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AutoChina International Reports 2013 Fourth Quarter and Year-End Financial Results, a 138% Increase in Commercial Vehicle Revenues in 2013

SHIJIAZHUANG, CHINA -- (Marketwired) -- 04/21/14 -- 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 fourth quarter and year ended December 31, 2013.

Operational Highlights

  • 4,290 commercial vehicles leased in fourth quarter of 2013, a 425.7% increase from 816 in prior-year period
  • 11,902 commercial vehicles leased in 2013, a 121.0% increase from 5,385 in 2012
  • During the 2013 fourth quarter, the Company established eight additional commercial vehicle financing and service centers. As of December 31, 2013, AutoChina operated 546 financing and service centers in 26 provinces.
  • Company announces development of two new products: 1) KyPay, a new form of electronic payment that offers its members a line of credit, and 2) TopAuto Net, a cloud-based e-commerce platform enabling transportation and logistics businesses in China to manage their operations online

Q4 2013 Financial Highlights (comparisons are year over year)

  • Total revenues of $238.3 million, up 359.0% from $51.9 million, largely due to the increase in new commercial vehicle leases initiated during Q4 2013
  • Gross profit of $22.5 million, up 31.1% from $17.2 million
  • Net income of $3.8 million, or $0.16 per diluted share, compared to $2.6 million, or $0.11 per diluted share
  • Adjusted EBITDA of $11.3 million, a 65.6% increase from $6.8 million

Full-year 2013 Financial Highlights (comparisons are year over year)

  • Total revenues of $658.1 million, up 97.6% from $333.1 million, largely due to the increase in new commercial vehicle leases initiated during 2013
  • Gross profit of $73.5 million, compared to $88.8 million, primarily as a result of the significantly larger number of new trucks purchased for leases initiated during 2013, which have relatively low margin, while finance income, which is relatively high margin, contributed a greater percentage of revenue in 2012
  • Net income of $11.8 million, or $0.50 per diluted share, compared to $23.5 million, or $0.99 per diluted share
  • Adjusted EBITDA of $33.8 million, compared to $50.3 million

Operational and Market Review
Mr. Yong Hui Li, Chairman and CEO of AutoChina, stated, "As we saw China's heavy truck industry begin to stabilize and recover over the course of 2013, we were able to capitalize on these improving market conditions and are very pleased to have achieved 121.0% year-over-year growth in commercial vehicle leases in 2013. The Company's revenues for the year nearly doubled to $658.1 million in 2013 as a result of the significant growth in new leases, which will continue to provide earnings and have a positive impact on margin as we collect finance income from these leases. According to the China Association of Automobile Manufacturers, sales of commercial vehicles in China saw year-over-year growth of 6.4%, to 4.06 million units in 2013, with heavy truck sales growing 21.7% year over year. 2013 marked the first year of growth in our industry since the declines experienced in 2011-2012. We anticipate growth in the heavy truck industry will remain steady in 2014 as China's economy and infrastructure continues to develop, and AutoChina will continue working to expand its specialty financing business by exploring new opportunities while providing quality service to its customers."

Heavy Truck Sales
The Company recorded 4,290 new leases of commercial vehicles (primarily Class 8 heavy trucks) as part of the Company's sales-type leasing program in the fourth quarter of 2013, an increase of 425.7% compared to 816 in the fourth quarter of 2012.

At December 31, 2013, the Company had 14,995 leased vehicles under its sales-type leasing program. AutoChina recorded 11,902 new leases in 2013, a 121.0% increase from 5,385 trucks leased in 2012. An additional 284 trucks were leased under AutoChina's used commercial vehicle sale-leaseback program during 2013, compared to 824 in the prior year.

Since launching its commercial vehicle sales and leasing business in March 2008, the Company has leased over 49,000 trucks.

Expansion of Specialty Finance Store Network
During the 2013 fourth quarter, the Company established eight additional commercial vehicle financing and service centers, one in Liaoning province, two in Sichuan province, one in Jiangsu province, two in Yunnan province, and two in Zhejiang province. As of December 31, 2013, AutoChina operated 546 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.

