|
95.5
|
|
|
|
83.8
|
|
Cash and cash equivalents at the end of period
|
|
|
132.8
|
|
|
|
66.0
|
|
Operating Activities
Net cash provided by operating activities increased to US$61.3 million for the six-month period ended June 30, 2014 from US$38.9 million for the six-month period ended June 30, 2013, primarily due to (i) an increase of US$145.4 million in cash collected from our customers for the six-month period ended June 30, 2014 as compared to the same period in 2013, partially offset by (ii) an increase of US$119.9 million in raw material purchases payment for the six-month period ended June 30, 2014 as compared to the same period in 2013, resulting from increasing sales during the period.
Investing Activities
Net cash used in the investing activities was US$188.6 million for the six-month period ended June 30, 2014 as compared to US$138.9 million for the same period of last year, mainly due to the increase of US$180.1 million purchase of time deposits, and the increase of US$73.0 million purchase of property, plant and equipment, partially offset by the increase of US$203.4 million proceeds from maturity of time deposits.
Financing Activities
Net cash provided by the financing activities was US$166.8 million for the six-month period ended June 30, 2014, as compared to US$80.8 million for the same period of last year, primarily as a result of the increase of US$195.2 million borrowings of bank loans from local banks, the proceeds of US$148.4 million from issuance of long-term notes payable, the release of restricted cash of US$1.6 million, and US$0.6 million proceeds from the exercise of Series A investor warrants, which was offset by the increase of US$236.1 million repayments of bank borrowings, the US$4.0 million payment of issuance costs related to the notes payable, and US$19.7 million of placement of restricted cash as collateral for bank borrowings for the six-month period ended June 30, 2014.
As of June 30, 2014, our cash balance was US$132.8 million, compared to US$95.5 million at December 31, 2013.
Accounts Receivables Days Sales Outstanding (DSO) has increased from 83 days for the six-month period ended June 30, 2013 to 86 days for the six-month period ended June 30, 2014 as a result of overall China economic slowdown and its impact on our industry. We believe that our DSO is below industry average Industry Standard Customer and Supplier Payment Terms (days) as below:
|
Six-month period ended June 30, 2014
|
Year ended December 31, 2013
|
Customer Payment Term
|
Payment in advance/up to 90 days
|
Payment in advance/up to 90 days
|
Supplier Payment Term
|
Payment in advance/up to 60 days
|
Payment in advance/up to 30 days
|
Inventory turnover days increased from 53 days for the six-month ended June 30, 2013 to 86 days for the six-month ended June 30, 2014, due to inventory of raw materials buildup in anticipation of increasing demand from our customers in the following quarters.
Based on past performance and current expectations, we believe our cash and cash equivalents provided by operating activities and financing activities will satisfy our working capital needs, capital expenditures and other liquidity requirements associated with our operations for at least the next 12 months.
The majority of the Company’s revenues and expenses were denominated primarily in Renminbi (“RMB“), the currency of the People’s Republic of China. There is no assurance that exchange rates between the RMB and the U.S. Dollar will remain stable. Inflation has not had a material impact on the Company’s business.
COMMITMENTS AND CONTINGENCIES
Contractual Obligations
Our contractual obligations as of June 30, 2014 are as follows:
Contractual obligations
|
|
Total
|
|
|
Payment due
less than 1 year
|
|
|
1 – 3 years
|
|
|
3-5 years
|
|
|
More than 5
years
|
|
Lease commitments
|
|
|
4,292,670
|
|
|
|
1,129,845
|
|
|
|
1,991,192
|
|
|
|
1,171,633
|
|
|
|
-
|
|
Purchase of land use rights, plant equipment, and construction in progress
|
|
|
56,416,372
|
|
|
|
56,416,372
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Long-term bank Loans (1)
|
|
|
176,962,213
|
|
|
|
7,883,985
|
|
|
|
169,078,228
|
|
|
|
-
|
|
|
|
-
|
|
Notes payable (2)
|
|
|
230,966,013
|
|
|
|
10,466,013
|
|
|
|
35,250,000
|
|
|
|
185,250,000
|
|
|
|
-
|
|
Total
|
|
|
468,637,268
|
|
|
|
75,896,215
|
|
|
|
206,319,420
|
|
|
|
186,421,633
|
|
|
|
-
|
|
(1)
|
Includes interest of US$16.0 million accrued at the interest rate under the loan agreements. For borrowings with a floating rate, the most recent rate as of June 30, 2014 was applied.
|
(2)
|
On February 4, 2014, Favor Sea Limited, a wholly owned subsidiary of the Company, issued US$150,000,000 aggregate principal amount of 11.75% Guaranteed Senior Notes due 2019 with issuance price of 99.080% (the ’Notes’). The Notes bear interest at a rate of 11.75% per annum, payable on February 4 and August 4 of each year, commencing August 4, 2014. The Notes will mature on February 4, 2019.
|
(3)
|
On March 8, 2013, Xinda Holding (HK) Company Limited (“Xinda Holding (HK)“), a wholly owned subsidiary of the Company, entered into an investment agreement with Shunqing Government, pursuant to which Xinda Holding (HK) will invest RMB1.8 billion (equivalent to US$290 million) in property, plant and equipment and approximately RMB0.6 billion (equivalent to US$97 million) in working capital, for the construction of Sichuan plant.
|
|
|
Legal Proceedings
None.
Off-Balance Sheet Arrangements
We have not engaged in any off-balance sheet transactions.