JINZHOU CITY, China, Nov. 3 /Xinhua-PRNewswire-FirstCall/ -- Wonder Auto
Technology, Inc. (Nasdaq: WATG) ('Wonder Auto' or the 'Company'), a leading
manufacturer of automotive electrical, suspension parts and engine accessories
in China, today announced record quarterly financial results for the third
quarter ended September 30, 2008.
Q3 Highlights:
-- Sales revenue increased 43.9% year-over-year to a record US$39.3
million
-- Gross profit rose 42.4% year-over-year to a record US$10.1 million
-- Net income increased 72.9% year-over-year to US$6.4 million
-- Export sales represented 15.8% of the higher total revenues
-- EPS rose 60% over same period last year to US$0.24, on 3 million more
weighted average shares outstanding
Third quarter sales revenue rose to a record of US$39.3 million, a 43.9%
increase from the 2007 third quarter revenue of US$27.3 million. The increase
was mainly attributable to increased demand for mid to small displacement
alternator and starter products, which grows faster than the overall
automobile industry, increased sales to the new and existing clients and
growth in export sales. Sales to existing customers increased $7.4 million
and sales to new customers contributed $4.6 million due to the Company's
competitive products at attractive prices. Export sales increased by 138.0%
to US 6.2 million as compared to that in the third quarter of 2007.
In the first nine months of 2008, China's auto market continued its solid
growth. Due to the general affordability, fuel prices, environmental concerns
and government tax incentives, the mid- to small engine passenger vehicles
still dominate China's passenger vehicle market with an increased market share.
Wonder Auto benefited from this large and growing market with increased sales
of high performance alternators and starters, as well as rods and shafts
products.
2008 third quarter gross profit increased 42.4% to a record of US$10.1
million from a gross profit of US$7.1 million in the same quarter of 2007.
Gross margin was 25.8% in the 2008 third quarter compared with 26.0% for the
same period last year. The decreased gross margin was due to the change of
the Company's product portfolio to manufacture more smaller displacement
starter and alternator products which generally have relatively lower gross
margin than the larger displacement products.
Operating expenses for the 2008 third quarter were US$3.3 million as
compared to US$1.9 million in the same period of 2007, reflecting a 79.6%
increase. The increase was primarily attributed to the increase of
administrative expenses and selling expenses. The higher administrative
expenses were primarily contributable to the consolidation of the financial
results of Jinzhou Hanhua Electrical System Co., Ltd. and Jinzhou Karham
Electrical Equipment Co., Ltd, audit and assessment costs in complying with
Sarbanes-Oxley Act of 2002 and non-cash employee stock option compensation
incurred during the third quarter of 2008. Selling expenses constituted 3.1%
of sales revenue compared with 2.3% in the 2007 third quarter. The increase
of selling expenses was mainly attributable to the increased sales commissions
and salaries as well as transportation expenses during the Beijing Olympics.
Research and development costs increased to US$459,804 from US$255,086 for the
same period in 2007. As a percentage of revenue, research and development
costs were 1.2% in the third quarter.
Income before income taxes increased $3.1 million, or 68.1%, to $7.6
million in the third quarter of 2008. As percentage of sales revenue, income
before income taxes increased to 19.3% compared with same quarter last year.
Net income increased 72.9% to a quarterly record of US$6.4 million from
US$3.7 million in the same quarter of 2007. Fully diluted earnings per share
for the third quarter were US$0.24 versus US$0.15 in the 2007 third quarter.
As of September 30, 2008, the total shares outstanding on a diluted basis were
26,959,994 shares, as compared to 23,959,994 diluted shares outstanding in the
same quarter of 2007.
'We continue our solid growth in the 2008 third quarter generating
increased sales from both existing customers and new customers. We also
benefited from the growth in export. With emphasis on research and
development, we are able to broaden our product lines and expand our market
both in China and overseas. We are very confident about our future
development.' said Chairman and CEO, Mr. Qingjie Zhao.
Financial Condition
As of September 30, 2008, Wonder Auto had US$ 19.9 million in cash and
cash equivalents (including US$5.1 million restricted cash), a current ratio
of 2.0 to 1, working capital of US$55.8 million and US$18.0 million long-term
debt. Shareholders' equity increased to US$98.0 million. As of September 30,
the value of property, plant and equipment rose to $33.7 million from $22.5
million at December 31, 2007.
