AutoChina International Limited (“AutoChina” or the “Company”)
(NASDAQ: AUTC), China’s largest commercial vehicle sales,
servicing, leasing, and support network, today reported unaudited
financial results for its first quarter ended March 31, 2011.
Q1 2011 Financial Highlights
- Total revenues of $136.2 million, a
12.8% increase from $120.7 million in the prior-year period
- Improvement across all margins—gross
margin up 4 percentage points to 17.1%, operating margin up 2.7
percentage points to 9.5%, and net margin up 2.2 percentage points
to 7.3%, from the prior-year period
- Net income of $10.0 million, or $0.50
per diluted share, compared to net income of $6.2 million, or $0.33
per diluted share, in the prior-year period
- Adjusted EBITDA of $18.2 million, a
45.9% increase year over year
Operational Highlights
- 2,559 commercial vehicles were financed
in the first quarter of 2011, which has historically been the
Company’s slowest seasonal quarter due to the Chinese New Year
holiday, compared to 2,506 in the prior-year period
- Total number of commercial vehicle
sales and leasing branches increased from 180 at March 31, 2010, to
318 at March 31, 2011, and 333 at May 31, 2011
- Eight lease defaults during the
three-month period on a total loan portfolio of 21,727 commercial
vehicles at March 31, 2011
- Company launches used commercial
vehicle sale-leaseback program
Guidance for 2011
- Company reiterates its expectation of
leasing approximately 20,000 vehicles in 2011 and operating at
least 500 stores by the end of 2011
- Company reiterates its revenue guidance
of between $900 million and $950 million and net income guidance of
between $52 million and $57 million for the year ending December
31, 2011
- Company expects continued improvement
in gross margin as finance and insurance revenues increase as a
percentage of total revenues in each quarter
Market Overview
Mr. Yong Hui Li, Chairman and CEO of AutoChina, stated, “We were
pleased to achieve double-digit growth on the top and bottom line
during the first quarter, which is historically the Company’s
slowest period due to seasonality caused by the Chinese New Year
holiday. Since the latter half of 2010, we have seen demand in the
heavy-truck market normalize from its previously high growth
levels. In 2010, heavy truck sales in China rose by roughly 60%
when compared to heavy truck sales in 2009. We feel this was an
extraordinary jump over the historical growth in the market, driven
in part by the effects of the government's stimulus program.
However, we are still seeing steady growth in our sector. According
to China Automotive Review, sales of heavy-duty trucks, including
chassis and semi-tractor trailers, in the first quarter of 2011
totaled 299,436 units, up 8.4% from the first quarter of 2010. We
believe that China’s continuing economic development will keep
driving demand for commercial vehicles in the long term.”
Operational Review
AutoChina’s commercial vehicle sales, servicing, leasing and
support business recorded 2,559 lease-to-own loans (“leases”) in
the three months ended March 31, 2011, compared to 2,506 for the
three months ended March 31, 2010.
The Company had a total of 21,727 leases outstanding as of March
31, 2011. During the quarter, 8 vehicles experienced default or
were lost due to accidents. Since inception and through March 31,
2011, a total of 68 vehicles have experienced defaults or were lost
due to accidents out of over 23,000 total vehicles leased.
During the 2011 first quarter, AutoChina’s value-added services
(diesel, tire, and insurance financing) programs, which were
launched in early 2010, continued to expand. As of March 31, 2011,
over 80 tire outlets and over 60 fueling stations were
participating in the program. Revenues from value-added services
totaled $1.1 million during the quarter.
During the first quarter of 2011, the Company established a
total of 18 additional commercial vehicle sales, servicing, leasing
and support centers in Anhui, Guangxi, Jilin, Shaanxi, Shandong,
Shanxi, and Yunnan provinces, bringing the total number of
locations to 318 as of March 31, 2011. Three of these new stores
were opened in provinces (Jilin, Guangxi, and Yunnan) in which the
company did not previously have operations. The Company expects to
operate at least 500 locations by the end of 2011.
