Wonder Auto Reports Its Record First Quarter 2010 Financial Results
JINZHOU CITY, China, May 6 /PRNewswire-Asia-FirstCall/ -- Wonder Auto Technology, Inc. (Nasdaq: WATG) ("Wonder Auto" or "the Company"), a leading manufacturer of automotive electrical parts, suspension products and engine accessories in China, today announced its financial results for the first quarter ended March 31, 2010.
Operational Highlights for the first quarter of 2010:
-- Sales revenue increased 59.1% year-over-year to $63.6 million;
-- Gross profit rose 54.8% year-over-year to $15.6 million from $10.1
million;
-- Non-GAAP Net income attributable to Wonder Auto increased 43.4% year-
over-year to $7.41 million;
-- Non-GAAP EPS was $ 0.22, representing a 14.2% increase from $ 0.19
compared with first quarter 2009;
-- Sales revenue from outside PRC increased $4.91 million, or 163.7% year-
over-year, from $3.00 million in the first quarter 2009, or increased
to 12.4% of total sales revenue from 7.5% in the first quarter 2009.
*(Notes):
For the quarter ended For the quarter ended
March 31, 2010 March 31, 2009
GAAP Net income $5,781,077 $5,171,624
Share-based compensation $1,634,895 --
Non-GAAP Net income $7,415,972 $5,171,624
GAAP EPS $0.17 $0.19
Non-GAAP EPS $0.22 $0.19
Business outlook
For the second quarter of 2010, our sales revenue is expected to be above $66.0 million.
Growth drivers
Our products are increasingly demanded attributable to the following advantages:
-- Market oriented focus. Our alternator and starter products are
primarily for mid-to-small sized engine vehicles, which are encouraged
in sales by China's government in the stimulus plans. Also the momentum
increase of this market segment contributes our sales revenue in and
outside China.
-- Favorable government policies. China has implemented a series of
stimulus policies to bolster its auto industry.
Selected Financial performance
Sales revenue increased by approximately $23.6 million, or 59.1%, to approximately $63.6 million for the three months ended March 31, 2010, compared with $40.0 million of the same period last year. This increase was mainly attributable to the higher increased market demand for our products in and outside China.
Sales revenue from China increased by approximately $18.7 million, or 50.7%, to approximately $55.7 million in the first quarter of 2010, as compared to approximately $37.0 million for the same period last year. This increase was mainly attributable to the higher increased market demand for our products in expanded automobile market. Sales revenue outside China increased by approximately $4.9 million, or 163.7%, to approximately $7.9 million in the first quarter of 2010, compared with approximately $3.0 million for the same period last year. This increase was mainly attributable to the recovery of international automobile market. Export accounted for approximately 12.4% of our total sales revenue in this quarter.
Sales revenue from alternators and starters was $19.5 million and $20.1 million in the three months ended March 31, 2010, as compared to $14.4 million and $13.3 million in the same quarter last year, respectively. Sales in China continue to be our major source of sales revenue. Sales revenue from sales of alternators and starter in China increased by approximately $10.2 million or 37.8% to approximately $37.3 million in the three months ended March 31, 2010 from $27.1 million of the same quarter in 2009. The increase mainly resulted from the increased automobile market in China, especially the market for mid- to-small engine automobiles.
Sales revenue from rods and shafts was $7.4 million in the three months ended March 31, 2010, an increase of $2.4 million from the same period last year. The increase was mainly due to export sales increase of approximately $1.5 million. Sales of engine valve and tappet were approximately $16.7 million in the first quarter of 2010, up $9.4 million from the same period last year. This increase was mainly attributable to the domestic sales increase of approximately $7.7 million.
Our cost of sales increased by approximately $18.1 million, or 60.6%, to approximately $48.0 million for the three months ended March 31, 2010 from approximately $29.9 million during the same period in 2009. This increase was mainly due to the increase of our sales volume. As a percentage of sales revenue, the cost of sales increased slightly by approximately 0.7% to 75.4 % during the three months ended March 31, 2010 from 74.7 % for the same period of 2009. The percentage increase in the first quarter of 2010 was due to fact that a large portion of our total sales revenue was generated from alternators and starters with mid-to-small displacement as compared to the same period last year. Our alternators and starters with small displacement generally have a lower margin than our alternators and starters with larger displacement.
