SORL Auto Parts Reports a 44.1% Sales Increase in the First Quarter of 2018
SORL Auto Parts Reports a 44.1% Sales Increase in the First Quarter of 2018
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 173,176,607 134,384,961
$1,297,734 from related party at March 31, 2018 and D
ecember 31, 2017, respectively
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, US $192,341,749 US $118,051,633
respectively
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 31,773,249 37,383,224
unamortized debt issuance costs
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 919,278 769,280
interest in subsidiaries
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 1,723,731 860,423
noncontrolling interest in subsidiaries
Comprehensive income
attributable to US $15,513,583 US $7,743,808
common stockholders
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
=== ===
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SOURCE SORL Auto Parts, Inc.
