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SECURITIES AND EXCHANGE COMMISSION
o | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(Jurisdiction of incorporation or organization)
Keji Central 3rd Road
Hi-Tech Park, Nanshan District
Shenzhen 518057, People’s Republic of China
(Address of principal executive offices)
15th Floor, Block A, Guoren Building
Keji Central 3rd Road
Hi-Tech Park, Nanshan District
Shenzhen 518057, People’s Republic of China
Telephone: (86 755) 2663-7600
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Name of Each Exchange | ||
Title of Each Class | On Which Registered | |
American Depositary Shares, each representing 25 | The NASDAQ Global Select Market | |
ordinary shares of par value US$0.00002 per share | ||
Ordinary shares of par value US$0.00002 per share* | The NASDAQ Global Select Market* |
* | Not for trading, but only in connection with the registration of American Depositary Shares. |
(Title of Class)
(Title of Class)
Large accelerated filero | Accelerated filero | Non-accelerated filerþ |
U.S. GAAPþ | International Financial Reporting Standards as issued | Othero | ||
by the International Accounting Standards Boardo |
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Exhibit 8.1 | ||||||||
Exhibit 12.1 | ||||||||
Exhibit 12.2 | ||||||||
Exhibit 13.1 | ||||||||
Exhibit 15.1 | ||||||||
Exhibit 15.2 | ||||||||
Exhibit 15.3 |
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• | our company’s reliance on business relationships with the Chinese telecommunications operators and base station equipment manufacturers, in particular, the annual capital spending by Chinese telecommunications operators and demand from domestic base station equipment manufacturers; |
• | risks associated with large accounts receivable, long collection periods and accounts receivable cycles; |
• | fierce competition in the wireless communication industry; |
• | growth of, and risks inherent in, the wireless communication industry in China; |
• | uncertainty as to future profitability and our company’s ability to obtain adequate financing for our planned capital expenditure requirements; |
• | uncertainty as to our company’s ability to continuously develop and manufacture new radio frequency, or RF, technology and keep up with changes in RF technology; |
• | uncertainty as to future capital expenditure on telecommunication infrastructure by the Chinese telecommunications operators; |
• | uncertainty as to cost of raw materials and price fluctuations imposed by suppliers; |
• | future changes to the regulations and policies governing the telecommunications industry in China, including possible future industry restructuring; |
• | limitation on our company’s production capacity for wireless coverage products or base station RF products; |
• | risks associated with possible defects and errors in our wireless coverage products or base station RF products; |
• | uncertainty as to our company’s ability to protect and enforce our intellectual property rights; and |
• | uncertainty as to our company’s ability to attract and retain qualified executives and personnel. |
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Year ended December 31, | ||||||||||||||||||||||||
2006 | 2007 | 2008 | 2009 | 2010 | 2010 | |||||||||||||||||||
(RMB) | (RMB) | (RMB) | (RMB) | (RMB) | (US$) | |||||||||||||||||||
(in thousands, except for per share and number of shares data) | ||||||||||||||||||||||||
Consolidated statements of operations information | ||||||||||||||||||||||||
Revenues | 832,795 | 979,302 | 984,657 | 1,602,943 | 1,720,974 | 260,754 | ||||||||||||||||||
Cost of revenues | (437,040 | ) | (611,436 | ) | (751,367 | ) | (1,223,973 | ) | (1,265,247 | ) | (191,704 | ) | ||||||||||||
Gross profit | 395,755 | 367,866 | 233,290 | 378,970 | 455,727 | 69,050 | ||||||||||||||||||
Other revenue | — | — | — | 3,344 | 16,594 | 2,514 | ||||||||||||||||||
Operating expenses | ||||||||||||||||||||||||
Research and development costs | (47,671 | ) | (56,525 | ) | (70,232 | ) | (59,899 | ) | (71,590 | ) | (10,847 | ) | ||||||||||||
Sales and distribution expenses | (112,948 | ) | (126,816 | ) | (138,524 | ) | (180,525 | ) | (166,592 | ) | (25,241 | ) | ||||||||||||
General and administrative expenses | (55,944 | ) | (68,498 | ) | (127,028 | ) | (81,506 | ) | (78,478 | ) | (11,891 | ) | ||||||||||||
Impairment of goodwill | — | — | (27,589 | ) | — | — | — | |||||||||||||||||
Total operating expenses | (216,563 | ) | (251,839 | ) | (363,373 | ) | (321,930 | ) | (316,660 | ) | (47,979 | ) | ||||||||||||
Operating income (loss) | 179,192 | 116,027 | (130,083 | ) | 60,384 | 155,661 | 23,585 | |||||||||||||||||
Other income (expense) | ||||||||||||||||||||||||
Interest income | 19,186 | 22,313 | 31,257 | 40,997 | 27,770 | 4,208 | ||||||||||||||||||
Interest expense | (28,026 | ) | (35,347 | ) | (54,844 | ) | (56,766 | ) | (58,142 | ) | (8,809 | ) | ||||||||||||
Investment income | 238 | 318 | 4,873 | — | — | — | ||||||||||||||||||
Foreign currency exchange loss | (9,875 | ) | (18,791 | ) | (10,418 | ) | (211 | ) | (597 | ) | (90 | ) | ||||||||||||
Grant income | 7,670 | 7,355 | 15,209 | 6,322 | 2,157 | 327 | ||||||||||||||||||
Total other expense | (10,807 | ) | (24,152 | ) | (13,923 | ) | (9,658 | ) | (28,812 | ) | (4,364 | ) | ||||||||||||
Income (loss) before income tax expense | 168,385 | 91,875 | (144,006 | ) | 50,726 | 126,849 | 19,221 | |||||||||||||||||
Income tax expense | (18,277 | ) | (10,321 | ) | (3,157 | ) | (18,068 | ) | (29,714 | ) | (4,502 | ) | ||||||||||||
Net income (loss) | 150,108 | 81,554 | (147,163 | ) | 32,658 | 97,135 | 14,719 | |||||||||||||||||
Net (loss) income attributable to non-controlling interests | (1,267 | ) | 982 | 796 | 14 | 1,005 | 152 | |||||||||||||||||
Net income (loss) attributable to the equity shareholders of China GrenTech Corporation Limited, or GrenTech | 148,841 | 82,536 | (146,367 | ) | 32,672 | 98,140 | 14,871 | |||||||||||||||||
Dividends, accretion to redemption value and foreign currency rate movements on mandatorily redeemable convertible preference shares | (549 | ) | — | — | — | — | — | |||||||||||||||||
Net income (loss) attributable to the equity shareholders of GrenTech | 148,292 | 82,536 | (146,367 | ) | 32,672 | 98,140 | 14,871 | |||||||||||||||||
Earnings (loss) per share: | ||||||||||||||||||||||||
- Basic | 0.25 | 0.13 | (0.24 | ) | 0.05 | 0.17 | 0.03 | |||||||||||||||||
- Diluted | 0.25 | 0.13 | (0.24 | ) | 0.05 | 0.16 | 0.02 | |||||||||||||||||
Weighted average number of ordinary shares outstanding: | ||||||||||||||||||||||||
- Basic | 584,580,799 | 624,624,852 | 610,158,841 | 595,536,733 | 581,814,594 | 581,814,594 | ||||||||||||||||||
- Diluted | 593,150,684 | 624,624,852 | 610,158,841 | 604,781,041 | 595,199,449 | 595,199,449 | ||||||||||||||||||
Total cash dividend declared to ordinary shareholders | 7,609 | — | — | — | — | — |
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Year ended December 31, | ||||||||||||||||||||||||
2006 | 2007 | 2008 | 2009 | 2010 | 2010 | |||||||||||||||||||
(RMB) | (RMB) | (RMB) | (RMB) | (RMB) | (US$) | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Consolidated balance sheet information | ||||||||||||||||||||||||
Cash and cash equivalents | 467,423 | 316,778 | 293,353 | 469,454 | 380,098 | 57,591 | ||||||||||||||||||
Restricted cash | 238,618 | 259,786 | 122,368 | 103,035 | 90,132 | 13,656 | ||||||||||||||||||
Accounts receivable, net | 747,859 | 925,838 | 728,260 | 892,149 | 1,154,540 | 174,931 | ||||||||||||||||||
Inventories | 434,406 | 542,094 | 520,619 | 771,236 | 643,265 | 97,464 | ||||||||||||||||||
Total current assets | 1,948,407 | 2,107,691 | 1,779,666 | 2,352,667 | 2,374,988 | 359,847 | ||||||||||||||||||
Property, plant and equipment, net | 161,503 | 225,069 | 412,259 | 444,578 | 436,290 | 66,105 | ||||||||||||||||||
Construction in progress | 7,100 | 134,637 | 2,816 | 3,961 | 63,008 | 9,547 | ||||||||||||||||||
Long-term accounts receivable | 268,957 | 389,505 | 551,210 | 452,191 | 462,521 | 70,079 | ||||||||||||||||||
Total assets | 2,415,834 | 2,997,299 | 2,838,970 | 3,337,347 | 3,419,003 | 518,032 | ||||||||||||||||||
Short-term bank loans | 336,050 | 456,050 | 480,207 | 613,378 | 638,229 | 96,702 | ||||||||||||||||||
Total current liabilities | 866,435 | 1,249,081 | 1,266,617 | 1,755,819 | 1,772,001 | 268,485 | ||||||||||||||||||
Long-term bank loan | — | 150,000 | 130,000 | 110,000 | 90,000 | 13,636 | ||||||||||||||||||
Total liabilities | 866,435 | 1,405,019 | 1,401,369 | 1,870,498 | 1,866,599 | 282,818 | ||||||||||||||||||
Total equity | 1,549,399 | 1,592,280 | 1,437,601 | 1,466,849 | 1,552,404 | 235,214 |
Year ended December 31, | ||||||||||||||||||||||||
2006 | 2007 | 2008 | 2009 | 2010 | 2010 | |||||||||||||||||||
(RMB) | (RMB) | (RMB) | (RMB) | (RMB) | (US$) | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Consolidated cash flow information | ||||||||||||||||||||||||
Net cash (used in) provided by operating activities | (114,778 | ) | (120,228 | ) | 5,056 | 90,731 | 10,225 | 1,548 | ||||||||||||||||
Net cash (used in) provided by investing activities | (243,150 | ) | (294,437 | ) | 28,113 | (45,338 | ) | (91,672 | ) | (13,890 | ) | |||||||||||||
Net cash provided by (used in) financing activities | 708,514 | 272,619 | (52,085 | ) | 130,919 | (7,312 | ) | (1,107 | ) | |||||||||||||||
Cash and cash equivalents at the end of year | 467,423 | 316,778 | 293,353 | 469,454 | 380,098 | 57,591 |
Noon buying rate | ||||||||||||||||
Period | Period end | Average (1) | Low | High | ||||||||||||
(RMB per US$1.00) | ||||||||||||||||
2006 | 7.8041 | 7.9723 | 8.0702 | 7.8041 | ||||||||||||
2007 | 7.2946 | 7.6072 | 7.8127 | 7.2946 | ||||||||||||
2008 | 6.8225 | 6.9477 | 7.2946 | 6.7800 | ||||||||||||
2009 | 6.8259 | 6.8295 | 6.8470 | 6.8176 | ||||||||||||
2010 | 6.6000 | 6.7603 | 6.8305 | 6.6000 | ||||||||||||
2010 December | 6.6000 | 6.6497 | 6.6745 | 6.6000 | ||||||||||||
2011 January | 6.6017 | 6.5964 | 6.6364 | 6.5809 | ||||||||||||
February | 6.5713 | 6.5761 | 6.5965 | 6.5520 | ||||||||||||
March | 6.5483 | 6.5645 | 6.5743 | 6.5483 | ||||||||||||
April | 6.4900 | 6.5267 | 6.5477 | 6.4900 | ||||||||||||
May | 6.4786 | 6.4957 | 6.5073 | 6.4786 | ||||||||||||
June (through June 17) | 6.4700 | 6.4785 | 6.4830 | 6.4700 |
(1) | Annual averages are calculated from month-end rates. Monthly averages are calculated using the average of the daily rates during the relevant period. |
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• | 41% of the contract value due upon the signing of the contract and the issuance of the completion certificate or delivery certificate, |
• | an additional 38% due upon the issuance of the preliminary inspection certificate, |
• | a further 17% due upon the issuance of the final inspection certificate, and |
• | the final 4% due upon the expiration of our warranty period. |
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• | rapidly changing technology; |
• | revolving industry standards and transmission protocols; |
• | frequent improvements in products and services; and |
• | fierce competition from well-funded and technologically advanced companies. |
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• | research and development capability; |
• | product quality; |
• | pricing; |
• | scope and flexibility of product offering; |
• | after-sale service capability; and |
• | relationships with wireless operators and base station equipment manufacturers. |
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• | departure of any of our management members or employees in possession of our confidential proprietary information; |
• | breach by such departing management member or employee of his or her confidentiality and non-disclosure undertaking to us; |
• | expiration of the protection period of our registered patents or trademarks; |
• | infringement by others of our proprietary technology and intellectual property rights; or |
• | refusal by relevant regulatory authorities to approve our patent or trademark applications. |
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• | Guoren Industrial Developments Limited (Yingjie Gao, our chairman and chief executive officer, has the sole power to vote or to direct the vote and the sole power to dispose or to direct the disposition of the shares held by this company) with 26.5%; |
• | Drag Investments Limited (majority-owned by Professor Kunjie Zhuang, a technology consultant and former director of our company) with 10.0%; and |
• | Heng Xing Yue Investments Limited (partially-owned by Rong Yu, a director and our chief financial officer) with 6.0%. |
• | composition of our board of directors; |
• | selection of our senior management; |
• | amount and timing of dividends and other distributions; |
• | our overall strategic and investment decisions; |
• | issuance of securities and adjustment to our capital structure; |
• | amendment to our memorandum and articles of association; and |
• | other corporate actions requiring approval of our shareholders, including election and removal of directors, merger, consolidation or sale of our assets, or any other change of control event that may benefit our other shareholders generally. |
