Attached files
| file | filename |
|---|---|
| 10-K - SCHWEITZER MAUDUIT INTERNATIONAL INC | v176564_10k.htm |
| EX-21 - SCHWEITZER MAUDUIT INTERNATIONAL INC | v176564_ex21.htm |
| EX-32 - SCHWEITZER MAUDUIT INTERNATIONAL INC | v176564_ex32.htm |
| EX-31.1 - SCHWEITZER MAUDUIT INTERNATIONAL INC | v176564_ex31-1.htm |
| EX-23.2 - SCHWEITZER MAUDUIT INTERNATIONAL INC | v176564_ex23-2.htm |
| EX-24.1 - SCHWEITZER MAUDUIT INTERNATIONAL INC | v176564_ex24-1.htm |
| EX-31.2 - SCHWEITZER MAUDUIT INTERNATIONAL INC | v176564_ex31-2.htm |
| EX-23.1 - SCHWEITZER MAUDUIT INTERNATIONAL INC | v176564_ex23-1.htm |
CHINA
TOBACCO MAUDUIT (JIANGMEN)
PAPER INDUSTRY COMPANY
LTD.
Financial
Statements
For the
years ended December 31, 2009 and 2008
CHINA
TOBACCO MAUDUIT (JIANGMEN) PAPER INDUSTRY COMPANY LTD.
INDEX
TO FINANCIAL STATEMENTS
|
Page
|
||||
|
Report
of Independent Registered Public Accounting Firm
|
F-2
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|||
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Statements
of Operations for the years ended December 31, 2007 (unaudited), 2008 and
2009
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F-3
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|||
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Balance
Sheets as of December 31, 2008 and December 31, 2009
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F-4
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|||
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Statements
of Changes in Stockholders' Equity and Comprehensive Income (Loss) for the
years ended December 31, 2007 (unaudited), 2008 and 2009
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F-5
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|||
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Statements
of Cash Flows for the years ended December 31, 2007 (unaudited), 2008 and
2009
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F-6
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|||
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Notes
to Financial Statements
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F-7
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F-1
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and Stockholders of China Tobacco Mauduit (Jiangmen) Paper
Industry Company Ltd.
We have
audited the accompanying balance sheets of China Tobacco Mauduit (Jiangmen)
Paper Industry Company Ltd. (the "Company") as of December 31, 2009 and 2008,
and the related statements of operations, changes in stockholders' equity and
comprehensive income (loss), and cash flows for each of the two years in the
period ended December 31, 2009. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company's
internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our
opinion, such financial statements present fairly, in all material respects, the
financial position of China Tobacco Mauduit (Jiangmen) Paper Industry Company
Ltd. as of December 31, 2009 and 2008, and the results of its operations and its
cash flows for each of the two years in the period ended December 31, 2009, in
conformity with accounting principles generally accepted in the United States of
America.
/s/
Deloitte Touche Tohmatsu CPA Limited Guangzhou Branch
Certified
Public Accountants
Guangzhou
●
China
March 4,
2010
F-2
CHINA
TOBACCO MAUDUIT (JIANGMEN) PAPER INDUSTRY COMPANY LTD.
STATEMENTS
OF OPERATIONS
(In
thousands of U.S. dollars)
|
For
the year ended December 31,
|
||||||||||||
|
2009
|
2008
|
2007
|
||||||||||
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(unaudited)
|
||||||||||||
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Related
party sales
|
$ | 33,073 | $ | 3,289 | $ | — | ||||||
|
Cost
of products sold
|
23,569 | 9,169 | — | |||||||||
|
Gross
profit (loss)
|
9,504 | (5,880 | ) | — | ||||||||
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Operating
expenses
|
||||||||||||
|
Selling
expense
|
845 | 337 | — | |||||||||
|
General
and administrative expense
|
3,644 | 3,315 | 1,182 | |||||||||
|
Total
operating expenses
|
4,489 | 3,652 | 1,182 | |||||||||
|
Profit
(loss) from operations
|
5,015 | (9,532 | ) | (1,182 | ) | |||||||
|
Non-operating
income (expenses)
|
||||||||||||
|
Interest
income
|
53 | 60 | 74 | |||||||||
|
Interest
expense
|
(3,163 | ) | (1,411 | ) | — | |||||||
|
Foreign
exchange gain (loss)
|
(69 | ) | 2,762 | 855 | ||||||||
|
Other
income, net
|
124 | 228 | — | |||||||||
|
Total
non-operating income (expenses)
|
(3,055 | ) | 1,639 | 929 | ||||||||
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Income
(loss) before income taxes
|
1,960 | (7,893 | ) | (253 | ) | |||||||
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Income
tax benefit
|
342 | — | — | |||||||||
|
Net
income (loss)
|
$ | 2,302 | $ | (7,893 | ) | $ | (253 | ) | ||||
See notes
to the financial statements.
