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China Auto Logistics Reports 2017 First Quarter Results


May 15, 2017 - Tianjin, China

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 first quarter ended March 31, 2017.

In the 2017 first quarter, the Company incurred a net loss attributable to shareholders from continuing operations of $(135,246) or $(0.03) per share. This compared with a somewhat higher loss in the same quarter last year of $(187,522) or $(0.05) per share and a total loss attributable to shareholders in the 2016 first quarter of $(1,060,917) or $(0.21)) per share. The latter figures include a loss from operations that were discontinued during 2016 and are not included in 2017 results.

In what is typically the Company's slowest quarter, net revenues of approximately $111 million in the 2017 first quarter were approximately 19% lower than in the first quarter of 2016 when stronger than anticipated sales were spurred largely by customer response to a rapid devaluation of the Chinese currency.

Commenting on the quarter, Mr. Tong Shiping, Chairman and CEO of the Company, stated: "Despite a still relatively slower economy, increased competition, and increased government taxation on some luxury items, I believe we have continued to stabilize our business and are prepared to capitalize on any future overall improvements in the Chinese economy." He added, "While auto sales were down compared with unusually strong first quarter results in 2016, they nevertheless remained approximately 27% higher than in the first quarter of 2015. Also, we continue to be the sole one-stop provider of Financing Services to auto dealers in Tianjin, and this remains a base for our leadership, as does our much stronger financial position following the decision to sell our Zhonghe operations last year."

Financial Highlights for the First Quarter ended March 31, 2017

  • Net revenue was $110,533,781 compared with $137,064,018 in the first quarter of 2016.

  • Net loss from continuing operations attributable to shareholders of $(135,246) was an approximately 28% improvement over the net loss in the same quarter last year of $(187,522), and compared with a net loss attributable to shareholders (including discontinued operations) in the 2016 first quarter of $(1,060,917).

  • On a per share basis, a net loss per share attributable to shareholders of $(0.03) improved from $(0.05) per share in the first quarter last year and a total loss (including discontinued businesses) of $(0.26) per share in the 2016 first quarter.

  • Net revenue from Sales of Automobiles decreased 19.17% to $109,795,054 on an approximately 15% decrease in sales volume; operating income from Sales of Automobiles declined to $29,958.

  • On net revenues of $737,932, Financing Services contributed $402,996 in income from operations including $290,353 in a recovery from a reserve for uncollected accounts; in the prior year first quarter operating income was $394,067 on net revenues of $1,220,602.

  • As a result of a lower average balance of short term borrowings following the sale of Zhonghe in June of 2016, interest expense (excluding operating interest expense related to Financing Services) was $206,344 in the quarter, down from $602,039 in the first quarter of 2016.

  • Cash and cash equivalents as of March 31, 2017 were $3,003,497.

  • Working capital as of March 31, 2017, was $23,670,308 as compared with $23,576,035 as of December 31, 2016. Due mainly to the Company's continuing operating losses, negative operating cash flow, and accumulated deficit, the Company included a "going concern" paragraph in the Notes to the Company's Condensed Consolidated Financial Statements for the quarter ended March 31, 2017.

Sales of Automobiles

During the first quarter of 2017 the Company sold 1,104 automobiles compared with 1,304 in the same period in 2016, while the average unit selling price in the 2017 first quarter was $99,000 compared with $104,000 in the first quarter of 2016. Typically, due to the Chinese New Year holidays, the first quarter is the Company's slowest quarter of the year. In 2016, however, as has been detailed in prior reports, the devaluations of the Chinese Renminbi ("RMB") in that year and in 2015, contributed to a strong boost in sales in the second half of 2015 and the first quarter of 2016, as auto dealer customers decided to build their inventories in anticipation of higher prices based on the currency devaluations.

In the 2017 first quarter the Company also was affected by a new 10% sales tax on all autos selling for more than approximately $190,000. This was announced in December of 2016 and had an immediate impact on the Company's sales of higher end cars, which also tend to have the highest profit margins. Consequently, the Company experienced a decline in the quarter in its gross margin, which slipped to 0.17% in this period, compared with 0.29% in the same period a year earlier. The top three brands sold by the Company -- Land Rover, Mercedes Benz and Toyota -- accounted for 73% of net auto sales in the first quarter, down from 79% in the prior year first quarter.

