China Automotive Systems Reports 2018 First Quarter Results

China Automotive Systems Reports 2018 First Quarter Results

WUHAN, China, May 10, 2018 /PRNewswire/ -- China Automotive Systems, Inc. (NASDAQ: CAAS) ("CAAS" or the "Company"), a leading power steering components and systems supplier in China, today announced its unaudited financial results for the first quarter ended March 31, 2018.

First Quarter 2018 Highlights

  • Net sales increased 12.3% to $134.0 million from $119.3 million in the first quarter of 2017
  • Net income attributable to parent company's common shareholders was $4.3 million, or diluted earnings per share of $0.14, compared to $5.7 million, or diluted earnings per share of $0.18 in the first quarter of 2017
  • Total cash and cash equivalents, pledged cash and short-term investments were $124.5 million

Mr. Qizhou Wu, chief executive officer of CAAS, commented, "Our sales continue to benefit from increased demand for our advanced products and exports. We are pleased to report that our sales to North America grew by 84.5% in the first quarter of 2018 compared with the same quarter last year.  As we continue to invest in our electric power steering and other advanced steering technologies to position the Company for the future, our broad portfolio of steering products provides solutions to meet our customers' needs across all automotive segments."

Mr. Jie Li, chief financial officer of CAAS, commented, "We continue to focus on building our financial strength to support our growing sales volume." 

First Quarter of 2018

In the first quarter of 2018, net sales were $134.0 million compared to $119.3 million in the same quarter of 2017, reflecting a 12.3% year-over-year growth. The increase in net sales was mainly due to increased sales volume, especially for legacy products for the North American and heavy-duty vehicle markets, and the effect of foreign currency exchange. The Company adopted ASC Topic 606 "Revenue from Contracts with Customer" as of January 1, 2018.  Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under ASC Topic 605 "Revenue Recognition". No significant impact to the consolidated financial statements as a result of the adoption.

Gross profit was $21.6 million in the first quarter of each 2018 and 2017. The gross margin was 16.1% in the first quarter of 2018 compared to 18.1% in the first quarter of 2017 due to changes in the product mix.

Gain on other sales was $1.5 million in the first quarter of 2018 compared to $0.8 million in the first quarter of 2017, reflecting higher scrap volume.

Selling expenses were $5.8 million in the first quarter of 2018, compared to $4.1 million in the first quarter of 2017. The increase was primarily due to higher logistics fees reflecting higher sales volume and increased marketing expenses. Selling expenses represented 4.3% of net sales in the first quarter of 2018 compared to 3.4% in the first quarter of 2017. 

General and administrative expenses ("G&A expenses") were $4.4 million in the first quarter of 2018, compared to $4.4 million in the same quarter of 2017. G&A expenses represented 3.3% of net sales in the first quarter of 2018 and 3.7% in the first quarter of 2017. 

Research and development expenses ("R&D expenses") were $8.3 million in the first quarter of 2018, compared to $6.8 million in the first quarter of 2017. R&D expenses represented 6.2% of net sales in the first quarter of 2018 compared to 5.7% in the first quarter of 2017. The increase in R&D expenses was due to increased investment in EPS product research and development such as brushless motor and Advanced Driver Assistance Systems (ADAS) related projects.

Income from operations was $4.6 million in the first quarter of 2018, compared to $7.2 million in the same quarter of 2017. The decrease was primarily due to lower gross margin and higher selling and research and development expenses.

Interest expense was $0.4 million in the first quarter of 2018 compared to $0.2 million, in the same quarter of 2017. The increase was due to new bank borrowings at higher interest rates.

Net financial expense was $0.8 million in the first quarter of 2018 compared to net financial income of $0.3 million in the first quarter of 2017. The increase of net financial expense was primarily due to an increase in foreign exchange rates related to higher export sales in the first quarter of 2018.

