Document And Entity Information
Document And Entity Information - shares | 3 Months Ended | |
Mar. 31, 2017 | May 15, 2017 | |
Document Information [Line Items] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2017 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q1 | |
Entity Registrant Name | SORL Auto Parts Inc | |
Entity Central Index Key | 714,284 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Trading Symbol | SORL | |
Entity Common Stock, Shares Outstanding | 19,304,921 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
Current Assets | ||
Cash and cash equivalents | $ 11,455,214 | $ 8,057,155 |
Accounts receivable, net, including $0 and $5,025,509 from related parties at March 31, 2017 and December 31, 2016, respectively | 104,844,561 | 102,129,294 |
Bank acceptance notes from customers | 45,638,224 | 42,697,276 |
Inventories | 71,745,365 | 65,776,517 |
Prepayments, current | 9,711,086 | 10,797,601 |
Restricted cash | 5,596,257 | 5,476,621 |
Other current assets | 1,774,940 | 1,124,608 |
Deferred tax assets | 3,219,643 | 3,210,575 |
Total Current Assets | 253,985,290 | 239,269,647 |
Property, plant and equipment, net | 54,885,852 | 53,737,706 |
Land use rights, net | 8,284,055 | 8,309,333 |
Intangible assets, net | 9,324 | 11,438 |
Total Assets | 327,613,171 | 301,328,124 |
Prepayments, non-current | 10,448,650 | 0 |
Total Non-Current Assets | 73,627,881 | 62,058,477 |
Current Liabilities | ||
Accounts payable and bank acceptance notes to vendors, including $6,234,911 and $1,953,707 due to related parties at March 31, 2017 and December 31, 2016, respectively | 60,477,514 | 65,672,626 |
Deposit received from customers | 25,900,566 | 22,733,742 |
Short term bank loans | 48,871,970 | 27,416,376 |
Income tax payable | 1,268,213 | 996,522 |
Accrued expenses | 17,688,422 | 20,103,392 |
Other current liabilities, including $117,723 and $0 payables to related party at March 31, 2017 and December 31, 2016, respectively | 2,410,732 | 2,013,943 |
Total Current Liabilities | 156,617,417 | 138,936,601 |
Total Liabilities | 156,617,417 | 138,936,601 |
Equity | ||
Preferred stock - no par value; 1,000,000 authorized; none issued and outstanding as of March 31, 2017 and December 31, 2016 | 0 | 0 |
Common stock - $0.002 par value; 50,000,000 authorized, 19,304,921 issued and outstanding as of March 31, 2017 and December 31, 2016 | 38,609 | 38,609 |
Additional paid-in capital | (28,582,654) | (28,582,654) |
Reserves | 15,822,287 | 15,129,935 |
Accumulated other comprehensive income | 6,937,331 | 6,117,042 |
Retained earnings | 152,583,697 | 146,352,530 |
Total SORL Auto Parts, Inc. Stockholders' Equity | 146,799,270 | 139,055,462 |
Noncontrolling Interest In Subsidiaries | 24,196,484 | 23,336,061 |
Total Equity | 170,995,754 | 162,391,523 |
Total Liabilities and Equity | $ 327,613,171 | $ 301,328,124 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
Accounts receivable, related party | $ 0 | $ 5,025,509 |
Accounts payable, related party | 6,234,911 | 1,953,707 |
Other current liabilities, related party | $ 117,723 | $ 0 |
Preferred stock, par or stated value per share | $ 0 | $ 0 |
Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value per share | $ 0.002 | $ 0.002 |
Common stock, shares authorized | 50,000,000 | 50,000,000 |
Common stock, shares issued | 19,304,921 | 19,304,921 |
Common stock, shares outstanding | 19,304,921 | 19,304,921 |
Consolidated Statements of Inco
Consolidated Statements of Income and Comprehensive Income - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Sales | $ 73,895,781 | $ 53,836,728 |
Include: sales to related parties | 3,026,924 | 2,580,846 |
Cost of sales | 53,348,076 | 39,397,649 |
Gross profit | 20,547,705 | 14,439,079 |
Expenses: | ||
Selling and distribution expenses | 5,608,623 | 5,562,432 |
General and administrative expenses | 4,044,913 | 6,929,858 |
Research and development expenses | 2,055,096 | 1,743,687 |
Total operating expenses | 11,708,632 | 14,235,977 |
Other operating income, net | 788,468 | 914,205 |
Income from operations | 9,627,541 | 1,117,307 |
Interest income | 10,550 | 88,102 |
Government grants | 28,909 | 4,757 |
Other income | 664 | 45,589 |
Interest expenses | (481,160) | (174,460) |
Other expenses | (207,531) | (637,629) |
Income before income taxes provision (benefit) | 8,978,973 | 443,666 |
Income taxes provision (benefit) | 1,286,174 | (34,824) |
Net income | 7,692,799 | 478,490 |
Net income attributable to noncontrolling interest in subsidiaries | 769,280 | 47,849 |
Net income attributable to common stockholders | 6,923,519 | 430,641 |
Comprehensive income: | ||
Net income | 7,692,799 | 478,490 |
Foreign currency translation adjustments | 911,432 | 1,106,640 |
Comprehensive income | 8,604,231 | 1,585,130 |
Comprehensive income attributable to noncontrolling interest in subsidiaries | 860,423 | 158,513 |
Comprehensive income attributable to common stockholders | $ 7,743,808 | $ 1,426,617 |
Weighted average common share - basic | 19,304,921 | 19,304,921 |
Weighted average common share - diluted | 19,304,921 | 19,304,921 |
EPS - basic | $ 0.36 | $ 0.02 |
EPS - diluted | $ 0.36 | $ 0.02 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Cash Flows From Operating Activities | ||
Net Income | $ 7,692,799 | $ 478,490 |
Adjustments to reconcile net income to net cash used in operating activities: | ||
Allowance for doubtful accounts | 0 | 3,676,683 |
Depreciation and amortization | 2,017,224 | 1,733,874 |
Deferred income tax | 8,453 | (596,802) |
Changes in assets and liabilities: | ||
Accounts receivable | (2,151,307) | (3,192,855) |
Bank acceptance notes from customers | (2,700,239) | (5,236,626) |
Other currents assets | (638,653) | (216,932) |
Inventories | (5,594,100) | 6,020,763 |
Prepayments, current | 1,142,387 | (4,828,231) |
Prepaid capital lease interest | 0 | 40,714 |
Accounts payable and bank acceptance notes to vendors | (4,434,657) | 2,389,292 |
Income tax payable | 265,518 | 0 |
Deposits received from customers | 3,033,848 | 1,221,498 |
Other current liabilities and accrued expenses | (2,133,534) | (1,900,667) |
Net Cash Flows Used In Operating Activities | (3,492,261) | (410,799) |
Cash Flows From Investing Activities | ||
Change in short term investments | 0 | 2,854,289 |
Acquisition of property and equipment | (14,320,981) | (1,247,024) |
Advance to related party | 0 | (18,695,590) |
Change in restricted cash | (89,465) | (284,338) |
Net Cash Flows Used In Investing Activities | (14,410,446) | (17,372,663) |
Cash Flows From Financing Activities | ||
Proceeds from bank loans | 21,247,576 | 13,795,728 |
Repayment of bank loans | 0 | (20,050,944) |
Repayment of capital lease | 0 | (906,123) |
Net Cash Flows Provided By (Used In) Financing Activities | 21,247,576 | (7,161,339) |
Effects on changes in foreign exchange rate | 53,190 | 817,739 |
Net change in cash and cash equivalents | 3,398,059 | (24,127,062) |
Cash and cash equivalents - beginning of the period | 8,057,155 | 30,230,828 |
Cash and cash equivalents - end of the period | 11,455,214 | 6,103,766 |
Supplemental Cash Flow Disclosures: | ||
Interest paid | 250,601 | 275,913 |
Income taxes paid | $ 1,012,203 | $ 677,301 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Equity - 3 months ended Mar. 31, 2017 - USD ($) | Total | Common Stock [Member] | Additional Paid-in Capital [Member] | Reserves [Member] | Retained Earnings [Member] | Accumulated Other Comprehensive Income [Member] | Stockholders' Equity [Member] | Non-controlling Interest [Member] |
Balance at Dec. 31, 2016 | $ 162,391,523 | $ 38,609 | $ (28,582,654) | $ 15,129,935 | $ 146,352,530 | $ 6,117,042 | $ 139,055,462 | $ 23,336,061 |
Balance, shares at Dec. 31, 2016 | 19,304,921 | |||||||
Net income | 7,692,799 | $ 0 | 0 | 0 | 6,923,519 | 0 | 6,923,519 | 769,280 |
Foreign currency translation adjustment | 911,432 | 0 | 0 | 0 | 0 | 820,289 | 820,289 | 91,143 |
