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SORL Auto Parts Reports a 44.1% Sales Increase in the First Quarter of 2018

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SORL Auto Parts Reports a 44.1% Sales Increase in the First Quarter of 2018

PR Newswire

ZHEJIANG, China, May 15, 2018 /PRNewswire/ -- 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, 2018.

First Quarter 2018 Financial Highlights

  • Net sales for the 2018 first quarter increased by 44.1% to $107.7 million from $74.4  million in the first quarter of 2017;
  • Net sales by segment grew by 33.5%, 73.2% and 27.9% in the OEM, aftermarket and international markets, respectively,  in the first quarter of 2018;
  • Gross profit increased by 43.5% with a gross margin of 28.0% compared with 28.2% in the first  quarter of 2017;
  • Net Income attributable to stockholders rose 19.5% to $8.3  million, or $0.43 per diluted share, compared with $6.9 million, or $0.36 per diluted share in the first quarter of 2017.

Mr. Xiaoping Zhang, SORL's Chief Executive Officer and Chairman, stated, "We are pleased to report strong sales growth across the board in the first quarter of 2018. We have been consistently outperforming the commercial vehicle market in China as our advanced products with high technology content continue to capture market shares.  Our sales growth combined with strict cost controls and higher efficiency in our new production has created earnings growth as well."

First Quarter 2018 Financial Results

For the first quarter of 2018, net sales increased by 44.1% year-over-year to $107.7 million from $74.7 million in the 2017 first quarter. Revenues from the Company's domestic OEM customers were $51.8 million, an increase of 33.5% from $38.7 million in the first quarter of 2017. The higher OEM sales were mainly due to higher truck sales in the first quarter of 2018. During the first quarter of 2018, the total commercial vehicle sales in China grew by 3.6% year-over-year with total truck sales up by 3.6% led by a 13.8% growth in heavy-duty truck sales.

SORL's aftermarket sales in China grew by 73.2% to $38.0 million for the first quarter of 2018, compared with $22.0 million for the same period of 2017. The increase in new vehicle sales in China and the growing expiration of  OEM warranties helped propel growth in the aftermarket business. Revenues from SORL's international markets sales increased 27.9% to $17.9 million, compared to $14.0 million in the first quarter of 2017 due to an expanding overseas customer base.

The gross profit for the first quarter of 2018 increased by 43.5% year-over-year to $30.2 million from $21.0 million a year ago. Gross margin was 28.0% compared with 28.2% in the first quarter of 2017. The gross margin change was mostly due to the product mix in the first quarter of 2018 compared with the same quarter last year. 

In the first quarter of 2018, operating expenses increased 57.2% year-over-year to $18.4 million from $11.7 million in the same quarter of 2017. The increase reflected higher selling and distribution expenses related to the quarterly sales growth, increased general and administrative expenses ("G&A") and higher research and development ("R&D") costs. As a percentage of revenue, operating expenses were 17.1% in the first quarter of 2018, compared with 15.7% in the first quarter of 2017.

  • Selling and distribution expenses increased to $10.0 million from $5.6 million, and represented 9.3% of quarterly revenues from 7.5% in the same quarter last year. The increase was mainly due to higher freight and packaging expenses related to the growth in  product volumes and increased labor costs as the Company added more self-owned distribution centers throughout the country to target the aftermarket segment.
  • G&A expenses in the first quarter of 2018 increased to $4.8 million from $4.0 million in the first quarter of 2017.  G&A expenses represented 4.4% of quarterly revenues compared with 5.4% of revenues in the same quarter last year.  The increase in G&A expenses was mainly due to an increased bad debt provision associated with higher sales in the quarter.
  • R&D expenses increased to $3.6 million from $2.1 million in the first quarter of 2017. As a percentage of revenue, R&D expenses were 3.3% in the first quarter of 2018 compared with 2.7% of revenue in the first quarter of 2017.

Income from operations increased by 45.4% to $14.0 million in the first quarter of 2018 compared with $9.6 million in the first quarter of 2017. As a percentage of revenue, income of operations was 13.0% in the first quarter of 2018 and 12.9% in the 2017 first quarter.

Financial expenses were $3.4 million in the first quarter of 2018 compared with $0.5 million in the first quarter of 2017.  The increase in financial expenses was due to a higher average interest rate on a larger amount of loans outstanding compared with the first quarter of 2017.

Income before income taxes was $10.8 million for the first quarter of 2018, compared to $9.0 million for the same quarter of 2017. The increase in income before income taxes reflected higher sales and operating income during the first quarter of 2018 compared to the first quarter of 2017.

The provision for income taxes was a $1.6 million expense in the first quarter of 2018, compared with an expense of $1.3 million in the first quarter of 2017.

Net income attributable to stockholders for the first quarter of 2018  was $8.3 million, or $0.43 per basic and diluted share, compared with $6.9 million, or $0.36 per basic and diluted share, a year ago.

