SOURCE: China Auto Logistics Inc.

China Auto Logistics Inc.

April 01, 2013 07:30 ET

China Auto Logistics' 2012 Revenue Grew 31% Year Over Year Led by Another Record Year in Luxury Auto Sales

Lower Margins and Impairment Charges Related to the Downsizing of Goodcar Operations Reduced Net Income Despite Continued Growth in High Margin Financing Services; Luxury Auto Sales Outlook Remains Strong

2012 Year End Investor Conference Call to Be Held Tuesday, April 2nd at 8:00am ET

TIANJIN, CHINA--(Marketwire - Apr 1, 2013) -  China Auto Logistics Inc. (the "Company") (NASDAQ: CALI), a top seller in China of luxury imported automobiles, a leading provider of auto-related services, and developer and operator of a leading automobile portal and auto-related websites, today reported another year of record revenues in 2012 based primarily on continued strong luxury auto sales. At the same time, the Company experienced a year over year reduction in margins and net income mainly resulting from a planned substantial decrease in web-based advertising sales, impairment charges related to its planned termination of Goodcar advertising services, and a margin lowering product mix shift in its luxury imported auto sales business aimed at maintaining the Company's industry leadership position.

Financial Highlights

  • 2012 revenues grew 30.78% compared with the prior year to $591,315,104, led by luxury imported auto sales which grew 32.43% to $581,292,369, and Financing Services sales which advanced 72.72% to $7,085,357.
  • Income from operations in 2012, as reported, was $3,582,194, compared with $11,377,088 in 2011. Non-GAAP adjusted income from operations in 2012 was $8,243,395, down approximately 33% from $12,270,671 a year earlier. Non-GAAP figures exclude impairment charges in 2012 of $4,661,201, for goodwill and intangible assets related to the downsizing of Goodcar, and $893,583 in 2011. 
  • While the Company realized increased operating income from Financing Services and Automobile Value Added Services in 2012, operating income from Web-based Advertising Services decreased as planned from approximately $4.4 million in 2011, to a loss of approximately $4.2 million in 2012, due to the Company's focus shifting away from web advertising and the impairment charge of $4,661,201. Additionally, lower margins on sales of automobiles (as explained below), which was partially offset by increased volume sold, reduced the contribution to operating income from this segment by approximately $.7 million in 2012.
  • As reported, net income attributable to shareholders in 2012 was $2,567,087, or $0.69 per share. On a non-GAAP basis, excluding the impairment loss of goodwill and intangible assets of $3,947,040 (impairment charge of $4,661,201 less income tax benefit of $714,161), adjusted net income attributable to shareholders in 2012 was $6,514,127, or $1.76 per share. Net income attributable to shareholders in 2011 was $8,032,615, or $2.34 per share. On a non-GAAP basis, excluding the impairment loss of goodwill and intangible assets of $893,583 (impairment charge of $893,583 less income tax benefit of $0), adjusted net income attributable to shareholders in 2011 was $8,926,198 or $2.60 per share. Reflecting the Company's 1 for 6 reverse share split in 2012, the weighted average number of shares outstanding as of December 31, 2012 was 3,694,394, compared with 3,437,740 shares a year earlier.

Operations Overview

The major contribution to revenues in 2012 was from the Company's Sales of Automobiles segment. During the year, the Company sold 6,588 automobiles, compared with 4,190 in 2011, a gain in unit volume of just over 57%. At the same time, the average unit selling price in 2012 decreased just over 16% to approximately $88,000 from $105,000 a year earlier. In response to competition from smaller dealers, and with an aim of maintaining leadership in the market, during the year the Company lowered selling prices and gross margins, while also experiencing higher demand for the lower end luxury models of its top selling brands, namely Toyota, BMW and Mercedes. Based on several studies, the Company is optimistic that the growth rate in China for luxury autos will continue to outpace the mainstream auto market, and that China will shortly become the world's top market for most major luxury autos. With this in mind, continuing the rapid growth of this business remains the Company's key focus.