Development of New Products -- KyPay and TopAuto Net
The Company announced it is developing two new products that are expected to help the Company expand its business and further assist its customers with their everyday operational needs: 1) KyPay, a new form of electronic payment that offers its members a line of credit and 2) TopAuto Net, a cloud-based e-commerce platform enabling transportation and logistics businesses in China to manage their operations online.

KyPay is a solution whereby the Company will provide credit advances to its customers, allowing them to pay for their everyday truck-operating needs without the need to use cash up front. Based on AutoChina's proprietary methods to determine credit worthiness, KyPay will grant new members a credit line they can use for purchases at merchants that are part of the KyPay network. For example, a vehicle owner will be able to use KyPay to pay for purchases such as gas, parts, and repairs from merchants or other KyPay members. These merchants will then be able to withdraw the funds as cash or use them to pay for goods and services provided by other KyPay members. AutoChina plans to collect merchant fees for KyPay. Fees from customers are anticipated to apply only if customers carry a balance.

TopAuto Net will provide businesses in China's transportation industry with a powerful outsourced solution for managing their operations, as well as an opportunity to build an online presence and audience. TopAuto Net is a cloud-based e-commerce platform that will allow many traditional automotive operating and servicing businesses in China to manage their operations through customizable online information systems (i.e. CRM, ERP) without the need to acquire additional IT resources or hardware/software. AutoChina plans to charge a subscription fee for the use of TopAuto Net.

Financial Review

2013 Fourth Quarter

Revenues

  • Total revenues for the fourth quarter ended December 31, 2013, were $238.3 million, a 359.0% increase from $51.9 million in the prior-year period.


                       Three months ended     Three months ended
(in thousands)          December 31, 2013     December 31, 2012
                       ------------------     ------------------
                                   % of                   % of      YoY %
                         Amount   Revenue       Amount   Revenue   Change
                       --------- --------     --------- --------  --------
Commercial vehicles    $ 220,696     92.7%    $  34,819     67.1%    533.8%
                       --------- --------     --------- --------  --------
Finance                   12,029      5.0%       13,145     25.3%     (8.5)%
                       --------- --------     --------- --------  --------
Insurance                  5,296      2.2%        3,945      7.6%     34.2%
                       --------- --------     --------- --------  --------
Rent and property
 management                  259      0.1%           --      0.0%    100.0%
                       --------- --------     --------- --------  --------
Total revenues         $ 238,280    100.0%    $  51,909    100.0%    359.0%
                       --------- --------     --------- --------  --------

  • Commercial vehicle revenues increased 533.8% to $220.7 million from $34.8 million in the prior-year period, primarily as a result of the increase in new leases initiated during the 2013 fourth quarter. The increase in commercial vehicle revenues was also a result of an increase in average price per vehicle, from $45,000 per vehicle in the 2012 fourth quarter to $51,400 per vehicle in the 2013 fourth quarter.
  • The Company reported finance revenue of $12.0 million, or 5.0% of total revenues, during the fourth quarter of 2013, compared to $13.1 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 December 31, 2013, compared to the fourth 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 December 31, 2013, owners of 1,217 vehicles continued to pay for services after the termination of the direct financing and sales-type lease, representing a retention rate of approximately 3.7%.
  • 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 34.2% to $5.3 million during the period from $3.9 million in the prior-year period.
  • Rent and property management revenue from the Company's newly commenced office-leasing business totaled $259,000. This business did not exist in the prior-year period.

Gross Profit/Margin

  • Cost of sales during the period totaled $215.8 million, compared to $34.7 million in the prior-year period, as a result of the increased number of leases initiated.
  • Gross profit was $22.5 million in the three months ended December 31, 2013, a 31.1% increase from $17.2 million in the prior-year period.
  • Gross margin decreased to 9.4% for the three months ended December 31, 2013, from 33.1% 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.
  • As these new leases generate finance income over the next two years, they will have a positive impact on margins.

Net Income

  • Net income in the three months ended December 31, 2013, was $3.8 million, or $0.16 per diluted share based on 23.7 million diluted weighted average shares outstanding, compared to $2.6 million, or $0.11 per share based on 23.9 million diluted weighted average shares outstanding, in the three months ended December 31, 2012.

Adjusted EBITDA

  • Adjusted EBITDA, which is EBITDA excluding stock-based compensation, increased 65.5% to $11.3 million for the quarter ended December 31, 2013, compared to $6.8 million in the prior-year quarter.

