AutoChina International Limited : AutoChina International Reports 2011 Fourth Quarter and Year-end Financial Results
04/05/2012| 06:35pm US/Eastern
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AutoChina International Limited ("AutoChina" or the "Company") (OTC:
AUTCF), China's largest commercial vehicle sales, servicing, leasing,
and support network, today reported financial results for its fourth
quarter and year ended December 31, 2011.
Q4 2011 Financial Highlights (comparisons are year over year)
Total revenues of $107.4 million, compared to $155.9 million
Gross profit of $26.5 million, compared to $25.6 million
Net income of $6.9 million, compared to a net loss of $4.2 million
Adjusted net income of $6.9 million, compared to $10.9 million
Adjusted EBITDA of $16.2 million, compared to $18.2 million
Full-year 2011 Financial Highlights (comparisons are year over year)
Total revenues of $598.1 million, compared to $618.1 million
Gross profit of $107.5 million, compared to $88.0 million
Net income of $26.1 million, compared to a net loss of $62.9 million
Adjusted net income of $43.4 million, compared to $37.5 million
Adjusted EBITDA of $80.0 million, compared to $69.1 million
2011 Operational Highlights
1,804 commercial vehicles leased in the fourth quarter of 2011
10,935 commercial vehicles leased during the year ended December 31,
2011
Company focusing on growing its specialty finance business and service
offerings, continuing its geographic expansion, sees continued margin
expansion
Mr. Yong Hui Li, Chairman and CEO of AutoChina, stated, "Though
AutoChina had to address a difficult set of challenges in 2011, we kept
a firm focus on growing our business while remaining committed to
providing our customers with quality service. We launched our used
commercial vehicle sale-leaseback program in early 2011 and in the
fourth quarter of 2011 established an insurance agency business whereby
AutoChina intends to broker different insurance products from various
carriers to existing and new customers. We also partnered with the
Postal Savings Bank of China ("PSBC"), enabling qualified AutoChina
customers to access credit cards through PSBC and also make payments to
us directly from PSBC branches. Compared to the robust economic growth
and heavy-truck demand of 2009 and 2010, 2011 was a year of
normalization on both fronts. However, as AutoChina continues to
increase its geographic presence across China, we believe that the
country's continuing economic development will remain the primary driver
of demand for commercial vehicles in the long term. Further, we remain
committed to leveraging the power of the store network we have created
to offer a variety of specialty finance and insurance options to
individuals throughout China, and continue to seek additional means of
diversifying our revenues."
Operational Review
Heavy Truck Sales
The Company leased 1,804 commercial vehicles in the fourth quarter of
2011, compared to 3,076 in the fourth quarter of 2010.
AutoChina's commercial vehicle specialty finance business recorded
10,935 new leases during the year ended December 31, 2011, compared to
12,561 new leases in the prior year. The Company continues to maintain a
low default rate, as AutoChina realized losses in lease-to-own loans on
169 vehicles, or 1.5%, for loss and accidents during the year ended
December 31, 2011. There were 55, or 0.4%, such losses recognized in the
previous year.
Value-Added Services
AutoChina also continues to make progress with its higher-margin
value-added services (diesel, tires, and insurance) programs. Revenues
from value-added services totaled $4.0 million for the year ended
December 31, 2011, compared to $1.6 million in the prior-year period.
Used Vehicle Leasing
The Company officially launched its commercial vehicle sale-leaseback
program in early 2011 and leased an additional 1,131 used vehicles under
this program during the year ended December 31, 2011. Revenues generated
from these secondhand commercial vehicle leasing arrangements during
2011 totaled $0.9 million.
Expansion of Specialty Finance Store Network
During the year ended December 31, 2011, the Company opened 206
additional financing and service centers. At December 31, 2011,
AutoChina owned and operated 506 financing centers in 26 provinces or
province-level regions across China, compared to 300 at December 31,
2010. Out of the 206 new locations, 94 were opened in provinces that did
not have an AutoChina presence as of December 31, 2010. The Company now
operates commercial vehicle financing and service centers in the Anhui,
Beijing, Chongqing, Fujian, Gansu, Guangdong, Guangxi, Guizhou, Hebei,
Henan, Hubei, Hunan, Inner Mongolia, Jiangsu, Jiangxi, Jilin, Liaoning,
Ningxia, Shaanxi, Shandong, Shanghai, Shanxi, Sichuan, Tianjin, Yunnan,
and Zhejiang areas of China.
