SORL Auto Parts Reports 34.6% Increase in Revenue and 34.0% Increase in Net Income for the 2011 First Quarter

ZHEJIANG, China, May 16, 2011 /PRNewswire-Asia-FirstCall/ -- 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 financial results for the first quarter ended March 31, 2011.

First Quarter 2011 Financial Highlights

• Revenues rose 34.6% year-over-year;
• OEM sales rose 39.7% year-over-year;
• Gross margin was 28.1% in the first quarter of 2011;
• Net income rose 34.0% year-over-year;
• EPS $0.25 versus $0.19 in the first quarter of 2010.

Mr. Xiaoping Zhang, SORL Auto Parts' Chief Executive Officer and Chairman, stated, "We are pleased to report continued strong growth from all segments of our business. While our OEM business achieved the largest sales gains, we are pleased to see more balance in aftermarket sales and exports as our production capacity has been expanded to meet market demand. We continue to build relationships with existing OEM customers and penetrate new markets."

Financial Performance

For the first quarter of 2011, net sales were $52.0 million, a 34.6% increase compared to $38.6 million for the first quarter of 2010. Revenues from the Company's domestic OEM customers were $32.0 million, a 39.7% increase over the first quarter of 2010. Revenues from China's domestic aftermarket were $8.6 million, a 32.3% increase over the previous year's first quarter. Revenues from international markets were $11.4 million, a 23.9% increase from the same period in 2010. The sales increases were primarily due to continued growth in China's auto market, a greater number of vehicles in operation in China requiring more replacement parts, and an improved foreign customer base. Further, OEM customers increasingly purchased the Company's integrated systems and modular supplies of air brake systems instead of single products, which also consolidated our strategic partnerships with these OEMs. We increasingly focused on the light-duty, bus and agricultural vehicle markets in 2011.

First quarter gross profit increased 25.6% to $14.6 million from $11.6 million a year ago. Gross margin was 28.1%, slightly less than the 30.1% in the same period a year ago. The gross margin decrease was primarily the result of higher material and labor expenses, and the impact of appreciation in the value of Chinese currency against other currencies. The Company believes production efficiencies and greater sales of higher-profit, new products will help maintain its gross profit margin.

Operating expenses increased 20% to $8.5 million in the first quarter of 2011 from $7.0 million in the first quarter of 2010. As a percentage of revenue, operating expenses decreased to 16.3% in the first quarter 2011 from 18.2% in the first quarter of 2010 mainly as greater expenses were partially offset by higher sales.

Selling and distribution expenses were $3.1 million, or 5.9% of quarterly revenue compared with $2.4 million, and 6.2% in the same quarter of 2010. General and administrative (G&A) expenses in the first quarter of 2011 were $2.9 million, or 5.5% of revenue compared with $3.0 million, or 7.8% in the previous year's first quarter. Research and development (R&D) expenses were almost $2.0 million, or 3.8% of revenue in the 2011 first quarter compared with $1.5 million, or 3.9% in the first quarter a year ago.

Operating income increased 33.7% to $6.1 million for the first quarter 2011 from $4.6 million for the same quarter last year.

Net income attributable to stockholders for the first quarter of 2011 increased 34.0% to $4.9 million, or $0.25 per basic and diluted share, from $3.6 million, or $0.19 million per basic and diluted share, in the first quarter of 2010.

As of March 31, 2011, the Company had cash and cash equivalents of $12.2 million as compared to $6.7 million on December 31, 2010. Bank acceptance note to vendors were $7.1 million compared with $1.0 million at December 31, 2010. Total equity increased to $154.7 million at the end of March 2011 compared with $147.8 million at December 31, 2010. Net cash flow from operating activities was $8.3 million compared with $1.2 million for the first quarter of 2010.

Recent Developments

SORL Auto Parts, Inc. announced that its operating subsidiary, Ruili Group Ruian Auto Parts Co., Ltd. (Ruili), was awarded a "core supplier" designation from the China FAW Group Corporation (FAW Group). SORL was one of only 26 suppliers to be recognized as an FAW Group "core supplier."  We believe that this will create an opportunity for us to increase our sales to FAW Group. FAW Group is one of SORL's top three current customers, and we believe that we can increase sales to FAW Group by 10% to 15% in 2011. FAW Group is one of the largest auto producers in China. .