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

Full-year 2013

Revenues

  • Total revenues for the year ended December 31, 2013, were $658.1 million, a 97.6% increase from $333.1 million in the prior year.


                           Year ended             Year ended
(in thousands)          December 31, 2013     December 31, 2012
                       -----------------------------------------
                                   % of                   % of      YoY %
                         Amount   Revenue       Amount   Revenue   Change
                       --------- --------     --------- --------  --------
Commercial vehicles    $ 593,912     90.2%    $ 249,090     74.8%    138.4%
                       --------- --------     --------- --------  --------
Finance                   43,385      6.6%       69,804     21.0%    (37.8)%
                       --------- --------     --------- --------  --------
Insurance                 20,330      3.1%       14,268      4.3%     42.5%
                       --------- --------     --------- --------  --------
Rent and property
 management                  501      0.1%           --      0.0%    100.0%
                       --------- --------     --------- --------  --------
Total revenues         $ 658,128    100.0%    $ 333,112    100.0%     97.6%
                       --------- --------     --------- --------  --------

  • Commercial vehicle revenues increased 138.4% to $593.9 million from $249.1 million in the prior year, primarily as a result of the increase in new leases initiated during 2013. An increase in average price per vehicle, from $46,200 per vehicle in 2012 to $49,900 per vehicle in 2013, also contributed to the growth in commercial vehicle revenues.
  • The Company reported finance revenue of $43.4 million, or 6.6% of total revenues, during 2013, compared to $69.8 million in the prior year, as a result of the decrease in the total outstanding number of commercial vehicle sales, servicing, leasing and support contracts in effect.
  • The Company's insurance-related revenue increased 42.5% to $20.3 million during 2013 from $14.3 million in 2012.
  • Rent and property management revenue from the Company's newly commenced office-leasing business totaled $501,000. This business did not exist during the year ended December 31, 2012.

Gross Profit/Margin

  • Gross profit for year ended December 31, 2013, was $73.5 million, representing gross margin of 11.2%, a decrease from gross margin of 26.7% in 2012, which is primarily due to reasons stated in the 2013 fourth quarter financial review.

Net Income

  • Net income for the year ended December 31, 2013, was $11.8 million, or $0.50 per share based on 23.8 million diluted weighted average shares outstanding, compared to $23.5 million, or $0.99 per share based on 23.8 million diluted weighted average shares outstanding, in the prior year.

Adjusted EBITDA

  • Adjusted EBITDA for the year ended December 31, 2013, was $33.8 million, compared to $50.3 million in the prior year.

Balance Sheet Highlights
At December 31, 2013, AutoChina's cash and cash equivalents (not including restricted cash) were $31.4 million, working capital was $47.9 million, total debt was $295.0 million (including due to affiliates and accounts payable, related parties), and stockholders' equity was $252.8 million, compared to $75.8 million, $105.4 million, $201.7 million, and $228.4 million, respectively, at December 31, 2012.

Mr. Li concluded, "As we enter 2014, we are excited to announce the launch of two new offerings for the commercial transportation and logistics industries. We believe KyPay and TopAuto Net will greatly enhance the value AutoChina brings to its customers and the industry at large as KyPay will provide its members with an advanced line of credit that functions as a cashless and secure payment solution while TopAuto Net will enable businesses to expand the scope of their operations through a modern, easy-to-use online platform. Customers will be able to readily communicate and transact with a growing network of merchants, while merchants will be able to market and sell their products and services to a large captive audience, with all transactions funneling through the KyPay payment system. We continue to work toward completing the development of KyPay and TopAuto Net and expect to launch these new products later this year."

