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Highlights:
-- $59.0 million sales revenue for the third quarter of 2009, an increase
of 50.2% from the same quarter of last year; $41.0 million organic
sales revenue in China, an increase of 24.1% on year-over-year basis
excluding acquisition contribution.
-- $6.5 million net income, or $0.24 per share on a basic and diluted
basis, for the third quarter of 2009, an increase of 2.4% from the same
period of last year;
-- On a non-GAAP basis, net income for the third quarter of fiscal 2009
increased 25.8% to $6.9 million, or $0.26 per share, on a basic and
diluted basis, as compared with a non-GAAP net income of $5.5 million,
or $0.20 per share, for the third quarter of fiscal 2008. Non-GAAP net
income excludes non-cash exchange gain/loss in connection with a loan
denominated in euro.
Business outlook
We project approximately $208 million sales revenue and $23 million net income attributable to our common stockholders for the whole year ended December 31, 2009.
Financial performance
Sales Revenue. Sales revenue increased by approximately $19.7 million, or 50.2%, to approximately $59.0 million for the three months ended September 30, 2009, compared with $39.3 million of the same period last year. This increase was mainly attributable to the $12.9 million in additional revenues generated in the third quarter of 2009 by recently acquired subsidiary, Jinan Worldwide and increased sales volume of starter and alternator products in the third quarter of 2009 due to the high market demand.
Gross Profit. Gross profit increased by approximately $3.8 million, or 37.8%, to approximately $14.0 million for the three months ended September 30, 2009, compared with approximately $10.1 million for the same period in 2008 as a result of increased demand for and sales of alternator and starter products and the consolidation of the operating results of Jinan Worldwide which contributed $3.7 million to gross profit. Gross margin was 23.7% for the three-month period ended September 30, 2009, as compared to 25.8% of the same period in 2008. Such decrease was mainly due to a larger portion of sales revenue was generated from alternators and starters for small-to-mid displacement engine vehicles which generally have a lower margin than alternators and starters for large displacement engine vehicle.
Total Operating Expenses. Total operating expenses increased by approximately $1.8 million, or 54.3%, to approximately $5.2 million for the three months ended September 30, 2009, compared with approximately $3.3 million for the same period in 2008. As a percentage of sales revenue, total expenses increased to 8.8% for the three months ended September 30, 2009, compared from 8.5% for the same period in 2008.
Net finance cost. Net finance cost was $1.5 million for the three months ended on September 30, 2009 as compared to a net finance income of $139,381 for the same period last year. The Company has an outstanding loan of EUR8.3 million from DEG - Deutsche Investitions - und Entwicklungsgesellschaft mbH, (the "DEG Loan"). Since the DEG Loan is denominated in euro, with the depreciation of RMB against euro, the Company incurred a $439,746 non-cash exchange loss during the three months ended September 30, 2009. In contrast, the Company had a non-cash exchange gain of approximately $1.0 million for the same period of 2008.
Income Taxes. Income taxes increased $307,503 to $939,622 during the three months ended September 30, 2009 from $632,570 during the same period in 2008. The income taxes increase is mainly due to the increase in income and the change in tax rate for the Company's subsidiary Jinzhou Wanyou. Jinzhou Wanyou was exempted from the PRC enterprise income tax in 2008 and its EIT rate increased to 12.5% in 2009.
Net Income. Net income increased by $153,483, or 2.4%, to approximately $6.5 million during the three months ended September 30, 2009 from approximately $6.4 million during the same period in 2008.
Events overview
On September 28, 2009, Wonder Auto's subsidiary Jinzhou Halla entered into a joint development agreement with Shenzhen BYD Auto Company Limited ("Shenzhen BYD") to design and develop alternator prototypes for Shenzhen BYD's F3/F3R sedan models, which have engine sizes between 1.3 liters and 1.5 liters, and were among the top ten best-selling models in China in the first nine months in 2009. Sample deliveries are expected to start in November 2009 for testing.
On September 22, 2009, Wonder Auto's subsidiary Jinzhou Wanyou Mechanical Parts Co., Ltd. acquired Friend Birch Limited and its China-based operating subsidiaries, Jinzhou Jiade Machinery Co., Ltd. and Jinzhou Lida Auto Parts Co., Ltd. Jinzhou Jiade Machinery and Jinzhou Lida Auto Parts manufacture and sell gas spring shafts and other thin mechanical shafts products, automotive springs and gas springs, and prior to the acquisition were among Wonder Auto's key suppliers of those products. As part of the transaction, Jinzhou Wanyou also acquired all proprietary technologies of Friend Birch Limited's rods and shafts technology center in Brazil.
