<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10Q
[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.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from to
----------------- ------------------------
Commission File No. 0-3132
SUNBASE ASIA, INC.
(Exact name of Registrant as specified in its charter)
Nevada 94-1612110
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
19/F, First Pacific Bank Centre
51-57 Gloucester Road
Wanchai, Hong Kong
(Address of principal executive offices)
Registrant's telephone number, including area code: (852) 2865-1511
Indicate by check mark whether the registrant (1) has filed all reports required
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
--- ---
As of September 30, 1997, the Company had 12,700,141 shares of common stock
issued and outstanding.
1
<PAGE>
SUNBASE ASIA , INC. AND SUBSIDIARIES
------------------------------------
INDEX
<TABLE>
<CAPTION>
PAGE
----
PART I: FINANCIAL INFORMATION
<S> <C>
Item 1 -- Financial statements
Consolidated Condensed Balance Sheets (unaudited)
- December 31, 1996 and September 30, 1997 3-4
Consolidated Condensed Statements of Income (unaudited)
- Three months and nine months ended
September 30, 1996 and 1997 5
Consolidated Condensed Statements of Cash Flows (unaudited)
- Nine months ended September 30, 1996 and 1997 6
Notes to Consolidated Condensed Financial Statements
(unaudited)
- Three months and nine months ended
September 30, 1996 and 1997 7-11
Item 2 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations 12-19
PART II: OTHER INFORMATION
Item 6 -- Exhibits and Reports on Form 8-K 20
SIGNATURES 21
EXHIBIT 11 Computation of Earnings Per Common Share 22-23
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
--------------------
SUNBASE ASIA, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
AS OF DECEMBER 31, 1996 AND SEPTEMBER 30, 1997
(Amounts in thousands, except number
of shares and per share data)
<TABLE>
<CAPTION>
12/31/96 9/30/97
---------------- ----------------
Notes RMB US$ RMB US$
----- ----- --- --- ---
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and bank balances 87,428 10,546 50,266 6,064
Accounts receivable, net 313,791 37,852 377,861 45,580
Notes receivable 15,212 1,835 6,465 780
Inventories, net 4 476,409 57,468 489,241 59,016
Other receivables 70,075 8,453 97,187 11,723
Receivable from disposal
of an investment 13,419 1,618 - -
Due from related companies 205,275 24,762 405,287 48,889
--------- -------- ---------- -------
Total current assets 1,181,609 142,534 1,426,307 172,052
Fixed assets 656,071 79,140 637,600 76,912
Deferred asset 22,204 2,678 15,395 1,857
Long term investments 1,012 122 1,012 122
Goodwill 11,587 1,398 10,954 1,321
--------- ---------- --------- -------
Total assets 1,872,483 225,872 2,091,268 252,264
========= ========== ========= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short term bank loans 358,847 43,286 382,646 46,158
Long term bank loans, current portion 98,641 11,899 106,171 12,807
Accounts payable 151,971 18,332 125,318 15,117
Notes payable 2,800 338 10,800 1,303
Accrued liabilities and other payables 55,544 6,700 92,117 11,112
Short term obligations under capital leases 18,788 2,266 20,015 2,414
Short term portion of
secured promissory note 5 12,450 1,502 12,435 1,500
Income tax payable 38,368 4,628 64,064 7,728
Taxes other than income 25,225 3,043 75,610 9,121
Due to related companies 14,357 1,732 34,398 4,149
--------- ---------- --------- -------
Total current liabilities 776,991 93,726 923,574 111,409
Long term bank loans 35,000 4,222 23,000 2,774
Long term obligations under capital leases 88,924 10,726 73,756 8,897
Long term portion of secured promissory note 5 12,450 1,502 12,435 1,500
Convertible debentures 6 95,450 11,514 95,335 11,500
Minority interests 420,484 50,722 475,212 57,324
--------- -------- ---------- -------
1,429,299 172,412 1,603,312 193,404
</TABLE>
Continued/...
The accompanying notes form an integral part of these consolidated condensed
financial statements.
3
<PAGE>
SUNBASE ASIA, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND SEPTEMBER 30, 1997 (UNAUDITED) (CONTINUED)
(Amounts in thousands, except number
of shares and per share data)
<TABLE>
<CAPTION>
12/31/96 9/30/97
------------------ -------------------
RMB US$ RMB US$
--------- ------- ---------- -------
<S> <C> <C> <C> <C>
Shareholders' equity:
Common Stock, par value US$ 0.001 each,
50,000,000 shares authorized;
12,700,141 shares issued, and fully paid up 107 13 107 13
Preferred Stock, par value US$ 0.001 each,
25,000,000 shares authorized;
Convertible Preferred Stock - Series A;
36 shares issued and outstanding 44,533 5,372 44,533 5,372
Convertible Preferred Stock - Series B;
6,800 shares issued and outstanding 28,288 3,412 28,288 3,412
Contributed surplus 188,019 22,680 188,019 22,680
Reserves 27,866 3,361 27,866 3,361
Retained earnings 154,371 18,622 199,143 24,022
--------- ------- ---------- -------
Total shareholders' equity 443,184 53,460 487,956 58,860
--------- ------- ---------- -------
Total liabilities and shareholders' equity 1,872,483 225,872 2,091,268 252,264
========= ======= ========== =======
</TABLE>
The accompanying notes form an integral part of these consolidated condensed
financial statements.
