WUHAN, China, November 13, 2013 /PRNewswire-FirstCall/ -- 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 third quarter and nine months ended September 30, 2013.
Third Quarter 2013 Highlights
First Nine Months of 2013 Highlights
Mr. Qizhou Wu, chief executive officer of CAAS, commented, "Following our record net sales for any first and second quarter in our history, we again achieved our highest net sales for any third quarter as well in 2013. We continued to capture market share as our sales growth in the third quarter accelerated to 24.2% compared to the third quarter of 2012. Our sales growth far outpaced the total Chinese vehicle sales growth of 13.6% during the third quarter compared to the third quarter of 2012. Many of our large customers experienced significant growth in the third quarter, such as Great Wall, which posted a 42% increase in its SUV sales compared to the third quarter of 2012. Sales by Brilliance rose by 29% and Dongfeng Peugeot Citroen Automobile's sales climbed by 18%. In July, one of our top 10 customers, Dongfeng Peugeot Citroen, increased its production capacity to 750,000 vehicles as a new assembly plant began operation. In terms of exports, our shipments to North America continued to grow and we are especially encouraged by our customer Chrysler's 42 consecutive months of sales increases in North America. We continue to view North America as one of our future growth drivers, as we believe that our product performance and track record will eventually be recognized by other Original Equipment Manufacturers ("OEMs") in that market."
"We continue to invest in research and development to propel our growth in Electric Power Steering ("EPS") products and introduce new production techniques for cost-effective manufacturing. This strategy positions CAAS to continue to be the market leader in China as well as expand its global footprint. With our increasing sales into North America and our recent win of Chrysler's 2013 Supplier of the Year Metallic award, we are also upgrading our product quality in the Chinese domestic market to strengthen our long-term relationship with our local customers. With over 60 OEM customers, we are well-positioned to benefit from the continuing growth of the automotive market in China and abroad."
Mr. Jie Li, chief financial officer of CAAS, commented, "We continue to strengthen our financial position as we believe a strong financial position supports long-term sustainable growth. The sale of the idle land use rights enables us to generate more cash into our books. We have achieved record quarterly growth in the first, second and third quarters of 2013 without incurring long-term debt as we generated positive earnings and solid cash flow from operations. With the high cash inflows during the quarter, we accordingly increased research and development funding to accelerate the development of EPS products for future growth in sales and market share as well as expanding our leadership in China. From a long-term perspective, we aim to maintain R&D budget at 4% of our annual revenue."
Third Quarter of 2013
In the third quarter of 2013, net sales increased by 24.2% to a record third-quarter high of $90.9 million, compared to $73.2 million in the same quarter of 2012. The net sales increase was mainly due to significant sales growth to SAIC-GM-Wuling Automobile, Brilliance Auto, and other customers such as Dongfeng Peugeot Citroen, BYD and Great Wall which experienced rapid growth. Our sales to the North American market continue to grow as our shipments to Chrysler remains strong.
Gross profit increased by 32.0% to $16.5 million in the third quarter of 2013, compared to $12.5 million in the third quarter of 2012. The gross margin was 18.2% in the third quarter of 2013, versus 17.1% in the third quarter of 2012. The increase in gross profit was primarily due to greater sales volume. The increase in gross margin was mainly because of lower raw material costs and the enhancement in production efficiency in the third quarter of 2013.
Gain on other sales of $5.0 million was income from the sale of partial idle land use rights, which represented a pre-tax gain of $4.1 million as the calculated difference between the land's selling price and the net book value of the related land use rights.
Selling expenses rose by 8.3% to $2.6 million in the third quarter of 2013, compared to $2.4 million in the third quarter of 2012. Selling expenses represented 2.9% of net sales in the third quarter of 2013, compared to 3.3% in the third quarter of 2012. The increased selling expenses were primarily due to increases in compensation to salesmen, warehouse rental fees and transportation expenses resulting from higher sales volume.
General and administrative expenses ("G&A expenses") increased by 12.0% to $2.8 million in the third quarter of 2013, compared to $2.5 million in the same quarter of 2012. The increase in G&A expenses was due primarily to higher property taxes in the third quarter of 2013. G&A expenses represented 3.1% of net sales in the third quarter of 2013 and 3.4% in the third quarter of 2012.
