-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, HKUjhr2nOiucnGyZaShLFw2QbzJxovfd+dYH6iGu0Geeqqk4HoPU8v3Kynaw5EhJ M9QuaYIMJl/WZyQhanSFAQ== 0000898430-95-001664.txt : 19950823 0000898430-95-001664.hdr.sgml : 19950823 ACCESSION NUMBER: 0000898430-95-001664 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950821 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUNBASE ASIA INC CENTRAL INDEX KEY: 0000095626 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 941612110 STATE OF INCORPORATION: NV FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-03132 FILM NUMBER: 95565686 BUSINESS ADDRESS: STREET 1: 19 F FIRST PACIFIC BANK CENTERE STREET 2: 51-57 GLOUCESTER ROAD CITY: WANCHAI HONG KONG STATE: K3 BUSINESS PHONE: 01185228651511 MAIL ADDRESS: STREET 1: P O BOX 2600 CITY: BAKERSFIELD STATE: CA ZIP: 93303 FORMER COMPANY: FORMER CONFORMED NAME: PAN AMERICAN INDUSTRIES INC DATE OF NAME CHANGE: 19941216 FORMER COMPANY: FORMER CONFORMED NAME: PAN AMERICAN ENERGY CORPORATION DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: SUPREME OIL & GAS CORP DATE OF NAME CHANGE: 19901029 10-Q 1 FORM 10-Q PERIOD ENDED 6/30/95 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1995 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1974. 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 No.) 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 filed by Section 13 or 15(d) of the Securities Exchange Act 1934 during the preceding 12 months, 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 issuer's classes of common stock, as of the latest practicable date: Common Stock $0.001 Par Value - 11,700,063 shares outstanding at June 30, 1995 Page 1 of 16 SUNBASE ASIA, INC. ------------------ Page PART I: Financial Information ITEM 1 -- Financial statements and footnotes 3-8 ITEM 2 -- Management's discussion and analysis of financial condition and results of operations 9-15 PART II: Other Information 15 2 PART I. FINANCIAL INFORMATION ITEM 1 - Financial Statements SUNBASE ASIA, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS AS OF DECEMBER 31, 1994 AND JUNE 30, 1995 (Amounts in thousands, except number of shares and per share data)
(Unaudited) (Unaudited) Notes 12/31/94 12/31/94 6/30/95 6/30/95 RMB US$ RMB US$ ASSETS Current assets Cash and bank balances 65,646 7,909 46,251 5,572 Accounts receivable, net 298,210 35,929 487,501 58,735 Notes receivable -- -- 26,744 3,222 Inventories, net 4 361,455 43,549 282,237 34,004 Other receivables 35,636 4,293 66,447 8,006 Due from related companies 133,047 16,030 94,122 11,340 --------- -------- ---------- ---------- Total current assets 893,994 107,710 1,003,302 120,879 Fixed assets 481,295 57,987 493,798 59,494 Deferred asset 35,729 4,305 35,062 4,224 Long term investments 6,999 843 6,999 843 --------- -------- ---------- ---------- Total assets 1,418,017 170,845 1,539,161 185,440 ========= ======== ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Short term bank loans 227,078 27,359 233,107 28,085 Accounts payable 151,853 18,296 105,988 12,770 Notes payable - - 15,225 1,834 Other payables 44,761 5,393 86,124 10,376 Short term obligations under capital leases 15,873 1,912 16,557 1,995 Other loans 33,810 4,073 33,810 4,073 Income tax payable 9,342 1,126 16,079 1,937 Taxes other than income 20,970 2,527 43,825 5,280 Due to related companies 130,635 15,739 119,157 14,356 Due to shareholders 11,682 1,407 10,342 1,246 --------- -------- ---------- ---------- Total current liabilities 646,004 77,832 680,214 81,952 Long term bank loans 68,424 8,244 83,866 10,104 Long term obligations under capital leases 124,982 15,058 116,529 14,040 Secured promissory note 5 42,250 5,090 42,250 5,090 Minority interests 288,175 34,720 328,082 39,528 --------- -------- ---------- ---------- 1,169,835 140,944 1,250,941 150,714 Shareholders' equity: Common Stock, par value US$0.001 each, 50,000,000 shares authorized; 11,700,063 issued and outstanding 99 12 99 12 Preferred Stock, par value US$0.001 each, 25,000,000 shares authorized; Convertible Preferred Stock - Series A; 36 shares issued and outstanding 44,533 5,366 44,533 5,366 Contributed surplus 151,942 18,306 151,942 18,306 Reserves 13,011 1,567 12,939 1,559 Retained earnings 38,597 4,650 78,707 9,483 --------- -------- ---------- ---------- Total shareholders' equity 248,182 29,901 288,220 34,726 --------- -------- ---------- ---------- Total liabilities and shareholders' equity 1,418,017 170,845 1,539,161 185,440 ========= ======== ========== ==========
