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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q/A
(Amendment No. 1 to 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 September 30, 1997
Commission file number 00028358
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/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITY
EXCHANGE ACT OF 1934
For the transition period from to
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CHINA CONTAINER HOLDINGS LIMITED
(Exact Name of Registrant as Specified in Its Charter)
Nevada 11-2243727
(State or Other Jurisdiction of (IRS Employer Identification No.)
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 for 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 X 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, 1997.
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PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
CHINA CONTAINER HOLDINGS LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
(Amounts in thousands, except for per share data)
<TABLE>
<CAPTION>
Three Months ended Nine Months ended
September 30 September 30
(Unaudited) (Unaudited)
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1997 1996 1997 1996
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<S> <C> <C> <C> <C>
NET SALES 25,219 6,483 93,340 72,800
COST OF SALES (25,916) (8,499) (87,316) (64,028)
SELLING AND ADMINISTRATIVE EXPENSES (1,118) (761) (3,497) (2,912)
FINANCIAL EXPENSES, NET (1,473) (510) (6,197) (1,842)
OTHER INCOME, NET 210 47 247 58
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INCOME BEFORE INCOME TAXES (3,078) (3,240) (3,423) 4,076
INCOME TAXES -- 2 -- (559)
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(3,078) (3,238) (3,423) 3,517
SHARE OF NET INCOME/(LOSSES)
OF ASSOCIATED COMPANIES 6 33 (157) 18
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INCOME/(LOSS) BEFORE
MINORITY INTERESTS (3,072) (3,205) (3,580) 3,535
MINORITY INTERESTS 566 (332) 861 (2,699)
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NET INCOME/(LOSS) (2,506) (3,537) (2,719) 836
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NET INCOME/(LOSS) PER SHARE (0.10) (0.14) (0.11) 0.03
======= ====== ======= =======
WEIGHTED AVERAGE
NUMBER OF COMMON
SHARES OUTSTANDING 25,000 25,000 25,000 25,000
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</TABLE>
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
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CHINA CONTAINER HOLDINGS LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND SEPTEMBER 30, 1997
(Amounts in thousands)
<TABLE>
<CAPTION>
Note September 30 December 31
(unaudited) (audited)
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1997 1996
US$ US$
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash equivalents 6,949 2,873
Accounts receivable 23,947 6,188
Deposits and other receivables 8,727 7,544
Inventories 3 21,526 41,804
Amount due from associated companies 1,552 908
Amount due from related companies 11,911 6,181
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TOTAL CURRENT ASSET 74,612 65,498
INTANGIBLE ASSETS 2,299 2,864
FIXED ASSETS 24,312 23,137
CONSTRUCTION IN PROGRESS 713 747
INTERESTS IN ASSOCIATED COMPANIES 2,830 2,009
AMOUNTS DUE FROM RELATED COMPANIES 37,445 15,783
OTHER ASSETS 606 1,317
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TOTAL 142,817 111,355
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</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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CHINA CONTAINER HOLDINGS LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND SEPTEMBER 30, 1997
(Amounts in thousands)
September 30, 1997 December 31, 1996
(unaudited) (audited)
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LIABILITIES AND SHAREHOLDERS'
EQUITY CURRENT LIABILITIES
Bank loans and overdrafts 100,033 80,758
Accounts payable 17,418 14,428
Accrued liabilities and other payables 11,048 4,735
Income taxes payable 1,130 -
Amount due to associated companies 1,196 320
Amount due to related companies 4,216 191
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TOTAL CURRENT LIABILITIES 135,041 100,432
MINORITY INTERESTS 3,401 3,893
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138,442 104,325
SHAREHOLDERS' EQUITY
Share capital 25 25
Additional paid-in capital 4,683 4,683
Reserves 7,603 7,603
Accumulated losses (7,936) (5,217)
Currency translation adjustments - (64)
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TOTAL SHAREHOLDERS' EQUITY 4,375 7,030
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TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 142,817 111,355
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The accompanying notes are an integral part of these condensed consolidated
financial statements.
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CHINA CONTAINER HOLDINGS LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
(Amounts in thousands)
Nine months ended
September 30
(unaudited)
1997 1996
US$ US$
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Net cash used in operating activities (11,682) (24,210)
CASH FLOWS USED IN INVESTING ACTIVITIES
Increase in fixed assets (3,517) (1,286)
Increase in construction in progress - (7,956)
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Net cash used in investing activities (3,517) (9,242)
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
Repayment of bank loans and overdrafts (15,658) -
Proceeds from bank loans and overdrafts 34,933 30,245
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Net cash provided by financing activities 19,275 30,245
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NET INCREASE/(DECREASE) IN CASH AND
CASH EQUIVALENTS 4,076 (3,207)
Cash and cash equivalents, at beginning
of period 2,873 7,431
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Cash and cash equivalents, at end of period 6,949 4,224
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The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
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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 nine month periods ended
September 30, 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.
