SOURCE: China Auto Logistics, Inc.

China Auto Logistics Reports 2014 First Quarter Results

Net Loss Recorded in the Quarter With Auto Mall and Used Auto Joint Venture Not Expected to Be on Stream Until the Second Half of the Year

Auto Sales Margins Stabilize With Improved High End Sales Mix

 

China Auto Logistics 2014 First Quarter Investor Conference Call Scheduled for Monday, May 19th at 8:00am ET

 

China Auto Logistics Inc. (the "Company" or "CALI") (NASDAQ: CALI), a top seller in China of luxury imported automobiles, a leading provider of auto-related services and a soon to be entrant in used car sales in China, today reported that revenues in its first quarter ended March 31, 2014, were down slightly compared with last year's first quarter to approximately $107 million. Higher interest and non-cash depreciation expense coupled with reduced Financial Services income, with no offsetting revenues of any magnitude or income as yet from the new used car joint venture, Car King Tianjin, or the recently acquired Airport International Auto Mall, led to an approximately $1.35 million loss in the first quarter. On a positive note, the Company saw gross margins in its Auto Sales business, which contributed almost 98% of revenues in the first quarter, improve slightly for the first time in several quarters and believes they have stabilized.

 

Mr. Tong Shiping, Chairman and CEO of the Company commented, "While maintaining our leadership position in the highly competitive imported luxury auto sales business, we also were able to stabilize margins with an improved mix of sales that greatly increased our average price per vehicle. While this business is likely to remain highly competitive, we remain optimistic about its long-term future. At the same time, we were able to move ahead with major steps in our diversification strategy with the acquisition we made, and the used car joint venture we concluded near the end of 2013. Both should begin to come on stream in the second half of the year." He added, "It will be somewhat painful to absorb the additional expense as we finalize our strategy. However, we believe it will be very worthwhile, given the size and growth of the used car market in China, and the excellent location of the new mall in what we hope will become another Free Trade Zone before year end."

 

Financial Highlights

 

-          Revenues in the first quarter of 2014 were $106,975,050, down 0.60% from $107,625,066 a year earlier. The 2014 figure does not include revenues from Car King Tianjin, which are accounted for under the equity method of accounting as the Company's equity interest is less than half at 40%. Sales of Automobiles accounted for 97.90% of revenues in the quarter, up from 97.41% a year earlier.

 

-          Gross profit margins for sales of automobiles stabilized at 0.17% in the quarter, up from 0.04% a year earlier. Nevertheless, the overall gross profit margin in the quarter was 1.33% compared with 2.07% in the first quarter last year, as gross profits declined to $1,423,797 from $2,227,719 year over year. A key factor in this result was a decline in the gross margins of Financing Services to 36.45% in the quarter from 69.7% a year earlier, as the Company temporarily ceased providing certain Financing Services due to a reutilization of available funds to finance the Zhonghe acquisition and to provide a working capital loan to Car King Tianjin.

 

-          The aforementioned reduction in Financing Services offerings, one fewer month of Auto Mall Management Services revenue due to the expiration of the Auto Mall Management Services contract in February, and a decline in revenues from Value Added Auto Services and Web Based Advertising Services all contributed to a loss in income from operations in the quarter of $7,562, compared with operating income of $1,464,322 a year earlier.

 

-          Car King Tianjin had a net loss in the quarter of $738,160, which resulted in a reported loss to the Company of $295,264 from its 40% equity investment. 

 

-          There were also significant acquisition related interest, depreciation and amortization costs in the quarter. In particular, interest expense in the quarter increased to $1,322,583 from $76,636 a year earlier, and depreciation on the Airport International Auto Mall property increased this expense to $644,889 from $28,153 a year earlier.

 

-          Reflecting in particular the reduced income from operations (particularly from Financing Services) and the increased interest and depreciation costs, a loss attributable to shareholders was incurred in the quarter of $1,346,167, or ($0.33) per share, as compared with year earlier net income of $1,007,335, or $0.27 per share.

