China Auto Logistics Reports 2016 Full Year Results

TIANJIN, CHINA--(Marketwired - Mar 28, 2017) - 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, today reported that strong fourth quarter Auto Sales were a key factor in the approximately 4.6% year over year increase achieved in net revenues in 2016. Additionally, improved 2016 year over year bottom line results in Financing Services, despite lower year over year sales in this business, helped to significantly reduce the Company's net loss from continuing operations in 2016 compared with year ago results. 

Financial Highlights

• Net revenue for the year ended December 31, 2016 was $467,060,769, a gain of 4.64% over net revenue of $446,344,447 in the prior year.
  
  
• The 2016 net loss attributable to shareholders of China Auto Logistics from continuing operations of $(741,176) or $(0.18) per share, was a significant improvement over the net loss reported in 2015 of $(9,554,918) or $(2.37) per share.
  
  
• 2016 total net income, which included net income from discontinued operations of $4,724,832, increased to $3,983,656, or $0.99 per share, as compared with a loss of $(12,014,594) or $(2.98) per share in 2015.
  
  
• Net revenue from Sales of Automobiles increased 4.99% to $462,712,818 in 2016 on a 5.7% increase in sales volume, while operating income from this business in 2016 increased to $261,478 from a loss in 2015 of $(3,778,533).
  
  
• Despite a decline in net revenue from Financing Services in 2016 of approximately 22.51% to $4,314,291, operating income from this business increased to $1,168,420 from a loss of $(1,664,990) a year earlier.
  
  
• For the full year ended December 31, 2016 the Company reported sharply lower interest expense of $1,519,016 as compared with $2,858,299 in 2015, as a result of lower average balance of short-term borrowings following the sale of Zhonghe in June of 2016.
  
  
• Cash, cash equivalents totaled $3,004,932 as of December 31, 2016.
  
  
• As of December 31, 2016 the Company also had positive working capital of $23,576,035 as compared with a working capital deficit of $(30,801,730) as of the same date in 2015. Despite an improved financial picture, the Company reported negative operating cash flow for 2016 and a smaller but still accumulated deficit as of December 31, 2016 which were key factors in determining the inclusion of a "going concern" paragraph in the Notes to the Company's Condensed Consolidated Financial Statements for 2016.
  
  

Sales of Automobiles

During 2016, the Company sold 4,438 automobiles, up 5.7% from the prior year's sales volume of 4,199 automobiles. However, the average unit sales price in 2016 declined slightly from $105,000 in 2015 to $104,000, and the gross margin dropped to 0.20% in 2016 compared with 0.26% in the prior year. This was a reflection of the continuing competition in the imported automobile market, and the Company's attempt to remain a leader in this market.

The Company's top three selling brands in 2016 were Land Rover, Mercedes Benz and Toyota. The strongest sales in 2016 occurred in the first quarter, followed by weaker second and third quarters, reflecting the reaction of the Company's dealer customers to currency fluctuations. The strong sales of $139.9 million recognized in the fourth quarter, in part, may have reflected customers' depletion of built up inventories earlier in the year.

The Company believes that sales during 2016 were helped somewhat by the implementation of the government's parallel import scheme, which placed importers such as CALI on equal competitive footing with authorized automobile importers.

Financing Services

Financing Services in 2016 was again the largest contributor to the Company's operating income given its typically much larger profit margins compared with automobile sales. While net revenues from this business decreased approximately 22.51% to $4,314,291 in 2016 compared with $5,567,208 in 2015, reflecting declines in both fee income and interest income, the gross margin for this business increased to 46.28% in 2016 compared with 39.52% in 2015.

As of December 31, 2016, the Company had aggregate credit lines of approximately $125 million to support its financing services, of which $78 million remained available to be used. These credit lines are with several of China's largest commercial banks, and the Company has not had any formidable difficulties in obtaining these bank lines.

Management Comments on Results and Outlook

Mr. Tong Shiping, Chairman and CEO of China Auto Logistics, commented, "During the past year we made the decision to sell Zhonghe, which strengthened our financial situation and permitted us to compete more effectively in the still very competitive imported automobile space. We were aided further by the implementation of the still new 'Parallel Imported Vehicle' scheme, which has created a much better climate for sales by wholesalers such as ourselves, as our customers can now obtain the same benefits buying from us as they would have buying from 'authorized' dealers." He added, "In fact, we believe the new scheme strengthens certain advantages that we will continue to capitalize on, such as faster access to the newest luxury models."

"Over the near term, while we will aim to continue our leadership in imported vehicles, and, at the least, maintain our current margins," Mr. Tong said, "we also will continue to try to expand our higher margin financing services, as well as add new services, such as online sales, which is one such new service we are continuing to explore."

