EX-99.3 8 v203694_ex99-3.htm
    Wonder Auto Technology, Inc.

 Unaudited Pro Forma Condensed
Combined Financial Statements
June 30, 2010
(Stated in US dollars)

 
 
 

Wonder Auto Technology, Inc.
Unaudited Pro Forma Condensed Combined Financial Statements

Index to Unaudited Pro Forma Condensed Combined Financial Statements
 
   
Pages
     
Introduction to Unaudited Pro Forma Condensed Combined Financial Statements
  
1
     
Unaudited Pro Forma Condensed Combined Balance Sheet
  
2 - 3
     
Unaudited Pro Forma Condensed Combined Statements of income and comprehensive income
  
4 - 5
     
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
  
6 - 7

 
 
 

Wonder Auto Technology, Inc.
June 30, 2010

Introduction to Unaudited Pro Forma Condensed Combined Financial Statements

The following unaudited pro forma condensed combined financial statements have been prepared to give effects of the acquisition of Jinheng (BVI) Limited (“Jinheng BVI”) by Wonder Auto Technology, Inc. (the “Company”) (the “Acquisition”).  The unaudited pro forma condensed combined financial statements were prepared using the historical consolidated financial statements of the Company and Jinheng BVI.  Please note that the unaudited pro forma condensed combined financial statements should be read in conjunction with the historical financial statements of the Company and Jinheng BVI, respectively.  The Company’s financial information can be found in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009 and quarterly report on Form 10-Q for the three and six months ended June 30, 2010.  The financial information of Jinheng BVI is filed together with this Pro Forma Condensed Combined Financial Statements on this Form 8-K.

The unaudited pro forma condensed combined balance sheet as of June 30, 2010 combines the unaudited condensed consolidated balance sheets of the Company and Jinheng BVI as of June 30, 2010 and gives effect to the acquisition as if the acquisition occurred on June 30, 2010.

The unaudited pro forma condensed combined statements of income and comprehensive income for the year ended December 31, 2009 and for the six months ended June 30, 2010 give effect to the acquisition as if the acquisition occurred on January 1, 2009.  The unaudited pro forma condensed combined statement of income and comprehensive income for the year ended December 31, 2009 combines the audited consolidated statement of income and comprehensive income of the Company and Jinheng BVI for the year ended December 31, 2009. The unaudited pro forma combined statement of income and comprehensive income for the six months ended June 30, 2010 combines the unaudited condensed consolidated statement of income and comprehensive income of the Company and Jinheng BVI for the six months ended June 30, 2010.

The information presented in the unaudited pro forma condensed combined financial statements does not purport to represent what our financial position or results of operations would have been had the Acquisition occurred as of the dates indicated, nor is it indicative of our future financial position or results of operations for any period. You should not rely on this information as being indicative of the historical results that would have been achieved had the companies always been combined or the future results that the combined company will experience after the Acquisition.

The unaudited pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable under the circumstances.
 
 
 
- 1 -
 

Wonder Auto Technology, Inc.
Unaudited Pro Forma Condensed Combined Balance Sheet
As of June 30, 2010
(Stated in US Dollars)

   
The Company
    
Jinheng BVI
                    
   
As of
    
As of
                    
   
June 30,
    
June 30,
    
Pro Forma
    
Pro Forma
    
Pro Forma
  
   
2010
    
2010
    
Adjustment - (a)
    
Adjustments
    
Combined
  
ASSETS
                              
Current assets
                              
Cash and cash equivalents
   $ 60,616,182     $ 3,858,660     $ (43,891 )   $ -     $ 64,430,951  
Restricted cash
     14,638,128       3,325,053       -       -       17,963,181  
Trade receivables, net
     48,444,434       47,692,961       (4,879 )     -       96,132,516  
Bills receivable
     45,769,941       2,619,390       (164,976 )     -       48,224,355  
Other receivables, prepayments and deposits
     9,503,920       5,024,149       (24,276 )     -       14,503,793  
Inventories
     53,172,880       24,467,966       (415,378 )     (256,801 )(f)     76,968,667  
Amount due from Jinying
     -       -       -       20,817,000 (e)     20,817,000  
Amounts due from related companies
     -       13,202,565       (1,399,514 )     1,033,281 (c)     12,836,332  
Amounts due from fellow subsidiaries
     -       8,713,284       (515,550 )     (8,197,734 )(c)     -  
Deferred taxes
     1,230,242       144,128       -       -       1,374,370  
                                         
