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SORL Auto Parts Reports Fourth Quarter and Fiscal 2009 Financial Results

March 29, 2010

ZHEJIANG, China, March 29 /PRNewswire-Asia-FirstCall/ — SORL Auto Parts,
Inc. (Nasdaq: SORL) (“SORL” or “the Company”), a leading manufacturer and
distributor of commercial vehicle air brake systems as well as related auto
parts in China, today announced financial results for the fourth quarter and
fiscal year ended December 31, 2009.

    2009 Fourth Quarter Financial Highlights

    -- OEM sales were up 115% year-over-year from $10.4 million to $22.4
       million, and 29% quarter-over-quarter from $17.4 million to $22.4
       million;
    -- Revenues rose 63% from $25.1 million to $41.0 million,
    -- Gross margin was 31%, up from 21% in the fourth quarter of 2008;
    -- Net income rose 184% year-over-year from $1.8 million to $5.0 million
       and 31% quarter-over-quarter from $3.8 million to $5.0 million.
    -- EPS was $0.28 versus $0.10 in the same quarter in 2008;
    -- Cash and equivalents were $10.3 million; current ratio of 5.1 to 1.

Xiaoping Zhang, SORL Auto Parts’ Chairman and Chief Executive Officer,
commented, “We are encouraged by a record-setting quarter as our margin
expanded and sales rose. Our margin benefited from the strategic decision we
made in early 2009 to optimize our product offerings and increase our
penetration of the domestic OEM market. After a turbulent 2008, the Chinese
truck market staged a strong come-back in 2009. Thanks to Chinese government
stimulus initiatives and their ripple effect from coastal provinces to inland
China, our OEM business growth gathered momentum in the first half of 2009 and
accelerated thereafter. Our strategy of optimizing our product portfolio by
launching high value-add and high-margin products started showing results. We
believe that our reputation for making quality products, for more than
20-years, and our continued dedication to R&D, form a basis for what we intend
to be steady and sustainable future growth.”

Fourth Quarter Financial Results

For the fourth quarter of 2009, net sales were $41.0 million, a $15.9
million
or 63.3% increase from the $25.1 million in the same quarter of 2008,
and a 20.6% gain over the net sales of $34.0 million in the third quarter of
2009.

Revenues from China’s domestic OEM market were $22.4 million in the fourth
quarter of 2009, an increase of 115.4% from the $10.4 million of the fourth
quarter of 2008, and a gain of 28.7% from the $17.4 million in the 2009 third
quarter. Revenues from China’s domestic aftermarket in the 2009 fourth quarter
were $9.1 million, a 35.8% rise compared with the $6.7 million in last year’s
fourth quarter, and a 4.6% increase compared with $8.7 million in the 2009
third quarter. Revenues from the international markets were $9.6 million in
the 2009 fourth quarter, an 18.5% rise compared with the $8.1 million in the
same quarter last year, and 23% gain compared with the $7.8 million in the
third quarter of 2009.

The higher domestic Chinese sales growth, especially the strong OEM
business, was mainly due to China’s steady economic expansion and the impact
of accelerated infrastructure construction spending during the second half of
2009 on commercial vehicle sales. The Company’s sales growth also was due to
the success of integrated products and modular supplies of air brake systems,
and penetration of the light-duty, agricultural and bus markets.

Gross profit was $12.7 million for the fourth quarter of 2009, an increase
of $7.5 million or 144.2% from $5.2 million in the 2008 fourth quarter and a
42.7% gain over the $8.9 million of the 2009 third quarter. Gross margin
increased to 30.9% from 20.7% in the fourth quarter last year, and from 26.1%
in the 2009 third quarter. The higher gross margin was mainly due to a product
shift as more higher-margin new valve products and brake products were
introduced.

Operating expenses in the fourth quarter of 2009 were $7.4 million, as
compared with $3.0 million in the 2008 fourth quarter and $4.0 million the
third quarter of 2009. As a percentage of revenue, operating expenses were
18.1% in the 2009 fourth quarter compared with 12.0% in the same quarter last
year.

