SHIJIAZHUANG, China--()--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 first quarter ended March 31, 2012.
Q1 2012 Financial Highlights (comparisons are year over year)
- Total revenues of $103.1 million, compared to $136.2 million
- Gross profit of $24.5 million, compared to $23.2 million
- Net income of $8.0 million, compared to a net loss of $27.4 million (which included loss on change in fair value of earn-out obligation)
- Adjusted net income of $8.0 million, compared to $11.0 million
- Adjusted EBITDA of $16.2 million, compared to $18.2 million
Operational Highlights
- 1,725 commercial vehicles leased in the first quarter of 2012
- During the first quarter, AutoChina opened 6 new commercial vehicle financing and service centers, and, as of March 31, 2012, operated 512 financing and service centers, compared to 318 centers at March 31, 2011.
- Expects continued margin expansion as finance and insurance income grows as a percentage of revenue
Operational and Market Review
Mr. Yong Hui Li, Chairman and CEO of AutoChina, stated, "During the first quarter of 2012, we remained focused on expanding our store network and service and finance offerings despite difficult market conditions. Sales of heavy-trucks in China were generally affected by weaker than expected economic growth as well as seasonality in the first quarter due to the Chinese New Year. Despite these conditions, we have continued to stick closely to a thorough credit screening process for our new truck lease agreements, which has been evidenced by our continued low-default rate. We are also working to diversify our service offerings to our current and potential customers across China. This includes cost-effectively expanding our new insurance agency business, sale-leaseback program, value-added services (tires, fuel), and growing our network of financing and service centers. While we have encountered difficult market conditions, we feel that these initiatives will position the Company for long term success."
Heavy Truck Sales
The Company leased 1,725 new commercial vehicles (primarily Class 8 heavy trucks) as part of the Company's sales-type leasing program in the first quarter of 2012, compared to 2,559 in the first quarter of 2011. Since launching its commercial vehicle sales and leasing business in March 2008, the Company has leased over 33,000 trucks. The Company realized losses in relation to 147 vehicles for loss and accidents during the three months ended March 31, 2012. There were 8 such losses recognized in the three months ended March 31, 2011. The decrease in commercial vehicle sales and servicing and leasing was primarily due to a general slowdown in the economy that led to unfavorable investment sentiment for purchasers of commercial vehicles. The Company has also begun to gain traction through the leasing of a wider array of commercial vehicles, including cement mixers and dump trucks, and will continue to offer different types of vehicles that fit AutoChina's leasing standards.
Used Vehicle Leasing
The Company launched its used commercial vehicle sale-leaseback program in early 2011 and 290 trucks were leased under this program in the first quarter of 2012.
Insurance Agency Services
In November 2011, the Company announced that it had established its own insurance agency company, which commenced business in December 2011. AutoChina has now signed agreements with four major insurance companies in China to sell insurance: China United Property Insurance Company Limited, Sinosafe General Insurance Co. Ltd. (Hua An Insurance), Ping An Insurance (Group) Company of China, Ltd., and China Life Property and Casualty Insurance Company Limited. While each of AutoChina's 512 store locations is licensed to sell insurance from its carrier partners, the Company has also launched 12 new insurance agency branch offices solely dedicated to this service in appropriate markets.
Expansion of Specialty Finance Store Network
During the first quarter, AutoChina opened 6 new commercial vehicle financing and service centers, and, as of March 31, 2012, operated 512 financing and service centers, compared to 318 centers at March 31, 2011. 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.
2012 First Quarter Financial Review
- Revenues for the first quarter ended March 31, 2012, were $103.1 million, compared to $136.2 million in the first quarter of 2011. The decrease in revenues primarily resulted from lower demand for heavy trucks, which was partially offset by higher finance and insurance income during the period. The Company reported $80.4 million in commercial vehicle revenues, and $22.6 million, or 21.9%, in revenues related to finance and insurance.
- Cost of sales during the period totaled $78.5 million, with an average cost per commercial vehicle of $45,500. Gross margin increased to 23.7% for the three months ended March 31, 2012, from 17.1% for the prior-year period, primarily due to a higher contribution to revenues from finance and insurance versus direct sales of commercial vehicles.
- Net income in the three months ended March 31, 2012, was $8.0 million, or $0.34 per share based on 23.6 million diluted weighted average shares outstanding, compared to a net loss of $27.3 million, or $1.16 per share based on 23.5 million diluted weighted average shares outstanding, in the three months ended March 31, 2011. 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 earn-out obligation, which has now been cancelled.
- Adjusted net income, which is net income excluding the loss on change in fair value of earn-out obligation, was $8.0 million, compared to $11.0 million for the first quarter of 2011.
- Adjusted EBITDA for the quarter ended March 31, 2012, 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.
Balance Sheet Highlights
At March 31, 2012, AutoChina's cash and cash equivalents (not including restricted cash) were $35.4 million, working capital was $186.7 million, total debt was $185.1 million (including due to affiliates and accounts payable, related parties), and stockholders' equity was $293.6 million, compared to $43.0 million, $170.7 million, $230.1 million, and $290.3 million, respectively, at December 31, 2011.
