Form 8-K Orient Paper Inc. For: Apr 17

  

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549 

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of report (Date of earliest event reported): April 17, 2018

 

ORIENT PAPER, INC.

(Exact name of registrant as specified in its charter)

 

Nevada

(State or other jurisdiction of incorporation)

 

001-34577		20-4158835
(Commission File Number)		(IRS Employer Identification No.)

 

Science Park, Juli Road Xushui District, Baoding City Hebei Province, People’s Republic of China		072550
(Address of principal executive offices)		(Zip Code)

 

(86) 312-8698215

(Registrant’s telephone number, including area code)

  

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

☐  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).  

 

Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

Item 2.02

Results of Operations and Financial Condition.

 

On April 17, 2018, Orient Paper, Inc. (the “Company”) issued a press release announcing its financial results and operational results for the fourth quarter and fiscal year ended December 31, 2017. A copy of the press release making the announcement is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

 

Item 9.01

Financial Statements and Exhibits.

 

(d) Exhibits.

 

The following exhibits are filed herewith:

 

Exhibit Number		Description
99.1		Press Release dated April 17, 2018, announcing financial results and operational results of the Company for the fourth quarter and fiscal year ended December 31, 2017.

 

 

SIGNATURES

 

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 hereunto duly authorized.

 

	ORIENT PAPER, INC.
Date: April 18, 2018	By:	/s/ Zhenyong Liu
		Name:	Zhenyong Liu
		Title:	Chief Executive Officer

 

 

2

 

Exhibit 99.1

 

Orient Paper, Inc. Announces Fourth Quarter and Fiscal Year 2017 Financial Results

 

Earnings Conference Call is Scheduled for Wednesday, April 18, 2018, 8:00 am ET

 

BAODING, China, April 17, 2018 /PRNewswire/ -- Orient Paper, Inc. (NYSE MKT: ONP) (“Orient Paper” or the “Company”), a leading manufacturer and distributor of diversified paper products in North China, today announced its financial results for the fourth quarter and fiscal year ended December 31, 2017.

 

		For the Three Months Ended December 31,
($ millions)		2017				2016				% Change
Revenues			35.4				31.4				12.9	%
Regular Corrugating Medium Paper (“CMP”)*			24.6				18.3				34.8	%
Light-Weight CMP**			5.2				5.3				-2.5	%
Offset Printing Paper			5.4				6.5				-16.8	%
Tissue Paper Products			0.3				1.4				-80.1	%
Digital Photo Paper			0.0				0.0				-100.0	%
Gross profit			3.6				7.5				-52.1	%
Gross margin			10.2	%			24.0	%			-13.8	pp
Regular Corrugating Medium Paper (“CMP”)*			8.9	%			23.2	%			-14.3	pp
Light-Weight CMP**			10.0	%			28.8	%			-18.9	pp
Offset Printing Paper			16.5	%			25.1	%			-8.6	pp
Tissue Paper Products			5.8	%			11.0	%			-5.3	pp
Digital Photo Paper			NA				-58.8	%			NM
Operating income (loss)			-1.7				4.6				-136.2	%
Net income (loss)			-1.6				3.1				-153.1	%
EBITDA			2.0				8.3				-75.3	%
Basic and Diluted earnings (loss) per share			-0.08				0.14				-153.1	%

 

* Products from PM6

** Products from PM1

*** pp represents percentage points      

  

Revenue increased by 12.9% to $35.4 million, primarily due to increase in average selling prices (“ASPs”) and partially offset by decreases in sales volumes across all product categories.

 

●

Gross profit decreased by 52.1% to $3.6 million. Gross margin decreased by 13.8 percentage points to 10.2%. The decrease in gross margin was across all product categories.

 

●

Net loss was $1.6 million, or loss per share of $0.08, compared to net income of $3.1 million, or earning per share of $0.14, for the same period of the prior year. The Company booked loss on impairment of assets of $2.3 million in the fourth quarter of 2017.

