Revenue Grew 40% YoY, Aftermarket Sales Rose, Gross Margin
Maintained at 22% ZHEJIANG, China, Nov. 14
/Xinhua-PRNewswire-FirstCall/ -- SORL Auto Parts, Inc.
(NASDAQ:SORL), a leading manufacturer and distributor of commercial
vehicle air brake valves as well as other auto parts in China,
today announced its financial results for the third quarter ended
September 30, 2007. Third Quarter Financial Highlights -- Revenue
increased to $29.7 million, reflecting a 40% year-over-year growth;
-- Revenue from sales to OEMs increased to $9.2 million, reflecting
a 37% year-over-year growth; -- Chinese domestic aftermarket
revenue increased to $7.7 million, reflecting a 48% year-over-year
growth; -- Export revenue increased to $12.8 million, reflecting a
36% year-over-year growth; -- Net income increased to $2.1 million,
reflecting a 20% year-over-year growth; and -- Third quarter
diluted earnings per share were $0.12 -- One-time items were
approximately 300,000 dollars Total revenue for the third quarter
of 2007 was $29.7 million, a 40% increase as compared to $21.3
million for the same period in 2006. Revenue from sales to Original
Equipment Manufacturers (OEM) for the third quarter of 2007 was
$9.2 million, a 37% increase as compared to $6.7 million for the
third quarter of 2006. Aftermarket revenue from the Chinese
domestic market for the third quarter of 2007 was $7.7 million, an
increase of 48% as compared to $5.2 million for the third quarter
of 2006. Revenue from exports was $12.8 million for the third
quarter of 2007, an increase of 36% as compared to $9.4 million for
the third quarter of 2006. Xiaoping Zhang, SORL Auto Parts'
Chairman and CEO, said, "We are delighted to report another solid
quarter as we continued to achieve a strong top line increase with
well-balanced growth among all three divisions -- OEM, Aftermarket
and Export. The third quarter is normally a slow season due to the
summer. During this quarter, we repositioned our sales effort to
focus on the Chinese domestic aftermarket space where seasonality
does not have a major impact. We continued to sign OEM customers,
expand geographic and application coverage, and introduce new
products. Our newly acquired facility will enable us to rapidly
ramp up production capacity to meet the growing market demand for
our high-quality SORL products." Gross profit for the third quarter
of 2007 was $6.6 million, an increase of 39% as compared to $4.8
million in the same period in 2006. Operating income for the third
quarter of 2007 was $2.7 million, an increase of 15% as compared to
$2.3 million in the same period in 2006. Total selling expenses
were $1.9 million for the third quarter of 2007, as compared to
$1.2 million in the same period of 2006. The increased
transportation fees for domestic sales, packaging fees for exports
and overall advertising expenses contributed to the higher selling
expenses during this quarter. The increased transportation fees
were due to the capacity bottleneck and increased shipping
frequency during the quarter. Packaging fees in this quarter were
also increased in preparation for the high season of export
shipment normally in the 4th quarter. Advertising fee increase was
due to a one-time outdoor advertising opportunity. General and
administrative expenses were $1.7 million for the three months
ended September 30, 2007, as compared to $1.0 million for the same
period of 2006. The increase was mainly due to such factors as
increased depreciation, office expenses, one-time staff
compensation, R&D expense and travel expenses related to the
expansion of the facilities and workforce. The Company also
incurred a one-time professional consulting fee related to the SOX
404 compliance program. Net income for the third quarter of 2007
was $2.1 million, an increase of 20% as compared to net income of
$1.8 million in the same period in 2006. During the third quarter
of 2007, the diluted earnings per share were $0.12 as compared to
$0.13 diluted earnings per share in the same period in 2006. Fully
diluted common shares for the 2007 third quarter were 18,312,574, a
37% increase compared to the 13,368,387 in the third quarter last
year. For the nine months ended September 30, 2007, total revenue
increased 37% to $83.3 million as compared to $60.8 in the first
nine months of 2006. Net income in the first nine months of 2007
grew 45% to $8.3 million from $5.7 million in the first nine months
of 2006. Fully diluted earnings per share were $0.45 as compared to
$0.43 in same period of 2006. Total cash and cash equivalents as of
Sept 30, 2007 totaled $2.0 million as compared to $11.1 million as
of December 31, 2006. The working capital as of September 30, 2007
was $41.2 million as compared to $47.2 million as of December 31,
2006. Stockholder's equity increased to $68.2 million as of the end
of September 30, 2007 from $57.4 million as of December 31, 2006.
