WUHAN, Hubei, China, May 14 /Xinhua-PRNewswire-FirstCall/ -- China Automotive Systems, Inc. (Nasdaq: CAAS), a leading power steering components and systems supplier in China, today announced 2008 first quarter results for the period ended March 31, 2008.
2008 First Quarter Highlights:
-- Net sales increased to US$41.5 million, reflecting 46.1% year-over-year
growth;
-- Net sales from steering components for passenger and light-duty
vehicles increased to US$30.2 million, reflecting a 44% year-over-year
growth;
-- Net sales from steering components for commercial vehicles increased to
US$11.3million, reflecting a 51.9% increase year-over-year;
-- Operating income rose to US$6.8 million, reflecting 30.8% year-over-
year growth;
-- Net income was US$4.4 million, reflecting 169.6% year-over-year growth;
and
-- Diluted earnings per share were US$0.18, reflecting 157.1% year-over-
year growth.
First quarter net sales for 2008 from steering products for passenger and light-duty vehicles increased to US$30.2 million as compared with US$21 million reported in the same period for 2007, reflecting a 44% year-over-year growth. First quarter net sales from steering products for commercial vehicles increased to US$11.3 million as compared with US$7.4 million reported in the same quarter for 2007, reflecting a 51.9% year-over-year growth.
Gross profit for the first quarter of 2008 increased to US$12.2 million compared with US$9.2 million in the same period for 2007, and US$12.7 million for the fourth quarter of 2007, reflecting a 32.9% increase year-over-year and a slight decline quarter-over- quarter growth, respectively. Gross margin declined to 29.5% from 32.4% in the first quarter a year ago due to higher material cost. The Company’s research and development team is revising production techniques to reduce material waste and improve production efficiency, and price increase negotiations are underway. The annual gross margin goal is to achieve not less than 30%.
Operating income for the first quarter of 2008 was US$6.8 million, compared with US$5.2 million reported in the same period of 2007, and US$3.5 million for the fourth quarter of 2007, reflecting a 30.8% increase
year-over-year and a 114.2% increase quarter-over-quarter, respectively. Operating margin for the first quarter of 2008 reached 16.4%.
Operating expenses in the first quarter of 2008 were US$5.6 million compared with US$4.1 million in the same quarter in 2007 and US$9.4 million in the fourth quarter of 2007. Selling expenses rose 55.3% to US$2.5 million from US$1.6 million in the same quarter last year due to higher sales and the related increase in warranty costs as well as higher transportation expenses. Depreciation rose by US$401,747 from US$ 0.9 million to US$1.3 million primarily due to the increased equipment in operation. General and administrative expenses in the 2008 first quarter were US$1.6 million, 7.1% higher versus the same quarter last year primarily because of greater labor insurance expenses.
Higher Other Income grew from increased government subsidies. There was also a positive swing in financial income from a negative US$394,997 to a positive US$20,693 due to changes in currency exchange and amortization for the discount of the US$35 million convertible notes.
An income tax decrease of US$469,685 in the 2008 first quarter compared with the same quarter in 2007, reflected an increase in deferred tax assets, a 5% reduced tax rate for one subsidiary, and refunds for equipment purchases.
First quarter net income in 2008 was US$4.4 million, or US$0.18 per weighted average diluted share as compared with US$1.6 million, or US$0.07 per diluted share in the same period a year ago, and compared with US$2.2 million, or US$0.09 per diluted share, for the fourth quarter of 2007. The first quarter net income represented 169.6% growth versus the same quarter in 2007 and a 104.8% rise over the 2007 fourth quarter. Weighted average number of fully diluted shares outstanding were 25,936,500 for the 2008 first quarter and 23,949,809 for the first quarter last year.
Total cash and cash equivalents as of March 31, 2008 totaled US$50 million compared with US$19.5 million as of December 31, 2007. Working capital was US$43 million. Stockholder’s equity was US$48.5 million as of March 31, 2008 compared to US$67.2 million as of December 31, 2007. The reduction in stockholder’s equity is related to the acquisition of the 35.5% of Henglong Automotive Parts Company during the 2008 first quarter.
Mr. Jie Li, Chief Financial Officer of China Automotive Systems, said, “During the first quarter, we experienced high cost especially with our steering products for commercial vehicles, mainly due to price appreciation in our raw materials, particularly steel. We have successfully negotiated with our customers to raise our average selling price accordingly in the second quarter. We strive to maintain our high gross margin among our auto part peers as we continue to position China Automotive Systems as a high-technology and high-quality supplier to ensure safety measures for millions of vehicles on the roads of China.”
“Our acquisition of Jingzhou Henglong Automotive Parts Co. was successfully completed and financials were consolidated smoothly as we planned in 2007. Our efforts in expense control and economies-of-scale management continue to propel a stronger growth in the operating line. We are now fully reflecting our robust top line growth in our bottom line,” Mr. Li concluded.
Key Events in the 2008 First Quarter
In January, China Automotive Systems announced that its joint venture, Wuhu Henglong Auto Steering Systems ("WHAS"), was named a Core Supplier by Chery Automotive Co., Ltd. ("Chery Auto"). Under the joint venture agreement, China Automotive Systems and Chery Auto own 77.3% and 22.7%, respectively, of the joint venture. In December 2007, Chery Auto honored 30 of its Core Suppliers at its Annual Suppliers Meeting. With its reliable quality, new product development, and timely delivery, Wuhu Henglong Auto Steering Systems was among the 30 Core Suppliers named for the year 2007. WHAS’s CEO Yusheng Han was present as an honored guest of Chery and he received the prize on behalf of the Joint Venture.
