Autochina Intl (PINK:AUTC)

SHIJIAZHUANG, China--(BUSINESS WIRE)-- AutoChina International Limited (“AutoChina” or the “Company”) (OTC: AUTCF.PK - News), China’s largest commercial vehicle sales, servicing, leasing, and support network, today reported its second quarter financial results ended June 30, 2011, and third quarter and nine month financial results ended September 30, 2011 (see attached tables). AutoChina also filed restated financial results for the first quarter ended March 31, 2011.

Q2 2011 Financial Highlights

•  Total revenues of $185.8 million, a decrease of 7.2% from $200.3 million in the prior-year period
• Adjusted net income excludes any non-cash charges from the Earn-out Share Provision, see “Non-GAAP Financial Measures” below) of $13.6 million, compared to adjusted net income of $10.9 million
• Adjusted EBITDA of $23.7 million, compared to $19.2 million

Q3 2011 Financial Highlights

•  Total revenues of $168.6 million, an increase of 18.9% compared to $141.8 million in the prior-year period
• Adjusted net income of $11.9 million, compared to adjusted net income of $9.4 million
• Adjusted EBITDA of $21.8 million, compared to $19.0 million

Nine Month Financial Highlights

•  Total revenues of $490.7 million, an increase of 6.2% compared to $462.2 million in the prior-year period
• Adjusted net income of $36.6 million, compared to adjusted net income of $26.6 million
• Adjusted EBITDA of $63.8 million, compared to $50.9 million

Operational Highlights and Guidance

•  3,446 commercial vehicles leased in the second quarter of 2011, and 3,126 in the third quarter of 2011
• 9,131 commercial vehicles leased for the nine-month period
• Expects to lease between 10,000 and 12,000 vehicles in 2011; operate at least 500 stores by the end of 2011
• Company continues to expand geographic base and service offerings, sees continued margin expansion

Company Provides Financial Guidance for Year Ending December 31, 2011

•  Expects revenues of between $575 million and $625 million
• Expects adjusted net income of between $37 million and $42 million
  

Management Comments

Mr. Li stated, �Though the past year has been challenging on a corporate level, AutoChina remains committed to our employees, customers, and shareholders. We continue to focus on methods to further evolve our business. In addition to providing flexible lease options, we are also enhancing our service offering, including expanding the sale-leaseback program. This program allows new and existing AutoChina customers who need to generate funding quickly to pay the sale-leaseback over time and better manage their cash flow. We also established a Company-owned insurance agency in October 2011 for the purpose of conducting a motor vehicle insurance agency business in the future. We plan to commence the motor vehicle insurance agency business in the first quarter of 2012. Although we have encountered a general slowdown from the robust heavy-truck sales growth of 2010, we expect that China�s continuing economic development will continue to drive demand for commercial vehicles in the future. Our entire Company is focusing on what has made AutoChina successful since its founding�reliably and efficiently providing a nationwide sales and support network for our customers in China. We believe our value proposition to these small business owners provides cost efficiencies that are valued in this economic climate. Thanks to the support of our employees, vendors, and customers, we expect to continue providing quality service to our clientele and growth in the future. We again thank all of AutoChina�s loyal shareholders for their support over the past year.�

Company Revises Financial and Operating Guidance for 2011 

The Company also announced that it is adjusting its financial and operational guidance for the year ending December 31, 2011, due to the normalizing of demand in China’s heavy truck market. The Company is adjusting its revenue guidance to between $575 million and $625 million (from $900 million to $950 million) and its adjusted net income (which excludes any non-cash charges from the Earn-out Share Provision related to the Company’s acquisition of its business in 2009) guidance to between $37 million and $42 million (from $52 million to $57 million). For the year ended December 31, 2010, the Company had revenues of $622.1 million and adjusted net income (which excludes any non-cash charges from the Earn-out Share Provision related to the Company’s acquisition of its business in 2009) of $37.5 million.

The Company now expects to lease between 10,000 and 12,000 vehicles (from approximately 20,000 vehicles) in 2011, but still expects to operate at least 500 stores by the end of 2011.

Mr. Yong Hui Li, Chairman and CEO of AutoChina, stated, “China’s commercial vehicle market saw extraordinary growth during the past couple of years, driven by the country’s robust economic development and government stimulus efforts. In 2011, China’s economic growth has begun to stabilize, and the national government has made attempts to control inflation. As a result, the short-term impact on the commercial vehicle market in China, particularly the heavy truck market, has been significant. According to China Automotive Review, 591,300 heavy-duty trucks sold in China from January to July 2011, a decrease of 9.6 percent from the prior-year period. ACT Research estimates that China’s heavy-duty market will grow less than 1 percent year over year in 2011. As a result, we have adjusted our financial and operational guidance for 2011 and will continue to monitor the market environment closely.”