Our gross profit increased by approximately $5.5 million, or 54.8 %, to approximately $15.6 million for the three months ended March 31, 2010, compared with approximately $10.1 million for the same period in 2009 as a result of increased sales volume driving by the strong market demand for our products. Gross margin was 24.6 % for the three-month period ended March 31, 2010, as compared to 25.3 % of the same period last year. Such slight decrease was mainly due to the increase of the cost of sales on a percentage basis as discussed above.
Our total operating expenses increased by approximately $4.9 million, or 121.7 %, to approximately $ 8.8 million for the three months ended March 31, 2010, as compared to approximately $4.0 million for the same period in 2009. As a percentage of sales revenue, our total expenses increased to 13.9% for the three months ended March 31, 2010, compared from 10.0% for the same period last year. The percentage increase was primarily attributable to the increase of non-cash share-based compensation, selling expenses and research and development expenses as discussed below.
Administrative expenses consist of the costs associated with staff and support personnel who manage our business activities, professional fees paid to third parties and non-cash share-based compensation. Our administrative expenses increased by approximately $2.8 million, or 119.3%, to approximately $5.1 million for the three months ended March 31, 2010, from approximately $2.7 million for the same period last year. As a percentage of sales revenue, administrative expenses increased to 8.0% for the three month ended March 31, 2010, from 5.8% for same period last year. The increases in amount and percentage were mainly due to the non-cash share-based compensation of approximately $1.5 million incurred this quarter, which not incurred last quarter, the consolidation of the operating results of Friend Birch and the increased professional expenses related to the investment in Applaud Group Limited.
Our administrative expenses excluding non-cash share based compensation increased by approximately $1.3 million, or 55.5 %, to approximately $3.6 million for the three months ended March 31, 2010, from approximately $2.3 million for the same period last year. The amount increase was primarily due to the consolidation of the operating results of Friend Birch and the increased professional expenses related to the investment in Applaud Group Limited. As a percentage of sales revenue, administrative expenses excluding non-cash share-based compensation decreased 0.1% to 5.7 % for the three months ended March 31, 2010 from 5.8% for the same period last year. The decrease on a percentage basis was mainly attributable to the increase of sales revenue.
Research and development expenses consist of amounts spent on developing new products, enhancing our existing products, and non-cash share-based compensation. Our research and development expenses increased by $893,297, or 195.8%, to approximately $1.3 million for the three months ended March 31, 2010, from $456,232 for the same period last year. As a percentage of sales revenue, research and development expenses increased to 2.1% for three month ended March 31, 2010, from 1.1% for the same period last year. The increases in amount and percentage were mainly due to the non-cash share-based compensation of $91,782 incurred this quarter, which not incurred for the same period last year, the increased expenses associated with development of new products, including alternative energy vehicle parts.
Our research and development expenses excluding non-cash share-based compensation increased $801,515, or 175.7 %, to approximately $1.3 million for the three months ended March 31, 2010 from $456,232 for the same period last year. As a percentage of sales revenue, research and development expenses excluding non-cash share-based compensation increased to 2.0 % from 1.1% for the three months ended March 31, 2009. Such dollar and percentage increases were primarily attributable to the increased expenses associated with development of new products, including alternative energy vehicle parts.
Our selling expenses increased by approximately $1.2 million, or 98.6%, to approximately $2.4 million for the three months ended March 31, 2010, from approximately $1.2 million for the same period last year. As a percentage of sales revenue, selling expenses increased to 3.8% for three months ended March 31, 2010, from 3.0% for the same period last year. The increases in amount was mainly due to the non-cash share-based compensation of $65,419 incurred this quarter, the increases in salaries from the increased sales personnel to expand market share, provision for product warranties and freight resulting from the increased sales volume. The increase in percentage was mainly due to the increases in salaries from the increased sales personnel to expand market share.
