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China Auto Logistics Reports 2013 First Quarter Results

China Auto Logistics Reports 2013 First Quarter Results 
Luxury Auto Unit Sales Grew 11% Year Over Year But Aggressive Price
Cutting Strategy Reduced Profits Despite Record Financing Services
Contribution; 2013 First Quarter Investor Conference Call Scheduled
for Friday, May 17th at 8:00am ET 
TIANJIN, CHINA -- (Marketwired) -- 05/15/13 --  China Auto Logistics
Inc. (the "Company") (NASDAQ: CALI), a top seller in China of luxury
imported automobiles, a leading provider of auto-related services,
and developer and operator of a leading automobile portal and
auto-related websites, reported today that in the first quarter of
2013 the Company continued its aggressive luxury auto price-cutting
strategy in order to expand its market share. As anticipated, this
led to a year over year decline in net income on narrowed margins,
despite an 11% increase in unit sales of luxury autos, and a record
contribution to operating income from the Company's high margin
Financing Services business. 
Mr. Tong Shiping, CEO and Chairman of the Company, stated, "It is of
paramount importance to the Company, and its plans to expand new and
existing higher margin auto-related services, that we maintain a
leadership position in luxury auto sales. While our price cutting
strategy currently is squeezing margins, we believe it ultimately
will shake out weaker competitors and build our market share.
Meanwhile, we remain pleased with the growing contribution to our
bottom line from Financing Services, and also are making progress
developing other high margin auto-related services opportunities that
we hope to be able to report on in the very near future."  
Financial Highlights 


 
--  Net revenues for the three months ended March 31, 2013 increased 0.17%
    to $107,625,066 from $107,445,586 in the first quarter last year. The
    main contributor to revenues were Auto Sales which comprised 97.41%,
    of total revenues, followed by Financing Services, with 1.76%. The
    percentage contribution to revenues from web-based advertising
    services declined further to 0.20% reflecting the Company's decision
    last year to shift the focus of their online presence away from ad
    revenue generation, in an attempt to create other growth opportunities
    for their online portal.
    
    
--  Income from operations in the 2013 first quarter declined to
    $1,464,322, primarily due to a sharply lower contribution to operating
    income from Auto Sales. While this was not offset by contributions to
    results from the Company's higher margin auto-related services
    businesses, including financing, web-based advertising and automobile
    value added services, the combined operating income of these other
    businesses grew strongly to $1.55 million, up from $1.24 million a
    year earlier, led by a record $1.05 million contribution from
    Financing Services, compared to a $704,000 contribution from this
    business in the year earlier quarter.
    
    
--  Net income attributable to shareholders in the 2013 first quarter
    declined to $1,007,335, or $0.27 per share, compared with $1,581,477,
    or $0.43 per share in the first quarter of 2012. The weighted average
    number of diluted common shares in both periods was 3,694,394 shares.

  
Segment Review 


 
--  In the 2013 first quarter, the Company sold 1,256 automobiles, up 11%
    from 1,129 automobiles in the same period last year. However, the
    average unit selling price decreased 8.7% from $92,000 a year earlier
    to $84,000 per vehicle in the 2013 first quarter. This decline
    primarily was a consequence of a continuing aggressive pricing
    strategy aimed at expanding market share and maintaining market leader
    status. Additionally, reflecting market demand, the Company sold more
    lower end models of luxury vehicles where gross margins typically are
    lower than higher end models.
    
    
--  Financing Services continued to grow strongly in the 2013 first
    quarter, although not fully reflected in the revenues for this segment
    of $1,899,410, compared with $2,000,432 in the first quarter last
    year. Revenues from this segment are comprised of interest income and
    fees for services and, while lower interest rates in the period
    reduced interest income, the fee portion of financing revenue grew
    52.24% to $1,329,434. New financing service types and increased
    pricing also helped grow the Financing Services gross margin
    percentage in the 2013 first quarter to 69.70%, up from 43.36% in the
    first three months of 2012. As of March 31, 2013, the Company had
    aggregate credit lines of approximately $136 million, supporting this
    business, on which it had drawn approximately $80 million.
    
    
--  The Company also continued to see solid but relatively flat year over
    year contributions to results in the 2013 first quarter from its other
    higher margin auto-related services, namely, auto mall management
    services and automobile value added services.