Financing Services

With slightly higher year over net operating income of $402,996 in the 2017 first quarter, bolstered by a recovery from a reserve for uncollected accounts, Financing Services continued to be the biggest contributor to the Company's income from operations in the period. Nevertheless, continuing intense competition which reduced customers and customer transactions - - as reflected in particular in lower revenues, reduced fee income and reduced profit margins - - impacted results in the quarter. Revenues, which consist of both fee income and interest income, declined 39.54% to $737,932 in the 2017 quarter from $1,220,602 in the same quarter last year. Fee income was reduced to $272,892 in the 2017 first quarter, from $543,735 in the year earlier period. Gross margin in the 2017 first quarter remained relatively high at 36.98%, but was down from 44.55% in the first quarter last year. As of March 31, 2017, the Company had an aggregate amount of credit lines of $134 million, of which approximately $94 million was available for use in Financing Services.

Outlook

"Over the near term, we do not expect to see any significant improvements in our gross margins in auto sales, if the new 'super luxury' tax remains a factor in our sales mix," Mr. Tong stated. "However," he added, "we have built up our inventory in the first quarter in anticipation of an improving outlook for auto sales. We think an improving economy will contribute to this, as well as benefits we anticipate from the Parallel Import Scheme that is being implemented in Tianjin and other key cities, which we believe provides us with some great long term advantages competing with official authorized automobile dealers."

"At the same time," Mr. Tong said, "we continue to study potential opportunities to expand into new higher margin services such as internet sales."

Conference Call Invitation

The Company will discuss 2017 first quarter results during a live conference call and webcast on Tuesday, May 16, 2017 at 8:00am ET.

To participate in the call, interested participants should call 1-877-723-9502 when calling within the United States or 1-​719-325-4842 when calling internationally. Please ask for the Conference ID: 2619356. There will be a playback available until 05/23/17. 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: 2619356.

This call is being webcast by ViaVid Broadcasting and can be accessed by clicking on this link http://public.viavid.com/index.php?id=124481 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
March 31, 2017 December 31,
(Unaudited) 2016
-------------- --------------
ASSETS:
Current assets:
Cash and cash equivalents $ 3,003,497 $ 3,004,932
Restricted cash 10,074,978 22,703,835
Accounts receivable 1,451,267 -
Receivable related to financing services,
net 41,544,212 48,549,972
Inventories 12,013,616 13,049,065
Advances to suppliers, net 66,914,400 71,921,388
Prepaid expenses 34,967 376,581
Value added tax receivable 350,956 615,555
--------------
Total current assets 135,387,893 160,221,328

Property, plant, and equipment, net 299,136 317,282
Other assets 30,563 30,329
--------------
Total assets $ 135,717,592 $ 160,568,939
==============

LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Lines of credit related to financing
services $ 39,787,152 $ 47,081,763
Short term borrowings 13,061,405 12,961,389
Accounts payable 1,358,132 365,120
Notes payable to suppliers 11,610,137 25,922,779
Accrued expenses 149,987 131,128
Customer deposits 41,599,221 46,047,515
Deferred revenue 54,854 48,171
Due to former shareholder 1,971,723 1,956,625
Due to director 1,634,987 1,550,745
Income tax payable 489,987 580,058
--------------
Total current liabilities 111,717,585 136,645,293

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 March 31, 2017 and
December 31, 2016, respectively 4,034 4,034
Additional paid-in capital 22,979,734 22,979,734
Accumulated other comprehensive income 4,151,790 3,939,898
Accumulated deficit (3,498,812) (3,363,566)
--------------
Total China Auto Logistics Inc.
shareholders' equity 23,636,746 23,560,100
Noncontrolling interests 363,261 363,546
--------------
Total equity 24,000,007 23,923,646
--------------

Total liabilities and shareholders' equity $ 135,717,592 $ 160,568,939
==============


CHINA AUTO LOGISTICS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended
March 31
--------------------------
2017 2016
------------ -------------

Net revenue $110,533,781 $137,064,018
Cost of revenue 110,069,887 136,112,906
------------ ------------
Gross profit 463,894 951,112
------------- -------------

Operating expenses:
Selling and marketing 182,598 184,081
General and administrative 612,623
556,009

Recovery from reserve for uncollectible account
on receivable related to financing services (290,353) (68,813)
------------ ------------
Total operating expenses 504,868 671,277
------------ ------------

(Loss) income from operations (40,974) 279,835
------------ ------------

Other income (expenses):
Interest income 16,269 196,350
Interest expense (206,344) (602,039)
Gain on disposal of property and equipment - 2,707
Foreign exchange gain 1,143 -
Miscellaneous - 1,569
------------ ------------
Total other expenses (188,932) (401,413)
------------- -------------

Loss from continuing operations before income
tax expense (229,906) (121,578)

Income tax (benefit) expense (94,579) 65,969
------------ ------------

Net loss from continuing operations (135,327) (187,547)
------------ ------------


