SORL Auto Parts Reports Third Quarter 2009 Financial Results
- EPS of $0.21 in the 2009 third quarter -
ZHEJIANG, China, Nov. 13 /PRNewswire-Asia-FirstCall/ -- SORL Auto Parts, Inc. ("SORL" or "The Company"), a leading manufacturer and distributor of commercial vehicle air brake systems as well as related auto parts in China, announced financial results for the third quarter ended September 30, 2009. SORL provides both year over year and sequential comparisons when discussing its third quarter 2009 financial performance.
Third Quarter Financial Highlights -- Revenues rose 14.3% from the 2009 second quarter; -- OEM sales were up 67.3% year-over-year; -- Gross margin was 26.1% up from 25.5% in the third quarter of 2008, -- Net income rose 62.7% year-over-year and 27.1% quarter-over-quarter; -- EPS $0.21 versus $0.13 in the corresponding period in 2008; -- Cash and equivalents were $12.5 million; current ratio of 4.8 to 1. Business outlook
We project approximately $120 million of sales revenue and $11 million of net income attributable to our common stockholders for the full year ending December 31, 2009.
Financial Performance
For the third quarter of 2009, net sales were $34.0 million, a $1 million or 3.1% increase over the $33.0 million in the same quarter of 2008, and a 14.3% gain over the net sales of $29.7 million in the second quarter of 2009. The higher sales in the domestic Chinese market, especially the strong growth of the OEM business, partially resulted from the steady recovery of China's economy and accelerated infrastructure construction spending.
Revenues from China's domestic OEM market were $17.4 million, a $7.0 million or 67.3% increase over the $10.4 million in 2008 third quarter sales, and a gain of 23.4% compared with the 2009 second quarter sales. Revenues from China's domestic aftermarket were $8.7 million, a $0.3 million or 3.6% increase over the $8.4 million in the year ago same quarter, and a 20.8% gain compared with the 2009 second quarter. Revenues from the international markets were $7.8 million, a decline of $6.3 million or 44.7% compared with the $14.1 million of the third quarter of 2008, and a 7.1% reduction compared with the 2009 second quarter.
Gross profit was $8.9 million for the third quarter of 2009, an increase of $0.5 million or 5.4% from $8.4 million in the 2008 third quarter, and was also 5.4% above the 2009 second quarter profit. Gross margin of 26.1% in the 2009 third quarter increased 60 basis points from 25.5% in the third quarter last year. Increased gross margin is the result of the Company's successful strategic shift which emphasizes production efficiency, product mix (including sales of its higher-margin new valve products), and technology content.
Operating expenses in the third quarter of 2009 were $4.0 million, a decline of $1.5 million or 27.8% from the $5.5 million in the 2008 third quarter, and an 8.5% reduction from the 2009 second quarter. As a percentage of revenue, operating expenses were 11.7% in the 2009 third quarter compared with 16.7% in the same quarter last year. The lower percentage of operating expenses in the 2009 third quarter was due to reduced expenses, especially general and administrative expenses and selling and distribution expenses. General and Administrative expense declined to $1.8 million, a 40.2% reduction from the $3.0 million in the 2008 third quarter primarily because the provision for bad debts reversed to a positive in the 2009 third quarter. Selling expenses declined due to lower international shipping expenses and increased domestic logistics efficiency.
Operating income in the third quarter of 2009 was $4.9 million, a 68.1% increase over the $2.9 million in the 2008 third quarter, and a 20.2% increase over the $4.1 million reported in the 2009 second quarter. Operating margin was 14.4% in the 2009 third quarter, an increase of 560 basis points compared with the operating margin of 8.8% in the third quarter last year, and compared with 13.7% for the second quarter of 2009. The increase in operating income and margin is due to sales growth, a higher gross margin and lower operating expenses during the third quarter of 2009.
Net income attributable to stockholders for the third quarter of 2009 was $3.8 million, or $0.21 per diluted share, a 62.7% gain over the $2.3 million, or $0.13 per diluted share, in the year ago third quarter, and a 27.1% increase over the $3.0 million or $0.16 per diluted share, in the 2009 second quarter.
