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AutoChina International Reports 2013 Third Quarter and Nine Months Financial Results, Commercial Vehicle Revenues Increase of 204%

SHIJIAZHUANG, CHINA -- (Marketwired) -- 12/13/13 -- AutoChina International Limited ("AutoChina" or the "Company") (OTCBB: AUTCF), China's largest commercial vehicle sales, servicing, leasing, and support network, today reported financial results for the third quarter and nine months ended September 30, 2013.

Operational Highlights

  • 3,166 commercial vehicles leased in third quarter of 2013, a 174.4% increase from 1,154 in prior-year period
  • During the 2013 third quarter, the Company established four additional commercial vehicle financing and service centers, and closed one of its centers in Jiangsu province. As of September 30, 2013, AutoChina operated 538 financing and service centers in 26 provinces.

Q3 2013 Financial Highlights (comparisons are year over year)

  • Total revenues of $176.4 million, up 140.6% from $73.3 million, largely due to the increase in new commercial vehicle leases initiated during Q3 2013
  • Gross profit of $18.6 million, compared to $21.8 million, primarily as a result of the significantly larger number of new trucks purchased for leases initiated during Q3 2013, which have a relatively low margin, while finance income, which is relatively high margin, contributed a greater percentage of revenues in Q3 2012
  • Net income of $3.3 million, or $0.14 per diluted share, compared to $4.5 million, or $0.19 per diluted share
  • Adjusted EBITDA of $8.3 million, compared to $11.9 million

Nine Months 2013 Financial Highlights (comparisons are year over year)

  • Total revenues of $419.8 million, up 49.3% from $281.2 million
  • Gross profit of $51.0 million, compared to $71.6 million
  • Net income of $8.0 million, compared to $21.0 million
  • Adjusted EBITDA of $22.5 million, compared to $43.5 million

Operational and Market Review
Mr. Yong Hui Li, Chairman and CEO of AutoChina, stated, "We continue to see steadily improving conditions in our marketplace. We had our second consecutive quarter of strong lease growth during the 2013 third quarter, and the increased revenues for the period will provide substantial earnings from finance margin over the coming quarters. We continued to keep our default rate stable during the decline in the market cycle and now intend to place our focus on expansion and growth. According to the China Association of Automobile Manufacturers, sales of commercial vehicles in China were up 7.38% to 3.36 million units during the first 10 months of 2013. We continue to operate in the largest global market according to a recent global market report by AlixPartners, as China produced 33% of all commercial trucks built worldwide last year (by comparison North American comprised 18%), and sales of commercial trucks are expected to improve by approximately 7% year-over-year to 995,000 units in 2013. We intend to leverage the infrastructure AutoChina invested in during the recent downward economic cycle in our industry and are optimistic about our prospects in the coming quarters."

Heavy Truck Sales
The Company announced that it recorded 3,166 new leases of commercial vehicles (primarily Class 8 heavy trucks) as part of the Company's sales-type leasing program in the third quarter of 2013, an increase of 174.4% compared to 1,154 in the third quarter of 2012.

At September 30, 2013, the Company had 13,311 leased vehicles under its sales-type leasing program. AutoChina believes that China's heavy truck industry has begun showing signs of recovery throughout the year, as both output and sales volume have begun to stabilize. Through the first nine months of 2013, the Company recorded 7,612 new leases, a 66.6% increase from 4,569 trucks leased in the prior-year period. An additional 43 trucks were leased under AutoChina's used commercial vehicle sale-leaseback program during the third quarter of 2013, compared to 201 in the prior-year period.

Since launching its commercial vehicle sales and leasing business in March 2008, the Company has leased over 45,000 trucks.

Expansion of Specialty Finance Store Network
During the 2013 third quarter, the Company established four additional commercial vehicle financing and service centers, one in Sichuan province, two in Yunnan province, and one in Fujian province. The Company also closed one of its centers in Jiangsu province. As of September 30, 2013, AutoChina operated 538 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.

Financial Review

2013 Third Quarter

Revenues

  • Total revenues for the third quarter ended September 30, 2013, were $176.4 million, a 140.6% increase from $73.3 million in the prior-year period.


