SORL Auto Parts Reports 2007 Second Quarter Results

2007-08-14 16:07 703

Revenue Increased to Record High of US$ 29.2 Million; Net Income Increased to US$ 4.1 Million With a 73% YoY Growth

ZHEJIANG, China, Aug. 14 /Xinhua-PRNewswire/ -- SORL Auto Parts, Inc. (Nasdaq: SORL), a leading manufacturer and distributor of commercial vehicle air brake valves in China, today reported its financial results for the second quarter ending June 30, 2007.

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Second Quarter Financial Highlights

-- Revenue increased to US$ 29.2 million, reflecting 45.1% year-over-year


-- Revenue from OEM's increased to US$12.0 million, reflecting 100% year-

over-year growth;

-- Revenue from exports increased to US$10.9 million, reflecting 22.5%

year-over-year growth;

-- Net income increased to US$ 4.1 million, reflecting 73.2% year-over-

year growth and

-- Second quarter fully diluted earnings per share were US$ 0.22.

Revenue for the second quarter of 2007 was US$ 29.2 million, a 45.1% increase as compared to US$ 20.1 million for the same period in 2006. Sales to Original Equipment Manufacturers (OEM) for the second quarter of 2007 were US$ 12.0 million, a 100% increase as compared to US$ 6.0 million for the second quarter of 2006. Aftermarket revenue from the Chinese domestic market for the second quarter of 2007 was US$ 6.3 million, an increase of 21.2% as compared to US$ 5.2 million for the second quarter of 2006. Revenue from exports was US$ 10.9 million for the second quarter of 2007, an increase of 22.5% as compared to US$ 8.9 million for the second quarter of 2006.

Xiaoping Zhang, SORL Auto Parts' Chairman and CEO, said, "We are excited to report record high quarterly revenue as our sales to OEMs doubled and growth continued to accelerate. In the first half of 2007, the Chinese heavy duty truck market demonstrated robust 58% sales growth and semi-trailer sales increased by 123%. Encouragingly, in the first half of 2007, SORL’s largest customer FAW, a Fortune Global 500 company, recorded the highest unit sales of heavy duty trucks in China. We are pleased that our focus and strategy in the high-quality brake products for the heavy duty market continues to be successful. We were able to increase our production capacity while at the same time maintaining product quality to capture the market opportunities in China. Our leadership in the Chinese OEM market also helped strengthen SORL brand name and benefited our aftermarket sales in China."

Gross profit for the second quarter of 2007 was US$ 6.4 million, an increase of 37.1% as compared to US$ 4.6 million in the same period in 2006. Operating income for the second quarter of 2007 was US$ 3.9 million, an increase of 32.4% as compared to US$ 2.9 million in the same period in 2006. Net income for the second quarter of 2007 was US$ 4.1 million, an increase of 73.2% as compared to net income of US$ 2.4 million. The fully diluted earnings per share for the second quarter of 2007 were US$ 0.22 as compared to US$ 0.18 in the same period in 2006.

Total cash and cash equivalents as of June 30, 2007 totalled $5.8 million as compared to $11.1 million as of December 31, 2006. Stockholder’s equity increased to $65.1 million as of the end of June 30, 2007 from $57.4 million as of December 31, 2006. The decrease of cash and cash equivalents was due to the increased working capital needs to support the Company’s expanded sales to OEMs and the higher capital expenditures for capacity expansion. In early July, SORL announced a capacity expansion of 25% which included additional quality control equipment.

Ms. Zongyun Zhou, Chief Financial Officer, said, "In the second quarter of 2007, we encountered gross margin decrease mainly due to the appreciation of the Chinese currency affecting our export margin. In response to the margin erosion, we not only increased our sales to domestic China market, but also focused on supplier selection and production streamlining to lower cost and material wastage. As a result, our overall gross margin only experienced a slight decrease of 1%. We focused on leveraging our relationships with our long-term OEM customers to reach economies-of-scale and our selling expenses stabilized during the second quarter. Our effort in receivable collections also enabled us to reverse nearly US$ 234,154 of bad debt provision during the second quarter. As the Chinese government encourages domestic equipment purchase, SORL received an income tax refund of $991,133 for the purchase of domestic equipment, which has been reflected as a reduction to current income tax expense. We will continue to focus on internal cost control and rationally expand our capacity to capture the market opportunities and enjoy the favorable policies from the local government."

Recent Development

In July 2007, SORL announced that it has successfully completed the installation of new equipment to increase production capacity and to meet the growing demand from large OEM customers in China. The Company installed 10 additional die casting machines, added 47 computerized numerical control machines to the 198 machines previously in use, purchased 4 new tooling machines for the clutch servo product and streamlined the production facility to increase total capacity by nearly 25%. All equipment completed testing and has begun mass production. The Company plans to further invest in new equipment and continue to expand capacity in the second half of 2007.

Earnings Conference Call

SORL's management team will host a conference call at 8:30AM Eastern Time on August 14, 2007. A live webcast and replay of the conference call will be available at: . The webcast replay will be available through August 14, 2008.

The dial-in by telephone details for the live conference call: U.S. Toll Free Number +1-877-407-8035, International dial-in number +1-201-689-8035.

