Wonder Auto Technology, Inc. Reports Record Second Quarter 2007 Results
JINZHOU CITY, China, Aug. 7, 2007; 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 quarter ended June 30, 2007.
Second Quarter 2007 Highlights
-- Revenues increased 25.2% year-over-year to a record $23.6 million
-- Gross margin was 24.0%
-- Net income was $3.8 million, up 84.2% year-over-year from net income of
-- $2.1 million in the second quarter of 2006, up 46.4% before government
grant income of $0.8 million for net income of $3.0 million. Net income
also reflects the benefit of a $0.4 million tax refund in the quarter
-- Export sales revenue increased to 11.6% of total revenue
Revenue for the second quarter of 2007 increased to a record $23.6 million, up 25.2% from $18.8 million in the second quarter of 2006. The quarter was favorably impacted by the Company's April acquisition of the remaining 79.6% of Jinzhou Wanyou Mechanical Parts Co., Ltd. ("Wanyou") and its subsequent consolidation with Wonder Auto's financial results, which contributed $1.6 million to revenues during the quarter. Gross profit for the quarter was $5.7 million, up 69.6% from gross profit of $3.3 million in the comparable quarter a year ago. Net income in the second quarter of 2007 increased to $3.8 million, up 84.2%, from $2.1 million in the second quarter of 2006.
Basic and diluted earnings per share for the quarter were $0.16 compared to basic and diluted earnings per share of $0.12 in the same quarter a year ago.
"We are pleased with our results for the second quarter. We continued making good progress in research and development, market expansion, cost control and other key areas. Meanwhile, the Wanyou acquisition began contributing to the overall business. The Wanyou acquisition is contributing to both our top and bottom line results and increasing our penetration into overseas markets," said Chairman and CEO, Mr. Qingjie Zhao.
Wonder Auto's strong revenue growth over the same quarter last year was driven by a combination of increased market demand from new and existing clients and the Wanyou acquisition in April of 2007. Leading customers Beijing Hyundai Motor Company, Harbin Dongan Auto Engine Co., Ltd., and Shenyang Aerospace Mitsubishi Motors Engine Manufacturing Co., Ltd. represented 11.0%, 19.6% and 15.2% of total revenues for the quarter, respectively. Revenues from exports increased to 11.6% of total revenue from 3.6% in the same period a year ago. A significant amount of export sales resulted from the Wanyou acquisition which derived a substantial portion of its revenues from international markets.
For the second quarter of 2007, gross profit was $5.7 million for a year- over-year increase of 69.6% from $3.3 million in the second quarter of 2006. Gross margin increased to 24.0% in the quarter, up from 17.7% in the same period last year. The increase in gross margin is a result of management implementing cost control measures and improved technology that offset increases in the price of copper wire. The Company's gross margin also continues to benefit from the consolidation of Jinzhou Dongwoo, a supplier to Wonder Auto, in November of 2006.
Operating expenses were $1.8 million, or 7.8% of revenue, up 94.4% from $940,843, or 5.0% of revenue, in the second quarter of 2006. The increase in operating expenses was primarily due to higher consulting fees for compliance with Sarbanes-Oxley Act of 2002, salaries for independent directors and insurance for directors and officers.
Income from operations for the second quarter of 2007 was $3.8 million, up 59.9% from $2.4 million in the comparable quarter a year ago. Operating margin increased to 16.2% from 12.7%.
Net income was $3.8 million, up 84.2% from net income of $2.1 million, in the second quarter of 2006. Net income increased to $3.0 million before the inclusion of $0.8 million of government grant income. Taxation for the quarter, a credit of $34,090, benefited from a $426,325 tax refund in respect of capital equipment purchased.
Basic and diluted earnings per share in the second quarter of 2007 were $0.16 compared to basic and diluted earnings per share of $0.12 in the same period a year ago.
Financial Condition
As of June 30, 2007, Wonder Auto had $15.2 million in cash, cash equivalents and restricted cash, working capital of $34.1 million and $16.5 million of long-term debt. Shareholders' equity stood at $45.8 million, up from $38.2 million at December 31, 2006.
Recent Events
On August 3rd, 2007, Wonder Auto was approved to list its common stock on the NASDAQ Global Market. The Company expects to begin trading on or around August 9th, 2007 under the symbol "WATG".
