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 financial results for the first
quarter ended March 31, 2019.
First Quarter 2018 Financial
Highlights
- Net sales for the 2019 first quarter were $136.2 million, up
26.5% from $107.7 million in the first quarter of 2018;
- Revenues from the domestic OEM segment grew 44.6%
year-over-year to $74.9 million;
- Revenues from international markets increased to $18.0
million;
- Gross margin was 26.8% compared with 28.0% in the first quarter
of 2018;
- Net income attributable to stockholders increased to $9.0
million, or $0.46 per basic and diluted share, compared with $8.3
million, or $0.43 per basic and diluted share in the first quarter
of 2018.
Mr. Xiaoping Zhang, SORL's Chief Executive
Officer and Chairman, stated, “We are taking a ‘winner-takes-all’
mentality to expand our market shares in a business environment
filled with uncertainties and anxieties. On the OEM side, we
continue to strengthen our relationships with the main truck and
bus producers in China through our new products and service.
For the aftermarket, we differentiate ourselves with better pricing
and top quality to gain market share. In the international market,
we continue to focus on key markets and key customers to bolster
our foothold.”
Ms. Jinrui Yu, SORL’s Chief Operating Officer,
added, “Our growing product portfolio of advanced products
continues to generate substantial sales growth even in the current
challenging economic environment in China. We continue to add
resources to our research and development program while we also
maintain one of the highest gross margins in the industry.”
First Quarter 2019 Financial
Results
For the first quarter of 2019, net sales
increased 26.5% year-over-year to $136.2 million compared to $107.7
million in the first quarter of 2018.
Revenues from the Company’s domestic OEM
customers were $74.9 million, an increase of 44.6% from $51.8
million in the first quarter of 2018. The strong
year-over-year sales growth was mainly due to increased truck sales
in the first quarter and improved market share. Sales to
China's domestic aftermarket was $43.3 million compared with $38.0
million in the same quarter of 2018. The increase in aftermarket
sales was mainly attributable to the expiration of warranties from
higher sales of new vehicles over the past few years and the
Company’s increased marketing campaigns to bolster its market share
through its already well-established distribution network.
Revenues from international markets were $18.0 million compared to
$17.9 million in the same quarter of 2018.
The gross profit for the first quarter of 2019
increased 20.9% to $36.5 million from $30.2 million in the first
quarter of 2018. Gross margin was 26.8% compared with 28.0%
in the first quarter of 2018.
In the first quarter of 2019, operating expenses
increased to $25.2 million from $18.4 million in the same quarter
of 2018. As a percentage of total revenues, operating
expenses were 18.5% in the first quarter of 2019 compared to 17.1%
in the first quarter of 2018.
- Selling and distribution expenses were $12.9 million, or 9.5%
of quarterly revenues, compared with $10.0 million, or 9.3% in the
first quarter of 2018. The higher selling and distribution
expenses were primarily due to the higher freight and packaging
costs and increased personnel costs.
- General and administrative ("G&A") expenses in the first
quarter of 2019 were $7.4 million compared with $4.8 million a year
ago. G&A expenses as a percentage of revenue in the first
quarter of 2019 were 5.4% compared with 4.4% in the first quarter
of 2018. The higher G&A expenses were mainly due to an increase
in allowance for doubtful accounts and labor costs during this
quarter.
- Research and development ("R&D") expenses were $5.0 million
compared with $3.6 million in the first quarter of 2018. As a
percentage of revenue, R&D expenses were 3.6% in the first
quarter of 2019 compared with 3.3% of revenue in the first quarter
of 2018.
Interest income was $1.7 million compared with
$1.5 million in the first quarter of 2018. Financial expenses
were $4.0 million compared with $3.4 million in the first quarter
of 2018.
Income before income taxes was $11.8 million in
the first quarter of 2019 compared with $10.8 million in the first
quarter of 2018.
Income taxes were $1.9 million in the first
quarter of 2019 compared with $1.6 million in the first quarter of
2018.
Net income attributable to stockholders for the
first quarter of 2019 was $9.0 million, or $0.46 per basic and
diluted share, compared with $8.3 million, or $0.43 per basic and
diluted share a year ago.
