TIANJIN, CHINA--(Marketwired - Nov 14, 2017) - China Auto Logistics Inc. (the "Company" or "CALI") (
In the 2017 third quarter - - based primarily on higher sales of automobiles - - revenues from continuing operations increased 30.5% year over year to approximately $125 million. However, weak gross margins in Auto Sales coupled with reduced fee revenues and margins in Financing Services, and a reserve for uncollectible receivables in the latter business, resulted in a net loss from continuing operations in the 2017 third quarter of approximately $(939,000) or a loss of $(0.23) per share.
During the third quarter a key impact on gross margins in the Auto Sales business continued to be the 10% additional tax on "super luxury" cars imposed by the Chinese government in December of 2016. Although the Company was able to sell more high end luxury vehicles in the quarter as compared with the second quarter this year, high end sales nevertheless continued to be lower than normal and reduced profitability of the business. With respect to the large year over year increase in sales of automobiles, to some extent this reflected the lower than normal sales in the 2016 third quarter. The Company believes the latter resulted from auto dealer customers continuing throughout 2016 to draw down on inventories they had built up in 2015 and first quarter of 2016 in response to anticipated and actual sharp devaluations of the RMB versus the U.S. dollar.
For the nine months ended September 30, 2017, year over year revenues increased approximately 14.5% to approximately $374.5 million. Weak gross margins in Auto Sales, lower Financing Services revenue, and a reserve set up for uncollectible Financing Services accounts, produced a net loss attributable to shareholders from continuing operations in the period of approximately $(1.42 million), or $(0.35) per share. This compared with a loss from continuing operations of approximately $(865 thousand), or $(0.21) per share in the first nine months of 2016.
Commenting on these results, Mr. Tong Shiping, Chairman and CEO of the Company, stated, "While our efforts during the quarter generated an increase in Auto Sales, the steps we took to improve margins, such as increased retail sales, fell short. We will continue to take the necessary steps to maintain our leadership position and believe this will serve us well down the road as China's economy continues to rebound and as high end buyers return to the market." He added, "One key indicator during the quarter of confidence in the future of the Company was the acquisition in September by our largest shareholder - - Bright Praise Enterprises Limited ('Bright Praise') - - of 806,000 new common shares issued by the Company in connection with a Debt Exchange Agreement. This transaction which is fully described in our Form 10-Q and in other filings with the U.S. Securities and Exchange Commission, brought Bright Praise ownership of the Company to 50.7%."
Financial Highlights of the Third Quarter and Nine Months ended September 30, 2017
- Net revenue from continuing operations in the third quarter rose 30.05% to $125,231,888 from $96,293,622 in the third quarter of 2016.
- The net loss from continuing operations attributable to shareholders in the third quarter was $(939,443), or $(0.23) per share, compared with a net loss of $(200,000) or $(0.05) per share, in the year earlier quarter.
- Gross profit margins in the 2017 third quarter declined to 0.42% from 0.65% a year earlier primarily due to the continuing impact of a 10% additional tax on "super luxury" automobiles imposed by the government, as well as lower Financing Services sales, and recording a reserve of $519,334 for uncollectable Financing Services accounts receivable.
- Net revenue from continuing operations for the nine months ended September 30, 2017 increased 14.47% to $374,524,571 from $327,177,025 in the year earlier period. Gross profit margins in the first nine months of 2017 decreased to 0.40% from 0.68% a year earlier, leading to a net loss from continuing operations of $(1,416,798) on $(0.35) per share, as compared with a net loss of $(835,397), or $(0.21) per share, in the 2016 nine month results.
- Total cash and cash equivalents increased to $5,742,988 as of September 30, 2017 from $3,004,932 as of December 31, 2016.
- As of September 30, 2017 the Company had working capital of $24,913,664 compared with $23,576,035 as of December 31, 2016.
- Primarily reflecting the operating losses incurred thus far in 2017 and the negative operating cash flows, the Company included a "Going Concern" paragraph in the Notes to the Company's Condensed Consolidated Financial Statements for the period ended September 30, 2017.
- As a consequence of the issuance of 806,000 common shares by the Company in September this year, the weighted average number of basic and diluted common shares outstanding for the three months ended September 30, 2017 increased to 4,095,720 from 4,034,494 at the same time last year.
Sales of Automobiles
In the 2017 third quarter the Company achieved increases in the volume and dollar amount of automobiles sold. Net revenue from Auto Sales of $124,174,090 represented a 30.35% increase over the prior year quarter, as the number of autos sold increased to 1,208 from 902 a year earlier. As previously described, these increases compared with relatively low sales in the third quarter of 2016 due to the inventory buildup by auto dealers in 2015 and first quarter of 2016 which was sold off in the remainder of 2016. Profit margins in the 2017 third quarter dropped to 0.12% from 0.14% a year earlier, primarily due to the continuing impact of the government's 10% extra tax on "super luxury" vehicles priced above $190,000, which typically yield the highest profit margins to the Company. Sales of these vehicles increased over sales in the 2017 second quarter, but not enough to generate significantly better results.
