Related Party Transactions |
9 Months Ended |
|---|---|
Sep. 30, 2015 | |
| Related Party Transactions [Abstract] | |
| Related Party Transactions |
RELATED PARTY TRANSACTIONS
On January 1, 2014, the Company commenced operations of a majority-owned joint venture in mainland China. Upon commencement, the joint venture entered into Transition Services Agreements (“TSAs”) with Swire, the non-controlling shareholder in the joint venture, under which Swire renders administrative and information technology services on behalf of the joint venture. The joint venture incurred service fees, valued under the TSAs at Swire's cost, of $1,225,000 and $2,194,000 during the three months ended September 30, 2015 and 2014, respectively, and $5,099,000 and $7,075,000 during the nine months ended September 30, 2015 and 2014, 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 $73,000 and $81,000 for the three months ended September 30, 2015 and 2014, respectively. For the nine months ended September 30, 2015 and 2014, the joint venture incurred sourcing fees of $362,000 and $374,000, respectively.
During 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 note payable to related party in the Condensed Consolidated Balance Sheet as of September 30, 2015 and 2014 and December 31, 2014. The note with Swire, in the principal amount of 97,600,000 RMB (US$15,356,000 at September 30, 2015), matures on December 31, 2018 and bears interest at a fixed annual rate of 7%. Interest expense related to this note was $275,000 and $282,000 for the three months ended September 30, 2015 and 2014, respectively, and $827,000 and $769,000 for the nine months ended September 30, 2015 and 2014, respectively.
As of September 30, 2015 and 2014 and December 31, 2014, net payables to Swire for service fees, interest expense and miscellaneous expenses totaled $2,995,000, $4,062,000 and $3,651,000, 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 normal third-party distributor terms and pricing.
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