Balance Sheet
As of March 31, 2019, the Company had cash and
cash equivalents of $8.0 million compared to $73.6 million on
December 31, 2018. Accounts receivable were $178.9 million
compared to $150.0 million on December 31, 2018. Inventories
were $187.4 million compared to $204.3 million on December 31,
2018. Short-term bank loans were $212.4 million compared to
$217.9 million on December 31, 2018. Total equity was $219.7
million at March 31, 2019 compared with $205.5 million at December
31, 2018. On March 31, 2019, working capital was $44.6
million with a current ratio of 1.1 to 1. Net cash used by
operating activities was $25.8 million compared with net cash flow
provided by operating activities of $36.3 million in the first
quarter of 2018. Acquisition of property, equipment, plant and land
use rights was $13.3 million compared with $19.7 million in the
first quarter of 2018.
Business Outlook
For the fiscal year 2019, management reiterated
its expectation that net sales will be approximately $515 million
and net income attributable to stockholders to be approximately $22
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 Wednesday, May 15, 2019, at 8:00 P.M. EDT/ 8:00
A.M. Beijing Time on May 16, 2019, to discuss its unaudited
financial results for the 2019 first quarter ended March 31,
2019. 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 June 15,
2019 or 8:00 A.M. Beijing Time on June 16, 2019 . 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 “49126” 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.
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+86-577-6581-7721phyllis@sorl.com.cn
Kevin Theiss Awaken Advisors 212-521-4050
kevin.theiss@awakenlab.com
-Tables Follow –
SORL Auto Parts, Inc. and
SubsidiariesConsolidated Balance
SheetsMarch 31, 2019 and December 31,
2018
|
|
March 31, 2019 |
|
|
December 31, 2018 |
|
Assets |
|
(Unaudited) |
|
|
|
|
Current
Assets |
|
|
|
|
|
|
Cash and cash equivalents |
|
US$ |
8,024,006 |
|
|
US$ |
73,588,229 |
|
Accounts receivable, net, including $341,110 and $261,889 from
related parties as of March 31, 2019 and December 31, 2018,
respectively |
|
|
178,871,527 |
|
|
|
150,047,797 |
|
Bank acceptance notes from customers |
|
|
73,404,114 |
|
|
|
62,052,225 |
|
Inventories, net |
|
|
187,384,139 |
|
|
|
204,285,427 |
|
Prepayments, current, including $5,129,110 and $3,670,573 to
related party at March 31, 2019 and December 31, 2018,
respectively |
|
|
17,350,867 |
|
|
|
7,776,591 |
|
Restricted cash, current |
|
|
16,804,852 |
|
|
|
19,307,003 |
|
Advances to related parties |
|
|
98,136,035 |
|
|
|
79,739,417 |
|
Deposits on loan agreements, current |
|
|
5,197,891 |
|
|
|
- |
|
Other current assets, net |
|
|
11,566,191 |
|
|
|
15,697,448 |
|
Total Current Assets |
|
|
596,739,622 |
|
|
|
612,494,137 |
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
|
107,063,204 |
|
|
|
96,053,386 |
|
Land use rights, net |
|
|
21,355,991 |
|
|
|
21,124,455 |
|
Intangible assets, net |
|
|
132,294 |
|
|
|
220,232 |
|
Deposits on loan agreements, non-current |
|
|
5,197,891 |
|
|
|
10,199,324 |
|