The accompanying notes form an integral part of these consolidated condensed financial statements. 3 SUNBASE ASIA, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME FOR THE PERIODS ENDED JUNE 30, 1994 AND JUNE 30, 1995 (Amounts in thousands, except number of shares and per share data) (UNAUDITED)
Six Six Six Three Three Three months months months months months months ended ended ended ended ended ended Notes 6/30/94 6/30/95 6/30/95 6/30/94 6/30/95 6/30/95 RMB RMB US$ RMB RMB US$ Net sales 391,039 434,833 52,390 208,362 235,979 28,431 Cost of sales ( 244,468) ( 265,683) ( 32,010) ( 128,103) ( 143,587) ( 17,300) ---------- ---------- ---------- --------- ---------- ---------- Gross profit 146,571 169,150 20,380 80,259 92,392 11,131 Selling, general and administrative expenses ( 42,421) ( 51,045) ( 6,150) ( 17,386) ( 26,626) ( 3,208) Interest expense, net ( 23,168) ( 23,589) ( 2,842) ( 11,682) ( 7,540) ( 908) ---------- ---------- ---------- --------- ---------- ---------- Income before income taxes 80,982 94,516 11,388 51,191 58,226 7,015 Provision for income taxes: -Current ( 12,501) ( 14,499) ( 1,747) ( 7,856) ( 8,888) ( 1,071) -Deferred -- -- -- -- -- -- ---------- ---------- ---------- --------- ---------- ---------- Income before minority interests 68,481 80,017 9,641 43,335 49,338 5,944 Minority interests ( 34,406) ( 39,907) ( 4,808) ( 21,620) ( 24,466) ( 2,948) ---------- ---------- ---------- --------- ---------- ---------- Net income 34,075 40,110 4,833 21,715 24,872 2,996 ====== ====== ===== ====== ====== ===== Earnings per common share 6 2.23 2.62 0.32 1.42 1.62 0.20 ==== ==== ==== ==== ==== ==== Numbers of shares outstanding 6 15,300,063 15,300,063 15,300,063 15,300,063 15,300,063 15,300,063 ========== ========== ========== ========== ========== ==========
The accompanying notes form an integral part of these consolidated condensed financial statements. 4 SUNBASE ASIA, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 1994 AND JUNE 30, 1995 (Amounts in thousands) (UNAUDITED)
Six Six Six Months Months Months ended ended ended 6/30/94 6/30/95 6/30/95 RMB RMB US$ Cash flows from operating activities: Net Income 34,075 40,110 4,832 Adjustments to reconcile income to net cash provided by operating activities: Minority interests 34,406 39,907 4,808 Depreciation 22,281 22,220 2,677 Loss on disposal of fixed assets -- 969 117 Others ( 391) ( 463) ( 56) (Increase) decrease in assets: Accounts receivable (243,715) (189,291) ( 22,806) Notes receivable -- ( 26,744) ( 3,222) Inventories ( 17,936) 80,276 9,672 Other receivables ( 33,980) ( 30,811) ( 3,712) Due from related companies ( 736) 38,925 4,690 Increase (decrease) in liabilities: Accounts payable 14,544 ( 45,865) ( 5,526) Notes payable -- 15,225 1,834 Other payables 31,422 41,363 4,983 Income tax payable 14,858 6,737 812 Taxes other than income 34,053 22,855 2,754 Due to related companies 19,718 ( 19,247) ( 2,319) Due to shareholders ( 354) ( 1,340) ( 162) -------- -------- -------- Net cash used in operating activities ( 91,755) ( 5,174) ( 624) Cash flows from investing activities: Proceeds from disposal of fixed assets -- 274 33 Disposal of long term investment 263 -- -- Addition to fixed assets ( 25,119) ( 35,966) ( 4,333) -------- -------- -------- Net cash used in investing activities ( 24,856) ( 35,692) ( 4,300) -------- -------- -------- Cash flows from financing activities: Proceeds from short term bank loans 228,863 186,889 22,517 Repayment of short term bank loans (189,394) (180,860) ( 21,790) Redemption of debentures ( 10,000) -- -- Proceeds from long term bank loans 8,852 15,442 1,860 -------- -------- -------- Net cash provided by financing activities 38,321 21,471 2,587 -------- -------- -------- Net decrease in cash and cash equivalents ( 78,290) ( 19,395) ( 2,337) Cash and cash equivalents, at beginning of period 166,615 65,646 7,909 -------- -------- -------- Cash and cash equivalents, at end of period 88,325 46,251 5,572 ======== ======== ======== Non-cash transaction: Financing of lease arrangements 7,449 7,769 936 ===== ===== ===