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![(FLOW CHART)](https://capedge.com/proxy/20-F/0000950123-11-063002/c19221c1922101.gif)
(1) | The remaining 1% interest in Shenzhen Lingxian Technology Company Limited is owned by Ms. Xiujun Zhang, an employee of ours. | |
(2) | The remaining 30% interest in Shenzhen GrenTech IOT Network Corporation Limited is owned by Shenzhen Xing Guang Investment Company Limited as discussed below. | |
(3) | The remaining 0.001% interest in GrenTech India Private Limited is owned by Mr. Zhengyu You, a former employee of ours. Mr. You resigned from his position with us with effect from June 1, 2011. It is intended that such 0.001% interest owned by Mr. You will be transferred to another employee of ours. |
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• | Shenzhen Lingxian Technology Co., Ltd., or Shenzhen Lingxian; |
• | Shenzhen Lingxian Communication Company Limited, or Shenzhen Lingxian Communication; |
• | Shenzhen GrenTech RF Communication Ltd., or Shenzhen GrenTech RF; |
• | Shenzhen Kaige Communication Technology Co., Ltd., or Shenzhen Kaige; |
• | Shenzhen Kaixuan Communication Technology Co., Ltd., or Shenzhen Kaixuan; |
• | Shenzhen GrenTech IOT Network Corporation Limited, or Shenzhen GrenTech IOT Network; and |
• | Express (Shenzhen) Network Company Limited, or Express (Shenzhen) Network. |
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• | research and development capabilities; |
• | quality of products in terms of performance, functionality and reliability; |
• | pricing; |
• | overall financial strength and operational scale; and |
• | range and standards of services to be provided, including after-sale services. |
• | specifications contained in customers’ bid invitations; and |
• | operational manuals and staff training. |
• | pricing; |
• | project design, installation and after sales services capacities; |
• | overall financial strength and operational scale; and |
• | grading of quality certificate. |
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• | research and development capabilities; |
• | quality of products in terms of performance, functionality and reliability; |
• | pricing; |
• | range and standards of services to be provided, including after-sale services; |
• | project design, installation and after sales services capacities; |
• | overall financial strength and operational scale; and |
• | grading of quality certificate. |
Project | Location | Customer | Completion date | |||
Indoor coverage | ||||||
Shenyun Village | Shenzhen | China Mobile group | September 2010 | |||
Qiurui Jia Yuan | Tianjin | China Unicom group | December 2010 | |||
Zijin Town | Harbin | China Mobile group | December 2010 | |||
Shijingshan Wanda Galaxy Plaza | Beijing | China Mobile group | September 2010 | |||
Kangjian Commercial Plaza | Shanghai | China Mobile group | February 2010 | |||
Shengda International Finance Center | Shanghai | China Unicom group | November 2010 | |||
Guohai Plaza | Beijing | China Mobile group | December 2010 | |||
Guangzhou West Tower | Guangzhou | China Unicom group | June 2010 | |||
Yuxi Shanshui Jia Yuan Phase II | Yuxi | China Mobile group | September 2010 | |||
Zhengzhou Futian Sun City | Zhengzhou | China Telecom group | May 2010 | |||
Shenzhen Universiade Sports Center | Shenzhen | China Telecom group | December 2010 | |||
Zunyi Customhouse Building (WLAN) | Zunyi | China Mobile group | December 2010 | |||
Binzhou College (WLAN) | Binzhou | China Mobile group | December 2010 | |||
Dezhou Tiancheng Community (WLAN) | Dezhou | China Unicom group | December 2010 | |||
Mingzhu International Park (WLAN) | Dali | China Mobile group | December 2010 |
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Project | Location | Customer | Completion date | |||
Outdoor coverage | ||||||
Waitan Channel | Shanghai | China Mobile group | April 2010 | |||
Liaocheng University Eastern Campus (Outdoor AP) | Liaocheng | China Mobile group | September 2010 | |||
Chengde City Mobile Dong Yingzi Tunnel G | Chengde | China Mobile group | November 2010 | |||
Citic Plaza | Guangzhou | China Unicom group | December 2010 | |||
The First Affiliated Hospital of Sun Yat-sen University (Huangpu Branch) | Guangzhou | China Unicom group | December 2010 | |||
Convention and Exhibition Center | Lanzhou | China Mobile group | March 2010 | |||
Taohua Island Pipe | Shanghai | China Mobile group | December 2010 | |||
Zunyi Railway Tunnel Phase II (Indoor Distribution) | Zunyi | China Mobile group | January 2010 | |||
Outside of Room C of the Tang Xian Damao Mountain Scenic Area | Baoding | China Telecom group | June 2010 | |||
Chengde Jingcheng Highway Yi Jia Gou Tunnel C (Piaojia Yard) | Chengde | China Telecom group | May 2010 | |||
Metro Line 3 Southern Baohe Resettlement Community | Shenzhen | China Unicom group | March 2010 | |||
Chisha Metro Operation Headquarter | Guangzhou | China Mobile group | August 2010 | |||
Northern New Community Railway Line 6 Flower Garden Station Construction Area | Chongqing | China Unicom group | November 2010 | |||
Metro Line 10 | Shanghai | China Unicom group | April 2010 |
• | We first go through stringent certification processes to become a certified supplier of base station equipment manufacturers. Each base station equipment manufacturer has its own unique certification process, the principal conditions of which include production capacity, management efficacy, quality control, environment protection, and overall reputation. To date, we have been certified by seven major base station equipment manufacturers. |
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• | We next obtain technology certification from our base station equipment manufacturer customers and conduct product development according to the customer specifications. All of our base station RF parts and components are customized for each client’s unique specifications. |
• | We then provide samples for certification by our base station equipment manufacturer customers. We have to date developed more than 377 types of base station RF parts and components for various base station equipment manufacturer customers. |
• | Thereafter, we obtain purchase orders with trial quantities, and if our customers are satisfied with the trials, our customers will request proposals from us for RF parts and components. We then submit bids to the customers. |
• | If we win the bid, we will proceed to bulk production. |
• | We generally provide a credit period for payment to our customers and payments are usually made within 90 to 180 days of delivery. |
Type of products | Production Capacity | Average Utilization | ||||||
(sets per month) | (sets per month) | |||||||
Wireless coverage products | 10,000 | 9,124 | ||||||
Base station RF products | 45,000 | 35,734 |
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• | integrated circuit board processing; |
• | covering and welding; |
• | manufacturing and assembly; |
• | testing; and |
• | quality control. |
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• | type, quantity and composition of base station RF products; |
• | internal target gross margin objectives; |
• | region in which the products are sold; and |
• | current market conditions, including the prevailing prices offered by our competitors. |
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Year ended December 31, | ||||||||||||||||||||||||||||
2008 | 2009 | 2010 | ||||||||||||||||||||||||||
(RMB) | (%) | (RMB) | (%) | (RMB) | (US$) | (%) | ||||||||||||||||||||||
(in millions, except for percentages) | ||||||||||||||||||||||||||||
Wireless coverage products and services: | ||||||||||||||||||||||||||||
China Mobile group | 390.3 | 39.6 | 390.9 | 24.4 | 632.2 | 95.8 | 36.7 | |||||||||||||||||||||
China Unicom group | 244.5 | 24.8 | 518.2 | 32.3 | 483.0 | 73.2 | 28.1 | |||||||||||||||||||||
China Telecom group | 75.4 | 7.7 | 241.2 | 15.0 | 228.1 | 34.6 | 13.3 | |||||||||||||||||||||
China Netcom group(1) | 4.7 | 0.5 | — | — | — | — | — | |||||||||||||||||||||
Overseas customers | 8.1 | 0.8 | 17.1 | 1.1 | 11.5 | 1.7 | 0.7 | |||||||||||||||||||||
Others | 40.1 | 4.1 | 28.6 | 1.8 | 69.2 | 10.5 | 4.0 | |||||||||||||||||||||
Subtotal | 763.1 | 77.5 | 1,196.0 | 74.6 | 1,424.0 | 215.8 | 82.7 | |||||||||||||||||||||
Base station RF products: | ||||||||||||||||||||||||||||
Equipment manufacturers | 221.6 | 22.5 | 406.9 | 25.4 | 297.0 | 45.0 | 17.3 | |||||||||||||||||||||
Total | 984.7 | 100.0 | 1,602.9 | 100.0 | 1,721.0 | 260.8 | 100.0 | |||||||||||||||||||||
(1) | As part of the restructuring of the Chinese telecommunications operators, China Netcom group merged with China Unicom group in 2008. |
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• | increasing market demand, although at uneven levels from year to year; |
• | increasing technical requirements; |
• | expanding customer base, beginning with the China Mobile group and the China Unicom group, and now including the China Telecom group and overseas customers; and |
• | increasing demand for next generation network construction and the triggering of expanded market opportunities that are expected to attract new competitors to enter into the wireless coverage market. |
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Number of | ||||
employees | ||||
Management and administrative | 214 | |||
Research and development | 247 | |||
Production and quality control | 865 | |||
Project design and technical service | 2,556 | |||
Sales and marketing | 561 | |||
Total | 4,443 | |||
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• | lead project contractors, |
• | specialized contractors, and |
• | service subcontractors. |
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• | the risk and rewards are transferred; |
• | delivery has occurred; |
• | persuasive evidence of an arrangement exists; |
• | price to the buyer is fixed and determinable; |
• | collectibility is reasonably assured; and |
• | we have an enforceable legal right to receive the contractually specified amount in cash attributable to the product sale. |
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Three months ended | ||||||||||||||||||||||||||||||||||||||||||||||||
March 31, | June 30, | Sept 30, | Dec 31, | March 31, | June 30, | Sept 30, | Dec 31, | March 31, | June 30, | Sept 30, | Dec 31, | |||||||||||||||||||||||||||||||||||||
2008 | 2008 | 2008 | 2008 | 2009 | 2009 | 2009 | 2009 | 2010 | 2010 | 2010 | 2010 | |||||||||||||||||||||||||||||||||||||
(in thousands of RMB) | ||||||||||||||||||||||||||||||||||||||||||||||||
Revenues | 71,389 | 186,341 | 212,478 | 514,449 | 285,293 | 423,214 | 394,852 | 499,584 | 159,364 | 370,413 | 396,900 | 794,297 | ||||||||||||||||||||||||||||||||||||
Cost of revenues | (49,420 | ) | (124,216 | ) | (149,635 | ) | (428,096 | ) | (212,179 | ) | (317,326 | ) | (289,641 | ) | (404,827 | ) | (120,608 | ) | (278,158 | ) | (293,150 | ) | (573,331 | ) | ||||||||||||||||||||||||
Gross profit | 21,969 | 62,125 | 62,843 | 86,353 | 73,114 | 105,888 | 105,211 | 94,757 | 38,756 | 92,255 | 103,750 | 220,966 | ||||||||||||||||||||||||||||||||||||
Other revenue | — | — | — | — | — | 425 | 1,255 | 1,664 | 3,131 | 4,401 | 4,968 | 4,094 | ||||||||||||||||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||||||||||||||||||
Research and development costs | (15,328 | ) | (17,815 | ) | (15,477 | ) | (21,612 | ) | (13,333 | ) | (12,557 | ) | (16,485 | ) | (17,524 | ) | (13,713 | ) | (20,633 | ) | (22,218 | ) | (15,026 | ) | ||||||||||||||||||||||||
Sales and distribution expenses | (28,810 | ) | (31,014 | ) | (26,841 | ) | (51,859 | ) | (33,715 | ) | (44,705 | ) | (43,199 | ) | (58,906 | ) | (30,441 | ) | (37,064 | ) | (40,078 | ) | (59,009 | ) | ||||||||||||||||||||||||
General and administrative expenses | (14,158 | ) | (18,225 | ) | (17,816 | ) | (76,829 | ) | (15,071 | ) | (19,442 | ) | (16,989 | ) | (30,004 | ) | (18,080 | ) | (20,714 | ) | (21,084 | ) | (18,600 | ) | ||||||||||||||||||||||||
Impairment of goodwill | — | — | — | (27,589 | ) | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
Total operating expenses | (58,296 | ) | (67,054 | ) | (60,134 | ) | (177,889 | ) | (62,119 | ) | (76,704 | ) | (76,673 | ) | (106,434 | ) | (62,234 | ) | (78,411 | ) | (83,380 | ) | (92,635 | ) | ||||||||||||||||||||||||
Operating (loss)/income | (36,327 | ) | (4,929 | ) | 2,709 | (91,536 | ) | 10,995 | 29,609 | 29,793 | (10,013 | ) | (20,347 | ) | 18,245 | 25,338 | 132,425 | |||||||||||||||||||||||||||||||
Other (expense)/income | ||||||||||||||||||||||||||||||||||||||||||||||||
Interest income | 5,472 | 4,764 | 4,482 | 16,539 | 10,024 | 7,984 | 6,749 | 16,240 | 4,777 | 3,951 | 4,108 | 14,934 | ||||||||||||||||||||||||||||||||||||
Interest expense | (13,242 | ) | (13,990 | ) | (15,349 | ) | (12,263 | ) | (13,978 | ) | (14,565 | ) | (14,708 | ) | (13,515 | ) | (13,211 | ) | (14,848 | ) | (14,531 | ) | (15,552 | ) | ||||||||||||||||||||||||
