Revenue Grows 45% and Net Income Grows 15%
Second Quarter Financial Highlights:
-- Revenue increased 44.5% year-over-year to $42.2 million
-- Gross profit margin increased to 27.0% compared with 21.8% a year ago
-- Net income increased 15% to $4.7 million
ZHEJIANG, China, Aug. 13 /Xinhua-PRNewswire-FirstCall/ -- SORL Auto Parts, Inc. (Nasdaq: SORL) (“The Company”), a leading manufacturer and distributor of commercial vehicle air brake valves as well as related auto parts in China, announced today financial results for the second quarter ended June 30, 2008.
Second Quarter Results
Revenue for the second quarter of 2008 was $42.2 million, a 44.5% increase from $29.2 million for the same period in 2008. Revenues from China’s domestic OEM market, China’s domestic aftermarket and international markets for the second quarter of 2008 were $17.5 million, $10.5 million, and $14.1 million, respectively. The increase in sales was a result of the continued growth of the commercial vehicle market in China, including demand for replacement parts, as well as the continued development of export markets. For the first half of 2008 sales were $72.8 million as compared to $53.6 million in the first half of 2007, an increase of 35.9%.
Gross profit for the second quarter of 2008 was $11.4 million, a 79.4% increase as compared to $6.4 million for the same period in 2007. Gross profit margin was 27.0% compared with 21.8% in the same quarter last year, an increase of 520 basis points. The higher gross margin was the result of various factors including price increases, the sale of more systems versus individual components, and ongoing efforts to improve manufacturing efficiency. For the first half of 2008 gross margin was 27.5% versus 22.5% in the prior year period.
Operating expenses increased 137.5% from $2.5 million in the second quarter of 2007 to $5.9 million in the second quarter of 2008. As a percentage of revenue, operating expenses increased from 8.5% in the second quarter of 2007 to 13.9% in the second quarter of 2008. This increase in operating expenses as a percentage of revenue was a result of several factors the most prominent of which were an increase in transportation charges related to the rising cost of fuel and an increase in research and development expenses from $0.3 million in the second quarter of 2007 to $1.3 million in the second quarter of 2008. For the first half of 2008 operating expenses as a percentage of sales was 13.8% versus 10.2% in the prior year period.
Operating income increased 42.4% or $1.6 million from $3.9 million in the second quarter of 2007 to $5.5 million in the second quarter of 2008. As a percentage of revenue, operating income was 13.1% in the second quarter of 2008 as compared to 13.3% in the prior year period. This small decrease was a result of the combination of the improved gross margin and the increase in operating expenses as a percentage of sales. For the first half of 2008, operating income as a percentage of sales increased to 13.7% versus 12.2% in the first half of 2007.
Net income increased 15.0%, or $0.6 million, from $4.1 million in the second quarter of 2007, or $0.23 per share, to $4.7 million in the second quarter of 2008, or $0.26 per share. Net margin decreased 290 basis points from 14.1% in the second quarter of 2007 to 11.2% in the second quarter of 2008. In addition to the above factors, net margin was negatively impacted by income taxes which changed from a $0.4 million credit in the second quarter of 2007 to a $0.3 million charge in the second quarter of 2008. For the first half of 2008 net income was $8.3 million, or $0.45 per diluted share, an increase of 32.9% as compared to $6.2 million, or $0.34 per diluted share, in the first half of 2007. Net margin for the first half of 2008 was 11.3% as compared to 11.6% for the first half of 2007.
“We are very pleased with our financial performance in the second quarter of 2008,” said Xiaoping Zhang, SORL Auto Parts’ CEO and Chairman. “We continued to experience significant growth in all of our major markets. We are particularly pleased to see our business in India growing rapidly along with the continued expansion of our business in the Chinese bus market. We are also very satisfied that our efforts to improve our gross margins continue to produce positive results as our margins remain well above last year’s level. Although we expect to continue to make progress in all of these areas during the second half of the year, we can also see certain challenges ahead. First, due to the implementation of new emission standards in the China as of July 1st, 2008, we believe there may be a trend on the part of Chinese OEM’s to increase orders in the first half of the year which may have a significant downward impact on OEM orders during the second half of the year. Secondly, due to government-mandated traffic control related to the Olympics, some of our key customers will halt production during the third quarter. It is difficult at this time to project the precise impact these factors. While we still expect to have a strong year, it is possible we will not be able to duplicate the growth rate of the second quarter.”
Management will host a conference call at 8:00 am ET on Wednesday, August 13, 2008. Listeners may access the call by dialing #1-913-312-1294 A live webcast of the conference call will also be available at http://www.viavid.net . A replay of the call will be available from August 13, 2008 to August 3, 2008. Listeners may access the replay by dialing 1-719-457-0820; passcode: 8647426.
About SORL Auto Parts, Inc.
