Market Overview

SORL Auto Parts Reports 40% Top Line Growth in the Second Quarter and Diluted Earnings Per Share of $0.78 for the First Six Months of 2018

Share:

SORL Auto Parts Reports 40% Top Line Growth in the Second Quarter and Diluted Earnings Per Share of $0.78 for the First Six Months of 2018

PR Newswire

ZHEJIANG, China, Aug. 14, 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, today announced its unaudited financial results for the second quarter of 2018 and the first six months ended June 30, 2018.

Second Quarter 2018 Financial Highlights

  • Net sales increased 40.1% to $128.5 million compared with $91.7 million in the second quarter last year;
  • Gross profit increased 39.5% and the gross margin was 26.8% in the second quarter of 2018 compared to 26.9% in the same period of 2017;
  • Diluted earnings per share were $0.35 compared with $0.31 in the same quarter last year.

First Six Months of 2018 Financial Highlights

  • Net sales increased 41.9% to $236.2 million compared with $166.5 million in same period of last year;
  • Operating income increased 29.4% to $23.8 million from $18.4 million in the same period in 2017;
  • Net income attributable to stockholders increased 16.9% to $15.0 million or $0.78 per basic and diluted, compared with $12.8 million, or $0.67 per basic and diluted share in the same period of 2017.

Mr. Xiaoping Zhang, SORL's Chief Executive Officer and Chairman, stated, "We continue to achieve strong growth in all three business lines with a 35.0% gain in the OEM market and a 70.5% increase in aftermarket sales. Our sales are outperforming the markets as we continue to increase our market share and profits. In addition, our cash flow is strengthening our financial resources even as we reduce our debt."

Second Quarter 2018 Financial Performance

For the second quarter of 2018, net sales increased by 40.1% to $128.5 million from $91.7 million for the second quarter of 2017. Revenues from the Company's domestic OEM customers increased by 35.0% to $62.6 million from $46.4 million in the second quarter of 2017. Commercial vehicle production and sales increased in the second quarter of 2018 and SORL continued to increase its leading market position. Sales from China's domestic aftermarket increased 70.5% to $42.8 million in the second quarter of 2018 from $25.1 million in the same quarter of 2017. Higher aftermarket product sales were generated due to the growing number of OEM warranties that expired from prior new vehicle sales in China. Also, the Chinese government's increased support for public transportation due to greater urbanization, expanded SORL's bus aftermarket sales. Revenues from international markets increased 13.9% to $23.1 million from $20.2 million in the second quarter of 2017 primarily due to a larger customer base.

The gross profit for the second quarter of 2018 increased 39.5% to $34.4 million from $24.7 million for the second quarter of 2017. Gross margin for the second quarter of 2018 was 26.8%, compared with a gross margin of 26.9% in the same quarter of 2017. The decrease in gross margin was primarily due to increased sales promotion during the second quarter of 2018.

Operating expenses increased 66.8% to $27.0 million from $16.2 million in the second quarter of 2017. Operating expenses rose due to higher research and development, and increased selling and distribution expenses and higher general and administrative expenses related to higher sales in the second quarter of 2018. As a percentage of revenue, operating expenses were 21.0% in the second quarter of 2018, compared with 17.6% in the second quarter of 2017.

  • Selling and distribution expenses were $14.0 million, or 10.9% of quarterly revenues, compared with $9.0 million, or 9.8% in the same quarter of 2017. The increase in expenses was mainly due to higher packaging and repair expenses and increased warranty fees.
  • General and administrative ("G&A") expenses in the second quarter of 2018 were $7.7 million, or 6.0% of revenue, compared with $4.7 million, or 5.1% in the second quarter of 2017.
  • Research and development ("R&D") expenses were $5.3 million in the second quarter of 2018 compared with $2.5 million in the same quarter of 2017. As a percentage of revenue, R&D was 4.1% in the second quarter of 2018 and compared with 2.7% of revenue in the second quarter of 2017. The R&D program mainly focused on the development of new, higher-margin, electronically controlled products, products for new energy vehicles and upgrading legacy brake products to enhance the Company's market leadership.

Income from operations increased 11.9% to $9.8 million in the second quarter of 2018 compared with $8.8 million in the same quarter of 2017.