Investment income | 296 | — | — | 4,577 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Foreign currency exchange (loss)/gain | (7,029 | ) | (2,904 | ) | (974 | ) | 489 | (27 | ) | (675 | ) | 329 | 162 | (43 | ) | (453 | ) | 40 | (141 | ) | ||||||||||||||||||||||||||||
Grant income | 2,030 | 91 | 110 | 12,978 | 324 | 1,342 | 3,736 | 920 | 2,092 | 8 | — | 57 | ||||||||||||||||||||||||||||||||||||
Total other (expense)/income | (12,473 | ) | (12,039 | ) | (11,731 | ) | 22,320 | (3,657 | ) | (5,914 | ) | (3,894 | ) | 3,807 | (6,385 | ) | (11,342 | ) | (10,383 | ) | (702 | ) | ||||||||||||||||||||||||||
(Loss)/income before income tax (expense)/benefit | (48,800 | ) | (16,968 | ) | (9,022 | ) | (69,216 | ) | 7,338 | 23,695 | 25,899 | (6,206 | ) | (26,732 | ) | 6,903 | 14,955 | 131,723 | ||||||||||||||||||||||||||||||
Income tax benefit /(expense) | 7,046 | (277 | ) | 363 | (10,289 | ) | (1,030 | ) | (10,383 | ) | (5,772 | ) | (883 | ) | 3,798 | (1,662 | ) | (2,529 | ) | (29,321 | ) | |||||||||||||||||||||||||||
Net (loss)/income | (41,754 | ) | (17,245 | ) | (8,659 | ) | (79,505 | ) | 6,308 | 13,312 | 20,127 | (7,089 | ) | (22,934 | ) | 5,241 | 12,426 | 102,402 | ||||||||||||||||||||||||||||||
Net loss/(income) attributable to non-controlling interests | 226 | 202 | 227 | 141 | (3 | ) | (3 | ) | 6 | 14 | 19 | 16 | 474 | 496 | ||||||||||||||||||||||||||||||||||
Net (loss)/income attributable to the equity shareholders of GrenTech | (41,528 | ) | (17,043 | ) | (8,432 | ) | (79,364 | ) | 6,305 | 13,309 | 20,133 | (7,075 | ) | (22,915 | ) | 5,257 | 12,900 | 102,898 |
As of | ||||||||||||||||||||||||||||||||||||||||||||||||
March 31, | June 30, | Sept 30, | Dec 31, | March 31, | June 30, | Sept 30, | Dec 31, | March 31, | June 30, | Sept 30, | Dec 31, | |||||||||||||||||||||||||||||||||||||
2008 | 2008 | 2008 | 2008 | 2009 | 2009 | 2009 | 2009 | 2010 | 2010 | 2010 | 2010 | |||||||||||||||||||||||||||||||||||||
(in thousands of RMB) | ||||||||||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | 216,193 | 43,089 | 67,954 | 293,353 | 116,733 | 149,514 | 49,009 | 469,454 | 131,612 | 188,767 | 122,329 | 380,098 | ||||||||||||||||||||||||||||||||||||
Restricted cash | 216,602 | 188,817 | 131,999 | 122,368 | 127,656 | 182,567 | 91,286 | 103,035 | 99,138 | 76,655 | 77,874 | 90,132 | ||||||||||||||||||||||||||||||||||||
Accounts receivable, net | 890,095 | 960,019 | 959,887 | 728,260 | 911,156 | 931,487 | 956,612 | 892,149 | 887,504 | 998,639 | 1,009,811 | 1,154,540 | ||||||||||||||||||||||||||||||||||||
Long-term accounts receivable | 369,329 | 341,675 | 387,573 | 551,210 | 524,936 | 585,622 | 612,276 | 452,191 | 420,678 | 448,973 | 453,567 | 462,521 | ||||||||||||||||||||||||||||||||||||
Short-term bank loans | 506,050 | 429,925 | 448,083 | 480,207 | 423,965 | 560,886 | 586,159 | 613,378 | 532,586 | 716,493 | 639,145 | 638,229 | ||||||||||||||||||||||||||||||||||||
Long-term debt | 150,000 | 130,000 | 130,000 | 130,000 | 130,000 | 110,000 | 110,000 | 110,000 | 110,000 | 90,000 | 90,000 | 90,000 |
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Year ended December 31, | ||||||||||||||||||||||||||||
2008 | 2009 | 2010 | ||||||||||||||||||||||||||
RMB | % | RMB | % | RMB | US$ | % | ||||||||||||||||||||||
(in millions, except for percentages) | ||||||||||||||||||||||||||||
Wireless coverage solutions: | ||||||||||||||||||||||||||||
Wireless coverage products | 499.0 | 50.7 | 781.9 | 48.8 | 814.0 | 123.3 | 47.3 | |||||||||||||||||||||
Installation services | 277.9 | 28.2 | 469.5 | 29.3 | 633.9 | 96.0 | 36.8 | |||||||||||||||||||||
Base station RF products | 221.6 | 22.5 | 407.0 | 25.4 | 297.0 | 45.0 | 17.3 | |||||||||||||||||||||
Provision for settlement discounts | (13.8 | ) | (1.4 | ) | (55.5 | ) | (3.5 | ) | (23.9 | ) | (3.5 | ) | (1.4 | ) | ||||||||||||||
Total (1) | 984.7 | 100.0 | 1,602.9 | 100.0 | 1,721.0 | 260.8 | 100.0 |
(1) | Includes an insignificant amount of revenue generated from our Internet and Internet-based real estate agent businesses in 2010. |
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Year ended December 31, | ||||||||||||||||||||||||||||
2008 | 2009 | 2010 | ||||||||||||||||||||||||||
RMB | % | RMB | % | RMB | US$ | % | ||||||||||||||||||||||
(in millions, except for percentages) | ||||||||||||||||||||||||||||
Wireless coverage solutions: | ||||||||||||||||||||||||||||
Wireless coverage products | 375.5 | 50.0 | 575.4 | 47.0 | 606.0 | 91.8 | 47.9 | |||||||||||||||||||||
Installation services | 186.2 | 24.8 | 308.1 | 25.2 | 413.7 | 62.7 | 32.7 | |||||||||||||||||||||
Base station RF products | 189.7 | 25.2 | 340.5 | 27.8 | 245.5 | 37.2 | 19.4 | |||||||||||||||||||||
Total | 751.4 | 100.0 | 1,224.0 | 100.0 | 1,265.2 | 191.7 | 100.0 |
Year ended December 31, | ||||||||||||||||||||||||||||
2008 | 2009 | 2010 | ||||||||||||||||||||||||||
RMB | % | RMB | % | RMB | US$ | % | ||||||||||||||||||||||
(in millions, except for percentages) | ||||||||||||||||||||||||||||
Research and development costs | 70.3 | 19.3 | 59.9 | 18.6 | 71.6 | 10.9 | 22.6 | |||||||||||||||||||||
Sales and distribution expenses | 138.5 | 38.1 | 180.5 | 56.1 | 166.6 | 25.2 | 52.6 | |||||||||||||||||||||
General and administrative expenses | 127.0 | 35.0 | 81.5 | 25.3 | 78.5 | 11.9 | 24.8 | |||||||||||||||||||||
Impairment of goodwill | 27.6 | 7.6 | — | — | — | — | — | |||||||||||||||||||||
Total operating expenses | 363.4 | 100.0 | 321.9 | 100.0 | 316.7 | 48.0 | 100.0 |
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Year ended December 31, | ||||||||||||||||
2008 | 2009 | 2010 | ||||||||||||||
(RMB) | (RMB) | (RMB) | (US$) | |||||||||||||
(in thousands) | ||||||||||||||||
Bank loan interest | 35,186 | 35,156 | 39,007 | 5,910 | ||||||||||||
Receivable discounting fee (1) | 13,521 | 15,660 | 14,835 | 2,248 | ||||||||||||
Financial charges on bills financing | 1,763 | 2,990 | 1,706 | 258 | ||||||||||||
Others (2) | 4,374 | 2,960 | 2,594 | 393 | ||||||||||||
Total | 54,844 | 56,766 | 58,142 | 8,809 |
(1) | We receive proceeds from the sale of accounts receivable and record a receivable discounting fee. Discount on the sale of accounts receivable is recorded as interest expense in the period during which it occurs. The increase of receivable discounting fee in 2009 as compared to 2008 was due to an increase in accounts receivable sold during 2009. The decrease of receivable discounting fee in 2010 as compared to 2009 was due to a decrease in accounts receivable sold during 2010. | |
(2) | Others mainly consist of bank fees. |
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• | the risk and rewards are transferred; |
• | delivery has occurred; |
• | persuasive evidence of an arrangement exists; |
• | price to the buyer is fixed and determinable; |
• | collectibility is reasonably assured; and |
• | we have an enforceable legal right to receive the contractually specified amount in cash attributable to the product sale. |
Year ended December 31, | ||||||||||||||||
2008 | 2009 | 2010 | ||||||||||||||
(RMB) | (RMB) | (RMB) | (US$) | |||||||||||||
(in thousands) | ||||||||||||||||
Balance at beginning of year | 10,657 | 24,425 | 53,624 | 8,125 | ||||||||||||
Provision during the year | 13,768 | 55,500 | 23,888 | 3,619 | ||||||||||||
Utilization during the year | — | (26,301 | ) | (16,340 | ) | (2,476 | ) | |||||||||
Balance at end of year | 24,425 | 53,624 | 61,172 | 9,268 |
Year ended December 31, | ||||||||||||||||
2008 | 2009 | 2010 | ||||||||||||||
(RMB) | (RMB) | (RMB) | (US$) | |||||||||||||
(in thousands) | ||||||||||||||||
Balance at beginning of year | 22,354 | 25,323 | 36,586 | 5,543 | ||||||||||||
Derecognized on disposal of subsidiaries | (11,017 | ) | — | — | — | |||||||||||
Bad debt expense | 57,574 | 11,916 | 2,994 | 454 | ||||||||||||
Written back during the year | — | (653 | ) | — | — | |||||||||||
Written off during the year | (43,588 | ) | — | — | — | |||||||||||
Balance at end of year | 25,323 | 36,586 | 39,580 | 5,997 |
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Year ended December 31, | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
(%) | (%) | (%) | ||||||||||
Revenues | 100.0 | 100.0 | 100.0 | |||||||||
Cost of revenues | (76.3 | ) | (76.4 | ) | (73.5 | ) | ||||||
Gross profit | 23.7 | 23.6 | 26.5 | |||||||||
Other revenue | — | 0.2 | 1.0 | |||||||||
Operating expenses: | ||||||||||||
Research and development costs | (7.1 | ) | (3.7 | ) | (4.2 | ) | ||||||
Sales and distribution expenses | (14.1 | ) | (11.3 | ) | (9.7 | ) | ||||||
General and administrative expenses | (12.9 | ) | (5.1 | ) | (4.6 | ) | ||||||
Impairment of goodwill | (2.8 | ) | — | — | ||||||||
Total operating expenses | (36.9 | ) | (20.1 | ) | (18.4 | ) | ||||||
Operating (loss) income | (13.2 | ) | 3.7 | 9.0 | ||||||||
Other (expense) income: | ||||||||||||
Interest income | 3.2 | 2.6 | 1.6 | |||||||||
Interest expense | (5.6 | ) | (3.5 | ) | (3.4 | ) | ||||||
Investment income | 0.5 | — | — | |||||||||
Foreign currency exchange loss | (1.1 | ) | (0.0 | ) | (0.0 | ) | ||||||
Grant income | 1.5 | 0.4 | 0.1 | |||||||||
Total other expense | (1.4 | ) | (0.5 | ) | (1.7 | ) | ||||||
(Loss) income before income tax expense | (14.6 | ) | 3.2 | 7.4 | ||||||||
Income tax expense | (0.3 | ) | (1.2 | ) | (1.7 | ) | ||||||
Net (loss) income | (14.9 | ) | 2.0 | 5.6 | ||||||||
Net loss attributable to non-controlling interests | 0.1 | 0.0 | 0.1 | |||||||||
Net (loss) income attributable to the equity shareholders of GrenTech | (14.8 | ) | 2.0 | 5.7 |
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Year ended December 31, | ||||||||||||||||
2008 | 2009 | 2010 | ||||||||||||||
(RMB) | (RMB) | (RMB) | (US$) | |||||||||||||
(in thousands) | ||||||||||||||||
Net cash provided by operating activities | 5,056 | 90,731 | 10,225 | 1,548 | ||||||||||||
Net cash provided by (used in) investing activities | 28,113 | (45,338 | ) | (91,672 | ) | (13,890 | ) | |||||||||
Net cash (used in) provided by financing activities | (52,085 | ) | 130,919 | (7,312 | ) | (1,107 | ) | |||||||||
Cash and cash equivalents at the end of year | 293,353 | 469,454 | 380,098 | 57,591 |
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As of December 31, 2010 | ||||||||||||
(RMB) | (US$) | (%) | ||||||||||
(in millions, except for percentages) | ||||||||||||
China Mobile group | 617.1 | 93.5 | 38.5 | |||||||||
China Unicom group | 507.7 | 76.9 | 31.6 | |||||||||
China Telecom group | 260.7 | 39.5 | 16.2 | |||||||||
Others | 219.1 | 33.2 | 13.7 | |||||||||
Total | 1,604.6 | 243.1 | 100.0 |
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As of December 31, | ||||||||||||||||||||||||||||
2008 | 2009 | 2010 | ||||||||||||||||||||||||||
RMB | % | RMB | % | RMB | US$ | % | ||||||||||||||||||||||
(in millions, except for percentages) | ||||||||||||||||||||||||||||
Less than one year | 571.9 | 45.8 | 773.9 | 57.3 | 828.3 | 125.5 | 51.6 | |||||||||||||||||||||
Between one to two years | 392.1 | 31.4 | 232.4 | 17.2 | 374.9 | 56.8 | 23.4 | |||||||||||||||||||||
Between two to three years | 184.4 | 14.8 | 236.7 | 17.5 | 167.4 | 25.3 | 10.4 | |||||||||||||||||||||
Over three years | 100.8 | 8.0 | 107.5 | 8.0 | 234.0 | 35.5 | 14.6 | |||||||||||||||||||||
Total | 1,249.2 | 100.0 | 1,350.5 | 100.0 | 1604.6 | 243.1 | 100.0 |
As of December 31, | ||||||||||||||||||||||||||||
2008 | 2009 | 2010 | ||||||||||||||||||||||||||
RMB | % | RMB | % | RMB | US$ | % | ||||||||||||||||||||||
(in millions, except for percentages) | ||||||||||||||||||||||||||||
Contractually due | 632.1 | 50.6 | 622.2 | 46.1 | 716.7 | 108.6 | 44.7 | |||||||||||||||||||||
Non-contractually due | 617.1 | 49.4 | 728.3 | 53.9 | 887.9 | 134.5 | 55.3 | |||||||||||||||||||||
Total | 1,249.2 | 100.0 | 1,350.5 | 100.0 | 1,604.6 | 243.1 | 100.0 |
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As of December 31, | ||||||||||||||||
2008 | 2009 | 2010 | ||||||||||||||
(RMB) | (RMB) | (RMB) | (US$) | |||||||||||||
(in thousands) | ||||||||||||||||
Raw materials | 163,589 | 205,608 | 137,981 | 20,906 | ||||||||||||
Work in progress | 15,539 | 8,055 | 8,672 | 1,314 | ||||||||||||
Finished goods | 341,491 | 557,573 | 496,612 | 75,244 | ||||||||||||
Total | 520,619 | 771,236 | 643,265 | 97,464 | ||||||||||||
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Finished goods | Work in progress | Raw materials | Total | |||||||||||||||||||||||||||||||||||||||||||||
(RMB) | (US$) | (%) | (RMB) | (US$) | (%) | (RMB) | (US$) | (%) | (RMB) | (US$) | (%) | |||||||||||||||||||||||||||||||||||||
(in thousands, except for percentages) | ||||||||||||||||||||||||||||||||||||||||||||||||
Age | ||||||||||||||||||||||||||||||||||||||||||||||||
Less than one year | 367,806 | 55,728 | 74.1 | % | 8,672 | 1,314 | 100.0 | % | 91,756 | 13,902 | 66.5 | % | 468,234 | 70,945 | 72.8 | % | ||||||||||||||||||||||||||||||||
One to two years | 82,185 | 12,452 | 16.5 | % | — | — | 0.0 | % | 35,591 | 5,393 | 25.8 | % | 117,776 | 17,845 | �� | 18.3 | % | |||||||||||||||||||||||||||||||
Over two years | 46,621 | 7,064 | 9.4 | % | — | — | 0.0 | % | 10,634 | 1,611 | 7.7 | % | 57,255 | 8,675 | 8.9 | % | ||||||||||||||||||||||||||||||||
Total | 496,612 | 75,244 | 100.0 | % | 8,672 | 1,314 | 100.0 | % | 137,981 | 20,906 | 100.0 | % | 643,265 | 97,465 | 100.0 | % |