Financing Services
While net revenues from Financing Services in the 2017 third quarter increased 3.06% compared with the prior year quarter, revenue from the fee income portion of the business declined 22.48% in this time frame. This resulted in a 35.74% gross margin in the period compared with 47.52% a year earlier. The Company continued to lose market share in the quarter to new players in this increasingly competitive market.
Outlook
"While we anticipate continuing difficulty in the short term with respect to improving margins," Mr. Tong stated, "we remain optimistic that the boost being provided to independent importers like ourselves by the government's Parallel Imported Vehicle Scheme, and an improving economy in China, will lead to improved results, especially as luxury buyers return to the market. In addition, we continue to review potential new higher margin businesses and are likely as well to continue to expand our retail sales where we believe higher margins also are possible."
Conference Call Invitation
The Company will discuss 2017 third quarter results during a live conference call and webcast on Wednesday, November 15th at 8:00am ET.
To participate in the call, interested participants should call 1-800-239-9838 when calling within the United States or 1-323-794-2551 when calling internationally. Please ask for the Conference ID: 2890686. There will be a playback available until 11/22/17. 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: 2890686.
This call is being webcast by ViaVid Broadcasting and can be accessed by clicking on this link: http://public.viavid.com/index.php?id=127245 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 | ||||||||
| September 30, 2017 (Unaudited) | December 31, 2016 | |||||||
| ASSETS: | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 5,742,988 | $ | 3,004,932 | ||||
| Restricted cash | 9,390,254 | 22,703,835 | ||||||
| Receivable related to financing services, net | 54,270,503 | 48,549,972 | ||||||
| Inventories | 13,007,389 | 13,049,065 | ||||||
| Advances to suppliers, net | 69,854,476 | 71,921,388 | ||||||
| Prepaid expenses | 35,324 | 376,581 | ||||||
| Value added tax receivable | 328,778 | 615,555 | ||||||
| Total current assets | 152,629,712 | 160,221,328 | ||||||
| Property, plant, and equipment, net | 272,681 | 317,282 | ||||||
| Other assets | 31,647 | 30,329 | ||||||
| Total assets | $ | 152,934,040 | $ | 160,568,939 | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY: | ||||||||
| Current liabilities: | ||||||||
| Lines of credit related to financing services | $ | 49,671,882 | $ | 47,081,763 | ||||
| Short term borrowings | 15,778,796 | 12,961,389 | ||||||
| Accounts payable | 2,770,789 | 365,120 | ||||||
| Notes payable to suppliers | 12,021,940 | 25,922,779 | ||||||
| Accrued expenses | 159,173 | 131,128 | ||||||
| Customer deposits | 42,430,668 | 46,047,515 | ||||||
| Deferred revenue | 52,438 | 48,171 | ||||||
| Due to former shareholder | 2,041,659 | 1,956,625 | ||||||
| Due to shareholder | 2,248,026 | - | ||||||
| Due to director | 69,950 | 1,550,745 | ||||||
| Income tax payable | 470,727 | 580,058 | ||||||
| Total current liabilities | 127,716,048 | 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, with 4,840,394 shares issued and outstanding as of September 30, 2017 and 4,034,394 shares issued and outstanding as of December 31, 2016 | 4,840 | 4,034 | ||||||
| Additional paid-in capital | 24,679,588 | 22,979,734 | ||||||
| Accumulated other comprehensive income | 5,121,205 | 3,939,898 | ||||||
| Accumulated deficit | (4,780,364 | ) | (3,363,566 | ) | ||||
| Total China Auto Logistics Inc. shareholders' equity | 25,025,269 | 23,560,100 | ||||||
| Noncontrolling interests | 192,723 | 363,546 | ||||||
| Total equity | 25,217,992 | 23,923,646 | ||||||
| Total liabilities and shareholders' equity | $ | 152,934,040 | $ | 160,568,939 | ||||
| China Auto Logistics Inc. Condensed Consolidated Statements of Operations (Unaudited) | ||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||||
