Core Viewpoint - China Automotive Systems, Inc. reported a mixed performance in the first quarter of 2024, with a slight decline in net sales but improvements in gross profit, income from operations, and net cash flow from operating activities [2][3][4]. Financial Performance - Net sales decreased by 2.0% to $139.4 million in Q1 2024, down from $142.2 million in Q1 2023 [4]. - Gross profit increased by 11.6% to $24.1 million, with a gross margin of 17.3%, compared to a gross profit of $21.6 million and a margin of 15.2% in Q1 2023 [2][5]. - Income from operations rose by 26.0% to $9.7 million, compared to $7.7 million in the same period last year [2][7]. - Diluted income per share increased by 17.4% to $0.27, up from $0.23 in Q1 2023 [2][9]. - Cash, cash equivalents, and short-term investments totaled $135.8 million as of March 31, 2024 [2][10]. Sales Breakdown - Net sales of traditional steering products were $92.0 million, down from $94.4 million in Q1 2023 [4]. - Net sales of electric power steering (EPS) products were $47.4 million, slightly down from $47.8 million in the same period last year, representing approximately 34.0% of total net sales [4][3]. - North American net export sales decreased by 12.4% year-over-year to $30.4 million, primarily due to lower demand from Stellantis N.V. [4][3]. - Sales in Brazil increased by 17.6% year-over-year to $12.7 million, driven by higher sales to Fiat [4][3]. Expense Management - Selling expenses increased by 20.6% to $4.1 million, primarily due to higher office expenses, representing 2.9% of net sales [5][6]. - General and administrative expenses rose to $5.5 million from $4.8 million, accounting for 3.9% of net sales [6]. - Research and development expenses decreased by 17.2% to $5.3 million, representing 3.8% of net sales [6]. Income and Taxation - Income before income tax expenses increased by 37.2% to $11.8 million compared to $8.6 million in Q1 2023 [8]. - Income tax expense was $1.7 million for Q1 2024, up from $0.8 million in Q1 2023, mainly due to an increase in GILTI tax expenses [9]. Balance Sheet and Cash Flow - Total accounts receivable were $266.7 million, and accounts payable were $243.0 million as of March 31, 2024 [10]. - Working capital rose to $206.7 million from $180.3 million as of December 31, 2023 [10]. - Net cash provided by operating activities was $10.5 million in Q1 2024, compared to a net cash used of $1.4 million in Q1 2023 [2][10]. Business Outlook - The company reiterated its revenue guidance for the full fiscal year 2024 at $605.0 million, based on current operating and market conditions [11].

WUHAN, China, May 7, 2024 /PRNewswire/ -- China Automotive Systems, Inc. (Nasdaq: CAAS) ("CAAS" or the "Company"), a leading power steering components and systems supplier in China, today announced that it will issue unaudited financial results for the first quarter ended March 31, 2024, on Tuesday,  May 14, 2024, before the market opens.  Management will conduct a conference call on May 14th at 8:00 A.M. EDT/8:00 P.M. Beijing Time to discuss these results.  A question and answer session will follow managem ...

China Automotive Systems, Inc. (NASDAQ:CAAS) Q4 2023 Earnings Conference Call March 28, 2024 8:00 AM ET Company Participants Kevin Theiss - IR Jie Li - CFO Conference Call Participants Operator Greetings. Welcome to the China Automotive Systems Fourth Quarter and Fiscal Year 2023 Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. I will now turn th ...

Exhibit 99.1 China Automotive Systems Reports Record Annual Revenue, and a 81.2% Increase in Diluted Net Income Per Share to $1.25 in Fiscal Year 2023 - Electric Power Steering ("EPS") Sales Increased by 24.6% in 2023 - WUHAN, China, March 28, 2024 -- 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 fourth quarter and the audited results for the fiscal year ended ...

PART I [Item 1. Business](index=4&type=section&id=Item%201.%20Business.) CAAS manufactures and sells power steering systems and related automotive parts through its subsidiaries in China and Brazil, serving over sixty OEMs - CAAS is a Delaware holding company primarily manufacturing power steering systems and related automotive parts in **China and Brazil**[6](index=6&type=chunk)[8](index=8&type=chunk)[24](index=24&type=chunk) - The company serves over **sixty vehicle manufacturers**, including major Chinese and international OEMs[22](index=22&type=chunk) - CAAS's strategic plan emphasizes **market expansion, brand recognition, quality control, cost efficiency, R&D, and strategic acquisitions**[43](index=43&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk) Top 5 Customers by Percentage of Total Revenue (2023) | Name of Major Customers | Percentage of Total Revenue in 2023 (%) | | :------------------------------ | :---------------------------------- | | Stellantis N.V. | 17.2 | | BYD Auto Co., Ltd. | 6.4 | | Hubei Hongrun Intelligent System Co., Ltd. | 6.1 | | Mahindra & Mahindra Ltd | 5.5 | | Chery Automobile Co.,Ltd. | 5.2 | - R&D expenditures were **$29.2 million in 2023**, with newly developed products accounting for **33.8% of total sales**[60](index=60&type=chunk) Chinese Automobile Industry Output and Sales Volume Growth (2023 vs. 2022) | Category | Output Growth (YoY, %) | Sales Volume Growth (YoY, %) | | :----------------- | :------------------ | :------------------------ | | Passenger Vehicles | 9.7 | 10.6 | | Commercial Vehicles| 25.0 | 21.2 | Sales and Total Assets by Geographic Region (2023) | Geographic Region | Net Sales (2023, %) | Long-term Assets (2023, %) | | :------------------ | :--------------- | :---------------------- | | China | 65.1 | 98.7 | | United States | 19.3 | 0.5 | | Other Foreign Countries | 15.6 | 0.8 | | Total Consolidated | 100.0 | 100.0 | [Item 1A. Risk Factors](index=21&type=section&id=Item%201A.%20Risk%20Factors.) The company faces significant risks from the automotive industry's cyclical nature, rising costs, intense competition, customer dependence, and China's evolving regulatory environment - The automotive industry's **cyclical nature, increasing raw material costs, and intense competition** pose significant business risks[72](index=72&type=chunk)[73](index=73&type=chunk)[74](index=74&type=chunk)[75](index=75&type=chunk)[79](index=79&type=chunk)[81](index=81&type=chunk) - Dependence on **few large customers** (top 5 accounted for **40.4% of 2023 sales**) and **OEM pricing pressure** can materially affect operations[83](index=83&type=chunk)[84](index=84&type=chunk) - Operating in China involves risks from **government intervention, evolving regulatory policies, and legal system uncertainties**[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk)[121](index=121&type=chunk)[122](index=122&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk)[136](index=136&type=chunk)[137](index=137&type=chunk)[142](index=142&type=chunk)[143](index=143&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk)[172](index=172&type=chunk)[173](index=173&type=chunk)[181](index=181&type=chunk)[182](index=182&type=chunk)[184](index=184&type=chunk)[185](index=185&type=chunk) - The company is exposed to **foreign currency exchange rate fluctuations**, particularly between USD and RMB, impacting operating margins[127](index=127&type=chunk)[128](index=128&type=chunk)[133](index=133&type=chunk)[134](index=134&type=chunk)[135](index=135&type=chunk) - PCAOB's ability to inspect the company's auditor in China was resolved in December 2022, but future inability could lead to **delisting from Nasdaq**[23](index=23&type=chunk)[144](index=144&type=chunk)[145](index=145&type=chunk)[146](index=146&type=chunk)[147](index=147&type=chunk)[148](index=148&type=chunk) [Item 1B. Unresolved Staff Comments](index=49&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments.) This section confirms the absence of any unresolved staff comments applicable to the company [Item 1C. Cybersecurity](index=49&type=section&id=Item%201C.