China Automotive Systems Reports Fourth Quarter and Fiscal 2017 Results
China Automotive Systems Reports Fourth Quarter and Fiscal 2017 Results
WUHAN, China, March 29, 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 fourth quarter and the audited results for the fiscal year ended December 31, 2017.
Fourth Quarter 2017 Highlights
-- Net sales were $143.7 million compared to $149.6 million in the fourth
quarter of 2016
-- Net loss attributable to parent company's common shareholders was $39.0
million, or diluted loss per share of $1.23, reflecting an accrued
one-time corporate tax of $35.6 million recognized in the fourth quarter
mandated by the recent U.S. tax reform and additional $4.0 million
withholding tax for the planned dividends from the Company's PRC
subsidiaries in order to fund the payments of such tax.
Fiscal Year 2017 Highlights
-- Net sales were $499.1 million, compared to $462.1 million in 2016
-- Diluted loss per share attributable to parent company's common
shareholders was $0.61 compared to diluted income per share attributable
to parent company's common shareholders of $0.70 in 2016
-- Cash and cash equivalents, pledged cash and short-term investments were
$125.7 million as of December 31, 2017
-- Net cash flow from operating activities was $50.2 million
Mr. Qizhou Wu, chief executive officer of CAAS, commented, "Our growth in 2017 was led by higher sales of our new advanced hydraulic products into the North American market and higher sales of hydraulic products for the commercial vehicle market in China. Our sales to North America grew by 51.4% and accounted for 16.9% of total sales in 2017. Truck sales in China grew by 16.9% in China, led by record sales of 1.1 million units of heavy-duty trucks. With our large and broad line of steering products, we are well positioned to take advantage of growth opportunities in a number of automotive segments."
Mr. Jie Li, chief financial officer of CAAS, commented, "We remain focused on increasing our financial strength. We generated $50.2 million in cash flow from operations in 2017."
Fourth Quarter of 2017
In the fourth quarter of 2017, net sales were $143.7 million compared to $149.6 million in the same quarter of 2016. The net sales decrease was mainly due to the exceptionally strong Chinese auto market in the fourth quarter of 2016 and the production for new products targeting the Company's North American customers reaching its full capacity.
Gross profit was $16.5 million in the fourth quarter of 2017, compared to $21.8 million in the fourth quarter of 2016. The decrease in gross profit was primarily due to the decrease in net sales and change of product mix.
Gain on other sales was $1.7 million, compared to $1.8 million in the fourth quarter of 2016.
Selling expenses were $6.8 million in the fourth quarter of 2017, compared to $4.9 million in the fourth quarter of 2016. The increase was primarily due to higher transportation expenses and increased marketing expenses that were related to increased revenue. Selling expenses represented 4.7% of net sales in the fourth quarter of 2017 compared to 3.3% in the fourth quarter of 2016.
General and administrative expenses ("G&A expenses") increased to $5.5 million from $4.9 million in the fourth quarter of 2016. G&A expenses represented 3.8% of net sales in the fourth quarter of 2017 compared to 3.2% of net sales in the fourth quarter of 2016. The increase in G&A expenses and G&A expenses as a percentage of net sales in the fourth quarter of 2017 was mainly due to higher personnel costs.
Research and development expenses ("R&D expenses") were $9.9 million in the fourth quarter of 2017, compared to $8.9 million in the fourth quarter of 2016. R&D expenses represented 6.9% of net sales in the fourth quarter of 2017 compared to 5.9% in the fourth quarter of 2016. The increase in R&D expenses was due to ongoing higher investment in EPS product research and development such as brushless motors and Advanced Driver Assistance Systems (ADAS) related projects. Additional engineers, newly acquired technologies, and more testing equipment accounted for most of the increase.
Loss from operations was $4.0 million in the fourth quarter of 2017, compared to income from operations of $5.0 million in the same quarter of 2016. The loss was mainly due to lower gross profit and higher investment in R&D and selling expenses.
