omniture

SORL Auto Parts Increases Earnings Per Share by 158.8% on a 59.0% Rise in Net Sales in the 2017 Third Quarter Results

2017-11-15 19:02 1026

- Full Year Top Line Guidance Increased to $370 Million with EPS Guidance of $1.58 -

ZHEJIANG, China, Nov. 15, 2017 /PRNewswire/ -- SORL Auto Parts, Inc. (NASDAQ: SORL) ("SORL" or the "Company"), a leading manufacturer and distributor of automotive brake systems as well as other key safety-related auto parts in China, announced today its unaudited financial results for the third quarter and nine-month periods ended September 30, 2017.

Third Quarter 2017 Financial Highlights

  • Net Sales increased by 59.0% to $101.3 million in the third quarter of 2017 compared to $63.7 million in the third quarter of 2016;
  • Gross margin for the third quarter of 2017 was 26.9%;
  • Income from operations increased 215.7% year-over-year to $11.8 million;
  • Net Income attributable to stockholders rose by 165.0%% to $8.6 million from $3.2 million in the third quarter of 2016; basic and diluted earnings per share were $0.44 in the third quarter of 2017 compared with $0.17 in the third quarter of 2016;
  • Cash and cash equivalents at September 30, 2017 were $7.7 million with working capital of $97.2 million;
  • Annual 2017 guidance was increased to net sales of approximately $370.0 million and net income of approximately $30.5 million.

Mr. Xiaoping Zhang, SORL's Chairman and Chief Executive Officer, stated, "We are excited to report that our sales growth in all three segments accelerated during the quarter. We continue to capture market share in the Chinese commercial vehicle braking market with our new advanced products and attractive pricing. Our OEM sales soared 70.6% compared with a 28.0% increase in overall commercial vehicle sales and a 31.8% sales growth in trucks. Our aftermarket sales in China grew at an even faster rate of 76.0% in the third quarter."

"Demand for our innovative products has increased as we provide technologically advanced solutions to meet the evolving needs of our customers.  Our stringent cost controls and production efficiencies have enhanced our profitability during the third quarter of 2017," Mr. Zhang concluded.

Third Quarter 2017 Financial Performance

Net sales for the third quarter of 2017 increased 59.0% to $101.3 million from $63.7 million in the third quarter of 2016. Revenues from the Company's domestic OEM customers increased 70.6% to $50.5 million from $29.6 million in the third quarter of 2016. Sales from China's domestic aftermarket increased 76.0% to $31.5 from $17.9 million in the third quarter of 2016. Revenues from international markets rose 19.1% to $19.3 million from $16.2 million in the third quarter of 2016, mainly due to the Company's growing global customer base.   

SORL's commercial vehicle brake sales increased 62.5% year-over-year to $85.3 million and represented 84.2% of total sales in the third quarter of 2017. The sales of passenger vehicle brake systems increased by 42.9% year-over-year, to $16.0 million, which accounted for 15.8% of the total sales for the third quarter of 2017.

Gross profit for the third quarter of 2017 grew 44.4% to $27.3 million compared with $18.9 million for the third quarter of 2016. Gross margin for the third quarter of 2017 was 26.9%, compared with a gross margin of 29.7% in the same quarter of 2016. The decrease in gross margin was primarily due to higher raw materials costs and price promotions designed to increase market share during the third quarter of 2017. In 2016, the Chinese government led a nationwide supply-side reform in the hope of controlling widespread overcapacities in the mining and basic material sectors. As a result, commodity prices experienced an average 21.8% increase in the first nine months, which negatively affected the Company's cost of sales. During the third quarter, the Company also increased sales promotions through offering discounts on its core volume products to increase its market share in both OEM and aftermarket segments.

Operating expenses increased by 4.9% to $16.0 million in the third quarter of 2017, from $15.2 million in the third quarter of 2016. As a percentage of revenue, operating expenses were 15.8% in the third quarter of 2017, compared with 23.9% in the third quarter of 2016. The increase in operating expenses was primarily due to higher research and development, and an increase in selling and distribution expenses related to higher net sales. The decline in operating expenses as a percentage of revenue was primarily due to higher net sales.