----------------------------------------------------------------------------
(in thousands)      Three months ended    Three months ended
                    September 30, 2013    September 30, 2012
----------------------------------------------------------------------------
                                                                  YoY %
                   Amount  % of Revenue   Amount % of Revenue     Change
----------------------------------------------------------------------------
Commercial
 vehicles         $159,542         90.5%  52,485         71.6%       204.0%
----------------------------------------------------------------------------
Finance             10,576          6.0%  16,381         22.3%       (35.4)%
----------------------------------------------------------------------------
Insurance            6,029          3.4%   4,448          6.1%        35.5%
----------------------------------------------------------------------------
Rent and property
 management            242          0.1%      --          0.0%       100.0%
----------------------------------------------------------------------------
Total revenues    $176,389        100.0%  73,314        100.0%       140.6%
----------------------------------------------------------------------------


  • Commercial vehicle revenues increased 204.0% to $159.5 million from $52.5 million in the prior-year period, primarily as a result of the increase in new leases initiated during the period. The increase in commercial vehicle revenues was also a result of an increase in average price per vehicle, from $45,500 per vehicle in the 2012 third quarter to $50,400 per vehicle in the 2013 third quarter.
  • The Company reported finance revenue of $10.6 million, or 6.0% of total revenues, during the third quarter of 2013, compared to $16.4 million in the prior-year period, as a result of the decrease in the total outstanding number of commercial vehicle sales, servicing, leasing and support contracts in effect and a decrease in the effective interest rate on leases during the three months ended September 30, 2013, compared to the third quarter of 2012.
  • Once a lease term ends, a customer can elect to continue to participate in AutoChina's service and support network, and the Company will charge service and support fees on a monthly basis when the services are rendered. As of September 30, 2013, owners of 1,501 vehicles continued to pay for services after the termination of the direct financing and sales-type lease, representing a retention rate of approximately 5.0%.
  • The Company launched its own insurance agency business in December 2011 and has signed agreements with seven major insurance carriers in China. All of AutoChina's branch locations are each licensed to sell insurance from these carrier partners. The Company's insurance related revenue increased 35.5% to $6.0 million during the period from $4.4 million in the prior-year period.
  • Rent and property management revenue from the Company's newly commenced office leasing business totaled $242,000. The office leasing business did not exist in the prior-year period.

Gross Profit/Margin

  • Cost of sales during the period totaled $157.8 million, compared to $51.5 million in the prior-year period, as a result of the increased number of leases initiated.
  • Gross profit was $18.6 million in the three months ended September 30, 2013, compared to $21.8 million in the prior-year period.
  • Gross margin decreased to 10.6% for the three months ended September 30, 2013, from 29.7% in the prior-year period, primarily due to the significantly higher number of new leases established during the period, which increased the revenue contributions from the lower-margin initial establishment of new leases relative to the higher-margin monthly amortized finance income.
  • AutoChina expects margins to improve as these new leases generate finance income over the next two years, increasing the percentage of revenues from finance and insurance income.

Net Income

  • Net income in the three months ended September 30, 2013, was $3.3 million, or $0.14 per diluted share based on 23.6 million diluted weighted average shares outstanding, compared to $4.5 million, or $0.19 per share based on 23.5 million diluted weighted average shares outstanding, in the three months ended September 30, 2012.

Adjusted EBITDA

  • Adjusted EBITDA, which is EBITDA excluding stock-based compensation and accretion of stock repurchase obligation, was $8.3 million for the quarter ended September 30, 2013, compared to $11.9 million in the prior-year quarter.

See "Non-GAAP Financial Measures" below for a description of Adjusted EBITDA.

Nine Months 2013

  • Revenues for the nine months ended September 30, 2013, were $419.8 million, a 49.3% increase from $281.2 million in the prior-year period. The Company reported $373.2 million in commercial vehicle revenues, and $46.6 million in revenues related to finance, insurance, and real estate.

  • Gross profit for the nine months ended September 30, 2013, was $51.0 million, representing gross margin of 12.1%, a decrease from gross margin of 25.5% for the same period in 2012, which is primarily due to reasons stated in the 2013 third quarter financial review.

  • Net income for the nine months ended September 30, 2013, was $8.0 million, or $0.34 per share based on 23.7 million diluted weighted average shares outstanding, compared to $21.0 million, or $0.89 per share based on 23.7 million diluted weighted average shares outstanding, in the prior-year period.

  • Adjusted EBITDA for the nine months ended September 30, 2013, was $22.5 million, compared to $43.5 million in the prior-year period.

Balance Sheet Highlights
At September 30, 2013, AutoChina's cash and cash equivalents (not including restricted cash) were $9.5 million, working capital was $66.9 million, total debt was $155.2 million (including due to affiliates and accounts payable, related parties), and stockholders' equity was $245.4 million, compared to $75.8 million, $105.4 million, $170.3 million, and $228.4 million, respectively, at December 31, 2012.

