China Automotive Systems Reports Unaudited 2018 Third Quarter Results
WUHAN, China, Nov. 9, 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 third quarter and nine months ended September 30, 2018.
Third Quarter 2018 Highlights
-- Net sales were $112.1 million compared to $118.4 million in the third
quarter of 2017;
-- Gross margin decreased to $15.4 million from $22.5 million, and the
gross margin declined to 13.7% from 19.0% in the third quarter of 2017;
-- Income from operations was $1.8 million, with an operating margin of
1.6% compared with 4.2% in the same quarter last year;
-- Net income attributable to parent company's common shareholders was $0.4
million, or diluted earnings per share of $0.01, compared to net income
attributable to parent company's common shareholders of $5.1 million, or
diluted earnings per share of $0.16, in the third quarter of 2017.
First Nine Months of 2018 Highlights
-- Net sales increased 4.7% to $371.9 million, compared to $355.3 million
in the first nine months of 2017;
-- Gross margin was 14.5% compared with 19.2% in the same period last year;
-- Diluted earnings per share attributable to parent company's common
shareholders was $0.17 compared with $0.62 for the first nine months of
2017;
-- Cash and cash equivalents, pledged cash deposits and short-term
investments were $144.1 million as of September 30, 2018;
-- Net cash flow from operating activities was $9.0 million.
Mr. Qizhou Wu, the Chief Executive Officer of CAAS, commented, "Sales of our traditional hydraulic products continued to anchor our sales in the Chinese automotive market in the third quarter of 2018. Our advanced hydraulic steering products remain the primary sales driver to Chrysler and Ford for use in the North American markets with sales rising by 22.2% in the third quarter of 2018 compared to the same quarter last year. Sales of our steering columns also grew to help offset softness in the Chinese passenger vehicle and heavy-duty truck markets."
"We continue to be optimistic about our electric power steering ("EPS") business as our new joint venture, Hubei Henglong KYB Automobile Electric Steering System Co., Ltd., with KYB (China) Investment Co., Ltd., will receive all the EPS business in China from both joint venture partners. Our new joint venture will enhance EPS research and development and production capabilities at CAAS's compound in Jingzhou City."
Mr. Jie Li, the Chief Financial Officer of CAAS, commented, "We continue to focus on our financial strength and cash flow from operations to invest in new products and increase our market penetration."
Third Quarter of 2018
In the third quarter of 2018, net sales were $112.1 million compared to $118.4 million in the same quarter of 2017. The decrease in net product sales was mainly due to a change in the product mix and lower domestic sales volume due to softer demand in the Chinese domestic brand automobile market. Net product sales to North America grew 22.2% to $30.3 million compared to $24.8 million for the same quarter in 2017. The increase in export sales to North America was mainly due to higher sales of the Company's more advanced products.
Gross profit was $15.4 million in the third quarter of 2018, compared to $22.5 million in the third quarter of 2017. Gross margin was 13.7% compared to 19.0% for the same period of 2017, mainly due to an increase in the cost of raw materials and the changes in the product mix.
Selling expenses were $3.4 million in the third quarter of 2018, compared to $4.5 million in the third quarter of 2017. Lower selling expenses were mainly due to lower unit sales as well as utilizing lower cost shippers. Selling expenses represented 3.0% of net sales in the third quarter of 2018, compared to 3.8% in the third quarter of 2017.
General and administrative expenses ("G&A expenses") were $3.7 million in the third quarter of 2018, compared to $4.4 million in the same quarter of 2017. The decline was primarily due to lower personnel expenses. G&A expenses represented 3.3% of net sales in the third quarter of 2018 compared with 3.7% in the third quarter of 2017.
Research and development expenses ("R&D expenses") were $7.0 million in the third quarter of 2018, compared to $9.2 million in the third quarter of 2017. R&D expenses represented 6.2% of net sales in the third quarter of 2018 compared with 7.8% in the third quarter last year. The lower R&D expenses were mainly due to greater cost controls over R&D expenditures and the transfer of some research projects to our new joint venture, Hubei Henglong KYB Automobile Electric Steering System Co., Ltd., for electric power steering.
