Revenue Grows 26% and Net Income Grows 68%
First Quarter Financial Highlights
-- Revenue increased 25.6% year-over-year to US$30.7 million
-- Gross profit margin increased to 28.2% compared with 23.3% a year ago
-- Net income rose 68.0% year-over-year to US$3.5 million; diluted EPS
increased to US$0.19 from US$0.11 a year ago
ZHEJIANG, China, May 14 /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 first quarter ended March 31, 2008.
First Quarter Results
Revenue for the first quarter of 2008 was US$30.7 million, a 25.6% increase as compared to US$24.4 million for the same period in 2008. Revenues from China's domestic OEM market, China's domestic aftermarket and international markets for the first quarter of 2008 were US$10.7 million, US$9.9 million and US$10.1 million, respectively. All three segments grew significantly, though overall growth was slowed somewhat by the snow storms that paralyzed parts of China in January and February and seriously affected transportation and supply chains in central and east China.
Gross profit for the first quarter of 2008 was US$8.6 million, a 51.9% increase as compared to US$5.7 million for the same period in 2007. Gross profit margin reached 28.2% compared with 23.3% in the same quarter last year, an increase of 490 basis points. The improved gross margin was the result of several factors including increased prices on certain products, the introduction of improved models which command higher margins, increased sale of systems (as opposed to individual components) which command higher margins, and improved manufacturing efficiency.
Operating expenses increased 38.6% from $3.0 million in the first quarter of 2007 to $4.2 million in the first quarter of 2008. As a percentage of revenue, operating expenses increased from 12.4% in the first quarter of 2007 to 13.7% in the first quarter of 2008 primarily as a result of foreign currency losses related to the depreciation of the US dollar versus the Chinese currency and an approximately 100% increase in research and development expenses related to developing electronic truck parts.
Operating income increased 66.9% or $1.8 million from $2.7 million in the first quarter of 2007 to $4.5 million in the first quarter of 2008. Operating margin increased 360 basis points from 10.9% in the first quarter of 2007 to 14.5% in the first quarter of 2008 as a result of the increase in gross margin slightly offset by the increase in operating expenses as a percent of revenue.
Net income increased 68% or $1.4 million from $2.1 million in the first quarter of 2007, or $0.11 per share, to $3.5 million in the first quarter of 2008, or $0.19 per share. Net margin increased 290 basis points from 8.6% in the first quarter of 2007 to 11.5% in the first quarter of 2008.
"We are very pleased with our financial performance in the first quarter of 2008," said Xiaoping Zhang, SORL Auto Parts' CEO and Chairman. "Top line growth was strong across all of our market segments despite difficult conditions in China due to severe snow storms and the related transportation problems. As we entered 2008, while we remained committed to growing our business, we also decided to place greater emphasis on improving efficiency and profitability. During the first quarter of 2008, our gross margin improved by almost 5% demonstrating the success we are having relative to this goal, particularly as relates to improving manufacturing productivity and bringing higher margin products and systems to market. We will continue to work toward this goal and are confident these efforts will help us continue to improve our competitiveness and financial performance in the future."
Management will host a conference call at 8:00 am ET on Wednesday, May 14, 2008. Listeners may access the call by dialing #913-981-5529. 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 May 14, 2008 to June 3, 2008. Listeners may access the replay by dialing 719-457-0820; passcode: 2438044.
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
March 31, 2008 and December 31, 2007
31-Mar-08 31-Dec-07
(Unaudited) (Audited)
Assets
Current Assets
Cash and Cash Equivalents US$ 2,732,810 US$ 4,340,211
Accounts Receivable, Net of Provision 35,854,111 30,586,239
Notes Receivable 10,434,941 9,410,385
Inventory 11,083,242 8,220,373
Prepayments 2,530,131 1,336,212
Other current assets, including $0
and $1,761,007 from related
parties at March 31, 2008 and
December 31, 2007, respectively 2,056,025 4,275,294
Total Current Assets 64,691,260 58,168,714
Fixed Assets
Property, Plant and Equipment 29,592,712 27,889,182
Less: Accumulated Depreciation (6,927,803) (6,094,229)
Property, Plant and Equipment,
Net 22,664,909 21,794,953
Land Use Rights, Net 14,374,566 13,889,705
Other Assets
Deferred compensation cost-stock
options 54,662 69,571
Intangible Assets 79,889 76,150
Less: Accumulated Amortization (28,102) (25,116)
Intangible Assets, Net 51,788 51,034
Total Other Assets 106,450 120,605
Total Assets
US$101,837,185 US$ 93,973,977
Liabilities and Shareholders' Equity
Current Liabilities
Accounts Payable and Notes Payable,
including $3,120,968 and $97,503
due to related parties at March 31,
2008 and December 31, 2007,
respectively US$ 7,417,133 US$ 5,305,172
Deposit Received from Customers 2,657,046 2,079,946
Short term bank loans 1,025,511 3,370,328
Income tax payable 513,673 373,769
Accrued Expenses 2,030,046 1,859,938
Other Current Liabilities 387,490 463,563
Total Current Liabilities 14,030,899 13,452,716
Minority Interest 8,754,160 8,024,152
Shareholders' Equity
Common Stock - $0.002 Par Value;
50,000,000 authorized, 18,279,254
issued and outstanding as of
March 31, 2008 and December 31, 2007
respectively 36,558 36,558
Additional Paid In Capital 37,498,452 37,498,452
Statutory Reserves 2,237,597 1,882,979
Accumulated other comprehensive
income 8,456,090 5,432,189
Retained Earnings 30,823,429 27,646,931
79,052,126 72,497,109
Total Liabilities and Shareholders'
Equity US$101,837,185 US$ 93,973,977
SORL Auto Parts, Inc. and Subsidiaries
Consolidated Statements of Income
For The First Quarter Ended on March 31, 2008 and 2007
Three Months Ended March 31,
2008 2007
Sales US$ 30,658,442 24,416,989
include: sales to related parties 817,918 914,683
Cost of Sales 22,016,581 18,726,052
Gross Profit 8,641,861 5,690,937
Expenses:
Selling and Distribution Expenses 1,839,275 1,183,647
General and Administrative Expenses 1,976,201 1,693,187
Financial Expenses 369,676 143,168
Total Expenses 4,185,152 3,020,002
Operating Income 4,456,709 2,670,935
Other Income 111,078 32,340
Non-Operating Expenses (79,178) (4,089)
Income (Loss) Before Provision for
Income Taxes 4,488,609 2,699,186
Provision for Income Taxes 563,474 362,465
Net Income Before Minority Interest
& Other Comprehensive Income US$ 3,925,135 2,336,721
Minority Interest 394,019 235,189
Net Income Attributable to
Shareholders 3,531,116 2,101,532
Foreign Currency Translation
Adjustment 3,359,890 621,941
Minority Interest's Share 335,989 62,194
Comprehensive Income (Loss) 6,555,017 2,661,279
Weighted average common share -
Basic 18,279,254 18,275,126
Weighted average common share -
Diluted 18,290,126 18,333,009
EPS - Basic 0.19 0.11
EPS - Diluted 0.19 0.11