4
<PAGE>
SUNBASE ASIA, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
(Amounts in thousands, except number of shares and per share data)
<TABLE>
<CAPTION>
Nine Months Ended September 30, Three Months Ended September 30,
--------------------------------------- --------------------------------------
1996 1997 1997 1996 1997 1997
Notes RMB RMB US $RMB RMB US$
------ ---- ---- ---- ---- --- ----
<S> <C> <C> <C> <C> <C> <C>
Net sales to
- Third parties 588,084 427,571 51,577 152,011 158,047 19,065
- Related parties 136,876 219,095 26,429 107,260 2,776 335
---------- ---------- ---------- ----------- ---------- ----------
724,960 646,666 78,006 259,271 160,823 19,400
Cost of sales ( 444,750) ( 394,097) ( 47,539) ( 158,833) ( 98,272) ( 11,854)
---------- ---------- ---------- ----------- ---------- ----------
Gross profit 280,210 252,569 30,467 100,438 62,551 7,546
Selling, general and
administrative expenses
- Third parties ( 58,397) ( 49,614) ( 5,985) ( 18,109) ( 14,332) ( 1,729)
- Related parties ( 33,334) ( 33,693) ( 4,064) ( 11,263) ( 8,747) ( 1,055)
---------- ---------- ---------- ----------- ---------- ----------
( 91,731) ( 83,307) ( 10,049) ( 29,372) ( 23,079) ( 2,784)
Interest expense, net
- Third parties ( 38,474) ( 43,431) ( 5,239) ( 13,192) ( 11,726) ( 1,415)
- Related parties ( 7,573) ( 6,446) ( 778) ( 2,434) ( 2,051) ( 248)
---------- ---------- ---------- ----------- ---------- ----------
( 46,047) ( 49,877) ( 6,017) ( 15,626) ( 13,777) ( 1,663)
---------- ---------- ---------- ----------- ---------- ----------
Income before income taxes 142,432 119,385 14,401 55,440 25,695 3,099
Provision for income taxes:
- Current ( 23,590) ( 19,885) ( 2,399) ( 9,170) ( 4,162) ( 502)
---------- ---------- ---------- ----------- ---------- ----------
Income before minority
interests 118,842 99,500 12,002 46,270 21,533 2,597
Minority interests ( 64,926) ( 54,728) ( 6,601) ( 25,236) ( 11,457) ( 1,381)
---------- ---------- ---------- ----------- ---------- ----------
Net income 53,916 44,772 5,401 21,034 10,076 1,216
========== ========== ========== =========== ========== ==========
Earnings per common share 2
- Primary 3.26 2.64 0.32 1.23 0.59 0.07
========== ========== ========== =========== ========== ==========
- Fully Diluted 3.25 2.77 0.33 1.22 0.67 0.08
========== ========== ========== =========== ========== ==========
Number of shares outstanding 2
- Primary 16,561,644 16,980,141 16,980,141 17,107,412 16,980,141 16,980,141
========== ========== ========== =========== ========== ==========
- Fully Diluted 16,963,420 19,280,141 19,280,141 18,199,593 19,280,141 19,280,141
========== ========== ========== =========== ========== ==========
</TABLE>
The accompanying notes form an integral part of these consolidated condensed
financial statements.
5
<PAGE>
SUNBASE ASIA, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
(Amounts in thousands)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
------------------------------------
1996 1997 1997
RMB RMB US$
---- ---- ----
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income 53,916 44,772 5,401
Adjustments to reconcile income to net cash
used in operating activities:
Minority interests 64,926 54,728 6,601
Depreciation 47,232 53,170 6,414
Loss on disposal of fixed assets ( 1,111) 582 70
Amortization of goodwill 352 633 76
Exchange difference on secured promissory
note and convertible debentures - ( 145) ( 17)
Amortization of present value discount on deferred asset - ( 587) ( 71)
Amortization of deferred debenture issue expense - 1,021 123
Others 2,145 - -
Changes in operating assets and liabilities-
(Increase) decrease in assets:
Accounts receivable ( 243,397) ( 64,070) ( 7,729)
Notes receivable 9,748 8,747 1,055
Inventories 73,636 ( 12,832) ( 1,548)
Prepaid VAT 40,429 - -
Other receivables ( 10,167) ( 27,112) ( 3,270)
Receivable from disposal of an investment - 13,419 1,619
Due from related companies 10,829 (200,012) (24,127)
Increase (decrease) in liabilities:
Accounts payable 30,199 ( 26,653) ( 3,215)
Notes payable 6,228 8,000 965
Accrued liabilities and other payables ( 20,098) 36,573 4,412
Income tax payable 29,064 25,696 3,100
Taxes other than income 28,664 56,760 6,847
Due to related companies ( 109,646) 6,100 736
Due to shareholders ( 16,646) - -
-------- -------- -------
Net cash used in operating activities ( 3,697) ( 21,210) ( 2,558)
-------- -------- -------
Cash flows from investing activities:
Disposal of long term investments 426 - -
Proceeds from disposal of fixed assets 1,798 (134) ( 16)
Additions to fixed assets ( 66,319) ( 35,147) ( 4,240)
-------- -------- -------
Net cash used in investing activities ( 64,095) ( 35,281) ( 4,256)
-------- -------- -------
Cash flows from financing activities:
Net increase in bank loans 60,758 19,329 2,332
Repayment of other loans ( 33,810) - -
Repayment of secured promissory note 5 ( 16,700) -
Proceeds from issuance of convertible debentures 6 95,450 -
Proceeds from sale of common stock, net of costs 7 35,399 -
-------- ------- -
Net cash provided by financing activities 141,097 19,329 2,332
-------- -------- -------
Net increase (decrease) in cash and cash equivalents 73,305 ( 37,162) ( 4,482)
Cash and cash equivalents, at beginning of period 30,944 87,428 10,546
-------- -------- -------
Cash and cash equivalents, at end of period 104,249 50,266 6,064
======== ======== =======
Non-cash transaction:
Financing of lease arrangements 12,815 6,446 777
======== ======== =======
</TABLE>
The accompanying notes form an integral part of these consolidated condensed
financial statements.
6
<PAGE>
SUNBASE ASIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS
ENDED SEPTEMBER 30, 1996 AND 1997
(Amounts in thousands, except number of shares and per share data)
1. GENERAL
Sunbase Asia, Inc., a Nevada Corporation ("the Company"), is engaged in
the design, manufacture and distribution of a broad range of bearing products
in the People's Republic of China ("PRC") and certain western countries,
including the United States.