On July 6th, 2007, Wonder Auto filed a registration statement on Form S-1 with the Securities and Exchange Commission for an offering of up to 6.5 million shares of common stock. The company intends to offer 5 million shares of common stock with the additional 1.5 million of common stock offered by an existing stockholder. The total shares outstanding after the offering will be 28,959,994. The Company has also granted the underwriters a 30-day option to purchase up to 975,000 additional shares of common stock to cover over allotments, if any.
Business Outlook
Added Mr. Zhao, "During the quarter, we reached close to full capacity with our alternator and starter production lines as a result of the growth we have experienced. We are alleviating our capacity constraints with new production lines that will start in the third quarter and look forward to being able to fulfill the current demand we are experiencing for our products."
Wonder Auto completed the installation of its new production lines in July 2007. The Company is in the final stages of testing the lines before it begins full production in the third quarter of 2007. The additional production lines will bring total capacity for alternators and starters to approximately 1.7 million and 1.8 million units, respectively.
Wonder Auto reaffirms its previous guidance for the full year of revenues of $100 million and net income of $13.5 million.
About Wonder Auto Technology, Inc.
Wonder Auto Technology, Inc., through its Chinese subsidiaries, designs, develops, manufactures and sells automotive electrical parts. The Company was ranked second in sales revenue in the China market for automotive alternators and starters in 2006. Its products are suitable for various types of automobiles and most of its products are used in passenger cars with smaller engines having displacement below 1.6 liters. Wonder Auto's customers include Beijing Hyundai Motor Company, Shenyang Aerospace Mitsubishi Motors Engine Manufacturing Co., Ltd., Harbin Harbin Dongan Automotive Engine Manufacturing Co., Ltd., and Tianjin FAW Xiali Automobile Co., Ltd. Wonder Auto Technology, Inc. is a Nevada corporation with its manufacturing subsidiaries and its corporate headquarters located in Jinzhou City, Liaoning Province, China.
Financial Tables Below
Wonder Auto Technology, Inc.
Condensed Consolidated Statements of Income and Comprehensive Income
For the three months ended June 30, 2007 and 2006
(Stated in US Dollars)
Three months ended June 30
(unaudited)
2007 2006
Net sales $23,555,638 $18,813,107
Cost of sales 17,899,115 15,478,235
Gross profit 5,656,523 3,334,872
Operating expenses
Administrative expenses 910,106 297,160
Research and development costs 214,174 99,327
Selling expenses 704,999 544,356
1,829,279 940,843
Income from operations 3,827,244 2,394,029
Interest income 38,068 8,487
Other income 15,531 116,684
Government grant 786,154 -
Finance costs (592,890) (195,593)
Income before income taxes 4,074,107 2,323,607
Income taxes 34,090 (243,534)
Minority interests (276,706) -
Net income $3,831,491 $2,080,073
Other comprehensive income
Foreign currency translation
Adjustments 709,413 78,529
Comprehensive income $4,540,904 $2,158,602
Earnings per share: basic and
diluted $0.16 $0.12
Weighted average number of
shares outstanding:
basic and diluted 23,959,994 17,893,079
Wonder Auto Technology, Inc.
Condensed Consolidated Balance Sheets
As of June 30, 2007 and December 31, 2006
(Stated in US Dollars)
June 30, December 31,
2007 2006
(Unaudited) (Audited)
ASSETS
Current assets
Cash and cash equivalents $9,719,619 $8,203,699
Restricted cash 5,437,191 4,876,879
Trade receivables (net of
allowance of doubtful
accounts of $42,124
in 2007 and
$32,150 in 2006) 29,207,840 24,696,982
Bills receivable 10,042,945 3,098,314
Other receivables,
prepayments and deposits 1,575,212 1,254,209
Inventories 14,590,021 13,689,374
Amount due from a related
company 71,508 69,561
Deferred taxes 278,169 237,570
Total current assets 70,922,505 56,126,588
Intangible assets 9,634,218 4,250,800
Property, plant and equipment,
net 15,585,589 13,945,846
Land use right 1,210, 766 1,203,256
Deposit for acquisition of
property, plant and equipment 3,978,828 1,740,548
Investment in an unconsolidated
affiliate - 527,627
Deferred taxes 232,424 205,475
TOTAL ASSETS $101,564,330 $78,000,140
Wonder Auto Technology, Inc.
