Wonder Auto Technology, Inc. Reports Record Third Quarter 2006 Results
JINZHOU CITY, China, Nov. 14, 2006; Wonder Auto Technology, Inc., (BULLETIN BOARD: WATG) (''Wonder Auto'' or ''the Company''), a China-based manufacturer of automotive electrical parts, today announced its financial results for the third quarter 2006. The Company's business is focused on designing, developing, manufacturing and selling automotive electrical parts, specifically, starters and alternators.
Q3 Highlights
-- Revenues increased for the third consecutive quarter to a record
$19.5 million up from $12.1 million a year ago
-- Net income increased 55.9% year over year to $2.4 million
-- New production lines installed increasing manufacturing capacity
(this is not in the 10-Q)
Revenue increased for the third consecutive quarter to a record $19.5 million, up 60.0% from revenues in the third quarter 2005 of $12.1 million. The increase in revenues was due to the continued increase in demand from current customers for alternators and starters and the addition of new customers. Gross profit for the quarter increased 39.8% to $3.8 million from gross profit of $2.7 million in the comparable period a year earlier. Net income increased to $2.4 million or 55.9% for the third quarter 2006 from $1.5 million in the third quarter 2005. Fully diluted earning per share for the quarter was $0.10. Earlier this year, the Company completed a $12.0 million capital raise in conjunction with a reverse merger transaction which resulted in an increase of share count and the Company being a public reporting company in the United States.
''We are very excited to announce our third consecutive quarter of record revenues. We are also pleased that this quarter's growth was in part driven by shipments to new customers including Nanjing Fiat, as well as solid growth in shipments to existing customers. In addition to increased revenues, one of our top priorities was to improve our gross margin from lower levels earlier this year, and we were able to do that through a combination of price action, reduction in product costs and sales of a more favorable product mix. This improved our gross margins to 19.7% up from 17.2% last quarter,'' commented Chairman and CEO, Qingjie Zhao. ''We also completed two new starter production lines significantly increasing our starter production capacity. We expect this capacity to offer not only greater production capability but also more efficient scheduling and staffing.''
Gross profit was $3.8 million, for a year-over-year increase of 39.8% from $2.7 million in the third quarter 2005. Gross profit was impacted by an increased sales volume and management controls of product costs. Gross margin was 19.7% for the quarter compared to 22.2% for the same period a year earlier.
Operating expenses were $1.16 million which was 6% of revenue.
Income from operations before tax increased to $2.7 million for the third quarter 2006, up 53.3% from $1.8 million in the third quarter 2005.
Net income for the third quarter 2006 increased to $2.4 million, up 55.9% from the third quarter 2005 of $1.5 million. Fully diluted Earnings Per Share for the quarter was $0.10.
Nine Months Financial Results
Revenue for the first nine months of 2006 was $53.1 million, up 40.7% from $37.7 million in revenue for the first nine months of 2005. Income from operations before tax and net income was $6.7 million and $5.8 million, respectively for the first nine months of 2006.
Financial Condition
As of September 30, 2006, Wonder Auto had $10.2 million in cash and cash equivalents and $$.4 million in restricted cash, working capital of $16.1 million and no long-term debt. Shareholders' equity stood at $35.3 million, up from $18.9 million from December 31, 2005.
Business Outlook
Wonder Auto continues to pursue development contracts with a number of OEMs. The Company has experienced a significant increase in business with Shenyang Mitsubishi caused by the customer's increase in engine business with certain vehicle manufacturers. In November 2006, Wonder Auto attended the Automotive Aftermarket Products Expo in Las Vegas (''Expo''), and has begun developing its entry into the U.S. market. Following the Expo, two aftermarket companies expressed strong interest in visiting Wonder Auto's factories, and the Company established further important industry contacts. Longer-term, Wonder Auto is looking to expand its international presence in the United States, Japan, Korea, and India.
''We have been working diligently on both operational efficiencies and new business, both of which we feel have positioned us for a strong year in 2007. We continue to maintain high quality control so that we can achieve a favorable quality to price ratio and continue to generate net profit margins of approximately 10- 11%. These are also key elements of our strategy to move from the number two Chinese manufacturer of alternators and starters to the number one position,'' concluded Mr. Zhao.
About Wonder Auto
Wonder Auto , through its subsidiary, Jinzhou Halla Electrical Equipment Co., Ltd., designs, develops, manufactures and sells automotive electrical parts and is the second largest seller of automotive alternators and starters in China. The Company's products are suitable for various types of automobiles and industrial vehicles. Wonder Auto's customers include Beijing Hyundai, Shenyang Aerospace Mitsubishi, Harbin Dong'an Mitsubishi, and Dongfeng Yueda Kia Motor Co., Ltd. Wonder Auto is a Nevada corporation with its manufacturing subsidiary Halla and its corporate headquarters located in Jinzhou City, Liaoning, China.
