China Auto Logistics 2012 First Quarter Revenues Climbed Past $100 Million on 33% Year Over Year Growth in Luxury Auto Sales

Profits Dampened by Continued Shift in Web-Based Ad Strategy; Near Tripling of Financing Services Led Gains in Other High Margin Services; Investor Conference Call Scheduled for Thursday, May 17th at 8:00am ET

Marketwired

TIANJIN, CHINA--(Marketwire -05/15/12)- China Auto Logistics Inc. (the "Company" or "CALI") (CALI), one of China's leading developers of websites for buyers and sellers of imported and domestic automobiles, a top seller in China of imported luxury cars, and a leading provider of auto-related services, reported today that first quarter revenues in 2012, benefitting from the continuing strong demand in China for luxury vehicles, rose 31.7% to $107.45 million compared with $81.57 million a year earlier. At the same time, the Company continued to shift its focus from web-based advertising sales to further reshaping its online platforms into springboards for increased auto sales and high margin auto related services growth. Consequently, despite continued growth in the Company's other auto-related services businesses, including a 186% increase in finance services revenues, lower results in web-based advertising sales led to an approximately 24% decline in net income to $1,581,477, or $0.07 per share in this year's first quarter, from $2,077,134 or $0.11 per share in the first quarter of 2011.

The per share figures also reflect a year over year increase in diluted weighted average shares outstanding from 19,163,427 shares in last year's first quarter to 22,163,427 shares in 2012.

Regrouping At a High Level of Achievement

Mr. Tong Shiping, CEO and Chairman of the Company, stated, "While I would have liked to continue the long string of quarterly profit gains we achieved in recent years, we have paused to regroup at a very high level of achievement with an aim to grow more strongly and steadily in the future, utilizing our web platforms." He added, "Of particular note, our quarterly revenues now exceed the annual revenues we had when we went public in November 2008. We also have dramatically expanded our web presence from a sole focus on auto importers, in a single city, to the full spectrum of China's auto buying public, with a presence in 50 cities across the country. Additionally, we have developed very strong banking relationships that should serve us well in future expansion efforts, while continuing to make strides in developing new high margin on-line services."

Auto Sales

Despite a much weaker quarter for auto sales generally in China, luxury auto sales continued to show strength. Capitalizing on its strong web presence and ability to offer dealers a variety of "one-stop" services, including short-term financing, the Company sold 1,129 autos in this year's first quarter, up 44% from 785 vehicles in the first quarter of 2011. Average selling prices per vehicle in the quarter decreased 7.34% to $92,381, reflecting stronger demand for the lower end models of the Company's top selling luxury brands (Toyota, BMW and Mercedes Benz). Together, this resulted in a 33.26% climb in revenues for this segment to $104,297,837. Historically, margins in this business are low, and remained so in the 2012 first quarter, although the Company achieved a slight increase in gross margins to 1.70% from 1.61% a year earlier.

Financing Services

The first quarter of 2012 saw a sharp increase in the Company's short term auto financing services on which it earns a services fee for providing dealers use of its bank facility lines of credit. As of March 31, 2012, the Company had an aggregate line with several of China's leading banks totaling approximately $149 million, from which it had drawn a total of approximately $81 million. Revenues from financing increased 186.32% over the prior year quarter from $698,671 to $2,000,432. Higher interest rates in the period lowered the gross margin on this revenue to approximately 43% from nearly 48% a year earlier, but this nevertheless is a substantially higher margin than on auto sales.

Web-based Advertising

In mid 2011, increasing competition leading to lower advertising pricing led to a re-think of the Company's strategy in this previously fast growing segment, most evident in the decision to write down and discontinue the VIP card business on its Goodcar site. Coverage of the Company's strong line-up of websites was extended to 50 cities in 2012 from 36 in 2011. However, the Company's focus shifted from building web-based advertising sales, to strengthening its online platforms to enhance their ability to draw attention to the Company's auto sales and the auto-related services it offers. The Company saw strong increases in services and auto sales revenues that, in part, related to this. Another short term effect, though, was the 85% reduction in revenues from this previously high margin business to $294,827 in the quarter, which negatively impacted the Company's net income. From a strategic view, however, the Company sees this as a short term sacrifice on the path to increased future growth from new internet-based services which the Company continues to anticipate implementing.