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 December 31, 2013, the Company owned and operated 546 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
          CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME
               (in thousands except share and per share data)

                    Three months ended December
                                31,                Year ended December 31,
                    ---------------------------  --------------------------
                        2013           2012          2013          2012
                    ------------   ------------  ------------  ------------
                     (unaudited)    (unaudited)    (audited)     (audited)
Revenues
  Commercial
   vehicles         $    220,696   $     34,819  $    593,912  $    249,090
  Finance                 12,029         13,145        43,385        69,804
  Insurance                5,296          3,945        20,330        14,268
  Property lease
   and management            259              -           501             -
                    ------------   ------------  ------------  ------------
    Total revenues       238,280         51,909       658,128       333,112
                    ------------   ------------  ------------  ------------

Cost of sales
  Commercial
   vehicles                2,727          1,268         9,981         7,350
  Commercial
   vehicles,
   related parties       211,661         32,569       569,807       234,781
  Insurance                  822            894         3,485         2,159
  Property lease
   and management            554              -         1,360             -
                    ------------   ------------  ------------  ------------
    Total cost of
     sales               215,764         34,731       584,633       244,290
                    ------------   ------------  ------------  ------------

Gross profit              22,516         17,178        73,495        88,822
                    ------------   ------------  ------------  ------------

Operating (income)
 expenses
  Selling and
   marketing               2,882          2,615        10,262        10,126
  General and
   administrative         14,230         11,317        49,927        41,951
  Interest expense         2,406          1,839         7,626        10,621
  Interest expense,
   related parties           980            184         1,971           869
  Other income, net       (3,501)        (2,167)      (13,435)       (7,101)
                    ------------   ------------  ------------  ------------
    Total operating
     expenses             16,997         13,788        56,351        56,466
                    ------------   ------------  ------------  ------------

Income from
 operations                5,519          3,390        17,144        32,356
                    ------------   ------------  ------------  ------------

Other income
  Interest income             31             82           406           308
                    ------------   ------------  ------------  ------------
    Total other
     income                   31             82           406           308
                    ------------   ------------  ------------  ------------

Income before
 income taxes              5,550          3,472        17,550        32,664

Income tax
 provision                (1,759)          (875)       (5,722)       (9,115)
                    ------------   ------------  ------------  ------------

Net income                 3,791          2,597        11,828        23,549

Foreign currency
 translation
 adjustment                2,432         (2,484)        8,842           402
                    ------------   ------------  ------------  ------------

Comprehensive
 income             $      6,223   $      5,081  $     20,670  $     23,951
                    ============   ============  ============  ============

Earnings per share
  Basic             $       0.16   $       0.11  $       0.50  $       1.00
                    ============   ============  ============  ============
  Diluted           $       0.16   $       0.11  $       0.50  $       0.99
                    ============   ============  ============  ============

Weighted average
 shares outstanding
  Basic               23,545,939     23,538,919    23,540,761    23,538,919
                    ============   ============  ============  ============
  Diluted             23,740,298     23,538,919    23,806,194    23,762,378
                    ============   ============  ============  ============



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

                                                              December 31,
                                                           -----------------
                                                             2013     2012
                                                           -------- --------
ASSETS
Current assets
Cash and cash equivalents                                  $ 31,370 $ 75,777
Restricted cash                                               1,244      160
Accounts receivable, net of provision for doubtful
 accounts of $20,891 and $12,041, respectively               27,931   32,956
Inventories                                                   5,319    6,728
Prepaid expenses and other current assets                     5,261    4,532
Current maturities of net investment in direct financing
 and sales-type leases, net of provision for doubtful
 accounts of $389 and $296, respectively                    261,684  196,213
Deferred income tax assets                                    5,515       --
                                                           -------- --------
Total current assets                                        338,324  316,366

Construction-in-progress                                         --   76,669
Property, equipment and leasehold improvements, net          82,254    4,985
Deferred income tax assets                                    4,126    2,547
Net investment in direct financing and sales-type leases,
 net of current maturities                                  128,415   38,739
                                                           -------- --------

Total assets                                               $553,119 $439,306
                                                           ======== ========

