SOURCE: China Auto Logistics, Inc.

China Auto Logistics Reports 2013 Results

Company Managed Small Full Year Profit As it Competed to Maintain Industry Leadership in Slower Luxury Imported Auto Market; Difficult Comparisons Expected to Continue Through the First Half of 2014 Until New Airport Auto Mall Related Businesses Come on S

 

Company Aims to Diversify Profits with a Used Car Business and Other Auto-Related Sales and Services Businesses Capitalizing on Potential of Anticipated New Free Trade Zone in Tianjin

 

China Auto Logistics 2013 Year End Investor Conference Call Scheduled for Friday, April 11th at 8:00am ET

 

China Auto Logistics Inc. (the "Company" or "CALI") (NASDAQ: CALI), a top seller in China of luxury imported automobiles, and a leading provider of auto-related services, reported today a lower year over year small profit for the year ended December 31, 2013, as it sought to maintain leadership in China's highly competitive luxury imported vehicle market. In a slower and more restrictive economic environment in 2013, the Company's luxury imported automobile sales declined approximately 22% and largely were of less profitable, lower end luxury vehicles.

 

Diversification and Free Trade Zone Potential

On a positive note, the Company saw fee income from Financing Services continue to grow despite slower auto sales. Most significantly, in the final months of the year, a key building block for diversifying into a potentially fast growing used car business as well as other auto related businesses was put into place, with the successful acquisition for $91.4 million on November 30, 2013 of Zhonghe Auto Sales Service Co., Ltd., which owns and operates the Tianjin Airport International Automall. The auto mall is in a prime location earmarked as one of the key sites in a proposed new Free Trade Zone (FTZ) in Tianjin, similar to the FTZ in Shanghai, which boosted real estate values and the value of companies located there. This followed an agreement in November with Car King China to launch Tianjin Car King Used Car Trading Company in which the Company has a 40% interest.

 

Mr. Tong Shiping, Chairman and CEO of the Company, stated, "While in 2013 we again absorbed the impact on our bottom line from competitive pricing in order to maintain leadership in our imported luxury auto business, I'm very pleased we succeeded in establishing a new leg for our business with significant long term growth potential. Used cars sales have become a much bigger slice of the auto sales pie in China, and we see a major opportunity for Car King Tianjin in the years ahead. It will take a while to build and measure our success with this new business as well as with our further possible diversification into higher margin retail auto sales. While we will continue to focus on expanding our existing auto-related services businesses and stabilizing auto sales margins, diversification will greatly strengthen our Company, position us well for new successes -- especially if the Tianjin FTZ comes to fruition -- and provide investors with new reasons for optimism about our future."

 

Financial Highlights

-          2013 revenues, which consisted primarily of luxury imported auto sales (98.30%), were $459,235,057, down 22.34% from $591,315,104 a year earlier, reflecting the year over year decline in Auto Sales.

-          Gross profit margins in 2013 decreased to 1.49% from 1.90% in 2012, primarily reflecting a continuing decline in Auto Sales pricing in order to remain an industry leader against strong competition.

-          Income from operations in 2013 was $2,929,747 compared with $3,582,194 a year earlier (including impairment changes for goodwill and intangible assets). The main contribution to income from operations came from Financing Services with operating income of $2,855,602 in 2013.

-          Net income attributable to shareholders in 2013 was $524,260, or $0.14 per share, compared with $2,567,087, or $0.69 per share in 2012.

