China Automotive Systems Reports 25.2% Net Sales Growth in the 2017 Third Quarter
WUHAN, China, Nov. 9, 2017 /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 third quarter and nine months ended September 30, 2017.
Third Quarter 2017 Highlights
-- Net sales increased 25.2% to $118.4 million, compared to $94.6 million
in the third quarter of 2016;
-- Gross margin was19.0%;
-- Net income attributable to parent company's common shareholders was $5.1
million, or diluted earnings per share of $0.16, compared to net income
attributable to parent company's common shareholders of $5.7 million, or
diluted earnings per share of $0.18, in the third quarter of 2016.
First Nine Months of 2017 Highlights
-- Net sales increased 13.7% to $355.3 million, compared to $312.5 million
in the first nine months of 2016;
-- Gross margin was 19.2%;
-- Diluted earnings per share attributable to parent company's common
shareholders was $0.62 compared with $0.52 for the first nine months of
2016;
-- Cash and cash equivalents, pledged cash deposits and short-term
investments were $110.3 million as of September 30, 2017;
-- Net cash flow from operating activities was $43.0 million.
Mr. Qizhou Wu, the Chief Executive Officer of CAAS, commented, "Sales of our traditional hydraulic products led our strong growth in the third quarter of 2017 as sales of Chinese passenger vehicles and heavy-duty trucks remain solid. Additionally, our new advanced hydraulic steering products have been the primary driver of our robust sales to Chrysler and Ford for use in the North American markets with sales rising by 78.3% in the third quarter of 2017. Our electric power steering ("EPS") business is stable and we remain optimistic about its future as we continue to develop more advanced products and production capabilities."
Mr. Jie Li, the Chief Financial Officer of CAAS, commented, "We continue to invest in our operations to ensure we have developed the right products and can efficiently build them to add value for our customers. In addition to capital investment, we have increased our investment in our joint venture fund to develop new automotive technologies. We intend to further penetrate our key markets in China, North America and Brazil."
Third Quarter of 2017
In the third quarter of 2017, net sales increased 25.2% to $118.4 million, compared to $94.6 million in the same quarter of 2016. This increase was mainly due to higher volumes of traditional steering products to autos and heavy-duty vehicles in China. Also, new products drove higher sales to the Company's North American customers.
Gross profit was $22.5 million in the third quarter of 2017, compared to $20.0 million in the third quarter of 2016. The gross margin was 19.0% in the third quarter of 2017, versus 21.1% in the third quarter of 2016. The margin decline was primarily related to changes in the product mix as some higher-margin products experienced slower growth during the third quarter.
Selling expenses were $4.5 million in the third quarter of 2017, compared to $3.8 million in the third quarter of 2016. Greater unit sales led to higher transportation expenses in the third quarter of 2017. Selling expenses represented 3.8% of net sales in the third quarter of 2017, compared to 4.0% in the third quarter of 2016.
General and administrative expenses ("G&A expenses") were $4.4 million in the third quarter of 2017, compared to $3.7 million in the same quarter of 2016. G&A expenses represented 3.7% of net sales in the third quarter of 2017compared with 3.9% in the third quarter of 2016.
Research and development expenses ("R&D expenses") were $9.2 million in the third quarter of 2017, compared to $6.7 million in the third quarter of 2016. R&D expenses represented 7.8% of net sales in the third quarter of 2017 compared with 7.1% in the third quarter of 2016. The higher R&D expenses were mainly due to greater emphasis on accelerating the development of brushless motor EPS products as well as other new advanced products.
Net financial income was $1.0 million in the third quarter of 2017 compared to net financial income of $0.8 million in the third quarter of 2016.
Income from operations was $4.9 million in the third quarter of 2017, compared to $5.7 million in the same quarter of 2016. The decrease was mainly due to lower gross margin and higher operating expenses.
