SORL Auto Parts Reports 26.5% Net Sales Increase in the First Quarter of 2019

Date : 05/15/2019 @ 9:30PM
Source : GlobeNewswire Inc.
Stock : SORL Auto Parts Inc (SORL)
Quote : 3.12  0.0 (0.00%) @ 9:00AM

SORL Auto Parts Reports 26.5% Net Sales Increase in the First Quarter of 2019

SORL Auto Parts (NASDAQ:SORL)
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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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