SOURCE: China Auto Logistics Inc.

China Auto Logistics Inc.

November 14, 2016 07:45 ET

China Auto Logistics Reports Third Quarter and Nine Month 2016 Financial Results

Investor Conference Call Scheduled for Tuesday, November 15th at 8:00am EST

TIANJIN, CHINA--(Marketwired - Nov 14, 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, today reported a net loss from continuing operations in its 2016 third quarter of $(200,000), or $(0.05) per share on lower sales in the period of $96,293,622, down approximately 36% from the same period a year earlier. In the 2015 third quarter the net loss from continuing operations attributable to shareholders was $(354,036) or $(0.09) per share. The year over year bottom line improvement despite lower year over year sales in the 2016 third quarter primarily reflected a substantial reduction in interest expense following the sale in the 2016 second quarter of the Company's Zhonghe subsidiary. 

In the second half of 2015 and early 2016, the Company believes CALI car dealer customers increased their purchases of luxury imported automobiles ahead of an anticipated and actual devaluation of China's RMB as the dealers expected the devaluation would lead to higher auto purchase costs and reduced profits. However, the currency changes began to moderate in the 2016 second quarter and continued to stabilize in the third quarter. While these currency changes resulted in increased sales initially, there was a concomitant fall off and then stabilization in sales in the 2016 third quarter which has since continued. 
Results in the third quarter of 2015 also included a gain from discontinued operations of $1,602,916 or $0.40 per share following the sale of Zhonghe. This resulted in total income attributable to shareholders for the period of $1,248,880 or $0.31 per share. There was no loss or gain from discontinued operations in the 2016 third quarter.

Nine Month Results

Through the first nine months ending September 30, 2016, net revenue of $327,177,025 was down slightly from net revenues of $331,209,443 in the same period in 2015. While automobile sales volume increased approximately 2% year over year, average unit selling prices and gross margins decreased over the same period. Additionally, the reduction in both interest and fee income from Financing Services resulted in a 22.65% decline in revenues from this business segment, although the gross margin increased approximately 46% when compared to the same period of the prior year. These results contributed to a net loss from continuing operations attributable to shareholders in the first nine months of 2016 of $(865,397) or $(0.21) per share which was an approximately 47% improvement over the net loss from continuing operations attributable to shareholders in the same period a year earlier of $(1,621,949) or $(0.40) per share.

Total reported income in the first nine months of 2016 included net income from discontinued operations of $4,790,709 or $1.19 per share, as compared with a loss from discontinued operations in the same period last year of $(2,040,975) or $(0.51) per share. Consequently, total net income in the nine months ended September 30, 2016 was $3,925,312 or $0.98 per share compared with a loss of ($3,662,924), or a loss of $(0.91) per share in the same period a year earlier. Upon the sale of Zhonghe on June 1, 2016, the Airport Automall Automotive Services of Zhonghe was discontinued. 

Positive Working Capital

As of September 30, 2016 the Company had working capital of $24,568,418, compared with a working capital deficit of ($30,801,730) as of December 31, 2015. This increase was primarily attributable to the approximately $21.9 million in net cash received from the disposition of Zhonghe as well as the relief of the payable related to the Zhonghe acquisition of approximately $36.8 million.

As of September 30, 2016 and December 31, 2015 the Company had an aggregate outstanding balance of lines of credit relating to financing services of $47,161,036 and $73,004,179, respectively, and outstanding balances of short term borrowings of $13,494,508 and $67,290,734. Bank overdrafts as of September 31, 2016 were reduced to zero.

Despite this improved financial picture, the Company's operating losses and negative operating cash flow as well as an accumulated cash deficit of approximately $3.4 million and, as of September 30, 2016, the year over year increased net cash used during the year for operating activities from continuing operations of approximately $51.4 million (largely for making deposits to suppliers related to inventory purchases in anticipation of future sales), were key factors in the decision 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, "In the first half of the year, we took the necessary step with the sale of Zhonghe to strengthen our financial situation and thereby create a new base for moving forward in a still highly competitive imported luxury auto market. At the current time our focus is on further strengthening and building our Auto Sales business, where we may see new opportunities for growth possible as a consequence of our leadership position and the "Parallel Imported Vehicles" scheme that has begun to be implemented in Tianjin and a few other large cities. We believe, too, that the currency situation has stabilized."

He added, "While over the near term we will focus mainly on our core auto sales business, we also are considering other possible higher margin opportunities, as both our auto sales and financial services business can be expected to remain highly competitive, with the former, in particular, not leaving a lot of room for margin expansion."

Conference Call Invitation

The Company will discuss 2016 third quarter results during a live conference call and webcast on Tuesday, November 15, 2016 at 8:00am EST.

To participate in the call, interested participants should call 1-877-419-6594 when calling within the United States or 1-719-325-4747 when calling internationally. Please ask for the Conference ID: 2783813. There will be a playback available until 11/22/16. 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: 2783813.