At September 30, 2009, the Company had cash and cash equivalents of $12. 5 million compared with $7.8 million at December 31, 2008. Working capital was $70.5 million at September 30, 2009, with a current ratio of 4.8 to 1. Shareholders' equity grew by 8.7% to $98.1 million at September 30, 2009 from $90.3 million at December 31, 2008.
SORL announced on November 11, 2009, it has entered into a joint venture agreement with MGR, a Hong Kong-based global auto parts distribution specialist firm. The new joint venture, named SORL International Holding, Ltd. ("SIH"), will be primarily devoted to expanding SORL's international sales network in Asia-Pacific and creating a larger footprint in Europe, the Middle East and Africa with the aim of creating a global distribution network. SORL holds a 60% interest in the joint venture. The three principals of MGR have held senior positions at WABCO Holdings building its international division.
"The central government's 4 trillion RMB stimulus package has improved China's economy as GDP rose by 8.9% in the 2009 third quarter," said Xiaoping Zhang, SORL Auto Parts' CEO and Chairman. "We are experiencing improved results in many areas on both a sequential basis and year-over-year basis. Sales increased 14.3%, operating income increased 68.1% and net income rose 27.1% between the second and third quarters of 2009.
"The recovery of the Chinese economy is improving the commercial vehicle market as it expands infrastructure construction and highway building which requires more trucks. Rising urbanization requires more buses to move people. Additionally, the government's programs to improve the agriculture market with direct vehicle subsidies as well as incentives to trade in older, less fuel efficient and less environmentally friendly vehicles is also improving the commercial vehicle market. Production of heavy-duty vehicles including heavy trucks, trailers and chassis for the three month ended September 30, 2009 was up 67.2% year-over-year and 10.2% quarter-over-quarter higher.
"International sales remained challenging but we see signs of recovery especially in the aftermarket. We have established a new joint venture with MGR, whose senior team has a proven record of sales growth in key overseas markets. We are very confident we will further expand our international market share in the future." Mr. Zhang concluded.
Conference Call
Management will host a conference call at 8:00 am EST, on Friday, November 13, 2009 to discuss its third quarter 2009 financial results. Listeners may access the call by dialing #1-877-407-0789 or # 1-201-689-8562 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 November 13, 2009 to November 20, 2009. Listeners may access the replay by dialing 1-877-660-6853 or # 1-201-612-7415 for overseas callers; using account: 3055; conference ID: 337306.
About SORL Auto Parts, Inc.
As China's leading manufacturer and distributor of automotive brake systems, 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/ .
For more information, please contact:
Ben Chen
Director of Investor Relations
SORL Auto Parts, Inc.
Tel: +86-577-6581-7721
Email: ben@sorl.com.cn
Kevin Theiss
Grayling
Tel: +1-646-284-9409
Email: kevin.theiss@us.grayling.com
SORL Auto Parts, Inc. and Subsidiaries
Consolidated Balance Sheets
September 30, 2009 and December 31, 2008
September 30, December 31,
2009 2008
(Unaudited) (Audited)
Assets
Current Assets
Cash and Cash Equivalents US$ 12,542,642 US$ 7,795,987
Accounts Receivable, Net of
Provision 42,598,949 35,797,824
Notes Receivable 11,270,861 7,536,534
Inventory 15,874,610 19,105,845
Prepayments, including $0 and
$187,813 to related parties at
September 30, 2009 and December
31, 2008, respectively 6,083,150 1,013,440
Other current assets, including
$154,995 and $1,906,070 to
related parties at September 30,
2009 and December 31, 2008,
respectively 493,450 4,445,778
Total Current Assets 88,863,662 75,695,408
Fixed Assets
Property, Plant and Equipment 34,329,214 32,927,306
Less: Accumulated Depreciation (10,910,816) (8,951,886)
Property, Plant and Equipment,
Net 23,418,398 23,975,420
Leasehold Improvements in Progress 465,818 --
Land Use Rights, Net 14,279,268 14,514,983
Other Assets
Deferred compensation cost-stock
options -- 9,935
Intangible Assets 161,480 161,347
Less: Accumulated Amortization (50,543) (39,018)
Intangible Assets, Net 110,937 122,329
Deferred tax assets 370,305 189,228
Total Other Assets 481,242 321,492
Total Assets US$ 127,508,388 US$ 114,507,303
Liabilities and Shareholders'
Equity
Current Liabilities
Accounts Payable and Notes Payable,
including $1,676,153 and $0 to
related parties at September 30,
2009 and December 31, 2008,
respectively US$ 6,694,424 US$ 4,623,850
Deposit Received from Customers 6,188,582 6,295,857
Income tax payable 1,677,143 340,138
Accrued Expenses 3,253,979 2,389,314
Other Current Liabilities 531,957 460,124
Total Current Liabilities 18,346,085 14,109,283
Non-Current Liabilities
Deferred tax liabilities 171,062 106,826
Total Liabilities 18,517,147 14,216,109
Stockholders' Equity
Preferred Stock - No Par Value;
1,000,000 authorized; none -- --
Common Stock - $0.002 Par Value;
50,000,000 authorized, 18,279,254
issued and outstanding as of
September 30, 2009 and December
31, 2008 36,558 36,558
Additional Paid In Capital 37,498,452 37,498,452
Reserves 3,902,190 3,126,086
Accumulated other comprehensive
income 10,926,200 10,848,248
Retained Earnings 45,749,676 38,774,684
Total SORL Auto Parts, Inc.