Discontinued operations:
-
Loss from operations of discontinued Airport
Automall Automotive Services - (1,021,108)
-
Income tax benefit - (147,713)
------------- -------------
Net loss from discontinued operations - (873,395)
------------- -------------

-
Net loss (135,327) (1,060,942)
-
Less: Net loss attributable to noncontrolling
interests (81) (25)
------------- -------------
Net loss attributable to shareholders of China
Auto Logistics Inc. $ (135,246) (1,060,917)
============- ============-

-
Net loss attributable to shareholders of China
Auto Logistics Inc.
-
- continuing operations $ (135,246) (187,522)
-
- discontinued operations - (873,395)
------------ ------------
$ (135,246) (1,060,917)
------------ ------------
Loss per share attributable to shareholders of
China Auto Logistics Inc. from
-
- continuing operations - basic and diluted $ (0.03) (0.05)
------------- -------------
- discontinued operations - basic and diluted $ - (0.21)
------------- -------------
Total loss per share attributable to
shareholders of China Auto Logistics Inc. $ (0.03) $ (0.26)
------------- -------------

Weighted average number of common shares
outstanding
- basic and diluted 4,034,494 4,034,494
------------ ------------


CHINA AUTO LOGISTICS INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
Three Months Ended
March 31,
----------------------------
2017 2016
------------- -------------

Net loss $ (135,327) $ (1,060,942)

Other comprehensive income
Foreign currency translation adjustments 211,688 152,494
------------- -------------

Comprehensive income (loss) 76,361 (908,448)

Add: Comprehensive loss attributable to
noncontrolling interests (285) (9)
------------- -------------

Comprehensive income (loss) attributable to
shareholders of China Auto Logistics Inc. $ 76,646 $ (908,439)
------------- -------------


CHINA AUTO LOGISTICS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended
March 31,
--------------------------
2017 2016
------------ --------------
Cash flows from operating activities
Net loss $ (135,327) $ (1,060,942)
Add: loss from discontinued operations - 873,395

Adjustments to reconcile net loss to net cash
provided by (used in) operating activities
Recovery on reserve for uncollectible account
on receivable related to financing services (290,353) (68,813)
Depreciation on property, plant and equipment 21,879 9,234
Gain on sale of property and equipment - (5,702)

Changes in operating assets and liabilities:
Restricted cash 12,808,420 (15,046,585)
Accounts receivable - trade (1,451,763) -
Receivables related to financing services 7,673,264 18,706,213
Inventories 1,136,529 (10,321,688)
Advances to suppliers 5,563,861 (79,577)
Prepaid expenses, other current assets and
other assets 344,638 3,142
Value added tax receivable 269,441 (1,707,930)
Accounts payable 990,532 1,983,994
Line of credit related to financing services (7,660,527) (12,176,165)
Notes payable to suppliers (14,517,627) 15,291,689
Accrued expenses 18,193 (26,560)
Customer deposits (4,805,254) 6,461,553
Deferred revenue 6,315 (8,140)
Income tax payable (94,579) 3,503
------------ ------------
Cash (used in) provided by operating activities
from continuing operations (122,358) 2,830,621
--
Cash used in operating activities from
discontinued operations - (17,589)
------------ --------------
Net cash (used in) provided by operating
activities (122,358) 2,813,032
------------- --------------

Cash flows from investing activities
Proceeds from sale of property and equipment - 8,563
Purchase of property and equipment (1,278) (120,436)
------------- ------------
Cash provided by investing activities from
continuing operations (1,278) (111,873)
Cash provided by investing activities from
discontinued operations - -
------------ --------------
Net cash used in investing activities (1,278) (111,873)
------------- --------------

Cash flows from financing activities
Bank overdraft - 168,552
Proceeds from short-term borrowings 4,355,288 28,442,541
Repayments of short-term borrowings (4,355,288) (33,452,706)
Proceeds from director 99,998 161,486
------------ ------------
Cash provided by (used in) financing activities
from continuing operations 99,998 (4,680,127)
Cash provided by financing activities from
discontinued operations - -
------------- --------------
Net cash provided by (used in) financing
activities 99,998 (4,680,127)
------------- --------------

Effect of exchange rate change on cash 22,203 19,719
------------ ------------

Net decrease in cash and cash equivalents (1,435) (1,959,249)

Cash and cash equivalents at the beginning of
period 3,004,932 7,119,686
------------ ------------
Cash and cash equivalents at the end of period $ 3,003,497 $ 5,160,437
------------- --------------

Supplemental disclosure of cash flow
information
Interest paid $ 667,892 $ 1,554,729
------------ ------------
Income taxes paid $ - $ 62,466
------------- --------------

CONTACT:

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

MarketWire

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