  
Outlook 
Mr. Tong commented, "We believe we will continue to operate in a strong
growth market for luxury car sales in China, where most forecasters
see this segment of the market outperforming the anticipated growth
in general automobile sales. At the same time, we see continuing
competition in the luxury automobile segment necessitating a
continuation of our efforts to beat the prices of weaker competitors
to expand our market share. To help us with this strategy, we
envision a growing contribution over time from our current and
planned higher margin auto-services related businesses." 
Conference Call Invitation 
The Company will discuss 2013 first quarter results during a live
conference call and webcast on Friday, May 17th, at 8:00am ET.  
To participate in the call, interested participants should call
1-877-941-1427 when calling within the United States or
1-480-629-9664 when calling internationally. Please ask for the China
Auto Logistics 2013 First Quarter Earnings Conference Call,
Conference ID: 4619448. There will be a playback available until May
24, 2013. 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: 4619448.  
This call is being webcast by ViaVid Broadcasting and can be accessed
by clicking on this link http://public.viavid.com/index.php?id=104737
or 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, and also manages China's largest imported auto mall
in Tianjin. Additionally, it operates www.cali.com.cn, one of the
leading automobile portals in China, as well as three major websites
serving China's auto dealers and their customers. The Company also
provides a growing variety of "one stop" automobile related services
such as short term dealer financing. Additional information about the
Company is available at www.chinaautologisticsinc.com. 
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. 


 
                                                                            
                                                                            
                         CHINA AUTO LOGISTICS INC.                          
          CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)           
                                                                            
                                               Three Months Ended March 31, 
                                               ---------------------------- 
                                                    2013           2012     
                                               -------------  ------------- 
                                                                            
Net revenue                                    $ 107,625,066  $ 107,445,586 
Cost of revenue                                  105,397,347    103,915,001 
                                               -------------  ------------- 
    Gross profit                                   2,227,719      3,530,585 
                                               -------------  ------------- 
                                                                            
Operating expenses:                                                         
  Selling and marketing                              170,034        245,677 
  General and administrative                         593,363        841,276 
                                               -------------  ------------- 
    Total operating expenses                         763,397      1,086,953 
                                               -------------  ------------- 
                                                                            
Income from operations                             1,464,322      2,443,632 
                                               -------------  ------------- 
                                                                            
Other income (expenses)                                                     
  Interest income                                    222,288         13,364 
  Interest expense                                   (76,636)       (86,024)
  Loss on disposal of property and equipment               -        (45,596)
  Foreign exchange loss                             (166,151)             - 
                                               -------------  ------------- 
    Total other expenses                             (20,499)      (118,256)
                                               -------------  ------------- 
                                                                            
Income before income taxes                         1,443,823      2,325,376 
                                                                            
Income taxes                                         435,500        736,589 
                                               -------------  ------------- 
                                                                            
Net income                                         1,008,323      1,588,787 
                                                                            
Less: Net income attributable to                                            
 noncontrolling interests                                988          7,310 
                                               -------------  ------------- 
                                                                            
Net income attributable to shareholders of                                  
 China Auto Logistics Inc.                     $   1,007,335  $   1,581,477 
                                               -------------  ------------- 
                                                                            
Earnings per share attributable to                                          
 shareholders of China Auto Logistics Inc.                                  
  - basic and diluted                          $        0.27  $        0.43 
                                               -------------  ------------- 
                                                                            
Weighted average number of common shares                                    
 outstanding                                                                
  - basic and diluted                              3,694,394      3,694,394 
                                               -------------  ------------- 
                                                                            
                                                                            
                                                                            
                          CHINA AUTO LOGISTICS INC.                         
              CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)             
                                                                            
                                               March 31, 2013  December 31, 
                                                 (Unaudited)        2012    
                                               -------------- --------------
ASSETS                                                                      
Current assets                                                              
  Cash and cash equivalents                    $    2,331,532 $    8,888,749
  Restricted cash                                  26,079,907     27,015,351
  Accounts receivable - trade, net of                                       
   allowance for doubtful accounts of $0 as of                              
   March 31, 2013                                   3,358,600              -
  Receivables related to financing services        71,618,325     57,134,815
  Notes receivable                                  3,191,523      1,587,024
  Inventories                                      13,180,620     27,141,004
  Advances to suppliers                            75,516,551     43,019,343
  Prepaid expenses                                     17,055         19,071
  Value added tax refundable                                -        338,513
  Deferred tax assets                                 718,093        714,161
                                               -------------- --------------
    Total current assets                          196,012,206    165,858,031
                                                                            
Property and equipment, net                           289,524        314,126
Other assets                                            9,476         23,559
                                               -------------- --------------
    Total Assets                               $  196,311,206 $  166,195,716
                                               -------------- --------------
                                                                            
