China Auto Logistics Reports 2014 First Quarter Results

China Auto Logistics Reports 2014 First Quarter Results 
Net Loss Recorded in the Quarter With Auto Mall and Used Auto Joint
Venture Not Expected to Be on Stream Until the Second Half of the
Year 
Auto Sales Margins Stabilize With Improved High End Sales Mix 
China Auto Logistics 2014 First Quarter Investor Conference Call
Scheduled for Monday, May 19th at 8:00am ET 
TIANJIN, CHINA -- (Marketwired) -- 05/15/14 --  China Auto Logistics
Inc. (the "Company" or "CALI") (NASDAQ: CALI), a top seller in China
of luxury imported automobiles, a leading provider of auto-related
services and a soon to be entrant in used car sales in China, today
reported that revenues in its first quarter ended March 31, 2014,
were down slightly compared with last year's first quarter to
approximately $107 million. Higher interest and non-cash depreciation
expense coupled with reduced Financial Services income, with no
offsetting revenues of any magnitude or income as yet from the new
used car joint venture, Car King Tianjin, or the recently acquired
Airport International Auto Mall, led to an approximately $1.35
million loss in the first quarter. On a positive note, the Company
saw gross margins in its Auto Sales business, which contributed
almost 98% of revenues in the first quarter, improve slightly for the
first time in several quarters and believes they have stabilized. 
Mr. Tong Shiping, Chairman and CEO of the Company commented, "While
maintaining our leadership position in the highly competitive
imported luxury auto sales business, we also were able to stabilize
margins with an improved mix of sales that greatly increased our
average price per vehicle. While this business is likely to remain
highly competitive, we remain optimistic about its long-term future.
At the same time, we were able to move ahead with major steps in our
diversification strategy with the acquisition we made, and the used
car joint venture we concluded near the end of 2013. Both should
begin to come on stream in the second half of the year." He added,
"It will be somewhat painful to absorb the additional expense as we
finalize our strategy. However, we believe it will be very
worthwhile, given the size and growth of the used car market in
China, and the excellent location of the new mall in what we hope
will become another Free Trade Zone before year end." 
Financial Highlights 


 
--  Revenues in the first quarter of 2014 were $106,975,050, down 0.60%
    from $107,625,066 a year earlier. The 2014 figure does not include
    revenues from Car King Tianjin, which are accounted for under the
    equity method of accounting as the Company's equity interest is less
    than half at 40%. Sales of Automobiles accounted for 97.90% of
    revenues in the quarter, up from 97.41% a year earlier.
--  Gross profit margins for sales of automobiles stabilized at 0.17% in
    the quarter, up from 0.04% a year earlier. Nevertheless, the overall
    gross profit margin in the quarter was 1.33% compared with 2.07% in
    the first quarter last year, as gross profits declined to $1,423,797
    from $2,227,719 year over year. A key factor in this result was a
    decline in the gross margins of Financing Services to 36.45% in the
    quarter from 69.7% a year earlier, as the Company temporarily ceased
    providing certain Financing Services due to a reutilization of
    available funds to finance the Zhonghe acquisition and to provide a
    working capital loan to Car King Tianjin.
--  The aforementioned reduction in Financing Services offerings, one
    fewer month of Auto Mall Management Services revenue due to the
    expiration of the Auto Mall Management Services contract in February,
    and a decline in revenues from Value Added Auto Services and Web Based
    Advertising Services all contributed to a loss in income from
    operations in the quarter of $7,562, compared with operating income of
    $1,464,322 a year earlier.
--  Car King Tianjin had a net loss in the quarter of $738,160, which
    resulted in a reported loss to the Company of $295,264 from its 40%
    equity investment.
--  There were also significant acquisition related interest, depreciation
    and amortization costs in the quarter. In particular, interest expense
    in the quarter increased to $1,322,583 from $76,636 a year earlier,
    and depreciation on the Airport International Auto Mall property
    increased this expense to $644,889 from $28,153 a year earlier.
--  Reflecting in particular the reduced income from operations
    (particularly from Financing Services) and the increased interest and
    depreciation costs, a loss attributable to shareholders was incurred
    in the quarter of $1,346,167, or ($0.33) per share, as compared with
    year earlier net income of $1,007,335, or $0.27 per share.

