Highlights:   -- Sales revenue increased 35.4% year-over-year to $49.7 million;   -- Export increased 26.6% year-over-year to $6.5 million.   -- Net income increased 2.1% year-over-year to $5.4 million;   -- EPS Non-GAAP earnings per share was $0.22 for the second quarter of      2009, regardless the non-cash foreign exchange loss/gain, an increase      of $0.03 for the second quarter of 2008. The fully diluted net income      per share was $0.20, the same as the second quarter of 2008.    Business outlook  

For the third quarter of 2009, our sales revenue is expected to be over $55.5 million with the net income to be over $6.3 million.

Growth drivers

Our products are increasingly demanded attributable to the following advantages:

   -- Market oriented focus. Our alternator and starter products are      primarily for mid- to small-sized engine vehicles, which are encouraged      in sales by China's government in the stimulus plans.   -- New joint development programs. In the second quarter of 2009, we      developed 18 joint programs, among which 3 were with international      customers. Most of these programs will turn into sales contracts.   -- Strategic acquisitions. We will be able to achieve market expansion and      cross-selling synergies through acquisitions.   -- Favourable government policies. China has implemented a series of      stimulus policies to bolster its auto industry.     Financial performance  

Our sales revenue increased by approximately $13.0 million, or 35.4%, to approximately $49.7 million for the three months ended June 30, 2009, compared with $36.7 million of the same period last year. This increase was mainly attributable to the increased sales volume of alternators and starters, and the inclusion of engine valves and tappets.

Our export increased $1.4 million year over year, or 26.6% to $6.5 million, compared with $5.1million of the same period last year. As a percentage of sales revenue, our export increased to 13.1% for the three months ended June 30, 2009, as compared to 7.5% for the first quarter in 2009, which represents a 116.6% or $3.5 million increase, compared to $3.0 million for the first quarter of 2009.

Sales revenue from alternators and starters was approximately $32.4 million, decreased $632,099 or 1.9% from $33.1 million of the same quarter in 2008. Such decrease was mainly due to the decreased average selling prices resulted by the fact that a large portion of our revenue was generated from alternators and starters for mid-to-small displacement vehicles, the decreased raw material prices during this quarter, as well as the higher percentage of starters in the mix, which had lower average selling prices. Sales revenue from rods and shafts was approximately $4.7 million, up $1.1 million, or 30.1% from $3.6 million of the same period in 2008.

Our gross profit increased by approximately $2.7 million, or 28.6%, to approximately $12.2 million for the three months ended June 30, 2009, compared with approximately $9.5 million for the same period in 2008 as a result of increased demand for and sales of our starters, rods and shafts and valve and tappet products. Gross margin was 24.6% for the three-month period ended June 30, 2009, as compared to 25.9% of the same period in 2008. Such decrease was mainly due to the increase of cost of sales on a percentage basis as discussed above.

Our total operating expenses increased by approximately $2.0 million, or 74.4%, to approximately $4.7 million for the three months ended June 30, 2009, compared with approximately $2.7 million for the same period in 2008. As a percentage of sales revenue, our total expenses increased to 9.5% for the three months ended June 31, 2009, compared from 7.4% for the same period in 2008.

Our administrative expenses increased $1.3 million, or 92.6%, to approximately $2.8 million for the three months ended June 30, 2009, from approximately $1.4 million for the same period in 2008. As a percentage of sales revenue, administrative expenses increased to 5.5% for the three months ended June 30, 2009, as compared to 3.9% for the same period in 2008. The increase in the amount and percentage of administrative expenses was primarily due to the consolidation of the financial results of Yearcity.

Our research and development expenses increased $174,010, or 59.9%, to $464,675 for the three months ended June 30, 2009 from $290,665 for the same period in 2008. As a percentage of sales revenue, research and development costs increased to 0.9% from 0.8% for the three months ended June 30, 2008. The Company expects to increase the amount of investments in research and development as revenues increase and will maintain the ratio of research and development costs to total sales revenue at approximately 1.0%.

Our selling expenses increased $523,511, or 52.6% to approximately $1.5 million for the three months ended June 30, 2009 from $994,993 for the same period in 2008. As a percentage of sales revenue, our selling expenses were 3.1% for the three months ended June 30, 2009, which was 2.7% in the second quarter last year. The increase in the amount and percentage of selling expenses was mainly due to the consolidation of Yearcity.

Our net finance cost increased $1.4 million, or 243.5% to $1.9 million for the three months ended on June 30, 2009 from $566,630 for the same period last year. The increase was mainly due to the non-cash exchange loss of $709,991 for the three months ended June 30, 2009, as compared to the non-cash exchange gain of $299,429 for the same period of 2008, resulting from the EUR8.3 million loan from DEG Bank

Our income taxes decreased $163,042 to $633,024 during the three months ended June 30, 2009 from $796,426 during the same period in 2008.

Net Income attributable to Noncontrolling Interests. Our net income attributable to noncontrolling interests decreased $423,636, or 61.1% to $270,098 for the second quarter in 2009 from $693,734 for the same period in 2008. The net income attributable to noncontrolling interests were held by third parties in Jinzhou Dong Woo, Jinzhou Hanhua and Jinzhou Karham.

Net Income attributable to Wonder Auto Technology, Inc. common stockholders. Our net income attributable to Wonder Auto Technology, Inc. common stockholders increased by $109,738, or 2.1%, to approximately $5.4 million during the three months ended June 30, 2009 from approximately $5.3 million during the same period in 2008, as a result of the factors described above.

Net income attributable to the Company increased $0.11 million, or 2.0%, to $5.4 million in the second quarter 2009 from $5.3 million of the same quarter last year.

EPS Non-GAAP earnings per share was $0.22 for the second quarter of 2009, regardless of the non-cash foreign exchange loss/gain, an increase of $0.03 for the second quarter of 2008. The fully diluted net income per share was $0.20, the same as the second quarter of 2008.

As of June 30, 2009, Wonder Auto had $31.7 million in cash and cash equivalents, a current ratio of 1.2, working capital of $31.2 million. Shareholders' equity increased to $110.3 million.

Events overview

On July 3, 2009, our subsidiary, Jingzhou Halla closed the acquisition of 100% ownership of Yearcity Limited, or Yearcity, a BVI company, upon the approval of the acquisition by the Department of Foreign Trade and Economic Cooperation, Liaoning Province of China.