Total current assets
     233,375,727       109,048,156       (2,568,464 )     13,395,746       353,251,165  
Restricted cash
     586,800       -       -       -       586,800  
Intangible assets, net
     8,084,188       2,956,421       (168,264 )     30,313,770 (f)     41,186,115  
Goodwill
     23,200,260       25,185       -       81,924,876 (d)     105,150,321  
Property, plant and equipment, net
     75,197,144       30,732,799       (2,019,960 )     (3,483,626 )(f)     100,426,357  
Land use rights
     10,052,355       2,655,858       -       3,278,937 (f)     15,987,150  
Deposits for acquisition of property, plant and equipment
     10,109,428       5,908,489       -       -       16,017,917  
Deposit for acquisition of a subsidiary
     8,700,000       -       -       -       8,700,000  
Investments in subsidiaries
     -       -       2,502,406       (2,502,406 )(a)     -  
Investments in non-consolidated affiliates
     16,022,362       2,485,024       -       (17,896,394 )(b)     610,992  
Deferred taxes
     1,080,366       -       -       -       1,080,366  
                                         
TOTAL ASSETS
   $ 386,408,630     $ 153,811,932     $ (2,254,282 )   $ 105,030,903     $ 642,997,183  

 
 
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Wonder Auto Technology, Inc.
Unaudited Pro Forma Condensed Combined Balance Sheet
As of June 30, 2010
(Stated in US Dollars)
 
   
The Company
    
Jinheng BVI
                    
   
As of
    
As of
                    
   
June 30,
    
June 30,
    
Pro Forma
    
Pro Forma
    
Pro Forma
  
   
2010
    
2010
    
Adjustment - (a)
    
Adjustments
    
Combined
  
LIABILITIES AND STOCKHOLDERS’ EQUITY
                              
                               
LIABILITIES
                              
Current liabilities
                              
Trade payables
   $ 36,423,883     $ 28,440,892     $ (359,124 )   $ 7,311,129 (b)   $ 71,816,780  
Bills payable
     28,149,030       10,318,365       -       -       38,467,395  
Other payables and accrued expenses
     13,762,417       4,573,622       (147,779 )     -       18,188,260  
Amounts due to related companies
     -       7,311,129       -       (7,311,129 )(b)     -  
Amounts due to fellow subsidiaries
     -       2,071,497       (390,469 )     (1,681,028 )(c)     -  
Provision for warranty
     2,783,651       -       -       -       2,783,651  
Income tax payable
     1,516,897       165,047       -       -       1,681,944  
Secured borrowings
     66,464,837       38,354,440       -       -       104,819,277  
Payable to Jinheng Holdings
     -       20,753,590       -       133,276,322 (g)     154,029,912  
Early retirement benefits cost
     371,734       -       -       -       371,734  
                                         
Total current liabilities
     149,472,449       111,988,582       (897,372 )     131,595,294       392,158,953  
Secured borrowings
     18,161,648       2,235,900       -       -       20,397,548  
Deferred revenue - government grants
     3,113,050       -       -       -       3,113,050  
Early retirement benefits cost
     377,575       -       -       -       377,575  
Deferred taxes
     -       569,423       -       1,661,675 (i)     2,231,098  
                                         