As China’s leading manufacturer and distributor of automotive air brake valves, SORL Auto Parts, Inc. ranks first in market share in the segment for commercial vehicles weighing more than three tons, such as trucks and buses. The Company distributes products both within China and internationally under the SORL trademark. SORL ranks among the top 100 auto component suppliers in China, with a product range that includes 40 types of air brake valves and over 1000 different specifications. The Company has four authorized international sales centers in Australia, United Arab Emirates, India, and the United States, with additional offices slated to open in other locations in the near future. 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. Forward-looking statements can be identified by the use of forward-looking terminology such as "will", "believes", "expects" or similar expressions. These forward-looking statements may also include statements about our proposed discussions related to our business or growth strategy, which is subject to change. Such information is based upon expectations of our management that were reasonable when made but may prove to be incorrect. All of such assumptions are inherently subject to uncertainties and contingencies beyond our control and upon assumptions 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. 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 filed with the Securities and Exchange Commission (SEC) on Form 10-K, and our subsequent SEC filings. 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 .
SORL Auto Parts, Inc. and Subsidiaries
Consolidated Balance Sheets
June 30, 2008 and December 31, 2007
30-Jun-08 31-Dec-07
(Unaudited) (Audited)
Assets
Current Assets
Cash and Cash Equivalents US$ 4,481,177 US$ 4,340,211
Accounts Receivable, Net of
Provision 38,862,983 30,586,239
Notes Receivable 12,805,169 9,410,385
Inventory 13,531,271 8,220,373
Prepayments 3,309,421 1,336,212
Other current assets 2,259,417 4,275,294
Total Current Assets 75,249,438 58,168,714
Fixed Assets
Property, Plant and Equipment 30,828,160 27,889,182
Less: Accumulated Depreciation (7,676,656) (6,094,229)
Property, Plant and
Equipment, Net 23,151,504 21,794,953
Land Use Rights, Net 14,627,491 13,889,705
Other Assets
Deferred compensation
cost-stock options 39,753 69,571
Intangible Assets 160,770 76,150
Less: Accumulated Amortization (31,250) (25,116)
Intangible Assets, Net 129,520 51,034
Total Other Assets 169,273 120,605
Total Assets US$ 113,197,706 US$ 93,973,977
Liabilities and Shareholders’ Equity
Current Liabilities
Accounts Payable and Notes
Payable US$ 8,013,208 US$ 5,305,172
Deposit Received from Customers 3,557,350 2,079,946
Short term bank loans 1,990,622 3,370,328
Income tax payable 732,316 373,769
Accrued Expenses 3,234,970 1,859,938
Other Current Liabilities 487,979 463,563
Total Current Liabilities 18,016,445 13,452,716
Minority Interest 9,493,164 8,024,152
Shareholders’ Equity
Common Stock - $0.002 Par
Value; 50,000,000 authorized,
18,279,254 issued and
outstanding as of June 30,
2008 and December 31, 2007
respectively 36,558 36,558
Additional Paid In Capital 37,498,452 37,498,452
Reserves 2,661,841 1,882,979
Accumulated other comprehensive
income 10,355,764 5,432,189
Retained Earnings 35,135,482 27,646,931
85,688,097 72,497,109
Total Liabilities and
Shareholders’ Equity US$ 113,197,706 US$ 93,973,977
SORL Auto Parts, Inc. and Subsidiaries
Consolidated Statements of Income and Comprehensive Income (unaudited)
For The Three Months and Six Months Ended June 30, 2008 and 2007
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
Sales US$ 42,186,119 29,189,572 72,844,561 53,606,561
Cost of Sales 30,776,773 22,829,287 52,793,354 41,555,339
Gross Profit 11,409,346 6,360,285 20,051,207 12,051,222
Expenses:
Selling and
Distribution
Expenses 2,771,803 1,331,643 4,611,078 2,515,290
General and
Administrative
Expenses 2,718,217 1,027,436 4,694,418 2,720,623
Financial Expenses 383,320 114,268 752,996 257,436
Total Expenses 5,873,340 2,473,347 10,058,492 5,493,349
Operating Income 5,536,006 3,886,938 9,992,715 6,557,873
Other Income 222,762 351,932 333,840 384,272
Non-Operating
Expenses (175,785) (80,550) (254,963) (84,639)
Income (Loss) Before
Provision for Income
Taxes 5,582,983 4,158,320 10,071,592 6,857,506
Provision for Income
Taxes 318,757 (422,721) 882,231 (60,256)
Net Income Before
Minority Interest
& Other
Comprehensive
Income US$ 5,264,226 4,581,041 9,189,361 6,917,762
Minority Interest 527,929 461,930 921,948 697,119
Net Income
Attributable to
Shareholders 4,736,297 4,119,111 8,267,413 6,220,643
Foreign Currency
Translation
Adjustment 2,110,749 1,075,648 5,470,639 1,697,589
Minority Interest’s
Share 211,075 107,565 547,064 169,759
Comprehensive Income
(Loss) 6,635,971 5,087,194 13,190,988 7,748,473
Weighted average
common share -
Basic 18,279,254 18,275,126 18,279,254 18,275,126
Weighted average
common share -
Diluted 18,287,764 18,322,260 18,288,958 18,328,526
EPS - Basic 0.26 0.23 0.45 0.34
EPS - Diluted 0.26 0.22 0.45 0.34
For more information, please contact:
Richard Cai
Director of Investor Relations
SORL Auto Parts, Inc.
Tel: +86-577-6581-7720
Email: richardcai@sorl.com.cn
Dan Joseph
ICR, Inc.
Tel: +86-21-6122-1077
Email: dan.joseph@icrinc.com
Bill Zima
ICR, Inc.
Tel: +1-203-682-8200
Email: william.zima@icrinc.com