Financial Review
2011 Fourth Quarter
The Company reported revenues for the fourth quarter ended December
31, 2011, of $107.4 million, compared to the $155.9 million reported
in the fourth quarter of 2010. The decrease in revenues primarily
resulted from lower demand for heavy trucks from the extraordinarily
robust levels in 2010, which was partially offset by higher finance
and insurance income during the period. The Company reported $83.4
million in commercial vehicle revenues, and $24.0 million, or 22.3% of
revenues, related to finance and insurance.
The Company's cost of sales during the period totaled $80.9 million,
with an average cost per commercial vehicle of $44,800. Gross margin
increased to 24.7% for the three months ended December 31, 2011, from
16.4% for the prior-year period. The increase in gross margin was due
to a higher contribution to revenues from finance and insurance versus
direct sales of commercial vehicles.
Net income in the three months ended December 31, 2011, was $6.9
million, or $0.29 earnings per share based on 23.5 million diluted
weighted average shares outstanding, compared to a net loss of $4.2
million, or $0.22 earnings per share based on 19.6 million diluted
weighted average shares outstanding, in the three months ended
December 31, 2010. The year-over-year increase of net income from a
net loss position primarily resulted from the decrease of loss on
change in fair value of the Earn-out obligation.
Adjusted net income was $6.9 million, compared to $10.9 million for
the fourth quarter of 2010.
Adjusted EBITDA for the quarter ended December 31, 2011, was $16.2
million, compared to $18.2 million in the prior-year quarter.
See "Non-GAAP Financial Measures" below for a description of adjusted
net income and adjusted EBITDA.
Full-year 2011
For the year ended December 31, 2011, the Company reported revenues of
$598.1 million, compared to $618.1 million for 2010. The decrease in
revenues was primarily due to lower demand for heavy trucks compared
to the high demand levels of 2010. The Company reported $505.6 million
in sales of its commercial vehicles, and $92.5 million, or 15.5% of
sales, related to finance and insurance. The increase in finance and
insurance revenue is due to an increase in the total leasing customer
base compared to the prior period.
The Company's gross profit was $107.5 million for the year ended
December 31, 2011, representing a gross margin of 18.0%, an increase
from gross margin of 14.2% in 2010, which is primarily due to the
increased number of outstanding leasing contracts signed that
increased the contribution to monthly finance and insurance income.
Net income for the year ended December 31, 2011, was $26.1 million, or
$1.11 earnings per share based on 23.6 million diluted weighted
average shares outstanding, compared to a net loss of $62.9 million,
or $3.42 per share based on 18.4 million diluted weighted average
shares outstanding, for the year ended December 31, 2010. This
year-over-year increase was primarily due to the decrease of loss on
change in fair value of the Earn-out obligation, significant increase
in profits generated from the finance and insurance revenue, and
improved gross profit margin.
Adjusted net income was $43.4 million, a 15.8% increase from adjusted
net income of $37.5 million in 2010.
Adjusted EBITDA for full-year 2011 increased to $80.0 million, from
$69.1 million in the prior-year period.
Balance Sheet Highlights
At December 31, 2011, AutoChina's cash and cash equivalents (not
including restricted cash) were $43.0 million, working capital was
$170.7 million, total debt was $230.1 million (including due to
affiliates and accounts payable, related parties), and stockholders'
equity was $290.3 million, compared to $30.9 million, $127.4 million,
$326.6 million (includes $73.1 million in Earn-out obligation), and
$156.8 million, respectively, at December 31, 2010.
Mr. Li concluded, "The Company believes itself to be a partner to
individuals and small business owners. By providing access to affordable
commercial vehicle ownership, we enable them to transport their
high-demand goods all over the vast and rapidly developing Chinese
countryside and grow their businesses, which, in turn, enable them to
support their families. We remain committed to this vision and will
continue to work toward our goal of becoming a vertically integrated
specialty finance provider in China."
About AutoChina International Limited:
AutoChina International Limited is China's largest commercial vehicle
sales, servicing, leasing, and support network. AutoChina's operating
subsidiary was founded in 2005 by nationally recognized Chairman and
CEO, Yong Hui Li. As of December 31, 2011, the Company owned and
operated 506 commercial vehicle financing centers across China, and
primarily provides sales-type leasing and support services for local
customers. The Company's website is http://www.autochinaintl.com.