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 March 31, 2012, the Company owned and operated 512 commercial vehicle financing centers across China, and primarily provides sales-type leasing and support services for local customers.
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AUTOCHINA INTERNATIONAL LIMITED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (Unaudited) (in thousands except share and per share data) |
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| Three months ended March 31, | ||||||||
| 2012 | 2011 | |||||||
| Revenues | ||||||||
| Commercial vehicles | $ | 80,443 | $ | 116,642 | ||||
| Finance and insurance | 22,625 | 19,591 | ||||||
| Total revenues | 103,068 | 136,233 | ||||||
| Cost of sales | ||||||||
| Commercial vehicles | 2,747 | 32,131 | ||||||
| Commercial vehicles, related parties | 75,797 | 80,868 | ||||||
| Total cost of sales | 78,544 | 112,999 | ||||||
| Gross profit | 24,524 | 23,234 | ||||||
| Operating expenses | ||||||||
| Selling and marketing | 2,124 | 1,746 | ||||||
| General and administrative | 8,120 | 4,329 | ||||||
| Interest expense | 3,795 | 3,323 | ||||||
| Interest expense - related parties | 281 | 643 | ||||||
| Other income, net | (568 | ) | (600 | ) | ||||
| Total operating expenses | 13,752 | 9,441 | ||||||
| Income from operations | 10,772 | 13,793 | ||||||
| Other income (expense) | ||||||||
| Loss on change in fair value of earn-out obligation | €” | (38,400 | ) | |||||
| Interest income | 32 | 23 | ||||||
| Other income (expense), net | 32 | (38,377 | ) | |||||
| Income (loss) from operations before income taxes | 10,804 | (24,584 | ) | |||||
| Income tax provision | 2,768 | 2,793 | ||||||
| Net income (loss) | 8,036 | (27,377 | ) | |||||
| Foreign currency translation adjustment | 192 | 1,188 | ||||||
| Comprehensive income (loss) | $ | 8,228 | $ | (26,189 | ) | |||
| Earnings (loss) per share | ||||||||
| Basic | $ | 0.34 | $ | (1.16 | ) | |||
| Diluted | $ | 0.34 | $ | (1.16 | ) | |||
| Weighted average shares outstanding | ||||||||
| Basic | 23,538,919 | 23,538,919 | ||||||
| Diluted | 23,612,622 | 23,538,919 | ||||||
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AUTOCHINA INTERNATIONAL LIMITED AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands except share and per share data) |
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| March 31, | December 31, | ||||||
| 2012 | 2011 | ||||||
| (unaudited) | |||||||
| ASSETS | |||||||
| Current assets | |||||||
| Cash and cash equivalents | $ | 35,432 | $ | 43,019 | |||
| Restricted cash | 159 | 159 | |||||
| Accounts receivable, net of provision for doubtful debts of $6,667 and $4,830, respectively | 26,412 | 25,357 | |||||
| Inventories | 3,628 | 2,529 | |||||
| Deposits for inventories | 71 | 105 | |||||
| Deposits for inventories, related party | €” | 14,539 | |||||
| Prepaid expenses and other current assets | 11,357 | 12,096 | |||||
| Current maturities of net investment in direct financing and sales-type leases, net of provision for doubtful debts of $887 and $714, respectively | 321,234 | 329,111 | |||||
| Total current assets | 398,293 | 426,915 | |||||
| Property, equipment and leasehold improvements, net | 4,184 | 3,356 | |||||
| Deferred income tax assets | 2,423 | 1,811 | |||||
| Net investment in direct financing and sales-type leases, net of current maturities | 100,310 | 114,447 | |||||
| Total assets | $ | 505,210 | $ | 546,529 | |||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
| Current liabilities | |||||||
| Short-term borrowings (including short-term borrowings of the consolidated variable interest entities ("VIEs") without recourse to AutoChina of $104,062 and $111,095 as of March 31, 2012 and December 31, 2011, respectively) | $ | 127,099 | $ | 149,979 | |||
| Long-term borrowings (including long-term borrowings, current of the consolidated VIEs without recourse to AutoChina of $44,485 and $44,438 as of March 31, 2012 and December 31, 2011, respectively) | 44,485 | 44,438 | |||||
| Accounts payable (including accounts payable of the consolidated VIEs without recourse to AutoChina of $122 and $112 as of March 31, 2012 and December 31, 2011, respectively) | 282 | 404 | |||||
| Accounts payable, related parties (including accounts payable, related parties of the consolidated VIEs without recourse to AutoChina of $5,374 and nil as of March 31, 2012 and December 31, 2011, respectively) | 9,127 | €” | |||||
| Other payables and accrued liabilities (including other payables and accrued liabilities of the consolidated VIEs without recourse to AutoChina of $4,777 and $4,415 as of March 31, 2012 and December 31, 2011, respectively) | 13,514 | 13,652 | |||||
| Due to affiliates (including due to affiliates of the consolidated VIEs without recourse to AutoChina of $3,314 and $3,244 as of March 31, 2012 and December 31, 2011, respectively) | 4,410 | 35,661 | |||||