F-3
CHINA
TOBACCO MAUDUIT (JIANGMEN) PAPER INDUSTRY COMPANY LTD.
BALANCE
SHEETS
(In
thousands of U.S. dollars)
|
December
31,
|
||||||||
|
2009
|
2008
|
|||||||
|
ASSETS
|
||||||||
|
Current
Assets
|
||||||||
|
Cash
and cash equivalents
|
$ | 2,765 | $ | 1,371 | ||||
|
Restricted
cash
|
— | 1,113 | ||||||
|
Related
party receivables
|
8,077 | 391 | ||||||
|
Inventories
|
9,301 | 6,462 | ||||||
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Other
current assets
|
756 | 1,987 | ||||||
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Total
Current Assets
|
20,899 | 11,324 | ||||||
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Property,
plant and equipment, net
|
84,312 | 88,522 | ||||||
|
Deferred
income tax benefits
|
342 | — | ||||||
|
Land
use right
|
1,573 | 1,629 | ||||||
|
Total
Assets
|
$ | 107,126 | $ | 101,475 | ||||
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LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
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Current
Liabilities
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||||||||
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Current
debts
|
$ | 15,433 | $ | 13,817 | ||||
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Accounts
payables
|
3,350 | 2,851 | ||||||
|
Related
party payables
|
1,551 | 728 | ||||||
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Accrued
expenses
|
1,628 | 775 | ||||||
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Total
Current Liabilities
|
21,962 | 18,171 | ||||||
|
Long-term
debts
|
51,789 | 51,950 | ||||||
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Other
long term liabilities
|
192 | 457 | ||||||
|
Total
Liabilities
|
73,943 | 70,578 | ||||||
|
Stockholders'
Equity
|
||||||||
|
Contributed
capital
|
35,116 | 35,116 | ||||||
|
Accumulated
deficit
|
(6,128 | ) | (8,430 | ) | ||||
|
Accumulated
other comprehensive income
|
4,195 | 4,211 | ||||||
|
Total
Stockholders' Equity
|
33,183 | 30,897 | ||||||
|
Total
Liabilities and Stockholders' Equity
|
$ | 107,126 | $ | 101,475 | ||||
See notes
to the financial statements.
F-4
CHINA
TOBACCO MAUDUIT (JIANGMEN) PAPER INDUSTRY COMPANY LTD.
STATEMENTS
OF CHANGES IN STOCKHOLDERS' EQUITY
AND
COMPREHENSIVE INCOME (LOSS)
(In
thousands of U.S. dollars)
|
Contributed
Capital
|
Accumulated
Deficit
|
Accumulated
Other Comprehensive Income
|
Total
Equity
|
Total
Comprehensive Income (Loss)
|
||||||||||||||||
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UNAUDITED
BALANCE AT JANUARY 1, 2007
|
$ | 5,729 | $ | (284 | ) | $ | 134 | $ | 5,579 | $ | — | |||||||||
|
Contribution
from shareholders
|
25,427 | — | — | 25,427 | — | |||||||||||||||
|
Foreign
currency translation adjustment
|
— | — | 1,567 | 1,567 | 1,567 | |||||||||||||||
|
Net
loss
|
— | (253 | ) | — | (253 | ) | (253 | ) | ||||||||||||
|
UNAUDITED
BALANCE AT DECEMBER 31, 2007
|
$ | 31,156 | $ | (537 | ) | $ | 1,701 | $ | 32,320 | $ | 1,314 | |||||||||
|
Contribution
from shareholders
|
3,960 | — | — | 3,960 | ||||||||||||||||
|
Foreign
currency translation adjustment
|
— | — | 2,510 | 2,510 | 2,510 | |||||||||||||||
|
Net
loss
|
— | (7,893 | ) | — | (7,893 | ) | (7,893 | ) | ||||||||||||
|
BALANCE
AT DECEMBER 31, 2008
|
$ | 35,116 | $ | (8,430 | ) | $ | 4,211 | $ | 30,897 | $ | (5,383 | ) | ||||||||
|
Foreign
currency translation adjustment
|
— | — | (16 | ) | (16 | ) | (16 | ) | ||||||||||||
|
Net
income
|
— | 2,302 | — | 2,302 | 2,302 | |||||||||||||||
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BALANCE
AT DECEMBER 31, 2009
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$ | 35,116 | $ | (6,128 | ) | $ | 4,195 | $ | 33,183 | $ | 2,286 | |||||||||
See notes
to the financial statements.