Safe Harbor Statement:
This press release may contain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 about
the Company. Forward-looking statements are statements that are not
historical facts. Such forward-looking statements, based upon the
current beliefs and expectations of the Company's management, are
subject to risks and uncertainties, which could cause actual results to
differ from the forward-looking statements. The following factors, among
others, could cause actual results to meaningfully differ from those set
forth in the forward-looking statements:
Continued compliance with government regulations;
Changing legislation or regulatory environments;
Requirements or changes affecting the businesses in which the Company
is engaged;
Industry trends, including factors affecting supply and demand;
Labor and personnel relations;
Credit risks affecting the Company's revenue and profitability;
Changes in the commercial vehicle industry;
The Company's ability to effectively manage its growth, including
implementing effective controls and procedures and attracting and
retaining key management and personnel;
Changing interpretations of generally accepted accounting principles;
General economic conditions; and
Other relevant risks detailed in the Company's filings with the
Securities and Exchange Commission.
The information set forth herein should be read in light of such risks.
The Company does not assume any obligation to update the information
contained in this press release.
AUTOCHINA INTERNATIONAL LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS)
(in thousands except share and per share data)
Three months ended
December 31,
Year ended
December 31,
2011
2010
2011
2010
Revenues
Commercial vehicles
$
83,422
$
136,539
$
505,618
$
558,004
Finance and insurance
23,998
19,118
92,476
59,405
Agency service, related parties
--
222
--
664
Total revenues
107,420
155,879
598,094
618,073
Cost of sales
Commercial vehicles
638
49,565
86,055
419,383
Commercial vehicles, related parties
80,242
80,749
404,572
110,728
Total cost of sales
80,880
130,314
490,627
530,111
Gross profit
26,540
25,565
107,467
87,962
Operating expenses (income)
Selling and marketing
2,353
2,485
8,055
6,260
General and administrative
10,049
5,915
27,198
17,590
Interest expense
4,157
3,269
15,920
10,512
Interest expense, related parties
1,049
1,576
3,020
6,945
Other expenses (income), net
(596
)
147
(3,415
)
(789
)
Total operating expenses
17,012
13,392
50,778
40,518
Income from operations
9,528
12,173
56,689
47,444
Other income (expense)
Loss on change in fair value of earn-out obligation
--
(15,100
)
(17,300
)
(100,400
)
Interest income
65
--
160
433
Other income (expense), net
65
(15,100
)
(17,140
)
(99,967
)
Income (loss) before income taxes
9,593
(2,927
)
39,549
(52,523
)
Income tax provision
(2,726
)
(1,305
)
(13,419
)
(10,369
)
Net (loss) income
$
6,867
$
(4,232
)
$
26,130
$
(62,892
)
Foreign currency translation adjustment
2,806
3,539
14,072
6,894
Comprehensive income (loss)
$
9,673
$
(693
)
$
40,202
$
(55,998
)
Earnings (loss) per share
Basic
$
0.29
$
(0.22
)
$
1.11
$
(3.42
)
Diluted
$
0.29
$
(0.22
)
$
1.11
$
(3.42
)
Weighted average shares outstanding
Basic
23,538,919
19,619,876
23,538,919
18,415,305
Diluted
23,538,919
19,619,876
23,612,398
18,415,305
AUTOCHINA INTERNATIONAL LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands except share and per share data)
December 31,
2011
2010
ASSETS
Current assets
Cash and cash equivalents
$
43,019
$
30,931
Restricted cash
159
--
Accounts receivable, net of provision for doubtful accounts of
$4,830 and $1,464, respectively
25,357
22,101
Inventories
2,529
1,412
Deposits for inventories
105
1,004
Deposits for inventories, related party
14,539
--
Prepaid expenses and other current assets
12,096
8,113
Prepaid interest expenses, related parties
--
604
Due from an affiliate
--
9,000
Current maturities of net investment in direct financing and
sales-type leases, net of provision for doubtful accounts of
$714 and $281, respectively
329,111
282,108
Total current assets
426,915
355,273
Property, equipment and leasehold improvements, net
3,356
2,669
Deferred income tax assets
1,811
259
Net investment in direct financing and sales-type leases, net of
current maturities
114,447
142,005
Total assets
$
546,529
$
500,206
AUTOCHINA INTERNATIONAL LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS - Continued
(in thousands except share and per share data)
