<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1997
Commission file number 000-28358
-----------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITY EXCHANGE
ACT OF 1934
For the transition period from _____________ to ______________
CHINA CONTAINER HOLDINGS LIMITED
(Exact Name of Registrant as Specified in Its Charter)
NEVADA 11-2243727
(State or Other Jurisdiction (IRS Employer Identification No.)
of Incorporation or Organization)
61, EAST GARDEN ROAD, YANGZHOU, JIANGSU, CHINA 225003
(Address of principal executive offices)
Registrant's Telephone Number, Including area code, (212) 629-7378
Indicate by check mark whether the registrant: (1) has filed all
reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days Yes ________ No _________
Indicate the number of shares outstanding of each of the issue's class of
common stock, as of the latest practical date.
Common stock $0.001 par value; 25,000,273 shares outstanding at September
30, 1996.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CHINA CONTAINER HOLDINGS LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
FOR THE THREE MONTHS ENDED March 31, 1997 AND March 31, 1996
(Amounts in thousands, except for per share data)
<TABLE>
<CAPTION>
Three months ended
March 31
(Unaudited)
Note ------------------------------------
1997 1996
US$ US$
<S> <C> <C> <C>
NET SALES 29, 640 24,193
COST OF SALES ( 27,258) ( 19,755)
SELLING AND ADMINISTRA-
TIVE EXPENSES ( 839) ( 1,221)
FINANCIAL EXPENSES, NET ( 2,765) ( 474)
OTHER INCOME, NET 23 16
-------- --------
INCOME/(LOSS) BEFORE
INCOME TAXES (1,199) 2,759
INCOME TAXES 2 ( 0) ( 246)
-------- --------
(1,199) 2,513
SHARE OF NET LOSSES OF
ASSOCIATED COMPANIES ( 95) (58)
-------- --------
INCOME/(LOSS) BEFORE
MINORITY INTERESTS (1,294) 2,455
MINORITY INTERESTS 387 ( 767)
-------- --------
NET INCOME/(LOSS) (907) 1,688
======== ========
NET INCOME/(LOSS) PER
COMMON SHARE (0.04) 0.07
======== ========
WEIGHTED AVERAGE
NUMBER OF COMMON
SHARES OUTSTANDING 25,000 25,000
======== ========
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
<PAGE>
CHINA CONTAINER HOLDINGS LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1997 AND DECEMBER 31, 1996
(Amounts in thousands)
<TABLE>
<CAPTION>
March 31 December 31
(unaudited) (audited)
(Note 1)
Note ------------------------ -----------------------
1997 1996
US$ US$
ASSETS
<S> <C> <C> <C>
CURRENT ASSETS
Cash and Cash equivalents 1,059 2,873
Accounts receivable 25,143 6,188
Deposits and other receivables 8,052 7,544
Inventories 3 30,149 41,804
Amount due from associated companies 1,333 908
Amount due from related companies 37,942 6,181
TOTAL CURRENT ASSETS 103,678 65,498
INTANGIBLE ASSETS 3,273 2,864
FIXED ASSETS 23,033 23,137
CONSTRUCTION IN PROGRESS 1,299 747
INTERESTS IN ASSOCIATED COMPANIES 2,843 2,009
AMOUNTS DUE FROM RELATED COMPANIES 4,254 15,783
OTHER ASSETS 909 1,317
------- -------
TOTAL 139,289 111,355
======= =======
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
<PAGE>
CHINA CONTAINER HOLDINGS LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1997 AND DECEMBER 31, 1996
(Amounts in thousands)
<TABLE>
<CAPTION>
March 31 December 31
(Unaudited) (Audited)
(Note 1)
---------------------- --------------------
1997 1996
US$ US$
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Bank loans and overdrafts 92,179 80,758
Accounts payable 16,491 14,428
Accrued liabilities and other payables 13,496 4,735
Income taxes payable 806 -
Amount due to associated companies 841 320
Amount due to related companies 6,496 191
------- -------
TOTAL CURRENT LIABILITIES 130,309 100,432
MINORITY INTERESTS 3,930 3,893
------- -------
TOTAL LIABILITIES 134,239 104,325
------- -------
SHAREHOLDERS' EQUITY
Share capital- shares of 100,000,000
common stock of US$0.001 each and 5,000,000 preferred stock
of US$0.01 each authorized; shares 25,000,273 common stock
of US$0.001 each outstanding 25 25
Additional paid-in capital 4,683 4,683
Reserves 7,603 7,603
Accumulated losses (7,261) (5,217)
Currency translation adjustments 0 (64)
------- -------
TOTAL SHAREHOLDERS' EQUITY 5,050 7,030
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 139,289 111,355
======= =======
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
<PAGE>
CHINA CONTAINER HOLDINGS LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997
(Amounts in thousands)
<TABLE>
<CAPTION>
Three month ended
March 31
(unaudited)
1997 1996
US$ US$
<S> <C> <C>
Net cash used in operating activities (11,579) (12,151)
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchases of fixed assets (1,656) (1,959)
Increase in construction in progress - ( 9,822)
Increase in investments in associated companies - (100)
------- -------
Net cash used in investing activities (1,656) (11,881)
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
Repayment of bank loans and overdrafts (705) -
Proceeds from bank loans and overdrafts 12,126 19,233
------- -------
Net cash provided by financing activities 11,421 19,233
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,814) (4,799)
Cash and cash equivalents, at beginning of period 2,873 7,431
------- -------
Cash and cash equivalents, at end of period 1,059 2,632
======= =======
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
<PAGE>
CHINA CONTAINER HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Amounts in thousands)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instruction to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
Management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three month period ended March 31, 1997 are not necessarily
indicative of the results that may be expected for the year ended December
31, 1997. The unaudited condensed consolidated financial statements should
be read in conjunction with the consolidated financial statements and
footnotes thereto included in the Company's audited financial statements
for the year ended December 31, 1996.