F-5
CHINA
TOBACCO MAUDUIT (JIANGMEN) PAPER INDUSTRY COMPANY LTD.
STATEMENTS
OF CASH FLOWS
(In
thousands of US dollars)
|
For
the year ended December 31,
|
||||||||||||
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2009
|
2008
|
2007
|
||||||||||
|
(unaudited)
|
||||||||||||
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Cash
flows from operating activities
|
||||||||||||
|
Net
income (loss)
|
$ | 2,302 | $ | (7,893 | ) | $ | (253 | ) | ||||
|
Adjustment
for:
|
||||||||||||
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Depreciation
|
4,202 | 2,107 | 91 | |||||||||
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Land
use right expense
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91 | 66 | 75 | |||||||||
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Inventory
impairment
|
119 | 624 | — | |||||||||
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Change
in fair value of foreign currency contracts
|
— | — | 166 | |||||||||
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Income
tax benefit
|
(342 | ) | — | — | ||||||||
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Others
|
32 | — | — | |||||||||
|
Changes
in operating working capital:
|
||||||||||||
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Related
party receivables
|
(7,686 | ) | (358 | ) | (33 | ) | ||||||
|
Inventories
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(2,958 | ) | (6,308 | ) | (778 | ) | ||||||
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Other
current assets
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1,231 | (1,793 | ) | (70 | ) | |||||||
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Accounts
payables
|
1,856 | 315 | 5,490 | |||||||||
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Related
party payables
|
823 | (645 | ) | 1,373 | ||||||||
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Accrued
expenses
|
853 | 61 | 366 | |||||||||
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Other
long term liabilities
|
(265 | ) | 457 | — | ||||||||
|
Acquisition
of land use right
|
(35 | ) | (295 | ) | (92 | ) | ||||||
|
Net
cash provided by (used in) operations
|
223 | (13,662 | ) | 6,335 | ||||||||
|
Cash
flows from investing activities
|
||||||||||||
|
Purchases
of plant, property, and equipment,
|
(1,381 | ) | (25,302 | ) | (59,635 | ) | ||||||
|
Change
in restricted cash
|
1,113 | (701 | ) | (412 | ) | |||||||
|
Cash
used in investing activities
|
(268 | ) | (26,003 | ) | (60,047 | ) | ||||||
|
Cash
flows from financing activities
|
||||||||||||
|
Proceeds
from bank borrowings
|
73,461 | 46,877 | 27,721 | |||||||||
|
Repayments
of bank borrowings
|
(72,006 | ) | (16,670 | ) | — | |||||||
|
Contributions
from shareholders
|
— | 3,960 | 25,427 | |||||||||
|
Cash
provided by financing activities
|
1,455 | 34,167 | 53,148 | |||||||||
|
Increase
(decrease) in cash and cash equivalents
|
1,410 | (5,498 | ) | (564 | ) | |||||||
|
Effect
of exchange rate on cash
|
(16 | ) | 2,651 | 1,565 | ||||||||
|
Cash
and cash equivalents at beginning of year
|
1,371 | 4,218 | 3,217 | |||||||||
|
Cash
and cash equivalents at end of year
|
$ | 2,765 | $ | 1,371 | $ | 4,218 | ||||||
|
Supplemental
disclosure of non cash transactions
|
||||||||||||
|
Interest
paid (net of interest capitalized)
|
3,251 | 1,413 | — | |||||||||
|
Non-cash
investing activity
|
||||||||||||
|
Purchase
of plant, property and equipment
|
1,182 | 2,539 | 3,639 | |||||||||
See notes
to the financial statements.
F-6
CHINA
TOBACCO MAUDUIT (JIANGMEN) PAPER INDUSTRY COMPANY LTD.
