SORL SORL Auto Parts Inc

- Demonstrated strong growth in sales to OEMs, export set new historical high ZHEJIANG, China, Nov. 8 /PRNewswire-FirstCall/ -- SORL Auto Parts, Inc. (NASDAQ:SORL), a leading manufacturer and distributor of commercial vehicle air brake valves as well as other auto parts in China, today announced its financial results for the third quarter of 2006. Third Quarter Financial Highlights -- Revenue increased to $21.3 million, reflecting a 30% year-over-year growth; -- Revenue from sales to OEMs increased to $6.7 million, reflecting a 48.9% year-over-year growth; -- Export revenue increased to $9.4 million, reflecting a 34% year-over-year growth; -- Operating income increased to $2.6 million, reflecting a 44% year-over-year growth; -- Net income increased to $1.8 million, reflecting a 20% year-over-year growth; and -- Third quarter diluted earnings per share increased to $0.13, reflecting a 18% year-over-year growth Total revenue for the third quarter of 2006 was $21.3 million, a 30% increase as compared to $16.4 million for the same period in 2005. Revenue from sales to Original Equipment Manufacturers (OEM) for the third quarter of 2006 was $6.7 million, a 49% increase as compared to $4.5 million for the third quarter of 2005. Aftermarket revenue from the Chinese domestic market for the third quarter of 2006 was $5.2 million, an increase of 6% as compared to $4.9 million for the third quarter of 2005. Revenue from exports from China was $9.4 million for the third quarter of 2006, an increase of 34% as compared to $7.0 million for the third quarter of 2005. The export market's contribution to total revenue has slightly increased from 43% in the third quarter of 2005 to 44% in the third quarter of 2006. Gross profit for the third quarter of 2006 was $4.8 million, an increase of 38% as compared to $3.5 million in the same period in 2005. Operating income for the third quarter of 2006 was $2.6 million, an increase of 44% as compared to $1.8 million in the same period in 2005. Net income for the third quarter of 2006 was $1.8 million or $0.13 diluted earnings per share, an increase of 20% and 18% respectively as compared to net income of $1.5 million or $0.11 diluted earnings per share in the same period in 2005. The disparity between operating income and net income was mainly due to the expiration of the two-year tax holiday which increased our tax rate effective January 2006. Beginning in 2006, there is a three-year period for tax reduction with the reduced tax rate expected to be at 13.2%. Total cash and cash equivalents as of Sept 30, 2006 totaled $1.19 million as compared to $0.96 million as of December 31, 2005. Stockholder's equity increased to $22.61 million as of the end of Sept 30, 2006 from $15.98 million as of December 31, 2005. Xiaoping Zhang, SORL Auto Parts' Chairman and CEO, said, "We are delighted to see our growth momentum continue. We are highly encouraged by the recovery of Chinese domestic commercial vehicle sector. In particular, the heavy duty truck sales improved from same period last year. Many of our long term OEM customers benefited from the continuous economic development throughout China and growing export to other emerging markets." About SORL Auto Parts, Inc. As China's leading manufacturer and distributor of automotive air brake valves, SORL Auto Parts, Inc. ranks first in market share in the segment for commercial vehicles weighing more than three tons, such as trucks and buses. The Company distributes products both within China and internationally under the SORL trademark. SORL ranks among the top 100 auto component suppliers in China, with a product range that includes 40 types of air brake valves and over 800 different specifications. The Company has three authorized international sales centers in Australia, United Arab Emirates, and the United States, with additional offices slated to open in other locations in the near future. For more information, please visit http://www.sorl.cn/ Safe Harbor Statement Statements made in this press release that