 

●

Earnings before interest, taxes, depreciation and amortization (“EBITDA”) decreased by 75.3% to $2.0 million.

 

 

“Revenue increased by 12.9% to $35.4 million for the fourth quarter of 2017, benefitted from an increase of 35.8% in blended ASP and partially offset by a decrease of 16.9% in overall sales volume,” said Zhenyong Liu, Chairman and Chief Executive Officer of Orient Paper.

 

Mr, Liu continued, “As previously announced, the Company temporarily suspended its production in January 2018 due to a government-mandated restriction on the natural gas supply, which is the energy resource we need for production. As of March 14, 2018, the company resumed production at its manufacturing facilities. As a result of the temporary suspension of production, we expect revenue to be significantly impacted in the first quarter of 2018.”

 

Fourth Quarter 2017 Financial Results

 

Revenue

 

For the fourth quarter of 2017, total revenue increased by $4.1 million, or 12.9%, to $35.4 million from $31.4 million for the same period of the prior year. The increase in total revenue was mainly due to increase in ASP and partially offset by decreases in sales volume across all product categories. Production of tissue paper was suspended in September and October for the replacement of coal boilers, and began intermittent production in the following months. In addition, we decreased the production volume of regular CMP, light-Weight CMP and offset printing paper and sales of these products due to environmental conditions in Northern China. The government strengthened its pollution control and rectification measures, resulting in restrictions on production in the manufacturing industry. As a result, the production volume of regular CMP, light-Weight CMP and offset printing paper and sales of these products decreased in the fourth quarter of 2017 as compared to the same period of the prior year. The following table summarizes revenue, volume and ASP by product for the fourth quarter of 2017 and 2016, respectively:

 

Revenue from CMP, including both regular CMP and light-Weight CMP, increased by $6.2 million, or 26.5%, to $29.8 million and accounted for 84.1% of total revenue for the fourth quarter of 2017, compared to $23.6 million, or 75.1%, of total revenue for the same period of the prior year. The Company sold 53,705 tonnes of CMP at an ASP of $555/tonne in the fourth quarter of 2017, compared to 60,701 tonnes at an ASP of $388/tonne in the same period of the prior year.

 

Of the total CMP sales, revenue from regular CMP increased by $6.4 million, or 34.8%, to $24.6 million, resulting from sales of 44,411 tonnes at an ASP of $555/tonne, during the fourth quarter of 2017, compared to revenue of $18.3 million, resulting from sales of 47,338 tonnes at an ASP of $386/tonne, during the same period of the prior year. Revenue from light-weight CMP decreased by $0.1 million, or 2.5%, to $5.2 million, resulting from sales of 9,294 tonnes at an ASP of $554/tonne for the fourth quarter of 2017, compared to revenue of $5.3 million, resulting from sales of 13,363 tonnes at an ASP of $395/tonne for the same period of the prior year.

 

Revenue from offset printing paper decreased by $1.1 million, or 16.8%, to $5.4 million for the fourth quarter of 2017, from $6.5 million for the same period of the prior year. The Company sold 6,512 tonnes of offset printing paper at an ASP of $826/tonne in the fourth quarter of 2017, compared to 10,815 tonnes at an ASP of $598/tonne in the same period of the prior year.

 

Revenue from tissue paper products decreased by $1.1 million, or 80.1%, to $0.3 million for the fourth quarter of 2017, from $1.4 million for the same period of the prior year. The Company sold 185 tonnes of tissue paper products at an ASP of $1,456/tonne in the fourth quarter of 2017, compared to 1,129 tonnes at an ASP of $1,201/tonne in the same period of the prior year.

 

 

We had no revenue from digital photo paper for the fourth quarter of 2017 and for the same period of the prior year. In June 2016, we suspended the production of digital photo paper due to low market demand for our products and are now upgrading the production line to produce more competitive products. We expect to resume our digital photo paper production in the near future.