Mr. Li continued, “During the 2011 first quarter, we continued
our expansion into the far northern and southern regions of China,
opening store branches in the Jilin, Yunnan, and Guangxi provinces
where AutoChina did not previously have a presence. As we expand
our store footprint in China, we continue to expect significant
overall growth in our business, as new stores and market expansion
are the primary drivers behind AutoChina’s sales.”
2011 First Quarter Financial Review
- The Company reported revenues for the
2011 first quarter of $136.2 million, a 12.8% increase from $120.7
million in the first quarter of 2010. The Company reported $116.6
million in commercial vehicle revenues; $19.6 million, or 14.4% of
revenues, in finance and insurance revenues; with no revenues from
agency services rendered to related parties.
- Gross margin increased to 17.1% for the
three months ended March 31, 2011, from 13.1% for the prior-year
period. The increase was largely due to a higher number of
outstanding leases, which, in turn, increased the contribution from
finance and insurance income throughout the term of the loans
provided to AutoChina’s customers. As a result, finance and
insurance revenues have increased as a percentage of revenues for
the past five quarters. The Company’s additional financing
services, specifically the higher-margin tire and diesel financing
services, also contributed to the increased margin.
- The Company reported net income for the
first quarter of 2011 of $10.0 million, or $0.50 per diluted share
based on 20.1 million weighted average diluted shares outstanding,
a 60.1% increase from net income of $6.2 million, or $0.33 per
diluted share based on 18.7 million diluted shares outstanding, in
the prior-year period.
- Adjusted EBITDA for the quarter ended
March 31, 2011, increased to $18.2 million from $12.5 million in
the prior-year period. A table reconciling Adjusted EBITDA to net
income can be found at the end of this press release.
Balance Sheet Highlights
At March 31, 2011, AutoChina’s cash and cash equivalents (not
including restricted cash) were $86.1 million, working capital was
$132.1 million, total debt was $324.1 million (including due to
affiliates), and stockholders’ equity was $242.0 million, compared
to $30.9 million, $128.2 million, $253.5 million, and $229.9
million, respectively, at December 31, 2010.
Lease Securitization Program and Bank Financing
Since November 2010, AutoChina has begun securitizing a portion
of its commercial vehicle leases through a partnership with CITIC
Trust Co. Ltd. Under this lease securitization program, up to RMB60
million, or $9.1 million, of AutoChina’s commercial truck leases
will be securitized and sold to investors each month through CITIC
Trust.
As of March 31, 2011, the Company had short-term borrowings of
$156.1 million, including $117.5 million in loans from various
Chinese banks and $38.6 million in lease securitization borrowings.
In addition, the Company also had long-term borrowings of $42.7
million from a Chinese bank. The Company’s total borrowings have a
blended interest rate of 6.88% per annum.
Company Launches Used Commercial Vehicle Sale-Leaseback
Program
In September 2010, AutoChina began market trials leasing used
commercial vehicles. Since then the Company has formalized its used
commercial vehicles leasing program, which leverages its existing
business model and store network. AutoChina provides this valuable
service to both former and new AutoChina customers, allowing them
to place the vehicles that they own outright into a sale-leaseback
program. The resulting lease is structured similarly to those that
AutoChina provides to customers purchasing new heavy trucks.
Customers in the sale-leaseback program also have access to all of
AutoChina’s value-added services. AutoChina evaluates applicants of
this new program with its existing strict credit procedures and
implements highly conservative loan-to-values (LTVs) to further
mitigate its risk exposure.
Mr. Li concluded, “We continue to focus on methods to further
evolve our business. We feel that our existing store network and
financing structure can be easily scaled and adapted to other
areas, namely used commercial trucks through a sale-leaseback
program. This program will allow new and existing AutoChina
customers who need to generate funding quickly to pay the
sale-leaseback over time and better manage their cash flow. We also
expect to conduct certain smaller-scale testing trials in the
coming weeks, applying our financing program and services to other
asset classes where there is a need, such as cement mixers, cranes,
other construction equipment, or even large-scale medical
equipment. We believe that this added option will prove valuable to
a new customer base, and we look forward to keeping shareholders
apprised of our progress.”
