SOURCE: China Auto Logistics Inc.

China Auto Logistics Inc.

August 15, 2016 07:30 ET

China Auto Logistics Reports Second Quarter and Six Month 2016 Financial Results

Discontinued Zhonghe Operations Sold in the Quarter Generated Significant Gains While Results From Continuing Operations in the Second Quarter Were Roughly Flat Year-Over-Year

Investor Conference Call Scheduled for Tuesday August 16th at 8:00am EDT

TIANJIN, CHINA--(Marketwired - Aug 15, 2016) - 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, which sold its Zhonghe subsidiary during the 2016 second quarter, today reported that the net loss attributable to CALI shareholders in this period from continuing operations was ($477,875) or $(0.12) per share, compared to ($469,783) or ($0.12) per share a year earlier, while net income attributable to CALI shareholders from discontinued operations in the quarter amounted to $5,664,104 (including a gain from disposal of $6,701,350) or $1.40 per share, compared to a loss of ($1,775,580) or ($0.44) per share during the same period in 2015. 

The Company explained that the roughly flat year-over-year bottom line results in continuing operations in the 2016 second quarter primarily reflected the very slight 0.74% year-over-year increase in auto sales to approximately $92.77 million in the period. As previously reported, the Company believes these sales results were primarily a consequence of the anticipated and actual decline in the value of the Chinese renminbi (RMB) against the U.S. dollar, beginning in 2015, which until the 2016 second quarter led CALI customers to increase their purchases ahead of anticipated increased costs for imported vehicles. Mainly reflecting the stronger 2016 first quarter auto sales of $135.84 million, revenues in the first six months of 2016 were approximately 27.5% higher than in the first half of 2015.

In the six months ended June 30, 2016, the net loss attributable to shareholders from continuing operations was ($665,397) or $(0.16) per share, compared to ($1,132,864) or ($0.28) per share during the same period in 2015. Net income attributable to shareholders from discontinued operations in the 2016 six month period was $4,790,709 (including a gain from disposal of $6,701,350), or $1.19 per share, compared to a loss of ($3,778,940) or ($0.94) per share during the same period in 2015.

The net proceeds from the Zhonghe sale of approximately $21.9 million increased the Company's liquidity and helped turn the Company's working capital positive at June 30, 2016. Nevertheless, the Company's accumulated deficit at June 30, 2016, as well as the operating loss from continuing operations and negative operating cash flow in the second quarter, were key factors in the decision to continue to include a "going concern" paragraph in the Notes to the Company's condensed consolidated financial statements.

Management Comments

Mr. Tong Shiping, Chairman and CEO of the Company, commented, "This was a significant period for us in that we were able to address key problems we faced head on. With the ongoing downward shift in China's economy and real estate values, we needed to take steps to strengthen our financial situation. With our sale of Zhonghe, which included the Airport International Auto Mall in Tianjin and our 40% interest in a used car joint venture, we eliminated related payables, greatly reduced interest expense and returned to a positive working capital at June 30, 2016 from a working capital deficit at March 31, 2016. Our focus shifted back to improving our core luxury imported auto sales business and developing more profitable auto-related services such as our Financing Services business." 

Second Quarter Highlights

  • Effective June 1, 2016 CALI sold its Zhonghe subsidiary -- including the Airport International Auto Mall in Tianjin and CALI's 40% interest in Car King Tianjin -- to Wuxi Huitong for approximately $62.8 million. The Company transferred a payable related to the Zhonghe acquisition of approximately $36.8 million to Wuxi Huitong to offset the price of the Zhonghe sale.
  • Net revenue for the three months ended June 30, 2016 of $93,819,385 compared with $93,688,413 in the same period last year. In the second quarter of 2016, 98.89% of revenue came from Auto Sales, and about 1.09% of revenue came from Financing Services.
  • For the three months ended June 30, 2016, net loss from continuing operations attributable to CALI shareholders was $(477,875) or a loss of $(0.12) per share, compared with a loss of $(469,783) or $(0.12) in the second quarter of 2015.

Net income generated by discontinued operations in the second quarter of 2016 was $5,664,104 or $1.40 per share compared with a loss of $(1,775,580) or $(0.44) per share in the same quarter in 2015.

  • The Company's working capital as of June 30, 2016 was $24,861,325, compared with a working capital deficit of ($30,801,730) as of December 31, 2015.