In February, the Company closed a previously announced senior convertible notes with warrants private placement transaction and received funding from Lehman Brothers ("Lehman") for $30 million and from YA Global Investments, L.P., which is managed by Yorkville Advisors, LLC, for $5 million. The proceeds are planned to support the Company’s acquisitions, capital expenditures for expansion and working capital for future growth.
Recent Developments
Conference Call
Management will conduct a conference call on at 8:00 a.m. Eastern Daylight Time today 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: +1-877-407-9205 (North America)
Phone Number: +1-201-689-8054 (International)
In addition, the conference call will be broadcast live over the Internet at: http://www.caasauto.com or http://investor.shareholder.com/media/
Please go to the web site at least 15 minutes early to register, download and install any necessary software.
A telephone replay of the call will be available after the conclusion of the conference call through 11:59 PM Eastern Time on May 28, 2008. 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; using Account "286" and Conference ID "284924" to access the replay. The internet audio stream will also be available until 11:59 pm Eastern Time on Wednesday, May 28.
About CAAS
For further information, please contact:
Jie Li
Chief Financial Officer
China Automotive Systems
Email: jieli@chl.com.cn
Kevin Theiss
Investor Relations
The Global Consulting Group
Tel: +1-646-284-9409
Email: ktheiss@hfgcg.com
(Tables to follow)
China Automotive Systems, Inc.
Condensed Consolidated Statements of Operations (Unaudited)
Three Months Ended March 31,
2008 2007
Net product sales, including $2,051,082 and
$902,584 to related parties at March 31,
2008 and 2007 $41,467,043 $28,383,392
Cost of product sold, including $1,952,390
and $1,051,480 purchased from related
parties at March 31, 2008 and 2007 29,254,673 19,191,486
Gross profit 12,212,370 9,191,906
Add: Gain on other sales 134,190 112,094
Less: Operating expenses-
Selling expenses 2,475,341 1,593,646
General and administrative expenses 1,616,150 1,509,027
R&D expenses 175,678 119,465
Depreciation and amortization 1,294,727 893,251
Total Operating expenses 5,561,896 4,115,389
Income from operations 6,784,664 5,188,611
Add: Other income, net 199,459 38,462
Financial income (expenses) net 20,693 (394,997)
Income before income taxes 7,004,816 4,832,076
Less: Income taxes 824,395 1,294,080
Income before minority interests 6,180,421 3,537,996
Less: Minority interests 1,750,247 1,894,895
Net income $4,430,174 $1,643,101
Net income per common share-
Basic $0.18 $0.07
Diluted $0.18 $0.07
Weighted average number of common shares
outstanding -
Basic 23,959,702 23,938,078
Diluted 25,936,500 23,949,809
China Automotive Systems, Inc.
Condensed Consolidated Balance Sheets
March 31, December 31,
2008 2007
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $32,462,022 $19,487,159
Pledged cash deposits 22,928,261 4,645,644
Accounts and notes receivable, net, including
$2,943,990 and $1,869,480 from related parties
at March 31, 2008 and December 31, 2007, net
of an allowance for doubtful accounts of
$3,258,368 and $3,827,838 at March 31, 2008
and December 31, 2007 96,139,674 82,022,643
Advance payments and other, including $594,491
and $55,323 to related parties at March 31,
2008 and December 31, 2007 2,347,585 922,578
Inventories 22,676,585 20,193,286
Total current assets $176,554,127 $127,271,310
Long-term Assets:
Property, plant and equipment, net $47,087,219 $46,585,041
Intangible assets, net 653,871 589,713
Other receivables, net, including $770,156 and
$638,826 from related parties at March 31,
2008 and December 31, 2007, net of an
allowance for doubtful accounts of $769,224
and $652,484 at March 31, 2008 and December
31, 2007 1,260,335 888,697
Advance payments for property, plant and
equipment, including $2,329,206 and
$1,560,378 to related parties at March 31,
2008 and December 31, 2007 8,630,991 6,260,443
Long-term investments 76,934 73,973
Deferred income taxes assets 1,477,495 1,315,510
Total assets $235,740,972 $182,984,687
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Bank loans $13,819,632 $13,972,603
Accounts and notes payable, including
$1,578,981and $1,134,817 to related parties
at March 31, 2008 and December 31, 2007 54,762,108 47,530,383
Customer deposits 121,406 135,627
Accrued payroll and related costs 2,677,769 2,664,464
Accrued expenses and other payables, including
$33,374,697 and $0 from related parties at
March 31, 2008 and December 31, 2007 48,189,248 14,938,055
Accrued pension costs 4,021,656 3,622,729
Taxes payable 9,661,988 9,080,493
Amounts due to shareholders/directors 253,573 304,601
Total current liabilities $133,507,380 $92,248,955
Long-term liabilities:
Advances payable 347,995 334,600
Derivative liabilities 3,972,068
Convertible note payable, net 30,722,374 --
Total liabilities 168,549,817 $92,583,555
Minority interests $18,650,147 $23,166,270
Related Party Translations
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.0001 par value - Authorized -
20,000,000 shares Issued and outstanding - None $-- $--
Common stock, $0.0001 par value - Authorized -
80,000,000 Shares Issued and Outstanding -
23,959,702 shares and 23,959,702 shares at
March 31, 2008 and December 31, 2007,
respectively 2,396 2,396
Additional paid-in capital 4,618,037 30,125,951
Retained earnings-
Appropriated 7,525,777 7,525,777
Unappropriated 28,021,449 23,591,275
Accumulated other comprehensive income 8,373,349 5,989,463
Total stockholders’ equity 48,541,008 $67,234,862
Total liabilities and stockholders’ equity $235,740,972 $182,984,687