NOTES
TO FINANCIAL STATEMENTS
(In
thousands of US dollars)
|
1.
|
Description
of business
|
|
|
China
Tobacco Mauduit (Jiangmen) Paper Industry Company Ltd. (the "Company") was
incorporated in the People's Republic of China ("PRC" or "China") on
December 31, 2005 as a joint venture between Schweitzer-Mauduit
International China Ltd., a wholly owned subsidiary of Schweitzer-Mauduit
International Inc. and China National Tobacco Corporation
("CNTC"). The Company is engaged in manufacture and sale of
cigarette paper and porous plug wrap
paper.
|
|
2.
|
Summary
of significant accounting policies
|
|
|
(a)
|
Basis
of preparation
|
The
financial statements and the notes thereto have been prepared and presented in
accordance with accounting principles generally accepted in the United States of
America, or U.S. GAAP. Management evaluated subsequent events through March 4,
2010, when our financial statements were issued.
|
|
(b)
|
Use
of estimates
|
|
|
The
preparation of the financial statements, in accordance with U.S. GAAP
requires the Company to make estimates and assumptions that affect the
amounts reported in the financial statements. The Company believes the
estimates and assumptions used in the preparation of the financial
statements are reasonable, based upon currently available facts and known
circumstances. Actual results could materially differ from these estimates
and assumptions. Significant estimates which are susceptible to change as
more information becomes available are the useful lives of plant,
property, and equipment, valuation of deferred tax assets and charges to
inventories.
|
|
|
(c)
|
Concentration
of risk
|
|
|
Financial
instruments that potentially expose the Company to concentrations of
credit risk consist primarily of cash and cash equivalents and related
party receivables.
|
|
|
The
Company places its cash and cash equivalents in various financial
institutions in the PRC. The Company believes that no
significant credit risk exists as these banks are principally
government-owned financial institutions with high credit ratings and
quality.
|
|
|
The
Company conducts credit evaluations of its affiliated
companies. The Company establishes an allowance for doubtful
accounts mainly based on age of the receivables and other factors
surrounding the credit risk of specific customers and affiliated
companies.
|
|
|
(d)
|
Fair
value of financial instruments
|
|
|
The
Company's financial instruments include cash and cash equivalents, related
party receivables, other current assets, accounts payables, related party
payables, accrued expenses, short-term bank borrowings and long-term
debts. As of December 31, 2009, the carrying amounts
approximate the fair values due to the short-term nature of these
instruments. The carrying amount of long-term debts approximate
their fair values as they carry market interest
rates.
|
F-7
CHINA
TOBACCO MAUDUIT (JIANGMEN) PAPER INDUSTRY COMPANY LTD.
NOTES
TO FINANCIAL STATEMENTS
(In
thousands of US dollars)
|
2.
|
Summary
of significant accounting policies -
continued
|
|
|
(e)
|
Cash
and cash equivalents
|
|
|
Cash
and cash equivalents consist of cash on hand and highly liquid short-term
deposits which are unrestricted as to withdrawal and use, and which have
maturities of three months or less when
purchased.
|
|
|
(f)
|
Inventories
|
|
|
Inventories
are valued at the lower of cost or market. Cost is determined using the
First-In, First-Out method, or FIFO. Costs include materials,
direct labor, and overheads incurred in bringing the inventories to their
present location and condition. The definition of market value with
respect to all inventories is replacement cost or net realizable value.
The Company reviews and determines the necessity of write-offs for excess,
obsolete or unsaleable inventory based on its judgment of future
realization. These reviews require the Company to assess customer and
market demand. The Company recognized impairment of $119, $624 and $0
(unaudited) at December 31, 2009, 2008 and 2007,
respectively.
|
|
|
(g)
|
Property,
plant, and equipment, net
|
|
|
Property,
plant, and equipment are stated at cost less accumulated depreciation.
Interest is capitalized as a component of the cost of construction for the
buildings, plant and machinery. Expenditures for betterments are
capitalized whereas normal repairs and maintenance are expensed as
incurred. When property is sold or retired, the cost of the property and
the related accumulated depreciation are removed from the balance sheets,
and any gain or loss on the transaction is normally included in statements
of operations. Depreciation on property, plant, and equipment is
calculated on the straight-line method over the estimated useful lives of
the assets. The depreciable lives are as
follows:
|
|
Years
|
|
|
Building
|
lesser
of 30 years or lease term
|
|
Plant
and machinery
|
16
to 20 years
|
|
Furniture,
fixtures and equipment
|
5
|
|
Motor
vehicles
|
5
|
|
|
(h)
|
Impairment
of long-lived assets
|
|
|
The
Company evaluates the recoverability of long-lived assets with finite
lives when events or circumstances warrant a review. The
Company assesses recoverability by a comparison of the carrying amount of
the long-lived asset to the estimated undiscounted future cash flows
expected to be generated by the asset. If the carrying amount
of an asset exceeds its estimated future undiscounted cash flows, an
impairment loss is measured by the amount the estimated fair value of the
asset exceeds its net carrying
amount.
|
F-8
CHINA
TOBACCO MAUDUIT (JIANGMEN) PAPER INDUSTRY COMPANY LTD.
