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WONDER AUTO TECHNOLOGY REPORTS RECORD FINANCIAL RESULTS
FOR THE FIRST QUARTER OF 2008
JINZHOU CITY, China, May 14. 2008, -- 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 financial results for the first quarter ended March 31, 2008.
Q1 Highlights
– Sales revenue increased 44.3% year-over-year to a record US$31.1 million
– Gross profit rose 53.8% year-over-year to a record US$8.2 million
– Net income increased 46.9% year-over-year to US$4.0 million
– Export sales increased to 16.3% of total revenue
– EPS rose 36.4% over same period last year to US$0.15.
First quarter sales revenue increased to a record US$31.1 million, a 44.3% increase from the 2007 first quarter revenue of US$21.6 million. Sales revenue increase was primarily due to the increased demand of our alternators and starters products in China and increased export sales that reached US$5.1 million in the first quarter of 2008, constituting 16.3% of our total sales revenue, a significant increase from 4.8% of total sales revenue in the same quarter last year. A major portion of the export increase was derived from the inclusion of approximately US$4.5 million of suspension part sales from Jinzhou Wanyou, which we acquired in April 2007. The Chinese automotive market, especially the market for small engine automobiles, continued to demonstrate solid growth in the first quarter of 2008 due in part to favorable new government regulations and tax laws which encourage use of low-emission vehicles. Such growing market benefited the sales of the Company’s diverse line of alternators and starters. In addition, the Company’s sales growth also benefited from the increased penetration of the growing mid-sized vehicle market, where rising middle class population in China increased their car ownership.
2008 first quarter gross profit increased 53.8% to a record US$8.2 million from a gross profit of US$5.3 million in the first quarter last year. Gross margin was 26.3% in the 2008 first quarter compared with 24.6% for the same period last year. This gross margin increase was mainly due to economies-of-scale and change of product mix. In the first quarter of 2008, we sold a greater number of more profitable, larger displacement alternators and starters, and higher-margin rods and shafts manufactured by Jinzhou Wanyou which contributed approximately 14% of the total sales revenue. Additionally, improved technology allowed us to reduce raw material and component consumption per unit of production.
Operating expenses for the first quarter of 2008 were US$2.4 million as compared to US$1.6 million in the same period of 2007, reflecting a 53.2% increase, primarily because of the consolidation of Jinzhou Wanyou, Jinzhou Hanhua and Jinzhou Karham during the first quarter, and the increased professional expenses of being a public company after the Company moved to the Nasdaq Global Market. Due to the acquisition of Jinzhou Hanhua and Jinzhou Karham, the Company absorbed more administrative costs without a rise in sales revenue as both acquired companies are suppliers to Wonder Auto. Higher selling expenses during the first quarter were also primarily related to the acquisitions, but remained at approximately the same percentage of revenue in both the 2008 and 2007 first quarters. Research and development costs increased US$114,111, or 43.3%, to US$377,557 for the three months ended March 31, 2008 from US$263,446 for the same period in 2007. As a percentage of sales revenue, research and development costs remained at 1.2% for the three months ended March 31, 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%.
First quarter 2008 net income increased 46.9% to US$4.0 million from US$2.7 million in the same quarter of 2007. Fully diluted earnings per share for the first quarter were US$0.15 versus US$0.11 in the same period of 2007. As of March 31, 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 are excited with another strong quarter, as we outperformed the market once again. Our top customer Shenyang Dongan Engines experienced strong growth in the first quarter, as their main customers, Chinese national automakers, continued to expand market share in Chinese domestic market. Apart from our operating achievements and profit returns to our shareholders, our export sales increased remarkably during the quarter, with significant growth in Asia, North America and South America which validates our ability to enter key global markets,'' said Chairman and CEO, Mr. Qingjie Zhao.
Financial Condition
As of March 31, 2008, Wonder Auto had US$24.7 million in cash and cash equivalents (including US$6.7 million restricted cash), a current ratio of 2.4 to 1, working capital of US$56.8 million and US$19.4 million long-term debt. Shareholders' equity increased to US$84.6 million. On December 11, 2007, Wonder Auto announced the completion of a private placement of 3 million shares raising gross proceeds of almost US$26 million.
Events Overview
On January 1, 2008, the Company acquired a 50% equity interest in Jinzhou Hanhua, a manufacturer of armatures for automotive starters for a total cash consideration of US$4.1 million.
On February 19, 2008, Wonder Auto acquired a 65% equity interest in Jinzhou Karham at a cash consideration of US$820,000. Jinzhou Karham manufactures, markets and sells carbon brushes and other components for automotive starters.
On March 19, 2008, Wonder Auto announced that through its subsidiary, Jinzhou Halla Electrical Equipment Co., Ltd, it developed a total of 12 new models of starters and alternators for vehicle engines ranging from 1.2 to 2.5 liter displacement. These new models were generated from previous joint development programs with customers beginning in 2007, and these new models were custom-designed to serve the fast-growing automobile market in China.