Prepayments, non-current |
|
|
33,069,906 |
|
|
|
31,575,238 |
|
Other assets, non-current |
|
|
574,397 |
|
|
|
563,542 |
|
Restricted cash, non-current |
|
|
18,415,386 |
|
|
|
18,067,374 |
|
Operating lease right of use assets |
|
|
1,222,064 |
|
|
|
- |
|
Deferred tax assets |
|
|
3,566,545 |
|
|
|
4,073,838 |
|
Total Non-current Assets |
|
|
190,597,678 |
|
|
|
181,877,389 |
|
Total Assets |
|
US$ |
787,337,300 |
|
|
US$ |
794,371,526 |
|
|
|
|
|
|
|
|
|
|
Liabilities and
Equity |
|
|
|
|
|
|
|
|
Current
Liabilities |
|
|
|
|
|
|
|
|
Accounts payable and bank acceptance notes to vendors, including
$30,167,916 and $23,805,200 due to related parties as of
March 31, 2019 and December 31, 2018, respectively |
|
US$ |
226,765,213 |
|
|
US$ |
236,433,718 |
|
Deposits received from customers |
|
|
53,150,261 |
|
|
|
51,529,795 |
|
Short term bank loans |
|
|
212,363,818 |
|
|
|
217,940,471 |
|
Current portion of long term loans, net of unamortized debt
issuance costs |
|
|
25,086,705 |
|
|
|
21,141,029 |
|
Income tax payable, current |
|
|
3,229,510 |
|
|
|
3,421,486 |
|
Accrued expenses |
|
|
19,499,647 |
|
|
|
24,045,902 |
|
Due to related party |
|
|
6,820,963 |
|
|
|
5,959,752 |
|
Deferred income |
|
|
1,259,842 |
|
|
|
1,453,282 |
|
Operating lease liabilities, current |
|
|
492,494 |
|
|
|
- |
|
Other current liabilities |
|
|
3,452,129 |
|
|
|
3,288,344 |
|
Total Current Liabilities |
|
|
552,120,582 |
|
|
|
565,213,779 |
|
|
|
|
|
|
|
|
|
|
Long term loans, less current portion and net of unamortized debt
issuance costs |
|
|
5,426,193 |
|
|
|
14,429,404 |
|
Operating lease liabilities, non-current |
|
|
797,107 |
|
|
|
- |
|
Income tax payable, non-current |
|
|
9,259,307 |
|
|
|
9,259,307 |
|
Total Non-current Liabilities |
|
|
15,482,607 |
|
|
|
23,688,711 |
|
Total Liabilities |
|
|
567,603,189 |
|
|
|
588,902,490 |
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
Preferred stock - no par value; 1,000,000 authorized; none issued
and outstanding as of March 31, 2019 and December 31, 2018 |
|
|
- |
|
|
|
- |
|
Common stock - $0.002 par value; 50,000,000 authorized, 19,304,921
issued and outstanding as of March 31, 2019 and December 31,
2018 |
|
|
38,609 |
|
|
|
38,609 |
|
Additional paid-in capital |
|
|
(28,582,654 |
) |
|
|
(28,582,654 |
) |
Reserves |
|
|
20,911,801 |
|
|
|
20,007,007 |
|
Accumulated other comprehensive income |
|
|
10,516,102 |
|
|
|
6,655,803 |
|
Retained earnings |
|
|
186,601,111 |
|
|
|
178,535,378 |
|
Total SORL Auto Parts, Inc. Stockholders’
Equity |
|
|
189,484,969 |
|
|
|
176,654,143 |
|
Noncontrolling Interest In Subsidiaries |
|
|
30,249,142 |
|
|
|
28,814,893 |
|
Total Equity |
|
|
219,734,111 |
|
|
|
205,469,036 |
|
Total Liabilities and Equity |
|
US$ |
787,337,300 |
|
|
US$ |
794,371,526 |
|
SORL Auto Parts, Inc. and
SubsidiariesConsolidated Statements of Income and
Comprehensive IncomeFor The Quarters Ended March
31, 2019 and 2018 (Unaudited)
|
|
Three months ended March 31, |
|
|
|
2019 |
|
|
2018 |
|
Sales |
|
US$ |
136,219,924 |
|
|
US$ |
107,726,682 |
|
Include: sales to related
parties |
|
|
10,646,746 |