 

Gross Profit and Gross Margin

 

Total cost of sales increased by $8.0 million, or 33.5%, to $31.8 million for the fourth quarter of 2017, from $23.8 million for the same period of the prior year. Cost of sales per tonne was $527 for the fourth quarter of 2017, compared to $328 for the same period of the prior year. The increase in overall cost of sales per tonne was mainly attributable to the higher average unit purchase costs of recycled paper board, cost of recycled white scrap paper and additional subsidies to the labors during the production restriction, and partially offset by the use of natural gas and liquefied gas to replace coal into the production. Costs of sales per tonne for regular CMP, light-weight CMP, offset printing paper, and tissue paper products were, $505, $499, $690, and $1,373, respectively, for the fourth quarter of 2017, compared to $296, $281, $448, and $1,068, respectively, for the same period of the prior year.

 

Total gross profit decreased by $3.9 million, or 52.1%, to $3.6 million for the fourth quarter of 2017, from $7.5 million for the same period of the prior year. Overall gross margin was 10.2% for the fourth quarter of 2017, compared to 24.0% for the same period of the prior year. Gross margins for regular CMP, light-weight CMP, offset printing paper, and tissue paper products were 8.9%, 10.0%, 16.5%, and 5.8%, respectively, for the fourth quarter of 2017, compared to 23.2%, 28.8%, 25.1%, and 11.0%, respectively, for the same period of the prior year.

 

Selling, General and Administrative Expenses

 

Selling, general and administrative expenses (“SG&A”) increased by $0.3 million, or 9.3%, to $3.0 million for the fourth quarter of 2017 from $2.7 million for the same period of the prior year. As a percentage of total revenue, SG&A was 8.4% for the fourth quarter of 2017, compared to 8.7% for the same period of the prior year.

 

Loss on Impairment of Assets

 

The Company booked loss on impairment of assets of $2.3 million in the fourth quarter of 2017, compared to $nil in the same period of the prior year.

 

Income(loss) from Operations

 

Loss from operations was $1.7 million for the fourth quarter of 2017, compared to income from operations of $4.6 million for the same period of the prior year. Operating loss margin was 4.7% for the fourth quarter of 2017, compared to operating income margin of 14.8% for the same period of the prior year.

 

 

Net Income (loss)

 

Net loss was $1.6 million, or $0.08 per loss basic and diluted share, for the fourth quarter of 2017, compared to net income of $3.1 million, or earnings per basic and diluted share of $0.14, for the same period of the prior year.

 

EBITDA

 

EBITDA decreased by $6.2 million, or 75.3%, to $2.0 million for the fourth quarter of 2017 from $8.3 million for the same period of the prior year.

 

Note 1: Non-GAAP Financial Measures

 

In addition to our U.S. GAAP results, this press release includes a discussion of EBITDA, a non-GAAP financial measure as defined by the Securities and Exchange Commission (“SEC”). The Company defines EBITDA as net income before interest, income taxes, depreciation and amortization. EBITDA is a key measure used by management to evaluate our results and make strategic decisions. Management believes this measure is useful to investors because it is an indicator of operational performance. Because not all companies use identical calculations, the Company’s presentation of EBITDA may not be comparable to similarly titled measures of other companies, and should not be viewed as an alternative to measures of financial performance or changes in cash flows calculated in accordance with the U.S. GAAP.

