ZHEJIANG, China, Aug. 14, 2019 (GLOBE NEWSWIRE) -- SORL Auto Parts, Inc. (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 2019 and the first six months ended June 30, 2019.
Second Quarter 2019 Financial Highlights
|·||Net sales increased 8.5% to $139.4 million compared with $128.5 million in the second quarter last year;|
|·||Gross profit increased 5.3% and the gross margin was 26.0% in the second quarter of 2019 compared to a 26.8% gross margin in the same period of 2018;|
|·||Diluted earnings per share were $0.29 compared with $0.35 in the same quarter last year.|
First Six Months of 2019 Financial Highlights
|·||Net sales increased 16.7% to $275.6 million compared with $236.2 million in same period of last year;|
|·||Gross profit increased 12.6% to $72.8 million from $64.6 million in the same period in 2018;|
|·||Net income attributable to stockholders was$14.6 million or $0.76 per basic and diluted earnings per share, compared with $15.0 million, or $0.78 per basic and diluted share, in the same period of 2018.|
Mr. Xiaoping Zhang, SORL's Chief Executive Officer and Chairman, stated, “Our second quarter results were positive considering the current state of Chinese economy as well as the commercial vehicles sector. We have maintained our market leadership in China with new advanced products.”
Second Quarter 2019 Financial Performance
For the second quarter of 2019, net sales increased by 8.5% to $139.4 million from $128.5 million for the second quarter of 2018. Revenues from the Company's domestic OEM customers increased by 10.6% to $69.2 million from $62.6 million in the second quarter of 2018. Commercial vehicle sales in China decreased in the second quarter of 2019, but SORL continued to expand its leading market share due to higher product quality and better service. Sales from China's domestic aftermarket increased 8.8% to $46.6 million in the second quarter of 2019 from $42.8 million in the same quarter of 2018. Higher aftermarket product sales were generated due to the growing number of OEM warranties that expired from prior new vehicle sales in China and the Company’s marketing campaign to enhance market share through its distribution campaign. Revenues from international markets increased 2.0% to $23.6 million from $23.1 million in the second quarter of 2018 primarily due to a larger customer base.
The gross profit for the second quarter of 2019 increased 5.3% to $36.3 million from $34.4 million for the second quarter of 2018. Gross margin for the second quarter of 2019 was 26.0%, compared with a gross margin of 26.8% in the same quarter of 2018. The decrease in gross margin was primarily due to increased sales promotion during the second quarter of 2019. Also, gross profit and gross margin decreased in the passenger vehicle auto parts operations. The focus for the remainder of 2019 is to increase production efficiency, improve product technology, and enhance SORL’s product portfolio, to help to maintain or increase gross profit margins.
Operating expenses increased 21.1% to $32.7 million from $27.0 million in the second quarter of 2018. Operating expenses rose due to higher research and development, selling and distribution, and general and administrative expenses in the second quarter of 2019. As a percentage of revenue, operating expenses were 23.4% in the second quarter of 2019, compared with 21.0% in the second quarter of 2018.
|·||Selling and distribution expenses increased 17.9% to $16.5 million, or 11.8% of quarterly revenues, compared with $14.0 million, or 10.9% in the same quarter of 2018. The increase in expenses was mainly due to higher packaging and repair expenses, increased warranty fees and higher labor costs.|
|·||General and administrative ("G&A") expenses in the second quarter of 2019 were $9.2 million, or 6.6% of revenue, compared with $7.7 million, or 6.0% in the second quarter of 2018 primarily due to higher labor expenses.|
|·||Research and development ("R&D") expenses were $7.0 million in the second quarter of 2019 compared with $5.3 million in the same quarter of 2018. As a percentage of revenue, R&D was 5.0% in the second quarter of 2019 and compared with 4.1% of revenue in the second quarter of 2018. 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 was $6.1 million in the second quarter of 2019 compared with $9.8 million in the same quarter of 2018.