TOTAL LIABILITIES
     171,124,722       114,793,905       (897,372 )     133,256,969       418,278,224  
                                         
STOCKHOLDERS’ EQUITY
                                        
                                         
Common stock
     3,386       13       -       (13 )(h)     3,386  
Additional paid-in capital
     140,812,492       4,664,417       -       (4,664,417 )(h)     140,812,492  
Statutory and other reserves
     10,186,701       4,846,428       -       (4,846,428 )(h)     10,186,701  
Accumulated other comprehensive income
     10,264,498       5,315,993       -       (5,315,993 )(h)     10,264,498  
                              (18,804,846 )(h)        
Retained earnings
     47,697,425       18,804,846       -       5,405,631 (e)     53,103,056  
                                         
TOTAL COMPANY AND JINHENG BVI STOCKHOLDERS’ EQUITY
     208,964,502       33,631,697       -       (28,226,066 )     214,370,133  
                                         
NONCONTROLLING INTERESTS
     6,319,406       5,386,330       (1,356,910 )     -       10,348,826  
                                         
TOTAL EQUITY
     215,283,908       39,018,027       (1,356,910 )     (28,226,066 )     224,718,959  
                                         
TOTAL LIABILITIES AND EQUITY
   $ 386,408,630     $ 153,811,932     $ (2,254,282 )   $ 105,030,903     $ 642,997,183  

 
 
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Wonder Auto Technology, Inc.
Unaudited Pro Forma Condensed Combined Statements of Income and Comprehensive Income
Year ended December 31, 2009
(Stated in US Dollars)

   
The Company
    
Jinheng BVI
              
   
Year ended
    
Year ended
              
   
December 31,
    
December 31,
    
Pro Forma
    
Pro Forma
  
   
2009
    
2009
    
Adjustments
    
Combined
  
                         
Sales Revenue
   $ 211,024,016     $ 109,070,738     $ (2,209,295 )(a)   $ 317,885,459  
Cost of sales
     159,659,681       87,803,904       (1,669,455 )(a)     245,794,130  
                                 
Gross profit
     51,364,335       21,266,834       (539,840 )     72,091,329  
                                 
Other operating income
     -       673,291       -       673,291  
                                 
Operating expenses
                                
Administrative expenses
     11,673,683       5,576,658       (320,740 )(a)     16,929,601  
Research and development expenses
     3,026,895       5,150,134       -       8,177,029  
Selling expenses
     7,767,770       2,488,865       (20,778 )(a)     10,235,857  
Share-based compensation
     1,171,935       -       -       1,171,935  
                                 
      23,640,283       13,215,657       (341,518 )     36,514,422  
                                 
Income from operations
     27,724,052       8,724,468       (198,322 )     36,250,198  
Other income
     1,177,215       119,400       (92,364 )(a)     1,204,251  
Government grants
     2,754,978       150,264       -       2,905,242  
Equity in net income of a non-consolidated affiliate
     -       258,302       (258,302 )(b)     -  
Net finance costs
     (4,577,660 )     (2,219,729 )     3,319 (a)     (6,794,070 )
                                 
Income before income taxes and noncontrolling interests
     27,078,585       7,032,705       (545,669 )     33,565,621  
Income taxes
     (3,223,881 )     (723,061 )     -       (3,946,942 )
                                 
Net income before noncontrolling interests
     23,854,704       6,309,644       (545,669 )     29,618,679  
                                 
Net income attributable to noncontrolling interests
     (996,114 )     (775,854 )     101,412 (a)     (1,670,556 )
                                 
Net income attributable to the Company’s common stockholders and Jinheng BVI stockholder
   $ 22,858,590     $ 5,533,790     $ (444,257 )   $ 27,948,123  
                                 
Net income before noncontrolling interests
   $ 23,854,704     $ 6,309,644     $ (545,669 )   $ 29,618,679  
                                 
Other comprehensive income
                                
Foreign currency translation adjustments
     149,199       2,617       (196 )(a)     151,620  
                                 
Comprehensive income
     24,003,903       6,312,261       (545,865 )     29,770,299  
                                 
Comprehensive income attributable to noncontrolling interests
     (996,881 )     (776,396 )     101,481 (a)     (1,671,796 )
                                 
