SHIJIAZHUANG, CHINA -- (Marketwired) -- 12/22/14 -- AutoChina International Limited ("AutoChina" or the "Company") (
Q3 2014 Operational Highlights
Q3 2014 Financial Highlights (comparisons are year over year)
Nine Months 2014 Financial Highlights (comparisons are year over year)
Management Comments
Mr. Yong Hui Li, Chairman and CEO of AutoChina, stated, "We continue to be pleased with the steady growth in our truck-leasing business. The 2014 third quarter was the first full quarter in which our new peer stores business operated, and it was a significant contributor to our total number of commercial vehicles leased during the period. Our third quarter 2014 revenues were impacted by the significant portion of commercial vehicles leased through our peer stores business, which decreases the average price per vehicle as trucks leased through the peer stores typically are leased without a trailer while trucks leased directly through AutoChina's store network are usually leased with a trailer. We are pleased with the positive initial reception of our peer stores business and look forward to growing our network of peer stores in the coming months. In a highly fragmented market like China's heavy truck industry, we are confident in this strategy for expanding our customer base in China."
Mr. Li continued, "We also continue to explore ways in which we can better serve our customers, which led to our introduction of K-Pay, AutoChina's electronic payment platform, and K-Lend, a peer-to-peer lending platform. We understand that it can be very difficult for small business owners to receive a line of credit from a bank, or other traditional ways of financing a business. With K-Pay and K-Lend, we are hoping to fill our customers' needs and making it more convenient for them to operate their businesses with support from AutoChina and others within the transportation industry. We expect to launch both of these platforms before the end of 2014."
Operations - Heavy Truck Sales
The Company leased 3,409 commercial vehicles in the third quarter of 2014, compared to 3,166 in the prior-year period. Of the 3,409 vehicles leased during the 2014 third quarter, 1,254 trucks were leased through AutoChina's store network, and 2,155 trucks were leased through AutoChina's peer stores. At September 30, 2014, the Company had 20,932 leased vehicles under its sales-type leasing program.
During the quarter, the Company repossessed 91 vehicles whose lessees had defaulted on installment payments, sold 110 repossessed vehicles (repossessed in the quarter or in prior periods), and recorded seven vehicles as losses during the three months ended September 30, 2014. In comparison, there were 173 vehicles repossessed, 230 vehicles sold and 11 loss vehicles recorded in the quarter ended September 30, 2013.
Details of the vehicles leased are as follows:
Number of
Vehicles
Leased
------------
Balance at January 1, 2013 15,078
New leases recorded in the year ended December 31, 2013 11,902
Vehicles repossessed or loss to accident in 2013 (782)
Vehicles transferred to customers at the end of lease term in
2013 (11,203)
------------
Balance at December 31, 2013 14,995
New leases recorded in the nine months ended September 30,
2014 10,828
Vehicles repossessed or loss due to accident in the first nine
months of 2014 (545)
Vehicles returned to lessee upon settling the outstanding
installment 232
Vehicles transferred to customers at the end of lease term in
first nine months of 2014 (4,578)
------------
Balance at September 30, 2014 20,932
============
Operations - Expansion of Specialty Finance Store Network
During the third quarter of 2014, the Company established five additional commercial vehicle sales, servicing, leasing and support centers, one in Guangdong province, three in Guangxi province, and one in Guizhou province. The Company also closed five centers in the provinces of Hebei, Liaoning, Shanghai, and Zhejiang. As of September 30, 2014, AutoChina operated 554 financing and service centers in 26 provinces. The Company 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.
Launch of Peer Stores Business
During the second quarter of 2014, AutoChina began working with third-party commercial vehicle financing stores ("peer stores") to provide financing to their customers. The first two products to be offered are financing for new commercial vehicle purchases and financing for the insurance and taxes related to the purchase of a new commercial vehicle, which were launched in April 2014 and May 2014, respectively. The Company believes that by working with peer stores it can gain a much larger addressable customer base without investment in additional infrastructure. For example, there are currently over 2,400 peer stores participating in the program, which significantly expands AutoChina's reach beyond its own existing store network.
New Products - Electronic Payment Platform K-Pay and Peer-to-Peer Lending Platform K-Lend
AutoChina continues to make progress on the development of K-Pay, the electronic payment platform the Company announced in April 2014. K-Pay was developed to provide a convenient method for customers to make electronic payments and for the Company to make credit advances to its customers, allowing customers to pay for their everyday truck-operating needs at participating merchants within the K-Pay network. It is now undergoing trials with a group of more than 2,000 users.
