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China Auto Logistics Reports Second Quarter and Six Month 2016 Financial Results

Discontinued Zhonghe Operations Sold in the Quarter Generated Significant Gains While Results From Continuing Operations in the Second Quarter Were Roughly Flat Year-Over-Year

Investor Conference Call Scheduled for Tuesday August 16th at 8:00am EDT


/EINPresswire.com/ -- TIANJIN, CHINA -- (Marketwired) -- 08/15/16 -- China Auto Logistics Inc. (the "Company" or "CALI") (NASDAQ: CALI), a top seller in China of luxury imported automobiles and a leading provider of auto-related services, which sold its Zhonghe subsidiary during the 2016 second quarter, today reported that the net loss attributable to CALI shareholders in this period from continuing operations was ($477,875) or $(0.12) per share, compared to ($469,783) or ($0.12) per share a year earlier, while net income attributable to CALI shareholders from discontinued operations in the quarter amounted to $5,664,104 (including a gain from disposal of $6,701,350) or $1.40 per share, compared to a loss of ($1,775,580) or ($0.44) per share during the same period in 2015.

The Company explained that the roughly flat year-over-year bottom line results in continuing operations in the 2016 second quarter primarily reflected the very slight 0.74% year-over-year increase in auto sales to approximately $92.77 million in the period. As previously reported, the Company believes these sales results were primarily a consequence of the anticipated and actual decline in the value of the Chinese renminbi (RMB) against the U.S. dollar, beginning in 2015, which until the 2016 second quarter led CALI customers to increase their purchases ahead of anticipated increased costs for imported vehicles. Mainly reflecting the stronger 2016 first quarter auto sales of $135.84 million, revenues in the first six months of 2016 were approximately 27.5% higher than in the first half of 2015.

In the six months ended June 30, 2016, the net loss attributable to shareholders from continuing operations was ($665,397) or $(0.16) per share, compared to ($1,132,864) or ($0.28) per share during the same period in 2015. Net income attributable to shareholders from discontinued operations in the 2016 six month period was $4,790,709 (including a gain from disposal of $6,701,350), or $1.19 per share, compared to a loss of ($3,778,940) or ($0.94) per share during the same period in 2015.

The net proceeds from the Zhonghe sale of approximately $21.9 million increased the Company's liquidity and helped turn the Company's working capital positive at June 30, 2016. Nevertheless, the Company's accumulated deficit at June 30, 2016, as well as the operating loss from continuing operations and negative operating cash flow in the second quarter, were key factors in the decision to continue to include a "going concern" paragraph in the Notes to the Company's condensed consolidated financial statements.

Management Comments

Mr. Tong Shiping, Chairman and CEO of the Company, commented, "This was a significant period for us in that we were able to address key problems we faced head on. With the ongoing downward shift in China's economy and real estate values, we needed to take steps to strengthen our financial situation. With our sale of Zhonghe, which included the Airport International Auto Mall in Tianjin and our 40% interest in a used car joint venture, we eliminated related payables, greatly reduced interest expense and returned to a positive working capital at June 30, 2016 from a working capital deficit at March 31, 2016. Our focus shifted back to improving our core luxury imported auto sales business and developing more profitable auto-related services such as our Financing Services business."

Second Quarter Highlights

  • Effective June 1, 2016 CALI sold its Zhonghe subsidiary -- including the Airport International Auto Mall in Tianjin and CALI's 40% interest in Car King Tianjin -- to Wuxi Huitong for approximately $62.8 million. The Company transferred a payable related to the Zhonghe acquisition of approximately $36.8 million to Wuxi Huitong to offset the price of the Zhonghe sale.
  • Net revenue for the three months ended June 30, 2016 of $93,819,385 compared with $93,688,413 in the same period last year. In the second quarter of 2016, 98.89% of revenue came from Auto Sales, and about 1.09% of revenue came from Financing Services.
  • For the three months ended June 30, 2016, net loss from continuing operations attributable to CALI shareholders was $(477,875) or a loss of $(0.12) per share, compared with a loss of $(469,783) or $(0.12) in the second quarter of 2015.

Net income generated by discontinued operations in the second quarter of 2016 was $5,664,104 or $1.40 per share compared with a loss of $(1,775,580) or $(0.44) per share in the same quarter in 2015.

  • The Company's working capital as of June 30, 2016 was $24,861,325, compared with a working capital deficit of ($30,801,730) as of December 31, 2015.

Six Month Highlights

  • Net revenue for the six months ended June 30, 2016 grew 27.53% to $230,883,403 from $181,038,575 in the same period in 2015.
  • Income from continuing operations grew 105.85% in the first six months of 2016 to $330,875 compared with $160,739 in the first six months of 2015.
  • Net loss from continuing operations attributed to CALI shareholders in the first six months of 2016 was $(665,397) or $(0.16) per share, down from a loss of $(1,132,864) or $(0.28) per share in the year earlier period. In the first six months of 2016, income from discontinued operations was $4,790,709, or $1.19 per share compared with a loss of $(3,778,940) or $(0.94) per share in the same period in 2015.

