SORL Auto Parts Reports Second Quarter 2009 Financial Results

Share Name	Share Symbol	Market	Type	Share ISIN	Share Description
Solana Res	LSE:SORL	London	Ordinary Share	CA8341281001	COM SHS NPV

Industry Sector	Turnover	Profit	EPS - Basic	PE Ratio	Market Cap
	0	0		N/A	0

Solana Res (LSE:SORL)
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-- 2Q09 Gross Margin Increased 130 Basis Points YoY to 28.3% -- ZHEJIANG, China, Aug. 13 /PRNewswire-Asia-FirstCall/ -- SORL Auto Parts, Inc. (NASDAQ:SORL) ("SORL" or "The Company"), a leading manufacturer and distributor of commercial vehicle air brake valves as well as related auto parts in China, announced financial results for the quarter ended June 30, 2009. Prior to the implementation of the China III emission standard beginning on July 1, 2008, demand for commercial vehicles equipped with China II engines was significantly enhanced in the first half of 2008. This resulted in higher than usual output and sales volume of commercial vehicles in the first and second quarter of 2008, distorting year over year comparisons. SORL provides both year over year and sequential comparisons when discussing its second quarter 2009 financial performance. For the second quarter of 2009, net sales were $29.7 million, a 29.5% decrease compared to $42.2 million in the same period of 2008 and a 46.9% increase compared to the first quarter of 2009. Revenues from China's domestic OEM market were $14.1 million, a 19.4% decrease from $17.5 million in the same period of 2008 and a 53.3% increase compared to the first quarter of 2009. Revenues from China's domestic aftermarket were $7.2 million, a 31.4% decrease from $10.5 million in the same period of 2008 and a 10.8% increase compared to the first quarter of 2009. Revenues from international markets were $8.4 million a 40.4% decrease from $14.1 million in the same period of 2008 and an 82.6% increase compared to the first quarter of 2009. The year over year decrease in sales was due to a combination of the global financial crisis and macro-economic recession which weakened demand from our Chinese and international customers in 2009 and the implementation of government emissions regulations enacted for the second half of 2008 that spurred higher levels of sales in the first half of 2008. Gross profit for the second quarter of 2009 was $8.4 million, a 26.2% decrease compared to $11.4 million in the same period of 2008 and a 52.8% increase compared to the first quarter of 2009. Gross margin in the second quarter of 2009 increased 130 basis points to 28.3% from 27.0% in the same period of 2008 and 27.2% in the first quarter of 2009. The increase in gross margin was primarily the result of increasing management efficiency, improving the technologies of products, and SORL's continued market expansion with new, higher profit valve products. Operating expenses in the second quarter of 2009 were $4.3 million, a 26.1% decrease compared to $5.9 million in the same period of 2008 and a 4.9% increase compared to the first quarter of 2009. As a percentage of revenue, operating expenses increased to 14.6% in the second quarter 2009 from 13.9% in the same period of 2008 as a result of decreased sales output offset by increased selling, general and administrative expenses. Selling expenses as a percentage of revenue increased as the Company increased packing expenses to improve package quality of some export products. General and administrative expenses as a percentage of revenue increased due to decreased sales without a commensurate decline in certain fixed production costs, such as management payroll, depreciation and professional fees resulting from being a public company. Operating expenses as a percent of revenue decreased from 20.4% in the first quarter of 2009 primarily due to rebounding sales volume. Operating income in the second quarter of 2009 was $4.1 million, a 26.3% decrease compared to $5.5 million in the same period of 2008 and a 197% increase compared to the first quarter of 2009. Operating margin increased 60 basis points to 13.7% for the second quarter 2009 from 13.1% in the same period of 2008 as a result of the increase in sales gross margin, offset by the increase in operating expenses as a percent of revenue. In the second quarter of 2009, operating margin increased 690 basis points from 6.8% in the first quarter of 2009 as a result of stronger sales. Net income attributable to stockholders for the second quarter of 2009 was $3.0 million or $0.16 per diluted share, a 36.7% decrease compared to $4.7 million, or $0.26 per share in the same period of 2008 and a 