The Company acquired 100% of the issued share capital of China Bearing
Holdings Limited (China Bearing) on December 2, 1994 pursuant to a Share
Exchange Agreement with Asean Capital Limited in exchange for 10,261,000
shares of common stock. The transaction has been treated as a
recapitalization of China Bearing with China Bearing as the acquirer (reverse
acquisition). The historical financial statements prior to December 2, 1994
are those of China Bearing.
The Company owns, through various subsidiaries and joint venture
interests, a 51.4% indirect ownership in Harbin Bearing Company Limited
("Harbin Bearing"), a joint stock limited company organized under the law of
the PRC. Harbin Bearing is located in Harbin, the PRC, and has been in
business since 1950. Harbin Bearing manufactures a wide variety of bearings
in the PRC for use in commercial, industrial and aerospace applications and
which are sold primarily in the PRC and certain western countries, including
the United States.
On January 16, 1996 (effective December 29, 1995), the Company acquired
Smith Acquisition Company, Inc. dba Southwest Products Company (Southwest
Products), a bearing manufacturing company located in Los Angeles County,
California, that has been in business since 1945. Southwest Products
manufactures precision spherical bearings that are sold primarily to the
aerospace and commercial aviation industries. Its major customers are
located in the United States.
2. BASIS OF PRESENTATION
The accompanying consolidated condensed financial statements have been
prepared in accordance with generally accepted accounting principles in the
United States of America. All material intercompany accounts and
transactions were eliminated on consolidation.
The accompanying consolidated condensed financial statements are
unaudited but, in the opinion of the management of the Company, contain all
adjustments, necessary to present fairly the financial position at September
30, 1997, the results of operations for the three months and nine months
ended September 30, 1996 and 1997, and the changes in cash flows for the nine
months ended September 30, 1996 and 1997. These adjustments are of a normal
recurring nature.
7
<PAGE>
SUNBASE ASIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS
ENDED SEPTEMBER 30, 1996 AND 1997
(Amounts in thousands, except number of shares and per share data)
2. BASIS OF PRESENTATION (continued)
The consolidated balance sheet as of December 31, 1996, is derived from
the Company's audited financial statements. Certain information and footnote
disclosures normally included in financial statements that have been prepared
in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations of the Securities
and Exchange Commission, although management of the Company believes that the
disclosures contained in these financial statements are adequate to make the
information presented therein not misleading. For further information, refer
to the consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1996 as filed with the Securities and Exchange Commission.
For the three months and nine months ended September 30, 1996 and 1997,
primary earnings per common share have been calculated using the weighted
average number of shares of common stock and common stock equivalents
outstanding during the respective periods. Common stock equivalents consist
of convertible preferred stock and outstanding stock options. The
computation of fully diluted earnings per share, where appropriate, assumes
the full conversion of the Convertible Debentures and the elimination of the
related after tax interest expense effective August 23, 1996.
The results of operations for the three months and nine months ended
September 30, 1997 are not necessarily indicative of the results of
operations to be expected for the full fiscal year ending December 31, 1997.
3. FOREIGN CURRENCY TRANSLATION AND EXCHANGE
In preparing the consolidated financial statements, the financial
statements of the Company are measured using Renminbi ("RMB") as the
functional currency. All foreign currency transactions are translated into
RMB using the applicable floating rates of exchange quoted by the People's
Bank of China prevailing at the dates of the transactions. Monetary assets
and liabilities denominated in foreign currencies have been translated into
RMB using the unified exchange rate prevailing at the balance sheet dates.
The resulting exchange gains or losses have been credited or charged to the
statements of income for the periods in which they occur.
The Company's share capital is denominated in United States dollars
(US$) and the reporting currency is the RMB. For financial reporting
purposes, the US$ share capital amounts have been translated into RMB at the
applicable rates prevailing on the transaction dates.
For financial reporting purposes, translation of amounts from RMB into
US$ for the convenience of the reader has been made at the exchange rate
quoted by the People's Bank of China on September 30, 1997 of US$ 1.00 = RMB
8.29. No representation is made that the RMB amounts could have been, or
could be, converted into US$ at the rate on September 30, 1997 or at any
other certain rate on September 30, 1997.
8
<PAGE>
SUNBASE ASIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS
ENDED SEPTEMBER 30, 1996 AND 1997
(Amounts in thousands, except number of shares and per share data)
4. INVENTORIES
Inventories consist of the following at December 31, 1996 and September 30,
1997:
<TABLE>
<CAPTION>
December 31, 1996 September 30, 1997
----------------- -------------------
<S> <C> <C> <C> <C>
RMB US$ RMB US$
--- --- --- ---
Raw materials 102,856 12,407 95,508 11,521
Work-in-progress 121,847 14,698 126,291 15,234
Finished goods 257,121 31,016 273,810 33,029
------- -------- ------- ------
481,824 58,121 495,609 59,784
Less: Allowance for obsolescence (5,415) (653) (6,368) (768)
------- -------- ------- ------
Inventories, net 476,409 57,468 489,241 59,016
======= ======== ======= ======
</TABLE>
5. SECURED PROMISSORY NOTE
A promissory note for US$ 5,012 (RMB 41,600) (the "Note") was issued to
Asean Capital Limited ("Asean") in connection with the Share Exchange
Agreement and is secured by a continuing security interest in all of the
Company's title and interest in the outstanding capital stock of its wholly-
owned subsidiary China Bearing. The Note is denominated in and is repayable
in full in United States dollars, and bears interest at 8% per annum.
In connection with the issuance of convertible debentures described
at Note 6, Asean has undertaken that for so long as any of the debentures are
outstanding, no amounts are to be repaid on the Note unless there is
sufficient working capital and the repayment is made in three annual
installments with an effective date of August 1, 1996. The first installment
was made on September 10, 1996.
