Revenue Grows 45% and Net Income Grows 15% Second Quarter Financial
Highlights: -- Revenue increased 44.5% year-over-year to $42.2
million -- Gross profit margin increased to 27.0% compared with
21.8% a year ago -- Net income increased 15% to $4.7 million
ZHEJIANG, China, Aug. 13 /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 second quarter ended June 30, 2008. Second Quarter Results
Revenue for the second quarter of 2008 was $42.2 million, a 44.5%
increase from $29.2 million for the same period in 2008. Revenues
from China's domestic OEM market, China's domestic aftermarket and
international markets for the second quarter of 2008 were $17.5
million, $10.5 million, and $14.1 million, respectively. The
increase in sales was a result of the continued growth of the
commercial vehicle market in China, including demand for
replacement parts, as well as the continued development of export
markets. For the first half of 2008 sales were $72.8 million as
compared to $53.6 million in the first half of 2007, an increase of
35.9%. Gross profit for the second quarter of 2008 was $11.4
million, a 79.4% increase as compared to $6.4 million for the same
period in 2007. Gross profit margin was 27.0% compared with 21.8%
in the same quarter last year, an increase of 520 basis points. The
higher gross margin was the result of various factors including
price increases, the sale of more systems versus individual
components, and ongoing efforts to improve manufacturing
efficiency. For the first half of 2008 gross margin was 27.5%
versus 22.5% in the prior year period. Operating expenses increased
137.5% from $2.5 million in the second quarter of 2007 to $5.9
million in the second quarter of 2008. As a percentage of revenue,
operating expenses increased from 8.5% in the second quarter of
2007 to 13.9% in the second quarter of 2008. This increase in
operating expenses as a percentage of revenue was a result of
several factors the most prominent of which were an increase in
transportation charges related to the rising cost of fuel and an
increase in research and development expenses from $0.3 million in
the second quarter of 2007 to $1.3 million in the second quarter of
2008. For the first half of 2008 operating expenses as a percentage
of sales was 13.8% versus 10.2% in the prior year period. Operating
income increased 42.4% or $1.6 million from $3.9 million in the
second quarter of 2007 to $5.5 million in the second quarter of
2008. As a percentage of revenue, operating income was 13.1% in the
second quarter of 2008 as compared to 13.3% in the prior year
period. This small decrease was a result of the combination of the
improved gross margin and the increase in operating expenses as a
percentage of sales. For the first half of 2008, operating income
as a percentage of sales increased to 13.7% versus 12.2% in the
first half of 2007. Net income increased 15.0%, or $0.6 million,
from $4.1 million in the second quarter of 2007, or $0.23 per
share, to $4.7 million in the second quarter of 2008, or $0.26 per
share. Net margin decreased 290 basis points from 14.1% in the
second quarter of 2007 to 11.2% in the second quarter of 2008. In
addition to the above factors, net margin was negatively impacted
by income taxes which changed from a $0.4 million credit in the
second quarter of 2007 to a $0.3 million charge in the second
quarter of 2008. For the first half of 2008 net income was $8.3
million, or $0.45 per diluted share, an increase of 32.9% as
compared to $6.2 million, or $0.34 per diluted share, in the first
half of 2007. Net margin for the first half of 2008 was 11.3% as
compared to 11.6% for the first half of 2007. "We are very pleased
with our financial performance in the second quarter of 2008," said
Xiaoping Zhang, SORL Auto Parts' CEO and Chairman. "We continued to
experience significant growth in all of our major markets. We are
particularly pleased to see our business in India growing rapidly
along with the continued expansion of our business in the Chinese
bus market. We are also very satisfied that our efforts to improve
our gross margins continue to produce positive results as our
margins remain well above last year's level. Although we expect to
continue to make progress in all of these areas during the second
half of the year, we can also see certain challenges ahead. First,
due to the implementation of new emission standards in the China as
of July 1st, 2008, we believe there may be a trend on the part of
Chinese OEM's to increase orders in the first half of the year
which may have a significant downward impact on OEM orders during
the second half of the year. Secondly, due to government-mandated
traffic control related to the Olympics, some of our key customers
will halt production during the third quarter. It is difficult at
this time to project the precise impact these factors. While we
still expect to have a strong year, it is possible we will not be
able to duplicate the growth rate of the second quarter."
Management will host a conference call at 8:00 am ET on Wednesday,
August 13, 2008. Listeners may access the call by dialing
#1-913-312-1294 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 August 13, 2008 to August 3, 2008. Listeners may
access the replay by dialing 1-719-457- 0820; passcode: 8647426.
