-- 2Q09 Gross Margin Increased 130 Basis Points YoY to 28.3% --
ZHEJIANG, China, Aug. 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 June 30, 2009. 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 of 2008. This resulted in
higher than usual output and sales volume of commercial vehicles in
the first and second quarter of 2008, distorting year over year
comparisons. SORL provides both year over year and sequential
comparisons when discussing its second quarter 2009 financial
performance. For the second quarter of 2009, net sales were $29.7
million, a 29.5% decrease compared to $42.2 million in the same
period of 2008 and a 46.9% increase compared to the first quarter
of 2009. Revenues from China's domestic OEM market were $14.1
million, a 19.4% decrease from $17.5 million in the same period of
2008 and a 53.3% increase compared to the first quarter of 2009.
Revenues from China's domestic aftermarket were $7.2 million, a
31.4% decrease from $10.5 million in the same period of 2008 and a
10.8% increase compared to the first quarter of 2009. Revenues from
international markets were $8.4 million a 40.4% decrease from $14.1
million in the same period of 2008 and an 82.6% increase compared
to the first quarter of 2009. The year over year decrease in sales
was due to a combination of the global financial crisis and
macro-economic recession which weakened demand from our Chinese and
international customers in 2009 and the implementation of
government emissions regulations enacted for the second half of
2008 that spurred higher levels of sales in the first half of 2008.
Gross profit for the second quarter of 2009 was $8.4 million, a
26.2% decrease compared to $11.4 million in the same period of 2008
and a 52.8% increase compared to the first quarter of 2009. Gross
margin in the second quarter of 2009 increased 130 basis points to
28.3% from 27.0% in the same period of 2008 and 27.2% in the first
quarter of 2009. The increase in gross margin was primarily the
result of increasing management efficiency, improving the
technologies of products, and SORL's continued market expansion
with new, higher profit valve products. Operating expenses in the
second quarter of 2009 were $4.3 million, a 26.1% decrease compared
to $5.9 million in the same period of 2008 and a 4.9% increase
compared to the first quarter of 2009. As a percentage of revenue,
operating expenses increased to 14.6% in the second quarter 2009
from 13.9% in the same period of 2008 as a result of decreased
sales output offset by increased selling, general and
administrative expenses. Selling expenses as a percentage of
revenue increased as the Company increased packing expenses to
improve package quality of some export products. General and
administrative expenses as a percentage of revenue increased due to
decreased sales without a commensurate decline in certain fixed
production costs, such as management payroll, depreciation and
professional fees resulting from being a public company. Operating
expenses as a percent of revenue decreased from 20.4% in the first
quarter of 2009 primarily due to rebounding sales volume. Operating
income in the second quarter of 2009 was $4.1 million, a 26.3%
decrease compared to $5.5 million in the same period of 2008 and a
197% increase compared to the first quarter of 2009. Operating
margin increased 60 basis points to 13.7% for the second quarter
2009 from 13.1% in the same period of 2008 as a result of the
increase in sales gross margin, offset by the increase in operating
expenses as a percent of revenue. In the second quarter of 2009,
operating margin increased 690 basis points from 6.8% in the first
quarter of 2009 as a result of stronger sales. Net income
attributable to stockholders for the second quarter of 2009 was
$3.0 million or $0.16 per diluted share, a 36.7% decrease compared
to $4.7 million, or $0.26 per share in the same period of 2008 and
a 217% increase compared to the first quarter of 2009. "Year over
year comparisons in the second quarter of 2009 reflected
challenging conditions for SORL," said Xiaoping Zhang, SORL Auto
Parts' CEO and Chairman. "Sales growth in China and internationally
was negatively affected by difficult global economic conditions and
year over year comparisons were made more difficult in the first
half of 2009 because of government regulations enacted in 2008. In
response to the implementation of the China III emission standard
beginning July 1, 2008, sales of trucks equipped with China II
engines accelerated in the first half of the year before the policy
was enforced." Mr. Zhang continued, "Looking at SORL's financial
performance on a sequential basis, we experienced significant
improvement. Sales increased 46.9% between the first and second
quarter of 2009. Gross profit increased 52.8% between the first and
second quarter of 2009 and operating income increased 197%. Net
income increased 217% between the first and second quarter of 2009.
