JINZHOU CITY, China, March 3 /PRNewswire-Asia-FirstCall/ -- Wonder Auto Technology, Inc. (Nasdaq: WATG; "Wonder Auto" or "the Company"), a leading manufacturer of automotive electrical, suspension parts and engine accessories in China, today announced its financial results for the fourth quarter and full year ended December 31, 2008.
Highlights:
-- Sales revenue increased 38.3% year-over-year to $141.2 million;
-- Gross profit rose 42.2% year-over-year to $36.4 million;
-- Net income increased 30.3% year-over-year to $18.9 million;
-- Export sales reached $22.9 million, representing 16.2% of total sales
revenue;
-- Non-GAAP EPS was $ 0.73, representing 21.0% increase compared with
$0.60 in 2007
Business outlook
For the first quarter of 2009, sales revenue is expected to be approximately $40 million with net income to be about $4.0 million.
Financial performance
Sales revenue in 2008 rose to a record high of $141.2 million, which is a 38.3% increase from $102.1 million in 2007. Revenue from alternators and starters increased $20.6 million, the sales of rod and shaft products increased $10.8 million and engine valves valve tappets contributed $7.7 million to revenue. The increase was mainly attributable to the growing market demand for our cost effective and high quality products. Export sales increased by 135.1% to $22.9 million as compared to $9.8 million in 2007.
In 2008, gross profit increased 42.2% to a record of $36.4 million from a gross profit of $25.6 million in 2007. Gross margin was 25.8% in 2008 compared with 25.1% for year 2007. The increased gross margin was attributable to the advantage of economies of scale that emerged from the robust sales volume in the past year, and the lower raw material consumption and decreased per unit cost through our continuous improvement in R&D capabilities and optimized technical solutions.
Operating expenses for 2008 increased $5.3 million, or 66.1%, to $13.3 million from $8.0 million of 2007. The increase was primarily due to higher administrative expenses, research & development costs and higher selling expenses. The increased administrative expenses were primarily due to administrative expenses of the newly acquired subsidiaries, higher expenses on legal, audit, and due diligent work for acquisitions, maintenance fees as a Nasdaq listed company, especially the consulting and auditing costs for SOX 404 compliance work during 2008. In addition, a stock-based compensation of $706,295 was incurred from termination of the stock option plan. The increase of research and development costs is primarily attributable to the research and development of new and existing products. As a percentage of revenue, research and development costs were 1.2% in 2008 compared with 1.1% in 2007. Selling expenses increased to $4.1 million compared with $3.3 million in 2007. The increased selling expenses were mainly caused by commissions for increased sales volume and higher freight costs during the period of Beijing Olympic Games.
Income before income taxes increased $6.5 million, or 38.2%, to $23.5 million in 2008 from $17.0 million in 2007. Income before income taxes as a percentage of revenue was 16.7% in 2008 -- the same as in 2007.
Net income increased $4.4 million, or 30.3%, to $18.9 million in 2008 from $14.5 million in 2007. Non-GAAP EPS was $0.73, representing a 21.0% increase from $0.60 in 2007, without considering the stock-based compensation of $706,295 incurred from termination of the stock option plan.
As of December 31, 2008, Wonder Auto had $8.2 million in cash and cash equivalents and restricted cash of $24.2 million, a current ratio of
1.2-to-1, working capital of $26.4 million, and $16.1 million long term bank loan. Shareholders' equity increased to $102.1 million. As of December 31, 2008, the value of property, plant and equipment rose to $69.1 million from $22.5 million as of December 31, 2007.
Events overview
In January 2008, the Company acquired 50% equity interest in Jinzhou Hanhua Electrical System Co., Ltd., a manufacturer of armatures for starters.
In February 2008, the Company acquired 65% equity interest in Jinzhou Karham Electrical Equipment Co., Ltd., a producer of carbon brush assembly for starters.
In March 2008, the Company entered into a four-year supply agreement and received supply orders from a major North American OE automotive manufacturer with total value of the contracts exceeding $13.5 million.
In October 2008, the Company acquired 65% equity interest of Jinan Worldwide Auto Accessories Company, one of the largest engine valve and valve tappets manufacturer in China.
In November 2008, one of the Company's subsidiaries, Jinzhou Motor, signed a development agreement with Korean CT&T Co., Ltd. to develop electric motor and driver products for CT&T's electric vehicles with prototype deliveries to commence in March 2009. The total revenue will be approximately $330 million from 2010 to 2013.