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 June 30, 2008 and
December 31, 2007 30-Jun-08 31-Dec-07 (Unaudited) (Audited) Assets
Current Assets Cash and Cash Equivalents US$ 4,481,177 US$
4,340,211 Accounts Receivable, Net of Provision 38,862,983
30,586,239 Notes Receivable 12,805,169 9,410,385 Inventory
13,531,271 8,220,373 Prepayments 3,309,421 1,336,212 Other current
assets 2,259,417 4,275,294 Total Current Assets 75,249,438
58,168,714 Fixed Assets Property, Plant and Equipment 30,828,160
27,889,182 Less: Accumulated Depreciation (7,676,656) (6,094,229)
Property, Plant and Equipment, Net 23,151,504 21,794,953 Land Use
Rights, Net 14,627,491 13,889,705 Other Assets Deferred
compensation cost-stock options 39,753 69,571 Intangible Assets
160,770 76,150 Less: Accumulated Amortization (31,250) (25,116)
Intangible Assets, Net 129,520 51,034 Total Other Assets 169,273
120,605 Total Assets US$ 113,197,706 US$ 93,973,977 Liabilities and
Shareholders' Equity Current Liabilities Accounts Payable and Notes
Payable US$ 8,013,208 US$ 5,305,172 Deposit Received from Customers
3,557,350 2,079,946 Short term bank loans 1,990,622 3,370,328
Income tax payable 732,316 373,769 Accrued Expenses 3,234,970
1,859,938 Other Current Liabilities 487,979 463,563 Total Current
Liabilities 18,016,445 13,452,716 Minority Interest 9,493,164
8,024,152 Shareholders' Equity Common Stock - $0.002 Par Value;
50,000,000 authorized, 18,279,254 issued and outstanding as of June
30, 2008 and December 31, 2007 respectively 36,558 36,558
Additional Paid In Capital 37,498,452 37,498,452 Reserves 2,661,841
1,882,979 Accumulated other comprehensive income 10,355,764
5,432,189 Retained Earnings 35,135,482 27,646,931 85,688,097
72,497,109 Total Liabilities and Shareholders' Equity US$
113,197,706 US$ 93,973,977 SORL Auto Parts, Inc. and Subsidiaries
Consolidated Statements of Income and Comprehensive Income
(unaudited) For The Three Months and Six Months Ended June 30, 2008
and 2007 Three Months Ended Six Months Ended June 30, June 30, 2008
2007 2008 2007 Sales US$ 42,186,119 29,189,572 72,844,561
53,606,561 Cost of Sales 30,776,773 22,829,287 52,793,354
41,555,339 Gross Profit 11,409,346 6,360,285 20,051,207 12,051,222
Expenses: Selling and Distribution Expenses 2,771,803 1,331,643
4,611,078 2,515,290 General and Administrative Expenses 2,718,217
1,027,436 4,694,418 2,720,623 Financial Expenses 383,320 114,268
752,996 257,436 Total Expenses 5,873,340 2,473,347 10,058,492
5,493,349 Operating Income 5,536,006 3,886,938 9,992,715 6,557,873
Other Income 222,762 351,932 333,840 384,272 Non-Operating Expenses
(175,785) (80,550) (254,963) (84,639) Income (Loss) Before
Provision for Income Taxes 5,582,983 4,158,320 10,071,592 6,857,506
Provision for Income Taxes 318,757 (422,721) 882,231 (60,256) Net
Income Before Minority Interest & Other Comprehensive Income
US$ 5,264,226 4,581,041 9,189,361 6,917,762 Minority Interest
527,929 461,930 921,948 697,119 Net Income Attributable to
Shareholders 4,736,297 4,119,111 8,267,413 6,220,643 Foreign
Currency Translation Adjustment 2,110,749 1,075,648 5,470,639
1,697,589 Minority Interest's Share 211,075 107,565 547,064 169,759
Comprehensive Income (Loss) 6,635,971 5,087,194 13,190,988
7,748,473 Weighted average common share - Basic 18,279,254
18,275,126 18,279,254 18,275,126 Weighted average common share -
Diluted 18,287,764 18,322,260 18,288,958 18,328,526 EPS - Basic
0.26 0.23 0.45 0.34 EPS - Diluted 0.26 0.22 0.45 0.34 For more
information, please contact: Richard Cai Director of Investor
Relations SORL Auto Parts, Inc. Tel: +86-577-6581-7720 Email: Dan
Joseph ICR, Inc. Tel: +86-21-6122-1077 Email: Bill Zima ICR, Inc.
Tel: +1-203-682-8200 Email: DATASOURCE: SORL Auto Parts, Inc.
CONTACT: Richard Cai, Director of Investor Relations of SORL Auto
Parts, Inc., +86-577-6581-7720, or ; Or Dan Joseph of ICR, Inc.,
+86-21-6122-1077, or ; Or Bill Zima of ICR, Inc., +1-203- 682-8200,
or Web site: http://www.sorl.cn/ http://www.viavid.net/
http://www.sec.gov/
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