Form 6-K DAQO NEW ENERGY CORP. For: Nov 18

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE

SECURITIES EXCHANGE ACT OF 1934

 

For the month of November 2016

 

Commission File Number: 001-34602

 

 

DAQO NEW ENERGY CORP.

 

 

666 Longdu Avenue

Wanzhou, Chongqing 404000

People’s Republic of China

(+86-23) 6486-6666

 

(Address of principal executive offices)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

 

Form 20-F

x

Form 40-F

o

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):              

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):              

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	DAQO NEW ENERGY CORP.
	By:	/s/ Gongda Yao
	Name:	Gongda Yao
	Title:	Director and Chief Executive Officer

 

Date: November 18, 2016

 

 

EXHIBIT INDEX

 

Exhibit 99.1 – Press Release

 

 

Exhibit 99.1

 

Daqo New Energy Announces Unaudited Third Quarter 2016 Results

 

CHONGQING, China—November 15, 2016—Daqo New Energy Corp. (NYSE: DQ) ("Daqo New Energy", the "Company" or “we”), a leading manufacturer of high-purity polysilicon for the global solar PV industry, today announced its unaudited financial results for the third quarter of 2016.

 

Third Quarter 2016 Financial and Operating Highlights

·

Polysilicon production volume of 3,636 MT in Q3 2016, compared to 3,570 MT in Q2 2016

·

Polysilicon external sales volume(1) of 2,838 MT in Q3 2016, compared to 2,931 MT in Q2 2016

·

Polysilicon average total production cost(2) of $8.66/kg in Q3 2016, compared to $9.43/kg in Q2 2016

·

Polysilicon average cash cost(2) of $6.88/kg in Q3 2016, compared to $7.42/kg in Q2 2016

·

Average selling price (ASP) of polysilicon was $15.64/kg in Q3 2016, compared to $17.24/kg in Q2 2016

·

Solar wafer sales volume of 14.4 million pieces in Q3 2016, compared to 25.0 million pieces in Q2 2016

·

Revenue of $54.3 million in Q3 2016, compared to $71.0 million in Q2 2016

·

Non-GAAP gross margin(3) of 39.9% in Q3 2016, compared to 43.9% in Q2 2016

·

EBITDA (non-GAAP)(3) of $25.0 million in Q3 2016, compared to $34.7 million in Q2 2016

·

EBITDA margin (non-GAAP)(3) of 46.0% in Q3 2016, compared to 48.9% in Q2 2016

·

Net income attributable to Daqo New Energy shareholders of $11.2 million in Q3 2016, compared to $19.8 in Q2 2016 and $3.1 million in Q3 2015

·

Earnings per basic ADS of $1.07 in Q3 2016, compared to $1.90 in Q2 2016 and $0.29 in Q3 2015

·

Adjusted net income (non-GAAP)(3) attributable to Daqo New Energy shareholders of $13.2 million in Q3 2016, compared to $22.0 million in Q2 2016 and $6.3 million in Q3 2015

·

Adjusted earnings per basic ADS (non-GAAP)(3) of $1.26 in Q3 2016, compared to $2.10 in Q2 2016 and $0.60 in Q3 2015

 

		Three months ended
US$ millions except as indicated otherwise		Sep. 30, 2016				Jun. 30, 2016				Sep. 30, 2015
Revenues			54.3				71.0				46.6
Gross profit			20.1				29.4				8.6
Gross margin			37.1	%			41.4	%			18.4	%
Income from operations			16.4				26.1				6.7
Net income attributable to Daqo New Energy shareholders			11.2				19.8				3.1
Earnings per basic ADS ($ per ADS)			1.07				1.90				0.29
Adjusted net income (non-GAAP)(3) attributable to Daqo New Energy shareholders			13.2				22.0				6.3
Adjusted earnings per basic ADS (non-GAAP)(3) ($ per ADS)			1.26				2.10				0.60
Non-GAAP gross profit(3)			21.6				31.2				10.9
Non-GAAP gross margin(3) (%)			39.9	%			43.9	%			23.4	%
EBITDA (non-GAAP)(3)			25.0				34.7				15.0
EBITDA margin (non-GAAP)(3)			46.0	%			48.9	%			32.1	%
Polysilicon external sales volume (MT)(1)			2,838				2,931				2,277
Polysilicon production cost ($/kg)(2)			8.66				9.43				11.15
Polysilicon cash cost (excl. dep’n) ($/kg)(2)			6.88				7.42				8.71