Interest income was $0.8 million in the second quarter of 2018, compared with $0.01 million in the same quarter in 2017.

Financial expenses were $3.5 million in the second quarter of 2018, compared with $0.5 million in the second quarter of 2017. The increase was due to a rise in interest rates and a higher amount of average loans outstanding.

Exchange differences were $1.1 million in the second quarter of 2018, compared with negative $0.4 million in the same quarter in 2017.

Income before income taxes was $8.7 million for the second quarter of 2018, compared to $7.9 million for the second quarter of 2017. The pretax income margin was 6.8% in the second quarter of 2018, compared with 9.6% in the second quarter of 2017.

The provision for income taxes was $1.2 million in the second quarter of 2018, compared with $1.3 million in the second quarter of 2017.  

Net income attributable to stockholders for the second quarter of 2018 increased to $6.7 million, or $0.35 per basic and diluted share, compared with $5.9 million, or $0.31 on per basic and diluted share, in the second quarter of 2017.

First Six Months 2018 Financial Performance

Net sales for the first six months of 2018 increased 41.9% to $236.2 million from $166.5 million for the first six months of 2017. Net sales from the Company's China OEM market increased 34.4% to $114.4 million from $85.2 million in the same period in 2017. Revenues from China's domestic aftermarket increased 71.1% to $80.9 million from $47.1 million in the first six months of 2017. Revenues from international markets increased 19.5% to $40.9 million from $34.2 million in the first six months of 2017.

Gross profit for the first six months of 2018 increased 41.4% to $64.6 million from $45.7 million in the same period in 2017. Gross margin for the six months ended June 30, 2018, was 27.4% compared to 27.5% for the first six months of 2017.

Operating income for the first six months of 2018 increased 29.4% to $23.8 million from $18.4 million in the same period in 2017. Operating margin was 10.1% versus 11.1% in first six months of 2017.

Net income attributable to stockholders for the first six months of 2018 was $15.0 million, or $0.78 per basic and diluted share, compared with $12.8 million, or $0.67 per basic and diluted share, in the same period in 2017.

Balance Sheet

As of June 30, 2018, the Company had cash and cash equivalents of $24.5 million up from $22.7 million at March 31, 2018 and $4.2 million at December 31, 2017. Cash and cash equivalents plus restricted cash was $76.4 million on June 30, 2018, up from $69.3 million at March 31, 2018 and up from $4.6 million at December 31, 2017. Inventories increased to $136.9 million at June 30, 2018 from $114.3 million at December 31, 2017. Bank acceptance notes from customers increased to $129.7 million on June 30, 2018 from $116.0 million, and accounts receivables were $183.1 million compared with $134.4 million on December 31, 2017. Short-term bank loans declined to $162.2 million from $239.6 million at March 31, 2018, and was $125.4 million at December 31, 2017. Total equity was $214.0 million at June 30, 2018. On June 30, 2018, working capital was $87.4 million.

Business Outlook

For the fiscal year 2018, management has reiterated its expectation for annual net sales to be approximately $450 million and net income to be approximately $28.0 million. These targets are based on the Company's current views on the operating and market conditions, which are subject to change.

Conference Call

Management will host a conference call on Tuesday, August 14, 2018 at 8:00 P.M. EDT which is also 8:00 A.M. Beijing Time on Wednesday, August 15, 2018 to discuss its 2018 second quarter and six months 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 P.M. EDT on September 14, 2018, or 8:00 A.M. Beijing Time on September 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 "36631" 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
646-726-6511
kevin.theiss@awakenlab.com

-tables follow –

 

SORL Auto Parts, Inc. and Subsidiaries

Consolidated Balance Sheets

June 30, 2018 and December 31, 2017




June 30,
2018


December 31,
2017



(Unaudited)



Assets





Current Assets





Cash and cash equivalents

US$

24,525,413

US$

4,221,940

Accounts receivable, net, including $1,503,376 and $1,297,734
from related party at June 30, 2018 and December 31, 2017, respectively


183,072,448


134,384,961

Bank acceptance notes from customers


129,662,579


116,040,688

Inventories


136,914,131


114,300,564

Prepayments, current, including $3,440,141 and $999,527
to related party at June 30, 2018 and December 31, 2017, respectively