Selling expenses in the fourth quarter of 2009 were $2.6 million, as
compared to $1.6 million in the 2008 fourth quarter. Selling expenses as a
percentage of total net sales was 6.4% as compared to 6.2% in the fourth
quarter of 2008.

G&A expenses in the fourth quarter of 2009 were $2.4 million, as compared
to $0.8 million in the 2008 fourth quarter. G&A expenses as a percentage of
total net sales was 5.8% as compared to 3.3% in the fourth quarter of 2008.
The higher G&A expenses in the 2009 fourth quarter were due to increased
investment in personnel costs, rent, and travel related expenses for business
expansion.

R&D expenses in the fourth quarter of 2009 were $2.4 million, as compared
to $0.8 million in the 2008 fourth quarter. R&D expenses as a percentage of
total net sales was 5.8% as compared to 3.0% in the fourth quarter of 2008.
During the fourth quarter, the Company increased R&D expenses which were
related to new product development focused on upgrading traditional valve
products and developing electronically controlled products.

Operating income in the fourth quarter of 2009 was $5.2 million, a 138.7%
increase over the $2.2 million in the 2008 fourth quarter, and a 6.6% increase
over the $4.9 million reported in the 2009 third quarter. Operating margin was
12.7% in the 2009 fourth quarter, compared with the operating margin of 8.7%
in the fourth quarter last year.

Net income attributable to stockholders for the fourth quarter of 2009 was
$5.0 million, or $0.28 per diluted share, a 184.1% gain over the $1.8 million,
or $0.10 per diluted share, in the year ago fourth quarter, and a 31.4%
increase over the $3.8 million or $0.21 per diluted share, in the 2009 third
quarter.

Fiscal Year 2009 Results

Annual net sales were $125.0 for the fiscal year 2009, as compared to net
sales of $130.9 million in 2008. Revenues in 2009 from China’s domestic OEM
market were $63.1 million, a $14.1 million or 28.8% increase from the $49.0
million
in 2008. Revenues from China’s domestic aftermarket were $31.5 million
versus $35.3 million in 2008. Revenues from international markets were $30.4
million
in 2009 compared with $46.4 million last year.

In early 2009, the Company identified key growth areas and made strategic
moves to place more focus on the domestic OEM market and optimize its product
portfolio. The Chinese government’s stimulus package revitalized the domestic
truck market and demand continued to rise as inland China’s urbanization and
infrastructure development picked up speed. Regarding the Company’s products,
SORL removed a number of low-end and low-margin products from its portfolio in
the first half of 2009, and introduced a series of new high-margin, value-add
products into the marketplace. These products have been well received by OEM
customers.

Gross profit for the fiscal year 2009 increased by approximately $1.8
million to $35.5 million
from $33.7 million for the 2008 fiscal year. Gross
margin increased by approximately 2.7% to 28.4% from 25.7% in 2008. The
increased profit and margin reflected an improved product portfolio as new
higher-margin products were introduced and certain low-margin items eliminated.

Selling expenses were $8.1 million in fiscal year 2009 compared with $8.4
million
for the 2008 year. As a percentage of sales revenue, selling expenses
were essentially flat year over year.

General and administrative expenses were $7.3 million for the 2009 year,
compared with $6.1 million a year ago. General and administrative expenses
increased to 5.8% of 2009′s revenues compared with 4.6% for 2008. The increase
was mainly due to higher salary and welfare costs, rent, and travel related
expenses during 2009 to support the growth of the Company.

Research and development expenses were $4.3 million in the 2009 year
compared with $3.2 million last year. The Company increased investment in new
product development, with an emphasis on improving its traditional valve
products and developing electronically controlled products.

Operating income in 2009 rose to $15.6 million from $15.1 million in 2008.