  
Operational Highlights 
Sales of Automobiles in the quarter continued to be affected by the
slower economy and steep competition in the luxury imported auto
space. Revenue in the quarter was down 0.1% year over year. While the
Company sold 981 automobiles in the quarter, down 22% from a year
earlier volume of 1,256 automobiles, the average unit selling price
increased to $106,000 compared with $84,000 a year earlier. This
increase came largely from the sale of higher end vehicles and
resulted in a small increase in gross margin. 
Financing Services revenues in the quarter declined 18.76% year over
year to $1,543,169, as the decision was made to discontinue the fee
service of providing customers with credit beyond the financing terms
provided by banks. The Company determined that the working capital
needed to provide this service would be better utilized in financing
the Zhonghe acquisition and provide working capital to Car King
Tianjin. The contribution from financing fees to operating income
also therefore declined to $570,531 although interest income
increased to $972,638. In future periods, it is anticipated that the
revenue lost from discontinuing this product will be replaced by
restoring the product or by other new products. 
Airport Auto Mall Services - A small amount of revenue was generated
in the quarter by leasing space in the Airport International Auto
Mall to Car King Tianjin. The Company continues to finalize its plans
for both the facility and the used car business, and expects that
they will begin to come to fruition in the second half of this year. 
Outlook 
"As we indicated last quarter," Mr. Tong said, "We anticipate having
to work very hard to try to overcome the continuing obstacles in the
luxury auto sales space, including the slow economy, the government's
concerns with auto pollution and fierce competition. However, we
believe stability on the auto sales bottom line will continue as we
focus on the best possible approach to optimizing our entry into the
used car arena, and determining the best possible uses of our new
auto mall. Our optimism for the longer term is well founded, we
believe, given our size and stature in the auto industry, and the
growth still being forecasted for both luxury autos and used cars, as
well for auto related services such as dealer financing." 
Commenting on the recent publicity surrounding the SEC complaint
filed against several individuals for alleged improprieties with
respect to CALI shares, Mr. Tong stated, "We spend a lot of time and
effort to comply with SEC requirements and operate our business with
the best interests of our shareholders in mind. As such, we strongly
endorse the SEC's actions whenever they take steps to protect
shareholders and try to maintain an even playing field for all
investors."  
Conference Call Invitation 
The Company will discuss 2014 first quarter results during a live
conference call and webcast on Monday, May 19, 2014 at 8:00 am
Eastern Time.  
To participate in the call, interested participants should call
1-877-941-8416 when calling within the United States or
1-480-629-9808 when calling internationally. Please ask for the China
Auto Logistics 2014 First Quarter Earnings Conference Call,
Conference ID: 4683974. There will be a playback available until May
26, 2014. 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: 4683974. 
This call is being webcast by ViaVid Broadcasting and can be accessed
by clicking on this link http:
http://public.viavid.com/index.php?id=109326 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. It also provides a growing variety of "one stop"
automobile related services such as short term dealer financing.
Additionally, in November, 2013, it acquired the owner and operator
of the 26,000 square meter Airport International Automall in Tianjin
for $91.4 million, with plans to develop it, among other things, as
the flagship site for a used car business, with Car King (China) Used
Car Trading Co., Ltd.  
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                   
                                                                            
                                                March 31,                   
                                                   2014        December 31, 
                                               (Unaudited)         2013     
                                             --------------- ---------------
ASSETS                                                                      
Current assets                                                              
  Cash and cash equivalents                  $    10,364,520 $    15,041,505
  Restricted cash                                 38,116,578      29,665,536
  Accounts receivable - trade, Car King                                     
   Tianjin                                           324,575               -
  Receivable related to auto mall management                                
   fees                                                    -         255,712
  Receivables related to financing services      104,290,689      68,568,562
  Inventories                                     17,903,606      15,343,671
  Advances to suppliers                           42,189,218      38,074,096
  Prepaid expenses                                    45,436          12,311
  Value added tax refundable                         714,859         283,478
  Deferred tax assets                                 12,657          48,345
                                             --------------- ---------------
    Total current assets                         213,962,138     167,293,216
                                                                            