Interest expense was $0.6 million in the fourth quarter of 2017, compared to interest expense of $0.1 million in the fourth quarter of 2016 due to higher average loans outstanding.
Net financial income was $0.2 million in the fourth quarter of 2017, which was consistent with the same quarter of 2016.
Net loss attributable to parent company's common shareholders was $39.0 million in the fourth quarter of 2017 primarily due to the one-time accrued tax of $35.7 million mandated by the recent U.S. tax reform and accrued withholding tax of $4.0 million related to the planned dividend distribution from PRC subsidiaries in order to fulfil the payment of a one-time accrued tax. In the fourth quarter of 2016 net income attributable to parent company's common shareholders was $5.8 million. Diluted loss per share was $1.23 in the fourth quarter of 2017, compared to diluted income per share of $0.18 in the fourth quarter of 2016.
The weighted average number of diluted common shares outstanding was 31,646,897 in the fourth quarter of 2017, compared to 31,711,888 in the fourth quarter of 2016.
Fiscal Year 2017
Annual net sales were $499.1 million in 2017, an 8.0% increase compared to $462.1 million in 2016. The overall increase was mainly due to higher sales of advanced legacy hydraulic products offset by the sales of electric power steering systems (EPS) sales which decreased by 6.6% in 2017. EPS sales represented 24.2% of total revenue in 2017.
Gross profit in 2017 was $84.6 million, compared to $80.9 million in 2016. The increase in gross profit was primarily due to the increase in net sales.
Gain on other sales mainly consisted of the net amount retained from the sales of materials, property, plant and equipment and scraps. For the year ended December 31, 2017, gain on other sales amounted to $7.6 million, compared to $3.8 million in 2016. The increase in gain on other sales was primarily due to the disposal of a building and higher scrap volume in 2017.
Selling expenses were $19.9 million in 2017, compared to $17.2 million in 2016, which was mainly due to higher transportation and marketing expenses during the year. Selling expenses represented 4.0% in 2017, compared to 3.7% of net sales in 2016.
G&A expenses were $19.5 million in 2017, compared to $16.8 million in 2016. The increase was primarily due to higher personnel costs and allowance for doubtful accounts. G&A expenses represented 3.9% of net sales in 2017 compared to 3.6% of net sales in 2016.
R&D expenses were $33.5 million in 2017, compared to $27.7 million in 2016. R&D expenses represented 6.7% of net sales in 2017, compared to 6.0% of net sales in 2016. The increase in R&D expenses was due to ongoing higher investment in EPS product research and development such as brushless motors and Advanced Driver Assistance Systems (ADAS)-related projects. Additional engineers, newly acquired technologies, and more testing equipment represented most of the increase.
Operating income was $19.3 million in 2017, compared to $23.0 million in 2016. The decrease was primarily due to higher operating expenses in 2017.
Interest expense was $1.8 million in 2017, compared to interest expense of $0.7 million in 2016 due primarily to an increase in loans outstanding and higher interest rates.
Net financial income was $2.2 million in 2017, compared to net financial income of $1.4 million in 2016 due primarily to an increase in interest income.
Income before income tax expenses and equity in earnings of affiliated companies was $20.4 million for 2017, compared to $24.9 million for 2016. This decline was mainly due to lower income from operations and higher interest expense.
Income tax expense was $41.6 million for the year ended December 31, 2017, compared to $2.5 million for the year ended December 31, 2016, representing an increase of $39.1 million. The increase in 2017 resulted primarily from a one-time accrued tax of $35.6 million recognized in the fourth quarter of 2017 that represented management's estimate of the amount of U.S. corporate income tax for the mandatory repatriation of the Company's share of previously deferred earnings of certain non-U.S. subsidiaries of the Company as mandated by the recent U.S. tax reform. We elected to pay the one-time accrued tax over eight years commencing in April 2018. In addition, withholding tax of $4.0 million was accrued in the fourth quarter of 2017 in order to fund the payment of such one-time accrued tax since the Company plans to distribute dividends from its PRC subsidiaries to the Company. Excluding the one-time accrued tax and withholding tax discussed above, income tax expense was $1.9 million, representing a decrease of $0.6 million which was mainly due to the decrease in income before income tax. The effective tax rate (excluding the impact of the one-time transition tax) was consistent from 2016 to 2017 at approximately 10%.