Net financial income was $0.8 million in the third quarter of 2018 compared to net financial income of $1.0 million in the third quarter of 2017.
Income from operations was $1.8 million in the third quarter of 2018, compared to $4.9 million in the same quarter of 2017. The decrease was mainly due to lower gross profit and lower gross margin.
Income before income tax expenses and equity in earnings of affiliated companies was $1.8 million in the third quarter of 2018, compared to $5.7 million in the third quarter of 2017. 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 2018 compared with the third quarter of 2017.
Net income attributable to parent company's common shareholders was $0.4 million in the third quarter of 2018, compared to net income attributable to parent company's common shareholders of $5.1 million in the third quarter of 2017. Diluted earnings per share were $0.01 in the third quarter of 2018, compared to diluted earnings per share of $0.16 in the third quarter of 2017.
The weighted average number of diluted common shares outstanding was 31,645,556 in the third quarter of 2018, compared to 31,644,271 in the third quarter of 2017.
First Nine Months of 2018
Net sales for the first nine months of 2018 were $371.9 million, compared to $355.3 million in the first nine months of 2017. Nine-month gross profit was $54.0 million, compared to $68.2 million in the corresponding period last year. Nine-month gross margin was 14.5%, compared to 19.2% for the corresponding period in 2017. For the nine months ended September 30, 2018, gain on other sales amounted to $3.0 million, compared to $5.9 million for the corresponding period in 2017. Income from operations was $7.0 million compared to $23.2 million in the first nine months of 2017. Operating margin was 1.9%, compared to 6.5% for the corresponding period of 2017.
Net income attributable to parent company's common shareholders was $5.5 million compared with $19.7 million in the corresponding period last year. Diluted earnings per share were $0.17 in the first nine months of 2018, compared to diluted earnings per share of $0.62 for the corresponding period in 2017.
Balance Sheet
As of September 30, 2018, total cash and cash equivalents, pledged cash deposits and short-term investments were $144.1 million, total accounts receivable including notes receivable were $249.6 million, accounts payable including notes payable were $196.6 million, and short-term loans were $70.9 million. Total parent company stockholders' equity was $309.5 million as of September 30, 2018, compared to $306.1 million as of December 31, 2017.
Business Outlook
Management has reduced its revenue guidance for the full year 2018 to US$510 million from US$520.0 million. This target is based on the Company's current views on operating and market conditions, which are subject to change.
Conference Call
Management will conduct a conference call on November 9, 2018 at 8:00 A.M. EST/9:00 P.M. Beijing Time to discuss these results. A question and answer session will follow management's presentation. To participate, please call the following numbers 10 minutes before the call start time and ask to be connected to the "China Automotive Systems" conference call:
Phone Number: +1-877-407-8031 (North America)
Phone Number: +1-201-689-8031 (International)
A replay of the call will be available on the Company's website under the investor relations section.