  • Selling and distribution expenses rose to $8.3 million from $7.9 million in the same quarter of 2016. As a percentage of revenue, selling and distribution expenses were 8.2% compared with 12.5% of quarterly revenues in the same quarter of 2016. The increase in selling and distribution expenses was primarily the result of higher freight and packaging expenses as unit volume rose during the third quarter of 2017.
  • General and administrative ("G&A") expenses for the third quarter of 2017 were $4.8 million, or 4.7% of revenue, compared with $4.9 million, or 7.7% in the third quarter of 2016. The decline in G&A expenses and G&A expenses as a percentage of revenue was mainly due to a decrease in allowance for doubtful accounts during the third quarter of 2017.
  • Research and development ("R&D") expenses were $2.9 million in the third quarter of 2017 compared with $2.4 million in the third quarter of 2016. As a percentage of revenue, R&D was 2.9% in the third quarter of 2017, compared with 3.8% of revenue in the third quarter of 2016. The Company continues to develop new, higher-margin, electronically controlled products, and upgrade the Company's traditional brake products, to capture greater market share.

Interest expenses were $0.8 million in the third quarter of 2017 compared to $0.2 million in the third quarter of 2016. Increased interest expenses were mainly due to a higher average interest rate and a higher average amount of loans outstanding during the third quarter of 2017.

Income before provision for income taxes rose 176.8% to $11.2 million for the third quarter of 2017 as compared with $4.0 million for the third quarter of 2016. The increase in income before taxes was primarily due to higher gross profit and strictly controlled operating expenses. Pretax income margin was 11.0% in the third quarter of 2017, compared with 6.3% in the third quarter of 2016. 

The provision for income taxes was $1.6 million in the third quarter of 2017 compared with $0.4 million, in the third quarter of 2016. The tax rate was 14.6% in the third quarter of 2017 compared with 10.8% for the third quarter in 2016.

Net income attributable to stockholders for the third quarter of 2017 increased 165.1% to $8.6 million, or $0.44 per basic and diluted share, compared with $3.2 million, or $0.17 on per basic and diluted share, in the third quarter of 2016.

Nine-Month 2017 Financial Performance

Net sales for the first nine months of 2017 increased 38.7% to $267.6 million from $192.9 million for the first nine months of 2016. Revenues from the Company's China OEM customers increased by 47.2% to $141.8 million from $96.3 million in the same period in 2016. Revenues from China's domestic aftermarket increased 44.9% to $72.3 million from $49.9 million in the first nine months of 2016. Revenues from international markets increased 14.6% to $53.5 million from $46.7 million in the first nine months of 2016.

SORL's commercial vehicle brake sales increased 42.3% year-over-year to $223.9 million and represented 83.7% of total sales in the first nine months of 2017. The sales of passenger vehicle brake systems increased by 22.8% year-over-year, to $43.7 million, which accounted for 16.3% of the total sales for the first nine months of 2016.

Gross profit for the first nine months of 2017 increased 29.6% to $72.9 million from $56.3 million in the same period in 2016. Gross margin for the first nine months of 2017 decreased to 27.2% from 29.2% for the first nine months of 2016. In 2016, the Chinese government led a nationwide supply-side reform in the hope of controlling widespread overcapacities in the mining and basic material sectors. As a result, commodity prices experienced an average 21.8% increase in the first nine months of 2017, which negatively affected the Company's cost of sales. The Company also increased sales promotions through offering discounts on its core volume products to increase its market share in both OEM and aftermarket segments.

Operating income for the first nine months of 2017 increased to $30.2 million from $12.5 million in the same period in 2016. Operating margin was 11.3% for the first nine months of 2017 compared to 6.5% in first nine months of 2016.  

Net income attributable to stockholders for the first nine months of 2017 was $21.4 million, or $1.11 per basic and diluted share, compared with $10.9 million, or $0.57 per basic and diluted share, in the same period in 2016.

Balance Sheet

As of September 30, 2017, the Company had cash and cash equivalents of $7.6 million. Inventories increased to $83.1 million from $65.8 million as of December 31, 2016. Deposits received from customers increased 78.8% to $40.7 million from $22.7 million at December 31, 2016. There were no long-term liabilities as of September 30, 2017. Total stockholders' equity was $167.7 million at September 30, 2017. The Company had working capital of $97.2 million at September 30, 2017 with the current ratio of 1.4:1. 

Cash-flow provided by operating activities for the first nine months of 2017 was $15.0 million. Capital expenditures were $36.9 million in the first nine months of 2017. 

