China Automotive Systems Reports
2009 Second Quarter Results
- Net sales of $62.5 million set new quarterly sales record;
quarterly sales grew 34.4% year-over-year -
WUHAN, Hubei, China, August 12, 2009 - -- China Automotive Systems, Inc. , (the “Company”), (NASDAQ: CAAS), a leading power steering components and systems supplier in China, today announced its financial results for the second quarter ended June 30, 2009.
2009 Second Quarter Highlights:
| · | Net sales increased to a quarterly record of $62.5 million, reflecting a 34.4% year-over-year growth; |
| · | Net sales for the six months ended June 30, 2009 were $107.2 million; |
| · | Net income attributable to common shareholders was $6.1 million, reflecting a 28.1% year-over-year growth with diluted earnings per share of $0.21, |
| · | 2009 second quarter non-GAAP diluted EPS was $0.24, versus $0.14 in the second quarter of 2008, despite 9.0% greater number of diluted shares outstanding in the 2009 second quarter; |
| · | Unrestricted cash was $39.6 million; and |
| · | Net cash flow from operations was $15.8 million for the six months ended June 30, 2009. |
Net sales for the second quarter of 2009 represented a 34.4% year-over-year increase to $62.5 million, the highest quarterly sales in the Company’s history. Second quarter sales were almost $16 million above the sales in the second quarter of 2008 of $46.5 million, and were 39.8% above the $44.7 million in the 2009 first quarter sales.
Net sales for the second quarter of 2009 from steering products for passenger and light-duty vehicles increased by 45.3% year-over-year to $41.8 million, compared with $28.7 million in the same quarter of 2008. Net sales from steering products for commercial vehicles for the second quarter of 2009 increased 7.9% year-over-year to $14.6 million, from $13.6 million reported in the same quarter in 2008. Net sales from oil pumps and sensors for the second quarter of 2009 increased 48.5% to almost $6.0 million from $4.0 million in the same quarter in 2008.
Gross profit in the second quarter of 2009 was $18.5 million compared with $14.5 million for the same quarter in 2008, and $12.2 million in the 2009 first quarter, reflecting a 27.9% year-over-year increase and a 51.7% quarter-over-quarter increase respectively. The gross margin in the second quarter of 2009 was 29.6%, compared with 31.1% in the second quarter last year, and 27.3% in the first quarter of 2009.
Operating income increased by 112.9% year-over-year to $11.6 million in the second quarter of 2009, compared with $5.5 million in the same quarter in 2008, and was 64.4% above the $7.1 million in the first quarter of 2009. The increase in gross profit combined with lower operating expenses, primarily from a decline in general and administrative expenses and lower depreciation and amortization costs generated this increased income.
Net income attributable to common shareholders was $6.1 million for the three months ended June 30, 2009, or $0.21 per diluted share, compared with $4.7 million, or $0.18 per diluted share in the same quarter in 2008, and compared with $2.2 million, or $0.08 per diluted share in the first quarter of 2009. The diluted weighted average shares outstanding were 31.5 million in the second quarter of 2009 compared with 28.8 million in the second quarter of 2008.
Summary of Financial Results (US dollars except shares outstanding) | For the Three Months | |||||||
| Ended June 30, | ||||||||
| 2009 | 2008 | |||||||
| Net income attributable to common shareholders | $ | 6,076,349 | $ | 4,744,355 | ||||
| Amortization related to convertible note discount | 348,638 | 81,879 | ||||||
| Interest expenses of convertible note | 262,500 | 262,500 | ||||||
| (Gain)/Loss on change in fair value of derivative | 977,435 | (1,014,262 | ) | |||||
| Pro forma Net Income | 7,664,922 | 4,074,472 | ||||||
| Adjustment to diluted EPS | 0.05 | (0.02 | ) | |||||
| Pro forma diluted EPS | $ | 0.24 | $ | 0.14 | ||||
| Diluted avg. number of common shares | 31,446,402 | 28,834,380 | ||||||
As of June 30, 2009, total cash and cash equivalents were $47.8 million, as compared with $43.8 million as of December 31, 2008. Stockholder's equity increased to $113.8 million as of June 30, 2009 from $104.6 million as of December 31, 2008. Working capital reached $48.7 million. Total account and notes receivables were $121.5 million reflecting higher sales. Equipment and machinery increased by $5.8 million as the Company purchased equipment to enhance its production capacity.