On March 26, 2008, Wonder Auto announced that its subsidiary, Jinzhou Halla Electrical Equipment Co., Ltd., entered into a 4-year supply agreement and received supply orders for its starter and alternator products from a major North American OEM automotive manufacturer. Shipments from these orders are expected to begin in June 2009 with an even number of units shipped each year through June 2013. Units will be delivered to the customer's facility in North America. The total value of the contracts is in excess of US$13.5 million.
“Acquiring Jinzhou Hanhua and Jinzhou Karham is part of our strategic plan to control the supply of key components and costs, which enhances our competitive position,” commented Mr. Zhao.
Business Outlook
Wonder Auto’s management re-affirms that 2008’s anticipated total sales revenue could exceed US$140 million with over US$20 million in net income.
Conference Call
The Company will host a conference call, to be simultaneously Webcast today at 8:30 a.m. Eastern Standard 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 Wednesday, May 28, 2008, at 11:59 p.m. Eastern Standard Time/11:59 a.m. Beijing Time, May 29. 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: 284443
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 alternator and starter 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 months ended March 31, 2008 and 2007
(Unaudited)
(Stated in US Dollars)
Three months ended | |||||||
March 31 | |||||||
2008 | 2007 | ||||||
Net sales | $ | 31,116,707 | $ | 21,566,796 | |||
Cost of sales | (22,943,936 | ) | (16,251,790 | ) | |||
Gross profit | 8,172,771 | 5,315,006 | |||||
Operating expenses | |||||||
Administrative expenses | 1,338,373 | 666,566 | |||||
Research and development costs | 377,557 | 263,446 | |||||
Selling expenses | 707,857 | 651,616 | |||||
2,423,787 | 1,581,628 | ||||||
Income from operations | 5,748,984 | 3,733,378 | |||||
Interest income | 112,470 | 16,709 | |||||
Other income | 105,063 | 23,795 | |||||
Finance costs | (1,066,172 | ) | (419,392 | ) | |||
Equity in net income of an unconsolidated affiliate | - | 34,147 | |||||
Income before income taxes | 4,900,345 | 3,388,637 | |||||
Income taxes | (430,817 | ) | (466,814 | ) | |||
Minority interests | (483,745 | ) | (209,371 | ) | |||
Net income | $ | 3,985,783 | $ | 2,712,452 | |||
Other comprehensive income | |||||||
Foreign currency translation adjustments | 2,188,902 | 367,329 | |||||
Total comprehensive income | $ | 6,174,685 | $ | 3,079,781 | |||
Earnings per share: basic and diluted | $ | 0.15 | $ | 0.11 | |||
Weighted average number of shares outstanding: | |||||||
basic and diluted | 26,959,994 | 23,959,994 |
Wonder Auto Technology, Inc.
Condensed Consolidated Balance Sheets
As of March 31, 2008 and December 31, 2007
(Stated in US Dollars)
March 31, | December 31, | ||||||
2008 | 2007 | ||||||
(Unaudited) | (Audited) | ||||||
ASSETS | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 17,975,619 | $ | 26,102,993 | |||
Restricted cash | 6,695,984 | 8,613,262 | |||||
Trade receivables (net of allowance of doubtful accounts | |||||||
of $67,728 in 2008 and $37,071 in 2007) | 39,921,553 | 38,124,411 | |||||
Bills receivable | 12,367,209 | 11,766,478 | |||||
Advances to staff | 328,202 | 314,964 | |||||
Other receivables, prepayments and deposits | 2,665,097 | 1,320,483 | |||||
Inventory | 17,452,766 | 12,634,786 | |||||
Amount due from a related company | 77,374 | 74,822 | |||||
Deferred taxes | 204,673 | 307,338 | |||||
Total current assets | 97,688,477 | 99,259,537 | |||||
Intangible assets | 17,916,589 | 16,873,051 | |||||
Property, plant and equipment, net | 29,758,214 | 22,516,900 | |||||
Land use right | 2,799,359 | 1,235,029 | |||||
Deposit for acquisition of property, plant and equipment | 1,995,922 | 2,072,458 | |||||
Deferred taxes | 658,355 | 439,760 | |||||
TOTAL ASSETS | $ | 150,816,916 | $ | 142,396,735 |
Wonder Auto Technology, Inc.
Condensed Consolidated Balance Sheets (Cont’d)
As of March 31, 2008 and December 31, 2007
(Stated in US Dollars)
March 31, | December 31, | ||||||
2008 | 2007 | ||||||
(Unaudited) | (Audited) | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
LIABILITIES | |||||||
Current liabilities | |||||||
Trade payables | $ | 18,354,432 | $ | 12,726,989 | |||
Bills payable | 10,567,200 | 15,903,600 | |||||
Other payables and accrued expenses | 3,198,440 | 2,413,140 | |||||
Provision for warranty | 1,258,448 | 1,124,655 | |||||
Income tax payable | 547,964 | 666,589 | |||||
Secured short-term bank loans | 6,940,473 | 10,282,500 | |||||
Total current liabilities | 40,866,957 | 43,117,473 | |||||
Secured long-term bank loans | 19,359,606 | 17,622,186 | |||||
TOTAL LIABILITIES | 60,226,563 | 60,739,659 | |||||
COMMITMENTS AND CONTINGENCIES | |||||||
MINORITY INTERESTS | 5,973,275 | 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 | 6,610,934 | 4,422,032 | |||||
Retained earnings | 28,275,484 | 24,289,701 | |||||
TOTAL STOCKHOLDERS’ EQUITY | 84,617,078 | 78,442,393 | |||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 150,816,916 | $ | 142,396,735 |
Wonder Auto Technology, Inc.