 

Operational Highlights

 

Sales of Automobiles in the quarter continued to be affected by the slower economy and steep competition in the luxury imported auto space. Revenue in the quarter was down 0.1% year over year. While the Company sold 981 automobiles in the quarter, down 22% from a year earlier volume of 1,256 automobiles, the average unit selling price increased to $106,000 compared with $84,000 a year earlier. This increase came largely from the sale of higher end vehicles and resulted in a small increase in gross margin.

 

Financing Services revenues in the quarter declined 18.76% year over year to $1,543,169, as the decision was made to discontinue the fee service of providing customers with credit beyond the financing terms provided by banks. The Company determined that the working capital needed to provide this service would be better utilized in financing the Zhonghe acquisition and provide working capital to Car King Tianjin. The contribution from financing fees to operating income also therefore declined to $570,531 although interest income increased to $972,638. In future periods, it is anticipated that the revenue lost from discontinuing this product will be replaced by restoring the product or by other new products.

 

Airport Auto Mall Services - A small amount of revenue was generated in the quarter by leasing space in the Airport International Auto Mall to Car King Tianjin. The Company continues to finalize its plans for both the facility and the used car business, and expects that they will begin to come to fruition in the second half of this year.

 

Outlook

 

"As we indicated last quarter," Mr. Tong said, "We anticipate having to work very hard to try to overcome the continuing obstacles in the luxury auto sales space, including the slow economy, the government's concerns with auto pollution and fierce competition. However, we believe stability on the auto sales bottom line will continue as we focus on the best possible approach to optimizing our entry into the used car arena, and determining the best possible uses of our new auto mall. Our optimism for the longer term is well founded, we believe, given our size and stature in the auto industry, and the growth still being forecasted for both luxury autos and used cars, as well for auto related services such as dealer financing."

 

Commenting on the recent publicity surrounding the SEC complaint filed against several individuals for alleged improprieties with respect to CALI shares, Mr. Tong stated, "We spend a lot of time and effort to comply with SEC requirements and operate our business with the best interests of our shareholders in mind. As such, we strongly endorse the SEC's actions whenever they take steps to protect shareholders and try to maintain an even playing field for all investors." 

 

Conference Call Invitation

 

The Company will discuss 2014 first quarter results during a live conference call and webcast on Monday, May 19, 2014 at 8:00 am Eastern Time. 

 

To participate in the call, interested participants should call 1-877-941-8416 when calling within the United States or 1-480-629-9808 when calling internationally. Please ask for the China Auto Logistics 2014 First Quarter Earnings Conference Call, Conference ID: 4683974. There will be a playback available until May 26, 2014. To listen to the playback, please call 1-877-870-5176 when calling within the United States or 1-858-384-5517 when calling internationally. Use the Replay Pin Number: 4683974.

 

This call is being webcast by ViaVid Broadcasting and can be accessed by clicking on this link http: http://public.viavid.com/index.php?id=109326 or at ViaVid's website at http://viavid.com

 

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.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

March 31,
2014
(Unaudited)

 


December 31,
2013

ASSETS

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

10,364,520

 

$

15,041,505

 

Restricted cash

 

 

38,116,578

 

 

29,665,536

 

Accounts receivable - trade, Car King Tianjin

 

 

324,575

 

 

-

 

Receivable related to auto mall management fees

 

 

-

 

 

255,712

 

Receivables related to financing services

 

 

104,290,689

 

 

68,568,562

 

Inventories

 

 

17,903,606

 

 

15,343,671

 

Advances to suppliers

 

 

42,189,218

 

 

38,074,096

 

Prepaid expenses

 

 

45,436

 

 

12,311

 

Value added tax refundable

 

 

714,859

 

 

283,478

 

Deferred tax assets

 

 

12,657

 

 

48,345

 

 

Total current assets

 

 

213,962,138

 

 

167,293,216

 

 

 

 

 

 

 

Property and equipment, net

 

 

71,722,521

 

 

72,977,985

Ownership interest in Car King Tianjin

 

 

280,028

 

 

577,904

Due from Car King Tianjin

 

 

1,298,301

 

 

-

Goodwill

 

 

19,990,877

 

 

20,159,365

Intangible assets, net

 

 

514,993

 

 

547,155

 

 

Total Assets

 

$

307,768,858

 