 

Reconciliation of Net Income to EBITDA

(Amounts expressed in US$)

 

		For the Three Months Ended December 31,
($ millions)		2017				2016
Net income			-1.6				3.1
Add: Income tax			-0.4				1.0
Net interest expense			0.4				0.5
Depreciation and amortization			3.7				3.6
EBITDA			2.0				8.3

  

 

Full Year 2017 Financial Results

 

		For the Twelve Months Ended December 31,
($ millions)		2017				2016				% Change
Revenues			117.0				134.7				-13.2	%
Regular Corrugating Medium Paper (“CMP”)*			80.4				77.9				3.2	%
Light-Weight CMP**			15.6				16.7				-6.8	%
Offset Printing Paper			18.7				33.4				-44.0	%
Tissue Paper Products			2.4				6.1				-61.2	%
Digital Photo Paper			0.0				0.7				-100.0	%
Gross profit			20.0				25.5				-21.8	%
Gross margin			17.1	%			18.9	%			-1.9	pp
Regular Corrugating Medium Paper (“CMP”)*			16.9	%			17.1	%			-0.2	pp
Light-Weight CMP**			18.9	%			25.5	%			-6.5	pp
Offset Printing Paper			17.3	%			22.7	%			-5.4	pp
Tissue Paper Products			6.5	%			11.8	%			-5.4	pp
Digital Photo Paper			NA				-58.7	%			NM
Operating income			4.7				13.0				-63.9	%
Net income			1.7				7.3				-77.2	%
EBITDA			19.4				28.3				-31.6	%
Basic and Diluted earnings per share			0.08				0.34				-76.5	%

 

* Products from PM6

** Products from PM1

*** pp represents percentage points      

  

Revenue

 

For the year ended December 31, 2017, total revenue decreased by $17.7 million, or 13.2%, to $117.0 million from $134.7 million for 2016. The decrease in total revenue was mainly decreases in sales volume across all product categories and partially offset by a moderate increase in blended ASP. Production of tissue paper was suspended in September and October for the replacement of coal boilers, and began intermittent production in the following months. In addition, we decreased the production volume of regular CMP, light-Weight CMP and offset printing paper and sales of these products due to environmental conditions in Northern China. The government strengthened its pollution control and rectification measures, resulting in restrictions on production in the manufacturing industry. As a result, the production volume of regular CMP, light-Weight CMP and offset printing paper and sales of these products decreased in 2017 as compared to 2016. The following table summarizes revenue, volume and ASP by product for 2017 and 2016, respectively:

 

		For the Twelve Months Ended December 31,
		2017												2016
		Revenue ($’000)				Volume  (tonne)				ASP  ($/tonne)				Revenue ($’000)				Volume  (tonne)				ASP  ($/tonne)
Regular CMP			80,379				173,399				464				77,889				230,382				338
Light-Weight CMP			15,600				33,690				463				16,736				47,841				350
Offset Printing Paper			18,688				26,610				702				33,391				52,255				639
Tissue Paper Products			2,357				1,804				1,306				6,071				4,917				1,235
Digital Photo Paper			-				-				-				657				372				1,767
Total			117,024				235,503				497				134,745				335,767				401

  

 

Revenue from CMP, including both regular CMP and light-Weight CMP, increased by $1.4 million, or 1.4%, to $96.0 million, and accounted for 82.0% of total revenue for 2017, compared to $94.6 million, or 70.2% of total revenue for 2016. The Company sold 207,089 tonnes of CMP at an ASP of $463/tonne in 2017, compared to 278,223 tonnes at an ASP of $340/tonne in 2016.

 

Of the total CMP sales, revenue from regular CMP increased by $2.5 million, or 3.2%, to $80.4 million, resulting from sales of 173,399 tonnes at an ASP of $464/tonne, for 2017, compared to revenue of $77.9 million, resulting from sales of 230,382 tonnes at an ASP of $338/tonne for 2016. Revenue from light-weight CMP decreased by $1.1 million, or 6.8%, to $15.6 million, resulting from sales of 33,690 tonnes at an ASP of $463/tonne for 2017, compared to revenue of $16.7 million, resulting from sales of 47,841 tonnes at an ASP of $350/tonne for 2016.

 

Revenue from offset printing paper decreased by $14.7 million, or 44.0%, to $18.7 million for 2017, from $33.4 million for 2016. The Company sold 26,610 tonnes of offset printing paper at an ASP of $702/tonne in 2017, compared to 52,255 tonnes at an ASP of $639/tonne in 2016.