Three months ended Nine months ended
30-Sep 30-Sep
(unaudited) (unaudited)
2006 2005 2006 2005
Revenue
Sales $19,458,451 $12,141,962 $53,064,779 $37,710,520
Cost of sales (15,618,660) (9,449,207) (43,112,678) (29,036,098)
Gross profit 3,839,791 2,692,755 9,952,101 8,674,422
Expenses
Administrative
expenses 375,080 222,161 997,898 717,374
Amortization &
Depreciation 39,980 34,958 111,519 98,078
Other
Operating
Expenses 1,079 6,558 1,833 13,082
Selling
Expense 659,759 476,465 1,895,388 1,588,459
1,075,898 740,142 3,006,638 2,416,993
Income before
the following
items and taxes 2,763,893 1,952,613 6,945,463 6,257,429
Interest income 55,012 2,630 76,360 14,541
Other income 82,972 9,801 199,656 146,179
Finance costs (253,001) (201,904) (706,995) (574,183)
Equity in net
income of
unconsolidated
affiliate 140,223 -- 140,223 --
Income before
income taxes 2,703,214 1,763,140 6,654,707 5,843,966
Income taxes -
Note 5 (335,007) (244,080) (797,194) (779,086)
Net income $2,368,207 $1,519,060 $5,857,513 $5,064,880
Earnings per
share: basic
and diluted $0.10 $0.09 $0.30 $0.29
Weighted
average
number of
shares
outstanding:
basic and
diluted 23,959,994 17,227,198 19,718,086 17,227,198
September 30, December 31,
2006 2005
(Unaudited) (Audited)
ASSETS
Current assets
Cash and cash equivalents $10,206,352 $4,368,757
Restricted cash 4,425,965 3,597,609
Marketable securities -- 37,159
Trade receivables (net of allowance
of doubtful accounts of $39,511 in
2006 and $38,745 in 2005) 25,732,026 18,472,619
Bills receivable 3,967,489 3,528,649
Other receivables, prepayments and
deposits 701,672 392,906
Inventories - Note 7 12,519,338 7,807,610
Deferred taxes 266,581 261,548
Total current assets 57,819,423 38,466,857
Know-how 1,449,675 1,421,556
Trademarks and patents 7,827 1,907
Property, plant and equipment, net -
Note 8 11,158,962 10,648,082
Land use right - Note 9 571,097 580,020
Deposit for acquisition of property,
plant and equipment 888,160 819,183
Investment in unconsolidated
affiliate 5,005,031 --
Deferred taxes 189,773 152,316
TOTAL ASSETS $77,089,948 $52,089,921
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current liabilities
Trade payables $13,797,544 $10,299,879
Bills payable 6,947,251 7,060,222
Other payables and accrued expenses 4,353,453 709,822
Provision for warranty 1,351,785 914,403
Dividend payable -- 1,699,282
Income tax payable 269,924 161,277
Amount due to a stockholder -- 5,149
Amount due to a related company 64,480 --
Secured short-term bank loans - Note
10 14,970,695 7,431,813
Total current liabilities 41,755,132 28,281,847
Secured long-term bank loans - Note 10 -- 4,954,542
TOTAL LIABILITIES 41,755,132 33,236,389
COMMITMENTS AND CONTINGENCIES - Note
11
STOCKHOLDERS' EQUITY
Preferred stock: authorized
10,000,000 shares; $0.0001 par
value, none issued and outstanding
Common stock: authorized 90,000,000
shares $0.0001 par value; issued
and outstanding 23,959,994 shares
in 2006;
issued and outstanding 17,227,198
shares in 2005 2,396 1,723
Additional paid-in capital - Note 12 28,040,143 11,998,377
Statutory and other reserves 2,347,848 2,347,848
Accumulated other comprehensive
income 926,002 444,670
Retained earnings 4,018,427 4,060,914
TOTAL STOCKHOLDERS' EQUITY 35,334,816 18,853,532
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $77,089,948 $52,089,921
Nine months ended September 30
(Unaudited)
2006 2005
Cash flows from operating activities
Net income $5,857,513 $5,064,880
Adjustments to reconcile net income
to net cash (used in)provided by
operating activities:
Depreciation 1,030,576 862,842
Amortization of trademarks and
patents 431 258
Amortization of land use right 20,242 19,808
Deferred taxes (34,043) 45,050
Recovery of obsolete inventories (69,708) (52,423)
Equity in net income of
unconsolidated affiliate (140,223) --
Changes in operating assets and
liabilities:
Trade receivables (6,841,892) (11,824,833)
Bills receivable (366,251) 1,492,331
Other receivables, prepayments and
deposits (297,497) (33,144)
Inventories (4,453,132) 209,769
Trade payables 3,269,026 6,498,379
Bills payable (250,718) 5,077,282
Other payables and accrued expenses (21,153) 410,033
Provision for warranty 416,125 102,202
Income tax payable 104,660 140,806
Net cash flows (used in) provided by
operating activities (1,776,044) 8,013,240
Cash flows from investing activities
Payments to acquire trademarks and
patents (6,268) --
Payments to acquire and for deposit
for acquisition of property, plant
and equipment (1,380,935) (1,558,316)
Decrease in restricted cash (828,356) (2,574,829)
Proceeds from sales of marketable
securities 37,608 --
Cash acquired from the RTO 419 --
Investment in unconsolidated
affiliate (1,200,000) --
Net cash flows used in investing
activities $(3,377,532) $(4,133,145)