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
+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 September 30,
2018 2017
Net product sales ($8,207 and $7,563 sold to related parties for the $
112,084 $
118,365
three months ended September 30, 2018 and 2017)
Cost of products sold ($4,659 and $6,549 purchased from related 96,718 95,878
parties for the three months ended September 30,
2018 and 2017)
Gross profit 15,366 22,487
Gain on other sales 482 553
Less: Operating expenses
Selling expenses 3,353 4,537
General and administrative expenses 3,708 4,390
Research and development expenses 6,957 9,194
Total operating expenses 14,018 18,121
Income from operations 1,830 4,919
Other (expense)/income, net (461) 100
Interest expense (431) (318)
Financial income, net 815 1,027
Income before income tax expenses and equity in earnings of 1,753 5,728
affiliated companies
Less: Income taxes 326 991
Equity in losses of affiliated companies (1,049) 491
Net income 378 5,228
Net (loss)/income attributable to non-controlling interests 1 169
Net income attributable to parent company's common $
377 $
5,059
shareholders
Comprehensive income:
Net income $
378 $
5,228
Other comprehensive income:
Foreign currency translation (loss)/gain, net of tax (13,012) 6,705
Comprehensive (loss)/income (12,634) 11,933
Comprehensive (loss)/income attributable to non-controlling (619) 386
interests
Comprehensive (loss)/income attributable to parent company $
(12,015) $
11,547
Net income attributable to parent company's common shareholders
per share
Basic - $
0.01 $
0.16
Diluted - $
0.01 $
0.16
Weighted average number of common shares outstanding
Basic 31,644,004 31,644,004
Diluted 31,645,556 31,644,271
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,
2018 2017
Net product sales ($29,909 and $25,684 sold to related $
371,884 $
355,333
parties for the nine months ended September 30, 2018 and
2017)
Cost of products sold ($20,336 and $20,195 purchased from 317,858 287,156
related parties for the nine months ended September 30, 2018
and 2017)
Gross profit 54,026 68,177
Gain on other sales 2,972 5,896
Less: Operating expenses
Selling expenses 14,067 13,160
General and administrative expenses 12,574 14,027
Research and development expenses 23,349 23,666
Total operating expenses 49,990 50,853
Income from operations 7,008 23,220
Other income/(expense), net 760 (2)
Interest expense (1,647) (1,193)
Financial income, net 947 1,909
Income before income tax expenses and equity in earnings of 7,068 23,934
affiliated companies
Less: Income taxes 1,116 4,367
Equity in (losses)/earnings of affiliated companies (546) 480
Net income 5,406 20,047
Net (loss)/income attributable to non-controlling interests (130) 353
Net income attributable to parent company's common $
5,536 $
19,694
shareholders
Comprehensive income:
Net income $
5,406 $
20,047
Other comprehensive income:
Foreign currency translation (loss)/gain, net of tax (17,237) 14,148
Comprehensive (loss)/income (11,831) 34,195
Comprehensive (loss)/income attributable to non-controlling (814) 819
interests
Comprehensive (loss)/income attributable to parent $
(11,017) $
33,376
company
Net income attributable to parent company's common
shareholders per share
Basic - $
0.17 $
0.62
Diluted - $
0.17 $
0.62
Weighted average number of common shares outstanding
Basic 31,644,004 31,644,004
Diluted 31,645,622 31,647,833
China Automotive Systems, Inc. and Subsidiaries
Condensed Unaudited Consolidated Balance Sheets
(In thousands of USD unless otherwise indicated)
September 30, 2018 December 31, 2017
ASSETS
Current assets:
Cash and cash equivalents $
95,788 $
64,558
Pledged Cash 26,115 31,535
Short-term investments 22,241 29,587
Accounts and notes receivable, net - unrelated parties 232,114 274,989
Accounts and notes receivable, net - related parties 17,522 19,086
Advance payments and others - unrelated parties 14,160 12,790
Advance payments and others - related parties 413 20,841
Inventories 87,769 79,217
Total current assets 496,122 532,603
Non-current assets:
Property, plant and equipment, net 124,823 126,033
Intangible assets, net 605 661
Other receivables, net - unrelated parties 1,609 2,188
Advance payment for property, plant and equipment - unrelated 8,657 9,657
parties
Advance payment for property, plant and equipment - related 6,566 5,264
parties
Long-term investments 30,874 27,596
Deferred tax assets 12,680 13,367