Income before income tax expenses and equity in earnings of affiliated companies was $4.0 million in the first quarter of 2018, compared to $7.1 million in the first quarter of 2017. The decrease in income before income tax expenses and equity in earnings of affiliated companies was mainly due to lower income from operations. 

Net income attributable to parent company's common shareholders was $4.3 million in the first quarter of 2018, compared to $5.7 million in the first quarter of 2017. Diluted earnings per share were $0.14 per share in the first quarter of 2018, compared to $0.18 in the first quarter of 2017.  

The weighted average number of diluted common shares outstanding was 31,644,004 in the first quarter of 2018, compared to 31,649,908 in the first quarter of 2017.

Balance Sheet

As of March 31, 2018, total cash and cash equivalents, pledged cash and short-term investments were $124.5 million, total accounts receivable including notes receivable were $304.7 million, accounts payable were $237.6 million and short-term bank and government loans were $63.2 million. Total parent company stockholders' equity was $316.5 million as of March 31, 2018, compared to $299.4 million as of December 31, 2017.   

Business Outlook

Management has raised its revenue guidance for the full year 2018 to US$520 million. This target is based on the Company's current views on operating and market conditions, which are subject to change.

About China Automotive Systems, Inc.

Based in Hubei Province, the People's Republic of China, China Automotive Systems, Inc. is a leading supplier of power steering components and systems to the Chinese automotive industry, operating through eight Sino-foreign joint ventures. The Company offers a full range of steering system parts for passenger automobiles and commercial vehicles. The Company currently offers four separate series of power steering with an annual production capacity of over 6 million sets of steering gears, columns and steering hoses. Its customer base is comprised of leading auto manufacturers, such as China FAW Group, Corp., Dongfeng Auto Group Co., Ltd., BYD Auto Company Limited, Beiqi Foton Motor Co., Ltd. and Chery Automobile Co., Ltd. in China, and Chrysler Group LLC in North America. For more information, please visit: http://www.caasauto.com.

Forward-Looking Statements

This press release contains statements that are "forward-looking statements" as defined under the Private Securities Litigation Reform Act of 1995. Forward-looking statements represent our estimates and assumptions only as of the date of this press release. These forward-looking statements include statements regarding the qualitative and quantitative effects of the accounting errors, the periods involved, the nature of the Company's review and any anticipated conclusions of the Company or its management and other statements that are not historical facts. Our actual results may differ materially from the results described in or anticipated by our forward-looking statements due to certain risks and uncertainties. As a result, the Company's actual results could differ materially from those contained in these forward-looking statements due to a number of factors, including those described under the heading "Risk Factors" in the Company's Form 10-K annual report filed with the Securities and Exchange Commission on March 29, 2018, and in documents subsequently filed by the Company from time to time with the Securities and Exchange Commission. We expressly disclaim any duty to provide updates to any forward-looking statements made in this press release, whether as a result of new information, future events or otherwise.

For further information, please contact:

Jie Li
Chief Financial Officer
China Automotive Systems, Inc.
Email: jieli@chl.com.cn

Kevin Theiss
Investor Relations
+1-212-521-4050
Email: Kevin.Theiss@awakenlab.com

- Tables Follow -

China Automotive Systems, Inc. and Subsidiaries

Condensed Unaudited Consolidated Statements of Operations and Comprehensive Income

(In thousands of USD, except share and per share amounts)

 
   
   

Three Months Ended March 31,

 
   

2018

   

2017

 

Net product sales ($10,846 and $9,538 sold to related parties for
the three months ended March 31, 2018 and 2017)

 

$

134,018

   

$

119,308

 

Cost of products sold ($8,249 and $7,363 purchased from
related parties for the three months ended March 31, 2018 and
2017)

   

112,379

     

97,679

 

Gross profit

   

21,639

     

21,629

 

Gain on other sales

   

1,513

     

788

 

Less: Operating expenses

               

Selling expenses

   

5,827

     

4,068

 

General and administrative expenses

   

4,424

     

