JINZHOU CITY, China, Aug. 6 /Xinhua-PRNewswire-FirstCall/ -- Wonder Auto Technology, Inc. (Nasdaq: WATG) ("Wonder Auto" or the "Company"), a leading manufacturer of automotive electrical and suspension parts in China, today announced record quarterly financial results for the second quarter ended June 30, 2008.
Q2 Highlights:
-- Sales revenue increased 55.6% year-over-year to a record US$36.7
million
-- Gross profit rose faster at 68% year-over-year to a record US$9.5
million
-- Net income increased 37.4% year-over-year to US$5.3 million
-- Export sales represented 14% of the higher total revenues
-- EPS rose 25% over same period last year to US$0.20, on 3 million more
weighted average shares outstanding.
Second quarter sales revenue rose to a record US$36.7 million, a 55.6% increase from the 2007 second quarter revenue of US$23.6 million. The sales revenue increase was primarily due to the increased demand for the Company’s alternators and starter products from OEMs in China.
With the rising price of gasoline, Chinese consumers regained interest in small-sized automobiles. As a result, the smaller engine market continued to demonstrate solid growth in the first half of 2008. This growing market trend benefited the sales of Wonder Auto’s high performance alternators and starters for smaller engines. Additionally, the central government has initiated a number of incentives and policies to encourage the purchase of smaller vehicles with low-emission engines to help the environment. In addition, the Company’s sales growth also benefited from the strong sales growth of its key customers. After a lackluster 2007, Beijing Hyundai staged a robust comeback and posted a record setting 50% year-over-year unit sales growth.
2008 second quarter gross profit increased 68% to a record US$9.5 million from a gross profit of US$5.7 million in the same quarter of 2007. Gross margin was 25.9% in the 2008 second quarter compared with 24.0% for the same period last year. The gross margin increase was a combination of higher sales in the 2008 second quarter generating greater economies-of-scale than a year ago and effective cost saving programs. Additionally, the Company’s research and development continues to develop technology and methods to lower raw material usage and component consumption per unit of production.
Operating expenses for the 2008 second quarter were US$2.7 million as compared to US$1.8 million in the same period of 2007, reflecting a 48.4% increase. The higher expenses were mostly from more administrative spending primarily because of the consolidation of Jinzhou Hanhua and Jinzhou Karham since the first quarter of 2008, and the increased professional expenses of being a public company. Because both companies are Wonder Auto’s suppliers, the addition of these two companies increased our administrative costs, but did not increase the sales revenue. As a percentage of sales revenue, administrative expenses remained at 3.9% of sales for the three months ended June 30, 2008, the same percentage as in the 2007 quarter. Selling expenses of US$994,993 were higher in the second quarter due to the increased warranty provision reflecting higher sales, greater sales commission and more traveling expenses due to increased gas prices. The selling expenses were 2.7% as a percentage of revenue in the 2008 quarter compared with 3.0% in the 2007 second quarter. Research and development costs increased to US$290,665 from US$214,174 for the same period in 2007. As a percentage of revenue, research and development costs were 0.8% in the second quarter. The investment in research and development is expected to continue to rise and remain around 1% of sales revenue.
Income from operations was US$6.8 million, a 77.4% increase from US$3.8 million in the second quarter of 2007.
Net income increased 37.4% to a quarterly record of US$5.3 million from US$3.8 million in the same quarter of 2007. Fully diluted earnings per share for the second quarter were US$0.20 versus US$0.16 in the 2007 second quarter. As of June 30, 2008, the weighted average number of shares outstanding on a diluted basis increased by 12.5% to 26,959,994 shares, as compared to 23,959,994 diluted shares outstanding in the same quarter of 2007.
"We continued our strong growth in the 2008 second quarter as starter sales were strong and export sales augmented our growth in the Chinese domestic market. Our investment into our new facilities provide us with more production capacity for further expansion, as we are targeting bigger customers and additional new markets," said Chairman and CEO, Mr. Qingjie Zhao.
Financial Condition
As of June 30, 2008, Wonder Auto had US$28.4 million in cash and cash equivalents (including US$6.0 million restricted cash), a current ratio of 1.9 to 1, working capital of US$55.0 million and US$19.4 million long-term debt. Shareholders’ equity increased to US$91.4 million. Net trade receivables rose in the second quarter reflecting the higher sales volumes and inventories also increased to accommodate future sales growth. Wonder Auto is also building new facilities. As of June 30, the value of its buildings rose to $11.4 million from $6.9 million at December 31, 2007 and plant and equipment rose to $27.2 million from $20.1 million at the end of 2007.
Events Overview
In April 2008, Wonder Auto’s Board of Directors adopted the 2008 Equity Incentive Plan. As part of the Plan, the compensation committee of the Board granted stock options to approximately 65 Wonder Auto managers to be vested upon the achievement of pro forma net income results, approximating 40% annual growth, over the next three years. Such plan was approved by shareholders at Wonder Auto’s 2008 annual meeting of stockholders.