 

Notes:

(1) Our polysilicon external sales volume excludes internal sales to our Chongqing wafer manufacturing subsidiary, which utilizes polysilicon as raw material for the production of solar wafers. The sales volume is the quantity of goods that have been accepted by customers, and thus the corresponding revenue has been recognized during the period indicated.

(2) Production cost and cash cost only refer to production in our Xinjiang polysilicon facilities. Production cost is calculated by the inventoriable costs relating to production of polysilicon in Xinjiang divided by the production volume in the period indicted. Cash cost is calculated by the inventoriable costs relating to production of polysilicon excluding depreciation expense in Xinjiang, divided by the production volume in the period indicated.

(3) Daqo New Energy provides non-GAAP gross profit, non-GAAP gross margin, EBITDA, EBITDA margin, adjusted net income (loss) attributable to our shareholders and adjusted earnings (loss) per ADS on a non-GAAP basis to provide supplemental information regarding its financial performance. For more information on these non-GAAP financial measures, please see the section captioned "Use of Non-GAAP Financial Measures" and the tables captioned "Reconciliation of non-GAAP financial measures to comparable US GAAP measures" set forth at the end of this press release.

 

Commentary

 

“During the third quarter of 2016, we successfully set new records again in terms of polysilicon production volume and costs. I would like to thank our entire team for their hard work and dedication. Our polysilicon production for the third quarter reached a record high of 3,636 MT, which surpassed our name plate capacity of 12,150 MT per annum. Through technical and process improvements, we also made significant progress in reducing our production cost even further, achieving our lowest ever cost structure with $8.66/kg in total cost and $6.88/kg in cash cost,” said Dr. Gongda Yao, Chief Executive Officer of the Company.

 

“In the third quarter of 2016, downstream solar end market and polysilicon market experienced significant volatility. Due to a slow-down in China end market demand and installation activities after China’s FIT adjustment at the end of June 2016, the market saw lower levels of demand towards the end of the third quarter of 2016. Our third quarter ASP was $15.64/kg, compared to second quarter ASP of $17.24. As a result, several polysilicon manufacturers, both within China and abroad, partially shut down their capacities due to weak polysilicon pricing. The resulting reduction in polysilicon supply has helped to stabilize the market and paved the way for price recovery. Nevertheless, as a result of our continuous effort on technology improvements and cost reduction, our quarterly average production cost has been further reduced by 8% from $9.43/kg in the second quarter to $8.66/kg in the third quarter of 2016. ”

 

“Due to a delay in the delivery of critical specialty components, the start date of annual maintenance for our Xinjiang polysilicon facility was postponed to October 3 from the second half of September as originally planned. We conducted more than 500 maintenance items, including special projects that are expected to improve our manufacturing efficiency even further. The maintenance was completed successfully, and we initiated a gradual restart of production on October 24. In early November, production resumed successfully and we reached full capacity utilization. Overall, we estimate that the annual maintenance has an impact of approximately 800 MT to 900 MT on our fourth quarter polysilicon production volume.”

 

“In the third quarter of 2016, due to market volatility and declining conditions for the solar wafer segment, we reduced our wafer production utilization rate. As a result, the Company sold 14.4 million pieces of wafer in the third quarter, compared to 25.0 million pieces in the second quarter of 2016. With improving market conditions, the Company ramped up wafer production utilization starting from mid-October and reached full production in November.”

 

“The solar market began to recover in early October, with strong customer demand and order momentum. Due to limited channel inventory, polysilicon pricing has recovered particularly well, with increases in orders from our broad based customers. Wafer pricing also recovered significantly. During early November, we also saw downstream product pricing recovering meaningfully, including pricing for solar cells and solar modules.”

