China Automotive Systems Reports 2015 Second Quarter Financial Results

Aug 13, 2015, 05:00 ET from China Automotive Systems, Inc.

WUHAN, China, Aug. 13, 2015 /PRNewswire/ -- China Automotive Systems, Inc. ("CAAS" or the "Company") (NASDAQ: CAAS), a leading power steering components and systems supplier in China, today announced its unaudited financial results for the second quarter and six months ended June 30, 2015.

Second Quarter 2015 Highlights

  • Net sales were $109.2 million, compared to $115.5 million in the second quarter of 2014;
  • Gross margin was 20.0%, compared to 18.7% in the second quarter of 2014;
  • Operating margin was 7.6%, compared to 14.3% in the second quarter of 2014. Excluding a one-time gain on the sale of land use rights (non-GAAP measurement), the operating margin would have been 7.8% in the second quarter of 2014;
  • Net income attributable to parent company's common shareholders was $7.7 million, or diluted earnings per share of $0.24, compared to net income attributable to parent company's common shareholders of $11.0 million, or diluted earnings per share of $0.39, in the second quarter of 2014. Excluding the one-time gain on the sale of land use rights, net income and diluted earnings per share would have been $5.9 million and $0.21 respectively in the second quarter of 2014;
  • Cash, cash equivalents and short-term investments were $108.6 million and $109.5 million as of June 30, 2015 and December 31, 2014, respectively.  

First Six Months of 2015 Highlights

  • Net sales increased to $232.6 million, compared to $229.8 million in the first six months of 2014;
  • Gross profit increased to $43.5 million, compared to $42.9 million in the first six months of 2014; gross margin was 18.7% in the first six months of 2015, equivalent to the same period last year;
  • Operating margin was 7.6%, compared to 11.4% in the first six months of 2014. The operating margin in last year's first six months benefitted from a gain in the sale of land use rights not present in the 2015 period. Excluding the one-time gain on the sale of land use rights, the operating margin would have been 8.2% in the first six months of 2014;
  • Diluted earnings per share attributable to parent company's common shareholders was $0.50, compared to diluted earnings per share attributable to parent company's common shareholders of $0.63 in the first six months of 2014. Excluding the one-time gain on the sale of land use rights, the diluted earnings per share would have been $0.45 in the first six months of 2014.

Mr. Qizhou Wu, chief executive officer of CAAS, commented, "We are pleased to report that sales were resilient in the face of headwinds in both the passenger and commercial vehicle markets in the second quarter of 2015. Our new products, especially electric power steering for the domestic market and steering products for North America, generated higher sales.     

"Sales to North America accelerated by 15.2% compared to the same period last year. Our key customer, Chrysler, reported its 63rd consecutive month of year-over-year sales gains in June 2015. The Jeep® brand reported that June 2015 sales were the highest June sales in its history and it has achieved 21 consecutive months of year-over-year sale increases. The Jeep brand's sales grew by 25% in June and Wrangler's sales growth of 17% represented its best June sales ever. RAM® pickup truck sales increased by 1% in June, to its highest June sales in the last 11 years."

"We believe our strategy of focusing on new product development and penetration of foreign markets positions us to capture market share in multiple markets," Mr. Wu concluded.

Mr. Jie Li, chief financial officer of CAAS, commented, "We continued to generate positive cash flow from operations of over $9.6 million in the second quarter of 2015 to enhance our financial strength. We are maintaining our leadership position in China as we expand our presence in North and South American markets. Our investment in research and development has led to new products that maintain and increase our market positions in China as we expand in overseas markets."  

Second Quarter of 2015

In the second quarter of 2015, net sales were $109.2 million, compared to $115.5 million in the same quarter of 2014. Net sales declined due to lower sales of domestic vehicles using the Company's legacy hydraulic power steering, partially offset by higher sales to North America and sales of electric power steering ("EPS") units in China. Also, steering sales to the commercial vehicle market declined due to the economic slowdown in China and the effects of the implementation of the stricter National IV emission standards in 2015.

Gross profit increased to $21.8 million in the second quarter of 2015, compared to $21.6 million in the second quarter of 2014. The gross margin was 20.0% in the second quarter of 2015, versus 18.7% in the second quarter of 2014 and 17.6% in the first quarter of 2015. The gross margin increased mainly due to greater efficiencies driving unit cost lower.   

Selling expenses decreased to $4.0 million in the second quarter of 2015, compared to $4.3 million in the second quarter of 2014. Selling expenses represented 3.7% of net sales in the second quarter of both 2015 and 2014. The decrease was mainly due to lower transportation expenses and reduced advertising costs.