Comprehensive income attributable to the Company’s common stockholders and Jinheng BVI stockholder
   $ 23,007,022     $ 5,535,865     $ (444,384 )   $ 28,098,503  
                                 
Earnings per share Attributable to Wonder Auto Technology, Inc. common stockholders :
                                
basic
   $ 0.82     $ 537             $ 1.00  
diluted
   $ 0.82     $ 537             $ 1.00  
                                 
Weighted average number of shares outstanding :
                                
basic
     27,829,583       10,309               27,829,583  
diluted
     27,843,009       10,309               27,843,009  

 
 
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Wonder Auto Technology, Inc.
Unaudited Pro Forma Condensed Combined Statement of Income and Comprehensive Income
Six months ended June 30, 2010
(Stated in US Dollars)
 
   
The Company
    
Jinheng BVI
              
   
Six months
    
Six months
              
   
ended
    
ended
              
   
June 30,
    
June 30,
    
Pro Forma
    
Pro Forma
  
   
2010
    
2010
    
Adjustments
    
Combined
  
                         
Sales Revenue
   $ 132,079,159     $ 74,955,383     $ (1,992,536 )(a)   $ 205,042,006  
Cost of sales
     99,301,954       59,613,525       (1,562,530 )(a)     157,352,949  
                                 
Gross profit
     32,777,205       15,341,858       (430,006 )     47,689,057  
                                 
Other operating income
     -       664,465       -       664,465  
                                 
Operating expenses
                                
Administrative expenses
     10,018,399       2,572,774       (188,095 )(a)     12,403,078  
Research and development costs
     2,888,319       2,506,318       -       5,394,637  
Selling expenses
     4,454,639       2,772,998       (25,753 )(a)     7,201,884  
                                 
Total operating expenses
     17,361,357       7,852,090       (213,848 )     24,999,599  
                                 
Income from operations
     15,415,848       8,154,233       (216,158 )     23,353,923  
Other income
     580,109       90,632       (50,102 )(a)     620,639  
Government grants
     420,691       88,020       -       508,711  
Gain on disposal of a non-consolidated affiliate
     -       -       5,405,631 (e)     5,405,631  
Equity in net income of non-consolidated affiliates
     781,961       385,551       (385,551 )(b)     781,961  
Net finance costs
     (1,711,518 )     (1,146,358 )     1,862 (a)     (2,856,014 )
                                 
Income before income taxes and noncontrolling interests
     15,487,091       7,572,078       4,755,682       27,814,851  
Income taxes
     (2,595,189 )     (775,349 )     -       (3,370,538 )
                                 
Net income before noncontrolling interests
     12,891,902       6,796,729       4,755,682       24,444,313  
Net income attributable to noncontrolling interests
     (465,073 )     (395,902 )     93,306 (a)     (767,669 )
                                 
Net income attributable to the Company’s common stockholders and Jinheng BVI stockholder
   $ 12,426,829     $ 6,400,827     $ 4,848,988     $ 23,676,644  
                                 
Net income before noncontrolling interests
   $ 12,891,902     $ 6,796,729     $ 4,755,682     $ 24,444,313  
                                 
Other comprehensive income
                                
Foreign currency translation adjustments
     648,062       250,074       (15,720 )(a)     882,416  
                                 
Comprehensive income
     13,539,964       7,046,803       4,739,962       25,326,729  
Comprehensive income attributable to noncontrolling interests
     (495,688 )     (415,260 )     98,854 (a)     (812,094 )
                                 
Comprehensive income attributable to the Company’s common stockholders and Jinheng BVI stockholder
   $ 13,044,276     $ 6,631,543     $ 4,838,816     $ 24,514,635  
                                 
Earnings per share attributable to Wonder Auto Technology, Inc. Common stockholders :
                                
basic and diluted
   $ 0.37     $ 621             $ 0.70  
                                 
Weighted average number of shares
                                
outstanding: basic and diluted
     33,859,994       10,309               33,859,994  

