Food quality, safety, and management controls are of primary importance to us. We have established quality control and food safety management systems for all stages of our business, including raw material sourcing, producing, packaging, storage and transportation of our products.
Most of our products have been certified "green food" by national standards. Standards of quality and safety of agricultural products include the whole process of agricultural production, theyproduction. They are standards of agricultural products varieties, as well as the environmental standards of manufacturing location, production and processing technical specifications, product classification, Safetysafety and Hygiene,hygiene, packing, storage and transit. We have been implementing and practicing “The Food Safety Law of the People’s Republic of China,” and incorporating international standards policies and procedures to meet the quality and food safety requirements of many markets.
Our products have strict quality assurance measures. For example, our hops, beer barley, cotton, potatoes and other products go through intense inspection and testing by the “PRC National Quality Inspection Bureau”. Our hops and beer barley have to meet strict standards for national beer manufacturers who have special hops and barley quality standards, such as acid content, color and purity. Our potatoes are mainly used for producing starch and mashed potatoes with high demands on the starch content and to utilizingutilize certain strains designated by our customers, such as KFC, Pepsi, and McDonalds.
We have implemented different levels of tracking for each industry and product. These systems allow our products to be traced back to the agro base and farm plot of origin and can be crossed check by our reports from our production management and technical support team. This allows for quick and efficient identification of the source of theany problem and allowallows for quick correction or measures to ensure safety.
Assuring food safety and quality controls is dependent on a system of standardized cultivation that can produce consistent products in size and flavor that are safe to consume. We implement quality control measures to ensure that through the production process from start to finish that our management, technicians and labor force follow these guidelines.
Seeds, clones, and sprouts from inception are tested and trialed to ensure consistent traits in growing performance, size, appearance, flavor, and nutrition. At this stage of cultivation, the companiesCompany's technical and production management team intend to be actively involved in assuring the standards are met.
Fertilizers are very important and we take all measures to utilized organic fertilizers. The companyCompany internally produces organic fertilizer materials within the company’sCompany’s sustainable operations concept. The fertilizers used are friendly to the environment and non toxic to water systems. Our efforts are to reduce the effects of over farmed land on fertile soil and create a medium for enhanced water saving techniques as well as adding additional nutrients. The quality of soil is vital and this approach achieves that goal. This approach also allows for a higher quality product with more nutrients, flavor, and appearance.
We have a diverse product portfolio requiring many types of processing after production. Many techniques are undertaken and each product has a separate team to oversee this process. Processing facilities are equipped with cleaning, sorting, packaging, and required temperature storage be it dry or cold and the sales, marketing, and production management team work closely to ensure quick delivery. All facilities follow PRC, ISO, and HACCP, processing and packaging standards and are monitored and managed by our production team and related departments.
Our diverse product portfolio requires little storage accept for short term storage. We have also established cold and dry storage facilities for products that have those demands. All facilities are regularly inspected and follow PRC and ISO standards for cleanliness, organization, and safe working environment.environments. Quality control measures implemented by the production and technical management team continue all the way until the product is delivered to the customer desired location. These procedures are recorded in reports and filed for upper management
Gansu Yasheng is our parent of the Company and controls us by its ownership of approximately 78% of our voting securities of the Company. Many of the directors of Gansu Yasheng also serve as our directors. Messrs. X. Wang, D. Wang, L. Wei and S. Yang and Ms. He each received $10,000$12,000 paid by Gansu Yasheng per year for serving as our employees or employees of our subsidiaries.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
32.1 | Charter of the Corporate Governance and Nominating Committee (4) | ____________ |
(1) Incorporated by reference to Form 8-K filed with the SEC on June 18, 2004 (2) Incorporated by reference to Form 8-K filed with the SEC on July 16, 2004 (3) Incorporated by reference to Form 8-K filed with the SEC on October 18, 2010 (4) Incorporated by reference to Form 8-K filed with the SEC on October 14, 2010 (4) Incorporated by reference to Form 8-K filed with the SEC on October 14, 2010 (4) Incorporated by reference to Form 8-K filed with the SEC on October 14, 2010
YASHENG, GROUP AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 20092010
Index
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | F-2 | CONSOLIDATED BALANCE SHEETS | F-3 | CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME | F-4 | CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY | F-5 | CONSOLIDATED STATEMENTS OF CASH FLOWS | F-6 | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | F-7 |
![](https://capedge.com/proxy/10-K/0001199835-10-000484/gansu_header.jpg) ![](https://capedge.com/proxy/10-KA/0001199835-11-000227/yasheng_auditorheader.jpg) Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Yasheng Group: We have audited the accompanying consolidated balance sheets of Yasheng Group and its subsidiaries (the “Company”) as of December 31, 2010, 2009 and 2008, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years then ended. 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes 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 consolidated financial statements present fairly, in all material respects, the financial position of Yasheng Group and its subsidiaries as of December 31, 2010, 2009 and 2008, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Gansu Hongxin Certified Public Accountants Co., Ltd. Lanzhou, China February 26, 201025, 2011
Yasheng Group 2010 Financial Results
| CONSOLIDATED BALANCE SHEETS |