%20Cybersecurity) The company maintains robust cybersecurity policies, conducts periodic assessments, and reports no material incidents in 2023, with board oversight - The company has established policies and processes for assessing, identifying, and managing material cybersecurity risks, including **periodic assessments and employee training**[194](index=194&type=chunk)[195](index=195&type=chunk) - The **board of directors** oversees strategic cybersecurity risk, with regular briefings from CEO and executive management[197](index=197&type=chunk) - No cybersecurity incidents materially affected the company's business, strategy, operations, or financial condition in **2023**[196](index=196&type=chunk) [Item 2. Properties](index=51&type=section&id=Item%202.%20Properties.) The company's headquarters are in Jingzhou City, PRC, operating numerous manufacturing facilities across China with a total area of 661,526 square meters - The company's headquarters are in **Jingzhou City, Hubei Province, PRC**[198](index=198&type=chunk) Summary of Manufacturing Facilities (as of December 31, 2023) | Name of Entity | Product | Total Area (sq.m.) | Building Area (sq.m.) | Original Cost of Equipment ($ thousands) | | :------------- | :------------------------ | :----------------- | :-------------------- | :----------------------------- | | Henglong | Automotive Parts | 97,818 | 20,226 | 64,293 | | Jiulong | Power Steering Gear | 39,478 | 24,734 | 44,802 | | Shenyang | Automotive Steering Gear | 35,354 | 18,041 | 8,865 | | Chongqing | Power Steering Gear | 57,849 | 22,812 | 3,544 | | Jielong | Electric Power Steering | — | — | 7,449 | | Wuhan Chuguanjie | Electric Power Steering | 53,675 | 44,054 | 5,472 | | Henglong KYB | Automotive Steering Gear | — | — | 16,121 | | Hubei Henglong | Automotive Steering Gear | 280,254 | 78,833 | 92,493 | | Wuhu | Automotive Steering Gear | 83,705 | 27,288 | 7,550 | | Wuhu Hongrun | High Polymer Materials | — | — | 1,158 | | Total | | 661,526 | 249,695 | 251,747 | - **Jielong, Henglong KYB, and Wuhu Hongrun** rent their buildings from other subsidiaries[199](index=199&type=chunk) [Item 3. Legal Proceedings](index=51&type=section&id=Item%203.%20Legal%20Proceedings.) The company is not involved in any pending or threatened legal proceedings, nor are its directors or officers - The company is not a party to any **pending or threatened legal proceedings**[201](index=201&type=chunk) - No director, officer, affiliate, or major security holder is a party adverse to the company in pending litigation[201](index=201&type=chunk) [Item 4. Mine Safety Disclosures](index=51&type=section&id=Item%204.%20Mine%20Safety%20Disclosures.) This item is not applicable to the company's operations PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=52&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities.) The company's common stock trades on Nasdaq under 'CAAS,' with 32.3 million shares outstanding, and does not anticipate paying cash dividends - The company's common stock trades on the **Nasdaq Capital Market** under the symbol **"CAAS"**[203](index=203&type=chunk) - As of December 31, 2023, **32,338,302 common shares** were outstanding with approximately **60 stockholders of record**[206](index=206&type=chunk) Share Repurchase Program Activity | Year Ended December 31 | Shares Repurchased | Cash Consideration ($ thousands) | | :--------------------- | :----------------- | :--------------------- | | 2023 | 0 | 0 | | 2022 | 322,269 | N/A | - The company does not anticipate paying **cash dividends** in the foreseeable future, retaining earnings for operations and expansion[207](index=207&type=chunk) Securities Authorized for Issuance Under Equity Compensation Plans (as of December 31, 2023) | Plan Category | Number of securities to be issued upon exercise of outstanding options (shares) | Weighted average exercise price of outstanding options ($) | Number of securities remaining available for future issuance (shares) | | :------------------------------------------ | :------------------------------------------------------------------- | :--------------------------------------------------------- | :----------------------------------------------------------- | | Equity compensation plans approved by security holders | 2,200,000 | 6.26 | 1,541,150 | [Item 6. [Reserved]](index=52&type=section&id=Item%206.%20%5BReserved%5D.) This item is reserved and contains no information [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=54&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) Net income increased by 77.8% to $37.7 million in 2023, driven by 8.8% sales growth and improved gross margin, while operating cash flow decreased Selected Financial Highlights (2023 vs. 2022, in thousands of USD) | Metric | 2023 | 2022 | Change | Change % | | :---------------------------------------------- | :--------- | :--------- | :--------- | :------- | | Net product sales | $576,354 | $529,551 | $46,803 | 8.8 | | Cost of products sold | 472,603 | 446,157 | 26,446 | 5.9 | | Net gain on other sales | 5,788 | 3,696 | 2,092 | 56.6 | | Selling expenses | 15,610 | 16,910 | (1,300) | (7.7) | | General and administrative expenses | 25,503 | 26,120 | (617) | (2.4) | | Research and development expenses | 29,181 | 36,109 | (6,928) | (19.2) | | Other income, net | 5,345 | 5,782 | (437) | (7.6) | | Interest expense | 1,021 | 1,450 | (429) | (29.6) | | Financial income, net | (4,666) | (10,753) | 6,087 | (56.6) | | Income taxes | 5,137 | 3,082 | 2,055 | 66.7 | | Net income | 42,738 | 22,343 | 20,395 | 91.3 | | Net income attributable to non-controlling interest | 5,050 | 1,132 | 3,918 | 346.1 | | Net income attributable to parent company's common shareholders | 37,658 | 21,181 | 16,447 | 77.8 | - Net product sales increased by **8.8% to $576.4 million** in 2023, primarily from a **24.6% increase in Electric Power Steering (EPS) sales**[215](index=215&type=chunk)[216](index=216&type=chunk) - Gross margin improved to **18.0% in 2023** from 15.7% in 2022, driven by a favorable product mix[231](index=231&type=chunk) Cash Flow Summary (2023 vs. 2022, in thousands of USD) | Cash Flow Activity | 2023 | 2022 | Change | | :---------------------- | :--------- | :--------- | :--------- | | Operating Activities | $19,906 | $48,023 | $(28,117) | | Investing Activities | $(28,637) | $(32,740) | $4,103 | | Financing Activities | $6,798 | $(1,583) | $8,381 | - Cash, cash equivalents, and short-term investments totaled **$125.7 million** as of December 31, 2023, a **decrease of $8.4 million**[243](index=243&type=chunk) - Working capital increased by **$23.8 million (15.2%) to $180.3 million** as of December 31, 2023[244](index=244&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures about Market Risk](index=74&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk.) The company faces market risks from foreign currency and interest rate fluctuations, with credit risk concentrated in trade accounts receivable - The company's primary market risks are **foreign currency exchange rate fluctuations** (RMB vs. USD) and **interest rate changes**[284](index=284&type=chunk)[285](index=285&type=chunk) - A price negotiation mechanism with international customers mitigates currency exchange rate risk if fluctuations exceed **8%**[287](index=287&type=chunk) - Credit risk is concentrated in trade accounts receivable, with **Stellantis N.V. accounting for 17.2% of 2023 consolidated revenues**, mitigated by long-term relationships[288](index=288&type=chunk)[435](index=435&type=chunk) - Interest rate risk stems from **credit facility borrowings**, with outstanding indebtedness subject to fluctuations[289](index=289&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=75&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data.) This section references the full consolidated financial statements and supplementary quarterly data, showing fluctuating net sales and income - The financial statements required by this item begin on **page 