Property and equipment, net                       71,722,521      72,977,985
Ownership interest in Car King Tianjin               280,028         577,904
Due from Car King Tianjin                          1,298,301               -
Goodwill                                          19,990,877      20,159,365
Intangible assets, net                               514,993         547,155
                                             --------------- ---------------
    Total Assets                             $   307,768,858 $   261,555,625
                                             --------------- ---------------
                                                                            
LIABILITIES AND SHAREHOLDERS' EQUITY                                        
Current liabilities                                                         
  Bank overdraft                             $     2,415,942 $     2,439,429
  Lines of credit related to financing                                      
   services                                       94,060,031      66,173,312
  Short term borrowings                           34,612,971       6,259,598
  Accounts payable                                   189,517               -
  Notes payable to suppliers                      11,360,132      21,275,203
  Accrued expenses                                   398,536         236,599
  Customer deposits                               36,569,643      35,205,567
  Deferred revenue                                   179,793         202,428
  Payable related to acquisition of Zhonghe                                 
   - current portion, net                         15,883,504      15,706,581
  Due to shareholders                              2,204,875       2,223,458
  Due to director                                    504,380         597,393
  Income tax payable                                 230,470         174,540
  Deferred tax liability                             718,202         786,413
                                             --------------- ---------------
    Total current liabilities                    199,327,996     151,280,521
                                                                            
Payable related to acquisition of Zhonghe,                                  
 excluding current portion, net                   35,685,728      35,306,223
Deferred tax liability                            11,902,184      12,239,842
                                             --------------- ---------------
      Total liabilities                          246,915,908     198,826,586
                                             --------------- ---------------
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,                                   
   2014 and December 31, 2013                          4,034           4,034
  Additional paid-in capital                      22,979,734      22,979,734
  Accumulated other comprehensive income           7,114,641       7,642,886
  Retained earnings                               30,184,501      31,530,669
                                             --------------- ---------------
    Total China Auto Logistics Inc.                                         
     shareholders' equity                         60,282,910      62,157,323
Noncontrolling interests                             570,040         571,716
                                             --------------- ---------------
    Total equity                                  60,852,950      62,729,039
                                             --------------- ---------------
                                                                            
    Total liabilities and shareholders'                                     
     equity                                  $   307,768,858 $   261,555,625
                                             --------------- ---------------
                                                                            
                                                                            
                         CHINA AUTO LOGISTICS INC.                          
        CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)         
                                                                            
                                            Three Months Ended March 31,    
                                          --------------------------------  
                                                2014             2013       
                                          ---------------  ---------------  
                                                                            
Net revenue                               $   106,975,050  $   107,625,066  
Cost of revenue                               105,551,253      105,397,347  
                                          ---------------  ---------------  
      Gross profit                              1,423,797        2,227,719  
                                          ---------------  ---------------  
                                                                            
Operating expenses:                                                         
  Selling and marketing                           186,527          170,034  
  General and administrative                    1,244,832          593,363  
                                          ---------------  ---------------  
    Total operating expenses                    1,431,359          763,397  
                                          ---------------  ---------------  
                                                                            
(Loss) income from operations                      (7,562)       1,464,322  
                                          ---------------  ---------------  
                                                                            
Other income (expenses)                                                     
  Interest income                                  60,900          222,288  
  Interest expense                             (1,322,583)         (76,636) 
  Gain on disposal of property and                                          
   equipment                                       11,694                -  
  Equity loss - share of investee company                                   
   loss                                          (295,264)               -  
  Foreign exchange loss                               (96)        (166,151) 
                                          ---------------  ---------------  
    Total other expenses                       (1,545,349)         (20,499) 
                                          ---------------  ---------------  
                                                                            
(Loss) income before income taxes              (1,552,911)       1,443,823  
                                                                            
Income tax (benefit) expense                     (205,873)         435,500  
                                          ---------------  ---------------  
                                                                            
Net (loss) income                              (1,347,038)       1,008,323  
                                                                            
Less: Net (loss) income attributable to                                     
 noncontrolling interests                            (871)             988  
                                          ---------------  ---------------  
                                                                            
Net (loss) income attributable to                                           
 shareholders of China Auto Logistics                                       
 Inc.                                     $    (1,346,167) $     1,007,335  
                                          ===============  ===============  
                                                                            
