China Auto Logistics' 2012 Revenue Grew 31% Year Over Year Led by Another Record Year in Luxury Auto Sales

2012 Year End Investor Conference Call to Be Held Tuesday, April 2nd at 8:00 am ET

 

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, today reported another year of record revenues in 2012 based primarily on continued strong luxury auto sales. At the same time, the Company experienced a year over year reduction in margins and net income mainly resulting from a planned substantial decrease in web-based advertising sales, impairment charges related to its planned termination of Goodcar advertising services, and a margin lowering product mix shift in its luxury imported auto sales business aimed at maintaining the Company's industry leadership position.

 

Financial Highlights

-2012 revenues grew 30.78% compared with the prior year to $591,315,104, led by luxury imported auto sales which grew 32.43% to $581,292,369, and Financing Services sales which advanced 72.72% to $7,085,357.

 

-Income from operations in 2012, as reported, was $3,582,194, compared with $11,377,088 in 2011. Non-GAAP adjusted income from operations in 2012 was $8,243,395, down approximately 33% from $12,270,671 a year earlier. Non-GAAP figures exclude impairment charges in 2012 of $4,661,201, for goodwill and intangible assets related to the downsizing of Goodcar, and $893,583 in 2011. 

 

-While the Company realized increased operating income from Financing Services and Automobile Value Added Services in 2012, operating income from Web-based Advertising Services decreased as planned from approximately $4.4 million in 2011, to a loss of approximately $4.2 million in 2012, due to the Company's focus shifting away from web advertising and the impairment charge of $4,661,201. Additionally, lower margins on sales of automobiles (as explained below), which was partially offset by increased volume sold, reduced the contribution to operating income from this segment by approximately $.7 million in 2012.

 

-As reported, net income attributable to shareholders in 2012 was $2,567,087, or $0.69 per share. On a non-GAAP basis, excluding the impairment loss of goodwill and intangible assets of $3,947,040 (impairment charge of $4,661,201 less income tax benefit of $714,161), adjusted net income attributable to shareholders in 2012 was $6,514,127, or $1.76 per share. Net income attributable to shareholders in 2011 was $8,032,615, or $2.34 per share. On a non-GAAP basis, excluding the impairment loss of goodwill and intangible assets of $893,583 (impairment charge of $893,583 less income tax benefit of $0), adjusted net income attributable to shareholders in 2011 was $8,926,198 or $2.60 per share. Reflecting the Company's 1 for 6 reverse share split in 2012, the weighted average number of shares outstanding as of December 31, 2012 was 3,694,394, compared with 3,437,740 shares a year earlier.

 

Operations Overview

The major contribution to revenues in 2012 was from the Company's Sales of Automobiles segment. During the year, the Company sold 6,588 automobiles, compared with 4,190 in 2011, a gain in unit volume of just over 57%. At the same time, the average unit selling price in 2012 decreased just over 16% to approximately $88,000 from $105,000 a year earlier. In response to competition from smaller dealers, and with an aim of maintaining leadership in the market, during the year the Company lowered selling prices and gross margins, while also experiencing higher demand for the lower end luxury models of its top selling brands, namely Toyota, BMW and Mercedes. Based on several studies, the Company is optimistic that the growth rate in China for luxury autos will continue to outpace the mainstream auto market, and that China will shortly become the world's top market for most major luxury autos. With this in mind, continuing the rapid growth of this business remains the Company's key focus.

 

The sharpest sales gain during the year came from the Company's Financing Services business, which contributed approximately $2.98 million to income from operations on just under $7.1 million in revenues. The Company had an aggregate amount of approximately $135 million in credit lines to support this business as of December 31, 2012. During the year, banks tightened requirements for credit lines, with outcomes such as requiring personal guarantees by the Company's executives and directors or major customers and suppliers. Nevertheless, the Company does not foresee any difficulty at this time in accessing credit lines or other bank facilities and maintains good relationships with several major commercial banks in China. The Company also engages in negotiations regularly with these and other banks to obtain bigger lines of credit on more favorable terms.