61** (original document)[290](index=290&type=chunk) Quarterly Results of Operations (2023 vs. 2022, in thousands of USD, except per share amounts) | Metric | 2023 First | 2022 First | 2023 Second | 2022 Second | 2023 Third | 2022 Third | 2023 Fourth | 2022 Fourth | | :------------------------------------------------------------------ | :--------- | :--------- | :---------- | :---------- | :--------- | :--------- | :---------- | :---------- | | Net sales | $142,243 | $136,396 | $137,410 | $127,161 | $137,541 | $137,207 | $159,160 | $128,787 | | Gross profit | 21,618 | 14,734 | 22,718 | 22,711 | 24,757 | 20,918 | 34,658 | 25,031 | | Income/(loss) from operations | 7,744 | (1,538) | 7,789 | 7,200 | 10,153 | 4,887 | 13,559 | (2,598) | | Net income | 7,883 | 149 | 11,468 | 9,935 | 11,244 | 8,007 | 12,143 | 4,252 | | Net income/(loss) attributable to non-controlling interest | 1,055 | 200 | 995 | 500 | 1,749 | 529 | 1,251 | (97) | | Net income/(loss) attributable to parent company's common shareholders | 6,820 | (59) | 10,466 | 9,428 | 9,488 | 7,470 | 10,884 | 4,342 | | Net income/(loss) attributable to parent company's common shareholders per share - Basic | $0.23 | $— | $0.35 | $0.31 | $0.31 | $0.24 | $0.36 | $0.14 | | Diluted | $0.23 | $— | $0.35 | $0.31 | $0.31 | $0.24 | $0.36 | $0.14 | [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=75&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure.) This section confirms no changes in or disagreements with accountants on accounting and financial disclosure [Item 9A. Controls and Procedures](index=76&type=section&id=Item%209A.%20Controls%20and%20Procedures.) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2023 - The company's management, including the CEO and CFO, concluded that **disclosure controls and procedures were effective** as of December 31, 2023[292](index=292&type=chunk) - Management assessed and determined that **internal control over financial reporting was effective** as of December 31, 2023[295](index=295&type=chunk) - No **material changes in internal control over financial reporting** occurred during Q4 2023[298](index=298&type=chunk) - The report acknowledges **inherent limitations in control systems**, providing reasonable, not absolute, assurance[297](index=297&type=chunk) [Item 9B. Other Information](index=78&type=section&id=Item%209B.%20Other%20Information.) Wiselink Holding Limited entered a Rule 10b5-1 Trading Plan on June 1, 2023, for the sale of 282,100 shares - **Wiselink Holding Limited** and UBS Financial Services Inc. entered a **Rule 10b5-1 Trading Plan** on June 1, 2023[299](index=299&type=chunk) Rule 10b5-1 Trading Plan Details | Order | Number of shares to be sold (shares) | Type of Limited Order: price(s) | Duration of order | Order cancel Date | | :------ | :-------------------------- | :------------------------------ | :---------------- | :---------------- | | 1 | 282,100 | $5.00 | GTC | August 30, 2024 | [Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=78&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections.) The company expects to no longer be a Commission-Identified Issuer after 2023, following PCAOB's access to inspect auditors in China - The company was previously identified as a **Commission-Identified Issuer** under the HFCAA due to PCAOB's inability to inspect its auditor in mainland China[300](index=300&type=chunk) - Following PCAOB's December 2022 announcement of complete access, the company does not expect to be identified as a **Commission-Identified Issuer** after its 2023 annual report[301](index=301&type=chunk) - The company confirms it is **not owned or controlled by any foreign governmental entity**, has no material contracts with such parties, and no foreign government representatives on its board[300](index=300&type=chunk) PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=53&type=section&id=Item%2010.%20Directors,%20Executive%20Officers%20and%20Corporate%20Governance.) The board includes independent directors on key committees, with family relationships among some executives, and the company maintains a Code of Ethics Directors and Executive Officers (as of December 31, 2023) | Name | Age | Position(s) | | :------------ | :-- | :-------------------------------- | | Hanlin Chen | 66 | Chairman of the Board | | Tong Kooi Teo | 67 | Director | | Guangxun Xu | 73 | Director | | Heng Henry Lu | 58 | Director | | Qizhou Wu | 59 | Chief Executive Officer and Director | | Jie Li | 54 | Chief Financial Officer | | Andy Tse | 53 | Senior Vice President | | Haimian Cai | 60 | Vice President | | Henry Chen | 33 | Vice President | - The **Audit, Compensation, and Nominating Committees** are comprised of independent directors[315](index=315&type=chunk)[316](index=316&type=chunk)[319](index=319&type=chunk) - **Guangxun Xu** chairs the Audit and Nominating Committees, while **Tong Kooi Teo** chairs the Compensation Committee[315](index=315&type=chunk)[316](index=316&type=chunk)[319](index=319&type=chunk) - Family relationships exist between **Hanlin Chen and Andy Tse (brothers-in-law)**, and **Hanlin Chen and Henry Chen (father and son)**[321](index=321&type=chunk) - The company has adopted a **Code of Ethics and Conduct** applicable to all officers, directors, and employees[322](index=322&type=chunk) [Item 11. Executive Compensation](index=56&type=section&id=Item%2011.%20Executive%20Compensation.) The Compensation Committee sets executive compensation, including base salary and performance bonuses, with a new Compensation Recovery Policy adopted in October 2023 - The **Compensation Committee**, comprised of independent directors, sets executive compensation policies and administers benefit plans[324](index=324&type=chunk) - Executive compensation aims to **attract and retain talent** and **align incentives with stockholder value creation**[325](index=325&type=chunk)[326](index=326&type=chunk) - A **Compensation Recovery Policy** was adopted effective October 10, 2023, allowing clawback of incentive compensation based on restated financial results[327](index=327&type=chunk) Executive Officer Compensation (2023 vs. 2022, in thousands of USD) | Name (Position) | Year | Salary ($) | Bonus ($) | Option Awards ($) | Total ($) | | :------------------------- | :--- | :--------- | :-------- | :---------------- | :-------- | | Hanlin Chen (Chairman) | 2023 | 306 | 77 | — | 383 | | | 2022 | 321 | 80 | — | 401 | | Qizhou Wu (CEO) | 2023 | 204 | 51 | — | 255 | | | 2022 | 214 | 53 | — | 267 | | Jie Li (CFO) | 2023 | 122 | 31 | — | 153 | | | 2022 | 128 | 32 | — | 160 | | Haimian Cai (Vice President) | 2023 | 387 | — | — | 387 | | | 2022 | 383 | — | — | 383 | - The company accrued **25% of annual salary as performance bonus** for Named Executive Officers in 2023 due to achieving sales growth[331](index=331&type=chunk)[332](index=332&type=chunk) - No **stock options were granted** to management in 2023 or 2022[334](index=334&type=chunk)[495](index=495&type=chunk) Director Compensation (2023, in thousands of USD) | Name | Fees earned or paid in cash ($) | Option awards ($) | Total ($) | | :------------ | :------------------------------ | :---------------- | :-------- | | Tong Kooi Teo | 32 | — | 32 | | Guangxun Xu | 59 | — | 59 | | Heng Henry Lu | 32 | — | 32 | [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=89&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters.) Management beneficially owned 64.73% of common stock as of December 31, 2023, with Chairman Hanlin Chen controlling 57.39%, giving him significant influence Security Ownership of Certain Beneficial Owners and Management (as of December 31, 2023) | Name/Title | Total Number of Shares | Percentage Ownership (%) | | :--------------------------------------- | :--------------------- | :------------------- | | Hanlin Chen, Chairman | 17,323,670 | 57.39 | | Qizhou Wu, CEO and Director | 1,537,524 | 5.09 | | Guangxun Xu, Director | — | — | | Tong Kooi Teo, Director | — | — | | Heng Henry