ZHEJIANG, China, May 13 /PRNewswire-Asia/ -- SORL Auto Parts, Inc. (Nasdaq: SORL) (“SORL” or “The Company”), a leading manufacturer and distributor of commercial vehicle air brake valves as well as related auto parts in China, announced financial results for the quarter ended March 31, 2009.
For the first quarter of 2009, net sales were $20.2 million, a 34.2% decrease compared to $30.7 million for the same period of 2008. Revenues from China’s domestic OEM market were US$9.2 million, a 14.0% decrease over the same period in 2008. Revenues from China’s domestic aftermarket were US$6.5 million, a 34.3% decrease over the same period in 2008. Revenues from international markets were US$4.6 million a 54.5% decrease from the same period in 2008. The decrease in sales was primarily due to weak global economic conditions, which lessened demand from our Chinese and international customers. In addition, prior to the implementation of the China III emission standard beginning on July 1, 2008, demand for commercial vehicles equipped with China II engines was significantly enhanced in the first half year of 2008. This resulted in higher than usual output and sales volume of commercial vehicles in the first and second quarter of 2008.
Gross profit decreased 36.2% to $5.5 million for the first period of 2009, from $8.6 million for the same period of 2008. Gross margin decreased 100 basis points to 27.2% from 28.2%. The decrease in gross margin was primarily the result of decreased output without a commensurate decline in certain fixed production costs, such as depreciation. SORL is committed to increasing management efficiency, improving the technologies of products, and improving its product portfolio to increase gross margins. Meanwhile, SORL expects its expansion to the higher-profit bus market will also help to increase gross profit margins.
Operating expenses decreased 1.1% to $4.1 million for the first quarter of 2009 from $4.2 million for the same period of 2008. As a percentage of revenue, operating expenses increased to 20.4% in the first quarter 2009 from 13.7% in the same period of 2008 primarily as a result of decreased sales output offset by increased R&D expense as the Company enhanced research and development activities on new products for the bus and agricultural vehicle market segments.
Operating income decreased 69% to $1.4 million for the first quarter 2009 from $4.5 million for the same quarter last year. Operating margin decreased 770 basis points to 6.8% for the first quarter 2009 from 14.5% in the first quarter of 2008 as a result of the decrease in sales and gross margin, offset by the increase in operating expenses as a percent of revenue.
Net income attributable to stockholders for the first quarter of 2009 decreased 73.2%, to $0.94 million, or $0.05 per share from $3.5 million, or $0.19 per share in the first quarter of 2008.
“The first quarter of 2009 proved to be a challenging quarter for SORL,” said Xiaoping Zhang, SORL Auto Parts’ CEO and Chairman. “Sales growth in China and internationally was negatively affected by global economic conditions. Demand in the global auto market was significantly weaker and the output and sales of our Commercial Vehicle business and the demand for air brake valves from our domestic OEM customers and international customers declined in the first quarter of 2009. In response to the implementation of the China III emission standard beginning July 1, 2008, sales of trucks equipped with China II engines accelerated before the policy was enforced in the first half of the year, which will cause difficult year over year comparisons for the first and second quarters of 2009.
“As I indicated, we have been through a very difficult time. We believe that the economic conditions are showing signs of stabilization and we remain confident about the long-term viability of the global market and China’s auto market.” Mr. Zhang continued, “We have actively pursued the bus and agricultural vehicle market to broaden our product reach into high growth, high margin business segments. We continue to invest in research and development to fund exciting new products for these market segments. The financial position of our company remains solid, with $10.7 million of cash on the balance sheet and no long-term debt, and we generated $3.1 million of cash flow from operations during the quarter.
“In addition, we strongly believe that the second quarter of 2009 will be better compared with the first quarter. The Chinese government’s stimulus plan has already induced increased demand in the auto market, which we believe will boost our performance in the second half this year. The stabilizing market is starting to show a positive impact on our sales, reflected in improved sales performance in April.”
Conference Call
Management will host a conference call at 8:30 am ET, on Wednesday May 13, 2009 to discuss its first quarter 2009 financial results. Listeners may access the call by dialing # 1-888-726-2458 or +1-913-312-0940 for international callers. A live webcast of the conference call will also be available at http://www.sorl.cn .
A replay of the call will be available from May 13 to May 20, 2009. Listeners may access the replay by dialing 1-888-203-1112 or +1-719-457-0820; passcode: 4571737.
