China Automotive Systems Reports 2018 Second Quarter Unaudited Financial Results

WUHAN,China,Aug. 9,2018 -- 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 second quarter and six months ended June 30,2018.

Second Quarter 2018 Highlights

Net sales increased 6.9% to $125.8 million from $117.7 million in the second quarter of 2017;

Gross profit declined 29.3% to $17.0 million and the gross margin decreased to 13.5% from 20.4% in the second quarter of 2017;

Income from operations decreased to $0.6 million with an operating margin of 0.5% compared with 9.4% in the second quarter of 2017;

Net income attributable to parent company's common shareholders declined to $0.8 million,or diluted earnings per share of $0.03,compared to net income attributable to parent company's common shareholders of $8.9 million,or diluted earnings per share of $0.28,in the second quarter of 2017.

First Six Months of 2018 Highlights

Net sales grew 9.6% to $259.8 million,compared to $237.0 million in the first six months of 2017;

Gross profit decreased to $38.7 million,compared to $45.7 million in the first six months of 2017; gross margin decreased to 14.9% in the first six months of 2018,compared to 19.3% in the first six months of 2017;

Income from operations decreased to $5.2 million from $18.3 million with an operating margin of 2.0% compared with 7.7% in the second quarter of 2017;

Net income attributable to parent company's common shareholders was $5.2 million from $14.6 million in the first six months of 2017; diluted earnings per share attributable to parent company's common shareholders was $0.16,compared to diluted earnings per share attributable to parent company's common shareholders of $0.46 in the first six months of 2017;

Net cashflow used in operating activities was $5.4 million compared with net cashflow provided of $22.1 million in the first six months of 2017.

Mr. Qizhou Wu,chief executive officer of CAAS,commented,"Our sales in the second quarter of 2018 reflect higher sales of our traditional steering products. We continue to invest more resources to develop new generations of electric power steering ("EPS") products and other advanced steering products for future growth."

Mr. Jie Li,chief financial officer of CAAS,"We continue to enhance our financialresources while we build advanced steering products to offer a broader line of steering products to meet the changing requirements of our customers."

Second Quarter of 2018

In the second quarter of 2018,net sales increased 6.9% to $125.8 million,compared to $117.7 million in the same quarter of 2017. Net sales of traditional steering products grew by 8.5% and the Company sold more products to its North American customers. Sales of electric power steering ("EPS") represented 21.4% of total net sales.

Gross profit decreased to $17.0 million in the second quarter of 2018,compared to $24.1 million in the second quarter of 2017. The gross margin was 13.5% in the second quarter of 2018,versus 20.4% in the second quarter of 2017. The gross margin decreased mainly due to a lower sales price,higher unit cost and the change in product mix.

Gain on other sales was $1.0 million in the second quarter of 2018,compared to $4.6 million in the second quarter of 2017. The decrease was due to the fact that during the second quarter of 2017,the Company disposed of a building located in Jingzhou and recognized a gain of $2.2 million.

Selling expenses were $4.9 million in the second quarter of 2018,compared to $4.6 million in the second quarter of 2017. The increase was mainly due to higher logistics expenses related to increased sales during the quarter. Selling expenses represented 3.9% of net sales in the second quarter of 2018 and in the second quarter of 2017.

General and administrative expenses ("G&A expenses") were $4.4 million in the second quarter of 2018 compared to $5.3 million in the second quarter of 2017. G&A expenses represented 3.5% of net sales in the second quarter of 2018 compared to 4.5% in the second quarter of 2017. The decrease was mainly due to a lower allowance for doubtful accounts.

Research and development expenses ("R&D expenses") increased 5.2% to $8.1 million in the second quarter of 2018,compared to $7.7 million in the second quarter of 2017. R&D expenses continue to focus on the development of the Company's EPS and other new products. R&D expenses represented 6.4% of sales in the second quarter of 2018,compared with 6.6% in the 2017 second quarter.