$

261,555,625

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Bank overdraft

 

$

2,415,942

 

$

2,439,429

 

Lines of credit related to financing services

 

 

94,060,031

 

 

66,173,312

 

Short term borrowings

 

 

34,612,971

 

 

6,259,598

 

Accounts payable

 

 

189,517

 

 

-

 

Notes payable to suppliers

 

 

11,360,132

 

 

21,275,203

 

Accrued expenses

 

 

398,536

 

 

236,599

 

Customer deposits

 

 

36,569,643

 

 

35,205,567

 

Deferred revenue

 

 

179,793

 

 

202,428

 

Payable related to acquisition of Zhonghe - current portion, net

 

 

15,883,504

 

 

15,706,581

 

Due to shareholders

 

 

2,204,875

 

 

2,223,458

 

Due to director

 

 

504,380

 

 

597,393

 

Income tax payable

 

 

230,470

 

 

174,540

 

Deferred tax liability

 

 

718,202

 

 

786,413

 

 

Total current liabilities

 

 

199,327,996

 

 

151,280,521

 

 

 

 

 

 

 

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

 

 

35,685,728

 

 

35,306,223

Deferred tax liability

 

 

11,902,184

 

 

12,239,842

 

 

 

Total liabilities

 

 

246,915,908

 

 

198,826,586

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 issued and outstanding as of March 31, 2014 and December 31, 2013

 

 

4,034

 

 

4,034

 

Additional paid-in capital

 

 

22,979,734

 

 

22,979,734

 

Accumulated other comprehensive income

 

 

7,114,641

 

 

7,642,886

 

Retained earnings

 

 

30,184,501

 

 

31,530,669

 

 

Total China Auto Logistics Inc. shareholders' equity

 

 

60,282,910

 

 

62,157,323

Noncontrolling interests

 

 

570,040

 

 

571,716

 

 

Total equity

 

 

60,852,950

 

 

62,729,039

 

 

 

 

 

 

 

 

 

Total liabilities and shareholders' equity

 

$

307,768,858

 

$

261,555,625

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CHINA AUTO LOGISTICS INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

 

 

 

 

 

Three Months Ended March 31,

 

 

 

2014

 

 

2013

 

 

 

 

 

 

 

 

Net revenue

 

$

106,975,050

 

 

$

107,625,066

 

Cost of revenue

 

 

105,551,253

 

 

 

105,397,347

 

 

 

 

Gross profit

 

 

1,423,797

 

 

 

2,227,719

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Selling and marketing

 

 

186,527

 

 

 

170,034

 

 

General and administrative

 

 

1,244,832

 

 

 

593,363

 

 

 

Total operating expenses

 

 

1,431,359

 

 

 

763,397

 

 

 

 

 

 

 

 

 

 

(Loss) income from operations

 

 

(7,562

)

 

 

1,464,322

 

 

 

 

 

 

 

 

 

 

Other income (expenses)

 

 

 

 

 

 

 

 

 

Interest income

 

 

60,900

 

 

 

222,288

 

 

Interest expense

 

 

(1,322,583

)

 

 

(76,636

)

 

Gain on disposal of property and equipment

 

 

11,694

 

 

 

-

 

 

Equity loss - share of investee company loss

 

 

(295,264

)

 

 

-

 

 

Foreign exchange loss

 

 

(96

)

 

 

(166,151

)

 

 

Total other expenses

 

 

(1,545,349

)

 

 

(20,499

)

 

 

 

 

 

 

 

 

 

(Loss) income before income taxes

 

 

(1,552,911

)

 

 

1,443,823

 

 

 

 

 

 

 

 

 

 

Income tax (benefit) expense

 

 

(205,873

)

 

 

435,500

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

 

(1,347,038

)

 

 

1,008,323

 

 

 

 

 

 

 

 

 

 

Less: Net (loss) income attributable to noncontrolling interests

 

 

(871

)

 

 

988

 

 

 

 

 

 

 

 

 

 

Net (loss) income attributable to shareholders of China Auto Logistics Inc.