Income before income tax expenses and equity in earnings of affiliated companies was $5.7 million in the third quarter of 2017, compared to $6.7 million in the third quarter of 2016. The decrease in income before income tax expenses and equity in earnings of affiliated companies was mainly due to lower operating income in the third quarter of 2017 compared with the third quarter of 2016.
Net income attributable to parent company's common shareholders was $5.1 million in the third quarter of 2017, compared to net income attributable to parent company's common shareholders of $5.7 million in the third quarter of 2016. Diluted earnings per share were $0.16 in the third quarter of 2017, compared to diluted earnings per share of $0.18 in the third quarter of 2016.
The weighted average number of diluted common shares outstanding was31,644,271in the third quarter of 2017, compared to 31,911,722 in the third quarter of 2016.
First Nine Months of 2017
Net sales for the first nine months of 2017 were $355.3 million, compared to $312.5 million in the first nine months of 2016. Nine-month gross profit was $68.2 million, compared to $59.1 million in the corresponding period last year. Nine-month gross margin was 19.2%, compared to 18.9% for the corresponding period in 2016. For the nine months ended September 30, 2017, gain on other sales amounted to $5.9 million, compared to $2.0 million for the corresponding period in 2016. Income from operations was $23.2 million compared to $18.0 million in the first nine months of 2016. Operating margin was 6.5%, compared to 5.8% for the corresponding period of 2016.
Net income attributable to parent company's common shareholders was $19.7 million compared with $16.8 million in the corresponding period last year. Diluted earnings per share were $0.62 in the first nine months of 2017, compared to diluted earnings per share of $0.52 for the corresponding period in 2016.
Balance Sheet
As of September 30, 2017, total cash and cash equivalents, pledged cash deposits and short-term investments were $110.3 million, total accounts receivable including notes receivable were $287.6 million, accounts payable including notes payable were $230.5 million, and short-term bank and government loans were $73.6 million. Total parent company stockholders' equity was $333.4 million as of September 30, 2017, compared to $300.5 million as of December 31, 2016.
Business Outlook
Management has raised its revenue guidance for the full year 2017to US$495 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 30, 2017, 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
+1-646-726-6511
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 September 30,
--------------------------------
2017 2016
---- ----
Net product sales ($7,563 and $9,950 sold to related parties for the $118,365 $94,626
three months ended September 30, 2017 and 2016)
Cost of products sold ($6,549 and $5,869 purchased from related 95,878 74,641
parties for the three months ended September 30, 2017 and 2016)
Gross profit 22,487 19,985
------ ------
Gain on other sales 553 22
--- ---
Less: Operating expenses
Selling expenses 4,537 3,840
General and administrative expenses 4,390 3,741
Research and development expenses 9,194 6,723
----- -----
Total operating expenses 18,121 14,304
------ ------
Income from operations 4,919 5,703
Other income 100 420
Interest expense (318) (201)
Financial income, net 1,027 800
----- ---
Income before income tax expenses and equity in earnings of 5,728 6,722
affiliated companies
Less: Income taxes 991 1,167
Equity in earnings of affiliated companies 491 304
--- ---
Net income 5,228 5,859
Net income attributable to non-controlling interests 169 177
--- ---
Net income attributable to parent company's common shareholders $5,059 $5,682
====== ======
Comprehensive income:
Net income $5,228 $5,859
Other comprehensive income:
Foreign currency translation gain/(loss), net of tax 6,705 (2,139)
----- ------
Comprehensive income 11,933 3,720
Comprehensive income attributable to non-controlling interests 386 119
--- ---
Comprehensive income attributable to parent company $11,547 $3,601
======= ======
