omniture

China Automotive Systems Reports Financial Results for First Quarter of 2012

2012-05-09 18:00 3149

WUHAN, China, May 9, 2012 /PRNewswire-Asia-FirstCall/ -- China Automotive Systems, Inc. ("CAAS" or the "Company") (NASDAQ: CAAS), a leading power steering components and systems supplier in China, today announced financial results for the first quarter ended March 31, 2012.

First Quarter Highlights

  • Net sales were $84.5 million, compared to $91.0 million in the first quarter of 2011
  • Gross profit was $16.0 million, compared to $20.0 million in the first quarter of 2011; gross margin was 19.0% in the first quarter of 2012, compared to 22.0% in the same quarter of last year
  • Income from operations was $6.4 million, compared with $11.7 million in the first quarter of 2011, and the operating margin was 7.6%, compared with 12.9% in the first quarter of 2011
  • Net loss attributable to the parent company's common shareholders was $0.8 million, or a diluted loss per share of $0.03, versus net income of $17.2 million, or diluted earnings per share of $0.23, in the first quarter of 2011
  • Non-GAAP net income attributable to the parent company's common shareholders was $3.8 million or $0.12 diluted earnings per share, versus non-GAAP net income of $6.9 million, or $0.22 diluted earnings per share in the first quarter of 2011
  • Research and development ("R&D") expenses were $3.7 million, compared to $2.3 million in the first quarter of 2011
  • Net cash flow from operations was $8.5 million, compared with net cash used in operations of $3.5 million in the first quarter of 2011
  • Cash and cash equivalents were $79.9 million at March 31, 2012, up from $73.0 million at December 31, 2011.

Mr. Qizhou Wu, chief executive officer of CAAS, commented: "During the first quarter, the PRC domestic passenger vehicle brands sold approximately 712,000 units, a year over year decline of 15%. On the commercial vehicle front, PRC truck sales continued to experience double-digit percentage declines due to fewer infrastructure projects and the slowed real estate market. As the largest supplier to many large domestic OEMs, we took hits from both sectors. While we are waiting for conditions to improve in the PRC, we are rapidly expanding our sales in North America and planning for expansions in emerging markets. Our shipments to North America, mainly to Chrysler, rose 86% from same period of 2011. We also recently announced our joint venture in Brazil, another large market currently dominated by European steering producers. Our financial standing remains solid, as we generated strong cash-flow in the first quarter."

First Quarter of 2012

For the first quarter of 2012, net sales were $84.5 million, compared with $91.0 million in the same quarter of 2011, a decrease of $6.5 million, or 7.1%. The net sales decline was mainly due to slow sales of the PRC domestic branded passenger vehicle OEMs and buyers deferring purchases due to rising gasoline prices. This is in line with the overall PRC vehicle market decline as mentioned above. The increased international sales to Chrysler North America, and the appreciation of the Chinese RMB versus the U.S. dollar, only partially offset lower unit sales of passenger vehicle steering products in China.

Gross profit was $16.0 million, compared to $20.0 million in the same quarter of last year. The gross margin was 19.0%, versus 22.0% in the same quarter in 2011, mainly due to sales price declines and unit cost increases resulting from rising labor costs.

Selling expenses were comparable at $2.4 million in the first quarters of 2012 and 2011, respectively. As a percentage of net sales, selling expenses were 2.8% in the first quarter of 2012, compared to 2.6% in the first quarter of 2011.

General and administrative ("G&A") expenses declined 7.7% to $3.6 million in the first quarter of 2012 from $3.9 million in the same quarter in 2011, mainly due to compensation cuts as the Company did not meet the performance targets set by the board of directors. As a percentage of net sales, G&A expenses were 4.3% in the first quarter of 2012, which was in line with the first quarter of 2011.

Research and development ("R&D") expenses rose by approximately 60.9% to $3.7 million in the first quarter of 2012, compared to $2.3 million for the three months ended March 31, 2011. CAAS has added advanced manufacturing and testing equipment to its research and development program and consequently, increased related depreciation expenses. In addition CAAS has created an incentive program to reward outstanding innovation. As a percentage of net sales, R&D expenses rose to 4.4% from 2.5% in the first quarter of last year.