Operations

  • Auto Sales revenue in the second quarter of 2016 was $92,774,929, an increase of 0.74% from the same period a year earlier, primarily due to a 7% year-over-year increase in sales volume. In the 2016 second quarter the Company sold 905 automobiles at an average unit selling price of $103,000 compared with 846 automobiles a year earlier at an average unit selling price of $109,000. As compared with an approximately 5.5% devaluation of the renminbi (RMB) against the U.S. dollar in the full year ended December 31, 2015, during the second quarter of 2016 the decline of the RMB against the U.S. dollar was 2.4%.
  • Revenue from Financing Services decreased 35% year-over-year in the 2016 second quarter to $1,027,280, as fee income in this business declined 27.8% in the quarter as compared to the same period in 2015. As has been the case in recent prior quarters, the Company's working capital allocations did not permit sales of certain products to customers that in the past were very popular. With improving liquidity, the Company hopes to be able to restore these products.
  • As of August 12, 2016, the Company had aggregate credit lines of approximately $125 million and approximately $61 million available to utilize in its Financing Services.

Outlook

"A continuation in the remainder of the year of the economic trends and competition that has been prevalent over the past few quarters, continues to make us cautious about further gains in profits and margins in Auto Sales in the second half of the year," stated Mr. Tong. He added, "We believe, however, that conditions have stabilized and we are in a better position to compete. We remain positive about the luxury auto market in China and our leadership role in it, which we believe offers growth possibilities, especially when conditions will permit us to pursue our goal of expanding throughout China. Our optimism in this regard has been buoyed by the 'Parallel Imported Vehicles' scheme initiated by our government which gives us equal footing with all auto dealers."

Conference Call Invitation

The Company will discuss 2016 second quarter results during a live conference call and webcast on Tuesday, August 16, 2016 at 8:00am EDT.

To participate in the call, interested participants should call 1-800-239-9838 when calling within the United States or 1-913-312-0404 when calling internationally. Please ask for the China Auto Logistics 2016 Second Quarter Earnings Conference Call. Conference ID: 8066758. There will be a playback available until 08/23/16. 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: 8066758.

This call is being webcast by ViaVid Broadcasting and can be accessed by clicking on this link http://public.viavid.com/index.php?id=120843 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 variety of "one stop" automobile related services such as short term dealer financing. Future growth is anticipated to come from the Company's Auto Sales business as well as further growth in the Company's higher margin financing services.

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,
                                                     2016       December 31,
                                                 (Unaudited)        2015
                                                -------------  -------------
ASSETS:
Current assets:
 Cash and cash equivalents                      $  4,014,335   $  7,119,686
 Restricted cash                                  24,479,115     23,799,346
 Receivable related to financing services         63,160,184     82,105,826
 Inventories                                      18,905,090     12,163,511
 Advances to suppliers                            62,923,559    100,807,121
 Prepaid expenses                                     81,438         29,372
 Recoverable and accrued value added tax
  receivable                                       1,528,381        369,940
                                                ------------   ------------
  Total current assets                           175,092,102    226,394,802

Property, plant, and equipment, net                  371,070         72,742
Other assets                                          31,700              -
Non current assets of discontinued operations              -     61,755,609
                                                ------------   ------------
  Total assets                                  $175,494,872   $288,223,153
                                                ============   ============

LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
 Bank overdraft                                 $          -   $  2,131,009
 Lines of credit related to financing services    60,660,883     73,004,179
 Short term borrowings                            14,149,381     67,290,734
 Accounts payable                                  3,381,642      1,334,829
 Notes payable to suppliers                       27,094,560     33,509,483
 Accrued expenses                                    220,653        273,497
 Customer deposits                                40,863,657     39,901,621
 Deferred revenue                                     78,332        121,456
 Due to former shareholder                         2,045,070      2,093,182
 Due to director                                   1,157,071        722,028
 Income tax payable                                  579,528        656,098
 Deferred tax liability                                    -        246,745
 Current liabilities of discontinued
  operations                                               -     35,911,671
                                                ------------   ------------
  Total current liabilities                      150,230,777    257,196,532

Non current liability of discontinued
 operations                                                -      9,248,814
                                                ------------   ------------
  Total liabilities                              150,230,777    266,445,346
                                                ------------   ------------
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, 4,034,394 shares issued
  and outstanding as of June 30, 2016 and
  December 31, 2015, respectively                      4,034          4,034
 Additional paid-in capital                       22,979,734     22,979,734
 Accumulated other comprehensive income            5,137,133      5,776,306
 Retained earnings                                (3,221,910)    (7,347,222)
                                                ------------   ------------
  Total China Auto Logistics Inc.
   shareholders' equity                           24,898,991     21,412,852
 Noncontrolling interests                            365,104        364,955
                                                ------------   ------------
  Total equity                                    25,264,095     21,777,807
                                                ------------   ------------