The sharpest sales gain during the year came from the Company's Financing Services business, which contributed approximately $2.98 million to income from operations on just under $7.1 million in revenues. The Company had an aggregate amount of approximately $135 million in credit lines to support this business as of December 31, 2012. During the year, banks tightened requirements for credit lines, with outcomes such as requiring personal guarantees by the Company's executives and directors or major customers and suppliers. Nevertheless, the Company does not foresee any difficulty at this time in accessing credit lines or other bank facilities and maintains good relationships with several major commercial banks in China. The Company also engages in negotiations regularly with these and other banks to obtain bigger lines of credit on more favorable terms.

In 2012 the Company pursued its strategic decision to limit and/or exit web-based advertising activities which, in prior years, were key high margin contributors to its profits. As a consequence, the contribution to revenue from this sector was reduced to under $1 million during the year and operating income was negatively impacted. As the Company has shifted from generating advertising revenue on its websites to utilizing them as marketing tools for current and potential customers, management believes opportunities are being created for the growth of other current and potential products and services which will outweigh the sacrifice of revenues. In conjunction with these decisions, the Company ceased all Goodcar advertising operations, but continues to operate the website to promote its products in other segments. The Company also reduced its website coverage to a single city -- the important port city of Tianjin -- and is reviewing future geographical coverage. During the year, the contributions to operating income from Auto Mall Management Services was about flat with the prior year, while the contribution to operating income from Automobile Value Added Services, which included terminated Goodcar activities, nevertheless slightly increased.

Growth Outlook

Mr. Tong Shiping, CEO and Chairman of the Company, stated, "Our decisions with respect to exiting web-based advertising and the advertising sales and related promotional services of Goodcar stemmed from recognition of the costs required to remain competitive in these areas. However, they mainly reflect our decision to remain true to our growth strategy, which is to allocate whatever resources are required to continue our leadership in luxury auto sales, around which we aim to grow higher margin automobile related services businesses. Maintaining our leadership in luxury auto sales -- which we strongly believe will continue to be a rapidly growing business in China -- also was behind the shift in our auto sales mix, which increased unit sales at the expense of slightly better margins."

He added, "Especially given the relatively weaker Chinese economy in 2012, we were very pleased with the top line growth we achieved based on continuing strong demand in China for luxury autos. We also had a further glimpse of our potential for the future in the substantial growth we achieved in our higher margin Financing Services business. We did not announce any developments during the year with regard to other profitable new services we hope to build in the future around growing awareness of our leadership in luxury auto sales. However, we did make progress that is continuing in the current year and look forward to sharing this progress at the appropriate time."

"All in all," Mr. Tong continued, "we remain very positive about our future growth outlook, which we believe has yet to be reflected in our share price."

Explanation of Non-GAAP Results

In addition to disclosing financial results in accordance with accounting principles generally accepted in the United States (GAAP), this earnings release contains non-GAAP financial measures that the Company believes are helpful in understanding and comparing past financial performance and future results. These non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations from these results should be carefully evaluated. Management believes the non-GAAP financial measures are appropriate for period to period comparisons in its budget, planning and evaluation processes, and to show the reader how the Company's performance compares to other periods. 

Conference Call Invitation

The Company will discuss 2012 year end results during a live conference call and webcast on Tuesday, April 2nd at 8:00am ET.

To participate in the call, interested participants should call 1-877-941-2068 when calling within the United States or 1-480-629-9712 when calling internationally. Please ask for the China Auto Logistics 2012 Year End Earnings Conference Call, Conference ID: 4609602. There will be a playback available until 04/09/13. 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: 4609602.

This call is being webcast by ViaVid Broadcasting and can be accessed by clicking on this link http://public.viavid.com/index.php?id=103982 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, and also manages China's largest imported auto mall in Tianjin. Additionally, it operates www.cali.com.cn, one of the leading automobile portals in China, as well as three major websites serving China's auto dealers and their customers. The Company also provides a growing variety of "one stop" automobile related services such as short term dealer financing. Additional information about the Company is available at www.chinaautologisticsinc.com.

