ZHEJIANG, China, May 16, 2014 /PRNewswire/ -- SORL Auto Parts,
Inc. (NASDAQ: SORL) ("SORL" or the "Company"), a leading
manufacturer and distributor of automotive brake systems as well as
other key safety-related auto parts in China, announced today its unaudited financial
results for the first quarter ended March
31, 2014.
First Quarter 2014 Financial Highlights
- Revenues for the first quarter of 2014 increased by 21.1% to
$50.0 million;
- Gross margin increased to 30.8% in the first quarter of
2014;
- Net Income increased by 124.6% to $2.8
million, or $0.14 per diluted
share;
- Cash and cash equivalents were $35.8
million compared with $28.2
million at December 31,
2013.
Mr. Xiaoping Zhang, SORL's Chief
Executive Officer and Chairman, stated, "We are pleased to report
strong revenue growth in a slow season, with higher profitability
in the first quarter of 2014. Our market share grew in the first
quarter of 2014 and the revenues for our three market segments (OEM
market, aftermarket, and international market) all increased in the
first quarter of 2014 compared with the first quarter in 2013,
respectively. With our growing market share, new products,
many OEM relationships in China
and financial strength, we are well positioned for future
growth."
First Quarter 2014 Financial Performance
For the first quarter of 2014, net sales were $50.0 million, compared with $41.3 million for the first quarter of 2013.
Revenues from the Company's domestic OEM customers increased by
25.4% to $28.6 million, compared with
$22.8 million for the first quarter
of 2013. The Company's domestic aftermarket revenues rose by
14.1% to $10.5 million, compared with
$9.2 million in the first quarter of
2013. Revenues from international market increased by 17.2% to
$10.9 million, compared with
$9.3 million in the first quarter in
2013.
Higher spending on real estate and infrastructure construction
generated higher demand for commercial vehicles, especially trucks
in the first quarter of 2014. The growing number of warranty
expirations is driving the Company's aftermarket growth.
International sales grew as the distribution network increased to
provide greater recognition of SORL to end users. Higher sales of
new products contributed to the increased sales in the OEM market,
aftermarket and international market.
The gross profit for the first quarter of 2014 increased by
25.9% to $15.4 million, from
$12.2 million for the first quarter
of 2013. Gross margin for the first quarter of 2014 improved to
30.8%from 29.6% for the first quarter of 2013. The gross margin
increased primarily due to high value-added new products, more
automated production line and the reclassifications of
certain costs associated with post-sales product modifications at
OEM sites, from costs of sales to selling and distribution
expenses. Retrospective adjustments to the historical income
statement have also been made to provide a consistent basis of
comparison for the financial results. These reclassifications did
not have a material impact on net earnings or the Company's
financial condition in the first quarter of 2014. The Company
believes its gross margin can be maintained by improving production
efficiencies and introducing products with more advanced
technologies.
Operating expenses increased to $11.5
million in the first quarter of 2014 from $10.0 million in the first quarter of 2013. The
increase in operating expenses reflected higher expenditures in the
selling and distribution, general and administrative, and research
and development areas. As a percentage of revenue, operating
expenses were 23.0% in the first quarter of 2014, compared with
24.1% in the first quarter of 2013.
- Selling and distribution expenses were $5.7 million, or 11.4% of quarterly revenues,
compared with $4.4 million, or 10.7%
in the first quarter of 2013. The increase in expenses was mainly
due to higher freight costs and packaging expenses during the
quarter.
- General and administrative expenses in the first quarter of
2014 were $4.3 million, or 8.6% of
revenue compared with $4.2 million,
or 10.1% in the first quarter of 2013.
- Research and development expenses ("R&D") were $1.5 million, or 3.0% of revenue in the first
quarter of 2014 compared with $1.4
million, or 3.4% of revenue in the first quarter of 2013.
The Company continues to deploy resources for the development of
new products, especially higher-margin electronically controlled
products, and product upgrades of older products. Strict cost
controls ensured the R&D expenditures were monitored for
effectiveness.
Financial expenses decreased to $0.7
million from $0.9 million due
to lower currency exchange losses during the first quarter of 2014
for the Company's export sales contracts.
Income before provision for income taxes increased by 140.0% to
$3.6 million for the first quarter of
2014 compared to $1.5 million for the
first quarter of 2013. The higher income reflected increased sales,
higher gross profits and controlled expenses during the first
quarter of 2014. The pretax income margin percentage was 7.2% in
the first quarter of 2014, compared with 3.7% in the first quarter
of 2013.