Our selling expenses excluding non-cash share-based compensation increased approximately $1.1 million, or 93.2% to approximately $2.3 million for the three months ended March 31, 2010, from approximately $1.2 million for the same period last year. As a percentage of sales revenue, our selling expenses excluding non-cash share-based compensation was 3.7 % for the three months ended March 31, 2010, which was 3.0 % in the first quarter last year. The increase in the amount was mainly due to the increases in salaries from the increased sales personnel to expand market share, provision for product warranties and freight resulting from the increased sales volume. The percentage increase was mainly due to the increase in salaries from the increased sales personnel to expand market share.
Our net finance cost increased by $546,839, or 651.1% to $630,828 for the three months ended on March 31, 2010 from $83,989 for the same period last year. The increase was mainly due to the interest expenses resulted from the enlarged bank loan volume of approximately $18.1 million and the interest income decrease resulting from the reduced volume of restricted cash by end of this quarter.
Income before income taxes and non-controlling interests increased by approximately $1.1 million or 17.8 %, to approximately $7.4 million during the three months ended March 31, 2010 from approximately $6.3 million during the same period in 2009. Income before income taxes as a percentage of sales revenue increased to 11.7 % during the three months ended March 31, 2010, as compared to 15.8% for the same period last year due to the factors described above.
Our income taxes increased by $528,085, or 57.4%, to approximately $1.4 million for the three months ended March 31, 2010 from $920,005 for the same period last year. Our effective income tax rate was approximately 19.5% for the first quarter in 2009, as compared to 14.6% for the same period last year.
Our financial statements reflect an adjustment to our consolidated group net income, and our net income attributable to non-controlling interests decreased $15,197, or 6.8% to $208,238 for the first quarter in 2010 from $223,435 for the same period last year, reflecting the net income attributable to non-controlling interests held by third parties in Jinzhou DongWoo, Jinzhou Hanhua and Jinzhou Karham.
Our net income attributable to Wonder Auto Technology, Inc. common stockholders increased by approximately $609,453, or 11.8%, to approximately $5.8 million during the three months ended March 31, 2010 from approximately $5.2 million during the same period last year, as a result of the factors described above.
Events overview
On March 7th 2010, Wonder Auto's Chairman and CEO Mr. Qingjie Zhao had been elected Executive Deputy Chairman of China Overseas Listed Corporations Association (COLCA). By joining COLCA, Wonder Auto has become a member of this great organization of enterprises with common interests. Wonder Auto can share with other members the resources in terms of funds, market, industry and capital, reduce business operating costs, find more opportunities for business development in China and overseas, and generate sustainable high-yield returns for its investors.
On January 19th 2010, Wonder Auto announced strategic acquisition of a Hong Kong-listed company. After this acquisition, Wonder Auto becomes the largest shareholder of Applaud Group Limited, who is the controlling shareholder of Jinheng Automotive Safety Technology Holdings Limited (HKG: 0872) ("Jinheng"). With this strategic acquisition, Wonder Auto expands into the auto parts business with tremendous growth potential in areas such as automotive safety systems and auto electronic systems.
On January 4th 2010, Wonder Auto's electric motor had been installed in electrical taxis. One of its major customers, WEV (Wonder Electric Vehicle Ltd) has obtained 100 AEV licenses for its electric taxis from the local government. Wonder Auto's electric motor had been installed in these taxis. This was not only a sign of adopting electronic cars as taxis for the first time globally, but also a remarkable moment for WATG that its electric motors' quality and techniques satisfy the driving systems of electric vehicles.
Conference call
The Company will host a conference call on Thursday, May 6, 2010, at 8:00 a.m. U.S. Eastern Time, or 8:00 p.m. Beijing Time. A question and answer session will follow management's presentation. Mr. Qingjie Zhao (Chairman & CEO), Mr. Ryan Yuan (CFO), Mr. Qingdong Zeng (Vice President), Mr. Patrick Sun (Investor Relations Manager) and Mr. Peng Li (CEO Assistant) 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: 71424376
Investors can also listen to the conference call in real time by visiting http://www.watg.cn . To access the listen-only audio webcast, visit the Wonder Auto's website at http://www.watg.cn , and select the webcast link from the Investor Relations page.