Income taxes were $1.8 million in 2009, compared with $1.6 million in the
2008 year. SORL has been awarded the Chinese government’s “High-Tech
Enterprise” designation which is valid for three years and provides for a
reduced tax rate of 15% for years 2009 through 2011. The previous taxation
exemption was superceded from 2009.

The net income attributable to stockholders for the fiscal year 2009 was
$12.8 million as compared to $12.4 million for the fiscal year 2008. Earnings
per share (“EPS”), both basic and diluted, for 2009 and 2008, were $0.70 and
$0.68 per share, respectively.

At December 31, 2009, the Company had cash and cash equivalents of $10.3
million
, as compared to cash and cash equivalents of $7.8 million at December
31, 2008
. Working capital was $75.9 million with a current ratio of 5.1:1 at
December 31, 2009. Net cash flow from operations was $9.7 million for the 2009
year.

Recent Developments

In January 2010, the Company announced a preliminary agreement to form a
strategic alliance with the Shandong Shifeng Group. According to the
preliminary agreement, Shandong Shifeng Group intends to increase its
purchases of brake systems and related products from SORL during 2010.
Furthermore, Shandong Shifeng plans to implement new joint product development
programs with SORL. Shandong Shifeng Group is one of the largest agricultural
vehicle and light-duty truck producers in China.

In January 2010, SORL signed a joint development and multi-year supply
agreement with Shenzhen Wuzhoulong Motors Co. Ltd. to supply clutch cylinders.
Shenzhen Wuzhoulong is one of the leading alternative energy bus manufacturers
in China.

Also in January 2010, SORL’s subsidiary, Ruili Group Ruian Auto Parts Co.,
Ltd., was awarded the Chinese government’s “National High-Tech Enterprise”
designation. The High-Tech Enterprise certificate designation is awarded to
industry leaders with the most advanced technologies and is valid for three
years. It provides for a reduced tax rate of 15% for years 2009 through 2011.

Business Outlook

For the first quarter of fiscal year 2010, the management is expecting net
sales to be approximately $30 million and net income to be approximately $2.9
million
, compared with net sales of $20.2 million and net income of $0.9
million
for 2009 first quarter respectively. These targets are based on the
Company’s current views on the operating and market conditions, which are
subject to change.

Mr. Xiaoping Zhang, the Company’s Chairman and Chief Executive Officer,
commented, “We remain cautiously optimistic as the further urbanization and
growing infrastructure build out of ports, highways, airports and rails will
continue to create demand for more trucks. We will continue to introduce new
products with more advanced technology and stronger pricing power. On the
export side, 2010 can be a time we test new marketplaces where global sourcing
is booming. With the strong cash on hand and established capacity, we are
confident that we have ample financial resources to fund our organic growth in
2010.”

Conference Call

Management will host a conference call at 8:00 am EDT, on Monday, March 29,
2010
to discuss its fourth quarter and fiscal year 2009 financial results.
Listeners may access the call by dialing # 1-877-407-0778 or # 1-201-689-8565
for international callers. 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 following the conclusion of
the earnings call through April 5, 2010. Listeners may access the replay by
dialing # 1-877-660-6853 or # 1-201-612-7415 for international callers;
account: 286; conference ID: 347283.

SORL Auto Parts, Inc.

As China’s leading manufacturer and distributor of automotive air brake
systems and other related auto parts. SORL Auto Parts, Inc. ranked No. 1 for
market share in the segment for commercial vehicles, such as trucks and buses.
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 40 categories with over 1000
specifications in air brake system, air controlling system and others. The
Company has four authorized international sales centers in Australia, UAE,
India, and the United States. 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.
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
     SORL Auto Parts, Inc.
     Corporate Secretary
     Director of Investor Relations
     Email: ben@sorl.com.cn

     Kevin Theiss
     Grayling
     Phone: +1-646-284-9409
     Email: kevin.theiss@grayling.com

