SOURCE: SORL Auto Parts Inc

August 15, 2005 18:34 ET

SORL Auto Parts, Inc. Reports Net Income of $2.9 Million for the First Six Months of 2005

SORL Delivers 31 Percent Revenue Growth for the Second Quarter of 2005 Fueled by Major Expansion Into New Markets

ZHEJIANG, CHINA -- (MARKET WIRE) -- August 15, 2005 -- SORL Auto Parts, Inc. (OTC BB: SAUP) a leading international auto parts manufacturer based in China, today announced record financial results for the second quarter ended June 30, 2005.

SORL Auto Parts, Inc. ("SORL" or the "Company") reported net income for the second quarter ended June 30, 2005 increased by $0.2 million, or 19 percent, to $1.4 million or $0.11 per share, compared to $1.2 million, or $0.09 per share, for the same period a year ago. For the first six months of 2005, net income increased by $0.8 million, or 35 percent, to $2.9 million or $0.22 per share, compared to $2.1 million or $0.16 per share, for the first six months of 2004.

Sales for the second quarter ended June 30, 2005 increased by $3.6 million, or 31 percent, to $14.9 million from $11.3 million for the same period a year ago. For the first six months of 2005, sales increased by $9 million, or 44 percent, to $29.4 million compared to $20.5 million for the same period a year ago. The increase is primarily due to the increase in volume of our products shipped as a result of our aggressive expansion into new markets, especially in North America. Export sales grew by approximately 91 percent and accounted for approximately one third of total sales.

SORL reported that gross profit for the second quarter ended June 2005 increased by $0.7 million, or 26 percent, to $3.4 million from $2.7 million a year ago. For the first six months of 2005, gross profit increased by $1.7 million or 34 percent, to $6.6 million from $4.9 million for the same period a year ago. The improvement in gross profit was attributed to increased sales in both the domestic and international markets. The gross profit margin dropped 2 percent from 24 percent in the first half of 2004 to 22 percent in the first half of 2005. This decrease was due to the fact that 10 percent of the Company's gross sales were from products that were purchased from outside vendors as opposed to products manufactured internally, which carry lower costs and higher profit margins.

Selling, general, administration and related sales expenses for the second quarter ended June 30, 2005 were $1.6 million, or 11 percent of net sales. This compares to $1.2 million, or 11 percent of net sales for the same period last year. For the first six months of 2005, selling, general, administration and related sales expenses were $3.1 million or 11 percent of net sales compared to $2.4 million or 12 percent of net sales for the first six months of 2004. The decrease in these expenses was primarily due to economies of scales resulting from the increase in sales.

Cash and cash equivalents for the second quarter totaled $0.3 million. There was surplus working capital of $8.6 million for that same period.

Company Chairman and Chief Executive Officer Xiaoping Zhang said, "The Company had another outstanding quarter propelled by improvements in product quality, new marketing initiatives and growing export sales. Export sales accounted for more than 30 percent of total sales in the second quarter 2005, and we see many more opportunities for expansion into international markets and continued strong growth in export sales over the next two years."

About SORL Auto Parts, Inc.

SORL Auto Parts, Inc. is engaged in the manufacture and distribution of automotive air brake valves and hydraulic break valves primarily for the commercial vehicle market for vehicles weighting more than three tons, such as trucks, vans and buses in the People's Republic of China (PRC). The Company distributes products both in China and internationally under SORL trademarks. The Company's product range includes 36 types of brake valves with over 800 different specifications. The Company is rated as one of the top 100 auto component suppliers in China. The Company has two international sales centers in Australia and UAE, with additional new offices slated for opening in the U.S. and other locations in the near future.

FORWARD-LOOKING STATEMENTS

The information contained herein includes forward-looking statements. These statements relate to future events or to our future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. You should not place undue reliance on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control and which could, and likely will, materially affect actual results, levels of activity, performance or achievements. Any forward-looking statement reflects our current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy and liquidity. We assume no obligation to publicly update or revise these forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. The safe harbor for forward-looking statements contained in the Securities Litigation Reform Act of 1995 protects companies from liability for their forward looking statements if they comply with the requirements of the Act.


