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EXIT AND DISPOSAL ACTIVITIES

12 Months Ended

Dec. 31, 2020

EXIT AND DISPOSAL ACTIVITIES

EXIT AND DISPOSAL ACTIVITIES

3. EXIT AND DISPOSAL ACTIVITIES

Relocation of polysilicon operations to Xinjiang

Starting 2013, the Group commenced a plan to expand the capacity at the Xinjiang plant and relocate significant production assets, with a carrying value of $144.7 million, from Chongqing Daqo to its Xinjiang plant and implemented a series of relocation process since then.

In the year ended December 31, 2018, the Group has continuously assessed the remaining polysilicon assets with a carrying value of $11.5 million in Chongqing and considering the remaining assets became no longer practicable in 2018, and the Group fully impaired the remaining assets.

Discontinued operations

In September 2018, the Group made a strategic decision to discontinue its Chongqing business subsidiary, including its solar wafer manufacturing operations, to accommodate the increasingly challenging market conditions. Accordingly, the Company recorded impairment losses of $7.3 million for the machinery and equipment related to the discontinued wafer manufacturing operations in 2018. The remaining long-lived assets located in Chongqing including property, plant and equipment of $57.8 million and prepaid land use rights of $1.7 million were considered held for sale as of December 31, 2018. As described earlier, the Group gradually transferred and reutilized significant polysilicon productions assets to Xinjiang plant since 2013. Chongqing Daqo and Xinjiang Daqo entered into long-term lease contract for the machinery and equipment relocated. Considering these assets will continuously and steadily operate along with existing polysilicon facility in Xinjiang plant, the Group decided to record these assets as continuing operations in financial statements as of December 31, 2019, which amounted to $43.1 million. In June 2020, Chongqing Daqo sold these machinery and equipment relocated to Xinjiang Daqo and lease contract terminated.

During the year ended December 31, 2019, following a comprehensive analysis, the Group suspended its plan to sell the idle wafer plant and land use right, instead the Group decided to rent out the idle wafer plant and land in the next 5 years and then sell these assets as appropriate. Accordingly, the Group recorded these assets, amounted to $6.7 million and the related $0.2 million depreciation and amortization expenses, as continuing operations in financial statements. Retrospective adjustments to the historical statements are made to provide a consistent basis of comparison for the financial results.

The discontinuation of the solar wafer manufacturing operations represents a strategic shift and has a major effect on the Group’s result of operations. Accordingly, assets and liabilities related to the discontinued Chongqing subsidiary have been reclassified as assets and liabilities associated with discontinued operations, while results of operations and cash flows related to the Chongqing subsidiary were reported as income (loss) and cash flows from discontinued operations, including comparatives in the accompanying consolidated financial statements for all periods presented.

Assets and liabilities of the discontinued operations


		December 31,
		2019			2020
ASSETS:
Cash and cash equivalents		$	845		$	—
Other current assets			81			—
Total current assets associated with discontinued operations		$	926		$	—
Long-lived assets held-for-sale			217			—
Total non-current assets associated with discontinued operations		$	217		$	—

LIABILITIES:
Accounts payable		$	542		$	—
Payables for purchases of property, plant and equipment			359			—
Other current liabilities			264			—
Total current liabilities associated with discontinued operations		$	1,165		$	—

Results of the discontinued operations


		Year ended December 31,
		2018			2019			2020

Revenues		$	7,113		$	—		$	—
Cost of revenues			(9,510)			—			—
Long-lived assets impairment			(18,770)			—			—
(Loss) income from discontinued operations, net of tax of nil		$	(23,030)		$	1,261		$	(141)

All notes to the accompanying consolidated financial statements have been retrospectively adjusted to reflect the effect of the discontinued operations, where applicable.

Condensed cash flow of the discontinued operations


		Year ended December 31,
		2018			2019			2020

Net cash provided by (used in) operating activities		$	17,993		$	1,010		$	(50)
Net cash provided by (used in) investing activities			617			1,457			(195)
Net cash used in financing activities			(16,779)			(2,651)			—