NOTES
TO FINANCIAL STATEMENTS
(In
thousands of US dollars)
|
2.
|
Summary
of significant accounting policies -
continued
|
|
|
(i)
|
Land
use right
|
|
|
Land
use right represents prepayments made to obtain land under operating lease
arrangements. Land use right is recognized as an expense on a
straight-line basis over the lease period of 30 years. Land use
right expense for the years ended December 31, 2009, 2008 and 2007 was
$91, $66 and $75 (unaudited),
respectively.
|
|
|
(j)
|
Revenue
recognition
|
|
|
The
Company recognizes revenue when the following 4 criteria are met: (1)
persuasive evidence of an arrangement exists; (2) ownership has
transferred to the customer; (3) the selling price is fixed or
determinable; and (4) collectability is reasonably assured based on the
Company's judgment regarding the collectability of its accounts
receivable. Generally, the Company recognizes revenue when it
ships its manufactured product and title and risk of loss passes to its
customers in accordance with the terms of sale of the
product. Revenue is recorded when the Company receives
acknowledgement of receipt from its customers, at which time title and
risk of loss are transferred. Sales agreements typically do not contain
customary product warranties except for return and replacement of
defective products within a period of 30 days from
delivery. Sales agreements do not contain any post-shipment
obligations or any other return or credit
provisions.
|
|
|
Freight
cost
|
|
|
The
cost of shipping and handling charged to the Company's customers is
recorded as a component of cost of products sold. Those costs
include the amounts paid to a third party to deliver the finished goods of
$851, $73 and $0 (unaudited) for the years ended December 31, 2009, 2008
and 2007, respectively. Any freight costs billed to and paid by
a customer are included in revenue.
|
|
|
(k)
|
Derivative
instruments
|
The
Company entered into derivative financial instruments such as foreign currency
forward contracts to manage its risks on foreign currency
borrowings. Derivative financial instruments are initially recognized
at fair value and subsequently remeasured at their fair values with changes in
fair value included in determination of net income. As of December
31, 2009, there were no derivative instruments outstanding.
|
|
(l)
|
Employee
welfare benefits
|
|
|
Full
time employees of the Company in the PRC participate in a
government-mandated multi-employer defined contribution plan pursuant to
which certain pension benefits, medical care, unemployment insurance, and
other welfare benefits are provided to the employees. Chinese
labor regulations require the Company to accrue for these defined
contribution plans based on certain percentages of the employees'
salaries. For the years ended December 31, 2009, 2008 and 2007,
the Company incurred expenses of $682, $375 and $230 (unaudited),
respectively.
|
F-9
CHINA
TOBACCO MAUDUIT (JIANGMEN) PAPER INDUSTRY COMPANY LTD.
NOTES
TO FINANCIAL STATEMENTS
(In
thousands of US dollars)
|
2.
|
Summary
of significant accounting policies -
continued
|
|
|
(m)
|
Income
taxes
|
The
Company applies the asset and liability approach to financial accounting and
reporting for income taxes. Deferred income tax assets and liabilities are
computed annually for differences between the financial statement and tax bases
of assets and liabilities that will result in taxable or deductible amounts in
the future based on enacted tax laws and rates applicable to the periods in
which the differences are expected to affect taxable income. The effect on
deferred tax assets and liabilities of change in tax rates has been recognized
in the statements of operations in the period of the enactment of the change.
Income tax expense (benefit) is the tax payable or refundable for the period
plus or minus the change during the period in deferred tax assets and
liabilities. Valuation allowances are recognized to reduce deferred tax assets
to the amount that is more likely than not to be realized. In assessing the
likelihood of realization, the Company considers estimates of future taxable
income.
|
|
(n)
|
Foreign
currency
|
|
|
The
functional currency of the Company is Renminbi (RMB). Foreign
currency transactions have been converted into the functional currency at
the exchange rates prevailing on transaction dates. Foreign
currency denominated monetary assets and liabilities have been translated
at the exchange rates prevailing on the balance sheet
date. Exchange differences have been included in the statements
of operations.