stockholders' equity 98,113,076 90,284,028
Noncontrolling Interest In
Subsidiaries 10,878,165 10,007,166
Total Equity 108,991,241 100,291,194
Total Liabilities and Stockholders'
Equity US$ 127,508,388 US$ 114,507,303
SORL Auto Parts, Inc. and Subsidiaries
Consolidated Statements of Income and Comprehensive Income (Unaudited)
For The Three Months and Nine Months Ended September 30,2009 and 2008
Three Months Ended Nine Months Ended
Sept 30, Sept 30,
2009 2008 2009 2008
Sales US$ 33,989,937 32,967,579 83,973,887 105,812,140
Include: sales to
related parties 181,873 540,304 383,484 2,362,453
Cost of Sales 25,116,609 24,550,613 61,166,233 77,343,967
Gross Profit 8,873,328 8,416,966 22,807,654 28,468,173
Expenses:
Selling and
Distribution
Expenses 2,131,054 2,261,143 5,509,506 6,872,221
General and
Administrative
Expenses 1,804,368 3,018,390 6,870,181 7,712,808
Including:
Research and
development
expenses 410,397 721,897 1,968,155 2,458,859
Financial
Expenses 37,216 221,694 75,307 974,690
Total Expenses
3,972,638 5,501,227 12,454,994 15,559,719
Operating Income 4,900,690 2,915,739 10,352,660 12,908,454
Other Income 121,567 276,752 337,028 610,592
Non-Operating Expenses (61,226) (119,677) (75,842) (374,640)
Income Before Provision
for Income Taxes 4,961,031 3,072,814 10,613,846 13,144,406
Provision for Income
Taxes 728,322 468,935 2,000,413 1,351,166
Net Income US$ 4,232,709 2,603,879 8,613,433 11,793,240
Other Comprehensive
Income - Foreign
Currency 45,431 578,065 86,614 6,048,704
Translation Adjustment
Total Comprehensive
Income 4,278,140 3,181,944 8,700,047 17,841,944
Less:
Net Income
Attributable to
Non-controlling 423,271 261,904 862,337 1,183,852
Interest In
Subsidiaries
Other Comprehensive
Income Attributable
to Non-controlling
Interest's Share 4,543 57,807 8,662 604,871
Total Comprehensive
Income Attributable
to Non-controlling
Interest's Share 427,814 319,711 870,999 1,788,723
Net Income Attributable
to Stockholders 3,809,438 2,341,975 7,751,096 10,609,388
Other Comprehensive
Income Attributable
to Stockholders 40,888 520,258 77,952 5,443,833
Total Comprehensive
Income Attributable
to Stockholders 3,850,326 2,862,233 7,829,048 16,053,22
Weighted average
common share - Basic 18,279,254 18,279,254 18,279,254 18,279,254
Weighted average
common share - Diluted 18,279,254 18,283,011 18,279,254 18,287,094
EPS - Basic 0.21 0.13 0.42 0.58
EPS - Diluted 0.21 0.13 0.42 0.58