217% increase compared to the first quarter of 2009. "Year over year comparisons in the second quarter of 2009 reflected challenging conditions for SORL," said Xiaoping Zhang, SORL Auto Parts' CEO and Chairman. "Sales growth in China and internationally was negatively affected by difficult global economic conditions and year over year comparisons were made more difficult in the first half of 2009 because of government regulations enacted in 2008. In response to the implementation of the China III emission standard beginning July 1, 2008, sales of trucks equipped with China II engines accelerated in the first half of the year before the policy was enforced." Mr. Zhang continued, "Looking at SORL's financial performance on a sequential basis, we experienced significant improvement. Sales increased 46.9% between the first and second quarter of 2009. Gross profit increased 52.8% between the first and second quarter of 2009 and operating income increased 197%. Net income increased 217% between the first and second quarter of 2009. "We believe that global economic conditions are showing signs of stabilization and we remain confident in the long-term viability of China's auto market and SORL's business plan. The Chinese government's stimulus plan has already induced increased demand in the auto market, which we believe will boost our performance in the second half of this year. The stabilizing market is already having a positive impact on our sales, reflected in improved sales performance in the second quarter of 2009 and so far in the third quarter of 2009. "We continue to invest in research and development to fund exciting new products for these market segments. The financial position of our company remains solid, with $15.8 million of cash on the balance sheet and no long- term debt, and we generated $5.4 million of cash flow from operations during the quarter." Conference Call Management will host a conference call at 8:30 am ET, on Thursday, August 13, 2009 to discuss its second quarter 2009 financial results. Listeners may access the call by dialing #1-888-668-1638 or #1-913-312-1495 for international callers. A live webcast of the conference call will also be available at http://www.sorl.cn/ . A replay of the call will be available from August 13, 2009 to August 20, 2009. Listeners may access the replay by dialing #1-888-203-1112 or #1-719- 457-0820 for international callers; pin number: 4220704. About SORL Auto Parts, Inc. As China's leading manufacturer and distributor of automotive air brake valves, SORL Auto Parts, Inc. ranks first in market share in the segment for commercial vehicles weighing more than three tons, such as trucks and buses. The Company distributes products both within China and internationally under the SORL trademark. SORL ranks among the top 100 auto component suppliers in China, with a product range that includes 40 types of air brake valves and over 1000 different specifications. The Company has four authorized international sales centers in Australia, United Arab Emirates, India, and the United States, with additional offices slated to open in other locations in the near future. 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. Forward- looking statements can be identified by the use of forward-looking terminology such as "will", "believes", "expects" or similar expressions. These forward- looking statements may also include statements about our proposed discussions related to our business or growth strategy, which is subject to change. Such information is based upon expectations of our management that were reasonable when made but may prove to be incorrect. All of such assumptions are inherently subject to uncertainties and contingencies beyond our control and upon assumptions with respect to future business decisions, which are subject to change. We do not undertake to update the forward-looking statements contained in this press release. For a description of the risks and uncertainties that may cause actual results to differ from the forward-looking statements contained in this press release, see our most recent Annual Report filed with the Securities and Exchange Commission (SEC) on Form 10-K, and our subsequent SEC filings. 