Net financial income in the second quarter of 2018 was $0.9 million compared with $0.6 million in the second quarter of 2017.

Income from operations was $0.6 million in the second quarter of 2018,compared to $11.1 million in the same quarter of 2017. The decrease was primarily due to lower gross profit and lower gain on other sales. As a percentage of net sales,the operating margin was 0.5% in the second quarter of 2018,compared to 9.4% in the second quarter of 2017.

Income before income tax expenses and equity in earnings of affiliated companies was $1.3 million in the second quarter of 2018,compared to $11.1 million in the second quarter of 2017.

Net income attributable to parent company's common shareholders was $0.8 million in the second quarter of 2018,compared to net income attributable to parent company's common shareholders of $8.9 million in the corresponding quarter of 2017. Diluted earnings per share were $0.03 in the second quarter of 2018,compared to diluted earnings per share of $0.28 in the second quarter of 2017. The weighted average number of diluted common shares outstanding was 31,647,305 in the second quarter of 2018,compared to 31,649,322 in the second quarter of 2017.

First Six Months of 2018

Net sales increased 9.6% to $259.8 million in the first six months of 2018,compared to $237.0 million in the first six months of 2017. Six-month gross profit was $38.7 million,compared to $45.7 million in the corresponding period last year. Six-month gross margin was 14.9% in the first six months of 2018 compared to 19.3% in the corresponding period in 2017. The gain on other sales was $2.5 million in the first six months of 2018 compared with $5.3 million in the corresponding period last year. Income from operations was $5.2 million in the first six months of 2018,compared to $18.3 million in the first six months of 2017. Operating margin was 2.0% in the first six months of 2018,compared to 7.7% in the corresponding period of 2017.

Net income attributable to parent company's common shareholders was $5.2 million in the first six months of 2018,compared to $14.6 million in the corresponding period in 2017. Diluted earnings per share were $0.16 in the first six months of 2018,compared to diluted earnings per share of $0.46 in the corresponding period of 2017.

As of June 30,2018,cash and equivalents,pledged cash and short-term investments were $112.4 million. Total accounts receivable including notes receivable were $283.6 million. Accounts payable were $219.4 million and short-term loans were $57.1 million. Total parent company stockholders' equity was $306.4 million as of June 30,compared to $306.1 million as of December 31,2017.

Net cash used in operating activities was $5.4 million in the first six months of 2018 compared with net cash provided by operating activities of $22.1 million in the first six months of 2017. Payments to acquire property,plant and equipment were $17.3 million compared with $10.2 million in the first six months of 2017.

Business Outlook

Management reiterated its revenue guidance for the full year 2018 of US$520 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 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 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.

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 29,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

+1-212-521-4050

kevin.theiss@awakenlab.com

(Tables Follow)

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)

ThreeMonthsEndedJune 30,

2018

2017

Net product sales ($10,856 and $8,583 sold to related parties for the three months

ended June 30,2018 and 2017)

$

125,782

$

117,660

Cost of products sold ($7,428 and $6,283 purchased from related parties for the

three months ended June 30,2018 and 2017)

108,761

93,599

Gross profit

17,021

24,061

Gain on other sales

977

4,555

Less: Operating expenses

Selling expenses

4,887

4,555

General and administrative expenses

4,442

5,283

Research and development expenses

8,085

7,707

Total operating expenses

17,414

17,545

Income from operations

584

11,071

Other income

600

152

Interest expense

(801)

(644)

Financial income,net

897

550

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

1,280

11,129

Less: Income taxes

202

2,186

Equity in losses of affiliated companies

(82)

(62)

Net income

996

8,881

Net income/(loss) attributable to non-controlling interests

149

(40)

Net income attributable to parent company's common shareholders

$

847

$

8,921

Comprehensive income:

Net income

$

996

$

8,881

Other comprehensive income:

Foreign currency translation (loss)/gain,net of tax

(17,467)

5,814

Comprehensive (loss)/income

(16,471)