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 Statements of Income and Comprehensive Income(Unaudited)
For The Three Months Ended on March 31, 2009 and 2008
Three Months Ended March 31,
2009 2008
Sales US$ 20,243,738 30,658,442
Include: sales to related parties 137,432 817,918
Cost of Sales 14,730,925 22,016,581
Gross Profit 5,512,813 8,641,861
Expenses:
Selling and Distribution Expenses 1,317,734 1,839,275
General and Administrative Expenses 2,792,749 1,976,201
Financial Expenses 28,962 369,676
Total Expenses 4,139,445 4,185,152
Operating Income 1,373,368 4,456,709
Other Income 39,217 111,078
Non-Operating Expenses -3,614 -79,178
Income Before Provision for Income
Taxes 1,408,971 4,488,609
Provision for Income Taxes 357,966 563,474
Net Income US$ 1,051,005 3,925,135
Other Comprehensive Income (Loss)-
Foreign Currency Translation Adjustment -19,202 3,359,890
Total Other Comprehensive Income 1,031,803 7,285,025
Less:
Net income Attributable to
Non-controlling Interest In Subsidiaries 106,094 394,019
Other Comprehensive Income (Loss)
Attributable to Non-controlling
Interest’s Share -1,920 335,989
Total Other Comprehensive Income
(Loss) Attributable to
Non-controlling Interest’s Share 104,174 730,008
Net income Attributable to Stockholders 944,911 3,531,116
Other Comprehensive Income (Loss)
Attributable to Stockholders -17,282 -3,023,901
Total Comprehensive Income (Loss)
Attributable to Stockholders 927,629 6,555,017
Weighted average common share - Basic 18,279,254 18,279,254
Weighted average common share - Diluted 18,279,254 18,290,126
EPS - Basic 0.05 0.19
EPS - Diluted 0.05 0.19
SORL Auto Parts, Inc. and Subsidiaries
Consolidated Balance Sheets
March 31, 2009 and December 31, 2008
31-Mar-09 31-Dec-08
(Unaudited) (Audited)
Assets
Current Assets
Cash and Cash Equivalents US$ 10,746,963 US$ 7,795,987
Accounts Receivable, Net of
Provision 33,743,368 35,797,824
Notes Receivable 7,358,128 7,536,534
Inventory 16,098,081 19,105,845
Prepayments, including $4,894,825
and $187,813 to related parties
at March 31, 2009 and December
31, 2008, respectively. 5,850,780 1,013,440
Other current assets, including
$221,585 and $1,906,070 to
related parties at March 31,
2009 and December 31, 2008,
respectively. 1,645,347 4,445,778
Total Current Assets 75,442,667 75,695,408
Fixed Assets
Property, Plant and Equipment 33,113,414 32,927,306
Less: Accumulated Depreciation -9,593,264 -8,951,886
Property, Plant and
Equipment, Net 23,520,150 23,975,420
Land Use Rights, Net 14,429,767 14,514,983
Other Assets
Intangible Assets 161,317 161,347
Less: Accumulated Amortization -42,838 -39,018
Intangible Assets, Net 118,479 122,329
Deferred compensation
cost-stock options -- 9,935
Deferred tax assets 363,047 189,228
Total Other Assets 481,526 321,492
Total Assets US$ 113,874,110 US$ 114,507,303
Liabilities and Shareholders’ Equity
Current Liabilities
Accounts Payable and
Notes Payable US$ 2,769,922 US$ 4,623,850
Deposit Received from Customers 6,172,697 6,295,857
Income tax payable 481,678 340,138
Accrued Expenses 2,634,749 2,389,314
Other Current Liabilities 363,900 460,124
Total Current Liabilities 12,422,946 14,109,283
Non-Current Liabilities
Deferred tax liabilities 128,167 106,826
Total Liabilities 12,551,113 14,216,109
Stockholders’ Equity
Common Stock - $0.002 Par Value;
50,000,000 authorized,
18,279,254 issued and
outstanding as of March 31, 2009
and December 31, 2008 36,558 36,558
Additional Paid In Capital 37,498,452 37,498,452
Reserves 3,221,571 3,126,086
Accumulated other
comprehensive income 10,830,966 10,848,248
Retained Earnings 39,624,110 38,774,684
Total SORL Auto Parts, Inc.
Stockholders’ Equity 91,211,657 90,284,028
Non-controlling Interest In
Subsidiaries 10,111,340 10,007,166
Total Equity 101,322,997 100,291,194
Total Liabilities and
Stockholders’ Equity US$ 113,874,110 US$ 114,507,303