The provision for income taxes was $0.5
million, or a 14.3% tax rate, in the first quarter of 2014,
which compared with $0.2 million, or
a 10.9% tax rate, in the first quarter in 2013. Despite the
fluctuation of the tax rate, the annual tax rate for 2014 is
approximately 15%.
Net income attributable to stockholders for the first quarter of
2014 was $2.8 million, or
$0.14 per basic and diluted share,
compared with $1.2 million, or
$0.06 on per basic and diluted share,
in the first quarter of 2013.
Balance Sheet
As of March 31, 2014, the Company
had cash and cash equivalents of $35.8
million compared to $28.2
million on December 31, 2013.
Total equity increased to $206.9
million at March 31, 2014
compared with $199.5 million at
December 31, 2013. At March 31, 2014, working capital increased to
$151.0 million with a current ratio
of 3.9 to 1.
Recent Developments
- On January 13, 2014, SORL
announced that the Company's new state-of-the-art testing center
has been completed in January 2014.The new testing center
approximates 1,500 square meters, and it has 13 rooms with nearly
111 instruments conducting different measurements on SORL's new and
upgraded products. The Company expects to invest in additional
advanced facilities to further enhance its testing capacity.
- On March 10, 2014, SORL announced
that the Company has received supplier awards from three of its
major customers, Dongfeng Liuzhou Automobile Co., Ltd., Dongfeng
Dana Axle Co., Ltd. and the Qingte Group. Dongfeng Liuzhou
Automobile Co., Ltd. is a premiere designer and manufacturer of
over 200 types of light-duty, medium-duty and heavy-duty commercial
vehicles and multi-purpose vehicles (MPVs). Dongfeng Dana Axle Co.,
Ltd., the largest axle manufacturer in Asia, is a joint venture between Dongfeng
Motor Co., Ltd. and Dana Holding Corporation. Qingte Group
manufactures special vehicles, axles and auto parts. Qingte has
received a number of accolades including as a "Top 100 Enterprise
of China Auto Parts", and "Top 10 Independent Brand Enterprise of China Auto Parts".
- On April 1, 2014, SORL announced
that its 2014 annual stockholder meeting will be held at
8:00 PM China Standard Time on
Thursday, June 20, 2014 in Meeting
Room No 1, No.2666, Kaifaqu Road, Ruian Economic Development
District, Ruian City, Zhejiang
Province, Zip 325200, China. Stockholders of record as of the close
of business on Friday, April 25, 2014
are entitled to notice of and to vote at the 2014 Annual
Meeting.
Business Outlook
For the fiscal year 2014, management expected the net sales to
be approximately $225.0 million and
net income to be approximately $12.5
million. These targets are based on the Company's current
views on the operating and market conditions, which are subject to
change.
"Our results in the first quarter of 2014 are a direct outcome
of our new product development, investment in advanced production
equipment and our leading position in the Chinese OEM market for
commercial braking systems. We have maintained a strong financial
condition with $35.8 million in cash
and cash equivalents and a 3.9 to 1 current ratio to support our
expanding operations as our OEM business, aftermarket and
international sales continued to post solid growth. Market share
expansion and gross margin remain as our top priorities," commented
Ms. Jinrui Yu, SORL's Chief
Operating Officer.
Conference Call
Management will host a conference call on Friday, May 16, 2014 at 8:00 a.m. EDT (8:00
p.m. Beijing Time) to discuss its 2014 first quarter
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, or China toll free
+86-400-120-2840. 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 June 16, 2014
(11:59 a.m. Beijing Time on
June 17, 2013). The replay dial-in
numbers are: U.S. toll free number +1-877-660-6853, or the
international number +1-201-612-7415. After dial-in, listeners may
use Conference ID "13581479" 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. is the
market leader 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 systems and others. The Company has four authorized
international sales centers in United
Arab Emirates, 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 within the meaning of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements can be identified by
the use of forward-looking terminology such as "expects,"
"anticipates," "believes," "targets," "goals," "projects,"
"intends," "plans," "seeks," "estimates," "may," "will," "should"
or similar expressions. These forward-looking statements may also
include statements about the Company's proposed discussions related
to its business or growth strategy, which are subject to change.