Transfer to reserve | 0 | 0 | 0 | 692,352 | (692,352) | 0 | 0 | 0 |
Balance at Mar. 31, 2017 | $ 170,995,754 | $ 38,609 | $ (28,582,654) | $ 15,822,287 | $ 152,583,697 | $ 6,937,331 | $ 146,799,270 | $ 24,196,484 |
Balance, shares at Mar. 31, 2017 | 19,304,921 |
DESCRIPTION OF BUSINESS
DESCRIPTION OF BUSINESS | 3 Months Ended |
Mar. 31, 2017 | |
DESCRIPTION OF BUSINESS [Abstract] | |
DESCRIPTION OF BUSINESS | NOTE A - DESCRIPTION OF BUSINESS SORL Auto Parts, Inc. (together with its subsidiaries, “we,” “us,” “our” or the “Company” or “SORL”), a Delaware corporation incorporated on March 24, 1982, is principally engaged in the manufacture and distribution of vehicle brake systems and other key safety-related components, through its 90 The Joint Venture was formed in the People’s Republic of China (“PRC” or “China”) as a Sino-Foreign joint venture on January 17, 2004, pursuant to the terms of a Joint Venture Agreement between the Ruili Group Co., Ltd. (the “Ruili Group”), a related party under common control, and Fairford Holdings Limited (“Fairford”), a wholly owned subsidiary of the Company. The Ruili Group was incorporated in China in 1987 and specializes in the development, production and sale of various kinds of automotive parts. Fairford and the Ruili Group contributed 90 10 On November 11, 2009, the Company, through its wholly owned subsidiary, Fairford, entered into a joint venture agreement with MGR Hong Kong Limited (“MGR”), a Hong Kong-based global auto parts distribution specialist firm and an unaffiliated Taiwanese individual investor. The joint venture was named SORL International Holding, Ltd. (“SIH”) based in Hong Kong. SORL held a 60 30 individual investor held 10 |
BASIS OF PRESENTATION AND SIGNI
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2017 | |
Accounting Policies [Abstract] | |
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES | NOTE B - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (1) BASIS OF PRESENTATION The consolidated financial statements include the accounts of the Company and its majority owned subsidiaries. All intercompany balances and transactions have been eliminated in the consolidation. Certain information and footnote disclosures normally included in financial statements prepared in conjunction with generally accepted accounting principles have been condensed or omitted as permitted by the rules and regulations of the United States Securities and Exchange Commission (“SEC”), although the Company believes that the disclosures contained in this report are adequate to make the information presented not misleading. The consolidated balance sheet information as of December 31, 2016 was derived from the consolidated audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. These consolidated financial statements should be read in conjunction with the annual consolidated audited financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, and other reports filed with the SEC. The accompanying unaudited interim consolidated financial statements reflect all adjustments of a normal and recurring nature which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows of the Company for the interim periods presented. The results of operations for these periods are not necessarily comparable to, or indicative of, results of any other interim period or for the fiscal year taken as a whole. (2) SIGNIFICANT ACCOUNTING POLICIES a. ACCOUNTING METHOD The Company uses the accrual method of accounting for financial statement and tax return purposes. b. USE OF ESTIMATES The preparation of financial statements in conformity with U.S generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Management makes its best estimate of the outcome for these items based on historical trends and other information available when the financial statements are prepared. Changes in estimates are recognized in accordance with the accounting rules for the estimate, which is typically in the period when new information becomes available to management. Actual results could differ from those estimates. c. FAIR VALUE OF FINANCIAL INSTRUMENTS For certain of the Company’s financial instruments, including cash and cash equivalents, restricted cash, accounts receivable, bank acceptance notes from customers, inventories, current prepayments, other current assets, accounts payable and bank acceptance notes to vendors, short term bank loans, deposit received from customers, income tax payable, accrued expenses, and other current liabilities, the carrying amounts approximate fair values due to their short maturities. Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated. It is not, however, practical to determine the fair value of amounts due from/to related parties due to their related party nature. d. RESTRICTED CASH Restricted cash mainly represents bank deposits used to pledge the bank acceptance notes. The Company entered into credit agreements with commercial banks in China (“endorsing banks”) which agree to provide credit within stipulated limits. Within the stipulated credit limits, the Company can issue bank acceptance notes to its suppliers as payments for the purchases. In order to issue bank acceptance notes, the Company is generally required to make initial deposits or pledge note receivables to the endorsing banks in amounts of certain percentage of the face amount of the bank acceptance notes to be issued by the Company. The cash in such accounts is restricted for use over the terms of the bank acceptance notes, which are normally three to six months. e. RELATED PARTY TRANSACTIONS A related party is generally defined as (i) any person that holds 10% or more of the Company’s securities and their immediate families, (ii) the Company’s management, (iii) someone that directly or indirectly controls, is controlled by or is under common control with the Company, or (iv) anyone who can significantly influence the financial and operating decisions of the Company. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. The Company conducts business with its related parties in the ordinary course of business. f. BANK ACCEPTANCE NOTES FROM CUSTOMERS Bank acceptance notes from customers generally due within six months are issued by some customers to pay certain outstanding receivable balances to the Company with specific payment terms and definitive due dates. Bank acceptance notes from customers do not bear interest. As of March 31, 2017 and December 31, 2016, bank acceptance notes from customers in the amount of $34,621,628 and $32,916,198, respectively, were pledged to endorsing banks to issue bank acceptance notes. The banks charge discount fees if the Company chooses to discount the bank acceptance notes from customers for cash before the maturity of the notes and such discount fees are included in interest expenses. REVENUE RECOGNITION Revenue from the sale of goods is recognized when the risks and rewards of ownership of the goods have transferred to the buyer. The transfer is decided by several factors, including factors such as when persuasive evidence of an arrangement exits, delivery has occurred, the sales price is fixed and determinable, and collection is probable. Revenue consists of the invoice value for the sale of goods and services net of value-added tax, rebates and discounts and returns. The Company nets sales return in gross revenue, i.e., the revenue shown in the income statement is the net sales. h. COST OF SALES Cost of sales consists primarily of materials costs, applicable local government levies, freight charges, purchasing and receiving costs, inspection costs, employee compensation, depreciation and related costs, which are directly attributable to production. Write-down of inventories to lower of cost or market is also recorded in cost of sales, if any. i . FOREIGN CURRENCY TRANSLATION The Company maintains its books and accounting records in RMB, the currency of the PRC. The Company’s functional currency is also RMB. The Company has adopted FASB ASC 830-30 in translating financial statement amounts from RMB to the Company’s reporting currency, United States dollars (“US$”). All assets and liabilities are translated at the current rate. The stockholders’ equity accounts are translated at the appropriate historical rate. Revenue and expenses are translated at the weighted average rates in effect on the transaction dates. Translation adjustments resulting from this process are included in accumulated other comprehensive income in the statement of stockholders’ equity. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred. |
