AutoChina International Limited (“AutoChina” or the “Company”)
(NASDAQ: AUTC, AUTCW, AUTCU), a leading one-stop commercial vehicle
sales and leasing company in China offering its customers
affordable lease-to-own options, reported financial results for its
third quarter and nine months ended September 30, 2009.
(1) The financial results through September 30, 2009 include
those of the automotive dealership business, which is in the
process of being sold. Pro forma statements of income for the nine
months ended September 30, 2009 and the year ended December 31,
2008 and a pro forma balance sheet as of September 30, 2009, to
present the pending sale of the automotive dealership business
segment as a discontinued operation, are presented below. In
addition, the financial results prior to April 9, 2009 reflect
those of the Company’s operating subsidiary, AutoChina Group, Inc.
(“ACG”) on a stand-alone basis, without adjustment, prior to its
acquisition by Spring Creek Acquisition Corp. on April 9, 2009.
The Company’s Chairman and CEO, Mr. Yong Hui Li, noted, “We are
pleased to have significantly improved our revenues and earnings
through the third quarter. We achieved this through the rapid
growth of our commercial vehicle sales and leasing business, which
we expanded to over 150 branches across China in just the first 18
months of operations. We plan to continue to open branches as we
further expand our store network across China. Our results have
continued to improve since February 2009, when nationwide
commercial vehicle sales rebounded and posted their first monthly
increase since July 2008. In the third quarter the market has
continued to gain momentum as highway freight volumes have
increased and monthly commercial vehicles sales have posted strong
year-over-year growth rates. We believe that we have a
“first-mover” advantage with a scalable and cost-efficient business
model that is well equipped to capitalize on this commercial
vehicle expansion.”
Mr. Li continued, “While we had hoped to close the sale of the
auto dealership business earlier this year, we now expect this
transaction to close by the end of December. Proceeds from this
sale will be utilized to fund our growth.”
2009 Third Quarter Financial Review
The Company reported revenues for the 2009 third quarter of
$242.0 million, up 110.8% year-over-year from $114.8 million in the
third quarter of 2008. The Company’s revenues by category were as
follows:
- $128.6 million, or 53.1%,
related to new automobiles;
- $97.4 million, or 40.3%, related
to commercial vehicles;
- $11.4 million, or 4.7%, related
to parts and service; and
- $4.6 million, or 1.9%, related
to finance and insurance, attributable primarily to the commercial
vehicle business
The Company’s commercial vehicle sales and leasing business
recorded 2,531 vehicle financing agreements and sales in the third
quarter of 2009, compared to 291 in the third quarter of 2008 and
1,535 in the second quarter of 2009. The Company did not realize
any losses on any lease-to-own loans on its commercial vehicles
during the first nine months of 2009. The increase in commercial
vehicle sales was in part due to the effects of economic stimulus
measures implemented by the Chinese government in the first quarter
and strengthening demand for commercial vehicles in the third
quarter.
Gross margin increased to 7.4% for the three months ended
September 30, 2009, from 7.0% for the prior fiscal year period, and
from 6.2% in the second quarter of 2009. The Company expects
continued improvement in margin due to the increased contribution
to revenues from the commercial vehicle sales and leasing business,
which has higher margins than the dealership business.
Net income attributable to shareholders for the third quarter of
2009 increased to $7.0 million, or $0.60 per diluted share based on
11.7 million weighted average diluted shares outstanding, compared
to $3.0 million, or $0.39 per diluted share based on 7.7 million
weighted average diluted shares outstanding in the third quarter of
2008.
Adjusted EBITDA for the quarter ended September 30, 2009
increased to $12.4 million, from $5.7 million in the prior year
quarter. A table reconciling Adjusted EBITDA to net income can be
found at the end of this press release.