General and administrative expenses ("G&A expenses") were $3.8 million in the second quarter of both 2015 and 2014. G&A expenses represented 3.5% of net sales in the second quarter of 2015 compared to 3.3% in the second quarter of 2014.

Research and development expenses ("R&D expenses") increased by 23.1% to $6.4 million in the second quarter of 2015, compared to $5.2 million in the second quarter of 2014. The increase in R&D expenses was mainly due to higher expenditures for the development of the Company's EPS products, and included higher personnel-related expenses and mold improvement costs. R&D expenses represented 5.9% of net sales in the second quarter of 2015, compared to 4.5% in the second quarter of 2014.

Income from operations was $8.3 million in the second quarter of 2015, compared to $16.5 million in the same quarter of 2014. The decrease was primarily due to the lower gain on other sales related to a $7.5 million gain on the sale of land use rights recognized in the second quarter of 2014. Without the $7.5 million gain on sale of land use rights, income from operations for the second quarter of 2014 would have approximated $9.0 million. As a percentage of net sales, the operating margin was 7.6% in the second quarter of 2015, compared to 14.3% in the second quarter of 2014. Without the $7.5 million gain on sale of land use rights, operating margin for the second quarter of 2014 would have approximated 7.8%.    

Net financial income in the second quarter of 2015 was $0.7 million compared with $0.5 million in the second quarter of 2014. The increase was mainly due to higher interest income from time deposits.  

Income before income tax expenses and equity in earnings of affiliated companies was $9.2 million in the second quarter of 2015, compared to $16.6 million in the second quarter of 2014. The decrease of $7.4 million in the second quarter of 2015 was mainly due to the reduction in the gain on other sales related to the sale of land use rights in the second quarter of 2014.  

Net income attributable to parent company's common shareholders was $7.7 million in the second quarter of 2015, compared to net income attributable to parent company's common shareholders of $11.0 million in the corresponding quarter of 2014. Diluted earnings per share were $0.24 in the second quarter of 2015, compared to diluted earnings per share of $0.39 in the second quarter of 2014. Excluding the one-time gain on the sale of land use rights, net income and diluted earnings per share would have been $5.9 million and $0.21 respectively in the second quarter of 2014. The weighted average number of diluted common shares outstanding increased by 14.5% to 32,138,438 in the second quarter of 2015, compared to 28,064,376 in the second quarter of 2014.

First Six Months of 2015

Net sales increased to $232.6 million in the first six months of 2015, compared to $229.8 million in the first six months of 2014. Six-month gross profit was $43.5 million, compared to $42.9 million in the corresponding period last year. Six-month gross margin was 18.7% in both 2015 and 2014. The gain on other sales of $2.4 million in the first six months of 2015 compared with $9.1 million in the 2014 period due to a gain of $7.5 million from the sale of land use rights in the second quarter of 2014. Income from operations was $17.6 million, compared to $26.3 million in the first six months of 2014. Without the gain from the sale of land use rights, income from operations would have approximated $18.8 million in the second quarter of 2014. Operating margin was 7.6%, compared to 11.4% for the corresponding period of 2014. Without the $7.5 million gain on sale of land use rights, operating margin for the first six months of 2014 would have approximated 8.2%.

Net income attributable to parent company's common shareholders was $16.2 million in the first six months of 2015, compared to $17.8 million in the corresponding period in 2014. Diluted earnings per share were $0.50 in the first six months of 2015, compared to diluted earnings per share of $0.63 for the corresponding period in 2014. Excluding the one-time gain on the sale of land use rights, the diluted earnings per share would have been $0.45 in the first six months of 2014.

As of June 30, 2015, total cash, cash equivalents and short-term investments were $108.6 million, compared to $109.5 million as of December 31, 2014. Working capital increased to $205.8 million as of June 30, 2015, compared to $198.1 million as of December 31, 2014. Cash flow from operations was $14.5 million for the six months ended June 30, 2015. Total parent company stockholders' equity was $314.0 million as of June 30, 2015, compared to $298.2 million as of December 31, 2014.

Business Outlook

Management has revised its revenue guidance for the full year 2015 to be even with 2014 due to the China auto market slowdown. 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 August 13, 2015 at 8:00 A.M. EDT/8:00 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) China Toll Free:  +86-400-120-2840 

A telephone replay of the call will be available after the conclusion of the conference call through 11:59 P.M. EDT on September 14, 2015. The dial-in details for the replay are:

U.S. Toll Free Number        +1-877-660-6853 International dial-in number  +1-201-612-7415

Use Conference ID "13616215" to access the replay.

