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China Automotive Systems Reports 25.2% Net Sales Growth in the 2017 Third Quarter

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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
three months ended September 30, 2017 and 2016)


$

118,365



$

94,626


Cost of products sold ($6,549 and $5,869 purchased from related
parties for the three months ended September 30, 2017 and 2016)



95,878




74,641


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
affiliated companies



5,728




6,722


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
nine months ended September 30, 2017 and 2016)


$

355,333



$

312,497


Cost of products sold ($20,195 and $18,912 purchased from related
parties for the nine months ended September 30, 2017 and 2016)



287,156




253,352


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
companies



23,934




19,774


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
parties



14,222




14,506


Advance payment for property, plant and equipment - related
parties



4,813




5,005


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
shares; Issued – 32,338,302 and 32,338,302 shares as of
September 30, 2017 and December 31, 2016, respectively


$

3



$

3


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
30, 2017 and December 31, 2016, respectively



(2,907)




(2,907)


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
$1,063



-




1,953


Cash received from property, plant and equipment sales



2,351




511


Payments to acquire property, plant and equipment (including $7,656
and $5,662 paid to related parties for the nine months ended
September 30, 2017 and 2016, respectively)



(19,187)




(27,161)


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
previously were advance payments


$

12,331



$

12,771


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.

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