Key Accomplishments in the Second Quarter of 2009:
On April 14, 2009, the Company announced that the R&D center of Henglong had evolved into the leading automotive steering technology research operation in China, as the Company enters the global steering market. Since 2006, the R&D center developed 28 power steering-related national patents, including 2 inventions and 26 utility model patents. New products have been manufactured by the Company for more than 20 domestic and foreign automotive OEMs, and sales totaled over RMB 847 million by the end of 2008. Among new steering technology being developed are: low-noise power steering technology, stabilizing power steering valves, electric power steering (EPS), electronically controlled hydraulic power steering (EHPS), and other innovative technologies. The R&D center also develops proprietary manufacturing equipment and processes.
On April 7, 2009, the Company’s subsidiaries, Jingzhou Henglong Automotive Parts Co., Ltd., (“Henglong”), and Shashi Jiulong Power Steering Gears Co., Ltd., (“Jiulong”), were recognized as High-Tech Enterprises by the Chinese Government, which qualified the two subsidiaries for a preferential income tax rate of 15% through 2011. Henglong and Jiulong were the two largest contributors to revenues and together, provided over $12 million of net income in 2008.
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2009 Outlook
The Company adjusted upward its revenue guidance for 2009. The Company now expects its revenue to increase by more than 20% for the year 2009. This target is based on the Company's current contracts from existing customers, which are subject to change.
Conference Call
Management will conduct a conference call on Wednesday, August 12 at 8:00 a.m. Eastern Daylight 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: +1-877-407-9205 (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 .
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. Eastern Daylight Time on Wednesday, August 26, 2009. 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 "329237" to access the replay. The internet audio stream will also be available until 11:59 p.m. Eastern Daylight Time on Wednesday, August 26 at 11:59 p.m. EDT.
About China Automotive Systems, Inc.
Based in Hubei Province, 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 seven Sino-foreign joint ventures. The Company offers a full range of steering system parts for passenger automobiles and commercial vehicles. The Company currently offers 4 separate series of power steering and 307 models of power steering with an annual production capacity of 1.1 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., Donfeng Auto Group Co., Ltd., Brilliance China Automotive Holdings Ltd., Beiqi Foton Motor Co., Ltd. and Chery Automobile Co., Ltd., etc. For more information, please visit: http://www.caasauto.com .
Safe Harbor Statement
This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations or beliefs, including, but not limited to, statements concerning the Company's operations, financial performance and, condition and the impact of acquisitions on its financial performance. For this purpose, statements that are not statements of historical fact may be deemed to be forward-looking statements. The Company cautions that these statements by their nature involve risks and uncertainties, and actual results may differ materially depending on a variety of important factors, including, among others, the impact of competitive products, pricing and new technology; changes in demand for the Company's products; changes in consumer preferences and tastes; and effectiveness of marketing; changes in laws and regulations; fluctuations in costs of production, delays and cost overruns related to developing and opening new production facilities; and other factors as those discussed in the Company's reports filed with the Securities and Exchange Commission from time to time.
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China Automotive Systems, Inc.