 

 

Outlook and Q4 2016 guidance

 

As a result of our annual maintenance, the Company expects to sell approximately 2,200 MT to 2,300 MT of polysilicon to external customers during the fourth quarter of 2016. The external sales guidance excludes shipments of polysilicon to be used internally by our Chongqing solar wafer facility, which utilizes polysilicon for its wafer manufacturing operation. Wafer sales volume is expected to be approximately 20 million to 21 million pieces for the fourth quarter of 2016.

 

This outlook reflects our current and preliminary view as of the date of this press release and may be subject to change. Our ability to achieve these projections is subject to risks and uncertainties. See “Safe Harbor Statement” at the end of this press release.

 

Third Quarter 2016 Results

 

Revenues

 

Revenues were $54.3 million, compared to $71.0 million in the second quarter of 2016 and $46.6 million in the third quarter of 2015.

 

Revenues from polysilicon sales to external customers were $44.4 million, compared to $50.5 million in the second quarter of 2016 and $34.1 million in the third quarter of 2015. External sales volume was 2,838 MT in the third quarter of 2016, compared to 2,931 MT in the second quarter of 2016. ASP of polysilicon was $15.64/kg in the third quarter of 2016, compared to $17.24/kg in the second quarter of 2016. The decrease in polysilicon revenues from the second quarter of 2016 was primarily due to lower polysilicon ASP and lower external sales volume.

 

Revenues from wafer sales were $9.9 million, compared to $20.5 million in the second quarter of 2016 and $12.5 million in the third quarter of 2015. Wafer sales volume was 14.4 million pieces, compared to 25.0 million pieces in the second quarter of 2016. The decrease in wafer revenues from the second quarter of 2016 was primarily due to lower wafer ASP and lower sales volume.

 

Gross profit and margin

 

Gross profit was $20.1 million, compared to $29.4 million in the second quarter of 2016 and $8.6 million in the third quarter of 2015. Non-GAAP gross profit, which excludes costs related to the non-operational polysilicon operations in Chongqing, was approximately $21.6 million, compared to $31.2 million in the second quarter of 2016 and $10.9 million in the third quarter of 2015. Gross margin was 37.1%, compared to 41.4% in the second quarter of 2016 and 18.4% in the third quarter of 2015.

 

In the third quarter of 2016, total costs related to the non-operational Chongqing polysilicon plant including depreciation were $1.5 million, compared to $1.8 million in the second quarter of 2016 and $2.3 million in the third quarter of 2015. Excluding such costs, the non-GAAP gross margin was approximately 39.9%, compared to 43.9% in the second quarter of 2016 and 23.4% in the third quarter of 2015.

 

 

Selling, general and administrative expenses

 

Selling, general and administrative expenses were $4.9 million, compared to $3.7 million in the second quarter of 2016 and $2.9 million in the third quarter of 2015. The increase in selling, general and administrative expenses as compared to the second quarter of 2016 was primarily due to higher relocation and moving expenses related to the company’s relocation of its idle polysilicon manufacturing equipments from Chongqing to Xinjiang, which were $1.7 million during the third quarter of 2016, compared to $0.6 million during the second quarter of 2016, as well as higher non-cash shared-based compensation expenses.

 

Research and development expenses

 

Research and development expenses were approximately $1.0 million, compared to $0.1 million in the second quarter of 2016 and $0.1 million in the third quarter of 2015.

 

Other operating income

 

Other operating income was $2.2 million, compared to $0.6 million in the second quarter of 2016 and $1.1 million in the third quarter of 2015. Other operating income mainly consists of unrestricted cash incentives that the Company received from local government authorities, the amount of which varies from period to period.

 

Income from operations and operating margin

 

Income from operations was $16.4 million, compared to $26.1 million in the second quarter of 2016 and $6.7 million in the third quarter of 2015.

Operating margin was 30.3%, compared to 36.8% in the second quarter of 2016 and 14.3% in the third quarter of 2015.

 

Interest expense

 

Interest expenses were $3.1 million, compared to $3.5 million in the second quarter of 2016 and $3.1 million in the third quarter of 2015.