December 31,
2011
2010
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term borrowings (including short-term borrowings of the
consolidated VIEs without recourse to AutoChina of $111,095 and
$106,864 as of December 31, 2011 and 2010, respectively)
$
149,979
$
117,485
Long-term borrowings, current (including long-term borrowings,
current of the consolidated VIEs without recourse to AutoChina of
$44,438 and nil as of December 31, 2011 and 2010, respectively)
44,438
--
Accounts payable (including accounts payable of the consolidated
VIEs without recourse to AutoChina of $112 and $408 as of December
31, 2011 and 2010, respectively)
404
911
Accounts payable, related parties (including accounts payable,
related parties of the consolidated VIEs without recourse to
AutoChina of nil and $16,202 as of December 31, 2011 and 2010,
respectively)
--
16,202
Other payables and accrued liabilities (including other payables and
accrued liabilities of the consolidated VIEs without recourse to
AutoChina of $4,415 and $5,626 as of December 31, 2011 and 2010,
respectively)
13,652
7,425
Due to affiliates (including due to affiliates of the consolidated
VIEs without recourse to AutoChina of $3,244 and nil as of December
31, 2011 and 2010, respectively)
35,661
77,295
Customer deposits (including customer deposits of the consolidated
VIEs without recourse to AutoChina of $508 and $1,014 as of December
31, 2011 and 2010, respectively)
1,152
1,198
Income tax payable (including income tax payable of the consolidated
VIEs without recourse to AutoChina of $1,548 and $7,012 as of
December 31, 2011 and 2010, respectively)
2,799
7,147
Deferred income tax liabilities (including deferred income tax
liabilities of the consolidated VIEs without recourse to AutoChina
of $4,764 and $192 as of December 31, 2011 and 2010, respectively)
8,162
192
Total current liabilities
256,247
227,855
Noncurrent liabilities
Long-term borrowings (including long-term borrowings of the
consolidated VIEs without recourse to AutoChina of nil and $42,485
as of December 31, 2011 and 2010, respectively)
--
42,485
Earn-out obligation
--
73,100
Total liabilities
256,247
343,440
Commitment and Contingencies
Shareholders' equity
Preferred shares, $0.001 par value authorized - 1,000,000 shares;
issued - none
--
--
Ordinary shares - $0.001 par value authorized - 50,000,000 shares;
issued and outstanding - 23,538,919 shares and 19,615,766 shares at
December 31, 2011 and 2010, respectively
24
20
Additional paid-in capital
379,952
286,642
Statutory reserves
13,016
6,272
Accumulated losses
(124,349
)
(143,735
)
Accumulated other comprehensive income
21,639
7,567
Total shareholders' equity
290,282
156,766
Total liabilities and shareholders' equity
$
546,529
$
500,206
AUTOCHINA INTERNATIONAL LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
December 31,
2011
2010
Cash flow from operating activities:
Net income (loss)
$
26,130
$
(62,892
)
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Loss on change in fair value of earn-out obligation
17,300
100,400
Depreciation and amortization
1,420
952
Provision for bad debts
4,271
1,447
Deferred income taxes
6,261
(959
)
Stock-based compensation expenses
2,914
3,281
Changes in operating assets and liabilities, net of acquisitions and
divestitures:
Accounts receivable
(5,997
)
(20,263
)
Notes receivable
--
222
Net investment in direct financing and sales-type leases
2,175
(194,490
)
Inventories
(1,024
)
(1,255
)
Deposits for inventories
923
16,567
Deposits for inventories, related party
(14,177
)
--
Prepaid expense and other current assets
(3,511
)
(1,828
)
Trade notes payable
--
(12,561
)
Accounts payable
(536
)
(2,756
)
Accounts payable, related parties
--
16,104
Other payable and accrued liabilities
5,730
4,229
Customers deposits
(100
)
(182
)
Income tax payable
(4,568
)
4,912
Net cash provided by (used in) operating activities
37,211
(149,072
)
Cash flow from investing activities:
Purchase of property, equipment and leasehold improvements
(1,967
)
(1,427
)
(Increase) decrease) in restricted cash
(155
)
12,561
Decrease (increase) in due from an affiliate
9,000
(9,000
)
Net cash provided by investing activities
6,878
2,134
AUTOCHINA INTERNATIONAL LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
(in thousands)
December 31,
2011
2010
Cash flow from financing activities:
Proceeds from borrowings
189,850
220,028
Repayments of borrowings
(163,567
)
(73,269
)
Proceeds from affiliates