Condensed Consolidated Statements of Operations (Unaudited, US dollars)
| Three Months Ended June 30, | ||||||||
| 2009 | 2008 | |||||||
| Net product sales, including $1,314,247 and $747,405 to related parties for the three months ended June 30, 2009 and 2008 | $ | 62,484,279 | $ | 46,508,340 | ||||
| Cost of product sold, including $2,812,741 and $2,651,000 purchased from related parties for the three months ended June 30, 2009 and 2008 | 43,982,547 | 32,045,336 | ||||||
| Gross profit | 18,501,732 | 14,463,004 | ||||||
| Add: Gain on other sales | 172,747 | 117,710 | ||||||
| Less: Operating expenses- | ||||||||
| Selling expenses | 3,816,301 | 2,936,835 | ||||||
| General and administrative expenses | 2,246,330 | 4,151,633 | ||||||
| R&D expenses | 444,226 | 563,295 | ||||||
| Depreciation and amortization | 507,341 | 1,451,064 | ||||||
| Total Operating expenses | 7,014,198 | 9,102,827 | ||||||
| Income from operations | 11,660,281 | 5,477,887 | ||||||
| Add: Other income, net | - | - | ||||||
| Financial income (expenses) net | (478,228 | ) | (459,140 | ) | ||||
| Gain (loss) on change in fair value of derivative | (977,435 | ) | 995,153 | |||||
| Income before income taxes | 10,204,618 | 6,013,900 | ||||||
| Less: Income taxes | 1,474,618 | (415,458 | ) | |||||
| Net income | $ | 8,730,000 | $ | 6,429,358 | ||||
| Net income attributable to noncontrolling interests | 2,653,651 | 1,685,003 | ||||||
| Net income attributable to common shareholders | $ | 6,076,349 | $ | 4,744,355 | ||||
| Net income per common share- | ||||||||
| Basic | $ | 0.23 | $ | 0.19 | ||||
| Diluted | $ | 0.21 | $ | 0.18 | ||||
| Weighted average number of common shares outstanding – | ||||||||
| Basic | 26,983,244 | 24,880,071 | ||||||
| Diluted | 31,466,402 | 28,834,380 | ||||||
| Three Months Ended June 30, | ||||||||
| 2009 | 2008 | |||||||
| Net income | $ | 8,730,000 | $ | 6,429,358 | ||||
| Other comprehensive income: | ||||||||
| Foreign currency translation gain (loss) | (187,750 | ) | 2,785,709 | |||||
| Comprehensive income | $ | 8,542,250 | $ | 9,215,067 | ||||
| Comprehensive income attributable to non-controlling interests | 2,667,188 | 2,119,778 | ||||||
| Comprehensive income attributable to common shareholders | $ | 5,875,062 | $ | 7,095,289 | ||||
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| Six Months Ended June 30, | ||||||||
| 2009 | 2008 | |||||||
| Net product sales, including $1,873,258 and $2,798,487 to related parties for the six months ended June 30, 2009 and 2008 | $ | 107,181,725 | $ | 87,975,383 | ||||
| Cost of product sold, including $4,986,222 and $4,603,390 purchased from related parties for the six months ended June 30, 2009 and 2008 | 76,482,162 | 61,300,009 | ||||||
| Gross profit | 30,699,563 | 26,675,374 | ||||||
| Add: Gain on other sales | 239,626 | 251,900 | ||||||
| Less: Operating expenses- | ||||||||
| Selling expenses | 6,175,467 | 5,412,176 | ||||||
| General and administrative expenses | 4,048,032 | 5,767,783 | ||||||
| R&D expenses | 884,148 | 738,973 | ||||||
| Depreciation and amortization | 1,078,754 | 2,745,791 | ||||||
| Total Operating expenses | 12,186,401 | 14,664,723 | ||||||
| Income from operations | 18,752,788 | 12,262,551 | ||||||
| Add: Other income, net | - | 199,459 | ||||||
| Financial income (expenses) net | (917,708 | ) | (438,447 | ) | ||||
| Gain (loss) on change in fair value of derivative | (2,538,283 | ) | 995,153 | |||||
| Income before income taxes | 15,296,797 | 13,018,716 | ||||||
| Less: Income taxes | 2,924,288 | 408,937 | ||||||
| Net income | $ | 12,372,509 | $ | 12,609,779 | ||||
| Net income attributable to noncontrolling interests | 4,037,348 | 3,435,250 | ||||||
| Net income attributable to common shareholders | $ | 8,335,161 | $ | 9,174,529 | ||||
| Net income per common share- | ||||||||
| Basic | $ | 0.31 | $ | 0.37 | ||||
| Diluted | $ | 0.29 | $ | 0.36 | ||||
| Weighted average number of common shares outstanding – | ||||||||
| Basic | 26,983,244 | 24,422,429 | ||||||
| Diluted | 31,719,477 | 27,394,392 | ||||||
| Six Months Ended June 30, | ||||||||
| 2009 | 2008 | |||||||
| Net income | $ | 12,372,509 | $ | 12,609,779 | ||||
| Other comprehensive income: | ||||||||
| Foreign currency translation gain (loss) | (202,329 | ) | 6,097,038 | |||||
| Comprehensive income | $ | 12,170,180 | $ | 18,706,817 | ||||
| Comprehensive income attributable to non-controlling interests | 4,046,468 | 4,797,468 | ||||||
| Comprehensive income attributable to common shareholders | $ | 8,123,712 | $ | 13,909,349 | ||||
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China Automotive Systems, Inc.