In November 2008, the Company disposed its $5 million short-term investment in Money Victory Limited.
In December 2008, the Company signed development agreements with Shenzhen BYD Auto Co., Ltd and will develop starters and alternators for Shenzhen BYD with prototype deliveries to commence in March 2009.
In February 2009, the Company won the bid to supply starters to Dongfeng Automotive Co., Ltd with prototype deliveries for road testing to be commenced in 2009. The expected revenue under this agreement will be approximately $20 million during the period of 2011 to 2015 progressively.
"Wonder Auto is well-positioned to weather the current economic downturn. We delivered a very strong fiscal year highlighted by the increasing demand for our products. This was attributable to our market-oriented focus, stringent quality control, advanced technology, effective cost structure, as well as the favorable government policies to boost China's auto industry. Our strategic acquisitions also contributed to our market expansion and product portfolio optimization through cross-selling synergies. We are seeing growth momentum in the mid- to small-sized engine vehicle market in China and the growing market demand for alternative energy vehicles and parts, which will further our quest to bring exceptional value to our customers and our shareholders," commented Mr. Qingjie Zhao, Chairman and Chief Executive Officer of Wonder Auto.
Conference call
The company will host a conference call on Tuesday, March 3 at 8:00 a.m. U.S. Eastern Standard time. A question and answer session will follow management's presentation. Mr. Qingjie Zhao (Chairman & CEO), Mr. Ryan Yuan (CFO) and Ms. Lydia Zhao (Assistant CFO) will be the primary speakers for the call.
To participate, please call the following numbers ten minutes before the call start time:
Phone number: +1-866-242-1388 (United States)
Phone number: +852-800-968-831 (Hong Kong)
Phone number: +86-10-800-264-0084 (China)
Phone number: +86-10-800-640-0084 (China)
Conference ID: 86242210
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 .
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, suspension products and engine accessories. Wonder Auto was ranked second in sales revenue in the China market for automotive alternators and starters in 2007. With respective 5 different series and over 150 models of alternators, 70 models of starters, various suspension and engine 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 MOBIS Auto Parts & Components Co., Ltd, Harbin Dongan Automotive Engine Co., Ltd, Shenyang Xinguang Huachen Auto Engine Co., Ltd, SWT, Shenyang Aerospace Mitsubishi Motors Engine Co., Ltd., Shanghai VW and Weifang Diesel Engine. For more information, please log on http://www.watg.cn .
Safe harbor statement
This press release may contain forward-looking information about Wonder Auto Technology, Inc. and its wholly owned subsidiaries which are intended to be covered by the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical facts. These statements can be identified by the use of forward-looking terminology such as "believe," "expect," "may," "will," "should," "project," "plan," "seek," "intend," or "anticipate" or the negative thereof or comparable terminology, and include discussions of strategy, statements about industry trends and Wonder Auto Technology, Inc.'s future performance, operations and products. This and other "Risk Factors" are contained in Wonder Auto Technology, Inc.'s public filings with the SEC.
Wonder Auto Technology, Inc.
Consolidated Statements of Income and Comprehensive Income
(Stated in US Dollars)
Year ended December 31,
2008 2007 2006
Sales revenue $141,189,559 $102,083,722 $72,150,483
Cost of sales 104,750,150 76,459,944 57,342,201
Gross profit 36,439,409 25,623,778 14,808,282
Operating expenses
Administrative expenses 6,827,200 3,565,332 1,917,817
Stock-based compensation 706,295 -- --
Research and development costs 1,647,888 1,135,997 947,702
Selling expenses 4,093,413 3,290,689 2,137,853
13,274,796 7,992,018 5,003,372
Income from operations 23,164,613 17,631,760 9,804,910
Other income 1,359,883 287,322 356,590
Government grants 192,882 1,496,547 --
Net finance costs (2,246,099) (2,409,021) (936,741)
Equity in net income of
non-consolidated
affiliates 1,072,788 34,147 371,005
Income before income taxes and
minority interests 23,544,067 17,040,755 9,595,764
Income taxes (2,174,948) (1,389,008) (1,270,391)
Minority interests (2,460,352) (1,136,694) (101,827)
Net income $18,908,767 $14,515,053 $8,223,546
Other comprehensive income
Foreign currency translation
adjustments 4,002,238 2,969,894 1,007,468
Total comprehensive income $22,911,005 $17,484,947 $9,231,014
Earnings per share: basic and
diluted $0.70 $0.60 $0.40
Weighted average number of shares
outstanding:
Basic and diluted 26,959,994 24,140,816 20,787,279
Wonder Auto Technology, Inc.