 

EBITDA

 

EBITDA was $25.0 million, compared to $34.7 million in the second quarter of 2016 and $15.0 million in the third quarter of 2015. EBITDA margin was 46.0%, compared to 48.9% in the second quarter of 2016 and 32.1% in the third quarter of 2015.

 

Net income attributable to Daqo New Energy shareholders and earnings per ADS

 

Net income attributable to Daqo New Energy shareholders was $11.2 million, compared to $19.8 million in the second quarter of 2016 and $3.1 million in the third quarter of 2015.

 

Earnings per basic ADS were $1.07, compared to $1.90 in the second quarter of 2016 and $0.29 in the third quarter of 2015.

 

Financial Condition

 

As of September 30, 2016, the Company had $29.2 million in cash and cash equivalents and restricted cash, compared to $42.9 million as of June 30, 2016 and $68.7 million as of September 30, 2015.

 

As of September 30, 2016, the accounts receivable balance was $4.6 million, compared to $10.1 million as of June 30, 2016 and $15.4 million as of September 30, 2015.

 

As of September 30, 2016, the note receivables balance was $17.0 million, compared to $14.8 million as of June 30, 2016 and $16.5 million as of September 30, 2015.

 

As of September 30, 2016, total borrowings were $227.6 million, of which $129.0 million were long-term borrowings, compared to total borrowings of $227.9 million, including $118.4 million long-term borrowings, as of June 30, 2016, and total borrowings of $259.1 million, including $144.0 million long-term borrowings, as of September 30, 2015.

 

As of September 30, 2016, the note payables balance was $14.4 million, compared to $26.1 million as of June 30, 2016 and $52.2 million as of September 30, 2015.

 

 

Cash Flows

 

For the nine months ended September 30, 2016, net cash provided by operating activities was $70.9 million, compared to $65.6 million in the same period of 2015.

 

For the nine months ended September 30, 2016, net cash used in investing activities was $51.0 million, compared to $82.7 million in the same period of 2015.

 

For the nine months ended September 30, 2016, net cash used in financing activities was $12.3 million, compared to net cash provided by financing activities of $38.1 million in the same period of 2015.

 

Non-GAAP Financial Measures

To supplement Daqo’s consolidated financial results presented in accordance with United States Generally Accepted Accounting Principles (“US GAAP”), the Company uses certain non-GAAP financial measures that are adjusted for certain items from the most directly comparable GAAP measures including non-GAAP gross profit and non-GAAP gross margin; earnings before interest, taxes, depreciation and amortization ("EBITDA") and EBITDA margin; adjusted net income attributable to our shareholders and adjusted earnings per basic ADS. Management believes that each of these non-GAAP measures is useful to investors, enabling them to better assess changes in key element of the Company's results of operations across different reporting periods on a consistent basis, independent of certain items as described below. Thus, management believes that, used in conjunction with US GAAP financial measures, these non-GAAP financial measures provide investors with meaningful supplemental information to assess the Company's operating results in a manner that is focused on its ongoing, core operating performance. Management uses these non-GAAP measures internally to assess the business, its financial performance, current and historical results, as well as for strategic decision-making and forecasting future results. Given management's use of these non-GAAP measures, the Company believes these measures are important to investors in understanding the Company's operating results as seen through the eyes of management. These non-GAAP measures are not prepared in accordance with US GAAP or intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with US GAAP; the non-GAAP measures should be reviewed together with the US GAAP measures, and may be different from non-GAAP measures used by other companies.

 

Non-GAAP gross profit and non-GAAP gross margin includes adjustments for costs related to the non-operational polysilicon assets in Chongqing. Such costs mainly consist of non-cash depreciation costs, as well as utilities and maintenance costs associated with the temporarily idle polysilicon machinery and equipment, which will be or are in the process of being relocated to the Company's Xinjiang polysilicon manufacturing facility. The Company would expect a majority of these costs, such as depreciation, will continue to occur as part of the production cost at the Xinjiang facilities subsequent to the completion of the relocation plan. Once these assets are placed back in service, the Company will remove this adjustment from the non-GAAP reconciling item. The Company also uses EBITDA, which represents earnings before interest, taxes, depreciation and amortization, and EBITDA margin, which represents the proportion of EBITDA in revenue. Adjusted net income attributable to our shareholders and adjusted earnings per basic ADS exclude costs related to the non-operational polysilicon assets in Chongqing as described above. Adjusted net income attributable to our shareholders and adjusted earnings per basic ADS also exclude costs related to share-based compensation. Share-based compensation is a non-cash expense that varies from period to period. As a result, management excludes this item from its internal operating forecasts and models. Management believes that this adjustment for share-based compensation provides investors with a basis to measure the company's core performance, including compared with the performance of other companies, without the period-to-period variability created by share-based compensation.