Total shares outstanding on fully diluted basis as of Sept 30, 2007
were 18,312,574 as compared to 13,368,387 as of September 30, 2006.
Ms Zongyun Zhou, Chief Financial Officer, said, "We successfully
maintained our gross margin at 22% with our high-quality products
and reliable after-sales support. As we experienced strong top line
growth along with gradual expansion of our production capacity, we
encountered temporary operating expense increases. In the third
quarter of 2007, the increase in operating expenses was mainly due
to higher SG&A expenses: selling expenses increased by $765,686
during this quarter as compared to the same period in 2006.
However, beginning in October, with our newly acquired capacity, we
will be able to better manage the domestic transportation costs and
control packaging costs. General & Administrative expenses
increased by $653,209 including a higher compensation cost which is
also a one-time item, increased R&D expenditures, a one-time
SOX consulting fee, and costs related to our annual shareholder
meeting. We strongly believe that our focus on new product R&D,
internal controls and corporate governance will help build stronger
shareholder value in the long run. We are confident that we will
continue to grow our business and ramp up production capacity while
improving cost and expense management." Key Event On October 1,
2007, SORL announced that, through its subsidiary, Ruili Group
Ruian Auto Parts Co. Ltd., it has purchased land rights, a
manufacturing plant and office building with a total floor area of
66,177.91 square meters, or 712,333 square feet, from Ruili Group
Co. Ltd. ("Ruili"), for 152 million yuan (approximately $20
million). The Company had previously leased from Ruili and occupied
approximately 50 percent of this production facility. Ruili vacated
the rest of the facility in October. The appraisal of the assets
was conducted by the leading independent appraiser, DTZ Debenham
Tie Leung Ltd., and total asset value was appraised at 154 million
yuan. As a result of this transaction, the acquired capacity
expansion is expected to meet the Company's growth demands for the
next 2 to 3 years. Recent Development On October 15, 2007, SORL
announced that it has been designated as the exclusive air brake
parts supplier for the estimated 2,400 new municipal buses the City
of Tianjin is purchasing. These new buses are being acquired to
both help solve the transport needs of the city's residents and to
accommodate the expected larger transportation demands of the
nearby Beijing 2008 Olympics. Tianjin is a major economic hub for
northern China with a population of approximately 10 million people
and is located only 63 miles away from Beijing. Additionally,
Beijing has also chosen SORL as a designated air brake parts
supplier for its municipal bus fleet. SORL management estimates
that the Company has achieved a 25% market share in the Beijing and
Tianjin aftermarket for bus brake parts for 2007. On October 25,
2007, SORL announced that it has entered into a technology
development agreement with China's second largest heavy truck
maker, Baotou North- Benz Heavy Duty Truck Co. Ltd. ("North-Benz").
With this new agreement, SORL becomes a major long-term supplier of
air brake products for North-Benz. After more than six months of
trial installations and stringent testing of SORL's air brake
systems, the two companies signed the technology development
agreement and formally began a comprehensive strategic partnership.
The partnership will include technology research and new product
development for North-Benz's broad range of truck products. SORL's
management estimates that by next year, SORL will supply
approximately 40%-50% of the air brake systems installed in
North-Benz's heavy duty trucks. The estimated value of the contract
is approximately US$2 million in 2008. Earnings Conference Call
SORL's management team will host a conference call at 8:30AM
Eastern Time on November 14, 2007. A live webcast and replay of the
conference call will be available at:
http://www.vcall.com/IC/CEPage.asp?ID=117078 . The webcast replay
will be available through November 14, 2008. The dial-in by
telephone details for the live conference call: U.S. Toll Free
Number +1-877-407-8035, International dial-in number
+1-201-689-8035. 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 800 different
specifications. The Company has three authorized international
sales centers in Australia, United Arab Emirates, 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 Statements made in this