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 September 30, 2013, the Company owned and operated 538 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 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,
                             ----------------------  ----------------------
                                2013        2012        2013        2012
                             ----------  ----------  ----------  ----------

Revenues
  Commercial vehicles        $  159,542  $   52,485  $  373,216  $  214,221
  Finance                        10,576      16,381      31,356      56,659
  Insurance                       6,029       4,448      15,034      10,323
  Property lease and
   management                       242          --         242          --
                             ----------  ----------  ----------  ----------
    Total revenues              176,389      73,314     419,848     281,203
                             ----------  ----------  ----------  ----------

Cost of sales
  Commercial vehicles             2,797       1,508       7,254       6,082
  Commercial vehicles,
   related parties              153,190      49,233     358,146     202,212
  Insurance                         985         794       2,663       1,265
  Property lease and
   management                       806          --         806          --
                             ----------  ----------  ----------  ----------
    Total cost of sales         157,778      51,535     368,869     209,559
                             ----------  ----------  ----------  ----------

Gross profit                     18,611      21,779      50,979      71,644
                             ----------  ----------  ----------  ----------

Operating (income) expenses
  Selling and marketing           2,559       2,660       7,380       7,511
  General and administrative     12,453      13,689      35,697      30,634
  Interest expense                1,771       2,011       5,220       8,782
  Interest expense, related
   parties                          614         174         991         685
  Other income, net              (3,294)     (4,044)     (9,934)     (4,934)
                             ----------  ----------  ----------  ----------
    Total operating expenses     14,103      14,490      39,354      42,678
                             ----------  ----------  ----------  ----------

Income from operations            4,508       7,289      11,625      28,966
                             ----------  ----------  ----------  ----------

Other income
  Interest income                   148          74         375         226
                             ----------  ----------  ----------  ----------
    Other income                    148          74         375         226
                             ----------  ----------  ----------  ----------

Income before income taxes        4,656       7,363      12,000      29,192

Income tax provision             (1,392)     (2,837)     (3,963)     (8,240)
                             ----------  ----------  ----------  ----------

Net income                        3,264       4,526       8,037      20,952
Foreign currency translation
 adjustment                       1,400      (1,651)      6,410      (2,082)
                             ----------  ----------  ----------  ----------

Comprehensive income         $    4,664  $    2,875  $   14,447  $   18,870
                             ==========  ==========  ==========  ==========
Earnings per share
  Basic                      $      0.14 $      0.19 $      0.34 $      0.89
                             =========== =========== =========== ===========
  Diluted                    $      0.14 $      0.19 $      0.34 $      0.89
                             =========== =========== =========== ===========


Dividend declared per share  $        -- $        -- $        -- $      0.25
                             =========== =========== =========== ===========
Weighted average shares
 outstanding
  Basic                       23,542,468  23,538,919  23,540,106  23,538,919
                             =========== =========== =========== ===========
  Diluted                     23,560,402  23,538,919  23,740,298  23,658,660
                             =========== =========== =========== ===========




              AUTOCHINA INTERNATIONAL LIMITED AND SUBSIDIARIES
                    CONDENSED CONSOLIDATED BALANCE SHEETS
               (in thousands except share and per share data)

                                                September 30,  December 31,
                                                    2013           2012
                                               -------------- --------------
                                                 (unaudited)
ASSETS
Current assets
  Cash and cash equivalents                    $        9,529 $       75,777
  Restricted cash                                         979            160
  Accounts receivable, net of provision for
   doubtful debts of $18,739 and $12,041
   respectively                                        33,580         32,956
  Inventories                                           5,482          6,728
  Deposits for inventories                                 64             20
  Prepaid expenses and other current assets             5,804          4,512
  Current maturities of net investment in
   direct financing and sales-type leases, net
   of provision for doubtful debts of $448 and
   $296, respectively                                 201,901        196,213
  Deferred income tax assets                            4,100             --
                                               -------------- --------------
    Total current assets                              261,439        316,366

Construction in progress                                   --         76,669
Property, equipment and leasehold
 improvements, net                                     82,328          4,985
Deferred income tax assets                              4,304          2,547
Net investment in direct financing and sales-
 type leases, net of current maturities                93,163         38,739
                                               -------------- --------------

    Total assets                               $      441,234 $      439,306
                                               ============== ==============

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 $76,448 and $75,412 as of
   September 30, 2013 and December 31, 2012,
   respectively)                               $      112,232 $      102,458
  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, 2013 and December 31, 2012,
   respectively)                                        1,388             --
  Accounts payable (including accounts payable
   of the consolidated VIEs without recourse
   to AutoChina of $5,450 and $68 as of
   September 30, 2013 and December 31, 2012,
   respectively)                                       10,342         16,392
  Accounts payable, related parties (including
   accounts payable of the consolidated VIEs
   without recourse to AutoChina of nil and
   $706 as of September 30, 2013 and December
   31, 2012, respectively)                                367          2,228
  Other payables and accrued liabilities
   (including other payables and accrued
   liabilities of the consolidated VIEs
   without recourse to AutoChina of $10,362
   and $4,857 as of September 30, 2013 and
   December 31, 2012, respectively)                    20,622         15,049
  Due to affiliates (including due to
   affiliates of the consolidated VIEs without
   recourse to AutoChina of nil and $86 as of
   September 30, 2013 and December 31, 2012,
   respectively)                                       41,171         65,595
  Customer deposits (including customer
   deposits of the consolidated VIEs without
   recourse to AutoChina of $414 and $161 as
   of September 30, 2013 and December 31,
   2012, respectively)                                  2,664          1,956
  Income tax payable (including income tax
   payable of the consolidated VIEs without
   recourse to AutoChina of $3,894 and $1,931
   as of September 30, 2013 and December 31,
   2012, respectively)                                  5,754          2,551