Nine Months Ended September 30, 2009 Financial Review
For the nine months ended September 30, 2009, revenues increased
70.1% to $565.2 million, from $332.2 million in the comparable
prior year period. The Company’s revenues by sales category were as
follows:
- $353.6 million, or 62.6% of
revenues, related to new automobiles;
- $168.3 million, or 29.8%,
related to commercial vehicles;
- $35.5 million, or 6.3%, related
to parts and service; and
- $7.8 million, or 1.3%, related
to finance and insurance.
Gross margin increased to 6.7% from 6.1% in the prior year
period, which reflected the change in the revenue mix.
Net income attributable to shareholders for the nine months
ended September 30, 2009 was $12.5 million, or $1.25 per diluted
share, based on 10.0 million weighted average diluted shares
outstanding, compared to $6.1 million, or $1.03 per diluted share
based on 7.7 million weighted average diluted shares outstanding in
the prior year period.
Adjusted EBITDA for the nine months ended September 30, 2009
increased to $25.3 million from $12.9 million in the prior year
period. A table reconciling Adjusted EBITDA to net income can be
found at the end of this press release.
The Company believes that, after taking into consideration its
present banking facilities, its financing arrangement with its
affiliate, its existing cash resources, the cash flows expected to
be generated from continuing operations, and the proceeds to be
received from the sale of the consumer automotive dealership
business, it has adequate sources of liquidity to meet its
short-term obligations and working capital requirements.
Additional information with respect to the Company, including
more detailed information with respect to the Company’s September
30, 2009 interim financial statements, will be available on Form
6-K, which the Company expects to file with the Securities and
Exchange Commission on December 11, 2009 (available without charge
at www.sec.gov).
About AutoChina International Limited:
AutoChina International Limited is a leading one-stop commercial
auto financing and sales company in China. AutoChina’s operating
subsidiary was founded in 2005 by nationally recognized Chairman
and CEO, Yong Hui Li. 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 automobile
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;
- Whether the transaction to sell
the automobile dealership business is consummated;
- 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 INCOME (Unaudited)
(in thousands except share and per share data)
Three months ended September 30,
Nine months ended September 30,
2009
2008
2009
2008
Revenues New automobiles $ 128,530 $ 91,827 $ 353,624 $
270,164 Commercial vehicles 97,374 11,428 168,332 33,102 Parts and
services 11,427 10,752 35,468 27,327 Finance and insurance 4,647
794 7,779 1,613 Total revenues 241,978
114,801 565,203 332,206 Cost of
sales New automobiles 123,542 89,000 339,981 261,108 Commercial
vehicles 91,206 10,512 158,988 31,188 Parts and services 9,261
7,208 28,111 19,584 Total cost of sales
224,009 106,720 527,080 311,880
Gross profit 17,969 8,081 38,123 20,326
Operating expenses Selling and marketing 3,151 1,261 8,059
4,541 General and administrative 3,646 1,610 8,412 4,808 Other
income, net (356 ) (230 ) (888 ) (467 ) Total operating expenses
6,441 2,641 15,583 8,882 Income
from operations 11,528 5,440 22,540 11,444
Other income (expense) Floor plan interest expense
(133 ) (178 ) (561 ) (630 ) Interest expense (541 ) (873 ) (1,464 )
(1,736 ) Interest expense, related parties (854 ) - (1,075 ) -
Interest income 125 222 344 450 Accretion of share repurchase
obligations (221 ) - (531 ) - Equity in earnings (loss) of
unconsolidated subsidiaries - (33 ) 37 (50 ) Acquisition-related
costs - - (295 ) - Other expense, net
(1,624 ) (862 ) (3,545 ) (1,966 ) Income from
continuing operations before income taxes 9,904 4,578 18,995 9,478