Interest income was $1.5 million in the second quarter of 2019, compared with $0.8 million in the same quarter in 2018.
Financial expenses were $3.2 million in the second quarter of 2019, compared with $3.5 million in the second quarter of 2018. The decrease was due mainly to lower long-term loans outstanding.
Exchange differences were $0.5 million in the second quarter of 2019, compared with $1.1 million in the same quarter in 2018.
Income before income taxes was $6.6 million for the second quarter of 2019, compared to $8.7 million for the second quarter of 2018. The pretax income margin was 4.7% in the second quarter of 2019, compared with 6.8% in the second quarter of 2018.
The provision for income taxes was $0.3 million in the second quarter of 2019, compared with $1.2 million in the second quarter of 2018.
Net income attributable to stockholders for the second quarter of 2019 was $5.6 million, or $0.29 per basic and diluted share, compared with $6.7 million, or $0.35 on per basic and diluted share, in the second quarter of 2018.
First Six Months 2019 Financial Performance
Net sales for the first six months of 2019 increased 16.7% to $275.6 million from $236.2 million for the first six months of 2018. Net sales from the Company's China OEM market increased 26.0% to $144.1 million from $114.4 million in the same period in 2018. Revenues from China's domestic aftermarket increased 11.1% to $89.9 million from $80.9 million in the first six months of 2018. Revenues from international markets increased 1.6% to $41.6 million from $40.9 million in the first six months of 2018.
Gross profit for the first six months of 2019 increased 12.6% to $72.8 million from $64.6 million in the same period in 2018. Gross margin for the six months ended June 30, 2019, was 26.4% compared to 27.4% for the first six months of 2018.
Operating income for the first six months of 2019 decreased 16.6% to $19.9 million from $23.8 million in the same period in 2018. Operating margin was 7.2% versus 10.1% in first six months of 2018.
Net income attributable to stockholders for the first six months of 2019 was $14.6 million, or $0.76 per basic and diluted share, compared with $15.0 million, or $0.78 per basic and diluted share, in the same period in 2018.
As of June 30, 2019, the Company had cash and cash equivalents of $10.3 million up from $8.0 million at March 31, 2019 and compared with $73.6 million at December 31, 2018. Cash and cash equivalents plus restricted cash was $24.9 million on June 30, 2019 compared with $92.9 million at December 31, 2018. Inventories decreased to $183.5 million at June 30, 2019 from $204.3 million at December 31, 2018. Bank acceptance notes from customers increased to $73.7 million on June 30, 2019 from $62.1 million on December 31, 2018. Short-term bank loans increased to $224.4 million on June 30, 2019 from $217.9 million at December 31, 2018. Total equity was $221.2 million at June 30, 2019. On June 30, 2019, working capital was $35.7 million.
For the fiscal year 2019, management has reiterated its expectation for annual net sales to be approximately $515 million and net income to be approximately $22.0 million. These targets are based on the Company's current views on the operating and market conditions, which are subject to change.
Management will host a conference call on Wednesday, August 14, 2019 at 8:00 P.M. EDT and at 8:00 A.M. Beijing Time on Thursday, August 15, 2019 on to discuss its 2019 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 or at https://www.investornetwork.com/event/presentation/52973.
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 " 52973 " 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.