Net loss attributable to parent company's common shareholders was $19.3 million in 2017, compared to net income attributable to parent company's common shareholders of $22.5 million in 2016. Diluted loss per share was $0.61 in 2017, compared to diluted income per share of $0.70 in 2016.
The weighted average number of diluted common shares outstanding was 31,646,897 in 2017, compared to 31,957,052 in 2016.
Balance Sheet
As of December 31, 2017, total cash and cash equivalents, pledged cash and short-term investments were $125.7 million, total accounts receivable including notes receivable were $294.1 million, accounts payable were $240.2 million and bank and government loans were $73. million. Total parent company stockholders' equity was $299.4 million as of December 31, 2017, compared to $305.9 million as of December 31, 2016. Net cash flow from operating activities was $50.2 million in 2017.
Business Outlook
Management has provided revenue guidance for the full year 2018 of $510 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
Consolidated Balance Sheets
(In thousands of USD, except share and per share amounts)
December 31,
------------
2017 2016
---- ----
ASSETS
Current assets:
Cash and cash equivalents $64,558 $31,092
Pledged cash 31,535 30,799
Short-term investments 29,587 30,475
Accounts and notes receivable, net -
unrelated parties 274,989 285,731
Accounts and notes receivable, net -related
parties 19,086 20,984
Advance payments and others -unrelated
parties 12,790 10,203
Advance payments and others -related
parties 20,841 624
Inventories 79,217 68,050
Total current assets 532,603 477,958
Non-current assets:
Long-term time deposits - 865
Property, plant and equipment, net 126,033 101,478
Intangible assets, net 661 617
Other receivables, net - unrelated parties 2,188 2,252
Advance payment for property, plant and
equipment -unrelated parties 9,657 14,506
Advance payment for property, plant and
equipment -related parties 5,264 5,005
Long-term investments 27,596 16,431
Deferred tax assets 13,367 12,587
------ ------
Total assets $717,369 $631,699
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank and government loans $72,711 $40,820
Accounts and notes payable -unrelated
parties 233,048 216,993
Accounts and notes payable - related parties 7,168 6,803
Customer deposits 1,128 700
Accrued payroll and related costs 8,577 6,971
Accrued expenses and other payables 40,127 35,882
Accrued pension costs 4,051 4,130
Taxes payable 5,927 11,674
Amounts due to shareholders/directors 343 312
Advances payable (current portion) 383 382
Total current liabilities 373,463 324,667
Long-term liabilities:
Long-term government loan 306 608
Advances payable 359 339
Deferred tax liabilities 4,393 193
Long-term taxes payable 32,719 -
Total liabilities 411,240 325,807
------- -------
Commitments and Contingencies (Note 31)
Stockholders' Equity
Common stock, $0.0001 par value -Authorized
-80,000,000 shares Issued - 32,338,302 and
32,338,302 shares at December 31, 2017 and
2016, respectively 3 3
Additional paid-in capital 64,406 64,764
Retained earnings-
Appropriated 10,707 10,549
Unappropriated 209,459 228,963
Accumulated other comprehensive income/
(loss) 17,780 (892)
Treasury stock - 694,298 and 694,298 shares
at December 31, 2017 and 2016, respectively (2,907) (2,907)
------ ------
Total parent company stockholders' equity 299,448 300,480
Non-controlling interests 6,681 5,412
----- -----
Total stockholders' equity 306,129 305,892
------- -------
Total liabilities and stockholders' equity $717,369 $631,699
======== ========
China Automotive Systems, Inc. and Subsidiaries
Consolidated Statements of Income
(In thousands of USD, except share and per share amounts)
Year Ended December 31,