Consolidated Balance Sheets
(Stated in US Dollars)
As of December 31,
2008 2007
ASSETS
Current assets
Cash and cash equivalents $8,159,156 $26,102,993
Restricted cash 24,181,645 8,613,262
Trade receivables, net 46,571,619 38,124,411
Bills receivable 8,388,926 11,766,478
Other receivables, prepayments and
deposits 16,408,304 1,635,447
Inventories 44,016,192 12,634,786
Amount due from a related company -- 74,822
Amount due from Hony Capital 7,637,216 --
Income tax recoverable 289,000 --
Deferred taxes 1,075,766 307,338
Total current assets 156,727,824 99,259,537
Intangible assets 22,062,560 16,873,051
Property, plant and equipment, net 69,131,579 22,516,900
Land use rights 10,391,527 1,235,029
Deposit for acquisition of property,
plant and equipment 3,845,774 2,072,458
Deferred taxes 870,500 439,760
TOTAL ASSETS $263,029,764 $142,396,735
Wonder Auto Technology, Inc.
Consolidated Balance Sheets (Cont’d)
(Stated in US Dollars)
As of December 31,
2008 2007
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Current liabilities
Trade payables $21,616,932 $12,726,989
Bills payable 31,247,100 15,903,600
Other payables and accrued expenses 20,465,014 2,413,140
Provision for warranty 2,377,620 1,124,655
Income tax payable -- 666,589
Payable to Hony Capital 10,187,216 --
Secured short-term bank loans 44,055,803 10,282,500
Early retirement benefits cost 419,301 --
Total current liabilities 130,368,986 43,117,473
Secured long-term bank loans 16,054,478 17,622,186
Deferred revenue - government grants 2,806,777 --
Early retirement benefits cost 798,115 --
TOTAL LIABILITIES 150,028,356 60,739,659
COMMITMENTS AND CONTINGENCIES
MINORITY INTERESTS 10,941,715 3,214,683
STOCKHOLDERS’ EQUITY
Preferred stock: par value $0.0001
per share; authorized 10,000,000
shares in 2008 and 2007; none
issued and outstanding -- --
Common stock: par value $0.0001 per
share
Authorized 90,000,000 shares in 2008
and 2007; issued and outstanding
26,959,994 shares in 2008 and 2007 2,696 2,696
Additional paid-in capital 45,576,599 44,870,304
Statutory and other reserves 7,628,541 4,857,660
Accumulated other comprehensive
income 8,424,270 4,422,032
Retained earnings 40,427,587 24,289,701
TOTAL STOCKHOLDERS’ EQUITY 102,059,693 78,442,393
TOTAL LIABILITIES AND STOCKHOLDERS’
EQUITY $263,029,764 $142,396,735
Wonder Auto Technology, Inc.
Consolidated Statements of Cash Flows
(Stated in US Dollars)
Year ended December 31,
2008 2007 2006
Cash flows from operating activities
Net income $18,908,767 $14,515,053 $8,223,546
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 3,734,534 2,014,045 1,401,541
Amortization of intangible assets
and land use right 169,641 90,712 29,652
Deferred taxes (112,140) (263,993) (16,369)
(Gain)/Loss on disposal of property,
plant and equipment (129,374) 20,255 79,527
Gain on disposal of Man Do Auto
Technology Co., Ltd. ("Man Do Auto") -- (500) --
Loss on disposal of non-consolidated
affiliate 122,788 -- --
Provision/(Recovery of) for doubtful
debts 8,577 2,159 (7,701)
Provision/(Recovery of) for obsolete
inventories 46,917 39,115 (52,470)
Exchange (gain)/loss on translation
of monetary assets and liabilities (1,242,479) 532,738 --
Equity in net income of
non-consolidated affiliate (1,072,788) (34,147) (371,005)
Share-based compensation 706,295 -- --
Increase in minority interests 2,460,352 1,136,694 101,827
Deferred revenue amortized 28,241 -- --
Changes in operating assets and
liabilities:
Trade receivables 2,993,828 (10,651,989) (5,493,345)
Bills receivable 6,251,024 (6,504,351) 1,536,869
Other receivables, prepayments and
deposits 2,001,363 2,902 (664,255)
Inventories (14,861,979) 2,265,298 (4,481,151)
Trade payables (53,217) 2,554,508 460,403
Bills payable (956,502) 5,110,761 601,360
Amount due to an unconsolidated
affiliate -- -- 36,719
Amount due from a related company 78,516 -- --
Other payables and accrued expenses (2,644,372) 1,099,131 (263,895)
Provision for warranty 262,316 6,124 102,845
Income tax payable (1,526,913) 235,971 164,834
Early retirement benefits cost (117,834) -- --
Net cash flows provided by operating
activities $15,055,561 $12,170,486 $1,388,932
Wonder Auto Technology, Inc.
