TIANJIN, CHINA--(Marketwired - Nov 14, 2016) - 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, today reported a net loss from continuing operations in its 2016 third quarter of $(200,000), or $(0.05) per share on lower sales in the period of $96,293,622, down approximately 36% from the same period a year earlier. In the 2015 third quarter the net loss from continuing operations attributable to shareholders was $(354,036) or $(0.09) per share. The year over year bottom line improvement despite lower year over year sales in the 2016 third quarter primarily reflected a substantial reduction in interest expense following the sale in the 2016 second quarter of the Company's Zhonghe subsidiary.
In the second half of 2015 and early 2016, the Company believes CALI car dealer customers increased their purchases of luxury imported automobiles ahead of an anticipated and actual devaluation of China's RMB as the dealers expected the devaluation would lead to higher auto purchase costs and reduced profits. However, the currency changes began to moderate in the 2016 second quarter and continued to stabilize in the third quarter. While these currency changes resulted in increased sales initially, there was a concomitant fall off and then stabilization in sales in the 2016 third quarter which has since continued.
Results in the third quarter of 2015 also included a gain from discontinued operations of $1,602,916 or $0.40 per share following the sale of Zhonghe. This resulted in total income attributable to shareholders for the period of $1,248,880 or $0.31 per share. There was no loss or gain from discontinued operations in the 2016 third quarter.
Nine Month Results
Through the first nine months ending September 30, 2016, net revenue of $327,177,025 was down slightly from net revenues of $331,209,443 in the same period in 2015. While automobile sales volume increased approximately 2% year over year, average unit selling prices and gross margins decreased over the same period. Additionally, the reduction in both interest and fee income from Financing Services resulted in a 22.65% decline in revenues from this business segment, although the gross margin increased approximately 46% when compared to the same period of the prior year. These results contributed to a net loss from continuing operations attributable to shareholders in the first nine months of 2016 of $(865,397) or $(0.21) per share which was an approximately 47% improvement over the net loss from continuing operations attributable to shareholders in the same period a year earlier of $(1,621,949) or $(0.40) per share.
Total reported income in the first nine months of 2016 included net income from discontinued operations of $4,790,709 or $1.19 per share, as compared with a loss from discontinued operations in the same period last year of $(2,040,975) or $(0.51) per share. Consequently, total net income in the nine months ended September 30, 2016 was $3,925,312 or $0.98 per share compared with a loss of ($3,662,924), or a loss of $(0.91) per share in the same period a year earlier. Upon the sale of Zhonghe on June 1, 2016, the Airport Automall Automotive Services of Zhonghe was discontinued.
Positive Working Capital
As of September 30, 2016 the Company had working capital of $24,568,418, compared with a working capital deficit of ($30,801,730) as of December 31, 2015. This increase was primarily attributable to the approximately $21.9 million in net cash received from the disposition of Zhonghe as well as the relief of the payable related to the Zhonghe acquisition of approximately $36.8 million.
As of September 30, 2016 and December 31, 2015 the Company had an aggregate outstanding balance of lines of credit relating to financing services of $47,161,036 and $73,004,179, respectively, and outstanding balances of short term borrowings of $13,494,508 and $67,290,734. Bank overdrafts as of September 31, 2016 were reduced to zero.
Despite this improved financial picture, the Company's operating losses and negative operating cash flow as well as an accumulated cash deficit of approximately $3.4 million and, as of September 30, 2016, the year over year increased net cash used during the year for operating activities from continuing operations of approximately $51.4 million (largely for making deposits to suppliers related to inventory purchases in anticipation of future sales), were key factors in the decision 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, "In the first half of the year, we took the necessary step with the sale of Zhonghe to strengthen our financial situation and thereby create a new base for moving forward in a still highly competitive imported luxury auto market. At the current time our focus is on further strengthening and building our Auto Sales business, where we may see new opportunities for growth possible as a consequence of our leadership position and the "Parallel Imported Vehicles" scheme that has begun to be implemented in Tianjin and a few other large cities. We believe, too, that the currency situation has stabilized."
He added, "While over the near term we will focus mainly on our core auto sales business, we also are considering other possible higher margin opportunities, as both our auto sales and financial services business can be expected to remain highly competitive, with the former, in particular, not leaving a lot of room for margin expansion