Lu, Director | — | — | | Haimian Cai, VP | 50,000 | 0.17 | | Jie Li, CFO | 97,031 | 0.32 | | Tse Andy, Sr. VP | 531,682 | 1.76 | | Henry Chen, VP | — | — | | All Directors and Executive Officers (9 persons) | 19,539,907 | 64.73 | - Chairman **Hanlin Chen beneficially owns 57.39% of common stock**, including shares held by his wife and a controlled company, granting him effective control[341](index=341&type=chunk)[532](index=532&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=91&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions,%20and%20Director%20Independence.) The company engages in related party transactions at fair market prices, with the Audit Committee reviewing and approving them to ensure arm's-length terms - The company engages in various **related party transactions**, including sales, material purchases, technology services, and short-term loans[455](index=455&type=chunk)[456](index=456&type=chunk)[457](index=457&type=chunk)[458](index=458&type=chunk) - These related party transactions are conducted at **fair market prices** and under terms similar to unaffiliated third parties[455](index=455&type=chunk)[456](index=456&type=chunk)[457](index=457&type=chunk) - The **Audit Committee reviews and approves related party transactions** to ensure arm's-length terms[345](index=345&type=chunk) [Item 14. Principal Accountant Fees and Services](index=91&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services.) PricewaterhouseCoopers Zhong Tian LLP served as principal accountant, with audit fees of $724,000 in 2023, and the Audit Committee pre-approves all services Principal Accountant Fees (in thousands of USD) | Category | Fiscal 2023 | Fiscal 2022 | | :--------- | :---------- | :---------- | | Audit Fees | $724 | $731 | | Other Fees | $44 | $— | | Total Fees | $768 | $731 | - The **Audit Committee has a pre-approval policy** for all audit and non-audit services to maintain auditor independence[347](index=347&type=chunk) PART IV [Item 15. Exhibits, Financial Statement Schedules](index=60&type=section&id=Item%2015.%20Exhibits,%20Financial%20Statement%20Schedules.) This section lists the comprehensive financial statements and various exhibits filed as part of the Annual Report on Form 10-K - The report includes the **Independent Auditor's Report, Consolidated Balance Sheets, Income Statements, Comprehensive Income, Equity Changes, Cash Flows, and Notes**[348](index=348&type=chunk) - A list of exhibits, including **corporate governance documents, joint venture agreements, and certifications**, is provided as part of this Form 10-K[351](index=351&type=chunk)[352](index=352&type=chunk)[544](index=544&type=chunk) [Item 16. Form 10-K Summary](index=62&type=section&id=Item%2016.%20Form%2010-K%20Summary.) This item is not applicable to the company's reporting requirements Financial Statements [Report of Independent Registered Public Accounting Firm](index=65&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) PricewaterhouseCoopers Zhong Tian LLP issued an unqualified opinion on the consolidated financial statements, identifying deferred tax asset recoverability as a critical audit matter - **PricewaterhouseCoopers Zhong Tian LLP** issued an **unqualified opinion** on the 2023 and 2022 consolidated financial statements, affirming U.S. GAAP conformity[358](index=358&type=chunk) - A critical audit matter was the assessment of **deferred tax asset recoverability**, involving significant management judgment and estimation uncertainty[362](index=362&type=chunk)[363](index=363&type=chunk)[364](index=364&type=chunk) [Consolidated Balance Sheets](index=67&type=section&id=Consolidated%20Balance%20Sheets) Total assets increased to $766.4 million in 2023, driven by receivables, while liabilities and equity also grew, reflecting operational changes Consolidated Balance Sheet Highlights (in thousands of USD) | Metric | December 31, 2023 | December 31, 2022 | | :-------------------------- | :---------------- | :---------------- | | Total current assets | $564,075 | $520,718 | | Total non-current assets | $202,365 | $193,634 | | Total assets | $766,440 | $714,352 | | Total current liabilities | $383,739 | $364,195 | | Total long-term liabilities | $14,297 | $28,732 | | Total liabilities | $398,018 | $386,937 | | Total stockholders' equity | $367,809 | $326,833 | - **Cash and cash equivalents decreased to $114.7 million** in 2023 from $121.2 million in 2022[369](index=369&type=chunk) - **Accounts and notes receivable (net) increased to $269.4 million** in 2023 from $224.3 million in 2022[369](index=369&type=chunk)[462](index=462&type=chunk) - **Accounts and notes payable (total) increased to $253.6 million** in 2023 from $235.1 million in 2022[369](index=369&type=chunk)[483](index=483&type=chunk) [Consolidated Statements of Income or Loss](index=68&type=section&id=Consolidated%20Statements%20of%20Income%20or%20Loss) Net product sales increased by 8.8% to $576.4 million, driving a 91.3% rise in net income to $42.7 million and EPS of $1.25 in 2023 Consolidated Statements of Income or Loss Highlights (in thousands of USD, except per share amounts) | Metric | 2023 | 2022 | Change | Change % | | :---------------------------------------------- | :--------- | :--------- | :--------- | :------- | | Net product sales | $576,354 | $529,551 | $46,803 | 8.8 | | Cost of products sold | 472,603 | 446,157 | 26,446 | 5.9 | | Gross profit | 103,751 | 83,394 | 20,357 | 24.4 | | Operating income | 39,245 | 7,951 | 31,294 | 393.6 | | Net income | 42,738 | 22,343 | 20,395 | 91.3 | | Net income attributable to parent company's common shareholders | 37,658 | 21,181 | 16,447 | 77.8 | | Basic EPS | $1.25 | $0.69 | $0.56 | 81.2 | | Diluted EPS | $1.25 | $0.69 | $0.56 | 81.2 | - **Gross margin improved to 18.0%** in 2023 from 15.7% in 2022[231](index=231&type=chunk) - **Research and development expenses decreased by 19.1% to $29.2 million** in 2023[236](index=236&type=chunk) - **Financial income, net, decreased by $6.1 million**, primarily due to lower foreign exchange gains[239](index=239&type=chunk) [Consolidated Statements of Comprehensive Income or Loss](index=69&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20or%20Loss) Comprehensive income reached $37.5 million in 2023, a significant improvement from a $7.6 million loss in 2022, driven by reduced foreign currency translation loss Consolidated Statements of Comprehensive Income or Loss Highlights (in thousands of USD) | Metric | 2023 | 2022 | | :-------------------------------------------------------- | :--------- | :---------- | | Net income | $42,738 | $22,343 | | Foreign currency translation loss | (5,191) | (29,934) | | Comprehensive income/(loss) | 37,547 | (7,591) | | Comprehensive income/(loss) attributable to parent company | $32,813 | $(6,949) | - **Foreign currency translation loss significantly decreased from $29.9 million in 2022 to $5.2 million in 2023**[372](index=372&type=chunk) [Consolidated Statements of Changes in Stockholders' Equity](index=70&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Total stockholders' equity increased to $367.8 million in 2023, driven by net income and improved accumulated other comprehensive income, with no share repurchases Consolidated Statements of Changes in Stockholders' Equity Highlights (in thousands of USD) | Metric | December 31, 2023 | December 31, 2022 | | :-------------------------------------------------------- | :---------------- | :---------------- | | Common Stock | $3 | $3 | | Additional Paid-in Capital | $63,731 | $63,731 | | Retained Earnings - Appropriated | $11,851 | $11,851 | | Retained Earnings - Unappropriated | $284,832 | $247,174 | | Accumulated Other Comprehensive (Loss)/Income | $(8,258) | $(3,413) | | Treasury Stock | $(7,695) | $(7,695) | | Total parent company stockholders' equity | $344,464 | $311,651 | | Non-controlling Interest | $23,345 | $15,182 | | Total stockholders' equity | $367,809 | $326,833 | - **Net income attributable to parent