China Auto Logistics Reports 2014 First Quarter Results ~ Portfolio For Life

Thursday, May 15, 2014

China Auto Logistics Reports 2014 First Quarter Results

4:33 AM No comments

TIANJIN, CHINA, China, via eTeligis Inc., 05/15/2014 - - Auto Sales Margins Stabilize With Improved High End Sales Mix

China Auto Logistics 2014 First Quarter Investor Conference Call Scheduled for Monday, May 19th at 8:00am ET

China Auto Logistics Inc. (the "Company" or "CALI") (NASDAQ: CALI), a top seller in China of luxury imported automobiles, a leading provider of auto-related services and a soon to be entrant in used car sales in China, today reported that revenues in its first quarter ended March 31, 2014, were down slightly compared with last year's first quarter to approximately $107 million. Higher interest and non-cash depreciation expense coupled with reduced Financial Services income, with no offsetting revenues of any magnitude or income as yet from the new used car joint venture, Car King Tianjin, or the recently acquired Airport International Auto Mall, led to an approximately $1.35 million loss in the first quarter. On a positive note, the Company saw gross margins in its Auto Sales business, which contributed almost 98% of revenues in the first quarter, improve slightly for the first time in several quarters and believes they have stabilized.

Mr. Tong Shiping, Chairman and CEO of the Company commented, "While maintaining our leadership position in the highly competitive imported luxury auto sales business, we also were able to stabilize margins with an improved mix of sales that greatly increased our average price per vehicle. While this business is likely to remain highly competitive, we remain optimistic about its long-term future. At the same time, we were able to move ahead with major steps in our diversification strategy with the acquisition we made, and the used car joint venture we concluded near the end of 2013. Both should begin to come on stream in the second half of the year." He added, "It will be somewhat painful to absorb the additional expense as we finalize our strategy. However, we believe it will be very worthwhile, given the size and growth of the used car market in China, and the excellent location of the new mall in what we hope will become another Free Trade Zone before year end."

Financial Highlights

- Revenues in the first quarter of 2014 were $106,975,050, down 0.60% from $107,625,066 a year earlier. The 2014 figure does not include revenues from Car King Tianjin, which are accounted for under the equity method of accounting as the Company's equity interest is less than half at 40%. Sales of Automobiles accounted for 97.90% of revenues in the quarter, up from 97.41% a year earlier.

- Gross profit margins for sales of automobiles stabilized at 0.17% in the quarter, up from 0.04% a year earlier. Nevertheless, the overall gross profit margin in the quarter was 1.33% compared with 2.07% in the first quarter last year, as gross profits declined to $1,423,797 from $2,227,719 year over year. A key factor in this result was a decline in the gross margins of Financing Services to 36.45% in the quarter from 69.7% a year earlier, as the Company temporarily ceased providing certain Financing Services due to a reutilization of available funds to finance the Zhonghe acquisition and to provide a working capital loan to Car King Tianjin.

- The aforementioned reduction in Financing Services offerings, one fewer month of Auto Mall Management Services revenue due to the expiration of the Auto Mall Management Services contract in February, and a decline in revenues from Value Added Auto Services and Web Based Advertising Services all contributed to a loss in income from operations in the quarter of $7,562, compared with operating income of $1,464,322 a year earlier.

- Car King Tianjin had a net loss in the quarter of $738,160, which resulted in a reported loss to the Company of $295,264 from its 40% equity investment.

- There were also significant acquisition related interest, depreciation and amortization costs in the quarter. In particular, interest expense in the quarter increased to $1,322,583 from $76,636 a year earlier, and depreciation on the Airport International Auto Mall property increased this expense to $644,889 from $28,153 a year earlier.

- Reflecting in particular the reduced income from operations (particularly from Financing Services) and the increased interest and depreciation costs, a loss attributable to shareholders was incurred in the quarter of $1,346,167, or ($0.33) per share, as compared with year earlier net income of $1,007,335, or $0.27 per share.

Operational Highlights

Sales of Automobiles in the quarter continued to be affected by the slower economy and steep competition in the luxury imported auto space. Revenue in the quarter was down 0.1% year over year. While the Company sold 981 automobiles in the quarter, down 22% from a year earlier volume of 1,256 automobiles, the average unit selling price increased to $106,000 compared with $84,000 a year earlier. This increase came largely from the sale of higher end vehicles and resulted in a small increase in gross margin.

Financing Services revenues in the quarter declined 18.76% year over year to $1,543,169, as the decision was made to discontinue the fee service of providing customers with credit beyond the financing terms provided by banks. The Company determined that the working capital needed to provide this service would be better utilized in financing the Zhonghe acquisition and provide working capital to Car King Tianjin. The contribution from financing fees to operating income also therefore declined to $570,531 although interest income increased to $972,638. In future periods, it is anticipated that the revenue lost from discontinuing this product will be replaced by restoring the product or by other new products.

Airport Auto Mall Services - A small amount of revenue was generated in the quarter by leasing space in the Airport International Auto Mall to Car King Tianjin. The Company continues to finalize its plans for both the facility and the used car business, and expects that they will begin to come to fruition in the second half of this year.

Outlook

"As we indicated last quarter," Mr. Tong said, "We anticipate having to work very hard to try to overcome the continuing obstacles in the luxury auto sales space, including the slow economy, the government's concerns with auto pollution and fierce competition. However, we believe stability on the auto sales bottom line will continue as we focus on the best possible approach to optimizing our entry into the used car arena, and determining the best possible uses of our new auto mall. Our optimism for the longer term is well founded, we believe, given our size and stature in the auto industry, and the growth still being forecasted for both luxury autos and used cars, as well for auto related services such as dealer financing."

Commenting on the recent publicity surrounding the SEC complaint filed against several individuals for alleged improprieties with respect to CALI shares, Mr. Tong stated, "We spend a lot of time and effort to comply with SEC requirements and operate our business with the best interests of our shareholders in mind. As such, we strongly endorse the SEC's actions whenever they take steps to protect shareholders and try to maintain an even playing field for all investors."

Conference Call Invitation

The Company will discuss 2014 first quarter results during a live conference call and webcast on Monday, May 19, 2014 at 8:00 am Eastern Time.

To participate in the call, interested participants should call 1-877-941-8416 when calling within the United States or 1-480-629-9808 when calling internationally. Please ask for the China Auto Logistics 2014 First Quarter Earnings Conference Call, Conference ID: 4683974. There will be a playback available until May 26, 2014. 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: 4683974.

This call is being webcast by ViaVid Broadcasting and can be accessed by clicking on this link http: http://public.viavid.com/index.php?id=109326 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. It also provides a growing variety of "one stop" automobile related services such as short term dealer financing. Additionally, in November, 2013, it acquired the owner and operator of the 26,000 square meter Airport International Automall in Tianjin for $91.4 million, with plans to develop it, among other things, as the flagship site for a used car business, with Car King (China) Used Car Trading Co., Ltd.

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.