Form 8-K SORL Auto Parts Inc For: May 15

 

 

UNITED STATES

 

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): May 15, 2015

 

SORL Auto Parts, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware	000-11991	30-0091294
(State or other jurisdiction	(Commission	(I.R.S. Employer
of incorporation)	File Number)	Identification No.)
	No. 1169 Yumeng Road
	Ruian Economic Development  District
	Ruian City, Zhejiang Province
	People’s Republic of China
	(Address of principal executive offices)

 

Registrant’s telephone number, including area code:    86-577-6581-7720

 

N/A

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

  

 

 

ITEM 2.02. Results of Operations and Financial Condition.

 

A copy of the Company’s press release issued on May 15, 2015, regarding the Company’s financial results, is attached hereto as Exhibit 99.1. 

  

ITEM 9.01 Financial Statements and Exhibits.

 

(d) Exhibits.

 

There is furnished as part of this report the exhibit listed on the accompanying Index to Exhibits, which is incorporated herein by reference.

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.

 

	SORL Auto Parts, Inc.
Date: May 15, 2015	/s/ Xiao Ping Zhang
	Xiao Ping Zhang, Chief Executive Officer

 

 

 

EXHIBIT INDEX

 

Exhibit No.		Description
99.1		Press release issued on May 15, 2015

 

 

 

 Exhibit 99.1

 

 

SORL Auto Parts Reports Increased Sales and Net Income
in the First Quarter of 2015

 

ZHEJIANG, China, May 15, 2015 -- 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, 2015.

 

First Quarter 2015 Financial Highlights

 

·

Revenues for the first quarter of 2015increased by 4.4% to $52.2 million;

·

International sales rose by 27.5%and aftermarket sales rose by 18.0%;

·

Gross margin declined to 26.3% in the first quarter of 2015;

·

Net Income increased by10.1% to $3.1 million, or $0.16per diluted share;

·

Cash, cash equivalents and short-term investments totaled $49.6 million with a current ratio of 3.7to 1.

 

Mr. Xiaoping Zhang, SORL's Chief Executive Officer and Chairman, stated, “We are pleased to report revenue and net income growth in a very difficult market for commercial vehicles during the first quarter of 2015. The production and sales of commercial vehicles declined by 18.4% and 19.5% year-over-year respectively in the first quarter of 2015. Truck production and sales were down a deeper 21.8% and 22.7% year-over-year, respectively for the 2015 first quarter. Our strong positions in the aftermarket and growing international customer base offset weakness in the Chinese OEM market. Truck sales were especially impacted by the ‘pre-buy’ of less expensive National III emission standard trucks in the year ago same quarter and before the January 1, 2015 nationwide enforcement of the stricter National IV emission standards.”

 

“Our growing portfolio of advanced products, strong customer relationships and more efficient production positions us well to capture additional market share,” Mr. Zhang concluded.

 

First Quarter 2015Financial Performance

 

For the first quarter of 2015, net sales were $52.2 million, compared with $50.0million for the first quarter of 2014. Revenues from the Company’s domestic OEM customers decreased by 9.4%to $25.9 million, compared with $28.6 million for the first quarter of 2014. The Company’s domestic aftermarket revenues rose by 18.0% to $12.4 million, compared with $10.5 million in the first quarter of 2014.Aftermarket sales increased as the Company's expanded line of advanced products serviced a larger number of recently sold vehicles which exceeded their warranty period. Revenues from international markets increased by 27.5% to $13.9million, compared with $10.9million in the first quarter in 2014, mainly due to our expanding customer base in international markets.

 

The gross profit for the first quarter of 2015 decreased by 10.8% to $13.7million, from $15.4 million for the first quarter of 2014. Gross margin in the first quarter of 2015 was 26.3%. The gross margin decreased primarily due to temporary price promotions to increase sales and market share.

 

Operating expenses decreased to $9.8million in the first quarter of 2015 from $11.5 million in the first quarter of 2014. The decrease in operating expenses reflected lower expenditures in the selling and distribution and general and administrative sectors, partially offset by an increase in research and development. As a percentage of revenue, operating expenses were 18.7% in the first quarter of 2015, compared with 23.0% in the first quarter of 2014.

 

·

Selling and distribution expenses were $5.4million, or 10.3%of quarterly revenues, compared with $5.7million, or11.4% in the first quarter of 2014. The 6.2% decrease in expenses was mainly due to lower freight and labor expenses.

 

 

·

General and administrative expenses in the first quarter of 2015 were $2.7 million, or 5.2% of revenue compared with $4.3 million, or 8.6% in the first quarter of 2014. The decline was due to cost controls implemented in the first quarter of 2015.

 

·

Research and development expenses ("R&D") were $1.7 million, or3.3% of revenue in the first quarter of 2015 compared with $1.5million, or 3.0% of revenue in the first quarter of 2014. The Company continues to invest in the development of new products, especially higher-margin electronically controlled products, and upgrades of older products.