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 800 different specifications. The Company has four authorized international sales centers in Australia, United Arab Emirates, the United States and India, with additional offices slated to open in other locations in the near future. For more information, please log on .

Safe Harbor Statement

Statements made in this press release that are not historical fact are "forward-looking statements," which are based on current expectations that include a number of risks and uncertainties. Additional factors that could potentially affect the Company's financial results may be found on the Company's filings with the Securities and Exchange Commission ( ).

SORL Auto Parts, Inc. and Subsidiaries

Consolidated Balance Sheets

June 30, 2007 and December 31,2006

June 30,2007 December 31, 2006

(Unaudited) (Audited)


Current Assets

Cash and

Cash Equivalents US$ 5,751,342 US$ 11,137,501

Accounts Receivable,

Net of Provision 31,994,767 26,750,778

Notes Receivable 9,297,671 3,494,327

Inventory 7,362,666 4,528,856

Prepayments 2,290,204 5,532,802

Other current assets 3,872,774 2,925,558

Total Current Assets 60,569,424 54,369,822

Fixed Assets

Property, Plant and

Equipment 26,435,259 20,418,557

Less: Accumulated

Depreciation (4,924,874) (4,106,901)

Property, Plant

and Equipment, Net 21,510,385 16,311,656

Other Assets

Deferred compensation

cost-stock options 99,389 129,207

Intangible Assets 67,264 45,779

Less: Accumulated

Amortization Intangible (20,916) (17,655)

Assets, Net 46,348 28,124

Other Non-current Assets 42,045 41,299

Total Other Assets 187,782 198,630

Total Assets US$ 82,267,591 US$ 70,880,108

Liabilities and Shareholders’ Equity

Current Liabilities

Accounts Payable

and Notes Payable US$ 5,823,167 US$ 4,620,692

Deposit Received

from Customers 809,348 508,268

Short term

bank loans 1,504,571 --

Income tax payable 430,981 358,367

Accrued Expenses 916,109 1,232,845

Other Current

Liabilities 439,357 454,430

Total Current

Liabilities 9,923,533 7,174,602

Minority Interest 7,203,435 6,336,557

Shareholders' Equity

Common Stock - $0.002

Par Value; 50,000,000

authorized, 18,275,126

issued and outstanding

as of June 30, 2007

and December 31, 2006

respectively 36,550 36,550

Additional Paid In

Capital 37,467,252 37,444,051

Reserves 1,424,523 797,116


other comprehensive

income 2,630,299 1,102,469

Retained Earnings 23,581,999 17,988,763


Shareholders' Equity 65,140,623 57,368,949

Total Liabilities

and Shareholder's

Equity US$ 82,267,591 US$ 70,880,108

SORL Auto Parts, Inc. and Subsidiaries

Consolidated Statements of Operations and Comprehensive Income

For The Second Quarter Ended June 30, 2007 and 2006

Three Months Ended June 30, Six Months Ended June 30,

2007 2006 2007 2006

Sales US$ 29,189,572 20,117,002 US$ 53,606,561 39,536,586

Cost of Sales 22,829,287 15,477,658 41,555,339 30,501,484

Gross Profit 6,360,285 4,639,344 12,051,222 9,035,102



Selling and


Expenses 1,331,643 1,376,442 2,515,290 2,244,458

General and


Expenses 1,027,436 86,289 2,720,623 1,183,251


Expenses 114,268 241,900 257,436 507,447



Expenses 2,473,347 1,704,631 5,493,349 3,935,156

Operating Income 3,886,938 2,934,713 6,557,873 5,099,946

Other Income 351,932 68,696 384,272 68,696


Expenses (80,550) (67,050) (84,639) (156,725)

Income Before

Provision for

Income Taxes 4,158,320 2,936,359 6,857,506 5,011,917

Provision for

Income Taxes (422,721) 293,897 (60,256) 587,505

Net Income

Before Minority

Interest & Other


Income US$ 4,581,041 2,642,462 US$ 6,917,762 4,424,412


Interest 461,930 264,246 697,119 442,441

Net Income

Attributable to

Shareholders 4,119,111 2,378,216 6,220,643 3,981,971

Foreign Currency


Adjustment 1,075,648 59,974 1,697,589 186,680



Share (107,565) (5,997) (169,759) (18,668)


Income 5,087,194 2,432,193 7,748,473 4,149,983

Weighted average

common share -

Basic 18,275,126 13,287,055 18,275,126 13,287,055

Weighted average

common share -

Diluted 18,322,260 13,287,055 18,328,526 13,287,055

EPS - Basic 0.23 0.18 0.34 0.3

EPS - Diluted 0.22 0.18 0.34 0.3

For more information, please contact:

Richard Cai

Investor Relations

SORL Auto Parts, Inc.

Tel: +86-577-6581-7720


Kevin Theiss

Investor Relations

The Global Consulting Group

Tel: +1-646-284-9409


Sophy Miles/Ivette Almeida

Media Relations

The Global Consulting Group

Tel: +1-646-284-9400

Email: or

Source: SORL Auto Parts, Inc.
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