-           

Operations Overview

 

Sales of Automobiles declined 22.56% from a year earlier to $450,143,413 in 2013. The decline in volume was 26.58%, as the Company sold 4,837 imported luxury automobiles during the year compared with 6,588 a year earlier. Average unit selling prices, however, increased year over year in 2013 by 6.82% to approximately $94,000. Nevertheless, most of the Company's auto sales were of lower end luxury models where demand was stronger. Profit margins on these vehicles are lower and were further impacted by the Company's desire to maintain its leading position against strong competition by offering customers the lowest possible prices. In addition to the slower economy, two key factors influenced the declining sales of imported automobiles during 2013. The first was the implementation by PRC Customs of unified inspection standards, which prolonged purchasing cycles and led to insufficient inventories to meet customer's needs. Additionally, the PRC Motor Registration Office began strict enforcement of rules resulting in required alterations to imported automobiles to obtain registration permits. The additional costs to customers entailed by these alterations reduced demand for imported automobiles beginning in the second quarter.

 

Going forward, the Company is aiming to stabilize gross margins in 2014. At the same time, a new austerity program for government officials in effect is likely to extend the competitive environment in luxury auto sales.

 

Financing Services growth was impacted by the issues affecting Automobile Sales. Nevertheless, revenue from fee income increased 17.39% over 2012 results to $4,356,061. Revenue from the interest portion of this business was lower than in 2012 due to lower prevailing interest rates. The Company also was able to take advantage of available credit lines provided by banks, and does not foresee any difficulty in obtaining additional credit lines and loan facilities from its banks. As of April 7, 2014, the Company had a credit line of approximately $159 million and is regularly in negotiations for new credit lines.

 

Airport Auto Mall Automotive Services contributed a negligible amount to 2013 results as the Airport Auto Mall had only one month of operations following its acquisition near year-end. The Company anticipates selling used cars through Car King Tianjin at the Airport Auto Mall, as well as leasing a portion of the facility. As of February 28, 2014, as previously announced, the Company's contract for managing the International Auto Mall in Tianjin was not renewed, and the Company will instead focus on developing the Airport Auto Mall.

 

Potential for Tianjin Free Trade Zone (FTZ)

Considerable excitement is building in Tianjin about the potential for it becoming the second major FTZ in China after the recent opening of the Shanghai FTZ. The Company's recently purchased Airport Auto Mall is in the area of Tianjin earmarked for the FTZ. If the pattern that emerged in Shanghai is followed in Tianjin, real estate values could increase and significant new business opportunities could be created.

 

Outlook

Commenting on the outlook for 2014 and beyond, Mr. Tong stated, "Near term, the Company will face continuing competition and softer demand for its luxury imported automobile business and, at the same time, does not anticipate generating meaningful results from the Airport Auto Mall and Car King Tianjin until at least the second half of the year. We also will be looking at higher interest costs in connection with the payment of the remaining installments of the purchase price for the Airport Auto Mall. We therefore anticipate comparisons will continue to be difficult through the first six months of 2014."

 

"However," he continued, "we believe that we have established a stronger company, with a more diversified base of operations that, in time, will be worth the expense and major effort we are putting into bringing our strategy to fruition - - and our goal is to be a leader in each new area we enter. As successful business managers for many years, we welcome the possible opening of a Free Trade Zone in Tianjin, and the freeing up of capital this could entail in China's second major port city which already is a major hub of commercial activity."

 

Conference Call Invitation

The Company will discuss 2013 year end results during a live conference call and webcast on Friday, April 11, 2014 at 8:00 am Eastern Time.

 

To participate in the call, interested participants should call 1-877-941-1427 when calling within the United States or 1-480-629-9664 when calling internationally. Please ask for the China Auto Logistics 2013 Year End Earnings Conference Call, Conference ID: 4678872. There will be a playback available until April 18, 2014. To listen to the playback, please call1-877-870-5176 when calling within the United States or 1-858-384-5517 when calling internationally. Use the Replay Pin Number: 4678872.

 

This call is being webcast by ViaVid Broadcasting and can be accessed by clicking on this link http://public.viavid.com/index.php?id=108683 or at ViaVid's website at http://viavid.com

 

SEE ATTACHED TABLES

 

About China Auto Logistics Inc.

