TIANJIN, CHINA--(Marketwired - Aug 14, 2017) - China Auto Logistics Inc. (the "Company" or "CALI") (
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.
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.
"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.
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 |
|December 31, 2016|
|Cash and cash equivalents||$||1,567,726||$||3,004,932|
|Receivable related to financing services, net||58,119,145||48,549,972|
|Advances to suppliers, net||70,433,770||71,921,388|
|Value added tax receivable||258,595||615,555|
|Total current assets||158,456,941||160,221,328|
|Property, plant, and equipment, net||290,053||317,282|
|LIABILITIES AND SHAREHOLDERS' EQUITY:|
|Lines of credit related to financing services||$||54,632,818||$||47,081,763|
|Short term borrowings||15,493,837||12,961,389|
|Notes payable to suppliers||18,445,044||25,922,779|
|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|
|China Auto Logistics Inc. shareholders' equity:|
|Preferred stock, $0.001 par value, 5,000,000 shares authorized, none issued and outstanding||-||-|
|Common stock, $0.001 par value, 95,000,000 shares authorized, 4,034,394 shares issued and outstanding as of June 30, 2017 and December 31, 2016||4,034||4,034|
|Additional paid-in capital||22,979,734||22,979,734|
|Accumulated other comprehensive income||4,611,920||3,939,898|
|Total China Auto Logistics Inc. shareholders' equity||23,754,767||23,560,100|
|Total liabilities and shareholders' equity||$||158,778,070||$||160,568,939|
|CHINA AUTO LOGISTICS INC.|
|CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)|
|Three Months Ended |
|Six Months Ended |
|Cost of revenue||138,237,315||93,173,641||248,307,202||229,286,547|
|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)|
|Gain on sale of property and equipment||-||-||-||2,707|
|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||)|
|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||)||$||(665,397||)|
|- discontinued operations||-||5,664,104||-||4,790,709|
|(Loss) income per share attributable to shareholders of China Auto Logistics Inc. from|
|- continuing operations - basic and diluted||$||(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.||$||(0.08||)||1.28||(0.12||)||1.03|
|Weighted average number of common shares Outstanding|
|- basic and diluted||4,034,494||4,034,494||4,034,494||4,034,494|
|CHINA AUTO LOGISTICS INC.|
|CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)|
|Three Months Ended |
|Six Months Ended |
|Net (loss) income||$||(342,169||)||$||5,186,382||$||(477,496||)||$||4,125,440|
|Other comprehensive income (loss)|
|Foreign currency translation adjustments||460,256||(791,646||)||671,944||(639,152||)|
|Less: Comprehensive income (loss) attributable to noncontrolling interests||66||158||(219||)||149|
|Comprehensive income attributable to shareholders of China Auto Logistics Inc.||$||118,021||$||4,394,578||$||194,667||$||3,486,139|
|CHINA AUTO LOGISTICS INC.|
|CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)|
|Six Months Ended |
|Cash flows from operating activities|
|Net (loss) income||$||(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:|
|Receivables related to financing services||(8,011,178||)||17,465,431|
|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||)|
|Line of credit related to financing services||6,344,863||(10,833,045||)|
|Notes payable to suppliers||(7,958,471||)||36,344,159|
|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 $4,092,476||-||21,750,802|
|Proceeds from disposal of property and equipment||-||8,563|
|Purchase of property and equipment||(9,509||)||(336,327||)|
|Cash provided by investing activities from continuing operations||(9,509||21,423,038|
|Cash provided by investing activities from discontinued operations||-||-|
|Net cash (used in) provided by investing activities||(9,509||)||21,423,038|
|Cash flows from financing activities|
|Proceeds from short-term borrowings||17,327,841||80,346,450|
|Repayments of short-term borrowings||(15,141,455||)||(52,438,207||)|
|Proceeds from director||356,198||384,826|
|Cash provided by financing activities from continuing operations||2,542,584||26,175,095|
|Cash provided by financing activities from discontinued operations||-||-|
|Net cash provided by financing activities||2,542,584||26,175,095|
|Effect of exchange rate change on cash||52,892||(112,388||)|
|Net decrease in cash and cash equivalents||(1,437,206||)||(3,105,351||)|
|Cash and cash equivalents at the beginning of period||3,004,932||7,119,686|
|Cash and cash equivalents at the end of period||$||1,567,726||$||4,014,335|
|Supplemental disclosure of cash flow information|
|Income taxes paid||$||-||$||150,355|
|Increase in payable to non controlling interest on de-registration of subsidiary for reduction of non controlling interests in Equity as a result of de-registration of Ganghui||$||172,660||$||-|
|Assumption of outstanding payable to former owner of Zhonghe by Huitong to offset the sale price of Zhonghe||$||-||$||36,755,594|