China Auto Logistics Reports 2017 Second Quarter and Six Month Results

/EINPresswire.com/ -- TIANJIN, CHINA--(Marketwired - Aug 14, 2017) - China Auto Logistics Inc. (the "Company" or "CALI") (NASDAQ: CALI), a top seller in China of luxury imported automobiles and a leading provider of auto-related services, today announced results for its second quarter and first six months ended June 30, 2017. 

Net revenues in the 2017 second quarter rose sharply year over year, to approximately $138 million -- a gain of approximately 48% -- mainly on the strength of increased sales of automobiles compared with relatively weak auto sales in the second quarter of 2016.

The increased revenues offset by lower gross margins contributed to a narrowing of the year over year loss from continuing operations attributable to shareholders in the 2017 second quarter to $342,109 or an $0.08 loss per share, as compared with a loss of $477,875 or a $0.12 loss per share in the second quarter of 2016. Total net income attributable to shareholders in the 2016 second quarter was approximately $5.2 million or $1.28 in earnings per share, as it includes approximately $5.7 million or $1.40 per share in income from discontinued operations.

In the first six months of 2017, revenues from continuing operations increased approximately 8% to approximately $249 million, while the net loss from continuing operations attributable to shareholders decreased approximately 28% to approximately $477,000, or a $0.12 loss per share. In the first six months of 2016 the loss was approximately $665,000, or a loss of $0.16 per share. Total net income attributable to shareholders in the first six months of 2016 was approximately $4.1 million, or $1.03 per share, including approximately $4.8 million, or $1.19 in earnings per share from discontinued operations.

Commenting on these results, Mr. Tong Shiping, Chairman and CEO of the Company, stated: "We were pleased to see the year over year rebound in auto sales in the second quarter. However, we also clearly saw our already tight margins further impacted by the recent tax imposed on purchasers of our higher margin, high end autos which kept buyers of these autos away. We think at some point we'll see high end buyers return and, meanwhile, are continuing to fight to maintain our position as a leader in the industry."

Financial Highlights for the Second Quarter ended June 30, 2017

• Net revenue in the 2017 second quarter increased 48% to $138,758,902 from $93,819,385 in the second quarter of 2016.
  
  
• The net loss from continuing operations attributable to shareholders in the 2017 second quarter improved from $477,875, or a $0.12 loss per share a year earlier, to $342,109 or a loss per share of $0.08. The net income from discontinued operations attributable to shareholders was $0 in the 2017 second quarter compared to $5,664,104 or earnings per share of $1.40 in the 2016 second quarter.
  
  
• Net revenues from Sales of Automobiles increased 48.63% year over year to $137,892,079 while sales volume also grew. Average unit selling prices declined, however, largely due to the impacts triggered by an additional 10% tax imposed on "super luxury cars," which typically are the most profitable autos sold by the Company.
  
  
• Net revenues for Financing Services in the 2017 second quarter decreased year over year 16.17% to $861,173. The decrease included a year over year decline in fee income of 37.74% to $294,188, mainly reflecting increased competition.

Financial Highlights for the Six Months Ended June 30, 2017

• Net revenue from continuing operations in the first six months of 2017 was $249,292,683, an increase of 7.97% from $230,883,403 in the same period of 2016.
  
  
• As the gross profit margin in the first six months of 2017 declined to 0.40% compared with 0.69% in the year earlier period, the Company's gross profit also declined and led to a net loss from continuing operations attributable to shareholders of $477,355, or a loss of $0.12 per share. This nevertheless was a slight improvement over the prior year first half loss of $665,397 or a loss of $0.16 per share. The total net income attributable to shareholders in the first six months of 2016, including results of discontinued operations, was $4,125,312, or $1.03 per share.
  
  
• Interest expense (excluding operating interest expense related to Financing Services) was $429,905 in the first half of 2017, compared with $1,129,032 in the first six months of 2016.
  
  
• Cash and cash equivalents as of June 30, 2017 was $1,567,726.
  
  
• Working capital as of June 30, 2017 was $23,626,413 as compared with working capital as of December 31, 2016 of $23,576,035. The Company has included a "going concern" paragraph in the Notes to the Company's Condensed Consolidated Financial Statements for the quarter and six months ended June 30, 2017 reflecting the continuing operating losses, accumulated deficit and negative operating cash flow.