Condensed Consolidated Statements of Cash Flows
For the three months ended March 31, 2008 and 2007
(Unaudited)
(Stated in US Dollars)
Three months ended March 31 | |||||||
2008 | 2007 | ||||||
Cash flows from operating activities | |||||||
Net income | $ | 3,985,783 | $ | 2,712,452 | |||
Adjustments to reconcile net income to net cash provided by | |||||||
(used in) operating activities: | |||||||
Depreciation | 721,576 | 445,132 | |||||
Amortization of intangible assets and land use right | 34,476 | 13,158 | |||||
Deferred taxes | (85,579 | ) | 7,454 | ||||
Provision for doubtful debts | 28,504 | 5,533 | |||||
Provision (recovery) of obsolete inventory | 89,171 | (22,720 | ) | ||||
Equity in net income of an unconsolidated affiliate | - | (34,147 | ) | ||||
Minority interests | 483,745 | 209,371 | |||||
Exchange loss on translating of monetary assets and | 480,381 | - | |||||
Liabilities | |||||||
Loss on disposal of property, plant and equipment | (1,205 | ) | - | ||||
Changes in operating assets and liabilities: | |||||||
Trade receivables | 162,770 | (1,102,316 | ) | ||||
Bills receivable | 1,738,842 | (4,951,887 | ) | ||||
Other receivables, prepayments and deposits | (116,494 | ) | (225,679 | ) | |||
Advances to staff | (140 | ) | 37,742 | ||||
Inventory | (3,470,261 | ) | (1,677,966 | ) | |||
Trade payables | 4,514,176 | 2,673,792 | |||||
Bills payable | (5,896,500 | ) | (1,988,059 | ) | |||
Amount due to an unconsolidated affiliate | - | 62,029 | |||||
Amount due from a related company | 547 | - | |||||
Other payables and accrued expenses | (1,823,881 | ) | 104,787 | ||||
Provision for warranty | 85,207 | (78,866 | ) | ||||
Income tax payable | (143,264 | ) | 43,200 | ||||
Net cash flows provided by (used in) operating activities | 787,854 | (3,766,990 | ) |
Three months ended March 31 | |||||||
2008 | 2007 | ||||||
Cash flows from investing activities | |||||||
Payment to acquire intangible assets | (4,152 | ) | - | ||||
Payments to acquire and for deposit for acquisition of | |||||||
property, plant and equipment | (2,942,933 | ) | (1,932,319 | ) | |||
Proceeds from sales of property, plant and equipment | 76,570 | - | |||||
Decrease in restricted cash | 2,227,576 | 956,907 | |||||
Installment payments for acquisition of Jinzhou Dongwoo | - | (400,000 | ) | ||||
Net cash paid to acquire Jinzhou Hanhua | (3,042,676 | ) | - | ||||
Net cash paid to acquire Jinzhou Karham | (703,712 | ) | - | ||||
Net cash flows used in investing activities | $ | (4,389,327 | ) | $ | (1,375,412 | ) | |
Cash flows from financing activities | |||||||
Repayment of bank loans | (6,095,280 | ) | (7,977,971 | ) | |||
New bank loans | 1,102,008 | 10,874,139 | |||||
Net cash flows (used in) provided by financing activities | (4,993,272 | ) | 2,896,168 | ||||
Effect of foreign currency translation on cash and cash equivalents | 467,371 | 107,837 | |||||
Net decrease in cash and cash equivalents | (8,127,374 | ) | (2,138,397 | ) | |||
Cash and cash equivalents - beginning of period | 26,102,993 | 8,203,699 | |||||
Cash and cash equivalents - end of period | $ | 17,975,619 | $ | 6,065,302 | |||
Supplemental disclosures for cash flow information: | |||||||
Cash paid for: | |||||||
Interest | $ | 187,140 | $ | 222,702 | |||
Income taxes | $ | 599,198 | $ | 416,161 |
For further information, please contact:
Yuechun Xie
Investor Relations Manager
Wonder Auto Technology, Inc.
Tel: +86-416-266-1186
Email: ycxie@watg.cn
Kevin Theiss
Investor Relations
The Global Consulting Group
Tel: +1-646-284-9409
Email: ktheiss@hfgcg.com
Stacy Dimakakos
Media Relations
The Global Consulting Group
Tel: +1-646-284-9417
Email: sdimakakos@hfgcg.com