RECENTLY ISSUED ACCOUNTING PRON
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS | 3 Months Ended |
Mar. 31, 2017 | |
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS [Abstract] | |
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS | NOTE C RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In January 2017, the FASB issued ASU 2017-03, “ Accounting Changes and Error Corrections (Topic 250) and Investments - Equity Method and Joint Ventures (Topic 323) |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 3 Months Ended |
Mar. 31, 2017 | |
RELATED PARTY TRANSACTIONS [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE D - RELATED PARTY TRANSACTIONS The Company continues to purchase primarily packaging materials from the Ruili Group. The Ruili Group is the minority stockholder of Joint Venture and is collectively controlled by Mr. Xiao Ping Zhang, his wife Ms. Shu Ping Chi, and his brother Mr. Xiao Feng Zhang. In addition, the Company purchases automotive components from four other related parties, Guangzhou Kormee Automotive Electronic Control Technology Co., Ltd. (“Guangzhou Kormee”), Ruian Kormee Automobile Braking Co., Ltd. (“Ruian Kormee”), Ruili MeiLian Air Management System (LangFang) Co., Ltd (“Ruili MeiLian”) and Shanghai Dachao Electric Technology Co., Ltd. (“Shanghai Dachao”). Guangzhou Kormee and Ruili Meilian are controlled by the Ruili Group and Ruian Kormee is the wholly-owned subsidiary of Guangzhou Kormee. Ruili Group owns 49 Three Months Ended March 31, 2017 2016 PURCHASES FROM: Guangzhou Kormee Automotive Electronic Control Technology Co., Ltd. $ 335,927 $ 392,924 Ruian Kormee Automobile Braking Co., Ltd. 355,671 130,513 Ruili MeiLian Air Management System (LangFang) Co.,Ltd. 783,070 Shanghai Dachao Electric Technology Co., Ltd. 55,230 33,744 Ruili Group Co., Ltd. 1,126,718 865,798 Total Purchases $ 2,656,616 $ 1,422,979 SALES TO: Guangzhou Kormee Automotive Electronic Control Technology Co., Ltd. $ 777,357 $ 617,846 Ruian Kormee Automobile Braking Co., Ltd. 573 Ruili Group Co., Ltd. 3,026,924 2,580,846 Total Sales $ 3,804,281 $ 3,199,265 During the three months ended March 31, 2017 and 2016, for the sales mentioned above, the sales to Guangzhou Kormee and Ruian Kormee were sales of scrap materials and the related operating results were included in other operating income, net in the consolidated statements of income and comprehensive income. The sales to Ruili Group were included in sales in the consolidated statements of income and comprehensive income. March 31, December 31, 2017 2016 ACCOUNTS RECEIVABLE FROM RELATED PARTIES Ruili Group Co., Ltd. $ $ 4,361,010 Guangzhou Kormee Automotive Electronic Control Technology Co., Ltd. 664,499 Total $ $ 5,025,509 ACCOUNTS PAYABLE AND BANK ACCEPTANCE NOTES TO RELATED PARTIES Ruian Kormee Automobile Braking Co., Ltd. $ 801,409 $ 628,310 Guangzhou Kormee Automotive Electronic Control Technology Co., Ltd. 1,133,781 Shanghai Dachao Electric Technology Co., Ltd. 6,820 100,441 Ruili MeiLian Air Management System (LangFang) Co., Ltd. 1,771,012 1,224,956 Ruili Group Co., Ltd. 2,521,889 Total $ 6,234,911 $ 1,953,707 OTHER PAYABLES TO RELATED PARTY Ruili Group Co., Ltd. $ 117,723 $ Total $ 117,723 $ The Company collects dormitory utility fees from employees and pays to Ruili Group periodically which is recorded as other payables. As of March 31, 2017 and December 31, 2016, the payable balance was $ 117,723 0 The Company entered into several lease agreements with related parties. See Note K for more details. The Company provided a guarantee for the credit line granted to Ruili Group by Bank of Ningbo in the amount of RMB 150,000,000 21,623,180 May 30, 2016 May 14, 2017 The Company provided a guarantee for the credit line granted to Ruili Group by the China Merchants Bank in the amount of RMB 50,000,000 7,699,889 July 29, 2015 40,000,000 5,766,181 October 24, 2016 The Company has short term bank loans guaranteed or pledged by related parties. See Note I for more details. The Company provided a guarantee for the credit line granted to Ruili Group by China Guangfa Bank in the amount of RMB 200,000,000 28,830,907 May 22, 2016 May 22, 2017 |
ACCOUNTS RECEIVABLE, NET
ACCOUNTS RECEIVABLE, NET | 3 Months Ended |
Mar. 31, 2017 | |
Receivables [Abstract] | |
ACCOUNTS RECEIVABLE, NET | NOTE E - ACCOUNTS RECEIVABLE, NET March 31, December 31, 2017 2016 Accounts receivable $ 116,594,836 $ 113,815,711 Less: allowance for doubtful accounts (11,750,275) (11,686,417) Accounts receivable, net $ 104,844,561 $ 102,129,294 No customer individually accounted for more than 10% of our revenues or accounts receivable for the three months ended March 31, 2017 and 2016. The changes in the allowance for doubtful accounts at March 31, 2017 and December 31, 2016 are summarized as follows: March 31, December 31, 2017 2016 Beginning balance $ 11,686,417 $ 12,075,402 Add: increase to allowance 395,491 Less: accounts written off Effects on changes in foreign exchange rate 63,858 (784,476) Ending balance $ 11,750,275 $ 11,686,417 |
INVENTORIES
INVENTORIES | 3 Months Ended |
Mar. 31, 2017 | |
INVENTORIES [Abstract] | |
INVENTORIES | NOTE F - INVENTORIES March 31, December 31, 2017 2016 Raw materials $ 16,220,912 $ 20,121,513 Work-in-process 14,586,579 14,843,653 Finished goods 40,937,874 30,811,351 Less: write-down of inventories Total inventories $ 71,745,365 $ 65,776,517 |
PROPERTY, PLANT AND EQUIPMENT,
PROPERTY, PLANT AND EQUIPMENT, NET | 3 Months Ended |
Mar. 31, 2017 | |
PROPERTY, PLANT AND EQUIPMENT [Abstract] | |
PROPERTY, PLANT AND EQUIPMENT | NOTE G - PROPERTY, PLANT AND EQUIPMENT, NET March 31, December 31, 2017 2016 Machinery $ 90,559,680 $ 87,694,677 Molds 1,264,714 1,257,841 Office equipment 2,049,011 2,021,982 Vehicles 2,661,084 2,246,203 Buildings 15,913,220 15,826,738 Leasehold improvements 461,071 458,566 Sub-total 112,908,780 109,506,007 Less: accumulated depreciation (58,022,928) (55,768,301) Property, plant and equipment, net $ 54,885,852 $ 53,737,706 Depreciation expense charged to operations was $ 1,944,565 1,638,817 In May 2016, the Company, through its principal operating subsidiary, entered into a Purchase Agreement with Ruili Group, pursuant to which the Company agreed to exchange the land use rights and factory facilities located at No. 1169 Yumeng Road, Rui'an Economic Development Zone, Rui'an City, Zhejiang Province, the People's Republic of China (the “Dongshan Facility”), purchased in 2007 from Ruili Group, plus RMB 501 76.5 the land use rights and factory facilities located at No. 2666 Kaifaqu Avenue, Rui’an Economic Development Zone, Rui’an City, Zhejiang Province, the People’s Republic of China (the “Development Zone Faciliy”). As of the filing date, the Company has not obtained the property ownership certificate or land use right certificate of the Development Zone Facility. The Company reserved the relevant tax amount of RMB 4,560,000 745,220 15.0 2.3 3 |
DEFERRED TAX ASSETS
DEFERRED TAX ASSETS | 3 Months Ended |
Mar. 31, 2017 | |
DEFERRED TAX ASSETS AND DEFERRED TAX LIABILITIES [Abstract] | |