Sales of Automobiles

A total of 1,398 automobiles were sold in the 2017 second quarter, up 54% from the 905 vehicles sold in the same period a year earlier. However, the average unit selling price in the 2017 quarter decreased to $99,000 from $103,000 a year earlier. As previously explained, the Company saw a decline in sales of its higher margin high end luxury vehicles in 2017 following the imposition of the additional 10% luxury tax by the government. The Company believes sales were unusually low in the second quarter of 2016 due to a depletion of the inventories built up in the prior quarters when dealers stocked up inventories in anticipation of increased prices due to a sudden devaluation of the RMB starting in August of 2015. The Company believes the government's "Parallel Imported Vehicle" scheme did not offset the depletion of built up inventories during the quarter, but the Company continues to believe this program will help boost sales over time.

Financing Services

The Company believes continuing competition eroded both fee income and margins in this business in the 2017 second quarter. Year over year revenue declined 16.17% to $861,173 from $1,027,280 in the prior year period. Most reflective of the competitive situation was the 37.74% year over year decline in fee income to $294,188 in the second quarter of 2017 from $472,545 in the same period of 2016. The remaining portion of revenue consisted of interest income of $566,985, up slightly from $554,735 in the second quarter of 2016. 

As of August 10, 2017, the Company had aggregate credit lines of $136 million, and did not incur any difficulties in accessing these lines and bank loan facilities, nor does it anticipate any difficulty in this regard over the near term.

Outlook

"Much of our future growth in Auto Sales," Mr. Tong commented, "is dependent on the continuing growth and strengthening of the Chinese economy. While there is always reason to have some concerns about this, generally, we remain quite confident about the economy and, concomitantly, future sales of imported luxury and 'super luxury' vehicles."

He added, "While we remain cautious about steps we may take to improve our profitability, we are aware of the need and are staying focused on the issue."

Conference Call Invitation

The Company will discuss 2017 second quarter results during a live conference call and webcast on Tuesday, August 15, 2017 at 8:00am ET.

To participate in the call, interested participants should call 1-800-334-0872 when calling within the United States or 1-719-457-2607 when calling internationally. Please ask for the Conference ID: 9672875. There will be a playback available until 08/22/17. To listen to the playback, please call 1-844-512-2921 when calling within the United States or 1-412-317-6671 when calling internationally. Use the Replay Pin Number: 9672875.

This call is being webcast by ViaVid Broadcasting and can be accessed by clicking on this link: http://public.viavid.com/index.php?id=125899 at ViaVid's website at http://viavid.com.

SEE ATTACHED TABLES

About China Auto Logistics Inc.

China Auto Logistics Inc. is one of China's top sellers of imported luxury vehicles. It also provides a variety of "one stop" automobile related services such as short term dealer financing.

Information Regarding Forward-Looking Statements

Except for historical information contained herein, the statements in this press release are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause our actual results in future periods to differ materially from forecasted results. These risks and uncertainties include, among other things, product demand, market competition, and risks inherent in our operations. These and other risks are described in our filings with the U.S. Securities and Exchange Commission. We do not undertake any obligation to publicly update these forward-looking statements, whether as a result of new information, future events or otherwise.

CHINA AUTO LOGISTICS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
		June 30, 2017 (Unaudited)			December 31, 2016
ASSETS:
Current assets:
Cash and cash equivalents		$	1,567,726		$	3,004,932
Restricted cash			16,033,081			22,703,835
Receivable related to financing services, net			58,119,145			48,549,972
Inventories			11,969,891			13,049,065
Advances to suppliers, net			70,433,770			71,921,388
Prepaid expenses			74,733			376,581
Value added tax receivable			258,595			615,555
Total current assets			158,456,941			160,221,328
Property, plant, and equipment, net			290,053			317,282
Other assets			31,076			30,329
Total assets		$	158,778,070		$	160,568,939
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Lines of credit related to financing services		$	54,632,818		$	47,081,763
Short term borrowings			15,493,837			12,961,389
Accounts payable			5,825,052			365,120
Notes payable to suppliers			18,445,044			25,922,779
Accrued expenses			144,427			131,128
Customer deposits			35,734,873			46,047,515
Deferred revenue			58,121			48,171
Due to former shareholder			2,004,787			1,956,625
Due to director			1,856,684			1,550,745
Payable to non controlling interest on de-registration of subsidiary			172,660			-
Income tax payable			462,225			580,058
Total current liabilities			134,830,528			136,645,293