The accompanying notes form an integral part of these consolidated condensed financial statements. 5 SUNBASE ASIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS FOR THE PERIODS ENDED JUNE 30, 1994 AND JUNE 30, 1995 (Amounts in thousands, except number of shares and per share data) 1. GENERAL Sunbase Asia, Inc. ("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. At the date of the exchange, 1,439,063 shares of common stock were outstanding. Immediately following the exchange, the total number of shares of common stock outstanding was 11,700,063. The exchange 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 is a Nevada Corporation which owns, through various subsidiaries and joint venture interests, a 51.4% indirect ownership in Harbin Bearing Company Limited, a joint stock limited company organized under the law of the People's Republic of China. Harbin Bearing Company Limited develops and manufactures bearings in China and sells bearings primarily in China as well as western countries, including the United States. 2. BASIS OF PRESENTATION The accompanying consolidated condensed financial statements are unaudited but, in the opinion of the management of the Company, contain all adjustments, consisting of only normal recurring accruals, necessary to present fairly the financial position at June 30, 1995, the results of operations for the three months and six months ended June 30, 1994 and 1995, and the changes in cash flows for the six months ended June 30, 1994 and 1995. 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 footnotes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, as filed with the Securities and Exchange Commission. 6 SUNBASE ASIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED) FOR THE PERIODS ENDED JUNE 30, 1994 AND JUNE 30, 1995 (Amounts in thousands, except number of shares and per share data) The results of operations for the three months and six months ended June 30, 1995 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 1995. 3. FOREIGN CURRENCY EXCHANGE The Company's reporting currency is Renminbi. For financial reporting purposes, translation of amounts from Renminbi (RMB) into United States Dollars (US$) for the convenience of the reader has been made at the exchange rate quoted by the People's Bank of China on June 30, 1995 of US$ 1.00 - RMB 8.3. No representation is made that the RMB amounts would have been, or would be converted into US$ at the rate on June 30, 1995 or at any other time. 4. INVENTORIES Inventories are comprised of:
(Unaudited) December 31, June 30, 1994 1995 RMB RMB Raw materials 122,684 91,633 Work-in-progress 87,839 107,563 Finished goods 169,948 101,175 -------- -------- 380,471 300,371 Less: Allowance for obsolescence ( 19,016) ( 18,134) -------- -------- Inventories, net 361,455 282,237 ======== ========
7 SUNBASE ASIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED) FOR THE PERIODS ENDED JUNE 30, 1994 AND JUNE 30, 1995 (Amounts in thousands, except number of shares and per share data) 5. SECURED PROMISSORY NOTE The promissory note (the "Note") was issued to Asean Capital Limited 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 Holdings Limited ("China Bearing"). The net assets of China Bearing represents all of the net assets of the Company before taking into account the carrying value of the Note together with the accrued interest. The Note is repayable in full on December 31, 1996 and bears interest at 8% per annum. 6. EARNINGS PER SHARE/NUMBER OF SHARES OUTSTANDING During December 1994, the Company issued new shares in consideration for the acquisition of the interests in China Bearing, which acquisition has been accounted for as a reverse acquisition. As a result, the earnings per share for the periods ended June 30, 1994 are presented on a pro forma basis, and have been calculated using the common stock and common stock equivalents outstanding, after assuming that all convertible preferred stock has been converted into common stock, as if the existing and new shares had been outstanding throughout all 1994 periods presented. The earnings per common share for the periods ended June 30, 1995 have been calculated using the weighted average number of shares of common stock and common stock equivalents outstanding, after assuming that all convertible preferred stock has been converted into common stock. The Series A Convertible Preferred Stock may be converted at the option of the holder at the rate of 100,000 shares of common stock for one share of Series A Convertible Preferred Stock. 