DEFERRED TAX ASSETS AND DEFERRED TAX LIABILITIES | NOTE H - DEFERRED TAX ASSETS March 31, December 31, 2017 2016 Deferred tax assets - current Allowance for doubtful accounts $ 1,754,918 $ 1,798,894 Revenue (net of cost) 92,062 76,719 Unpaid accrued expenses 344,876 357,352 Warranty 1,027,787 977,610 Deferred tax assets 3,219,643 3,210,575 Valuation allowance Deferred tax assets - current $ 3,219,643 $ 3,210,575 Deferred taxation is calculated under the liability method in respect of taxation effect arising from all timing differences, which are expected with reasonable probability to realize in the foreseeable future. The Company and its subsidiaries do not have income tax liabilities in U.S. as the Company had no taxable income for the reporting period. The Company’s subsidiary registered in the PRC is subject to income taxes within the PRC at the applicable tax rate. |
SHORT-TERM BANK LOANS
SHORT-TERM BANK LOANS | 3 Months Ended |
Mar. 31, 2017 | |
SHORT-TERM BANK LOANS [Abstract] | |
SHORT-TERM BANK LOANS | NOTE I - SHORT-TERM BANK LOANS March 31, December 31, 2017 2016 Secured $ 48,871,970 $ 27,416,376 The Company obtained those short term loans from Bank of China, Bank of Ningbo, Agricultural Bank of China, China Zheshang Bank, and China Construction Bank, respectively, to finance general working capital as well as new equipment acquisition. Interest rate for the loans outstanding during the three months ended March 31, 2017 ranged from 0.55 4.48 April 28, 2017 8,668,980 4,484,755 460,912 75,698 As of March 31, 2017, $ 1,998,753 Pledged by Ruili Group, a related party, with its land and buildings. Guaranteed by Ruili Group, a related party, and Mr. Xiao Ping Zhang and Ms. Shu Ping Chi, both the Company’s principal stockholders. $ 2,832,171 Pledged by Ruili Group, a related party, with its land and buildings. Guaranteed by Mr. Xiao Ping Zhang and Ms. Shu Ping Chi, both the Company’s principal stockholders. $ 14,358,993 Guaranteed by Ruili Group, a related party, Mr. Xiao Ping Zhang and Ms. Shu Ping Chi, both the Company’s principal stockholders. $ 5,824,852 Guaranteed by Ruili Group, a related party. $ 7,247,112 Pledged by Hangzhou Ruili Zhiye Development Ltd., a related party under common control of Ruili Group, with its property. Guaranteed by Mr. Xiao Ping Zhang and Ms. Shu Ping Chi, both the Company’s principal stockholders. $ 10,712,681 Pledged by the Company with its bank acceptance notes. $ 5,897,408 Pledged by the Company with its accounts receivable. |
INCOME TAXES
INCOME TAXES | 3 Months Ended |
Mar. 31, 2017 | |
INCOME TAXES [Abstract] | |
INCOME TAXES | NOTE J - INCOME TAXES The Joint Venture is registered in the PRC, and is therefore subject to state and local income taxes within the PRC at the applicable tax rate on the taxable income as reported in the PRC statutory financial statements in accordance with relevant income tax laws. In 2015, the Joint Venture was awarded the Chinese government's "High-Tech Enterprise" designation for a third time, which is valid for three years and it continues to be taxed at the 15 Three Months Ended Three Months Ended March 31, 2017 March 31, 2016 US statutory income tax rate 35.00 % 35.00 % Valuation allowance recognized with respect to the loss in the US company -35.00 % -35.00 % China statutory income tax rate 25.00 % 25.00 % Effects of income tax exemptions and reliefs -10.00 % -10.00 % Effects of additional deduction allowed for R&D expenses -2.14 % -29.48 % Expenses not deductible for tax purpose 0.62 % 6.63 % Other items 0.84 % Effective tax rate 14.32 % -7.85 % Income taxes are calculated on a separate entity basis. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. There currently is no tax benefit recorded for the United States. The tax authority may examine the tax returns of the Company three years after the year ended December, 31, 2015. In the three months ended March 31, 2017 and 2016, there were no penalties and interest, which generally are recorded in the general and administrative expenses or in the tax expenses. Three Months Ended Three Months Ended March 31, 2017 March 31, 2016 Current $ 1,294,627 $ 561,978 Deferred (8,453) (596,802) Total $ 1,286,174 $ (34,824) ASC 740-10 requires recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. The management evaluated the Company’s tax positions and considered that no provision for uncertainty in income taxes was necessary as of March 31, 2017 and December 31, 2016. |
OPERATING LEASES WITH RELATED P
OPERATING LEASES WITH RELATED PARTIES | 3 Months Ended |
Mar. 31, 2017 | |
OPERATING LEASES WITH RELATED PARTIES [Abstract] | |
OPERATING LEASES WITH RELATED PARTIES | NOTE K OPERATING LEASES WITH RELATED PARTIES In December 2006, Ruian entered into a lease agreement with Ruili Group Co., Ltd. for the lease of two apartment buildings. These two apartment buildings are for Ruian’s management personnel and staff, respectively. The lease term is from January 2013 to December 2016. This lease was amended in 2013 with a new lease term from January 1, 2013 to December 31, 2022. The annual lease expense is RMB 2,100,000 333,688 The lease expenses were $ 75,887 422,611 |
WARRANTY CLAIMS
WARRANTY CLAIMS | 3 Months Ended |
Mar. 31, 2017 | |
WARRANTY CLAIMS [Abstract] | |
WARRANTY CLAIMS | NOTE L - WARRANTY CLAIMS Warranty claims were $ 637,874 495,385 Beginning balance at January 1, 2017 $ 6,517,402 Aggregate increase for new warranties issued during current period 637,874 Aggregate reduction for payments made (339,795) Effect of exchange rate fluctuation 36,431 Ending balance at March 31, 2017 $ 6,851,912 |
SEGMENT INFORMATION
SEGMENT INFORMATION | 3 Months Ended |
Mar. 31, 2017 | |
SEGMENT INFORMATION [Abstract] | |
SEGMENT INFORMATION | NOTE M SEGMENT INFORMATION The Company produces brake systems and other related components for different types of commercial vehicles (“Commercial Vehicle Brake Systems”). On August 31, 2010, the Company through Ruian, executed an Asset Purchase Agreement to acquire, and purchased, a segment of the passenger vehicle auto parts business (“Passenger Vehicle Brake Systems”) of Ruili Group. As a result of this acquisition, the Company's product offerings were expanded to both commercial and passenger vehicles' brake systems and other key safety-related auto parts. The Company has two operating segments: Commercial Vehicle Brake Systems and Passenger Vehicle Brake Systems. For the reporting periods, all of the Company’s long-lived assets are located in the PRC. The Company and its subsidiaries do not have long-lived assets in the United States for the reporting periods. Three Months Ended March 31, 2017 2016 SALES TO EXTERNAL CUSTOMERS Commercial vehicles brake systems $ 60,676,304 $ 44,080,072 Passenger vehicles brake systems 13,219,477 9,756,656 Sales $ 73,895,781 $ 53,836,728 INTERSEGMENT SALES Commercial vehicles brake systems $ $ Passenger vehicles brake systems Intersegment sales $ $ GROSS PROFIT Commercial vehicles brake systems $ 16,400,238 $ 11,960,732 Passenger vehicles brake systems 4,147,467 2,478,347 Gross profit $ 20,547,705 $ 14,439,079 Selling and distribution expenses 5,608,623 5,562,432 General and administrative expenses 4,044,913 6,929,858 Research and development expenses 2,055,096 1,743,687 Other operating income, net 788,468 914,205 Income from operations 9,627,541 1,117,307 Interest income 10,550 88,102 Government grants 28,909 4,757 Other income 664 45,589 Interest expenses (481,160) (174,460) Other expenses (207,531) (637,629) Income before income tax provision (benefit) $ 8,978,973 $ 443,666 CAPITAL EXPENDITURE Commercial vehicles brake systems $ 11,758,957 $ 1,021,063 Passenger vehicles brake systems 2,562,024 225,961 Total $ 14,320,981 $ 1,247,024 DEPRECIATION AND AMORTIZATION Commercial vehicles brake systems $ 1,656,343 $ 1,419,696 Passenger vehicles brake systems 360,881 314,178 Total $ 2,017,224 $ 1,733,874 March 31, 2017 December 31, 2016 TOTAL ASSETS Commercial vehicles brake systems $ 269,003,175 $ 248,023,179 Passenger vehicles brake systems 58,609,996 53,304,945 Total $ 327,613,171 $ 301,328,124 March 31, 2017 December 31, 2016 LONG LIVED ASSETS Commercial vehicles brake systems $ 51,876,467 $ 51,080,332 Passenger vehicles brake systems 11,302,764 10,978,145 Total $ 63,179,231 $ 62,058,477 |