14,695

Comprehensive (loss)/income attributable to non-controlling interests

(431)

155

Comprehensive (loss)/income attributable to parent company

$

(16,040)

$

14,540

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

Basic –

$

0.03

$

0.28

Diluted-

$

0.03

$

0.28

Weighted average number of common shares outstanding

Basic

31,644,004

31,004

Diluted

31,305

31,322

China Automotive Systems,except share and per share amounts)

Six MonthsEndedJune 30,

2018

2017

Net product sales ($21,702 and $18,121 sold to related parties for the six months

ended June 30,2018 and 2017)

$

259,800

$

236,968

Cost of products sold ($15,677 and $13,646 purchased from related parties for the six

months ended June 30,2018 and 2017)

221,140

191,278

Gross profit

38,660

45,690

Gain on other sales

2,490

5,343

Less: Operating expenses

Selling expenses

10,714

8,623

General and administrative expenses

8,866

9,637

Research and development expenses

16,392

14,472

Total operating expenses

35,972

32,732

Income from operations

5,178

18,301

Other income/(expense),net

1,221

(102)

Interest expense

(1,216)

(875)

Financial income,net

132

882

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

5,315

18,206

Less: Income taxes

790

3,376

Equity in earnings/(losses) of affiliated companies

503

(11)

Net income

5,028

14,819

Net (loss)/income attributable to non-controlling interests

(131)

184

Net income attributable to parent company's common shareholders

$

5,159

$

14,635

Comprehensive income:

Net income

$

5,028

$

14,819

Other comprehensive income:

Foreign currency translation (loss)/gain,net of tax

(4,225)

7,443

Comprehensive income

803

22,262

Comprehensive (loss)/gain attributable to non-controlling interests

(195)

433

Comprehensive income attributable to parent company

$

998

$

21,829

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

Basic –

$

0.16

$

0.46

Diluted-

$

0.16

$

0.46

Weighted average number of common shares outstanding

Basic

31,645,655

31,615

China Automotive Systems,Inc. and Subsidiaries

Condensed Unaudited Consolidated Balance Sheets

(In thousands of USD unless otherwise indicated)

June 30,2018

December31,2017

ASSETS

Current assets:

Cash and cash equivalents

$

58,682

$

64,558

Pledged cash

26,803

31,535

Short-term investments

26,902

29,587

Accounts and notes receivable,net - unrelated parties

262,733

274,989

Accounts and notes receivable,net - related parties

20,826

19,086

Advance payments and others - unrelated parties

12,464

12,790

Advance payments and others - related parties

1,006

20,841

Inventories

90,594

79,217

Total current assets

500,010

532,603

Non-current assets:

Property,plant and equipment,net

131,100

126,033

Intangible assets,net

549

661

Other receivables,net - unrelated parties

945

2,188

Advance payment for property,plant and equipment - unrelated parties

6,971

9,657

Advance payment for property,plant and equipment - related parties

6,672

5,264

Long-term investments

33,479

27,596

Deferred tax assets

13,270

13,367

Total assets

$

692,996

$

717,369

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Short-term loans

$

57,073

$

72,711

Accounts and notes payable - unrelated parties

212,436

233,048

Accounts and notes payable - related parties

6,913

7,168

Customer deposits

762

1,128

Accrued payroll and related costs

7,372

8,577

Accrued expenses and other payables

41,499

40,127

Accrued pension costs

3,876

4,051

Taxes payable

10,408

5,927

Amounts due to shareholders/directors

336

343

Advances payable (current portion)

378

383

Total current liabilities

341,053

373,463

Long-term liabilities:

Long-term loans

302

306

Advances payable

355

359

Other long-term payable

10,843

-

Long-term tax payable

29,874

32,719

Deferred tax liabilities

4,175

4,393

Total liabilities

$

386,602

$

411,240

Stockholders' equity:

Common stock,$0.0001 par value - Authorized - 80,000,000 shares; Issued

– 32,338,302 and 32,302 shares as of June 30,2018 and December 31,

2017,respectively

$

3

$

3

Additional paid-in capital

64,406

64,406

Retained earnings-

Appropriated

10,830

10,707

Unappropriated

214,495

209,459

Accumulated other comprehensive income

13,619

17,780

Treasury stock – 694,298 and 694,298 shares as of June 30,2018 and

December 31,2017,respectively

(2,907)

(2,907)

Total parent company stockholders' equity

300,446

299,448

Non-controlling interests

5,948

6,681

Total stockholders' equity

306,394

306,129

Total liabilities and stockholders' equity

$

692,369

China Automotive Systems,Inc. and Subsidiaries

Condensed Unaudited Consolidated Statements of Cash Flows

(In thousands of USD unless otherwise indicated)

Six MonthsEndedJune 30,

2018

2017

Cash flows from operating activities:

Net income

$

5,819

Adjustments to reconcile net income from operations to net cash provided by

operating activities:

Depreciation and amortization

8,837

7,809

Increase in provision for doubtful accounts

242

1,008

Inventory write downs

3,456

2,101

Deferred income taxes

(231)

971

Equity in earnings/(losses) of affiliated companies

(503)

11

Loss/(gain) on fixed assets disposals

9

(2,202)

Changes in operating assets and liabilities

(Increase)/decrease in:

Accounts and notes receivable

6,644

6,570

Advance payments and others

(1,374)

1,241

Inventories

(16,062)

2,104

Increase/(decrease) in:

Accounts and notes payable

(15,574)

(2,932)

Customer deposits

(345)

(7)

Accrued payroll and related costs

(1,153)

(2)

Accrued expenses and other payables

2,245

(3,028)

Accrued pension costs

(96)

(307)

Taxes payable

3,484

(6,069)

Net cash (used)/provided by operating activities

(5,393)

22,087

Cash flows from investing activities:

Increase in other receivables

1,190

137

Cash received from property,plant and equipment sales

199

2,334

Payments to acquire property,plant and equipment (including $5,694 and $3,497

paid to related parties for the six months ended June 30,2018 and 2017,

respectively)

(17,299)

(10,178)

Purchase of short-term investments

(18,502)

(8,069)

Purchase of long-term time deposit

-

(5,836)

Proceeds from maturities of short-term investments

21,687

11,923

Investment under equity method

(5,957)

(730)

Cash received for related party loan repayment

20,430

-

Loan to a related party

-

(29,044)

Net cash provided/(used) in investing activities

1,748

(39,463)

Cash flows from financing activities:

Proceeds from bank loans

19,672

59,088

Repayments of bank loans

(35,664)

(34,128)

Proceeds from sale and leaseback transaction

11,758

-

Repayments of the borrowing for sale and leaseback transaction

(1,125)

-

Net cash (used)/provided by financing activities

(5,359)

24,960

Effects of exchange rate on cash,cash equivalents and pledged cash

(1,604)

1,466

Net (decrease)/increase in cash,cash equivalents and pledged cash

(10,608)

9,050

Cash,cash equivalents and pledged cash at beginning of period

96,093

61,891

Cash,cash equivalents and pledged cash at end of period

$

85,485

$

70,941

China Automotive Systems,Inc. and Subsidiaries

Condensed Unaudited Consolidated Statements of Cash Flows (continued)

(In thousands of USD unless otherwise indicated)

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Six monthsEndedJune 30,

2018

2017

Cash paid for interest

$

432

$

354

Cash paid for income taxes

637

4,172

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

Six monthsEndedJune 30,

2018

2017

Property,plant and equipment recorded during the period which previously were

advance payments

$

5,419

$

10,310

Accounts payable for acquiring property,plant and equipment

107

709

Dividends payable to non-controlling interests

538

608

View original content:/news-releases/china-automotive-systems-reports-2018-second-quarter-unaudited-financial-results-300694539.html