 

Revenue from tissue paper products decreased by $3.7 million, or 61.2%, to $2.4 million, for 2017, from $6.1 million for 2016. The Company sold 1,804 tonnes of tissue paper products at an ASP of $1,306/tonne in 2017, compared to 4,917 tonnes at an ASP of $1,235/tonne in 2016.

 

We had no revenue from digital photo paper for 2017, compared to $0.7 million, resulting from sales of 372 tonnes at an ASP of $1,767/tonne, for 2016. In June 2016, we suspended the production of digital photo paper due to low market demand for our products and are now upgrading the production line to produce more competitive products. We expect to resume our digital photo paper production in the near future.

 

Gross Profit and Gross Margin

 

Total cost of sales decreased by $12.1 million, or 11.1%, to $97.1 million for 2017, from $109.2 million for 2016. This was mainly a result of the decrease in volume sold, partially offset by increase in cost of recycled paper board. Cost of sales per tonne was $412 for 2017, compared to $325 for 2016. The increase in overall cost of sales per tonne was mainly due to higher average unit purchase costs of recycled paper board, cost of recycled white scrap paper and additional subsidies created by the Company to the labors suspending work during the production restriction in September and October 2017 and partially offset by the use of natural gas and liquefied gas to replace coal in the production. Costs of sales per tonne for regular CMP, light-weight CMP, offset printing paper, tissue paper products, and digital photo paper were, $385, $375, $581, $1,222, and $nil, respectively, for 2017, compared to $280, $261, $494, $1,089, and $2,805, respectively, for 2016.

 

 

Total gross profit decreased by $5.6 million, or 21.8%, to $20.0 million for 2017, from $25.5 million for 2016. Overall gross margin decreased by 1.9 percentage points to 17.1% for 2017 from 18.9% for 2016. Gross margin for regular CMP, light-weight CMP, offset printing paper, tissue paper products, and digital photo paper was 16.9%, 18.9%, 17.3%, 6.5% and nil, respectively, for 2017, compared to 17.1%, 25.5%, 22.7%, 11.8%, and -58.7%, respectively, for 2016.

 

Selling, General and Administrative Expenses

 

Selling, general and administrative expenses (“SG&A”) decreased by $1.1 million, or 8.8%, to $11.3 million for 2017, from $12.4 million for 2016. As a percentage of total revenue, SG&A was 9.7% for 2017, compared to 9.2% for 2016. The expenses were higher in 2016 because the Company issued 1,133,916 shares of common stock, valued at $1,417,395, pursuant to the Company’s compensatory incentive plans in January 2016.

 

Loss on Impairment of Assets

 

The Company booked loss on impairment of assets of $2.3 million in 2017, compared to $nil in 2016.

 

Income from Operations

 

Income from operations decreased by $8.3 million, or 63.9%, to $4.7 million for 2017 from $13.0 million for 2016. Operating margin was 4.0% for 2017, compared to 9.6% for 2016.

 

Net Income (loss)

 

Net income was $1.7 million, or $0.08 per basic and diluted share, for 2017, compared to $7.3 million, or $0.34 per basic and diluted share, for 2016.

 

EBITDA

 

EBITDA decreased by $8.9 million, or 31.6%, to $19.4 million for 2017, from $28.3 million for 2016.

 

Note 2: Non-GAAP Financial Measures

 

In addition to our U.S. GAAP results, this press release includes a discussion of EBITDA, a non-GAAP financial measure as defined by the Securities and Exchange Commission (“SEC”). The Company defines EBITDA as net income before interest, income taxes, depreciation and amortization. EBITDA is a key measure used by management to evaluate our results and make strategic decisions. Management believes this measure is useful to investors because it is an indicator of operational performance. Because not all companies use identical calculations, the Company’s presentation of EBITDA may not be comparable to similarly titled measures of other companies, and should not be viewed as an alternative to measures of financial performance or changes in cash flows calculated in accordance with the U.S. GAAP.