| Customer deposits (including customer deposits of the consolidated VIEs without recourse to AutoChina of $352 and $508 as of March 31, 2012 and December 31, 2011, respectively) | 1,350 | 1,152 | |||||
| Income tax payable (including income tax payable of the consolidated VIEs without recourse to AutoChina of $1,567 and $1,548 as of March 31, 2012 and December 31, 2011, respectively) | 2,191 | 2,799 | |||||
| Deferred income tax liabilities (including deferred income tax liabilities of the consolidated VIEs without recourse to AutoChina of nil and $4,764 as of March 31, 2012 and December 31, 2011, respectively) | 9,185 | 8,162 | |||||
| Total current liabilities | 211,643 | 256,247 | |||||
| Total liabilities | 211,643 | 256,247 | |||||
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AUTOCHINA INTERNATIONAL LIMITED AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS - Continued (in thousands except share and per share data) |
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| March 31, | December 31, | ||||||||
| 2012 | 2011 | ||||||||
| (unaudited) | |||||||||
| Commitment and Contingency | |||||||||
| 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 at March 31, 2012 and December 31, 2011 respectively | 24 | 24 | |||||||
| Additional paid-in capital | 380,894 | 379,952 | |||||||
| Statutory reserves | 13,016 | 13,016 | |||||||
| Accumulated losses | (122,198 | ) | (124,349 | ) | |||||
| Accumulated other comprehensive income | 21,831 | 21,639 | |||||||
| Total shareholders' equity | 293,567 | 290,282 | |||||||
| Total liabilities shareholders' and equity | $ | 505,210 | $ | 546,529 | |||||
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AUTOCHINA INTERNATIONAL LIMITED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) |
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| Three months ended March 31, | ||||||||
| 2012 | 2011 | |||||||
| Net cash provided by (used in) operating activities | $ | 44,649 | $ | (23,057 | ) | |||
| Cash flow from investing activities: | ||||||||
| Purchase of property, equipment and leasehold improvements | (1,247 | ) | (440 | ) | ||||
| Repayment of due from an affiliate | €” | 9,000 | ||||||
| Net cash (used in) provided by investing activities | (1,247 | ) | 8,560 | |||||
| Cash flow from financing activities: | ||||||||
| Proceeds from borrowings | 29,200 | 73,198 | ||||||
| Repayments of borrowings | (52,215 | ) | (35,388 | ) | ||||
| Proceeds from affiliates for debt | €” | 229,380 | ||||||
| Repayment to affiliates | (31,259 | ) | (228,654 | ) | ||||
| Increase in accounts payable, related parties | 75,797 | 80,868 | ||||||
| Repayment to accounts payable, related parties | (66,679 | ) | (49,839 | ) | ||||
| Dividend paid | (5,885 | ) | €” | |||||
| Net cash (used in) provided by financing activities | (51,041 | ) | 69,565 | |||||
| Net cash (used in) provided by operating, investing and financing activities | (7,639 | ) | 55,068 | |||||
| Effect of foreign currency translation on cash | 52 | 89 | ||||||
| Net (decrease) increase in cash and cash equivalents | (7,587 | ) | 55,157 | |||||
| Cash and cash equivalents, beginning of the period | 43,019 | 30,931 | ||||||
| Cash and cash equivalents, end of the period | $ | 35,432 | $ | 86,088 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Interest paid | $ | 7,076 | $ | 2,453 | ||||
| Income taxes paid | $ | 2,965 | $ | 3,639 | ||||
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Non-GAAP Financial Measures ($ in 000s) |
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A reconciliation of Adjusted Net Income to net income (loss) is provided below: |
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Three Months Ended
March 31, |
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| 2012 | 2011 | |||||||
| Net income (loss) | $ | 8,036 | $ | (27,377 | ) | |||
| Loss (gain) on change in fair value of earn-out obligation | €” | (38,400 | ) | |||||
| Adjusted Net Income | $ | 8,036 | $ | 11,023 | ||||
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A reconciliation of Adjusted EBITDA to net income (loss) is provided below: |
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Three Months Ended
March 31, |
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| 2012 | 2011 | |||||||
| Net income (loss) | $ | 8,036 | $ | (27,377 | ) | |||
| Interest expenses | 4,076 | 3,966 | ||||||
| Interest income | (32 | ) | (23 | ) | ||||
| Income tax provision | 2,768 | 2,793 | ||||||
| Loss (gain) on change in fair value of earn-out obligation | €” | 38,400 | ||||||
| Stock-based compensation | 942 | 147 | ||||||
| Depreciation & Amortization | 423 | 306 | ||||||
| Adjusted EBITDA | $ | 16,213 | $ | 18,212 | ||||
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.