Net income attributable to parent company's common shareholders per share
Basic - $0.16 $0.18
===== =====
Diluted- $0.16 $0.18
===== =====
Weighted average number of common shares outstanding
Basic 31,644,004 31,911,360
Diluted 31,644,271 31,911,722
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)
Nine Months Ended September 30,
-------------------------------
2017 2016
---- ----
Net product sales ($25,684 and $28,589 sold to related parties for the $355,333 $312,497
nine months ended September 30, 2017 and 2016)
Cost of products sold ($20,195 and $18,912 purchased from related 287,156 253,352
parties for the nine months ended September 30, 2017 and 2016)
Gross profit 68,177 59,145
------ ------
Gain on other sales 5,896 2,008
----- -----
Less: Operating expenses
Selling expenses 13,160 12,273
General and administrative expenses 14,027 11,998
Research and development expenses 23,666 18,849
------ ------
Total operating expenses 50,853 43,120
------ ------
Income from operations 23,220 18,033
Other (expense)/income, net (2) 995
Interest expense (1,193) (524)
Financial income, net 1,909 1,270
----- -----
Income before income tax expenses and equity in earnings of affiliated 23,934 19,774
companies
Less: Income taxes 4,367 3,416
Equity in earnings of affiliated companies 480 561
--- ---
Net income 20,047 16,919
Net income attributable to non-controlling interests 353 164
--- ---
Net income attributable to parent company's common shareholders $19,694 $16,755
======= =======
Comprehensive income:
Net income $20,047 $16,919
Other comprehensive income:
Foreign currency translation gain/(loss), net of tax 14,148 (8,435)
------ ------
Comprehensive income 34,195 8,484
Comprehensive gain/(loss) attributable to non-controlling interests 819 (143)
--- ----
Comprehensive income attributable to parent company $33,376 $8,627
======= ======
Net income attributable to parent company's common shareholders per
share
Basic - $0.62 $0.52
===== =====
Diluted- $0.62 $0.52
===== =====
Weighted average number of common shares outstanding
Basic 31,644,004 32,038,933
Diluted 31,647,833 32,040,514
China Automotive Systems, Inc. and Subsidiaries
Condensed Unaudited Consolidated Balance Sheets
(In thousands of USD unless otherwise indicated)
September 30, 2017 December 31, 2016
------------------ -----------------
ASSETS
Current assets:
Cash and cash equivalents $55,382 $31,092
Pledged cash 31,075 30,799
Short-term investments 23,829 30,475
Accounts and notes receivable, net - unrelated parties 269,943 285,731
Accounts and notes receivable, net - related parties 17,607 20,984
Advance payments and others - unrelated parties 12,235 10,203
Advance payments and others - related parties 31,397 624
Inventories 73,030 68,050
Current deferred tax assets 7,476 7,946
----- -----
Total current assets 521,974 485,904
Non-current assets:
Long-term time deposits 6,027 865
Property, plant and equipment, net 115,302 101,478
Intangible assets, net 512 617
Other receivables, net - unrelated parties 2,234 2,252
Advance payment for property, plant and equipment - unrelated 14,222 14,506
parties
Advance payment for property, plant and equipment - related 4,813 5,005
parties
Long-term investments 25,341 16,431
Non-current deferred tax assets 4,295 4,641
----- -----
Total assets $694,720 $631,699
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank and government loans $73,594 $40,820
Accounts and notes payable - unrelated parties 224,758 216,993
Accounts and notes payable - related parties 5,749 6,803
Customer deposits 869 700
Accrued payroll and related costs 7,460 6,971
Accrued expenses and other payables 32,883 35,882
Accrued pension costs 4,750 4,130
Taxes payable 3,800 11,674
Amounts due to shareholders/directors 335 312
Advances payable (current portion) 399 382
Current deferred tax liabilities 190 193
--- ---
Total current liabilities 354,787 324,860
Long-term liabilities:
Long-term bank loan - 608
Advances payable 354 339
Total liabilities $355,141 $325,807
-------- --------
Commitments and Contingencies (See Note 29)
Stockholders' equity:
Common stock, $0.0001 par value - Authorized - 80,000,000 $3 $3
shares; Issued - 32,338,302 and 32,338,302 shares as of