CONTINGENCIES
CONTINGENCIES | 3 Months Ended |
Mar. 31, 2017 | |
CONTINGENCIES [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE N CONTINGENCIES (1) The Company purchased the Dongshan Facility from Ruili Group in 2007 and subsequently transferred the plants and land use right to Ruili Group. The Company has never obtained the land use right certificate nor the property ownership certificate of the building for the Dongshan Facility. The Company reserved the relevant tax amount of RMB 4,560,000 745,220 3 (2) The information of lease commitments is provided in Note K. (3) The information of guarantees and assets pledged is provided in Note D. |
BASIS OF PRESENTATION AND SIG21
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
Accounting Policies [Abstract] | |
ACCOUNTING METHOD | a. ACCOUNTING METHOD The Company uses the accrual method of accounting for financial statement and tax return purposes. |
USE OF ESTIMATES | b. USE OF ESTIMATES The preparation of financial statements in conformity with U.S generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Management makes its best estimate of the outcome for these items based on historical trends and other information available when the financial statements are prepared. Changes in estimates are recognized in accordance with the accounting rules for the estimate, which is typically in the period when new information becomes available to management. Actual results could differ from those estimates. |
FAIR VALUE OF FINANCIAL INSTRUMENTS | c. FAIR VALUE OF FINANCIAL INSTRUMENTS For certain of the Company’s financial instruments, including cash and cash equivalents, restricted cash, accounts receivable, bank acceptance notes from customers, inventories, current prepayments, other current assets, accounts payable and bank acceptance notes to vendors, short term bank loans, deposit received from customers, income tax payable, accrued expenses, and other current liabilities, the carrying amounts approximate fair values due to their short maturities. Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated. It is not, however, practical to determine the fair value of amounts due from/to related parties due to their related party nature. |
RESTRICTED CASH | d. RESTRICTED CASH Restricted cash mainly represents bank deposits used to pledge the bank acceptance notes. The Company entered into credit agreements with commercial banks in China (“endorsing banks”) which agree to provide credit within stipulated limits. Within the stipulated credit limits, the Company can issue bank acceptance notes to its suppliers as payments for the purchases. In order to issue bank acceptance notes, the Company is generally required to make initial deposits or pledge note receivables to the endorsing banks in amounts of certain percentage of the face amount of the bank acceptance notes to be issued by the Company. The cash in such accounts is restricted for use over the terms of the bank acceptance notes, which are normally three to six months. |
RELATED PARTY TRANSACTIONS | e. RELATED PARTY TRANSACTIONS A related party is generally defined as (i) any person that holds 10% or more of the Company’s securities and their immediate families, (ii) the Company’s management, (iii) someone that directly or indirectly controls, is controlled by or is under common control with the Company, or (iv) anyone who can significantly influence the financial and operating decisions of the Company. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. The Company conducts business with its related parties in the ordinary course of business. |
BANK ACCEPTANCE NOTES FROM CUSTOMERS | f. BANK ACCEPTANCE NOTES FROM CUSTOMERS Bank acceptance notes from customers generally due within six months are issued by some customers to pay certain outstanding receivable balances to the Company with specific payment terms and definitive due dates. Bank acceptance notes from customers do not bear interest. As of March 31, 2017 and December 31, 2016, bank acceptance notes from customers in the amount of $34,621,628 and $32,916,198, respectively, were pledged to endorsing banks to issue bank acceptance notes. The banks charge discount fees if the Company chooses to discount the bank acceptance notes from customers for cash before the maturity of the notes and such discount fees are included in interest expenses. |
REVENUE RECOGNITION | REVENUE RECOGNITION Revenue from the sale of goods is recognized when the risks and rewards of ownership of the goods have transferred to the buyer. The transfer is decided by several factors, including factors such as when persuasive evidence of an arrangement exits, delivery has occurred, the sales price is fixed and determinable, and collection is probable. Revenue consists of the invoice value for the sale of goods and services net of value-added tax, rebates and discounts and returns. The Company nets sales return in gross revenue, i.e., the revenue shown in the income statement is the net sales. |
COST OF SALES | h. COST OF SALES Cost of sales consists primarily of materials costs, applicable local government levies, freight charges, purchasing and receiving costs, inspection costs, employee compensation, depreciation and related costs, which are directly attributable to production. Write-down of inventories to lower of cost or market is also recorded in cost of sales, if any. |
FOREIGN CURRENCY TRANSLATION | i . FOREIGN CURRENCY TRANSLATION The Company maintains its books and accounting records in RMB, the currency of the PRC. The Company’s functional currency is also RMB. The Company has adopted FASB ASC 830-30 in translating financial statement amounts from RMB to the Company’s reporting currency, United States dollars (“US$”). All assets and liabilities are translated at the current rate. The stockholders’ equity accounts are translated at the appropriate historical rate. Revenue and expenses are translated at the weighted average rates in effect on the transaction dates. Translation adjustments resulting from this process are included in accumulated other comprehensive income in the statement of stockholders’ equity. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred. |
RELATED PARTY TRANSACTIONS (Tab
RELATED PARTY TRANSACTIONS (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
RELATED PARTY TRANSACTIONS [Abstract] | |
Schedule of Related Party Transactions | Three Months Ended March 31, 2017 2016 PURCHASES FROM: Guangzhou Kormee Automotive Electronic Control Technology Co., Ltd. $ 335,927 $ 392,924 Ruian Kormee Automobile Braking Co., Ltd. 355,671 130,513 Ruili MeiLian Air Management System (LangFang) Co.,Ltd. 783,070 Shanghai Dachao Electric Technology Co., Ltd. 55,230 33,744 Ruili Group Co., Ltd. 1,126,718 865,798 Total Purchases $ 2,656,616 $ 1,422,979 SALES TO: Guangzhou Kormee Automotive Electronic Control Technology Co., Ltd. $ 777,357 $ 617,846 Ruian Kormee Automobile Braking Co., Ltd. 573 Ruili Group Co., Ltd. 3,026,924 2,580,846 Total Sales $ 3,804,281 $ 3,199,265 During the three months ended March 31, 2017 and 2016, for the sales mentioned above, the sales to Guangzhou Kormee and Ruian Kormee were sales of scrap materials and the related operating results were included in other operating income, net in the consolidated statements of income and comprehensive income. The sales to Ruili Group were included in sales in the consolidated statements of income and comprehensive income. March 31, December 31, 2017 2016 ACCOUNTS RECEIVABLE FROM RELATED PARTIES Ruili Group Co., Ltd. $ $ 4,361,010 Guangzhou Kormee Automotive Electronic Control Technology Co., Ltd. 664,499 Total $ $ 5,025,509 ACCOUNTS PAYABLE AND BANK ACCEPTANCE NOTES TO RELATED PARTIES Ruian Kormee Automobile Braking Co., Ltd. $ 801,409 $ 628,310 Guangzhou Kormee Automotive Electronic Control Technology Co., Ltd. 1,133,781 Shanghai Dachao Electric Technology Co., Ltd. 6,820 100,441 Ruili MeiLian Air Management System (LangFang) Co., Ltd. 1,771,012 1,224,956 Ruili Group Co., Ltd. 2,521,889 Total $ 6,234,911 $ 1,953,707 OTHER PAYABLES TO RELATED PARTY Ruili Group Co., Ltd. $ 117,723 $ Total $ 117,723 $ |