Events Overview
On October 1, 2008, Wonder Auto entered into an equity transfer agreement
and acquired the control stake of 65% of Year City Limited's equity, who owns
100% shares of Jinan Worldwide Auto Accessories Company ('Jinan Worldwide').
Jinan Worldwide is currently the largest engine valve and valve tappets
manufacturer in China with a customer base including Shanghai VW, FAW, Chery,
Geely Auto, Weifang Diesel Engine, and one of the Big Three US auto
manufacturers. Through this acquisition, Wonder Auto is expected to enter
into Jinan Worldwide's main market-the diesel engine market, and Jinan
Worldwide is expected to penetrate into Wonder Auto's main market- the
gasoline market. The Company anticipates that this acquisition will not only
diversify its product offerings, but also further strengthen its market
competitiveness through sharing of resources.
Conference Call
The Company will host a conference call, to be simultaneously Webcast on
Tuesday, November 4 at 8:30 a.m. Eastern Standard Time / 9:30 P.M. Beijing
Time. A question and answer session will follow the management presentation.
Mr. Qingjie Zhao (Chairman & CEO), Mr. Ryan Yuan (CFO), Miss Lydia Zhao
(assistant CFO) and Mr. Yuechun Xie (Investor Relations Manager) will be the
primary speakers for the call.
To participate, please call the following numbers ten minutes before the
call start time for your kind registration:
Phone Number + 1 866 242-1388 (North America)
Phone Number + 852 800 968 831 (Hong Kong)
Phone Number + 86 10 800 640 0084 (China)
Phone Number + 86 10 800 264 0084 (China)
Conference ID Number: 71053685
A live webcast of the conference call will be available on the Investor
Relations page of Wonder Auto's web site at http://www.watg.cn.
About Wonder Auto
Based in Jinzhou City, Liaoning, China, Wonder Auto Technology, Inc.,
through its Chinese subsidiaries, designs, develops, manufactures and sells
automotive electrical parts, suspension products and engine accessories.
Wonder Auto was ranked second in sales revenue in the China market for
automotive alternator and starter in 2007. With respective 5 different series
and over 150 models of alternators, 70 models of starters, and various
suspension and engine parts products, the Company supplies to a wide range of
automakers, engine producers and auto parts suppliers both in domestic China
and overseas. Wonder Auto's main customers include Beijing Hyundai Motor
Company, Shenyang Aerospace Mitsubishi Motors Engine Manufacturing Co. Ltd.,
Harbin Dongan Automotive Engine Manufacturing Co., Ltd., and Tianjin FAW Xiali
Automotive Co., Ltd, Shanghai VW and Weifang Diesel Engine. For more
information, please log on to http://www.watg.cn .
Safe Harbor Statement
This press release contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. Such statements
include, among others, those concerning our business outlook, growth of the
auto and auto parts industry and expected synergy with the newly acquired
Jinan Worldwide as well as all assumptions, expectations, predictions,
intentions or beliefs about future events. You are cautioned that any such
forward-looking statements are not guarantees of future performance and that a
number of risks and uncertainties could cause actual results of the Company to
differ materially from those anticipated, expressed or implied in the forward-
looking statements. The words 'believe,' 'expect,' 'anticipate,' 'project,'
'targets,' 'optimistic,' 'intend,' 'aim,' 'will' or similar expressions are
intended to identify forward-looking statements. All statements other than
statements of historical fact are statements that could be deemed forward-
looking statements. Risks and uncertainties that could cause actual results
to differ materially from those anticipated include risks related to new and
existing products, product defects and any related product recall; any
projections of sales, earnings, revenue, margins or other financial items; any
statements of the plans, strategies and objectives of management for future
operations; any statements regarding future economic conditions or performance;
uncertainties related to conducting business in China; any statements of
belief or intention; any of the factors and risks mentioned in the 'Risk
Factors' section of our Annual Report on Form 10-K for the year ended December
31, 2007 and any subsequent SEC filings. The Company assumes no obligation
and does not intend to update any forward-looking statements, except as
required by law.