9
<PAGE>
SUNBASE ASIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS
ENDED SEPTEMBER 30, 1996 AND 1997
(Amounts in thousands, except number of shares and per share data)
6. CONVERTIBLE DEBENTURES
Pursuant to a Subscription Agreement dated August 2, 1996, (the
"Subscription Agreement"), among China Bearing, Asean Capital Limited, China
International Bearing Holdings Limited, the Company and Southwest Products
(collectively, the "Sunbase Group"); Glory Mansion Limited, Wardley China
Investment Trust, MC Private Equity Partners Asia Limited and Chine
Investissement 2000 (collectively the "Investors"), on August 23, 1996, China
Bearing issued an aggregate of US$ 11,500,000 principal amount of Convertible
Debentures (the "Convertible Debentures") to the Investors. Unless the
Convertible Debentures have been converted, the Convertible Debentures are
due and payable in August, 1999 (the "Maturity Date"). The Convertible
Debentures bear interest at the rate of the higher of (i) 5% per annum (net
of withholding tax, if applicable) and (ii) such percentage of the dividend
yield calculated by reference to dividing the annual dividend declared per
share of Common Stock of the Company by the Conversion Price (as hereinafter
defined). Interest is payable quarterly.
The Investors have the right to convert at any time, in whole or in part
the principal amount of the Convertible Debentures into shares of the Common
Stock of the Company. The Conversion Price (the "Conversion Price") is
initially $5.00 per share, subject to adjustment for (a) change in par value
of the Common Stock, (b) issuance of shares by way of capitalization of
profits or reserves, (c) capital distributions, (d) rights offering at a
price which is less than the lower of the then market price or Conversion
Price, (e) issuance of derivative securities where the total consideration
per share initially received is less than the lower of the then market price
or Conversion Price, (f) issuance of shares at a price per share which is
less than the lower of the then market price or the Conversion Price, and (g)
if the cumulative audited earnings per common share for any two consecutive
fiscal years commencing with the fiscal year ending December 31, 1996 and
ending with the fiscal year ending December 31, 1998 are less than the
specified projection of cumulative earnings per common share for such
periods.
The Convertible Debentures are required to be redeemed on the
Maturity Date at its principal amount outstanding together with any accrued
but unpaid interest together with an amount that would enable the Investors
to yield an aggregate internal rate of return of 12% per annum on the cost of
their investment. In addition, if any of the events of default specified in
the Convertible Debentures occur, the Convertible Debenture are automatically
due and payable at the principal amount outstanding together with accrued
interest and an amount that would enable the Investors to yield an aggregate
internal rate of return on their investment of 19.75% per annum. Events of
default include the delisting of the shares from NASDAQ or its suspension
thereof; default in performance after failure to cure after notice; failure
to pay principal or interest; failure to pay indebtedness for borrowed money;
bankruptcy, insolvency or unsatisfied judgment; failure to achieve earning
per common share of at least $.55 for fiscal years commencing January 1,
1996; and accounts receivable reaching a certain level in relationship to net
sales.
10
<PAGE>
SUNBASE ASIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS
ENDED SEPTEMBER 30, 1996 AND 1997
(Amounts in thousands, except number of shares and per share data)
6. CONVERTIBLE DEBENTURES (continued)
As a result of the foregoing, although the Convertible Debentures bear
interest at the rate of 5% per annum, interest is accrued at the rate of 12%
per annum.
The obligations of China Bearing under the Convertible Debentures are
guaranteed by the other members of the Sunbase Group.
7. SALE OF COMMON STOCK
On June 10, 1996, the Company sold 1,000,000 shares of common stock (the
"Private Placement Shares") at US$5.00 per share, which generated net
proceeds of US$ 4,347 (RMB 36,077). Such shares to the extent held by non-
affiliates of the Company may be sold pursuant to Rule 144 under the
Securities Act of 1933.
11
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OF OPERATIONS
- -------------
OVERVIEW
The Company owns, through various subsidiaries and joint venture
interests, a 51.4% indirect ownership in Harbin Bearing. Harbin Bearing
manufactures a wide variety of bearings in the PRC for use in commercial,
industrial and aerospace applications that are sold primarily in the PRC and
certain western countries, including the United States. On January 16, 1996
(effective December 29, 1995), the Company acquired Southwest Products, which
manufactures precision spherical bearings that are sold primarily to the
aerospace and commercial aviation industries. The acquisition of Southwest
Products has been accounted for under the purchase method of accounting. The
results of Southwest Products have been consolidated into the Company's
consolidated results of operations commencing January 1, 1996.
Unless specifically stated, all amounts are in thousands (RMB '000).
RESULTS OF OPERATION
THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997:
The following table sets forth certain unaudited operating data (in RMB
and as a percentage of the Company's sales) for the three months ended September
30, 1996 and 1997.
<TABLE>
<CAPTION>
Three Months Ended September 30,
---------------------------------------------
1996 1997
------- -----------
RMB % RMB %
----------- ------- ----------- -------
<S> <C> <C> <C> <C>
Sales 259,271 100.0 160,823 100.0
Cost of sales (158,833) (61.3) (98,272) (61.1)
-------- ----- -------- -----
Gross profit 100,438 38.7 62,551 38.9
Selling expenses (7,692) (3.0) (4,619) (2.9)
General and administrative expenses (21,680) (8.4) (18,460) (11.5)
Interest expenses (15,626) (6.0) (13,777) (8.6)
-------- ----- -------- -----
Income before income taxes 55,440 21.3 25,695 15.9
Provision for income taxes (9,170) (3.5) (4,162) (2.6)
-------- ----- -------- -----
Income before minority interests 46,270 17.8 21,533 13.3
Minority interests (25,236) (9.7) (11,457) (7.1)
-------- ----- -------- -----
Net income 21,034 8.1 10,076 6.2
======== ===== ======== =====
</TABLE>
12
<PAGE>
Sales
-----
Sales for the three months ended September 30, 1997 decreased by RMB
98,448 or 38% to RMB 160,823, as compared to RMB 259,271 for the three
months ended September 30, 1996. The decrease in sales was a result of the
Company's efforts to adjust to tightened credit conditions in the PRC. The
Company has responded to such conditions by enhancing its credit review
procedures and limiting sales to customers where collectability was
uncertain. During the period presented, there were no material price
increases from the prior three month period.
