Reports 13% Increase in Revenues and 15% Increase in Diluted EPS for 2008
ZHEJIANG, China, March 31 /PRNewswire-Asia/ --
2008 Financial Highlights:
-- Revenue increased 13.1% year-over-year to US$130.9 million
-- Gross profit margin increased to 25.7% compared with 23.3% a year ago
-- Net income rose 15.1% year-over-year to US$12.4 million; diluted EPS
increased to US$0.68 from US$0.59 a year ago
Revenue in 2008 was US$130.9 million, a 13.1% increase as compared to US$115.8 million in 2007. Revenues from China's domestic OEM market were US$49.0 million, an 18.6% increase over 2007. Revenues from China's domestic aftermarket were US$35.5 million, a 14.1% increase over 2007. Revenues from international markets were US$46.4 million a 6.9% increase over 2007. The increase in these market segments were primarily the result of our introduction of new products and enhanced volume with our principal OEM customers. In addition, greater success by our Chinese sales network, increased production capacity, expansion of the contract sales force, and the implementation of a focused market plan on these market segments contributed to our success in 2008.
Gross profit in 2008 was US$33.7 million, a 25% increase as compared to US$27.0 million for the same period in 2007. Gross profit margin reached 25.7% compared with 23.3% in 2007, an increase of 240 basis points. The improved gross margin was the result of several factors including increased prices on Spring Brake Chamber and Clutch Servo and lower production costs. Favorable changes in product and market mix helped raise the average selling price of certain products. During 2008, the Company enhanced sales to OEM customers by improving customer service and increasing integrated systems and modular supplies. The successful expansion of sales into the higher margin municipal bus market also contributed to the gross margin improvement of the Joint Venture since the fourth quarter of 2007.
Operating expenses increased 23.8% to US$18.6 million in 2008 from US$15.0 million in 2007. As a percentage of revenue, operating expenses increased to 14.2% in 2008 from 13.0% in 2007 primarily as a result of increased selling and general and administrative costs due to higher R&D expenses, increased packaging costs and increased transportation cost driven by higher fuel prices and Chinese governmental regulations on overloading effective since the third quarter of 2007. Also increasing general and administrative costs were increased compensation of the sales staff associated with elevated marketing efforts and increased benefits for management due to business expansion.
Operating income increased 25.8% or $3.1 million to US$15.1 million in 2008 from US$12.0 million in 2007. Operating margin increased 110 basis points to 11.5% in 2008 from 10.4% in 2007 as a result of the increase in sales and gross margin, offset slightly by the increase in operating expenses as a percent of revenue.
Net income for 2008 increased 15.1%, or $1.6 million, or $0.68 per share from $10.7 million, or $0.59 per share in 2007.
"We are very pleased with our financial performance in 2008," said Xiaoping Zhang, SORL Auto Parts' CEO and Chairman. "Sales growth was strong across all of our market segments despite a year that proved to be highly unusual. Severe snowstorms paralyzed parts of China in January 2008 and seriously affected transportation and supply chains throughout significant portions of China. 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 in turn caused a significant decline in demand in the second half of 2008.
"During the 2008 Beijing Olympic Games many of our major customers, such as FAW Qiongdao, Beiqi Foton Zhucheng and Beiqi Foton Aumen halted production due to traffic control in the region around Beijing.
"Lastly, the global financial crisis triggered by the subprime mortgage crisis in the U.S. has negatively impacted the global automobile industry and China's market was no exception.
"Despite the tough market environment in 2008, we achieved significant overall growth. We remained committed to growing our business but also emphasized improved efficiency and profitability. We showed considerable achievement on this front as gross margins improved approximately 240 basis points and operating margins improved approximately 110 basis points despite our considerable investment in R&D. 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."
Fourth Quarter 2008 Results
Revenue for the fourth quarter of 2008 was US$25.1 million, a 22.7% decrease as compared to US$32.5 million for the same period in 2007. Revenues from China's domestic OEM market, China's domestic aftermarket and international markets for the fourth quarter of 2008 were US$10.4 million, US$6.7 million and US$8.1 million, down by 7.1%, 33.0% and 28.3% respectively. The decline was primarily the result of decreased demand in domestic and international markets due to the global financial crisis in the fourth quarter of 2008.
Gross profit for the fourth quarter of 2008 was US$5.2 million, a 37.4% decrease as compared to US$8.3 million for the same period in 2007. Gross profit margin was 20.7% compared with 25.6% in the same quarter last year, a decrease of 490 basis points. The decreased gross margin was primarily the result of lower sales.
Operating expenses decreased 45.8% to US$3.0 million in the fourth quarter of 2008 from US$5.6 million. As a percentage of revenue, operating expenses decreased to 12.0% in the fourth quarter of 2008 from 17.1% in the fourth quarter of 2007 primarily as a result of decreased selling and G&A expenses associated with the weak sales in the fourth quarter of 2008. The decrease was also partially due to higher G&A and selling expenses occurred in the same period of 2007. These included extra professional fees, particularly Sarbanes-Oxley Section 404 consulting fees, incurred as a result of being a public company in the fourth quarter of 2007, and high selling expense attributed to increased "3-R Warranties" service expenses and increased transportation expenses associated with surging sales.