8 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 Company Limited, a joint stock limited company organized under the law of the People's Republic of China ("Harbin Bearing"), which develops and manufactures bearings in China and sells bearings in China as well as western countries, including the United States. The Company produces six types of bearings with a focus on medium and large sized bearings which have a relatively higher profit margin. During the second quarter of 1995, there were six new bearing products in production of which approximately two thousand units were sold. In total, there were eleven new bearing products in production of which about seven thousand units were sold during the six months ended June 30, 1995. Those new bearing products are mainly medium and large-sized self-aligning ball bearings and angular contact ball bearings which are used for motor vehicles and machine-tools applications, respectively. Unless specifically stated, all amounts in this Management's Discussion and Analysis are in thousands (RMB '000). 9 RESULTS OF OPERATION I. Second Quarter Comparison
Quarter Quarter ended ended June 30, June 30, 1995 1994 RMB RMB Sales 235,979 208,362 Cost of sales (143,587) (128,103) -------- -------- Gross Profit 92,392 80,259 Gross Profit percentage 39.1% 38.5% Selling, General and Administrative expenses ( 26,626) ( 17,386) Finance Expenses ( 7,540) ( 11,682) -------- -------- Income Before Taxes and Minority Interests 58,226 51,191 ======== ========
10 Sales Sales increased by RMB 27,617 or 13.3% in the quarter ended June 30, 1995 as compared with the quarter ended June 30, 1994. The increase in sales was attributable to: (i) an increase in demand from industries such as automotive and machine-tools; (ii) a change in sales mix as the Company focused on producing and selling higher margin medium and large sized ball bearings since the third quarter of 1994. Gross Profit Cost of sales increased from RMB 128,103 in the second quarter of 1994 to RMB 143,587 in the second quarter of 1995. The net result was that gross profit increased by 15.1% or RMB 12,133 in the second quarter of 1995 compared to the second quarter of 1994. Gross profit as a percentage of revenue increased from 38.5% in the second quarter of 1994 to 39.1% in the second quarter of 1995. The increase was mainly due to higher general sales prices during the period from 1994 to 1995 and the effect of the sales mix change to higher-margin products. Selling, General and Administrative Expenses Total Selling, General and Administrative Expenses were RMB 26,626 or 11.3% of net revenue in the second quarter of 1995 as compared to RMB 17,386 or 8.3% of net revenue in the second quarter of 1994. Selling Expenses increased by RMB 1,912 in the second quarter of 1995 compared to the second quarter of 1994. The increase was mainly due to additional royalty expenses resulting from the increase in sales. In addition, marketing and transportation costs increased as the Company put forth significant efforts to improve its customer and market focus. Selling expenses as a percentage of revenue increased from 2.7% in 1994 to 3% in 1995. General and Administrative Expenses increased by 22% or RMB 3,692 in the second quarter of 1995 compared to the second quarter of 1994. General and Administrative Expenses as a percentage of revenue increased from 7.9% in 1994 to 8.6% in 1995. The increase in General and Administrative Expenses was mainly due to the increase in staff wages and welfare costs associated with the hiring of new workers. There was no significant change in number of workers between the first quarter and second quarter of 1995. Other expenses increased by RMB 3,636 in the second quarter of 1995 compared to the second quarter of 1994. The increase was mainly due to the compensation for a voluntary 11 early retirement program established after July 1994. The purpose of the early retirement program is to streamline the organizational structure and improve operating efficiency. Under this program, a worker could get up to a maximum amount of RMB 25 depending on years of service. In 1994, the total amount paid for this program