-tables follow –
SORL Auto Parts, Inc. and Subsidiaries
Consolidated Balance Sheets
June 30, 2019 and December 31, 2018
|June 30, |
|December 31, |
|Cash and cash equivalents||US$||10,294,982||US$||73,588,229|
|Accounts receivable, net, including $333,881 and $261,889 from related parties as of June 30, 2019 and December 31, 2018, respectively||184,101,294||150,047,797|
|Bank acceptance notes from customers||73,736,320||62,052,225|
|Prepayments, current, including $4,421,841 and $3,670,573 to related party at June 30, 2019 and December 31, 2018, respectively||16,228,104||7,776,591|
|Restricted cash, current||14,572,162||19,307,003|
|Advances to related parties||76,586,592||79,739,417|
|Deposits on loan agreements, current||5,091,131||-|
|Other current assets, net||11,432,369||15,697,448|
|Total Current Assets||575,562,226||612,494,137|
|Property, plant and equipment, net||112,336,122||96,053,386|
|Land use rights, net||20,745,600||21,124,455|
|Intangible assets, net||39,291||220,232|
|Deposits on loan agreements, non-current||5,091,131||10,199,324|
|Other assets, non-current||1,633,292||563,542|
|Restricted cash, non-current||17,164,385||18,067,374|
|Deferred tax assets||4,523,866||4,073,838|
|Total Non-current Assets||197,510,805||181,877,389|
|Liabilities and Equity|
|Accounts payable and bank acceptance notes to vendors, including $18,956,493 and $23,805,200 due to related parties at June 30, 2019 and December 31, 2018, respectively||US$||193,279,964||US$||236,433,718|
|Deposits received from customers||60,023,972||51,529,795|
|Short term bank loans||224,366,412||217,940,471|
|Current portion of long term loans, net of unamortized debt issuance costs||21,976,961||21,141,029|
|Income tax payable, current||4,481,767||3,421,486|
|Due to related party||7,774,184||5,959,752|
|Other current liabilities||4,040,963||3,288,344|
|Total Current Liabilities||539,891,498||565,213,779|
|Long term loans, less current portion and net of unamortized debt issuance costs||2,895,552||14,429,404|
|Operating lease liabilities, non-current||714,307||-|
|Income tax payable, non-current||8,377,468||9,259,307|
|Total Non-current Liabilities||11,987,327||23,688,711|
|Preferred stock - no par value; 1,000,000 authorized; none issued and outstanding as of June 30, 2019 and December 31, 2018||-||-|
|Common stock - $0.002 par value; 50,000,000 authorized, 19,304,921 issued and outstanding as of June 30, 2019 and December 31, 2018||38,609||38,609|
|Additional paid-in capital||(28,582,654||)||(28,582,654||)|
|Accumulated other comprehensive income||6,187,063||6,655,803|
|Total SORL Auto Parts, Inc. Stockholders’ Equity||190,794,055||176,654,143|
|Noncontrolling Interest In Subsidiaries||30,400,151||28,814,893|
|Total Liabilities and Equity||US$||773,073,031||US$||794,371,526|
SORL Auto Parts, Inc. and Subsidiaries
Consolidated Statements of Income and Comprehensive Income (Loss)
For the Three and Six Months Ended June 30, 2019 and 2018 (Unaudited)
|Three months ended |
|Six months ended |
|Include: sales to related parties||7,971,932||5,962,527||18,618,678||13,663,581|
|Cost of sales||103,104,120||94,074,682||202,803,474||171,601,878|
|Selling and distribution expenses||16,463,830||13,956,009||29,348,397||23,993,870|
|General and administrative expenses||9,221,426||7,694,411||16,596,319||12,468,189|
|Research and development expenses||6,981,251||5,331,956||11,932,787||8,922,358|
|Total operating expenses||32,666,507||26,982,376||57,877,503||45,384,417|
|Other operating income, net||2,495,568||2,379,227||4,958,170||4,576,551|
|Income from operations||6,098,423||9,827,121||19,870,599||23,821,890|
|Income before income taxes provision||6,600,102||8,731,441||18,444,723||19,529,662|
|Provision for income taxes||329,964||1,238,752||2,198,731||2,844,193|
|Net income attributable to noncontrolling interest in subsidiaries||632,013||749,269||1,637,340||1,668,547|