Income tax provision 2,419 1,220 4,958
2,285 Income from continuing operations 7,485 3,358 14,037
7,193 Loss from discontinued operations, net of taxes - (2 )
- (153 ) Net income 7,485 3,356 14,037 7,040 Net
income attributable to noncontrolling interests (493 ) (313 )
(1,552 ) (930 ) Net income attributable to shareholders $ 6,992
$ 3,043 $ 12,485 $ 6,110
AUTOCHINA INTERNATIONAL LIMITED
AND SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME (Unaudited) - Continued
(in thousands except share and
per share data)
Three months ended September 30,
Nine months ended September 30,
2009
2008
2009
2008
Earnings (loss) per share Basic Continuing operations $ 0.76
$ 0.39 $ 1.46 $ 1.05 Discontinued operations - - - (0.02 ) $ 0.76 $
0.39 $ 1.46 $ 1.03 Diluted Continuing operations $ 0.60 $ 0.39 $
1.25 $ 1.05 Discontinued operations - - - (0.02 ) $ 0.60 $ 0.39 $
1.25 $ 1.03 Weighted average shares outstanding Basic
9,212,703 7,745,625 8,572,134 7,745,625 Diluted 11,733,174
7,745,625 10,027,442 7,745,625 Amounts attributable
to shareholders Income from continuing operations, net of taxes $
6,992 $ 3,045 $ 12,485 $ 6,263 Discontinued operations, net of
taxes - (2 ) - (153 ) Net income $ 6,992 $ 3,043 $ 12,485 $ 6,110
AUTOCHINA INTERNATIONAL LIMITED
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in thousands except share and per share data)
September 30,
December 31,
2009
2008
(unaudited) ASSETS Current assets Cash and cash equivalents $
38,136 $ 17,406 Restricted cash 53,530 40,824 Accounts receivable
3,196 4,272 Inventories 34,529 37,463 Deposits for inventories
41,673 21,621 Prepaid expenses and other current assets 6,981 5,474
Due from unconsolidated subsidiary 439 529 Current maturities of
net investment in sales-type leases 82,258 14,867 Deferred income
tax assets 2,741 1,020 Total current assets 263,483 143,476
Investment in unconsolidated subsidiaries 266 229 Property,
equipment and leasehold improvements, net 28,450 26,907 Net
investment in sales-type leases, net of current maturities 56,980
8,492 Goodwill 941 941 Total assets $ 350,120 $ 180,045
LIABILITIES AND EQUITY Current liabilities Floor plan notes
payable - manufacturer affiliated $ 11,115 $ 12,379 Notes payable
28,841 3,921 Trade notes payable 65,586 60,134 Short-term loan
14,590 - Deposit for pending disposal of consumer automotive
dealership business 29,255 - Accounts payable 3,948 1,270 Accounts
payable, related parties 83,388 2,272 Other payables and accrued
liabilities 8,729 5,189 Share repurchase obligations 2,537 - Due to
affiliates 5,456 5,894 Customer deposits 5,424 3,224 Customer
deposits, related party - 16,095 Income tax payable 3,042 1,674
Total current liabilities 261,911 112,052 Long term debt Net
deferred income tax liabilities 2,020 405 Total liabilities 263,931
112,457
AUTOCHINA INTERNATIONAL LIMITED
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS - Continued
(in thousands except share and per share data)
September 30, December 31,
2009
2008
(unaudited) 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 - 10,716,720 shares
and 8,606,250 shares at September 30, 2009 and December 31, 2008,
respectively; outstanding – 9,557,095 shares and 7,745,625 shares
at September 30, 2009 and December 31, 2008, respectively 11 9
Additional paid-in capital 40,639 35,912 Statutory reserves 741 741
Retained earnings 30,276 17,791 Accumulated other comprehensive
income 6,166 6,185 Total shareholders’ equity 77,833 60,638
Noncontrolling interest 8,356 6,950 Total equity 86,189 67,588
Total liabilities and equity $ 350,120 $ 180,045
AUTOCHINA INTERNATIONAL LIMITED
AND SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)
Nine Months Ended September 30, 2009 2008
Cash flow from operating
activities:
Net income attributable to shareholders $ 12,485 $ 6,110
Adjustments to reconcile net
income attributableto shareholders to net cash used in
operatingactivities:
Depreciation and amortization 2,647 1,627
Loss on disposal of property,
equipment andleasehold improvements
90 - Deferred income taxes (106) (112) Equity in (earnings) loss of
unconsolidated subsidiaries (37) 50 Gain on disposal of equity in
subsidiary - (52) Stock-based compensation 112 - Accretion of share
repurchase obligations 531 - Noncontrolling interests 1,552 930
Changes in operating assets and
liabilities, netof acquisitions and divestitures:
Accounts receivable 1,076 (283) Net investment in sales-type leases
(115,879) (23,693) Inventories 2,934 (14,443) Deposits for
inventories (20,052) 6,467 Prepaid expense and other current assets
(1,443) 4,315 Floor plan notes payable – manufacturer affiliated
(1,264) 2,213 Trade notes payable 5,452 21,985 Accounts payable
2,678 (1,138) Other payable and accrued liabilities 1,808 (8,512)
Customers deposits 2,200 (975) Customers deposits, related party
(16,095) - Income tax payable 1,368 745 Net cash provided by
discontinued operations - 7,648
Net cash (used in)
provided by operating activities $ (119,943) $ 2,882
AUTOCHINA INTERNATIONAL LIMITED
AND SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (Unaudited) - Continued
(in thousands)
Nine Months Ended September 30, 2009 2008
Cash flow from investing activities: Business
acquisitions, net of cash acquired $ - $ (3,560) Purchase of
property, equipment and leasehold improvements (5,645) (8,871)
Proceeds from the sale of
property, equipment andleasehold improvements
2,425 2,206 Cash received from sales of equity in subsidiaries
2,928 - Cash relinquished upon sale of equity in discontinued
subsidiary - (5,432)
Deposits received from pending
sale of consumerautomotive dealership business
29,255 - Increase in restricted cash (12,706) (13,311)
Net cash provided by (used in) investing activities 16,257
(28,968)
Cash flow from financing activities: Floor
plan borrowings - non-manufacturer affiliated, net - (716) Proceeds
from borrowings 59,201 25,267 Repayments of borrowings (20,120)
(8,543) Proceeds from affiliates 4,692 - Repayment to affiliates
(5,499) - Increase in accounts payable, related party 81,116 -
Capital contributions - 16,218 Cash acquired in reverse merger
1,697 - Release of restricted cash held in escrow 4,987 -
Repurchase of warrants subsequent to closing of reverse merger
(449) - Dividends paid to noncontrolling interest (1,250)
(2,406)
Net cash provided by financing activities 124,375
29,820
Effect of foreign currency translation on cash
41 1,107
Net increase in cash and cash equivalents
20,730 4,841
Cash and cash equivalents, beginning of the
period 17,406 12,820
Cash and cash equivalents, end
of the period $ 38,136 $ 17,661
Supplemental
disclosure of cash flow information: Interest paid $
2,403 $ 1,684 Income taxes paid $ 5,514 $ 2,203
Supplemental
disclosure of non-cash financing activity: Settlement of share
repurchase obligations $ 5,902 $ -
AUTOCHINA INTERNATIONAL LIMITED
AND SUBSIDIARIES
PRO FORMA CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
(Reclassified For Discontinued
Operations)
(in thousands except share and per
share data)
Nine Months
Ended
September 30,
2009
Year
Ended
December 31,
2008
(unaudited)
Revenues Commercial vehicles $ 168,332 $
34,059 Finance and insurance 7,042 2,239
Total revenues
175,374 36,298
Cost of sales Commercial vehicles 158,988
31,970
Gross profit 16,386 4,328
Operating
expenses: Selling and marketing 1,537 965 General and
administrative 3,905 2,177 Other income, net (93) (162) Total
operating expenses 5,349 2,980
Income from operations 11,037
1,348
Other income (expense) : Interest expense (286)
(5) Interest expense, related parties (1,075) - Interest income 25
14 Accretion of share repurchase obligations (531) -
Acquisition-related costs (295) -
Other income (expense),
net (2,162) 9
Income from continuing operations
before income taxes
8,875 1,357 Income tax provision 1,967 185
Income from
continuing operations 6,908 1,172