This call is being webcast by ViaVid Broadcasting and can be accessed by clicking on this link http://public.viavid.com/index.php?id=121974 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
 
    September 30,
2016
(Unaudited)
  December 31, 2015  
ASSETS:              
Current assets:              
  Cash and cash equivalents   $ 1,390,772   $ 7,119,686  
  Restricted cash     24,978,329     23,799,346  
  Receivable related to financing services     48,607,894     82,105,826  
  Inventories     19,382,417     12,163,511  
  Advances to suppliers     63,333,915     100,807,121  
  Prepaid expenses     41,153     29,372  
  Recoverable and accrued value added tax receivable     1,725,419     369,940  
    Total current assets     159,459,899     226,394,802  
               
Property, plant, and equipment, net     352,929     72,742  
Other assets     31,577     -  
Non current assets of discontinued operations     -     61,755,609  
    Total assets   $ 159,844,405   $ 288,223,153  
               
LIABILITIES AND SHAREHOLDERS' EQUITY:              
Current liabilities:              
  Bank overdraft   $ -   $ 2,131,009  
  Lines of credit related to financing services     47,161,036     73,004,179  
  Short term borrowings     13,494,508     67,290,734  
  Accounts payable     3,210,172     1,334,829  
  Notes payable to suppliers     26,989,015     33,509,483  
  Accrued expenses     109,365     273,497  
  Customer deposits     39,976,474     39,901,621  
  Deferred revenue     71,061     121,456  
  Due to former shareholder     2,037,104     2,093,182  
  Due to director     1,265,476     722,028  
  Income tax payable     577,270     656,098  
  Deferred tax liability     -     246,745  
  Current liabilities of discontinued operations     -     35,911,671  
    Total current liabilities     134,891,481     257,196,532  
               
Non current liability of discontinued operations     -     9,248,814  
  Total liabilities     134,891,481     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 September 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     5,026,061     5,776,306  
  Accumulated deficit     (3,421,910 )   (7,347,222 )
    Total China Auto Logistics Inc. shareholders' equity     24,587,919     21,412,852  
Noncontrolling interests     365,005     364,955  
    Total equity     24,952,924     21,777,807  
               
    Total liabilities and shareholders' equity   $ 159,844,405   $ 288,223,153  
                   
                   
CHINA AUTO LOGISTICS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
 
    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
    2016     2015     2016     2015  
                                 
Net revenue   $ 96,293,622     $ 150,170,868     $ 327,177,025     $ 331,209,443  
Cost of revenue     95,671,721       149,129,426       324,958,268       328,853,778  
    Gross profit     621,901       1,041,442       2,218,757       2,355,665  
                                 
Operating expenses:                                
  Selling and marketing     180,371       209,190       532,676       570,719  
  General and administrative     460,664       375,992       1,374,340       1,167,947  
    Total operating expenses     641,035       585,182       1,907,016       1,738,666  
                                 
(Loss) income from continuing operations     (19,134 )     456,260       311,741       616,999  
                                 
  Other income (expenses)                                
  Interest income     18,811       99,754       233,274       214,122  
  Interest expense     (202,803 )     (622,156 )     (1,331,835 )     (2,050,389 )
  Gain on sale of property and equipment     -       -       2,707       (8,254 )
  Loss on sale of equity interest in subsidiary     -       (209,638 )     -       (209,638 )
  Miscellaneous     3,091       (29 )     6,546       133  
    Total other expenses     (180,901 )     (732,069 )     (1,089,308 )     (2,054,026 )
                                 
Loss from continuing operations before income taxes     (200,035 )     (275,809 )     (777,567 )     (1,437,027 )
                                 
Income tax expense     -       78,350       87,737       186,022  
                                 
Net loss from continuing operations     (200,035 )     (354,159 )     (865,304 )     (1,623,049 )
                                 
Discontinued operations:                                
  Income (loss) from operations of discontinued Airport Automall Automotive Services (including gain on disposal of $6,701,350 for the nine months ended September 30, 2016)     -       1,373,179       4,543,918       (2,734,650 )
  Income tax benefit     -       (229,737 )     (246,791 )     (693,675 )
Net income (loss) from discontinued operations     -       1,602,916       4,790,709       (2,040,975 )
                                 
Net loss (income)     (200,035 )     1,248,757       3,925,405       (3,664,024 )
Less: Net (loss) income attributable to noncontrolling interests     (35 )     (123 )     93       (1,100 )
                                 
Net (loss) income attributable to shareholders of China Auto Logistics Inc.   $ (200,000 )   $ 1,248,880     $ 3,925,312     $ (3,662,924 )
                                 