(Loss) earnings per share attributable to                                   
 shareholders of China Auto Logistics                                       
 Inc.- basic and diluted                  $         (0.33) $          0.27  
                                          ===============  ===============  
                                                                            
Weighted average number of common share                                     
 Outstanding - basic and diluted                4,034,494        3,694,394  
                                          ===============  ===============  
                                                                            
                                                                            
                         CHINA AUTO LOGISTICS INC.                          
        CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)         
                                                                            
                                             Three Months Ended March 31,   
                                           -------------------------------- 
                                                 2014             2013      
                                           ---------------  --------------- 
Cash flows from operating activities                                        
Net (loss) income                          $    (1,347,038) $     1,008,323 
                                                                            
Adjustments to reconcile net (loss) income                                  
 to 
net cash provided by(used in)                                           
 operating activities                                                       
Depreciation on property and equipment             672,605           28,153 
Gain on disposal of property and equipment         (11,694)               - 
Equity loss - share of investee company                                     
 loss                                              295,264                - 
Change of Inventory reserve                       (142,203)               - 
Change of deferred tax assets                       35,551                - 
Change of deferred tax liabilities                (101,202)               - 
                                                                            
Changes in operating assets and                                             
 liabilities:                                                               
Restricted cash                                 10,270,967        1,082,394 
Accounts receivable - trade, Car King                                       
 Tianjin                                          (327,033)      (3,353,088)
Receivable related to auto mall management                                  
 fees                                              255,494                - 
Receivables related to financing services      (36,569,995)     (14,271,668)
Notes receivable                                         -       (1,593,143)
Inventories                                     (2,566,324)      14,086,651 
Advances to suppliers                           (4,466,903)     (32,207,433)
Prepaid expenses, other current assets and                                  
 other assets                                      (33,479)          16,308 
Value added tax receivable                        (437,033)         339,818 
Accounts payable                                   190,380          262,260 
Line of credit related to financing                                         
 services                                       28,655,094       28,162,474 
Notes payable to suppliers                      (9,810,975)               - 
Accrued expenses                                   164,962          (36,527)
Accrued interest                                   792,178                - 
Value added tax payable                                  -          130,975 
Customer deposits                                1,670,872       12,388,325 
Deferred revenue                                   (21,101)          (9,227)
Income tax payable                                  57,823          108,500 
                                           ---------------  --------------- 
Net cash (used in) provided by operating                                    
 activities                                    (12,773,790)       6,143,095 
                                           ---------------  --------------- 
                                                                            
Cash flows from investing activities                                        
Proceeds from disposal of property and                                      
 equipment                                          17,954                - 
Purchase of property and equipment                    (652)          (1,864)
Advances to Car King Tianjin                    (1,308,130)               - 
                                           ---------------  --------------- 
Net cash used in investing activities           (1,290,828)          (1,864)
                                           ---------------  --------------- 
                                                                            
Cash flows from financing activities                                        
Bank overdraft                                      (3,122)               - 
Proceeds from short-term borrowings             31,875,389        5,842,297 
Repayments of short-term borrowings             (3,254,646)     (18,582,569)
Decrease in restricted cash related to                                      
 short-term borrowings                         (19,035,807)               - 
Proceeds from director                             205,942          202,203 
Repayments to director                            (310,728)        (198,263)
                                           ---------------  --------------- 
Net cash provided by (used in) financing                                    
 activities                                      9,477,028      (12,736,332)
                                           ---------------  --------------- 
                                                                            
Effect of exchange rate change on cash             (89,395)          37,884 
                                           ---------------  --------------- 
                                                                            
Net decrease in cash and cash equivalents       (4,676,985)      (6,557,217)
                                                                            
Cash and cash equivalents at the beginning                                  
 of period                                      15,041,505        8,888,749 
                                           ---------------  --------------- 
Cash and cash equivalents at the end of                                     
 period                                    $    10,364,520  $     2,331,532 
                                           ---------------  --------------- 
                                                                            
Supplemental disclosure of cash flow                                        
 information                                                                
Interest paid                              $     1,590,426  $       788,038 
                                           ---------------  --------------- 
Income taxes paid                          $             -  $       544,000 
                                           ---------------  --------------- 

  
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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