Balance Sheet

As of March 31, 2018, the Company had cash, cash equivalents and restricted cash of $69.3 million compared to $4.6 million on December 31, 2017. Net accounts receivable rose to $173.2 million from $134.4 million at December 31, 2017. Bank acceptance notes from customers increased to $141.4 million at March 31, 2018 from $116.0 million at December 31, 2017. Inventories rose to $117.8 million from $114.3 million at the end of 2017. Short-term bank loans were $239.6 million at March 31, 2018 compared with $125.4 million at December 31, 2017. Total equity increased to $217.5 million at March 31, 2018 compared with $200.3 million at December 31, 2017. On March 31, 2018, working capital was $102.4 million with a current ratio of 1.2 to 1.  Net cash flows provided by operations was $36.3 million in the first quarter of 2018.

Business Outlook

Management has reiterated its fiscal year 2018 guidance for net sales of $450 million and net income attributable to common stockholders of $28 million. These targets are based on the Company's current views on the operating and market conditions, which are subject to change.

"Our growing broad line of advanced products with their higher performance and reliability is providing the growth stimulus to enhance our market position in key markets.  We are now better positioned in our markets than any time in our history," stated Ms. Jinrui Yu, SORL's Chief Operating Officer.

Conference Call

Management will host a conference call on Tuesday, May 15, 2018, at 8:00 A.M. EDT/ 8:00 P.M. Beijing Time to discuss its unaudited 2018 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 +86 400-120-2840. 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 8:00 A.M. EDT or 8:00 P.M. Beijing Time on June 15, 2018. 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 "29319" 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, India, the 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
phyllis@sorl.com.cn

Kevin Theiss
Investor Relations
Awaken Advisors
212-521-4050
kevin.theiss@awakenlab.com

-- Tables Follow --

SORL Auto Parts, Inc. and Subsidiaries

Consolidated Balance Sheets

March 31, 2018 and December 31, 20176




March 31, 2018


December 31, 2017



(Unaudited)



Assets





Current Assets





    Cash and cash equivalents

US$

22,682,734

US$

4,221,940

    Accounts receivable, net, including $1,369,846 and  
        $1,297,734 from related party at March 31, 2018 and D
        ecember 31, 2017, respectively


173,176,607


134,384,961

    Bank acceptance notes from customers


141,418,791


116,040,688

    Inventories


117,758,209


114,300,564

    Prepayments, current, including $9,690,080 and $999,527
        to related parties at March 31, 2018 and December 31,
        2017, respectively


 

24,451,933


 

8,826,004

    Restricted cash


46,602,834


376,236

    Advances to related parties


138,038,517


72,318,224

    Other current assets, net


7,637,869


5,555,568

        Total Current Assets


671,767,494


456,024,185

    Property, plant and equipment, net


83,500,305


79,828,006

    Land use rights, net


15,360,639


14,912,134

    Intangible assets, net


-


3,341

    Deposits on loan agreements


11,132,138


10,712,865

    Prepayments, non-current


33,401,173


16,594,987

    Deferred tax assets


3,487,908


4,240,424

        Total Non-current Assets


146,882,163


126,291,757

        Total Assets

US$

818,649,657

US$

582,315,942






Liabilities and Equity





Current Liabilities





    Accounts payable and bank acceptance notes to vendors,
        including $10,104,627 and $15,896,804 due to related
        parties at March 31, 2018 and December 31, 2017,
        respectively

 

US$

 

192,341,749

 

US$

 

118,051,633

    Deposits received from customers


49,997,137


43,087,473

    Short term bank loans


239,625,661


125,380,899

    Current portion of long term loans


26,141,459


24,266,031

    Income tax payable


1,709,222


3,249,727

    Accrued expenses


17,651,012


25,154,658

    Due to related parties


36,939,943


1,572,963

    Deferred income


927,678


1,020,273

    Other current liabilities


4,013,302


2,857,130

        Total Current Liabilities


569,347,163


344,640,787

    Long term loans, less current portion and net of
        unamortized debt issuance costs


31,773,249


37,383,224

        Total Non-current Liabilities


31,773,249


37,383,224

        Total Liabilities


601,120,412


382,024,011

Equity





    Preferred stock - no par value; 1,000,000 authorized; none
        issued and outstanding as of March 31, 2018 and December
        31, 2017


-


-

    Common stock - $0.002 par value; 50,000,000
        authorized,19,304,921 issued and outstanding as of





March 31, 2018 and December 31, 2017


38,609


38,609

Additional paid-in capital


(28,582,654)


(28,582,654)

Reserves


18,389,707


17,562,357

Accumulated other comprehensive income


23,143,269


15,903,188

Retained earnings


175,690,481


168,244,329

    Total SORL Auto Parts, Inc. Stockholders' Equity


188,679,412


173,165,829

    Noncontrolling Interest In Subsidiaries


28,849,833


27,126,102

    Total Equity


217,529,245


200,291,931

    Total Liabilities and Equity

US$

818,649,657

US$

582,315,942

 

