China Auto Logistics Reports 2013 First Quarter Results

TIANJIN, CHINA--(Marketwired - May 15, 2013) -   China Auto Logistics Inc. (the "Company") ( NASDAQ : CALI ), a top seller in China of luxury imported automobiles, a leading provider of auto-related services, and developer and operator of a leading automobile portal and auto-related websites, reported today that in the first quarter of 2013 the Company continued its aggressive luxury auto price-cutting strategy in order to expand its market share. As anticipated, this led to a year over year decline in net income on narrowed margins, despite an 11% increase in unit sales of luxury autos, and a record contribution to operating income from the Company's high margin Financing Services business.

Mr. Tong Shiping, CEO and Chairman of the Company, stated, "It is of paramount importance to the Company, and its plans to expand new and existing higher margin auto-related services, that we maintain a leadership position in luxury auto sales. While our price cutting strategy currently is squeezing margins, we believe it ultimately will shake out weaker competitors and build our market share. Meanwhile, we remain pleased with the growing contribution to our bottom line from Financing Services, and also are making progress developing other high margin auto-related services opportunities that we hope to be able to report on in the very near future." 

Financial Highlights

• Net revenues for the three months ended March 31, 2013 increased 0.17% to $107,625,066 from $107,445,586 in the first quarter last year. The main contributor to revenues were Auto Sales which comprised 97.41%, of total revenues, followed by Financing Services, with 1.76%. The percentage contribution to revenues from web-based advertising services declined further to 0.20% reflecting the Company's decision last year to shift the focus of their online presence away from ad revenue generation, in an attempt to create other growth opportunities for their online portal.
• Income from operations in the 2013 first quarter declined to $1,464,322, primarily due to a sharply lower contribution to operating income from Auto Sales. While this was not offset by contributions to results from the Company's higher margin auto-related services businesses, including financing, web-based advertising and automobile value added services, the combined operating income of these other businesses grew strongly to $1.55 million, up from $1.24 million a year earlier, led by a record $1.05 million contribution from Financing Services, compared to a $704,000 contribution from this business in the year earlier quarter.
• Net income attributable to shareholders in the 2013 first quarter declined to $1,007,335, or $0.27 per share, compared with $1,581,477, or $0.43 per share in the first quarter of 2012. The weighted average number of diluted common shares in both periods was 3,694,394 shares.

Segment Review

• In the 2013 first quarter, the Company sold 1,256 automobiles, up 11% from 1,129 automobiles in the same period last year. However, the average unit selling price decreased 8.7% from $92,000 a year earlier to $84,000 per vehicle in the 2013 first quarter. This decline primarily was a consequence of a continuing aggressive pricing strategy aimed at expanding market share and maintaining market leader status. Additionally, reflecting market demand, the Company sold more lower end models of luxury vehicles where gross margins typically are lower than higher end models.
• Financing Services continued to grow strongly in the 2013 first quarter, although not fully reflected in the revenues for this segment of $1,899,410, compared with $2,000,432 in the first quarter last year. Revenues from this segment are comprised of interest income and fees for services and, while lower interest rates in the period reduced interest income, the fee portion of financing revenue grew 52.24% to $1,329,434. New financing service types and increased pricing also helped grow the Financing Services gross margin percentage in the 2013 first quarter to 69.70%, up from 43.36% in the first three months of 2012. As of March 31, 2013, the Company had aggregate credit lines of approximately $136 million, supporting this business, on which it had drawn approximately $80 million. 
• The Company also continued to see solid but relatively flat year over year contributions to results in the 2013 first quarter from its other higher margin auto-related services, namely, auto mall management services and automobile value added services.

Outlook

Mr. Tong commented, "We believe we will continue to operate in a strong growth market for luxury car sales in China, where most forecasters see this segment of the market outperforming the anticipated growth in general automobile sales. At the same time, we see continuing competition in the luxury automobile segment necessitating a continuation of our efforts to beat the prices of weaker competitors to expand our market share. To help us with this strategy, we envision a growing contribution over time from our current and planned higher margin auto-services related businesses."

Conference Call Invitation

The Company will discuss 2013 first quarter results during a live conference call and webcast on Friday, May 17th, at 8:00am ET.

To participate in the call, interested participants should call 1-877-941-1427 when calling within the United States or 1-480-629-9664 when calling internationally. Please ask for the China Auto Logistics 2013 First Quarter Earnings Conference Call, Conference ID: 4619448. There will be a playback available until May 24, 2013. To listen to the playback, please call 1-877-870-5176 when calling within the United States or 1-858-384-5517 when calling internationally. Use the Replay Pin Number: 4619448.

This call is being webcast by ViaVid Broadcasting and can be accessed by clicking on this link http://public.viavid.com/index.php?id=104737 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, and also manages China's largest imported auto mall in Tianjin. Additionally, it operates www.cali.com.cn , one of the leading automobile portals in China, as well as three major websites serving China's auto dealers and their customers. The Company also provides a growing variety of "one stop" automobile related services such as short term dealer financing. Additional information about the Company is available at www.chinaautologisticsinc.com .

Information Regarding Forward-Looking Statements

Except for historical information contained herein, the statements in this press release are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause our actual results in future periods to differ materially from forecasted results. These risks and uncertainties include, among other things, product demand, market competition, and risks inherent in our operations. These and other risks are described in our filings with the U.S. Securities and Exchange Commission.