Business Outlook

For the second quarter of fiscal year 2011, management is expecting net sales to be approximately $65 million and net income to be approximately $6.1million. These targets are based on the Company's current views on the operating and market conditions, which are subject to change.

Conference Call

Management will host a conference call on Monday, May 16, 2011 at 8:00 a.m. EDT / 8:00 p.m. Beijing Time to discuss its 2011 first quarter financial results. Listeners may access the call by dialing U.S. toll free number [phone], or [phone] for international callers. 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 11:59 p.m. EDT on June 6, 2011, or 11:59 a.m. Beijing Time on June 7, 2011. The replay dial-in numbers are:  U.S. toll free number [phone], or the international number is [phone]; using Account "286" and Conference ID "372506" to access the replay.

About SORL Auto Parts, Inc.

As a leading manufacturer and distributor of automotive brake systems and other key safety related auto parts in China, management believes that SORL Auto Parts, Inc. ranks No. 1 for market share in China in the segment for brake systems for commercial vehicles, such as trucks and buses. 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 system and others. The Company has four authorized international sales centers in Australia, UAE, India, and the United States. 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 includes 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.

Contact Information
Ben Chen
Director of Investor Relations
[phone]
Email: [e-mail]
Kevin Theiss
Grayling
Tel:   [phone]
Email: [e-mail]

- Tables follow -

SORL Auto Parts, Inc. and Subsidiaries
Consolidated Balance Sheets
March 31, 2011 and December 31, 2010
			March 31, 2011		December 31, 2010
			(Unaudited)		(Audited)
	Assets
Current Assets
	Cash and Cash Equivalents	US$	12,189,960	US$	6,691,078
	Accounts Receivable, Net of Provision		64,413,585		54,168,856
	Notes Receivable		12,267,520		27,318,361
	Inventory		37,421,450		31,960,053
	Prepayments		10,012,821		7,632,674
	Other current assets, including $73,479 and $52,743 from related parties at March 31, 2011 and December 31, 2010, respectively.		3,992,146		3,497,659
	Total Current Assets		140,297,482		131,268,681
Fixed Assets
	Property, Plant and Equipment		70,368,340		67,926,160
	Less: Accumulated Depreciation		(24,855,526)		(23,032,159)
	Property, Plant and Equipment, Net		45,512,814		44,894,001
	Leasehold Improvements in Progress		412,121		424,881
Land Use Rights, Net			14,357,142		14,298,522
Other Assets
	Intangible Assets		168,194		166,510
	Less: Accumulated Amortization		(76,585)		(71,868)
	Intangible Assets, Net		91,609		94,642
	Deferred tax assets		366,686		398,034
	Total Other Assets		458,295		492,676
	Total Assets	US$	201,037,854	US$	191,378,761
	Liabilities and Shareholders' Equity
Current Liabilities
	Accounts Payable, including $1,196,760 and $3,151,493 due to related parties at March 31, 2011 and December 31, 2010, respectively.	US$	8,625,752	US$	10,672,514
	Bank acceptance note to vendors		7,077,054		966,373
	Deposit Received from Customers		5,254,318		7,484,839
	Short term bank loans		15,978,270		15,770,448
	Income tax payable		1,194,705		1,174,976
	Accrued Expenses		7,434,305		6,777,830
	Other Current Liabilities, including $117,950 and $200,762 due to related parties at March 31, 2011 and December 31, 2010, respectively.		597,508		559,575
	Total Current Liabilities		46,161,912		43,406,555
Non-Current Liabilities
	Deferred tax liabilities		187,083		171,981
	Total Liabilities	US$	46,348,995	US$	43,578,536
Stockholders' Equity
	Preferred Stock - No Par Value; 1,000,000 authorized; none issued and outstanding as of March 31, 2011 and December 31, 2010	US$	-		-
	Common Stock - $0.002 Par Value; 50,000,000 authorized,
	19,304,921 and 19,304,921 issued and outstanding as of
	March 31, 2011 and December 31, 2010		38,609		38,609
	Additional Paid In Capital		42,199,014		42,199,014
	Reserves		7,134,049		6,641,547
	Accumulated other comprehensive income		16,112,365		14,731,607
	Retained Earnings		74,034,107		69,672,286
	Total SORL Auto Parts, Inc. stockholders' equity		139,518,144		133,283,063
	Noncontrolling Interest In Subsidiaries		15,170,715		14,517,162
	Total Equity		154,688,859		147,800,225
	Total Liabilities and Stockholders' Equity	US$	201,037,854	US$	191,378,761