"Longer term," Mr. Tong continued, "we remain very positive about the outlook for luxury imported automobile sales in China as the economy continues to grow and create new wealthy consumers."

Conference Call Invitation

The Company will discuss 2016 year end results during a live conference call and webcast on Wednesday, March 29, 2017 at 8:00am EDT.

To participate in the call, interested participants should call 1-877-419-6591 when calling within the United States or 1-719-325-4745 when calling internationally. Please ask for the Conference ID: 5567235. There will be a playback available until 04/05/17. To listen to the playback, please call 1-844-512-2921 when calling within the United States or 1-412-317-6671 when calling internationally. Use the Replay Pin Number: 5567235.

This call is being webcast by ViaVid Broadcasting and can be accessed by clicking on this link http://public.viavid.com/index.php?id=123536 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 variety of "one stop" automobile related services such as short term dealer financing.

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. We do not undertake any obligation to publicly update these forward-looking statements, whether as a result of new information, future events or otherwise.

CHINA AUTO LOGISTICS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
	December 31,
	2016			2015
ASSETS:
Current assets:
Cash and cash equivalents	$	3,004,932		$	7,119,686
Restricted cash		22,703,835			23,799,346
Receivable related to financing services, net		48,549,972			82,105,826
Inventories, net		13,049,065			12,163,511
Advances to suppliers, net		71,921,388			100,807,121
Prepaid expenses		376,581			29,372
Value added tax receivable		615,555			369,940
Total current assets		160,221,328			226,394,802
Property, plant, and equipment, net		317,282			72,742
Other assets		30,329			-
Non current assets of discontinued operations		-			61,755,609
Total assets	$	160,568,939		$	288,223,153
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Bank overdraft	$	-		$	2,131,009
Lines of credit related to financing services		47,081,763			73,004,179
Short term borrowings		12,961,389			67,290,734
Accounts payable		365,120			1,334,829
Notes payable to suppliers		25,922,779			33,509,483
Accrued expenses		131,128			273,497
Customer deposits		46,047,515			39,901,621
Deferred revenue		48,171			121,456
Due to former shareholder		1,956,625			2,093,182
Due to director		1,550,745			722,028
Income tax payable		580,058			656,098
Current liabilities of discontinued operations		-			36,158,416
Total current liabilities		136,645,293			257,196,532
Non current liability of discontinued operations		-			9,248,814
Total liabilities		136,645,293			266,445,346
Commitments and contingencies

CHINA AUTO LOGISTICS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Continued)
	December 31,
	2016				2015
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 December 31, 2016 and 2015, respectively		4,034				4,034
Additional paid-in capital		22,979,734				22,979,734
Accumulated other comprehensive income		3,939,898				5,776,306
Accumulated deficit		(3,363,566	)			(7,347,222	)
Total China Auto Logistics Inc. shareholders' equity		23,560,100				21,412,852
Noncontrolling interests		363,546				364,955
Total equity		23,923,646				21,777,807
Total liabilities and shareholders' equity	$	160,568,939			$	288,223,153

CHINA AUTO LOGISTICS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
	Year Ended December 31,
	2016				2015
Net revenue	$	467,060,769			$	446,344,447
Cost of revenue		464,099,247				442,944,716
Gross profit		2,961,522				3,399,731
Operating expenses:
Selling and marketing		700,928				761,307
General and administrative		1,869,156				1,649,559
Reserve for uncollectible account on receivable related to financing services		158,092				3,216,727
Impairment loss on goodwill and intangible asset		-				4,281,414
Total operating expenses		2,728,176				9,909,007
Income (loss) from operations		233,346				(6,509,276	)
Other income (expenses):
Interest income		541,070				278,392
Interest expense		(1,519,016	)			(2,858,299	)
Gain (loss) on disposal of property and equipment		5,613				(8,085	)
Loss on sale of equity interest in subsidiary		-				(210,895	)
Foreign exchange gain		109,670				-
Miscellaneous		-				1,879
Total other expenses		(862,663	)			(2,797,008	)
Loss from continuing operations before income tax expense		(629,317	)			(9,306,284	)
Income tax expense		113,163				249,988
Net loss from continuing operations		(742,480	)			(9,556,272	)
Discontinued operations:
Income (loss) from operations of discontinued Airport Automall Automotive Services (including gain on disposal of $6,629,243 for 2016)		4,479,736				(3,435,730	)
Income tax benefit		245,096				976,054
Net income (loss) from discontinued operations		4,724,832				(2,459,676	)
Net income (loss)		3,982,352				(12,015,948	)
Less: Net loss attributable to noncontrolling interests		(1,304	)			(1,354	)
Net income (loss) attributable to shareholders of China Auto Logistics Inc.	$	3,983,656				(12,014,594	)
Net income (loss) attributable to shareholders of China Auto Logistics Inc.
- continuing operations	$	(741,176	)			(9,554,918	)
- discontinued operations		4,724,832				(2,459,676	)
	$	3,983,656				(12,014,594	)
income (loss) per share attributable to shareholders of China Auto Logistics Inc. from
- continuing operations - basic and diluted	$	(0.18	)			(2.37	)
- discontinued operations - basic and diluted	$	1.17				(0.61	)
Total income (loss) per share attributable to shareholders of China Auto Logistics Inc.	$	0.99			$	(2.98	)
Weighted average number of common shares outstanding
- basic and diluted		4,034,494				4,034,494

