SOURCE: China Auto Logistics Inc.

August 14, 2017 07:30 ET

China Auto Logistics Reports 2017 Second Quarter and Six Month Results

Investor Conference Call Scheduled for Tuesday, August 15th at 8:00am ET

TIANJIN, CHINA--(Marketwired - Aug 14, 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 announced results for its second quarter and first six months ended June 30, 2017. 

Net revenues in the 2017 second quarter rose sharply year over year, to approximately $138 million -- a gain of approximately 48% -- mainly on the strength of increased sales of automobiles compared with relatively weak auto sales in the second quarter of 2016.

The increased revenues offset by lower gross margins contributed to a narrowing of the year over year loss from continuing operations attributable to shareholders in the 2017 second quarter to $342,109 or an $0.08 loss per share, as compared with a loss of $477,875 or a $0.12 loss per share in the second quarter of 2016. Total net income attributable to shareholders in the 2016 second quarter was approximately $5.2 million or $1.28 in earnings per share, as it includes approximately $5.7 million or $1.40 per share in income from discontinued operations.

In the first six months of 2017, revenues from continuing operations increased approximately 8% to approximately $249 million, while the net loss from continuing operations attributable to shareholders decreased approximately 28% to approximately $477,000, or a $0.12 loss per share. In the first six months of 2016 the loss was approximately $665,000, or a loss of $0.16 per share. Total net income attributable to shareholders in the first six months of 2016 was approximately $4.1 million, or $1.03 per share, including approximately $4.8 million, or $1.19 in earnings per share from discontinued operations.

Commenting on these results, Mr. Tong Shiping, Chairman and CEO of the Company, stated: "We were pleased to see the year over year rebound in auto sales in the second quarter. However, we also clearly saw our already tight margins further impacted by the recent tax imposed on purchasers of our higher margin, high end autos which kept buyers of these autos away. We think at some point we'll see high end buyers return and, meanwhile, are continuing to fight to maintain our position as a leader in the industry."

Financial Highlights for the Second Quarter ended June 30, 2017

  • Net revenue in the 2017 second quarter increased 48% to $138,758,902 from $93,819,385 in the second quarter of 2016.

  • The net loss from continuing operations attributable to shareholders in the 2017 second quarter improved from $477,875, or a $0.12 loss per share a year earlier, to $342,109 or a loss per share of $0.08. The net income from discontinued operations attributable to shareholders was $0 in the 2017 second quarter compared to $5,664,104 or earnings per share of $1.40 in the 2016 second quarter.

  • Net revenues from Sales of Automobiles increased 48.63% year over year to $137,892,079 while sales volume also grew. Average unit selling prices declined, however, largely due to the impacts triggered by an additional 10% tax imposed on "super luxury cars," which typically are the most profitable autos sold by the Company.

  • Net revenues for Financing Services in the 2017 second quarter decreased year over year 16.17% to $861,173. The decrease included a year over year decline in fee income of 37.74% to $294,188, mainly reflecting increased competition.

Financial Highlights for the Six Months Ended June 30, 2017

  • Net revenue from continuing operations in the first six months of 2017 was $249,292,683, an increase of 7.97% from $230,883,403 in the same period of 2016.

  • As the gross profit margin in the first six months of 2017 declined to 0.40% compared with 0.69% in the year earlier period, the Company's gross profit also declined and led to a net loss from continuing operations attributable to shareholders of $477,355, or a loss of $0.12 per share. This nevertheless was a slight improvement over the prior year first half loss of $665,397 or a loss of $0.16 per share. The total net income attributable to shareholders in the first six months of 2016, including results of discontinued operations, was $4,125,312, or $1.03 per share.

  • Interest expense (excluding operating interest expense related to Financing Services) was $429,905 in the first half of 2017, compared with $1,129,032 in the first six months of 2016.

  • Cash and cash equivalents as of June 30, 2017 was $1,567,726.

  • Working capital as of June 30, 2017 was $23,626,413 as compared with working capital as of December 31, 2016 of $23,576,035. The Company has included a "going concern" paragraph in the Notes to the Company's Condensed Consolidated Financial Statements for the quarter and six months ended June 30, 2017 reflecting the continuing operating losses, accumulated deficit and negative operating cash flow.