Research and development expenses ("R&D expenses") increased by 82.1% to $5.1 million in the third quarter of 2013, compared to $2.8 million in the third quarter of 2012. The increase in R&D expenses was mainly due to the development and trial production of the Company's EPS and other new products, as well as improvement in production molds, higher external technical support fees and increased wages. R&D expenses represented 5.6% of net sales in the third quarter of 2013 compared with 3.8% in the third quarter of 2012.
Income from operations increased by $5.5 million, or 100.0%, to $11.0 million in the third quarter of 2013, compared to $5.5 million in the same quarter of 2012. As a percentage of net sales, the operating margin was 12.1% in the third quarter of 2013, compared to 7.5% in the third quarter of 2012. The increase was mainly due to higher gross profit and the increase in Gain on other sales in the third quarter of 2013, compared to the third quarter of 2012.
Net financial income was $0.7 million in the third quarter of 2013 compared to net financial expenses of $0.4 million in the third quarter of 2012. The Company's increased time deposits generated more interest while a decrease in bank loans reduced interest expense during the third quarter of 2013.
Income before income tax expenses and equity in earnings of affiliated companies was $12.2 million in the third quarter of 2013, compared to $5.3 million in the third quarter of 2012. The increase in income before income tax expenses and equity in earnings of affiliated companies in the third quarter of 2013 was mainly due to increased operating income of $11.0 million and a $1.1 million reduction in financial expenses.
Net income attributable to parent company's common shareholders was $8.6 million in the third quarter of 2013, compared to net income attributable to parent company's common shareholders of $3.4 million in the corresponding quarter of 2012. Diluted earnings per share were $0.31 in the third quarter of 2013, compared to diluted earnings per share of $0.12 in the third quarter of 2012. The weighted average number of diluted common shares outstanding was 28,062,297 in the third quarter of 2013, compared to 28,260,880 in the third quarter of 2012.
First Nine Months of 2013
Net sales increased by 22.0% to a nine-month record high of $286.0 million, compared to $234.5 million in the first nine months of 2012. Nine-month gross profit was $54.3 million, compared to $43.5 million in the corresponding period last year. Nine-month gross margin was 19.0%, compared to 18.6% for the corresponding period in 2012. Gain on Other Sales of $6.8 million was income from the sale of idle land, which represented a pre-tax gain of $4.1 million calculated by the difference between the selling price and net book value of related land use rights. Income from operations was $28.1 million, compared to $20.4 million in the first nine months of 2012. Operating margin was 9.8%, compared to 8.7% for the corresponding period of 2012. Income from continuing operations was $24.2 million in the first nine months of 2013, compared to $16.3 million in the corresponding period in 2012. Diluted earnings per share were $0.70 in the first nine months of 2013, compared to diluted earnings per share of $0.52 (including $0.08 of diluted earnings per share from discontinued operations) for the corresponding period in 2012.
As of September 30, 2013, total cash and cash equivalents and short-term investments were $87.0 million, compared to $87.6 million as of December 31, 2012. Working capital was $164.4 million as of September 30, 2013, compared to $138.7 million as of December 31, 2012. Total parent company stockholders' equity was $217.7 million as of September 30, 2013, compared to $193.6 million as of December 31, 2012.