CHINA AUTO LOGISTICS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
	Year Ended December 31,
	2016				2015
Net income (loss)	$	3,982,352			$	(12,015,948	)
Other comprehensive loss
- Foreign currency translation adjustments		(1,836,513	)			(1,553,261	)
Comprehensive income (loss)		2,145,839				(13,569,209	)
Less: Comprehensive (loss) income attributable to noncontrolling Interests		(1,409	)			74
Comprehensive income (loss) attributable to shareholders of China Auto Logistics Inc.	$	2,147,248			$	(13,569,283	)

CHINA AUTO LOGISTICS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
		Year Ended December 31,
		2016				2015
Cash flows from operating activities:
Net income (loss)		$	3,982,352			$	(12,015,948	)
Add: loss from discontinued operations			1,904,411				2,459,676
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
Depreciation and amortization			80,709				165,950
(Gain) loss on disposal of property and equipment			(5,613	)			8,085
Impairment loss on goodwill and intangible asset			-				4,281,414
Reserve for uncollectible account on receivable related to financing services			158,092				3,216,727
(Recovery) allowance for uncollectible advances to suppliers			(75,267	)			102,573
Gain on sale of Zhonghe			(6,629,243	)			-
Loss on sale of equity interest in subsidiary			-				210,895
Changes in operating assets and liabilities:
Restricted cash			(33,595,344	)			(12,828,262	)
Receivables related to financing services			29,317,679				11,541,198
Inventories			(2,009,455	)			(282,015	)
Advances to suppliers			(65,408,469	)			(37,540,818	)
Prepaid expenses, other current assets and other assets			(365,559	)			(6,936	)
Value added tax receivable			(284,980	)			71,697
Other assets			(31,702	)			-
Accounts payable			(922,577	)			1,295,039
Lines of credit related to financing services			(22,117,471	)			13,906,901
Notes payable			35,751,865				18,898,271
Accrued expenses			247,112				(38,617	)
Customer deposits			10,114,574				3,769,780
Deferred revenue			(68,318	)			(685,079	)
Income tax payable			(34,741	)			16,438
Cash used in operating activities from continuing operations			(49,991,945	)			(3,453,031	)
Cash used in operating activities from discontinued operations			(322,172	)			(3,927,010	)
Net cash used in operating activities			(50,314,117	)			(7,380,041	)
Cash flows from investing activities:
Cash proceeds from sale of Zhonghe, net of cash at Zhonghe of $172,812 and amount owed to Zhonghe of $4,023,656			21,385,037				-
Sale of equity interest in subsidiary			-				3,048,483
Proceeds from sales of property and equipment			8,430				11,197
Purchase of property and equipment			(336,949	)			(3,603	)
Cash provided by investing activities from continuing operations			21,056,518				3,056,077
Cash provided by investing activities from discontinued operations			-				1,865,702
Net cash provided by investing activities			21,056,518				4,921,779
Cash flows from financing activities:
Bank overdraft			(2,082,149	)			(167,582	)
Proceeds from short-term borrowings			86,557,148				73,464,249
Repayments of short-term borrowings			(59,726,535	)			(71,250,503	)
Proceeds from a director			686,185				599,120
Repayment of amount due to director			-				(454,280	)
Cash provided by financing activities from continuing operations			25,434,649				2,191,004
Cash provided by financing activities from discontinued operations			-				-
Net cash provided by financing activities			25,434,649				2,191,004
Effect of exchange rate change on cash			(291,804	)			(407,008	)
Net decrease in cash and cash equivalents			(4,114,754	)			(674,266	)
Cash and cash equivalents at the beginning of year			7,119,686				7,793,952
Cash and cash equivalents at the end of year		$	3,004,932			$	7,119,686
Supplemental disclosure of cash flow information:
Interest paid		$	6,148,825			$	11,525,429
Income taxes paid		$	147,905			$	193,615
Non cash investing activities:
Amount due to Zhengji to offset the sales price of equity interest in Zhengji		$	-			$	5,231,941
Assumption of outstanding payable to former owner of Zhonghe by Huitong to offset the sale price of Zhonghe		$	36,137,505			$	-