Wonder Auto Technology, Inc.
No 56 Lingxi Street
Taihe District
Jinzhou City, 121013
China - Map
Phone: 86 41 6518 6632
Web Site: http://www.watg.cn
DETAILS
Index Membership: N/A
Sector: Consumer Goods
Industry: Auto Parts
Full Time Employees: 318
BUSINESS SUMMARY
Wonder Auto Technology, Inc., through its subsidiaries, engages in the design, development, manufacture, and sale of automotive electrical parts primarily in the People's Republic of China. It primarily offers starters and alternators, which are used in various types of automobiles, such as sedan and passenger cars, pickup trucks, and sport utility vehicles. The company also offers product design and development services for new car models or automotive components based on customers' required specifications. Its customers include automakers and automotive components suppliers. The company was incorporated in 2004 and is headquartered in Jinzhou City, the People's Republic of China.
------------------------------------------------------------------------------
Wonder Auto Technology Reports Financial Results for the Third Quarter of 2007
Monday October 29, 7:00 am ET
YoY 40% Revenue Growth, 55% Net Income Increase and Improved Gross Margin to 26%
JINZHOU CITY, Liaoning, China, Oct. 29 /Xinhua-PRNewswire-FirstCall/ -- Wonder Auto Technology, Inc. (NasdaqGM: WATG - News; "Wonder Auto" or the "Company"), a leading manufacturer of automotive electrical and suspension parts in China, today reported its financial results for the third quarter ending September 30, 2007.
Third Quarter Financial Highlights
-- Sales revenue increased to US$ 27.3 million, reflecting 40%
year-over-year growth;
-- Gross profit increased to US$ 7.1 million, reflecting 78%
year-over-year growth;
-- Operating income increased to US$ 5.2 million, reflecting 96%
year-over-year growth
-- Net income increased to US$ 3.7 million, reflecting 55%
year-over-year growth and
-- Fully diluted earnings per share increased to US$ 0.15, reflecting
50% year-over-year growth
For the 2007 third quarter, sales revenue was US$ 27.3 million, a 40% increase as compared to US$ 19.5 million for the same period in 2006. Gross profit for the third quarter of 2007 was US$ 7.1 million, an increase of 78% as compared to US$ 4.0 million in the same period in 2006. Net income was US$ 3.7 million, an increase of 55% as compared to net income of US$ 2.4 million in the 2006 third quarter. The fully diluted earnings per share were US$ 0.15, a 50% increase as compared to US$ 0.10 for the same quarter a year ago.
Sales revenue from exports reached approximately 10% of sales revenue for the third quarter 2007, compared to 6% of sales for the same period in 2006. Jinzhou Wanyou Mechanical Parts Co, Ltd. ("Jinzhou Wanyou") became the Company's wholly owned subsidiary in April 2007, and contributed sales revenue of $2.2 million in the third quarter, mostly in the export market.
Qingjie Zhao, Wonder Auto' Chairman and CEO, said, "We are pleased to report a strong quarter as our quarterly revenue reached a record high with improved margins. In response to the Chinese government's policies on emission control, Wonder Auto continues to focus on Chinese domestic economy- car OEMs and small- to mid-size engine manufacturing opportunities in China. Also, we are strengthening our penetration into the global markets, in particular Europe and North America. We continue to increase investment in R&D with a focus on higher-margin, new products to meet market demand. We believe our emphasis on producing high-quality products will generate sales growth and enable us to expand our market share, increase earnings and build shareholder value."
Gross margin increased to 26% of sales for the 2007 third quarter as compared to 21% for the same period in 2006. Gross margin improvement was mainly due to economies-of-scale, efficient cost controls, product price increases and the addition of Jinzhou Wanyou which had an approximately 28% gross margin in the third quarter of 2007. The Company's financial performance has also benefited from the consolidation of Jinzhou Dongwoo Precision Co., Ltd.'s ("Jinzhou Dongwoo") results, which became a consolidated subsidiary in November 2006.