                   SORL Auto Parts, Inc.
                Consolidated Balance Sheets
             June 30, 2005 and December 31, 2004

                                          June 30,        December 31,
                                            2005             2004
                                         (Unaudited)       (Audited)
                                        ------------     ------------

Assets

Current Assets
  Cash and Cash Equivalents                  317,030          729,875
  Trade Receivables, Net of Provision     18,988,834       12,595,905
  Notes Receivable                           934,783          129,675
  Inventory                                2,604,395        1,875,300
  Prepayments                              1,810,466        1,404,710
  Other Currents (Receivables, or
   discontinued operations)                   62,742          393,300
                                        ------------     ------------
    Total Current Assets                  24,718,250       17,128,765

Fixed Assets
  Property, Plant and Equipment            8,590,023        7,517,796
  Less:  Accumulated Depreciation         (2,554,240)      (2,165,142)
                                        ------------     ------------
    Fixed Assets, Net                      6,035,783        5,352,654

Other Assets
  Loans Receivable                                 0                0
  Intangible Assets                           43,173           43,174
  Less:  Accumulated Amortization             (8,013)          (4,454)
    Intangible Assets, Net                    35,160           38,720

  Other LT Assets (Discontinued
   Operations)                                     0                0
                                        ------------     ------------
    Total Other                               35,160           38,720

                                        ------------     ------------
Total Assets                              30,789,193       22,520,139
                                        ============     ============

Liabilities and Shareholders' Equity

Current Liabilities
  Accounts Payable                         5,101,678        4,717,655
  Deposit Received from Customers          1,499,868          861,624
  ST Bank Loans                            8,174,590        4,830,918
  Accrued Expenses                           221,866          625,769
  Other Current Liabilities                1,075,428                0

    Total Current Liabilities             16,073,430       11,035,966

Long-Term Liabilities
  LT Bank Loans                                    0                0
  Other LT Liabilities                             0                0
                                        ------------     ------------
    Total Liabilities                     16,073,430       11,035,966
                                        ------------     ------------

Minority Interest                          1,471,577        1,148,418

Shareholders' Equity
  Common Stock                                26,574           26,574
  Paid In Capital                          4,082,237        4,082,237
  Reserves                                         0                0
  Retained Earnings (Deficit)              9,135,375        6,226,944
                                        ------------     ------------
                                          13,244,186       10,335,755
                                        ------------     ------------

Total Liabilities and Shareholders'
  Equity                                $ 30,789,193      $ 22,520,139
                                        ============      ============


                        SORL Auto Parts, Inc.
               Consolidated Statements of Operations
       For The Second Quarter Ending on June 30, 2005 and 2004


                       2005 Q2     2005 YTD         2004 Q2      2004 YTD
                     ----------   ----------        ---------   ----------

Sales           US$  14,924,151   29,440,016  US$  11,340,173   20,409,618

Cost of Sales        11,561,779   22,857,952        8,686,430   15,525,677
                     ----------   ----------        ---------   ----------

Gross Profit          3,362,372    6,582,064        2,653,743    4,883,941

Expenses:
  Selling and
   Distribution
   Expenses             954,666    1,881,755          387,736    1,012,874
  General and
   Administrative
   Expenses             652,039    1,206,293          839,266    1,408,171
                              0            0                0            0
                     ----------   ----------        ---------   ----------
Total Expenses        1,606,705    3,088,048        1,227,002    2,421,045

Operating Income      1,755,667    3,494,016        1,426,741    2,462,896

Financial
 Expenses              (126,348)    (186,800)         (76,267)    (156,175)
Other Income                  0            0                0            0
Non-Operating
 Expenses               (66,473)     (75,626)         (36,187)     (36,187)
                     ----------   ----------        ---------   ----------

Income (Loss)
 Before Provision
 for Income Taxes     1,562,846    3,231,590        1,314,287    2,270,534

Provision for
 Income Taxes                 0            0                0            0
                     ----------   ----------        ---------   ----------

Net Income
 Before
 Minority
 Interest             1,562,846    3,231,590        1,314,287    2,270,534
                     ==========   ==========       ==========   ==========

Minority Interest       156,285      323,159          131,428      227,053

Net Income
 Attributable
 to Shareholders      1,406,561    2,908,431        1,182,859    2,043,481
                     ==========   ==========       ==========   ==========

Weighted average
 common share -
 Basic               13,287,055   13,287,055          328,533      328,533

Weighted average
 common share -
 Diluted             13,287,055   13,287,055        7,588,334    3,958,422

EPS -Basic                 0.11         0.22             3.60         6.22

EPS -Diluted               0.11         0.22             0.16         0.52

Contact Information

  • CONTACTS:

    David He
    SORL Auto Parts, Inc.
    Phone: +86 (577) 6581-7720
    Email Contact

    Pamela A. Solly
    Keating After Market Support, LLC
    Greenwood Village, CO
    Email Contact
    (720) 489-5876