              AUTOCHINA INTERNATIONAL LIMITED AND SUBSIDIARIES
             CONDENSED CONSOLIDATED BALANCE SHEETS - Continued
               (in thousands except share and per share data)

                                           September 30,     December 31,
                                               2013              2012
                                         ----------------  ----------------
                                            (unaudited)

Deferred income tax liabilities
 (including deferred income tax
 liabilities of the consolidated VIEs
 without recourse to AutoChina of nil
 and nil as of September 30, 2013 and
 December 31, 2012, respectively)                      --             4,717
                                         ----------------  ----------------
Total current liabilities                         194,540           210,946
                                         ----------------  ----------------

Noncurrent liabilities
Long-term payables (including long-term
 payables of the consolidated VIEs
 without recourse to AutoChina of nil
 and nil as of September 30, 2013 and
 December 31, 2012, respectively)                   1,250                --

Total liabilities                                 195,790           210,946

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 - 100,000,000 shares;
   issued and outstanding - 23,545,939
   shares at September 30, 2013 and
   December 31, 2012, respectively                     24                24
  Additional paid-in capital                      326,493           323,856
  Statutory reserves                               16,997            16,997
  Accumulated losses                             (127,450)         (135,487)
  Accumulated other comprehensive income           29,380            22,970
                                         ----------------  ----------------
  Total shareholders' equity                      245,444           228,360
                                         ----------------  ----------------

    Total liabilities and shareholders'
     equity                              $        441,234  $        439,306
                                         ================  ================




              AUTOCHINA INTERNATIONAL LIMITED AND SUBSIDIARIES
        CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
                               (in thousands)

                                            Nine Months Ended September 30,
                                           --------------------------------
                                                 2013             2012
                                           ---------------  ---------------


Net cash (used in) provided by operating
 activities                                $       (41,994) $       200,048
                                           ---------------  ---------------

Cash flow from investing activities:
  Capital expenditure on construction in
   progress                                             --          (75,838)
  Purchase of property, equipment and
   leasehold improvements                           (8,755)          (2,275)
  Repayment (borrowing) of due from an
   affiliate                                            --            7,886
                                           ---------------  ---------------

Net cash used in investing activities               (8,755)         (70,227)
                                           ---------------  ---------------

Cash flow from financing activities:
  Proceeds from borrowings                         121,546           86,933
  Repayments of borrowings                        (111,572)        (186,065)
  Proceeds from affiliates for debt                  7,682          128,145
  Repayment to affiliates                          (32,620)        (130,314)
  Increase in accounts payable, related
   parties                                         358,146          202,124
  Repayment to accounts payable, related
   parties                                        (360,035)        (196,981)
  Dividend paid                                         --           (5,885)
  Capital distribution                                  --          (29,285)
                                           ---------------  ---------------

Net cash provided by used in financing
 activities                                        (16,853)        (131,328)
                                           ---------------  ---------------

Net cash used in operating, investing and
 financing activities                              (67,602)          (1,507)
                                           ---------------  ---------------

Effect of foreign currency translation on
 cash and cash equivalents                           1,354              263
                                           ---------------  ---------------

Net decrease in cash and cash equivalents          (66,248)          (1,244)

Cash and cash equivalents, beginning of
 the period                                         75,777           43,048
                                           ---------------  ---------------

Cash and cash equivalents, end of the
 period                                    $         9,529  $        41,804
                                           ===============  ===============

Supplemental disclosure of cash flow
 information:
  Interest paid                            $         6,399  $        13,346
                                           ===============  ===============
  Income taxes paid                        $        11,332  $         8,215
                                           ===============  ===============




                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,

                                    2013       2012       2013       2012
                                 ---------  ---------  ---------  ---------

Net income attributable to
 shareholders                    $   3,264  $   4,526  $   8,037  $  20,952

Interest expenses                    2,385      2,185      6,211      9,467

Interest income                       (148)       (74)      (375)      (226)

Income tax provision                 1,392      2,837      3,963      8,240

Stock-based compensation                 -      1,979      1,941      3,627

Depreciation & Amortization          1,385        492      2,727      1,411
                                 ---------  ---------  ---------  ---------

Adjusted EBITDA                  $   8,278  $  11,945  $  22,504  $  43,471
                                 =========  =========  =========  =========


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 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 therein. 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, 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 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.

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