Net (loss) income attributable to shareholders of China Auto Logistics Inc.                                
  - continuing operations   $ (200,000 )   $ (354,036 )   $ (865,397 )   $ (1,621,949 )
  - discontinued operations     -       1,602,916       4,790,709       (2,040,975 )
    $ (200,000 )   $ 1,248,880     $ 3,925,312     $ (3,662,924 )
                                 
(Loss) income per share attributable to shareholders of China Auto Logistics Inc. from                                
  - continuing operations - basic and diluted   $ (0.05 )     (0.09 )   $ (0.21 )   $ (0.40 )
  - discontinued operations - basic and diluted   $ -     $ 0.40     $ 1.19     $ (0.51 )
  Total (loss) income per share attributable to shareholders of China Auto Logistics Inc.   $ (0.05 )   $ 0.31     $ 0.98     $ (0.91 )
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
September 30,
    Nine Months Ended
September 30,
 
    2016     2015     2016     2015  
                                 
Net (loss) income   $ (200,035 )   $ 1,248,757     $ 3,925,405     $ (3,664,024 )
                                 
Other comprehensive (loss) income                                
  Foreign currency translation adjustments     (111,136 )     (1,407,306 )     (750,288 )     (1,117,777 )
                                 
Comprehensive (loss) income     (311,171 )     (158,549 )     3,175,117       (4,781,801 )
Less: Comprehensive (loss) income attributable to noncontrolling interests     (99 )     (93 )     50       (838 )
                                 
  Comprehensive (loss) income attributable to shareholders of China Auto Logistics Inc.   $ (311,072 )   $ (158,456 )   $ 3,175,067     $ (4,780,963 )
                                   
                                   
CHINA AUTO LOGISTICS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 
    Nine Months Ended
September 30,
 
    2016     2015  
Cash flows from operating activities                
Net income (loss)   $ 3,925,405     $ (3,664,024 )
Add: loss from discontinued operations     1,910,641       2,040,975  
                 
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities                
Depreciation on property, plant and equipment     58,532       49,164  
Amortization on customer relations     -       82,799  
(Gain) loss on disposal of property and equipment     (5,702 )     8,254  
Loss on sale of equity interest in subsidiary     -       209,638  
Change in allowance for receivable related to financing services     (68,813 )     -  
Change in Inventory reserve     -       692  
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     (35,507,788 )     (29,328,731 )
Accounts receivable     -       1,291  
Receivables related to financing services     31,710,041       12,822,334  
Inventories     (7,938,670 )     (1,215,690 )
Advances to suppliers     (54,723,792 )     (42,899,839 )
Prepaid expenses, other current assets and other assets     (14,304 )     (8,933 )
Value added tax receivable     (1,390,994 )     226,351  
Other assets     (32,244 )     -  
Accounts payable     1,952,284       1,553,900  
Line of credit related to financing services     (24,103,238 )     6,160,561  
Notes payable to suppliers     36,344,159       36,809,837  
Accrued expenses     318,354       (59,694 )
Accrued interest     897,826       (1,570,313 )
Customer deposits     2,161,062       13,588,419  
Deferred revenue     (47,981 )     (724,987 )
Income tax payable     (62,549 )     29,376  
Cash used in operating activities from continuing operations     (51,395,675 )     (5,783,901 )
Cash used in operating activities from discontinued operations     (1,299,109 )     (640,931 )
Net cash used in operating activities     (52,694,784 )     (6,424,832 )
                 
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  
Proceeds from sale of equity interest in Zhengji, net     -       3,030,303  
Purchase of property and equipment     (342,435 )     (2,318 )
Cash provided by investing activities from continuing operations     21,416,930       3,037,260  
Cash provided by investing activities from discontinued operations     -       -  
Net cash provided by investing activities     21,416,930       3,037,260  
                 
Cash flows from financing activities                
Bank overdraft     (2,117,974 )     (91,222 )
Proceeds from short-term borrowings     84,846,873       88,339,880  
Repayments of short-term borrowings     (57,538,686 )     (86,160,953 )
Proceeds from director     484,919       599,120  
Repayments to director     -       (455,373 )
Cash provided by financing activities from continuing operations     25,675,132       2,231,452  
Cash provided by financing activities from discontinued operations     -       -  
Net cash provided by financing activities     25,675,132       2,231,452  
                 
Effect of exchange rate change on cash     (126,192 )     (199,829 )
                 
Net decrease in cash and cash equivalents     (5,728,914 )     (1,355,949 )
                 
Cash and cash equivalents at the beginning of period     7,119,686       7,793,952  
Cash and cash equivalents at the end of period   $ 1,390,772     $ 6,438,003  
                 
Supplemental disclosure of cash flow information                
Interest paid   $ 3,958,670     $ 8,369,596  
Income taxes paid   $ 150,355     $ 149,194  
                 
Non-cash activities:                
Assumption of outstanding payable to former owner of Zhonghe by Huitongto 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