|
|
|
7,701,054 |
|
Cost of sales |
|
|
99,699,354 |
|
|
|
77,527,196 |
|
Gross profit |
|
|
36,520,570 |
|
|
|
30,199,486 |
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
Selling and distribution
expenses |
|
|
12,884,567 |
|
|
|
10,037,861 |
|
General and administrative
expenses |
|
|
7,374,893 |
|
|
|
4,773,778 |
|
Research and development
expenses |
|
|
4,951,536 |
|
|
|
3,590,402 |
|
Total operating expenses |
|
|
25,210,996 |
|
|
|
18,402,041 |
|
|
|
|
|
|
|
|
|
|
Other operating income,
net |
|
|
2,462,602 |
|
|
|
2,197,324 |
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
13,772,176 |
|
|
|
13,994,769 |
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
1,736,775 |
|
|
|
1,488,264 |
|
Government grants |
|
|
1,792,412 |
|
|
|
133,933 |
|
Other income |
|
|
54,680 |
|
|
|
27,066 |
|
Interest expenses |
|
|
(3,972,498 |
) |
|
|
(3,353,711 |
) |
Exchange differences |
|
|
(1,061,005 |
) |
|
|
(601,286 |
) |
Other expenses |
|
|
(477,919 |
) |
|
|
(890,814 |
) |
|
|
|
|
|
|
|
|
|
Income before income taxes
provision |
|
|
11,844,621 |
|
|
|
10,798,221 |
|
|
|
|
|
|
|
|
|
|
Provision for income
taxes |
|
|
1,868,767 |
|
|
|
1,605,441 |
|
|
|
|
|
|
|
|
|
|
Net income |
|
US$ |
9,975,854 |
|
|
US$ |
9,192,780 |
|
|
|
|
|
|
|
|
|
|
Net income attributable to
noncontrolling interest in subsidiaries |
|
|
1,005,327 |
|
|
|
919,278 |
|
|
|
|
|
|
|
|
|
|
Net income attributable to
common stockholders |
|
US$ |
8,970,527 |
|
|
US$ |
8,273,502 |
|
|
|
|
|
|
|
|
|
|
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
US$ |
9,975,854 |
|
|
US$ |
9,192,780 |
|
Foreign currency translation
adjustments |
|
|
4,289,221 |
|
|
|
8,044,534 |
|
Comprehensive income |
|
|
14,265,075 |
|
|
|
17,237,314 |
|
Comprehensive income
attributable to noncontrolling interest in subsidiaries |
|
|
1,434,249 |
|
|
|
1,723,731 |
|
Comprehensive income
attributable to common stockholders |
|
US$ |
12,830,826 |
|
|
US$ |
15,513,583 |
|
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$ |
0.46 |
|
|
US$ |
0.43 |
|
|
|
|
|
|
|
|
|
|
EPS - diluted |
|
US$ |
0.46 |
|
|
US$ |
0.43 |
|
SORL Auto Parts, Inc. and
SubsidiariesConsolidated Statements of Cash
FlowsFor The Three Months Ended March 31, 2019 and
2018 (Unaudited)
|
|
Three Months Ended March 31, |
|
|
|
2019 |
|
|
2018 |
|
Cash Flows From
Operating Activities |
|
|
|
|
|
|
Net income |
|
US$ |
9,975,854 |
|
|
US$ |
9,192,780 |
|
Adjustments to
reconcile net income to net cash provided by (used in) operating
activities: |
|
|
|
|
|
|
|
|
Allowance for doubtful
accounts |
|
|
(79,426 |
) |
|
|
278,397 |
|
Depreciation and
amortization |
|
|
3,382,629 |
|
|
|
2,847,303 |
|
Deferred income tax |
|
|
580,171 |
|
|
|
900,839 |
|
Gain on disposal of property
and equipment |
|
|
(29,768 |
) |
|
|
- |
|
Amortization of debt issuance
costs |
|
|
181,333 |
|
|
|
372,025 |
|
Changes in assets and
liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(25,606,528 |
) |
|
|
(32,888,322 |
) |
Bank acceptance notes from
customers |
|
|
(10,059,686 |
) |
|
|
12,354,888 |
|
Inventories, net |
|
|
20,637,304 |
|
|
|
996,280 |