 

Financial expenses decreased to $0.2million from $0.5million due to decreased interest rate and decreased amount of average loans outstanding.

 

Income before provision for income taxes increased by 17.4% to $4.2 million for the first quarter of 2015 compared to $3.6 million for the first quarter of 2014. The higher income reflected increased sales and controlled expenses during the first quarter of 2015. The pretax income margin percentage was 8.0% in the first quarter of 2015, compared with 7.2% in the first quarter of 2014.

 

The provision for income taxes was $1.0 million, or a 23.8% tax rate, in the first quarter of 2015, which compared with $0.5 million, or a 14.3% tax rate in the first quarter in 2014.

 

Net income attributable to stockholders for the first quarter of 2015 was $3.1 million, or $0.16 per basic and diluted share, compared with $2.8 million, or $0.14 per basic and diluted share, in the first quarter of 2014.

 

Balance Sheet

 

As of March 31, 2015, the Company had cash, cash equivalents and short-term investments that totaled $49.6 million. Total equity increased to $222.6million at March 31, 2015 compared with $220.2 million at December 31, 2014. At March 31, 2015, working capital increased to $166.0million with a current ratio of 3.7 to 1.

 

Recent Developments

 

·

On January 5, 2015, SORL announced that it won its first "Excellent Supplier" award from Shaanxi HANDE Axle Co., Ltd. ("HANDE"). As a high-technology enterprise, HANDE has been recognized as one of the Top 500 China Machinery Enterprises and China's 100 Best Auto Parts Enterprises for many years. This award is a further testament to our ability to produce large quantities of global-quality braking products that meet the strictest requirements.

 

Business Outlook

 

For the fiscal year2015, management reiterates that the net sales will be approximately $256.0 million and net income to be approximately $15.0 million. These targets are based on the Company’s current views on the operating and market conditions, which are subject to change.

 

"Our higher sales and net income in the first quarter of 2015 reflect both our new cost controls and pricing to gain additional market leadership in a difficult environment. We are maintaining our strong cash and financial position to provide the resources to develop new products and support further growth,” commented Ms. Jinrui Yu, SORL’s Chief Operating Officer.

 

Conference Call

 

Management will host a conference call on Friday, May 15, 2015 at 8:00 a.m. EDT (8:00 p.m. Beijing Time) to discuss its 2015 first quarter financial results. Listeners may access the call by dialing U.S. toll free number +1-877-407-0778, +1-201-689-8565 for international callers, or China toll free +86-400-120-2840. A live webcast 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 11:59 p.m. EDT on June 15, 2015(11:59 a.m. Beijing Time on June 16, 2015). The replay dial-in numbers are: U.S. toll free number +1-877-660-6853, or the international number +1-201-612-7415. After dial-in, listeners may use Conference ID “13609502” 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, 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

 

Raymond Lin

+86.139.6777.6556

+86.577.6581.7721

[email protected]

 

Phyllis Huang

+86.151.6770.5972

+86.577.6581.7721

[email protected]

 

Kevin Theiss

Grayling

+1.646.284.9409

[email protected]

 

- Tables Follow -

 

 

 

 

SORL Auto Parts, Inc. and Subsidiaries

Consolidated Balance Sheets

March 31, 2015 and December 31, 2014

 

			March 31, 2015						December 31, 2014
			(Unaudited)
Assets
Current Assets
Cash and cash equivalents		US$		4,727,453				US$		14,009,597
Accounts receivable, net				72,785,233						68,171,387
Bank acceptance notes from customers				16,840,791						17,626,704
Short-term investments				44,845,698						34,838,757
Inventories				79,941,795						84,186,766
Prepayments, including $15,992 and $83,206 due from related parties at March 31, 2015 and December 31, 2014, respectively.				4,494,755						4,663,002
Current portion of prepaid capital lease interest				235,612						282,280
Other current assets				1,833,224						1,282,182
Deferred tax assets				2,023,880						1,868,371
Total Current Assets				227,728,441						226,929,046
Property, plant and equipment, net				43,189,388						43,550,927
Land use rights, net				14,272,734						14,421,729
Intangible assets, net				34,444						37,661
Security deposits on lease agreement				1,860,664						1,867,719
Non-current portion of prepaid capital lease interest				57,003						99,180
Total Non-Current Assets				59,414,233						59,977,216
Total Assets		US$		287,142,674				US$		286,906,262
Liabilities and Equity
Current Liabilities
Accounts payable,including $283,021 and $136,609 due to related parties at March 31, 2015 and December 31, 2014, respectively.		US$		9,196,839				US$		13,867,316
Deposit received from customers				20,686,281						19,045,172
Short-term bank loans				12,648,031						9,539,476
Income tax payable				1,491,189						1,101,103
Accrued expenses				11,541,927						13,561,163
Current portion of capital lease obligations				3,721,328						3,735,438
Other current liabilities, including $213,060 and $17,681 due to related parties at March 31, 2015 and December 31, 2014, respectively.				2,487,172						2,131,527
Total Current Liabilities				61,772,767						62,981,195
Non-Current Liabilities
Non-current portion of capital lease obligations				2,790,996						3,735,437
Total Non-Current Liabilities				2,790,996						3,735,437
Total Liabilities				64,563,763						66,716,632
Equity
Preferred stock - no par value; 1,000,000 authorized; none issued and outstanding as of March 31, 2015 and December 31, 2014				-						-
Common stock - $0.002 par value; 50,000,000 authorized,19,304,921 issued and outstanding as of March 31, 2015 and December 31, 2014				38,609						38,609
Additional paid-in capital				42,199,014						42,199,014
Reserves				12,335,365						12,019,532
Accumulated other comprehensive income				26,766,638						27,516,206
Retained earnings				119,669,501						116,935,053
Total SORL Auto Parts, Inc. Stockholders' Equity				201,009,127						198,708,414
Noncontrolling Interest In Subsidiaries				21,569,784						21,481,216
Total Equity				222,578,911						220,189,630
Total Liabilities and Equity		US$		287,142,674				US$		286,906,262