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 STATEMENTS OF INCOME  
   
    Year Ended December 31,  
    2012     2011  
                 
Net revenue   $ 591,315,104     $ 452,149,602  
Cost of revenue     580,057,718       436,010,820  
    Gross profit     11,257,386       16,138,782  
                 
Operating expenses:                
  Selling and marketing     977,555       1,488,408  
  General and administrative     2,036,436       2,379,703  
  Impairment loss of goodwill and intangible assets     4,661,201       893,583  
    Total operating expenses     7,675,192       4,761,694  
                 
Income from operations     3,582,194       11,377,088  
                 
Other income (expenses):                
  Interest income     230,916       63,922  
  Interest expense     (531,301 )     (16,641 )
  Loss on disposal of property and equipment     (172,043 )     7,736  
  Gain on forgiveness of debt     1,139,861       -  
  Miscellaneous     (72,922 )     3,730  
    Total other income     594,511       58,747  
                 
Income before income taxes     4,176,705       11,435,835  
                 
Income taxes     1,596,179       3,303,177  
                 
Net income     2,580,526       8,132,658  
                 
Less: Net income attributable to noncontrolling interests     13,439       100,043  
                 
Net income attributable to shareholders of China Auto Logistics Inc.   $ 2,567,087     $ 8,032,615  
                 
Earnings per share attributable to shareholders of China Auto Logistics Inc.                
  - basic and diluted   $ 0.69     $ 2.34  
                 
Weighted average number of common shares outstanding                
  - basic and diluted     3,694,394       3,437,740  
                 
                 
CHINA AUTO LOGISTICS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 
      December 31,
      2012   2011
ASSETS:              
Current assets:              
  Cash and cash equivalents     $ 8,888,749   $ 8,184,793
  Restricted cash       27,015,351     18,805,876
  Accounts receivable - trade, net of allowance for doubtful accounts of $0 and $2,796 in 2012 and 2011, respectively       -     107,936
  Receivables related to financing services       57,134,815     89,252,244
  Notes receivable       1,587,024     4,761,225
  Inventories       27,141,004     28,702,113
  Advances to suppliers       43,019,343     44,746,804
  Prepaid expenses       19,071     141,665
  Value added tax receivable       338,513     625,724
  Deferred tax assets       714,161     -
    Total current assets       165,858,031     195,328,380
               
Property and equipment, net       314,126     642,672
Goodwill       -     3,736,573
Intangible assets, net       -     1,419,830
Other assets       23,559     37,637
    Total assets     $ 166,195,716   $ 201,165,092
               
LIABILITIES AND SHAREHOLDERS' EQUITY:              
Current liabilities:              
  Lines of credit related to financing services     $ 51,528,018   $ 87,710,957
  Short term borrowings       19,673,128     4,285,102
  Accounts payable       -     1,566
  Notes payable to suppliers       12,696,196     -
  Accrued expenses       356,114     446,264
  Customer deposits       19,131,420     46,865,945
  Deferred revenue       241,598     319,974
  Due to shareholders       2,156,166     3,296,548
  Due to director       512,023     22,316
  Income tax payable       400,932     1,161,664
    Total current liabilities       106,695,595     144,110,336
               
Deferred tax liability       -     359,342
    Total liabilities       106,695,595     144,469,678
               
               
CHINA AUTO LOGISTICS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Continued)
 
  December 31,
  2012   2011
           
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, 3,694,394 shares issued and outstanding as of December 31, 2012 and 2011   3,694     3,694
  Additional paid-in capital   21,994,074     21,994,074
  Accumulated other comprehensive income   5,923,398     5,699,444
  Retained earnings   31,006,409     28,439,322
    Total China Auto Logistics Inc. shareholders' equity   58,927,575     56,136,534
Noncontrolling interests   572,546     558,880
    Total equity   59,500,121     56,695,414
           
    Total liabilities and shareholders' equity $ 166,195,716   $ 201,165,092
               

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