Related Party Transactions
|3 Months Ended|
Mar. 31, 2018
|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 $71,000 and $516,000 during the three months ended March 31, 2018 and 2017, respectively. These fees are included in SG&A expenses in the Condensed Consolidated Statements of Operations.
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 March 31, 2017. In June 2017, the Company repaid these loans, including the note with Swire in the principal amount of RMB 97,600,000 (USD 14,171,000), and as such, the balance on the Condensed Consolidated Balance Sheets is zero at March 31, 2018. The Company did not incur interest expense related to this note for the three months ended March 31, 2018. Interest expense related to this note was $249,000 for the three months ended March 31, 2017.
As of March 31, 2018 and 2017, and December 31, 2017, net payables to Swire for service fees, interest expense and miscellaneous expenses totaled $156,000, $1,139,000 and $89,000, 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.
In April 2018, the Company announced its intent to buy out the remaining 40% non-controlling interest in the joint venture under the terms of the initial agreement. The buy out is subject to various terms and conditions, including regulatory approval in China, and is expected to be complete in early 2019.
The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.
Reference 1: http://www.xbrl.org/2003/role/presentationRef