Wonder Auto recently entered into an investment option agreement with the shareholders of Jinzhou Wonder Alternative Energy Vehicle Technology Co., Ltd. ("Jinzhou AEV"), which allows Wonder Auto to acquire a 10% ownership interest in Jinzhou AEV by the end of 2009 and grants the Company a right of first refusal to acquire a greater ownership interest in Jinzhou AEV. In addition, Wonder Auto will be the preferred supplier of motors to Jinzhou AEV. Jinzhou AEV is a manufacturer of electric and alternative energy vehicles, including electric sedans, taxis, minivans, pick-ups, freight cars, tourist coaches, golf carts and motorized bikes. Wonder Auto's CEO and chairman, Mr. Qingjie Zhao, is a 60% owner of Jinzhou AEV.
Mr. Qingjie Zhao, Chairman and Chief Executive Officer of Wonder Auto commented, "In the process of fighting against the global economic recession, significant changes have taken place in the auto industry. As the 10 million sales target was achieved in the Chinese auto market during October, people begin to turn their focuses to China's economy recovery. We have achieved our preliminary goals for adjustments to response to the financial crisis, and thus reinforced our competitiveness in the markets."
Conference call
The company will host a conference call on Monday, November 2 at 8:00 a.m. U.S. Eastern Daylight time. A question and answer session will follow management's presentation. Mr. Qingjie Zhao (Chairman & CEO), Mr. Ryan Yuan (CFO), Mr. Patrick Sun (Investor Relations Manager) and Mr. Rui Wang (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, China Telecom)
Phone number: +86 10 800 640 0084 (China, NetCom Users)
Phone number: +44 08082347860 (United Kingdom)
Conference ID: 38225903
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 .
Non-GAAP Financial Measures and Related Reconciliation
To supplement the Company's financial results presented in accordance with GAAP, the Company provides non-GAAP net income and non-GAAP net income per share data on a basic and diluted basis. The presentation of these non-GAAP financial measures should be considered in addition to the Company's GAAP results and are not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. The Company's non-GAAP measures may be different from non-GAAP measures used by other companies. The Company's management believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance by excluding certain exchange gains and losses that may not be indicative of the Company's business operating results. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing the Company's performance. These non-GAAP financial measures also facilitate comparisons to the Company's historical performance and its competitors' operating results. The Company includes these non-GAAP financial measures because management believes they are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making. Non-GAAP measures are reconciled to comparable GAAP measures in the table below:
Three Months Ended
September 30,
2009 2008
Calculation of non-GAAP net income:
GAAP net income $6.5 mil $6.4 mil
Foreign exchange (loss) gain: ($0.4 mil) $1.0 mil
Non-GAAP net income $6.9 mil $5.5 mil
Basic and diluted non-GAAP net income
per share $0.26 $0.20
Shares used in the calculation of non-GAAP
net income per share - basic and diluted 26,959,994 26,959,994
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 components. Wonder Auto ranked second and third in sales revenue in the Chinese market for automobile alternators and starters in 2008, respectively. Wonder Auto's products are used in a wide range of passenger and commercial automobiles with special focus on the fast-growing small- to medium-engine passenger vehicle market. For more information, please log on http://www.watg.cn .
Safe Harbor Statement
This press release may include certain statements that are not descriptions of historical facts, but are forward-looking statements. Such statements include, among others, those concerning our expected financial performance and strategic and operational plans, our future operating results, our expectations regarding the market for our products, as well as all assumptions, expectations, predictions, intentions or beliefs about our relative strength and about future events. Forward-looking statements can be identified by the use of forward-looking terminology such as "will," "believe," "expect," "may," "should," "potential," "continue," "anticipate," "future," "intend," "plan," "believe," "is/are likely to," "estimate" or similar expressions. Such information is based upon assumptions and expectations of our management that were reasonable when made but may prove to be incorrect. All of such assumptions and expectations are inherently subject to uncertainties and contingencies beyond our control and based upon premises with respect to future business decisions, which are subject to change. We do not undertake to update the forward- looking statements contained in this press release, except as required under applicable law. For a description of the risks and uncertainties that may cause actual results to differ from the forward-looking statements contained in this press release, see our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC"), and our subsequent SEC filings. Copies of filings made with the SEC are available through the SEC's electronic data gathering analysis retrieval system at http://www.sec.gov . All information provided in this press release and in the attachments is as of the date of this press release.
Wonder Auto Technology, Inc.
