ZHEJIANG, China -- SORL Auto Parts, Inc.
(Nasdaq: SORL - News), 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.
Second Quarter Financial Highlights
-- Revenue increased to US$ 29.2 million, reflecting 45.1% year-over-year
growth;
-- 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: http://www.vcall.com/IC/CEPage.asp?ID=117078 . 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 http://www.sorl.cn .
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
( http://www.sec.gov ).
SORL Auto Parts, Inc. and Subsidiaries
Consolidated Balance Sheets
June 30, 2007 and December 31,2006
June 30,2007 December 31, 2006
(Unaudited) (Audited)
Assets
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 - $0.002
Par Value; 50,000,000
authorized, 18,275,126
issued and outstanding
as of June 30, 2007
and December 31, 2006
respectively 36,550 36,550
Additional Paid In
Capital 37,467,252 37,444,051
Reserves 1,424,523 797,116
Accumulated
other comprehensive
income 2,630,299 1,102,469
Retained Earnings 23,581,999 17,988,763
Total
Shareholders' Equity 65,140,623 57,368,949
Total Liabilities
and Shareholder's
Equity US$ 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
Operating
Expenses
Selling and
Distribution
Expenses 1,331,643 1,376,442 2,515,290 2,244,458
General and
Administrative
Expenses 1,027,436 86,289 2,720,623 1,183,251
Financial
Expenses 114,268 241,900 257,436 507,447
Total
Operating
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
Non-Operating
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
Comprehensive
Income US$ 4,581,041 2,642,462 US$ 6,917,762 4,424,412
Minority
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
Translation
Adjustment 1,075,648 59,974 1,697,589 186,680
Minority
Interest's
Share (107,565) (5,997) (169,759) (18,668)
Comprehensive
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