YASHENG GROUP | | YASHENG GROUP | | CONSOLIDATED BALANCE SHEETS | | CONSOLIDATED BALANCE SHEETS | | | | Year Ended December 31, | | | December 31, | | | | | | 2009 | | | 2008 | | 2010 | | | 2009 | | | 2008 | | | | | | | | | | | | | | | | | ASSETS | | | | | | | | | | | | | | | | | | | | | | | | | | Current assets: | | | | | | | | | | | | | Cash and cash equivalents | | $ | 8,010,017 | | | $ | 7,880,338 | | | 10,116,750 | | | | 8,010,017 | | | | 7,880,338 | | Accounts receivable, less allowances of $3,740,350 and $3,395,528, respectively | | | 71,216,566 | | | | 64,616,646 | | | Accounts receivable, net | | | 76,240,589 | | | | 71,216,566 | | | | 64,616,646 | | Inventories | | | 75,332,668 | | | | 70,357,148 | | | 103,588,885 | | | | 75,332,668 | | | | 70,357,148 | | Prepaid and other current assets | | | 4,673,279 | | | | 4,762,327 | | | 4,538,059 | | | | 4,673,279 | | | | 4,762,327 | | | | | | | | | | | | | | | | | | | | | | Total current assets | | | 159,232,530 | | | | 147,616,459 | | | 194,484,282 | | | | 159,232,530 | | | | 147,616,459 | | | | | | | | | | | | | | | | | | | | | | Equity and other investments | | | 190,402 | | | | 190,509 | | | 193,974 | | | | 190,402 | | | | 190,509 | | | | | | | | | | | | | | | | | | | | | | Property, plant and equipment, net | | | 393,776,831 | | | | 403,954,071 | | | 404,385,526 | | | | 393,776,831 | | | | 403,954,071 | | | | | | | | | | | | | | | Construction in progress | | | 5,446,595 | | | | 5,823,620 | | | 6,664,773 | | | | 5,446,595 | | | | 5,823,620 | | Intangible assets, net | | | 958,065,063 | | | | 945,931,378 | | | 985,004,893 | | | | 958,065,063 | | | | 945,931,378 | | Other long term assets | | | 232,711,379 | | | | 224,002,445 | | | 276,361,639 | | | | 232,711,379 | | | | 224,002,445 | | | | | | | | | | | | | | | | | | | | | | Total assets | | $ | 1,749,422,800 | | | $ | 1,727,518,481 | | | 1,867,095,086 | | | | 1,749,422,800 | | | | 1,727,518,481 | | | | | | | | | | | | | | | | | | | | | | LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Current liabilities: | | | | | | | | | | | | | Accounts payable and accrued expenses | | $ | 55,031,294 | | | $ | 65,925,273 | | | 44,593,435 | | | | 55,031,294 | | | | 65,925,273 | | Short term loans | | | 19,606,983 | | | | 25,761,947 | | | 15,099,582 | | | | 19,606,983 | | | | 25,761,947 | | VAT payable | | | 1,142,638 | | | | 1,205,555 | | | VAT Tax payable | | | 988,429 | | | | 1,142,638 | | | | 1,205,555 | | Current portion of long term debt | | | 9,796,158 | | | | 25,228,661 | | | 7,518,868 | | | | 9,796,158 | | | | 25,228,661 | | Other current liabilities | | | 1,170,455 | | | | 1,365,609 | | | 801,140 | | | | 1,170,455 | | | | 1,365,609 | | | | | | | | | | | | | | | | | | | | | | Total current liabilities | | | 86,747,529 | | | | 119,487,044 | | | 69,001,454 | | | | 86,747,529 | | | | 119,487,044 | | | | | | | | | | | | | | | | | | | | | | Long term debt | | | 3,220,335 | | | | 3,579,453 | | | 2,441,364 | | | | 3,220,335 | | | | 3,579,453 | | Long term payable | | | 51,643,382 | | | | 77,168,451 | | | 37,359,986 | | | | 51,643,382 | | | | 77,168,451 | | | | | | | | | | | | | | | | | | | | | | Total liabilities | | | 141,611,245 | | | | 200,234,948 | | | 108,802,804 | | | | 141,611,245 | | | | 200,234,948 | | | | | | | | | | | | | | | | | | | | | | Stockholders’ equity: | | | | | | | | | | | | | | | | | | | | Common stock, No par | | | | | | | | | | Common stock, US$1.00 par value | | | | | | | | | | | | | 800,000,000 shares authorized | | | | | | | | | | | | | | | | | | | | 155,097,355 shares issued and outstanding | | | 155,097,355 | | | | 155,097,355 | | | 155,097,355 | | | | 155,097,355 | | | | 155,097,355 | | Accumulated other comprehensive income | | | 240,383,631 | | | | 238,919,350 | | | 291,678,383 | | | | 240,383,631 | | | | 238,919,350 | | Retained earnings | | | 1,212,330,569 | | | | 1,133,266,828 | | | 1,311,516,545 | | | | 1,212,330,569 | | | | 1,133,266,828 | | | | | | | | | | | | | | | | | | | | | | Total stockholders’ equity | | | 1,607,811,555 | | | | 1,527,283,533 | | | 1,758,292,283 | | | | 1,607,811,555 | | | | 1,527,283,533 | | | | | | | | | | | | | | | | | | | | | | Total liabilities & stockholders' equity | | $ | 1,749,422,800 | | | $ | 1,727,518,481 | | | 1,867,095,086 | | | | 1,749,422,800 | | | | 1,727,518,481 | | | | | | | | | | | | | | | | | | | | | | The accompanying notes are an integral part of these consolidated financial statements. | The accompanying notes are an integral part of these consolidated financial statements. | | The accompanying notes are an integral part of these consolidated financial statements. | |
YASHENG GROUP | CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME |
YASHENG GROUP | | CONSOLIDATED STATEMENTS OF OPERATIONS | | | | | | | | | | | | | | Year Ended December 31, | | | | 2010 | | | 2009 | | | 2008 | | | | | | | | | | | | Net sales | | | 849,454,265 | | | | 739,630,043 | | | | 736,213,299 | | | | | | | | | | | | | | | Cost of goods sold | | | 743,600,855 | | | | 655,376,444 | | | | 655,007,437 | | | | | | | | | | | | | | | Gross profit | | | 105,853,410 | | | | 84,253,599 | | | | 81,205,861 | | | | | | | | | | | | | | | Operating expenses: | | | | | | | | | | | | | Sales and marketing | | | 1,490,933 | | | | 1,298,979 | | | | 1,298,127 | | General and administrative | | | 3,548,949 | | | | 3,091,676 | | | | 3,087,467 | | Total operating expenses | | | 5,039,882 | | | | 4,390,655 | | | | 4,385,594 | | | | | | | | | | | | | | | Operating profit | | | 100,813,528 | | | | 79,862,944 | | | | 76,820,267 | | | | | | | | | | | | | | | Interest expense | | | 2,354,175 | | | | 2,465,698 | | | | 2,487,221 | | | | | | | | | | | | | | | Other income (expense) | | | 726,623 | | | | 1,666,495 | | | | 1,662,433 | | | | | | | | | | | | | | | Income before income tax expense | | | 99,185,975 | | | | 79,063,741 | | | | 75,995,479 | | Income tax expense | | | | | | | | | | | | | | | | | | | | | | | | | | Net income | | | 99,185,975 | | | | 79,063,741 | | | | 75,995,479 | | | | | | | | | | | | | | | Basic earnings per share | | | 0.64 | | | | 0.51 | | | | 0.49 | | Weighted average number of shares | | | 155,097,355 | | | | 155,097,355 | | | | 155,097,355 | | | | | | | | | | | | | | | The accompanying notes are an integral part of these consolidated financial statements. | |
| | Year Ended December 31, | | | | 2009 | | | 2008 | | | | | | | | | Net sales | | $ | 739,630,043 | | | $ | 736,213,299 | | | | | | | | | | | Cost of goods sold | | | 655,376,444 | | | | 655,007,437 | | | | | | | | | | | Gross profit | | | 84,253,599 | | | | 81,205,861 | | | | | | | | | | | Operating expenses: | | | | | | | | | Sales and marketing | | | 1,298,979 | | | | 1,298,127 | | General and administrative | | | 3,091,676 | | | | 3,087,467 | | Total operating expenses | | | 4,390,655 | | | | 4,385,594 | | | | | | | | | | | Operating income | | | 79,862,944 | | | | 76,820,267 | | | | | | | | | | | Interest expense | | | (2,465,698 | ) | | | (2,487,221 | ) | | | | | | | | | | Other income | | | 1,666,495 | | | | 1,662,433 | | | | | | | | | | | Net income | | $ | 79,063,741 | | | $ | 75,995,479 | | | | | | | | | | | Basic and Diluted Earnings Per Share | | $ | 0.51 | | | $ | 0.49 | | Weighted average number of shares | | | 155,097,355 | | | | 155,097,355 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net Income | | $ | 79,063,741 | | | $ | 75,995,479 | | Other Comprehensive Income: | | | | | | | | | Foreign currency translation adjustment | | | 1,464,281 | | | | 87,986,470 | | Total Comprehensive Income | | $ | 80,528,022 | | | $ | 163,981,194 | | | | | | | | | | | | | | | | | | | | The accompanying notes are an integral part of these consolidated financial statements. | |
| CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY |
YASHENG GROUP | | | | CONSOLIDATED STATEMENTS OF CASH FLOWS | | | | | | | | | | | | | | Year Ended December 31, | | | | 2010 | | | 2009 | | | 2008 | | Operating activities: | | | | | | | | | | | | | Net income | | | 99,185,975 | | | | 79,063,741 | | | | 75,995,479 | | Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | | | | | | Depreciation and amortization | | | 9,035,968 | | | | 8,753,216 | | | | 8,699,320 | | Others | | | (15,885,871 | ) | | | (25,597,399 | ) | | | (5,058,787 | ) | Changes in assets and liabilities: | | | | | | | | | | | | | Accounts receivable | | | (2,814,198 | ) | | | (6,539,356 | ) | | | (3,611,194 | ) | Inventories | | | (25,918,671 | ) | | | (4,909,575 | ) | | | 9,357,306 | | Prepaid and other current assets | | | 280,230 | | | | 93,512 | | | | (203,685 | ) | Accounts payable | | | (12,128,737 | ) | | | (10,945,564 | ) | | | (15,302,753 | ) | Tax payables | | | (189,664 | ) | | | (64,047 | ) | | | (1,442 | ) | Accrued expenses and other current liabilities | | | (422,357 | ) | | | (206,640 | ) | | | 67,878 | | Net cash provided by operating activities | | | 51,142,675 | | | | 39,647,889 | | | | 69,942,124 | | | | | | | | | | | | | | | Investing activities: | | | | | | | | | | | | | Purchase of assets | | | (42,115,807 | ) | | | (17,560,924 | ) | | | (141,958,706 | ) | Investments | | | 2,336 | | | | 286 | | | | 8,903 | | Net cash used in investing activities | | | (42,113,471 | ) | | | (17,560,638 | ) | | | (141,949,803 | ) | | | | | | | | | | | | | | Cash flows from financing activities: | | | | | | | | | | | | | Issuance of common stock | | | | | | | | | | | | | Dividens paid | | | | | | | | | | | | | Increase (decrease) in debt | | | (8,575,957 | ) | | | (21,997,732 | ) | | | (30,572,953 | ) | Net cash provided by financing activities | | | (8,575,957 | ) | | | (21,997,732 | ) | | | (30,572,953 | ) | | | | | | | | | | | | | | Effect of exchange rate change on cash and cash equivalents | | | 1,653,486 | | | | 40,160 | | | | 87,986,470 | | | | | | | | | | | | | | | Net increase (decrease) in cash and cash equivalents | | | 2,106,733 | | | | 129,679 | | | | (14,594,162 | ) | | | | | | | | | | | | | | Cash and cash equivalents at beginning of period | | | 8,010,017 | | | | 7,880,338 | | | | 22,474,500 | | Cash and cash equivalents at end of period | | | 10,116,750 | | | | 8,010,017 | | | | 7,880,338 | | | | | | | | | | | | | | | Supplemental disclosures: | | | | | | | | | | | | | Cash paid for interest | | | 2,742,518 | | | | 3,808,767 | | | | 3,805,201 | | Cash paid for income taxes | | | | | | | | | | | | | | | | | | | | | | | | | | The accompanying notes are an integral part of these consolidated financial statements. | |
| | Common Stock | | | Retained Earnings | | | Accumulated Other Comprehensive Income | | | Total | | | | | | | | | | | | | | | December 31, 2007 | | $ | 155,097,355 | | | $ | 1,057,271,349 | | | $ | 150,932,880 | | | $ | 1,363,301,583 | | | | | | | | | | | | | | | | | | | Net income | | | | | | | 75,995,479 | | | | | | | | 75,995,479 | | Foreign currency translation | | | | | | | | | | | 87,986,470 | | | | 87,986,470 | | December 31, 2008 | | | 155,097,355 | | | | 1,133,266,828 | | | | 238,919,350 | | | | 1,527,283,533 | | | | | | | | | | | | | | | | | | | Net income | | | | | | | 79,063,741 | | | | | | | | 79,063,741 | | Foreign currency translation | | | | | | | | | | | 1,464,281 | | | | 1,464,281 | | December 31, 2009 | | $ | 155,097,355 | | | $ | 1,212,330,569 | | | $ | 240,383,631 | | | $ | 1,607,811,555 | | | | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements. |
YASHENG GROUP | CONSOLIDATED STATEMENTS OF CASH FLOWS |
YASHENG GROUP | | CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | | | | | | | | Year Ended December 31, | | | | 2010 | | | 2009 | | | 2008 | | | | | | | | | | | | Net income | | | 99,185,975 | | | | 79,063,741 | | | | 75,995,479 | | Other comprehensive income: | | | | | | | | | | | | | Foreign currency translation adjustment | | | 51,294,752 | | | | 1,464,281 | | | | 87,986,470 | | Total other comprehensive income | | | 51,294,752 | | | | 1,464,281 | | | | 87,986,470 | | | | | | | | | | | | | | | Total comprehensive income | | | 150,480,727 | | | | 80,528,022 | | | | 163,981,949 | | | | | | | | | | | | | | | The accompanying notes are an integral part of these statements. | |
| | Year Ended December 31, | | | | 2009 | | | 2008 | | Operating activities: | | | | | | | Net income | | | 79,063,741 | | | | 75,995,479 | | Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | | Depreciation and amortization | | | 8,753,216 | | | | 8,699,320 | | Allowance for doubtful accounts | | | 343,452 | | | | 192,637 | | Others | | | (25,597,399 | ) | | | (5,058,787 | ) | Changes in assets and liabilities: | | | | | | | | | Accounts receivable | | | (6,882,808 | ) | | | (3,803,831 | ) | Inventories | | | (4,909,575 | ) | | | 9,357,306 | | Prepaid and other current assets | | | 93,512 | | | | (203,685 | ) | Accounts payable | | | (10,945,564 | ) | | | (15,302,753 | ) | Tax payables | | | (64,047 | ) | | | (1,442 | ) | Accrued expenses and other current liabilities | | | (206,640 | ) | | | 67,878 | | Net cash provided by operating activities | | | 39,647,889 | | | | 69,942,124 | | | | | | | | | | | Investing activities: | | | | | | | | | Purchase of assets | | | (17,560,924 | ) | | | (141,958,706 | ) | Investments | | | 286 | | | | 8,903 | | Net cash used in investing activities | | | (17,560,638 | ) | | | (141,949,803 | ) | | | | | | | | | | Cash flows from financing activities: | | | | | | | | | Issuance of common stock | | | | | | | | | Dividens paid | | | | | | | | | Increase (decrease) in debt | | | (21,997,732 | ) | | | (30,572,953 | ) | Net cash provided by financing activities | | | (21,997,732 | ) | | | (30,572,953 | ) | | | | | | | | | | Effect of exchange rate change on cash and cash equivalents | | | 40,160 | | | | 87,986,470 | | | | | | | | | | | Net increase (decrease) in cash and cash equivalents | | | 129,679 | | | | (14,594,161 | ) | | | | | | | | | | Cash and cash equivalents at beginning of period | | | 7,880,338 | | | | 22,474,500 | | Cash and cash equivalents at end of period | | | 8,010,017 | | | | 7,880,338 | | | | | | | | | | | Supplemental disclosures: | | | | | | | | | Cash paid for interest | | | 3,808,767 | | | | 3,805,201 | | Cash paid for income taxes | | | | | | | | |