was RMB 7,243. The Company expects the compensation paid for this year will not be more than RMB 7,000. Finance Expenses Finance Expenses mainly represent interest expense. As a result of the overaccrual of interest expense of RMB 4,750 during the first quarter of 1995 (which was subsequently reversed during the second quarter of 1995), interest expense for the second quarter of 1995 was underaccrued by a similar amount. Excluding the effect of this RMB 4,750 adjustment, Finance Expenses increased by 5.2% or RMB 608 in the second quarter of 1995 compared to the second quarter of 1994. The increase was mainly attributable to interest expense related to a US$ 5,000 promissory note issued on December 31, 1994, with interest payable at 8% per annum. II. Six Months Period Comparison
Six months Six months ended ended June 30, June 30, 1995 1994 RMB RMB Sales 434,833 391,039 Cost of Sales (265,683) (244,468) -------- -------- Gross Profit 169,150 146,571 Gross Profit percentage 38.9% 37.5% Selling, General and Administrative expenses ( 51,045) ( 42,421) Finance Expenses ( 23,589) ( 23,168) -------- -------- Income Before Income Taxes and Minority Interests 94,516 80,982 ======== ========
12 Sales Sales increased by RMB 43,794 or 11.2% during the six months ended June 30, 1995 as compared with the six months ended June 30, 1994. The reasons for the increase in sales are the same as the reasons stated in the previous comparison of the second quarter of 1995 to the second quarter of 1994. Gross Profit Cost of sales increased from RMB 244,468 in the six months ended June 30, 1994 to RMB 265,683 in the six months ended June 30, 1995. The net result was that gross profit increased by RMB 22,579 or 15.4% in 1995 compared to 1994. Gross profit as a percentage of revenue increased from 37.5% in 1994 to 38.9% in 1995, reflecting the increase in general sales prices during the period from 1994 to 1995 and the effect of the sales mix change to higher-margin products. Selling, General and Administrative Expenses Total Selling, General and Administrative Expenses were RMB 51,045 or 11.7% of net revenue in the six months ended June 30, 1995 as compared to RMB 42,421 or 10.8% of net revenue in the six months ended June 30, 1994. Selling Expenses increased by RMB 1,457 in the six months ended June 30, 1995 compared to the six months ended June 30, 1994. The increase was mainly due to additional royalty expenses, marketing and transportation costs as discussed in the previous comparison of the second quarter of 1995 to the second quarter of 1994. Selling expenses as a percentage of revenue increased from 1.4% in 1994 to 1.6% in 1995. General and Administrative Expenses increased by RMB 7,167 or 20% RMB in the six months ended June 30, 1995 compared to the six months ended June 30, 1994. The significant increase was mainly due to the compensation for a voluntary early retirement program, as previously discussed, during the six months ended June 30, 1995 of RMB 5,051 which was established after July 1994. Also, during the six months ended June 30, 1995, there was a loss on disposal of fixed assets of RMB 917 whereas in the six months ended June 30, 1994, there was a gain on disposal of fixed assets of RMB 1,087. 13 Finance Expenses Finance Expenses increased by RMB 421 in the six months ended June 30, 1995 compared to the six months ended June 30, 1994. The increase was mainly attributable to interest expense related to a US$ 5,000 promissory note issued on December 30, 1994 with interest payable at 8% per annum. LIQUIDITY AND CAPITAL RESOURCES The Company's cash position decreased by RMB 19,395 during the six months ended June 30, 1995 as compared to the decrease in cash position during the six months ended June 30, 1994 of RMB 78,290. Operating activities The Company utilized cash in operating activities of RMB 5,174 in the six months ended June 30, 1995 compared to RMB 91,755 in the six months ended June 30, 1994. The decrease in cash outflow was mainly due to the decrease in accounts receivable (including notes receivable) and inventories of RMB 27,680 and RMB 98,212 in the six months ended June 30, 1995, respectively, as a result of improvement in cash settlements from customers and better inventory control. This was partially offset by an increase in cash outflow of RMB 45,184 in