press release that are not historical fact are "forward-looking
statements," which are based on current expectations that include a
number of risks and uncertainties. Additional factors that could
potentially affect the Company's financial results may be found on
the Company's filings with the Securities and Exchange Commission (
http://www.sec.gov/ ). SORL Auto Parts, Inc. and Subsidiaries
Consolidated Statements of Operations and Comprehensive Income For
The Second Quarter Ended September 30, 2007 and 2006 Three Months
Ended Nine Months Ended September 30, September 30, 2007 2006 2007
2006 Sales US $29,703,227 21,288,002 US$ 83,309,788 60,824,588 Cost
of Sales 23,064,724 16,511,343 64,620,063 47,012,827 Gross Profit
6,638,503 4,776,659 18,689,725 13,811,761 Operating Expenses
Selling and Distribution Expenses 1,928,763 1,163,077 4,444,053
3,407,535 General and Administrative Expenses 1,682,071 1,028,862
4,402,694 2,212,113 Financial Expenses 349,056 259,587 606,492
767,034 Total Operating Expenses 3,959,890 2,451,526 9,453,239
6,386,682 Operating Income 2,678,613 2,325,133 9,236,486 7,425,079
Other Income 118,334 24,280 502,606 92,976 Non-Operating Expenses
(10,357) (75,841) (94,996) (232,566) Income Before Provision for
Income Taxes 2,786,590 2,273,572 9,644,096 7,285,489 Provision for
Income Taxes 434,139 311,208 373,883 898,713 Net Income Before
Minority Interest & Other Comprehensive Income US$ 2,352,451
1,962,364 US$ 9,270,213 6,386,776 Minority Interest 239,867 196,236
936,986 638,677 Net Income Attributable to Shareholders 2,112,584
1,766,128 8,333,227 5,748,099 Foreign Currency Translation
Adjustment 1,025,919 262,110 2,723,508 448,790 Minority Interest's
Share (102,592) (26,211) (272,351) (44,879) Comprehensive Income
3,035,911 2,002,027 10,784,384 6,152,010 Weighted average common
share -- Basic 18,278,805 13,346,555 18,276,366 13,346,555 Weighted
average common share -- Diluted 18,312,574 13,368,387 18,323,125
13,360,639 EPS -- Basic 0.12 0.13 0.46 0.43 EPS -- Diluted 0.12
0.13 0.45 0.43 SORL Auto Parts, Inc. and Subsidiaries Consolidated
Balance Sheets September 30, 2007 and December 31,2006 September
30, 2007 December 31, 2006 (Unaudited) (Audited) Assets Current
Assets Cash and Cash Equivalents US$ 1,972,825 US$ 11,137,501
Accounts Receivable, Net of Provision 31,351,401 26,750,778 Notes
Receivable 5,953,499 3,494,327 Inventory 8,814,201 4,528,856
Prepayments 2,276,728 5,532,802 Other current assets 4,216,545
2,925,558 Total Current Assets 54,585,199 54,369,822 Fixed Assets
Property, Plant and Equipment 26,172,629 20,418,557 Less:
Accumulated Depreciation (5,410,661) (4,106,901) Property, Plant
and Equipment, Net 20,761,968 16,311,656 Land Use Rights, Net
13,583,427 -- Other Assets Deferred compensation cost-stock options
84,480 129,207 Intangible Assets 74,059 45,779 Less: Accumulated
Amortization (22,768) (17,655) Intangible Assets, Net 51,291 28,124
Other Non-current Assets 38,637 41,299 Total Other Assets 174,408
198,630 Total Assets US$ 89,105,002 US$ 70,880,108 Liabilities and
Shareholders' Equity Current Liabilities Accounts Payable and Notes
Payable US$ 5,649,773 US$ 4,620,692 Deposit Received from Customers
877,625 508,268 Short term bank loans 4,705,709 -- Income tax
payable 540,063 358,367 Accrued Expenses 1,086,373 1,232,845 Other
Current Liabilities 491,823 454,430 Total Current Liabilities
13,351,366 7,174,602 Long-Term Liabilities Long term bank loans --
-- Other long term liabilities -- -- Total Liabilities 13,351,366
7,174,602 Minority Interest 7,545,894 6,336,557 Shareholders'
Equity Common Stock - $0.002 Par Value; 50,000,000 authorized,
18,279,254 and 18,275,126 issued and outstanding as of September
30, 2007 and December 31, 2006 respectively 36,558 36,550
Additional Paid In Capital 37,498,452 37,444,051 Reserves 1,640,403
797,116 Accumulated other comprehensive income 3,553,626 1,102,469
Retained Earnings 25,478,703 17,988,763 Total Shareholders' Equity
68,207,742 57,368,949 Total Liabilities and Shareholders' Equity
US$ 89,105,002 US$ 70,880,108 For more information, please contact:
Richard Cai SORL Auto Parts, Inc. Tel: +86-577-6581-7720 Email:
Kevin Theiss The Global Consulting Group Tel: +1-646-284-9409
Email: DATASOURCE: SORL Auto Parts, Inc. CONTACT: Richard Cai of
SORL Auto Parts, Inc., +86-577-6581-7720, or ; Kevin Theiss of The
Global Consulting Group, +1-646-284-9409, or , both for SORL Auto
Parts, Inc. Web site: http://www.sorl.cn/
http://www.vcall.com/IC/CEPage.asp?ID=117078
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