SORL Reports Record Revenues for the 2011 Fourth Quarter and Year

ZHEJIANG, China, March 29, 2012 /PRNewswire-Asia-FirstCall/ -- SORL Auto Parts, Inc. (NASDAQ: SORL) ("SORL" or "the Company"), a leading supplier of brake and control systems to the global commercial vehicle industry, announced today financial results for the fourth quarter and fiscal year ended December 31, 2011.

Fourth Quarter Financial Highlights

• Record net sales were $56.1 million;
• Aftermarket and international market revenues increased 13.6% and 26.5%, respectively, versus the fourth quarter of 2010;
• Gross margin was 28.1%, compared with 27.5% in the same quarter of 2010 and 27.5%; in the third quarter of 2011;
• Net income attributable to stockholders for the fourth quarter of 2011 was $3.3 million, or $0.17 per diluted share.

Full Year 2011 Financial Highlights

• Record annual net sales of $216.8 million;
• Aftermarket and international market revenues increased 33.1% and 17.7%, respectively, versus 2010;
• Gross margin was 27.7%;
• Net income attributable to stockholders for fiscal 2011 was $16.7 million, or $0.86 per diluted share.

Mr. Xiaoping Zhang, SORL Auto Parts' Chief Executive Officer and Chairman, stated, " 2011 was a difficult year for the Chinese commercial vehicle market due to the macro business environment and government monetary policies. We are very proud that we defended our OEM market share, further consolidated our leadership in the domestic aftermarket and strengthened our expansion in the international market segments. Over the years, our consistent delivery of products with excellent quality has further strengthened our relationships with OEMs as they remain highly selective of suppliers of safety-related auto components. In the aftermarket segment, we benefited from higher safety measures introduced by the Chinese government and our ongoing effort in building relationships with end customers through our robust nationwide distribution and marketing network. In the international markets, we continued to implement our globalization strategy by further expanding our global sales network. At the same time, our highly cost-effective products and newly developed, innovative products are helping us to further gain share in the international markets. Our continuing R&D investments started to bear fruit. The successful introduction of innovative products has earned us new customer wins and helped improve our profitability. Also, our further investment in modern machinery equipment has enabled us to offset the pressure from rising labor costs and raw material increases. Going forward, we will continue to diversify our product offerings and further the integration of our sales network and end markets. We are confident of our ability to maintain steady progress despite the uncertain market conditions."

Fourth Quarter 2011 Financial Performance

For the fourth quarter of 2011, net sales were $56.1 million versus $54.8 million for the fourth quarter of 2010. Revenues from the Company's domestic OEM customers were $29.6 million, compared with $32.8 million for the fourth quarter of 2010. Revenues from China's domestic aftermarket were $11.7 million, a 13.6% increase over the previous year's fourth quarter. Revenues from international markets were $14.8 million, a 26.5% increase from the same quarter in 2010.

The decline in OEM sales resulted from lower commercial vehicle sales in China reflecting the macroeconomic environment. Greater aftermarket sales reflected the growing and large number of vehicles owned in China, tighter safety measures and the expiration of vehicle warranties. New product sales and market share increased in both the OEM and aftermarket as they helped to improve safety factors for vehicles on the road and added new functional features. International sales growth reflects the recovery of the international markets, and also shows that the continuous expansion of the Company's overseas sales network is gaining traction.

Fourth quarter gross profit was $15.8 million in 2011 versus $15.6 million a year ago. Gross margin was 28.1%, compared with 27.5% in the same period a year ago and 27.5% in the third quarter of 2011. Despite higher material costs, higher labor expenses, and the consistent pressure from the appreciation of the Chinese Renminbi ("RMB"), the Company improved its gross margin from a year ago and from the preceding quarter, through introducing more automated equipment to continually improve production efficiency, and developing more value-added, advanced products to enhance profitability.

Operating expenses were $12.5 million in the fourth quarter of 2011 compared with $8.3 million in the fourth quarter of 2010. As a percentage of revenue, operating expenses increased to 22.3% in the fourth quarter 2011 from 15.2% a year ago.

Selling and distribution expenses were $4.8 million, or 8.6% of quarterly revenue compared with $4.1 million, or 7.5% of revenue in the same quarter of 2010. The increase in expense and percentage was mainly due to higher labor cost and higher domestic and overseas transportation costs.

General and administrative (G&A) expenses in the fourth quarter of 2011 were $4.2 million, or 7.4% of revenue, compared with $2.0 million, or 3.6% in the previous year's fourth quarter. G&A expenses rose due to higher labor costs and expenditures related to the Company's business expansion.