YASHENG GROUP | | CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY | | | | | | | | | | | | | | | | | Common Stock | | | Retained Earnings | | | Accumulated Other Comprehensive Income | | | Total | | | | | | | | | | | | | | | Balance as of January 1, 2008 | | | 155,097,355 | | | | 1,057,271,349 | | | | 150,932,880 | | | | 1,363,301,584 | | Net income | | | | | | | 75,995,479 | | | | | | | | 75,995,479 | | Foreign currency translation | | | | | | | | | | | 87,986,470 | | | | 87,986,470 | | | | | | | | | | | | | | | | | | | Balance as of December 31, 2008 | | | 155,097,355 | | | | 1,133,266,828 | | | | 238,919,350 | | | | 1,527,283,533 | | Net income | | | | | | | 79,063,741 | | | | | | | | 79,063,741 | | Foreign currency translation | | | | | | | | | | | 1,464,281 | | | | 1,464,281 | | | | | | | | | | | | | | | | | | | Balance as of December 31, 2009 | | | 155,097,355 | | | | 1,212,330,569 | | | | 240,383,631 | | | | 1,607,811,555 | | Net income | | | | | | | 99,185,975 | | | | | | | | 99,185,975 | | Foreign currency translation | | | | | | | | | | | 51,294,752 | | | | 51,294,752 | | | | | | | | | | | | | | | | | | | Balance as of December 31, 2010 | | | 155,097,355 | | | | 1,311,516,545 | | | | 291,678,383 | | | | 1,758,292,283 | | | | | | | | | | | | | | | | | | | The accompanying notes are an integral part of these consolidated financial statements. | |
The accompanying notes are an integral part of these consolidated financial statements.
Yasheng Group Notes to Consolidated Financial Statements
1. | Organization and nature of operations |
Yasheng Group (“The Company”) is a California corporation with primary operations in China. The Company producesdesigns, develops, manufactures and markets high-quality farming and sideline products includingproducts; chemical materials and products; textiles; construction materials; and livestock and poultry. It also designs, develops and markets new technologies related to agriculture.agriculture and genetic biology.
2. | Summary of significant accounting policies |
TheseThe consolidated financial statements have been prepared on a historical cost basis to reflect the Company’s financial position and results of operations of the Company in accordance with accounting principles generally accepted in the United States of America. Certain prior period amounts have been reclassified to conform to current period presentation.
The Company’s fiscal year ends on the 31st of December of each calendar year.
The consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany balances and transactions have been eliminated.
The Company’s discussion and analysis of its financial condition and results of operations are based upon its consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Act ualActual results may differ from these estimates under different assumptions or conditions.
Yasheng Group Notes to Consolidated Financial Statements
2. | Summary of significant accounting policies - continued |
(e) | Fair value of financial instrumentsRevenue recognition |
The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, and collectability is reasonably assured.
(f) | Shipping and handling costs |
The carrying amounts of accounts receivable, accounts payable, other liabilities,Company records outward freight, purchasing and short-term borrowings approximate their fair value due to the short-term maturity of these instruments. Long-term debt approximates fair valuereceiving costs in selling expenses; inspection costs and warehousing costs are recorded as its interest rates approximates market interest rates.general and administrative expenses.
(f)(g) | Cash and cash equivalents |
Cash and cash equivalents include cash on hand, demand deposits held by banks, and securities with maturities of three months or less. The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Cash equivalents are composed primarily of investments in money market accounts stated at cost, which approximates fair value.
(g)(h) | Accounts receivableInventories |
Inventories are recorded using the weighted average method and are valued at the lower of cost or market.
(i) | Accounts receivable, net |
The carrying amount of accounts receivable is reduced by a valuation allowance that reflects the Company’s best estimate of the amounts that will not be collected. In addition to reviewing delinquent accounts receivable, the Company considers many factors in estimating its general allowance, including aging analysis, historical bad debt records, customer credit analysis and any specific known troubled accounts.
Yasheng Group
Notes to Consolidated Financial Statements
2.(j) | Summary of significant accounting policies - continued Property, plant and equipment |
Inventories are recorded using the weighted average method and are valued at the lower of cost or market.
Investments consist primarily of less than 20% equity positions in non-marketable securities and are recorded at lower of cost or market.
(j) | Property, plant and equipment
|
Property, plant and equipment are carried at cost less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets. Amortization of leasehold improvements is calculated on a straight-line basis over the life of the asset or the term of the lease, whichever is shorter. Major renewals and betterments are capitalized and depreciated; maintenance and repairs that do not extend the life of the respective assets are charged to expense as incurred. Upon disposal of assets, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in income. Depreciation related to Property, plantproperty and equipment used in productio nproduction is reported in cost of sales. Property plant and equipment are depreciated over their estimated useful lives as follows:
Yasheng Group Notes to Consolidated Financial Statements Transportation 2. | 3 years | Machinery and equipment | 7 years | Farming facilities | 10 years | Buildings and improvements | 20Summary of significant accounting policies - 40 yearscontinued |
Buildings and improvements 20 - 40 years Farming facilities 10 years Machinery and equipment 7 years Transportation and other facilities 3 - 15 years
Long-term assets of the Company are reviewed annually to assess whether the carrying value has become impaired.impaired, according to the guidelines established in Statement of Accounting Standards (SFAS) No. 144, "Accounting for the Impairment of Disposal of Long-Lived Assets." The Company also evaluates the periods of amortization to determine whether subsequent events and circumstances warrant revised estimates of useful lives. There were no impairmentsNo impairment of assets werewas recorded forin the periods presented.reported.
Intangible assets consist of land use rights and are recorded at cost. Under PRC’s current property rights regime, use rights for specified periods (e.g., 40 to 70 years) can be obtained from the state through the up-front payment of land use fees. The fees are determined by the location, type and density of the proposed development. This separation of land ownership and use rights allows the trading of land use rights while maintaining state ownership of land. The Company has over 250,000 acres of arablefarming land that are utilized for grazing, cultivation, and reclamation, of which 50,00055,000 acres are under cultivation using the latest scientific technologies to produce a wide variety of agricultural products.