|
Prepayments |
|
|
(9,630,754 |
) |
|
|
(14,987,105 |
) |
Other currents assets,
net |
|
|
3,162,436 |
|
|
|
(1,890,438 |
) |
Operating lease right of use
assets |
|
|
125,799 |
|
|
|
- |
|
Accounts payable and bank
acceptance notes to vendors |
|
|
(13,728,060 |
) |
|
|
63,073,488 |
|
Deposits received from
customers |
|
|
621,908 |
|
|
|
5,123,039 |
|
Income tax payable |
|
|
(207,909 |
) |
|
|
(1,635,670 |
) |
Deferred income |
|
|
(219,320 |
) |
|
|
(129,981 |
) |
Operating lease
liabilities |
|
|
(326,476 |
) |
|
|
- |
|
Other current liabilities and
accrued expenses |
|
|
(4,598,818 |
) |
|
|
(7,302,268 |
) |
Net Cash Flows
Provided By (Used In) Operating Activities |
|
|
(25,819,311 |
) |
|
|
36,305,255 |
|
|
|
|
|
|
|
|
|
|
Cash Flows From
Investing Activities |
|
|
|
|
|
|
|
|
Acquisition of property,
equipment, plant and land use rights |
|
|
(13,252,877 |
) |
|
|
(19,682,775 |
) |
Advances to related
parties |
|
|
(15,305,460 |
) |
|
|
(67,694,035 |
) |
Repayment of advances to
related parties |
|
|
- |
|
|
|
5,821,183 |
|
Net Cash Flows Used In
Investing Activities |
|
|
(28,558,337 |
) |
|
|
(81,555,627 |
) |
|
|
|
|
|
|
|
|
|
Cash Flows From
Financing Activities |
|
|
|
|
|
|
|
|
Proceeds from short term bank
loans |
|
|
113,629,530 |
|
|
|
222,636,613 |
|
Repayment of short term bank
loans |
|
|
(123,310,819 |
) |
|
|
(115,398,302 |
) |
Proceeds from related
parties |
|
|
739,289 |
|
|
|
264,565,400 |
|
Repayments to related
parties |
|
|
- |
|
|
|
(256,883,171 |
) |
Repayment of long term
loans |
|
|
(5,869,199 |
) |
|
|
(6,401,331 |
) |
Net Cash Flows
Provided By (Used In) Financing Activities |
|
|
(14,811,199 |
) |
|
|
108,519,209 |
|
|
|
|
|
|
|
|
|
|
Effects on changes in foreign
exchange rate |
|
|
1,470,485 |
|
|
|
1,418,555 |
|
Net change in cash, cash
equivalents and restricted cash |
|
|
(67,718,362 |
) |
|
|
64,687,392 |
|
Cash, cash equivalents, and
restricted cash - beginning of the period |
|
|
110,962,606 |
|
|
|
4,598,176 |
|
Cash, cash
equivalents, and restricted cash - end of the period |
|
US$ |
43,244,244 |
|
|
US$ |
69,285,568 |
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow
Disclosures: |
|
|
|
|
|
|
|
|
Interest paid |
|
US$ |
2,903,589 |
|
|
US$ |
2,278,298 |
|
Income taxes paid |
|
US$ |
1,471,174 |
|
|
US$ |
2,340,272 |
|
|
|
|
|
|
|
|
|
|
Non-cash Investing and
Financing Transactions |
|
|
|
|
|
|
|
|
Loans from related party in
the form of bank acceptance notes |
|
US$ |
- |
|
|
US$ |
32,791,380 |
|
Repayments to related party in
the form of bank acceptance notes |
|
US$ |
- |
|
|
US$ |
5,846,083 |
|
|
|
|
|
|
|
|
|
|
Reconciliation of
cash, cash equivalents, and restricted cash to the consolidated
balance sheets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
US$ |
8,024,006 |
|
|
US$ |
22,682,734 |
|
Restricted cash, current |
|
|
16,804,852 |
|
|
|
46,602,834 |
|
Restricted cash,
non-current |
|
|
18,415,386 |
|
|
|
- |
|
Total cash, cash
equivalents, and restricted cash at end of the period |
|
US$ |
43,244,244 |
|
|
US$ |
69,285,568 |
|
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