 

 

A reconciliation of non-GAAP financial measures to comparable US GAAP measures is presented later in this document.

 

Conference Call

 

The Company has scheduled a conference call to discuss the results at 8:00 AM Eastern Time on November 15, 2016.

 

The dial-in details for the live conference call are as follows:

 

Participant dial in (toll free):	+1-888-346-8982
Participant international dial in:	+1-412-902-4272
China mainland toll free:	4001-201203
China Beijing local toll:	+86-10-5357-3132
Hong Kong toll free:	800-905945
Hong Kong-local toll:	+852-301-84992

 

Participants please ask to be joined into the Daqo New Energy Corp. call.

      

You can also listen to the conference call via Webcast through the URL:

 

http://mms.prnasia.com/DQ/20161115/default.aspx

 

A replay of the call will be available 1 hour after the end of the conference through November 22, 2016.

 

The conference call replay numbers are as follows:

 

US Toll Free:	1-877-344-7529
International Toll:	1-412-317-0088
Canada Toll Free:	855-669-9568
Replay access code:	10095716

 

Participants will be required to state their name and company upon entering the call.

 

Investors will also have the opportunity to listen to the replay over the Internet through the investor relations section of Daqo New Energy’s web site at: www.dqsolar.com

 

 

About Daqo New Energy Corp.

 

Founded in 2008, Daqo New Energy Corp. (NYSE: DQ) is a leading manufacturer of high-purity polysilicon for the global solar PV industry. As one of the world's lowest cost producers of high-purity polysilicon and solar wafers, the Company primarily sells its products to solar cell and solar module manufacturers. The Company has built a manufacturing facility that is technically advanced and highly efficient with a nameplate capacity of 12,150 metric tons in Xinjiang, China. The Company also operates a solar wafer manufacturing facility in Chongqing, China.

 

Safe Harbor Statement

 

This announcement contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” and similar statements. Among other things, the outlook for the fourth quarter of 2016 and quotations from management in this announcement, as well as Daqo New Energy’s strategic and operational plans, contain forward-looking statements. The Company may also make written or oral forward-looking statements in its reports filed or furnished to the U.S. Securities and Exchange Commission, in its annual reports to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about the Company’s beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: the demand for photovoltaic products and the development of photovoltaic technologies; global supply and demand for polysilicon; alternative technologies in cell manufacturing; our ability to significantly expand our polysilicon production capacity and output; the reduction in or elimination of government subsidies and economic incentives for solar energy applications; and our ability to lower our production costs. Further information regarding these and other risks is included in the reports or documents we have filed with, or furnished to, the Securities and Exchange Commission. Daqo New Energy does not undertake any obligation to update any forward-looking statement, except as required under applicable law. All information provided in this press release and in the attachments is as of the date of this press release, and Daqo New Energy undertakes no duty to update such information, except as required under applicable law.

 

 

Daqo New Energy Corp.

Unaudited Preliminary Condensed Consolidated Statement of Operations and Comprehensive Income

(US dollars in thousands, except ADS and per ADS data)

 