Condensed Consolidated Statements of Income and Comprehensive Income
For the three and nine months ended September 30, 2009 and 2008
Three months ended Nine months ended
September 30, September 30,
(Unaudited) (Unaudited)
2009 2008 2009 2008
Sales revenue $58,961,604 $39,265,821 $148,588,838 $107,041,424
Cost of sales 45,007,159 29,139,968 112,320,802 79,238,857
Gross profit 13,954,445 10,125,853 36,268,036 27,802,567
Operating expenses
Administrative
expenses 2,594,285 1,676,857 7,662,331 4,444,210
Research and
development
expenses 487,572 459,804 1,408,479 1,128,026
Selling expenses 2,080,438 1,209,170 4,811,601 2,912,020
5,162,295 3,345,831 13,882,411 8,484,256
Income from operations 8,792,150 6,780,022 22,385,625 19,318,311
Other income 149,146 107,023 827,043 520,349
Government grants 397,277 -- 749,815 --
Net finance (costs)/
income (1,481,640) 139,381 (3,511,726) (1,380,951)
Equity in net
income of an
unconsolidated
affiliate -- 567,802 -- 792,924
Income before income
taxes and
noncontrolling
interests 7,856,933 7,594,228 20,450,757 19,250,633
Income taxes (939,622) (632,570) (2,492,651) (1,859,813)
Net income before
noncontrolling
interests 6,917,311 6,961,658 17,958,106 17,390,820
Net income
attributable to
noncontrolling
interests (410,290) (608,120) (903,823) (1,785,599)
Net income
attributable to
Wonder Auto
Technology, Inc.
common
stockholders $6,507,021 $6,353,538 $17,054,283 $15,605,221
Net income before
noncontrolling
interests $6,917,311 $6,961,658 $17,958,106 $17,390,820
Other comprehensive
income
Foreign currency
translation
adjustments 167,348 185,858 112,056 4,448,672
Comprehensive income 7,084,659 7,147,516 18,070,162 21,839,492
Comprehensive income
attributable to
noncontrolling
interests (421,159) (623,982) (904,590) (2,372,767)
Comprehensive income
attributable to
Wonder Auto
Technology, Inc.
common
stockholders $6,663,500 $6,523,534 $17,165,572 $19,466,725
Earnings per share
attributable to
Wonder Auto
Technology, Inc.
common stockholders:
basic and diluted $0.24 $0.24 $0.63 $0.58
Weighted average
number of shares
outstanding:
basic and diluted 26,959,994 26,959,994 26,959,994 26,959,994
Wonder Auto Technology, Inc.
Condensed Consolidated Balance Sheets
As of September 30, 2009 and December 31, 2008
September 30, December 31,
2009 2008
(Unaudited) (Audited)
ASSETS
Current assets
Cash and cash equivalents $21,419,751 $8,159,156
Restricted cash 21,283,623 24,181,645
Trade receivables, net 50,640,997 46,571,619
Bills receivable 21,351,329 8,388,926
Other receivables, prepayments
and deposits 9,225,466 16,408,304
Inventories 46,916,547 44,016,192
Amount due from Hony Capital -- 7,637,216
Income tax recoverable -- 289,000
Deferred taxes 1,204,625 1,075,766
Total current assets 172,042,338 156,727,824
Intangible assets 22,097,408 22,062,560
Property, plant and equipment,
net 71,883,262 69,131,579
Land use rights 10,206,638 10,391,527
Deposit for acquisition of
property, plant and equipment 2,554,387 3,845,774
Deferred taxes 628,382 870,500
TOTAL ASSETS $279,412,415 $263,029,764
Wonder Auto Technology, Inc.
Condensed Consolidated Balance Sheets (Cont'd)
As of September 30, 2009 and December 31, 2008
September 30, December 31,
2009 2008
(Unaudited) (Audited)
LIABILITIES AND EQUITY
LIABILITIES
Current liabilities
Trade payables $30,633,985 $21,616,932
Bills payable 31,161,376 31,247,100
Other payables and accrued
expenses 13,540,880 20,465,014
Provision for warranty 2,581,872 2,377,620
Payable to Hony Capital -- 10,187,216
Income tax payable 602,290 --
Secured borrowings 54,010,768 44,055,803
Early retirement benefits cost 371,247 419,301
Total current liabilities 132,902,418 130,368,986
Secured borrowings 18,577,971 16,054,478
Deferred revenue - government grants 3,382,726 2,806,777
Early retirement benefits cost 519,895 798,115
TOTAL LIABILITIES 155,383,010 150,028,356
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock: par value $0.0001
per share; authorized 10,000,000
shares in 2009 and 2008;
none issued and outstanding -- --
Common stock: par value $0.0001 per
share Authorized 90,000,000 shares in
2009 and 2008; issued and outstanding
26,959,994 shares in 2009 and 2008 2,696 2,696
Additional paid-in capital 67,711,999 71,349,599
Statutory and other reserves 7,944,120 7,628,541
Accumulated other comprehensive
income 9,609,908 8,424,270
Retained earnings 31,708,870 14,654,587
TOTAL WONDER AUTO TECHNOLOGY, INC.