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As of December 31, 2010 | ||||||||||||||||||||||||||||||||
Payment Due by Period | ||||||||||||||||||||||||||||||||
Total | Less than 1 Year | 1-3 Years | After 3 Years | |||||||||||||||||||||||||||||
RMB | US$ | RMB | US$ | RMB | US$ | RMB | US$ | |||||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||||||
Short-term bank loans | 591.0 | 89.5 | 591.0 | 89.5 | — | — | — | — | ||||||||||||||||||||||||
Long-term debt (1) | 124.0 | 18.7 | 26.7 | 4.0 | 97.3 | 14.7 | — | — | ||||||||||||||||||||||||
Bills payable | 121.7 | 18.4 | 121.7 | 18.4 | — | — | — | — | ||||||||||||||||||||||||
Operating lease commitments | 9.0 | 1.3 | 7.4 | 1.1 | 1.6 | 0.2 | — | — | ||||||||||||||||||||||||
Other capital commitments | 1.8 | 0.3 | 1.8 | 0.3 | — | — | — | — | ||||||||||||||||||||||||
Unrecognized income tax benefit | 87.3 | 13.2 | 87.3 | 13.2 | — | — | — | — | ||||||||||||||||||||||||
Total contractual obligations | 934.8 | 141.4 | 835.9 | 126.5 | 98.9 | 14.9 | — | — |
(1) | The amount of long-term debt includes principal and interest. Interest is calculated based on the prevailing market interest rates as of the relevant balance sheet dates. |
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Directors and Executive Officers(1) | Age | Position | ||||
Yingjie Gao | 55 | Chairman of the board and chief executive officer | ||||
Rong Yu | 46 | Director and chief financial officer | ||||
Qi Wang | 45 | Director and vice president | ||||
Jing Fang | 48 | Director and vice president | ||||
Cuiming Shi | 70 | Independent director | ||||
Xiaohu You | 48 | Independent director | ||||
Kin Kwong Mak | 49 | Independent director (audit committee financial expert) | ||||
Qingchang Liu | 43 | Vice president | ||||
Kaichang Zou | 36 | Vice president |
(1) | Professor Kunjie Zhuang resigned from our board of directors for personal reasons, effective October 29, 2010. |
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• | selecting the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by the independent auditors; |
• | reviewing and approving all proposed related-party transactions; |
• | discussing the annual audited financial statements with management and the independent auditors; |
• | annually reviewing and reassessing the adequacy of our audit committee charter; |
• | meeting separately and periodically with management and the independent auditors; |
• | reviewing such other matters that are specifically delegated to our audit committee by our board of directors from time to time; and |
• | reporting regularly to the full board of directors. |
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• | reviewing and determining the compensation package for our senior executives; |
• | reviewing and making recommendations to our board with respect to the compensation of our directors; |
• | reviewing and approving officer and director indemnification and insurance matters; |
• | reviewing and approving any employee loan in an amount equal to or greater than RMB100,000; and |
• | reviewing periodically and approving any long-term incentive compensation or equity plans, programs or similar arrangements, annual bonuses, employee pension and welfare benefit plans. |
• | identifying and recommending to the board nominees for election or re-election to the board; |
• | making appointments to fill any vacancy on our board; |
• | reviewing annually with the board the current composition of the board in light of the characteristics of independence, age, skills, experience and availability of service to us; |
• | identifying and recommending to the board any director to serve as a member of the board’s committees; |
• | advising the board periodically with respect to significant developments in the law and practice of corporate governance as well as our compliance with applicable laws and regulations, and making recommendations to the board on all matters of corporate governance and on any corrective action to be taken; and |
• | monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance. |
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• | motivate the eligible participants to optimize their performance efficiency for the benefit of our company; and |
• | attract and retain or otherwise maintain an on-going business relationship with the eligible participants whose contributions are or will be beneficial to our long-term growth. |
• | any full-time or part-time employees, executives or officers of our company or any of our subsidiaries; |
• | any directors, including independent and non-independent directors, of our company or any of our subsidiaries; |
• | any advisers, consultants and agents to us or any of our subsidiaries; and |
• | such other persons who, in the sole opinion of our board of directors, will contribute or have contributed to our development and operations and our quality of work, have shown initiative and commitment in performing his/her duties, or have provided service or contribution to our company for a specified length of time. |
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• | by any reason other than death, ill-health, injury, disability or the termination of his employment on one or more of the following grounds: he has been guilty of serious misconduct, or has committed any act of bankruptcy or is unable to pay his debts or has become insolvent or has made any arrangement or has compromised with his creditors generally, or has been convicted of any criminal offence involving his integrity or honesty or in relation to an employee of our company and/or any of our subsidiaries (if so determined by our board of directors) on any other ground on which an employer would be entitled to terminate his employment at common law or pursuant to any applicable laws or under the grantee’s service contract with our company or our relevant subsidiary, or the Special Termination Events, the grantee may exercise the option up to the entitlement of the grantee as of the date of cessation (to the extent not already exercised) within a period of one month from such cessation; or |
• | by reason of death, ill-health, injury or disability (all evidenced to the satisfaction of our board of directors) and none of the Special Termination Events would be a ground for termination of the grantee’s relationship with our company or any of our subsidiaries, the grantee or his personal representative(s) may exercise the option within a period of 12 months from such cessation, which date shall be the last actual working day with us or our subsidiary whether salary is paid in lieu of notice or not, failing which it will lapse. |
• | each of our executive officers and directors; |
• | each person known by us to beneficially own 5% or more of our ordinary shares; and |
• | all current directors and executive officers as a group. |
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Shares beneficially owned (1)(2) | ||||||||
Name | Number of Shares | % | ||||||
Directors and executive officers(3) | ||||||||
Yingjie Gao (4) | 149,151,325 | 26.5 | ||||||
Rong Yu (5) | 59,673,550 | 10.6 | ||||||
Kunjie Zhuang (6) | 56,110,500 | 10.0 | ||||||
Qi Wang (7)(9) | 6,563,264 | 1.2 | ||||||
Jing Fang | — | — | ||||||
Cuiming Shi | — | — | ||||||
Xiaohu You | — | — | ||||||
Kin Kwong Mak | — | — | ||||||
Qingchang Liu | — | — | ||||||
Kaichang Zou | — | — | ||||||
All directors and executive officers as a group (8 persons) | 271,498,639 | 48.2 | ||||||
Principal shareholders | ||||||||
Guoren Industrial Developments Limited (4) | 149,151,325 | 26.5 | ||||||
Well Sino Enterprises Limited (5)(9) | 59,673,550 | 10.6 | ||||||
Leakey Investments Limited (8)(9) | 59,549,550 | 10.6 | ||||||
Drag Investments Limited (6) | 56,110,500 | 10.0 | ||||||
Heng Xing Yue Investments Limited (9) | 34,006,550 | 6.0 | ||||||
Wells Fargo & Company (10) | 95,305,425 | 16.9 |
(1) | Beneficial ownership is determined in accordance with Rule 13d-3 of the General Rules and Regulations under the Exchange Act, and includes voting or investment power with respect to the ordinary shares. | |
(2) | Percentage of beneficial ownership of each listed person is based on 563,244,750 ordinary shares outstanding as of April 30, 2011, as well as the ordinary shares underlying share options exercisable by such person within 60 days of April 30, 2011. | |
(3) | The address of our current executive officers and directors is c/o China GrenTech Corporation Limited, 15th Floor, Block A, Guoren Building, Keji Central 3rd Road, Hi-Tech Park, Nanshan District, Shenzhen 518057, People’s Republic of China. | |
(4) | Mr. Yingjie Gao, our chairman and chief executive officer, beneficially owns 149,151,325 ordinary shares, which are held through his wholly-owned company, Guoren Industrial Developments Limited. Guoren Industrial Developments Limited is a British Virgin Islands company with its business address at 15th Floor, Block A, Guoren Building, Keji Central 3rd Road, Nanshan District, Shenzhen 518057, People’s Republic of China. Its principal business is investment holding. Guoren Industrial Developments Limited is ultimately wholly-owned by The GRRF Trust, a family trust established by Mr. Yingjie Gao, our chairman and chief executive officer. Guoren Industrial Developments Limited, as the record holder, of which Mr. Gao is the sole director, continues to have sole power to vote or to direct the vote and the sole power to dispose or to direct the disposition with respect to such 149,151,325 ordinary shares. Mr. Gao, as the sole director of Guoren Industrial Developments Limited, also acts as the protector and the investment manager of The GRRF Trust. Credit Suisse Trust Limited acts as the trustee of The GRRF Trust and disclaims beneficial ownership of our ordinary shares. On August 31, 2009, Guoren Industrial Development Limited adopted a Rule10b5-1 Trading Plan , which expired on June 10, 2011. This share information is based upon a report on Schedule 13D/A filed by Guoren Industrial Developments Limited with the U.S. Securities and Exchange Commission on January 19, 2010. | |
(5) | Ms. Rong Yu, our director and chief financial officer, beneficially owns 59,673,550 ordinary shares, which are held indirectly through Heng Xing Yue Investments Limited and through her wholly-owned company, Well Sino Enterprises Limited, which holds 35.2% of the outstanding shares of Heng Xing Yue Investments Limited. Heng Xing Yue Investments Limited is the record holder of 34,006,550 ordinary shares in our share capital. Ms. Rong Yu and Ms. Yin Huang are directors of Heng Xing Yue Investments Limited. Each beneficial owner of Heng Xing Yue Investments Limited has the voting rights with respect to the securities beneficially owned by him or her. Wells Sino Enterprises Limited is a British Virgin Islands investment holding company and is the record holder of 25,667,000 ordinary shares in our share capital. Ms. Rong Yu is the sole director of Wells Sino Enterprises Limited. This share information is based upon a report on Schedule 13G/A filed by Heng Xing Yue Investments Limited with the U.S. Securities and Exchange Commission on February 11, 2011. |
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(6) | Professor Kunjie Zhuang resigned from our board of directors in October 2010. Professor Zhuang beneficially owns 56,110,500 ordinary shares, which are held through his majority-owned company, Drag Investments Limited. Drag Investments Limited is a British Virgin Islands company with its business address at 15th Floor, Block A, Guoren Building, Keji Central 3rd Road, Nanshan District, Shenzhen 518057, People’s Republic of China. Its principal business is investment holding. Drag Investments Limited is 80%-owned by Professor Kunjie Zhuang, and 20%-owned by Mr. Haifan Zhuang, a son of Professor Kunjie Zhuang. Each beneficial owner of Drag Investments Limited has the voting rights with respect to the securities beneficially owned by him. Professor Kunjie Zhuang and Mr. Haifan Zhuang are both directors of Drag Investments Limited. This share information is based upon a report on Schedule 13G/A filed by Drag Investments Limited with the U.S. Securities and Exchange Commission on January 15, 2010. | |
(7) | Mr. Qi Wang, our director and vice president, beneficially owns 6,563,264 ordinary shares, which are held indirectly through Heng Xing Yue Investments Limited. | |
(8) | Leakey Investment Limited, a British Virgin Islands investment holding company wholly-owned by Ms. Yin Huang, beneficially owns 59,549,550 ordinary shares, of which 25,543,000 ordinary shares are held directly by Leakey Investment Limited and 34,006,550 are held indirectly through Heng Xing Yue Investments Limited. Leakey Investment Limited holds 35.2% of the outstanding shares of Heng Xing Yue Investments Limited. Ms. Rong Yu and Ms. Yin Huang are directors of Heng Xing Yue Investments Limited. Each beneficial owner of Heng Xing Yue Investments Limited has the voting rights with respect to the securities beneficially owned by him or her. Ms. Ying Huang is the sole director of Leakey Investments Limited. The business address of Ms. Ying Huang is 15th Floor, Block A, Guoren Building, Keji Central 3rd Road, Hi-Tech Park, Nanshan District, Shenzhen 518057, People’s Republic of China. This share information is based upon a report on Schedule 13G/A filed by Heng Xing Yue Investments Limited with the U.S. Securities and Exchange Commission on February 11, 2011. | |