Land use rights are amortized over 70 years using the straight-line method.
(l)(k) | Impairment of long-lived assets |
The carrying amounts of long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of assets to future undiscounted net cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell.
Investments consist primarily of less than 20% equity positions in non-marketable securities and are recorded at lower of cost or market.
(m) | Revenue recognitionForeign currency translation |
The Company recognizes revenueaccompanying financial statements are presented in United States (US) dollars. The functional currency is the Renminbi (RMB). The financial statements are translated into US dollars from RMB at year-end exchange rates for assets and liabilities, and weighted average exchange rates for revenues and expenses. Capital accounts are translated at their historical exchange rates when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, and collectability is reasonably assured.
capital transactions occurred. Direct and indirect productions costs are recorded in Cost of goods sold including shipping and handling for products sold such as outward freight, purchasing, and receiving.
Yasheng Group Notes to Consolidated Financial Statements 2. | Summary of significant accounting policies - continued |
Gains and losses resulting from foreign currency translation are recorded in a separate component of shareholders’ equity. Foreign currency translation adjustments are included in accumulated other comprehensive income in the consolidated statements of shareholders’ equity for the years presented. RMB is not freely convertible into the currency of other nations. All such exchange transactions must take place through authorized institutions. There is no guarantee the RMB amounts could have been, or could be, converted into US dollars at rates used in translation.
The Company records advertising expenses in the period incurred. Advertising amounted to $546,114 and $517,207 for years 2009 and 2008, respectively.
As ana state-owned agricultural enterprise, the Company and all of its agricultural subsidiaries are exempted from enterprise income taxes with approval from the Gansu Provincial Bureau of Local Taxation. The only non-agricultural subsidiary, Baiyin Cement Plant, has suffered net loss for the three years shown and therefore has no applicable taxable income. Because of the uncertainty of future profits, no deferred tax assets have been set up at this time.
Basic earnings per share are computed using the weighted average number of common shares outstanding during the year. Diluted earnings per share are computed using the weighted average number of common and, if dilutive, potential common shares outstanding during the year. The Company has no potentially dilutive shares for the periods shown.
(p) | Economic and Political Risks |
The Company faces a number of risks and challenges as a result of having primary operations and markets in the PRC. Changing political climates in the PRC could have a significant effect on the Company's business.
(q) | Value Added Tax (VAT)Advertising expense |
The Value Added Tax is a consumption tax levied on value added. While the standard VAT rate in PRC is 17%, the Company's agricultural subsidiaries enjoy a reduced VAT rate of 4%.Company expenses advertising as incurred. Advertising expenses amounted to $664,410, $546,114, and $517,207, for year 2010, 2009, and 2008, respectively.
(r) | Foreign currency translation |
The accompanying financial statements are presented in United States (US) dollars. The functional currency is the (RMB). The financial statements are translated into US dollars from RMB at year-end exchange rates for monetary assets and liabilities, and an average of the year for revenues and expenses. Capital accounts and nonmonetary assets are translated at their historical exchange rates when the transactions occurred.
Gains and losses resulting from foreign currency transactions are recorded to operating results in the period incurred. Cumulative foreign currency translation adjustments are recorded in the consolidated financial statements within accumulated other comprehensive income. RMB is not freely convertible into the currency of other nations. All such exchange transactions must take place through authorized institutions. There is no guarantee the RMB amounts could have been, or could be, converted into US dollars at rates used in translation.
Comprehensive income is defined as the change in equity of a company during a period from transactions and other events and circumstances excluding transactions resulting from investments from owners and distributions to owners. Accumulated other comprehensive income, as presented on the accompanying consolidated balance sheets, consists of mainly the cumulative foreign currency translation adjustment.
Basic earnings per share are computed using the weighted average number of common shares outstanding during the year. Diluted earnings per share are computed using the weighted average number of common and, if dilutive, potential common shares outstanding during the year. The Company has no potentially dilutive shares for the periods shown.
(u) | Economic, political and credit risks
|
The Company faces a number of risks and challenges as a result of having primary operations and markets in the PRC. Changing political climates in the PRC could have a significant effect on the Company's business.
Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash and cash equivalents and accounts receivable. As of December 31, 2009, substantially all of the Company’s cash and cash equivalents were deposited in several financial institutions. Accounts receivable are typically unsecured and are derived from revenue earned from customers in the PRC. The risk with respect to accounts receivable is mitigated by credit evaluations performed by the Company as well as ongoing monitoring processes on outstanding balances.
Yasheng Group Notes to Consolidated Financial Statements 2. | Summary of significant accounting policies - continued |
Value added tax is a consumption tax levied on value added. While the standard VAT rate in PRC is 17%, the Company's agricultural subsidiaries enjoy a reduced VAT rate of 4%.