LIABILITIES AND EQUITY

Current liabilities
Short-term borrowings (including short-term borrowings of
 the consolidated VIEs without recourse to AutoChina of
 $124,654 and $75,412 as of December 31, 2013 and 2012,
 respectively)                                             $160,737 $102,458
Long-term payables, current (including long-term payables,
 current of the consolidated VIEs without recourse to
 AutoChina of nil and nil as of December 31, 2013 and
 2012, respectively)                                          1,436       --
Accounts payable (including accounts payable of the
 consolidated VIEs without recourse to AutoChina of $93
 and $68 as of December 31, 2013 and 2012, respectively)     10,130   16,392
Accounts payable, related parties (including accounts
 payable, related parties of the consolidated VIEs without
 recourse to AutoChina of $44,044 and $706 as of December
 31, 2013 and 2012, respectively)                            57,586    2,228
Other payables and accrued liabilities (including other
 payables and accrued liabilities of the consolidated VIEs
 without recourse to AutoChina of $10,323 and $4,857 as of
 December 31, 2013 and 2012, respectively)                   17,146   15,049
Due to affiliates (including due to affiliates of the
 consolidated VIEs without recourse to AutoChina of
 $12,745 and $86 as of December 31, 2013 and 2012,
 respectively)                                               38,143   65,595
Customer deposits (including customer deposits of the
 consolidated VIEs without recourse to AutoChina of $319
 and $161 as of December 31, 2013 and 2012, respectively)     1,680    1,956
Income tax payable (including income tax payable of the
 consolidated VIEs without recourse to AutoChina of $2,761
 and $1,931 as of December 31, 2013 and 2012,
 respectively)                                                3,599    2,551
Deferred income tax liabilities (including deferred income
 tax liabilities of the consolidated VIEs without recourse
 to AutoChina of nil and nil as of December 31, 2013 and
 2012, respectively)                                             --    4,717
                                                           -------- --------
Total current liabilities                                   290,457  210,946

Noncurrent liabilities
Long-term payables (including long-term payables of the
 consolidated VIEs without recourse to AutoChina of $8,955
 and nil as of December 31, 2013 and 2012, respectively)      9,857       --
                                                           -------- --------
Total liabilities                                           300,314  210,946
                                                           -------- --------



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

                                                           December 31,
                                                       --------------------
                                                          2013       2012
                                                       ---------  ---------
Commitment and Contingencies

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 December 31, 2013, respectively;
 and $0.001 par value authorized - 100,000,000 shares;
 issued and outstanding - 23,538,919 shares at
 December 31, 2012, respectively                              24         24
Additional paid-in capital                               327,631    323,856
Statutory reserves                                        22,947     16,997
Accumulated losses                                      (129,609)  (135,487)
Accumulated other comprehensive income                    31,812     22,970
                                                       ---------  ---------
Total equity                                             252,805    228,360
                                                       ---------  ---------

Total liabilities and equity                           $ 553,119  $ 439,306
                                                       =========  =========



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

                                                      December 31,
                                            -------------------------------
                                               2013       2012       2011
                                            ---------  ---------  ---------

Cash flow from continuing operating
 activities:

Net income                                  $  11,828  $  23,549  $  25,151
Adjustments to reconcile net income to net
 cash provided by (used in) operating
 activities:
Net loss from discontinued operations              --         --        973
Loss on change in fair value of earn-out
 obligation                                        --         --     17,300
Depreciation and amortization                   3,289      1,902      1,420
Provision for bad debts                        18,886     14,550      4,271
Deferred income taxes                         (11,681)    (4,180)     6,261
Stock-based compensation expenses               3,775      4,553      2,914
Changes in operating assets and
 liabilities, net of acquisitions and
 divestitures:
Restricted cash                                (1,060)        --         --
Accounts receivable                           (12,832)   (22,331)    (5,997)
Net investment in direct financing and
 sales-type leases                           (145,392)   209,063      2,175
Inventories                                     1,594     (4,176)    (1,024)
Deposits for inventories, related party            --     14,515    (14,177)
Prepaid expense and other current assets         (576)     7,671     (2,588)
Accounts payable                                  874     15,922       (536)
Other payable and accrued liabilities           1,596      1,356      5,729
Customers deposits                               (332)       798       (100)
Income tax payable                                951       (254)    (4,568)
                                            ---------  ---------  ---------

Net cash (used in) provided by continuing
 operating activities                        (129,080)   262,938     37,204
                                            ---------  ---------  ---------

Cash flow from continuing investing
 activities:

Capital expenditure on construction in
 progress                                          --    (76,353)        --
Purchase of property, equipment and
 leasehold improvements                        (8,892)    (3,516)    (1,967)
Cash received from sales of subsidiaries           --         --      7,589
Increase in restricted cash                        --         --       (155)
Decrease in due from an affiliate                  --      7,891      9,000
                                            ---------  ---------  ---------