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 its subsidiaries and 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 5.0 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 Fiat Chrysler 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  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 26, 2015, 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 Grayling Tel:   +1-646-284-9409 Email: caas@grayling.com (Tables Follow)

 

China Automotive Systems, Inc. and Subsidiaries

 Condensed Consolidated Balance Sheets

 (In thousands of USD unless otherwise indicated)

June 30, 2015

December 31, 2014

Unaudited

Audited

ASSETS 

Current assets: 

Cash and cash equivalents 

$

70,889

$

68,505

Pledged cash deposits 

32,810

33,633

Short-term investments 

37,760

41,017

Accounts and notes receivable, net - unrelated parties 

276,648

282,348

Accounts and notes receivable, net - related parties 

27,003

22,760

Advance payments and others - unrelated parties 

2,538

2,124

Advance payments and others - related parties 

784

741

Inventories 

67,794

64,419

Current deferred tax assets 

7,334

7,078

     Total current assets 

523,560

522,625

Non-current assets: 

Property, plant and equipment, net 

83,027

82,466

Intangible assets, net 

3,124

3,419

Other receivables, net - unrelated parties

1,825

1,619

Other receivables, net - related parties 

19

76

Advance payment for property, plant and equipment - unrelated parties

8,481

6,755

Advance payment for property, plant and equipment - related parties

2,693

2,085

Long-term investments 

6,380

4,575

Goodwill 

646

645

Non-current deferred tax assets 

5,458

4,896

     Total assets 

$

635,213

$

629,161

LIABILITIES AND STOCKHOLDERS' EQUITY 

Current liabilities: 

Bank and government loans

$

45,387

$

43,988

Accounts and notes payable - unrelated parties 

209,777

213,090

Accounts and notes payable - related parties

5,198

4,857

Customer deposits 

1,224

1,885

Accrued payroll and related costs

5,963

7,554

Accrued expenses and other payables

35,296

35,429

Accrued pension costs 

5,450

5,586

Taxes payable 

8,331

11,557

Amounts due to shareholders/directors

380

380

Current deferred tax liabilities 

165

189

     Total current liabilities 

317,171

324,515

Long-term liabilities: 

Advances payable 

3,708

6,156

Non-current deferred tax liabilities 

302

321

     Total liabilities 

$

321,181

$

330,992

Commitments and Contingencies 

Stockholders' equity: 

Common stock, $0.0001 par value - Authorized - 80,000,000 shares; Issued – 32,338,302 and 32,338,302 shares as of June 30, 2015 and December 31, 2014, respectively

$

3

$

3

Additional paid-in capital 

64,522

64,522

Retained earnings- 

Appropriated 

10,349

10,178

Unappropriated 

195,434

179,435

Accumulated other comprehensive income 

36,297

36,119

Treasury stock – 217,283 and 217,283 shares as of June 30, 2015 and December 31, 2014, respectively

(1,000)

(1,000)

Total parent company stockholders' equity 

305,605

289,257

Non-controlling interests

8,427

8,912

     Total stockholders' equity 

314,032

298,169

     Total liabilities and stockholders' equity 

$

635,213

$

629,161

 

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 June 30,

2015

2014

Net product sales, including $11,640 and $14,928 to related parties for the three months ended June 30, 2015 and 2014

$

109,167

$

115,476

Cost of products sold, including $5,630 and $7,461 purchased from related parties for the three months ended June 30, 2015 and 2014

87,374

93,893

     Gross profit

21,793

21,583

Gain on other sales

713

8,226

Less: Operating expenses

Selling expenses

4,046

4,327

General and administrative expenses

3,787

3,776

Research and development expenses

6,413

5,180

Total operating expenses

14,246

13,283

     Income from operations

8,260

16,526

Other income, net

271

139

Interest expense

(65)

(546)

Financial income, net

709

518

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

9,175

16,637

Less: Income taxes

1,645

3,126

Equity in earnings of affiliated companies

98

75

Net income

7,628

13,586

Net income (loss) attributable to non-controlling interests

(31)

2,580

     Net income attributable to parent company's common shareholders

$

7,659

$

11,006

Comprehensive income:

Net income

$

7,628

$

13,586

Other comprehensive income:

Foreign currency translation loss, net of tax

1,436

(25)

Comprehensive income

9,064

13,561

Comprehensive income attributable to non-controlling interests

34

2,576

Comprehensive income attributable to parent company

$

9,030

$

10,985

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

Basic –

$

0.24

$

0.39

Diluted-

$

0.24

$

0.39

Weighted average number of common shares outstanding

Basic

32,121,019

28,043,019

Diluted

32,138,438

28,064,376

 

 

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)

Six Months Ended June 30,

2015

2014

Net product sales, including $19,939 and $26,738 to related parties for the six months ended June 30, 2015 and 2014