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 2009 financial results, our expected financial performance in 2010 and future strategic and operational plans, our future operating results, our expectations regarding the market for our products, our expectations regarding the continued growth of the automobile market, 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 months ended March 31, 2010 and 2009
(Unaudited)
(Stated in US Dollars)
Three months ended
March 31,
2010 2009
Sales revenue $63,620,565 $39,976,020
Cost of sales 47,994,842 29,881,662
Gross profit 15,625,723 10,094,358
Operating expenses
Administrative expenses
(included share-based
compensation of $1,477,694
in 2010, $Nil in 2009) 5,078,798 2,315,992
Research and development
expenses (included
share-based compensation
of $91,782 in 2010, $Nil
in 2009) 1,349,529 456,232
Selling expenses (included
share-based compensation
of $65,419 in 2010, $Nil in
2009) 2,408,261 1,212,659
8,836,588 3,984,883
Income from operations 6,789,135 6,109,475
Other income 528,795 114,516
Government grants 201,511 175,062
Equity in net income of an
non-consolidated affiliate 548,792 --
Net finance costs (630,828) (83,989)
Income before income taxes and
noncontrolling interests 7,437,405 6,315,064
Income taxes (1,448,090) (920,005)
Net income before noncontrolling
interests 5,989,315 5,395,059
Net income attributable to
noncontrolling interests (208,238) (223,435)
Net income attributable to Wonder
Auto Technology, Inc. common
stockholders $5,781,077 $5,171,624
Net income before noncontrolling
interests $5,989,315 $5,395,059
Other comprehensive income
Foreign currency translation
adjustments (4) (65,109)
Comprehensive income 5,989,311 5,329,950
Comprehensive income attributable
to noncontrolling interests (208,238) (208,020)
Comprehensive income attributable
to Wonder Auto Technology, Inc.
common stockholders $5,781,073 $5,121,930
Earnings per share attributable to
Wonder Auto Technology, Inc.
common stockholders:
basic and diluted $0.17 $0.19
Weighted average number of shares
outstanding:
basic and diluted 33,859,994 26,959,994
Wonder Auto Technology, Inc.
Condensed Consolidated Balance Sheets
As of March 31, 2010 and December 31, 2009
(Stated in US Dollars)
March 31, December 31,
2010 2009
(Unaudited) (Audited)
ASSETS
Current assets
Cash and cash equivalents $68,548,780 $82,414,287
Restricted cash 11,803,871 15,753,748
Trade receivables, net 48,280,371 49,522,583
Bills receivable 30,069,035 21,965,065
Other receivables,
prepayments and deposits 13,112,782 14,826,460
Inventories 55,024,719 51,119,562
Deferred taxes 1,063,524 1,186,410
Total current assets 227,903,082 236,788,115
Restricted cash 586,800 --
Intangible assets 31,595,891 32,907,720
Property, plant and equipment,
net 72,531,432 73,770,329
Land use rights 10,083,377 10,618,853
Deposits for acquisition of
property, plant and equipment 8,750,363 7,435,563
Investment in a non-consolidated
affiliate 15,411,369 --
Deferred taxes 851,496 731,575
TOTAL ASSETS $367,713,810 $362,252,155
March 31, December 31,
2010 2009
(Unaudited) (Audited)
LIABILITIES AND EQUITY
LIABILITIES
Current liabilities
Trade payables $37,830,098 $34,126,534
Bills payable 19,387,872 29,388,653
Other payables and accrued
expenses 15,553,707 14,886,909
Provision for warranty 2,593,327 2,272,322
Income tax payable 1,439,306 892,340
Secured borrowings 58,524,564 57,082,779
Early retirement benefits
cost 363,831 353,584
Total current liabilities 135,692,705 139,003,121
Secured borrowings 22,252,100 20,908,721
Deferred revenue - government
grants 3,209,466 3,315,762
Early retirement benefits cost 461,179 550,397
TOTAL LIABILITIES 161,615,450 163,778,001
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock: par value
$0.0001 per share; authorized
10,000,000 shares in 2010 and
2009; none issued and outstanding -- --
Common stock: par value $0.0001
per share; authorized 90,000,000
shares in 2010 and 2009; issued
and outstanding 33,859,994 shares
in 2010 and 2009 3,386 3,386
Additional paid-in capital 139,177,597 137,542,702
Statutory and other reserves 10,186,701 10,186,701
Accumulated other comprehensive
income 9,647,047 9,647,051
Retained earnings 41,051,673 35,270,596
TOTAL WONDER AUTO TECHNOLOGY, INC.
