China Automotive Systems Reports Third Quarter 2015 Results

Nov 12, 2015, 06:00 ET from China Automotive Systems, Inc.

WUHAN, China, Nov. 12, 2015 /PRNewswire/ -- China Automotive Systems, Inc. ("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, 2015.

Third Quarter 2015 Highlights

  • Net sales were $90.8 million, compared to $101.7 million in the third quarter of 2014.
  • Gross margin was 17.5%.
  • Net income attributable to parent company's common shareholders was $4.3 million, or diluted earnings per share of $0.13, compared to net income attributable to parent company's common shareholders of $6.7 million, or diluted earnings per share of $0.24 in the third quarter of 2014.

First Nine Months of 2015 Highlights

  • Net sales were $323.5 million, compared to $331.5 million in the first nine months of 2014.
  • Gross margin was 18.4%.
  • Operating margin was 7.0%.
  • Diluted earnings per share attributable to parent company's common shareholders was $0.64.
  • Cash and cash equivalents, pledged cash deposits and short-term investments were $132.5 million as of September 30, 2015.
  • Net cash flow from operating activities was $24.1 million, compared to $8.1 million for the first nine months of 2014. 

Mr. Qizhou Wu, chief executive officer of CAAS, commented, "The third quarter was more challenging than usual for China's automobile sector due to the turbulence in the Chinese stock market, poor consumer confidence driven by the slowdown of the Chinese economy; and  the depreciation of China's currency against the U.S. dollar. In September, passenger vehicle sales showed signs of recovery but the commercial vehicle market continued to suffer a decline. Fortunately, we were able to offset some of the impact of the market decline with 123% sales growth in our electronic power steering system (EPS) which accounted for 22.4% of our total sales in the third quarter. While we are encouraged by the growing adoption of EPS in China, our sales team is targeting many more OEMs with our EPS products. We expanded our production capacities in compliance with the US OEM standard, since we anticipate more contracts from the North American market in the foreseeable future. Our facility in Brazil is now undergoing final testing and we expect to enter into mass production in Brazil in 2016."

"In early October, the Chinese government announced an incentive plan that includes 50% purchase tax reductions that are intended to stimulate the passenger vehicle sector. We believe that this new policy will help revitalize the auto market in China after three consecutive weak quarters. As we are the main supplier to many OEMs in China, we are well positioned to benefit from this new policy," Mr. Wu concluded.

Mr. Jie Li, chief financial officer of CAAS, commented, "Due to our much improved operating cash flow, we continued to strengthen our balance sheet. More than half of our total receivables were represented by notes receivable and endorsed by large commercial banks at the end of third quarter, and we are confident about the full collection of our outstanding accounts receivable. As usual, we closely track our return on capital to maintain a solid return and increase shareholder value."

Third Quarter of 2015

In the third quarter of 2015, net sales were $90.8 million, compared to $101.7 million in the same quarter of 2014. The net sales decline was mainly due to the decreased auto sales in a weak economic environment.

Gross profit was $15.9 million in the third quarter of 2015, compared to $20.6 million in the third quarter of 2014. The gross margin was 17.5% in the third quarter of 2015, versus 20.2% in the third quarter of 2014. The decrease in gross margin was mainly due to weaker unit volume sales and lower average selling price adjustment.

Gain on other sales was $0.9 million, compared with $1.1 million in the third quarter of 2014.

Selling expenses were $3.3 million in the third quarter of 2015, compared to $3.7 million in the third quarter of 2014. Selling expenses represented 3.7% of net sales in the third quarter of 2015, compared to 3.7% in the third quarter of 2014.

General and administrative expenses ("G&A expenses") decreased by 17.5% to $3.1 million in the third quarter of 2015, compared to $3.7 million in the same quarter of 2014. G&A expenses represented 3.4% of net sales in the third quarter of 2015 and 3.7% in the third quarter of 2014. The Company continued to implement cost control measures.