ACCOUNTS RECEIVABLE, NET (Table
ACCOUNTS RECEIVABLE, NET (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
ACCOUNTS RECEIVABLE [Abstract] | |
Schedule of Allowance for Doubtful Accounts | Accounts receivable, net consisted of the following: March 31, December 31, 2017 2016 Accounts receivable $ 116,594,836 $ 113,815,711 Less: allowance for doubtful accounts (11,750,275) (11,686,417) Accounts receivable, net $ 104,844,561 $ 102,129,294 No customer individually accounted for more than 10% of our revenues or accounts receivable for the three months ended March 31, 2017 and 2016. The changes in the allowance for doubtful accounts at March 31, 2017 and December 31, 2016 are summarized as follows: March 31, December 31, 2017 2016 Beginning balance $ 11,686,417 $ 12,075,402 Add: increase to allowance 395,491 Less: accounts written off Effects on changes in foreign exchange rate 63,858 (784,476) Ending balance $ 11,750,275 $ 11,686,417 |
INVENTORIES (Tables)
INVENTORIES (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
INVENTORIES [Abstract] | |
Schedule of Inventories | At March 31, 2017 and December 31, 2016, inventories consisted of the following: March 31, December 31, 2017 2016 Raw materials $ 16,220,912 $ 20,121,513 Work-in-process 14,586,579 14,843,653 Finished goods 40,937,874 30,811,351 Less: write-down of inventories Total inventories $ 71,745,365 $ 65,776,517 |
PROPERTY, PLANT AND EQUIPMENT25
PROPERTY, PLANT AND EQUIPMENT, NET (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
PROPERTY, PLANT AND EQUIPMENT [Abstract] | |
Schedule of Property, Plant and Equipment | Property, plant and equipment consisted of the following at March 31, 2017 and December 31, 2016: March 31, December 31, 2017 2016 Machinery $ 90,559,680 $ 87,694,677 Molds 1,264,714 1,257,841 Office equipment 2,049,011 2,021,982 Vehicles 2,661,084 2,246,203 Buildings 15,913,220 15,826,738 Leasehold improvements 461,071 458,566 Sub-total 112,908,780 109,506,007 Less: accumulated depreciation (58,022,928) (55,768,301) Property, plant and equipment, net $ 54,885,852 $ 53,737,706 |
DEFERRED TAX ASSETS (Tables)
DEFERRED TAX ASSETS (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
DEFERRED TAX ASSETS AND DEFERRED TAX LIABILITIES [Abstract] | |
Schedule of Deferred Tax Assets and Liabilities | Deferred tax assets consisted of the following as of March 31, 2017 and December 31, 2016: March 31, December 31, 2017 2016 Deferred tax assets - current Allowance for doubtful accounts $ 1,754,918 $ 1,798,894 Revenue (net of cost) 92,062 76,719 Unpaid accrued expenses 344,876 357,352 Warranty 1,027,787 977,610 Deferred tax assets 3,219,643 3,210,575 Valuation allowance Deferred tax assets - current $ 3,219,643 $ 3,210,575 |
SHORT-TERM BANK LOANS (Tables)
SHORT-TERM BANK LOANS (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
SHORT-TERM BANK LOANS [Abstract] | |
Schedule of Bank Loans | Bank loans represented the following as of March 31, 2017 and December 31, 2016: March 31, December 31, 2017 2016 Secured $ 48,871,970 $ 27,416,376 |
Schedule of Personal or Corporate Guarantees | corporate or personal guarantees provided for those bank loans were as follows: $ 1,998,753 Pledged by Ruili Group, a related party, with its land and buildings. Guaranteed by Ruili Group, a related party, and Mr. Xiao Ping Zhang and Ms. Shu Ping Chi, both the Company’s principal stockholders. $ 2,832,171 Pledged by Ruili Group, a related party, with its land and buildings. Guaranteed by Mr. Xiao Ping Zhang and Ms. Shu Ping Chi, both the Company’s principal stockholders. $ 14,358,993 Guaranteed by Ruili Group, a related party, Mr. Xiao Ping Zhang and Ms. Shu Ping Chi, both the Company’s principal stockholders. $ 5,824,852 Guaranteed by Ruili Group, a related party. $ 7,247,112 Pledged by Hangzhou Ruili Zhiye Development Ltd., a related party under common control of Ruili Group, with its property. Guaranteed by Mr. Xiao Ping Zhang and Ms. Shu Ping Chi, both the Company’s principal stockholders. $ 10,712,681 Pledged by the Company with its bank acceptance notes. $ 5,897,408 Pledged by the Company with its accounts receivable. |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
INCOME TAXES [Abstract] | |
Schedule of Effective Income Tax Rate Reconciliation | The reconciliation of the effective income tax rate of Ruian to the statutory income tax rate in the PRC for the three months ended March 31, 2017 and 2016 is as follows: Three Months Ended Three Months Ended March 31, 2017 March 31, 2016 US statutory income tax rate 35.00 % 35.00 % Valuation allowance recognized with respect to the loss in the US company -35.00 % -35.00 % China statutory income tax rate 25.00 % 25.00 % Effects of income tax exemptions and reliefs -10.00 % -10.00 % Effects of additional deduction allowed for R&D expenses -2.14 % -29.48 % Expenses not deductible for tax purpose 0.62 % 6.63 % Other items 0.84 % Effective tax rate 14.32 % -7.85 % |
Schedule of Income Tax Provision | The provisions for income taxes for the three months ended March 31, 2017 and 2016, respectively, are summarized as follows: Three Months Ended Three Months Ended March 31, 2017 March 31, 2016 Current $ 1,294,627 $ 561,978 Deferred (8,453) (596,802) Total $ 1,286,174 $ (34,824) |
WARRANTY CLAIMS (Tables)
WARRANTY CLAIMS (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
WARRANTY CLAIMS [Abstract] | |
Schedule of Accrued Warranty Expenses | The movement of accrued warranty expenses for the three months ended March 31, 2017 was as follows: Beginning balance at January 1, 2017 $ 6,517,402 Aggregate increase for new warranties issued during current period 637,874 Aggregate reduction for payments made (339,795) Effect of exchange rate fluctuation 36,431 Ending balance at March 31, 2017 $ 6,851,912 |
SEGMENT INFORMATION (Tables)
SEGMENT INFORMATION (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
SEGMENT INFORMATION [Abstract] | |
Schedule of Segment Information, by Segment | For the reporting periods, all of the Company’s long-lived assets are located in the PRC. The Company and its subsidiaries do not have long-lived assets in the United States for the reporting periods. Three Months Ended March 31, 2017 2016 SALES TO EXTERNAL CUSTOMERS Commercial vehicles brake systems $ 60,676,304 $ 44,080,072 Passenger vehicles brake systems 13,219,477 9,756,656 Sales $ 73,895,781 $ 53,836,728 INTERSEGMENT SALES Commercial vehicles brake systems $ $ Passenger vehicles brake systems Intersegment sales $ $ GROSS PROFIT Commercial vehicles brake systems $ 16,400,238 $ 11,960,732 Passenger vehicles brake systems 4,147,467 2,478,347 Gross profit $ 20,547,705 $ 14,439,079 Selling and distribution expenses 5,608,623 5,562,432 General and administrative expenses 4,044,913 6,929,858 Research and development expenses 2,055,096 1,743,687 Other operating income, net 788,468 914,205 Income from operations 9,627,541 1,117,307 Interest income 10,550 88,102 Government grants 28,909 4,757 Other income 664 45,589 Interest expenses (481,160) (174,460) Other expenses (207,531) (637,629) Income before income tax provision (benefit) $ 8,978,973 $ 443,666 CAPITAL EXPENDITURE Commercial vehicles brake systems $ 11,758,957 $ 1,021,063 Passenger vehicles brake systems 2,562,024 225,961 Total $ 14,320,981 $ 1,247,024 DEPRECIATION AND AMORTIZATION Commercial vehicles brake systems $ 1,656,343 $ 1,419,696 Passenger vehicles brake systems 360,881 314,178 Total $ 2,017,224 $ 1,733,874 March 31, 2017 December 31, 2016 TOTAL ASSETS Commercial vehicles brake systems $ 269,003,175 $ 248,023,179 Passenger vehicles brake systems 58,609,996 53,304,945 Total $ 327,613,171 $ 301,328,124 March 31, 2017 December 31, 2016 LONG LIVED ASSETS Commercial vehicles brake systems $ 51,876,467 $ 51,080,332 Passenger vehicles brake systems 11,302,764 10,978,145 Total $ 63,179,231 $ 62,058,477 |