Income from operations was $6.4 million in the first quarter of 2012, compared with $11.7 million in the first quarter of 2011. The decline of $5.3 million resulted primarily from lower gross profit and higher R&D expenses compared to the first quarter of 2011. As a percentage of net sales, the operating margin was 7.6% in the first quarter of 2012, as compared to 12.9% in the same period last year.

Financial expenses, net declined 18.2% to $0.9 million, compared to $1.1 million for the first quarter of 2011. This decrease was primarily due to higher interest income and lower losses on foreign exchange transactions compared with the first quarter of 2011.

The loss on the change in fair value of derivatives was $3.9 million in the first quarter of 2012, compared with a gain of $11.7 million for the same quarter of 2011. The gain or loss on the change in fair value of derivatives was primarily due to the Company's stock price movement and was non-cash in nature. During the three months ended March 31, 2012, the Company's common stock market price increased to $6.84 from $3.30 at the close of the prior quarter.

During the three months ended March 31, 2012, no convertible notes were converted. Thus, there was no gain on convertible notes conversion, as compared to a gain of $1.6 million in the first quarter of 2011. On March 1, 2011, a holder of the Company's convertible notes converted $6,428,571 of the principal amount of the convertible notes (at a conversion price of $7.0822 per share) and was issued 907,708 shares of the Company's common stock. The Company recorded a gain on convertible notes conversion of $1,564,418 in the first quarter of 2011, which is the difference between the market price of the common stock and the conversion consideration on the conversion date.

Income before income tax expenses and equity in earnings of affiliated companies was $1.7 million in the first quarter of 2012, compared with $24.0 million for the same quarter of 2011. The decrease of $22.3 million was mainly due to a decline in income from operations of $5.3 million, a decrease in gain on change in fair value of derivatives of $15.6 million and a decrease in gain on convertible notes conversion of $1.6 million, as compared with the same quarter in 2011.

Net loss attributable to parent company's shareholders was $0.8 million in the first quarter of 2012, compared to net income of $17.2 million in the same quarter of 2011. Diluted loss per share was $0.03 in the first quarter of 2012 compared with diluted earnings per share of $0.23 in the corresponding period of 2011. The weighted average number of basic and diluted common shares outstanding was 28,260,302 in the 2012 first quarter, compared to basic and diluted shares outstanding of 27,478,395 and 31,558,363, respectively, in the first quarter of 2011.

As of March 31, 2012, total cash and cash equivalents were $79.9 million, compared with $73.0 million at the end of 2011. Working capital was $117.3 million at March 31, 2012, compared with $147.8 million as of December 31, 2011. Net cash flows from operations were $8.5 million, compared with net cash used in operations of $3.5 million in the first quarter of 2011. Cash used to acquire property, plant and equipment was $2.0 million in the first quarter of 2012, compared with $6.1 million in the same quarter of 2011.

Non-GAAP Measures

For the three months ended March 31, 2012, adjusted net income attributable to the parent company's common shareholders (Non-GAAP) was $3.8 million versus adjusted net income attributable to the parent company's common shareholders of $6.9 million in the first quarter of last year. Adjusted diluted earnings per share was $0.12 for the three months ended March 31, 2012 versus adjusted diluted earnings per share of $0.22 for same period of 2011.

