Category: Auto / Truck Parts

SORL Auto Parts Reports a 37.4% Increase in Sales and a Significant Increase in EPS for the First Quarter of 2017

ZHEJIANG, China, May 15, 2017 -- SORL Auto Parts, Inc. (NASDAQ: 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, 2017.
 
 First Quarter 2017 Financial Highlights
Net sales for the 2017 first quarter increased by 37.4% to $73.9 million from $53.8 million in the first quarter of 2016; 
Gross profit increased by 42.4% with the gross margin rising to 27.8% from 26.8% in the first quarter of 2016; 
Net Income attributable to stockholders was $6.9 million, or $0.36 per diluted share, compared with $0.4 million, or $0.02 per diluted share in the first quarter of
Mr. Xiaoping Zhang, SORL's Chief Executive Officer and Chairman, stated, "We are pleased to announce another quarter of robust performance as we posted growth in all lines of our business and achieved margin expansions from top to bottom. Since the Chinese government introduced rigorous regulations on overloading in the truck market to reduce emissions and improve safety, we have been gaining market share with our advanced new products and superior performance. On the cost side, we continued to exceed our goals due to significantly improved economy of scale, strengthened receivables collections and better-than-expected cost control results."
 
First Quarter 2017 Financial Results
 
For the first quarter of 2017, net sales increased by 37.4% to $73.9 million from $53.8 million in the 2016 first quarter. Revenues from the Company's domestic OEM customers were $41.8 million, an increase of 48.8% from $28.1 million in the first quarter of 2016. The higher OEM sales were mainly due to higher truck sales in the first quarter of 2017. During the first quarter, the total commercial vehicle sales in China grew by 22.9%, while total truck sales were up by 30.9% led by a significant increase of 93.0% year-over-year in the heavy-duty segment.
 
SORL's aftermarket sales in China grew by 37.1% to $18.1 million for the first quarter of 2017, compared with $13.2 million for the same period of 2016. New vehicle sales in China and the expiration of their OEM warranties assisted our aftermarket business growth. Revenues from SORL's international markets sales increased 12.0% to $14.0 million, compared to $12.5 million in the first quarter of 2016 due to an organic expansion of the customer base across several overseas markets.
 
The gross profit for the first quarter of 2017 increased by 42.4% to $20.5 million from $14.4 million a year ago. Gross margin was 27.8% compared with 26.8% in the first quarter of 2016.
 
In the first quarter of 2017, operating expenses decreased 17.8% to $11.7 million from $14.2 million in the same quarter of 2016. The decrease reflected a decline of 41.6% in general and administrative expenses. As a percentage of revenue, operating expenses were 15.8% in the first quarter of 2017, compared with 26.4% in the first quarter of 2016.
  • Selling and distribution expenses remained the same at $5.6 million, yet decreased to 7.6% of quarterly revenues from 10.3% a year ago.
  • General and administrative ("G&A") expenses in the first quarter of 2017 were $4.0 million, or 5.5% of quarterly revenues compared with $6.9 million, or 12.9% of total revenues in the first quarter of 2016.  The decrease in G&A expenses was mainly due to a decrease in allowance for doubtful accounts during this quarter.
  • Research and development ("R&D") expenses were $2.1 million in the first quarter of 2017 compared with $1.7 million in the first quarter of 2016. As a percentage of revenue, R&D expenses were 2.8% in the first quarter of 2017 compared with 3.2% of revenue in the first quarter of 2016.

Income from operations increased by 761.7% to $9.6 million in the first quarter of 2017 compared with $1.1 million in the first quarter of 2016. As a percentage of revenue, income of operations was 13.0% in the first quarter of 2017, compared with 2.1% in the first quarter of 2016.

Financial expenses were $0.5 million in the first quarter of 2017 compared with $0.2 million in the first quarter of 2016.

Income before income taxes was $9.0 million for the first quarter of 2017, compared to $0.4 million for the same quarter of 2016. The increase in income before income taxes reflected higher sales and operating income with lower operating expenses during the first quarter of 2017 compared to the first quarter of 2016.

The provision for income taxes was $1.3 million in the first quarter of 2017, compared with a gain of $0.3 million in the first quarter of 2016.

Net income attributable to stockholders for the first quarter of 2017 was $6.9 million, or $0.36 per basic and diluted share, compared with $0.4 million, or $0.02 per basic and diluted share a year ago.

Balance Sheet

As of March 31, 2017, the Company had cash and cash equivalents of $11.5 million compared to $8.1 million on December 31, 2016. Total equity increased to $171.0 million at March 31, 2017 compared with $162.4 million at December 31, 2016. On March 31, 2017, working capital was $107.8 million with a current ratio of 1.7 to 1.

Business Outlook

For the fiscal year 2017, management has increased annual guidance of net sales to be approximately $315 million and net income to be approximately $27.5 million. These targets are based on the Company's current views on the operating and market conditions, which are subject to change.