(9) | Heng Xing Yue Investments Limited, a British Virgin Islands investment holding company with its business address at 15th Floor, Block A, Guoren Building, Keji Central 3rd Road, Nanshan District, Shenzhen 518057, People’s Republic of China, is the record holder of 34,006,550 ordinary shares. Ms. Rong Yu and Ms. Yin Huang are directors of Heng Xing Yue Investments Limited. Heng Xing Yue Investments Limited is held by various shareholders including Wells Sino Enterprises Limited as to 35.2%, Leakey Investment Limited as to 35.2% and Talenthome Management Limited, a company incorporated under the laws of the British Virgin Islands and wholly-owned by Mr. Qi Wang, as to 19.3%. Each beneficial owner of Heng Xing Yue Investments Limited has the voting rights with respect to the securities beneficially owned by him or her. This share information is based upon a report on Schedule 13G/A filed by Heng Xing Yue Investments Limited with the U.S. Securities and Exchange Commission on February 11, 2011. | |
(10) | Represents 95,305,425 ordinary shares (in the form of ADSs) held by Wells Fargo & Company, which is a Delaware company with its business address at 420 Montgomery Street, San Francisco, California 94163, U.S.A. This share information is based upon a report on Form 13F-HR/A filed by Wells Fargo & Company with the U.S. Securities and Exchange Commission on March 4, 2011. |
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• | the level of our cash and retained earnings; |
• | our expected financial performance; |
• | our projected levels of capital expenditure and other investment plans; |
• | the adequacy of our working capital; and |
• | the dividend yield of similarly listed companies with similar growth prospects as well as comparable providers of wireless coverage products and services globally. |
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Price per ADS (US$) | ||||||||
High | Low | |||||||
Annual | ||||||||
2006 (from listing date) | 22.50 | 8.21 | ||||||
2007 | 19.00 | 6.89 | ||||||
2008 | 9.12 | 0.78 | ||||||
2009 | 6.47 | 0.90 | ||||||
2010 | 4.69 | 1.51 | ||||||
Quarterly | ||||||||
First Quarter, 2009 | 1.50 | 0.90 | ||||||
Second Quarter, 2009 | 4.00 | 1.33 | ||||||
Third Quarter, 2009 | 6.47 | 2.80 | ||||||
Fourth Quarter, 2009 | 5.78 | 3.42 | ||||||
First Quarter, 2010 | 4.69 | 2.96 | ||||||
Second Quarter, 2010 | 3.15 | 1.56 | ||||||
Third Quarter, 2010 | 2.31 | 1.51 |
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Price per ADS (US$) | ||||||||
High | Low | |||||||
Fourth Quarter, 2010 | 3.71 | 2.06 | ||||||
First Quarter, 2011 | 3.70 | 2.83 | ||||||
Monthly | ||||||||
December 2010 | 3.36 | 2.72 | ||||||
January 2011 | 3.50 | 2.83 | ||||||
February 2011 | 3.39 | 2.85 | ||||||
March 2011 | 3.70 | 2.86 | ||||||
April 2011 | 3.57 | 3.00 | ||||||
May 2011 | 3.28 | 2.23 |
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• | dealers in stocks, securities or currencies; |
• | securities traders that use a mark-to-market accounting method; |
• | banks and financial institutions; |
• | insurance companies; |
• | regulated investment companies; |
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• | real estate investment trusts; |
• | tax-exempt organizations; |
• | persons holding shares or ADSs as part of a hedging or conversion transaction or a straddle; |
• | persons deemed to sell shares or ADSs under the constructive sale provisions of the Code; |
• | persons who or that are, or may become, subject to the expatriation provisions of the Code; |
• | persons whose functional currency is not the United States dollar; and |
• | direct, indirect or constructive owners of 10% or more of the total combined voting power of all classes of our voting stock. |
• | an individual citizen or resident of the United States; |
• | a corporation or other entity classified as a corporation for United States federal income tax purposes created or organized in or under the laws of the United States, any state thereof or the District of Columbia; |
• | an estate, the income of which is subject to United States federal income taxation regardless of its source; or |
• | a trust, if a court within the United States is able to exercise primary supervision over the administration of such trust and one or more “U.S. persons” (within the meaning of the Code) have the authority to control all substantial decisions of the trust, or if a valid election is in effect to be treated as a U.S. person. |
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Persons depositing or withdrawing shares must pay: | For: | |
Up to US$0.05 per ADS | • Issuance of ADSs, including issuances resulting from a distribution of ordinary shares or rights or other property | |
• Cancellation or withdrawals of ADSs | ||
• Distribution of ADSs pursuant to stock dividends, free stock distributions or exercise of rights | ||
• Distributions of securities other than ADSs or rights to purchase additional ADSs | ||
Up to US$0.02 per ADS | • Distributions of cash dividends or other cash distributions | |
• Annual depositary services | ||
US$1.5 per certificate presented for transfer | • Transfer of American depositary receipts, or ADRs | |
Taxes and other governmental charges the depositary or the custodian have to pay on any ADS or ordinary shares underlying an ADS, for example, stock transfer taxes, stamp duty or withholding taxes | • As necessary | |
Any charges, fees or expenses incurred by the depositary or its agents for servicing the deposited securities | • As necessary |
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• | Insufficient competent accounting personnel in applying U.S. GAAP in our financial reporting process |
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• | Recruit more competent accounting personnel who are proficient in applying U.S. GAAP in the financial reporting process to assure our financial statements are prepared in compliance with U.S. GAAP. |
• | Establish a team responsible for U.S. financial reporting matters. |
• | Provide additional training on U.S. GAAP knowledge to accounting personnel. |
Audit Fees | Audit-Related Fees | Tax Fees | Other Fees | |||||||||||||
(in millions of RMB) | ||||||||||||||||
2009 | 5.5 | — | — | — | ||||||||||||
2010 | 4.7 | — | — | — |
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Total Number | Approximate | |||||||||||||||||||
of ADSs | Dollar Value of | |||||||||||||||||||
Total Number | Purchased as | ADSs that May | ||||||||||||||||||
of American | Part of Publicly | Yet Be | ||||||||||||||||||
Depositary | Average | Average | Announced | Purchased | ||||||||||||||||
Shares | Price Paid | Price Paid | Plans or | Under the | ||||||||||||||||
Period | Purchased(1) | Per ADS | Per ADS(2) | Programs | Programs | |||||||||||||||
US$ | RMB | US$ | ||||||||||||||||||
2007 | 437,440 | 8.2480 | 60.8375 | 437,440 | 4,391,996 | |||||||||||||||
2008 | 483,409 | 3.0251 | 20.7840 | 920,849 | 2,292,635 | |||||||||||||||
2009 | 473,666 | 2.5635 | 17.5067 | 1,394,515 | 6,336,137 | |||||||||||||||
January 1 through January 31, 2010 | 53,800 | 3.2229 | 22.0021 | 1,448,315 | 6,162,745 | |||||||||||||||
February 1 through February 28, 2010 | 102,641 | 3.2152 | 21.9463 | 1,550,956 | 5,832,734 | |||||||||||||||
March 1 through March 31, 2010 | — | — | — | — | — | |||||||||||||||
April 1 through April 30, 2010 | — | — | — | — | — | |||||||||||||||
May 1 through May 31, 2010 | — | — | — | — | — | |||||||||||||||
June 1 through June 30, 2010 | 11,500 | 1.6388 | 11.1135 | 1,562,456 | 5,813,887 | |||||||||||||||
July 1 through July 31, 2010 | 150,860 | 1.8140 | 12.2868 | 1,713,316 | 5,540,227 | |||||||||||||||
August 1 through August 31, 2010 | 183,973 | 1.9324 | 13.1537 | 1,897,289 | 5,184,718 | |||||||||||||||
September 1 through September 30, 2010 | 150,821 | 1.8913 | 12.6537 | 2,048,110 | 4,899,470 | |||||||||||||||
October1 through October 31, 2010 | 163,000 | 2.3183 | 15.4647 | 2,211,110 | 4,521,587 | |||||||||||||||
November 1 through November 30, 2010 | 221,450 | 2.8282 | 18.8556 | 2,432,560 | 3,895,282 | |||||||||||||||
December 1 through December 31, 2010 | 37,650 | 2.9140 | 19.3644 | 2,470,210 | 3,785,570 | |||||||||||||||
Total | 2,470,210 | 3.5767 | 25.1480 | 2,470,210 |
(1) | Our company’s ADS to ordinary share ratio is one ADS for every 25 ordinary shares. | |
(2) | The conversion from United States dollars into Renminbi (RMB) is based on the noon buying rates adopted by our company for the reporting of our periodic results as follows: |
Exchange rate US$ | ||||||||
Period | Period ended | to RMB | ||||||
January 1 through January 31, 2010 | January 31, 2010 | 6.8268 | ||||||
February1 through February 28, 2010 | February 28, 2010 | 6.8258 | ||||||
March 1 through March 31, 2010 | March 31, 2010 | — | ||||||
April 1 through April 30, 2010 | April 30, 2010 | — | ||||||
May 1 through May 31, 2010 | May 31, 2010 | — | ||||||
June 1 through June 30, 2010 | June 30, 2010 | 6.7815 | ||||||
July 1 through July 31, 2010 | July 31, 2010 | 6.7733 | ||||||
August 1 through August 31, 2010 | August 31, 2010 | 6.8069 | ||||||
September 1 through September 30, 2010 | September 30, 2010 | 6.6905 | ||||||
October 1 through October 31, 2010 | October 31, 2010 | 6.6707 | ||||||
November 1 through November 30, 2010 | November 30, 2010 | 6.6670 | ||||||
December 1 through December 31, 2010 | December 31, 2010 | 6.6000 |
(3) | On September 21, 2007, we announced a share repurchase program authorized by our board of directors. Under the terms of the approved share repurchase program, we were authorized to repurchase up to US$8.0 million worth of our issued and outstanding ADSs from time to time in open-market transactions on NASDAQ. The share repurchase program did not have an expiration date and could be modified or discontinued at any time by our board of directors. |
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On June 4, 2009, we announced a second share repurchase program authorized by our board of directors. Under the terms of the approved share repurchase program, we may repurchase up to US$7.0 million worth of our issued and outstanding ADSs from time to time in open-market transactions on NASDAQ. This share repurchase program does not have an expiration date and may be modified or discontinued at any time by our board of directors. This share repurchase program supersedes the previous share repurchase program announced on September 21, 2007. |
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Exhibit No. | Description of Exhibit | |||
1.1 | Amended and restated memorandum and articles of association of the Registrant (1) | |||
2.1 | Form of share certificate (1) | |||
2.2 | Form of deposit agreement, including form of American Depositary Receipt (2) | |||
4.1 | Contract for grant of land use right of Shenzhen Municipality (3) | |||
4.2 | Translation of share transfer agreement for Lake Communication Limited by and between Shenzhen GrenTech Company Limited and Haifan Zhuang dated December 17, 2008 and related disposition of liabilities agreement (4) | |||
4.3 | Share option scheme (5) | |||
8.1 | List of subsidiaries | |||
11.1 | Code of ethics (6) | |||
12.1 | CEO certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||
12.2 | CFO certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||
13.1 | CEO and CFO certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |||
15.1 | Consent of PricewaterhouseCoopers Zhong Tian CPAs Limited Company, Independent Registered Public Accounting Firm | |||
15.2 | Consent of KPMG, Independent Registered Public Accounting Firm | |||
15.3 | Letter of KPMG dated June 30, 2011 |
(1) | Incorporated by reference to our Registration Statement on Form F-1 (File No. 333-132381) filed with the SEC in connection with our global offering in November 2004. |
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(2) | Incorporated by reference to our Registration Statement on Form F-6 (File No. 333-132385) filed with the SEC with respect to American Depositary Shares representing our ordinary shares. | |
(3) | Incorporated by reference to our Annual Report on Form 20-F for the fiscal year ended December 31, 2007 filed with the SEC on July 15, 2008. | |
(4) | Incorporated by reference to our Annual Report on Form 20-F for the fiscal year ended December 31, 2008 filed with the SEC on June 30, 2009. | |
(5) | Incorporated by reference to our Registration Statement on Form F-1 (File No. 333-132381) filed with the SEC in connection with our global offering in November 2004. | |
(6) | Incorporated by reference to our Annual Report on Form 20-F for the fiscal year ended December 31, 2006 filed with the SEC on May 4, 2007. |
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China GrenTech Corporation Limited | ||||
/s/ Rong Yu | ||||
