Form 8-K CHINA AUTOMOTIVE SYSTEMS For: May 09

May 9, 2019 6:28 AM EDT

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 8-K

  

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): May 9, 2019

 

China Automotive Systems, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

Delaware 000-33123 33-0885775
(State or other jurisdiction of
incorporation or organization)
(Commission File Number) (I.R.S. Employer
Identification No.)

 

No. 1 Henglong Road, Yu Qiao Development Zone
Shashi District, Jing Zhou City
Hubei Province
The People’s Republic of China
(Address of principal executive offices, including zip code)

 

Registrant’s telephone number, including area code (86) 27-8757 0027

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨Soliciting material pursuant to Rule 14a-12 under the Securities Exchange Act (17 CFR 240.14a-12)

 

¨Pre-commencement communications pursuant to Rule 14d-2(b) under the Securities Exchange Act (17 CFR 240.14d-2(b))

 

¨Pre-commencement communications pursuant to Rule 13e-4(c) under the Securities Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Securities Exchange Act. ¨

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common Stock, $0.0001 par value   CAAS   The Nasdaq Capital Market

 

 

 

 
 

 

Item 2.02Results of Operations and Financial Condition

 

On May 9, 2019, China Automotive Systems, Inc. (the “Company”) issued a press release announcing financial results for the first quarter ended March 31, 2019. The press release is attached as Exhibit 99.1 to this Current Report on Form 8-K.

 

The information in this Item 2.02 and in Exhibit 99.1 attached to this Form 8-K is furnished pursuant to Item 2.02 of Form 8-K and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of that section.

  

Item 9.01Financial Statements and Exhibits

 

  (d) Exhibits

 

Exhibit No Description
   
99.1 Press Release of China Automotive Systems, Inc. dated May 9, 2019.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

  China Automotive Systems, Inc.  
  (Registrant)  
       
Date: May 9, 2019 By: /s/ Hanlin Chen  
    Hanlin Chen  
    Chairman  

  

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Exhibit 99.1

 

 

China Automotive Systems Reports 2019 First Quarter Results

WUHAN, China, May 9, 2019 /PRNewswire/ -- China Automotive Systems, Inc. (NASDAQ: CAAS) ("CAAS" or the "Company"), a leading power steering components and systems supplier in China, today announced its unaudited financial results for the first quarter ended March 31, 2019.

 

First Quarter 2019 Highlights

 

·Net sales decreased 18.5% to $109.2 million from $134.0 million in the first quarter of 2018
·Net sales of electric power steering (“EPS”) products were $22.2 million, a 11.2% decrease year-over-year
·Net income attributable to parent company's common shareholders was $1.5 million, or diluted earnings per share of $0.05, compared to $4.3 million, or diluted earnings per share of $0.14, in the first quarter of 2018
·Total cash and cash equivalents and pledged cash were $91.7 million

 

Mr. Qizhou Wu, chief executive officer of CAAS, commented, "Our sales continue to reflect the challenges in the domestic Chinese market. We continue to invest in other advanced steering technologies to broaden our portfolio of steering products to provide a greater range of solutions for our customers.”

 

First Quarter of 2019

In the first quarter of 2019, net sales were $109.2 million compared to $134.0 million in the same quarter of 2018, reflecting an 18.5% year-over-year decline. The decrease in net sales was mainly due to lower sales volume for legacy products in the domestic and North American passenger markets and the domestic heavy-duty vehicle market, as well as the effect of foreign currency exchange.

 

Gross profit was $14.0 million in the first quarter of 2019 compared with $21.6 million in the first quarter of 2018. The gross margin was 12.8% in the first quarter of 2019 compared to 16.1% in the first quarter of 2018 mainly due to the changes in the product mix.

 

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Gain on other sales was $1.3 million in the first quarter of 2019 compared to $1.5 million in the first quarter of 2018, reflecting lower scrap volume.

 

Selling expenses were $3.1 million in the first quarter of 2019, compared to $5.8 million in the first quarter of 2018. The decrease was primarily due to reduced logistics fees reflecting lower sales volume and the use of lower-price shippers. Selling expenses represented 2.8% of net sales in the first quarter of 2019 compared to 4.3% in the first quarter of 2018.

 

General and administrative expenses ("G&A expenses") were $4.6 million in the first quarter of 2019, compared to $4.4 million in the same quarter of 2018. The increase primarily reflected higher personnel expenses. G&A expenses represented 4.2% of net sales in the first quarter of 2019 and 3.3% in the first quarter of 2018.