During the third quarter, total operating expenses were US$ 1.9 million as compared to US$ 1.3 million for the same period in 2006. The Company incurred higher administrative expenses mainly related to the addition of Jinzhou Wanyou and Jinzhou Dongwoo and the increased costs in connection with improving the Company's internal control system for Sarbanes-Oxley 404 compliance and the addition of three new independent directors. While experiencing strong revenue growth, the Company successfully managed to slightly reduce its selling expenses. As a result, operating income for the 2007 third quarter was US$ 5.2 million, an increase of 96% as compared to US$ 2.7 million for the same quarter a year ago. The operating margin reached 19% in the third quarter of 2007 as compared to 14% for the same period in 2006.
For the nine months ended September 30, 2007, sales revenue increased 37% to US$ 72.4 million. Net income grew 75% to US$ 10.2 million and fully diluted earnings per share were US$ 0.43.
Total cash and cash equivalents and restricted cash as of September 30, 2007 totaled US$ 17.8 million as compared to US$ 13.1 million as of December 31, 2006. Stockholders' equity increased to US$ 50.1 million as of September 30, 2007 from US$ 38.2 million as of December 31, 2006.
Ryan Yuan, Chief Financial Officer of Wonder Auto, commented, "We achieved favorable results during this quarter by increasing production capacity, tightening cost management, measuring material usage and controlling our operating expenses. The successful integration of the Jinzhou Wanyou and Jinzhou Dongwoo also benefited Wonder Auto's margin improvement and product diversification. We are confident that we are on track to exceed the goals of total revenues of $100 million with net income of $13.5 million for the year of 2007. We expect our fourth quarter sales revenue and net income to reach US$ 29.5 million and US$ 3.9 million, respectively."
The Company is expected to complete its 10Q filing on November 1st.
Recent Developments
On September 13, 2007, Wonder Auto announced the withdrawal of its registration statement on Form S-1 that was filed on July 6, 2007 for an offering of up to 7,475,000 shares of the Company's common stock and it has determined not to proceed with the public offering at this time. The withdrawal was due to the low valuation of the stock.
On October 4, 2007, the Company announced that its subsidiary Jinzhou Halla Electrical Equipment Co., Ltd. ("Jinzhou Halla") had received a credit line extension from the Bank of China and entered into a letter of intent to establish a line of credit with the China Construction Bank. The total loan proceeds available under these two credit facilities is up to approximately US$ 24 million. These resources will be used to expand the production capabilities and facilities, and for other working capital needs.
Global Reach
On September 18, 2007, Wonder Auto announced that Jinzhou Wanyou entered into a four-year supply agreement with a major European Tier-one auto parts producer. The annual order is projected to be approximately US$ 10 million.
On October 1, 2007, Jinzhou Halla opened an office in the metro-Detroit area. The office focuses on North American Original Equipment Manufacturers (OEMs) and the auto parts aftermarket. Concurrently, Robert Forreider, a former Delphi sales executive, joined Jinzhou Halla as Vice President of Marketing and Sales to lead its marketing and sales efforts to penetrate the North American market.
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.