		Three months Ended
		Sep. 30, 2016				Jun. 30, 2016				Sep. 30, 2015
Revenues		$	54,289			$	71,021			$	46,562
Cost of revenues			(34,152	)			(41,640	)			(37,988	)
Gross profit			20,137				29,381				8,574
Operating expenses
Selling, general and administrative expenses			(4,858	)			(3,675	)			(2,943	)
Research and development expenses			(997	)			(148	)			(94	)
Other operating income (expenses)			2,166				583				1,114
Total operating expenses			(3,689	)			(3,240	)			(1,923	)
Income from operations			16,448				26,141				6,651
Interest expense			(3,076	)			(3,487	)			(3,062	)
Interest income			123				171				51
Foreign exchange gain (loss)			(1	)			(3	)			1
Income  before income taxes			13,494				22,822				3,641
Income tax (expenses) benefit			(2,163	)			(2,802	)			(559	)
Net income			11,331				20,020				3,082
Net income attributable to non-controlling interest			135				176				-
Net income attributable to Daqo New Energy Corp. shareholders		$	11,196			$	19,844			$	3,082
Net income			11,331				20,020				3,082
Other comprehensive income (loss):
Foreign currency translation adjustments			(882	)			(8,116	)			(5,815	)
Total other comprehensive income (loss)			(882	)			(8,116	)			(5,815	)
Comprehensive income (loss)			10,449				11,904				(2,733	)
Comprehensive income (loss) attributable to noncontrolling interest			129				130				-
Comprehensive income (loss) attributable to Daqo New Energy Corp. shareholders		$	10,320			$	11,774			$	(2,733	)
Earnings (loss) per ADS
Basic			1.07				1.90				0.29
Diluted			1.05				1.87				0.29
Weighted average ADS outstanding
Basic			10,478,671				10,457,105				10,508,161
Diluted			10,642,235				10,596,753				10,630,996

 

 

Daqo New Energy Corp.

Unaudited Consolidated Balance Sheet

(US dollars in thousands)

 

		Sep. 30, 2016				Jun. 30, 2016				Sep. 30, 2015
ASSETS:
Current Assets:
Cash and cash equivalents		$	21,630			$	29,659			$	27,955
Restricted cash			7,531				13,201				40,729
Accounts receivable, net			4,585				10,061				15,400
Note receivables			17,037				14,798				16,474
Prepaid expenses and other current assets			6,849				6,630				15,543
Advances to suppliers			1,805				1,072				913
Inventories			14,905				9,539				12,157
Amounts due from related parties			1,869				4,514				2,421
Total current assets			76,211				89,474				131,592
Property, plant and equipment, net			561,324				546,227				557,737
Prepaid land use right			25,971				26,205				27,867
Deferred tax assets			610				612				-
Investment in an affiliate			182				182				-
Other non-current assets			-				-				165
TOTAL ASSETS			664,298				662,700				717,361
Current liabilities:
Short-term borrowings, including current portion of long-term borrowings			98,630				109,494				115,159
Accounts payable			17,698				18,665				16,728
Note payables			14,440				26,092				52,248
Advances from customers			4,189				3,408				7,282
Payables for purchases of property, plant and equipment			43,696				39,681				51,359
Accrued expenses and other current liabilities			8,744				11,973				8,934
Amounts due to related parties			41,390				41,100				57,918
Income tax payable			4,658				3,411				201
Total current liabilities			233,445				253,824				309,829
Long-term borrowings			128,975				118,368				143,949
Other long Term Liabilities			24,252				24,414				25,980
TOTAL LIABILITIES			386,672				396,606				479,758
EQUITY:
Ordinary shares			26				26				26
Treasury stock			(1,749	)			(1,749	)			(1,149	)
Additional paid-in capital			239,566				238,484				234,807
Accumulated income (losses)			36,304				25,107				(12,681	)
Accumulated other comprehensive income			1,841				2,717				14,084
Daqo New Energy Corp.’s shareholders’ equity			275,988				264,585				235,087
Noncontrolling interest			1,638				1,509				2,516
Total equity			277,626				266,094				237,603
TOTAL LIABILITIES & EQUITY			664,298				662,700				717,361

 

 

Daqo New Energy Corp.