Business Outlook
Management raised its revenue guidance to 20% from 15% year-over-year growth in the full year 2013 as the Company is determined to increase its market share and further expand its leading market position. 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 13, 2013 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: +1-877-407-8031 (North America)
Phone Number: +1-201-689-8031 (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 14, 2013. 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 "13572666" 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 4.0 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 North America 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 27, 2013, 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 Systems, Inc. and Subsidiaries Condensed Unaudited Consolidated Balance Sheets (In thousands of USD unless otherwise indicated) | |||||||
September 30, 2013 | December 31, 2012 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 54,702 | $ | 87,649 | |||
Pledged cash deposits | 25,633 | 26,481 | |||||
Short-term investments | 32,274 | - | |||||
Accounts and notes receivable, net - unrelated parties | 247,002 | 211,306 | |||||
Accounts and notes receivable, net - related parties | 17,783 | 12,286 | |||||
Advance payments and others - unrelated parties | 2,336 | 3,127 | |||||
Advance payments and others - related parties | 1,204 | 779 | |||||
`Inventories | 53,149 | 43,542 | |||||
Assets held for sale | 918 | - | |||||
Current deferred tax assets | 4,792 | 4,392 | |||||
Total current assets | 439,793 | 389,562 | |||||
Non-current assets: | |||||||
Property, plant and equipment, net | 82,523 | 81,691 | |||||
Intangible assets, net | 671 | 676 | |||||
Other receivables, net - unrelated parties | 764 | 849 | |||||
Other receivables, net - related parties | 67 | 107 | |||||
Advance payment for property, plant and equipment - unrelated parties | 1,949 | 1,001 | |||||
Advance payment for property, plant and equipment - related parties | 829 | 4,162 | |||||
Long-term investments | 3,933 | 3,665 | |||||
Non-current deferred tax assets | 5,549 | 4,112 | |||||
Total assets | $ | 536,078 | $ | 485,825 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Bank and government loans | $ | 42,199 | $ | 40,284 | |||
Accounts and notes payable - unrelated parties | 174,875 | 166,380 | |||||
Accounts and notes payable - related parties | 6,258 | 4,521 | |||||
Customer deposits | 1,894 | 870 | |||||
Accrued payroll and related costs | 6,111 | 5,472 | |||||
Accrued expenses and other payables | 27,008 | 23,063 | |||||
Accrued pension costs | 5,002 | 4,255 | |||||
Taxes payable | 8,979 | 5,593 | |||||
Amounts due to shareholders/directors | 303 | 332 | |||||
Deferred tax liabilities | 93 | 46 | |||||
Advances payable | 2,635 | - | |||||
Total current liabilities | 275,357 | 250,816 | |||||
Long-term liabilities: | |||||||
Advances payable | - | 2,609 | |||||
Total liabilities | $ | 275,357 | $ | 253,425 | |||
Commitments and Contingencies | |||||||
Stockholders' equity: | |||||||
Common stock, $0.0001 par value - Authorized - 80,000,000 shares; Issued- | $ | 3 | $ | 3 | |||
Additional paid-in capital | 39,565 | 39,371 | |||||
Retained earnings- | |||||||
Appropriated | 10,048 | 9,953 | |||||
Unappropriated | 138,778 | 119,329 | |||||
Accumulated other comprehensive income | 30,272 | 25,898 | |||||
Treasury stock - 217,283 and 217,283 shares at September 30, 2013 and | (1,000) | (1,000) | |||||
Total parent company stockholders' equity | 217,666 | 193,554 | |||||
Non-controlling interests | 43,055 | 38,846 | |||||
Total stockholders' equity | 260,721 | 232,400 | |||||
Total liabilities and stockholders' equity | $ | 536,078 | $ | 485,825 | |||
The condensed unaudited consolidated balance sheet of the Company as of December 31, 2012 has been adjusted | |||||||
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, | ||||||||
2013 | 2012 | |||||||
Net product sales | ||||||||
Unrelated parties | $ | 81,753 | $ | 70,245 | ||||