Name: | Rong Yu | |||
Title: | Chief Financial Officer | |||
Date: June 30, 2011 |
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F-2 | ||||
F-4 | ||||
F-5 | ||||
F-6 | ||||
F-7 | ||||
F-9 |
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Shenzhen, the PRC
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Hong Kong, China
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(RMB and USD expressed in thousands)
Note | 2009 | 2010 | 2010 | |||||||||||||
RMB | RMB | USD | ||||||||||||||
Assets | ||||||||||||||||
Current assets | ||||||||||||||||
Cash and cash equivalents | 469,454 | 380,098 | 57,591 | |||||||||||||
Restricted cash | 3 | 103,035 | 90,132 | 13,656 | ||||||||||||
Accounts receivable, net | 4 | 892,149 | 1,154,540 | 174,931 | ||||||||||||
Inventories | 5 | 771,236 | 643,265 | 97,464 | ||||||||||||
Prepaid expenses and other current assets | 6 | 81,835 | 70,735 | 10,717 | ||||||||||||
Deferred tax assets | 7 | 34,958 | 36,218 | 5,488 | ||||||||||||
Total current assets | 2,352,667 | 2,374,988 | 359,847 | |||||||||||||
Property, plant and equipment, net | 8 | 444,578 | 436,290 | 66,105 | ||||||||||||
Construction in progress | 8 | 3,961 | 63,008 | 9,547 | ||||||||||||
Lease prepayments, net | 9 | 80,422 | 78,721 | 11,927 | ||||||||||||
Intangible assets, net | 10 | 186 | — | — | ||||||||||||
Prepayment for fixed assets | 3,342 | 3,475 | 527 | |||||||||||||
Long-term accounts receivable | 4 | 452,191 | 462,521 | 70,079 | ||||||||||||
Total assets | 3,337,347 | 3,419,003 | 518,032 | |||||||||||||
Liabilities | ||||||||||||||||
Current liabilities | ||||||||||||||||
Short-term bank loans | 13 | 613,378 | 638,229 | 96,702 | ||||||||||||
Current portion of long-term bank loan | 14 | 20,000 | 20,000 | 3,030 | ||||||||||||
Accounts payable | 490,750 | 529,282 | 80,194 | |||||||||||||
Bills payable | 2 | (s) | 220,329 | 121,656 | 18,433 | |||||||||||
Accrued expenses and other payables | 11 | 304,299 | 340,303 | 51,561 | ||||||||||||
Amounts due to related parties | 20 | (a) | 34,000 | 25,284 | 3,831 | |||||||||||
Income tax payable | 73,063 | 97,247 | 14,734 | |||||||||||||
Total current liabilities | 1,755,819 | 1,772,001 | 268,485 | |||||||||||||
Long-term bank loan | 14 | 110,000 | 90,000 | 13,636 | ||||||||||||
Deferred tax liabilities | 7 | 4,679 | 4,598 | 697 | ||||||||||||
Total liabilities | 1,870,498 | 1,866,599 | 282,818 | |||||||||||||
Commitments and contingencies | 24 | |||||||||||||||
Equity | ||||||||||||||||
Ordinary shares US$0.00002 par value; 2,500,000,000 shares authorized, 625,000,000 issued as of December 31, 2009 and 2010 respectively; 590,137,125 and 563,244,750 outstanding as of December 31, 2009 and 2010 respectively | 103 | 103 | 16 | |||||||||||||
Additional paid-in capital | 861,646 | 864,112 | 130,926 | |||||||||||||
Statutory reserves | 25 | 148,697 | 161,519 | 24,473 | ||||||||||||
Retained earnings | 496,993 | 582,311 | 88,229 | |||||||||||||
Treasury stock at cost, 34,862,875 shares and 61,755,250 shares as of December 31, 2009 and 2010 respectively | 26 | (44,930 | ) | (61,976 | ) | (9,390 | ) | |||||||||
Total equity attributable to the equity shareholders of China GrenTech Corporation Limited, or GrenTech | 1,462,509 | 1,546,069 | 234,254 | |||||||||||||
Non-controlling interests | 4,340 | 6,335 | 960 | |||||||||||||
Total equity | 1,466,849 | 1,552,404 | 235,214 | |||||||||||||
Total liabilities and equity | 3,337,347 | 3,419,003 | 518,032 | |||||||||||||
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for the years ended December 31, 2008, 2009 and 2010
(RMB and USD expressed in thousands, except share and per share data)
Note | 2008 | 2009 | 2010 | 2010 | ||||||||||||||
RMB | RMB | RMB | USD | |||||||||||||||
Revenues | 17 | 984,657 | 1,602,943 | 1,720,974 | 260,754 | |||||||||||||
Cost of revenues | 17 | (751,367 | ) | (1,223,973 | ) | (1,265,247 | ) | (191,704 | ) | |||||||||
Gross profit | 233,290 | 378,970 | 455,727 | 69,050 | ||||||||||||||
Other revenue | — | 3,344 | 16,594 | 2,514 | ||||||||||||||
Operating expenses: | ||||||||||||||||||
Research and development costs | (70,232 | ) | (59,899 | ) | (71,590 | ) | (10,847 | ) | ||||||||||
Sales and distribution expenses | (138,524 | ) | (180,525 | ) | (166,592 | ) | (25,241 | ) | ||||||||||
General and administrative expenses | (127,028 | ) | (81,506 | ) | (78,478 | ) | (11,891 | ) | ||||||||||
Impairment of goodwill | (27,589 | ) | — | — | — | |||||||||||||
Total operating expenses | (363,373 | ) | (321,930 | ) | (316,660 | ) | (47,979 | ) | ||||||||||
Operating income (loss) | (130,083 | ) | 60,384 | 155,661 | 23,585 | |||||||||||||
Other income (expense) | ||||||||||||||||||
Interest income | 31,257 | 40,997 | 27,770 | 4,208 | ||||||||||||||
Interest expense | (54,844 | ) | (56,766 | ) | (58,142 | ) | (8,809 | ) | ||||||||||
Investment income | 4,873 | — | — | — | ||||||||||||||
Foreign currency exchange loss | (10,418 | ) | (211 | ) | (597 | ) | (90 | ) | ||||||||||
Grant income | 15,209 | 6,322 | 2,157 | 327 | ||||||||||||||
Total other expense | (13,923 | ) | (9,658 | ) | (28,812 | ) | (4,364 | ) | ||||||||||
Income (loss) before income tax expense | (144,006 | ) | 50,726 | 126,849 | 19,221 | |||||||||||||
Income tax expense | 7 | (3,157 | ) | (18,068 | ) | (29,714 | ) | (4,502 | ) | |||||||||
Net income (loss) | (147,163 | ) | 32,658 | 97,135 | 14,719 | |||||||||||||
Net loss attributable to non-controlling interests | 796 | 14 | 1,005 | 152 | ||||||||||||||
Net income (loss) attributable to the equity shareholders of GrenTech | (146,367 | ) | 32,672 | 98,140 | 14,871 | |||||||||||||
Earnings (loss) per share | ||||||||||||||||||
- Basic | 19 | (0.24 | ) | 0.05 | 0.17 | 0.03 | ||||||||||||
- Diluted | 19 | (0.24 | ) | 0.05 | 0.16 | 0.02 | ||||||||||||
Weighted average number of ordinary shares outstanding: | ||||||||||||||||||
- Basic | 19 | 610,158,841 | 595,536,733 | 581,814,594 | 581,814,594 | |||||||||||||
- Diluted | 19 | 610,158,841 | 604,781,041 | 595,199,449 | 595,199,449 | |||||||||||||
F - 5
Table of Contents
Equity | ||||||||||||||||||||||||||||||||||||||||
attributable to | ||||||||||||||||||||||||||||||||||||||||
China | ||||||||||||||||||||||||||||||||||||||||
GrenTech | ||||||||||||||||||||||||||||||||||||||||
Number of | Additional | Statutory | Retained | Corporation | Non-controlling | |||||||||||||||||||||||||||||||||||
Note | shares | Amount | paid-in capital | reserves | earnings | Treasury stock | Limited | Interests | Total equity | |||||||||||||||||||||||||||||||
RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | |||||||||||||||||||||||||||||||||
Balance as of January 1, 2008 | 614,064,000 | 103 | 853,476 | 146,077 | 613,308 | (26,447 | ) | 1,586,517 | 5,763 | 1,592,280 | ||||||||||||||||||||||||||||||
Net loss | — | — | — | — | (146,367 | ) | — | (146,367 | ) | (796 | ) | (147,163 | ) | |||||||||||||||||||||||||||
Share repurchased during the year | (12,085,225 | ) | — | — | — | — | (10,097 | ) | (10,097 | ) | — | (10,097 | ) | |||||||||||||||||||||||||||
Share-based compensation, net of nil tax | — | — | 3,194 | — | — | — | 3,194 | — | 3,194 | |||||||||||||||||||||||||||||||
Appropriation to statutory reserves | — | — | — | 2,511 | (2,511 | ) | — | — | — | — | ||||||||||||||||||||||||||||||
Disposal of subsidiaries | — | — | — | (6,430 | ) | 6,430 | — | — | (613 | ) | (613 | ) | ||||||||||||||||||||||||||||
Balance as of December 31, 2008 | 601,978,775 | 103 | 856,670 | 142,158 | 470,860 | (36,544 | ) | 1,433,247 | 4,354 | 1,437,601 | ||||||||||||||||||||||||||||||
Net income | — | — | — | — | 32,672 | — | 32,672 | (14 | ) | 32,658 | ||||||||||||||||||||||||||||||
Share repurchased during the year | 26 | (11,841,650 | ) | — | — | — | — | (8,386 | ) | (8,386 | ) | — | (8,386 | ) | ||||||||||||||||||||||||||
Share-based compensation, net of nil tax | 16 | — | — | 4,976 | — | — | — | 4,976 | — | 4,976 | ||||||||||||||||||||||||||||||
Appropriation to statutory reserves | — | — | — | 6,539 | (6,539 | ) | — | — | — | — | ||||||||||||||||||||||||||||||
Balance as of December 31, 2009 | 590,137,125 | 103 | 861,646 | 148,697 | 496,993 | (44,930 | ) | 1,462,509 | 4,340 | 1,466,849 | ||||||||||||||||||||||||||||||
Net income | — | — | — | — | 98,140 | — | 98,140 | (1,005 | ) | 97,135 | ||||||||||||||||||||||||||||||
Initial capital contribution | — | — | — | — | — | — | — | 3,000 | 3,000 | |||||||||||||||||||||||||||||||
Share repurchased during the year | 26 | (26,892,375 | ) | — | — | — | — | (17,046 | ) | (17,046 | ) | — | (17,046 | ) | ||||||||||||||||||||||||||
Share-based compensation, net of nil tax | 16 | — | — | 2,466 | — | — | — | 2,466 | — | 2,466 | ||||||||||||||||||||||||||||||
Appropriation to statutory reserves | — | — | — | 12,822 | (12,822 | ) | — | — | — | — | ||||||||||||||||||||||||||||||
Balance as of December 31, 2010 | 563,244,750 | 103 | 864,112 | 161,519 | 582,311 | (61,976 | ) | 1,546,069 | 6,335 | 1,552,404 | ||||||||||||||||||||||||||||||
Balance as of December 31, 2010 - US$ | — | 16 | 130,926 | 24,473 | 88,229 | (9,390 | ) | 234,254 | 960 | 235,214 | ||||||||||||||||||||||||||||||
F - 6
Table of Contents
Note | 2008 | 2009 | 2010 | 2010 | ||||||||||||||||
RMB | RMB | RMB | USD | |||||||||||||||||
Cash flow from operating activities | ||||||||||||||||||||
Net income (loss) | (147,163 | ) | 32,658 | 97,135 | 14,719 | |||||||||||||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||||||||||||||
Loss on disposal of property, plant and equipment | 390 | 1,524 | 963 | 146 | ||||||||||||||||
Depreciation of property, plant and equipment | 18 | 32,327 | 30,685 | 33,242 | 5,037 | |||||||||||||||
Impairment of goodwill | 27,589 | — | — | — | ||||||||||||||||
Amortization of lease prepayments and intangible assets | 3,356 | 3,332 | 1,888 | 286 | ||||||||||||||||
Allowance for doubtful accounts | 4 | 57,574 | 11,263 | 2,994 | 454 | |||||||||||||||
Deferred income taxes | (9,712 | ) | (17,633 | ) | (1,341 | ) | (203 | ) | ||||||||||||
Foreign currency exchange losses | 10,418 | 211 | 597 | 90 | ||||||||||||||||
Share-based compensation | 16 | 3,194 | 4,976 | 2,466 | 374 | |||||||||||||||
Net gain from disposal of equity interests in subsidiaries | 15 | (4,556 | ) | — | — | — | ||||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||||||
Accounts receivable | (132,065 | ) | (102,963 | ) | (256,864 | ) | (38,919 | ) | ||||||||||||
Inventories | 13,442 | (250,617 | ) | 127,971 | 19,390 | |||||||||||||||
Prepaid expenses and other current assets | (64,186 | ) | 15,838 | 11,875 | 1,799 | |||||||||||||||
Accounts payable | 195,957 | 129,434 | 38,531 | 5,838 | ||||||||||||||||
Amounts due to related parties | 9,648 | 24,352 | (8,716 | ) | (1,321 | ) | ||||||||||||||
Bills payable | 36,470 | 109,730 | (98,673 | ) | (14,950 | ) | ||||||||||||||
Accrued expenses and other payables | (38,012 | ) | 62,240 | 33,972 | 5,144 | |||||||||||||||
Income tax payable | 10,385 | 35,701 | 24,185 | 3,664 | ||||||||||||||||
Net cash (used in) provided by operating activities | 5,056 | 90,731 | 10,225 | 1,548 | ||||||||||||||||
Cash flow from investing activities | ||||||||||||||||||||
Purchase of property, plant and equipment | (100,138 | ) | (64,671 | ) | (104,992 | ) | (15,908 | ) | ||||||||||||
Decrease (increase) in restricted cash | 132,695 | 19,333 | 12,903 | 1,955 | ||||||||||||||||
Disposal of subsidiaries, net of cash disposed | (4,479 | ) | — | — | — | |||||||||||||||
Proceeds from sale of property, plant and equipment | 35 | — | 417 | 63 | ||||||||||||||||
Net cash (used in) provided by investing activities | 28,113 | (45,338 | ) | (91,672 | ) | (13,890 | ) | |||||||||||||
Cash flow from financing activities | ||||||||||||||||||||
Capital contributed by non-controlling interests | 1 | — | — | 3,000 | 455 | |||||||||||||||
Payment for repurchase of ordinary shares | (10,097 | ) | (8,386 | ) | (17,046 | ) | (2,583 | ) | ||||||||||||
Principal payments of short-term bank loans | (930,550 | ) | (805,000 | ) | (890,000 | ) | (134,848 | ) | ||||||||||||
Proceeds from short-term bank loans | 937,450 | 945,000 | 876,000 | 132,727 | ||||||||||||||||
Proceeds from (remittance of) collection of sold accounts receivable on behalf of financial institutions, net | 11 | (48,888 | ) | (695 | ) | 20,734 | 3,142 | |||||||||||||
Net cash provided by (used in) financing activities | (52,085 | ) | 130,919 | (7,312 | ) | (1,107 | ) | |||||||||||||
Effect of foreign currency exchange rate change on cash | (4,509 | ) | (211 | ) | (597 | ) | (90 | ) | ||||||||||||
Net increase (decrease) in cash and cash equivalents | (23,425 | ) | 176,101 | (89,356 | ) | (13,539 | ) | |||||||||||||
Cash and cash equivalents: | ||||||||||||||||||||
At beginning of year | 316,778 | 293,353 | 469,454 | 71,130 | ||||||||||||||||
At end of year | 293,353 | 469,454 | 380,098 | 57,591 | ||||||||||||||||
F - 7
Table of Contents
Consolidated Statements of Cash Flows
for the years ended December 31, 2008, 2009 and 2010
(RMB and USD expressed in thousands)
2008 | 2009 | 2010 | 2010 | |||||||||||||
RMB | RMB | RMB | USD | |||||||||||||
Supplemental Disclosures of Cash Flow Information: | ||||||||||||||||
Cash paid during the year for: | ||||||||||||||||