Research and development expenses ("R&D expenses") were $5.4 million in the third quarter of 2015, flat from $5.4 million in the third quarter of 2014. R&D expenses represented 6.0% of net sales in the third quarter of 2015 compared with 5.3% in the third quarter of 2014. The higher R&D expenses as a percentage of revenue was mainly due to the lower revenue base in the third quarter of 2015. The Company continued to develop EPS products and improve in production equipment.

Net financial income was $0.5 million in the third quarter of 2015 compared to net financial income of $1.1 million in the third quarter of 2014.

Income from operations was $5.0 million in the third quarter of 2015, compared to $8.8 million in the same quarter of 2014. The decrease was mainly due to the lower revenue in the 2015 third quarter compared with the same quarter of 2014.

Income before income tax expenses and equity in earnings of affiliated companies was $5.2 million in the third quarter of 2015, compared to $9.3 million in the third quarter of 2014. 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 2015, compared with the third quarter of 2014.

Net income attributable to parent company's common shareholders was $4.3 million in the third quarter of 2015, compared to net income attributable to parent company's common shareholders of $6.7 million in the third quarter of 2014. Diluted earnings per share were $0.13 in the third quarter of 2015, compared to diluted earnings per share of $0.24 in the third quarter of 2014.

The weighted average number of diluted common shares outstanding was 32,134,839 in the third quarter of 2015, compared to 28,063,661 in the third quarter of 2014.

First Nine Months of 2015

Net sales for the first nine months of 2015 were $323.5 million, compared to $331.5 million in the first nine months of 2014. Nine-month gross profit was $59.4 million, compared to $63.5 million in the corresponding period last year. Nine-month gross margin was 18.4%, compared to 19.2% for the corresponding period in 2014. For the nine months ended September 30, 2015, gain on other sales amounted to $3.2 million, compared to $10.3 million for the corresponding period in 2014, which included a one-time gain of $7.5 million on sales of land use rights. Income from operations was $22.6 million compared to $35.1 million in the first nine months of 2014. Operating margin was 7.0%, compared to 10.6% for the corresponding period of 2014, or 8.3% after excluding the one-time gain of $7.5 million (non-GAAP measurement). Net income attributable to parent company's common shareholders was $20.5 million compared with $24.5 million in the corresponding period last year. Diluted earnings per share were $0.64 in the first nine months of 2015, compared to diluted earnings per share of $0.87 for the corresponding period in 2014. Excluding the one-time net income of $5.1 million on the sale of land use rights, net income attributable to parent company's common shareholders and diluted earnings per share would have been $19.4 million and $0.69 respectively for the first nine months of 2014(non-GAAP measurement).

Balance Sheet

As of September 30, 2015, total cash and cash equivalents, pledged cash deposits and short-term investments were $132.5 million, total accounts receivable including notes receivable were $273.9 million, accounts payable were $192.5 million and bank and government loans were $45.0 million. Total parent company stockholders' equity was $305.9 million as of September 30, 2015, compared to $298.2 million as of December 31, 2014. Net cash flow from operating activities was $24.1 million, compared to $8.1 million for the first nine months in 2014. 

Business Outlook

Management has reiterated the revenue guidance for the full year 2015 to be even with 2014. 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 12, 2015 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:

+1-800 894 5910 (North America)

Phone Number:

+1-785 424 1052 (International)

A telephone replay of the call will be available after the conclusion of the conference call through 11:59 P.M. EST on December 12, 2015. The dial-in details for the replay are:

U.S. Toll Free Number

+1-800 723 5792

International dial-in number

+1-402 220 2664

Use Conference ID "CHINA" 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 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 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 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 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

Investor Relations
Email: caas@compassbell.com

 

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,



2015



2014

Net product sales, including $8,137 and $11,890  to related parties for the
three months ended September 30, 2015 and 2014


$

 

