China Auto Logistics Reports Third Quarter Results

China Auto Logistics Reports Third Quarter Results 
TIANJIN, CHINA -- (Marketwired) -- 11/14/13 --  China Auto Logistics
Inc. (the "Company" or "CALI") (NASDAQ: CALI) 


 
--  Aggressive Pricing Strategy Continued in the Quarter Despite Reduced
    Year Over Year Sales and Profit Dips Resulting From Continued
--  Stringent Enforcement of Imported Auto Regulations; Maintaining
    Imported Luxury Auto Leadership Still is Seen As Paramount to Future
    Success
--  Potential Acquisition of Tianjin Airport Auto Mall Remains Key Focus
    of Auto-related Services Expansion Strategy
--  Investor Conference Call Scheduled for Friday, November 15th at 8:00am
    ET

  
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, reported today results for its
third quarter and nine months ended September 30, 2013.  
During the quarter, the Company kept in place its aggressive pricing
strategy to provide customers in China with the lowest possible
prices on imported luxury autos and to maintain the Company's
leadership position in this industry segment. As anticipated, this
strategy led to a further reduction during the quarter in the
traditionally thin margins in this business. Imported vehicle sales
(approximately 98.4% of third quarter revenues), while up from sales
levels in the second quarter this year, also continued to be impacted
in a still slow economic environment by the increased customs
standards and tighter rule enforcement at the motor registration
office initiated in the prior quarter. 
Year over year revenues and profits in the Company's highly
profitable Financing Services segment were impacted by lower year
over year auto sales, in the quarter. Of note, however, through the
first nine months of 2013, operating income from this business
remained ahead of operating income generated in the comparable period
of 2012.  
A key management focus in the third quarter was the continued due
diligence investigation relating to the potential acquisition for an
estimated $65 million to $130 million of the Airport International
Automall, which includes the 26,000 square meter facility and the
land use rights on which it is situated in Tianjin. If completed,
this acquisition is expected to constitute a major element in the
Company's strategy to expand its auto-related services businesses to
fuel future growth. 
Financial Highlights 


 
--  Net revenues in the quarter were $125,489,366, compared with
    $170,456,821 in the same period last year. A decrease in Auto Sales
    revenue to $123,468,011 from $168,360,743 in the third quarter last
    year, as well as reduced revenues from Web-based Advertising, a
    segment the Company made the strategic decision to shrink, as well as
    lower revenues from Financing Services were the key reasons for the
    decline.
    
    
--  The gross profit margin in Auto Sales in the third quarter continued
    to be squeezed by the Company's decision to be very competitive in its
    Auto Sales pricing to maintain industry leadership in the face of
    significant competition. The contribution to income from operations
    from Auto Sales in the quarter decreased to $193,793 from $1,124,528 a
    year earlier. The largest contributor to operating income continued to
    be Financing Services, which saw its third quarter contribution
    reduced to $579,371 from $771,255 a year earlier, while contributions
    in the quarter also came from Auto Mall Management services,
    Automobile Value Added Services and Web-based Advertising Services of
    $181,550, $127,039 and $89,331 respectively.
    
    
--  Reflecting the reduced contributions to operating income, net income
    attributable to shareholders in the third quarter was $553,275
    compared with $1,517,549 in the year earlier period. Earnings per
    share in the 2013 third quarter attributable to shareholders was
    $0.15, compared with $0.41 in the third quarter of 2012.
    
    
--  For the nine months ended September 30, 2013, net revenues were
    $343,370,742, compared with $427,950,375 a year earlier. Net earnings
    attributable to shareholders in the first nine months of 2013 were
    $2,361,094, or $0.64 per share, compared with $4,748,487, or $1.29 per
    share in the first nine months of 2012.
    
    
--  In all periods noted above, there were 3,694,394 diluted weighted
    average common shares outstanding.

  
Segment Review 


 
--  The number of automobiles sold by the Company in the quarter was
    1,253, compared with 2,004 in the third quarter of 2012. This decrease
    was a result of several factors, not least of which was the softening
    in the Chinese economy. Another key issue was the implementation by
    the PRC customs department in the second quarter of unified standards
    to complete their inspection process. In the third quarter, this
    continued to prolong the Company's purchasing cycles such that it took
    longer than usual to fill customer orders. During the third quarter,
    inventory levels eventually increased to a stable level and,
    reflecting the Company's progress, the number of automobiles sold in
    the quarter slightly exceeded the 1,240 automobiles sold in the second
    quarter of 2013 and quarter over quarter revenues were correspondingly
    higher.
    