Six Month Highlights

  • Net revenue for the six months ended June 30, 2016 grew 27.53% to $230,883,403 from $181,038,575 in the same period in 2015.
  • Income from continuing operations grew 105.85% in the first six months of 2016 to $330,875 compared with $160,739 in the first six months of 2015.
  • Net loss from continuing operations attributed to CALI shareholders in the first six months of 2016 was $(665,397) or $(0.16) per share, down from a loss of $(1,132,864) or $(0.28) per share in the year earlier period. In the first six months of 2016, income from discontinued operations was $4,790,709, or $1.19 per share compared with a loss of $(3,778,940) or $(0.94) per share in the same period in 2015. 

Operations

  • Auto Sales revenue in the second quarter of 2016 was $92,774,929, an increase of 0.74% from the same period a year earlier, primarily due to a 7% year-over-year increase in sales volume. In the 2016 second quarter the Company sold 905 automobiles at an average unit selling price of $103,000 compared with 846 automobiles a year earlier at an average unit selling price of $109,000. As compared with an approximately 5.5% devaluation of the renminbi (RMB) against the U.S. dollar in the full year ended December 31, 2015, during the second quarter of 2016 the decline of the RMB against the U.S. dollar was 2.4%.
  • Revenue from Financing Services decreased 35% year-over-year in the 2016 second quarter to $1,027,280, as fee income in this business declined 27.8% in the quarter as compared to the same period in 2015. As has been the case in recent prior quarters, the Company's working capital allocations did not permit sales of certain products to customers that in the past were very popular. With improving liquidity, the Company hopes to be able to restore these products.
  • As of August 12, 2016, the Company had aggregate credit lines of approximately $125 million and approximately $61 million available to utilize in its Financing Services.

Outlook

"A continuation in the remainder of the year of the economic trends and competition that has been prevalent over the past few quarters, continues to make us cautious about further gains in profits and margins in Auto Sales in the second half of the year," stated Mr. Tong. He added, "We believe, however, that conditions have stabilized and we are in a better position to compete. We remain positive about the luxury auto market in China and our leadership role in it, which we believe offers growth possibilities, especially when conditions will permit us to pursue our goal of expanding throughout China. Our optimism in this regard has been buoyed by the 'Parallel Imported Vehicles' scheme initiated by our government which gives us equal footing with all auto dealers."

Conference Call Invitation

The Company will discuss 2016 second quarter results during a live conference call and webcast on Tuesday, August 16, 2016 at 8:00am EDT.

To participate in the call, interested participants should call 1-800-239-9838 when calling within the United States or 1-913-312-0404 when calling internationally. Please ask for the China Auto Logistics 2016 Second Quarter Earnings Conference Call. Conference ID: 8066758. There will be a playback available until 08/23/16. 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: 8066758.

This call is being webcast by ViaVid Broadcasting and can be accessed by clicking on this link http://public.viavid.com/index.php?id=120843 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 variety of "one stop" automobile related services such as short term dealer financing. Future growth is anticipated to come from the Company's Auto Sales business as well as further growth in the Company's higher margin financing services.

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,
2016
(Unaudited)
  December 31, 2015
ASSETS:                
Current assets:                
  Cash and cash equivalents   $ 4,014,335     $ 7,119,686  
  Restricted cash     24,479,115       23,799,346  
  Receivable related to financing services     63,160,184       82,105,826  
  Inventories     18,905,090       12,163,511  
  Advances to suppliers     62,923,559       100,807,121  
  Prepaid expenses     81,438       29,372  
  Recoverable and accrued value added tax receivable     1,528,381       369,940  
    Total current assets     175,092,102       226,394,802  
                 
Property, plant, and equipment, net     371,070       72,742  
Other assets     31,700       -  
Non current assets of discontinued operations     -       61,755,609  
    Total assets   $ 175,494,872     $ 288,223,153  
                 
LIABILITIES AND SHAREHOLDERS' EQUITY:                
Current liabilities:                
  Bank overdraft   $ -     $ 2,131,009  
  Lines of credit related to financing services     60,660,883       73,004,179  
  Short term borrowings     14,149,381       67,290,734  
  Accounts payable     3,381,642       1,334,829  
  Notes payable to suppliers     27,094,560       33,509,483  
  Accrued expenses     220,653       273,497  
  Customer deposits     40,863,657       39,901,621  
  Deferred revenue     78,332       121,456  
  Due to former shareholder     2,045,070       2,093,182  
  Due to director     1,157,071       722,028  
  Income tax payable     579,528       656,098  
  Deferred tax liability     -       246,745  
  Current liabilities of discontinued operations     -       35,911,671  
    Total current liabilities     150,230,777       257,196,532  
                 