The balance sheet at December 31, 1996 has been derived from the audited
financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
<PAGE>
CHINA CONTAINER HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Amounts in thousands)
2. INCOME TAX
A reconciliation of the effective income tax rates (excluding the
reorganization expenses) with the statutory income tax rate in the PRC is
as follows:
<TABLE>
<CAPTION>
Three months ended
March 31
(unaudited)
------------------------------
1997 1996
<S> <C> <C>
Statutory PRC tax rate (24.0%) 24.0
Tax holiday 23.9% (15.1%)
Other items 0.1% 0%
---- -----
0% 8.9%
==== =====
<CAPTION>
3. INVENTORIES
Inventories comprise:
March 31 December 31
(unaudited) (audited)
------------------------------ --------------------------
1997 1996
US$ US$
<S> <C> <C>
Raw materials 15,514 20,801
Work in progress - 4,283
Finished goods 14,635 16,897
------ ------
30,149 41,981
Less: Provision for inventories - (177)
------ ------
30,149 41,804
====== ======
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The Company is a Nevada corporation whose principal activity is the
management of the business of its indirectly held operating subsidiaries, which
manufacture international standard commercial freight containers in the People's
Republic of China.
The statements in this section relate to the operations and conditions of
the Company and its consolidated subsidiaries.
RESULTS OF OPERATIONS
1. Sales increased by 23% from US$24.2 million in the three
months ended March 31, 1996 to US$29.6 million in the three months ended March
31, 1997, and sales quantity increased by 28.4% from 8,383 TEU in 1996 to 10,760
TEU in 1997, as both orders and capacity increased. Capacity increased because
(i) the Company's subsidiary Tongsheng came on line in June 1996, effectively
doubling the Company's capacity to manufacture dry box containers, and (ii) the
Company's subsidiary which manufactures refrigerated containers ("Reefer")
completed its modernization program in December 1996, increasing its capacity by
250%.
2. The gross profit margin decrease from 18.2% on net sales in the
first quarter of 1996 to 8.0% in the first quarter of 1997 occurred primarily
because the average sales price per unit decreased, 15% for dry boxes and 22%
for reefers.
3. Selling and administrative expenses decreased by 33.3% from US$1.2
million in the first quarter of 1996 to US$800,000 in the first quarter of 1997.
4. Financial expenses increased by 483.3% from US$500,000 in the
first quarter of 1996 to US$2.8 million in the first quarter of 1997, due to (i)
the recharacterization of certain construction in progress (relating to the
Company's Tongsheng subsidiary) as a fixed asset, causing the interest on the
loan balance relating thereto to be recognized as an expense in 1997, (ii) an
increase in average interest rates of approximately 0.5%, and (iii) a
significant increase in average loan balances during the first quarter of 1997,
with Bank Loans as at March 31, 1997 of US$92.2 million compared with US$80.8
million as at December 31,1996. The following factor contributed to the
significant increase in the average loan balances mainly due to an increase in
the Company's working capital requirements as a result of filling a large order
from the PRC Railway Ministry, based on eight year payment terms.
FINANCIAL CONDITION
<PAGE>
1. Accounts Receivable increased by 306.3% from US$6.2 million as at
December 31, 1996 to US$25.1 million as at March 31, 1997, primarily due to the
recognition of the sales of certain containers to the PRC Railway Ministry which
had previously been classified as Inventories, which decreased by 27.8% from
US$41.8 million as at December 31, 1996 to US$30.2 million as at March 31, 1997.
2. Accrued Liabilities and other payables increased by 187.2% from
US$4.7 million as at December 31, 1996 to US$13.5 million as at March 31, 1997,
primarily as a result of lengthening of payment terms to certain creditors.
3. Cash and cash equivalents decreased by 62.1% from US$2.9 million
as at December 31, 1996 to US$1.1 million as at March 31, 1997, primarily as a
result of payments made to suppliers of raw materials.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
Item 5. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3(i) Articles of Incorporation of Registrant, filed August 8,
1995 and Articles of Amendment thereto filed April 16, 1986 and May 15,
1995.
3(ii) By-laws of Registrant.
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
<PAGE>
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 thereunto duly authorized.
CHINA CONTAINER HOLDINGS LIMITED
Date: November 7, 1997 By: /s/ Ma Tieyi
Ma Tieyi
Secretary and Treasurer
<PAGE>
CHINA CONTAINER HOLDINGS LIMITED
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------- --------
3(i) Articles of Incorporation of Registrant, filed
August 8, 1995 and Articles of Amendment
thereto filed April 16, 1986 and May 15, 1995,
incorporated by reference to the Registrant's
Form 10 and Amendment No. 1 thereto.
3(ii) By-laws of Registrant, incorporated by reference
to the Registrant's Form 10 and Amendment No. 1
thereto.
27 Financial Data Schedule
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1059
<SECURITIES> 0
<RECEIVABLES> 25143
<ALLOWANCES> 0
<INVENTORY> 30149
<CURRENT-ASSETS> 103678
<PP&E> 19778
<DEPRECIATION> 4783
<TOTAL-ASSETS> 139289
<CURRENT-LIABILITIES> 130309
<BONDS> 0
0
0
<COMMON> 25
<OTHER-SE> 5025
<TOTAL-LIABILITY-AND-EQUITY> 139289
<SALES> 29640
<TOTAL-REVENUES> 29640
<CGS> 27258
<TOTAL-COSTS> 27258
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1368
<INCOME-PRETAX> (1199)
<INCOME-TAX> 0
<INCOME-CONTINUING> (907)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (907)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