Sales of Automobiles

A total of 1,398 automobiles were sold in the 2017 second quarter, up 54% from the 905 vehicles sold in the same period a year earlier. However, the average unit selling price in the 2017 quarter decreased to $99,000 from $103,000 a year earlier. As previously explained, the Company saw a decline in sales of its higher margin high end luxury vehicles in 2017 following the imposition of the additional 10% luxury tax by the government. The Company believes sales were unusually low in the second quarter of 2016 due to a depletion of the inventories built up in the prior quarters when dealers stocked up inventories in anticipation of increased prices due to a sudden devaluation of the RMB starting in August of 2015. The Company believes the government's "Parallel Imported Vehicle" scheme did not offset the depletion of built up inventories during the quarter, but the Company continues to believe this program will help boost sales over time.

Financing Services

The Company believes continuing competition eroded both fee income and margins in this business in the 2017 second quarter. Year over year revenue declined 16.17% to $861,173 from $1,027,280 in the prior year period. Most reflective of the competitive situation was the 37.74% year over year decline in fee income to $294,188 in the second quarter of 2017 from $472,545 in the same period of 2016. The remaining portion of revenue consisted of interest income of $566,985, up slightly from $554,735 in the second quarter of 2016. 

As of August 10, 2017, the Company had aggregate credit lines of $136 million, and did not incur any difficulties in accessing these lines and bank loan facilities, nor does it anticipate any difficulty in this regard over the near term.

Outlook

"Much of our future growth in Auto Sales," Mr. Tong commented, "is dependent on the continuing growth and strengthening of the Chinese economy. While there is always reason to have some concerns about this, generally, we remain quite confident about the economy and, concomitantly, future sales of imported luxury and 'super luxury' vehicles."

He added, "While we remain cautious about steps we may take to improve our profitability, we are aware of the need and are staying focused on the issue."

Conference Call Invitation

The Company will discuss 2017 second quarter results during a live conference call and webcast on Tuesday, August 15, 2017 at 8:00am ET.

To participate in the call, interested participants should call 1-800-334-0872 when calling within the United States or 1-719-457-2607 when calling internationally. Please ask for the Conference ID: 9672875. There will be a playback available until 08/22/17. 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: 9672875.

This call is being webcast by ViaVid Broadcasting and can be accessed by clicking on this link: http://public.viavid.com/index.php?id=125899 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.
CONDENSED CONSOLIDATED BALANCE SHEETS
    June 30, 2017
(Unaudited)
  December 31, 2016
ASSETS:            
Current assets:            
Cash and cash equivalents   $ 1,567,726   $ 3,004,932
Restricted cash     16,033,081     22,703,835
Receivable related to financing services, net     58,119,145     48,549,972
Inventories     11,969,891     13,049,065
Advances to suppliers, net     70,433,770     71,921,388
Prepaid expenses     74,733     376,581
Value added tax receivable     258,595     615,555
Total current assets     158,456,941     160,221,328
             
Property, plant, and equipment, net     290,053     317,282
Other assets     31,076     30,329
Total assets   $ 158,778,070   $ 160,568,939
             
LIABILITIES AND SHAREHOLDERS' EQUITY:            
Current liabilities:            
Lines of credit related to financing services   $ 54,632,818   $ 47,081,763
Short term borrowings     15,493,837     12,961,389
Accounts payable     5,825,052     365,120
Notes payable to suppliers     18,445,044     25,922,779
Accrued expenses     144,427     131,128
Customer deposits     35,734,873     46,047,515
Deferred revenue     58,121     48,171
Due to former shareholder     2,004,787     1,956,625
Due to director     1,856,684     1,550,745
Payable to non controlling interest on de-registration of subsidiary     172,660     -
Income tax payable     462,225     580,058
Total current liabilities     134,830,528     136,645,293
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 June 30, 2017 and December 31, 2016     4,034       4,034  
Additional paid-in capital     22,979,734       22,979,734  
Accumulated other comprehensive income     4,611,920       3,939,898  
Accumulated deficit     (3,840,921 )     (3,363,566 )
Total China Auto Logistics Inc. shareholders' equity     23,754,767       23,560,100  
Noncontrolling interests     192,775       363,546  
Total equity     23,947,542       23,923,646  
                 
