SOURCE: China Auto Logistics Inc.

China Auto Logistics Inc.

May 15, 2013 07:30 ET

China Auto Logistics Reports 2013 First Quarter Results

Luxury Auto Unit Sales Grew 11% Year Over Year But Aggressive Price Cutting Strategy Reduced Profits Despite Record Financing Services Contribution; 2013 First Quarter Investor Conference Call Scheduled for Friday, May 17th at 8:00am ET

TIANJIN, CHINA--(Marketwired - May 15, 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, reported today that in the first quarter of 2013 the Company continued its aggressive luxury auto price-cutting strategy in order to expand its market share. As anticipated, this led to a year over year decline in net income on narrowed margins, despite an 11% increase in unit sales of luxury autos, and a record contribution to operating income from the Company's high margin Financing Services business.

Mr. Tong Shiping, CEO and Chairman of the Company, stated, "It is of paramount importance to the Company, and its plans to expand new and existing higher margin auto-related services, that we maintain a leadership position in luxury auto sales. While our price cutting strategy currently is squeezing margins, we believe it ultimately will shake out weaker competitors and build our market share. Meanwhile, we remain pleased with the growing contribution to our bottom line from Financing Services, and also are making progress developing other high margin auto-related services opportunities that we hope to be able to report on in the very near future." 

Financial Highlights

  • Net revenues for the three months ended March 31, 2013 increased 0.17% to $107,625,066 from $107,445,586 in the first quarter last year. The main contributor to revenues were Auto Sales which comprised 97.41%, of total revenues, followed by Financing Services, with 1.76%. The percentage contribution to revenues from web-based advertising services declined further to 0.20% reflecting the Company's decision last year to shift the focus of their online presence away from ad revenue generation, in an attempt to create other growth opportunities for their online portal.

  • Income from operations in the 2013 first quarter declined to $1,464,322, primarily due to a sharply lower contribution to operating income from Auto Sales. While this was not offset by contributions to results from the Company's higher margin auto-related services businesses, including financing, web-based advertising and automobile value added services, the combined operating income of these other businesses grew strongly to $1.55 million, up from $1.24 million a year earlier, led by a record $1.05 million contribution from Financing Services, compared to a $704,000 contribution from this business in the year earlier quarter.

  • Net income attributable to shareholders in the 2013 first quarter declined to $1,007,335, or $0.27 per share, compared with $1,581,477, or $0.43 per share in the first quarter of 2012. The weighted average number of diluted common shares in both periods was 3,694,394 shares.

Segment Review

  • In the 2013 first quarter, the Company sold 1,256 automobiles, up 11% from 1,129 automobiles in the same period last year. However, the average unit selling price decreased 8.7% from $92,000 a year earlier to $84,000 per vehicle in the 2013 first quarter. This decline primarily was a consequence of a continuing aggressive pricing strategy aimed at expanding market share and maintaining market leader status. Additionally, reflecting market demand, the Company sold more lower end models of luxury vehicles where gross margins typically are lower than higher end models.

  • Financing Services continued to grow strongly in the 2013 first quarter, although not fully reflected in the revenues for this segment of $1,899,410, compared with $2,000,432 in the first quarter last year. Revenues from this segment are comprised of interest income and fees for services and, while lower interest rates in the period reduced interest income, the fee portion of financing revenue grew 52.24% to $1,329,434. New financing service types and increased pricing also helped grow the Financing Services gross margin percentage in the 2013 first quarter to 69.70%, up from 43.36% in the first three months of 2012. As of March 31, 2013, the Company had aggregate credit lines of approximately $136 million, supporting this business, on which it had drawn approximately $80 million. 

  • The Company also continued to see solid but relatively flat year over year contributions to results in the 2013 first quarter from its other higher margin auto-related services, namely, auto mall management services and automobile value added services.

Outlook

Mr. Tong commented, "We believe we will continue to operate in a strong growth market for luxury car sales in China, where most forecasters see this segment of the market outperforming the anticipated growth in general automobile sales. At the same time, we see continuing competition in the luxury automobile segment necessitating a continuation of our efforts to beat the prices of weaker competitors to expand our market share. To help us with this strategy, we envision a growing contribution over time from our current and planned higher margin auto-services related businesses."

Conference Call Invitation

The Company will discuss 2013 first quarter results during a live conference call and webcast on Friday, May 17th, at 8:00am ET.

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 First Quarter Earnings Conference Call, Conference ID: 4619448. There will be a playback available until May 24, 2013. 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: 4619448.

This call is being webcast by ViaVid Broadcasting and can be accessed by clicking on this link http://public.viavid.com/index.php?id=104737 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.  
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)  
   
    Three Months Ended March 31,  
    2013     2012  
                 
Net revenue   $ 107,625,066     $ 107,445,586  
Cost of revenue     105,397,347       103,915,001  
    Gross profit     2,227,719       3,530,585  
                 
Operating expenses:                
  Selling and marketing     170,034       245,677  
  General and administrative     593,363       841,276  
    Total operating expenses     763,397       1,086,953  
                 
Income from operations     1,464,322       2,443,632  
                 
Other income (expenses)                
  Interest income     222,288       13,364  
  Interest expense     (76,636 )     (86,024 )
  Loss on disposal of property and equipment     -       (45,596 )
  Foreign exchange loss     (166,151 )     -  
    Total other expenses     (20,499 )     (118,256 )
                 
