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SORL Auto Parts Reports Increased Sales and Net Income in the First Quarter of 2015
Published:2015-07-17  [Back]

ZHEJIANG, China, May 15, 2015 /PRNewswire/ -- SORL Auto Parts, Inc. (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, 2015.

First Quarter 2015 Financial Highlights

  • Revenues for the first quarter of 2015 increased by 4.4% to $52.2 million;
  • International sales rose by 27.5% and aftermarket sales rose by 18.0%;
  • Gross margin declined to 26.3% in the first quarter of 2015;
  • Net Income increased by 10.1% to $3.1 million, or $0.16 per diluted share;
  • Cash, cash equivalents and short-term investments totaled $49.6 million with a current ratio of 3.7 to 1.

Mr. Xiaoping Zhang, SORL's Chief Executive Officer and Chairman, stated, "We are pleased to report revenue and net income growth in a very difficult market for commercial vehicles during the first quarter of 2015. The production and sales of commercial vehicles declined by 18.4% and 19.5% year-over-year respectively in the first quarter of 2015. Truck production and sales were down a deeper 21.8% and 22.7% year-over-year, respectively for the 2015 first quarter. Our strong positions in the aftermarket and growing international customer base offset weakness in the Chinese OEM market. Truck sales were especially impacted by the 'pre-buy' of less expensive National III emission standard trucks in the year ago same quarter and before the January 1, 2015 nationwide enforcement of the stricter National IV emission standards."

"Our growing portfolio of advanced products, strong customer relationships and more efficient production positions us well to capture additional market share," Mr. Zhang concluded.

First Quarter 2015 Financial Performance

For the first quarter of 2015, net sales were $52.2 million, compared with $50.0 million for the first quarter of 2014. Revenues from the Company's domestic OEM customers decreased by 9.4% to $25.9 million, compared with $28.6 million for the first quarter of 2014. The Company's domestic aftermarket revenues rose by 18.0% to $12.4 million, compared with $10.5 million in the first quarter of 2014. Aftermarket sales increased as the Company's expanded line of advanced products serviced a larger number of recently sold vehicles which exceeded their warranty period. Revenues from international markets increased by 27.5% to $13.9 million, compared with $10.9 million in the first quarter in 2014, mainly due to our expanding customer base in international markets.

The gross profit for the first quarter of 2015 decreased by 10.8% to $13.7 million, from $15.4 million for the first quarter of 2014. Gross margin in the first quarter of 2015 was 26.3%. The gross margin decreased primarily due to temporary price promotions to increase sales and market share.

Operating expenses decreased to $9.8 million in the first quarter of 2015 from $11.5 million in the first quarter of 2014. The decrease in operating expenses reflected lower expenditures in the selling and distribution and general and administrative sectors, partially offset by an increase in research and development. As a percentage of revenue, operating expenses were 18.7% in the first quarter of 2015, compared with 23.0% in the first quarter of 2014.

  • Selling and distribution expenses were $5.4 million, or 10.3% of quarterly revenues, compared with $5.7 million, or 11.4% in the first quarter of 2014. The 6.2% decrease in expenses was mainly due to lower freight and labor expenses.
  • General and administrative expenses in the first quarter of 2015 were $2.7 million, or 5.2% of revenue compared with $4.3 million, or 8.6% in the first quarter of 2014. The decline was due to cost controls implemented in the first quarter of 2015.
  • Research and development expenses ("R&D") were $1.7 million, or 3.3% of revenue in the first quarter of 2015 compared with $1.5 million, or 3.0% of revenue in the first quarter of 2014. The Company continues to invest in the development of new products, especially higher-margin electronically controlled products, and upgrades of older products.

Financial expenses decreased to $0.2 million from $0.5 million due to decreased interest rate and decreased amount of average loans outstanding.

Income before provision for income taxes increased by 17.4% to $4.2 million for the first quarter of 2015 compared to $3.6 million for the first quarter of 2014. The higher income reflected increased sales and controlled expenses during the first quarter of 2015. The pretax income margin percentage was 8.0% in the first quarter of 2015, compared with 7.2% in the first quarter of 2014. 

The provision for income taxes was $1.0 million, or a 23.8% tax rate, in the first quarter of 2015, which compared with $0.5 million, or a 14.3% tax rate in the first quarter in 2014.