|
|
|
The
financial statements are translated into U.S. dollar, the reporting
currency. All assets and liabilities are translated at the
rates of exchange ruling at the balance sheet date and all income and
expense items are translated at the average rates of exchange over the
year. All exchange differences arising from the translation of
financial statements are recorded as a component of comprehensive
income.
|
|
|
(o)
|
Comprehensive
income (loss)
|
|
|
Comprehensive
income (loss) includes all changes in equity from transactions and other
events and circumstances from non-shareholder sources. The
Company's comprehensive income (loss) consists of net income (loss) and
the unrealized foreign exchange differences arising from
translation.
|
F-10
CHINA
TOBACCO MAUDUIT (JIANGMEN) PAPER INDUSTRY COMPANY LTD.
NOTES
TO FINANCIAL STATEMENTS
(In
thousands of US dollars)
|
2.
|
Summary
of significant accounting policies -
continued
|
|
|
(p)
|
Recent
accounting pronouncements
|
In August
2009, the FASB published FASB ASU No. 2009-05, Fair Value Measurements and
Disclosures (Topic 820) - Measuring Liabilities at Fair Value. ASU
2009-05 amends ASC Subtopic 820-10, Fair Value Measurements and
Disclosures - Overall, for the fair value measurement of liabilities. It
provides clarification that in circumstances in which a quoted price in an
active market for the identical liability is not available, a reporting entity
is required to measure the fair value using (1) a valuation technique that uses
the quoted price of the identical liability when traded as an asset or quoted
prices for similar liabilities or similar liabilities when traded as assets or
(2) another valuation technique that is consistent with the principles of Topic
820. It also clarifies that when estimating the fair value of a liability, a
reporting entity is not required to include a separate input or adjustment to
other inputs relating to the existence of a restriction that prevents the
transfer of the liability and that both a quoted price in an active market for
the identical liability at measurement date and that the quoted price for the
identical liability when traded as an asset in an active market when no
adjustments to the quoted price of the asset are required are Level 1 fair value
measurements. The provisions of ASU 2009-05 are effective for the first
reporting period (including interim periods) beginning after issuance. Early
application is permitted. The Company does not expect the adoption of ASU
2009-05 will have a material impact on its financial
statements.
|
3.
|
Inventories
|
|
|
Inventories
by major class were as follows:
|
|
December
31,
|
||||||||
|
2009
|
2008
|
|||||||
|
Raw
materials
|
$ | 5,630 | $ | 4,516 | ||||
|
Work
in process
|
3,465 | 1,578 | ||||||
|
Finished
goods
|
206 | 368 | ||||||
|
Total
|
$ | 9,301 | $ | 6,462 | ||||
F-11
CHINA
TOBACCO MAUDUIT (JIANGMEN) PAPER INDUSTRY COMPANY LTD.
NOTES
TO FINANCIAL STATEMENTS
(In
thousands of US dollars)
|
4.
|
Property,
plant, and equipment, net
|
|
|
Property,
plant and equipment, net consisted of the
following:
|
|
December
31,
|
||||||||
|
2009
|
2008
|
|||||||
|
Cost
|
||||||||
|
Buildings
|
$ | 11,116 | $ | 10,334 | ||||
|
Plant
and machinery
|
78,562 | 79,418 | ||||||
|
Furniture,
fixtures and equipment
|
768 | 711 | ||||||
|
Motor
vehicles
|
343 | 334 | ||||||
| 90,789 | 90,797 | |||||||
|
Less
accumulated depreciation
|
(6,477 | ) | (2,275 | ) | ||||
|
Property,
plant, and equipment, net
|
$ | 84,312 | $ | 88,522 | ||||
|
|
Depreciation
expense was $4,202, $2,107 and $91 (unaudited) for the years ended
December 31, 2009, 2008 and 2007,
respectively.
|
Interest
incurred for construction of property, plant and equipment is capitalized as
part of the cost of such assets. No interest cost was capitalized for the year
ended December 31, 2009. Interest expense capitalized for the years ended
December 31, 2008 and 2007 was $2,251 and $833 (unaudited),
respectively.
|
5.
|
Debts
|
|
|
Total
debts consisted of the following:
|
|
December
31,
|
||||||||
|
2009
|
2008
|
|||||||
|
Short-term
debts:
|
||||||||
|
PRC
revolving loans
|
$ | — | $ | 1,010 | ||||
|
Short-term
loans
|
9,521 | 7,035 | ||||||
|
Current
portion of long-term debts
|
5,912 | 5,772 | ||||||
| 15,433 | 13,817 | |||||||
|
Long-term
debts:
|
||||||||
|
Term
loans
|
57,701 | 57,722 | ||||||
|
Less
current portion
|
(5,912 | ) | (5,772 | ) | ||||
|
Non-current
portion of long-term debts
|
$ | 51,789 | $ | 51,950 | ||||
F-12
CHINA
TOBACCO MAUDUIT (JIANGMEN) PAPER INDUSTRY COMPANY LTD.