26,885,985


8,826,004

Restricted cash


51,858,438


376,236

Advances to related parties


31,997,128


72,318,224

Other current assets, net


9,608,654


5,555,568

Total Current Assets


594,524,776


456,024,185






Property, plant and equipment, net


84,281,312


79,828,006

Land use rights, net


22,266,453


14,912,134

Intangible assets, net


-


3,341

Deposits on loan agreements


10,579,452


10,712,865

Prepayments, non-current


31,050,766


16,594,987

Deferred tax assets


3,566,820


4,240,424

Total Non-current Assets


151,744,803


126,291,757

Total Assets

US$

746,269,579

US$

582,315,942






Liabilities and Equity





Current Liabilities





Accounts payable and bank acceptance notes to vendors, including $7,397,162 and $15,896,804 due to related parties at June 30, 2018 and December 31, 2017, respectively

US$

222,438,493

US$

118,051,633

Deposits received from customers


62,481,147


43,087,473

Short term bank loans


162,173,062


125,380,899

Current portion of long term loans


23,938,329


24,266,031

Income tax payable


1,348,557


3,249,727

Accrued expenses


19,007,341


25,154,658

Due to related party


11,536,621


1,572,963

Deferred income


755,675


1,020,273

Other current liabilities


3,403,573


2,857,130

Total Current Liabilities


507,082,798


344,640,787






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


25,177,921


37,383,224

Total Non-current Liabilities


25,177,921


37,383,224

Total Liabilities


532,260,719


382,024,011






Equity





Preferred stock - no par value; 1,000,000 authorized; none issued and outstanding as of June 30, 2018 and December 31, 2017


-


-

Common stock - $0.002 par value; 50,000,000 authorized, 19,304,921 issued and outstanding as of June 30, 2018 and December 31, 2017


38,609


38,609

Additional paid-in capital


(28,582,654)


(28,582,654)

Reserves


19,064,049


17,562,357

Accumulated other comprehensive income


13,231,502


15,903,188

Retained earnings


181,759,559


168,244,329

Total SORL Auto Parts, Inc. Stockholders' Equity


185,511,065


173,165,829

Noncontrolling Interest In Subsidiaries


28,497,795


27,126,102

Total Equity


214,008,860


200,291,931

Total Liabilities and Equity

US$

746,269,579

US$

582,315,942

 

 

SORL Auto Parts, Inc. and Subsidiaries

Consolidated Statements of Income and Comprehensive Income (Loss)

For the Three and Six Months Ended June 30, 2018 and 2017 (Unaudited)




Three Months Ended June 30,


Six Months Ended June 30,



2018


2017


2018


2017










Sales

US$

128,504,952

US$

91,729,568

US$

236,231,634

US$

166,475,962

Include: sales to related parties


5,962,527


2,702,573


13,663,581


6,322,970

Cost of sales


94,074,682


67,056,897


171,601,878


120,757,355

Gross profit


34,430,270


24,672,671


64,629,756


45,718,607










Expenses:









Selling and distribution expenses


13,956,009


8,985,562


23,993,870


14,594,185

General and administrative expenses


7,694,411


4,710,522


12,468,189


8,755,435

Research and development expenses


5,331,956


2,481,563


8,922,358


4,536,659

Total operating expenses


26,982,376


16,177,647


45,384,417


27,886,279










Other operating income, net


2,379,227


288,472


4,576,551


578,709










Income from operations


9,827,121


8,783,496


23,821,890


18,411,037










Interest income


811,580


11,475


2,299,844


22,025

Government grants


609,592


84,395


743,525


113,304

Other income


175,627


50


202,693


714

Interest expenses


(3,529,416)


(542,176)


(6,883,127)


(1,023,336)

Exchange differences


1,091,208


(417,118)


489,922


(509,850)

Other expenses


(254,271)


(25,490)


(1,145,085)


(140,289)










Income before income taxes provision


8,731,441


7,894,632


19,529,662


16,873,605










Provision for income taxes


1,238,752


1,311,509


2,844,193


2,597,683










Net income

US$

7,492,689

US$

6,583,123

US$

16,685,469

US$

14,275,922










Net income attributable to noncontrolling interest in subsidiaries


749,269


658,312


1,668,547


1,427,592










Net income attributable to common stockholders

US$

6,743,420

US$

5,924,811

US$

15,016,922

US$

12,848,330










Comprehensive income:









Net income

US$

7,492,689

US$

6,583,123

US$

16,685,469

US$

14,275,922

Foreign currency translation adjustments


(11,013,074)


3,223,520


(2,968,540)


4,134,952

Comprehensive income (loss)


(3,520,385)


9,806,643


13,716,929


18,410,874

Comprehensive income (loss) attributable to noncontrolling interest in subsidiaries


(352,038)


980,664


1,371,693


1,841,087

Comprehensive income (loss) attributable to common stockholders

US$

(3,168,347)

US$

8,825,979

US$

12,345,236

US$

16,569,787










Weighted average common share - basic


19,304,921


19,304,921


19,304,921


19,304,921










Weighted average common share - diluted


19,304,921


19,304,921


19,304,921


19,304,921










EPS - basic

US$

0.35

US$

0.31

US$

0.78

US$

0.67










EPS - diluted

US$

0.35

US$

0.31

US$

0.78

US$

0.67

 

 


SORL Auto Parts, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

For the Six Months Ended June 30, 2018 and 2017 (Unaudited)




Six Months Ended June 30,



2018


2017

Cash Flows From Operating Activities





Net income

US$

16,685,469

US$

14,275,922

Adjustments to reconcile net income to net cash

provided by (used in) operating activities:














Allowance for doubtful accounts


1,445,353


381,715

Depreciation and amortization


5,832,558


4,187,811

Amortization of debt issuance costs


697,633


4,566

Gain on disposal of fixed assets


(73,809)


-

Deferred income tax


642,345


-

Changes in assets and liabilities:





Account receivable


(52,930,675)


(16,819,493)

Bank acceptance notes from customers


36,822,604


3,181,918

Other currents assets


(5,158,214)


(3,197,226)

Inventories


(24,642,342)


(16,436,720)

Prepayments, current


(25,749,865)


4,815,945

Accounts payable and bank acceptance notes to vendors


99,655,568


(395,358)

Income tax payable


(1,918,494)


438,458

Deposits received from customers


20,470,159


8,402,222

Deferred income


(259,132)


-

Other current liabilities and accrued expenses


(5,426,422)


(2,087,738)

Net Cash Flows Provided By (Used In) Operating Activities


66,092,736


(3,247,978)






Cash Flows From Investing Activities





Acquisition of property, equipment and land use rights


(33,712,960)


(29,561,593)

Advances to related parties


(190,438,634)


-

Repayments of advances to related parties


222,337,244


-

Net Cash Flows Used In Investing Activities


(1,814,350)


(29,561,593)






Cash Flows From Financing Activities





Proceeds from short term bank loans


296,959,191


41,540,998

Repayments of short term bank loans


(256,944,835)


(23,035,449)

Proceeds from related parties


311,026,410


62,786,671

Repayments to related parties


(328,443,191)


(54,076,148)

Repayments of long term loans


(12,800,786)


-

Net Cash Flows Provided By Financing Activities


9,796,789


27,216,072






Effects on changes in foreign exchange rate


(2,289,500)


314,449






Net change in cash, cash equivalents, and restricted cash


71,785,675


(5,279,050)






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$

76,383,851

US$

8,254,726











Supplemental Cash Flow Disclosures:





Interest paid

US$

5,521,273

US$

785,502

Income taxes paid

US$

4,120,342

US$

2,154,659






Non-cash Investing and Financing Transactions










Loans from related parties in the form of bank acceptance notes

US$

33,721,267

US$

14,375,855

Repayments to related party in the form of bank acceptance notes

US$

5,846,083

US$

-

Repayments from related party in the form of bank acceptance notes

US$

19,612,146

US$

-






Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheets





Cash and cash equivalents

US$

24,525,413

US$

7,892,336

Restricted cash


51,858,438


362,390

Total cash, cash equivalents, and restricted cash

US$

76,383,851

US$

8,254,726

 

Cision View original content:http://www.prnewswire.com/news-releases/sorl-auto-parts-reports-40-top-line-growth-in-the-second-quarter-and-diluted-earnings-per-share-of-0-78-for-the-first-six-months-of-2018--300697071.html

SOURCE SORL Auto Parts, Inc.

View Comments and Join the Discussion!