China Auto Logistics Inc. is one of China's top sellers of imported luxury vehicles. It also provides a growing variety of "one stop" automobile related services such as short term dealer financing. Additionally, in November, 2013, it acquired the owner and operator of the 26,000 square meter Airport International Automall in Tianjin for $91.4 million, with plans to develop it, among other things, as the flagship site for a used car business, with Car King (China) Used Car Trading Co., Ltd.

 

Information Regarding Forward-Looking Statements

Except for historical information contained herein, the statements in this press release are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause our actual results in future periods to differ materially from forecasted results. These risks and uncertainties include, among other things, product demand, market competition, and risks inherent in our operations. These and other risks are described in our filings with the U.S. Securities and Exchange Commission.

 

 

CHINA AUTO LOGISTICS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

 

 

December 31,

 

 

2013

 

2012

ASSETS:

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

15,041,505

 

$

8,888,749

 

Restricted cash

 

 

29,665,536

 

 

27,015,351

 

Receivable related to auto mall management fees

 

 

255,712

 

 

-

 

Receivable related to financing services

 

 

68,568,562

 

 

57,134,815

 

Notes receivable

 

 

-

 

 

1,587,024

 

Inventories

 

 

15,343,671

 

 

27,141,004

 

Advances to suppliers

 

 

38,074,096

 

 

43,019,343

 

Prepaid expenses

 

 

12,311

 

 

19,071

 

Value added tax receivable

 

 

283,478

 

 

338,513

 

Deferred tax assets

 

 

48,345

 

 

714,161

 

 

Total current assets

 

 

167,293,216

 

 

165,858,031

 

 

 

 

 

 

 

Property, plant, and equipment, net

 

 

72,977,985

 

 

314,126

Ownership interest in Car King Tianjin

 

 

577,904

 

 

-

Goodwill

 

 

20,159,365

 

 

-

Intangible assets, net

 

 

547,155

 

 

-

Other assets

 

 

-

 

 

23,559

Total assets

 

$

261,555,625

 

$

166,195,716

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY:

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Bank overdraft

 

$

2,439,429

 

$

-

 

Lines of credit related to financing services

 

 

66,173,312

 

 

51,528,018

 

Short term borrowings

 

 

6,259,598

 

 

19,673,128

 

Notes payable to suppliers

 

 

21,275,203

 

 

12,696,196

 

Accrued expenses

 

 

236,599

 

 

356,114

 

Customer deposits

 

 

35,205,567

 

 

19,131,420

 

Deferred revenue

 

 

202,428

 

 

241,598

 

Payable related to acquisition of Zhonghe - current portion, net

 

 

15,706,581

 

 

-

 

Due to shareholders

 

 

2,223,458

 

 

2,156,166

 

Due to director

 

 

597,393

 

 

512,023

 

Income tax payable

 

 

174,540

 

 

400,932

 

Deferred tax liability

 

 

786,413

 

 

-

 

 

Total current liabilities

 

 

151,280,521

 

 

106,695,595

 

 

 

 

 

 

 

Payable related to acquisition of Zhonghe, excluding current portion, net

 

 

35,306,223

 

 

-

Deferred tax liability

 

 

12,239,842

 

 

-

 

 

 

Total liabilities

 

 

198,826,586

 

 

106,695,595

 

 

 

 

 

 

 

Commitments and contingencies (Note 17)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CHINA AUTO LOGISTICS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Continued)

 

 

 

December 31,

 

 

2013

 

2012

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

China Auto Logistics Inc. shareholders' equity:

 

 

 

 

 

 

 

Preferred stock, $0.001 par value, 5,000,000 shares authorized, none issued and outstanding

 

 

-

 

 

-

 

Common stock, $0.001 par value, 95,000,000 shares authorized, 4,034,394 shares and 3,694,394 shares issued and outstanding as of December 31, 2013 and 2012, respectively

 

 

4,034

 

 

3,694

 

Additional paid-in capital

 

 