Wonder Auto announced that is has joined the Russell 2000 Index when Russell Investments changed its indexes on June 27, 2008.
During the second quarter, the Company also made investor presentations at the Roth 3rd Annual China Discovery Tour and the Piper Jaffray Industrial Growth Conference.
At the 2008 Annual Meeting of Stockholders held on Friday, June 20, 2008 in Beijing, Mr. Qingjie Zhao, Wonder Auto’s Chairman and Chief Executive Officer, Mr. Meirong Yuan, the Company’s Chief Financial Officer and Treasurer, Mr. Larry Goldman, Mr. David Murphy, and Mr. Xingye Zhang, were all re-elected to the Board of Directors. Also, the Wonder Auto Technology, Inc. 2008 Equity Incentive Plan was approved by shareholders, and PFK Hong Kong, Certified Public Accountants, was ratified as the Company’s independent registered public accounting firm.
Wonder Auto announced it will exhibit at the Automotive Aftermarket Products Expo (AAPEX), at the Sands Expo Center in Las Vegas, Nevada, between November 2-4, 2008. Wonder Auto will highlight its advanced starter and alternator products, especially those designed and targeting the global markets, as well as its suspension parts. The AAPEX exhibition is the world’s largest trade event for the automotive aftermarket.
Business Outlook
For the third quarter to end September 30, 2008, the Company expects sales revenues to grow strongly to US$39.0 million with the gross margin to exceed 25.5%.
Conference Call
The Company will host a conference call, to be simultaneously Webcast on Thursday, August 7 at 8:30 a.m. Eastern Daylight Time / 8:30 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:
Phone Number + 1 (877) 407-9210 (North America)
Phone Number + 1 (201) 689-8049 (International)
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 . Please visit the Web site at least 15 minutes early to register for the Webcast and download any necessary audio software.
A replay of the call will be available through Thursday, August 21, 2008, at 11:59 p.m. Eastern Daylight Time/11:59 a.m. Beijing Time, on August 22. For the replay, please call:
Phone Number +1 (877) 660-6853 (North America)
Phone Number +1 (201) 612-7415 (International)
Account Number: 286
Conference ID Number: 292425
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 and suspension products. Wonder Auto was ranked second in sales revenue in the China market for automotive alternators and starters in 2006. With respective 5 different series and over 150 models of alternators, 70 models of starters and various suspension related parts, 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. 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 and expected income from newly executed agreements 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 six months ended June 30, 2008 and 2007
(Unaudited) (Stated in US Dollars)
Three months ended Six months ended
30-Jun 30-Jun
(unaudited) (unaudited)
2008 2007 2008 2007
Sales revenue $36,658,896 $23,555,638 $67,775,603 $45,122,434
Cost of sales (27,154,953) (17,899,115) (50,098,889) (34,150,905)
Gross profit 9,503,943 5,656,523 17,676,714 10,971,529
Operating
expenses
Administrative
expenses 1,428,980 910,106 2,767,353 1,576,672
Research and
development
costs 290,665 214,174 668,222 477,620
Selling
expenses 994,993 704,999 1,702,850 1,356,615
2,714,638 1,829,279 5,138,425 3,410,907
Income from
operations 6,789,305 3,827,244 12,538,289 7,560,622
Interest
income 54,684 38,068 167,154 54,777
Other income 308,263 15,531 413,326 39,326
Government
grants -- 786,154 -- 786,154
Finance costs (621,314) (592,890) (1,687,486) (1,012,282)
Equity in net
income of an
unconsolidated
affiliate 225,122 -- 225,122 34,147
Income before
income taxes 6,756,060 4,074,107 11,656,405 7,462,744
Income taxes -
Note 4 (796,426) 34,090 (1,227,243) (432,724)
Minority
interests (693,734) (276,706) (1,177,479) (486,077)
Net income $5,265,900 $3,831,491 $9,251,683 $6,543,943
Other
comprehensive
income
Foreign
currency
translation
adjustments 1,502,606 709,413 3,691,508 1,076,742
Comprehensive
income $6,768,506 $4,540,904 $12,943,191 $7,620,685
Earnings per
share: basic
and diluted $0.20 $0.16 $0.34 $0.27
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 June 30, 2008 and December 31, 2007
(Stated in US Dollars)
June 30, December 31,
2008 2007
(Unaudited) (Audited)
ASSETS
Current assets
Cash and cash equivalents $22,376,705 $26,102,993
Restricted cash 6,036,175 8,613,262
Trade receivables (net of allowance
of doubtful accounts