(t) | Recently Issued Accounting Standards |
Recently Adopted Accounting Pronouncements In January 2010, the Financial Accounting Standards Board (“FASB”) issued guidance to amend the disclosure requirements related to recurring and nonrecurring fair value measurements. The guidance requires new disclosures on the transfers of assets and liabilities between Level 1 (quoted prices in active market for identical assets or liabilities) and Level 2 (significant other observable inputs) of the fair value measurement hierarchy, including the reasons and the timing of the transfers. Additionally, the guidance requires a roll forward of activities on purchases, sales, issuance, and settlements of the assets and liabilities measured using significant unobservable inputs (Level 3 fair value measurements). The guidance became effective for us with the reporting period beginning January 1, 2010, except for the disclosure on the roll forward activities for Level 3 fair value measurements, which will become effective for us with the reporting period beginning July 1, 2011. Other than requiring additional disclosures, adoption of this new guidance did not have a material impact on our financial statements. See Note 6 – Fair Value Measurements. On July 1, 2009, we adopted guidance issued by the FASB on business combinations. The guidance retains the fundamental requirements that the acquisition method of accounting (previously referred to as the purchase method of accounting) be used for all business combinations, but requires a number of changes, including changes in the way assets and liabilities are recognized and measured as a result of business combinations. It also requires the capitalization of in-process research and development at fair value and requires the expensing of acquisition-related costs as incurred. We have applied this guidance to business combinations completed since July 1, 2009 which have been none. On July 1, 2009, we adopted guidance issued by the FASB that changes the accounting and reporting for non-controlling interests. Non-controlling interests are to be reported as a component of equity separate from the parent’s equity, and purchases or sales of equity interests that do not result in a change in control are to be accounted for as equity transactions. In addition, net income attributable to a non-controlling interest is to be included in net income and, upon a loss of control, the interest sold, as well as any interest retained, is to be recorded at fair value with any gain or loss recognized in net income. Adoption of the new guidance did not have a material impact on our financial statements. On July 1, 2009, we adopted guidance on fair value measurement for nonfinancial assets and liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). Adoption of the new guidance did not have a material impact on our financial statements. Recent Accounting Pronouncements Not Yet Adopted In October 2009, the FASB issued guidance on revenue recognition that will become effective for us beginning July 1, 2010. Under the new guidance on arrangements that include software elements, tangible products that have software components that are essential to the functionality of the tangible product will no longer be within the scope of the software revenue recognition guidance, and software-enabled products will now be subject to other relevant revenue recognition guidance. Additionally, the FASB issued guidance on revenue arrangements with multiple deliverables that are outside the scope of the software revenue recognition guidance. Under the new guidance, when vendor specific objective evidence or third party evidence for deliverables in an arrangement cannot be determined, a best estimate of the selling price is required to separate deliverables and allocate arrangement consideration using the relative selling price method. The new guidance includes new disclosure requirements on how the application of the relative selling price method affects the timing and amount of revenue recognition. We believe adoption of this new guidance will not have a material impact on our financial statements. Yasheng Group Notes to Consolidated Financial Statements 2. | Summary of significant accounting policies - continued |
(v) | RECENTLY ISSUED ACCOUNTING STANDARDS |
In June 2009, the Financial Accounting Standards Board (“FASB”) established the FASB Accounting Standards Codification (the “Codification” or “ASC”) as the source of authoritative accounting principles in the preparation of financial statements in conformity with U.S. GAAP. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. The Codification superseded all existing non-SEC accounting and reporting standards, with limited exceptions to allow recently issued standards to be incorporated into the Codification. All other non-grandfathered, non-SEC accounting literature not included in the Codification became non-authoritative. After the September 15, 2009 effective date of the Codification, all new FASB standards will be in the form of Accounting Standards Updates (“ASU”), which will update the Codification, provide background information about the guidance and provide the basis for conclusions on the changes to the Codification. The Codification was not intended to change U.S. GAAP and did not affect the company’s accounting methods, but it did change the way the accounting standards are organized and presented, particularly in descriptions of significant accounting policies.
New accounting standards that could significantly affect the company’s Consolidated Financial Statements are summarized as follows and are not anticipated to have a material effect on the Company’s results of operations.
Date Issued | Description | Effective Date for the Company | Impact | January 2010 | Clarified accounting requirements for the deconsolidation of a subsidiary or a group of assets and expanded the related disclosure. Deconsolidation occurs when the parent ceases to have a controlling interest and any resulting gain or loss is calculated as the fair value of the consideration received plus the fair value of any retained interest less the carrying value. | Retrospectively, beginning January 1, 2010. | None. | January 2010 | Expanded disclosures for fair value measurements | Prospectively, beginning January 1, 2010. | Will expand disclosure. | January 2010 | Expanded disclosures for Level 3 fair value measurements to include purchases, sales, issuances and settlements. | Prospectively, beginning January 1, 2011. | Will expand disclosure. | June 2009 | Amended the evaluation criteria to identify the primary beneficiary of a variable interest entity and required ongoing reassessments of whether the company is the primary beneficiary. | Prospectively, beginning January 1, 2010. | None. | May 2009 | Created standards of accounting and disclosure for events that occur after the balance sheet date but before financial statements are issued. | Prospectively, beginning June 30, 2009. | Expanded disclosure. | April 2009 | Created new accounting standards for the initial recognition and measurement, subsequent measurement and accounting, and disclosure of contingent assets and contingent liabilities assumed in a business combination. | Prospectively, beginning January 1, 2009. | None. | December 2008 | Expanded annual disclosure of plan assets of a defined benefit pension or other postretirement plan, including fair value disclosures. | Prospectively, beginning December 31, 2009. | Was not material. | November 2008 | Clarified the accounting for certain transactions and impairment considerations involving equity-method investments. | Prospectively, beginning January 1, 2009. | Was not material. | June 2008 | Created new accounting standards for determining whether an option or warrant on an entity’s own shares, such as in the company’s Convertible Notes, is eligible for equity classification. | Prospectively, beginning January 1, 2009. | None. |
In June 2009, the FASB issued guidance on the consolidation of variable interest entities, which is effective for us beginning July 1, 2010. The new guidance requires revised evaluations of whether entities represent variable interest entities, ongoing assessments of control over such entities, and additional disclosures for variable interests. We believe adoption of this new guidance will not have a material impact on our financial statements. Yasheng Group
Notes to Consolidated(t) Fair Value of Financial Statements
Instruments The carrying amounts of accounts receivable, accounts payable, other liabilities, and short-term borrowings approximate their fair value due to the short-term maturity of these instruments. Long term debt approximates fair value as its interest rates approximates market interest rates.
Accounts receivable are recognized and carried at original invoice amountsamount outstanding less allowancesan allowance for doubtful accounts. As of December 31, 2009 and 2008,The activity in the allowances for doubtful accounts were$3,740,350 and $3,395,528, respectively.Accounts Receivable was as follows:
December 31st | | Gross Balance at end of year | | | Allowance for doubtful accounts | | | Net Balance at end of year | | | | | | | | | | | | 2008 | | | 68,012,174 | | | | 3,395,528 | | | | 64,616,646 | | 2009 | | | 74,956,916 | | | | 3,740,350 | | | | 71,216,566 | | 2010 | | | 80,244,805 | | | | 4,004,216 | | | | 76,240,589 | |
The allowance for doubtful accounts reflects our best estimate of probable losses inherent in the accounts receivable balances. We determine the allowance based on known troubled accounts, historical experience, and other currently available evidence. Activity in the allowance for doubtful accounts was as follows:
Year Ended December 31st | Beginning Balance | Charged to costs and expenses | Write offs and other | Ending Balance | | Beginning Balance | | | Charged to costs and expenses | | Write offs and other | | Ending Balance | | | | | | | | 2008 | 3,202,891 | 192,637 | - | 3,395,528 | | | 3,202,891 | | | | 192,637 | | | | | 3,395,528 | | 2009 | 3,395,528 | 344,822 | - | 3,740,350 | | | 3,395,528 | | | | 344,822 | | | | | 3,740,350 | | 2010 | | | | 3,740,350 | | | | 263,866 | | | | | 4,004,216 | |
The major classes of inventory: raw materials, packaging materials, products in process, finished goods, stocks, low-value consumable goods, materials in transit as well as others. Yasheng Group Notes to Consolidated Financial Statements 4. | Inventories - continued |
The following is a breakdown of the major categories of inventories.
