Related Party Transactions |
6 Months Ended |
|---|---|
Jun. 30, 2017 | |
| Related Party Transactions [Abstract] | |
| Related Party Transactions |
RELATED PARTY TRANSACTIONS
The Company owns a 60% controlling interest in a joint venture formed with Swire, which is a related party. The joint venture arrangement involves Transition Services Agreements ("TSAs") with Swire, under which Swire provides administrative and information technology services to the joint venture. The Company continues to reduce its costs under the TSAs as it internalizes the back-office functions and related personnel, including the transition of the joint venture's systems to the Company's platform in the second quarter of 2017. The joint venture incurred service fees, valued under the TSAs at Swire's cost, of $329,000 and $1,042,000 during the three months ended June 30, 2017 and 2016, respectively and $845,000 and $1,895,000 during the six months ended June 30, 2017 and 2016, respectively. These fees are included in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations. In addition, the joint venture pays Swire sourcing fees related to the purchase of certain inventory. These sourcing fees are capitalized into inventories and charged to cost of sales as the inventories are sold. The Company incurred sourcing fees of $4,000 and $10,000, for the three months ended June 30, 2017 and 2016, respectively, and $5,000 and $61,000, for the six months ended June 30, 2017 and 2016, respectively.
In 2014, both the Company and Swire funded long-term loans to the joint venture. The Company's loan has been eliminated in consolidation, while the Swire loan is reflected as a note payable to related party in the Condensed Consolidated Balance Sheets as of December 31, 2016 and June 30, 2016. In June 2017, the Company repaid these loans, including the note with Swire in the principal amount of RMB 97,600,000 (USD $14,236,000), and as such, the balance on the Condensed Consolidated Balance Sheets is zero at June 30, 2017. Interest expense related to this note was $180,000 and $262,000 for the three months ended June 30, 2017 and 2016, respectively, and $429,000 and $526,000 for the six months ended June 30, 2017 and 2016, respectively.
As of June 30, 2017 and 2016, and December 31, 2016, net payables to Swire for service fees, interest expense and miscellaneous expenses totaled $340,000, $1,042,000 and $707,000, respectively, and were included in accounts payable in the Condensed Consolidated Balance Sheets.
In addition to the transactions described above, Swire is also a third-party distributor of the Company's brands in certain regions outside of mainland China and purchases products from the Company under the Company's standard third-party distributor terms and pricing.
|