320,641
283,311
Repayment to affiliates
(364,175
)
(245,988
)
Increase in accounts payable, related parties
404,492
451,525
Repayment to accounts payable, related parties
(421,036
)
(570,637
)
Issue of shares on exercise of warrants
--
10,296
Issue of shares for cash, net of offering costs of $3,758
--
66,242
Shares repurchase
--
(1,630
)
Net cash (used in) provided by financing activities
(33,795
)
139,878
Net cash provided by (used in) operating, financing and investing
activities
10,294
(7,060
)
Effect of exchange rate fluctuation on cash and cash equivalents
1,794
1,223
Net increase (decrease) in cash and cash equivalents
12,088
(5,837
)
Cash and cash equivalents, beginning of the year
30,931
36,768
Cash and cash equivalents, end of the year
$
43,019
$
30,931
Non-GAAP Financial Measures ($ in 000s)
A reconciliation of Adjusted Net Income to net income (loss) is
provided below:
Three Months Ended
December 31,
Year Ended
December 31,
2011
2010
2011
2010
Net income (loss)
$
6,867
$
(4,232
)
$
26,130
$
(62,892
)
Loss (gain) on change in fair value of earn-out obligation
--
15,100
17,300
100,400
Adjusted Net Income
$
6,867
$
10,868
$
43,430
$
37,508
A reconciliation of Adjusted EBITDA to net income (loss) is
provided below:
Three Months Ended
December 31,
Year Ended
December 31,
2011
2010
2011
2010
Net income (loss)
$
6,867
$
(4,232
)
$
26,130
$
(62,892
)
Interest expenses
5,206
4,845
18,940
17,457
Interest income
(65
)
--
(160
)
(433
)
Income tax provision
2,726
1,305
13,419
10,369
Loss (gain) on change in fair value of earn-out obligation
--
15,100
17,300
100,400
Stock-based compensation
936
967
2,914
3,281
Depreciation & Amortization
539
262
1,420
952
Adjusted EBITDA
$
16,209
$
18,247
$
79,963
$
69,134
USE OF NON-GAAP MEASURES
AutoChina defines Adjusted Net Income as net income (loss) before gain
(loss) on change in fair value of earn-out obligation and Adjusted
EBITDA as net income before interest expense, income taxes, depreciation
and amortization, as well as certain other adjustments, including Loss
(gain) on change in fair value of earn-out obligation, stock-based
compensation and accretion of stock repurchase obligations. Adjusted Net
Income and Adjusted EBITDA exclude certain financial information that
would be included in net income (loss), the most directly comparable
GAAP financial measure. Users of this financial information should
consider the type of material events and transactions that are excluded
from Adjusted Net Income and Adjusted EBITDA, and the material
limitations of therein. Adjusted EBITDA does not include net interest
expense, but because AutoChina has borrowed money to finance its
operations, interest expense is a necessary and ongoing part of its
costs and has assisted AutoChina in generating revenue; Adjusted EBITDA
does not include taxes, although payment of taxes is a necessary and
ongoing part of AutoChina's operations; and Adjusted EBITDA does not
include depreciation and amortization expense, but because AutoChina
uses capital assets to generate revenue, depreciation and amortization
expense is a necessary element of its cost structure. Therefore,
Adjusted EBITDA should not be considered an alternative to, or more
meaningful than, net income, as determined in accordance with GAAP,
since it omits the impact of these expenses incurred by AutoChina.
AutoChina believes that the presentation of these non-GAAP financial
measures is warranted and useful to its shareholders because it provides
an additional analytical tool for understanding the Company's financial
performance by excluding certain items that may obscure trends in the
core operating performance of the Company's business. Using Adjusted Net
Income and Adjusted EBITDA also facilitates management's internal
comparisons to AutoChina's historical performance and liquidity.
AutoChina computes Adjusted Net Income and Adjusted EBITDA using the
same consistent method from quarter to quarter. The accompanying table
has more details on the reconciliations between GAAP financial measures
that are most directly comparable to Non-GAAP financial measures.
AutoChina International Ltd. Jason Wang, 858-997-0680 Chief
Financial Officer jcwang@autochinaintl.com or Investor
Relations The Equity Group Inc. Carolyne Yu, 212-836-9610 Account
Executive cyu@equityny.com or Adam
Prior, 212-836-9606 Vice President aprior@equityny.com
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