DESCRIPTION OF BUSINESS (Detail
DESCRIPTION OF BUSINESS (Details Textual) | Mar. 31, 2017 | Nov. 11, 2009 | Jan. 17, 2004 |
Ruian [Member] | |||
Description Of Business [Line Items] | |||
Ownership percentage | 90.00% | ||
Ruili Group, Co., Ltd. [Member] | |||
Description Of Business [Line Items] | |||
Ownership percentage | 49.00% | 10.00% | |
SORL International Holding, Ltd. [Member] | |||
Description Of Business [Line Items] | |||
Ownership percentage | 60.00% | ||
MGR Hong Kong Limited [Member] | SIH [Member] | |||
Description Of Business [Line Items] | |||
Ownership percentage | 30.00% | ||
Taiwanese Investor [Member] | |||
Description Of Business [Line Items] | |||
Ownership percentage | 10.00% | 10.00% | |
Fairford [Member] | |||
Description Of Business [Line Items] | |||
Ownership percentage | 90.00% |
BASIS OF PRESENTATION AND SIG32
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Details Textual) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 | Nov. 11, 2009 |
Notes Receivable [Member] | |||
Summary of Significant Accounting Policy [Line Items] | |||
Pledged assets amount | $ 34,621,628 | $ 32,916,198 | |
Taiwanese Investor [Member] | |||
Summary of Significant Accounting Policy [Line Items] | |||
Ownership percentage | 10.00% | 10.00% |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Related Party Transaction [Line Items] | ||
PURCHASES FROM: | $ 2,656,616 | $ 1,422,979 |
SALES TO: | 3,804,281 | 3,199,265 |
Guangzhou Kormee Automotive Electronic Control Technology Co., Ltd. [Member] | ||
Related Party Transaction [Line Items] | ||
PURCHASES FROM: | 335,927 | 392,924 |
SALES TO: | 777,357 | 617,846 |
Ruian Kormee Automobile Braking Co., Ltd. [Member] | ||
Related Party Transaction [Line Items] | ||
PURCHASES FROM: | 355,671 | 130,513 |
SALES TO: | 0 | 573 |
Ruili MeiLian Air Management System (LangFang) Co., Ltd [Member] | ||
Related Party Transaction [Line Items] | ||
PURCHASES FROM: | 783,070 | 0 |
Shanghai Dachao Electric Technology Co., Ltd. [Member] | ||
Related Party Transaction [Line Items] | ||
PURCHASES FROM: | 55,230 | 33,744 |
Ruili Group, Co., Ltd. [Member] | ||
Related Party Transaction [Line Items] | ||
PURCHASES FROM: | 1,126,718 | 865,798 |
SALES TO: | $ 3,026,924 | $ 2,580,846 |
RELATED PARTY TRANSACTIONS (D34
RELATED PARTY TRANSACTIONS (Details 1) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
Related Party Transaction [Line Items] | ||
ACCOUNTS RECEIVABLE | $ 0 | $ 5,025,509 |
ACCOUNTS PAYABLE | 6,234,911 | 1,953,707 |
OTHER PAYABLES | 117,723 | 0 |
Ruian Kormee Automobile Braking Co., Ltd. [Member] | ||
Related Party Transaction [Line Items] | ||
ACCOUNTS PAYABLE | 801,409 | 628,310 |
Ruili Group Co Ltd [Member] | ||
Related Party Transaction [Line Items] | ||
ACCOUNTS RECEIVABLE | 0 | 4,361,010 |
ACCOUNTS PAYABLE | 2,521,889 | 0 |
OTHER PAYABLES | 117,723 | 0 |
Guangzhou Kormee Automotive Electronic Control Technology Co., Ltd. [Member] | ||
Related Party Transaction [Line Items] | ||
ACCOUNTS RECEIVABLE | 0 | 664,499 |
ACCOUNTS PAYABLE | 1,133,781 | 0 |
Shanghai Dachao Electric Technology Co., Ltd. [Member] | ||
Related Party Transaction [Line Items] | ||
ACCOUNTS PAYABLE | 6,820 | 100,441 |
Ruili MeiLian Air Management System (LangFang) Co., Ltd [Member] | ||
Related Party Transaction [Line Items] | ||
ACCOUNTS PAYABLE | $ 1,771,012 | $ 1,224,956 |
RELATED PARTY TRANSACTIONS (D35
RELATED PARTY TRANSACTIONS (Details Textual) | 3 Months Ended | |||
Mar. 31, 2017USD ($) | Mar. 31, 2017CNY (¥) | Dec. 31, 2016USD ($) | Jan. 17, 2004 | |
Related Party Transaction [Line Items] | ||||
Due to Affiliate, Current | $ 117,723 | $ 0 | ||
Credit Line by China Guangfa Bank [Member] | ||||
Related Party Transaction [Line Items] | ||||
Guarantee amount | $ 28,830,907 | |||
Ruili Group Co Ltd [Member] | ||||
Related Party Transaction [Line Items] | ||||
Ownership percentage | 49.00% | 49.00% | 10.00% | |
Due to Affiliate, Current | $ 117,723 | $ 0 | ||
Ruili Group Co Ltd [Member] | Credit Line by Bank of Ningbo [Member] | ||||
Related Party Transaction [Line Items] | ||||
Guarantee end date | May 14, 2017 | |||
Ruili Group Co Ltd [Member] | Credit Line by China Merchants Bank [Member] | ||||
Related Party Transaction [Line Items] | ||||
Guarantee amount | $ 7,699,889 | ¥ 50,000,000 | ||
Guarantee start date | Jul. 29, 2015 | |||
Ruili Group Co Ltd One [Member] | Credit Line by Bank of Ningbo [Member] | ||||
Related Party Transaction [Line Items] | ||||
Guarantee amount | $ 21,623,180 | 150,000,000 | ||
Maturity date, Start | May 30, 2016 | |||
Ruili Group Co Ltd One [Member] | Credit Line by China Guangfa Bank [Member] | ||||
Related Party Transaction [Line Items] | ||||
Guarantee amount | ¥ | 200,000,000 | |||
Guarantee start date | May 22, 2016 | |||
Guarantee end date | May 22, 2017 | |||
Ruili Group Co Ltd One [Member] | Credit Line by China Merchants Bank [Member] | ||||
Related Party Transaction [Line Items] | ||||
Guarantee amount | $ 5,766,181 | ¥ 40,000,000 | ||
Guarantee start date | Oct. 24, 2016 |
ACCOUNTS RECEIVABLE, NET (Detai
ACCOUNTS RECEIVABLE, NET (Details) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
Concentration Risk [Line Items] | ||
Accounts receivable | $ 116,594,836 | $ 113,815,711 |
Less: allowance for doubtful accounts | (11,750,275) | (11,686,417) |
Account receivable balance, net | $ 104,844,561 | $ 102,129,294 |
ACCOUNTS RECEIVABLE, NET (Det37
ACCOUNTS RECEIVABLE, NET (Details 1) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
Concentration Risk [Line Items] | ||
Beginning balance | $ 11,686,417 | $ 12,075,402 |
Add: increase to allowance | 0 | 395,491 |
Less: accounts written off | 0 | 0 |
Effects on changes in foreign exchange rate | 63,858 | (784,476) |
Ending balance | $ 11,750,275 | $ 11,686,417 |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
Inventory [Line Items] | ||
Raw materials | $ 16,220,912 | $ 20,121,513 |
Work-in-process | 14,586,579 | 14,843,653 |
Finished goods | 40,937,874 | 30,811,351 |
Less: write-down of inventories | 0 | 0 |
Total inventories | $ 71,745,365 | $ 65,776,517 |
PROPERTY, PLANT AND EQUIPMENT39
PROPERTY, PLANT AND EQUIPMENT, NET (Details) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, Sub-total | $ 112,908,780 | $ 109,506,007 |
Less: accumulated depreciation | (58,022,928) | (55,768,301) |
Property, plant and equipment, net | 54,885,852 | 53,737,706 |
Machinery [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, Sub-total | 90,559,680 | 87,694,677 |
Molds [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, Sub-total | 1,264,714 | 1,257,841 |
Office equipments [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, Sub-total | 2,049,011 | 2,021,982 |
Vehicles [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, Sub-total | 2,661,084 | 2,246,203 |
Buildings [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, Sub-total | 15,913,220 | 15,826,738 |
Leasehold improvements [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, Sub-total | $ 461,071 | $ 458,566 |
PROPERTY, PLANT AND EQUIPMENT40
PROPERTY, PLANT AND EQUIPMENT, NET (Details Textual) | 1 Months Ended | 3 Months Ended | |||