Total liabilities and shareholders' equity   $ 158,778,070     $ 160,568,939  
                 
   
CHINA AUTO LOGISTICS INC.  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)  
    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
    2017     2016     2017     2016  
                                 
Net revenue   $ 138,758,902     $ 93,819,385     $ 249,292,683     $ 230,883,403  
Cost of revenue     138,237,315       93,173,641       248,307,202       229,286,547  
    Gross profit     521,587       645,744       985,481       1,596,856  
                                 
Operating expenses:                                
  Selling and marketing     194,785       168,224       377,383       352,305  
  General and administrative     496,801       426,480       1,109,424       982,489  
  Recovery from reserve for uncollectible receivable related to financing services     -       -       (290,353 )     (68,813 )
    Total operating expenses     691,586       594,704       1,196,454       1,265,981  
                                 
(Loss) income from continuing operations     (169,999 )     51,040       (210,973 )     330,875  
                                 
Other income (expenses)                                
  Interest income     13,689       18,113       29,958       214,463  
  Interest expense     (223,561 )     (526,993 )     (429,905 )     (1,129,032 )
  Gain on sale of property and equipment     -       -       -       2,707  
  Miscellaneous     2,163       1,886       3,306       3,455  
    Total other expenses     (207,709 )     (506,994 )     (396,641 )     (908,407 )
                                 
Loss from continuing operations before income taxes     (377,708 )     (455,954 )     (607,614 )     (577,532 )
                                 
Income tax (benefit) expense     (35,539 )     21,768       (130,118 )     87,737  
                                 
Net loss from continuing operations     (342,169 )     (477,722 )     (477,496 )     (665,269 )
                                 
Discontinued operations:                                
  Income from operations of discontinued Airport Automall Automotive Services (including gain on disposal of $6,701,350 for the three months and six months ended June 30, 2016)     -       5,565,026       -       4,543,918  
  Income tax benefit     -       (99,078 )     -       (246,791 )
Net income from discontinued operations     -       5,664,104       -       4,790,709  
                                 
Net (loss) income     (342,169 )     5,186,382       (477,496 )     4,125,440  
Less: Net (loss) income attributable to noncontrolling interests     (60 )     153       (141 )     128  
                                 
Net (loss) income attributable to shareholders of China Auto Logistics Inc.   $ (342,109 )   $ 5,186,229     $ (477,355 )   $ 4,125,312  
                                 
Net (loss) income attributable to shareholders of China Auto Logistics Inc.                                
  - continuing operations   $ (342,109 )   $ (477,875 )   $ (477,355 )   $ (665,397 )
  - discontinued operations     -       5,664,104       -       4,790,709  
    $ (342,109 )   $ 5,186,229     $ (477,355 )   $ 4,125,312  
                                 
(Loss) income per share attributable to shareholders of China Auto Logistics Inc. from                                
  - continuing operations - basic and diluted   $ (0.08 )     (0.12 )   $ (0.12 )   $ (0.16 )
  - discontinued operations - basic and diluted   $ -     $ 1.40     $ -     $ 1.19  
  Total (loss) earnings per share attributable to shareholders of China Auto Logistics Inc.   $ (0.08 )     1.28       (0.12 )     1.03  
Weighted average number of common shares Outstanding                                
  - basic and diluted     4,034,494       4,034,494       4,034,494       4,034,494  
                                   
   
CHINA AUTO LOGISTICS INC.  
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)  
    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
    2017     2016     2017     2016  
                                 
Net (loss) income   $ (342,169 )   $ 5,186,382     $ (477,496 )   $ 4,125,440  
                                 
Other comprehensive income (loss)                                
  Foreign currency translation adjustments     460,256       (791,646 )     671,944       (639,152 )
                                 
Comprehensive income     118,087       4,394,736       194,448       3,486,288  
Less: Comprehensive income (loss) attributable to noncontrolling interests     66       158       (219 )     149  
                                 