22,979,734

 

 

21,994,074

 

Accumulated other comprehensive income

 

 

7,642,886

 

 

5,923,398

 

Retained earnings

 

 

31,530,669

 

 

31,006,409

 

 

Total China Auto Logistics Inc. shareholders' equity

 

 

62,157,323

 

 

58,927,575

Noncontrolling interests

 

 

571,716

 

 

572,546

 

 

Total equity

 

 

62,729,039

 

 

59,500,121

 

 

 

 

 

 

 

 

 

Total liabilities and shareholders' equity

 

$

261,555,625

 

$

166,195,716

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CHINA AUTO LOGISTICS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

 

 

 

Year Ended December 31,

 

 

 

2013

 

 

2012

 

 

 

 

 

 

 

 

 

 

Net revenue

 

$

459,235,057

 

 

$

591,315,104

 

Cost of revenue

 

 

452,379,416

 

 

 

580,057,718

 

 

 

Gross profit

 

 

6,855,641

 

 

 

11,257,386

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Selling and marketing

 

 

751,114

 

 

 

977,555

 

 

General and administrative

 

 

3,174,780

 

 

 

2,036,436

 

 

Impairment loss of goodwill and intangible assets

 

 

-

 

 

 

4,661,201

 

 

 

Total operating expenses

 

 

3,925,894

 

 

 

7,675,192

 

 

 

 

 

 

 

 

 

 

Income from operations

 

 

2,929,747

 

 

 

3,582,194

 

 

 

 

 

 

 

 

 

 

Other income (expenses):

 

 

 

 

 

 

 

 

 

Interest income

 

 

515,212

 

 

 

230,916

 

 

Interest expense

 

 

(999,360

)

 

 

(531,301

)

 

Loss on disposal of property and equipment

 

 

-

 

 

 

(172,043

)

 

Gain on forgiveness of debt

 

 

-

 

 

 

1,139,861

 

 

Foreign exchange loss

 

 

(217,764

)

 

 

-

 

 

Equity loss - share of investee company loss

 

 

(76,660

)

 

 

-

 

 

Miscellaneous

 

 

-

 

 

 

(72,922

)

 

 

Total other income (loss)

 

 

(778,572

)

 

 

594,511

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

2,151,175

 

 

 

4,176,705

 

 

 

 

 

 

 

 

 

 

Income taxes

 

 

1,634,518

 

 

 

1,596,179

 

 

 

 

 

 

 

 

 

 

Net income

 

 

516,657

 

 

 

2,580,526

 

 

 

 

 

 

 

 

 

 

Less: Net income (loss) attributable to noncontrolling interests

 

 

(7,603

)

 

 

13,439

 

 

 

 

 

 

 

 

 

 

Net income attributable to shareholders of China Auto Logistics Inc.

 

$

524,260

 

 

$

2,567,087

 

 

 

 

 

 

 

 

 

 

Earnings per share attributable to shareholders of China Auto Logistics Inc.

 

 

 

 

 

 

 

 

 

- basic and diluted

 

$

0.14

 

 

$

0.69

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding

 

 

 

 

 

 

 

 

 

- basic and diluted

 

 

3,723,271

 

 

 

3,694,394

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CHINA AUTO LOGISTICS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

Year Ended December 31,

 

 

 

2013

 

 

2012

 

 

 

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

516,657

 

 

$

2,580,526

 

 

 

 

 

 

 

 

 

 

Adjustments to reconcile net income to net cash provided by (used in) operating activities

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

314,126

 

 

 

341,483

 

Loss on disposal of property and equipment

 

 

5,816

 

 

 

172,043

 

Impairment loss of goodwill and intangible assets

 

 

-

 

 

 

4,661,201

 

Gain on forgiveness of debt

 

 

-

 

 

 

(1,139,861

)

Equity loss - share of investee company loss

 

 

76,660

 

 

 

-

 