Business Outlook

Management has increased its fiscal year 2017 guidance for net sales from $315.0 million to approximately $370.0 million and net income attributable to common stockholders from $27.5 million to approximately $30.5 million. These targets are based on the Company's current views on the operating and market conditions, which are subject to change.

Conference Call

Management will host a conference call on Wednesday, November 15, 2017, at 8:00 A.M. EST/ 9:00 P.M. Beijing Time to discuss its 2017 third quarter results. Listeners may access the call by dialing U.S. toll free number +1-877-407-0778 and +1-201-689-8565 for international callers, and Mainland China toll free +86 400-120-2840. A live web cast of the conference call will also be available at http://www.sorl.cn.

A replay of the call will be available shortly after the conference call through 8:00 A.M. EST on December 15, 2017, or 9:00 P.M. Beijing Time on September 15, 2017. The replay dial-in numbers are: U.S. toll free number +1-877-481-4010 or the international number +1-919-882-2331; using Conference ID "22496" to access the replay.

About SORL Auto Parts, Inc.

As a global tier one supplier of brake and control systems to the commercial vehicle industry, SORL Auto Parts, Inc. is the market leader for commercial vehicles brake systems, such as trucks and buses in China. The Company distributes products both within China and internationally under the SORL trademark. SORL is listed among the top 100 auto component suppliers in China, with a product range that includes 65 categories with over 2000 specifications in brake systems and others. The Company has four authorized international sales centers in UAE, India, the United States and Europe. SORL is working to establish a broader global sales network. For more information, please visit http://www.sorl.cn.

Safe Harbor Statement

This press release may include certain statements that are not descriptions of historical facts, but are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the use of forward-looking terminology such as "expects," "anticipates," "believes," "targets," "goals," "projects," "intends," "plans," "seeks," "estimates," "may," "will," "should" or similar expressions. For example, when the Company describes the evaluation of the preliminary non-binding proposal letter, it is using forward-looking statements. These forward-looking statements may also include statements about the Company's proposed discussions related to its business or growth strategy, which are subject to change. Such information is based upon expectations of the Company's management that were reasonable when made, but may prove to be incorrect. All of such assumptions are inherently subject to uncertainties and contingencies beyond the Company's control and upon assumptions with respect to future business decisions, which are subject to change. The Company does not undertake to update the forward-looking statements contained in this press release. These risks and uncertainties may include, but are not limited to general political, economic and business conditions which may impact the demand for commercial vehicles or passenger vehicles in China and the other significant markets where the Company's products are sold, uncertainty regarding such political, economic and business conditions, trends in consumer debt levels and bad debt write-offs, general uncertainty related to possible recessions, natural disasters, the political stability of China and the impact of any of those events on demand for commercial or passenger vehicles, changes in consumer confidence, new product development and introduction, competitive products and pricing, seasonality, availability of alternative sources of supply in the case of the loss of any significant supplier or any supplier's inability to fulfill the Company's orders, cost of labor and raw materials, the loss of or curtailed sales to significant customers, the Company's dependence on key employees and officers, the ability to secure and protect trademarks, patents and other intellectual property rights, potential effects of competition in the Company's business, the dependency of the Company upon the normal operation of its sole manufacturing facility, potential effect of the economic and currency instability in China and countries to which the Company sold its products, the ability of the Company to successfully manage its expenses on a continuing basis, the continued availability to the Company of financing and credit on favorable terms, business disruptions, disease, general risks associated with doing business in China or other countries including, without limitation, foreign trade policies, import duties, tariffs, quotas, political and economic stability, and the other factors discussed in the Company's Annual Report on Form 10-K and other filings with the Securities and Exchange Commission. For additional information regarding known material factors that could cause the Company's results to differ from its projected results, please see its filings with the SEC, including its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K. Copies of filings made with the SEC are available through the SEC's electronic data gathering analysis retrieval system (EDGAR) at http://www.sec.gov.