-----------------------
2017 2016
---- ----
Net
product ended
sales December
($37,583 31, 2017
and and
$39,845 2016)
sold to
related
parties
for the
years $499,063 $462,050
Cost of
products years
sold ended
($28,994 December
and 31, 2017
$27,747 and
purchased 2016)
from
related
parties
for the 414,429 381,131
------- -------
Gross
profit 84,634 80,919
------ ------
Net gain
on other
sales 7,635 3,803
----- -----
Operating
expenses:
Selling
expenses 19,912 17,159
General
and
administrative
expenses 19,543 16,841
Research
and
development
expenses 33,544 27,706
------ ------
Total
operating
expenses 72,999 61,706
------ ------
Operating
income 19,270 23,016
Other
income,
net 678 1,116
Interest
expense 1,753 656
Financial
income,
net 2,180 1,428
----- -----
Income
before companies
income
tax
expenses
and
equity
in
earnings
of
affiliated 20,375 24,904
Less:
Income
taxes 41,633 2,484
Add:
Investment
income,
net 2,619 557
----- ---
Net
(loss)/income (18,639) 22,977
Net
income
attributable
to non-
controlling
interest 707 466
--- ---
Net
(loss)/income
attributable
to
parent
company's
common
shareholders (19,346) 22,511
======= ======
Net
(loss)/income
attributable
to
parent
company's
common
shareholders
per
share -
Basic $(0.61) $0.70
====== =====
Diluted $(0.61) $0.70
====== =====
Weighted
average
number
of
common
shares
outstanding
-
Basic 31,644,004 31,954,407
Diluted 31,646,897 31,957,052
China Automotive Systems, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
(In thousands of USD unless otherwise indicated)
Year Ended December 31,
-----------------------
2017 2016
---- ----
Net (loss)/income $(18,639) $22,977
Other comprehensive
income/(loss):
Foreign currency
translation
income/(loss) 19,384 (19,996)
------ -------
Comprehensive
income 745 2,981
Comprehensive
income/(loss)
attributable to
non-controlling
interest 1,352 (226)
----- ----
Comprehensive
(loss)/income
attributable to
parent company $(607) $3,207
===== ======
China Automotive Systems, Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity
(In thousands of USD, except share and per share amounts)
2017 2016
---- ----
Common Stock
------------
Balance at January 1, 2017 and
2016- 32,338,302 and
32,338,302 shares,
respectively $3 $3
Balance at December 31, 2017
and 2016- 32,338,302 and
32,338,302 shares,
respectively $3 $3
--- ---
Additional Paid-in Capital
--------------------------
Balance at January 1 $64,764 $64,627
Stock-based compensation 100 137
Acquisition of the non-
controlling interest in Brazil
Henglong (458) -
Balance at December 31 $64,406 $64,764
------- -------
Retained Earnings- Appropriated
-------------------------------
Balance at January 1 $10,549 $10,379
Appropriation of retained
earnings 158 170
--- ---
Balance at December 31 $10,707 $10,549
------- -------
Unappropriated
--------------
Balance at January 1 $228,963 206,622
Net (loss)/income attributable
to parent company (19,346) 22,511
Appropriation of retained
earnings (158) (170)
---- ----
Balance at December 31 $209,459 $228,963
-------- --------
Accumulated Other Comprehensive
(Loss)/Income
-------------------------------
Balance at January 1 $(892) 18,412
Other comprehensive loss
related to the non-
controlling interests acquired
by the Company (67) -
Net foreign currency
translation adjustment
attributable to parent company 18,739 (19,304)
------ -------
Balance at December 31 $17,780 $(892)
------- -----
Treasury Stock
--------------
Balance at January 1, 2017 and
2016 - 694,298 and 217,283
shares, respectively (2,907) (1,000)
Repurchase of common stock in
2017 and 2016 - nil and
477,015 shares, respectively - (1,907)
--- ------
Balance at December 31, 2017
and 2016 - 694,298 and 694,298
shares, respectively $(2,907) (2,907)