Stock issuance related to Zhonghe acquisition

 

 

986,000

 

 

 

-

 

Change of deferred tax liabilities

 

 

(32,418

)

 

 

(45,106

)

Inventory reserve

 

 

190,877

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Restricted cash

 

 

(13,792,120

)

 

 

(8,207,076

)

Accounts receivable - trade

 

 

-

 

 

 

107,894

 

Receivable related to auto mall management fees

 

 

(252,403

)

 

 

-

 

Receivables related to financing services

 

 

(9,955,175

)

 

 

32,524,609

 

Notes receivable

 

 

1,615,378

 

 

 

3,172,891

 

Inventories

 

 

13,708,851

 

 

 

1,559,629

 

Advances to suppliers

 

 

9,450,667

 

 

 

1,725,410

 

Prepaid expenses, other current assets and other assets

 

 

33,003

 

 

 

136,617

 

Value added tax receivable

 

 

305,993

 

 

 

287,087

 

Deferred tax assets

 

 

679,201

 

 

 

(713,900

)

Accounts payable

 

 

-

 

 

 

(1,565

)

Lines of credit related to financing services

 

 

13,297,886

 

 

 

(36,588,686

)

Notes payable

 

 

3,230,757

 

 

 

12,691,563

 

Accrued expenses

 

 

(137,505

)

 

 

(54,205

)

Accrued interest on payable related to Zhonghe acquisition

 

 

258,273

 

 

 

-

 

Customer deposits

 

 

15,266,991

 

 

 

(27,722,918

)

Deferred revenue

 

 

(51,867

)

 

 

(78,336

)

Income tax payable

 

 

(235,813

)

 

 

(760,417

)

Net cash provided by (used in) operating activities

 

 

35,479,835

 

 

 

(15,351,117

)

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Acquisition of Zhonghe, net of cash received of $194,445

 

 

(38,574,637

)

 

 

-

 

Repayments of receivable from former owner of Zhonghe

 

 

7,111,260

 

 

 

-

 

Purchase of property and equipment

 

 

(14,842

)

 

 

(6,058

)

Net cash used in investing activities

 

 

(31,478,219

)

 

 

(6,058

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Bank overdraft

 

 

2,407,865

 

 

 

-

 

Proceeds from short-term borrowings

 

 

28,444,740

 

 

 

32,464,014

 

Repayments of short-term borrowings

 

 

(42,472,868

)

 

 

(16,902,607

)

Decrease of restricted cash related to short-term borrowings

 

 

13,462,283

 

 

 

-

 

Proceeds from a director

 

 

862,200

 

 

 

852,075

 

Repayment of amount due to director

 

 

(755,921

)

 

 

(352,335

)

Net cash flows provided by financing activities

 

 

1,948,299

 

 

 

16,061,147

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CHINA AUTO LOGISTICS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Continued)

 

 

 

Year Ended December 31,

 

 

 

2013

 

2012

 

 

 

 

 

 

 

 

 

Effect of exchange rate change on cash

 

 

202,841

 

 

(16

)

 

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

 

6,152,756

 

 

703,956

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at the beginning of year

 

 

8,888,749

 

 

8,184,793

 

Cash and cash equivalents at the end of year

 

$

15,041,505

 

$

8,888,749

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

Interest paid

 

$

3,650,929

 

$

3,905,767

 

Income taxes paid

 

$

1,062,331

 

$

3,115,602

 

 

 

 

 

 

 

 

 

Non cash investing activities:

 

 

 

 

 

 

 

Payable related to the acquisition of Zhonghe

 

$

52,197,645

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

CONTACTS:

 

Sun Jiazhen

sjz_cali@126.com 

 

Ken Donenfeld

DGI Investor Relations Inc.

kdonenfeld@dgiir.com 

Tel: 212-425-5700

Fax: 646-381-9727

 

 

SOURCE: China Auto Logistics Inc.