$

232,610

$

229,782

Cost of products sold, including $12,638 and $14,652 purchased from related parties for the six months ended June 30, 2015 and 2014

189,146

186,861

     Gross profit

43,464

42,921

Gain on other sales

2,371

9,135

Less: Operating expenses

Selling expenses

7,670

7,369

General and administrative expenses

8,235

7,322

Research and development expenses

12,306

11,068

Total operating expenses

28,211

25,759

     Income from operations

17,624

26,297

Other income, net

365

378

Interest expense

(540)

(824)

Financial income, net

1,463

1,010

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

18,912

26,861

Less: Income taxes

3,055

5,101

Equity in earnings of affiliated companies

164

137

Net income

16,021

21,897

Net income (loss) attributable to non-controlling interests

(150)

4,116

     Net income attributable to parent company's common shareholders

$

16,171

$

17,781

Comprehensive income:

Net income

$

16,021

$

21,897

Other comprehensive income:

Foreign currency translation loss, net of tax

161

(2,422)

Comprehensive income

16,182

19,475

Comprehensive income (loss) attributable to non-controlling interests

(167)

3,712

Comprehensive income attributable to parent company

$

16,349

$

15,763

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

Basic –

$

0.50

$

0.63

Diluted-

$

0.50

$

0.63

Weighted average number of common shares outstanding

Basic

32,121,019

28,043,019

Diluted

32,136,585

28,063,939

 

 

China Automotive Systems, Inc. and Subsidiaries

Condensed Unaudited Consolidated Statements of Cash Flows

(In thousands of USD unless otherwise indicated)

Six Months Ended June 30,

Cash flows from operating activities:

2015

2014

Net income

$

16,021

$

21,897

Adjustments to reconcile net income from operations to net cash provided

by operating activities

Depreciation and amortization

7,897

7,751

Increases (decreases) in allowance for doubtful accounts

(32)

121

Inventory write downs

1,307

1,922

Deferred income taxes

(849)

(413)

Equity in earnings of affiliated companies

(164)

(128)

Gain on disposal of fixed assets

1

(7,506)

Changes in operating assets and liabilities:

(Increase) decrease in:

Pledged deposits

840

6,695

Accounts and notes receivable

1,843

(25,139)

Advance payments and others

(449)

1,038

Inventories

(4,604)

(7,461)

Increase (decrease) in:

Accounts and notes payable

(2,951)

7,948

Customer deposits

(661)

57

Accrued payroll and related costs

(1,595)

(790)

Accrued expenses and other payables

1,268

191

Accrued pension costs

(140)

502

Taxes payable

(3,237)

1,007

        Net cash provided by operating activities

14,495

7,692

Cash flows from investing activities:

Decrease (increase) in other receivables

(153)

636

Cash received from property, plant and equipment sales

570

6,777

Payments to acquire property, plant and equipment

(13,705)

(8,194)

Payments to acquire intangible assets

(825)

(5)

Purchase of short-term investments

(11,388)

(15,882)

Proceeds from maturities of short-term investments

14,672

12,597

Acquisition of Fujian Qiaolong, net of cash acquired

-

(2,976)

Investment under cost method

(1,636)

-

        Net cash used in investing activities

(12,465)

(7,047)

Cash flows from financing activities:

Proceeds from government and bank loan

6,420

6,774

Repayments of government and bank loan

(5,048)

(3,251)

Dividends paid to the non-controlling interest holders

(814)

(1,985)

Dividends paid to the holders of the Company's common stock

(252)

-

Increase in amounts due to shareholders/directors

-

69

        Net cash provided by financing activities

306

1,607

Effects of exchange rates on cash and cash equivalents

48

(474)

        Net decrease in cash and cash equivalents

2,384

1,778

Cash and cash equivalents at beginning of period

68,505

53,979

Cash and cash equivalents at end of period

$

70,889

$

55,757

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Six Months Ended June 30,

2015

2014

Cash paid for interest

$

561

$

603

Cash paid for income taxes

5,487

3,109

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING

AND FINANCING ACTIVITIES:

Six Months Ended June 30,

2015

2014

Advance payments for acquiring property, plant and equipment

$

6,732

$

5,155

Dividends payable to non-controlling interest holders

318

8,127

Dividends payable to the Company's shareholders

-

5,048

Non-controlling interests arising as a result of acquisition of Fujian Qiaolong

-

2,793

Accounts receivable for selling property, plant and equipment

-

1,890

Accounts payable for acquiring property, plant and equipment

328

-

SOURCE China Automotive Systems, Inc.



RELATED LINKS

http://www.caasauto.com