Related parties | 9,166 | 2,939 | ||||||
90,919 | 73,184 | |||||||
Cost of product sold | ||||||||
Unrelated parties | 63,894 | 56,231 | ||||||
Related parties | 10,500 | 4,452 | ||||||
74,394 | 60,683 | |||||||
Gross profit | 16,525 | 12,501 | ||||||
Gain on other sales | 5,030 | 704 | ||||||
Less: Operating expenses | ||||||||
Selling expenses | 2,647 | 2,437 | ||||||
General and administrative expenses | 2,821 | 2,487 | ||||||
Research and development expenses | 5,117 | 2,818 | ||||||
Total operating expenses | 10,585 | 7,742 | ||||||
Income from operations | 10,970 | 5,463 | ||||||
Other income, net | 499 | 238 | ||||||
Financial income (expenses), net | 689 | (437) | ||||||
Income before income tax expenses and equity in earnings of | 12,158 | 5,264 | ||||||
Less: Income taxes | 1,854 | 891 | ||||||
Equity in earnings of affiliated companies | 125 | 27 | ||||||
Net income | 10,429 | 4,400 | ||||||
Net income attributable to non-controlling interests | 1,805 | 996 | ||||||
Net income attributable to parent company's common shareholders | $ | 8,624 | $ | 3,404 | ||||
Comprehensive income: | ||||||||
Net income | 10,429 | 4,400 | ||||||
Other comprehensive income (loss): | ||||||||
Foreign currency translation gain (loss), net of tax | 1,218 | (556) | ||||||
Comprehensive income | 11,647 | 3,844 | ||||||
Comprehensive income attributable to non-controlling interests | 2,010 | 904 | ||||||
Comprehensive income attributable to parent company | $ | 9,637 | $ | 2,940 | ||||
Net income attributable to parent company's common shareholders | ||||||||
Basic | $ | 0.31 | $ | 0.12 | ||||
Diluted | $ | 0.31 | $ | 0.12 | ||||
Weighted average number of common shares outstanding | ||||||||
Basic | 28,043,019 | 28,260,302 | ||||||
Diluted | 28,062,297 | 28,260,880 | ||||||
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, | ||||||||
2013 | 2012 | |||||||
Net product sales | ||||||||
Unrelated parties | $ | 259,627 | $ | 215,157 | ||||
Related parties | 26,344 | 19,325 | ||||||
285,971 | 234,482 | |||||||
Cost of product sold | ||||||||
Unrelated parties | 208,525 | 176,834 | ||||||
Related parties | 23,171 | 14,137 | ||||||
231,696 | 190,971 | |||||||
Gross profit | 54,275 | 43,511 | ||||||
Gain on other sales | 6,762 | 2,625 | ||||||
Less: Operating expenses | ||||||||
Selling expenses | 9,611 | 6,704 | ||||||
General and administrative expenses | 10,164 | 8,999 | ||||||
Research and development expenses | 13,134 | 10,060 | ||||||
Total operating expenses | 32,909 | 25,763 | ||||||
Income from operations | 28,128 | 20,373 | ||||||
Other income, net | 573 | 317 | ||||||
Financial income (expenses), net | 380 | (1,850) | ||||||
Loss on change in fair value of derivative | - | (449) | ||||||
Gain on redemption of convertible notes | - | 1,421 | ||||||
Income before income tax expenses and equity in earnings of | 29,081 | 19,812 | ||||||
Less: Income taxes | 5,172 | 3,666 | ||||||
Equity in earnings of affiliated companies | 251 | 139 | ||||||
Income from continuing operations | 24,160 | 16,285 | ||||||
Discontinued operations - net of income tax | - | 2,651 | ||||||
Net income | 24,160 | 18,936 | ||||||
Net income attributable to non-controlling interests | 4,616 | 3,279 | ||||||
Net income attributable to parent company | $ | 19,544 | $ | 15,657 | ||||
Allocation to convertible notes holders | - | (925) | ||||||
Net income attributable to parent company's common shareholders | $ | 19,544 | $ | 14,732 | ||||
Comprehensive income: | ||||||||
Income from continuing operations | $ | 24,160 | $ | 16,285 | ||||
Income from discontinued operations | - | 2,651 | ||||||
Net income | 24,160 | 18,936 | ||||||
Other comprehensive income (loss): | ||||||||
Foreign currency translation gain (loss), net of tax - continuing | 5,265 | (1,205) | ||||||
Foreign currency translation loss, net of tax - discontinued | - | (75) | ||||||
Foreign currency translation gain (loss), net of tax | 5,265 | (1,280) | ||||||
Comprehensive income - continuing operations | 29,425 | 15,080 | ||||||