2. INCOME TAX
A reconciliation of the effective income tax rates with the statutory
income tax rate in the PRC is as follows:
Three months ended Nine months ended
September 30 September 30
(unaudited) (unaudited)
1997 1996 1997 1996
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Statutory PRC tax rate (24.0%) (24.0%) (24.0%) 24.0%
Tax holiday............... 15% 3.7% 15% (15%)
Other Items............... 9% 20.3% 9% 4.7%
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0% 0% 0% 13.7%
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3. INVENTORIES
Inventories comprise:
1997 1996
September December
(unaudited) (audited)
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1997 1996
US$ US$
Raw materials 9,361 20,801
Work in progress 1,612 4,283
Finished goods 10,553 16,897
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21,526 41,981
Less: provision for inventories - (177)
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21,526 41,804
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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
Third Quarter of 1997 Compared With Third Quarter of 1996
1. Sales increased by 287.7% from US$6.5 million in the three
months ended September 30, 1996 to US$25.2 million in the three months ended
September 30, 1997, and sales quantity increased by 465.2% from 2,257 TEU in
1996 to 12,756 TEU in 1997. This was primarily due to the temporary shutdown for
modernization of the main production facilities at the Company's TY Container
subsidiary during the third quarter of 1996 and startup problems at the
Company's Tongsheng subsidiary, which made no contribution to the sales in the
third quarter of 1996.
2. The gross profit margin increased from negative 30.8% on
net sales in the third quarter of 1996 to negative 2.8% in the third quarter of
1997 primarily because the higher sales quantity lowered the fixed cost per
unit, which increased gross profit margin.
3. Selling and administrative expenses increased by 37.5% from
US$800,000 in the third quarter of 1996 to US$l.l million in the third quarter
of 1997, reflecting the increase in sales and sales quantity.
4. Financial expenses increased by 200% from US$500,000 in the
third quarter of 1996 to US$1.5 million in the third quarter of 1997, primarily
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
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(iii) a 27.6% increase in loan balances from US$78.4 million as at September 30,
1996 to US$100.0 million as at September 30, 1997. The increase in the loan
balances was mainly due to an increase in the Company's working capital
requirements as a result of filling a large order from the Chinese Railway
Ministry, based on eight year payment terms.
Nine Months Ended September 30, 1997 Compared With Nine Months Ended September
30, 1996
1. Sales increased by 28.2% from US$72.8 million in the nine
months ended September 30, 1996 to US$93.3 million in the nine months ended
September 30, 1997, and sales quantity increased by 60.9% from 25,148 TEU in
1996 to 40,468 TEU in 1997. This was primarily because of the temporary shutdown
for modernization of the main production facilities at the Company's TY
Container subsidiary during the third quarter of 1996 and startup problems at
the Company's Tongsheng subsidiary during the same period.
2. The gross profit margin decreased from l2.0% on net sales
in l996 to 6.5% in 1997 primarily because of a decrease in the unit sales price
of containers.
FINANCIAL CONDITION
1. Accounts Receivable increased by 285.5% from US$6.2 million
as at December 31, 1996 to US$23.9 million as at September 30, 1997,
primarily due to orders placed by two new customers with containers being
delivered before September 30, 1997 using the 60 day letter of credit terms.
2. Accounts Payable increased by 20.8% from US$14.4 million as
at December 31, 1996 to US$17.4 million as at September 30, 1997, primarily as a
result of increased production.
3. Accrued Liabilities and other payables increased by 136.2%
from US$4.7 million as at December 31, 1996 to US$11.1 million as at September
30, 1997, primarily due to: (i) the lengthening of the average payment terms to
certain creditors, and (ii) provision for the payment of certain non-salary
employee benefits.
4. Cash and cash equivalents increased by 137.9% from US$2.9
million as at December 31, 1996 to US$6.9 million as at September 30, 1997,
primarily due to the receipt of certain loan proceeds at the end of the third
quarter of 1997.
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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: January 23,1998 By: /s/ Ma Tieyi
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Name: Ma Tieyi
Title: Secretary and Treasurer
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