Breakdown of Inventories | | Breakdown of Inventories | | | | | | | | | | | | | | | 2009 | | | 2008 | | | 2010 | | | 2009 | | | 2008 | | Raw material | | $ | 14,910,866 | | | $ | 15,942,891 | | | | 20,332,343 | | | | 14,910,866 | | | | 13,930,715 | | Finished Goods | | | 39,620,483 | | | | 39,857,227 | | | | 54,707,652 | | | | 39,620,483 | | | | 36,990,271 | | Low-value consumable goods | | | 10,167,090 | | | | 11,957,168 | | | | 14,125,571 | | | | 10,167,090 | | | | 9,498,215 | | Packaging material | | | 6,964,229 | | | | 7,971,445 | | | | 9,451,710 | | | | 6,964,229 | | | | 6,508,036 | | Supplies and other | | | 3,670,000 | | | | 3,985,723 | | | Total | | $ | 75,332,668 | | | $ | 79,714,454 | | | Maintenance material | | | | 4,971,609 | | | | 3,670,000 | | | | 3,429,911 | | | | | | | | | | | | | | | | Total for the year | | | | 103,588,884 | | | | 75,332,668 | | | | 70,357,148 | |
5. | Property, plant and equipment & depreciation |
The major classes of property, plant and equipment include building and improvements, machinery and equipment, transportation facilities, and agricultural facilities.facilities, etc. They are carried at cost less accumulated depreciation and amortization whichdepreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The following is a breakdown of fixed assets at December 31, 2009 and 2008.accumulated depreciation by fiscal year.
| | 2009 | | | 2008 | | | Property, plant and equipment | | | 2010 | | | 2009 | | | 2008 | | | | | | | | | | | | | | | | | | Buildings and improvements | | $ | 92,735,509 | | | $ | 91,616,116 | | | | 95,277,965 | | | | 92,735,509 | | | | 91,616,116 | | Farming facilities | | | 84,494,131 | | | | 83,472,461 | | | | 86,988,378 | | | | 84,494,131 | | | | 83,472,461 | | Machinery and equipment | | | 10,934,251 | | | | 10,795,997 | | | | 11,133,849 | | | | 10,934,251 | | | | 10,795,997 | | Transportation | | | 269,793,603 | | | | 266,541,793 | | | Transportation and other facilities | | | | 277,371,758 | | | | 269,793,603 | | | | 266,541,793 | | | | | | | | | | | | | | | | Total | | | 457,957,494 | | | | 452,426,368 | | | | 470,771,950 | | | | 457,957,494 | | | | 452,426,368 | | Less: Accumulated Depreciation and amortization | | | (64,180,663 | ) | | | (48,472,297 | ) | | Net | | $ | 393,776,831 | | | $ | 403,954,071 | | |
Accumulated Depreciation | | 2010 | | | 2009 | | | 2008 | | | | | | | | | | | | Total | | | 66,386,424 | | | | 64,180,663 | | | | 48,472,297 | | | | | | | | | | | | | | |
Yasheng Group Notes to Consolidated Financial Statements
The Company invests every year in windbreaks and sand-breaks to provide shelterbelts for many of the farms located near the Gobi Desert. These investments are recorded as other long term assets.
The Company obtains secured lending from the banks using the following two types of arrangements, collateral and guarantee. Collateral is loans secured against the assets of the Yasheng Group, while guarantee is loans provided with the guarantee from a third party.
(a) Long term debt
| Collateral | Guarantee | Total | Maturity | 2008 | 1,742,077 | 1,837,376 | 3,579,453 | 3 years | 2009 | 1,567,335 | 1,653,000 | 3,220,335 | 3 years |
(b) Current portion of long term debt
| Collateral | Guarantee | Total | Interest rate | 2008 | 16,567,359 | 8,661,302 | 25,228,661 | 7.02% | 2009 | 6,433,158 | 3,363,000 | 9,796,158 | 7.02% |
(c) Short term debt
| Collateral | Guarantee | Total | Maturity | Interest rate | 2008 | 15,887,084 | 9,874,863 | 25,761,947 | 1 year | 6.69% | 2009 | 12,090,983 | 7,516,000 | 19,606,983 | 1 year | 6.69% |
The Company issued no new shares during the years 2009 and 2008.
��
In 2006, the company board of directors and stockholders has approved but not formally adopted a 2006 Equity Incentive Plan (the “2006 Equity Incentive Plan’).
The purpose of the Equity Inventive Plan is to provide an incentive to attract and retain directors, officers, consultants, advisors and employees whose services are considered valuable, to encourage a sense of proprietorship and to stimulate an active interest of such persons in the company's development and financial success.
The Incentive Plan allows for awards of stock options, restricted stock grants and share appreciation rights for up to 1 million shares of common stock. Under the 2006 Equity Incentive Plan, the company authorized to issue incentive stock options intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended, and non-qualified stock options and all options under the plan shall vest quarterly over three years. The company no outstanding stock options as of December 31, 2009.
Yasheng Group
Notes to Consolidated Financial Statements
10. | Employee benefit plans |
The Company provides the following benefits for all employees:
A. Employee Welfare Fund: An amount equal to 14% of payroll is set aside by the Company for standard employee benefits. This fund is managed and controlled by the Company. All required payments current.
B. Open Policy Pension: The Company pays to national and community insurance agents an amount equal to 20% of payroll. This insurance continues to cover the employee subsequent to retirement.
C. Unemployment Insurance: The Company pays to the national employment administrative entities an amount equal to 1% of payroll. Any dismissed employee thereby receives a specified amount of family-support funds for a designated period.
D. Housing Surplus Reserve: The Company pays to the national housing fund administrative entities an amount equal to 10% of payroll for deposit into the employees' future housing allowance accounts.
The aforesaid items are for employee's benefits and should be accounted for as the Company's expenses.
11.7. | China contribution plan |
The Company’s subsidiaries in China participate in a government-mandated multi-employer defined contribution plan pursuant to which certain retirement, medical and other welfare benefits are provided to employees. Chinese labor regulations require the Company’s subsidiaries to pay to the local labor bureau a monthly contribution at a stated contribution rate based on the monthly basic compensation of qualified employees. The relevant local labor bureau is responsible for meeting all retirement benefit obligations; the Company has no further commitments beyond its monthly contribution.
12.8. | Profit appropriation |
Pursuant to the laws applicable to China’s Foreign Investment Enterprises, each of the Company’s subsidiaries in China must make appropriations from its after-tax profit to non-distributable reserve funds as determined by the Board of Directors. These reserve funds include a (i) general reserve, (ii) enterprise expansion fund and (iii) staff bonus and welfare fund. The general reserve fund requires annual appropriations of 10% of after-tax profit (as determined under PRC GAAP) until these reserves equal 50% of the amount of paid-in capital; the other fund appropriations are at the Company’s discretion.
The operations of the Company are substantially located in the PRC and accordingly, investing in the shares of the Company is subject to among others, the PRC’s political, economic and legal risks.
The Company and all of its agricultural subsidiaries are exempt from income taxes in the PRC. The Company has not filed an income tax return in the US.