 

In 2012 the Company pursued its strategic decision to limit and/or exit web-based advertising activities which, in prior years, were key high margin contributors to its profits. As a consequence, the contribution to revenue from this sector was reduced to under $1 million during the year and operating income was negatively impacted. As the Company has shifted from generating advertising revenue on its websites to utilizing them as marketing tools for current and potential customers, management believes opportunities are being created for the growth of other current and potential products and services which will outweigh the sacrifice of revenues. In conjunction with these decisions, the Company ceased all Goodcar advertising operations, but continues to operate the website to promote its products in other segments. The Company also reduced its website coverage to a single city -- the important port city of Tianjin -- and is reviewing future geographical coverage. During the year, the contributions to operating income from Auto Mall Management Services was about flat with the prior year, while the contribution to operating income from Automobile Value Added Services, which included terminated Goodcar activities, nevertheless slightly increased.

 

Growth Outlook

Mr. Tong Shiping, CEO and Chairman of the Company, stated, "Our decisions with respect to exiting web-based advertising and the advertising sales and related promotional services of Goodcar stemmed from recognition of the costs required to remain competitive in these areas. However, they mainly reflect our decision to remain true to our growth strategy, which is to allocate whatever resources are required to continue our leadership in luxury auto sales, around which we aim to grow higher margin automobile related services businesses. Maintaining our leadership in luxury auto sales -- which we strongly believe will continue to be a rapidly growing business in China -- also was behind the shift in our auto sales mix, which increased unit sales at the expense of slightly better margins."

 

He added, "Especially given the relatively weaker Chinese economy in 2012, we were very pleased with the top line growth we achieved based on continuing strong demand in China for luxury autos. We also had a further glimpse of our potential for the future in the substantial growth we achieved in our higher margin Financing Services business. We did not announce any developments during the year with regard to other profitable new services we hope to build in the future around growing awareness of our leadership in luxury auto sales. However, we did make progress that is continuing in the current year and look forward to sharing this progress at the appropriate time."

 

"All in all," Mr. Tong continued, "we remain very positive about our future growth outlook, which we believe has yet to be reflected in our share price."

 

Explanation of Non-GAAP Results

In addition to disclosing financial results in accordance with accounting principles generally accepted in the United States (GAAP), this earnings release contains non-GAAP financial measures that the Company believes are helpful in understanding and comparing past financial performance and future results. These non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations from these results should be carefully evaluated. Management believes the non-GAAP financial measures are appropriate for period to period comparisons in its budget, planning and evaluation processes, and to show the reader how the Company's performance compares to other periods. 

 

Conference Call Invitation

The Company will discuss 2012 year end results during a live conference call and webcast on Tuesday, April 2nd at 8:00am ET.

 

To participate in the call, interested participants should call 1-877-941-2068 when calling within the United States or 1-480-629-9712 when calling internationally. Please ask for the China Auto Logistics 2012 Year End Earnings Conference Call, Conference ID: 4609602. There will be a playback available until 04/09/13. 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: 4609602.

 

This call is being webcast by ViaVid Broadcasting and can be accessed by clicking on this link http://public.viavid.com/index.php?id=103982 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. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF INCOME

 

 

 

 

 

Year Ended December 31,

 

 

 

2012

 

 

2011

 

 

 

 

 

 

 

 

 

 

Net revenue

 

$

591,315,104

 

 

$

452,149,602

 

Cost of revenue

 

 

580,057,718

 

 

 

436,010,820

 

 

 

Gross profit

 

 

11,257,386

 

 

 

16,138,782

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Selling and marketing

 

 

977,555

 

 

 

1,488,408

 

 

General and administrative

 

 

2,036,436

 

 

 

2,379,703

 

 

Impairment loss of goodwill and intangible assets

 

 

4,661,201

 

 

 

893,583

 

 

 

Total operating expenses

 

 

7,675,192

 

 

 

4,761,694

 

 

 

 

 

 

 

 

 

 

Income from operations

 

 

3,582,194

 

 

 

11,377,088

 

 

 

 

 

 

 

 

 

 

Other income (expenses):

 

 

 

 

 

 

 

 

 

Interest income

 

 

230,916

 

 

 

63,922

 

 

Interest expense

 

 

(531,301

)

 

 

(16,641

)

 

Loss on disposal of property and equipment

 

 

(172,043

)

 

 

7,736

 

 

Gain on forgiveness of debt

 

 

1,139,861

 

 

 

-

 

 

Miscellaneous

 

 

(72,922

)

 

 

3,730

 

 

 

Total other income

 

 

594,511

 

 

 

58,747

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

4,176,705

 

 

 

11,435,835

 

 

 

 

 

 

 

 

 

 

Income taxes

 

 

1,596,179

 

 

 

3,303,177

 

 

 

 

 

 

 

 

 

 

Net income

 

 

2,580,526

 

 

 

8,132,658

 

 

 

 

 

 

 

 

 

 

Less: Net income attributable to noncontrolling interests

 

 

13,439

 

 

 

100,043

 

 

 

 

 

 

 

 

 

 

Net income attributable to shareholders of China Auto Logistics Inc.