Contact Information

Phyllis Huang
+86-151-6770-5972
+86-577-6581-7721
phyllis@sorl.com.cn

Kevin Theiss
Investor Relations
Awaken Advisors
212-521-4050
kevin.theiss@awakenlab.com

-tables follow –

 

 

SORL Auto Parts, Inc. and Subsidiaries

Consolidated Balance Sheets

September 30, 2017 and December 31, 2016



September 30,
2017


December 31,
2016


(Unaudited)



Assets






Current Assets






Cash and cash equivalents

US$

7,653,174


US$

8,057,155

Accounts receivable, net, including $0 and $5,025,509 from related
parties at September 30, 2017 and December 31, 2016, respectively


125,807,155



102,129,294

Bank acceptance notes receivable


66,563,935



42,697,276

Inventories


83,079,686



65,776,517

Prepayments, current, including $138,075 and $0 from related parties at
September 30, 2017 and December 31, 2016, respectively


11,811,104



10,797,601

Advances to related party


9,011,700



-

Restricted cash


700,974



5,476,621

Other current assets


6,632,395



1,124,608

Deferred tax assets


3,312,529



3,210,575

Total Current Assets


314,572,652



239,269,647







Property, plant and equipment, net


72,977,873



53,737,706

Land use rights, net


14,796,670



8,309,333

Intangible assets, net


5,263



11,438

Prepayments, non-current


9,184,597



-

Total Non-current Assets


96,964,403



62,058,477

Total Assets

US$

411,537,055


US$

301,328,124







Liabilities and Equity






Current Liabilities






Accounts payable and bank acceptance notes to vendors, including
$2,188,003 and $1,953,707 to related parties at September 30, 2017 and
December 31, 2016, respectively

US$

70,124,109


US$

65,672,626

Deposits received from customers


40,656,344



22,733,742

Short term bank loans


77,779,094



27,416,376

Income tax payable


1,972,847



996,522

Accrued expenses


19,981,863



20,103,392

Due to related party


4,129,808



-

Other current liabilities


2,695,541



2,013,943

Total Current Liabilities


217,339,606



138,936,601







Total Liabilities


217,339,606



138,936,601







Equity






Preferred stock - no par value; 1,000,000 authorized; none issued and
outstanding as of September 30, 2017 and December 31, 2016


-



-

Common stock - $0.002 par value; 50,000,000 authorized, 19,304,921
issued and outstanding as of September 30, 2017 and December 31,
2016


38,609



38,609

Additional paid-in capital


(28,582,654)



(28,582,654)

Reserves


17,273,279



15,129,935

Accumulated other comprehensive income


13,308,933



6,117,042

Retained earnings


165,642,629



146,352,530

Total SORL Auto Parts, Inc. Stockholders' Equity


167,680,796



139,055,462

Noncontrolling Interest in Subsidiaries


26,516,653



23,336,061

Total Equity


194,197,449



162,391,523

Total Liabilities and Equity

US$

411,537,055


US$

301,328,124

 

 

SORL Auto Parts, Inc. and Subsidiaries

Consolidated Statements of Income and Comprehensive Income

For the Three and Nine Months Ended September 30, 2017 and 2016 (Unaudited)



Three Months Ended
September 30,


Nine Months Ended
September 30,


2017


2016


2017


2016









Sales

US$

101,329,628


US$

63,706,397


US$

267,589,953


US$

192,917,633

Include: sales to related parties


7,401,464



3,315,026



13,479,162



11,518,005

Cost of sales


74,027,933



44,794,499



194,703,290



136,657,152

Gross profit


27,301,695



18,911,898



72,886,663



56,260,481













Expenses:












Selling and distribution expenses


8,283,704



7,949,947



22,877,889



20,637,464

General and administrative expenses


4,761,787



4,878,979



13,517,222



16,717,966

Research and development expenses


2,941,243



2,409,891



7,477,902



6,533,540

Total operating expenses


15,986,734



15,238,817



43,873,013



43,888,970













Other operating income, net


473,610



60,659



1,185,958



144,715













Income from operations


11,788,571



3,733,740



30,199,608



12,516,226













Interest income


16,150



33,979



38,175



1,047,667

Government grants


1,006,033



424,029



1,119,337



569,041

Other income


47,262



212,513



47,976



763,534

Interest expenses


(804,499)



(214,974)



(1,827,835)



(515,547)

Other expenses


(886,782)



(155,261)



(1,536,921)



(582,820)













Income before income taxes
provision


11,166,735



4,034,026



28,040,340



13,798,101













Income taxes provision


1,627,721



435,534



4,225,404



1,677,987













Net income

US$

9,539,014


US$

3,598,492


US$

23,814,936


US$

12,120,114













Net income attributable to
noncontrolling interest in
subsidiaries


953,901



359,849



2,381,493



1,212,011













Net income attributable to common
stockholders

US$

8,585,113


US$

3,238,643


US$

21,433,443


US$

10,908,103













Comprehensive income:
