SORL Auto Parts, Inc. and Subsidiaries

Consolidated Statements of Income and Comprehensive Income

 For The Three Months Ended March 31, 2018 and 2017 (Unaudited)






Three Months Ended March 31,



2018


2017






Sales

US$

107,726,682

US$

74,746,394

Include: sales to related parties


7,701,054


4,008,684

Cost of sales


77,527,196


53,700,458

Gross profit


30,199,486


21,045,936

Expenses:





Selling and distribution expenses


10,037,861


5,608,623

General and administrative expenses


4,773,778


4,044,913

Research and development expenses


3,590,402


2,055,096

Total operating expenses


18,402,041


11,708,632

Other operating income, net


2,197,324


290,237

Income from operations


13,994,769


9,627,541

Interest income


1,488,264


10,550

Government grants


133,933


28,909

Other income


27,066


664

Interest expenses


(3,353,711)


(481,160)

Exchange differences


(601,286)


(92,732)

Other expenses


(890,814)


(114,799)

Income before income taxes provision


10,798,221


8,978,973

Provision for income taxes


1,605,441


1,286,174

Net income

US$

9,192,780

US$

7,692,799

Net income attributable to noncontrolling
    interest in subsidiaries


919,278


769,280






Net income attributable to common stockholders

US$

8,273,502

US$

6,923,519

Comprehensive income:





Net income

US$

9,192,780

US$

7,692,799

Foreign currency translation adjustments


8,044,534


911,432

Comprehensive income


17,237,314


8,604,231

Comprehensive income attributable to
    noncontrolling interest in subsidiaries


1,723,731


860,423

Comprehensive income attributable to
    common stockholders

US$

15,513,583

US$

7,743,808

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$

0.43

US$

0.36

EPS - diluted

US$

0.43

US$

0.36

 

SORL Auto Parts, Inc. and Subsidiaries

 Consolidated Statements of Cash Flows

For The Three Months Ended March 31, 2018 and 2017 (Unaudited)




Three Months Ended March 31,



2018


2017






Cash Flows From Operating Activities





Net income

US$

9,192,780

US$

7,692,799

Adjustments to reconcile net income to net cash





provided by (used in) operating activities:





Allowance for doubtful accounts


278,397


-

Depreciation and amortization


2,847,303


2,017,224

Amortization of debt issuance costs


372,025


-

Deferred income tax


900,839


8,453

Changes in assets and liabilities:





Account receivable


(32,888,322)


(2,151,307)

Bank acceptance notes from customers


12,354,888


(2,700,239)

Other currents assets


(1,890,438)


(638,653)

Inventories


996,280


(5,594,100)

Prepayments, current


(14,987,105)


1,142,387

Accounts payable and bank acceptance notes to vendors


63,073,488


(4,434,657)

Income tax payable


(1,635,670)


265,518

Deposits received from customers


5,123,039


3,033,848

Deferred income


(129,981)


-

Other current liabilities and accrued expenses


(7,302,268)


(2,133,534)

Net Cash Flows Provided By (Used In) Operating Activities


36,305,255


(3,492,261)

Cash Flows From Investing Activities





Acquisition of property, equipment and land use rights


(19,682,775)


(14,320,981)

Advances to related parties


(67,694,035)


-

Repayments of advances to related parties


5,821,183


-

Net Cash Flows Used In Investing Activities


(81,555,627)


(14,320,981)

Cash Flows From Financing Activities





Proceeds from short term bank loans


222,636,613


21,247,576

Repayments of short term bank loans


(115,398,302)


-

Proceeds from related parties


264,565,400


-

Repayments to related parties


(256,883,171)


-

Repayments of long term loans


(6,401,331)


-

Net Cash Flows Provided By Financing Activities


108,519,209


21,247,576

Effects on changes in foreign exchange rate


1,418,555


83,361

Net change in cash, cash equivalents, and restricted cash


64,687,392


3,517,695

Cash, cash equivalents, and restricted cash - beginning of the period


4,598,176


13,533,776

Cash, cash equivalents, and restricted cash - end of the period

US$

69,285,568

US$

17,051,471

Supplemental Cash Flow Disclosures:





Interest paid

US$

2,278,298

US$

250,601

Income taxes paid

US$

2,340,272

US$

1,012,203

Non-cash Investing and Financing Transactions





Repayments to related party in the form of bank acceptance notes

US$

5,846,083

US$

-

Loans from related party in the form of bank acceptance notes

US$

32,791,380

US$

-

Reconciliation of cash, cash equivalents, and restricted cash as shown on
    the consolidated balance sheets





Cash and cash equivalents

US$

22,682,734

US$

11,455,214

Restricted cash


46,602,834


5,596,257

Total cash, cash equivalents, and restricted cash at end of period

US$

69,285,568

US$

17,051,471

Cision View original content:http://www.prnewswire.com/news-releases/sorl-auto-parts-reports-a-44-1-sales-increase-in-the-first-quarter-of-2018--300648312.html

SOURCE SORL Auto Parts, Inc.

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