Net income attributable to stockholders for the first quarter of 2015 was $3.1 million, or $0.16 per basic and diluted share, compared with $2.8 million, or $0.14 per basic and diluted share, in the first quarter of 2014.

Balance Sheet

As of March 31, 2015, the Company had cash, cash equivalents and short-term investments that totaled $49.6 million. Total equity increased to $222.6 million at March 31, 2015 compared with $220.2 million at December 31, 2014. At March 31, 2015, working capital increased to $166.0 million with a current ratio of 3.7 to 1.

Recent Developments

  • On January 5, 2015, SORL announced that it won its first "Excellent Supplier" award from Shaanxi HANDE Axle Co., Ltd. ("HANDE"). As a high-technology enterprise, HANDE has been recognized as one of the Top 500 China Machinery Enterprises and China's 100 Best Auto Parts Enterprises for many years. This award is a further testament to our ability to produce large quantities of global-quality braking products that meet the strictest requirements.

Business Outlook

For the fiscal year 2015, management reiterates that the net sales will be approximately $256.0 million and net income to be approximately $15.0 million. These targets are based on the Company's current views on the operating and market conditions, which are subject to change.

"Our higher sales and net income in the first quarter of 2015 reflect both our new cost controls and pricing to gain additional market leadership in a difficult environment. We are maintaining our strong cash and financial position to provide the resources to develop new products and support further growth," commented Ms. Jinrui Yu, SORL's Chief Operating Officer. 

Conference Call

Management will host a conference call on Friday, May 15, 2015 at 8:00 a.m. EDT (8:00 p.m. Beijing Time) to discuss its 2015 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 webcast 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 15, 2015 (11:59 a.m. Beijing Time on June 16, 2015). 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 "13609502" 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 UAE, 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) athttp://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, 2015 and December 31, 2014










March 31, 2015


December 31, 2014




(Unaudited)




Assets






Current Assets






Cash and cash equivalents

US$

4,727,453

US$

14,009,597


Accounts receivable, net


72,785,233


68,171,387


Bank acceptance notes from customers


16,840,791


17,626,704


Short-term investments


44,845,698


34,838,757


Inventories


79,941,795


84,186,766


Prepayments, including $15,992
and $83,206 due from related parties at
March 31, 2015 and December 31, 2014,
respectively.


4,494,755


4,663,002


Current portion of prepaid capital lease interest


235,612


282,280


Other current assets


1,833,224


1,282,182


Deferred tax assets


2,023,880


1,868,371


Total Current Assets


227,728,441


226,929,046








Property, plant and equipment, net


43,189,388


43,550,927


Land use rights, net


14,272,734


14,421,729


Intangible assets, net


34,444


37,661


Security deposits on lease agreement


1,860,664


1,867,719


Non-current portion of prepaid capital
lease interest


57,003


99,180


Total Non-Current Assets


59,414,233


59,977,216


Total Assets

US$

287,142,674

US$

286,906,262








Liabilities and Equity






Current Liabilities






Accounts payable, including $283,021
and $136,609 due to related parties at
March 31, 2015 and December 31, 2014,
respectively.

US$

9,196,839

US$

13,867,316


Deposit received from customers


20,686,281


19,045,172


Short-term bank loans


12,648,031


9,539,476


Income tax payable


1,491,189


1,101,103


Accrued expenses


11,541,927


13,561,163


Current portion of capital lease obligations


3,721,328


3,735,438


Other current liabilities, including
$213,060 and $17,681 due to related
parties at March 31, 2015 and December
31, 2014, respectively.


2,487,172


2,131,527


Total Current Liabilities


61,772,767


62,981,195








Non-Current Liabilities






Non-current portion of capital lease obligations


2,790,996


3,735,437


Total Non-Current Liabilities


2,790,996


3,735,437


Total Liabilities


64,563,763


66,716,632








Equity












Preferred stock - no par value; 1,000,000
authorized; none issued and outstanding
as of March 31, 2015 and December 31,
2014


-


-


Common stock - $0.002 par value;
50,000,000 authorized,19,304,921 issued
and outstanding as of March 31, 2015
and December 31, 2014