Sales for Harbin Bearing for the three months ended September 30,
1997 decreased by RMB 101,075 or 40.5% to RMB 148,709 as compared to RMB
249,784 for the three months ended September 30, 1996. However, this
decrease was partially offset by an increase in sales for Southwest
Products by RMB 2,627 or 27.7% to RMB 12,114 for the three months ended
September 30, 1997 as compared to RMB 9,487 for the three months ended
September 30, 1996.
Cost of Sales/Gross Profit
--------------------------
Cost of sales for the three months ended September 30, 1997
decreased 38.1% to RMB 98,272 as compared to RMB 158,833 for the three
months ended September 30, 1996. The cost of sales for Harbin Bearing for
the three months ended September 30, 1997 and 1996 was calculated using the
gross profit method by reference to average annual gross profit ratios.
The cost of sales for Southwest Products for the three months ended
September 30, 1997 and 1996 was calculated on an actual cost basis.
Gross profit decreased by RMB 37,887 or 37.7% for the three months
ended September 30, 1997 as compared to the three months ended September
30, 1996. The decrease in gross profit was attributable to the decrease in
sales. However, gross profit as a percentage of sales increased slightly
to 38.9% in 1997 from 38.7% in 1996 due to different product mix from small
and medium sized bearings to higher margin medium and large sized bearings.
Selling Expenses
----------------
Selling expenses for the three months ended September 30, 1997
decreased by RMB 3,073 or 40% to RMB 4,619 as compared to RMB 7,692 for the
three months ended September 30, 1996. The decrease in selling expenses
was due to the decrease in sales.
13
<PAGE>
General and Administrative Expenses
-----------------------------------
General and Administrative Expenses for the three months ended
September 30, 1997 decreased by RMB 3,220 or 14.8% to RMB 18,460 as
compared to RMB 21,680 for the three months ended September 30, 1996.
General and administrative expenses as a percentage of sales increased to
11.5% in 1997 from 8.4% in 1996 primarily due to the decline in sales.
Significant factors affecting the change in general and administrative
expenses between the three months ended September 30, 1997 and three months
ended September 30, 1996 were as follows:
a. An aggregate cash discount of RMB 479 which was granted during
the three months ended September 30, 1996 as an incentive to customers for
early settlement of debt in order to accelerate cash collections. No such
cash discount was granted during the three months ended September 30, 1997.
b. A decrease in operating expenses of RMB 2,770 during the three
months ended September 30, 1997 as compared to the three months ended
September 30, 1996 as a result of cost controls implemented in order to
achieve the operational efficiency.
Interest Expense
----------------
Interest Expense for the three months ended September 30, 1997
decreased by RMB 1,849 or 11.8% to RMB 13,777 as compared to RMB 15,626 for
the three months ended September 30, 1996. The decrease in interest expense
was primarily attributable to a decrease in the interest rate on new short
term bank loans effective on August 23, 1996. The average annual interest
rate was 12.55% in 1996 compared to 11.09% in 1997. However, this decrease
was partially offset by an increase in interest from the convertible
debentures.
Net Income
----------
As a result of the aforementioned factors, net income decreased by
RMB 10,958 or 52% to RMB 10,076 for the three months ended September 30,
1997 as compared to RMB 21,034 for the three months ended September 30,
1996.
14
<PAGE>
NINE MONTHS ENDED JUNE 30, 1996 AND 1997:
The following table sets forth certain unaudited operating data (in RMB
and as a percentage of the Company's sales) for the nine months ended September
30, 1996 and 1997.
<TABLE>
<CAPTION>
Nine Months Ended September 31,
---------------------------------------------
1996 1997
RMB % RMB %
---------- ------- ---------- -------
<S> <C> <C> <C> <C>
Sales 724,960 100.0 646,666 100.0
Cost of sales (444,750) (61.3) (394,097) (60.9)
-------- ----- -------- -----
Gross profit 280,210 38.7 252,569 39.1
Selling expenses (20,064) (2.8) (16,565) ( 2.6)
General and administrative expenses (71,667) (9.9) (66,742) (10.3)
Interest expenses (46,047) (6.4) (49,877) ( 7.7)
-------- ----- -------- -----
Income before income taxes 142,432 19.6 119,385 18.5
Provision for income taxes (23,590) (3.2) (19,885) ( 3.1)
-------- ----- -------- -----
Income before minority interests 118,842 16.4 99,500 15.4
Minority interests (64,926) (9.0) (54,728) (8.5)
-------- ----- -------- -----
Net income 53,916 7.4 44,772 6.9
======== ===== ======== =====
</TABLE>
Sales
-----
Sales for the nine months ended September 30, 1997 decreased by RMB
78,294 or 10.8% to RMB 646,666 as compared to RMB 724,960 for the nine
months ended September 30, 1996. The decrease in sales was a result of the
Company's efforts to adjust to tightened credit conditions in the PRC. The
Company has responded to such conditions by enhancing its credit review
procedures and limiting sales to customers where collectability was
uncertain. During the period presented, there were no material price
increases from the prior nine month period.
Sales for Harbin Bearing for the nine months ended September 30,
1997 decreased by RMB 86,270 or 12.3% to RMB 613,130 as compared to RMB
699,400 for the nine months ended September 30, 1996. However, this
decrease was partially offset by an increase in sales for Southwest
Products by RMB 7,976 or 31.2% to RMB 33,536 for the nine months ended
September 30, 1997 as compared to RMB 25,560 for the nine months ended
September 30, 1996.
