SORL SORL Auto Parts Inc

ZHEJIANG, China, May 13 /PRNewswire-Asia-FirstCall/ -- SORL Auto Parts, Inc. (NASDAQ:SORL) ('SORL' or 'The Company'), a leading manufacturer and distributor of commercial vehicle air brake valves as well as related auto parts in China, announced financial results for the quarter ended March 31, 2009. For the first quarter of 2009, net sales were $20.2 million, a 34.2% decrease compared to $30.7 million for the same period of 2008. Revenues from China's domestic OEM market were US$9.2 million, a 14.0% decrease over the same period in 2008. Revenues from China's domestic aftermarket were US$6.5 million, a 34.3% decrease over the same period in 2008. Revenues from international markets were US$4.6 million a 54.5% decrease from the same period in 2008. The decrease in sales was primarily due to weak global economic conditions, which lessened demand from our Chinese and international customers. In addition, prior to the implementation of the China III emission standard beginning on July 1, 2008, demand for commercial vehicles equipped with China II engines was significantly enhanced in the first half year of 2008. This resulted in higher than usual output and sales volume of commercial vehicles in the first and second quarter of 2008. Gross profit decreased 36.2% to $5.5 million for the first period of 2009, from $8.6 million for the same period of 2008. Gross margin decreased 100 basis points to 27.2% from 28.2%. The decrease in gross margin was primarily the result of decreased output without a commensurate decline in certain fixed production costs, such as depreciation. SORL is committed to increasing management efficiency, improving the technologies of products, and improving its product portfolio to increase gross margins. Meanwhile, SORL expects its expansion to the higher-profit bus market will also help to increase gross profit margins. Operating expenses decreased 1.1% to $4.1 million for the first quarter of 2009 from $4.2 million for the same period of 2008. As a percentage of revenue, operating expenses increased to 20.4% in the first quarter 2009 from 13.7% in the same period of 2008 primarily as a result of decreased sales output offset by increased R&D expense as the Company enhanced research and development activities on new products for the bus and agricultural vehicle market segments. Operating income decreased 69% to $1.4 million for the first quarter 2009 from $4.5 million for the same quarter last year. Operating margin decreased 770 basis points to 6.8% for the first quarter 2009 from 14.5% in the first quarter of 2008 as a result of the decrease in sales and gross margin, offset by the increase in operating expenses as a percent of revenue. Net income attributable to stockholders for the first quarter of 2009 decreased 73.2%, to $0.94 million, or $0.05 per share from $3.5 million, or $0.19 per share in the first quarter of 2008. 'The first quarter of 2009 proved to be a challenging quarter for SORL,' said Xiaoping Zhang, SORL Auto Parts' CEO and Chairman. 'Sales growth in China and internationally was negatively affected by global economic conditions. Demand in the global auto market was significantly weaker and the output and sales of our Commercial Vehicle business and the demand for air brake valves from our domestic OEM customers and international customers declined in the first quarter of 2009. 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 will cause difficult year over year comparisons for the first and second quarters of 2009. 'As I indicated, we have been through a very difficult time. We believe that the economic conditions are showing signs of stabilization and we remain confident about the long-term viability of the global market and China's auto market.' Mr. Zhang continued, 'We have actively pursued the bus and agricultural vehicle market to broaden our product reach into high growth, high margin business segments. We continue to invest in research and development to fund exciting new products for these market segments. The financial position of our company remains solid, with $10.7 million of cash on the balance sheet and no long-term debt, and we generated $3.1 million of cash flow from operations during the quarter. 