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Wonder Auto Technology Reports Record Revenues and Net Earnings for the Fourth Quarter and the 2007 Year

2008-02-05 18:43 926


2007 Annual Revenues Exceed US$100 Million for the First Time

JINZHOU CITY, China, Feb. 5 /Xinhua-PRNewswire-FirstCall/ -- Wonder Auto Technology, Inc. (Nasdaq: WATG) ("Wonder Auto" or the "Company"), a leading manufacturer of automotive electrical and suspension parts in China, today reported its financial results for the fourth quarter and year ended December 31, 2007.

Financial Highlights

-- 2007 fourth quarter sales revenue increased to a fourth quarter record

US$29.7 million, reflecting 55.4% year-over-year growth;

-- 2007 fourth quarter net income increased to a fourth quarter record

US$4.3 million, reflecting 81.6% year-over-year growth, and fully

diluted earnings per share increased to US$ 0.17, reflecting 70% year-

over-year growth

-- 2007 annual sales revenue increased to a record US$102.1 million,

reflecting 41.5% year-over-year growth;

-- 2007 annual net income increased to a record US$14.5 million,

reflecting 76.5% year-over-year growth, and fully diluted earnings per

share increased to US$ 0.60, reflecting 50% year-over-year growth

Mr. Qingjie Zhao, Wonder Auto’s Chairman and CEO, said, “Our robust results in 2007 validate our growth strategies to increase market share in the rapidly growing Chinese domestic medium-sized automobile market while using our R & D skills to develop products targeting specific international markets. As the Chinese consumer preference has moved towards medium-sized sedans due to the overall higher quality and driving ability, we also substantially increased our penetration in 1.6-2.0 liter engine market and 2.0-2.5 liter engine market, respectively, to meet the rising market demand. As a result, we not only captured rapid growth in the medium-sized sedan market, but also avoided the slowdown in the low-end economy car market. Besides our expansion in the sedan market, we also increased our sales in SUV, MPV and pick-up truck markets. We have accomplished these goals while maintaining our industry-leading gross margins.”

Fourth Quarter Financial Results

For the 2007 fourth quarter, sales revenue was US$29.7 million, a 55.4% increase as compared to US$19.1 million for the same period in 2006. Export sales were US$3.3 million as compared to US$1.6 million for the same period of 2006, reflecting a 106% year-over-year growth. Export sales in the fourth quarter represented 11.4% of total sales compared with US$1.6 million, or 8.2% of total sales for the same period in 2006.

Gross profit for the fourth quarter of 2007 was US$7.5 million, an increase of 93.0% as compared to US$3.9 million in the same period in 2006. Gross margin was 25.4% of sales for the 2007 fourth quarter as compared to 20.5% for the same period in 2006. Gross margin improvement was mainly due to efficient cost reduction through research and development efforts, focus on larger orders, successful price negotiation over volume discounts on raw material and subcomponents, and the ability to leverage economies-of-scale in production.

Operating income for the 2007 fourth quarter was US$4.8 million, an increase of 64.5% as compared to US$2.9 million for the same quarter a year ago. The operating margin reached 16.3% in the fourth quarter of 2007 as compared to 15.3% for the same period in 2006.

Net income was US$4.3 million, an increase of 81.6% as compared to net income of US$2.4 million in the fourth quarter last year. The net margin was 14.5% in the fourth quarter of 2007 compared with 12.4% for the same quarter in 2006. The fully diluted earnings per share were US$ 0.17, a 70% increase as compared to US$ 0.10 for the same quarter a year ago.

2007 Year Financial Results

For the year ended December 31, 2007, sales revenue increased 41.5% to US$102.1 million compared with US$72.2 million in 2006. For the 2007 year, alternators sales were US$59.8 million, starter sales were US$35.1 million, and rods and shafts contributed US$7.3 million in sales revenues. Sales to the domestic Chinese market were US$92.3 million in 2007, representing a 34.4% gain compared with US$68.7 million in 2006, and 90.4% of total 2007 sales. Export sales in 2007 of US$9.8 million rose 180% compared with US$3.5 million in 2006, and represented approximately 10% of total 2007 sales.