CHINA AUTO LOGISTICS INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
				Three Months Ended March 31,
				2013				2012
Net revenue				$	107,625,066			$	107,445,586
Cost of revenue					105,397,347				103,915,001
		Gross profit			2,227,719				3,530,585
Operating expenses:
	Selling and marketing				170,034				245,677
	General and administrative				593,363				841,276
		Total operating expenses			763,397				1,086,953
Income from operations					1,464,322				2,443,632
Other income (expenses)
	Interest income				222,288				13,364
	Interest expense				(76,636	)			(86,024	)
	Loss on disposal of property and equipment				-				(45,596	)
	Foreign exchange loss				(166,151	)			-
		Total other expenses			(20,499	)			(118,256	)
Income before income taxes					1,443,823				2,325,376
Income taxes					435,500				736,589
Net income					1,008,323				1,588,787
Less: Net income attributable to noncontrolling interests					988				7,310
Net income attributable to shareholders of China Auto Logistics Inc.				$	1,007,335			$	1,581,477
Earnings per share attributable to shareholders of China Auto Logistics Inc.
	- basic and diluted			$	0.27			$	0.43
Weighted average number of common shares outstanding
	- basic and diluted				3,694,394				3,694,394

CHINA AUTO LOGISTICS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
				March 31, 2013 (Unaudited)			December 31,  2012
ASSETS
Current assets
	Cash and cash equivalents			$	2,331,532		$	8,888,749
	Restricted cash				26,079,907			27,015,351
	Accounts receivable - trade, net of allowance for doubtful accounts of $0 as of March 31, 2013				3,358,600			-
	Receivables related to financing services				71,618,325			57,134,815
	Notes receivable				3,191,523			1,587,024
	Inventories				13,180,620			27,141,004
	Advances to suppliers				75,516,551			43,019,343
	Prepaid expenses				17,055			19,071
	Value added tax refundable				-			338,513
	Deferred tax assets				718,093			714,161
		Total current assets			196,012,206			165,858,031
Property and equipment, net					289,524			314,126
Other assets					9,476			23,559
		Total Assets		$	196,311,206		$	166,195,716
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
	Lines of credit related to financing services			$	79,949,410		$	51,528,018
	Short term borrowings				7,210,226			19,673,128
	Accounts payable				262,691			-
	Notes payable to suppliers				12,766,093			12,696,196
	Accrued expenses				321,109			356,114
	Value added tax payable				131,191			-
	Customer deposits				31,645,433			19,131,420
	Deferred revenue				233,686			241,598
	Due to shareholders				2,168,037			2,156,166
	Due to director				513,698			512,023
	Income tax payable				511,817			400,932
		Total current liabilities			135,713,391			106,695,595
Equity
China Auto Logistics Inc. shareholders' equity
	Preferred stock, $0.001 par value, 5,000,000 shares authorized, none issued and outstanding				-			-
	Common stock, $0.001 par value, 95,000,000 shares authorized, 3,694,394 shares issued and outstanding as of March 31, 2013 and December 31, 2012				3,694			3,694
	Additional paid-in capital				21,994,074			21,994,074
	Accumulated other comprehensive income				6,012,505			5,923,398
	Retained earnings				32,013,744			31,006,409
		Total China Auto Logistics Inc. shareholders' equity			60,024,017			58,927,575
	Noncontrolling interests				573,798			572,546
		Total equity			60,597,815			59,500,121
		Total liabilities and shareholders' equity		$	196,311,206		$	166,195,716

CHINA AUTO LOGISTICS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
		Three Months Ended March 31,
		2013				2012
Cash flows from operating activities
Net income		$	1,008,323			$	1,588,787
Adjustments to reconcile net income to net cash provided by (used for) operating activities
Depreciation on property and equipment			28,153				50,567
Amortization on intangible assets			-				59,743
Loss on disposal of property and equipment			-				45,596
Changes in operating assets and liabilities:
Restricted cash			1,082,394				1,751,337
Accounts receivable - trade			(3,353,088	)			15,902
Receivables related to financing services			(14,271,668	)			(9,536,708	)
Notes receivable			(1,593,143	)			(7,145,693	)
Inventories			14,086,651	)			877,760
Advances to suppliers			(32,207,433	)			(21,996,325	)
Prepaid expenses, other current assets and other assets			16,308				66,181
Value added tax receivable			339,818				400,777
Accounts payable			262,260				(1,505	)
Line of credit related to financing services			28,162,474				(6,989,185	)
Notes payable to suppliers			-				12,703,454
Accrued expenses			(36,527	)			(34,984	)
Value added tax payable			130,975				-
Customer deposits			12,388,325				19,849,649
Deferred revenue			(9,227	)			(72,992	)
Income tax payable			108,500				(30,820	)
Net cash provided by (used in) operating activities			6,143,095				(8,398,459	)
Cash flows from investing activities
Purchase of property and equipment			(1,864	)			-
Net cash used in investing activities			(1,864	)			-
Cash flows from financing activities
Proceeds from short-term borrowings			5,842,297				6,242,480
Repayments of short-term borrowings			(18,582,569	)			-
Proceeds from director			202,203				499,907
Repayments to director			(198,263	)			-
Net cash flows (used in) provided by financing activities			(12,736,332	)			6,742,387
Effect of exchange rate change on cash			37,884				(517	)
Net decrease in cash and cash equivalents			(6,557,217	)			(1,656,589	)
Cash and cash equivalents at the beginning of period			8,888,749				8,184,793
Cash and cash equivalents at the end of period		$	2,331,532			$	6,528,204

CHINA AUTO LOGISTICS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Continued)
		Three Months Ended March 31,
		2013			2012
Supplemental disclosure of cash flow information
Interest paid		$	788,038		$	1,213,210
Income taxes paid		$	544,000		$	736,589