STOCKHOLDERS' EQUITY 116,977,593 102,059,693
NONCONTROLLING INTERESTS 7,051,812 10,941,715
TOTAL EQUITY 124,029,405 113,001,408
TOTAL LIABILITIES AND EQUITY 279,412,415 $263,029,764
Wonder Auto Technology, Inc.
Condensed Consolidated Statements of Cash Flows
For the nine months ended September 30, 2009 and 2008
Nine months ended
September 30,
(Unaudited)
2009 2008
Cash flows from operating activities
Net income attributable to Wonder Auto
Technology, Inc. common stockholders $17,054,283 $15,605,221
Adjustments to reconcile net income
attributable to Wonder Auto
Technology, Inc. common stockholders
to net cash provided by
operating activities:
Depreciation 4,239,790 2,248,751
Amortization of intangible assets
and land use rights 297,888 85,162
Deferred taxes 111,617 (208,858)
Loss (gain) on disposal of
property, plant and equipment 59,490 (1,205)
Provision for doubtful debts 303,738 (4,020)
Provision of obsolete inventories 26,149 43,671
Exchange loss (gain) on translation
of monetary assets and liabilities 387,701 (828,205)
Equity net income of a
non-consolidated affiliate -- (792,924)
Share-based payment compensation -- 109,772
Noncontrolling interests 903,823 1,785,599
Deferred revenue amortized (193,408) --
Changes in operating assets and
liabilities :
Trade receivables (4,366,425) (15,303,061)
Bills receivable (11,649,801) 6,302,977
Other receivables, prepayments and
deposits 1,694,880 (1,860,072)
Inventories (2,926,673) (6,365,418)
Trade payables 9,010,565 3,254,639
Other payables and accrued expenses (4,604,814) (1,584,738)
Amount due from a related company -- 78,516
Early retirement benefit costs (325,977) --
Provision for warranty 203,981 542,873
Income tax payable 886,176 (9,835)
Net cash flows provided by operating
activities $11,112,983 $3,098,845
Wonder Auto Technology, Inc.
Condensed Consolidated Statements of Cash Flows (Cont'd)
For the nine months ended September 30, 2009 and 2008
Nine months ended
September 30,
(Unaudited)
2009 2008
Cash flows from investing activities
Payments to acquire intangible assets $(146,600) $(7,080)
Payments to acquire and for deposit for
acquisition of property, plant and
equipment and land use right (6,463,215) (11,776,593)
Proceeds from sales of property,
plant and equipment 29,125 100,988
Proceeds from sales of Money Victory Limited 5,950,000 --
Net cash paid to acquire Jinzhou Hanhua
Electrical Systems Co., Ltd. -- (3,042,676)
Net cash paid to acquire Money Victory Limited -- (5,000,000)
Net cash paid to acquire Jinzhou Karham Co.,
Ltd. -- (703,712)
Net cash paid to acquire Fuxin Huirui
Mechanical Co., Ltd. -- (140,990)
Net cash paid to acquire Yearcity (9,936,057) --
Net cash paid to acquire Jinzhou Wanyou
Mechanical Parts Co., Ltd. (1,705,437) --
Net cash flows used in investing activities (12,272,184) (20,570,063)
Cash flows from financing activities
Dividend paid to Winning -- (384,500)
Government grants received 769,006 --
Decrease in bills payable (1,381,350) (4,819,593)
Decrease in restricted cash 2,888,474 4,011,467
Proceeds from secured borrowings 64,274,001 15,631,122
Repayment of secured borrowings (52,193,550) (9,196,570)
Net cash flows provided by financing activities 14,356,581 5,241,926
Effect of foreign currency translation
on cash and cash equivalents 63,215 980,483
Net increase (decrease) in cash and cash
equivalents 13,260,595 (11,248,809)
Cash and cash equivalents - beginning of period 8,159,156 26,102,993
Cash and cash equivalents - end of period $21,419,751 $14,854,184
Supplemental disclosures for cash flow
information:
Cash paid for:
Interest $3,382,425 $1,346,694
Income taxes $1,489,450 $1,656,577
Non-cash investing and financing activities:
Settlement of amount due to Hony Capital
II, L.P. ("Hony Capital") by offsetting
with amount due from Hony Capital $7,626,804 $--
For more information, please contact:
Patrick Sun
Investor Relations Manager
Tel: +86-10-8478-5339
Cell: +86-153-1161-1742
Email: ir@watg.cn
SOURCE Wonder Auto Technology, Inc.
http://www.watg.cn
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