                        SORL Auto Parts, Inc. and Subsidiaries
                             Consolidated Balance Sheets
                             December 31, 2009 and 2008

                                             December 31,        December 31,
                                                 2009               2008
                    Assets
    Current Assets
      Cash and Cash Equivalents           US$ 10,255,259       US$ 7,795,987
      Accounts Receivable, Net of
      Provision                               44,546,107          35,797,824
      Notes Receivable                        13,083,691           7,536,534
      Inventory                               18,760,724          19,105,845
      Prepayments, including $0 and
       $187,813 from related parties
       at December 31, 2009 and
       December 31, 2008, respectively         7,558,140           1,013,440
      Other current assets, including
       $0 and $1,906,070 from related
       parties at December 31, 2009
       and December 31, 2008,
       respectively                              444,281           4,445,778
         Total Current Assets                 94,648,202          75,695,408

    Fixed Assets
      Property, Plant and Equipment           35,335,958          32,927,306
      Less: Accumulated
      Depreciation                           (11,608,920)         (8,951,886)
        Property, Plant and
         Equipment, Net                       23,727,038          23,975,420

      Leasehold Improvements in
       Progress                                  477,681                  --

    Land Use Rights, Net                      14,198,392          14,514,983

    Other Assets
      Deferred compensation
       cost-stock options                             --               9,935
      Intangible Assets                          161,499             161,347
      Less: Accumulated
      Amortization                               (54,380)            (39,018)
        Intangible Assets, Net                   107,119             122,329
      Deferred tax assets                        220,577             189,228
        Total Other Assets                       327,696             321,492
      Total Assets                       US$ 133,379,009     US$ 114,507,303

          Liabilities and Shareholders' Equity
    Current Liabilities
      Accounts Payable, including
       $1,985,291 and $0 due to
       related parties at December
       31, 2009 and December 31,
       2008, respectively                  US$ 9,724,715       US$ 4,623,850
      Deposit Received from
       Customers                               3,670,369           6,295,857
      Income tax payable                         551,900             340,138
      Accrued Expenses                         4,206,297           2,389,314
      Other Current Liabilities,
       including $200,762 and $0
       from related parties at
       December 31, 2009 and
       December 31, 2008,
       respectively                              585,176             460,124
        Total Current Liabilities             18,738,457          14,109,283

    Non-Current Liabilities

      Deferred tax liabilities                   115,481             106,826
        Total Liabilities                     18,853,938          14,216,109

    Stockholders' Equity
      Preferred Stock - No Par Value;
       1,000,000 authorized; none
       issued and outstanding as of
       December 31, 2009 and
       December 31, 2008                              --                  --

      Common Stock - $0.002 Par Value;
       50,000,000 authorized, 18,304,921
       and 18,279,254 issued and
       outstanding as of December 31,
       2009 and December 31, 2008                 36,609              36,558
      Additional Paid In Capital              37,498,401          37,498,452
      Reserves                                 4,425,784           3,126,086
      Accumulated other
       comprehensive income                   10,939,100          10,848,248
      Retained Earnings                       50,231,052          38,774,684
      Total SORL Auto Parts, Inc.            103,130,946          90,284,028
       stockholders' equity
      Noncontrolling Interest In              11,394,125          10,007,166
      Subsidiaries
      Total Equity                           114,525,071         100,291,194
      Total Liabilities and
       Stockholders' Equity              US$ 133,379,009     US$ 114,507,303

                      SORL Auto Parts, Inc. and Subsidiaries
           Consolidated Statements of Income and Comprehensive Income
                  For Years Ended on December 31, 2009 and 2008

                                                   2009               2008

    Sales                                  US$ 124,979,741        130,893,422
    Include: sales to related parties              569,621          2,816,816

    Cost of Sales                               89,516,540         97,225,582

    Gross Profit                                35,463,201         33,667,840

    Expenses:
      Selling and Distribution
       Expenses                                  8,137,377          8,423,124
      General and Administrative
       Expenses                                  7,282,110          6,075,404
      Research and development
       expenses                                  4,335,464          3,219,895
      Financial Expenses                           131,080            852,640