Such information is based upon expectations of the Company's
management that were reasonable when made, but may prove to be
incorrect. All of such assumptions are inherently subject to
uncertainties and contingencies beyond the Company's control and
upon assumptions with respect to future business decisions, which
are subject to change. The Company does not undertake to update the
forward-looking statements contained in this press release. These
risks and uncertainties may include, but are not limited to general
political, economic and business conditions which may impact the
demand for commercial vehicles or passenger vehicles in
China and the other significant
markets where the Company's products are sold, uncertainty
regarding such political, economic and business conditions, trends
in consumer debt levels and bad debt write-offs, general
uncertainty related to possible recessions, natural disasters, the
political stability of China and
the impact of any of those events on demand for commercial or
passenger vehicles, changes in consumer confidence, new product
development and introduction, competitive products and pricing,
seasonality, availability of alternative sources of supply in the
case of the loss of any significant supplier or any supplier's
inability to fulfill the Company's orders, cost of labor and raw
materials, the loss of or curtailed sales to significant customers,
the Company's dependence on key employees and officers, the ability
to secure and protect trademarks, patents and other intellectual
property rights, potential effects of competition in the Company's
business, the dependency of the Company upon the normal operation
of its sole manufacturing facility, potential effect of the
economic and currency instability in China and countries to which the Company sold
its products, the ability of the Company to successfully manage its
expenses on a continuing basis, the continued availability to the
Company of financing and credit on favorable terms, business
disruptions, disease, general risks associated with doing business
in China or other countries
including, without limitation, foreign trade policies, import
duties, tariffs, quotas, political and economic stability, and the
other factors discussed in the Company's Annual Report on Form 10-K
and other filings with the Securities and Exchange Commission. For
additional information regarding known material factors that could
cause the Company's results to differ from its projected results,
please see its filings with the SEC, including its Annual Report on
Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on
Form 8-K. 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
Raymond Lin
+86.139.6777.6556
+86.577.6581.7721
ljf@sorl.com.cn
Phyllis Huang
+86.151.6770.5972
+86.577.6581.7721
phyllis@sorl.com.cn
Kevin Theiss
Grayling
+1.646.284.9409
kevin.theiss@grayling.com
- Tables Follow -
SORL Auto Parts,
Inc. and Subsidiaries
|
Consolidated
Balance Sheets
|
March 31, 2014 and
December 31, 2013
|
|
|
|
|
|
|
|
|
|
March 31,
2014
|
|
December 31,
2013
|
|
|
|
(Unaudited)
|
|
(Audited)
|
|
Assets
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
Cash and cash
equivalents
|
US$
|
35,824,936
|
US$
|
28,241,983
|
|
Accounts receivable,
net of provision
|
|
63,397,436
|
|
57,912,384
|
|
Bank acceptance notes
from customers
|
|
13,168,857
|
|
20,186,787
|
|
Inventories
|
|
79,290,193
|
|
76,364,019
|
|
Prepayments
|
|
6,133,889
|
|
3,773,750
|
|
Current portion of
prepaid capital lease interest
|
|
417,348
|
|
453,053
|
|
Other current
assets
|
|
2,510,272
|
|
2,537,300
|
|
Deferred tax
assets
|
|
1,513,474
|
|
1,392,955
|
|
Total
Current Assets
|
|
202,256,405
|
|
190,862,231
|
Fixed
Assets
|
|
|
|
|
|
Machinery
|
|
48,399,494
|
|
46,475,961
|
|
Molds
|
|
1,418,319
|
|
1,388,218
|
|
Office
equipments
|
|
2,039,506
|
|
1,960,476
|
|
Vehicles
|
|
2,256,288
|
|
2,248,280
|
|
Buildings
|
|
9,103,713
|
|
8,910,501
|
|
Machinery held under
capital lease
|
|
29,012,601
|
|
28,396,853
|
|
Less: accumulated
depreciation
|
|
(46,829,883)
|
|
(44,175,888)
|
|
Property, plant and equipment, net
|
|
45,400,038
|
|
45,204,401
|
|
Leasehold
improvements in progress
|
|
248,812
|
|
264,612
|
|
|
|
|
|
|
Land Use Rights,
Net
|
|
14,627,244
|
|
14,409,170
|
|
|
|
|
|
|
Other Non-Current
Assets
|
|
|
|
|
|
Intangible
assets
|
|
180,125
|
|
176,302
|
|
Less: accumulated
amortization
|
|
(133,051)
|
|
(126,031)
|
|
Intangible assets,
net
|
|
47,074
|
|
50,271
|
|
Security deposits on
lease agreement
|
|
1,857,670
|
|
1,818,244
|
|
Non-current portion
of prepaid capital lease interest
|
|
292,144
|
|
371,355
|
|
Total Other Non-Current
Assets
|
|
2,196,888
|
|
2,239,870
|
|
Total
Assets
|
US$
|
264,729,387
|
US$
|
252,980,284
|
|
|
|
|
|
|
|
Liabilities and
Shareholders' Equity
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
Accounts payable,
including $963,642 and
$810,310 due to related parties at March 31,
2014 and December 31, 2013, respectively.