NOTES
TO FINANCIAL STATEMENTS
(In
thousands of US dollars)
|
5.
|
Debts
- continued
|
Short-term
debts consisted of a revolving credit facility and short-term bank
loans. Short-term debts had a weighted average interest rate of
approximately 4.61% and 6.38% per annum as of December 31, 2009 and 2008
respectively. As of December 31, 2009, all the short-term debts were
denoted in Renminbi. As of December 31, 2008, short-term debts of $7,035, $253,
$631, and $126 were denominated in Renminbi, US dollars, Euro and British
pounds, respectively. As of December 31, 2009, $732 was secured by the land use
right and fixed assets of the Company. As of December 31, 2008,
$6,291 was secured by the land use right and fixed assets of the
Company.
|
|
As
of December 31, 2009, $20,684 and $37,017 of long-term debts were
denominated in Renminbi and US dollars, respectively. As of
December 31, 2008, $20,665 and $37,057 of long-term debts were denominated
in Renminbi and US dollars, respectively. As of December 31, 2009, all
long-term debts were unsecured. As of December 31, 2008, all long-term
debts were secured by the land use right and fixed assets of the
Company. The weighted average interest rates were approximately
4.42% and 5.69% per annum as of December 31, 2009 and 2008
respectively. The Renminbi denominated loans carry interest
rate at 90% of the benchmark rate of 10 year term loan announced by the
People's Bank of China. According to the laws of the PRC, rates
may be adjusted annually based on the interest rates determined by the
People's Bank of China. For the US dollar denominated debts,
the interest rate is calculated at 1% plus the six month LIBOR of the
actual draw down day and is reset at the prevailing LIBOR rate plus 1%
every six months.
|
|
|
Following
were the contractual maturities for the Company's debt principal
obligations as of December 31,
2009:
|
|
6.
|
Capital
structure
|
The
Company was incorporated as a joint venture in December 2005 with initial
capital contribution of $5,729. In December 2007 and 2008 additional
capital of $25,427 and $3,960, were made by the venturers, respectively. There
is no change in capital contribution for the year ended December 31,
2009.
F-13
CHINA
TOBACCO MAUDUIT (JIANGMEN) PAPER INDUSTRY COMPANY LTD.
NOTES
TO FINANCIAL STATEMENTS
(In
thousands of US dollars)
|
7.
|
Income
taxes
|
|
|
The
Company is subject to Enterprise Income Tax ("EIT") on the taxable income
in accordance with the Enterprise Income Tax Law and the Income Tax Law of
the PRC concerning Foreign Investment Enterprise and Foreign Enterprises
(collectively "PRC Enterprise Income Tax
Laws").
|
|
|
On
March 16, 2007, the PRC National People's Congress passed the China
Corporate Income Tax Law which changed the income tax rates for most
enterprises from 33% at the present to 25%. This new law became
effective on January 1, 2008. There will be a transition
period for certain qualifying enterprises, whether foreign-invested or
domestic, which currently receive preferential tax treatments granted by
relevant tax authorities. Certain enterprises that are subject
to an enterprise income tax rate lower than 25% may continue to enjoy the
lower rate and gradually transfer to the new tax rate within five years
after the effective date of the new law. Certain enterprises
that are currently entitled to exemptions or reductions from the standard
income tax rate for a fixed term may continue to enjoy such treatment
until the fixed term expires.
|
|
|
Prior
to 2008, the Company was not considered an operating entity under PRC tax
rules and therefore there is no effect of income tax for the years
2006-2007. In 2008, the statutory tax rate was
25%. However, the Company is qualified for a tax holiday and is
entitled to full tax exemption for two years and 50% reduction in the
following three years. Therefore, the Company is exempted from
PRC EIT from 2008 to 2009 and will be subject to EIT at 12.5% from 2010 to
2012.
|
|
|
Income
tax benefit was as follows:
|
|
December
31,
|
||||||||||||
|
2009
|
2008
|
2007
|
||||||||||
|
(unaudited)
|
||||||||||||
|
Current
|
$ | — | $ | — | $ | — | ||||||
|
Deferred
|
$ | (342 | ) | $ | — | $ | — | |||||
|
Total
|
$ | (342 | ) | $ | — | $ | — | |||||
F-14
CHINA
TOBACCO MAUDUIT (JIANGMEN) PAPER INDUSTRY COMPANY LTD.