 

Research and development expenses ("R&D expenses") were $6.6 million in the first quarter of 2019, compared to $8.3 million in the first quarter of 2018. R&D expenses represented 6.0% of net sales in the first quarter of 2019 compared to 6.2% in the first quarter of 2018. The reduction in R&D expenses was due to increased cost controls.

 

Other income, net was $1.4 million for the three months ended March 31, 2019, compared to other income, net of $0.6 million for the three months ended March 31, 2018, representing an increase of $0.8 million, primarily due to an increase in the unspecific purpose subsidies being recognized in the first quarter of 2019.

 

Income from operations was $1.0 million in the first quarter of 2019, compared to $4.6 million in the same quarter of 2018. The decrease was primarily due to lower gross profit and gross margin.

 

Interest expense was $0.6 million in the first quarter of 2019 compared to $0.4 million in the same quarter of 2018. The increase was due to increased bank borrowings at higher interest rates.

 

Net financial expense was $0.7 million in the first quarter of 2019 compared to net financial income of $0.8 million in the first quarter of 2018. The decrease in net financial expense was primarily due to an increase in financial income in the first quarter of 2019.

 

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Income before income tax expenses and equity in earnings of affiliated companies was $1.2 million in the first quarter of 2019, compared to $4.0 million in the first quarter of 2018. The decrease in income before income tax expenses and equity in earnings of affiliated companies was mainly due to lower income from operations.

 

Net income attributable to parent company's common shareholders was $1.5 million in the first quarter of 2019, compared to $4.3 million in the first quarter of 2018. Diluted earnings per share were $0.05 per share in the first quarter of 2019, compared to $0.14 in the first quarter of 2018.

 

The weighted average number of diluted common shares outstanding was 31,513,297 in the first quarter of 2019, compared to 31,644,044 in the first quarter of 2018.

 

Balance Sheet

 

As of March 31, 2019, total cash and cash equivalents and pledged cash were $91.7 million, total accounts receivable including notes receivable were $264.3 million, accounts payable were $193.3 million and short-term bank and government loans were $65.9 million. Total parent company stockholders' equity was $292.9 million as of March 31, 2019, compared to $285.9 million as of December 31, 2018.

 

Business Outlook

 

Management reiterates its revenue guidance for the full year 2019 of US$510 million. This target is based on the Company's current views on operating and market conditions, which are subject to change.

 

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 6 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.

 

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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 28, 2019, 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

+1-212-521-4050

Email: Kevin.Theiss@awakenlab.com

 

-Tables Follow -

 

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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 March 31, 
   2019   2018 
Net product sales ($12,836 and $10,846 sold to related parties for the three months ended March 31, 2019 and 2018)  $109,193   $134,018 
Cost of products sold ($5,504 and $8,249 purchased from related parties for the three months ended March 31, 2019 and 2018)   95,148    112,379 
Gross profit   14,045    21,639 
Gain on other sales   1,269    1,513 
Less: Operating expenses          
Selling expenses   3,085    5,827 
General and administrative expenses   4,590    4,424 
Research and development expenses   6,602    8,307 
Total operating expenses   14,277    18,558 
Income from operations   1,037    4,594 
Other income, net   1,407    621 
Interest expense   (568)   (415)
Financial expense, net   (665)   (765)
Income before income tax expenses and equity in earnings of affiliated companies   1,211    4,035 
Less: Income taxes   198    588 
Equity in earnings of affiliated companies   211    585 
Net income   1,224    4,032 
Net loss attributable to non-controlling interests   (243)   (280)

Net income attributable to parent company’s

common shareholders

  $1,467   $4,312 
Comprehensive income:          
Net income  $1,224   $4,032 
Other comprehensive income:          
Foreign currency translation gain, net of tax   6,363    13,242 
Comprehensive income   7,587    17,274 
Comprehensive income attributable to non-controlling interests   214    236 
Comprehensive income attributable to parent company  $7,373   $17,038 
           
Net income attributable to parent company’s common shareholders per share          
           
Basic –  $0.05   $0.14 
           
Diluted-  $0.05   $0.14 
Weighted average number of common shares outstanding          
Basic   31,507,487    31,644,004 
Diluted   31,513,297    31,644,004 

   

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China Automotive Systems, Inc. and Subsidiaries

Condensed Unaudited Consolidated Balance Sheets

(In thousands of USD unless otherwise indicated)