September 30, 2017 and December 31, 2016, respectively
Additional paid-in capital 64,406 64,764
Retained earnings-
Appropriated 10,673 10,549
Unappropriated 248,533 228,963
Accumulated other comprehensive income/(loss) 12,722 (892)
Treasury stock - 694,298 and 694,298 shares as of September (2,907) (2,907)
30, 2017 and December 31, 2016, respectively
Total parent company stockholders' equity 333,430 300,480
Non-controlling interests 6,149 5,412
----- -----
Total stockholders' equity 339,579 305,892
------- -------
Total liabilities and stockholders' equity $694,720 $631,699
======== ========
China Automotive Systems, Inc. and Subsidiaries
Condensed Unaudited Consolidated Statements of Cash Flows
(In thousands of USD unless otherwise indicated)
Nine Months Ended September 30,
-------------------------------
2017 2016
---- ----
Cash flows from operating activities:
Net income $20,047 $16,919
Adjustments to reconcile net income from operations to net cash
provided by operating activities:
Share-based compensation 100 -
Depreciation and amortization 10,933 10,732
Increase in/(reversal of) provision for doubtful accounts 1,034 (126)
Inventory write downs 4,436 2,353
Deferred income taxes 1,354 (142)
Equity in earnings of affiliated companies (480) (561)
Gain on disposal of Fujian Qiaolong - (698)
Gain on fixed assets disposals (2,204) (6)
Changes in operating assets and liabilities
(Increase) decrease in:
Pledged cash 1,226 9,711
Accounts and notes receivable 32,807 (18,471)
Advance payments and others (1,527) (2,798)
Inventories (6,441) (18,244)
Increase (decrease) in:
Accounts and notes payable (3,023) 14,990
Customer deposits 158 (613)
Accrued payroll and related costs 182 544
Accrued expenses and other payables (6,216) 1,309
Accrued pension costs 443 (160)
Taxes payable (9,806) (1,582)
Advance payable - (75)
Net cash provided by operating activities 43,023 13,082
------ ------
Cash flows from investing activities:
Decrease in other receivables 159 2,382
Proceeds from disposition of a subsidiary, net of cash disposed of - 1,953
$1,063
Cash received from property, plant and equipment sales 2,351 511
Payments to acquire property, plant and equipment (including $7,656 (19,187) (27,161)
and $5,662 paid to related parties for the nine months ended
September 30, 2017 and 2016, respectively)
Payments to acquire intangible assets - (60)
Purchase of short-term investments (25,017) (28,181)
Purchase of long-term time deposit (5,836) -
Proceeds from maturities of short-term investments 33,749 13,236
Investment under equity method (7,629) (8,682)
Loan to a related party (29,044) -
------- ---
Net cash used in investing activities (50,454) (46,002)
------- -------
Cash flows from financing activities:
Proceeds from bank and government loans 69,635 12,151
Repayments of bank and government loans (39,271) (7,145)
Dividends paid to the non-controlling interest holders - (464)
Repurchases of common stock - (991)
--- ----
Net cash provided by financing activities 30,364 3,551
------ -----
Effects of exchange rate on cash and cash equivalents 1,357 (1,245)
----- ------
Net increase/decrease in cash and cash equivalents 24,290 (30,614)
Cash and cash equivalents at beginning of period 31,092 69,676
------ ------
Cash and cash equivalents at end of period $55,382 $39,062
======= =======
China Automotive Systems, Inc. and Subsidiaries
Condensed Unaudited Consolidated Statements of Cash Flows (continued)
(In thousands of USD unless otherwise indicated)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Nine Months Ended September 30,
-------------------------------
2017 2016
---- ----
Cash paid for interest $573 $219
Cash paid for income taxes 4,343 1,396
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Nine Months Ended September 30,
-------------------------------
2017 2016
Property, plant and equipment recorded during the period which $12,331 $12,771
previously were advance payments
Accounts payable for acquiring property, plant and equipment 890 844
Dividends payable to non-controlling interests 621 -
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SOURCE China Automotive Systems, Inc.
