China Automotive Systems Reports 2019 First Quarter Results

WUHAN,China,May 9,2019 -- 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 an18.5% 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.Gain on other sales was $1.3million 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 volumeand 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 expensewas $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 decreasein net financial expensewas primarily due to an increase in financial income in the first quarter of 2019.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 SheetAs of March 31,total cash and cash equivalents and pledged cash were $91.7million,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,compared to $285.9million as of December 31,2018.Business OutlookManagement 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.Forward-Looking StatementsThis 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,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.cnKevin Theiss

Investor Relations

+1-212-521-4050

Email: Kevin.Theiss@awakenlab.com-Tables Follow -China Automotive Systems,Inc. and SubsidiariesCondensed Unaudited Consolidated Statements of Operations and Comprehensive Income(In thousands of USD,except share and per share amounts)

ThreeMonthsEndedMarch 31,

2019

2018Net product sales ($12,836and $10,846 sold to related parties for the

three months ended March 31,2019 and 2018)$109,193

$134,018Cost of products sold ($5,504and $8,249purchased from related

parties for the three months ended March 31,2019 and 2018)

95,148

112,379Gross profit

14,045

21,639Gain on other sales

1,269

1,513Less: Operating expenses

Selling expenses

3,085

5,827General and administrative expenses

4,590

4,424Research and development expenses

6,602

8,307Total operating expenses

14,277

18,558Income from operations

1,037

4,594Other income,net

1,407

621Interest expense

(568)

(415)Financial expense,net

(665)

(765)Income before income tax expenses and equity in earnings of affiliated

companies

1,211

4,035Less: Income taxes

198

588Equity in earnings of affiliated companies

211

585Net income

1,224

4,032Net loss attributable to non-controlling interests

(243)

(280)Net income attributable to parent company's common shareholders$1,467

$4,312Comprehensive income:

Net income$1,224

$4,032Other comprehensive income:

Foreign currency translation gain,net of tax

6,363

13,242Comprehensive income

7,587

17,274Comprehensive income attributable to non-controlling interests

214

236Comprehensive 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

$0.14Weighted average number of common shares outstanding

Basic

31,507,487

31,004Diluted

31,297

31,004China Automotive Systems,Inc. and SubsidiariesCondensed Unaudited Consolidated Balance Sheets(In thousands of USD unless otherwise indicated)

March 31,2019

December31,2018ASSETS

Current assets:

Cash and cash equivalents$65,471

$86,346Pledged cash

26,205

29,623Accounts and notes receivable,net - unrelated parties

242,574

237,519Accounts and notes receivable,net - related parties

21,701

18,825Inventories

90,202

88,021Other current assets

34,076

35,094Total current assets

480,229

495,428Non-current assets:

Property,plant and equipment,net

137,033

129,853Long-term investments

33,433

32,620Other non-current assets

34,621

32,598Total assets$685,316

$690,499

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Short-term loans$65,888

$60,952Accounts and notes payable - unrelated parties

187,612

205,643Accounts and notes payable - related parties

5,668

4,477Accrued expenses and other payables

45,897

47,032Other current liabilities

24,181

23,196Total current liabilities

329,246

341,300Long-term liabilities:

Long-term government loan

297

291Other long-term payable

7,977

8,726Long-term tax payable

29,503

29,503Other non-current liabilities

6,221

5,852Total liabilities$373,244

$385,672

Stockholders' equity:

Common stock,$0.0001 par value - Authorized - 80,000,000

shares; Issued - 32,338,302 and 32,302 shares as of March 31,

2019 and December 31,respectively$3

$3Additional paid-in capital

64,429

64,429Retained earnings-

Appropriated

11,104

11,104Unappropriated

212,906

211,439Accumulated other comprehensive income

7,761

1,855Treasury stock - 840,579 and 711,698shares as of March 31,2019

and December 31,respectively

(3,295)

(2,953)Total parent company stockholders' equity

292,908

285,877Non-controlling interests

19,164

18,950Total stockholders' equity

312,072

304,827Total liabilities and stockholders' equity$685,499China Automotive Systems,Inc. and SubsidiariesCondensed Unaudited Consolidated Statements of Cash Flows(In thousands of USD unless otherwise indicated)

Three MonthsEndedMarch 31,

2019

2018Cash flows from operating activities:

Net income$1,032Adjustments 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)

275Inventory write downs

1,112

1,543Deferred income taxes

(84)

33Equity in earnings of affiliated companies

(211)

(585)Gain on fixed assets disposals

-

12Changes in operating assets and liabilities

(Increase)/decrease in:

Accounts and notes receivable

(1,977)

559Inventories

(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

4,988Net cash used in operating activities

(18,214)

(7,502)Cash flows from investing activities:

(Decrease)/increase in other receivables

(249)

647Cash received from property,plant and equipment sales

834

26Payments to acquire property,plant and equipment

(including $760and $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

19,108Cash received from repayment of the loan to a related party

-

20,430Net cash (used in)/provided by investing activities

(10,048)

30,605Cash flows from financing activities:

Proceeds from bank loans

15,275

19,672Repayments 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

3,595Net (decrease)/increase in cash,cash equivalents and

pledged cash

(24,293)

15,333Cash,cash equivalents and pledged cash at beginning of

the period

115,969

96,093Cash,cash equivalents and pledged cash at end of the

period$91,676

$111,426

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