are not historical fact are "forward-looking statements," which are based on current expectations that include a number of risks and uncertainties. Additional factors that could potentially affect the Company's financial results may be found on the Company's filings with the Securities and Exchange Commission (http://www.sec.gov/). SORL Auto Parts, Inc. and Subsidiaries Consolidated Statements of Operations and Comprehensive Income Three Months Ended Nine Months Ended September 30, September 30, 2006 2005 2006 2005 Sales US$ 21,288,002 16,376,928 US$ 60,824,588 45,794,109 Cost of Sales 16,511,343 12,909,886 47,012,827 35,747,428 Gross Profit 4,776,659 3,467,042 13,811,761 10,046,681 Operating Expenses Selling and Distribution Expenses 1,163,077 849,854 3,407,535 2,732,863 General and Administrative Expenses 1,028,862 822,925 2,212,113 2,027,085 Total Operating Expenses 2,191,939 1,672,779 5,619,648 4,759,948 Operating Income 2,584,720 1,794,263 8,192,113 5,286,733 Financial Expenses 259,587 145,168 767,034 331,254 Other Income 24,280 - 92,976 - Non-Operating Expenses 75,841 12,642 232,566 88,615 Income Before Provision for Income Taxes 2,273,572 1,636,453 7,285,489 4,866,864 Provision for Income Taxes 311,208 - 898,713 - Net Income Before Minority Interest & Other Comprehensive Income US$ 1,962,364 1,636,453 US$ 6,386,776 4,866,864 Minority Interest (196,236) (163,645) (638,677) (486,686) Net Income Attributable to Shareholders 1,766,128 1,472,808 5,748,099 4,380,178 Foreign Currency Translation Adjustment 262,110 312,320 448,790 312,320 Minority Interest's Share (26,211) (31,232) (44,879) (31,232) Comprehensive Income 2,002,027 1,753,896 6,152,010 4,661,266 Weighted average common share - Basic 13,346,555 13,297,055 13,346,555 13,290,388 Weighted average common share - Diluted 13,368,387 13,297,055 13,360,639 13,290,388 EPS - Basic 0.13 0.11 0.43 0.33 EPS - Diluted 0.13 0.11 0.43 0.33 The accompanying notes are an integral part of these financial statements SORL Auto Parts, Inc. and Subsidiaries Consolidated Balance Sheets September 30, 2006 and December 31, 2005 September 30, December 31, 2006 2005 (Unaudited) (Audited) Assets Current Assets Cash and Cash Equivalents US$ 1,190,574 US$ 961,131 Accounts Receivable, Net of Provision 28,219,063 25,339,774 Notes Receivable 3,521,942 1,488,104 Inventory 2,298,109 2,512,583 Prepayments 1,719,034 1,801,829 Other current assets 1,081,395 48,115 Total Current Assets 38,030,117 32,151,536 Fixed Assets Property, Plant and Equipment 12,147,798 10,140,947 Less: Accumulated Depreciation (3,779,836) (3,024,281) Property, Plant and Equipment, Net 8,367,962 7,116,666 Construction in progress - Other Assets Deferred compensation cost-stock options 218,879 - Intangible Assets 45,200 44,297 Less: Accumulated Amortization (16,485) (11,873) Intangible Assets, Net 28,715 32,424 Other Non-current Assets 56,185 Total Other Assets 303,779 32,424 Total Assets US$ 46,701,858 US$ 39,300,626 Liabilities and Shareholders' Equity Current Liabilities Accounts Payable and Notes Payable US$ 8,438,819 US$ 3,746,666 Deposit Received from Customers 967,998 1,324,085 Short term bank loans 10,874,101 16,026,717 Accrued Expenses 841,410 482,982 Other Current Liabilities 545,832 - Total Current Liabilities 21,668,160 21,580,450 Minority Interest 2,419,374 1,735,818 Shareholders' Equity Common Stock - $0.002 Par Value; 50,000,000 authorized, 13,346,555 issued and outstanding as of September 30, 2006 and December 31, 2005 26,693 26,693 Additional Paid In Capital 4,922,074 4,444,118 Accumulated other comprehensive income 740,904 336,993 Retained Earnings 16,924,653 11,176,554 22,614,324 15,984,358 Total Liabilities and Shareholders' Equity US$ 46,701,858 US$ 39,300,626 The accompanying notes are an integral part of these financial statements DATASOURCE: SORL Auto Parts, Inc. CONTACT: David Ming He, SORL Auto Parts, Inc., +86-577-6581-7720, ; or Christopher Chu, The Global Consulting Group, +1-646-284-9426, Web site: http://www.sorl.cn/

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