Consolidated Statements of Cash Flows (Cont’d)
(Stated in US Dollars)
Year ended December 31,
2008 2007 2006
Cash flows from investing
activities
Payments to acquire intangible
assets $(1,472,868) $(1,982) $(10,023)
Payments to acquire land use right (1,856,268) -- --
Payments to acquire and for deposit
for acquisition of property, plant
and equipment (17,308,878) (8,023,761) (3,627,589)
Proceeds from sales of property,
plant and equipment 242,044 25,803 73,169
Proceeds from sales of marketable
securities -- -- 37,585
Cash acquired from the RTO -- -- 419
Receivable from disposal of Money
Victory (5,950,000) -- --
Decrease/(Increase) in restricted
cash 2,293,532 (3,736,383) (917,757)
Net cash paid to acquire Jinzhou
Wanyou (293,400) (14,146,485) (500,000)
Net cash paid to acquire Jinzhou
Dongwoo -- (2,420,000) (2,192,669)
Cash inflow from disposal of Man Do -- 500 --
Net cash paid to acquire Jinzhou
Hanhua (4,040,472) -- --
Net cash paid to acquire Jinzhou
Karham (703,712) -- --
Net cash paid to acquire Money
Victory (5,000,000) -- --
Net cash paid to acquire Fuxin
Huirui (140,990) -- --
Net cash paid to acquire Yearcity (6,691,434) -- --
Net cash flows used in investing
activities (40,922,446) (28,302,308) (7,136,865)
Cash flows from financing
activities
Repayment to a stockholder -- -- (5,149)
Amount due from a related company -- -- (68,128)
Dividend paid to stockholders -- -- (1,719,985)
Dividend paid to Winning (644,030) (343,934) --
Dividend paid to minority
stockholders (1,653,271) (743,240) --
Proceeds from bank loans 18,426,341 29,486,379 17,573,649
Repayment of bank loans (9,196,570) (18,161,716) (16,696,664)
Net proceeds from issue of shares -- 22,730,461 10,142,020
Net cash flows provided by
financing activities 6,932,470 32,967,950 9,225,743
Effect of foreign currency
translation on cash
and cash equivalents 990,578 1,063,166 357,132
Net (decrease)/increase in cash and
cash equivalents (17,943,837) 17,899,294 3,834,942
Cash and cash equivalents -
beginning of year 26,102,993 8,203,699 4,368,757
Cash and cash equivalents - end of
year $8,159,156 $26,102,993 $8,203,699
Wonder Auto Technology, Inc.
Consolidated Statements of Cash Flows (Cont’d)
(Stated in US Dollars)
Year ended December 31,
2008 2007 2006
Supplemental disclosures for cash
flow information:
Cash paid for:
Interest $2,849,664 $1,445,534 $807,693
Income taxes $2,464,548 $1,316,837 $1,121,927
Cash investing activities:
Acquisitions:
Fair value of assets acquired $101,208,984 $3,149,361 $8,624,052
Fair value of liabilities assumed $86,049,295 $309,044 $3,691,211
For more information, please contact:
Wonder Auto Technology, Inc.
Lydia Zhao, Assistant CFO
Tel: +86-10-8478-5339
Cell: +86-130-2118-4792
Email: lydiaz@watg.cn
Yechon Xie, Investor Relations Manager
Tel: +86-416-266-1186
Cell: +86-137-0006-1685
Email: ycxie@watg.cn