    
    A further hindrance to imported auto sales in the quarter was the
    additional cost faced by customers due to vehicle alterations required
    by the PRC motor registration office as a consequence of stricter
    enforcement of existing rules. The Company has taken steps to help
    customers to minimize these costs and anticipates this will continue
    to ease some of their concerns.
    
    
    Additionally, sales in the third quarter continued to reflect a
    higher demand for lower end luxury models, with typically lower
    margins, for the Company's top selling brands. During the quarter,
    however, the Company began to see increased demand for certain higher
    end models which increased their average selling prices. As a
    consequence, following a long decline, the overall average unit
    selling price in the 2013 third quarter increased to $99,000 from
    $84,000 in the same period in 2012. Profit margins continued to
    decline in the quarter, however, as the Company continued to fight
    competition with the best possible prices coupled with its
    auto-related services. While continuing to focus on sales of higher
    end automobiles, the Company anticipates a continuation of low profit
    margins through the remainder of the year.
    
    
--  As previously noted, following the decline in Auto Sales revenues and
    profits, Financing Services also experienced a slight (1.4%) decline
    in revenues in the quarter, as interest income grew, and fee income
    decreased. Through the first nine months of 2013, however, the fee
    income portion of revenues from this key segment increased 13.97% over
    the same period of 2012, but overall revenue declined 6.3% as the
    contribution from interest income decreased. Gross margin in the
    business was 62.42% in the nine month period, up from 51.24% a year
    earlier and together with the increase in fee income is indicative of
    the continuing future growth potential of this important auto-related
    service. Further to this, as of September 30, 2013, the business was
    supported by aggregate credit lines of approximately $139 million, on
    which it had drawn approximately $49.7 million. In addition to the
    facility lines of credit agreements with several major banks in the
    PRC, the Company had $13.7 million of short term foreign currency
    borrowings as of September 30, 2013 with Agricultural Bank of China.
    At this date (Nov. 14, 2013), the Company does not anticipate any
    difficulties in obtaining credit lines and loan facilities from its
    banks on an "as needed" basis.
    
    
--  As previously noted, contributions to revenues and net income from the
    Company's web-based advertising services continued to decline as
    planned during 2013. Only minimal future contributions are anticipated
    from the Company's two remaining informational websites following the
    closing of its portal in 2013.
    
    
--  In May 2013, Shisheng signed a non-binding Letter of Intent to acquire
    a company which operates the Airport International Automall in
    Tianjin, and made a refundable deposit of RMB 100 million
    (approximately $16,296,200) related to this potential acquisition
    which the Company believes will cost between $65 million and $130
    million, and could become a key springboard for expanding its
    auto-related services. The Company is continuing its due diligence
    with a decision on possible next steps anticipated by the end of the
    year.

  
Outlook 
Mr. Tong Shiping, CEO and Chairman of the Company, commented, "We
continue to believe in the growth potential for imported luxury
vehicles in China as the economy continues to rebound. Consequently,
painful as it is in the short-term, we will continue to press ahead
at least through the remainder of the year with our aggressive
pricing. Coupled with the provision of our auto-related financing
this will make it difficult, if not impossible, for competitors to
match what we can offer customers. Maintaining our leadership will
facilitate the growth of our existing and planned auto-related
services, as would the successful completion of the acquisition of
the automall in Tianjin, although a final decision on the latter has
not been reached as yet." 
Conference Call Invitation 
The Company will discuss 2013 third quarter results during a live
conference call and webcast on Friday, November 15th, 2013 at 8:00 am
Eastern Time.  
To participate in the call, interested participants should call
1-877-941-4774 when calling within the United States or
1-480-629-9760 when calling internationally. Please ask for the China
Auto Logistics 2013 Third Quarter Earnings Conference Call,
Conference ID: 4650138. There will be a playback available until
November 22, 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: 4650138.  
This call is being webcast by ViaVid Broadcasting and can be accessed
by clicking on this link http://public.viavid.com/index.php?id=106886
or 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 manages China's largest imported auto mall
in Tianjin and 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 BALANCE SHEETS                   
                                                                            