 

$

(1,346,167

)

 

$

1,007,335

 

 

 

 

 

 

 

 

 

 

(Loss) earnings per share attributable to shareholders of China Auto Logistics Inc.- basic and diluted

 

$

(0.33

)

 

$

0.27

 

 

 

 

 

 

 

 

 

 

Weighted average number of common share Outstanding - basic and diluted

 

 

4,034,494

 

 

 

3,694,394

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CHINA AUTO LOGISTICS INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 

 

 

 

 

Three Months Ended March 31,

 

 

 

2014

 

 

2013

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(1,347,038

)

 

$

1,008,323

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

Depreciation on property and equipment

 

 

672,605

 

 

 

28,153

 

Gain on disposal of property and equipment

 

 

(11,694

)

 

 

-

 

Equity loss - share of investee company loss

 

 

295,264

 

 

 

-

 

Change of Inventory reserve

 

 

(142,203

)

 

 

-

 

Change of deferred tax assets

 

 

35,551

 

 

 

-

 

Change of deferred tax liabilities

 

 

(101,202

)

 

 

-

 

 

 

 

 

 

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Restricted cash

 

 

10,270,967

 

 

 

1,082,394

 

Accounts receivable - trade, Car King Tianjin

 

 

(327,033

)

 

 

(3,353,088

)

Receivable related to auto mall management fees

 

 

255,494

 

 

 

-

 

Receivables related to financing services

 

 

(36,569,995

)

 

 

(14,271,668

)

Notes receivable

 

 

-

 

 

 

(1,593,143

)

Inventories

 

 

(2,566,324

)

 

 

14,086,651

 

Advances to suppliers

 

 

(4,466,903

)

 

 

(32,207,433

)

Prepaid expenses, other current assets and other assets

 

 

(33,479

)

 

 

16,308

 

Value added tax receivable

 

 

(437,033

)

 

 

339,818

 

Accounts payable

 

 

190,380

 

 

 

262,260

 

Line of credit related to financing services

 

 

28,655,094

 

 

 

28,162,474

 

Notes payable to suppliers

 

 

(9,810,975

)

 

 

-

 

Accrued expenses

 

 

164,962

 

 

 

(36,527

)

Accrued interest

 

 

792,178

 

 

 

-

 

Value added tax payable

 

 

-

 

 

 

130,975

 

Customer deposits

 

 

1,670,872

 

 

 

12,388,325

 

Deferred revenue

 

 

(21,101

)

 

 

(9,227

)

Income tax payable

 

 

57,823

 

 

 

108,500

 

Net cash (used in) provided by operating activities

 

 

(12,773,790

)

 

 

6,143,095

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Proceeds from disposal of property and equipment

 

 

17,954

 

 

 

-

 

Purchase of property and equipment

 

 

(652

)

 

 

(1,864

)

Advances to Car King Tianjin

 

 

(1,308,130

)

 

 

-

 

Net cash used in investing activities

 

 

(1,290,828

)

 

 

(1,864

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Bank overdraft

 

 

(3,122

)

 

 

-

 

Proceeds from short-term borrowings

 

 

31,875,389

 

 

 

5,842,297

 

Repayments of short-term borrowings

 

 

(3,254,646

)

 

 

(18,582,569

)

Decrease in restricted cash related to short-term borrowings

 

 

(19,035,807

)

 

 

-

 

Proceeds from director

 

 

205,942

 

 

 

202,203

 

Repayments to director

 

 

(310,728

)

 

 

(198,263

)

Net cash provided by (used in) financing activities

 

 

9,477,028

 

 

 

(12,736,332

)

 

 

 

 

 

 

 

 

 

Effect of exchange rate change on cash

 

 

(89,395

)

 

 

37,884

 

 

 

 

 

 

 

 

 

 

Net decrease in cash and cash equivalents

 

 

(4,676,985

)

 

 

(6,557,217

)

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at the beginning of period

 

 

15,041,505

 

 

 

8,888,749

 

Cash and cash equivalents at the end of period

 

$

10,364,520

 

 

$

2,331,532

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

 

 

Interest paid

 

$

1,590,426

 

 

$

788,038

 

Income taxes paid

 

$

-

 

 

$

544,000

 

 

 

 

 

 

 

 

 

 

 

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.