Income tax | 2,485 | — | 6,871 | 1,041 | ||||||||||||
Interest paid, net of interest capitalized | 50,310 | 59,387 | 58,142 | 8,809 | ||||||||||||
Significant non-cash transactions: | ||||||||||||||||
Payable for purchase of property, plant and equipment | 24,333 | 19,597 | 118 | 18 | ||||||||||||
F - 8
Table of Contents
(1) | Principal Activities and Basis of Presentation |
Place of | ||||||||
incorporation or | Attributable equity | |||||||
Name of company | establishment | interest held | Principal activities | |||||
GrenTech (BVI) Limited | BVI | 100% | Investment holding | |||||
Shenzhen GrenTech Co., Ltd. (“Shenzhen GrenTech”) | PRC | 100% | Technical development, manufacturing and sales of telecommunication products in the PRC | |||||
Shenzhen Lingxian Technology Limited (“Shenzhen Lingxian”) | PRC | 99% | Technical development of software used for the Group’s telecommunication products | |||||
Shenzhen GrenTech RF Communication Co., Ltd (“Shenzhen GrenTech RF”) | PRC | 100% | Manufacturing and sales of radio frequency based products in the PRC | |||||
Shenzhen Kaige Communication Technology Co., Ltd (“Kaige”) | PRC | 100% | Investment holding | |||||
Shenzhen Kaixuan Communication Technology Co., Ltd (“Kaixuan”) | PRC | 100% | Provision of installation services on telecommunication products in the PRC | |||||
PT. GrenTech Indonesia (“GrenTech Indonesia”) | Indonesia | 100% | Sales of telecommunication products and provision of related installation services in Indonesia |
F - 9
Table of Contents
(1) | Principal Activities and Basis of Presentation (continued) |
Place of | ||||||||
incorporation or | Attributable equity | |||||||
Name of company | establishment | interest held | Principal activities | |||||
Shenzhen GrenTech IOT Network Corp., Ltd (“IOT”) | PRC | 70% | Development and sale of object network identification systems, communication systems and related electronic component products, design and installation of network and automation related products, as well as design and development of websites and software | |||||
Express (Shenzhen) Network Co., Ltd. (“Express (Shenzhen) Network”) | PRC | 70% | Real Estate information consulting | |||||
Shenzhen Lingxian Communication Co., Ltd. (“Shenzhen Lingxian Communication”) | PRC | 100% | Technical development and sales of telecommunication products in the PRC, import and export of technology and merchandise | |||||
GrenTech India Private Limited (“GrenTech India”) | India | 99.999% | Sales of telecommunication products and provision of related installation services in India | |||||
GrenTech Singapore PTE. Ltd. (“GrenTech Singapore”) | Singapore | 100% | Sales of telecommunication products and provision of related installation services in Singapore | |||||
GrenTech RF Communication (BVI) Limited (“RF (BVI)”) | BVI | 100% | Investment holding |
F - 10
Table of Contents
(2) | Summary of Significant Accounting Policies |
(a) | Principles of Consolidation |
The consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated upon consolidation. |
(b) | Foreign Currency Transactions |
(c) | Convenience translation to USD |
F - 11
Table of Contents
(2) | Summary of Significant Accounting Policies (continued) |
(d) | Use of Estimates |
(e) | Cash and Cash Equivalents |
(f) | Accounts Receivable |
F - 12
Table of Contents
(2) | Summary of Significant Accounting Policies (continued) |
(f) | Accounts Receivable (continued) |
(g) | Inventories |
(h) | Property, Plant and Equipment |
Years | ||||
Buildings | 50-56 | |||
Equipment and machinery | 5-10 | |||
Motor vehicles | 5-10 | |||
Office equipment and computer software | 5-10 |
(i) | Lease Prepayments |
F - 13
Table of Contents
(2) | Summary of Significant Accounting Policies (continued) |
(j) | Goodwill and Other Intangible Assets |
(k) | Impairment of Long-Lived Assets |
F - 14
Table of Contents
(2) | Summary of Significant Accounting Policies (continued) |
(l) | Revenue Recognition |
F - 15
Table of Contents
(2) | Summary of Significant Accounting Policies (continued) |
(l) | Revenue Recognition (continued) |
F - 16
Table of Contents
(2) | Summary of Significant Accounting Policies (continued) |
(l) | Revenue Recognition (continued) |
F - 17
Table of Contents
(2) | Summary of Significant Accounting Policies (continued) |
(m) | Provision for product warranties |
(n) | Cost of Revenues |
(o) | Income Taxes |
F - 18
Table of Contents
(2) | Summary of Significant Accounting Policies (continued) |
(p) | Advertising Costs |
(q) | Research and Development Costs |
(r) | Freight Costs |
(s) | Bills Payable and Bills Receivable |
(t) | Government Grants |
(u) | Commitments and Contingencies |
F - 19
Table of Contents
(2) | Summary of Significant Accounting Policies (continued) |
(v) | Earnings per Share |
(w) | Share-Based Payments |
(x) | Segment Reporting |
F - 20
Table of Contents
(2) | Summary of Significant Accounting Policies (continued) |
(y) | Fair value measurements |
Fair Value Measurements at Reporting Date Using | ||||||||||||||||
Quoted Prices | Significant | |||||||||||||||
Total Fair | in Active Market | Other | Significant | |||||||||||||
Value on | for Identical | Observable | Unobservable | |||||||||||||
Balance Sheet | Assets (Level 1) | Inputs (Level 2) | Inputs (Level 3) | |||||||||||||
RMB’000 | RMB’000 | RMB’000 | RMB’000 | |||||||||||||
As of December 31, 2009 | ||||||||||||||||
Cash and cash equivalents | 469,454 | 469,454 | — | — | ||||||||||||
Restricted cash | 103,035 | 103,035 | — | — | ||||||||||||
As of December 31, 2010 | ||||||||||||||||
Cash and cash equivalents | 380,098 | 380,098 | — | — | ||||||||||||
Restricted cash | 90,132 | 90,132 | — | — | ||||||||||||
F - 21
Table of Contents
(2) | Summary of Significant Accounting Policies (continued) |
(z) | Recently Issued Accounting Standards |
F - 22
Table of Contents
(2) | Summary of Significant Accounting Policies (continued) |
(z) | Recently Issued Accounting Standards (continued) |
F - 23
Table of Contents
2009 | 2010 | 2010 | ||||||||||
RMB’000 | RMB’000 | USD’000 | ||||||||||
Pledged deposits with financial institutions for security on: | ||||||||||||
- accounts receivable sold (Note (a)) | 33,209 | 39,374 | 5,966 | |||||||||
- bills payable (Note (b)) | 69,826 | 50,758 | 7,690 | |||||||||
103,035 | 90,132 | 13,656 | ||||||||||
(a) | In its ordinary course of business, the Group enters into one-year agreements with independent financial institutions to sell, on an ongoing basis, accounts receivable up to a specified amount (which totalled RMB500 million as of December 31, 2009 and RMB500 million (USD76 million) as of December 31, 2010). Accounts receivable are sold at a discount, the rate of which is adjusted based upon the timing of collection by the financial institutions. Under the terms of certain of these agreements, a portion of the receivables sold are subject to certain limited recourse provisions. The Group is required to deposit 10% of the sale proceeds into a restricted bank account as security in the event of default of payment by the customer. The cash in the restricted bank account is released to the Group upon full payment by the customer and is released on a proportionate basis to the extent that the collections fall short of the amount of accounts receivable sold. During the years ended December 31, 2008, 2009 and 2010, the Group sold accounts receivable of RMB202,178,000, RMB371,604,000 and RMB238,541,000 (USD36,143,000) and received proceeds from the sale of the accounts receivable of RMB188,422,000, RMB355,944,000 and RMB223,706,000 (USD33,895,000), respectively. Pursuant to the FASB ASC Topic 860,Transfers and Servicing ,the Group surrendered control over the accounts receivable sold to the financial institutions, and accordingly, the accounts receivable were derecognized from the balance sheet on their respective dates of the transfer. Loss on sale of the above accounts receivable of RMB13,521,000, RMB15,660,000 and RMB 14,835,000 (USD2,248,000), respectively, was included in interest expense for the years ended December 31, 2008, 2009 and 2010. The Company has not experienced any significant losses under the recourse provisions during the three-year period ended December 31, 2010. | |
As of December 31, 2009 and 2010, accounts receivable sold to financial institutions that have not been repaid by the Group’s customers amounted to RMB318,548,000 and RMB388,598,000 (USD58,879,000), respectively. | ||
Pursuant to the sales agreements with the financial institutions, the Group is responsible for servicing the accounts receivable sold until the expiration of the sales agreements. The service obligations primarily consist of serving notice to customers and collecting the cash on behalf of the financial institutions and remitting the cash to the financial institutions by a specified time. No servicing obligation was recorded at the date of sale as the amount was considered to be immaterial. As of December 31, 2009 and 2010, an amount of RMB27,040,000 and RMB47,774,000 (USD7,239,000), respectively, had been collected by the Group pending transfer to the financial institutions, and are included in accrued expenses and other payables in the accompanying consolidated balance sheets. |
F - 24
Table of Contents
(3) | Restricted Cash (continued) |
(b) | The Group entered into several financing facilities for bills with banks during the years presented. Under the terms of the arrangements, cash deposits ranging from 20% to 30% of the respective financing facilities amount were pledged to the banks. The pledged deposits will be released upon the termination or expiry of these facilities. |
(4) | Accounts Receivable, net |
2009 | 2010 | 2010 | ||||||||||
RMB’000 | RMB’000 | USD’000 | ||||||||||
Accounts receivable net of allowances for estimated settlement discounts of RMB53,624,000 and RMB61,172,000 respectively as of December 31, 2009 and 2010 | 1,350,552 | 1,604,608 | 243,122 | |||||||||
Less: Allowance for doubtful accounts | (36,586 | ) | (39,580 | ) | (5,997 | ) | ||||||
1,313,966 | 1,565,028 | 237,125 | ||||||||||
Long term accounts receivable, net | (452,191 | ) | (462,521 | ) | (70,079 | ) | ||||||
861,775 | 1,102,507 | 167,046 | ||||||||||
Bills receivable | 30,374 | 52,033 | 7,885 | |||||||||
Short term accounts receivable, net | 892,149 | 1,154,540 | 174,931 | |||||||||
2008 | 2009 | 2010 | 2010 | |||||||||||||
RMB’000 | RMB’000 | RMB’000 | USD’000 | |||||||||||||
Balance at beginning of year | 10,657 | 24,425 | 53,624 | 8,125 | ||||||||||||
Utilization during the year | — | (26,301 | ) | (16,340 | ) | (2,476 | ) | |||||||||
Provision during the year | 13,768 | 55,500 | 23,888 | 3,619 | ||||||||||||
Balance at end of year | 24,425 | 53,624 | 61,172 | 9,268 | ||||||||||||
F - 25
Table of Contents
(4) | Accounts Receivable, net (continued) |
2008 | 2009 | 2010 | 2010 | |||||||||||||
RMB’000 | RMB’000 | RMB’000 | USD’000 | |||||||||||||
Balance at beginning of year | 22,354 | 25,323 | 36,586 | 5,543 | ||||||||||||
Derecognized on disposal of subsidiaries | (11,017 | ) | — | — | — | |||||||||||
Charged to Statements of Operations | 57,574 | 11,916 | 2,994 | 454 | ||||||||||||
Written back during the year | — | (653 | ) | — | — | |||||||||||
Written off during the year | (43,588 | ) | — | — | — | |||||||||||
Balance at end of year | 25,323 | 36,586 | 39,580 | 5,997 | ||||||||||||
2009 | 2010 | 2010 | ||||||||||
RMB | RMB | USD | ||||||||||
Raw materials | 205,608 | 137,981 | 20,906 | |||||||||
Work-in-progress | 8,055 | 8,672 | 1,314 | |||||||||
Finished goods | 557,573 | 496,612 | 75,244 | |||||||||
�� | ||||||||||||
771,236 | 643,265 | 97,464 | ||||||||||
F - 26
Table of Contents
(6) | Prepaid Expenses and Other Current Assets |
2009 | 2010 | 2010 | ||||||||||
RMB | RMB | USD | ||||||||||
Deposits | 14,430 | 7,252 | 1,099 | |||||||||
Prepayment for purchase of raw materials | 40,687 | 46,176 | 6,996 | |||||||||
Advances to employees | 15,468 | 9,195 | 1,393 | |||||||||
Prepayment for installation costs to subcontractors | 8,984 | 5,006 | 759 | |||||||||
Others | 2,266 | 3,106 | 470 | |||||||||
Total prepaid expenses and other current assets | 81,835 | 70,735 | 10,717 | |||||||||
(7) | Income Tax Expense |
F - 27
Table of Contents
(7) | Income Tax Expense (continued) |
PRC Income tax expense/(benefit) | Current | Deferred | Total | |||||||||
RMB’000 | RMB’000 | RMB’000 | ||||||||||
Year ended December 31, 2008 | 12,608 | (9,451 | ) | 3,157 | ||||||||
Year ended December 31, 2009 | 35,701 | (17,633 | ) | 18,068 | ||||||||
Year ended December 31, 2010 | 31,055 | (1,341 | ) | 29,714 | ||||||||
(USD’000) | 4,705 | (203 | ) | 4,502 | ||||||||
F - 28
Table of Contents
(7) | Income Tax Expense (continued) |
2008 | 2009 | 2010 | 2010 | ||||||||||||||
RMB’000 | RMB’000 | RMB’000 | USD’000 | ||||||||||||||
Income (loss) before income tax expense: | |||||||||||||||||
- PRC | (130,458 | ) | 62,870 | 135,280 | 20,498 | ||||||||||||
- Non-PRC | (13,548 | ) | (12,144 | ) | (8,431 | ) | (1,277 | ) | |||||||||
Income (loss) before income tax expense | (144,006 | ) | 50,726 | 126,849 | 19,221 | ||||||||||||