| Net revenue | $ | 125,231,888 | $ | 96,293,622 | $ | 374,524,571 | $ | 327,177,025 | ||||||||||
| Cost of revenue | 124,704,662 | 95,671,721 | 373,011,864 | 324,958,268 | ||||||||||||||
| Gross profit | 527,226 | 621,901 | 1,512,707 | 2,218,757 | ||||||||||||||
| Operating expenses: | ||||||||||||||||||
| Selling and marketing | 212,440 | 180,371 | 589,823 | 532,676 | ||||||||||||||
| General and administrative | 564,931 | 460,664 | 1,674,355 | 1,443,153 | ||||||||||||||
| Reserve (recovery) from reserve for uncollectible receivable related to financing services | 519,334 | - | 228,981 | (68,813 | ) | |||||||||||||
| Total operating expenses | 1,296,705 | 641,035 | 2,493,159 | 1,907,016 | ||||||||||||||
| (Loss) income from continuing operations | (769,479 | ) | (19,134 | ) | (980,452 | ) | 311,741 | |||||||||||
| Other income (expenses) | ||||||||||||||||||
| Interest income | 23,240 | 18,811 | 53,198 | 233,274 | ||||||||||||||
| Interest expense | (200,151 | ) | (202,803 | ) | (630,056 | ) | (1,331,835 | ) | ||||||||||
| Gain on sale of property and equipment | 1,910 | - | 1,910 | 2,707 | ||||||||||||||
| Miscellaneous | 4,900 | 3,091 | 8,206 | 6,546 | ||||||||||||||
| Total other expenses | (170,101 | ) | (180,901 | ) | (566,742 | ) | (1,089,308 | ) | ||||||||||
| Loss from continuing operations before income taxes | (939,580 | ) | (200,035 | ) | (1,547,194 | ) | (777,567 | ) | ||||||||||
| Income tax (benefit) expense | - | - | (130,118 | ) | 87,737 | |||||||||||||
| Net loss from continuing operations | (939,580 | ) | (200,035 | ) | (1,417,076 | ) | (865,304 | ) | ||||||||||
| Discontinued operations: | ||||||||||||||||||
| Income from operations of discontinued Airport Automall Automotive Services (including gain on disposal of $6,701,350 for nine months ended September 30, 2016) | - | - | - | 4,543,918 | ||||||||||||||
| Income tax benefit | - | - | - | (246,791 | ) | |||||||||||||
| Net income from discontinued operations | - | - | - | 4,790,709 | ||||||||||||||
| Net (loss) income | (939,580 | ) | (200,035 | ) | (1,417,076 | ) | 3,925,405 | |||||||||||
| Less: Net (loss) income attributable to noncontrolling interests | (137 | ) | (35 | ) | (278 | ) | 93 | |||||||||||
| Net (loss) income attributable to shareholders of China Auto Logistics Inc. | $ | (939,443 | ) | $ | (200,000 | ) | $ | (1,416,798 | ) | $ | 3,925,312 | |||||||
| Net (loss) income attributable to shareholders of China Auto Logistics Inc. | ||||||||||||||||||
| - continuing operations | $ | (939,443 | ) | $ | (200,000 | ) | $ | (1,416,798 | ) | $ | (865,397 | ) | ||||||
| - discontinued operations | - | - | - | 4,790,709 | ||||||||||||||
| $ | (939,443 | ) | $ | (200,000 | ) | $ | (1,416,798 | ) | $ | 3,925,312 | ||||||||
| (Loss) income per share attributable to shareholders of China Auto Logistics Inc. from | ||||||||||||||||||
| - continuing operations - basic and diluted | $ | (0.23 | ) | (0.05 | ) | $ | (0.35 | ) | $ | (0.21 | ) | |||||||
| - discontinued operations - basic and diluted | $ | - | $ | - | $ | - | $ | 1.19 | ||||||||||
| Total (loss) earnings per share attributable to shareholders of China Auto Logistics Inc. | $ | (0.23 | ) | $ | (0.05 | ) | $ | (0.35 | ) | $ | 0.98 | |||||||
| Weighted average number of common shares Outstanding | ||||||||||||||||||
| - basic and diluted | 4,095,720 | 4,034,494 | 4,055,061 | 4,034,494 | ||||||||||||||
| CHINA AUTO LOGISTICS INC. | |||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) | |||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||||
| Net (loss) income | $ | (939,580 | ) | $ | (200,035 | ) | $ | (1,417,076 | ) | $ | 3,925,405 | ||||||
| Other comprehensive income (loss) | |||||||||||||||||
| Foreign currency translation adjustments | 509,370 | (111,136 | ) | 1,181,314 | (750,288 | ) | |||||||||||
| Comprehensive (loss) income | (430,210 | ) | (311,171 | ) | (235,762 | ) | 3,175,117 | ||||||||||
| Less: Comprehensive (loss) income (loss) attributable to noncontrolling interests | (52 | ) | (99 | ) | (271 | ) | 50 | ||||||||||