'In addition, we strongly believe that the second quarter of 2009 will be better compared with the first quarter. The Chinese government's stimulus plan has already induced increased demand in the auto market, which we believe will boost our performance in the second half this year. The stabilizing market is starting to show a positive impact on our sales, reflected in improved sales performance in April.' Conference Call Management will host a conference call at 8:30 am ET, on Wednesday May 13, 2009 to discuss its first quarter 2009 financial results. Listeners may access the call by dialing # 1-888-726-2458 or +1-913-312-0940 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 May 13 to May 20, 2009. Listeners may access the replay by dialing 1-888-203-1112 or +1-719-457-0820; passcode: 4571737. 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 Statements of Income and Comprehensive Income(Unaudited) For The Three Months Ended on March 31, 2009 and 2008 Three Months Ended March 31, 2009 2008 Sales US$ 20,243,738 30,658,442 Include: sales to related parties 137,432 817,918 Cost of Sales 14,730,925 22,016,581 Gross Profit 5,512,813 8,641,861 Expenses: Selling and Distribution Expenses 1,317,734 1,839,275 General and Administrative Expenses 2,792,749 1,976,201 Financial Expenses 28,962 369,676 Total Expenses 4,139,445 4,185,152 Operating Income 1,373,368 4,456,709 Other Income 39,217 111,078 Non-Operating Expenses -3,614 -79,178 Income Before Provision for Income Taxes 1,408,971 4,488,609 Provision for Income Taxes 357,966 563,474 Net Income US$ 1,051,005 3,925,135 Other Comprehensive Income (Loss)- Foreign Currency Translation Adjustment -19,202 3,359,890 Total Other Comprehensive Income 1,031,803 7,285,025 Less: Net income Attributable to Non-controlling Interest In Subsidiaries 106,094 394,019 Other Comprehensive Income (Loss) Attributable to Non-controlling Interest's Share -1,920 335,989 Total Other Comprehensive Income (Loss) Attributable to Non-controlling Interest's Share 104,174 730,008 Net income Attributable to Stockholders 944,911 3,531,116 Other Comprehensive Income (Loss) Attributable to Stockholders -17,282 -3,023,901 Total Comprehensive Income (Loss) Attributable to Stockholders 927,629 6,555,017 Weighted average common share - Basic 18,279,254 18,279,254 Weighted average common share - Diluted 18,279,254 18,290,126 EPS - Basic 0.05 0.19 EPS - Diluted 0.05 0.19 SORL Auto Parts, Inc. and Subsidiaries Consolidated Balance Sheets March 31, 2009 and December 31, 2008 31-Mar-09 31-Dec-08 (Unaudited) (Audited) Assets Current Assets Cash and Cash Equivalents US$ 10,746,963 US$ 7,795,987 Accounts Receivable, Net of Provision 33,743,368 35,797,824 Notes Receivable 7,358,128 7,536,534 Inventory 16,098,081 19,105,845 Prepayments, including $4,894,825 and $187,813 to related parties at March 31, 2009 and December 31, 2008, respectively. 5,850,780 1,013,440 Other current assets, including $221,585 and $1,906,070 to related parties at March 31, 2009 and December 31, 2008, respectively. 1,645,347 4,445,778 Total Current Assets 75,442,667 75,695,408 Fixed Assets Property, Plant and Equipment 33,113,414 32,927,306 Less: Accumulated Depreciation -9,593,264 -8,951,886 Property, Plant and Equipment, Net 23,520,150 23,975,420 Land Use Rights, Net 14,429,767 14,514,983 Other Assets Intangible Assets 161,317 161,347 Less: Accumulated Amortization -42,838 -39,018 Intangible Assets, Net 118,479 122,329 Deferred compensation cost-stock options -- 9,935 Deferred tax assets 363,047 189,228 Total Other Assets 481,526 321,492 Total Assets US$ 113,874,110 US$ 114,507,303 Liabilities and Shareholders' Equity Current Liabilities Accounts Payable and Notes Payable US$ 2,769,922 US$ 4,623,850 Deposit Received from Customers 6,172,697 6,295,857 Income tax payable 481,678 340,138 Accrued Expenses 2,634,749 2,389,314 Other Current Liabilities 363,900 460,124 Total Current Liabilities 12,422,946 14,109,283 Non-Current Liabilities Deferred tax liabilities 128,167 106,826 Total Liabilities 12,551,113 14,216,109 Stockholders' Equity Common Stock - $0.002 Par Value; 50,000,000 authorized, 18,279,254 issued