China Auto Logistics Reports 2015 First Quarter Results

DRAFT 2

TIANJIN, China, via ETELIGIS INC., 05/14/2015 – – 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, reported today a persisting slower economic environment in China, continuing competition in luxury auto sales and increased interest expenses were among the key factors in the widened year over year losses and negative operating cash flows incurred in the Company’s first quarter ended March 31, 2015, and the going concern opinion included in the Company’s Report of Independent Registered Public Accounting Firm.

Mr. Tong Shiping, Chairman and CEO of the Company, stated, “Clearly, our struggle to maintain leadership in the luxury imported auto space in China is exacting a substantial toll. However, we believe there continues to be reason for long term optimism for this business and the auto-related services we provide, particularly when the economy strengthens. Meanwhile, we remain focused on paying the remaining payments due this year and next in connection with our acquisition of the Airport International Auto Mall (the “Auto Mall”) in Tianjin. We see the Auto Mall as a core element in our plans for a China-wide retail sales business, as well as the primary showroom for our joint venture used car startup, Car King Tianjin. We also believe the recent formalization of the government decision to create a free trade zone in Tianjin, where our Auto Mall is centrally located, should help create other new avenues for growth.”

First Quarter Highlights

– Net revenues in the first quarter ended March 31, 2015 consisted mainly of Sales of Automobiles (98.69%) and declined 18.35% to $87,350,162 from $106,975,050 in the same period a year ago.

– Gross profit in the first quarter of 2015 was $481,842, down 66.16% from $1,423,797 in the first quarter of 2014.

– The net loss attributable to shareholders in the 2015 first quarter was $2,666,441 compared with a loss of $1,346,167 in the same period last year.

– A significant component of the reported losses in the first quarter of 2015 and 2014 was interest expense, mainly relating to the Company’s acquisition of Zhonghe. In the first three months of 2015, interest expense increased to $1,918,797 from $1,322,583 a year earlier. Additionally, depreciation and amortization expense in the 2015 first quarter was $617,563, compared with $672,605 in the prior year period. Reflecting this, EBITA (earnings before interest, taxes, depreciation and amortization) in the first quarter of 2015 amounted to a loss of $445,026 compared with earnings of $382,248 in the same period last year.

– A 17.68% decrease in revenues of Sales of Automobiles in the 2015 first quarter to $86,213,871 from $104,729,835 a year earlier was the key contributor to the overall decline in year over year net revenues. A bright note in this picture was the continuing increase in the 2015 first quarter of the average price per vehicle sold to $108,000 from $107,000 in the year earlier period. This helped the gross margin in the 2015 first quarter improve to 0.24% from 0.17% (0.03% excluding the effects on the change in inventory reserve) in the first quarter of 2014. While the Company continued to maintain its leadership position in this year’s first quarter, and saw continuing stabilization in margins despite continued competition, sales volume in the 2015 first quarter decreased approximately 19%, as the Company sold 796 automobiles compared with 981 automobiles in the prior year first quarter.

– The results of Financing Services for auto dealers also were down in the 2015 first quarter compared with the first quarter of 2014. Year over year net revenue decreased 27.83% to $1,113,763 from $1,543,169, as the Company once again saw the need to reutilize working capital in the period due to the Company’s acquisition of Zhonghe. This resulted in a 27.53% decrease in fee income as the activities of a key program popular with dealers declined as a result of the working capital restraint. Further, the Company was required to pay a maintenance fee to one of its banks in the 2015 quarter, which reduced gross margin to 22.49% from what would otherwise have been 37.21%. In last year’s first quarter the gross margin was 36.45%.

– As of March 31, 2015, the Company had drawn approximately $63 million of its $167 million available credit lines to support the Financing Services business. Going forward, it believes it will be able to obtain additional credit lines to support the Financing Services business on an “as needed” basis.

– As the Company owns less than 50% of the Car King Tianjin used car joint venture, net profit (loss) from its 40% interest is accounted for separately under the equity method of accounting. Sales in the still early stage business continued to grow from $604,766 in the first three months of 2014 to $1,795,160 in the first three months of 2015. However, the joint venture continued to generate a loss stemming from the Company’s heavy investments in it, and in the 2015 first quarter the Company’s equity in the net loss was $293,791 as compared with a net loss of $295,264 in the first quarter of 2014. In addition, the Company did not record any income from the rental of space at the Airport Auto Mall for the used car operation.

– As of March 31, 2015, the Company recorded a working capital deficit of $9,194,698. This includes approximately $69.24 million in current liabilities for short term borrowings due between July 2015 and February 2016, as well as approximately $17.31 million in payables related to the Zhonghe acquisition, due in November, 2015. Net cash used in operations through the first three months of 2015 was approximately $2.79 million. The Company plans to finance the remaining payments on the Zhonghe acquisition through its operating cash flows and bank loans, and believes it will likely require outside financing to do so, as cash flows from operations may be insufficient. The Company provides no assurance, however, that it will be successful in obtaining any loans on terms acceptable to it.

Outlook

Mr. Tong concluded, “Our goals for the year remain the same as those stated in our year end press release. Namely, while anticipating a continuing difficult economic and competitive climate, at least in the near term, we aim to stick to our payment schedule on the acquisition, while continuing to pursue more profitable growth in our current services businesses. We also hope to advance in other businesses we believe are promising, in particular, expansion in China of retail luxury auto sales in cooperation with Tianjin Binhai.”

Conference Call Invitation

The company will discuss 2015 first quarter results during a live conference call and webcast on Friday, May 15th at 8:00am Eastern Time.

To participate in the call, interested participants should call 1-888-359-3624 when calling within the United States or 1-719-325-2448 when calling internationally. Please ask for the China Auto Logistics 2015 First Quarter Investor Conference Call. Conference ID: 1766272. There will be a playback available until 5/22/15. 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: 1766272.

This call is being webcast by ViaVid Broadcasting and can be accessed by clicking on this link http://public.viavid.com/index.php?id=114628 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 Auto Mall in Tianjin for $91.4 million, with plans to develop the auto mall, among other things, as the flagship site for a joint venture with Car King (China) Used Car Trading Co., Ltd. In August, 2014, the Company also announced a Strategic Cooperation Agreement with a leading auto dealer leasing and development company to greatly expand its high end imported auto business via the purchase and construction of new auto malls throughout China coupled with a new e-commerce platform.

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.

CONTACT:

Sun Jiazhen

sjz_cali

Ken Donenfeld

DGI Investor Relations Inc.

kdonenfeld

Tel: 212-425-5700

Fax: 646-381-9727

SOURCE: China Auto Logistics, Inc.

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