4,354

 

Research and development expenses

   

8,307

     

6,765

 

Total operating expenses

   

18,558

     

15,187

 

Income from operations

   

4,594

     

7,230

 

Other income/(expense)

   

621

     

(254)

 

Interest expense

   

(415)

     

(231)

 

Financial (expense)/income, net

   

(765)

     

332

 

Income before income tax expenses and equity in earnings of
affiliated companies

   

4,035

     

7,077

 

Less: Income taxes

   

588

     

1,190

 

Equity in earnings of affiliated companies

   

585

     

51

 

Net income

   

4,032

     

5,938

 

Net (loss)/income attributable to non-controlling interests

   

(280)

     

224

 

Net income attributable to parent company's common
shareholders

 

$

4,312

   

$

5,714

 

Comprehensive income:

               

Net income

 

$

4,032

   

$

5,938

 

Other comprehensive income:

               

Foreign currency translation gain, net of tax

   

13,242

     

1,629

 

Comprehensive income

   

17,274

     

7,567

 

Comprehensive income attributable to non-controlling interests

   

236

     

278

 

Comprehensive income attributable to parent company

 

$

17,038

   

$

7,289

 
                 

Net income attributable to parent company's common
shareholders per share

               
                 

Basic -

 

$

0.14

   

$

0.18

 
                 

Diluted -

 

$

0.14

   

$

0.18

 

Weighted average number of common shares outstanding

               

Basic

   

31,644,004

     

31,644,004

 

Diluted

   

31,644,004

     

31,649,908

 
                 

 

China Automotive Systems, Inc. and Subsidiaries

Condensed Unaudited Consolidated Balance Sheets

(In thousands of USD unless otherwise indicated)

 
   
   

March 31, 2018

   

December 31, 2017

 
   

ASSETS

               

Current assets:

               

Cash and cash equivalents

 

$

78,729

   

$

64,558

 

Pledged cash

   

32,697

     

31,535

 

Short-term investments

   

13,040

     

29,587

 

Accounts and notes receivable, net - unrelated parties

   

282,072

     

274,989

 

Accounts and notes receivable, net - related parties

   

22,661

     

19,086

 

Advance payments and others - unrelated parties

   

12,208

     

12,790

 

Advance payments and others - related parties

   

1,068

     

20,841

 

Inventories

   

87,370

     

79,217

 

Total current assets

   

529,845

     

532,603

 

Non-current assets:

               

Property, plant and equipment, net

   

132,899

     

126,033

 

Intangible assets, net

   

632

     

661

 

Other receivables, net - unrelated parties

   

1,624

     

2,188

 

Advance payment for property, plant and equipment - unrelated
parties

   

8,406

     

9,657

 

Advance payment for property, plant and equipment - related
parties

   

9,244

     

5,264

 

Long-term investments

   

29,268

     

27,596

 

Deferred tax assets

   

13,800

     

13,367

 

Total assets

 

$

725,718

   

$

717,369

 
                 

LIABILITIES AND STOCKHOLDERS' EQUITY

               

Current liabilities:

               

Bank and government loans

 

$

63,176

   

$

72,711

 

Accounts and notes payable - unrelated parties

   

230,036

     

233,048

 

Accounts and notes payable - related parties

   

7,544

     

7,168

 

Customer deposits

   

1,398

     

1,128

 

Accrued payroll and related costs

   

7,841

     

8,577

 

Accrued expenses and other payables

   

38,952

     

40,127

 

Accrued pension costs

   

4,786

     

4,051

 

Taxes payable

   

9,902

     

5,927

 

Amounts due to shareholders/directors

   

364

     

343

 

Advances payable (current portion)

   

398

     

383

 

Total current liabilities

   

364,397

     

373,463

 

Long-term liabilities:

               

Long-term government loan

   

318

     

306

 

Advances payable

   

373

     

359

 

Long-term taxes payable

   

32,719

     

32,719

 