 

 

Reconciliation of Net Income to EBITDA

(Amounts expressed in US$)

 

		For the Twelve Months Ended December 31,
($ millions)		2017				2016
Net income			1.7				7.3
Add: Income tax			0.7				3.1
Net interest expense			2.4				2.6
Depreciation and amortization			14.6				15.3
EBITDA			19.4				28.3

 

Cash, Liquidity and Financial Position

 

As of December 31, 2017, the Company had cash and cash equivalents, short-term debt (including related party loan), current capital lease obligations, notes payable and long-term debt (including related party loans) of $2.9 million, $7.2 million, $nil, $6.1 million and $11.9 million, respectively, compared to $2.3 million, $5.1 million, $8.8 million, $2.2 million and $14.9 million, respectively, at the end of 2016. Net accounts receivable was $1.8 million as of December 31, 2017, compared to $3.9 million as of December 31, 2016. Net inventory was $8.5 million as of December 31, 2017, compared to $5.6 million at the end of 2016. As of December 31, 2017, the Company had a net working capital deficit of $1.8 million, compared to $6.1 million at the end of 2016.

 

Net cash provided by operating activities was $18.2 million for 2017, compared to $15.3 million for 2016. Net cash used in investing activities was $9.3 million for 2017, compared to $11.5 million for 2016. Net cash used by financing activities was $8.6 million for 2017, compared to $3.7 million for 2016.

 

Recent Development

 

In late January, 2018, the Company temporarily suspended its production due to a government-mandated restriction on the natural gas supply, which is the energy resource we need for production. Since March 14, 2018, the company has resumed production at its manufacturing facilities. Therefore, the Company’s revenues in the first quarter ended March 31, 2018 and the year ended December 31, 2018 are expected to be significantly impacted.

 

Earnings Conference Call

 

The Company’s management will host a conference call to discuss its fourth quarter and fiscal year 2017 financial results at 8:00 am US Eastern Time (5:00 am US Pacific Time/ 8:00 pm Beijing Time) on Wednesday, April 18, 2018.

 

To attend the conference call, please dial-in using the information below. When prompted upon dialing-in, please provide the conference ID or ask for the “Orient Paper Fourth Quarter and Fiscal Year 2017 Earnings Conference Call.”

 

Conference Call
Date:	Wednesday, April 18, 2018
Time:	8:00 am ET (5:00 am US Pacific Time/ 8:00 pm Beijing Time)
International Toll Free:	United States: +1-855-500-8701 Mainland China: 400-120-0654 Hong Kong: 800-906-606 International: +65-6713-5440
Conference ID:	7662826

 

 

This conference call will be broadcast live over the Internet, and can be accessed by all interested parties at http://www.orientpaperinc.com/ or  https://edge.media-server.com/m6/p/z6x2i7e5.

 

Please access the link at least fifteen minutes prior to the start of the call to register, download, and install any necessary audio software.

 

A playback will be available through 9:59 ET April 26, 2018. To listen, please dial +1-855-452-5696 if calling from the United States, or +61-290-034-211 if calling internationally. Use the passcode 7662826 to access the replay.

 

About Orient Paper, Inc.

 

Orient Paper, Inc. (“Orient Paper”) is a leading paper manufacturer in North China. Using recycled paper as its primary raw material (with the exception of its digital photo paper and tissue paper products), Orient Paper produces and distributes three categories of paper products: corrugating medium paper, offset printing paper and tissue paper products.

 

With production based in Baoding and Xingtai in North China’s Hebei Province, Orient Paper is located strategically close to the Beijing and Tianjin region, home to a growing base of industrial and manufacturing activities and one of the largest markets for paper products consumption in the country.

 

Orient Paper’s production facilities are controlled and operated by its wholly owned subsidiary Shengde Holdings Inc., which in turn controls and operates Baoding Shengde Paper Co., Ltd., and Hebei Baoding Orient Paper Milling Co., Ltd.