Gross profit for the 2007 year increased 73% to US$25.6 million, representing a margin of 25.1% of sales as compared to US$14.8 million, or a margin of 20.5% for 2006. Gross margin improvement was mainly due to economies-of-scale, research and development reducing costs, emphasizing larger orders from customers, efficient cost controls, and the addition of Jinzhou Wanyou.

During the 2007 year, total operating expenses were US$8.0 million as compared to US$5.0 million for 2006. The Company incurred higher administrative expenses due to increased financing and audit expenses, higher costs in connection with improving the Company’s internal control system for Sarbanes-Oxley 404 compliance and the addition of new independent directors. Research and development expenses increased as the Company developed products with higher output power, smaller size and weight, longer duration and higher endurance to harsh environment.

Income before income taxes for 2007 was US$17.0 million, an increase of 77.6% as compared to US$9.6 million a year ago. The operating margin reached 17.3% in 2007 as compared to 13.3% for the same period in 2006.

Net income grew 76.5% to US$14.5 million and fully diluted earnings per share were US$0.60, compared with $8.2 million, or fully diluted earnings per share of US$0.40 in 2006. The weighted average number of shares on fully diluted basis increased to 24,140,816 shares in 2007 versus 20,787,279 shares in 2006. The net income margin was 14.2% in 2007 compared to 11.4% for the 2006 year.

Ryan Yuan, Chief Financial Officer of Wonder Auto, commented, “We are pleased to report a strong quarterly result. Thanks to our strong fourth quarter performance, we exceeded our guidance of total revenues above US$100 million with net income over US$ 14.5 million for the 2007 year. We look forward to another year of strong growth during 2008 while managing our operating expenses.”

Financial Condition

Total cash and cash equivalents and restricted cash as of December 31, 2007 totaled US$34.7 million as compared to US$13.0 million as of December 31, 2006. Long-term debt was US$17.6 million. Stockholders’ equity increased to US$78.4 million as of December 31, 2007 from US$38.2 million as of December 31, 2006.

The Company is expected to complete its 10-K filing on or before February 14, 2008.

Recent Developments

Wonder Auto acquired the remaining 79.6% of Jinzhou Wanyou in April 2007 thereby expanding the Company’s product mix by adding shock absorber rods, vibration dampers and rotary axles for automotive alternators and starters. On January 1, 2008, the Company acquired 50% of Jinzhou Hanhua Electric Fitting Ltd., a manufacturer of armatures for automotive starters.

The Company announced on November 26 its largest supply contract to date for a foreign auto company. Wonder Auto is expected to supply approximately 800,000 automotive alternators to a Shanghai-registered international auto parts procurement center over the next three years. All alternators supplied through this contract are expected to be exported overseas to a major global automotive manufacturer. The contract value is projected to be approximately US$11 million per year and approximately US$32 million over the three-year contract period.

On December 11, 2007, Wonder Auto announced that it entered into a Securities Purchase Agreement with certain institutional investors to sell 3,000,000 newly issued shares of its common stock at a price of $8.65 per share. Gross proceeds to Wonder Auto from the sale of the privately placed common stock were US$25,950,000 and the Company expects to use the proceeds from such sale for working capital and general corporate purposes that include the purchase of additional R & D equipment and production assets.

Business Outlook

The management of Wonder Auto confirms that 2008 anticipated total sales could exceed US$140 million with over US$20 million in net income.

“Coming into 2008, we are excited about the opportunities lie ahead of us. After a successful expansion year in 2007, we aim to increase our market share in China in 2008. On the export front, we continue to focus on US and European markets in both OEM and aftermarket sectors. We also plan to use over $15 million from our recent financing to expand our production capacity to meet the growing demand for our products,” Mr. Zhao, Wonder Auto’s Chairman and CEO, commented.