        Total Expenses                          19,886,031         18,571,063

    Operating Income                            15,577,170         15,096,777

    Other Income                                   488,123            683,104
    Non-Operating Expenses                        (135,814)          (441,288)

    Income Before Provision for Income
     Taxes                                      15,929,479         15,338,593

    Provision for Income Taxes                   1,796,622          1,586,503

    Net Income                              US$ 14,132,857         13,752,090

    Other Comprehensive Income - Foreign
     Currency Translation Adjustment               100,968          6,017,843

    Total Comprehensive Income                  14,233,825         19,769,933

    Less:
    Net income Attributable to
     Non-controlling Interest In
     Subsidiaries                                1,376,791          1,381,230

    Other Comprehensive Income
     Attributable to Non-controlling
     Interest's Share                               10,116            601,784

    Total Comprehensive Income
     Attributable to Non-controlling
     Interest's Share                            1,386,907          1,983,014

                     SORL Auto Parts, Inc. and Subsidiaries
                      Consolidated Statements of Cash Flows
                  For Years Ended on December 31,2009 and 2008

                                                  2009               2008
    Cash Flows from Operating Activities
    Net Income                             US$ 12,756,066         12,370,860
      Adjustments to reconcile net
       income (loss) to net cash
       from operating activities:
      Noncontrolling Interest In
       Subsidiaries                             1,376,791          1,381,230
      Bad Debt Expense                             18,943             32,674
      Depreciation and Amortization             3,017,677          2,706,053
      Stock-Based Compensation Expense              9,935             59,636
      Loss on disposal of Fixed Assets             11,835             24,892
      Changes in Assets and
       Liabilities:
      Account Receivables                      (8,743,435)        (3,000,167)
      Notes Receivables                        (5,537,498)         2,437,182
      Other Currents Assets                     3,808,215            111,707
      Inventory                                   362,858         (9,977,123)
      Prepayments                              (2,179,237)           400,877
      Deferred tax assets                         (31,185)          (182,938)
      Accounts Payable and Notes
       Payable                                  5,062,595         (1,011,371)
      Income Tax Payable                          211,344            (33,631)
      Deposits Received from Customers         (2,630,156)         3,937,491
      Other Current Liabilities and
       Accrued Expenses                         2,179,900            312,840
      Deferred tax liabilities                      8,550            103,275

      Net Cash Flows from Operating
       Activities                               9,703,198          9,673,487

    Cash Flows from Investing Activities
      Acquisition of Property and
       Equipment                               (6,817,073)        (3,063,458)
    Leasehold Improvements in Progress           (477,876)                --
     Sales proceeds of disposal of
       fixed assets                                42,590              4,187
      Investment in Intangible Assets                  --            (77,303)

      Net Cash Flows from Investing
       Activities                              (7,252,359)        (3,136,574)

    Cash Flows from Financing
     Activities
      Proceeds from (Repayment of) Bank
       Loans                                           --         (3,482,360)
     Capital contributed by Minority S/H               52                 --

      Net Cash flows from Financing
       Activities                                      52         (3,482,360)

    Effects on changes in foreign
     exchange rate                                  8,381            401,223

    Net Change in Cash and Cash
     Equivalents                                2,459,272          3,455,776

    Cash and Cash Equivalents-
     Beginning of the year                      7,795,987          4,340,211

    Cash and cash Equivalents -
     End of the year                       US$ 10,255,259          7,795,987

    Supplemental Cash Flow Disclosures:
      Interest Paid                                    --            182,385
      Tax Paid                                  2,302,527          2,106,992

    Non-Cash Financing Activities:
    Cashless exercise of options and
     warrants and issuance of common
     stock                                             51                 --

SOURCE SORL Auto Parts, Inc.


Source: newswire



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