Net income

US$

9,539,014


US$

3,598,492


US$

23,814,936


US$

12,120,114

Foreign currency translation
adjustments


3,856,038



(1,109,719)



7,990,990



(4,599,246)

Comprehensive income


13,395,052



2,488,773



31,805,926



7,520,868

Comprehensive income attributable
to noncontrolling interest in
subsidiaries


1,339,505



248,877



3,180,592



752,086

Comprehensive income attributable
to common stockholders

US$

12,055,547


US$

2,239,896


US$

28,625,334


US$

6,768,782













Weighted average common share -
basic


19,304,921



19,304,921



19,304,921



19,304,921













Weighted average common share -
diluted


19,304,921



19,304,921



19,304,921



19,304,921













EPS - basic

US$

0.44


US$

0.17


US$

1.11


US$

0.57













EPS - diluted

US$

0.44


US$

0.17


US$

1.11


US$

0.57

 

 

SORL Auto Parts, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

For the Nine Months Ended September 30, 2017 and 2016 (Unaudited)



Nine Months Ended September 30,


2017


2016





Cash Flows From Operating Activities






Net income

US$

23,814,936


US$

12,120,114

Adjustments to reconcile net income to net cash provided by operating
activities:












Allowance for doubtful accounts


759,854



6,328,318

Depreciation and amortization


6,623,082



5,357,366

Deferred income tax


42,583



(1,253,285)







Changes in assets and liabilities:






Accounts receivable


(19,276,498)



(21,237,420)

Bank acceptance notes receivable


2,056,320



(22,588,093)

Other current assets


(2,317,124)



(360,110)

Inventories


(13,792,530)



8,225,129

Prepayments, current


(1,312,081)



(5,240,758)

Prepaid capital lease interest


-



86,777

Accounts payable and bank acceptance notes to vendors


1,347,005



15,400,637

Income tax payable


909,912



1,153,011

Deposits received from customers


16,516,529



4,217,264

Other current liabilities and accrued expenses


(371,575)



1,086,934

Net Cash Flows Provided By Operating Activities


15,000,413



3,295,884







Cash Flows From Investing Activities






Change in short term investments


-



60,567,408

Acquisition and prepayments of property, plant and equipment and land
use rights


(36,882,570)



(12,266,591)

Deposit for acquisition of land use rights


(2,982,537)



-

Advances to related party


(8,919,241)



(18,247,384)

Repayment of advances to related party


-



18,247,384

Change in restricted cash


4,871,113



(4,193,003)

Net Cash Flows Provided By (Used In) Investing Activities


(43,913,235)



44,107,814







Cash Flows From Financing Activities






Proceeds from bank loans


84,149,040



39,309,937

Repayment of bank loans


(36,149,680)



(37,110,783)

Proceeds from related parties


93,191,843



-

Repayments to related parties


(113,071,629)



-

Distribution to controlling shareholder in connection with plant and land
use rights exchange with entity under common control


-



(70,781,668)

Repayment of capital lease


-



(1,779,040)

Net Cash Flows Provided By (Used In) Financing Activities


28,119,574



(70,361,554)







Effects on changes in foreign exchange rate


389,267



216,995







Net change in cash and cash equivalents


(403,981)



(22,740,861)







Cash and cash equivalents- beginning of the period


8,057,155



30,230,828







Cash and cash equivalents - end of the period

US$

7,653,174


US$

7,489,967







Supplemental Cash Flow Disclosures:






Interest paid

US$

1,255,540


US$

575,349

Income taxes paid

US$

3,272,909


US$

2,340,720







Non-cash Investing and Financing Transactions






Transfer of plant and land use right to entity under common control

US$

-


US$

17,342,372

Liabilities assumed in connection with the plant and land use right
exchange

US$

-


US$

5,351,196

Loans from related party in the form of bank acceptance notes

US$

23,515,527


US$

-

 

 

View original content:http://www.prnewswire.com/news-releases/sorl-auto-parts-increases-earnings-per-share-by-1588-on-a-590-rise-in-net-sales-in-the-2017-third-quarter-results-300556462.html

Source: SORL Auto Parts, Inc.
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