company increased unappropriated retained earnings by $37.7 million** in 2023[374](index=374&type=chunk) - **Accumulated other comprehensive income improved from $(28.1) million loss in 2022 to $(4.8) million loss in 2023** due to foreign currency translation adjustments[374](index=374&type=chunk) - No **common stock was repurchased in 2023**, maintaining treasury stock at **$7.7 million**[374](index=374&type=chunk)[497](index=497&type=chunk) [Consolidated Statements of Cash Flows](index=71&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow decreased to $19.9 million in 2023, while financing cash flow reversed to a $6.8 million inflow, driven by bank loans Consolidated Statements of Cash Flows Highlights (in thousands of USD) | Cash Flow Activity | 2023 | 2022 | | :------------------------------------------------ | :--------- | :--------- | | Net cash provided by operating activities | $19,906 | $48,023 | | Net cash used in investing activities | $(28,637) | $(32,740) | | Net cash provided by/(used in) financing activities | $6,798 | $(1,583) | | Net decrease in cash and cash equivalents | $(3,757) | $(548) | | Cash, cash equivalents and pledged cash at end of year | $155,194 | $158,951 | - Operating cash flow decreased mainly due to reduced cash inflows from **accounts and notes receivable ($13.8 million)** and **accounts and notes payable ($5.2 million)**[273](index=273&type=chunk) - Cash used in investing activities decreased due to a net effect of **decreased purchase of short-term investments and long-term time deposits ($11.7 million)**[274](index=274&type=chunk) - Financing cash flow increased mainly due to **higher proceeds from bank and government loans ($12.9 million)**[275](index=275&type=chunk) Notes to Consolidated Financial Statements [1. Organization and Business](index=73&type=section&id=1.%20Organization%20and%20Business) CAAS operates through its wholly-owned subsidiaries and 16 indirect subsidiaries/joint ventures in China and Brazil, focusing on automotive systems and components - CAAS is a Delaware corporation operating through its wholly-owned subsidiaries and **16 indirect subsidiaries/joint ventures in China and Brazil**[380](index=380&type=chunk)[381](index=381&type=chunk)[382](index=382&type=chunk) - Subsidiaries like **Henglong and Jiulong produce power steering gears**, while newer entities like **Henglong KYB and Wuhan Hyoseong focus on electric steering systems**[384](index=384&type=chunk)[386](index=386&type=chunk)[391](index=391&type=chunk)[392](index=392&type=chunk) - **Zhirong**, established in June 2023, engages in inspection and testing of automotive products[395](index=395&type=chunk) [2. Basis of Presentation and Significant Accounting Policies](index=75&type=section&id=2.%20Basis%20of%20Presentation%20and%20Significant%20Accounting%20Policies) The financial statements adhere to U.S. GAAP, employing estimates for asset valuation and revenue recognition, with specific policies for credit losses, leases, and foreign currency translation - Consolidated financial statements are prepared in accordance with **U.S. GAAP**, including the company and its subsidiaries, with inter-company balances eliminated[396](index=396&type=chunk) - Significant estimates are made for **long-term asset valuation, receivables, inventories, warranty obligations, and deferred tax asset recoverability**[405](index=405&type=chunk) - Revenue is recognized when **control of products transfers to the customer**, with allowances for estimated price discounts and product warranties[423](index=423&type=chunk)[425](index=425&type=chunk) - The company adopted **ASC Topic 326 for credit losses** and **ASC 842 for leases**[408](index=408&type=chunk)[442](index=442&type=chunk) Warranty Activities (in thousands of USD) | Metric | 2023 | 2022 | | :----------------------------------- | :------ | :------ | | Balance at the beginning of year | $32,435 | $36,572 | | Additions during the year | 11,309 | 10,941 | | Settlement within the year | (12,676)| (11,877)| | Foreign currency translation loss | (628) | (3,201) | | Balance at end of year | $30,440 | $32,435 | - The company's **five largest customers accounted for 40.4% of 2023 consolidated sales**, with Stellantis N.V. alone accounting for **17.2%**[435](index=435&type=chunk) - Functional currencies include **USD, RMB, and BRL**, with foreign currency translation adjustments included in comprehensive income[452](index=452&type=chunk)[453](index=453&type=chunk) [3. Accounts and Notes Receivable](index=84&type=section&id=3.%20Accounts%20and%20Notes%20Receivable) Total accounts and notes receivable, net, increased to $269.4 million in 2023, with the allowance for doubtful accounts rising to $17.0 million Accounts and Notes Receivable (in thousands of USD) | Metric | December 31, 2023 | December 31, 2022 | | :---------------------------------------------- | :---------------- | :---------------- | | Accounts and notes receivable - unrelated parties | $276,836 | $228,667 | | Less: allowance for doubtful accounts - unrelated parties | $(15,599) | $(14,359) | | Accounts and notes receivable, net - unrelated parties | $261,237 | $214,308 | | Accounts and notes receivable - related parties | $9,573 | $11,779 | | Less: allowance for doubtful accounts - related parties | $(1,404) | $(1,763) | | Accounts and notes receivable, net - related parties | $8,169 | $10,016 | | Accounts and notes receivable, net | $269,406 | $224,324 | Allowance for Doubtful Accounts Activity (in thousands of USD) | Metric | 2023 | 2022 | | :--------------------------------------- | :------ | :------ | | Balance at beginning of year | $16,122 | $12,859 | | Amounts provided during the year | 2,002 | 5,371 | | Amounts reversed of collection during the year | (463) | (967) | | Writing off uncollectible account receivables | (410) | — | | Foreign currency translation | (248) | (1,141) | | Balance at end of year | $17,003 | $16,122 | - The company pledged **notes receivable of $11.5 million** in 2023 as collateral for bank notes payable[463](index=463&type=chunk) [4. Advance Payments and Others](index=85&type=section&id=4.%20Advance%20Payments%20and%20Others) Total advance payments and others, net, increased to $16.0 million in 2023, primarily driven by input VAT and prepayments for raw materials Advance Payments and Others (in thousands of USD) | Category | December 31, 2023 | December 31, 2022 | | :-------------------------------------- | :---------------- | :---------------- | | Input VAT | $8,957 | $4,283 | | Prepayments for purchase of raw materials | 3,206 | 3,942 | | Prepayment for R&D service | 1,553 | 748 | | Prepaid income tax | 948 | 1,287 | | Employee advances | 448 | 713 | | Prepayment for share repurchase program | 9 | 754 | | Others | 900 | 734 | | Total advance payments and others | $16,021 | $12,461 | | Less: Allowance for doubtful accounts | (22) | (115) | | Advance payments and others, net | $15,999 | $12,346 | [5. Inventories](index=85&type=section&id=5.%20Inventories) Total inventories remained stable at $112.4 million in 2023, with a shift from finished goods to raw materials and work in process Inventories (in thousands of USD) | Category | December 31, 2023 | December 31, 2022 | | :-------------------- | :---------------- | :---------------- | | Finished goods | $62,760 | $71,371 | | Raw materials | 28,505 | 24,502 | | Work in process | 17,123 | 16,001 | | Cost of R&D service | 4,004 | 362 | | Balance at end of year | $112,392 | $112,236 | - **Inventory write-downs** to cost of product sold were **$4.8 million in 2023** and $4.7 million in 2022[465](index=465&type=chunk) [6. Property, Plant and Equipment](index=85&type=section&id=6.