Outlook for 2011
AutoChina reiterates its previously announced financial guidance
for 2011. The Company believes revenue from its commercial vehicle
sales, servicing, leasing and support business will be between $900
million and $950 million and net income between $52 million and $57
million.
Estimated Financial Results
(unaudited) ($ in millions)
For the year ended For the year ended December 31, 2011 December
31, 2010 Percent Gain Total Revenue $900 - $950 $622.1 44.7% -
52.7% Net Income $52 - $57 $37.5 38.7% - 52.0%
Conference Call Information
AutoChina’s CFO, Jason Wang, will discuss these results in a
conference call (with accompanying presentation) later this morning
(June 6, 2011) at 10:00 a.m. Eastern Time. The dial-in numbers
are:
(877) 407-8033 (U.S.)(201) 689-8033 (International)
The call will also be simultaneously broadcast over the
Internet. To listen to the live webcast, please go to the Company’s
investor relations site, http://www.autochinaintl.com, or click the
below conference call link:
http://www.investorcalendar.com/IC/CEPage.asp?ID=164283. The
Company will also have an accompanying slide presentation available
in PDF format 30 minutes prior to the conference call at the
“Investor Relations” section of the AutoChina website.
Additional Information Available in Filing on Form
6-K
Additional information with respect to the Company, including
more detailed information with respect to the Company’s March 31,
2011, financial statements, will be available on Form 6-K, which
the Company will file with the Securities and Exchange Commission
today (June 6, 2011) and will be available without charge at
www.sec.gov.
About AutoChina International Limited
AutoChina International Limited is China’s largest one-stop
commercial vehicle sales, servicing, leasing and support network.
AutoChina’s operating subsidiary was founded in 2005 by Chairman
and CEO, Yong Hui Li, a nationally recognized entrepreneur in
China. The Company owns and operates 333 commercial vehicle
financing centers in China; and primarily provides sales-type,
lease-to-own loans 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” or
“heavy truck” 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
INCOME (Unaudited)
(in thousands except share and per share
data)
Three months ended March 31, 2011 2010
Revenues Commercial vehicles
$
116,642 $ 110,498 Finance and insurance 19,591 9,607 Agency
revenue, related parties — 627 Total revenues
136,233 120,732
Cost of sales
Commercial vehicles 32,130 24,578 Commercial vehicles, related
parties 80,868 80,303 Total 112,998
104,881
Gross profit 23,235
15,851 Operating expenses Selling and
marketing 1,746 1,215 General and administrative 5,149 3,224
Interest expense 3,323 1,612 Interest expense - related parties 643
1,646 Other income, net (600 ) (121 ) Total
operating expenses 10,261 7,576
Income from operations 12,974 8,275 Other income
(expense), net Interest income 23 413
Income from operations before income taxes 12,997 8,688
Income tax provision 2,999 2,442
Net
income
$
9,998 $ 6,246
Earnings (loss) per share
Basic
$
0.51
$
0.43
Diluted
$
0.50
$
0.33
Weighted average shares outstanding
Basic
19,615,766
14,614,434
Diluted
20,121,712
18,702,904
AUTOCHINA INTERNATIONAL LIMITED AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in thousands except share and per share
data)
March 31, December 31, 2011 2010 (unaudited) (unaudited)
ASSETS Current assets Cash and cash equivalents $ 86,088 $
30,931 Accounts receivable, net of provision for doubtful debts of
$1,740 and $1,464, respectively 26,311 22,101 Inventories 1,079
1,412 Deposits for inventories 970 1,003 Prepaid expenses and other
current assets 12,850 17,113 Prepaid expenses, related parties 9
604 Current maturities of net investment in sales-type leases, net
of provision for doubtful debts of $735 and $281, respectively
305,757 282,108 Deferred income tax assets 1,174 618
Total current assets 434,238 355,890 Property, equipment and
leasehold improvements, net 2,818 2,669 Deferred income tax assets
