China : SORL Auto Parts, Inc. Announces 42% Revenue Increase for Second Quarter; Company Expects Increasing Momentum for the Second Half of 2004
WENZHOU, China--Aug. 1, 20047, 2004--SORL Auto Parts, Inc. (OTC BB:SAUP), a Chinese company engaged in the manufacture and distribution of automotive air brake valves and hydraulic brake valves primarily for the commercial vehicles market, announced financial results for its second quarter ended June 30, 2004. The following are some of the highlights:-- Sales increased 42% to $11.4 million;
-- Gross profit rose 53% to $2.7 million;
-- Gross margin improved to 23.5%;
-- Net income improved 14%
Sales
SORL recorded sales of $11.4 million for the three months ended June 30, 2004 compared to $7.9 million in last year's second quarter. The increase of 42% was primarily due to an increase in volume and a modest increase in price. Unit volume for the same period was up 38.5%. Sales were driven by an increase in domestic demand from the aftermarket and from OEM manufacturers and by an increase in export sales.
Gross Profit
For the three months ended June 30, 2004, gross profit increased 53% to $2.6 million from $1.7 million last year. Gross margin improved to 23.4% from 21.7% in the comparable quarter last year. The improvement in gross margin was particularly noteworthy in the light of increases in material costs, such as steel and aluminum, by as much as 20%.
Net Income
Net income for the second quarter of 2004 increased 14% to $1.18 million from $1.04 million last year. Net income for the 2004 quarter was affected by a one-time expense of approximately $700,000 incurred in connection with the reverse acquisition and by an unfavorable comparison to last year's second quarter which included a $400,000 government subsidy. Based on the weighted average of common shares outstanding as of June 30, 2004, fully diluted earnings per share for the second quarter of 2004 was $0.16 as compared to $0.21 in the second quarter of 2003.
Taking into account the conversion of preferred shares as well as the 1-for-15 reverse split the Company effected on July 16, 2004, 13.3 million shares are currently outstanding.
Commenting on the results, Mr. Xiao Ping Zhang, Chairman and CEO, said, "Our strong performance is evidence of the growing demand for our products and the overall expansion of the market, both domestically and for export. Export sales increased 48% in the quarter and represents a confirmation of our strategy to grow our market share. In the first six months of 2004, export sales reached $5.3 million and the company is on track to reach its export target of 33% of sales for the full year."
Mr. Zhang added, "In the first six months our capacity expansion has enabled us to produce 2 million units, substantially more than the 1.7 million units manufactured for the full year of 2003. We believe that we meet our forecast of 3.2 million units in 2004. Overall, we are confident that the second half of 2004 will demonstrate that our strategy is appropriate to the market and will enable us to achieve record performance for the year."
Mr. Zhang concluded, "We would also like to take this occasion to announce the appointment of our new auditor, Rotenberg & Co., LLP."
About SORL Auto Parts
SORL Auto Parts, Inc., formerly The Ruili Group, was incorporated in the People's Republic of China in 1987 to specialize in the development, production and sale of various kinds of automotive parts. Its headquarters are located in the Ruian District of Wenzhou City, one of the leading automotive parts manufacturing centers of China. It manufactures and distributes automotive air brake valves and hydraulic brake valves in China and internationally for use primarily in vehicles weighing over three tons, such as trucks, vans and buses.
SORL sells its products to forty-two vehicle manufacturers, including all of the truck manufacturers in China, which are divided into three groups: OEMS or automobile manufacturers in China, aftermarket distributors, and international customers, accounting for approximately 56%, 26% and 18%, of annual sales, respectively. The Company maintains long-term relationships with its OEM customers, among them, First Auto Group at 34.3% of SORL's total revenue and Dongfeng Auto Corporation at 10.5%. Both are among the top five largest automobile manufacturers in China.
SORL AUTO PARTS, INC.
(INCORPORATED IN THE STATE OF DELAWARE)
(FORMERLY KNOWN AS THE ENCHANTED VILLAGE, INC.)