and outstanding as of March 31, 2009 and December 31, 2008 36,558 36,558 Additional Paid In Capital 37,498,452 37,498,452 Reserves 3,221,571 3,126,086 Accumulated other comprehensive income 10,830,966 10,848,248 Retained Earnings 39,624,110 38,774,684 Total SORL Auto Parts, Inc. Stockholders' Equity 91,211,657 90,284,028 Non-controlling Interest In Subsidiaries 10,111,340 10,007,166 Total Equity 101,322,997 100,291,194 Total Liabilities and Stockholders' Equity US$ 113,874,110 US$ 114,507,303 SORL Auto Parts, Inc. and Subsidiaries Consolidated Statements of Cash Flows(Unaudited) For The Three Months Ended on March 31, 2009 and 2008 Three Months Ended March 31, 2009 2008 Cash Flows from Operating Activities Net Income US$ 944,911 3,531,116 Adjustments to reconcile net income to net cash from operating activities: Non-controlling Interest In Subsidiaries 106,094 394,019 Bad Debt Expense 550,156 10,832 Depreciation and Amortization 729,433 654,555 Stock-Based Compensation Expense 9,935 14,909 Changes in Assets and Liabilities: Account Receivables 1,504,731 -3,949,778 Notes Receivables 176,990 -628,857 Other Currents Assets 2,792,782 2,347,575 Inventory 3,004,417 -2,477,972 Prepayments -4,837,993 -1,116,827 Deferred tax assets -173,871 -- Accounts Payable and Notes Payable -1,853,226 1,858,290 Income Tax Payable 141,540 139,904 Deposits Received from Customers -121,974 482,648 Other Current Liabilities and Accrued Expenses 149,836 -17,038 Deferred tax liabilities 21,363 -- Net Cash Flows from Operating Activities 3,145,124 1,243,376 Cash Flows from Investing Activities Acquisition of Property and Equipment -226,183 -557,391 Sales proceeds of disposal of fixed assets 33,795 -- Investment in Intangible Assets -- -628 Net Cash Flows from Investing Activities -192,388 -558,019 Cash Flows from Financing Activities Proceeds from (Repayment of) Bank Loans -- -2,432,466 Net Cash flows from Financing Activities -- -2,432,466 Effects on changes in foreign exchange rate -1,760 139,708 Net Change in Cash and Cash Equivalents 2,950,976 -1,607,401 Cash and Cash Equivalents - Beginning of the year 7,795,987 4,340,211 Cash and cash Equivalents - End of the year US$ 10,746,963 2,732,810 Supplemental Cash Flow Disclosures: Interest Paid 13,736 26,044 Tax Paid 368,857 1,883,375 SORL Auto Parts, Inc. and Subsidiaries Consolidated Statements of Changes in Stockholders' Equity For The Three Months Ended on March 31, 2009 and 2008 Number Common Additional Reserves Retained of Share Stock Paid-in Earnings Capital (Deficit) Beginning Balance - - January 1, 2008 18,279,254 36,558 37,498,452 1,882,979 27,646,931 Net Income -- -- -- -- 3,531,116 Other Comprehensive Income(Loss) -- -- -- -- -- Transfer to reserve -- -- -- 354,618 -354,618 Ending Balance - March 31, 2008 18,279,254 36,558 37,498,452 2,237,597 30,823,429 Beginning Balance - - January 1, 2009 18,279,254 36,558 37,498,452 3,126,086 38,774,684 Net Income -- -- -- -- 944,911 Other Comprehensive Income(Loss) -- -- -- -- -- Transfer to reserve -- -- -- 95,485 -95,485 Ending Balance - - March 31, 2009 18,279,254 36,558 37,498,452 3,221,571 39,624,110 Total SORL Auto Accumu. Other Parts, Inc. Non- Comprehensive Stockholders' controlling Total Income Equity Interest Equity Beginning Balance - January 1, 2008 5,432,189 72,497,109 8,024,152 80,521,261 Net Income -- 3,531,116 394,019 3,925,135 Other Comprehensive Income(Loss) 3,023,901 3,023,901 335,989 3,359,890 Transfer to reserve -- -- -- -- Ending Balance - - March 31, 2008 8,456,090 79,052,126 8,754,160 87,806,286 Beginning Balance - January 1, 2009 10,848,248 90,284,028 10,007,166 100,291,194 Net Income -- 944,911 106,094 1,051,005 Other Comprehensive Income(Loss) -17,282 -17,282 -1,920 -19,202 Transfer to reserve -- -- -- -- Ending Balance - - March 31, 2009 10,830,966 91,211,657 10,111,340 101,322,997 DATASOURCE: SORL Auto Parts, Inc. CONTACT: At SORL Auto Parts, Inc.: Ben Chen, Director of Investor Relations at +86-577-6581-7721 or ; At ICR, Inc.: In U.S.: Brian M. Prenoveau, CFA at +1-203-682-8200 or ; In China: Yuening Jiang at +86-10-6599-7965 or yuening.jiang@icrinc Web Site: http://www.sorl.cn/

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