The Company is also developing a new peer-to-peer lending platform called K-Lend, an online marketplace that is anticipated to provide short-term operating capital for small- to medium-sized businesses in the transportation industry. For example, it will allow individuals to purchase loans from their peers, such as AutoChina customers.
AutoChina expects to launch both K-Pay and K-Lend nationwide before the end of 2014.
Financial Review
2014 Third Quarter
Revenues
(in thousands)
Three months ended Three months ended
September 30, 2014 September 30, 2013
% of % of YoY %
Amount Revenue Amount Revenue Change
Commercial vehicles $ 159,795 88.9% $ 159,542 90.5% 0.2%
Finance 14,572 8.1% 10,576 6.0% 37.8%
Insurance 3,730 2.1% 6,029 3.4% (38.1)%
Property lease and
management 1,575 0.9% 242 0.1% 550.8%
---------- --------- ---------- --------- ---------
Total revenues $ 179,672 100.0% $ 176,389 100.0% 1.9%
Gross Profit/Margin
Net Income
Adjusted EBITDA
Nine Months 2014
Revenues
(in thousands)
Nine months ended Nine months ended
September 30, 2014 September 30, 2013
% of % of YoY %
Amount Revenue Amount Revenue Change
Commercial vehicles $ 533,430 90.2% $ 373,216 88.9% 42.9%
Finance 41,234 7.0% 31,356 7.5% 31.5%
Insurance 13,669 2.3% 15,034 3.6% (9.1)%
Property lease and
management 2,977 0.5% 242 0.1% 1130.2%
---------- --------- ---------- --------- ---------
Total revenues $ 591,310 100.0% $ 419,848 100.0% 40.8%
Gross Profit/Margin
Net Income
Adjusted EBITDA
See "Non-GAAP Financial Measures" below for a description of Adjusted EBITDA.
Balance Sheet Highlights
At September 30, 2014, AutoChina's cash and cash equivalents (not including restricted cash) were $20.7 million, working capital was $111.6 million, total debt was $327.0 million (including due to affiliates and accounts payable, related parties), and stockholders' equity was $256.1 million, compared to $31.4 million, $47.9 million, $295.0 million, and $252.8 million, respectively, at December 31, 2013.
The increase in total debt is largely due to increased financing to support the Company's increase in total number of sales-type leases. The Company also reported a 33.3% increase in current maturities of net investment in direct financing and sales-type leases during the period.
About AutoChina International Limited
AutoChina International Limited focuses on providing innovative financing solutions for China's transportation industry. Founded in 2005, we are China's largest commercial vehicle sales, servicing, leasing, and support network. As of September 30, 2014, the Company owned and operated 554 commercial vehicle financing centers in 26 provinces 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:
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 STATEMENT OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
(in thousands except share and per share data)
Three months ended Nine months ended
September 30, September 30,
------------------------ ------------------------
2014 2013 2014 2013
----------- ----------- ----------- -----------
Revenues
Commercial vehicles $ 159,795 $ 159,542 $ 533,430 $ 373,216
Finance 14,572 10,576 41,234 31,356
Insurance 3,730 6,029 13,669 15,034
Property lease and
management 1,575 242 2,977 242
----------- ----------- ----------- -----------
Total revenues 179,672 176,389 591,310 419,848
----------- ----------- ----------- -----------
Cost of sales
Commercial vehicles 14,010 2,797 32,096 7,254
Commercial vehicles,
related parties 143,189 153,190 489,825 358,146
Insurance 433 985 1,702 2,663
Property lease and
management 674 806 1,919 806
----------- ----------- ----------- -----------
Total cost of sales 158,306 157,778 525,542 368,869
----------- ----------- ----------- -----------
Gross profit 21,366 18,611 65,768 50,979
----------- ----------- ----------- -----------
Operating (income)
expenses
Selling and marketing 2,599 2,559 8,026 7,380
General and
administrative 11,227 12,453 35,833 35,697
Litigation expense -- -- 4,350 --
Interest expense 3,034 1,771 8,830 5,220
Interest expense,
related parties 3,505 614 8,154 991
Other income, net (3,429) (3,294) (8,376) (9,934)
----------- ----------- ----------- -----------
Total operating
expenses 16,936 14,103 56,817 39,354
----------- ----------- ----------- -----------
Income from operations 4,430 4,508 8,951 11,625
----------- ----------- ----------- -----------
Other income
Interest income 55 148 127 375
----------- ----------- ----------- -----------
