Sunbase Asia Inc. Announces Third- Quarter Results

Business Wire, Dec 10, 1998

LOS ANGELES--(BUSINESS WIRE)--Dec. 10, 1998--Sunbase Asia Inc. (Nasdaq/NM:SNBS) Thursday reported results for the third quarter ended Sept. 30, 1998.

Net sales for the third quarter were $14.2 million, compared with $19.5 million a year ago. The net loss for the period was $2.5 million, or 18 cents per share on a basic and diluted basis, compared with net income of $1.2 million, or 10 cents per share basic and 8 cents per share diluted.

Net sales for the nine-month period ended Sept. 30, 1998, were $45.6 million, compared with $77.9 million a year ago. The net loss for the period was $3.6 million, or 27 cents per share on a basic and diluted basis, compared with net income of $5.4 million, or 43 cents per share basic and 33 cents per share diluted.

These lower-than-expected third-quarter results were due to adverse market conditions in the People's Republic of China (PRC), due primarily to the financial crisis in Asia, a decrease in domestic demand for bearings in the PRC and liquidity constraints in the PRC.

In particular, because of liquidity problems of a Chinese financial institution, the company made a specific provision for deposits of its 51 percent indirect subsidiary with that financial institution, in the amount of $2.9 million, during the period ended Sept. 30, 1998.

These conditions may adversely affect the company's financial performance and its ability to achieve profitability in the fourth quarter and for the year.

Sunbase Asia is a leading manufacturer and distributor of a wide range of bearing products. Most of the company's manufacturing facilities are located in China. The company's bearing operations include more than 2 million square feet of manufacturing space and more than 12,000 employees.

Southwest Products Co., the company's U.S. manufacturing facility, is a 54-year-old designer and producer of high-technology bearings used by many Fortune 500 companies.

This release, other than historical financial information, may consist of forward-looking statements that involve risks and uncertainties, including statements regarding profitability and financial performance. These statements may differ materially from actual future events or results. Readers are referred to the documents filed by the company with the Securities and Exchange Commission, specifically the most recent reports on Form 10-Q and Form 10-K, which identifies important risk factors that could cause actual results to differ from those contained in the forward-looking statements. -0-

                  SUNBASE ASIA INC. AND SUBSIDIARIES
             Consolidated Condensed Statements of Income
                              (Unaudited)
      (In thousands, except number of shares and per-share data)

                              Three months ended     Nine months ended
                                   Sept. 30,             Sept. 30,
                                1998       1997       1998       1997

Net sales                    $14,219    $19,476    $45,618    $77,912
Cost of sales                 10,342     11,840     33,284     47,482
Gross profit                   3,877      7,536     12,334     30,430
Selling, general and
 administrative expenses       5,441      2,781      9,917     10,037
Interest expense, net          2,640      1,660      7,431      6,009
Income (loss) before income
 taxes and minority interest  (4,204)     3,096     (5,014)    14,384
Provision for income taxes       (60)       501        (73)     2,396
Minority interest              1,769      1,380      1,461      6,594
Net income (loss)             (2,495)     1,214     (3,626)     5,394
Earnings (loss) per common
 share:
 Basic                         (0.18)      0.10      (0.27)      0.43
 Diluted                       (0.18)      0.08      (0.27)      0.33
Number of shares outstanding:
 Basic                    13,576,116 12,700,141 13,215,509 12,700,141
 Diluted                  13,576,116 19,280,141 13,215,509 19,280,141