Comprehensive income - discontinued operations | - | 2,576 | ||||||
Comprehensive income | 29,425 | 17,656 | ||||||
Comprehensive income attributable to non-controlling interests | 5,507 | 3,023 | ||||||
Comprehensive income attributable to parent company | $ | 23,918 | $ | 14,633 | ||||
Net income attributable to parent company's common | ||||||||
Basic | ||||||||
Income per share from continuing operations attributable to | $ | 0.70 | $ | 0.44 | ||||
Income per share from discontinued operations | - | 0.08 | ||||||
$ | 0.70 | $ | 0.52 | |||||
Diluted | ||||||||
Income per share from continuing operations attributable to | $ | 0.70 | $ | 0.44 | ||||
Income per share from discontinued operations | - | 0.08 | ||||||
$ | 0.70 | $ | 0.52 | |||||
Weighted average number of common shares outstanding | ||||||||
Basic | 28,043,019 | 28,260,302 | ||||||
Diluted | 28,054,008 | 28,261,529 | ||||||
The condensed unaudited consolidated statement of operations and comprehensive income of the Company | ||||||||
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, | |||||||
2013 | 2012 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 24,160 | $ | 18,936 | |||
Adjustments to reconcile net income from operations to net cash provided by | |||||||
Stock-based compensation | 194 | 76 | |||||
Depreciation and amortization | 10,964 | 10,668 | |||||
Increase (decrease) in allowance for doubtful accounts | (139) | 16 | |||||
Inventory write downs | 480 | 501 | |||||
Deferred income taxes | (1,611) | (1,268) | |||||
Equity in earnings of affiliated companies | (251) | (139) | |||||
Gain on sale of a subsidiary | - | (2,848) | |||||
Gain on redemption of convertible notes | - | (1,421) | |||||
Loss on change in fair value of derivative | - | 449 | |||||
Amortization of debt issue cost | 58 | 135 | |||||
Loss (gain) on fixed assets disposals | (4,288) | 44 | |||||
Changes in operating assets and liabilities: | |||||||
(Increase) decrease in: | |||||||
Pledged deposits | 1,413 | (5,118) | |||||
Accounts and notes receivable | (36,803) | (4,741) | |||||
Advance payments and others | 465 | 570 | |||||
Inventories | (9,076) | (4,306) | |||||
Increase (decrease) in: | |||||||
Accounts and notes payable | 6,199 | (462) | |||||
Customer deposits | 1,016 | 337 | |||||
Accrued payroll and related costs | 514 | (180) | |||||
Accrued expenses and other payables | 3,459 | (6,702) | |||||
Accrued pension costs | 653 | 315 | |||||
Taxes payable | 3,256 | 4,294 | |||||
Advances payable | (32) | 2,210 | |||||
Net cash provided by operating activities | 631 | 11,366 | |||||
Cash flows from investing activities: | |||||||
Increase in other receivables | (66) | (1,598) | |||||
Cash received from property, plant and equipment sales | 6,282 | 622 | |||||
Payments to acquire property, plant and equipment | (9,065) | (16,982) | |||||
Payments to acquire intangible assets | (109) | (62) | |||||
Purchase of short-term investments | (32,197) | - | |||||
Dividends from investment under cost method | 158 | - | |||||
Proceeds from sales of a subsidiary | - | 3,561 | |||||
Net cash used in investing activities | (35,865) | (14,459) | |||||
Cash flows from financing activities: | |||||||
Proceeds from government and bank loan | 15,588 | 36,402 | |||||
Repayments of bank loan | (14,758) | (7,097) | |||||
Debt issuance costs paid for bank loan | - | (230) | |||||
Dividends paid to the non-controlling interests | (1,381) | (2,387) | |||||
Redemption of convertible notes | - | (23,571) | |||||
Decrease in amounts due to shareholders/directors | (40) | (8) | |||||
Net cash provided by financing activities | (591) | 3,109 | |||||
Effects of exchange rate on cash and cash equivalents | 1,878 | (487) | |||||
Net increase (decrease) in cash and cash equivalents | (32,947) | (471) | |||||
Cash and cash equivalents at beginning of period | 87,649 | 72,961 | |||||
Cash and cash equivalents at end of period | $ | 54,702 | $ | 72,490 | |||
The condensed unaudited consolidated statement of cash flows of the Company for the nine months | |||||||