Equity:
China Auto Logistics Inc. shareholders' equity:
Preferred stock, $0.001 par value, 5,000,000 shares authorized, none issued and outstanding			-				-
Common stock, $0.001 par value, 95,000,000 shares authorized, 4,034,394 shares issued and outstanding as of June 30, 2017 and December 31, 2016			4,034				4,034
Additional paid-in capital			22,979,734				22,979,734
Accumulated other comprehensive income			4,611,920				3,939,898
Accumulated deficit			(3,840,921	)			(3,363,566	)
Total China Auto Logistics Inc. shareholders' equity			23,754,767				23,560,100
Noncontrolling interests			192,775				363,546
Total equity			23,947,542				23,923,646
Total liabilities and shareholders' equity		$	158,778,070			$	160,568,939

CHINA AUTO LOGISTICS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
				Three Months Ended June 30,								Six Months Ended June 30,
				2017				2016				2017				2016
Net revenue				$	138,758,902			$	93,819,385			$	249,292,683			$	230,883,403
Cost of revenue					138,237,315				93,173,641				248,307,202				229,286,547
		Gross profit			521,587				645,744				985,481				1,596,856
Operating expenses:
	Selling and marketing				194,785				168,224				377,383				352,305
	General and administrative				496,801				426,480				1,109,424				982,489
	Recovery from reserve for uncollectible receivable related to financing services				-				-				(290,353	)			(68,813	)
		Total operating expenses			691,586				594,704				1,196,454				1,265,981
(Loss) income from continuing operations					(169,999	)			51,040				(210,973	)			330,875
Other income (expenses)
	Interest income				13,689				18,113				29,958				214,463
	Interest expense				(223,561	)			(526,993	)			(429,905	)			(1,129,032	)
	Gain on sale of property and equipment				-				-				-				2,707
	Miscellaneous				2,163				1,886				3,306				3,455
		Total other expenses			(207,709	)			(506,994	)			(396,641	)			(908,407	)
Loss from continuing operations before income taxes					(377,708	)			(455,954	)			(607,614	)			(577,532	)
Income tax (benefit) expense					(35,539	)			21,768				(130,118	)			87,737
Net loss from continuing operations					(342,169	)			(477,722	)			(477,496	)			(665,269	)
Discontinued operations:
	Income from operations of discontinued Airport Automall Automotive Services (including gain on disposal of $6,701,350 for the three months and six months ended June 30, 2016)				-				5,565,026				-				4,543,918
	Income tax benefit				-				(99,078	)			-				(246,791	)
Net income from discontinued operations					-				5,664,104				-				4,790,709
Net (loss) income					(342,169	)			5,186,382				(477,496	)			4,125,440
Less: Net (loss) income attributable to noncontrolling interests					(60	)			153				(141	)			128
Net (loss) income attributable to shareholders of China Auto Logistics Inc.				$	(342,109	)		$	5,186,229			$	(477,355	)		$	4,125,312
Net (loss) income attributable to shareholders of China Auto Logistics Inc.
	- continuing operations			$	(342,109	)		$	(477,875	)		$	(477,355	)		$	(665,397	)
	- discontinued operations				-				5,664,104				-				4,790,709
				$	(342,109	)		$	5,186,229			$	(477,355	)		$	4,125,312
(Loss) income per share attributable to shareholders of China Auto Logistics Inc. from
	- continuing operations - basic and diluted			$	(0.08	)			(0.12	)		$	(0.12	)		$	(0.16	)
	- discontinued operations - basic and diluted			$	-			$	1.40			$	-			$	1.19
	Total (loss) earnings per share attributable to shareholders of China Auto Logistics Inc.			$	(0.08	)			1.28				(0.12	)			1.03
Weighted average number of common shares Outstanding
	- basic and diluted				4,034,494				4,034,494				4,034,494				4,034,494