Cost of Sales/Gross Profit
--------------------------
Cost of sales for the nine months ended September 30, 1997 decreased
to RMB 394,097 as compared to RMB 444,750 for the nine months ended
September 30, 1996. The cost of sales for Harbin Bearing for the nine
months ended September 30, 1997 and 1996 was calculated using the gross
profit method by reference to average annual gross profit ratios. The cost
of sales for Southwest Products for the nine months ended September 30,
1997 and 1996 was calculated on an actual cost basis.
15
<PAGE>
Gross profit decreased by RMB 27,641 or 10% for the nine months ended
September 30, 1997 as compared to the nine months ended September 30, 1996. The
decrease in gross profit was attributable to the decrease in sales. However,
gross profit as a percentage of sales increased slightly to 39.1% in 1997 from
38.7% in 1996 due to different product mix from small and medium sized bearings
to higher margin medium and large sized bearings.
Selling Expenses
----------------
Selling expenses for the nine months ended September 30, 1997
decreased by RMB 3,499 or 17.4% to RMB 16,565 as compared to RMB 20,064 for
the nine months ended September 30, 1996. The decrease in selling expenses
was due to the decrease in sales. Selling expenses as a percentage of
sales decreased from 2.8% in 1996 to 2.6% in 1997.
General and Administrative Expenses
-----------------------------------
General and Administrative Expenses for the nine months ended
September 30, 1997 decreased by RMB 4,925 or 6.9% to RMB 66,742 as compared
to RMB 71,667 for the nine months ended September 30, 1996. General and
administrative expenses as a percentage of sales increased to 10.3% in 1997
from 9.9% in 1996.
The decrease was primarily due to:
a. An aggregate cash discount of RMB 6,986 which was granted during
the nine months ended September 30, 1996 as an incentive to customers for
early settlement of debts in order to accelerate cash collections. No such
cash discount was granted during the nine months ended September 30, 1997.
b. A decrease in compensation expense in 1997 of RMB 448 related to
the voluntary early retirement program at Harbin Bearing.
The above decrease was then offset by the following increases:
a. There was a loss on disposal of fixed assets of RMB 582 during
the nine months ended September 30, 1997 while there was a gain on disposal
of fixed assets of RMB 1,111 during the nine months ended September 30,
1996.
b. An increase in property tax of RMB 1,062 in the nine months
ended September 30, 1997 as a result of an increase in fixed assets. No
such tax was paid during the nine months ended September 30, 1996.
16
<PAGE>
Interest Expense
----------------
Interest Expense for the nine months ended September 30, 1997
increased by RMB 3,830 or 8.3% to RMB 49,877 as compared to RMB 46,047 for
the nine months ended September 30, 1996. The increase in interest expense
was primarily attributable to the increase of RMB 7,360 of Convertible
Debenture interest calculated at the rate of 12% per annum and was offset
by a decrease in the interest rate on new short term bank loan effective on
August 23, 1996. The average annual interest rate was 12.55% in 1996
compared to 11.09% in 1997. However, this decrease was partially offset by
an increase in interest from the convertible debentures.
Net Income
----------
As a result of the aforementioned factors, net income decreased by
RMB 9,144 or 17% to RMB 44,772 for the nine months ended September 30, 1997
as compared to RMB 53,916 for the nine months ended September 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES
For the nine months ended September 30, 1997, the Company's operations
utilized cash resources of RMB 21,210 as compared to RMB 3,697 utilized for the
nine months ended September 30, 1996. The Company's net working capital
increased by RMB 98,115 at September 30, 1997 to RMB 502,733 as compared to RMB
404,618 at December 31, 1996, and the Company's current ratio at September 30,
1997 was 1.54:1 as compared to 1.52:1 at December 31, 1996 and 1.66:1 at
September 30, 1996.
Accounts receivable increased by RMB 64,070 or 20% to RMB 377,861 at
September 30, 1997, as compared to RMB 313,791 at December 31, 1996. Due from
related companies increased by RMB 200,012 during the nine months ended
September 30, 1997. Both increases are mainly a result of credit terms granted
on sales made in the period. The aggregate of accounts receivable and due from
related parties increased RMB 264,082 or 50.9% during the nine months ended
September 30, 1997.
INVESTING ACTIVITIES
Capital expenditures for the nine months ended September 30, 1997 of RMB
35,147 consisted of costs relating to the construction of new plant and
buildings, and the renovation of existing facilities and equipment, and were
financed by internally generated funds, as well as short-term and long-term bank
loans. There are no other material capital expenditures expected in the near
future. There is also no dividend restriction on any bank loans.
During the nine months ended September 30, 1997, payment of RMB 13,419 was
received on the receivable from disposal of investment, which was recorded as
other income in the quarter ended December 31, 1996.
FINANCING ACTIVITIES
The Company has historically relied on both long and short term bank loans
from Chinese banks to
17
<PAGE>
support its operations and capital requirements. Short term loans have terms
ranging from three months to six months, are utilized to finance both operating
and capital requirements, and are renewed on a revolving basis. Long term bank
loans are utilized to fund capital expansion projects. During the nine months
ended September 30, 1997, the net increase in bank loans (after deducting
repayments) was RMB 19,329, which was utilized to fund the capital expenditures.
The Company believes that it will be able to continue to maintain and
expand its bank borrowings under existing terms and conditions.
Southwest Products has relied upon a revolving accounts receivable line
of credit to supplement its capital requirements. The Company believes that
Southwest Products will be able to continue to maintain and expand its bank
borrowings under existing terms and conditions.