------- ------
Total parent company
stockholders' equity $299,448 $300,480
-------- --------
Non-controlling Interest
------------------------
Balance at January 1 $5,412 $8,252
Net foreign currency
translation adjustment
attributable to non-
controlling interest 645 (692)
Net income attributable to non-
controlling interest 707 466
Other comprehensive income
related to the non-
controlling interests acquired
by the Company 67 -
Acquisition of the non-
controlling interest in Brazil
Henglong 458 -
Non-controlling interests
change due to the disposal of
Fujian Qiaolong - (2,150)
Distribution of retained
earnings (608) (464)
---- ----
Balance at December 31 $6,681 $5,412
------ ------
Total stockholders' equity $306,129 $305,892
======== ========
China Automotive Systems, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands of USD unless otherwise indicated)
Year Ended December 31,
-----------------------
2017 2016
---- ----
Cash flows from operating
activities:
Net income $(18,639) $22,977
Adjustments to reconcile net
income to net cash provided
by operating activities:
Stock-based compensation 100 137
Depreciation and
amortization 15,358 13,926
Deferred income taxes 4,143 (1,628)
Inventory write downs 5,109 3,210
Accrual/(reversal) of
provision for doubtful
accounts 887 (21)
Equity in earnings of
affiliated companies (2,617) (556)
Gain on disposal of Fujian
Qiaolong - (698)
Gain on disposal of fixed
assets (2,184) (23)
Changes in operating assets
and liabilities (net of the
impact of disposal of
Fujian Qiaolong):
(Increase) decrease in:
Pledged cash 1,254 (799)
Accounts and notes
receivable 30,908 (56,251)
Advance payments and other (529) (2,331)
Inventories (12,156) (15,442)
Increase (decrease) in:
Accounts and notes payable 2,533 35,455
Customer deposits 411 (646)
Accrued payroll and related
costs 1,182 1,143
Accrued expenses and other
payables 560 10,548
Accrued pension costs (331) (231)
Taxes payable (8,555) 3,130
Long-term taxes payable 32,719 -
Advances payable - (75)
--- ---
Net cash provided by
operating activities 50,153 11,825
------ ------
Cash flows from investing
activities:
Purchase of short-term
investments and long-term
time deposits (32,145) (28,210)
Proceeds from maturities of
short-term investments and
long-term time deposits 35,780 20,657
Decrease in other
receivables 198 2,388
Cash received from disposal
of Fujian Qiaolong - 1,953
Cash received from property,
plant and equipment sales 2,231 1,284
Cash paid to acquire
property, plant and
equipment (including
$12,691 and $8,021 paid to
related parties for the
years ended December 31,
2017 and 2016,
respectively) (27,096) (39,585)
Cash paid to acquire
intangible assets (201) (161)
Loan to a related party (29,044) -
Cash received from repayment
of the loan to a related
party 10,591 -
Investment under equity
method (7,629) (10,556)
------ -------
Net cash used in investing
activities (47,315) (52,230)
------- -------
Cash flows from financing
activities:
Proceeds from bank and
government loans 72,237 14,313
Repayment of bank and
government loans (43,154) (6,973)
Repurchase of common stock - (1,907)
Dividends paid to the
holders of the Company's
common stock - (544)
Dividends paid to the non-
controlling interest
holders of joint venture
companies (623) (464)
Net cash provided by
financing activities 28,460 4,425
------ -----
Cash and cash equivalents
affected by foreign
currency 2,168 (2,604)
----- ------
Net increase/(decrease) in
cash and cash equivalents 33,466 (38,584)
Cash and equivalents at
beginning of year 31,092 69,676
------ ------
Cash and equivalents at end
of year $64,558 $31,092
======= =======
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SOURCE China Automotive Systems, Inc.