 

$

2,567,087

 

 

$

8,032,615

 

 

 

 

 

 

 

 

 

 

Earnings per share attributable to shareholders of China Auto Logistics Inc.

 

 

 

 

 

 

 

 

 

- basic and diluted

 

$

0.69

 

 

$

2.34

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding

 

 

 

 

 

 

 

 

 

- basic and diluted

 

 

3,694,394

 

 

 

3,437,740

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CHINA AUTO LOGISTICS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

 

 

 

December 31,

 

 

 

2012

 

2011

ASSETS:

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

$

8,888,749

 

$

8,184,793

 

Restricted cash

 

 

 

27,015,351

 

 

18,805,876

 

Accounts receivable - trade, net of allowance for doubtful accounts of $0 and $2,796 in 2012 and 2011, respectively

 

 

 

-

 

 

107,936

 

Receivables related to financing services

 

 

 

57,134,815

 

 

89,252,244

 

Notes receivable

 

 

 

1,587,024

 

 

4,761,225

 

Inventories

 

 

 

27,141,004

 

 

28,702,113

 

Advances to suppliers

 

 

 

43,019,343

 

 

44,746,804

 

Prepaid expenses

 

 

 

19,071

 

 

141,665

 

Value added tax receivable

 

 

 

338,513

 

 

625,724

 

Deferred tax assets

 

 

 

714,161

 

 

-

 

 

Total current assets

 

 

 

165,858,031

 

 

195,328,380

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

 

314,126

 

 

642,672

Goodwill

 

 

 

-

 

 

3,736,573

Intangible assets, net

 

 

 

-

 

 

1,419,830

Other assets

 

 

 

23,559

 

 

37,637

 

 

Total assets

 

 

$

166,195,716

 

$

201,165,092

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY:

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Lines of credit related to financing services

 

 

$

51,528,018

 

$

87,710,957

 

Short term borrowings

 

 

 

19,673,128

 

 

4,285,102

 

Accounts payable

 

 

 

-

 

 

1,566

 

Notes payable to suppliers

 

 

 

12,696,196

 

 

-

 

Accrued expenses

 

 

 

356,114

 

 

446,264

 

Customer deposits

 

 

 

19,131,420

 

 

46,865,945

 

Deferred revenue

 

 

 

241,598

 

 

319,974

 

Due to shareholders

 

 

 

2,156,166

 

 

3,296,548

 

Due to director

 

 

 

512,023

 

 

22,316

 

Income tax payable

 

 

 

400,932

 

 

1,161,664

 

 

Total current liabilities

 

 

 

106,695,595

 

 

144,110,336

 

 

 

 

 

 

 

 

Deferred tax liability

 

 

 

-

 

 

359,342

 

 

Total liabilities

 

 

 

106,695,595

 

 

144,469,678

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CHINA AUTO LOGISTICS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Continued)

 

 

December 31,

 

2012

 

2011

 

 

 

 

 

 

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 December 31, 2012 and 2011

 

3,694

 

 

3,694

 

Additional paid-in capital

 

21,994,074

 

 

21,994,074

 

Accumulated other comprehensive income

 

5,923,398

 

 

5,699,444

 

Retained earnings

 

31,006,409

 

 

28,439,322

 

 

Total China Auto Logistics Inc. shareholders' equity

 

58,927,575

 

 

56,136,534

Noncontrolling interests

 

572,546

 

 

558,880

 

 

Total equity

 

59,500,121

 

 

56,695,414

 

 

 

 

 

 

 

 

Total liabilities and shareholders' equity

$

166,195,716

 

$

201,165,092

 

 

 

 

 

 

 

 

 

Contacts :Sun Jiazhensjz_cali@126.comKen DonenfeldDGI Investor Relations Inc.kdonenfeld@dgiir.comTel: 212-425-5700Fax: 646-381-9727

 

SOURCE: China Auto Logistics Inc.

 

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