CHINA AUTO LOGISTICS INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
			Three Months Ended June 30,								Six Months Ended June 30,
			2017				2016				2017				2016
Net (loss) income			$	(342,169	)		$	5,186,382			$	(477,496	)		$	4,125,440
Other comprehensive income (loss)
	Foreign currency translation adjustments			460,256				(791,646	)			671,944				(639,152	)
Comprehensive income				118,087				4,394,736				194,448				3,486,288
Less: Comprehensive income (loss) attributable to noncontrolling interests				66				158				(219	)			149
	Comprehensive income attributable to shareholders of China Auto Logistics Inc.		$	118,021			$	4,394,578			$	194,667			$	3,486,139

CHINA AUTO LOGISTICS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
		Six Months Ended June 30,
		2017				2016
Cash flows from operating activities
Net (loss) income		$	(477,496	)		$	4,125,440
Add: loss from discontinued operations			-				1,910,641
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities
Recovery on reserve for uncollectible receivable related to financing services			(290,353	)			(68,813	)
Depreciation on property, plant and equipment			44,037				35,721
Gain on disposal of property and equipment			-				(5,702	)
Change in inventory reserve			-				(68,813	)
Change in reserve for advances to suppliers			-				(76,554	)
Gain on sale of Zhonghe			-				(6,701,350	)
Changes in operating assets and liabilities:
Restricted cash			7,089,935				(34,912,920	)
Accounts receivable			5,827				-
Receivables related to financing services			(8,011,178	)			17,465,431
Inventories			1,378,718				(7,387,423	)
Advances to suppliers			3,195,847				(54,067,994	)
Prepaid expenses, other current assets and other assets			305,936				(54,291	)
Value added tax receivable			366,487				(1,187,901	)
Other assets			-				(32,244	)
Accounts payable			5,380,426				2,110,661
Line of credit related to financing services			6,344,863				(10,833,045	)
Notes payable to suppliers			(7,958,471	)			36,344,159
Accrued expenses			10,810				429,317
Accrued interest			-				897,826
Customer deposits			(11,287,077	)			2,889,429
Deferred revenue			8,634				(41,013	)
Income tax payable			(130,118	)			(62,549	)
Cash used in operating activities from continuing operations			(4,023,173	)			(49,291,987	)
Cash used in operating activities from discontinued operations			-				(1,299,109	)
Net cash used in operating activities			(4,023,173	)			(50,591,096	)
Cash flows from investing activities
Cash proceeds from sale of Zhonghe, net of cash at Zhonghe of $175,767 and amount owed to Zhonghe of $4,092,476			-				21,750,802
Proceeds from disposal of property and equipment			-				8,563
Purchase of property and equipment			(9,509	)			(336,327	)
Cash provided by investing activities from continuing operations			(9,509				21,423,038
Cash provided by investing activities from discontinued operations			-				-
Net cash (used in) provided by investing activities			(9,509	)			21,423,038
Cash flows from financing activities
Bank overdraft			-				(2,117,974	)
Proceeds from short-term borrowings			17,327,841				80,346,450
Repayments of short-term borrowings			(15,141,455	)			(52,438,207	)
Proceeds from director			356,198				384,826
Cash provided by financing activities from continuing operations			2,542,584				26,175,095
Cash provided by financing activities from discontinued operations			-				-
Net cash provided by financing activities			2,542,584				26,175,095
Effect of exchange rate change on cash			52,892				(112,388	)
Net decrease in cash and cash equivalents			(1,437,206	)			(3,105,351	)
Cash and cash equivalents at the beginning of period			3,004,932				7,119,686
Cash and cash equivalents at the end of period		$	1,567,726			$	4,014,335
Supplemental disclosure of cash flow information
Interest paid		$	976,415			$	2,790,801
Income taxes paid		$	-			$	150,355
Non-cash activities:
Increase in payable to non controlling interest on de-registration of subsidiary for reduction of non controlling interests in Equity as a result of de-registration of Ganghui		$	172,660			$	-
Assumption of outstanding payable to former owner of Zhonghe by Huitong to offset the sale price of Zhonghe		$	-			$	36,755,594