 
 
- 5 -
 
 
Wonder Auto Technology, Inc.
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
(Stated in US Dollars)

1.           Basis of presentation

On July 10, 2010, the Company’s subsidiaries, Wonder Auto Limited (“Wonder”) and Yearcity Limited (“Yearcity”) entered into a conditional sale and purchase agreement (the “Disposal Agreement”) with Jin Ying Limited (“Jinying”), a company incorporated in British Virgin Islands, pursuant to which Wonder and Yearcity agreed to dispose 38.36% equity interest in Applaud Group Limited (“Applaud”) for a total consideration of HK$162 million (equivalent to approximately $20.85 million).  The completion of the Disposal Agreement is conditioned upon the completion of a conditional acquisition agreement (the “Acquisition Agreement”) which was entered into between Vital Glee Development Limited (“Vital Glee”), a wholly own subsidiary of the Company, and Jinheng Automotive Safety Technology Holdings Limited (“Jinheng Holdings”) on July 20, 2010, pursuant to which Vital Glee agree to acquire 100% equity interest in Jinheng BVI, at cash consideration of HK$1,130 million (approximately US$145.43 million). Jinheng BVI is an investment holding company and through its subsidiaries engages in manufacturing and sales of safety automotive and electronic products. After the completion of acquisition, Jinheng BVI becomes a wholly owned subsidiary of the company.

In accordance with the Acquisition Agreement, both parties agreed that Jinheng BVI’s equity interests in Shanxi Winner Auto-Parts Limited (“Shanxi Winner”) and Shenyang Jinheng Jinsida Automobile Electronic Co., Ltd. (“Jinheng Jinsida”) were transferred to Jinheng Holdings or its subsidiaries and all the non-trade current accounts with Jinheng Holdings or its subsidiaries were written off as part of the transactions contemplated by the Acquisition Agreement before the acquisition by Vital Glee.

The acquisition was accounted for using the purchase method of accounting in accordance with Topic ASC 805 “Business Combination” (previously Statement of Financial Accounting Standards No.141R). Under the purchase method of accounting, the total purchase price is allocated to the net tangible assets of the business acquired in connection with the Acquisition Agreement, based on the estimated fair value as of the completion of acquisition. Management has estimated the fair value of assets acquired and liabilities assumed based on the fair value attributable to the actual net tangible assets and liabilities of Jinheng BVI that existed as of the date of the completion of the acquisition.

 
 
- 6 -
 
 
Wonder Auto Technology, Inc.
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
(Stated in US Dollars)

2.           Unaudited pro forma adjustments

The pro forma adjustments included in the unaudited pro forma condensed combined financial statements are as follows :-

 
(a)
Represents adjustments to transfer the equity interest in Jinheng Jinsida to Jinheng Holdings or its subsidiaries.

 
(b)
Represents adjustments to transfer the equity interests in Shanxi Winner and Applaud to Jinheng Holdings or its subsidiaries and Jinying respectively. After the completion of the acquisition, Shanxi Winner was no longer the related company of the Company and reclassified amount due to Shanxi Winner to trade payables.

 
(c)
Represents adjustments related to write off of non-trade current accounts with Jinheng Holdings or its subsidiaries.

 
(d)
Represents adjustment to record the estimated goodwill resulting from the allocation of the purchase price to the fair value of assets acquired and liabilities assumed as at June 30, 2010.

 
(e)
Represents adjustment to record the gain on disposal of Applaud and receivable from Jinying.

 
(f)
Represents adjustments to estimated fair value of inventories, property, plant and equipment, intangible assets and land use rights.

 
(g)
Represents adjustment to dividend payable and the payables for acquiring Jinheng BVI.

 
(h)
Represents elimination adjustments to shareholder’s equity of the acquired company as of the date of the acquisition.

 
(i)
To record the deferred tax liability for the book value increase to fair value of amortizable intangible assets which are non-deductible for tax.
 
 
 
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