90,845



$

101,735

Cost of products sold, including $5,721 and $6,069 purchased from related
parties for the three months ended September 30, 2015 and 2014



 

74,933




81,152

Gross profit



15,912




20,583

Gain on other sales



877




1,132

Less: Operating expenses








Selling expenses



3,319




3,734

General and administrative expenses



3,080




3,734

Research and development expenses



5,440




5,441

Total operating expenses



11,839




12,909

Income from operations



4,950




8,806

Other income, net



221




113

Interest expense



(501)




(728)

Financial income, net



556




1,140

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



5,226




9,331

Less: Income taxes



945




1,387

Equity in earnings of affiliated companies



100




82

Net income



4,381




8,026

Net income attributable to non-controlling interests



93




1,293

Net income attributable to parent company's common shareholders


$

4,288



$

6,733

Comprehensive income:








Net income


$

4,381



$

8,026

Other comprehensive income:








Foreign currency translation (loss) gain, net of tax



(12,477)




9

Comprehensive (loss) income



(8,096)




8,035

Comprehensive (loss) income attributable to non-controlling interests



(483)




1,293

Comprehensive (loss) income attributable to parent company


$

(7,613)



$

6,742









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
















Basic –


$

0.13



$

0.24









Diluted-


$

0.13



$

0.24

Weighted average number of common shares outstanding








Basic



32,121,019




28,043,019

Diluted



32,134,839




28,063,661

 

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,



2015



2014

Net product sales, including $28,076 and $38,627 to related parties for the
nine months ended September 30, 2015 and 2014


$

 

323,455



$

331,517

Cost of products sold, including $18,359 and $ 20,721 purchased from related
parties for the nine months ended September 30, 2015 and 2014



 

264,080




268,013

Gross profit



59,375




63,504

Gain on other sales



3,248




10,267

Less: Operating expenses








Selling expenses



10,989




11,104

General and administrative expenses



11,316




11,056

Research and development expenses



17,746




16,509

Total operating expenses



40,051




38,669

Income from operations



22,572




35,102

Other income, net



587




491

Interest expense



(1,040)




(1,552)

Financial income, net



2,018




2,150

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



24,137




36,191

Less: Income taxes



4,001




6,488

Equity in earnings of affiliated companies



264




220

Net income



20,400




29,923

Net (loss) income attributable to non-controlling interests



(56)




5,409

Net income attributable to parent company's common shareholders


$

20,456



$

24,514

Comprehensive income:








Net income


$

20,400



$

29,923

Other comprehensive income:








Foreign currency translation loss, net of tax



(12,316)




(2,413)

Comprehensive income



8,084




27,510

Comprehensive (loss) income attributable to non-controlling interests



(649)




5,006

Comprehensive income attributable to parent company


$

8,733



$

22,504









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
















Basic –


$

0.64



$

0.87









Diluted-


$

0.64



$

0.87

Weighted average number of common shares outstanding








Basic



32,121,019




28,043,019

Diluted



32,136,003




28,063,846

 

China Automotive Systems, Inc. and Subsidiaries

Condensed Unaudited Consolidated Balance Sheets

(In thousands of USD unless otherwise indicated)









September 30, 2015



December 31, 2014

ASSETS








Current assets:








Cash and cash equivalents


$

76,064



$

68,505

Pledged cash deposits



29,675




33,633

Short-term investments



26,801




41,017

Accounts and notes receivable, net - unrelated parties



242,510




282,348

Accounts and notes receivable, net - related parties



31,423




22,760

Advance payments and others - unrelated parties



3,673




2,124

Advance payments and others - related parties



812




741

Inventories



67,067




64,419

Current deferred tax assets



7,244




7,078

Total current assets



485,269




522,625

Non-current assets:








Property, plant and equipment, net



76,012




82,466

Intangible assets, net



2,973




3,419

Other receivables, net - unrelated parties



3,585




1,619

Other receivables, net - related parties



3




76

Advance payment for property, plant and equipment - unrelated parties



13,658




6,755

Advance payment for property, plant and equipment - related parties



6,185




2,085

Long-term investments



6,203




4,575

Goodwill



621




645

Non-current deferred tax assets



5,388




4,896

Total assets


$

599,897



$

629,161









LIABILITIES AND STOCKHOLDERS' EQUITY








Current liabilities:








Bank and government loans


$

44,982



$

43,988

Accounts and notes payable - unrelated parties



186,286




213,090

Accounts and notes payable - related parties



6,233




4,857

Customer deposits



1,477




1,885

Accrued payroll and related costs



6,259




7,554

Accrued expenses and other payables



33,835




35,429

Accrued pension costs



4,535




5,586

Taxes payable



7,580




11,557

Amounts due to shareholders/directors



358




380

Current deferred tax liabilities



177




189

Total current liabilities



291,722




324,515

Long-term liabilities:








Advances payable



1,960




6,156

Non-current deferred tax liabilities



280




321

Total liabilities


$

293,962



$

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 September 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



199,720




179,435

Accumulated other comprehensive income



24,396




36,119

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



(1,000)




(1,000)

Total parent company stockholders' equity



297,990




289,257

Non-controlling interests



7,945




8,912

Total stockholders' equity



305,935




298,169

Total liabilities and stockholders' equity


$

599,897



$

629,161

 

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,



2015


2014

Cash flows from operating activities:







Net income


$

20,400


$

29,923

Adjustments to reconcile net income from operations to net cash provided by
operating activities:







Stock-based compensation



-



193

Depreciation and amortization



11,509



11,592

Increase (decrease) in allowance for doubtful accounts



(124)



177

Inventory write downs



1,522



2,531

Deferred income taxes



(1,180)



(907)

Equity in earnings of affiliated companies



(236)



(182)

Loss (gain) on fixed assets disposals



2



(7,500)

Changes in operating assets and liabilities:







(Increase) decrease in:







Pledged deposits



2,696



1,953

Accounts and notes receivable



19,801



(19,173)

Advance payments and others



(1,741)



328

Inventories



(6,723)



(17,449)

Increase (decrease) in:







Accounts and notes payable



(17,021)



2,363

Customer deposits



(381)



1,313

Accrued payroll and related costs



(1,068)



(423)

Accrued expenses and other payables



1,109



597

Accrued pension costs



(842)



1,460

Taxes payable



(3,671)



1,257

Advances payable



-



8

Net cash provided by operating activities



24,052



8,061

Cash flows from investing activities:







Increase in other receivables



(1,965)



(347)

Cash received from property, plant and equipment sales



573



6,994

Payments to acquire property, plant and equipment



(24,077)



(11,317)

Payments to acquire intangible assets



(947)



(252)

Purchase of short-term investments



(12,264)



(46,192)

Proceeds from maturities of short-term investments



25,038



38,115

Acquisition of Fujian Qiaolong, net of cash acquired



-



(2,976)

Investment under cost method



(1,636)



-

Net cash used in investing activities



(15,278)



(15,975)

Cash flows from financing activities:







Proceeds from government and bank loan



11,420



15,836

Repayments of bank loan



(8,685)



(9,590)

Dividends paid to the non-controlling interest holders



(1,121)



(6,048)

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



-



(4,291)

Increase (decrease) in amounts due to shareholders/directors



(252)



69

Net cash provided by (used in) financing activities



1,362



(4,024)

Effects of exchange rates on cash and cash equivalents



(2,577)



(472)

Net increase (decrease) in cash and cash equivalents



7,559



(12,410)

Cash and cash equivalents at beginning of period



68,505



53,979

Cash and cash equivalents at end of period


$

76,064


$

41,569

SOURCE China Automotive Systems, Inc.



RELATED LINKS

http://www.caasauto.com