|Net income attributable to common stockholders||US$||5,638,125||US$||6,743,420||US$||14,608,652||US$||15,016,922|
|Foreign currency translation adjustments||(4,810,043||)||(11,013,074||)||(520,822||)||(2,968,540||)|
|Comprehensive income (loss)||1,460,095||(3,520,385||)||15,725,170||13,716,929|
|Comprehensive income (loss) attributable to noncontrolling interest in subsidiaries||151,009||(352,038||)||1,585,258||1,371,693|
|Comprehensive income (loss) attributable to common stockholders||US$||1,309,086||US$||(3,168,347||)||US$||14,139,912||US$||12,345,236|
|Weighted average common share - basic||19,304,921||19,304,921||19,304,921||19,304,921|
|Weighted average common share - diluted||19,304,921||19,304,921||19,304,921||19,304,921|
|EPS - basic||US$||0.29||US$||0.35||US$||0.76||US$||0.78|
|EPS - diluted||US$||0.29||US$||0.35||US$||0.76||US$||0.78|
SORL Auto Parts, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2019 and 2018 (Unaudited)
|Six months ended |
|Cash Flows From Operating Activities|
|Adjustments to reconcile net income to net cash provided by (used in) operating activities:|
|Allowance for doubtful accounts||1,633,832||1,445,353|
|Depreciation and amortization||6,927,367||5,832,558|
|Deferred income tax||(461,097||)||642,345|
|Gain on disposal of property and equipment||(38,330||)||(73,809||)|
|Amortization of debt issuance costs||325,413||697,633|
|Changes in assets and liabilities:|
|Bank acceptance notes from customers||(11,918,635||)||36,822,604|
|Other currents assets, net||2,048,887||(5,158,214||)|
|Accounts payable and bank acceptance notes to vendors||(43,192,905||)||99,655,568|
|Deposits received from customers||8,669,926||20,470,159|
|Income tax payable||189,523||(1,918,494||)|
|Other current liabilities and accrued expenses||(757,093||)||(5,426,422||)|
|Net Cash Flows Provided By (Used in) Operating Activities||(45,211,618||)||66,092,736|
|Cash Flows From Investing Activities|
|Acquisition of property, equipment, plant and land use rights||(27,478,369||)||(33,712,960||)|
|Advances to related parties||(15,305,460||)||(190,438,634||)|
|Repayment of advances to related parties||20,849,370||222,337,244|
|Proceeds from disposal of property and equipment||528||-|
|Net Cash Flows Used In Investing Activities||(21,933,931||)||(1,814,350||)|
|Cash Flows From Financing Activities|
|Proceeds from short term bank loans||213,297,377||296,959,191|
|Repayment of short term bank loans||(206,444,518||)||(256,944,835||)|
|Proceeds from related parties||1,843,951||311,026,410|
|Repayments to related parties||-||(328,443,191||)|
|Repayment of long term loans||(11,078,979||)||(12,800,786||)|
|Net Cash Flows Provided By (Used In) Financing Activities||(2,382,169||)||9,796,789|
|Effects on changes in foreign exchange rate||596,641||(2,289,500||)|
|Net change in cash, cash equivalents and restricted cash||(68,931,077||)||71,785,675|
|Cash, cash equivalents, and restricted cash - beginning of the year||110,962,606||4,598,176|
|Cash, cash equivalents, and restricted cash - end of the year||US$||42,031,529||US$||76,383,851|
|Supplemental Cash Flow Disclosures:|
|Income taxes paid||US$||2,464,974||US$||4,120,342|
|Non-cash Investing and Financing Transactions|
|Loans from related party in the form of bank acceptance notes||US$||-||US$||33,721,267|
|Repayments to related party in the form of bank acceptance notes||US$||-||US$||5,846,083|
|Repayments from related party in the form of bank acceptance notes||US$||-||US$||19,612,146|
|Liabilities assumed in connection with acquisition of property, plant and equipment||US$||338,025||US$||-|
|Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheets|
|Cash and cash equivalents||US$||10,294,982||US$||24,525,413|
|Restricted cash, current||14,572,162||51,858,438|
|Restricted cash, non-current||17,164,385||-|
|Total cash, cash equivalents, and restricted cash||US$||42,031,529||US$||76,383,851|
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