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/. SORL Auto Parts, Inc. and Subsidiaries Consolidated Balance Sheets June 30, 2009 and December 31, 2008 30-Jun-09 31-Dec-08 (Unaudited) (Audited) Assets Current Assets Cash and Cash Equivalents US$ 15,762,830 US$ 7,795,987 Accounts Receivable, Net of Provision 40,764,983 35,797,824 Notes Receivable 8,120,653 7,536,534 Inventory 16,246,168 19,105,845 Prepayments, including $0 and $187,813 to related parties at June 30, 2009 and December 31, 2008, respectively 1,568,450 1,013,440 Other current assets, including $41,042 and $1,906,070 to related parties at June 30, 2009 and December 31, 2008, respectively 562,310 4,445,778 Total Current Assets 83,025,394 75,695,408 Fixed Assets Property, Plant and Equipment 33,494,523 32,927,306 Less: Accumulated Depreciation -10,247,047 -8,951,886 Property, Plant and Equipment, Net 23,247,476 23,975,420 Leasehold Improvements In Progress 465,620 -- Land Use Rights, Net 14,355,711 14,514,983 Other Assets Deferred compensation cost- stock options -- 9,935 Intangible Assets 161,411 161,347 Less: Accumulated Amortization -46,692 -39,018 Intangible Assets, Net 114,719 122,329 Deferred tax assets 531,512 189,228 Total Other Assets 646,231 321,492 Total Assets US$121,740,432 US$114,507,303 Liabilities and Shareholders' Equity Current Liabilities Accounts Payable and Notes Payable, including $1,570,913 and $0 to related parties at June 30, 2009 and December 31, 2008, respectively US$ 5,487,114 US$ 4,623,850 Deposit Received from Customers 6,435,620 6,295,857 Income tax payable 1,281,330 340,138 Accrued Expenses 3,302,262 2,389,314 Other Current Liabilities 371,389 460,124 Total Current Liabilities 16,877,715 14,109,283 Non-Current Liabilities Deferred tax liabilities 149,616 106,826 Total Liabilities 17,027,331 14,216,109 Stockholders' Equity Preferred Stock - No Par Value; 1,000,000 authorized; none issued and outstanding as of June 30, 2009 and December 31, 2008 -- -- Common Stock - $0.002 Par Value; 50,000,000 authorized, 18,279,254 issued and outstanding as of June 30, 2009 and December 31, 2008 36,558 36,558 Additional Paid In Capital 37,498,452 37,498,452 Reserves 3,521,246 3,126,086 Accumulated other comprehensive income 10,885,312 10,848,248 Retained Earnings 42,321,182 38,774,684 Total SORL Auto Parts, Inc. Stockholders' Equity 94,262,750 90,284,028 Noncontrolling Interest In Subsidiaries 10,450,351 10,007,166 Total Equity 104,713,101 100,291,194 Total Liabilities and Stockholders' Equity US$121,740,432 US$114,507,303 SORL Auto Parts, Inc. and Subsidiaries Consolidated Statements of Income and Comprehensive Income (Unaudited) For The Three Months and Six Months Ended June 30,2009 and 2008 Three Months Ended Six Months Ended June 30, June 30, 2009 2008 2009 2008 Sales US$ 29,740,212 42,186,119 49,983,950 72,844,561 Include: sales to related parties 64,179 1,004,231 201,611 1,822,149 Cost of Sales 21,318,699 30,776,773 36,049,624 52,793,354 Gross Profit 8,421,513 11,409,346 13,934,326 20,051,207 Expenses: Selling and Distribution Expenses 2,060,718 2,771,803 3,378,452 4,611,078 General and Administrative Expenses 2,273,064 2,718,217 5,065,813 4,694,418 Financial Expenses 9,129 383,320 38,091 752,996 Total Expenses 4,342,911 5,873,340 8,482,356 10,058,492 Operating Income 4,078,602 5,536,006 5,451,970 9,992,715 Other Income 176,244 222,762 215,461 333,840 Non-Operating Expenses -11,002 -175,785 -14,616 -254,963 Income (Loss) Before Provision for Income Taxes 4,243,844 5,582,983 5,652,815 10,071,592 Provision for Income Taxes 914,125 318,757 1,272,091 882,231 Net Income US$ 3,329,719 5,264,226 4,380,724 9,189,361 Other Comprehensive Income (Loss)- Foreign Currency Translation Adjustment 60,385 2,110,749 41,183 5,470,639 Total Comprehensive Income 3,390,104 7,374,975 4,421,907 14,660,000 Less: Net income Attributable to Non-controlling Interest In Subsidiaries 332,972 527,929 439,066 921,948 Other Comprehensive Income (Loss) Attributable to Non- controlling Interest's Share 6,039 211,075 4,119 547,064 Total Comprehensive Income (Loss) Attributable to Non- controlling Interest's Share 339,011 739,004 443,185 1,469,012 Net Income Attributable to Stockholders 2,996,747 4,736,297 3,941,658 8,267,413 Other Comprehensive Income (Loss) Attributable to Stockholders 54,346 1,899,674 37,064 4,923,575 Total Comprehensive Income (Loss) Attributable to Stockholders 3,051,093 6,635,971 3,978,722 13,190,988 Weighted average common share - Basic 18,279,254 18,279,254 18,279,254 18,279,254 Weighted average common share - Diluted 18,279,254 18,287,764 18,279,254 18,288,958 EPS - Basic 0.16 0.26 0.22 0.45 EPS - Diluted 0.16 0.26 0.22 0.45 DATASOURCE: SORL Auto Parts, Inc. CONTACT: At SORL Auto Parts, Inc.: Ben Chen, Director of Investor Relations at +86-577-6581-7721 or ; At ICR, Inc.: In U.S.: Brian M. Prenoveau, CFA at +1-203-682-8200 or ; In China: Yuening Jiang at +86-10-6599-7965 or Web site: http://www.sorl.cn/

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