Non current liability of discontinued operations     -       9,248,814  
    Total liabilities     150,230,777       266,445,346  
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, 2016 and December 31, 2015, respectively     4,034       4,034  
  Additional paid-in capital     22,979,734       22,979,734  
  Accumulated other comprehensive income     5,137,133       5,776,306  
  Retained earnings     (3,221,910 )     (7,347,222 )
    Total China Auto Logistics Inc. shareholders' equity     24,898,991       21,412,852  
  Noncontrolling interests     365,104       364,955  
    Total equity     25,264,095       21,777,807  
                 
    Total liabilities and shareholders' equity   $ 175,494,872     $ 288,223,153  
                 
 
CHINA AUTO LOGISTICS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
 
    Three Months Ended
June 30,
  Six Months Ended
June 30,
    2016   2015   2016   2015
                                 
Net revenue   $ 93,819,385     $ 93,688,413     $ 230,883,403     $ 181,038,575  
Cost of revenue     93,173,641       92,856,032       229,286,547       179,724,352  
  Gross profit     645,744       832,381       1,596,856       1,314,223  
                                 
Operating expenses:                                
  Selling and marketing     168,224       187,231       352,305       361,529  
  General and administrative     426,480       368,995       913,676       791,955  
    Total operating expenses     594,704       556,226       1,265,981       1,153,484  
                                 
Income from continuing operations     51,040       276,155       330,875       160,739  
                                 
Other income (expenses)                                
  Interest income     18,113       30,118       214,463       114,368  
  Interest expense     (526,993 )     (701,309 )     (1,129,032 )     (1,428,233 )
  Gain on sale of property and equipment     -       (8,254 )     2,707       (8,254 )
  Miscellaneous     1,886       162       3,455       162  
    Total other expenses     (506,994 )     (679,283 )     (908,407 )     (1,321,957 )
                                 
Loss from continuing operations before income taxes     (455,954 )     (403,128 )     (577,532 )     (1,161,218 )
                                 
Income tax expense (benefit)     21,768       67,209       87,737       (27,377 )
                                 
Net loss from continuing operations     (477,722 )     (470,337 )     (665,269 )     (1,133,841 )
                                 
Discontinued operations:                                
  Income (loss) 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       (1,968,978 )     4,543,918       (4,107,829 )
  Income tax benefit     (99,078 )     (193,398 )     (246,791 )     (328,889 )
Net income (loss) from discontinued operations     5,664,104       (1,775,580 )     4,790,709       (3,778,940 )
                                 
Net income (loss)     5,186,382       (2,245,917 )     4,125,440       (4,912,781 )
Less: Net income (loss) attributable to noncontrolling interests     153       (554 )     128       (977 )
                                 
Net income (loss) attributable to shareholders of China Auto Logistics Inc.   $ 5,186,229     $ (2,245,363 )   $ 4,125,312     $ (4,911,804 )
                                 
Net income (loss) attributable to shareholders of China Auto Logistics Inc.                                
  - continuing operations   $ (477,875 )   $ (469,783 )   $ (665,397 )   $ (1,132,864 )
  - discontinued operations     5,664,104       (1,775,580 )     4,790,709       (3,778,940 )
    $ 5,186,229     $ (2,245,363 )   $ 4,125,312     $ (4,911,804 )
                                 
Earnings (loss) per share attributable to shareholders of China Auto Logistics Inc. from                                
  - continuing operations - basic and diluted   $ (0.12 )     (0.12 )   $ (0.16 )   $ (0.28 )
  - discontinued operations - basic and diluted   $ 1.40     $ (0.44 )   $ 1.19     $ (0.94 )
  Total earnings (loss) per share attributable to shareholders of China Auto Logistics Inc.   $ 1.28       (0.56 )     1.03       (1.22 )
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 (LOSS) INCOME
(UNAUDITED)
 
    Three Months Ended
June 30,
  Six Months Ended
June 30,
    2016   2015   2016   2015
                                 