May 31, 2016USD ($) | May 31, 2016CNY (¥) | Mar. 31, 2017USD ($) | Mar. 31, 2016USD ($) | Mar. 31, 2017CNY (¥) | |
Property, Plant and Equipment [Line Items] | |||||
Depreciation | $ | $ 1,944,565 | $ 1,638,817 | |||
Tax Amount Reserved for Land Use Rights | ¥ | ¥ 4,560,000 | ||||
Tax Rate Land Use Rights | 3.00% | 3.00% | |||
Dongshan Facility [Member] | |||||
Property, Plant and Equipment [Line Items] | |||||
Capital Expenditures Incurred but Not yet Paid | $ 76,500,000 | ¥ 501,000,000 | |||
Tax Amount Reserved for Land Use Rights | $ 745,220 | ¥ 4,560,000 | |||
Tax Rate Land Use Rights | 3.00% | 3.00% | |||
Development Zone Facility [Member] | |||||
Property, Plant and Equipment [Line Items] | |||||
Tax Amount Reserved for Land Use Rights | $ 2,300,000 | ¥ 15,000,000 | |||
Tax Rate Land Use Rights | 3.00% | 3.00% |
DEFERRED TAX ASSETS (Details)
DEFERRED TAX ASSETS (Details) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
Deferred tax assets - current | ||
Allowance for doubtful accounts | $ 1,754,918 | $ 1,798,894 |
Revenue (net of cost) | 92,062 | 76,719 |
Unpaid accrued expenses | 344,876 | 357,352 |
Warranty | 1,027,787 | 977,610 |
Deferred tax assets | 3,219,643 | 3,210,575 |
Valuation allowance | 0 | 0 |
Deferred tax assets - current | $ 3,219,643 | $ 3,210,575 |
SHORT-TERM BANK LOANS (Details)
SHORT-TERM BANK LOANS (Details) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
SHORT-TERM BANK LOANS [Abstract] | ||
Secured | $ 48,871,970 | $ 27,416,376 |
SHORT-TERM BANK LOANS (Details
SHORT-TERM BANK LOANS (Details Textual) - USD ($) | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
Ruili Group, Co., Ltd. [Member] | |||
Short-term Debt [Line Items] | |||
Corporate or personal guarantees | $ 1,998,753 | ||
Ruili Group Co Ltd And Related Parties And Shareholders One [Member] | |||
Short-term Debt [Line Items] | |||
Corporate or personal guarantees | 2,832,171 | ||
Ruili Group Co Ltd And Related Parties And Shareholders Two [Member] | |||
Short-term Debt [Line Items] | |||
Corporate or personal guarantees | 14,358,993 | ||
Ruili Group Co Ltd And Related Party [Member] | |||
Short-term Debt [Line Items] | |||
Corporate or personal guarantees | 5,824,852 | ||
Hangzhou Ruili Zhiye Development Ltd [Member] | |||
Short-term Debt [Line Items] | |||
Corporate or personal guarantees | 7,247,112 | ||
Bank Acceptance Notes [Member] | |||
Short-term Debt [Line Items] | |||
Corporate or personal guarantees | 10,712,681 | ||
Accounts Receivable Related Party [Member] | |||
Short-term Debt [Line Items] | |||
Corporate or personal guarantees | $ 5,897,408 | ||
Short Term Bank Loans [Member] | |||
Short-term Debt [Line Items] | |||
Maturity date, Start | Apr. 28, 2017 | ||
Interest expenses | $ 460,912 | $ 75,698 | |
Accounts receivable pledged as collateral | $ 8,668,980 | $ 4,484,755 | |
Short Term Bank Loans [Member] | Minimum [Member] | |||
Short-term Debt [Line Items] | |||
Debt Instrument, Interest Rate, Stated Percentage | 0.55% | ||
Short Term Bank Loans [Member] | Maximum [Member] | |||
Short-term Debt [Line Items] | |||
Debt Instrument, Interest Rate, Stated Percentage | 4.48% |
INCOME TAXES (Details)
INCOME TAXES (Details) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Income Tax [Line Items] | ||
China statutory income tax rate | 25.00% | 25.00% |
Effect of income tax exemptions and reliefs | (10.00%) | (10.00%) |
Effects of additional deduction allowed for R&D expenses | (2.14%) | (29.48%) |
Expenses not deductible for tax purposes | 0.62% | 6.63% |
Other items | 0.84% | 0.00% |
Effective tax rate | 14.32% | (7.85%) |
UNITED STATES | ||
Income Tax [Line Items] | ||
China statutory income tax rate | 35.00% | 35.00% |
Valuation allowance recognized with respect to the loss in the company | (35.00%) | (35.00%) |
INCOME TAXES (Details 1)
INCOME TAXES (Details 1) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
INCOME TAXES [Abstract] | ||
Current | $ 1,294,627 | $ 561,978 |
Deferred | (8,453) | (596,802) |
Total | $ 1,286,174 | $ (34,824) |
INCOME TAXES (Details Textual)
INCOME TAXES (Details Textual) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
Income Taxes [Line Items] | ||
"High-Tech Enterprise" income tax rate | 15.00% | 15.00% |
OPERATING LEASES WITH RELATED47
OPERATING LEASES WITH RELATED PARTIES (Details Textual) | 3 Months Ended | ||
Mar. 31, 2017USD ($) | Mar. 31, 2017CNY (¥) | Mar. 31, 2016USD ($) | |
Operating Leased Assets [Line Items] | |||
Lease expenses | $ 75,887 | $ 422,611 | |
Apartment Buildings [Member] | Ruili Group [Member] | |||
Operating Leased Assets [Line Items] | |||
Annual lease expense | $ 333,688 | ¥ 2,100,000 |
WARRANTY CLAIMS (Details)
WARRANTY CLAIMS (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Beginning balance at January 1, 2017 | $ 6,517,402 | |
Aggregate increase for new warranties issued during current period | 637,874 | $ 495,385 |
Aggregate reduction for payments made | (339,795) | |
Effect of exchange rate fluctuation | 36,431 | |
Ending balance at March 31, 2017 | $ 6,851,912 |
WARRANTY CLAIMS (Details Textua
WARRANTY CLAIMS (Details Textual) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Product Warranty Accrual, Warranties Issued | $ 637,874 | $ 495,385 |
SEGMENT INFORMATION (Details)
SEGMENT INFORMATION (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
Segment Reporting Information [Line Items] | |||
Sales | $ 73,895,781 | $ 53,836,728 | |
Gross profit | 20,547,705 | 14,439,079 | |
OPERATING EXPENSES | |||
Selling and distribution expenses | 5,608,623 | 5,562,432 | |
General and administrative expenses | 4,044,913 | 6,929,858 | |
Research and development expenses | 2,055,096 | 1,743,687 | |
Other operating income | 788,468 | 914,205 | |
Income from operations | 9,627,541 | 1,117,307 | |
Interest income | 10,550 | 88,102 | |
Government grants | 28,909 | 4,757 | |
Interest expenses | (481,160) | (174,460) | |
Other expenses | (207,531) | (637,629) | |
Other income | 664 | 45,589 | |
Income before income tax provision (benefit) | 8,978,973 | 443,666 | |
CAPITAL EXPENDITURE | 14,320,981 | 1,247,024 | |
DEPRECIATION AND AMORTIZATION | 2,017,224 | 1,733,874 | |
TOTAL ASSETS | 327,613,171 | $ 301,328,124 | |
LONG LIVED ASSETS | 63,179,231 | 62,058,477 | |
INTERSEGMENT SALES [Member] | |||
Segment Reporting Information [Line Items] | |||
Sales | 0 | 0 | |
Commercial Vehicles Brake Systems [Member] | |||
Segment Reporting Information [Line Items] | |||
Sales | 60,676,304 | 44,080,072 | |
Gross profit | 16,400,238 | 11,960,732 | |
OPERATING EXPENSES | |||
CAPITAL EXPENDITURE | 11,758,957 | 1,021,063 | |
DEPRECIATION AND AMORTIZATION | 1,656,343 | 1,419,696 | |
TOTAL ASSETS | 269,003,175 | 248,023,179 | |
LONG LIVED ASSETS | 51,876,467 | 51,080,332 | |
Commercial Vehicles Brake Systems [Member] | INTERSEGMENT SALES [Member] | |||
Segment Reporting Information [Line Items] | |||
Sales | 0 | 0 | |
Passenger Vehicles Brake Systems [Member] | |||
Segment Reporting Information [Line Items] | |||
Sales | 13,219,477 | 9,756,656 | |
Gross profit | 4,147,467 | 2,478,347 | |
OPERATING EXPENSES | |||
CAPITAL EXPENDITURE | 2,562,024 | 225,961 | |
DEPRECIATION AND AMORTIZATION | 360,881 | 314,178 | |
TOTAL ASSETS | 58,609,996 | 53,304,945 | |
LONG LIVED ASSETS | 11,302,764 | $ 10,978,145 | |
Passenger Vehicles Brake Systems [Member] | INTERSEGMENT SALES [Member] | |||
Segment Reporting Information [Line Items] | |||
Sales | $ 0 | $ 0 |
CONTINGENCIES (Details Textual)
CONTINGENCIES (Details Textual) | Mar. 31, 2017USD ($) | Mar. 31, 2017CNY (¥) |
Contingencies [Line Items] | ||
Relevant tax amount reserved | ¥ 4,560,000 | |
Tax rate, land use right | 3.00% | 3.00% |
Dongshan Facility [Member] | ||
Contingencies [Line Items] | ||
Relevant tax amount reserved | $ 745,220 | ¥ 4,560,000 |
Tax rate, land use right | 3.00% | 3.00% |