420 64 Net investment in sales-type leases, net of current
maturities 150,081 142,005 Total assets $
587,557 $ 500,628
LIABILITIES AND SHAREHOLDERS’
EQUITY Current liabilities Short-term borrowings $ 156,076 $
117,485 Accounts payable 1,284 911 Accounts payable, related
parties 57,467 16,202 Other payables and accrued liabilities 9,586
7,425 Due to affiliates 67,813 77,295 Customer deposits 2,287 1,198
Income tax payable 4,611 7,147 Deferred income tax liabilities
3,026 — Total current liabilities 302,150 227,663
Long term debt Deferred income tax liabilities 397 614 Other
long-term liabilities 286 — Long-term borrowings 42,706
42,485 Total liabilities 345,539 270,762
Commitment and Contingency
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 – 19,615,766
shares and 19,615,766 shares at March 31, 2011 and December 31,
2010, respectively
20 20 Additional paid-in capital 170,809 169,842 Retained earnings
62,435 52,437 Accumulated other comprehensive income 8,754
7,567 Total shareholders’ equity 242,018
229,866 Total liabilities and shareholders’ equity $ 587,557
$ 500,628
AUTOCHINA INTERNATIONAL LIMITED AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS (Unaudited)
(in thousands)
Three months ended March 31, 2011 2010
Cash
flow from operating activities: Net income $ 9,998 $
6,246 Adjustments to reconcile net income attributable to
shareholders to net cash used in operating activities: Depreciation
and amortization 306 215 Provision for bad debts 730 206 Deferred
income taxes 1,889 1,748 Stock-based compensation expenses 967 735
Changes in operating assets and liabilities, net of
acquisitions and divestitures: Accounts receivable (4,354) (369 )
Note receivable — (1,120 ) Net investment in sales-type leases
(29,577) (54,831 ) Inventories 339 (465 ) Deposits for inventories
38 9,276 Prepaid expense and other current assets (4,666) (532 )
Trade notes payable — (12,450 ) Accounts payable 367 (961 ) Other
long-term liabilities 285 — Other payable and accrued liabilities
2,113 541 Customers deposits 1,078 1,720 Income tax payable
(2,562) (179 )
Net cash used in operating
activities (23,049) (50,220 )
Cash flow
from investing activities: Purchase of property,
equipment and leasehold improvements (440) (319 ) Increase in
restricted cash — (2,664 ) Decrease in security deposits
9,000 —
Net cash provided by (used in) investing
activities 8,560 (2,983 )
AUTOCHINA INTERNATIONAL LIMITED AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS (Unaudited) – Continued
(in thousands)
Three months ended March 31, 2011 2010
Cash flow from financing activities: Proceeds from
borrowings 73,198 50,982 Repayments of borrowings (35,388) (8,788 )
Proceeds from affiliates 61,570 — Repayment to affiliates (71,414)
(9,479 ) Proceeds from accounts payable, related parties 80,857
2,281 Repayment to accounts payable, related parties (39,258) —
Issue of shares on exercise of warrants — 10,296 Issue of shares
for cash, net of offering costs of $3,680 — 66,320
Net cash provided by financing activities
69,565 111,612
Net cash provided by operating,
financing and investing activities 55,076 58,409
Effect of foreign currency translation on cash
81 (7 )
Net increase in cash and cash
equivalents 55,157 58,402
Cash and cash equivalents,
beginning of the period 30,931 36,768
Cash and cash equivalents, end of the period 86,088
95,170
Supplemental disclosure of cash flow
information: Interest paid $ 2,453 $ 3,665 Income taxes paid $
3,639 $ 3,380
A reconciliation of Adjusted EBITDA to net income is provided
below:
Three months ended March 31, 2011 2010
(Table in
000s) Net income $ 9,998
$ 6,246 Interest
expenses 3,966 3,258 Interest income (23) (413) Income tax
provision 2,999 2,442 Stock-based compensation 967 735 Depreciation
and amortization 306 215
Adjusted EBITDA $ 18,213
$ 12,483
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 stock-based compensation and
accretion of stock repurchase obligations. 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.
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