Research and development (R&D) expenses increased to $2.9 million, or 5.2% of revenues, compared with $1.9 million, or 3.5% of revenues, for the same period of 2010. R&D expenses were mainly allocated to investment in new mechatronic products to develop higher-margin, electronically controlled products and upgrading traditional valve products to better serve market demands.

Financial expenses for the three months ended December 31, 2011 were $0.5 million compared with $0.4 million in the fourth quarter of 2010, which was mainly increased interest expense and the financing expense associated with a capital lease transaction.

Operating income was $3.3 million for the fourth quarter 2011 compared with $7.3 million for the same quarter last year as higher expenses were experienced in the fourth quarter of 2011.

Net income attributable to stockholders for the fourth quarter of 2011 was $3.3 million, or $0.17 per basic and diluted share, down from $5.8 million, or $0.30 per basic and diluted share, in the fourth quarter of 2010, and down from $3.5 million, or $0.18 per basic and diluted share from the third quarter of 2011

Full Year 2011 Financial Results

SORL's net sales for the twelve months ended December 31, 2011, increased 8.7% year-over-year to $216.8 million from $199.4 million in 2010.

For the twelve months, domestic OEM sales were $115.1 million compared with $117.4 million in 2010 reflecting lower new commercial vehicle sales in China during 2011 as generated by the macroeconomic environment. In 2011, aftermarket sales were $44.6 million reflecting a 33.1% increase from a year ago due to a higher number of vehicles in operation, tighter safety measures for vehicles in China, and the expiration of warranties. International sales rose 17.7% to $57.1 million compared with last year, reflecting the gradual recovery of the international auto markets. It also shows that the continuous expansion of the Company's overseas sales network is gaining traction.

SORL's gross profit rose 3.2% to $60.0 million in 2011. Gross margin was 27.7% in 2011 compared with 29.2% for 2010. Gross margin was affected by higher labor expenses and raw material costs as well as the appreciation of the Chinese currency. The Company has introduced new, more efficient production equipment and strengthened investment in new higher-margin products to stabilize the gross margin.

SORL's operational expenses increased by $6.7 million during 2011. As the Company grew into a larger organization, administrative support and R&D investment have been expanded to provide new and upgraded products to ensure SORL's leadership in braking systems in China. The R&D program also enables SORL's products to better meet global quality standards as the Company accelerates the expansion of its global footprint. Financial expense increased by $2.1 million to $3.2 million mainly due to higher interest expenses, financing expenses associated with the Company's capital lease transaction and foreign exchange losses.

Income from operations was $19.7 million in 2011 from $24.6 million in 2010. The operating margin was 9.1% versus 12.3% a year ago.

The net income attributable to stockholders in 2011 was $16.7 million from $20.4 million in 2010. Earnings per share ("EPS"), both basic and diluted, for the full year ended December 31, 2011 and 2010, were $0.86 and $1.06 per share, respectively.

Balance Sheet

At December 31, 2011, SORL had cash and equivalents of $17.1 million as compared to cash and cash equivalents of $6.7 million at December 31, 2010. The Company had working capital of $115.1 million versus $88.3 million at December 31, 2010 with a current ratio of 3.3 to 1.

Net cash provided by operating activities was $7.6 million for the twelve months ended December 31, 2011.

Recent Developments

In November 2011, SORL and Nanjing Iveco Automobile Co., Ltd. ("NAVECO"), China's leading manufacturer of construction machinery equipment, signed a brake product development and supply agreement. SORL has developed the brake system and will supply it for several of NAVECO's new, high-end light trucks with a complete braking system to include foot brake valves, spring brake chambers, four-circuit and other braking products comprising the system. NAVECO plans to produce approximately 300,000 units of these high-end light truck models in 2015 and SORL is the sole braking supplier to date. Small volumes of the new braking systems have been completed with full commercial production beginning in 2012.

In December 2011, SORL Europe, a subsidiary of SORL, celebrated the opening of its regional headquarters office at "La Maison de l'Automobile", Brussels, Belgium on December 14, 2011. Mr. Xiao Ping Zhang, Chairman and CEO of the Company, Mr. Jean Francois Barth, Managing Director SORL International Holding, and General Manager of SORL Europe, and other guests attended the ceremony.