"We continue to roll out new advanced braking products which immediately gain traction in the market due to their enhanced performance, added features and improved reliability. We have implemented stricter cost controls, purchased more advanced machinery and moved into new facilities to improve our efficiency and increase our profitability," Ms. Jinrui Yu, SORL's Chief Operating Officer, stated.

Conference Call

Management will host a conference call on Monday, May 15, 2017, at 8:00 A.M. EDT/ 8:00 P.M. Beijing Time to discuss its 2017 first quarter results. Listeners may access the call by dialing U.S. toll free number +1-877-407-0778 and +1-201-689-8565 for international callers, and Mainland China toll free +864-001-202-840. 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 after the conference call through 11:59 P.M. EDT on June 15, 2017, or 11:59 A.M. Beijing Time on June 16, 2017. The replay dial-in numbers are: U.S. toll free number +1-877-481-4010 or the international number +1-919-882-2331; using Conference ID "10392" 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, Indiathe 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. For example, when the Company describes the evaluation of the preliminary non-binding proposal letter, it is using forward-looking statements. 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) at http://www.sec.gov.

Contact Information

Phyllis Huang
+86-151-6770-5972
+86-577-6581-7721
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Kevin Theiss
Investor Relations
Awaken Advisors
646-726-6511
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-- Tables Follow --

 

SORL Auto Parts, Inc. and Subsidiaries

Consolidated Balance Sheets

March 31, 2017 and December 31, 2016

 
   

March 31, 2017

     

December 31, 2016

 
   

(Unaudited)

         

Assets

                 

Current Assets

                 

Cash and cash equivalents

 

US$

11,455,214

     

US$

8,057,155

 

Accounts receivable, net, including $0 and $5,025,509 from related parties at March 31, 
2017 and December 31, 2016, respectively

   

104,844,561

       

102,129,294

 

Bank acceptance notes from customers

   

45,638,224

       

42,697,276

 

Inventories

   

71,745,365

       

65,776,517

 

Prepayments

   

20,159,736

       

10,797,601

 

Restricted cash

   

5,596,257

       

5,476,621

 

Other current assets

   

1,774,940

       

1,124,608

 

Deferred tax assets

   

3,219,643

       

3,210,575

 

Total Current Assets

   

264,433,940

       

239,269,647

 
                   

Property, plant and equipment, net

   

54,885,852

       

53,737,706

 

Land use rights, net

   

8,284,055

       

8,309,333

 

Intangible assets, net

   

9,324

       

11,438

 

Total Non-Current Assets

   

63,179,231

       

62,058,477

 

Total Assets

 

US$

327,613,171

     

US$

301,328,124

 
                   

Liabilities and Equity

                 

Current Liabilities

                 

Accounts payable and bank acceptance notes to vendors, including $6,234,911 and 
$1,953,707 due to related parties at March 31, 2017 and December 31, 2016, 
respectively

 

US$

60,477,514

     

US$

65,672,626

 

Deposit received from customers

   

25,900,566

       

22,733,742

 

Short term bank loans

   

48,871,970

       

27,416,376

 

Income tax payable

   

1,268,213

       

996,522

 

Accrued expenses

   

17,688,422

       

20,103,392

 

Other current liabilities

   

2,410,732

       

2,013,943

 

Total Current Liabilities

   

156,617,417

       

138,936,601

 
                   

Total Liabilities

   

156,617,417

       

138,936,601

 
                   

Equity

                 

Preferred stock - no par value; 1,000,000 authorized; none issued and outstanding as of 
March 31, 2017 and December 31, 2016

   

-

       

-

 

Common stock - $0.002 par value; 50,000,000 authorized,

                 

19,304,921 issued and outstanding as of

                 

March 31, 2017 and December 31, 2016

   

38,609

       

38,609

 

Additional paid-in capital

   

(28,582,654)

       

(28,582,654)

 

Reserves

   

15,822,287

       

15,129,935

 

Accumulated other comprehensive income

   

6,937,331

       

6,117,042

 

Retained earnings

   

152,583,697

       

146,352,530

 

Total SORL Auto Parts, Inc. Stockholders' Equity

   

146,799,270

       

139,055,462

 

Noncontrolling Interest In Subsidiaries

   

24,196,484

       

23,336,061

 

Total Equity

   

170,995,754

       

162,391,523

 

Total Liabilities and Equity

 

US$

327,613,171

     

US$

301,328,124

 

 

 

SORL Auto Parts, Inc. and Subsidiaries

Consolidated Statements of Income and Comprehensive Income

For The Three Months Ended March 31, 2017 and 2016 (Unaudited)

         
     

Three Months Ended March 31,

 
     

2017

     

2016

 
                 

Sales

   