Conference Call

The Company will host a conference call, to be simultaneously Webcast today at 8:00 a.m. Eastern Standard Time / 9:00 p.m. Beijing Time. A question and answer session will follow the management presentation. Mr. Qingjie Zhao (Chairman & CEO), Mr. Ryan Yuan (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 or use the following link at http://phx.corporate-ir.net/phoenix.zhtml?c=194220&p=irol-EventDetails&EventId=1745910. 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 Tuesday, February 19, 2008, at 11:59 p.m. Eastern Standard Time/12:59 p.m. Beijing Time. 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: 270297

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 alternators and starters 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 a wide range of auto makers, 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 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 expected financial performance and strategic and operational plans 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, 2006 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.

Consolidated Statements of Income and Comprehensive Income

(Stated in US Dollars)

2007 2006

Sales revenue $102,083,722 $72,150,483

Cost of sales (76,459,944) (57,342,201)

Gross profit 25,623,778 14,808,282

Operating expenses

Administrative expenses 3,565,332 1,917,817

Research and development costs 1,135,997 947,702

Selling expenses 3,290,689 2,137,853

7,992,018 5,003,372

Income from operation 17,631,760 9,804,910

Interest income 111,784 96,810

Other income 287,322 356,590

Government grants 1,496,547 --

Finance costs (2,520,805) (1,033,551)

Equity in net income of unconsolidated

Affiliates 34,147 371,005

Income before income taxes 17,040,755 9,595,764

Income taxes (1,389,008) (1,270,391)

Minority interests (1,136,694) (101,827)

Net income $14,515,053 $8,223,546

Other comprehensive income

Foreign currency translation adjustments 2,969,894 1,007,468

Total comprehensive income $17,484,947 $9,231,014

Earnings per share: basic and diluted $0.60 $0.40

Weighted average number of shares

outstanding:

basic and diluted 24,140,816 20,787,279

Wonder Auto Technology, Inc.

Consolidated Balance Sheets

(Stated in US Dollars)