Reconciliation of GAAP to Non-GAAP results:


1Q2012

1Q2011

Net income (loss) attributable to parent company's common shareholders

$(768,896)

$17,182,402

Add: Allocation to convertible notes holders

-

2,459,580

Add: Loss (gain) on change in fair value of derivative

3,860,786

(11,731,827)

Add: Accrued make-whole redemption interest expense for convertible notes

661,682

582,882

Less: Gain on convertible notes conversion

-

(1,564,418)

Adjusted net income attributable to parent company's common shareholders

$3,753,572

$6,928,619

Diluted earnings per share:



GAAP

$(0.03)

$0.23

Non-GAAP

$0.12

$0.22

Shares used in computing diluted earnings per share:



GAAP

28,260,302

31,558,363

Non-GAAP

31,591,584

31,558,363

To supplement our unaudited consolidated financial statements presented in accordance with generally accepted accounting principles (U.S. GAAP), we use non-GAAP measures of net income attributable to parent company and earnings per share, which are adjusted from results based on U.S. GAAP to exclude certain expenses, gains and losses associated with the Company's convertible notes. These non-GAAP financial measures are provided to enhance the user's overall understanding of our current financial performance and our prospects for the future. Specifically, we believe the non-GAAP results provide useful information to both management and investors, as these non-GAAP results exclude certain expenses, gains and losses that we believe are not indicative of our core operating results. We believe these non-GAAP measures are consistent with the financial models and estimates published by many analysts who follow the Company, and they assist in evaluating the Company's operating performance compared with that of other companies in its industry. These non-GAAP results are some of the primary indicators management uses for assessing our performance, allocating resources and planning, and forecasting future periods. Further, management uses non-GAAP information that excludes certain non-cash charges related to accrued make-whole redemption interest expense and allocation to convertible notes holders associated with the Company's convertible notes, as these non-GAAP items do not reflect the cash operating results of the business or the ongoing results.

Non-GAAP net income attributable to parent company and earnings per share are not measures of performance under accounting principles generally accepted in the United States (U.S. GAAP). The Company includes them in this press release in order to:

  • improve transparency for investors;
  • assist investors in their assessment of the Company's performance;
  • facilitate comparisons to historical performance;
  • ensure that these measures are fully understood in light of how the Company evaluates its operating results; and
  • properly define the metrics used and confirm their calculation.

These non-GAAP results should not be regarded as a substitute for corresponding U.S. GAAP measures, but instead utilized as a supplemental measure of operating performance in evaluating the Company's business. The Company recognizes that the usefulness of non-GAAP measures of net income attributable to parent company and earnings per share has certain limitations, including:

  • non-GAAP net income attributable to parent company and earnings per share do not include certain gains and losses associated with the Company's convertible notes. Because the changes in the value of the convertible notes are a recurring, non-cash item, related gains and losses are a necessary element of the Company's costs and ability to generate profits and cash flows. Therefore, any measure that excludes certain gains and losses associated with the Company's convertible notes may have material limitations; and
  • the manner in which the Company calculates non-GAAP net income attributable to parent company and earnings per share may differ from that of other companies, which limits their usefulness as comparative measures.

The Company compensates for the foregoing limitations by using non-GAAP net income attributable to parent company and earnings per share as comparative tools, together with U.S. GAAP measurements, to assist in the evaluation of its operating performance. As such, these non-GAAP measures should be viewed in conjunction with the Company's financial statements prepared in accordance with U.S. GAAP, as presented above and in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Quarterly Report on Form 10-Q for the three months ended March 31, 2012.

Business Outlook

Management's revenue guidance is for 5% year over year growth for the full year 2012. 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 May 9th 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)

In addition, the conference call will be broadcast live over the Internet at http://www.caasauto.com. 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 P.M. EDT on June 9, 2012. 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 Account "286" and Conference ID "393650" 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 nine 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 3.5 million sets, steering columns, steering oil pumps and steering hoses. Its customer base is comprised of leading Chinese auto manufacturers, such as China FAW Group, Corp., Dongfeng Auto Group Co., Ltd., BYD Auto Company Limited, Beiqi Foton Motor Co., Ltd., Chery Automobile Co., Ltd. and Chrysler North America, outside of 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 9, 2012, 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: kevin.theiss@grayling.com

(Tables Follow)

China Automotive System, Inc.
Condensed Unaudited Consolidated Balance Sheets

As of March 31, 2012 and December 31, 2011



March 31, 2012



December 31, 2011


ASSETS









Current assets:









Cash and cash equivalents


$

79,852,280



$

72,960,500


Pledged cash deposits



21,966,094




21,820,890


Accounts and notes receivable, net - unrelated parties



197,414,008




200,939,826


Accounts and notes receivable, net - related parties



13,622,544




11,519,432


Advance payments and others - unrelated parties



1,633,820




2,215,240


Advance payments and others - related parties



317,000




629,741


Inventories



58,290,087




51,607,193


Current deferred tax assets



3,323,099




3,686,713


Total current assets



376,418,932




365,379,535


Non-current assets:









Property, plant and equipment, net



82,598,866




84,843,250


Intangible assets, net



785,425




837,075


Other receivables, net - unrelated parties



2,401,508




1,876,953


Other receivables, net - related parties



540,538




499,652


Advance payment for property, plant and equipment - unrelated parties



2,085,554




1,472,442


Advance payment for property, plant and equipment - related parties



3,874,982




3,712,121


Long-term investments



3,568,651




3,485,118


Non-current deferred tax assets



4,599,860




4,340,974


Total assets


$

476,874,316



$

466,447,120


LIABILITIES AND STOCKHOLDERS' EQUITY









Current liabilities:









Bank and government loans


$

11,915,543



$

10,315,987


Accounts and notes payable - unrelated parties



169,013,062




169,456,482


Accounts and notes payable - related parties



3,629,840




2,052,897


Convertible notes payable



23,571,429




-


Compound derivative liabilities



4,419,934




-


Accrued make-whole redemption interest expense of convertible notes



8,277,391




-


Customer deposits



615,096




1,181,401


Accrued payroll and related costs



4,783,189




5,177,140


Accrued expenses and other payables



23,431,918




22,617,667


Accrued pension costs



4,301,127




4,067,399


Taxes payable



4,478,213




2,029,215


Amounts due to shareholders/directors



353,067




351,817


Deferred tax liabilities



316,026




309,667


Total current liabilities



259,105,835




217,559,672


Long-term liabilities:









Convertible notes payable



-




23,571,429


Compound derivative liabilities



-




559,148


Accrued make-whole redemption interest expense of convertible notes



-




7,615,709


Advances payable



1,618,925




983,986


Total liabilities



260,724,760




250,289,944


Commitments and Contingencies









Stockholders' equity-









Common stock, $0.0001 par value - Authorized - 80,000,000 shares
Issued and outstanding - 28,260,302 shares at March 31, 2012 and December 31, 2011



2,826




2,826


Additional paid-in capital



39,295,419




39,295,419


Retained earnings-









Appropriated



9,026,240




9,026,240


Unappropriated



98,744,499




99,513,395


Accumulated other comprehensive income



25,747,837




25,291,231


Total parent company stockholders' equity



172,816,821




173,129,111


Non-controlling interests



43,332,735




43,028,065


Total stockholders' equity



216,149,556




216,157,176


Total liabilities and stockholders' equity


$

476,874,316



$

466,447,120













China Automotive Systems, Inc.
Condensed Unaudited Consolidated Statements of Operations and Comprehensive Income

Three months Ended March 31, 2012 and 2011



Three Months Ended March 31,




2012



2011


Net product sales







Unrelated parties


$

76,506,018



$

81,478,349


Related parties



7,986,837




9,535,821





84,492,855




91,014,170


Cost of product sold









Unrelated parties



62,259,076




65,609,492


Related parties



6,187,879




5,419,770





68,446,955




71,029,262


Gross profit



16,045,900




19,984,908


Gain on other sales



122,432




413,186


Less: Operating expenses









Selling expenses



2,383,138




2,415,276


General and administrative expenses



3,631,967




3,940,837


Research and development expenses



3,726,083




2,310,731


Total operating expenses



9,741,188




8,666,844


Income from operations



6,427,144




11,731,250


Other income, net



71,941




32,640


Financial expenses, net



(911,087)




(1,062,213)


(Loss) gain on change in fair value of derivative



(3,860,786)