%20Property,%20Plant%20and%20Equipment) Net property, plant and equipment decreased to $101.4 million in 2023 due to depreciation and impairment, despite increased construction in progress Property, Plant and Equipment (in thousands of USD) | Category | December 31, 2023 | December 31, 2022 | | :------------------------- | :---------------- | :---------------- | | Machinery and equipment | $241,761 | $239,385 | | Buildings | 64,390 | 64,928 | | Electronic equipment | 5,804 | 6,242 | | Motor vehicles | 4,587 | 4,308 | | Construction in progress | 11,821 | 8,238 | | Gross Total | $328,363 | $323,101 | | Less: Accumulated depreciation | (226,436) | (216,495) | | Less: Impairment | (568) | — | | Balance at end of year, net | $101,359 | $106,606 | - **Depreciation charges were $17.2 million** in 2023 and $24.2 million in 2022[466](index=466&type=chunk) - The company pledged **$43.3 million in property, plant and equipment and land use rights** as security for credit facilities in 2023[467](index=467&type=chunk) [7. Intangible Assets](index=86&type=section&id=7.%20Intangible%20Assets) Net intangible assets increased to $3.9 million in 2023, primarily due to higher management software licenses, with amortization expenses of $1.0 million Intangible Assets (in thousands of USD) | Category | December 31, 2023 | December 31, 2022 | | :------------------------------ | :---------------- | :---------------- | | Management software license | $7,055 | $3,756 | | Patent technology | 2,340 | 2,266 | | Total intangible assets - at cost | $9,395 | $6,022 | | Less: Accumulated amortization | (5,530) | (4,749) | | Balance at end of year, net | $3,865 | $1,273 | - **Amortization expenses were $1.0 million** in 2023 and $0.6 million in 2022[468](index=468&type=chunk) [8. Long-term Investments](index=86&type=section&id=8.%20Long-term%20Investments) Total long-term investments slightly increased to $60.2 million in 2023, primarily in limited partnerships and corporations accounted for using the equity method Long-term Investments (in thousands of USD) | Category | December 31, 2023 | December 31, 2022 | | :-------------------------------------- | :---------------- | :---------------- | | Limited Partnerships: | | | | Chongqing Venture Fund | $13,158 | $14,435 | | Hubei Venture Fund | 12,217 | 11,738 | | Suzhou Qingshan | 8,409 | 4,179 | | Suzhou Venture Fund | 3,387 | 5,473 | | Suzhou Mingzhi | 1,261 | — | | Subtotal - Investments in limited partnerships | $38,432 | $35,825 | | Corporations: | | | | Sentient AB | $20,417 | $21,831 | | Henglong Tianyu | 793 | 774 | | Chongqing Jinghua | — | 695 | | Jiangsu Intelligent | 531 | 685 | | Subtotal - Investments in corporations | $21,741 | $23,985 | | Total | $60,173 | $59,810 | - Investments in limited partnerships and corporations are accounted for using the **equity method**[469](index=469&type=chunk)[470](index=470&type=chunk)[471](index=471&type=chunk)[472](index=472&type=chunk)[473](index=473&type=chunk) - The company's proportionate share of net loss from equity method investments was **$2.0 million in 2023**[474](index=474&type=chunk) [9. Deferred Income Tax Assets and Liabilities](index=88&type=section&id=9.%20Deferred%20Income%20Tax%20Assets%20and%20Liabilities) Net deferred tax assets increased to $11.2 million in 2023, while deferred tax liabilities decreased, with a reduction in the valuation allowance Deferred Tax Assets and Liabilities (in thousands of USD) | Category | December 31, 2023 | December 31, 2022 | | :------------------------------------------------ | :---------------- | :---------------- | | Total deferred tax assets | $30,229 | $33,635 | | Less: Valuation allowance | (18,981) | (23,270) | | Total deferred tax assets, net of valuation allowance | $11,248 | $10,365 | | Deferred withholding tax for dividend distribution from PRC subsidiaries | $3,943 | $4,010 | | Other taxable temporary differences | 2,349 | 2,713 | | Total deferred tax liabilities | $6,292 | $6,723 | Valuation Allowance for Deferred Tax Assets Activity (in thousands of USD) | Metric | 2023 | 2022 | | :--------------------------------------- | :------ | :------ | | Balance at beginning of year | $23,270 | $22,788 | | Amounts provided for during the year | 589 | 5,058 | | Amounts used during the year | (4,511) | (2,721) | | Foreign currency translation | (367) | (1,855) | | Balance at end of year | $18,981 | $23,270 | - The company has **net operating loss carry-forwards** in Hong Kong (**$1.7 million**) and PRC entities (**$2.4 million and $3.9 million**)[475](index=475&type=chunk) [10. Bank Loans](index=89&type=section&id=10.%20Bank%20Loans) Total bank loans increased to $49.2 million in 2023, with $195.8 million in credit facilities utilized at a 2.6% weighted average interest rate Bank Loans (in thousands of USD) | Category | December 31, 2023 | December 31, 2022 | | :---------------- | :---------------- | :---------------- | | Short-term bank loans | $48,005 | $45,671 | | Long-term loans | 1,221 | 528 | | Total bank loans | $49,226 | $46,199 | - The total credit facility was **$195.8 million in 2023**, with **$49.2 million drawn** at a **2.6% weighted average interest rate**[479](index=479&type=chunk) - Loans are secured by **property, plant and equipment, and land use rights**[479](index=479&type=chunk) - The company complied with all **financial covenants** as of December 31, 2023[481](index=481&type=chunk) [11. Accounts and Notes Payable](index=89&type=section&id=11.%20Accounts%20and%20Notes%20Payable) Total accounts and notes payable increased to $253.6 million in 2023, with notes payable at $93.0 million, secured by pledged cash and notes receivable Accounts and Notes Payable (in thousands of USD) | Category | December 31, 2023 | December 31, 2022 | | :------------------------------------- | :---------------- | :---------------- | | Accounts payable - unrelated parties | $147,712 | $133,882 | | Notes payable - unrelated parties | 93,027 | 84,530 | | Accounts and notes payable - unrelated parties | $240,739 | $218,412 | | Accounts and notes payable - related parties | $12,839 | $16,695 | | Balance at end of year | $253,578 | $235,107 | - The company pledged **cash of $39.3 million** and **notes receivable of $11.5 million** in 2023 as collateral for bank notes payable[482](index=482&type=chunk) [12. Accrued Expenses and Other Payables](index=90&type=section&id=12.%20Accrued%20Expenses%20and%20Other%20Payables) Accrued expenses and other payables decreased to $44.8 million in 2023, with warranty reserves remaining the largest component at $30.4 million Accrued Expenses and Other Payables (in thousands of USD) | Category | December 31, 2023 | December 31, 2022 | | :---------------------------------------- | :---------------- | :---------------- | | Accrued expenses | $10,464 | $9,652 | | Warranty reserves | 30,440 | 32,435 | | Payable for the investment in Sentient AB | — | 2,043 | | Payables for overseas transportation and custom clearance | 400 | 294 | | Dividends payable to holders of non-controlling interests | 424 | 431 | | Accrued interest | — | 465 | | Other payables | 3,043 | 2,991 | | Balance at end of year | $44,771 | $48,311 | [13. Taxes Payable](index=90&type=section&id=13.%20Taxes%20Payable) Short-term taxes payable remained stable at $17.3 million in 2023, while long-term taxes payable decreased to $8.8 million due to payments Taxes Payable (in thousands of USD) | Category | December 31, 2023 | December 31, 2022 | | :---------------------------------------- | :---------------- | :---------------- | | Value-added tax payable | $3,104 | $3,470 | | Tariffs payable | 3,548 | 7,061 | | Long-term taxes payable - current portion | 7,024 | 5,270 | | Income tax payable | 2,293 | 680 | | Other tax payable | 1,298 | 1,117 | | Short-term taxes payable | $17,267 | $17,598 | | Long-term taxes payable | $8,781 | $15,805 | - Long-term taxes payable relate to a **$35.6 million one-time transition tax** from the U.S. Tax Reform, payable over eight years[486](index=486&type=chunk) [14. Redeemable non-controlling interests](index=90&type=section&id=14.