LIABILITIES AND SHAREHOLDERS' EQUITY                                        
Current liabilities                                                         
  Lines of credit related to financing                                      
   services                                    $   79,949,410 $   51,528,018
  Short term borrowings                             7,210,226     19,673,128
  Accounts payable                                    262,691              -
  Notes payable to suppliers                       12,766,093     12,696,196
  Accrued expenses                                    321,109        356,114
  Value added tax payable                             131,191              -
  Customer deposits                                31,645,433     19,131,420
  Deferred revenue                                    233,686        241,598
  Due to shareholders                               2,168,037      2,156,166
  Due to director                                     513,698        512,023
  Income tax payable                                  511,817        400,932
                                               -------------- --------------
    Total current liabilities                     135,713,391    106,695,595
                                               -------------- --------------
                                                                            
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, 3,694,394 shares issued                               
   and outstanding as of March 31, 2013 and                                 
   December 31, 2012                                    3,694          3,694
  Additional paid-in capital                       21,994,074     21,994,074
  Accumulated other comprehensive income            6,012,505      5,923,398
  Retained earnings                                32,013,744     31,006,409
                                               -------------- --------------
    Total China Auto Logistics Inc.                                         
     shareholders' equity                          60,024,017     58,927,575
  Noncontrolling interests                            573,798        572,546
                                               -------------- --------------
    Total equity                                   60,597,815     59,500,121
                                               -------------- --------------
                                                                            
    Total liabilities and shareholders' equity $  196,311,206 $  166,195,716
                                               -------------- --------------
                                                                            
                                                                            
                                                                            
                         CHINA AUTO LOGISTICS INC.                          
        CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)         
                                                                            
                                               Three Months Ended March 31, 
                                                    2013           2012     
                                               -------------  ------------- 
                                                                            
Cash flows from operating activities                                        
Net income                                     $   1,008,323  $   1,588,787 
                                                                            
Adjustments to reconcile net income to net                                  
 cash provided by (used for) operating                                      
 activities                                                                 
Depreciation on property and equipment                28,153         50,567 
Amortization on intangible assets                          -         59,743 
Loss on disposal of property and equipment                 -         45,596 
                                                                            
Changes in operating assets and liabilities:                                
Restricted cash                                    1,082,394      1,751,337 
Accounts receivable - trade                       (3,353,088)        15,902 
Receivables related to financing services        (14,271,668)    (9,536,708)
Notes receivable                                  (1,593,143)    (7,145,693)
Inventories                                       14,086,651)       877,760 
Advances to suppliers                            (32,207,433)   (21,996,325)
Prepaid expenses, other current assets and                                  
 other assets                                         16,308         66,181 
Value added tax receivable                           339,818        400,777 
Accounts payable                                     262,260         (1,505)
Line of credit related to financing services      28,162,474     (6,989,185)
Notes payable to suppliers                                 -     12,703,454 
Accrued expenses                                     (36,527)       (34,984)
Value added tax payable                              130,975              - 
Customer deposits                                 12,388,325     19,849,649 
Deferred revenue                                      (9,227)       (72,992)
Income tax payable                                   108,500        (30,820)
                                               -------------  ------------- 
Net cash provided by (used in) operating                                    
 activities                                        6,143,095     (8,398,459)
                                               -------------  ------------- 
                                                                            
Cash flows from investing activities                                        
Purchase of property and equipment                    (1,864)             - 
                                               -------------  ------------- 
Net cash used in investing activities                 (1,864)             - 
                                               -------------  ------------- 
                                                                            
Cash flows from financing activities                                        
Proceeds from short-term borrowings                5,842,297      6,242,480 
Repayments of short-term borrowings              (18,582,569)             - 
Proceeds from director                               202,203        499,907 
Repayments to director                              (198,263)             - 
                                               -------------  ------------- 
Net cash flows (used in) provided by financing                              
 activities                                      (12,736,332)     6,742,387 
                                               -------------  ------------- 
                                                                            
Effect of exchange rate change on cash                37,884           (517)
                                                                            
Net decrease in cash and cash equivalents         (6,557,217)    (1,656,589)
                                                                            
Cash and cash equivalents at the beginning of                               
 period                                            8,888,749      8,184,793 
                                               -------------  ------------- 
Cash and cash equivalents at the end of period $   2,331,532  $   6,528,204 
                                               -------------  ------------- 
                                                                            
                                                                            
                                                                            
                          CHINA AUTO LOGISTICS INC.                         
         CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)        
                                 (Continued)                                
                                                                            
                                                Three Months Ended March 31,
                                                    2013           2012     
                                               -------------- --------------
                                                                            
Supplemental disclosure of cash flow                                        
 information                                                                
Interest paid                                  $      788,038 $    1,213,210
                                               -------------- --------------
Income taxes paid                              $      544,000 $      736,589
                                               -------------- --------------

  
Contacts:  
Sun Jiazhen 
sjz_cali@126.com  
Ken Donenfeld 
DGI Investor Relations Inc. 
kdonenfeld@dgiir.com 
Tel: 212-425-5700 
Fax: 646-381-9727 
 
 
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