Pursuant to a Subscription Agreement dated August 2, 1996, (the
"Subscription Agreement"), among China Bearing, Asean Capital Limited, China
International Bearing Holdings Limited, the Company and Southwest Products
(collectively, the "Sunbase Group"); Glory Mansion Limited, Wardley China
Investment Trust, MC Private Equity Partners Asia Limited and Chine
Investissement 2000 (collectively the "Investors"), on August 23, 1996, China
Bearing issued an aggregate of US$ 11,500,000 principal amount of Convertible
Debentures (the "Convertible Debentures") to the Investors. Unless the
Convertible Debentures have been converted, the Convertible Debentures are due
and payable in August, 1999 (the "Maturity Date"). The Convertible Debentures
bear interest at the rate of the higher of (i) 5% per annum (net of withholding
tax, if applicable) and (ii) such percentage of the dividend yield calculated by
reference to dividing the annual dividend declared per share of Common Stock of
the Company by the Conversion Price (as hereinafter defined). Interest is
payable quarterly.
The Investors have the right to convert at any time the whole or any
part of the principal amount of the Convertible Debentures into shares of the
Common Stock of the Company. The Conversion Price (the "Conversion Price") is
initially $5.00 per share, subject to adjustment for (a) change in par value of
the Common Stock, (b) issuance of shares by way of capitalization of profits or
reserves, (c) capital distributions, (d) rights offering at a price which is
less than the lower of the then market price or Conversion Price, (e) issuance
of derivative securities where the total consideration per share initially
received is less than the lower of the then market price or Conversion Price,
(f) issuance of shares at a price per share which is less than the lower of the
then market price or the Conversion Price, and (g) if the cumulative audited
earnings per common share for any two consecutive fiscal years commencing with
the fiscal year ending December 31, 1996 and ending with the fiscal year ending
December 31, 1998 are less than the specified projection of cumulative earnings
per common share for such period.
The Convertible Debentures are required to be redeemed on the Maturity
Date at its principal amount outstanding together with any accrued but unpaid
interest together with an amount that would enable the Investors to yield an
aggregate internal rate of return of 12% per annum on the cost of their
investment. In addition, if any of the events of default specified in the
Convertible Debentures occurs, the Convertible Debenture are automatically due
and payable at the principal amount outstanding together with accrued interest
and an amount that would enable the Investors to yield an aggregate internal
rate of return on their investment of 19.75% per annum. Events of default
include the delisting of the shares from NASDAQ or its suspension thereof;
default in performance after failure to cure after notice; failure to pay
principal or interest; failure to pay indebtedness for borrowed money;
bankruptcy, insolvency or unsatisfied judgments; failure to achieve earning per
common share of at least $.55 for fiscal years commencing January 1, 1996; and
accounts receivable reaching a certain level in relationship to net sales.
As a result of the foregoing, although the Convertible Debentures bear
interest at the rate of 5% per annum, interest is accrued at the rate of 12% per
annum.
18
<PAGE>
The obligations of China Bearing under the Convertible Debentures are
guaranteed by the other members of the Sunbase Group.
A promissory note for US$ 5,012 (RMB 41,600) (the "Note") was issued to
Asean Capital Limited ("Asean") in connection with the Share Exchange Agreement
and is secured by a continuing security interest in all of the Company's title
and interest in the outstanding capital stock of its wholly-owned subsidiary
China Bearing. The Note is denominated in and is repayable in full in United
States dollars, and bears interest at 8% per annum.
In connection with the issuance of convertible debentures described at
Note 6, Asean has undertaken that for so long as any of the debentures are
outstanding, no amounts are to be repaid on the Note unless there is sufficient
working capital and the repayment is made by three annual installments with
effect from August 1, 1996. The first installment was made on September 10,
1996.
The Company anticipates that its cash flows from operations, combined with
cash and cash equivalents, bank lines of credit and other external sources of
debt and equity financing, and the proceeds from the June 1996 sale of the
1,000,000 shares of common stock and the August 1996 issuance of the Convertible
Debentures, are adequate to finance the Company's current operating and debt
service requirements.
INFLATION AND CURRENCY MATTERS
In recent years, the Chinese economy has experienced periods of rapid
economic growth as well as high rates of inflation, which in turn has resulted
in the periodic adoption by the Chinese government of various corrective
measures designed to regulate growth and contain inflation. During the nine
months ended September 30, 1997, the general inflation rate in the PRC was under
control and was below 10% on an average basis. Since 1993, the Chinese
government has implemented and maintained an economic program designed to
control inflation, which has resulted in the tightening of working capital
available to Chinese business enterprises. The success of the Company depends
in substantial part on the continued growth and development of the Chinese
economy.
The Company continually monitors the effects of inflation. The Company is
generally able to raise its prices to shift a portion of the inflated costs to
the customers. However, the Company must also take into account market
conditions and competition and may not, in all circumstances, be able to raise
prices to offset increased costs to the Company. The price of bearing steel,
the major raw material used by the Company, remained fairly stable during 1996
and 1997. The major impact of inflation was on labor cost due to increases in
employees wages. However, the Company has generally managed to offset the
effects of inflation through improved operational efficiency.
Foreign operations are subject to certain risks inherent in conducting
business abroad, including price and currency exchange controls, and
fluctuations in the relative value of currencies. Changes in the relative value
of currencies occur periodically and may, in certain instances, materially
affect the Company's results of operations.
The Company conducts most of its business in the PRC and, accordingly, the
sale of its products is settled primarily in RMB. As a result, devaluation of
the RMB against the US$, could have a material adverse effect upon the results
of operations and financial position of the Company. Although prior to 1994 the
RMB experienced significant devaluation against the US$, the RMB has remained
fairly stable from 1994 to present. The unified exchange rate was US$ 1.00 to
RMB 8.65 at December 31, 1993, RMB 8.45 at December 31, 1994, RMB 8.32 at
December 31, 1995, RMB 8.3 at December 31, 1996 and RMB 8.29 at September 30,
1997.
19
<PAGE>
The Company is not able to predict whether or not the recent devaluation
of a number of Asian currencies will result in a devaluation of the RMB. To
date, the PRC government has indicated that it does not intend to devalue the
RMB against the dollar.