%20Redeemable%20non-controlling%20interests) Redeemable non-controlling interests totaled $613,000 in 2023, subject to purchase by the company if a subsidiary fails to complete a qualified IPO - Redeemable non-controlling interests were **$613,000 in 2023** and $582,000 in 2022[369](index=369&type=chunk) - These interests are subject to purchase by the company if the subsidiary fails to complete a qualified IPO, with an **accretion of $30,000** to the redemption value recognized annually[487](index=487&type=chunk)[488](index=488&type=chunk) [15. Stock Options](index=91&type=section&id=15.%20Stock%20Options) The stock option plan allows for 2.2 million common shares, with 22,500 options outstanding and exercisable as of December 31, 2023, and no grants in 2023 or 2022 - The stock option plan, extended to June 27, 2025, allows for issuance of up to **2,200,000 common shares**[489](index=489&type=chunk) Stock Option Activity (Shares) | Metric | 2023 | 2022 | | :-------------------------- | :------ | :------ | | Outstanding - January 1 | 30,000 | 37,500 | | Expired | (7,500) | (7,500) | | Outstanding - December 31 | 22,500 | 30,000 | - As of December 31, 2023, **22,500 stock options were outstanding and exercisable**, with a **weighted-average exercise price of $6.26** and a remaining contractual term of **2.00 years**[493](index=493&type=chunk)[494](index=494&type=chunk) - No **stock options were granted or exercised** during 2023 and 2022[495](index=495&type=chunk) [16. Retained Earnings](index=91&type=section&id=16.%20Retained%20Earnings) PRC subsidiaries must appropriate 10% of after-tax profits to statutory surplus reserves, which are not distributable as cash dividends - **PRC subsidiaries must appropriate 10% of after-tax profits to statutory surplus reserves** annually until 50% of registered capital is reached[496](index=496&type=chunk) - These statutory reserves are **not distributable as cash dividends**[496](index=496&type=chunk) - Statutory reserves appropriated by China subsidiaries were **nil in 2023** and $0.4 million in 2022[496](index=496&type=chunk) [17. Treasury Stock](index=92&type=section&id=17.%20Treasury%20Stock) The company held 2,152,600 shares of treasury stock valued at $7.7 million as of December 31, 2023, with no repurchases in 2023 - **Treasury stock** is accounted for under the cost method and represents repurchased shares no longer outstanding[497](index=497&type=chunk)[498](index=498&type=chunk) - As of December 31, 2023, the company held **2,152,600 shares of treasury stock valued at $7.7 million**[374](index=374&type=chunk) - No **shares were repurchased in 2023**; in 2022, **666,074 shares were repurchased for $2.4 million** under a $5.0 million program[497](index=497&type=chunk) [18. Other Income, Net](index=92&type=section&id=18.%20Other%20Income,%20Net) Other income, net, decreased to $5.3 million in 2023, primarily due to lower government subsidies and the absence of a prior year impairment provision Other Income, Net (in thousands of USD) | Category | 2023 | 2022 | | :------------------------------------------------ | :------ | :------ | | Government subsidy | $3,777 | $6,270 | | Investment income | 1,465 | 1,912 | | Charity donation | 103 | 140 | | Provision for impairment of prepayment for investment in Hefei Senye | — | (2,540) | | Total other income, net | $5,345 | $5,782 | - The decrease in other income, net, was mainly due to **lower government subsidies** and the absence of the Hefei Senye impairment provision in 2023[499](index=499&type=chunk) [19. Financial Income, net](index=92&type=section&id=19.%20Financial%20Income,%20net) Financial income, net, decreased significantly to $4.7 million in 2023, primarily due to lower foreign exchange gains from reduced volatility Financial Income, Net (in thousands of USD) | Category | 2023 | 2022 | | :------------------------- | :----- | :------ | | Foreign exchange income, net | $3,355 | $9,833 | | Interest income | 1,524 | 1,247 | | Bank fees | (213) | (327) | | Total financial income, net | $4,666 | $10,753 | - The decrease in financial income, net, was primarily due to a **decrease in foreign exchange gains** from reduced volatility in 2023[239](index=239&type=chunk)[500](index=500&type=chunk) [20. Income Taxes](index=93&type=section&id=20.%20Income%20Taxes) Income tax expense increased to $5.1 million in 2023 due to higher GILTI taxes, with PRC subsidiaries subject to 25% or preferential 15% rates and withholding taxes on dividends - **Income tax expense increased to $5.1 million** in 2023, mainly due to higher GILTI tax expenses[240](index=240&type=chunk)[514](index=514&type=chunk) - **PRC subsidiaries are subject to a 25% corporate income tax rate**, with a preferential **15% rate for "High & New Technology Enterprises"**[501](index=501&type=chunk)[505](index=505&type=chunk)[506](index=506&type=chunk) - Dividends from PRC subsidiaries to the Hong Kong holding company are subject to a **5% or 10% withholding tax**[503](index=503&type=chunk) - The company recognized **$3.9 million in deferred tax liabilities** for $39.4 million of undistributed profits expected to be distributed from PRC subsidiaries[504](index=504&type=chunk) - **Brazil Henglong is subject to a 24% income tax rate**, plus an additional **10% tax on taxable income over BRL 0.24 million**[507](index=507&type=chunk) - The company is subject to **U.S. corporate income tax at up to 21%** and has a **$35.1 million one-time transition tax liability** from the U.S. Tax Reform[509](index=509&type=chunk)[512](index=512&type=chunk) [21. Income Per Share](index=95&type=section&id=21.%20Income%20Per%20Share) Basic and diluted net income per share increased to $1.25 in 2023, reflecting higher net income attributable to parent company shareholders Income Per Share (in thousands of USD, except per share amounts) | Metric | 2023 | 2022 | | :------------------------------------------------------------------ | :--------- | :--------- | | Net income attributable to parent company's common shareholders | $37,658 | $21,181 | | Weighted average number of common shares outstanding - Basic | 30,185,702 | 30,639,102 | | Weighted average number of common shares outstanding - Diluted | 30,189,421 | 30,641,274 | | Basic income per share attributable to parent company's common shareholders | $1.25 | $0.69 | | Diluted income per share attributable to parent company's common shareholders | $1.25 | $0.69 | - **Basic and diluted EPS increased by $0.56 (81.2%)** in 2023 compared to 2022[520](index=520&type=chunk) - Stock options with exercise prices above market price were excluded from diluted EPS calculations as they were **anti-dilutive**[516](index=516&type=chunk) [22. Significant Concentrations](index=95&type=section&id=22.%20Significant%20Concentrations) The company's business is highly concentrated in China, with RMB currency controls and profit distribution rules posing risks to capital repatriation - A significant portion of the company's business is conducted in **China**, with **RMB as the primary currency**[517](index=517&type=chunk) - **PRC regulations on currency conversion**, especially for "capital account" transactions, require prior SAFE approval, potentially limiting capital repatriation[521](index=521&type=chunk)[522](index=522&type=chunk) - The company relies on **dividend payments from China-based subsidiaries**, subject to PRC profit distribution rules and statutory reserve requirements restricting cash dividends[518](index=518&type=chunk) [23. Related Party Transactions](index=96&type=section&id=23.