SORL Auto Parts, Inc. and Subsidiaries
Consolidated Statements of Income
For The First Quarter  Ended on March 31, 2011 and 2010
					Three Months Ended March 31,
					2011		2010
Sales				US$	51,992,965		38,631,601
Include: sales to related parties					904,947		249,156
Cost of Sales					37,403,946		27,016,524
Gross Profit					14,589,019		11,615,077
Expenses:
	Selling and Distribution Expenses				3,069,228		2,413,547
	General and Administrative Expenses				2,866,448		3,000,139
	Research and development expenses				1,978,901		1,525,797
	Financial Expenses				567,352		108,267
		Total Expenses			8,481,929		7,047,750
Operating Income					6,107,090		4,567,327
Other Income					205,248		108,545
Non-Operating Expenses					(8,137)		(12,659)
Income Before Provision for Income Taxes					6,304,201		4,663,213
Provision for Income Taxes					949,743		695,775
Net Income					5,354,458		3,967,438
Other Comprehensive Income - Foreign Currency Translation Adjustment				US$	1,534,176		39,970
Total Comprehensive Income					6,888,634		4,007,408
Less:
Net income attributable to Noncontrolling Interest In Subsidiaries					500,135		345,585
Other Comprehensive Income Attributable to Non-controlling Interest's Share					153,418		4,269
Total Comprehensive Income Attributable to Non-controlling Interest's Share					653,553		349,854
Net Income Attributable to Stockholders					4,854,323		3,621,853
Other Comprehensive Income Attributable to Stockholders					1,380,758		35,701
Total Comprehensive Income Attributable to Stockholders					6,235,081		3,657,554
Weighted average common share - Basic					19,304,921		18,871,588
Weighted average common share - Diluted					19,304,921		18,871,588
EPS - Basic					0.25		0.19
EPS - Diluted					0.25		0.19

SORL Auto Parts, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For The First Quarter Ended on March 31, 2011 and 2010
		Three Months Ended March 31,
		2011		2010
Cash Flows from Operating Activities
Net Income	US$	4,854,323		3,621,853
Adjustments to reconcile net income (loss) to net cash
from operating activities:
Noncontrolling Interest In Subsidiaries		500,135		345,585
Bad Debt Expense		-		157,199
Depreciation and Amortization		1,688,888		1,188,241
Stock-Based Compensation Expense		-		-
Loss on disposal of Fixed Assets		-		-
Changes in Assets and Liabilities:
Accounts Receivable		(9,744,191)		2,919,311
Notes Receivable		15,249,986		(3,329,084)
Other Current Assets		(540,196)		(28,417)
Inventory		(5,112,991)		(2,843,151)
Prepayments		(399,564)		942,716
Deferred tax assets		35,194		(100,421)
Accounts Payable and Bank acceptance note to vendors		3,274,639		(1,972,587)
Income Tax Payable		7,808		(336,074)
Deposits Received from Customers		(2,294,562)		1,104,956
Other Current Liabilities and Accrued Expenses		812,543		(488,406)
Deferred tax liabilities		13,296		12,833
Net Cash Flows from Operating Activities		8,345,308		1,194,554
Cash Flows from Investing Activities
Acquisition of Property and Equipment		(2,987,014)		(3,270,650)
Leasehold Improvements in Progress
Sales proceeds of disposal of fixed assets		-		-
Investment in Intangible Assets		-		-
Net Cash Flows from Investing Activities		(2,987,014)		(3,270,650)
Cash Flows from Financing Activities
Proceeds from (Repayment of) Bank Loans		48,104		-
Proceeds from Share Issuance		-		9,399,978
Capital contributed by Minority S/H		-		1,038,900
Net Cash flows from Financing Activities		48,104		10,438,878
Effects on changes in foreign exchange rate		92,484		2,751
Net Change in Cash and Cash Equivalents		5,498,882		8,365,533
Cash and Cash Equivalents- Beginning of the year		6,691,078		10,255,259
Cash and cash Equivalents - End of the period	US$	12,189,960		18,620,792
Supplemental Cash Flow Disclosures:
Interest Paid		551,121		-
Tax Paid		893,444		1,028,418

SOURCE SORL Auto Parts, Inc.

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