Wonder Auto Technology, Inc.
Condensed Consolidated Statements of Income and Comprehensive Income
For the three and nine months ended September 30, 2008 and 2007
(Unaudited)
(Stated in US Dollars)
Three months ended Nine months ended
September 30 September 30
(unaudited) (unaudited)
2008 2007 2008 2007
Sales revenue $39,265,821 $27,293,856 $107,041,424 $72,416,290
Cost of sales (29,139,968) (20,184,152) (79,238,857) (54,335,057)
Gross profit 10,125,853 7,109,704 27,802,567 18,081,233
Operating expenses
Administrative
expenses 1,676,857 967,086 4,444,210 2,543,758
Research and
development costs 459,804 255,086 1,128,026 732,706
Selling expenses 1,209,170 641,205 2,912,020 1,997,820
3,345,831 1,863,377 8,484,256 5,274,284
Income from
operations 6,780,022 5,246,327 19,318,311 12,806,949
Other income 107,023 45,116 520,349 84,442
Government grants -- -- -- 786,154
Net finance costs 139,381 (772,626) (1,380,951) (1,730,131)
Equity in net
income of an
non-consolidated
affiliate 567,802 -- 792,924 34,147
Income before
income taxes 7,594,228 4,518,817 19,250,633 11,981,561
Income taxes (632,570) (583,779) (1,859,813) (1,016,503)
Minority
interests (608,120) (260,427) (1,785,599) (746,504)
Net income $6,353,538 $3,674,611 $15,605,221 $10,218,554
Other comprehensive
income
Foreign currency
translation
adjustments 169,996 589,115 3,861,504 1,665,857
Comprehensive
income $6,523,534 $4,263,726 19,466,725 $11,884,411
Earnings per share:
Basic and diluted $0.24 $0.15 $0.58 $0.43
Weighted average
number of shares
outstanding:
Basic and
diluted $26,959,994 $23,959,994 $26,959,994 $23,959,994
Wonder Auto Technology, Inc.
Condensed Consolidated Balance Sheets
As of September 30, 2008 and December 31, 2007
(Stated in US Dollars)
September 30, December 31,
2008 2007
(Unaudited) (Audited)
ASSETS
Current assets
Cash and cash equivalents $14,854,184 $26,102,993
Restricted cash 5,063,570 8,613,262
Trade receivables (net of allowance
of doubtful accounts
of $36,664 in 2008 and $37,071 in 2007) 56,534,130 38,124,411
Bills receivable 8,130,410 11,766,478
Advances to staff 448,749 314,964
Other receivables, prepayments and
deposits 5,056,079 1,320,483
Inventory - Note 6 20,903,563 12,634,786
Amount due from a related company -- 74,822
Deferred taxes 250,177 307,338
Total current assets 111,240,862 99,259,537
Intangible assets 18,602,958 16,873,051
Property, plant and equipment, net 33,660,266 22,516,900
Land use rights 2,823,214 1,235,029
Deposit for acquisition of property,
plant and equipment
and land use rights 5,773,272 2,072,458
Investment in a non-consolidated
affiliate 5,792,924 --
Deferred taxes 756,058 439,760
TOTAL ASSETS $178,649,554 $142,396,735
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current liabilities
Trade payables $17,544,205 $12,726,989
Bills payable 12,023,163 15,903,600
Dividend payable to minority
stockholders 259,530 --
Dividend payable to Winning 259,530 --
Other payables and accrued expenses 3,531,487 2,413,140
Provision for warranty 1,750,704 1,124,655
Income tax payable 756,281 666,589
Secured short-term bank loans 19,311,600 10,282,500
Total current liabilities 55,436,500 43,117,473
Secured long-term bank loans 17,994,536 17,622,186
TOTAL LIABILITIES 73,431,036 60,739,659
COMMITMENTS AND CONTINGENCIES
MINORITY INTERESTS 7,199,628 3,214,683
STOCKHOLDERS' EQUITY
Preferred stock: par value $0.0001
per share; authorized 10,000,000
shares, none issued and outstanding -- --
Common stock: par value $0.0001 per
share; authorized 90,000,000 shares,
issued and outstanding 26,959,994
shares in 2008 and 2007 2,696 2,696
Additional paid-in capital 44,980,076 44,870,304
Statutory and other reserves 4,857,660 4,857,660
Accumulated other comprehensive income 8,283,536 4,422,032
Retained earnings 39,894,922 24,289,701
TOTAL STOCKHOLDERS' EQUITY 98,018,890 78,442,393
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $178,649,554 $142,396,735
Wonder Auto Technology, Inc.