US$

73,895,781

     

US$

53,836,728

 

Include: sales to related parties

     

3,026,924

       

2,580,846

 

Cost of sales

     

53,348,076

       

39,397,649

 

Gross profit

     

20,547,705

       

14,439,079

 
                     

Expenses:

                   

Selling and distribution expenses

     

5,608,623

       

5,562,432

 

General and administrative expenses

     

4,044,913

       

6,929,858

 

Research and development expenses

     

2,055,096

       

1,743,687

 

Total operating expenses

     

11,708,632

       

14,235,977

 
                     

Other operating income, net

     

788,468

       

914,205

 
                     

Income from operations

     

9,627,541

       

1,117,307

 
                     

Interest income

     

10,550

       

88,102

 

Government grants

     

28,909

       

4,757

 

Other income

     

664

       

45,589

 

Interest expenses

     

(481,160)

       

(174,460)

 

Other expenses

     

(207,531)

       

(637,629)

 
                     

Income before income taxes provision (benefit)

     

8,978,973

       

443,666

 
                     

Income taxes provision (benefit)

     

1,286,174

       

(34,824)

 
                     

Net income

   

US$

7,692,799

     

US$

478,490

 
                     

Net income attributable to noncontrolling interest in subsidiaries

     

769,280

       

47,849

 
                     

Net income attributable to common stockholders

   

US$

6,923,519

     

US$

430,641

 
                     

Comprehensive income:

                   
                     

Net income

   

US$

7,692,799

     

US$

478,490

 

Foreign currency translation adjustments

     

911,432

       

1,106,640

 

Comprehensive income

     

8,604,231

       

1,585,130

 

Comprehensive income attributable to noncontrolling interest in subsidiaries

     

860,423

       

158,513

 

Comprehensive income attributable to common shareholders

   

US$

7,743,808

     

US$

1,426,617

 
                     

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$

0.36

     

US$

0.02

 
                     

EPS - diluted

   

US$

0.36

     

US$

0.02

 

 

 

SORL Auto Parts, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

For The Three Months Ended March 31, 2017 and 2016 (Unaudited)

         
     

Three Months Ended March 31,

 
     

2017

     

2016

 
                 

Cash Flows From Operating Activities

                   

Net Income

   

US$

7,692,799

     

US$

478,490

 

Adjustments to reconcile net income to net cash

                   

used in operating activities:

                   
                     

Allowance for doubtful accounts

     

-

       

3,676,683

 

Depreciation and amortization

     

2,017,224

       

1,733,874

 

Deferred income tax

     

8,453

       

(596,802)

 
                     

Changes in assets and liabilities:

                   

Accounts receivable

     

(2,151,307)

       

(3,192,855)

 

Bank acceptance notes from customers

     

(2,700,239)

       

(5,236,626)

 

Other currents assets

     

(638,653)

       

(216,932)

 

Inventories

     

(5,594,100)

       

6,020,763

 

Prepayments

     

1,142,387

       

(4,828,231)

 

Prepaid capital lease interest  

     

-

       

40,714

 

Accounts payable and bank acceptance notes to vendors

     

(4,434,657)

       

2,389,292

 

Income tax payable

     

265,518

       

-

 

Deposits received from customers

     

3,033,848

       

1,221,498

 

Other current liabilities and accrued expenses

     

(2,133,534)

       

(1,900,667)

 

Net Cash Flows Used In Operating Activities

     

(3,492,261)

       

(410,799)

 
                     

Cash Flows From Investing Activities

                   

Change in short term investments

     

-

       

2,854,289

 

Acquisition of property and equipment

     

(14,320,981)

       

(1,247,024)

 

Advance to related party

     

-

       

(18,695,590)

 

Change in restricted cash

     

(89,465)

       

(284,338)

 

Net Cash Flows Used In Investing Activities

     

(14,410,446)

       

(17,372,663)

 
                     

Cash Flows From Financing Activities

                   

Proceeds from bank loans

     

21,247,576

       

13,795,728

 

Repayment of bank loans  

     

-

       

(20,050,944)

 

Repayment of capital lease

     

-

       

(906,123)

 

Net Cash Flows Provided By (Used In) Financing Activities

     

21,247,576

       

(7,161,339)

 
                     

Effects on changes in foreign exchange rate

     

53,190

       

817,739

 
                     

Net change in cash and cash equivalents

     

3,398,059

       

(24,127,062)

 
                     

Cash and cash equivalents - beginning of the period

     

8,057,155

       

30,230,828

 
                     

Cash and cash equivalents - end of the period

   

US$

11,455,214

     

US$

6,103,766

 
                     
                     

Supplemental Cash Flow Disclosures:

                   

Interest paid

   

US$

250,601

     

US$

275,913

 

Income taxes paid

   

US$

1,012,203

     

US$

677,301

 

 

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