Yasheng Group Notes to Consolidated Financial Statements 13.11. | Earnings per shareDebt |
The componentsCompany obtains secured lending from the banks using the following two types of basic earnings per share are as follows:arrangements, collateral and guarantee. Collateral is loans secured against the assets of the Yasheng Group, while guarantee is loans provided with the guarantee from a third party.
| | Years Ended December 31, | | | | 2009 | | | 2008 | | | | | | | | | Net income available for common shareholders | | $ | 79,063,741 | | | $ | 75,995,479 | | Weighted average shares of common stock | | | 155,097,355 | | | | 155,097,355 | | Basic and Diluted earnings per share | | $ | 0.51 | | | $ | 0.49 | |
(a) Long term debt | | Collateral | | | Guarantee | | | Total | | Maturity | 2008 | | | 1,742,077 | | | | 1,837,376 | | | | 3,579,453 | | 3 years | 2009 | | | 1,567,335 | | | | 1,653,000 | | | | 3,220,335 | | 3 years | 2010 | | | 1,191,364 | | | | 1,250,000 | | | | 2,441,364 | | 3 years |
(b) Current portion of long term debt
| | Collateral | | | Guarantee | | | Total | | | Interest rate | | 2008 | | | 16,567,359 | | | | 8,661,302 | | | | 25,228,661 | | | | 7.02 | % | 2009 | | | 6,433,158 | | | | 3,363,000 | | | | 9,796,158 | | | | 7.02 | % | 2010 | | | 5,018,868 | | | | 2,500,000 | | | | 7,518,868 | | | | 7.02 | % |
(c) Short term debt
| | Collateral | | | Guarantee | | | Total | | Maturity | | Interest rate | | 2008 | | | 15,887,084 | | | | 9,874,863 | | | | 25,761,947 | | 1 year | | | 6.69 | % | 2009 | | | 12,090,983 | | | | 7,516,000 | | | | 19,606,983 | | 1 year | | | 6.69 | % | 2010 | | | 9,099,582 | | | | 6,000,000 | | | | 15,099,582 | | 1 year | | | 7.27 | % |
14.12. | Operating leasesEmployee benefit plans |
The Company has no operating leasesprovides the following benefits for all employees: A. Employee Welfare Fund: An amount equal to 14% of payroll is set aside by the periods shown.Company for standard employee benefits. This fund is managed and controlled by the Company. All required payments current.
B. Open Policy Pension: The Company pays to national and community insurance agents an amount equal to 20% of payroll. This insurance continues to cover the employee subsequent to retirement.
C. Unemployment Insurance: The Company pays to the national employment administrative entities an amount equal to 1% of payroll. Any dismissed employee thereby receives a specified amount of family-support funds for a designated period. D. Housing Surplus Reserve: The Company pays to the national housing fund administrative entities an amount equal to 10% of payroll for deposit into the employees' future housing allowance accounts. The aforesaid items are for employee's benefits and should be accounted for as the Company's expenses.
Yasheng Group Notes to Consolidated Financial Statements 12. | Employee benefit plans - continued |
E. China contribution plan. The Company’s subsidiaries in China participate in a government-mandated multi-employer defined contribution plan pursuant to which certain retirement, medical and other welfare benefits are provided to employees. Chinese labor regulations require the Company’s subsidiaries to pay to the local labor bureau a monthly contribution at a stated contribution rate based on the monthly basic compensation of qualified employees. The relevant local labor bureau is responsible for meeting all retirement benefit obligations; the Company has no further commitments beyond its monthly contribution. 13. Stockholders' Equity
The Company issued no new shares during the years 2010 and 2009.
15.14. | Quarterly Information (Unaudited) |
FY2009 | | Mar 31 | | | Jun 30 | | | Sep 30 | | | Dec 31 | | | Total | | | | | | | 31-Mar | | | 30-Jun | | | 30-Sep | | | 31-Dec | | Total | Revenue | | | 168,078,088 | | | | 190,121,081 | | | | 181,586,179 | | | | 199,844,695 | | | | 739,630,043 | | | 168,319,589 | | 191,285,443 | | 255,590,303 | | 254,258,930 | | 849,454,265 | Gross Profit | | | 18,412,584 | | | | 20,989,622 | | | | 25,249,750 | | | | 19,601,644 | | | | 84,253,599 | | | 18,443,467 | | 20,989,622 | | 33,790,942 | | 32,629,379 | | 105,853,410 | Net Income | | | 17,109,017 | | | | 19,687,110 | | | | 24,006,817 | | | | 18,260,798 | | | | 79,063,741 | | | 17,137,981 | | 19,819,883 | | 31,651,593 | | 30,576,518 | | 99,185,975 | Basic and Diluted | | | | | | | | | | | | | | | | | | | earnings per share | | | .11 | | | | .13 | | | | .15 | | | | .12 | | | | .51 | | | Basic/Diluted EPS | | | 0.11 | | 0.13 | | 0.20 | | 0.20 | | 0.64 |
16.15. | SegmentsSegment information |
With the exception of Baiyin Cement Plant, all other subsidiaries of the Company are agricultural enterprises. As theThe construction materials representis less than one percent of sales, the Company actually has only oneis not therefore a segment that of agriculture. This segmentfor accounting purposes, but is shown inbelow for informational purposes.
Net Sales | | 2010 | | | 2009 | | | 2008 | | | | | | | | | | | | Construction material | | | 5,434,519 | | | | 4,838,960 | | | | 4,786,778 | | | | | | | | | | | | | | | Farming | | | 844,019,745 | | | | 734,791,083 | | | | 731,426,521 | | | | | | | | | | | | | | | Total | | | 849,454,265 | | | | 739,630,043 | | | | 736,213,299 | |
The Company has no operating leases for the Statement of Operations.periods shown. Yasheng Group Notes to Consolidated Financial Statements
17. | Subsequent EventsEarnings per share |
During the first and second quarters
The components of 2010 we have filed our form 10-Ks and 10-Qs with the SEC for prior years not previously filed. We have filed to date for the years 2004 through 2009.basic earnings per share are as follows:
| | | | | Years Ended December 31st, | | | | | | | 2010 | | | 2009 | | | 2008 | | Net income available | | | | | | | | | | For common shareholders | | | 99,185,975 | | | | 79,063,741 | | | | 75,995,479 | | | | | | | | | | | | | | | Weighted average shares | | | | | | | | | | | | | of common stock | | | 155,097,355 | | | | 155,097,355 | | | | 155,097,355 | | | | | | | | | | | | | | | Basic earnings per share | | | 0.64 | | | | 0.51 | | | | 0.49 | |
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each of the undersigned whose signature appears below constitutes and appoints Zhou Chang Sheng and Hai Yun Zhuang the undersigned's true and lawful attorney-in-fact and agent with full power of substitution, for the undersigned and in the undersigned's name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K and any other documents in connection therewith and to file the same, with all exhibits thereto, with the SEC, granting unto said attorney-in-fact and agent full power an authority to do and perform each and every act requisite and necessary to be done with respect to this Annual report on Form 10-K, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of Attorney as of the date indicated below.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature | Title | Date | | | | | CEO, Chairman of the Board
| | | | | | | | | | | | | | | | | | | | | | | | | | | Director and General Manager
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