Automobile Value Added Services

This business saw revenues increase 54% to 615,994.

Auto Mall Management Services

On March 1, 2011 and again on March 1, 2012, the Company agreed to provide services to manage the largest imported auto mall in Tianjin for an annual fee of $1 million. The contribution to revenues of this high margin business in the first quarter of 2012 was $236,496. Plans to acquire an auto mall were terminated as a mutually satisfactory agreement was not achieved. However, the Company continues to seek another similar acquisition.

Outlook

"A relaunch of our bottom line growth has taken a bit longer than originally anticipated, but one indication of our continuing potential is that even with the first quarter 85% revenue decline in web-based advertising, revenues in the quarter of $3.1 million for our higher margin web-based advertising, financing services and automobile value added services combined, were only $200,000 lower than the approximately $3.3 million combined figure a year earlier," Mr. Tong noted.

"We also are encouraged by the continuing strong double digit growth outlook for luxury cars in China even in a slowed economy," he continued, "as growth in luxury auto sales provides the underpinning for growth in most of our current services."

"Longer term," Mr. Tong added, "we still see new web-based auto related services for domestic and imported auto drivers and dealers as the key drivers of CALI's bottom line growth and are working hard to bring some of these new services to fruition at the earliest possible time."

Conference Call Invitation

The Company will discuss 2012 first quarter results during a live conference call and webcast on Thursday, May 17, at 8:00am ET.

To participate in the call, interested participants should call 1-888-846-5003 when calling within the United States or 1-480-629-9856 when calling internationally. Please ask for the China Auto Logistics 2012 First Quarter Earnings Conference Call, Conference ID: 4539009. There will be a playback available until 05/24/12. 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: 4539009.

This call is being webcast by ViaVid Broadcasting and can be accessed by clicking on this link http://public.viavid.com/index.php?id=100525 or at ViaVid's website at http://public.viavid.com.

SEE TABLES BELOW

About China Auto Logistics Inc.
China Auto Logistics Inc. operates www.cali.com.cn, one of the leading automobile portals for car dealers and consumers of vehicles and auto-related services in China. Additionally, it is one of China's top sellers of luxury imported cars and a leading developer of websites for buyers and sellers of imported and domestic automobiles. For additional information visit 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,
----------------------------
2012 2011
------------- -------------

Net revenue $ 107,445,586 $ 81,573,988
Cost of revenue 103,915,001 77,599,764
------------- -------------
Gross profit 3,530,585 3,974,224
------------- -------------

Operating expenses:
Selling and marketing 245,677 374,147
General and administrative 841,276 682,816
------------- -------------
Total operating expenses 1,086,953 1,056,963
------------- -------------

Income from operations 2,443,632 2,917,261
------------- -------------

Other income (expenses)
Interest income 13,364 12,518
Interest expenses (86,024) -
Loss on disposal of property and equipment (45,596) -
Miscellaneous - (9,087)
------------- -------------
Total other income (expenses) (118,256) 3,431
------------- -------------

Income before income taxes 2,325,376 2,920,692

Income taxes 736,589 816,188
------------- -------------

Net income 1,588,787 2,104,504

Less: Net income attributable to
noncontrolling interests 7,310 27,370
------------- -------------

Net income attributable to shareholders of
China Auto Logistics Inc.     $ 1,581,477 $ 2,077,134
============= =============

Earnings per share attributable to
shareholders of China Auto Logistics Inc. -
basic and diluted $ 0.07 $ 0.11
============= =============

Weighted average number of common share
outstanding
- basic and diluted 22,163,427 19,163,427
============= =============



CHINA AUTO LOGISTICS INC.     CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

March 31,
2012 December 31,
(Unaudited) 2011
-------------- --------------
ASSETS
Current assets
Cash and cash equivalents $ 6,528,204 $ 8,184,793
Restricted cash 17,024,951 18,805,876
Accounts receivable - trade, net of
allowance for doubtful accounts of $1,062
and $2,796 as of March 31, 2012 and
December 31, 2011, respectively 91,878 107,936
Receivables related to financing services 98,606,963 89,252,244
Notes receivable 11,881,753 4,761,225
Inventories 27,775,015 28,702,113
Advances to suppliers 66,611,798 44,746,804
Prepaid expenses 75,384 141,665
Value added tax refundable 224,760 625,724
-------------- --------------
Total current assets 228,820,706 195,328,380