11,731,827


Gain on convertible notes conversion



-




1,564,418


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



1,727,212




23,997,922


Income taxes



1,522,064




1,956,595


Equity in earnings of affiliated companies



79,878




38,911


Net income



285,026




22,080,238


Net income attributable to non-controlling interests



1,053,922




2,438,256


Net (loss) income attributable to parent company



(768,896)




19,641,982


Allocation to convertible notes holders



-




(2,459,580)


Net (loss) income attributable to parent company's common shareholders


$

(768,896)



$

17,182,402


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









Basic


$

(0.03)



$

0.63


Diluted


$

(0.03)



$

0.23


Weighted average number of common shares outstanding









Basic



28,260,302




27,478,395


Diluted



28,260,302




31,558,363


Comprehensive income:









Net income


$

285,026



$

22,080,238


Foreign currency translation gain, net of tax



501,724




2,113,825


Comprehensive income



786,750




24,194,063


Comprehensive income attributable to non-controlling interests



1,099,040




2,801,960


Comprehensive (loss) income attributable to parent company


$

(312,290)



$

21,392,103


China Automotive Systems, Inc.
Condensed Unaudited Consolidated Statements of Cash Flows
Three Months Ended March 31, 2012 and 2011



Three Months Ended March 31,




2012



2011









Cash flows from operating activities:







Net income


$

285,026



$

22,080,238


Adjustments to reconcile net income from continuing operations to net cash
provided by (used in) operating activities:









Depreciation and amortization



3,507,394




3,276,782


Increase (decrease) in allowance for doubtful accounts



69,247




(94,953)


Inventory write downs



116,763




-


Deferred income taxes assets and liabilities



119,180




380,087


Equity in earnings of affiliated companies



(79,878)




(38,911)


Gain on convertible notes conversion



-




(1,564,418)


Loss (gain) on change in fair value of derivative



3,860,786




(11,731,827)


Loss on fixed assets disposals



2,700




440


Changes in operating assets and liabilities:









(Increase) decrease in:









Pledged deposits



(122,326)




936,258


Accounts and notes receivable



1,610,246




(18,652,876)


Advance payments and others



901,529




(483,531)


Inventories



(6,746,058)




(10,243,348)


Increase (decrease) in:









Accounts and notes payable



953,698




11,381,369


Customer deposits



(567,044)




451,993


Accrued payroll and related costs



(399,380)




(496,074)


Accrued expenses and other payables



1,696,020




2,530,456


Accrued pension costs



229,463




(166,247)


Taxes payable



2,446,870




(1,022,913)


Advances payable



633,907




-


Net cash provided by (used in) operating activities



8,518,143




(3,457,475)


Cash flows from investing activities:









Decrease (increase) in other receivables



(600,556)




344,246


Proceeds from disposal of equipment



100,574




27,697


Payment to acquire property, plant and equipment



(1,991,758)




(6,143,104)


Payment to acquire intangible assets



(3,593)




-


Net cash used in investing activities



(2,495,333)




(5,771,161)


Cash flows from financing activities:









Proceeds from government subsidy loan



1,588,739




-


Dividends paid to the non-controlling interests



(795,958)




-


Increase (decrease) in amounts due to shareholders/directors



696




(44,436)


Net cash provided by (used in) financing activities



793,477




(44,436)


Effects of exchange rate on cash and cash equivalents



75,493




484,265


Net increase (decrease) in cash and cash equivalents



6,891,780




(8,788,807)


Cash and cash equivalents at beginning of period



72,960,500




49,424,979


Cash and cash equivalents at end of period


$

79,852,280



$

40,636,172


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:



Three Months Ended March 31,




2012



2011


Cash paid for interest


$

789,425



$

658,317


Cash paid for income taxes


$

552,311



$

2,862,605


SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:



Three Months Ended March 31,




2012



2011


Issuance of common shares for the conversion of convertible notes


$

-



$

10,111,869


Advance payments for acquiring property, plant and equipment



5,960,536




10,687,768


Dividend payable to non-controlling interests


$

807,230



$

1,545,921


Source: China Automotive Systems, Inc.
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