Other income 55 148 127 375
----------- ----------- ----------- -----------
Income before income
taxes 4,485 4,656 9,078 12,000
Income tax provision 1,508 1,392 4,301 3,963
----------- ----------- ----------- -----------
Net income 2,977 3,264 4,777 8,037
=========== =========== =========== ===========
Foreign currency
translation adjustment 14 1,400 (2,656) 6,410
----------- ----------- ----------- -----------
Comprehensive income $ 2,991 $ 4,664 $ 2,121 $ 14,447
=========== =========== =========== ===========
Earnings per share
Basic $ 0.13 $ 0.14 $ 0.20 $ 0.34
=========== =========== =========== ===========
Diluted $ 0.13 $ 0.14 $ 0.20 $ 0.34
=========== =========== =========== ===========
Weighted average shares
outstanding
Basic 23,549,644 23,542,468 23,548,933 23,540,106
Diluted 23,703,997 23,560,402 23,787,245 23,740,298
AUTOCHINA INTERNATIONAL LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands except share and per share data)
September 30, December 31,
2014 2013
-------------- --------------
(unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 20,693 $ 31,370
Restricted cash 1,226 1,244
Accounts receivable, net of provision for
doubtful debts of $27,262 and $20,891 as
of September 30, 2014 and December 31,
2013, respectively 27,456 27,931
Inventories 3,806 5,319
Prepaid expenses and other current assets 5,143 5,261
Prepaid expenses, related parties 399 --
Other financing receivables, net of
provision for doubtful debts of $337 and
nil as of September 30, 2014 and December
31, 2013, respectively 21,140 --
Current maturities of long-term net
investment in direct financing and sales-
type leases, net of provision for doubtful
debts of $71 and $389 as of September 30,
2014 and December 31, 2013, respectively 314,715 261,684
Short-term net investment in sales-type
leases, net of provision for doubtful
debts of $531 and nil as of September 30,
2014 and December 31, 2013, respectively 34,029 --
Deferred income tax assets 7,903 5,515
-------------- --------------
Total current assets 436,510 338,324
Noncurrent assets
Property, equipment and leasehold
improvements, net 79,398 82,254
Deferred income tax assets 5,445 4,126
Long-term net investment in direct financing
and sales-type leases, net of current
maturities 85,120 128,415
-------------- --------------
Total assets $ 606,473 $ 553,119
============== ==============
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 $130,028 and
$124,654 as of September 30, 2014 and
December 31, 2013, respectively) $ 146,282 $ 160,737
Long-term borrowings, current portion
(including long-term borrowings, current
of the consolidated VIEs without recourse
to AutoChina of nil and nil as of
September 30, 2014 and December 31, 2013,
respectively) 2,438 --
Long-term payables, current portion
(including long-term payables, current of
the consolidated VIEs without recourse to
AutoChina of nil and nil as of September
30, 2014 and December 31, 2013,
respectively) 1,261 1,436
Accounts payable (including accounts
payable of the consolidated VIEs without
recourse to AutoChina of $270 and $93 as
of September 30, 2014 and December 31,
2013, respectively) 4,207 10,130
Accounts payable, related parties
(including accounts payable of the
consolidated VIEs without recourse to
AutoChina of $131,548 and $44,044 as of
September 30, 2014 and December 31, 2013,
respectively) 132,764 57,586
Other payables and accrued liabilities
(including other payables and accrued
liabilities of the consolidated VIEs
without recourse to AutoChina of $12,704
and $10,323 as of September 30, 2014 and
December 31, 2013, respectively) 16,924 17,146
Due to affiliates (including due to
affiliates of the consolidated VIEs
without recourse to AutoChina of $689 and
$86 as of September 30, 2014 and December
31, 2013, respectively) 13,511 38,143
Customer deposits (including customer
deposits of the consolidated VIEs without
recourse to AutoChina of $333 and $319 as
of September 30, 2014 and December 31,
2013, respectively) 3,876 1,680
Income tax payable (including income tax
payable of the consolidated VIEs without
recourse to AutoChina of $1,212 and $2,761
as of September 30, 2014 and December 31,
2013, respectively) 3,617 3,599
AUTOCHINA INTERNATIONAL LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS - Continued
(in thousands except share and per share data)
September 30, December 31,
2014 2013
------------- -------------
(unaudited)
