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