Condensed Consolidated Balance Sheets
| June 30, 2009 | December 31, 2008 | |||||||
| US dollars | (Unaudited) | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 39,555,309 | $ | 37,113,375 | ||||
| Pledged cash deposits | 8,280,299 | 6,739,980 | ||||||
| Accounts and notes receivable, net, including $2,108,230 and $1,285,110 from related parties at June 30, 2009 and December 31, 2008 | 121,466,435 | 96,424,856 | ||||||
| Advance payments and other, including $400,890 and $9,374 to related parties at June 30, 2009 and December 31, 2008 | 2,256,519 | 1,442,614 | ||||||
| Inventories | 26,754,416 | 26,571,755 | ||||||
| Total current assets | $ | 198,312,978 | $ | 168,292,580 | ||||
Long-term Assets: | ||||||||
| Property, plant and equipment, net | $ | 56,116,786 | $ | 51,978,905 | ||||
| Intangible assets, net | 723,244 | 504,339 | ||||||
| Other receivables, net, including $998,447 and $903,674 from related parties at June 30, 2009 and December 31, 2008 | 1,369,831 | 1,349,527 | ||||||
| Advance payments for property, plant and equipment, including $3,651,235 and $2,473,320 to related parties at June 30, 2009 and December 31, 2008 | 4,368,370 | 6,459,510 | ||||||
| Long-term investments | 79,041 | 79,010 | ||||||
| Deferred income tax assets | 2,637,462 | 2,383,065 | ||||||
| Total assets | $ | 263,607,712 | $ | 231,046 ,936 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Bank loans | $ | 8,782,330 | $ | 7,315,717 | ||||
| Accounts and notes payable, including $1,803,688 and $1,097,642 to related parties at June 30, 2009 and December 31, 2008 | 78,913,062 | 59,246,043 | ||||||
| Convertible notes payable | 28,429,062 | 32,922,077 | ||||||
| Derivative liabilities | 4,042,857 | 1,502,597 | ||||||
| Customer deposits | 258,020 | 236,018 | ||||||
| Accrued payroll and related costs | 2,886,378 | 2,715,116 | ||||||
| Accrued expenses and other payables | 13,312,169 | 12,460,784 | ||||||
| Accrued pension costs | 3,794,216 | 3,806,519 | ||||||
| Taxes payable | 8,623,760 | 5,717,438 | ||||||
| Amounts due to shareholders/directors | 564,290 | 337,370 | ||||||
| Total current liabilities | $ | 149,606,144 | $ | 126,259,679 | ||||
| Long-term liabilities: | ||||||||
| Advances payable | 233,815 | 234,041 | ||||||
| Total liabilities | $ | 149,839,959 | $ | 126,493,720 | ||||
| Related Party Transactions and balances | ||||||||
| 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 - 26,983,244 shares at June 30, 2009 and December 31, 2008 | 2,698 | 2,698 | ||||||
| Additional paid-in capital | 27,148,206 | 27,148,206 | ||||||
| Retained earnings- | ||||||||
| Appropriated | 8,324,533 | 7,525,777 | ||||||
| Unappropriated | 43,562,921 | 36,026,516 | ||||||
| Deferred stock compensation | (375,039 | ) | (500,052 | ) | ||||
| Accumulated other comprehensive income | 10,916,056 | 11,127,505 | ||||||
| Non-controlling interests | 24,188,378 | 23,222,566 | ||||||
| Total stockholders' equity | $ | 113,767,753 | $ | 104,553,216 | ||||
| Total liabilities and stockholders' equity | $ | 263,607,712 | $ | 231,046,936 | ||||
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China Automotive Systems, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited, US dollars)
Six Months Ended June 30,, | ||||||||
| 2009 | 2008 | |||||||