|
US$
|
8,271,522
|
US$
|
13,290,282
|
|
Deposit received from
customers
|
|
13,703,908
|
|
13,931,658
|
|
Short term bank
loans
|
|
14,359,630
|
|
4,526,863
|
|
Income tax
payable
|
|
395,087
|
|
494,658
|
|
Accrued
expenses
|
|
10,592,393
|
|
10,066,969
|
|
Current portion of
capital lease obligations
|
|
3,715,340
|
|
3,636,488
|
|
Other current
liabilities, including
$127,770 and $94,246 due to related parties
at March 31, 2014 and December 31, 2013,
respectively.
|
|
264,210
|
|
256,430
|
|
Total
Current Liabilities
|
|
51,302,090
|
|
46,203,348
|
Non-Current
Liabilities
|
|
|
|
|
|
Non-current portion
of capital lease obligations
|
|
6,501,845
|
|
7,272,975
|
|
Total
Non-Current Liabilities
|
|
6,501,845
|
|
7,272,975
|
|
Total
Liabilities
|
US$
|
57,803,935
|
US$
|
53,476,323
|
Stockholders'
Equity
|
|
|
|
|
|
Preferred stock - no
par value; 1,000,000
authorized; none issued and outstanding as
of March 31, 2014 and December 31, 2013
|
|
-
|
|
-
|
|
Common stock - $0.002
par value;
50,000,000 authorized, 19,304,921 issued
and outstanding as
of
March 31, 2014 and
December 31, 2013
|
|
38,609
|
|
38,609
|
|
|
|
Additional paid-in
capital
|
|
42,199,014
|
|
42,199,014
|
|
Reserves
|
|
10,900,180
|
|
10,609,435
|
|
Accumulated other
comprehensive income
|
|
26,418,912
|
|
22,465,720
|
|
Retained
earnings
|
|
107,023,678
|
|
104,544,120
|
|
Total SORL Auto
Parts, Inc. stockholders' equity
|
|
186,580,393
|
|
179,856,898
|
|
Noncontrolling
Interest In Subsidiaries
|
|
20,345,059
|
|
19,647,063
|
|
Total
Equity
|
|
206,925,452
|
|
199,503,961
|
|
Total Liabilities
and Stockholders' Equity
|
US$
|
264,729,387
|
US$
|
252,980,284
|
SORL Auto Parts,
Inc. and Subsidiaries
|
Consolidated
Statements of Income and Comprehensive Income
|
For The Three
Months Ended on March 31, 2014 and 2013 (Unaudited)
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
2014
|
|
2013
|
|
|
|
|
|
Sales
|
US$
|
49,993,289
|
US$
|
41,318,160
|
Include: sales to
related parties
|
|
290,077
|
|
238,181
|
Cost of
sales
|
|
34,606,353
|
|
29,094,337
|
|
|
|
|
|
Gross
profit
|
|
15,386,936
|
|
12,223,823
|
|
|
|
|
|
Expenses:
|
|
|
|
|
Selling and
distribution expenses
|
|
5,705,494
|
|
4,408,499
|
General and
administrative expenses
|
|
4,316,154
|
|
4,163,146
|
Research and
development expenses
|
|
1,491,199
|
|
1,390,464
|
|
|
|
|
|
Total operating
expenses
|
|
11,512,847
|
|
9,962,109
|
|
|
|
|
|
Other operating
income
|
|
376,132
|
|
203,787
|
|
|
|
|
|
Income from
operations
|
|
4,250,221
|
|
2,465,501
|
|
|
|
|
|
Other
income
|
|
38,304
|
|
91,353
|
Financial
expenses
|
|
(659,883)
|
|
(946,244)
|
Non-operating
expenses
|
|
(51,907)
|
|
(68,077)
|
|
|
|
|
|
Income before
provision for income
taxes
|
|
3,576,735
|
|
1,542,533
|
|
|
|
|
|
Provision for income
taxes
|
|
513,235
|
|
168,854
|
|
|
|
|
|
Net income
|
US$
|
3,063,500
|
US$
|
1,373,679
|
|
|
|
|
|
Net income
attributable to noncontrolling interest in
subsidiaries
|
293,197
|
|
140,300
|
|
|
|
|
|
Net income
attributable to common stockholders
|
|
2,770,303
|
|
1,233,379
|
|
|
|
|
|
Comprehensive
income:
|
|
|
|
|
|
|
|
|
|
Net income
|
US$
|
3,063,500
|
US$
|
1,373,679
|
|
|
|
|
|
Foreign currency