Income from discontinued
operations, net of
income taxes
5,577 6,871
Net income attributable to shareholders $ 12,485
$ 8,043
Earnings per share Basic Continuing operations $
0.81 $ 0.15 Discontinued operations 0.65 0.89 1.46 1.04 Diluted
Continuing operations $ 0.69 $ 0.15 Discontinued operations 0.56
0.89 $ 1.25 $ 1.04 Weighted average shares outstanding Basic
8,572,134 7,745,625 Diluted 10,027,442 7,745,625
AUTOCHINA INTERNATIONAL LIMITED
AND SUBSIDIARIES
PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET (Unaudited)
(Reclassified For Discontinued
Operations)
September 30, 2009
(in thousands)
ASSETS Current assets Cash and
cash equivalents $ 22,042 Restricted cash 12,434 Accounts
receivable 2,086 Inventories 200 Deposits for inventories 21,574
Prepaid expenses and other current assets 3,086 Current maturities
of net investment in sales-type leases 82,258 Deferred income tax
assets 2,416 Assets of discontinued operations 145,119 Total
current assets 291,215 Property, equipment and leasehold
improvements, net 1,925 Net investment in sales-type leases, net of
current maturities 56,980 Total assets $ 350,120
AUTOCHINA INTERNATIONAL LIMITED
AND SUBSIDIARIES
PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET (Unaudited) - Continued
(Reclassified For Discontinued
Operations)
September 30, 2009
(in thousands)
LIABILITIES AND EQUITY Current
liabilities Notes payable $ 8,777 Trade notes payable 12,434
Short-term loan 14,590 Deposit received from pending disposal of
consumer automotive dealership business 29,255 Accounts payables
2,096 Accounts payables, related parties 83,388 Other payables and
accrued liabilities 5,007 Share repurchase obligations 2,537 Due to
affiliates 5,706 Customer deposits 1,868 Income tax payable 1,230
Liabilities of discontinued operations 94,935 Total current
liabilities 261,823 Long term debt Net deferred
income tax liabilities 2,108 Total liabilities 263,931
Equity Ordinary shares 11 Additional paid-in capital 40,639
Statutory reserves 741 Retained earnings 30,276 Accumulated other
comprehensive income 6,166 Total shareholders’ equity 77,833
Noncontrolling interests 8,356 Total equity 86,189 Total
liabilities and equity $ 350,120
USE OF NON-GAAP MEASURES
AutoChina defines Adjusted EBITDA as net income before interest
expense, income taxes, depreciation and amortization, as well as
certain other adjustments, including net income attributable to
noncontrolling interests, equity in earnings (loss) of
unconsolidated subsidiaries, accretion of share repurchase
obligations, stock-based compensation and acquisition-related
costs. Adjusted EBITDA excludes 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 EBITDA, and the
material limitations of Adjusted EBITDA, such as: 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 this non-GAAP
financial measure 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 EBITDA also facilitates
management's internal comparisons to AutoChina's historical
performance and liquidity. AutoChina computes 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.
A reconciliation of Adjusted EBITDA to net income attributable
to shareholders is provided below:
Three months endedSeptember 30, Nine months endedSeptember
30, 2009 2008 2009 2008 (in thousands) (in
thousands) (in thousands) (in thousands)
Net income
attributable to shareholders $ 6,992 $
3,043 $ 12,485 $ 6,110 Income
attributable to noncontrolling shareholders 493 313 1,552 930
Interest expenses 1,528 1,051 3,100 2,366 Interest income (125)
(222) (344) (450) Equity in loss (earnings) - 33 (37) 50 Income tax
provision 2,419 1,220 4,958 2,285 Accretion of stock repurchase
obligations 221 - 531 - Stock-based compensation 112 - 112 -
Acquisition-related costs - - 295 - Depreciation and amortization
805 272 2,647 1,627
Adjusted EBITDA $ 12,445
$ 5,710 $ 25,299 $ 12,918
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