Cash flows from operating activities: | ||||||||
| Net income | $ | 12,372,509 | $ | 12,609,779 | ||||
| Adjustments to reconcile net income from continuing operations to net cash provided by operating activities: | ||||||||
| Stock-based compensation | 125,013 | 95,400 | ||||||
| Depreciation and amortization | 3,886,332 | 4,766,575 | ||||||
| Allowance for doubtful accounts (Recovered) | (1,117,881 | ) | 218,515 | |||||
| Deferred income taxes assets | (253,521 | ) | (398,551 | ) | ||||
| Amortization for discount of convertible note payable | 506,985 | 181,328 | ||||||
| (Gain) loss on change in fair value of derivative | 2,538,283 | (995,153 | ) | |||||
| Other operating adjustments | (227,474 | ) | (4,203 | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| (Increase) decrease in: | ||||||||
| Pledged deposits | (1,537,010 | ) | 602,009 | |||||
| Accounts and notes receivable | (23,776,920 | ) | (16,249,120 | ) | ||||
| Advance payments and other | (813,196 | ) | (1,447,803 | ) | ||||
| Inventories | (171,352 | ) | (4,680,059 | ) | ||||
| Accounts and notes payable | 19,639,466 | 9,349,207 | ||||||
| Customer deposits | 21,744 | 456,276 | ||||||
| Accrued payroll and related costs | 170,135 | (13,849 | ) | |||||
| Accrued expenses and other payables | 1,512,206 | 699,033 | ||||||
| Accrued pension costs | (13,754 | ) | 155,338 | |||||
| Taxes payable | 2,901,849 | (2,591,573 | ) | |||||
| Net cash provided by operating activities | $ | 15,763,414 | $ | 2,753,149 | ||||
| Cash flows from investing activities: | ||||||||
| (Increase) decrease in other receivables | (55,386 | ) | (408,139 | ) | ||||
| Cash received from equipment sales | 458,950 | 96,317 | ||||||
| Cash paid to acquire property, plant and equipment | (6,341,035 | ) | (7,573,715 | ) | ||||
| Cash paid to acquire intangible assets | (321,671 | ) | (101,601 | ) | ||||
| Cash paid for the acquisition of 35.5% of Henglong | - | (10,000,000 | ) | |||||
| Net cash (used in) investing activities | $ | (6,259,142 | ) | $ | (17,987,138 | ) | ||
| Cash flows from financing activities: | ||||||||
| Proceeds from repayment of bank loans | 1,465,006 | (7,564,564 | ) | |||||
| Dividends paid to the non-controlling interest holders of Joint-venture companies | (3,768,668 | ) | (4,697,780 | ) | ||||
| (Decrease) in amounts due to shareholders/directors | 226,717 | (82,610 | ) | |||||
| Proceeds on issuance of convertible note payable | - | 35,000,000 | ||||||
| Repayment of convertible note payable | (5,000,000 | ) | - | |||||
| Net cash provided by (used in) financing activities | $ | (7,076,945 | ) | $ | 22,655,046 | |||
| Cash and cash equivalents effected by foreign currency | $ | 14,607 | $ | 1,522,990 | ||||
| Net increase in cash and cash equivalents | 2,441,934 | 8,944,047 | ||||||
| Cash and cash equivalents at beginning of period | 37,113,375 | 19,487,159 | ||||||
| Cash and cash equivalents at end of period | $ | 39,555,309 | $ | 28,431,206 | ||||
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For further information, please contact:
Jie Li
Chief Financial Officer
China Automotive Systems
Email: jieli@chl.com.cn
Kevin Theiss
Investor Relations
Grayling
Tel: +1-646-284-9409
Email: kevin.theiss@us.grayling.com
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