As of December 31,

2007 2006

ASSETS

Current assets

Cash and cash equivalents $26,102,993 $8,203,699

Restricted cash 8,613,262 4,876,879

Trade receivables (net of allowance

of doubtful accounts of $37,071 in

2007, $32,150 in 2006) 38,124,411 24,696,982

Bills receivable 11,766,478 3,098,314

Advances to staff 314,964 238,310

Other receivables, prepayments and

deposits

1,320,483 1,015,899

Inventories 12,634,786 13,689,374

Amount due from a related company 74,822 69,561

Deferred taxes 307,338 237,570

Total current assets 99,259,537 56,126,588

Intangible assets 16,873,051 4,250,800

Property, plant and equipment, net 22,516,900 13,945,846

Land use right 1,235,029 1,203,256

Deposit for acquisition of property, plant

and equipment 2,072,458 1,740,548

Investment in an unconsolidated affiliate -- 527,627

Deferred taxes 439,760 205,475

TOTAL ASSETS $142,396,735 $78,000,140

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES

Current liabilities

Trade payables $12,726,989 $9,631,537

Bills payable 15,903,600 8,628,078

Other payables and accrued expenses 2,413,140 3,121,533

Provision for warranty 1,124,655 1,049,344

Income tax payable 666,589 398,768

Amount due to an unconsolidated

affiliate -- 37,492

Secured short-term bank loans 10,282,500 14,326,831

Total current liabilities 43,117,473 37,193,583

Secured long-term bank loans 17,622,186 --

TOTAL LIABILITIES 60,739,659 37,193,583

MINORITY INTERESTS 3,214,683 2,579,572

STOCKHOLDERS’ EQUITY

Preferred stock: par value $0.0001 per

share; authorized 10,000,000 shares

in 2007 and 2006; none issued and

outstanding -- --

Common stock: par value $0.0001 per share

Authorized 90,000,000 shares in 2007

and 2006; issued and outstanding

26,959,994 shares in 2007 and

23,959,994 shares in 2006 2,696 2,396

Additional paid-in capital 44,870,304 22,140,143

Statutory and other reserves 4,857,660 3,148,265

Accumulated other comprehensive

income 4,422,032 1,452,138

Retained earnings 24,289,701 11,484,043

TOTAL STOCKHOLDERS’ EQUITY 78,442,393 38,226,985

TOTAL LIABILITIES AND STOCKHOLDERS’

EQUITY $142,396,735 $78,000,140

Wonder Auto Technology, Inc.

Consolidated Statements of Cash Flows

(Stated in US Dollars)

2007 2006

Cash flows from operating activities

Net income $14,515,053 $8,223,546

Adjustments to reconcile net income to

net cash provided by operating

activities:

Depreciation 2,014,045 1,401,541

Amortization of intangible

assets and land use right 90,712 29,652

Deferred taxes (263,993) (16,369)

Loss on disposal of property,

plant and equipment 20,255 79,527

Gain on disposal of Man Do (500) --

Provision/(Recovery of) for

doubtful debts 2,159 (7,701)

Provision/(Recovery of) for

obsolete inventories 39,115 (52,470)

Exchange loss on translation of

monetary assets and liabilities 532,738 --

Equity in net income of an

unconsolidated affiliate (34,147) (371,005)

Increase in minority interests 1,136,694 101,827

Changes in operating assets and

liabilities:

Trade receivables (10,651,989) (5,493,345)

Bills receivable (6,504,351) 1,536,869

Other receivables, prepayments and

deposits 60,105 (542,294)

Inventories 2,265,298 (4,481,151)

Trade payables 2,554,508 460,403

Advances to staff (57,203) (121,961)

Bills payable 5,110,761 601,360

Amount due to an unconsolidated

affiliate -- 36,719

Other payables and accrued expenses 1,099,131 (263,895)

Provision for warranty 6,124 102,845

Income tax payable 235,971 164,834

Net cash flows provided by operating

activities 12,170,486 1,388,932

Wonder Auto Technology, Inc.

Consolidated Statements of Cash Flows (Cont’d)

(Stated in US Dollars)

2007 2006

Cash flows from investing activities

Payments to acquire intangible assets (1,982) (10,023)

Payments to acquire and for deposit

for acquisition of property, plant

and equipment (8,023,761) (3,627,589)

Proceeds from sales of property, plant

and equipment 25,803 73,169

Payment to acquire marketable

securities --

Proceeds from sales of marketable

securities -- 37,585

Increase in restricted cash (3,736,383) (917,757)

Cash acquired from the RTO -- 419

Net cash paid to acquire Jinzhou

Wanyou (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 flows used in investing

activities $(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 (343,934) --

Dividend paid to minority stockholders (743,240) --

Proceeds from bank loans 29,486,379 17,573,649

Repayment of bank loans (18,161,716) (16,696,664)

Net proceed from issue of shares 22,730,461 10,142,020

Net cash flows provided by / (used in)

financing activities 32,967,950 9,225,743

Effect of foreign currency translation on

cash and cash equivalents 1,063,166 357,132

Net increase in cash and cash equivalents 17,899,294 3,834,942

Cash and cash equivalents - beginning of

period 8,203,699 4,368,757

Cash and cash equivalents - end of period $26,102,993 $8,203,699

Supplemental disclosures for cash flow

information:

Non-cash investing and financing

activities:

Acquisition of Jinzhou Wanyou

and Jinzhou Dongwoo $2,840,317 $4,932,841

Cash paid for:

Interest $1,194,371 $807,693

Income taxes $1,316,837 $1,121,927

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

Source: Wonder Auto Technology, Inc.
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