Condensed Consolidated Statements of Income and Comprehensive Income
For the three and nine months ended September 30, 2007 and 2006
(Unaudited)
Three months ended Nine months ended
September 30 September 30
(unaudited) (unaudited)
2007 2006 2007 2006
Sales revenue $27,293,856 $19,458,451 $72,416,290 $53,064,779
Cost of sales (20,184,152) (15,473,090) (54,335,057) (42,767,223)
Gross profit 7,109,704 3,985,361 18,081,233 10,297,556
Operating
expenses
Administrative
expenses 967,086 499,007 2,543,758 1,103,075
Research and
development
costs 255,086 145,570 732,706 345,455
Selling
expenses 641,205 662,776 1,997,820 1,903,563
1,863,377 1,307,353 5,274,284 3,352,093
Income from
operations 5,246,327 2,678,008 12,806,949 6,945,463
Interest
income 25,846 55,012 80,623 76,360
Other income 45,116 82,972 84,442 199,656
Government
grants -
Note 4 -- -- 786,154 --
Finance
costs (798,472) (253,001) (1,810,754) (706,995)
Equity in
net income of
an unconsolidated
affiliate -- 140,223 34,147 140,223
Income before
income taxes 4,518,817 2,703,214 11,981,561 6,654,707
Income taxes -
Note 5 (583,779) (335,007) (1,016,503) (797,194)
Minority
interests (260,427) -- (746,504) --
Net income $3,674,611 $2,368,207 $10,218,554 $5,857,513
Other comprehensive
income
Foreign currency
translation
adjustments 589,115 309,577 1,665,857 481,332
Comprehensive
income $4,263,726 $2,677,784 $11,884,411 $6,338,845
Earnings per
share: basic
and diluted $0.15 $0.10 $0.43 $0.30
Weighted average
number of shares
outstanding:
basic and
diluted 23,959,994 23,959,994 23,959,994 19,718,086
Wonder Auto Technology, Inc.
Condensed Consolidated Balance Sheets
As of September 30, 2007 and December 31, 2006
September 30, December 31,
2007 2006
(Unaudited) (Audited)
ASSETS
Current assets
Cash and cash equivalents $9,014,720 $8,203,699
Restricted cash 8,809,878 4,876,879
Trade receivables (net of
allowance of doubtful accounts
of $44,969 in 2007 and $32,150
in 2006) 35,322,157 24,696,982
Bills receivable 10,793,979 3,098,314
Other receivables, prepayments
and deposits 2,232,826 1,254,209
Inventories - Note 6 14,861,379 13,689,374
Amount due from a related company 72,541 69,561
Deferred taxes 279,042 237,570
Total current assets 81,386,522 56,126,588
Intangible assets - Note 7 9,632,919 4,250,800
Property, plant and equipment, net
- Note 8 18,961,099 13,945,846
Land use right 1,214,979 1,203,256
Deposit for acquisition of
property, plant and equipment 2,808,343 1,740,548
Investment in an unconsolidated
affiliate - Note 4 -- 527,627
Deferred taxes 246,443 205,475
TOTAL ASSETS $114,250,305 $78,000,140
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current liabilities
Trade payables $16,063,285 $9,631,537
Bills payable 9,844,920 8,628,078
Other payables and accrued expenses 3,209,480 3,121,533
Provision for warranty - Note 9 889,174 1,049,344
Income tax payable 623,291 398,768
Amount due to an unconsolidated
affiliate -- 37,492
Dividend payable to minority
stockholders 376,978 --
Secured short-term bank loans
- Note 10 13,286,640 14,326,831
Total current liabilities 44,293,768 37,193,583
Secured long-term bank loans - Note 10 17,107,077 --
TOTAL LIABILITIES 61,400,845 37,193,583
COMMITMENTS AND CONTINGENCIES - Note 11
MINORITY INTERESTS 2,738,064 2,579,572
STOCKHOLDERS' EQUITY
Preferred stock: par value $0.0001 per
share; authorized
10,000,000 shares, none issued and
outstanding -- --
Common stock: par value $0.0001 per
share; authorized
90,000,000 shares, issued and
outstanding 23,959,994
shares in 2007 and 2006 2,396 2,396
Additional paid-in capital 22,140,143 22,140,143
Statutory and other reserves 3,148,265 3,148,265
Accumulated other comprehensive income 3,117,995 1,452,138
Retained earnings 21,702,597 11,484,043
TOTAL STOCKHOLDERS' EQUITY 50,111,396 38,226,985
TOTAL LIABILITIES AND STOCKHOLDERS' $114,250,305 $78,000,140
EQUITY
Wonder Auto Technology, Inc.
