JINZHOU CITY, China, Nov. 14 /Xinhua-PRNewswire-FirstCall/ -- Wonder Auto
Technology, Inc., (OTC 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.
Conference Call
Wonder Auto will host a conference call on Tuesday, November 14th at
10:00 am ET to discuss results for the third quarter of 2006. Joining Mr.
Qingjie Zhao, Chairman, will be Ryan Yuan, CFO, and Jim Groh, Vice President
of Strategic Planning of Wonder Auto . To participate in the conference
call, please dial the following number five to ten minutes prior to the
scheduled conference call time (866) 800-8648. International callers should
dial (617) 614-2702. Callers from China should dial 10 800 130 0399. When
prompted by the operator, mention Conference Passcode 61797481.
If you are unable to participate in the call at this time, a replay will
be available on Tuesday, November 14 at 11:00 a.m. Eastern Time, through
Tuesday, November 21, 2006. To access the replay dial (888) 286-8010 and
enter the conference passcode 55248766. International callers should dial
(617) 801-6888 and enter the same passcode 55248766.
This conference call will be broadcast live over the Internet and can be
accessed by all interested parties by clicking on http://phx.corporate-
ir.net/playerlink.zhtml?c=194220&s=wm&e=1416205 . Please access the link at
least fifteen minutes prior to the start of the call to register, download,
and install any necessary audio software. For those unable to participate
during the live broadcast, a 90-day replay will be available shortly after
the call by accessing the same link.
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.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements are statements that are not historical facts. Such forward-
looking statements are based upon the current beliefs and expectations of
Wonder Auto’s management and are subject to risks and uncertainties, which
could cause actual results to differ from the forward-looking statements. The
following factors, among others, could cause actual results to differ from
those set forth in the forward-looking statements: business conditions in
China, weather and natural disasters, changing interpretations of generally
accepted accounting principles; outcomes of government reviews; inquiries and
investigations and related litigation; continued compliance with government
regulations; legislation or regulatory environments, requirements or changes
adversely affecting the businesses in which Wonder Auto is engaged;
fluctuations in customer demand; management of rapid growth; intensity of
competition from other providers of auto components; timing approval and
market acceptance of new product introduction; general economic conditions;
geopolitical events and regulatory changes, as well as other relevant risks
not included herein. The information set forth herein should be read in
light of such risks. Wonder Auto does not assume any obligation to update
the information contained in this press release.
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)
For more information, please contact:
Investor Relations Contact:
Mark Collinson, Partner
CCG Investor Relations
Tel: +1-310-477-9800 x117
Email: Mark.collinson@ccgir.com
Company Contact:
Jim Groh, Vice President, Strategic Planning
Wonder Auto Technology, Inc.
Tel: +1-843-277-0024
Email: jimgroh@wonderautotech.com