 

 

 

SORL Auto Parts, Inc. and Subsidiaries

Consolidated Statements of Income and Comprehensive Income

For The Three Months Ended March 31, 2015 and 2014 (Unaudited)

 

				Three Months Ended March 31,
				2015								2014
Net sales		US$			52,197,966				US$				49,993,289
Include: sales to related parties					1,011,924								290,077
Cost of sales					38,466,892								34,606,353
Gross profit					13,731,074								15,386,936
Expenses:
Selling and distribution expenses					5,350,998								5,705,494
General and administrative expenses					2,719,372								4,316,154
Research and development expenses					1,712,621								1,491,199
Total operating expenses					9,782,991								11,512,847
Other operating income					585,717								376,132
Income from operations					4,533,800								4,250,221
Other income					93,391								38,304
Interest expenses					(166,656	)							(485,756	)
Other expenses					(259,733	)							(226,034	)
Income before provision for income taxes					4,200,802								3,576,735
Provision for income taxes					998,278								513,235
Net income		US$			3,202,524				US$				3,063,500
Net income attributable to noncontrolling interest in subsidiaries					152,243								293,197
Net income attributable to common stockholders		US$			3,050,281				US$				2,770,303
Comprehensive income:
Net income		US$			3,202,524				US$				3,063,500
Foreign currency translation adjustments					(813,243	)							4,357,991
Comprehensive income					2,389,281								7,421,491
Comprehensive income attributable to noncontrolling interest in subsidiaries					88,568								697,996
Comprehensive income attributable to common stockholders		US$			2,300,713				US$				6,723,495
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$			0.16				US$				0.14
EPS - diluted		US$			0.16				US$				0.14

 

 

 

SORL Auto Parts, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

For The Three Months Ended March 31, 2015 and 2014 (Unaudited)

 

				Three Months Ended March 31,
				2015								2014
Cash Flows From Operating Activities
Net Income		US$			3,202,524				US$				3,063,500
Adjustments to reconcile net income to net cash
used in operating activities:
Allowance for doubtful accounts					(338,319	)							299,798
Depreciation and amortization					1,937,064								1,853,310
Deferred income tax					(162,875	)							(89,345	)
Loss on disposal of property and equipment					-								(8,217	)
Changes in assets and liabilities:
Account receivable					(4,556,747	)							(4,438,919	)
Bank acceptance notes from customers					720,695								7,375,687
Other currents assets					(557,779	)							117,457
Inventories					3,937,590								(1,279,739	)
Prepayments					(492,545	)							(2,254,068	)
Prepaid capital lease interest					87,570								131,368
Accounts payable					(4,765,769	)							(5,252,230	)
Income tax payable					394,992								(109,066	)
Deposits received from customers					1,716,287								(524,065	)
Other current liabilities and accrued expenses					(1,608,205	)							308,876
Net Cash Flows Used In Operating Activities					(485,517	)							(805,653	)
Cash Flows From Investing Activities
Change in short-term investments					(10,157,715	)							-
Acquisition of property and equipment					(859,313	)							(966,568	)
Proceeds of disposal of property and equipment					-								14,472
Net Cash Flows Used In Investing Activities					(11,017,028	)							(952,096	)
Cash Flows From Financing Activities
Proceeds from bank loans					8,643,266								20,196,632
Repayment of bank loans					(5,470,663	)							(10,566,433	)
Repayment of capital lease					(932,092	)							(918,873	)
Net Cash Flows Provided By Financing Activities					2,240,511								8,711,326
Effects on changes in foreign exchange rate					(20,110	)							629,376
Net change in cash and cash equivalents					(9,282,144	)							7,582,953
Cash and cash equivalents- beginning of the period					14,009,597								28,241,983
Cash and cash equivalents - end of the period		US$			4,727,453				US$				35,824,936
Supplemental Cash Flow Disclosures:
Interest paid		US$			191,154				US$				485,756
Income taxes paid		US$			766,161				US$				707,103

 

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