 

Founded in 1996, Orient Paper has been listed on the NYSE MKT under the ticker symbol “ONP” since December 2009. (For more information, please visit http://www.orientpaperinc.com)

 

Safe Harbor Statements

 

This press release may contain forward-looking statements. These forward-looking statements involve inherent risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, including risks outlined in the Company’s public filings with the Securities and Exchange Commission, including the Company’s latest annual report on Form 10-K. All information provided in this press release speaks as of the date hereof. Except as otherwise required by law, the Company undertakes no obligation to update or revise its forward-looking statements.

 

For more information, please contact:

 

Company Contact:

 

Orient Paper, Inc.

Email: [email protected]

  

Investor Relations:

 

Tony Tian, CFA
Weitian Group LLC
Email: [email protected]

Phone: +1-732-910-9692

 

 

ORIENT PAPER, INC.

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2017 AND 2016

 

		December 31,				December 31,
		2017				2016
ASSETS
Current Assets
Cash and bank balances		$	2,895,790			$	2,332,646
Restricted cash			6,121,637				2,162,318
Accounts receivable (net of allowance for doubtful accounts of $37,626 and $79,478 as of December 31, 2017 and 2016, respectively)			1,843,682				3,894,436
Inventories			8,474,165				5,632,030
Prepayments and other current assets			651,523				455,892
Total current assets			19,986,797				14,477,322
Property, plant, and equipment, net			189,388,709				187,689,880
Value-added tax recoverable			3,041,416				2,945,575
Deferred tax asset non-current			6,572,559				3,264,841
Total Assets		$	218,989,481			$	208,377,618
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Short-term bank loans		$	7,192,923			$	5,045,409
Current portion of long-term loans from credit union			6,366,502				-
Current obligations under capital lease			-				8,786,528
Accounts payable			422,705				559,952
Advance from customers			-				28,831
Notes payable			6,121,637				2,162,318
Due to a related party			60,378				56,872
Accrued payroll and employee benefits			231,247				209,936
Other payables and accrued liabilities			836,337				2,424,778
Income taxes payable			525,804				1,310,967
Total current liabilities			21,757,533				20,585,591
Loans from credit union			1,193,719				4,843,592
Loans from a related party			10,712,865				10,090,817
Deferred gain on sale-leaseback			-				102,232
Total liabilities (including amounts of the consolidated VIE without recourse to the Company of $31,235,520 and $35,618,995 as of December 31, 2017 and 2016, respectively)			33,664,117				35,622,232
Commitments and Contingencies
Stockholders’ Equity
Common stock, 500,000,000 shares authorized, $0.001 par value per share, 21,450,316 shares issued and outstanding as of December 31, 2017 and 2016, respectively			21,450				21,450
Additional paid-in capital			50,635,243				50,635,243
Statutory earnings reserve			6,080,574				6,080,574
Accumulated other comprehensive income (loss)			5,468,799				(5,441,391	)
Retained earnings			123,119,298				121,459,510
Total stockholders’ equity			185,325,364				172,755,386
Total Liabilities and Stockholders’ Equity		$	218,989,481			$	208,377,618

 

 

ORIENT PAPER, INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS)

FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016

 

	Year Ended
	December 31,
	2017			2016
Revenues	$	117,023,578		$	134,744,600
Cost of sales		(97,067,627	)		(109,212,717	)
Gross Profit		19,955,951			25,531,883
Selling, general and administrative expenses		(11,307,395	)		(12,401,858	)
Loss on impairment of assets		(2,291,027	)		-
Loss from disposal of property, plant and equipment		(1,677,262	)		(178,306	)
Income from Operations		4,680,267			12,951,719
Other Income (Expense):
Interest income		34,590			96,976
Subsidy income		41,529			-
Interest expense		(2,433,770	)		(2,621,147	)
Income before Income Taxes		2,322,616			10,427,548
Provision for Income Taxes		(662,828	)		(3,114,572	)
Net Income		1,659,788			7,312,976
Other Comprehensive Income (Loss)
Foreign currency translation adjustment		10,910,190			(11,784,410	)
Total Comprehensive Income (Loss)	$	12,569,978		$	(4,471,434	)
Earnings Per Share:
Basic and Diluted Earnings per Share	$	0.08		$	0.34
Outstanding – Basic and Diluted		21,450,316			21,416,143