NOTES
TO FINANCIAL STATEMENTS
(In
thousands of US dollars)
|
7.
|
Income
taxes - continued
|
In the
years ended December 31, 2009 and 2008, significant reconciling items between
the reported amount of income tax benefits attributable to the operations for
the year and the amount of income tax benefits that would result from applying
domestic federal statutory tax rates include tax effect of expenses not
deductible for tax purposes, effect of tax holidays, and changes in valuation
allowance.
Principal
components of deferred income tax assets and liabilities were as
follows:
|
December
31,
|
||||||||
|
2009
|
2008
|
|||||||
|
Non-current
deferred tax assets:
|
||||||||
|
Operating
loss carry forwards
|
$ | 903 | $ | 1,184 | ||||
|
Other
accrued liabilities
|
209 | — | ||||||
|
Valuation
allowance
|
— | (327 | ) | |||||
|
Total
deferred tax assets, net
|
$ | 1,112 | $ | 857 | ||||
|
Non-current
deferred tax liability:
|
||||||||
|
Plant,
property and equipment
|
$ | (770 | ) | $ | (857 | ) | ||
|
Non-current
deferred tax assets, net
|
$ | 342 | $ | — | ||||
The net
operating loss carry forwards of $7,221 as of December 31, 2009, for which $342
deferred tax assets were reflected on the balance sheet, will expire on various
dates through 2014. Valuation allowance had been recorded to the
extent deferred tax assets were expected to expire in the Company's tax
exemption period. Where a valuation allowance was not recorded, the Company
believes that there was sufficient positive evidence to support its conclusion
not to record a valuation allowance as it expects to generate sufficient taxable
income in the future. No valuation allowance was recorded as of December 31,
2009.
|
8.
|
Related
parties transactions
|
|
|
(a)
|
Royalties
to SWM and CNTC
|
|
|
The
Company entered into a Know-how License Contract with SWM, and a Cigarette
Information Services Contract with CNTC in which 2% of royalties charges
are payable on gross sales of cigarette paper and porous plug wrap paper.
Royalties were $1,323, $132 and $0 (unaudited) for the years ended
December 31, 2009, 2008 and 2007, respectively. Amounts paid to
both SWM and CNTC for the years ended December 31, 2009, 2008 and 2007
were $142, $57 and $0 (unaudited), respectively. Amounts due to
SWM and CNTC for the years ended December 31, 2009 and 2008 were $1,255
and $74, respectively.
|
F-15
CHINA
TOBACCO MAUDUIT (JIANGMEN) PAPER INDUSTRY COMPANY LTD.
NOTES
TO FINANCIAL STATEMENTS
(In
thousands of US dollars)
|
|
(b)
|
Technical
Services from PdM
|
|
|
For
the mill construction, Papeteries de Mauduit S.A.S. Inc. (PdM), a wholly
owned subsidiary of SWM, provided professional consultancy service to the
Company under a Technical Services Agreement signed between the Company
and PdM. Amounts paid to PDM for the years ended December 31, 2009, 2008
and 2007 amounted to $871, $2,467 and $1,972 (unaudited), respectively. As
of December 31, 2009 and 2008, amounts due to PdM for consultancy services
were $121 and $164, respectively.
|
|
|
(c)
|
Purchases
from PdM, PDM Industries and PdMal
|
|
|
Purchases
of raw materials and work in progress rolls from PdM, PDM Industries and
PdMal, subsidiaries of SWM, amounted to $1,972, $2,585 and $355
(unaudited) for the years ended December 31, 2009, 2008 and 2007,
respectively. The Company purchased fixed assets from PdM
amounting to $0, $264 and $0 (unaudited) for the years ended December 31,
2009, 2008 and 2007, respectively. As of December 31, 2009 and 2008,
amount due to PdM, PDM Industries and PdMal related to raw materials and
work in progress rolls purchased were $175 and $465,
respectively.
|
|
|
(d)
|
Sales
to cigarette manufacturer
|
|
|
All
of the Company's sales and related party receivables are transacted with
subsidiaries of CNTC.
|
*********
F-16