STOCKHOLDERS' EQUITY 200,066,404 192,650,436
NONCONTROLLING INTERESTS 6,031,956 5,823,718
TOTAL EQUITY 206,098,360 198,474,154
TOTAL LIABILITIES AND EQUITY $367,713,810 $362,252,155
Wonder Auto Technology, Inc.
Condensed Consolidated Statements of Cash Flows
For the three months ended March 31, 2010 and 2009
(Unaudited)
(Stated in US Dollars)
Three months ended March 31,
2010 2009
Cash flows from operating activities
Net income before noncontrolling
interests $5,989,315 $5,395,059
Adjustments to reconcile net income
before noncontrolling interests to
net cash (used in) provided by
operating activities:
Depreciation 1,668,523 1,373,739
Amortization of intangible
assets and land use rights 387,015 98,848
Deferred taxes 2,964 125,167
(Recovery of) provision for
doubtful accounts (102,611) 10,794
Provision of obsolete
inventories 71,807 19,498
Exchange gain on translating
of monetary assets and
liabilities (603,606) (762,035)
Loss (gain) on disposal of
property, plant and equipment 33,066 (296)
Deferred revenue amortized (106,296) (61,329)
Equity in net income of an
non-consolidated affiliate (548,792) --
Share-based compensation 1,634,895 --
Changes in operating assets and
liabilities:
Trade receivables 1,344,744 (5,749,760)
Bills receivable (8,123,041) 2,203,465
Other receivables, prepayments
and deposits (2,633,496) 4,142,968
Inventories (4,626,870) 2,650,725
Trade payables 3,696,142 504,105
Early retirement benefit costs (79,184) (107,547)
Other payables and accrued
expenses 652,579 (2,050,977)
Provision for warranty 321,006 190,783
Income tax payable 487,524 652,399
Net cash flows (used in) provided by
operating activities $(534,316) $8,635,606
Cash flows from investing activities
Payments to acquire and for deposits
for acquisition of property, plant
and equipment $(3,284,627) $(1,422,433)
Proceeds from sales of property, plant
and equipment -- 5,421
Net cash received from Winning 8,013,693 --
Net cash paid to acquire Applaud (14,862,577) --
Net cash paid for disposal of Jinzhou
Jiade (114,517) --
Net cash paid to acquire Yearcity -- (2,197,500)
Net cash flows used in investing
activities (10,248,028) (3,614,512)
Cash flows from financing activities
Bills payable (9,981,710) (14,042,025)
Decrease in restricted cash 3,363,077 11,092,454
Repayment of secured borrowings (5,779,980) (10,662,270)
Proceeds from secured borrowings 9,315,450 14,064,001
Net cash flows (used in) provided by
financing activities (3,083,163) 452,160
Effect of foreign currency translation
on cash and cash equivalents -- (888)
Net (decrease) increase in cash and
cash equivalents (13,865,507) 5,472,366
Cash and cash equivalents - beginning
of period 82,414,287 8,159,156
Cash and cash equivalents - end of
period $68,548,780 $13,631,522
Supplemental disclosures for cash flow
information:
Cash paid for:
Interest $975,228 $923,530
Income taxes $908,961 $103,140
Non-cash investing and financing
activities:
Acquisition of Yearcity by
offsetting with receivable
from disposal of an
unconsolidated affiliate $-- $5,950,000
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: [email protected]
SOURCE Wonder Auto Technology, Inc.
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