Income before income taxes     1,443,823       2,325,376  
                 
Income taxes     435,500       736,589  
                 
Net income     1,008,323       1,588,787  
                 
Less: Net income attributable to noncontrolling interests     988       7,310  
                 
Net income attributable to shareholders of China Auto Logistics Inc.   $ 1,007,335     $ 1,581,477  
                 
Earnings per share attributable to shareholders of China Auto Logistics Inc.                
  - basic and diluted   $ 0.27     $ 0.43  
                 
Weighted average number of common shares outstanding                
  - basic and diluted     3,694,394       3,694,394  
                 
                 
                 
CHINA AUTO LOGISTICS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 
    March 31, 2013
(Unaudited)
  December 31,
 2012
ASSETS            
Current assets            
  Cash and cash equivalents   $ 2,331,532   $ 8,888,749
  Restricted cash     26,079,907     27,015,351
  Accounts receivable - trade, net of allowance for doubtful accounts of $0 as of March 31, 2013     3,358,600     -
  Receivables related to financing services     71,618,325     57,134,815
  Notes receivable     3,191,523     1,587,024
  Inventories     13,180,620     27,141,004
  Advances to suppliers     75,516,551     43,019,343
  Prepaid expenses     17,055     19,071
  Value added tax refundable     -     338,513
  Deferred tax assets     718,093     714,161
    Total current assets     196,012,206     165,858,031
             
Property and equipment, net     289,524     314,126
Other assets     9,476     23,559
    Total Assets   $ 196,311,206   $ 166,195,716
             
LIABILITIES AND SHAREHOLDERS' EQUITY            
Current liabilities            
  Lines of credit related to financing services   $ 79,949,410   $ 51,528,018
  Short term borrowings     7,210,226     19,673,128
  Accounts payable     262,691     -
  Notes payable to suppliers     12,766,093     12,696,196
  Accrued expenses     321,109     356,114
  Value added tax payable     131,191     -
  Customer deposits     31,645,433     19,131,420
  Deferred revenue     233,686     241,598
  Due to shareholders     2,168,037     2,156,166
  Due to director     513,698     512,023
  Income tax payable     511,817     400,932
    Total current liabilities     135,713,391     106,695,595
             
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 March 31, 2013 and December 31, 2012     3,694     3,694
  Additional paid-in capital     21,994,074     21,994,074
  Accumulated other comprehensive income     6,012,505     5,923,398
  Retained earnings     32,013,744     31,006,409
    Total China Auto Logistics Inc. shareholders' equity     60,024,017     58,927,575
  Noncontrolling interests     573,798     572,546
    Total equity     60,597,815     59,500,121
             
    Total liabilities and shareholders' equity   $ 196,311,206   $ 166,195,716
                 
                 
                 
CHINA AUTO LOGISTICS INC.  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)  
   
    Three Months Ended March 31,  
    2013     2012  
                 
Cash flows from operating activities                
Net income   $ 1,008,323     $ 1,588,787  
                 
Adjustments to reconcile net income to net cash provided by (used for) operating activities                
Depreciation on property and equipment     28,153       50,567  
Amortization on intangible assets     -       59,743  
Loss on disposal of property and equipment     -       45,596  
                 
Changes in operating assets and liabilities:                
Restricted cash     1,082,394       1,751,337  
Accounts receivable - trade     (3,353,088 )     15,902  
Receivables related to financing services     (14,271,668 )     (9,536,708 )
Notes receivable     (1,593,143 )     (7,145,693 )
Inventories     14,086,651 )     877,760  
Advances to suppliers     (32,207,433 )     (21,996,325 )
Prepaid expenses, other current assets and other assets     16,308       66,181  
Value added tax receivable     339,818       400,777  
Accounts payable     262,260       (1,505 )
Line of credit related to financing services     28,162,474       (6,989,185 )
Notes payable to suppliers     -       12,703,454  
Accrued expenses     (36,527 )     (34,984 )
Value added tax payable     130,975       -  
Customer deposits     12,388,325       19,849,649  
Deferred revenue     (9,227 )     (72,992 )
Income tax payable     108,500       (30,820 )
Net cash provided by (used in) operating activities     6,143,095       (8,398,459 )
                 
Cash flows from investing activities                
Purchase of property and equipment     (1,864 )     -  
Net cash used in investing activities     (1,864 )     -  
                 
Cash flows from financing activities                
Proceeds from short-term borrowings     5,842,297       6,242,480  
Repayments of short-term borrowings     (18,582,569 )     -  
Proceeds from director     202,203       499,907  
Repayments to director     (198,263 )     -  
Net cash flows (used in) provided by financing activities     (12,736,332 )     6,742,387  
                 
Effect of exchange rate change on cash     37,884       (517 )
                 
Net decrease in cash and cash equivalents     (6,557,217 )     (1,656,589 )
                 
Cash and cash equivalents at the beginning of period     8,888,749       8,184,793  
Cash and cash equivalents at the end of period   $ 2,331,532     $ 6,528,204  
                 
                 
                 
CHINA AUTO LOGISTICS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Continued)
 
    Three Months Ended March 31,
    2013   2012
             
Supplemental disclosure of cash flow information            
Interest paid   $ 788,038   $ 1,213,210
Income taxes paid   $ 544,000   $ 736,589
             

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