Condensed Consolidated Statements of Cash Flows
For the nine months ended September 30, 2007 and 2006
(Unaudited)
Nine months ended
September 30
(Unaudited)
2007 2006
Cash flows from operating activities
Net income $10,218,554 $5,857,513
Adjustments to reconcile net income to
net cash provided by
(used in) operating activities:
Depreciation 1,434,556 1,030,576
Amortization of trademarks and
patents 1,114 431
Amortization of land use right 38,984 20,242
Amortization of customer contracts 24,526 --
Deferred taxes (64,505) (34,043)
Gain on disposal of property, plant
and equipment 15,636 --
Gain on disposal of Man Do (500) --
Provision for doubtful debts 11,144 --
Written back (recovery) of obsolete
inventories 67,782 (69,708)
Exchange loss on translation of
monetary assets and liabilities 492,825 --
Equity net income of an
unconsolidated affiliate (34,147) --
Minority interests 746,504 (140,223)
Changes in operating assets and
liabilities:
Trade receivables (8,870,324) (6,841,892)
Bills receivable (7,270,838) (366,251)
Other receivables, prepayments and
deposits (717,530) (297,497)
Inventories (374,688) (4,453,132)
Trade payables 6,270,135 3,269,026
Bills payable 854,241 (250,718)
Other payables and accrued expenses 1,036,024 (21,153)
Provision for warranty (201,004) 416,125
Income tax payable 210,416 104,660
Net cash flows provided by (used in)
operating activities 3,888,905 (1,776,044)
Cash flows from investing activities
Payments to acquire trademarks and
patents (1,982) (6,268)
Payments to acquire and for deposit for
acquisition of property, plant
and equipment (5,661,884) (1,380,935)
Proceeds from sales of property, plant
and equipment 11,171 --
Installment payment to acquire Jinzhou
Dongwoo (2,420,000) --
Increase in restricted cash (3,932,999) (828,356)
Proceeds from sales of marketable
securities -- 37,608
Net cash paid to acquire Jinzhou Wanyou (5,526,485) --
- Note 4
Payment to acquire an unconsolidated -- (1,200,000)
affiliate
Cash inflow from disposal of Man Do 500 --
Cash acquired from the RTO -- 419
Net cash flows used in investing
activities $(17,531,679) $(3,377,532)
Cash flows from financing activities
Dividend paid to stockholders $-- $(1,707,724)
Dividend paid to minority stockholders (357,280) --
Dividend paid to Winning (343,934) --
New bank loans 29,486,379 12,631,366
Repayment of bank loans (14,848,096) (10,309,721)
Repayment to stockholders -- (5,149)
Net proceeds from issuance of shares -- 10,142,020
Advance from a related company -- 64,480
Net cash flows provided by financing 13,937,069 10,815,272
activities
Effect of foreign currency translation on 516,726 175,899
cash and cash equivalents
Net increase in cash and cash equivalents 811,021 5,837,595
Cash and cash equivalents - beginning of
period 8,203,699 4,368,757
Cash and cash equivalents - end of period $9,014,720 $10,206,352
Supplemental disclosures for cash flow
information:
Non-cash investing and financing
activities:
Acquisition of Jinzhou Wanyou - Note 4 $2,840,317 $--
Cash paid for:
Interest $906,045 $605,319
Income taxes $586,935 $726,578
For further information, please contact:
Yuechun Xie
Investor Relations Manager
Wonder Auto Technology, Inc.
Tel: +86-416-266-1186
Email:
[email protected] Kevin Theiss
Investor Relations
The Global Consulting Group
Tel: +1-646-284-9409
Email:
[email protected] Stacy Dimakakos
Media Relations
The Global Consulting Group
Tel: +1-646-284-9417
Email:
[email protected]-----------------------------------------------------------------------------
Press Release Source: Wonder Auto Technology, Inc.