20
<PAGE>
PART II. OTHER INFORMATION
Item 1 Legal Proceedings
The lawsuit between the Company's subsidiary, Southwest Products, and an
employee was settled during the three months ended September 30, 1997.
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
None
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits:
11 Computation of Earnings per common share
27 Financial Data Schedule
(b) Reports on Form 8-K:
Three months ended September 30, 1997: None
21
<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.
Sunbase Asia, Inc.
------------------
(Registrant)
Date: November 19, 1997 By: /s/ William McKay
----------------------------------------
William McKay
Chief Executive Officer and
President
(Duly Authorized Officer)
Date: November 19, 1997 By: /s/ (Roger) Li Yuen Fai
----------------------------------------
(Roger) Li Yuen Fai
Vice President and
Chief Financial Officer
(Principal Financial Officer)
22
<PAGE>
EXHIBIT 11
----------
SUNBASE ASIA, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
(Amounts in thousands, except number of shares and per share data)
<TABLE>
<CAPTION>
Nine Months Ended September 30, Three Months Ended September 30,
------------------------------- --------------------------------
1996 1997 1997 1996 1997 1997
RMB RMB US$ RMB US$ RMB
---------- ---------- ---------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
PRIMARY
Net income, as reported 53,916 44,772 5,401 21,034 10,076 1,216
========== ========== ========== =========== ========== ==========
Weighted average number of shares
of common stock outstanding:
Share of common stock
outstanding on January 1 11,700,063 12,700,109 12,700,109 11,700,063 12,700,109 12,700,109
Share issued as a result of rounding
from reverse stock split 46 32 32 46 32 32
1,000,000 shares of common stock
issued on June 10, 1996 410,256 - - 1,000,000 - -
---------- ---------- ---------- ----------- ---------- ----------
Weighted average number of
shares of common stock outstanding 12,110,365 12,700,141 12,700,141 12,700,109 12,700,141 12,700,141
Shares of common stock
issuable assuming conversion of
the Convertible Preferred Stock
- Series A 3,600,000 3,600,000 3,600,000 3,600,000 3,600,000 3,600,000
- Series B 680,000 680,000 680,000 680,000 680,000 680,000
Shares of common stock issuable
assuming exercise of stock options,
reduced by the number of shares
which could have been purchased
with the proceeds from exercise of
such stock options 171,279 - - 127,303 - -
---------- ---------- ---------- ----------- ---------- ----------
Total weighted average number of
shares of common stock and
common stock equivalents
outstanding 16,561,644 16,980,141 16,980,141 17,107,412 16,980,141 16,980,141
========== ========== ========== =========== ========== ==========
Earnings per common share
- Primary 3.26 2.64 0.32 1.23 0.59 0.07
========== ========== ========== =========== ========== ==========
</TABLE>
<PAGE>
SUNBASE ASIA, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
(Amounts in thousands, except number of shares and per share data)
<TABLE>
<CAPTION>
Nine Months Ended September 30, Three Months Ended September 30,
------------------------------- --------------------------------
1996 1997 1997 1996 1997 1997
RMB RMB US$ RMB US$ RMB
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
FULLY DILUTED
Net income, as reported 53,916 44,772 5,401 21,034 10,076 1,216
Add after tax interest expense
applicable to Convertible
Debenture 1,224 8,584 1,035 1,224 2,860 345
------- ------- ------- ------- ------- -------
Net income, as adjusted 55,140 53,356 6,436 22,258 12,936 1,561
======= ======= ======= ======= ======= =======
Weighted average number of shares
of common stock outstanding:
Share of common stock
outstanding on January 1 11,700,063 12,700,109 12,700,109 11,700,063 12,700,109 12,700,109
Share issued as a result of rounding
from reverse stock split 46 32 32 46 32 32
1,000,000 shares of common stock
issued on June 10, 1996 410,256 - - 1,000,000 - -
---------- ---------- ---------- ---------- ---------- ----------
Weighted average number of
shares of common stock outstanding 12,110,365 12,700,141 12,700,141 12,700,109 12,700,141 12,700,141
Shares of common stock
issuable assuming conversion of
the Convertible Preferred Stock
- Series A 3,600,000 3,600,000 3,600,000 3,600,000 3,600,000 3,600,000
- Series B 680,000 680,000 680,000 680,000 680,000 680,000
Shares of common stock issuable
assuming conversion of the
Convertible Debentures on
August 23, 1996 328,571 2,300,000 2,300,000 975,000 2,300,000 2,300,000
Shares of common stock issuable
assuming exercise of stock options,
reduced by the number of shares
which could have been purchased
with the proceeds from exercise of
such stock options 244,484 - - 244,484 - -
---------- ---------- ---------- ---------- ---------- ----------
Total weighted average number of
shares of common stock and
common stock equivalents
outstanding 16,963,420 19,280,141 19,280,141 18,199,593 19,280,141 19,280,141
========== ========== ========== ========== ========== ==========
Earnings per common share
- Fully Diluted 3.25 2.77 0.33 1.22 0.67 0.08
========== ========== ========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS CONTAINED IN THE COMPANY'S
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 6,064
<SECURITIES> 0
<RECEIVABLES> 106,972
<ALLOWANCES> 0
<INVENTORY> 59,016
<CURRENT-ASSETS> 172,052
<PP&E> 76,912
<DEPRECIATION> 0
<TOTAL-ASSETS> 252,264
<CURRENT-LIABILITIES> 111,409
<BONDS> 0
0
8,784
<COMMON> 13
<OTHER-SE> 50,063
<TOTAL-LIABILITY-AND-EQUITY> 252,264
<SALES> 78,006
<TOTAL-REVENUES> 78,006
<CGS> 47,539
<TOTAL-COSTS> 47,539
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,017
<INCOME-PRETAX> 14,401
<INCOME-TAX> 2,399
<INCOME-CONTINUING> 5,401
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,401
<EPS-PRIMARY> 0.32
<EPS-DILUTED> 0.33
</TABLE>