Total assets $
681,936 $
717,369
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short term loans $
70,900 $
72,711
Accounts and notes payable - unrelated parties 192,146 233,048
Accounts and notes payable - related parties 4,468 7,168
Customer deposits 950 1,128
Accrued payroll and related costs 7,488 8,577
Accrued expenses and other payables 39,251 40,127
Accrued pension costs 3,587 4,051
Taxes payable 8,855 5,927
Amounts due to shareholders/directors 316 343
Advances payable (current portion) 363 383
Total current liabilities 328,324 373,463
Long-term liabilities:
Long-term loans 291 306
Advances payable 342 359
Other long-term payable 9,568
Long-term tax payable 29,874 32,719
Deferred tax liabilities 4,029 4,393
Total liabilities $
372,428 $
411,240
Commitments and Contingencies
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, 2018 and December 31, 2017, respectively
Additional paid-in capital 64,406 64,406
Retained earnings-
Appropriated 10,830 10,707
Unappropriated 214,872 209,459
Accumulated other comprehensive income 1,227 17,780
Treasury stock - 694,298 and 694,298 shares as of September 30, (2,907) (2,907)
2018 and December 31, 2017, respectively
Total parent company stockholders' equity 288,431 299,448
Non-controlling interests 21,077 6,681
Total stockholders' equity 309,508 306,129
Total liabilities and stockholders' equity $
681,936 $
717,369
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,
2018 2017
Cash flows from operating activities:
Net income $
5,406 $
20,047
Adjustments to reconcile net income from operations to
net cash provided by operating activities:
Depreciation and amortization 13,590 10,933
Share-based compensation 100
Increase in provision for doubtful accounts 253 1,034
Inventory write downs 4,971 4,436
Deferred income taxes (134) 1,354
Equity in earnings/(losses) of affiliated companies 546 (480)
(Loss)/gain on fixed assets disposals 6 (2,204)
Changes in operating assets and liabilities
(Increase) decrease in:
Accounts and notes receivable 29,758 32,807
Advance payments and others (1,604) (1,527)
Inventories (18,220) (6,441)
Increase (decrease) in:
Accounts and notes payable (28,744) (3,023)
Customer deposits (148) 158
Accrued payroll and related costs (756) 182
Accrued expenses and other payables 3,513 (6,216)
Accrued pension costs (237) 443
Taxes payable 807 (9,806)
Net cash provided by operating activities 9,007 41,797
Cash flows from investing activities:
Increase in other receivables 453 159
Cash received from property, plant and equipment sales 263 2,351
Payments to acquire property, plant and equipment (24,295) (19,187)
(including $6,747 and $7,656 paid to related parties for
the nine months ended September 30, 2018 and 2017,
respectively)
Purchase of short-term investments (19,974) (25,017)
Purchase of long-term time deposit (5,836)
Proceeds from maturities of short-term investments 26,793 33,749
Investment under equity method (5,957) (7,629)
Cash received for related party loan repayment 20,430
Loan to a related party (29,044)
Net cash used in investing activities (2,287) (50,454)
Cash flows from financing activities:
Proceeds from bank loans 67,938 69,635
Repayments of bank loans (69,025) (39,271)
Proceeds from sale and leaseback transaction 11,758
Repayments of the borrowing for sale and leaseback (2,181)
transaction
Dividends paid to non-controlling shareholder (524)
Cash received from capital contributions by non- 15,728
controlling shareholder
Net cash provided by financing activities 23,694 30,364
Effects of exchange rate on cash, cash equivalents and (4,603) 2,859
pledged cash
Net increase in cash, cash equivalents and pledged cash 25,811 24,566
Cash, cash equivalents and pledged cash at beginning of 96,093 61,891
period
Cash, cash equivalents and pledged cash at end of period $
121,904 $
86,457
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Nine Months Ended September 30,
2018 2017
Cash paid for interest $
706 $
573
Cash paid for income taxes 731 4,343
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Nine Months Ended September 30,
2018 2017
Property, plant and equipment recorded during the period which $
11,666 $
12,331
previously were advance payments
Accounts payable for acquiring property, plant and equipment 614 890
Dividends payable to non-controlling interests 621
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SOURCE China Automotive Systems, Inc.