the six months ended June 30, 1995 due to increased payments to suppliers (denoted by decreases in accounts payable and notes payable). The Company intends to strengthen the enforcement of credit control and the acceleration of the cash collection. As of June 30, 1995, the Company's working capital had increased to RMB 323,088 as compared to RMB 247,990 at December 31, 1994 and RMB 254,634 at June 30, 1994. The Company's current ratio was 1.47:1 as of June 30, 1995, as compared to 1.38:1 at December 31, 1994 and 1.5:1 at June 30, 1994. Investing activities Total capital expenditures for the six months ended June 30, 1995 were RMB 35,966 and were mainly for construction of new plant, buildings and renovating existing facilities and equipment. They were mainly financed by internally generated funds and the long term bank loans (see below). The Company had outstanding capital commitments for the purchase of equipment and the construction of plant of approximately RMB 91,500 at December 31, 1994, and RMB 55,000 at June 30, 1995. 14 Financing activities The Company relies on both long- and short-term bank loans from Chinese banks to support its operating and capital requirements. Short-term bank loans have terms ranging from three months to six months, and are renewed on a revolving basis. During the six months ended June 30, 1995, new bank loans drawn down (after deducting repayment of previous loans) totalled RMB 6,029. The increase in short-term bank loans in 1995 was utilized for funding operating activities. Long-term bank loans are utilized to fund capital expansion projects. During the six months ended June 30, 1995, new long-term bank loans totalled RMB 15,442, whereas during the six months ended June 30, 1994, new long-term bank loans totalled RMB 8,852. The increase in long-term bank loans in 1995 compared to 1994 was mainly due to additional capital projects requirements. The Company believes that it will be able to continue to maintain and expand its bank borrowings under existing terms and conditions. The Company believes that cash flow from operations, combined with bank borrowings, will provide sufficient cash flow to finance internal growth and debt service requirements for the foreseeable future. Effect of Inflation In China, the general inflation rate continued to be in excess of 10% on an annualized basis during the six months ended June 30, 1995, but it is expected that the Chinese government will make substantial efforts to control inflation over the near term. Inflation affects the performance of the Company in two ways: pricing and costs. The Company has raised its product price to shift part of the inflated costs to the customers. For cost, regarding the major raw material (bearing steel), the price remained fairly stable during 1994 and 1995. The only major impact of inflation on cost was on labor cost as wages of the employees has been increased. However, due to the improved operational efficiency as reflected by the increased gross profit ratio during the six months ended June 30, 1995, the overall effect of inflation did not have a material impact on the Company's performance. Due to the establishment of a higher scale of production and better control on its production cost structure, management believes that the high inflation rate would have a favorable impact on the market share of the Company because it would increase its relative competitiveness in the market to the detriment of other smaller manufacturers which would experience the same effects of inflation. Part II. OTHER INFORMATION Item 6. Exhibit (a) Exhibits: 27 Financial Data Schedule 15 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. Date: August 17, 1995 BY /s/ GUNTER GAO __________________________________________ Gunter Gao Chairman of the Board, President and Director (Duly authorized officer) Date: August 17, 1995 BY /s/ ROGER LI _______________________________________ Roger Li Director and Chief Financial Officer 16 EX-27 2 ARTICLE 5 FINANCIAL DATA SCHEDULE
5 1,000 RENMINBI 6-MOS DEC-31-1995 JAN-01-1995 JUN-30-1995 .12048 46,251 0 514,245 0 282,237 1,003,302 493,798 0 1,539,161 680,214 200,395 99 0 44,533 243,588 1,539,161 434,833 434,833 265,683 265,683 0 0 23,589 94,516 14,499 80,017 0 0 0 40,110 2.62 2.62
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