%20Related%20Party%20Transactions) The company engages in various related party transactions, including sales and purchases, all conducted at fair market prices, with Chairman Hanlin Chen holding significant control Merchandise Sold to Related Parties (in thousands of USD) | Related Party | 2023 | 2022 | | :------------------------ | :------ | :------ | | Hubei Hongrun | $33,829 | $32,489 | | Jingzhou Yude | 11,390 | 8,778 | | Xiamen Automotive Parts | 1,733 | 2,468 | | Other related parties | 562 | 547 | | Total | $47,514 | $44,282 | Materials Purchased from Related Parties (in thousands of USD) | Related Party | 2023 | 2022 | | :--------------------- | :------ | :------ | | Jingzhou Tongying | $12,033 | $12,152 | | Wuhan Tongkai | 8,311 | 9,974 | | Jiangling Tongchuang | 3,390 | 3,238 | | Honghu Changrun | 2,396 | 2,467 | | Henglong Tianyu | 557 | 611 | | Hubei Wiselink | 528 | 310 | | Hubei Yiling | 57 | 30 | | Other related parties | 16 | 28 | | Total | $27,288 | $28,810 | Advance Payments for Property, Plant and Equipment to Related Parties (in thousands of USD) | Related Party | December 31, 2023 | December 31, 2022 | | :--------------------- | :---------------- | :---------------- | | Hubei Wiselink | $3,609 | $1,618 | | Henglong Real Estate | 2,150 | 224 | | Hubei Hongrun | — | 42 | | Total | $5,759 | $1,884 | - **Hanlin Chen**, the chairman, owns **57.39% of the common stock**, granting him effective control over significant matters[532](index=532&type=chunk) [24. Commitments and Contingencies](index=98&type=section&id=24.%20Commitments%20and%20Contingencies) The company has no pending legal proceedings, but has non-cancelable commitments totaling $26.8 million, primarily for purchasing and investment contracts - The company is not a party to any **pending or threatened legal proceedings**[533](index=533&type=chunk) Non-Cancelable Commitments and Contingencies (as of December 31, 2023, in thousands of USD) | Category | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | | :------------------------------------- | :------- | :--------------- | :-------- | :-------- | :---------------- | | Obligations for investment contracts | $2,965 | $— | $2,965 | $— | $— |

Core Viewpoint - China Automotive Systems, Inc. (CAAS) reported significant growth in net sales and profits for both the fourth quarter and the fiscal year 2023, driven by increased demand for electric power steering (EPS) products and a favorable product mix [1][4]. Fourth Quarter 2023 Highlights - Net sales increased by 23.6% year-over-year to $159.2 million [2][6]. - Gross profit rose by 38.8% to $34.7 million, with gross margin improving to 21.8% from 19.4% [2][6]. - Operating income was $13.6 million, a turnaround from an operating loss of $2.6 million in the same quarter of 2022 [2][8]. - Net income attributable to common shareholders surged by 153.5% to $10.9 million, translating to diluted net income per share of $0.36 [2][9]. Fiscal Year 2023 Highlights - Annual net sales reached a record $576.4 million, an increase of 8.8% compared to $529.6 million in 2022 [3][10]. - Gross profit for the year increased by 24.5% to $103.8 million, with gross margin rising to 18.0% from 15.7% [3][10]. - Operating income skyrocketed by 390.0% to $39.2 million, compared to $8.0 million in 2022 [3][12]. - Diluted net income per share increased by 81.2% to $1.25 [3][14]. Product Performance - EPS sales grew by 24.6% in 2023, accounting for 33.8% of total net sales [4][10]. - Sales in Brazil increased by 22.9%, which helped offset a decline in North American sales [4][10]. Financial Position - Total cash and cash equivalents, pledged cash, and short-term investments were $166.3 million at year-end [5][15]. - The company maintained a strong balance sheet with a current ratio of nearly 1.5 [5][15]. Business Outlook - Management anticipates revenue guidance for fiscal year 2024 to be $605.0 million, reflecting optimism about market conditions and recovery in North America [16].

WUHAN, China, March 15, 2024 /PRNewswire/ -- China Automotive Systems, Inc. (Nasdaq: CAAS) ("CAAS" or the "Company"), a leading power steering components and systems supplier in China, today announced that it will issue unaudited financial results for the fourth quarter ended December 31, 2023, on Thursday, March 28, 2024, before the market opens. Management will conduct a conference call on March 28th at 8:00 A.M. EDT/8:00 P.M. Beijing Time to discuss these results.  A question and answer session will foll ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark one) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 Or ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | --- | --- | --- | --- | |-----------------------------------------------------------------------------|------------------|-------|----------------------------------------- ...

China Automotive Systems, Inc. (NASDAQ:CAAS) Q3 2023 Earnings Conference Call November 10, 2023 8:00 AM ET Company Participants Kevin Theiss - IR Jie Li - CFO Conference Call Participants Operator Good morning, everyone, and welcome to the China Automotive Systems' Third Quarter 2023 Conference Call. At this time, all participants are in a listen-only mode and the floor will be open for questions after the presentation. [Operator Instructions] Please note, this conference is being recorded. I will now turn ...

Financial Data and Key Metrics Changes - The company's net sales increased by 8.1% year-over-year to $137.4 million in Q2 2023 compared to $127.2 million in Q2 2022 [14] - Net income attributable to parent company's common shareholders rose to $10.5 million in Q2 2023 from $9.4 million in Q2 2022, with diluted earnings per share increasing by 12.9% to $0.35 [18] - For the first six months of 2023, net sales increased by 6.1% year-over-year to $279.7 million, with net income attributable to parent company shareholders reaching $17.3 million compared to $9.4 million in the same period last year [20] Business Line Data and Key Metrics Changes - Net sales of advanced electric power steering (EPS) products rose by 28.4% year-over-year to $41.6 million in Q2 2023 [14] - Sales of traditional steering products increased by 1.1% year-over-year to $95.8 million in Q2 2023 [14] - Sales to the commercial vehicle market increased by 7.2%, while Henglong passenger vehicle sales rose by 27.4% due to higher demand [9] Market Data and Key Metrics Changes - Overall automobile sales in China increased by 17.9% year-over-year in Q2 2023, with passenger vehicle sales rising by 19.3% and commercial vehicle sales up by 10.1% [8] - New energy vehicle sales rose by 44.1% in the first six months of 2023, reflecting a recovery from the previous year's COVID-19 restrictions [9] Company Strategy and Development Direction - The company continues to collaborate with major OEMs like BYD and Stellantis to enhance product offerings and develop new technologies [10] - Focus on developing proprietary EPS products for advanced driver assistance systems (ADAS) and level-4 autonomous driving [11] - Management reiterated a revenue growth target of $560 million for the full year 2023, based on current market conditions [21] Management Comments on Operating Environment and Future Outlook - The Chinese economy showed signs of recovery with a GDP growth rate of 5.5% year-over-year in the first half of 2023, although affected by internal and external factors [6] - Management noted that sales to North America declined by 24.5% due to reduced demand from customers, but market share remained stable [23] - New government incentives are expected to enhance economic growth in targeted markets, including the automobile sector [13] Other Important Information - Total cash, cash equivalents, and pledged cash were $125.5 million as of June 30, 2023 [20] - The company achieved an approximate 11% year-over-year decline in total operating expenses, contributing to an operating profit of $8.2 million in Q2 2023 [12] Q&A Session Summary Question: Could you shed some light on the decline in sales to the US and expectations going forward? - Management confirmed a 24.5% decline in sales to North America, primarily due to a decrease in customer production volumes, but market share remained stable [23] - The company is working on new products and expects to increase shipments as these are rolled out, while also pursuing new clients in North America [24] Question: What percentage of your sales come from North America currently? - Management indicated that approximately 20% of total revenues come from North America [25]