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.
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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 | ||||||||||||||||
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 |
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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.
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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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