Condensed Consolidated Balance Sheets (Cont'd)
As of June 30, 2007 and December 31, 2006
(Stated in US Dollars)
June 30, December 31,
2007 2006
(Unaudited) (Audited)
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current liabilities
Trade payables $11,479,345 $9,631,537
Bills payable 9,731,000 8,628,078
Other payables and accrued expenses 4,706,964 3,121,533
Provision for warranty 972,641 1,049,344
Income tax payable 99,425 398,768
Amount due to an unconsolidated affiliate - 37,492
Dividend payable to minority stockholders 366,664 -
Secured short-term bank loans 9,448,275 14,326,831
Total current liabilities 36,804,314 37,193,583
Secured long-term bank loans 16,474,321 -
TOTAL LIABILITIES 53,278,635 37,193,583
COMMITMENTS AND CONTINGENCIES
MINORITY INTERESTS 2,438,025 2,579,572
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 23,959,994
shares in 2007 and 2006 2,396 2,396
Additional paid-in capital 22,140,143 22,140,143
Statutory and other reserves 3,148,265 3,148,265
Accumulated other comprehensive income 2,528,880 1,452,138
Retained earnings 18,027,986 11,484,043
TOTAL STOCKHOLDERS' EQUITY 45,847,670 38,226,985
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $101,564,330 $78,000,140
Wonder Auto Technology, Inc.
Condensed Consolidated Statements of Cash Flows
For the six months ended June 30, 2007 and 2006
(Stated in US Dollars)
Six months ended June 30
(Unaudited)
2007 2006
Cash flows from operating activities
Net income $6,543,943 $3,489,306
Adjustments to reconcile net income to net
cash provided by
(used in) operating activities:
Depreciation 929,352 664,243
Amortization of trademarks and
patents 707 185
Amortization of land use right 25,793 13,391
Deferred taxes (56,238) 5,457
Gain on disposal of property, plant
and equipment 15,636 -
Provision for doubtful debts 8,923 -
Recovery of obsolete inventories (57,493) (79,990)
Exchange loss on translation of
monetary assets and liabilities 100,764 -
Equity net income of an
unconsolidated affiliate (34,147) -
Minority interests 486,077 -
Changes in operating assets and liabilities:
Trade receivables (3,214,204) (4,527,526)
Bills receivable (6,669,000) (1,653,822)
Other receivables, prepayments and
deposits (94,889) (72,138)
Inventories
(195,332) (2,556,444)
Trade payables 1,881,863 3,206,449
Bills payable 880,741 858,294
Other payables and accrued expenses 454,752 77,167
Provision for warranty (104,142) 366,729
Income tax payable (308,489) (14,150)
Net cash flows provided by (used in) operating
activities 594,617 (222,849)
Cash flows from investing activities
Payments to acquire trademarks and patents (326) (1,244)
Payments to acquire and for deposit for
acquisition of
property, plant and equipment (3,247,305) (797,301)
Proceeds from sales of property, plant and
equipment 11,171 -
Installment payment to acquire Jinzhou
Dongwoo (2,420,000) -
(Increase)/decrease in restricted cash (560,312) 347,860
Proceeds from sales of marketable securities - 37,317
Net cash paid to acquire Jinzhou Wanyou (3,426,485) -
Cash acquired from the RTO - 419
Net cash flows used in investing activities $(9,643,257) $(412,949)
Wonder Auto Technology, Inc.
Condensed Consolidated Statements of Cash Flows (Cont'd)
For the six months ended June 30, 2007 and 2006
(Stated in US Dollars)
Six months ended June 30
(Unaudited)
2007 2006
Cash flows from financing activities
Dividend paid to stockholders $- $(1,706,516)
Dividend paid to minority stockholders (357,280) -
Dividend paid to Winning (343,934) -
New bank loans 18,939,379 -
Repayment of bank loans (7,977,971) -
Repayment to stockholders - (5,149)
Net proceeds from issuance of shares - 10,142,020
Advance from a related company - 64,480
Net cash flows provided by financing activities 10,260,194 8,494,835
Effect of foreign currency translation on cash
and cash equivalents 304,366 54,248
Net increase in cash and cash equivalents 1,515,920 7,913,285
Cash and cash equivalents - beginning of period 8,203,699 4,368,757
Cash and cash equivalents - end of period $9,719,619 $12,282,042
Supplemental disclosures for cash flow
information:
Non-cash investing and financing
activities:
Acquisition of Jinzhou Wanyou $2,840,317 $-
Cash paid for:
Interest $750,402 $434,868
Income taxes $493,508 $470,878