                                                 September 30,              
                                                     2013       December 31,
                                                  (Unaudited)       2012    
                                                -------------- -------------
ASSETS                                                                      
Current assets                                                              
  Cash and cash equivalents                     $    5,973,548 $   8,888,749
  Restricted cash                                   40,528,915    27,015,351
  Accounts receivable - trade                          128,838             -
  Receivable related to auto mall management                                
   fees                                                254,628             -
  Receivables related to financing services         68,048,048    57,134,815
  Notes receivable                                           -     1,587,024
  Inventories                                       23,077,715    27,141,004
  Advances to suppliers                             42,842,131    43,019,343
  Prepaid expenses                                      25,437        19,071
  Value added tax refundable                         1,583,649       338,513
  Deferred tax assets                                  733,329       714,161
                                                -------------- -------------
    Total current assets                           183,196,238   165,858,031
                                                                            
Property and equipment, net                            251,322       314,126
Acquisition deposit                                 16,296,200             -
Other assets                                                 -        23,559
                                                -------------- -------------
    Total Assets                                $  199,743,760 $ 166,195,716
                                                -------------- -------------
                                                                            
LIABILITIES AND SHAREHOLDERS' EQUITY                                        
Current liabilities                                                         
  Bank overdraft                                $    2,421,468 $           -
  Lines of credit related to financing services     63,401,567    51,528,018
  Short term borrowings                             19,602,915    19,673,128
  Accounts payable                                      80,207             -
  Notes payable to suppliers                        13,036,960    12,696,196
  Accrued expenses                                     361,077       356,114
  Customer deposits                                 34,312,328    19,131,420
  Deferred revenue                                     138,589       241,598
  Due to shareholders                                2,214,037     2,156,166
  Due to director                                      501,597       512,023
  Income tax payable                                   335,768       400,932
                                                -------------- -------------
    Total current liabilities                      136,406,513   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 September 30, 2013 and                             
   December 31, 2012                                     3,694         3,694
  Additional paid-in capital                        21,994,074    21,994,074
  Accumulated other comprehensive income             7,403,250     5,923,398
  Retained earnings                                 33,367,503    31,006,409
                                                -------------- -------------
    Total China Auto Logistics Inc.                                         
     shareholders' equity                           62,768,521    58,927,575
Noncontrolling interests                               568,726       572,546
                                                -------------- -------------
    Total equity                                    63,337,247    59,500,121
                                                -------------- -------------
                                                                            
    Total liabilities and shareholders' equity  $  199,743,760 $ 166,195,716
                                                -------------- -------------
                                                                            
                                                                            
                                                                            
                          CHINA AUTO LOGISTICS INC.                         
           CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)          
                                                                            
                         Three Months Ended           Nine Months Ended     
                            September 30,               September 30,       
                     --------------------------  -------------------------- 
                         2013          2012          2013          2012     
                     ------------  ------------  ------------  ------------ 
                                                                            
Net revenue          $125,489,366  $170,456,821  $343,370,742  $427,950,375 
Cost of revenue       123,918,829   167,673,580   337,757,403   418,587,823 
                     ------------  ------------  ------------  ------------ 
    Gross profit        1,570,537     2,783,241     5,613,339     9,362,552 
                     ------------  ------------  ------------  ------------ 
                                                                            
Operating expenses:                                                         
  Selling and                                                               
   marketing              159,492       287,372       522,334       715,762 
  General and                                                               
   administrative         479,922       343,749     1,432,621     1,583,544 
                     ------------  ------------  ------------  ------------ 
    Total operating                                                         
     expenses             639,414       631,121     1,954,955     2,299,306 
                     ------------  ------------  ------------  ------------ 
                                                                            
Income from                                                                 
 operations               931,123     2,152,120     3,658,384     7,063,246 
                     ------------  ------------  ------------  ------------ 
                                                                            
Other income                                                                
 (expenses)                                                                 
  Interest income         124,540       128,167       367,186       156,839 
  Interest expense       (234,552)     (154,883)     (453,627)     (381,527)
  Loss on disposal                                                          
   of property and                                                          
   equipment                    -       (12,719)            -       (84,793)
  Foreign exchange                                                          
   loss                   (12,254)            -      (198,624)            - 
  Miscellaneous                 -             -             -          (114)
                     ------------  ------------  ------------  ------------ 
    Total other                                                             
     expenses            (122,266)      (39,435)     (285,065)     (309,595)
                     ------------  ------------  ------------  ------------ 
                                                                            
Income before income                                                        
 taxes                    808,857     2,112,685     3,373,319     6,753,651 
                                                                            
Income taxes              257,518       591,893     1,014,166     1,991,566 
                     ------------  ------------  ------------  ------------ 
                                                                            