| Comprehensive income attributable to shareholders of China Auto Logistics Inc. | $ | (430,158 | ) | $ | (311,072 | ) | $ | (235,491 | ) | $ | 3,175,067 | ||||||
| CHINA AUTO LOGISTICS INC. | ||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) | ||||||||
| Nine Months Ended September 30, | ||||||||
| 2017 | 2016 | |||||||
| Cash flows from operating activities | ||||||||
| Net (loss) income | $ | (1,417,076 | ) | $ | 3,925,405 | |||
| Add: loss from discontinued operations | - | 1,910,641 | ||||||
| Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities | ||||||||
| Reserve (recovery) on reserve for uncollectible receivable related to financing services | 228,981 | (68,813 | ) | |||||
| Depreciation on property, plant and equipment | 67,124 | 58,532 | ||||||
| Gain on disposal of property and equipment | (1,910 | ) | (5,702 | ) | ||||
| 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 | 14,010,712 | (35,507,788 | ) | |||||
| Accounts receivable | 5,827 | - | ||||||
| Receivables related to financing services | (3,624,954 | ) | 31,710,041 | |||||
| Inventories | 563,361 | (7,938,670 | ) | |||||
| Advances to suppliers | 5,065,968 | (54,723,792 | ) | |||||
| Prepaid expenses, other current assets and other assets | 346,620 | (14,304 | ) | |||||
| Value added tax receivable | 301,220 | (1,390,994 | ) | |||||
| Other assets | - | (32,244 | ) | |||||
| Accounts payable | 2,226,743 | 1,952,284 | ||||||
| Line of credit related to financing services | 393,687 | (24,103,238 | ) | |||||
| Notes payable to suppliers | (14,704,314 | ) | 36,344,159 | |||||
| Accrued expenses | 23,302 | 318,354 | ||||||
| Accrued interest | - | 897,826 | ||||||
| Customer deposits | (5,263,243 | ) | 2,161,062 | |||||
| Deferred revenue | 1,899 | (47,981 | ) | |||||
| Income tax payable | (130,118 | ) | (62,549 | ) | ||||
| Cash used in operating activities from continuing operations | (1,906,171 | ) | (51,395,675 | ) | ||||
| Cash used in operating activities from discontinued operations | - | (1,299,109 | ) | |||||
| Net cash used in operating activities | (1,906,171 | ) | (52,694,784 | ) | ||||
| 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 | 5,247 | 8,563 | ||||||
| Purchase of property and equipment | (13,281 | ) | (342,435 | ) | ||||
| Cash (used in) provided by investing activities from continuing operations | (8,034 | ) | 21,416,930 | |||||
| Cash provided by investing activities from discontinued operations | - | - | ||||||
| Net cash (used in) provided by investing activities | (8,034 | ) | 21,416,930 | |||||
| Cash flows from financing activities | ||||||||
| Bank overdraft | - | (2,117,974 | ) | |||||
| Proceeds from short-term borrowings | 19,726,363 | 84,846,873 | ||||||
| Repayments of short-term borrowings | (17,539,977 | ) | (57,538,686 | ) | ||||
| Proceeds from director | 2,551,427 | 484,919 | ||||||
| Payment to non controlling shareholders for Ganghui's book value at de-registration | (175,406 | ) | - | |||||
| Cash provided by financing activities from continuing operations | 4,562,407 | 25,675,132 | ||||||
| Cash provided by financing activities from discontinued operations | - | - | ||||||
| Net cash provided by financing activities | 4,562,407 | 25,675,132 | ||||||
| Effect of exchange rate change on cash | 89,854 | (126,192 | ) | |||||
| Net increase (decrease) in cash and cash equivalents | 2,738,056 | (5,728,914 | ) | |||||
| Cash and cash equivalents at the beginning of period | 3,004,932 | 7,119,686 | ||||||
| Cash and cash equivalents at the end of period | $ | 5,742,988 | $ | 1,390,772 | ||||
| Supplemental disclosure of cash flow information | ||||||||
| Interest paid | $ | 1,272,773 | $ | 3,958,670 | ||||
| Income taxes paid | $ | - | $ | 150,355 | ||||
| Non-cash activities: | ||||||||
| Assumption of outstanding payable to former owner of Zhonghe by Huitongto offset the sale price of Zhonghe | $ | - | $ | 36,755,594 | ||||
| Issuance of 806,000 shares of common stock to settle debt owed to shareholder | $ | 1,700,660 | $ | - | ||||
CONTACT: Ken Donenfeld DGI Investor Relations Inc. kdonenfeld@dgiir.com Tel: 212-425-5700 Fax: 646-381-9727