"We believe that global economic conditions are showing signs of
stabilization and we remain confident in the long-term viability of
China's auto market and SORL's business plan. 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 of this year. The stabilizing market is already having
a positive impact on our sales, reflected in improved sales
performance in the second quarter of 2009 and so far in the third
quarter of 2009. "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 $15.8 million
of cash on the balance sheet and no long- term debt, and we
generated $5.4 million of cash flow from operations during the
quarter." Conference Call Management will host a conference call at
8:30 am ET, on Thursday, August 13, 2009 to discuss its second
quarter 2009 financial results. Listeners may access the call by
dialing #1-888-668-1638 or #1-913-312-1495 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 August 13, 2009 to August 20, 2009. Listeners may
access the replay by dialing #1-888-203-1112 or #1-719- 457-0820
for international callers; pin number: 4220704. 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 Balance Sheets June 30, 2009 and December 31, 2008
30-Jun-09 31-Dec-08 (Unaudited) (Audited) Assets Current Assets
Cash and Cash Equivalents US$ 15,762,830 US$ 7,795,987 Accounts
Receivable, Net of Provision 40,764,983 35,797,824 Notes Receivable
8,120,653 7,536,534 Inventory 16,246,168 19,105,845 Prepayments,
including $0 and $187,813 to related parties at June 30, 2009 and
December 31, 2008, respectively 1,568,450 1,013,440 Other current
assets, including $41,042 and $1,906,070 to related parties at June
30, 2009 and December 31, 2008, respectively 562,310 4,445,778
Total Current Assets 83,025,394 75,695,408 Fixed Assets Property,
Plant and Equipment 33,494,523 32,927,306 Less: Accumulated
Depreciation -10,247,047 -8,951,886 Property, Plant and Equipment,
Net 23,247,476 23,975,420 Leasehold Improvements In Progress
465,620 -- Land Use Rights, Net 14,355,711 14,514,983 Other Assets
Deferred compensation cost- stock options -- 9,935 Intangible
Assets 161,411 161,347 Less: Accumulated Amortization -46,692
-39,018 Intangible Assets, Net 114,719 122,329 Deferred tax assets
531,512 189,228 Total Other Assets 646,231 321,492 Total Assets
US$121,740,432 US$114,507,303 Liabilities and Shareholders' Equity
Current Liabilities Accounts Payable and Notes Payable, including
$1,570,913 and $0 to related parties at June 30, 2009 and December
31, 2008, respectively US$ 5,487,114 US$ 4,623,850 Deposit Received
from Customers 6,435,620 6,295,857 Income tax payable 1,281,330
340,138 Accrued Expenses 3,302,262 2,389,314 Other Current
Liabilities 371,389 460,124 Total Current Liabilities 16,877,715
14,109,283 Non-Current Liabilities Deferred tax liabilities 149,616
106,826 Total Liabilities 17,027,331 14,216,109 Stockholders'
Equity Preferred Stock - No Par Value; 1,000,000 authorized; none
issued and outstanding as of June 30, 2009 and December 31, 2008 --
-- Common Stock - $0.002 Par Value; 50,000,000 authorized,
18,279,254 issued and outstanding as of June 30, 2009 and December
31, 2008 36,558 36,558 Additional Paid In Capital 37,498,452
37,498,452 Reserves 3,521,246 3,126,086 Accumulated other
comprehensive income 10,885,312 10,848,248 Retained Earnings
42,321,182 38,774,684 Total SORL Auto Parts, Inc. Stockholders'
Equity 94,262,750 90,284,028 Noncontrolling Interest In
Subsidiaries 10,450,351 10,007,166 Total Equity 104,713,101
100,291,194 Total Liabilities and Stockholders' Equity
US$121,740,432 US$114,507,303 SORL Auto Parts, Inc. and
Subsidiaries Consolidated Statements of Income and Comprehensive
Income (Unaudited) For The Three Months and Six Months Ended June
30,2009 and 2008 Three Months Ended Six Months Ended June 30, June
30, 2009 2008 2009 2008 Sales US$ 29,740,212 42,186,119 49,983,950
72,844,561 Include: sales to related parties 64,179 1,004,231
201,611 1,822,149 Cost of Sales 21,318,699 30,776,773 36,049,624
52,793,354 Gross Profit 8,421,513 11,409,346 13,934,326 20,051,207
Expenses: Selling and Distribution Expenses 2,060,718 2,771,803
3,378,452 4,611,078 General and Administrative Expenses 2,273,064
2,718,217 5,065,813 4,694,418 Financial Expenses 9,129 383,320
38,091 752,996 Total Expenses 4,342,911 5,873,340 8,482,356
10,058,492 Operating Income 4,078,602 5,536,006 5,451,970 9,992,715
Other Income 176,244 222,762 215,461 333,840 Non-Operating Expenses
-11,002 -175,785 -14,616 -254,963 Income (Loss) Before Provision
for Income Taxes 4,243,844 5,582,983 5,652,815 10,071,592 Provision
for Income Taxes 914,125 318,757 1,272,091 882,231 Net Income US$
3,329,719 5,264,226 4,380,724 9,189,361 Other Comprehensive Income
(Loss)- Foreign Currency Translation Adjustment 60,385 2,110,749
41,183 5,470,639 Total Comprehensive Income 3,390,104 7,374,975
4,421,907 14,660,000 Less: Net income Attributable to
Non-controlling Interest In Subsidiaries 332,972 527,929 439,066
921,948 Other Comprehensive Income (Loss) Attributable to Non-
controlling Interest's Share 6,039 211,075 4,119 547,064 Total
Comprehensive Income (Loss) Attributable to Non- controlling
Interest's Share 339,011 739,004 443,185 1,469,012 Net Income
Attributable to Stockholders 2,996,747 4,736,297 3,941,658
8,267,413 Other Comprehensive Income (Loss) Attributable to
Stockholders 54,346 1,899,674 37,064 4,923,575 Total Comprehensive
Income (Loss) Attributable to Stockholders 3,051,093 6,635,971
3,978,722 13,190,988 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 18,287,764 18,279,254 18,288,958 EPS -
Basic 0.16 0.26 0.22 0.45 EPS - Diluted 0.16 0.26 0.22 0.45
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
Web site: http://www.sorl.cn/
Copyright