Operating income decreased 20.7% or $573 thousand to US$2.2 million in the fourth quarter of 2008 from US$2.8 million in the fourth quarter of 2007. Operating margin increased 20 basis points to 8.7% in the fourth quarter of 2008 from 8.5% in the fourth quarter of 2007 as a result of the decreased selling and general and administrative operating expenses.
Net income decreased 26.9% or $649 thousand to US$1.8 million, or $0.10 per diluted share in the fourth quarter of 2008 from US$2.4 million, or $0.14 per share in the fourth quarter of 2007.
Conference Call
Management will host a conference call at 8:30 am EDT, on Tuesday, March 31, 2009 to discuss its 2008 financial results. Listeners may access the call by dialing 1-888-713-4494 or +1-913-312-0855 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 March 31 to April 7, 2009. Listeners may access the replay by dialing +1-719-457-0820, passcode: 8460388.
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
December 31, 2008 and 2007
December 31, 2008 December 31, 2007
(Audited) (Audited)
Assets
Current Assets
Cash and Cash
Equivalents US$ 7,795,987 US$ 4,340,211
Accounts Receivable, Net of
Provision 35,797,824 30,586,239
Notes Receivable 7,536,534 9,410,385
Inventory 19,105,845 8,220,373
Prepayments, including
$187,813 and $0 from related
parties at December 31, 2008
and December 31, 2007,
respectively. 1,013,440 1,336,212
Other current assets,
including $1,906,070 and
$1,761,007 from related
parties at December 31, 2008
and December 31, 2007,
respectively. 4,445,778 4,275,294
Total Current Assets 75,695,408 58,168,714
Fixed Assets
Property, Plant and Equipment 32,927,306 27,889,182
Less: Accumulated Depreciation (8,951,886) (6,094,229)
Property, Plant and
Equipment, Net 23,975,420 21,794,953
Land Use Rights, Net 14,514,983 13,889,705
Other Assets
Deferred compensation
cost-stock options 9,935 69,571
Intangible Assets 161,347 76,150
Less: Accumulated Amortization (39,018) (25,116)
Intangible Assets, Net 122,329 51,034
Deferred tax assets 189,228 --
Total Other Assets 321,492 120,605
Total Assets US$ 114,507,303 US$ 93,973,977
Liabilities and Stockholders'
Equity
Current Liabilities
Accounts Payable and
Notes Payable,
including $0 and
$97,503 due to
related parties at
December 31, 2008
and December 31,
2007, respectively. US$ 4,623,850 US$ 5,305,172
Deposit Received from
Customers 6,295,857 2,079,946
Short term bank loans -- 3,370,328
Income tax payable 340,138 373,769
Accrued Expenses 2,389,314 1,859,938
Other Current Liabilities 460,124 463,563
Total Current Liabilities 14,109,283 13,452,716
Non-Current Liabilities
Deferred tax liabilities 106,826 --
Total Liabilities 14,216,109 13,452,716
Minority Interest 10,007,166 8,024,152
Stockholders' Equity
Common Stock - $0.002 Par
Value; 50,000,000 authorized,
18,279,254 and 18,279,254
issued and outstanding as of
December 31, 2008 and
December 31, 2007,
respectively 36,558 36,558
Additional Paid In Capital 37,498,452 37,498,452
Reserves 3,126,086 1,882,979
Accumulated other
comprehensive income 10,848,248 5,432,189
Retained Earnings 38,774,684 27,646,931
90,284,028 72,497,109
Total Liabilities
and Stockholders'
Equity US$ 114,507,303 US$ 93,973,977
SORL Auto Parts, Inc. and Subsidiaries
Consolidated Statements of Income
For Years Ended on December 31, 2008 and 2007
2008 2007
Sales US$ 130,893,422 115,760,070
Include: sales to related parties 2,816,816 1,398,638
Cost of Sales 97,225,582 88,757,611
Gross Profit 33,667,840 27,002,459
Expenses:
Selling and Distribution Expenses 8,423,124 7,461,652
General and Administrative Expenses 9,295,299 6,542,522
Financial Expenses 852,640 1,000,931
Total Expenses 18,571,063 15,005,105
Operating Income 15,096,777 11,997,354
Other Income 683,104 731,982
Non-Operating Expenses (441,288) (141,814)
Income Before Provision for Income
Taxes 15,338,593 12,587,522
Provision for Income Taxes 1,586,503 636,976
Net Income Before Minority Interest
& Other Comprehensive Income US$ 13,752,090 11,950,546
Minority Interest 1,381,230 1,206,515
Net Income Attributable to
Stockholders 12,370,860 10,744,031
Foreign Currency Translation
Adjustment 6,017,843 4,810,800
Minority Interest's Share 601,784 481,080
Comprehensive Income 17,786,919 15,073,751
Weighted average common share
- Basic 18,279,254 18,277,094
Weighted average common share
- Diluted 18,279,254 18,323,315
EPS - Basic 0.68 0.59
EPS - Diluted 0.68 0.59