  Total liabilities and shareholders' equity    $175,494,872   $288,223,153
                                                ============   ============


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

                           Three Months Ended         Six Months Ended
                                June 30,                   June 30,
                       ------------------------- ---------------------------
                           2016         2015          2016          2015
                       ------------ ------------ ------------- -------------

Net revenue            $93,819,385  $93,688,413  $230,883,403  $181,038,575
Cost of revenue         93,173,641   92,856,032   229,286,547   179,724,352
                       -----------  -----------  ------------  ------------
 Gross profit              645,744      832,381     1,596,856     1,314,223
                       -----------  -----------  ------------  ------------

Operating expenses:
 Selling and marketing     168,224      187,231       352,305       361,529
 General and
  administrative           426,480      368,995       913,676       791,955
                       -----------  -----------  ------------  ------------
  Total operating
   expenses                594,704      556,226     1,265,981     1,153,484
                       -----------  -----------  ------------  ------------

Income from continuing
 operations                 51,040      276,155       330,875       160,739
                       -----------  -----------  ------------  ------------

Other income
 (expenses)
 Interest income            18,113       30,118       214,463       114,368
 Interest expense         (526,993)    (701,309)   (1,129,032)   (1,428,233)
 Gain on sale of
  property and
  equipment                      -       (8,254)        2,707        (8,254)
 Miscellaneous               1,886          162         3,455           162
                       -----------  -----------  ------------  ------------
  Total other expenses    (506,994)    (679,283)     (908,407)   (1,321,957)
                       -----------  -----------  ------------  ------------

Loss from continuing
 operations before
 income taxes             (455,954)    (403,128)     (577,532)   (1,161,218)

Income tax expense
 (benefit)                  21,768       67,209        87,737       (27,377)
                       -----------  -----------  ------------  ------------

Net loss from
 continuing operations    (477,722)    (470,337)     (665,269)   (1,133,841)
                       -----------  -----------  ------------  ------------

Discontinued
 operations:
 Income (loss) 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   (1,968,978)    4,543,918    (4,107,829)
 Income tax benefit        (99,078)    (193,398)     (246,791)     (328,889)
                       -----------  -----------  ------------  ------------
Net income (loss) from
 discontinued
 operations              5,664,104   (1,775,580)    4,790,709    (3,778,940)
                       -----------  -----------  ------------  ------------

Net income (loss)        5,186,382   (2,245,917)    4,125,440    (4,912,781)
Less: Net income
 (loss) attributable
 to noncontrolling
 interests                     153         (554)          128          (977)
                       -----------  -----------  ------------  ------------

Net income (loss)
 attributable to
 shareholders of China
 Auto Logistics Inc.   $ 5,186,229  $(2,245,363) $  4,125,312  $ (4,911,804)
                       -----------  -----------  ------------  ------------

Net income (loss)
 attributable to
 shareholders of China
 Auto Logistics Inc.
 - continuing
  operations           $  (477,875) $  (469,783) $   (665,397) $ (1,132,864)
 - discontinued
  operations             5,664,104   (1,775,580)    4,790,709    (3,778,940)
                       -----------  -----------  ------------  ------------
                       $ 5,186,229  $(2,245,363) $  4,125,312  $ (4,911,804)
                       ===========  ===========  ============  ============

Earnings (loss) per
 share attributable to
 shareholders of China
 Auto Logistics Inc.
 from
 - continuing
  operations - basic
  and diluted          $     (0.12)       (0.12) $      (0.16) $      (0.28)
                       ===========  ===========  ============  ============
 - discontinued
  operations - basic
  and diluted          $      1.40  $     (0.44) $       1.19  $      (0.94)
                       ===========  ===========  ============  ============
 Total earnings (loss)
  per share
  attributable to
  shareholders of
  China Auto Logistics
  Inc.                 $      1.28        (0.56)         1.03         (1.22)
                       ===========  ===========  ============  ============
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 (LOSS) INCOME
                                 (UNAUDITED)

                              Three Months Ended        Six Months Ended
                                   June 30,                 June 30,
                           ------------------------ ------------------------
                               2016        2015         2016        2015
                           ----------- ------------ ----------- ------------

Net income (loss)          $5,186,382  $(2,245,917) $4,125,440  $(4,912,781)

Other comprehensive income
 (loss)
 Foreign currency
  translation adjustments    (791,646)     118,130    (639,152)     289,529
                           ----------  -----------  ----------  -----------