BALANCE SHEET
ASSETS JUNE 30, 2004
CURRENT ASSETS
Cash and cash equivalents $207,531
Trade receivables, net of provisions 12,496,171
Notes Receivable 301,337
Inventory 1,778,159
Prepayments 557,665
-----------------
TOTAL CURRENT ASSETS 15,340,863
-----------------
OTHER ASSETS
Intangible Assets 42,468
-----------------
PROPERTY, PLANT AND EQUIPMENT, NET 5,163,691
-----------------
TOTAL ASSETS $ 20,547,022
=================
LIABILITIES AND SHAREHOLDERS' EQUITY JUNE 30, 2004
CURRENT LIABILITIES
Accounts payable $ 4,521,734
Deposit received from customers 610,060
Bank loans 4,578,313
Accrued Expenses 1,082,734
Income Taxes Payable 150,505
-----------------
TOTAL CURRENT LIABILITIES 10,943,346
-----------------
LONG-TERM LIABILITIES 1,204,819
-----------------
TOTAL LIABILITIES 12,148,165
-----------------
MINORITY INTEREST 839,885
SHAREHOLDERS' EQUITY JUNE 30, 2004
Convertible Preferred Stock, 5,000,000
Authorized $1 Par Value, 1,000,000 Issued
and Outstanding 1,000,000
Common Stock, 50,000,000 Authorized $.002
Par Value 4,928,000 Issued
and Outstanding 9,856
Additional paid-in capital 5,366,257
Retained Earnings 1,182,859
-----------------
TOTAL SHAREHOLDERS' EQUITY 7,558,972
-----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 20,547,022
=================
SORL AUTO PARTS, INC.
INCORPORATED IN THE STATE OF DELAWARE)
(FORMERLY KNOWN AS THE ENCHANTED VILLAGE, INC.)
STATEMENTS OF INCOME FOR THE THREE AND
SIX MONTHS ENDED JUNE 30, 2004 AND 2003
THREE MONTHS ENDED JUNE 30 SIX MONTHS ENDED JUNE 30
------------------------------------------------------------------
2004 2003 2004 2003
--------- --------- --------- --------
SALES $ 11,340,173 $ 7,986,136 $20,409,618 $14,209,385
COST OF SALES 8,686,430 6,253,243 15,525,677 11,173,632
--------- --------- --------- --------
GROSS PROFIT 2,653,743 1,732,893 4,883,941 3,035,753
SELLING AND DISTRIBUTION
EXPENSES 387,736 413,295 1,012,874 938,241
GENERAL AND ADMINISTRATIVE
EXPENSES 839,266 251,487 1,408,171 447,461
FINANCE COSTS 76,267 161,550 156,175 287,439
--------- --------- --------- --------
INCOME FROM
OPERATIONS 1,350,474 906,561 2,306,721 1,362,612
OTHER INCOME -- 379,395 -- 515,620
OTHER EXPENSES 36,187 -- 36,187 --
--------- --------- --------- --------
INCOME BEFORE
INCOME TAXES 1,314,287 1,285,956 2,270,534 1,878,232
INCOME TAXES
CURRENT -- 131,547 -- 234,056
--------- --------- --------- --------
NET INCOME BEFORE
MINORITY INTEREST 1,314,287 1,154,409 2,270,534 1,644,176
MINORITY INTEREST (131,428) (115,441) (227,053) (164,418)
--------- --------- --------- --------
SORL AUTO PARTS, INC.
(INCORPORATED IN THE STATE OF DELAWARE)
(FORMERLY KNOWN AS THE ENCHANTED VILLAGE, INC.)
STATEMENTS OF INCOME FOR THE THREE AND SIX MONTHS ENDED JUNE
30, 2004 AND 2003
THREE MONTHS ENDED JUNE SIX MONTHS ENDED JUNE 30
-------------------------- ----------------------
2004 2003 2004 2003
-------------------------- ----------------------
NET INCOME ATTRIBUTABLE
TO SHAREHOLDERS $ 1,182,859 $ 1,038,968 $ 2,043,481 $1,479,758
========= ========= ========= ========
NET INCOME PER SHARE
BASIC $ 0.24 $ 0.21 $ 0.41 $ 0.30
NET INCOME PER
SHARE DILUTED $ 0.16 $ 0.21 $ 0.52 $ 0.30
========= ========= ========= ========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING - BASIC
4,928,000 4,928,000 4,928,000 4,928,000
========= ========= ========= ========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING - DILUTED
7,588,334 4,928,000 3,958,422 4,928,000