Total current liabilities 324,880 290,457
------------- -------------
Noncurrent liabilities
Long-term borrowings (including long-term
borrowings of the consolidated VIEs without
recourse to AutoChina of nil and nil as of
September 30, 2014 and December 31, 2013,
respectively) 14,628 --
Long-term payables (including long-term
payables of the consolidated VIEs without
recourse to AutoChina of $10,892 and $8,955
as of September 30, 2014 and December 31,
2013, respectively) 10,892 9,857
------------- -------------
Total liabilities 350,400 300,314
------------- -------------
Commitments and Contingencies -- --
Shareholders' equity
Preferred shares, $0.001 par value
authorized - 1,000,000 shares; issued -
none -- --
Ordinary shares - $0.001 par value
authorized - 100,000,000 shares; issued and
outstanding - 23,549,644 shares at
September 30, 2014; and $0.001 par value
authorized - 100,000,000 shares; issued and
outstanding - 23,545,939 shares at December
31, 2013, respectively 24 24
Additional paid-in capital 328,778 327,631
Statutory reserves 22,947 22,947
Accumulated losses (124,832) (129,609)
Accumulated other comprehensive income 29,156 31,812
------------- -------------
Total shareholders' equity 256,073 252,805
------------- -------------
Total liabilities and shareholders' equity $ 606,473 $ 553,119
============= =============
AUTOCHINA INTERNATIONAL LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)
Nine Months Ended
September 30,
2014 2013
------------- -------------
Net cash used in operating activities $ (57,947) $ (41,994)
------------- -------------
Cash flow from investing activities:
Purchase of property, equipment and
leasehold improvements (6,645) (8,755)
------------- -------------
Net cash used in investing activities (6,645) (8,755)
------------- -------------
Cash flow from financing activities:
Proceeds from borrowings 186,944 121,546
Repayments of borrowings (183,853) (111,572)
Proceeds from affiliates for debt 51,464 7,682
Repayment to affiliates (75,777) (32,620)
Increase in accounts payable, related
parties 489,825 358,146
Repayment to related parties (414,050) (360,035)
------------- -------------
Net cash provided by (used in) financing
activities 54,553 (16,853)
------------- -------------
Net cash used in operating, investing and
financing activities (10,039) (67,602)
------------- -------------
Effect of foreign currency translation on cash
and cash equivalents (638) 1,354
------------- -------------
Net decrease in cash and cash equivalents (10,677) (66,248)
Cash and cash equivalents, beginning of the
period 31,370 75,777
------------- -------------
Cash and cash equivalents, end of the period $ 20,693 $ 9,529
============= =============
Supplemental disclosure of cash flow
information:
Interest paid $ 11,419 $ 6,399
============= =============
Income taxes paid $ 7,990 $ 11,332
============= =============
Non-GAAP Financial Measures ($ in thousands)
A reconciliation of Adjusted EBITDA to net income is provided below:
Three Months Ended Nine Months Ended
September 30, September 30,
2014 2013 2014 2013
-------- -------- -------- --------
Net income attributable to
shareholders $ 2,977 $ 3,264 $ 4,777 $ 8,037
Interest expenses 6,539 2,385 16,984 6,211
Interest income (55) (148) (127) (375)
Income tax provision 1,508 1,392 4,301 3,963
Stock-based compensation 276 695 1,147 2,636
Depreciation & Amortization 966 1,385 2,932 2,727
Litigation expense - - 4,350 -
-------- -------- -------- --------
Adjusted EBITDA $ 12,211 $ 8,973 $ 34,364 $ 23,199
======== ======== ======== ========
USE OF NON-GAAP MEASURES
AutoChina defines Adjusted EBITDA as net income before interest expense (income), income taxes, depreciation and amortization, as well as the exclusion of stock-based compensation and one-time litigation expenses. 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 associated therewith. For example, 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.
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 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 table above has more details on the reconciliations between GAAP financial measures that are most directly comparable to Non-GAAP financial measures.
At the Company
Jason Wang
Chief Financial Officer
(858) 997-0680
jcwang@kywmall.com
Investor Relations
The Equity Group Inc.
Carolyne Y. Sohn
Senior Associate
(415) 568-2255
csohn@equityny.com
Adam Prior
Senior Vice President
(212) 836-9606
aprior@equityny.com