Computed “expected” tax expense/(benefit) at statutory rate | (36,002 | ) | 12,681 | 31,713 | 4,805 | ||||||||||||
Non-deductible expenses: | |||||||||||||||||
Impairment of goodwill | 4,138 | — | — | — | |||||||||||||
Entertainment expenses | 4,051 | 4,098 | 5,460 | 827 | |||||||||||||
Settlement discounts on accounts receivables | 1,893 | — | — | — | |||||||||||||
Share-based compensation | 575 | 746 | 370 | 56 | |||||||||||||
Bad debt expenses for accounts receivables and other receivables | 15,165 | 1,916 | 943 | 143 | |||||||||||||
Others | 506 | — | 148 | 22 | |||||||||||||
Gain on disposal of investment | 4,963 | — | — | — | |||||||||||||
Additional deduction for research & development expenses | (4,073 | ) | (5,063 | ) | (5,315 | ) | (805 | ) | |||||||||
Change in deductibility of settlement discounts on accounts receivables | — | (3,664 | ) | — | — | ||||||||||||
Non-taxable income | (48 | ) | — | — | — | ||||||||||||
Tax rate differential | 15,002 | 2,852 | (9,308 | ) | (1,410 | ) | |||||||||||
Change in valuation allowance | 320 | 832 | 5,811 | 880 | |||||||||||||
Effect of change in enacted tax rate / tax status | — | 4,070 | — | — | |||||||||||||
Effect of change in tax rate on deferred tax assets | (3,333 | ) | (400 | ) | (108 | ) | (16 | ) | |||||||||
Actual income tax expense | 3,157 | 18,068 | 29,714 | 4,502 | |||||||||||||
F - 29
Table of Contents
(7) | Income Tax Expense (continued) |
2009 | 2010 | 2010 | ||||||||||
RMB’000 | RMB’000 | USD’000 | ||||||||||
Deferred tax assets — Current | ||||||||||||
Accounts receivable | 8,044 | 9,176 | 1,390 | |||||||||
Deferred income | 11,317 | 10,276 | 1,557 | |||||||||
Accrual | 2,801 | 2,365 | 358 | |||||||||
Warranty provision | 3,734 | 6,238 | 945 | |||||||||
Inventories | 9,062 | 9,212 | 1,396 | |||||||||
Tax loss carryforwards | 842 | 4,275 | 648 | |||||||||
Unrealized profit | — | 1,329 | 202 | |||||||||
Total gross deferred tax assets | 35,800 | 42,871 | 6,496 | |||||||||
Less: valuation allowance | (842 | ) | (6,653 | ) | (1,008 | ) | ||||||
34,958 | 36,218 | 5,488 | ||||||||||
Deferred tax liabilities — Non-current | ||||||||||||
Property, plant and equipment | (4,679 | ) | (4,598 | ) | (697 | ) | ||||||
Total gross deferred tax liabilities | (4,679 | ) | (4,598 | ) | (697 | ) | ||||||
Net deferred tax assets | 30,279 | 31,620 | 4,791 | |||||||||
2008 | 2009 | 2010 | 2010 | |||||||||||||
RMB’000 | RMB’000 | RMB’000 | USD’000 | |||||||||||||
Balance at the beginning of year | 5,181 | 729 | 842 | 128 | ||||||||||||
Charged to statements of operations | 320 | 832 | 5,811 | 880 | ||||||||||||
Effect of change in tax rate | 124 | — | ||||||||||||||
Disposal of subsidiaries (Note15) | (4,896 | ) | — | — | — | |||||||||||
Deregistration of a subsidiary | — | (719 | ) | — | — | |||||||||||
Balance at the end of year | 729 | 842 | 6,653 | 1,008 | ||||||||||||
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(7) | Income Tax Expense (continued) |
2008 | 2009 | 2010 | 2010 | |||||||||||||
RMB’000 | RMB’000 | RMB’000 | USD’000 | |||||||||||||
Balance as at the beginning of year | 37,830 | 37,360 | 69,679 | 10,557 | ||||||||||||
Additions based on tax positions related to the current year | 10,123 | 32,319 | 17,670 | 2,677 | ||||||||||||
Reductions due to disposal of subsidiaries | (10,593 | ) | — | — | — | |||||||||||
Balance as at the end of year | 37,360 | 69,679 | 87,349 | 13,234 | ||||||||||||
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(8) | Property, Plant and Equipment, net and Construction in Progress |
2009 | 2010 | 2010 | ||||||||||
RMB’000 | RMB’000 | USD’000 | ||||||||||
Buildings | 288,563 | 288,563 | 43,722 | |||||||||
Equipment and machinery | 195,364 | 209,033 | 31,672 | |||||||||
Motor vehicles | 17,349 | 18,162 | 2,752 | |||||||||
Office equipment and computer software | 49,479 | 53,778 | 8,148 | |||||||||
550,755 | 569,536 | 86,294 | ||||||||||
Accumulated depreciation | (106,177 | ) | (133,246 | ) | (20,189 | ) | ||||||
444,578 | 436,290 | 66,105 | ||||||||||
Construction in progress | 3,961 | 63,008 | 9,547 | |||||||||
448,539 | 499,298 | 75,652 | ||||||||||
(9) | Lease Prepayments, net |
2009 | 2010 | 2010 | ||||||||||
RMB’000 | RMB’000 | USD’000 | ||||||||||
Prepaid land use rights | 85,078 | 85,078 | 12,890 | |||||||||
Accumulated amortization | (4,656 | ) | (6,357 | ) | (963 | ) | ||||||
80,422 | 78,721 | 11,927 | ||||||||||
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(10) | Intangible Assets, net |
2009 | 2010 | 2010 | ||||||||||
RMB’000 | RMB’000 | USD’000 | ||||||||||
Patent | 3,260 | — | — | |||||||||
Accumulated amortization | (3,074 | ) | — | — | ||||||||
186 | — | — | ||||||||||
(11) | Accrued Expenses and Other Payables |
2009 | 2010 | 2010 | ||||||||||
RMB’000 | RMB’000 | USD’000 | ||||||||||
Amounts collected on sold accounts receivable on behalf of financial institutions (Note 3(a)) | 27,040 | 47,774 | 7,239 | |||||||||
Provision for warranties (Note 12) | 23,283 | 35,712 | 5,411 | |||||||||
Accruals for salaries and welfare | 15,914 | 16,101 | 2,440 | |||||||||
Receipts in advance | 71,346 | 53,746 | 8,143 | |||||||||
Value-Added Tax (“VAT”) payable | 110,031 | 133,910 | 20,289 | |||||||||
Business and other taxes payable | 28,981 | 38,925 | 5,898 | |||||||||
Staff deposits | 217 | 214 | 32 | |||||||||
Payable for purchase of property, plant and equipment | 19,597 | 118 | 18 | |||||||||
Others | 7,890 | 13,803 | 2,091 | |||||||||
304,299 | 340,303 | 51,561 | ||||||||||
(12) | Provision for Warranties |
2008 | 2009 | 2010 | 2010 | |||||||||||||
RMB’000 | RMB’000 | RMB’000 | USD’000 | |||||||||||||
Balance at beginning of year | 12,328 | 12,395 | 23,283 | 3,528 | ||||||||||||
Amount charged to cost of revenues | 8,697 | 24,377 | 30,163 | 4,570 | ||||||||||||
Amount utilized | (8,630 | ) | (13,489 | ) | (17,734 | ) | (2,687 | ) | ||||||||
Balance at end of year | 12,395 | 23,283 | 35,712 | 5,411 | ||||||||||||
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(13) | Short-Term Bank Loans |
2009 | 2010 | 2010 | ||||||||||
RMB’000 | RMB’000 | USD’000 | ||||||||||
- Uncollateralized | 333,378 | 542,229 | 82,157 | |||||||||
- Collateralized | 280,000 | 96,000 | 14,545 | |||||||||
613,378 | 638,229 | 96,702 | ||||||||||
(14) | Long-Term Bank Loan |
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(15) | Disposal of Subsidiaries and Equity Investments |
(16) | Share-based Compensation |
March 2008 | December 2008 | |||||||
options | options | |||||||
Fair value of shares on grant date | USD0.11 per ordinary share | USD0.03 per ordinary share | ||||||
Expected volatility | 65.7 | % | 94.7 | % | ||||
Expected dividends | Nil | Nil | ||||||
Expected Term | 3.5 | 3.5 | ||||||
Risk- free interest rate | 2.4 | % | 1.5 | % |
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(16) | Share-based Compensation (continued) |
Weighted average | ||||||||
Options | exercise price | |||||||
Outstanding as of January 1, 2010 | 35,580,000 | USD0.0876 | ||||||
Forfeited | (1,800,000 | ) | USD0.0388 | |||||
Outstanding as of December 31, 2010 | 33,780,000 | USD0.0903 |
Options outstanding and exercisable | ||||||||||||||||
Remaining | ||||||||||||||||
Number of | Exercise | Contractual | Intrinsic | |||||||||||||
Options | Options | Price | Term(Years) | value | ||||||||||||
March 2008 options | 10,000,000 | 0.2126 | 2.25 | — | ||||||||||||
December 2008 options | 23,780,000 | 0.0388 | 3 | 2,530,000 | ||||||||||||
Total | 33,780,000 | 0.0903 | 2.78 | 2,530,000 | ||||||||||||
2008 | 2009 | 2010 | ||||||||||||||||||||||||||||||
Cost of | Cost of | |||||||||||||||||||||||||||||||
Revenues | revenues | Revenues | revenues | Revenues | Cost of revenues | |||||||||||||||||||||||||||
RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | USD’000 | RMB’000 | USD’000 | |||||||||||||||||||||||||
Sale of wireless coverage products | 498,928 | (375,452 | ) | 781,973 | (575,338 | ) | 814,039 | 123,339 | (605,980 | ) | (91,815 | ) | ||||||||||||||||||||
Installation services of wireless coverage products | 277,931 | (186,165 | ) | 469,502 | (308,143 | ) | 633,875 | 96,042 | (413,690 | ) | (62,680 | ) | ||||||||||||||||||||
RF parts and components | 221,566 | (189,750 | ) | 406,968 | (340,492 | ) | 296,948 | 44,992 | (245,577 | ) | (37,209 | ) | ||||||||||||||||||||
Reversal of provision/ (provision) for settlement discounts | (13,768 | ) | — | (55,500 | ) | — | (23,888 | ) | (3,619 | ) | — | — | ||||||||||||||||||||
984,657 | (751,367 | ) | 1,602,943 | (1,223,973 | ) | 1,720,974 | 260,754 | (1,265,247 | ) | (191,704 | ) | |||||||||||||||||||||
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(18) | Depreciation |
2008 | 2009 | 2010 | 2010 | |||||||||||||
RMB’000 | RMB’000 | RMB’000 | USD’000 | |||||||||||||
Cost of revenues | 16,949 | 12,070 | 13,797 | 2,091 | ||||||||||||
Research and development costs | 6,937 | 6,494 | 7,149 | 1,083 | ||||||||||||
Sales and distribution expenses | 3,462 | 3,479 | 3,823 | 579 | ||||||||||||
General and administrative expenses | 4,979 | 8,642 | 8,473 | 1,284 | ||||||||||||
32,327 | 30,685 | 33,242 | 5,037 | |||||||||||||
(19) | Earnings (loss) Per Share |
2008 | 2009 | 2010 | 2010 | |||||||||||||
RMB’000 | RMB’000 | RMB’000 | USD’000 | |||||||||||||
Net income (loss) attributable to shareholders of the Company | (146,367 | ) | 32,672 | 98,140 | 14,871 | |||||||||||
Denominator: | ||||||||||||||||
Weighted average number of ordinary shares outstanding | 610,158,841 | 595,536,733 | 581,814,594 | 581,814,594 | ||||||||||||
Effect of stock options | — | 9,244,308 | 13,384,855 | 13,384,855 | ||||||||||||
Weighted average number of diluted shares outstanding | 610,158,841 | 604,781,041 | 595,199,449 | 595,199,449 | ||||||||||||
Basic earnings (loss) per share (expressed in RMB per share) | (0.24 | ) | 0.05 | 0.17 | 0.03 | |||||||||||
Diluted earnings (loss) per share (expressed in RMB per share) | (0.24 | ) | 0.05 | 0.16 | 0.02 | |||||||||||
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(20) | Related Party Transactions |
2008 | 2009 | 2010 | 2010 | |||||||||||||
RMB’000 | RMB’000 | RMB’000 | USD’000 | |||||||||||||
Disposition of 100% equity share of Lake Communication (Note 15) | 86,130 | — | — | — | ||||||||||||
Disposition of 80% equity share of Lake Microwave (Note 15) | 870 | — | — | — | ||||||||||||
Purchases from Lake Communication (Note (a)) | — | 138,252 | 24,588 | 3,725 | ||||||||||||
(a) | The Company purchased RF components under normal business term from Lake Communication, for its own manufacturing of wireless network products. Amounts due to Lake Communication amounting to RMB34,000,000 and RMB25,284,000 (USD3,831,000) as at December 31, 2009 and 2010 respectively, were arose from the purchase of RF components. The balance is repayable from 60 days to 90 days from date of billing. |
(21) | Pension and Other Post Retirement Benefits |
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(22) | Fair Value of Financial Instruments |
(23) | Concentration of Credit Risk |
2008 | 2009 | 2010 | ||||||||||||||||||||||||||
RMB’000 | % | RMB’000 | % | RMB’000 | % | USD’000 | ||||||||||||||||||||||
China Mobile Group | 390,266 | 39.6 | 390,902 | 24.4 | 632,158 | 36.7 | 95,782 | |||||||||||||||||||||
China Unicom Group | 244,455 | 24.8 | 518,246 | 32.3 | 483,031 | 28.1 | 73,187 | |||||||||||||||||||||
China Telecom Group | 75,440 | 7.7 | 241,198 | 15.0 | 228,106 | 13.3 | 34,562 | |||||||||||||||||||||
The Company’s RF based products customer — Customer A | 58,941 | 6.0 | 113,093 | 7.1 | 158,215 | 9.2 | 23,972 | |||||||||||||||||||||
The Company’s RF based products customer — Customer B | 102,253 | 10.4 | 137,588 | 8.6 | 37,761 | 2.2 | 5,721 |
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(23) | Concentration of Credit Risk (continued) |
2009 | 2010 | |||||||
RMB’000 | RMB’000 | |||||||
China Mobile Group | ||||||||
- Current portion | 287,671 | 390,746 | ||||||
- Long-term portion | 144,312 | 226,372 | ||||||
431,983 | 617,118 | |||||||
China Unicom Group | ||||||||
- Current portion | 318,477 | 367,510 | ||||||
- Long-term portion | 184,932 | 140,156 | ||||||
503,409 | 507,666 | |||||||
China Telecom Group | ||||||||
- Current portion | 99,655 | 188,085 | ||||||
- Long-term portion | 90,456 | 72,618 | ||||||
190,111 | 260,703 | |||||||
The Company’s RF based products customer — Customer A | ||||||||
- Current portion | 28,580 | 71,341 | ||||||
- Long-term portion | — | — | ||||||
28,580 | 71,341 | |||||||
The Company’s RF based products customer — Customer B | ||||||||
- Current portion | 50,529 | (975 | ) | |||||
- Long-term portion | — | — | ||||||
50,529 | (975 | ) | ||||||
1,204,612 | 1,455,853 | |||||||
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(24) | Commitments and Contingencies |
(i) | Operating lease commitments |
RMB’000 | USD’000 | |||||||
2011 | 7,353 | 1,114 | ||||||
2012 | 1,553 | 235 | ||||||
2013 | 99 | 15 | ||||||
2014 | 3 | — | ||||||
2015 | — | — | ||||||
9,008 | 1,364 | |||||||
(ii) | Capital commitments |
(iii) | Loan guarantees |
(iv) | Contingencies |
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(25) | Restricted Net Assets |
(26) | Share Repurchase |
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