Net cash (used in) provided by continuing
 investing activities                          (8,892)   (71,978)    14,467
                                            ---------  ---------  ---------



              AUTOCHINA INTERNATIONAL LIMITED AND SUBSIDIARIES
             CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
                               (in thousands)


                                                      December 31,
                                            -------------------------------
                                               2013       2012       2011
                                            ---------  ---------  ---------

Cash flow from continuing financing
 activities:

Proceeds from borrowings                      201,761    102,036    189,850
Repayments of borrowings                     (136,515)  (194,093)  (163,567)
Proceeds from affiliates                       22,224    137,052    320,641
Repayment to affiliates                       (50,672)  (170,520)  (372,259)
Increase in accounts payable, related
 parties                                      569,807    234,781    404,492
Repayment to accounts payable, related
 parties                                     (515,438)  (232,562)  (421,036)
Dividend paid                                      --     (5,885)        --
Capital distribution                               --    (29,274)        --
                                            ---------  ---------  ---------

Net cash provided by (used in) continuing
 financing activities                          91,167   (158,465)   (41,879)
                                            ---------  ---------  ---------

Net cash (used in) provided by continuing
 operating, financing and investing
 activities                                   (46,805)    32,495      9,792
                                            ---------  ---------  ---------

Cash flow of discontinued operations:

Cash provided by provided by operating
 activities                                        --         --     48,537
Cash provided by investing activities              --         --    172,922
Cash used in financing activities                  --         --   (222,289)
                                            ---------  ---------  ---------

Net cash flow used in discontinued
 operations                                        --         --       (830)
                                            ---------  ---------  ---------

Effect of exchange rate fluctuation on cash
 and cash equivalents                           2,398        234      3,138
                                            ---------  ---------  ---------

Net (decrease) increase in cash and cash
 equivalents                                  (44,407)    32,729     12,100

Cash and cash equivalents, beginning of the
 year                                          75,777     43,048     30,948
                                            ---------  ---------  ---------

Cash and cash equivalents, end of the year  $  31,370  $  75,777  $  43,048
                                            =========  =========  =========

Analysis of balances of cash and cash
 equivalents
Included in cash and cash equivalents per
 consolidated balance sheet                    31,370     75,777     43,048
Included in assets of discontinued
 operations                                        --         --         --
                                            ---------  ---------  ---------
                                               31,370     75,777     43,048
                                            =========  =========  =========

Supplemental disclosure of cash flow
 information:
Continuing Operations
Interest paid                               $   8,191  $  15,194  $  14,607
                                            =========  =========  =========
Income taxes paid                           $  16,486  $  13,544  $  11,348
                                            =========  =========  =========

Discontinued Operations
Interest paid                               $      --  $      --  $   3,943
                                            =========  =========  =========
Income taxes paid                           $      --  $      --  $       8
                                            =========  =========  =========

Supplemental disclosure on non-cash
 continuing financing activities
Reclassification from liability of the
 obligation to issue shares for the
 amendments of earn-out provision to equity $      --  $      --  $  90,400
                                            =========  =========  =========



                Non-GAAP Financial Measures ($ in thousands)

A reconciliation of Adjusted EBITDA to net income is provided below:

                                     Three Months Ended      Year Ended
                                        December 31,        December 31,
                                       2013      2012      2013      2012
                                     --------  --------  --------  --------
Net income attributable to
 shareholders                        $  3,791  $  2,597  $ 11,828  $ 23,549
Interest expenses                       3,386     2,023     9,597    11,490
Interest income                           (31)      (82)     (406)     (308)
Income tax provision                    1,759       875     5,722     9,115
Stock-based compensation                1,834       926     3,775     4,553
Depreciation & Amortization               562       491     3,289     1,902
                                     --------  --------  --------  --------
Adjusted EBITDA                      $ 11,301  $  6,830  $ 33,805  $ 50,301
                                     ========  ========  ========  ========

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. 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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At the Company
Jason Wang
Chief Financial Officer
(858) 997-0680
[email protected]

Investor Relations
The Equity Group Inc.
Carolyne Y. Sohn
Senior Associate
(415) 568-2255
[email protected]

Adam Prior
Senior Vice President
(212) 836-9606
[email protected]

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