  Comprehensive income attributable to shareholders of China Auto Logistics Inc.   $ 118,021     $ 4,394,578     $ 194,667     $ 3,486,139  
                                 
   
CHINA AUTO LOGISTICS INC.  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)  
    Six Months Ended
June 30,
 
    2017     2016  
Cash flows from operating activities                
Net (loss) income   $ (477,496 )   $ 4,125,440  
Add: loss from discontinued operations     -       1,910,641  
                 
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities                
Recovery on reserve for uncollectible receivable related to financing services     (290,353 )     (68,813 )
Depreciation on property, plant and equipment     44,037       35,721  
Gain on disposal of property and equipment     -       (5,702 )
Change in inventory reserve     -       (68,813 )
Change in reserve for advances to suppliers     -       (76,554 )
Gain on sale of Zhonghe     -       (6,701,350 )
                 
Changes in operating assets and liabilities:                
Restricted cash     7,089,935       (34,912,920 )
Accounts receivable     5,827       -  
Receivables related to financing services     (8,011,178 )     17,465,431  
Inventories     1,378,718       (7,387,423 )
Advances to suppliers     3,195,847       (54,067,994 )
Prepaid expenses, other current assets and other assets     305,936       (54,291 )
Value added tax receivable     366,487       (1,187,901 )
Other assets     -       (32,244 )
Accounts payable     5,380,426       2,110,661  
Line of credit related to financing services     6,344,863       (10,833,045 )
Notes payable to suppliers     (7,958,471 )     36,344,159  
Accrued expenses     10,810       429,317  
Accrued interest     -       897,826  
Customer deposits     (11,287,077 )     2,889,429  
Deferred revenue     8,634       (41,013 )
Income tax payable     (130,118 )     (62,549 )
Cash used in operating activities from continuing operations     (4,023,173 )     (49,291,987 )
Cash used in operating activities from discontinued operations     -       (1,299,109 )
Net cash used in operating activities     (4,023,173 )     (50,591,096 )
                 
Cash flows from investing activities                
Cash proceeds from sale of Zhonghe, net of cash at Zhonghe of $175,767 and amount owed to Zhonghe of $4,092,476     -       21,750,802  
Proceeds from disposal of property and equipment     -       8,563  
Purchase of property and equipment     (9,509 )     (336,327 )
Cash provided by investing activities from continuing operations     (9,509       21,423,038  
Cash provided by investing activities from discontinued operations     -       -  
Net cash (used in) provided by investing activities     (9,509 )     21,423,038  
                 
Cash flows from financing activities                
Bank overdraft     -       (2,117,974 )
Proceeds from short-term borrowings     17,327,841       80,346,450  
Repayments of short-term borrowings     (15,141,455 )     (52,438,207 )
Proceeds from director     356,198       384,826  
Cash provided by financing activities from continuing operations     2,542,584       26,175,095  
Cash provided by financing activities from discontinued operations     -       -  
Net cash provided by financing activities     2,542,584       26,175,095  
                 
Effect of exchange rate change on cash     52,892       (112,388 )
                 
Net decrease in cash and cash equivalents     (1,437,206 )     (3,105,351 )
                 
Cash and cash equivalents at the beginning of period     3,004,932       7,119,686  
Cash and cash equivalents at the end of period   $ 1,567,726     $ 4,014,335  
                 
Supplemental disclosure of cash flow information                
Interest paid   $ 976,415     $ 2,790,801  
Income taxes paid   $ -     $ 150,355  
                 
Non-cash activities:                
Increase in payable to non controlling interest on de-registration of subsidiary for reduction of non controlling interests in Equity as a result of de-registration of Ganghui   $ 172,660     $ -  
Assumption of outstanding payable to former owner of Zhonghe by Huitong to offset the sale price of Zhonghe   $ -     $ 36,755,594  
                 

Contact Information

  • CONTACT:

    Ken Donenfeld
    DGI Investor Relations Inc.
    kdonenfeld@dgiir.com
    Tel: 212-425-5700
    Fax: 646-381-9727