of $56,231 in 2008 and
$37,071 in 2007) 49,436,853 38,124,411
Bills receivable 11,065,438 11,766,478
Advances to staff 360,704 314,964
Other receivables, prepayments and
deposits 4,888,201 1,320,483
Inventory 20,818,962 12,634,786
Amount due from a related company -- 74,822
Deferred taxes 253,968 307,338
Total current assets 115,237,006 99,259,537
Intangible assets 17,953,146 16,873,051
Property, plant and equipment, net 31,164,423 22,516,900
Land use rights 2,840,594 1,235,029
Deposit for acquisition of property,
plant and equipment
and land use right 4,730,907 2,072,458
Investment in a non-consolidated
affiliate 5,225,122 --
Deferred taxes 706,623 439,760
TOTAL ASSETS $177,857,821 $142,396,735
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Current liabilities
Trade payables $18,683,127 $12,726,989
Bills payable 14,189,105 15,903,600
Other payables and accrued expenses 2,870,885 2,413,140
Provision for warranty 1,523,729 1,124,655
Income tax payable 922,180 666,589
Secured short-term bank loans 22,046,000 10,282,500
60,235,026 43,117,473
Total current liabilities
Secured long-term bank loans 19,402,036 17,622,186
TOTAL LIABILITIES 79,637,062 60,739,659
COMMITMENTS AND CONTINGENCIES
MINORITY INTERESTS 6,835,175 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 44,870,304 44,870,304
Statutory and other reserves 4,857,660 4,857,660
Accumulated other comprehensive
income 8,113,540 4,422,032
Retained earnings 33,541,384 24,289,701
TOTAL STOCKHOLDERS’ EQUITY 91,385,584 78,442,393
TOTAL LIABILITIES AND STOCKHOLDERS’
EQUITY $177,857,821 $142,396,735
Wonder Auto Technology, Inc.
Condensed Consolidated Statements of Cash Flows
For the six months ended June 30, 2008 and 2007
(Unaudited) (Stated in US Dollars)
Six months ended June 30
(Unaudited)
2008 2007
Cash flows from operating activities
Net income $9,251,683 $6,543,943
Adjustments to reconcile net income
to net cash (used in)
provided by operating activities:
Depreciation 1,536,209 929,352
Amortization of intangible assets and
land use rights 58,020 26,500
Deferred taxes (164,912) (56,238)
(Gain) loss on disposal of property,
plant and equipment (1,205) 15,636
Provision for doubtful debts 15,676 8,923
Provision (recovery) of obsolete
inventories 23,570 (57,493)
Exchange loss on translation of
monetary assets and liabilities 180,952 100,764
Equity net income of a non-
consolidated affiliate (225,122) (34,147)
Minority interests 1,177,479 486,077
Changes in operating assets and
liabilities:
Trade receivables (8,287,289) (3,214,204)
Bills receivable 3,337,080 (6,669,000)
Other receivables, prepayments and
deposits (1,634,771) 194,470
Advances to staff (73,628) (289,359)
Inventory (6,304,964) (195,332)
Trade payables 4,432,755 1,881,863
Bills payable (2,616,886) 880,741
Other payables and accrued expenses (2,210,222) 454,752
Amount due from a related company 78,516 --
Provision for warranty 318,877 (104,142)
Income tax payable 221,870 (308,489)
Net cash flows (used in) provided by
operating activities (886,312) 594,617
Cash flows from investing activities
Payments to acquire intangible assets (4,152) (326)
Payments to acquire and for deposit
for acquisition of
property, plant and equipment and
land use right (7,581,996) (3,247,305)
Proceeds from sales of property,
plant and equipment 85,533 11,171
Installment payment to acquire
Jinzhou Dongwoo -- (2,420,000)
Decrease (Increase) in
restricted cash 3,025,786 (560,312)
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 -- (3,426,485)
Net cash flows used in investing
activities $(13,362,207) $(9,643,257)
Cash flows from financing activities
Dividend paid to minority
stockholders $-- $(357,280)
Dividend paid to Winning -- (343,934)
New bank loans 16,643,208 18,939,379
Repayment of bank loans (6,987,856) (7,977,971)
Net cash flows provided by financing
activities 9,655,352 10,260,194
Effect of foreign currency
translation on cash and cash
equivalents 866,879 304,366
Net (decrease) increase in cash and
cash equivalents (3,726,288) 1,515,920
Cash and cash equivalents - beginning
of period 26,102,993 8,203,699
Cash and cash equivalents - end of
period $22,376,705 $9,719,619
Supplemental disclosures for cash
flow information:
Cash paid for:
Interest $1,117,712 $750,402
Income taxes $1,568,403 $493,508
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
Kevin Theiss
Investor Relations
Grayling Global
Tel: +1-646-284-9409
Email: ktheiss@hfgcg.com
Stacy Dimakakos
Media Relations
Grayling Global
Tel: +1-646-284-9417
Email: sdimakakos@hfgcg.com
