Xinhua China Reports Preliminary Year-End Results [FMYXWTS]
BEIJING, Oct. 17 /PRNewswire-FirstCall/ -- Xinhua China, Ltd.
(OTC Bulletin Board: XHUA) today announced preliminary results for the stub
fiscal year ended June 30, 2005. The company reported a net loss of
approximately $5.1 million, or nine cents per share on 58,646,775 weighted
average shares outstanding. Revenues for the period were about $15.5 million.
The company noted that since it began operations in February 2005 no
comparable prior period data is available. It also noted that its primary
operating subsidiary, Xinhua Publications Circulation & Distribution Co., Ltd.
was not established until February 1, 2005.
Preliminary results for the fiscal fourth quarter ended June 30 included
an unaudited net loss of about $3.6 million, or 6 cents per share, on
58,646,775 weighted average shares outstanding. Revenues in the fiscal fourth
quarter were approximately $10.9 million. No comparable fourth quarter
results are available since operations did not begin until February 1, 2005,
the company stated.
"As mentioned in prior announcements, the process of reconciling the
Chinese presentation of our results with U.S. generally accepted accounting
principles for the first time and the audit of those results, particularly at
the end of our first fiscal year, is a complex process and has taken longer
than originally anticipated," said Xianping Wang, president and CEO. "We
expect the audit work to be completed within the next few weeks but we have an
obligation to provide investors with information on a timely basis so we are
announcing preliminary results now. We do not anticipate that the remaining
work will result in significant differences," Wang noted.
"It is important to recognize these preliminary results represent only
five months of operations. Additionally the portion of the calendar year
these five months represents has, historically, accounted for less than half
of annual revenues.
"The circumstances surrounding our startup were such that accounting rules
prohibited us from recognizing certain revenues that would ordinarily be
recognized in the normal course of our ongoing business. These circumstances
were more fully discussed in our announcement of third quarter earnings on
May 24, 2005. Further, as part of the startup process, we incurred
significant one-time costs. Thus, our results for the stub year are not
representative of the level of performance we anticipate over the longer
term," Wang added.
The company also reported preliminary balance sheet data as of
June 30, 2005. Current assets were $57.3 million, consisting primarily of
cash in the amount of $1.7 million, accounts receivable of $39.3 million and
inventory of $16.3 million. Plant, equipment and machinery stood at
$20.6 million, the majority of which represented the company's one million
square foot distribution center in Beijing. Land use rights amounted to
$5.4 million and goodwill was $12.4 million.
The company's liabilities as of June 30, 2005 were 90.1 million. Of this
amount $70.3 million was related to accounts payable and $19.5 million of
long-term debt. As of the end of the stub year, the company reported a
shareholder deficit of $2.6 million.
Wang said the first five months of operations under the new structure
reflect not only the seasonal nature of the book business in China but also
the start-up process. "We began operations during a seasonally slow period of
the year and our results were further affected by the timing of the Chinese
New Year holiday, during which commerce slows dramatically. Additionally, our
goal of modernizing the book circulation and distribution industry in China is
not something that will be accomplished in a few months. Our customer network
is very large, including over 12,800 locations, and it will require some time
to create new systems for distribution and to gain the recognition and
acceptance of the new Xinhua C & D among all these customers," Wang noted.
"Looking at our long-term needs, we reached an agreement that gives us a
lease on land for a new, more efficient distribution center located in
Beijing. We are consolidating a number of presently dispersed parts of our
operation into a single, existing distribution center while we develop the new
center.
"Further, since operations began on February 1, 2005, we have taken steps
to rationalize our operating procedures and generally move the company from a
structure where social and political goals took precedent over profitability
to one in which the company can be consistently and increasingly profitable.
This has affected financial performance," said Wang.
"We are confident that these actions and others we will take will begin to
manifest themselves in the near future. Unquestionably we have additional
work ahead of us but we have the talent and resolve to achieve our goals,"
Wang added.
The company said it expects the audit and review of its year-end financial
statement to be completed within the next few weeks and it expects to file its
Annual Report to the U.S. Securities and Exchange Commission on Form 10-KSB as
soon as possible. It said it will update the information in this release and
provide audited financial statements at that time.
About Xinhua China
Xinhua China Ltd. is a US publicly traded holding company that, through
one of its subsidiaries, Xinhua Publications Circulation & Distribution Co.,
Ltd., holds a national license for distribution of books and other
publications in China. Xinhua China is involved in forming strategy,
operating and financing for Xinhua C & D. Xinhua China also interfaces with
the worldwide financial communities to inform them of the combined companies'
goals and developments. For more information, please call Mr. Alex Helmel at
1 800 884-3864 ext. 17 or visit its website at xinhuachina.com.cn . |