Comprehensive income
 (loss)                     4,394,736   (2,127,787)  3,486,288   (4,623,252)
Less: Comprehensive income
 (loss) attributable to
 noncontrolling interests         158         (437)        149         (745)
                           ----------  -----------  ----------  -----------

 Comprehensive income
  (loss) attributable to
  shareholders of China
  Auto Logistics Inc.      $4,394,578  $(2,127,350) $3,486,139  $(4,622,507)
                           ==========  ===========  ==========  ===========


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

                                                      Six Months Ended
                                                          June 30,
                                                ----------------------------
                                                     2016           2015
                                                -------------  -------------
Cash flows from operating activities
Net income (loss)                               $  4,125,440   $ (4,912,781)
Add: loss from discontinued operations             1,910,641      3,778,940

Adjustments to reconcile net income (loss) to
 net cash provided by (used in) operating
 activities
Depreciation on property, plant and equipment         35,721         38,111
Amortization on customer relations                         -         55,620
(Gain) loss on disposal of property and
 equipment                                            (5,702)         8,254
Change in Inventory reserve                          (68,813)        26,272
Change in reserve for advances to suppliers          (76,554)       104,719
Gain on sale of Zhonghe                           (6,701,350)             -

Changes in operating assets and liabilities:
Restricted cash                                  (34,912,920)   (14,434,440)
Accounts receivable                                                   1,291
Receivables related to financing services         17,396,618    (11,075,069)
Inventories                                       (7,387,423)    (1,215,690)
Advances to suppliers                            (54,067,994)   (56,164,079)
Prepaid expenses, other current assets and
 other assets                                        (54,291)        13,613
Value added tax receivable                        (1,187,901)      (174,339)
Other assets                                         (32,244)
Accounts payable                                   2,110,661      1,091,016
Line of credit related to financing services     (10,833,045)    30,775,774
Notes payable to suppliers                        36,344,159     21,221,809
Accrued expenses                                     429,317        (48,145)
Accrued interest                                     897,826     (2,118,118)
Customer deposits                                  2,889,429     33,608,269
Deferred revenue                                     (41,013)       527,282
Income tax payable                                   (62,549)          (174)
                                                ------------   ------------
Cash (used in) provided by operating
 activities from continuing operations           (49,291,987)     1,108,135
Cash used in operating activities from
 discontinued operations                          (1,299,109)    (2,836,578)
                                                ------------   ------------
Net cash used in operating activities            (50,591,096)    (1,728,443)
                                                ------------   ------------

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          9,275
Purchase of property and equipment                  (336,327)             -
                                                ------------   ------------
Cash provided by investing activities from
 continuing operations                            21,423,038          9,275
Cash provided by investing activities from
 discontinued operations                                   -              -
                                                ------------   ------------
Net cash provided by investing activities         21,423,038          9,275
                                                ------------   ------------

Cash flows from financing activities
Bank overdraft                                    (2,117,974)         4,953
Proceeds from short-term borrowings               80,346,450     25,316,614
Repayments of short-term borrowings              (52,438,207)   (26,137,618)
Proceeds from director                               384,826        389,120
Repayments to director                                     -       (244,990)
                                                ------------   ------------
Cash provided by (used in) financing
 activities from continuing operations            26,175,095       (671,921)
Cash provided by (used in) financing
 activities from discontinued operations                   -              -
                                                ------------   ------------
Net cash provided by (used in) financing
 activities                                       26,175,095       (671,921)
                                                ------------   ------------

Effect of exchange rate change on cash              (112,388)        41,811
                                                ------------   ------------

Net decrease in cash and cash equivalents         (3,105,351)    (2,349,278)

Cash and cash equivalents at the beginning of
 period                                            7,119,686      7,793,952
                                                ------------   ------------
Cash and cash equivalents at the end of period  $  4,014,335   $  5,444,674
                                                ------------   ------------

Supplemental disclosure of cash flow
 information
Interest paid                                   $  2,790,801   $  7,588,543
                                                ------------   ------------
Income taxes paid                               $    150,355   $     70,844
                                                ------------   ------------

Non-cash activities:
 Reclassification of the balance in due to
  former shareholder to other payable after an
  assignment of the balance to an unrelated
  party                                         $          -   $  2,231,346
                                                ============   ============
Increase in advances to Car King Tianjin for
 unpaid rent                                    $          -   $    246,354
                                                ============   ============
Assumption of outstanding payable to former
 owner of Zhonghe by Huitongto offset the sale
 price of Zhonghe                               $ 36,755,594   $          -
                                                ============   ============

CONTACTS:

Ken Donenfeld
DGI Investor Relations Inc.
kdonenfeld@dgiir.com
Tel: 212-425-5700
Fax: 646-381-9727


Distribution channels: Automotive, Consumer Goods