 

   March 31, 2019   December 31, 2018 
ASSETS          
Current assets:          
Cash and cash equivalents  $65,471   $86,346 
Pledged cash   26,205    29,623 
Accounts and notes receivable, net - unrelated parties   242,574    237,519 
Accounts and notes receivable, net - related parties   21,701    18,825 
Inventories   90,202    88,021 
Other current assets   34,076    35,094 
Total current assets   480,229    495,428 
Non-current assets:          
Property, plant and equipment, net   137,033    129,853 
Long-term investments   33,433    32,620 
Other non-current assets   34,621    32,598 
Total assets  $685,316   $690,499 
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
Current liabilities:          
Short-term loans  $65,888   $60,952 
Accounts and notes payable - unrelated parties   187,612    205,643 
Accounts and notes payable - related parties   5,668    4,477 
Accrued expenses and other payables   45,897    47,032 
Other current liabilities   24,181    23,196 
Total current liabilities   329,246    341,300 
Long-term liabilities:          
Long-term government loan   297    291 
Other long-term payable   7,977    8,726 
Long-term tax payable   29,503    29,503 
Other non-current liabilities   6,221    5,852 
Total liabilities  $373,244   $385,672 
           
Stockholders’ equity:          
Common stock, $0.0001 par value - Authorized - 80,000,000 shares; Issued - 32,338,302 and 32,338,302 shares as of March 31, 2019 and December 31, 2018, respectively  $3   $3 
Additional paid-in capital   64,429    64,429 
Retained earnings-          
Appropriated   11,104    11,104 
Unappropriated   212,906    211,439 
Accumulated other comprehensive income   7,761    1,855 
Treasury stock - 840,579 and 711,698 shares as of March 31, 2019 and December 31, 2018, respectively   (3,295)   (2,953)
Total parent company stockholders' equity   292,908    285,877 
Non-controlling interests   19,164    18,950 
Total stockholders' equity   312,072    304,827 
Total liabilities and stockholders' equity  $685,316   $690,499 

 

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China Automotive Systems, Inc. and Subsidiaries

Condensed Unaudited Consolidated Statements of Cash Flows

(In thousands of USD unless otherwise indicated)

 

   Three Months Ended March 31, 
   2019   2018 
Cash flows from operating activities:          
Net income  $1,224   $4,032 
Adjustments to reconcile net income from operations to net cash provided by operating activities:          
Depreciation and amortization   3,987    4,342 
(Reversal)/accrual of provision for doubtful accounts   (355)   275 
Inventory write downs   1,112    1,543 
Deferred income taxes   (84)   33 
Equity in earnings of affiliated companies   (211)   (585)
Gain on fixed assets disposals   -    12 
Changes in operating assets and liabilities          
(Increase)/decrease in:          
Accounts and notes receivable   (1,977)   559 
Inventories   (1,233)   (6,592)
Other current assets   2,387    (128)
Increase/(decrease) in:          
Accounts and notes payable   (21,299)   (11,950)
Accrued expenses and other payables   (2,208)   (4,031)
Other current liabilities   443    4,988 
Net cash used in operating activities   (18,214)   (7,502)
Cash flows from investing activities:          
(Decrease)/increase in other receivables   (249)   647 
Cash received from property, plant and equipment sales   834    26 
Payments to acquire property, plant and equipment (including $760 and $5,224 paid to related parties for the three months ended March 31, 2019 and 2018, respectively)   (8,777)   (8,192)
Payments to acquire intangible assets   (1,194)   - 
Purchase of short-term investments   (15,563)   (1,414)
Proceeds from maturities of short-term investments   14,901    19,108 
Cash received from repayment of the loan to a related party   -    20,430 
Net cash (used in)/provided by investing activities   (10,048)   30,605 
Cash flows from financing activities:          
Proceeds from bank loans   15,275    19,672 
Repayments of bank loans   (11,881)   (31,037)
Repayments of the borrowing for sale and leaseback transaction   (1,063)   - 
Repurchase of common shares   (342)   - 
Net cash provided by/(used in) financing activities   1,989    (11,365)
Effects of exchange rate on cash, cash equivalents and pledged cash   1,980    3,595 
Net (decrease)/increase in cash, cash equivalents and pledged cash   (24,293)   15,333 
Cash, cash equivalents and pledged cash at beginning of the period   115,969    96,093 
Cash, cash equivalents and pledged cash at end of the period  $91,676   $111,426 

 

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