In December 2011, the Company's subsidiary, Ruili Group Ruian Auto Parts Co., Ltd, received the "2011 Excellent Supplier" award from the Bei Ben Heavy-Duty Truck Co., Ltd. ("Bei Ben"). Only 53 suppliers received the "Excellent Supplier" award among the 400 suppliers that participated in Bei Ben's 2011 annual supplier meeting. SORL's sales of electrical and valve products to Bei Ben are estimated to grow by 10% to approximately 54 million RMB, or $8.5 million, in 2012.

In January 2012, the Company announced that it expects to generate RMB60 million in 2012 sales as the exclusive supplier of breathing spring brake chambers to its OEM customers' Shaanxi Auto, JAC and Beiqi Foton for their latest vehicles. The new breathing spring brake chamber is a timely response to the changing requirements of OEM customers' new vehicle models. The Company's new breathing spring brake chambers provide higher performance, reliability and quality than older spring chambers to enhance the road safety factor. The Chinese government is implementing new regulations to improve vehicle and driving safety which will enhance the sales potential of the Company's new spring brake chamber.

In January 2012, the Company announced that its subsidiary, Ruili Group Ruian Auto Parts Co., Ltd., was awarded a "Class A Supplier" designation from Zoomlion Mobile Crane Branch ("Zoomlion") and it will supply approximately 70% of the brake systems and related components to Zoomlion's crane truck fleet in 2012. SORL is the only brake system supplier to achieve the Class A Supplier title by Zoomlion. Zoomlion Mobile Crane Branch is a division of Changsha Zoomlion Heavy Industry Science & Technology Development Co., Ltd., China's leading manufacturer of construction machinery equipment. As a Class A Supplier of Zoomlion, SORL will receive large volume orders, preferential payment terms, and strategic cooperation. In 2011, SORL started to supply Zoomlion crane trucks with braking air processing unit (APU) technology. As the relationship progressed and evolved, SORL moved to provide Zoomlion's crane trucks with the entire brake system and related components to upgrade the braking technology and safety.

In March 2012, Ms. Jinrui Yu replaced Mr. Baojian Tao as the Company's Chief Operating Officer, effective immediately. With more than 15 years of experience in the auto parts industry, Ms. Yu has served as the Company's Production and International Market Vice President since August 2009. From 2004 to 2009, Ms. Yu served as the Company's Export Department Manager. Prior to that, Ms. Yu served as International sales Manager of Ruili Group Co., Ltd., which specializes in manufacturing auto parts, and from 1997 to 1999, Ms. Yu worked in the OEM market sales department of Ruili group Co., Ltd.

Business Outlook

We project approximately $234 million of sales revenue and $18.7 million of net income attributable to our common stockholders for the full year ending December 31, 2012. "We remain cautiously optimistic as Chinese OEM market still awaits catalyst. We will continue to increase production efficiency and improve product mix. Our success in maintaining domestic OEMs sales in 2011 has proven SORL's resilience and competitiveness in a soft OEM market. We continue to execute our international expansion strategy and build a stronger international foothold in 2012, as we expect more new customer wins in many emerging markets." Mr. Zhang concluded.

Conference Call

Management will host a conference call on Thursday, March 29, 2012 at 8:00 a.m. EDT / 8:00 p.m. Beijing Time to discuss its 2011 fourth quarter and year financial results. Listeners may access the call by dialing U.S. toll free number +1-877-407-0778, +1-201-689-8565 for international callers, and China toll free 00-800-4626-6666. A live web cast of the conference call will also be available at http://www.sorl.cn.

A replay of the call will be available shortly after the conference call through 11:59 p.m. EDT on April 29, 2012, or 11:59 a.m. Beijing Time on April 30, 2012. The replay dial-in numbers are: U.S. Toll-Free +1-877-660-6853, or International is +1-201-612-7415; using Account "286" and Conference ID "391332" to access the replay.

About SORL Auto Parts, Inc.

As a global tier one supplier of brake and control systems to the commercial vehicle industry, SORL Auto Parts, Inc. ranked No. 1 for market share in the segment for commercial vehicles brake systems, such as trucks and buses, in China. The Company distributes products both within China and internationally under the SORL trademark. SORL is listed among the top 100 auto component suppliers in China, with a product range that includes 65 categories with over 2000 specifications in brake system and others. The Company has four authorized international sales centers in UAE, India, the United States and Europe. SORL is working to establish a broader global sales network. 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.

Contact Information

Ben Chen
VP Finance & Corporate Secretary
+86 577 6581 7721
+86 13868890009
Email: ben@sorl.com.cn

Kevin Theiss
Grayling
+1 646 284 9409
Email: kevin.theiss@grayling.com

-- Tables Follow --