 

 

ORIENT PAPER, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016

  

														Accumulated
								Additional			Statutory			Other
		Common Stock						Paid-in			Earnings			Comprehensive			Retained
		Shares			Amount			Capital			Reserve			Income (loss)			Earnings			Total
Net income for the year of 2016																		7,312,976			7,312,976
Balance at December 31, 2016			21,450,316		$	21,450		$	50,635,243		$	6,080,574		$	(5,441,391	)	$	121,459,510		$	172,755,386
Foreign currency translation adjustment															10,910,190						10,910,190
Net income for the year of 2017																		1,659,788			1,659,788
Balance at December 31, 2017			21,450,316		$	21,450		$	50,635,243		$	6,080,574		$	5,468,799		$	123,119,298		$	185,325,364

 

 

ORIENT PAPER, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016

 

		Year Ended
		December 31,
		2017			2016
Cash Flows from Operating Activities:
Net income		$	1,659,788		$	7,312,976
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			14,633,780			15,287,509
Loss from impairment and disposal of property, plant and equipment			3,968,289			178,306
(Recovery from) Allowance for bad debts			(45,309	)		44,938
Share-based compensation expenses			-			1,417,395
Deferred tax			(3,010,577	)		(1,959,494	)
Changes in operating assets and liabilities:
Accounts receivable			2,265,428			(2,246,882	)
Prepayments and other current assets			(79,264	)		1,410,080
Inventories			(2,417,942	)		3,112,465
Accounts payable			(166,464	)		336,507
Advance from customers			(29,663	)		26,173
Notes payable			3,707,933			(11,273,279	)
Due to a related party			-			(300,621	)
Accrued payroll and employee benefits			8,111			(300,275	)
Other payables and accrued liabilities			(1,503,275	)		1,509,196
Income taxes payable			(839,047	)		722,528
Net Cash Provided by Operating Activities			18,151,788			15,277,522
Cash Flows from Investing Activities:
Purchases of property, plant and equipment			(9,380,702	)		(11,586,214	)
Proceeds from sale of property, plant and equipment			59,066			41,185
Net Cash Used in Investing Activities			(9,321,636	)		(11,545,029	)
Cash Flows from Financing Activities:
Proceeds from related party loans			-			3,020,208
Repayments of related party loans			-			(6,026,416	)
Proceeds from short term bank loans			12,903,609			6,463,347
Proceeds from credit union loans			2,373,077			-
Repayment of bank loans			(11,153,463	)		(14,730,418	)
Payment of capital lease obligation			(9,040,260	)		(675,139	)
(Increase in) Release of restricted cash			(3,707,933	)		8,267,072
Net Cash Used in Financing Activities			(8,624,970	)		(3,681,346	)
Effect of Exchange Rate Changes on Cash and Cash Equivalents			357,962			(360,418	)
Net Increase (Derease) in Cash and Cash Equivalents			563,144			(309,271	)
Cash and Cash Equivalents - Beginning of Year			2,332,646			2,641,917
Cash and Cash Equivalents - End of Year		$	2,895,790		$	2,332,646
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest, net of capitalized interest cost		$	2,103,340		$	2,414,458
Cash paid for income taxes		$	4,512,453		$	4,351,538
Cash and bank balances			2,895,790			2,332,646
Restricted cash			6,121,637			2,162,318
Total cash, cash equivalents and restricted cash shown in the statement of cash flows			9,017,427			4,494,964

 

13

 

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