Net income (loss)   $ 5,186,382     $ (2,245,917 )   $ 4,125,440     $ (4,912,781 )
                                 
Other comprehensive income (loss)                                
  Foreign currency translation adjustments     (791,646 )     118,130       (639,152 )     289,529  
                                 
Comprehensive income (loss)     4,394,736       (2,127,787 )     3,486,288       (4,623,252 )
Less: Comprehensive income (loss) attributable to noncontrolling interests     158       (437 )     149       (745 )
                                 
  Comprehensive income (loss) attributable to shareholders of China Auto Logistics Inc.   $ 4,394,578     $ (2,127,350 )   $ 3,486,139     $ (4,622,507 )
                                   
 
CHINA AUTO LOGISTICS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 
    Six Months Ended
June 30,
    2016   2015
Cash flows from operating activities                
Net income (loss)   $ 4,125,440     $ (4,912,781 )
Add: loss from discontinued operations     1,910,641       3,778,940  
                 
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities                
Depreciation on property, plant and equipment     35,721       38,111  
Amortization on customer relations     -       55,620  
(Gain) loss on disposal of property and equipment     (5,702 )     8,254  
Change in Inventory reserve     (68,813 )     26,272  
Change in reserve for advances to suppliers     (76,554 )     104,719  
Gain on sale of Zhonghe     (6,701,350 )     -  
                 
Changes in operating assets and liabilities:                
Restricted cash     (34,912,920 )     (14,434,440 )
Accounts receivable             1,291  
Receivables related to financing services     17,396,618       (11,075,069 )
Inventories     (7,387,423 )     (1,215,690 )
Advances to suppliers     (54,067,994 )     (56,164,079 )
Prepaid expenses, other current assets and other assets     (54,291 )     13,613  
Value added tax receivable     (1,187,901 )     (174,339 )
Other assets     (32,244 )        
Accounts payable     2,110,661       1,091,016  
Line of credit related to financing services     (10,833,045 )     30,775,774  
Notes payable to suppliers     36,344,159       21,221,809  
Accrued expenses     429,317       (48,145 )
Accrued interest     897,826       (2,118,118 )
Customer deposits     2,889,429       33,608,269  
Deferred revenue     (41,013 )     527,282  
Income tax payable     (62,549 )     (174 )
Cash (used in) provided by operating activities from continuing operations     (49,291,987 )     1,108,135  
Cash used in operating activities from discontinued operations     (1,299,109 )     (2,836,578 )
Net cash used in operating activities     (50,591,096 )     (1,728,443 )
                 
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       9,275  
Purchase of property and equipment     (336,327 )     -  
Cash provided by investing activities from continuing operations     21,423,038       9,275  
Cash provided by investing activities from discontinued operations     -       -  
Net cash provided by investing activities     21,423,038       9,275  
                 
Cash flows from financing activities                
Bank overdraft     (2,117,974 )     4,953  
Proceeds from short-term borrowings     80,346,450       25,316,614  
Repayments of short-term borrowings     (52,438,207 )     (26,137,618 )
Proceeds from director     384,826       389,120  
Repayments to director     -       (244,990 )
Cash provided by (used in) financing activities from continuing operations     26,175,095       (671,921 )
Cash provided by (used in) financing activities from discontinued operations     -       -  
Net cash provided by (used in) financing activities     26,175,095       (671,921 )
                 
Effect of exchange rate change on cash     (112,388 )     41,811  
                 
Net decrease in cash and cash equivalents     (3,105,351 )     (2,349,278 )
                 
Cash and cash equivalents at the beginning of period     7,119,686       7,793,952  
Cash and cash equivalents at the end of period   $ 4,014,335     $ 5,444,674  
                 
Supplemental disclosure of cash flow information                
Interest paid   $ 2,790,801     $ 7,588,543  
Income taxes paid   $ 150,355     $ 70,844  
                 
Non-cash activities:                
  Reclassification of the balance in due to former shareholder to other payable after an assignment of the balance to an unrelated party   $ -     $ 2,231,346  
Increase in advances to Car King Tianjin for unpaid rent   $ -     $ 246,354  
Assumption of outstanding payable to former owner of Zhonghe by Huitongto offset the sale price of Zhonghe   $ 36,755,594     $ -  
                 

Contact Information

  • CONTACTS:

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