translation adjustments
|
|
4,357,991
|
|
2,659,362
|
|
|
|
|
|
Comprehensive
income
|
|
7,421,491
|
|
4,033,041
|
|
|
|
|
|
Comprehensive income
attributable to noncontrolling interest in
subsidiaries
|
697,996
|
|
403,391
|
|
|
|
|
|
Comprehensive income
attributable to common shareholders
|
US$
|
6,723,495
|
US$
|
3,629,650
|
|
|
|
|
|
Weighted average
common share - basic
|
|
19,304,921
|
|
19,304,921
|
|
|
|
|
|
Weighted average
common share - diluted
|
|
19,304,921
|
|
19,304,921
|
|
|
|
|
|
EPS -
basic
|
US$
|
0.14
|
US$
|
0.06
|
|
|
|
|
|
EPS -
diluted
|
US$
|
0.14
|
US$
|
0.06
|
|
|
|
|
|
SORL Auto Parts,
Inc. and Subsidiaries
|
Consolidated
Statements of Cash Flows
|
For The Three
Months Ended on March 31, 2014 and 2013
(Unaudited)
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
|
Cash Flows from
Operating Activities
|
|
|
|
|
Net income
|
|
|
|
US$
|
3,063,500
|
US$
|
1,373,679
|
Adjustments to
reconcile net income to
net cash from operating activities:
|
|
|
|
|
Allowance for
doubtful accounts
|
|
|
299,798
|
|
221,346
|
Depreciation and
amortization
|
|
|
1,853,310
|
|
1,948,518
|
Deferred income
tax
|
|
|
|
(89,345)
|
|
(13,211)
|
Loss on disposal of
fixed assets
|
|
(8,217)
|
|
-
|
Changes in Assets
and Liabilities:
|
|
|
|
|
Accounts
receivable
|
|
|
|
(4,438,919)
|
|
4,891,616
|
Bank acceptance notes
from customers
|
|
7,375,687
|
|
2,609,107
|
Other currents
assets
|
|
|
|
117,457
|
|
(1,019,272)
|
Inventories
|
|
|
|
|
(1,279,739)
|
|
(4,130,237)
|
Prepayments
|
|
|
|
(2,254,068)
|
|
(131,123)
|
Prepaid capital lease
interest
|
|
131,368
|
|
43,827
|
Accounts payable and
bank acceptance notes to vendors
|
|
(5,252,230)
|
|
(5,426,720)
|
Income tax
payable
|
|
|
|
(109,066)
|
|
-
|
Deposits received
from customers
|
|
|
(524,065)
|
|
1,785,251
|
Other current
liabilities and accrued expenses
|
|
308,876
|
|
718,541
|
Net Cash Flows
Provided By (Used In)
Operating Activities
|
|
(805,653)
|
|
2,871,322
|
|
|
|
|
|
|
|
|
Cash Flows from
Investing Activities
|
|
|
|
|
Acquisition of
property and equipment
|
|
(966,568)
|
|
(965,846)
|
Proceeds of disposal
of fixed assets
|
|
14,472
|
|
-
|
|
|
|
|
|
|
|
|
Net Cash Flows
Used In Investing Activities
|
|
(952,096)
|
|
(965,846)
|
|
|
|
|
|
|
|
|
Cash Flows from
Financing Activities
|
|
|
|
|
Proceeds from bank
loans
|
|
20,196,632
|
|
21,363,325
|
Repayment of bank
loans
|
|
|
(10,566,433)
|
|
(25,095,400)
|
Repayment of capital
lease
|
|
|
(918,873)
|
|
(9,550,873)
|
Proceeds from capital
lease
|
|
|
-
|
|
12,783,841
|
|
|
|
|
|
|
Net Cash flows
Provided By (Used In) Financing Activities
|
|
8,711,326
|
|
(499,107)
|
|
|
|
|
|
|
Effects on changes
in foreign exchange rate
|
|
629,376
|
|
562,588
|
|
|
|
|
|
|
|
|
Net change in cash
and cash equivalents
|
|
7,582,953
|
|
1,968,957
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents- beginning of the year
|
|
28,241,983
|
|
41,253,353
|
|
|
|
|
|
|
|
|
Cash and Cash
Equivalents - End of the period
|
US$
|
35,824,936
|
US$
|
43,222,310
|
|
|
|
|
|
|
|
|
Supplemental Cash
Flow Disclosures:
|
|
|
|
|
Interest
paid
|
|
|
US$
|
485,756
|
US$
|
613,129
|
Tax paid
|
|
|
|
US$
|
707,103
|
US$
|
649,625
|
SOURCE SORL Auto Parts, Inc.