Property and equipment, net 545,583 642,672
Goodwill 3,729,884 3,736,573
Intangible assets, net 1,357,683 1,419,830
Other assets 37,570 37,637
-------------- --------------
Total Assets $ 234,491,426 $ 201,165,092
============== ==============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Lines of credit related to financing
services $ 80,581,029 $ 87,710,957
Short term borrowings 10,505,373 4,285,102
Accounts payable 62 1,566
Notes payable 12,673,870 -
Accrued expenses 374,850 446,264
Customer deposits 66,585,469 46,865,945
Deferred revenue 246,579 319,974
Due to shareholders 3,290,647 3,296,548
Due to director 522,206 22,316
Income tax payable 1,128,836 1,161,664
-------------- --------------
Total current liabilities 175,908,921 144,110,336
Deferred tax liability 358,699 359,342
-------------- --------------
Total liabilities 176,267,620 144,469,678
-------------- --------------
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, 22,163,427 shares issued
and outstanding as of March 31, 2012 and
December 31, 2011 22,163 22,163
Additional paid-in capital 21,975,605 21,975,605
Accumulated other comprehensive income 5,639,049 5,699,444
Retained earnings 30,020,679 28,439,322
-------------- --------------
Total China Auto Logistics Inc.     shareholders' equity 57,657,496 56,136,534
Noncontrolling interests 566,310 558,880
-------------- --------------
Total equity 58,223,806 56,695,414
-------------- --------------

Total liabilities and shareholders' equity $ 234,491,426 $ 201,165,092
============== ==============



CHINA AUTO LOGISTICS INC.     CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Three Months Ended
March 31,
2012 2011
------------- -------------

Cash flows from operating activities
Net income $ 1,588,787 $ 2,104,504

Adjustments to reconcile net income to net
cash provided by (used for) operating
activities
Depreciation and amortization 110,310 133,532
Loss on disposal of property and equipment 45,596 796

Changes in operating assets and liabilities:
Restricted cash 1,751,337 (8,269,224)
Accounts receivable - trade 15,902 46,452
Receivables related to financing services (9,536,708) 2,271,377
Notes receivable (7,145,693) -
Inventories 877,760 (6,392,191)
Advances to suppliers (21,996,325) (8,722,066)
Prepaid expenses, other current assets and
other assets 66,181 69,497
Value added tax refundable 400,777 (869,079)
Deferred tax assets - 10,107
Accounts payable (1,505) 1,441,191
Line of credit related to financing services (6,989,185) 7,879,679
Notes payable 12,703,454 -
Accrued expenses (34,984) 151,192
Customer deposits 19,849,649 1,338,342
Deferred revenue (72,992) (54,970)
Income tax payable (30,820) (101,386)
Deferred tax liability - (15,568)
------------- -------------
Net cash used for operating activities (8,398,459) (8,977,815)
------------- -------------

Cash flows from investing activities
Proceeds from disposal of property and
equipment - 531
Purchase of property and equipment - (26,149)
------------- -------------
Net cash used for investing activities - (25,618)
------------- -------------

Cash flows from financing activities
Proceeds from short-term loans 6,242,480 -
Repayments to shareholders - (758,777)
Proceeds from director 499,907 38,710
Repayments of amount due to director - (590,796)
------------- -------------
Net cash flows provided by (used for)
financing activities 6,742,387 (1,310,863)
------------- -------------

Effect of exchange rate change on cash (517) 124,364

Net decrease in cash and cash equivalents (1,656,589) (10,189,932)

Cash and cash equivalents at the beginning of
period 8,184,793 17,733,502
------------- -------------
Cash and cash equivalents at the end of period $ 6,528,204 $ 7,543,570
============= =============



CHINA AUTO LOGISTICS INC.     CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Continued)

Three Months Ended
March 31,
2012 2011
----------- -----------

Supplemental disclosure of cash flow information
Interest paid $ 1,213,210 $ 363,188
=========== ===========
Income taxes paid $ 736,589 $ 923,035
=========== ===========

Non-cash activities

Increase in balance due to shareholders for accrued
expenses paid by shareholder $ - $ 151,067
=========== ===========
Contact:

Richard Sun
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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