38,609


38,609


Additional paid-in capital


42,199,014


42,199,014


Reserves


12,335,365


12,019,532


Accumulated other comprehensive income


26,766,638


27,516,206


Retained earnings


119,669,501


116,935,053


Total SORL Auto Parts, Inc. Stockholders' Equity


201,009,127


198,708,414


Noncontrolling Interest In Subsidiaries


21,569,784


21,481,216


Total Equity


222,578,911


220,189,630


Total Liabilities and Equity

US$

287,142,674

US$

286,906,262








 

 

SORL Auto Parts, Inc. and Subsidiaries

Consolidated Statements of Income and Comprehensive Income

For The Three Months Ended March 31, 2015 and 2014 (Unaudited)








Three Months Ended March 31,



2015


2014






Net sales

US$

52,197,966

US$

49,993,289

Include: sales to related parties


1,011,924


290,077

Cost of sales


38,466,892


34,606,353

Gross profit


13,731,074


15,386,936






Expenses:





Selling and distribution expenses


5,350,998


5,705,494

General and administrative expenses


2,719,372


4,316,154

Research and development expenses


1,712,621


1,491,199

Total operating expenses


9,782,991


11,512,847






Other operating income


585,717


376,132






Income from operations


4,533,800


4,250,221






Other income


93,391


38,304

Interest expenses


(166,656)


(485,756)

Other expenses


(259,733)


(226,034)






Income before provision for income taxes


4,200,802


3,576,735






Provision for income taxes


998,278


513,235






Net income

US$

3,202,524

US$

3,063,500






Net income attributable to noncontrolling interest in subsidiaries


152,243


293,197






Net income attributable to common stockholders

US$

3,050,281

US$

2,770,303






Comprehensive income:










Net income

US$

3,202,524

US$

3,063,500






Foreign currency translation adjustments


(813,243)


4,357,991






Comprehensive income


2,389,281


7,421,491






Comprehensive income attributable to noncontrolling interest in subsidiaries

88,568


697,996






Comprehensive income attributable to common stockholders

US$

2,300,713

US$

6,723,495











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$

0.16

US$

0.14






EPS - diluted

US$

0.16

US$

0.14

 

 

SORL Auto Parts, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

For The Three Months Ended March 31, 2015 and 2014 (Unaudited)




Three Months Ended March 31,



2015


2014






Cash Flows From Operating Activities





Net Income

US$

3,202,524

US$

3,063,500

Adjustments to reconcile net income to net cash





used in operating activities:










Allowance for doubtful accounts


(338,319)


299,798

Depreciation and amortization


1,937,064


1,853,310

Deferred income tax


(162,875)


(89,345)

Loss on disposal of property and equipment


-


(8,217)

Changes in assets and liabilities:





Account receivable


(4,556,747)


(4,438,919)

Bank acceptance notes from customers


720,695


7,375,687

Other currents assets


(557,779)


117,457

Inventories


3,937,590


(1,279,739)

Prepayments


(492,545)


(2,254,068)

Prepaid capital lease interest


87,570


131,368

Accounts payable


(4,765,769)


(5,252,230)

Income tax payable


394,992


(109,066)

Deposits received from customers


1,716,287


(524,065)

Other current liabilities and accrued expenses


(1,608,205)


308,876

Net Cash Flows Used In Operating Activities


(485,517)


(805,653)






Cash Flows From Investing Activities





Change in short-term investments


(10,157,715)


-

Acquisition of property and equipment


(859,313)


(966,568)

Proceeds of disposal of property and equipment


-


14,472

Net Cash Flows Used In Investing Activities


(11,017,028)


(952,096)






Cash Flows From Financing Activities





Proceeds from bank loans


8,643,266


20,196,632

Repayment of bank loans


(5,470,663)


(10,566,433)

Repayment of capital lease


(932,092)


(918,873)

Net Cash Flows Provided By Financing Activities


2,240,511


8,711,326






Effects on changes in foreign exchange rate


(20,110)


629,376






Net change in cash and cash equivalents


(9,282,144)


7,582,953






Cash and cash equivalents- beginning of the period


14,009,597


28,241,983






Cash and cash equivalents - end of the period

US$

4,727,453

US$

35,824,936






Supplemental Cash Flow Disclosures:





Interest paid

US$

191,154

US$

485,756

Income taxes paid

US$

766,161

US$

707,103

 

 

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