Wonder Auto Technology Awarded Contract for Approximately $32 Million By a New Export Customer
Monday November 26, 7:50 am ET
2008 Anticipated Total Sales Could Exceed US$140 Million With Over $20 Million in Net Income
JINZHOU CITY, China, Nov. 26 /Xinhua-PRNewswire-FirstCall/ -- Wonder Auto Technology, Inc. (Nasdaq: WATG - News; "Wonder Auto" or the "Company"), a leading manufacturer of automotive electrical and suspension parts in China, today announced its largest supply contract to date for a foreign auto company. According to the contract, 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 $11 million per year and approximately $32 million over the three-year contract period.
ADVERTISEMENT
Mr. Qingjie Zhao, Wonder Auto's Chairman and CEO, commented, "This contract marks one of the most exciting milestones yet in the current stage of Wonder Auto's continuing growth. Our selection to supply this major global auto parts center is another indicator of our growing reputation for delivering high-quality, cost-effective products in large quantities. This new contract complements our recent agreement to supply the European aftermarket and the opening of our Detroit office as we position Wonder Auto as an emerging force in the global auto parts marketplace.
''With this large new customer and the other new and existing customers, we are optimistic that our anticipated sales in 2008 could exceed $140 million, with over $20 million in net income,'' Mr. Zhao concluded.
Wonder Auto's guidance for the year to end December 31, 2007 is for sales to exceed $100 million with net income of more than $13.5 million.
Wonder Auto has already sent the initial 1,000 alternators in the contract to the international auto parts customer and received payment.
About Wonder Auto
Based in Jinzhou City, Liaoning Province, China, Wonder Auto Technology, Inc. specializes in design, development and manufacturing of automotive electrical parts and suspension products. In 2006, the Company was the second largest alternator and starter producer in the China market. With respective 5 different series and over 150 models of alternators, 70 models of starters and various strut rods and shock absorber rods, the Company supplies a wide range of automakers, engine producers and tier one 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., Tianjin FAW Xiali Automotive Co., Ltd. and ArvinMeritor, Inc. 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 anticipated contract value and expected financial results for 2007 and 2008 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.
For further information, please contact:
Yuechun Xie
Investor Relations Manager,
Wonder Auto Technology, Inc.
Tel: +86-416-266-1186
Email:
[email protected] Kevin Theiss
Investor Relations,
The Global Consulting Group
Tel: +1-646-284-9409
Email:
[email protected] Stacy Dimakakos
Media Relations,
The Global Consulting Group
Tel: +1-646-284-9417
Email:
[email protected]-------------------------------------------------------------------------------
http://stockcharts.com/h-sc/ui?s=WATG&p=D&b=5&g=0&id=p59191861522
Applaud! Nice stock sully.
"The company also expects new contracts to push 2008 profit above $20 million on more than $140 million in revenue."
2008 EPS of .83 times 20 PE = $16.66 stock price. Reminds me of CDS, similar stock price, earnings, and market cap. I hope I can enter a small position on a dip.
I also think this one looks attractive.
It seems there are many Chinese stocks still under the radar and very undervalued. Once the tide turns on Chinese equities again some of these could really take off. It seems to me there is a bearish vibe now, although I suppose the Hang Seng was up 4% last night...
I really like this stock...and have so since earnings. But I have yet to buy.
Nice chart ;)
Getting a nice rally after a touch of the 50MA. Would like to see more volume though. Anyone take advantage of the dip?
Still showing alot of strength and volume through the market mayhem. New high Friday.
I wish I had some cash lying around to pick up some WATG. The fundamentals are awesome.
I guess the chart looks kinda ugly, but they should probably have another nice quarter. Overall market weakness seems to have presented a terrific opportunity in this one.
Applauds again for this great pick Sully. Hope you are withstanding this market pressure okay, I have had a rough time. I think the tide is turning though!
Wonder Auto Technology Reports Record Revenues and Net Earnings for the Fourth Quarter and the 2007 Year
Tuesday February 5, 5:49 am ET
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 - News; "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.