Deferred tax liabilities

   

4,508

     

4,393

 

Total liabilities

 

$

402,315

   

$

411,240

 
                 

Stockholders' equity:

               

Common stock, $0.0001 par value - Authorized - 80,000,000
shares; Issued - 32,338,302 and 32,338,302 shares as of March 31,
2018 and December 31, 2017, respectively

 

$

3

   

$

3

 

Additional paid-in capital

   

64,406

     

64,406

 

Retained earnings-

               

Appropriated

   

10,707

     

10,707

 

Unappropriated

   

213,771

     

209,459

 

Accumulated other comprehensive income

   

30,506

     

17,780

 

Treasury stock –694,298 and 694,298 shares as of March 31, 2018
and December 31, 2017, respectively

   

(2,907)

     

(2,907)

 

Total parent company stockholders' equity

   

316,486

     

299,448

 

Non-controlling interests

   

6,917

     

6,681

 

Total stockholders' equity

   

323,403

     

306,129

 

Total liabilities and stockholders' equity

 

$

725,718

   

$

717,369

 

 

China Automotive Systems, Inc. and Subsidiaries

Condensed Unaudited Consolidated Statements of Cash Flows

(In thousands of USD unless otherwise indicated)

 
   
   

Three Months Ended March 31,

 
   

2018

   

2017

 

Cash flows from operating activities:

               

Net income

 

$

4,032

   

$

5,938

 

Adjustments to reconcile net income from operations to net cash
provided by operating activities:

               

Depreciation and amortization

   

4,342

     

4,189

 

Accrual/(reversal) of provision for doubtful accounts

   

275

     

(19)

 

Inventory write downs

   

1,543

     

813

 

Deferred income taxes

   

33

     

(63)

 

Equity in earnings of affiliated companies

   

(585)

     

(51)

 

Gain on fixed assets disposals

   

12

     

17

 

Changes in operating assets and liabilities

               

(Increase)/decrease in:

               

Pledged cash

   

72

     

(2,618)

 

Accounts and notes receivable

   

559

     

2,480

 

Advance payments and others

   

(128)

     

52

 

Inventories

   

(6,592)

     

(1,444)

 

Increase/(decrease) in:

               

Accounts and notes payable

   

(11,950)

     

(1,592)

 

Customer deposits

   

246

     

123

 

Accrued payroll and related costs

   

(1,064)

     

(431)

 

Accrued expenses and other payables

   

(4,031)

     

(1,467)

 

Accrued pension costs

   

576

     

(247)

 

Taxes payable

   

5,230

     

(3,318)

 

Net cash (used in)/provided by operating activities

   

(7,430)

     

2,362

 

Cash flows from investing activities:

               

Increase in other receivables

   

647

     

20

 

Cash received from property, plant and equipment sales

   

26

     

26

 

Payments to acquire property, plant and equipment (including $5,224
and $493 paid to related parties for the three months ended March 31,
2018 and 2017, respectively)

   

(8,192)

     

(3,245)

 

Purchase of short-term investments

   

(1,414)

     

-

 

Proceeds from maturities of short-term investments

   

19,108

     

2,433

 

Loan to a related party

   

-

     

(29,044)

 

Cash received from repayment of the loan to a related party

   

20,430

     

-

 

Net cash provided by/(used in) investing activities

   

30,605

     

(29,810)

 

Cash flows from financing activities:

               

Proceeds from bank loans

   

19,672

     

27,754

 

Repayments of bank loans

   

(31,037)

     

(245)

 

Net cash (used in)/provided by financing activities

   

(11,365)

     

27,509

 

Effects of exchange rate on cash and cash equivalents

   

2,361

     

150

 

Net (decrease)/increase in cash and cash equivalents

   

14,171

     

211

 

Cash and cash equivalents at beginning of period

   

64,558

     

31,092

 

Cash and cash equivalents at end of period

 

$

78,729

   

$

31,303

 

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