Net income                551,339     1,520,792     2,359,153     4,762,085 
                                                                            
Less: Net income                                                            
 (loss) attributable                                                        
 to noncontrolling                                                          
 interests                 (1,936)        3,243        (1,941)       13,598 
                     ------------  ------------  ------------  ------------ 
                                                                            
Net income                                                                  
 attributable to                                                            
 shareholders of                                                            
 China Auto                                                                 
 Logistics Inc.      $    553,275  $  1,517,549  $  2,361,094  $  4,748,487 
                     ============  ============  ============  ============ 
                                                                            
Earnings per share                                                          
 attributable to                                                            
 shareholders of                                                            
 China Auto                                                                 
 Logistics Inc. -                                                           
 basic and diluted   $       0.15  $       0.41  $       0.64  $       1.29 
                     ============  ============  ============  ============ 
                                                                            
Weighted average                                                            
 number of common                                                           
 share Outstanding -                                                        
 basic and diluted      3,694,394     3,694,394     3,694,394     3,694,394 
                     ============  ============  ============  ============ 
                                                                            
                                                                            
                                                                            
                          CHINA AUTO LOGISTICS INC.                         
         CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)        
                                                                            
                                                      Nine Months Ended     
                                                        September 30,       
                                                 -------------------------- 
                                                     2013          2012     
                                                 ------------  ------------ 
Cash flows from operating activities                                        
Net income                                       $  2,359,153  $  4,762,085 
                                                                            
Adjustments to reconcile net income to net cash                             
 provided by (used for) operating activities                                
Depreciation on property and equipment                 83,826       123,233 
Amortization on intangible assets                           -       178,920 
Loss on disposal of property and equipment                  -        84,793 
                                                                            
Changes in operating assets and liabilities:                                
Restricted cash                                   (12,735,438)  (10,342,558)
Accounts receivable - trade                           (88,091)      107,738 
Receivable related to auto mall management fees      (253,599)            - 
Receivables related to financing services          (9,571,239)   28,805,018 
Notes receivable                                    1,631,363   (13,153,761)
Inventories                                         4,516,046    (9,355,312)
Advances to suppliers                               1,868,155   (13,213,116)
Prepaid expenses, other current assets and other                            
 assets                                                17,843        88,709 
Value added tax receivable                         (1,236,134)   (1,685,533)
Accounts payable                                       72,540       285,704 
Line of credit related to financing services       10,386,661   (27,188,268)
Notes payable to suppliers                                  -    19,044,809 
Accrued expenses                                       (1,904)      (48,001)
Value added tax payable                                (1,572)            - 
Customer deposits                                  14,354,058    (3,277,890)
Deferred revenue                                     (108,670)      (34,158)
Income tax payable                                    (76,845)     (468,182)
Deferred tax liability                                      -       (45,045)
                                                 ------------  ------------ 
Net cash provided by (used in) operating                                    
 activities                                        11,216,153   (25,330,815)
                                                 ------------  ------------ 
                                                                            
Cash flows from investing activities                                        
Purchase of property and equipment                    (13,502)       (1,958)
Acquisition deposit                               (16,122,531)            - 
                                                 ------------  ------------ 
Net cash used in investing activities             (16,136,033)       (1,958)
                                                 ------------  ------------ 
                                                                            
Cash flows from financing activities                                        
Bank overdraft                                      2,395,570             - 
Proceeds from short-term borrowings                25,383,484    30,959,992 
Repayments of short-term borrowings               (26,023,210)   (8,469,915)
Decrease in restricted cash related to short-                               
 term borrowings                                      136,027             - 
Proceeds from director                                502,201       699,086 
Repayments to director                               (496,089)     (210,209)
                                                 ------------  ------------ 
Net cash provided by financing activities           1,897,983    22,978,954 
                                                 ------------  ------------ 
                                                                            
Effect of exchange rate change on cash                106,696           391 
                                                                            
Net decrease in cash and cash equivalents          (2,915,201)   (2,353,428)
                                                                            
Cash and cash equivalents at the beginning of                               
 period                                             8,888,749     8,184,793 
                                                 ------------  ------------ 
Cash and cash equivalents at the end of period   $  5,973,548  $  5,831,365 
                                                 ------------  ------------ 
                                                                            
Supplemental disclosure of cash flow information                            
Interest paid                                    $  2,398,901  $  3,059,236 
                                                 ------------  ------------ 
Income taxes paid                                $    937,321  $  2,458,979 
                                                 ------------  ------------ 

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