Unaudited Consolidated Statements of Cash Flows

(US dollars in thousands)

 

		For the nine months ended September 30,
		2016				2015
Operating Activities:
Net income			39,741				3,338
Adjustments to reconcile net income to net cash provided by operating activities:
Share-based compensation			2,260				3.413
Inventory write-down			-				62
Allowance / (reversal) for doubtful accounts			(1,063	)			(824	)
Depreciation of property, plant and equipment			25,727				22,230
Gain on disposal of assets			(188	)			-
Changes in operating assets and liabilities:
Accounts receivable			15,914				(6,976	)
Note receivables			(6,221	)			32,582
Prepaid expenses and other current assets			5,063				(3,009	)
Advances to suppliers			(804	)			408
Inventories			(4,472	)			(2,863	)
Amounts due from related parties			(1,604	)			3,299
Amounts due to related parties			771				1,922
Prepaid land use rights			435				457
Accounts payable			669				339
Note payables			(5,242	)			13,973
Accrued expenses and other current liabilities			355				189
Income tax payable			3,718				201
Advances from customers			(3,778	)			(3,176	)
Deferred government subsidies			(334	)			48
Net cash provided by operating activities			70,947				65,613
Investing activities:
Purchases of property, plant and equipment			(62,044	)			(68,745	)
Increase (decrease) in restricted cash			11,028				(19,082	)
Proceeds from disposition of Nanjing Daqo			-				5,110
Investment in an affiliate			(188	)			-
Net cash used in investing activities			(51,204	)			(82,717	)
Financing activities:
Proceeds from related parties loans			98,535				210,640
Repayment of related parties loans			(103,174	)			(230,668	)
Proceeds from bank borrowings			82,146				228,287
Repayment of bank borrowings			(90,742	)			(200,247	)
Proceeds from follow-on equity offering			-				28,679
Issuance cost for follow-on equity offering			-				(682	)
Proceeds from options exercised			949				276
Repurchase stock			-				(750	)
Proceeds from the issuance of additional ownership interests by Xinjiang Daqo			-				2,516
Net cash provided by (used in) financing activities			(12,286	)			38,051
Effect of exchange rate changes on cash and cash equivalent			(317	)			(60	)
Net increase in cash and cash equivalents			7,140				20,887
Cash and cash equivalents at the beginning of the period			14,490				7,068
Cash and cash equivalents at the end of the period			21,630				27,955

 

 

Daqo New Energy Corp.

Reconciliation of non-GAAP financial measures to comparable US GAAP measures

(US dollars in thousands)

 

		Three months Ended
		Sep. 30, 2016				Jun. 30, 2016				Sep. 30, 2015
Gross profit			20,137				29,381				8,574
Costs related to the non-operational Chongqing polysilicon operations			1,501				1,775				2,327
Non-GAAP gross profit			21,638				31,156				10,901

 

		Three months Ended
		Sep. 30, 2016				Jun. 30, 2016				Sep. 30, 2015
Gross margin			37.1	%			41.4	%			18.4	%
Costs related to the non-operational Chongqing polysilicon operations (proportion of revenue)			2.8	%			2.5	%			5.0	%
Non-GAAP gross margin			39.9	%			43.9	%			23.4	%

 

		Three months Ended
		Sep. 30, 2016				Jun. 30, 2016				Sep. 30, 2015
Net income			11,331				20,020				3,082
Income tax expense			2,163				2,802				559
Interest expense			3,076				3,487				3,062
Interest income			(123	)			(171	)			(51	)
Depreciation			8,522				8,598				8,305
EBITDA (non-GAAP)			24,969				34,736				14,957
EBIDTA margin (non-GAAP)			46.0	%			48.9	%			32.1	%

 

		Three months Ended
		Sep. 30, 2016				Jun. 30, 2016				Sep. 30, 2015
Net income attributable to Daqo New Energy Corp. shareholders			11,196				19,844				3,082
Costs related to the non-operational Chongqing polysilicon operations			1,501				1,775				2,327
Share-based compensation			522				393				911
Adjusted Net income (non-GAAP)			13,219				22,012				6,320
Adjusted Earnings per basic ADS (non-GAAP)		$	1.26			$	2.10			$	0.60
Adjusted Earnings per diluted ADS (non-GAAP)		$	1.24			$	2.08			$	0.59

 

For further information, please contact:

Daqo New Energy Corp.

Kevin He, Investor Relations

Phone: +86-187-1658-5553

Email: [email protected]

SOURCE: Daqo New Energy Corp.

 

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