Condensed Consolidated Statements of Cash Flows
For the nine months ended September 30, 2008 and 2007
(Unaudited)
(Stated in US Dollars)
Nine months ended
September 30
(Unaudited)
2008 2007
Cash flows from operating activities
Net income $15,605,221 $10,218,554
Adjustments to reconcile net income
to net cash (used in)
provided by operating activities:
Depreciation 2,248,751 1,434,556
Amortization of intangible assets and
land use rights 85,162 64,624
Deferred taxes (208,858) (64,505)
(Gain) loss on disposal of property,
plant and equipment (1,205) 15,636
Gain on disposal of Man Do -- (500)
Provision for doubtful debts (4,020) 11,144
Provision of obsolete inventories 43,671 67,782
Exchange (gain)/loss on translation
of monetary assets and liabilities (828,205) 492,825
Equity in net income of a non-
consolidated affiliate (792,924) (34,147)
Share-based payment compensation 109,772 --
Minority interests 1,785,599 746,504
Changes in operating assets and
liabilities:
Trade receivables (15,303,061) (8,870,324)
Bills receivable 6,302,977 (7,270,838)
Other receivables, prepayments and
deposits (1,748,770) (717,530)
Advances to staff (111,302)
Inventory (6,365,418) (374,688)
Trade payables 3,254,639 6,270,135
Bills payable (4,819,593) 854,241
Other payables and accrued expenses (1,584,738) 1,036,024
Amount due from a related company 78,516 --
Provision for warranty 542,873 (201,004)
Income tax payable (9,835) 210,416
Net cash flows (used in) provided by
operating activities (1,720,748) 3,888,905
Cash flows from investing activities
Payments to acquire intangible assets (7,080) (1,982)
Payments to acquire and for deposit
for acquisition of
property, plant and equipment and
land use rights (11,776,593) (5,661,884)
Proceeds from sales of property,
plant and equipment 100,988 11,171
Installment payment to acquire
Jinzhou Dongwoo -- (2,420,000)
Decrease (Increase) in restricted cash 4,011,467 (3,932,999)
Cash inflow from disposal of Man Do -- 500
Net cash paid to acquire Jinzhou Hanhua (3,042,676) --
Net cash paid to acquire Money Victory (5,000,000) --
Net cash paid to acquire Jinzhou Karham (703,712) --
Net cash paid to acquire Fuxin Huirui (140,990) --
Net cash paid to acquire Jinzhou Wanyou -- (5,526,485)
Net cash flows used in investing
activities $(16,558,596) $(17,531,679)
Cash flows from financing activities
Dividend paid to minority stockholders $-- $(357,280)
Dividend paid to Winning (384,500) $(343,934)
New bank loans 15,631,122 29,486,379
Repayment of bank loans (9,196,570) (14,848,096)
Net cash flows provided by financing
activities 6,050,052 13,937,069
Effect of foreign currency
translation on cash and cash
equivalents 980,483 516,726
Net (decrease) increase in cash and
cash equivalents (11,248,809) 811,021
Cash and cash equivalents - beginning
of period 26,102,993 8,203,699
Cash and cash equivalents - end of
period $14,854,184 $9,014,720
Supplemental disclosures for cash
flow information:
Cash paid for:
Interest $1,346,694 $906,045
Income taxes $1,656,577 $586,935
For further information, please contact:
Yuechun Xie
Investor Relations Manager
Wonder Auto Technology, Inc.
Tel: +86-800-890-2596
Tel: +86-416-266-1186
Email: ycxie@watg.cn
Lydia Zhao
Assistant CFO
Wonder Auto Technology, Inc.
Tel: +86-10-84785339
Email lydiaz@watg.cn
SOURCE Wonder Auto Technology, Inc.