Mr. Li concluded, “Despite these near-term headwinds, we remain optimistic about the heavy truck market’s long-term prospects and continue to expect growth in our business. We also continue to seek new means of diversifying our revenue stream. We are excited by the initial success of our sale-leaseback program and will research additional markets where AutoChina’s large store network may provide a tangible advantage.”

Q1 2011 Financial Highlights

• Total revenues of $136.2 million, a 12.8% increase from $120.7 million in the prior-year period
• Improvement across all margins—gross margin up 4 percentage points to 17.1%, operating margin up 2.7 percentage points to 9.5%, and net margin up 2.2 percentage points to 7.3%, from the prior-year period
• Net income of $10.0 million, or $0.50 per diluted share, compared to net income of $6.2 million, or $0.33 per diluted share, in the prior-year period
• Adjusted EBITDA of $18.2 million, a 45.9% increase year over year

Market Overview

Mr. Yong Hui Li, Chairman and CEO of AutoChina, stated, “We were pleased to achieve double-digit growth on the top and bottom line during the first quarter, which is historically the Company’s slowest period due to seasonality caused by the Chinese New Year holiday. Since the latter half of 2010, we have seen demand in the heavy-truck market normalize from its previously high growth levels. In 2010, heavy truck sales in China rose by roughly 60% when compared to heavy truck sales in 2009. We feel this was an extraordinary jump over the historical growth in the market, driven in part by the effects of the government's stimulus program. However, we are still seeing steady growth in our sector. According to China Automotive Review, sales of heavy-duty trucks, including chassis and semi-tractor trailers, in the first quarter of 2011 totaled 299,436 units, up 8.4% from the first quarter of 2010. We believe that China’s continuing economic development will keep driving demand for commercial vehicles in the long term.”

AutoChina reiterates its previously announced financial guidance for 2011. The Company believes revenue from its commercial vehicle sales, servicing, leasing and support business will be between $900 million and $950 million and net income between $52 million and $57 million.

Fourth Quarter Highlights:

• Total revenues of $155.8 million, compared to $150.1 million in the prior-year period
• Net income of $10.9 million, or $0.54 per diluted share, compared to net income of $23.8 million, or $1.77 per diluted share, in the prior-year period, which included $15.5 million of income, or $1.15 per diluted share, from discontinued operations (net income from continuing operations was $8.3 million, or $0.62 per diluted share, in the prior-year period)
• Adjusted EBITDA of $18.0 million, an increase of 36.8% year over year

Mr. Yong Hui Li, Chairman and CEO of AutoChina, stated, "We were pleased with the steady growth throughout our operations in the fourth quarter, in addition to a number of exciting developments that we announced during the period. We continued to expand in southern China, opening 82 stores and leasing 3,076 vehicles during the fourth quarter. We also announced the establishment of a new financial leasing company and the conversion of our existing wholly foreign-owned enterprise into a financial leasing company. These two financial leasing companies will allow us to lease commercial vehicles directly to our customers and represent the first steps in the transition away from our VIE holding structure."

• Company expects to lease approximately 20,000 vehicles in 2011 and operate at least 500 stores by the end of 2011
• Company believes revenue will be between $900 million and $950 million and net income between $52 million and $57 million for the year ending December 31, 2011

Company expects continued improvement in gross margin as finance and insurance revenues increase as a percentage of total revenues in each quarter

AUTC made comments related to the company's following 2010 3rd quarter results and guidance:

Financial Highlights

• Total revenues of $143.5 million, up 41.4% from $101.5 million in the prior-year period
• Net income of $9.5 million, or $0.47 per diluted share, up 35.3% from net income of $7.0 million, or $0.60 per diluted share in the prior-year period, which included $2.0 million of income, or $0.17 per diluted share, from discontinued operations generated from the consumer auto business, disposed in December 2009
• Adjusted EBITDA of $18.8 million, an increase of 132.9% year over year

Guidance

• Company reiterates its expectation of leasing between 12,000 and 13,000 vehicles in 2010 and of operating at least 275 stores by the end of 2010
• Reiterates revenue guidance of between $600 million and $650 million
• Revises net income guidance to between $34 million and $38 million (from between $42 million and $47 million), primarily as a result of higher-than-anticipated down payments from customers and thus, lower interest income, slower-than-expected adoption of the Company’s higher-margin value-added services, and slightly lower-than-expected truck sales during the second half of 2010

Mr. Yong Hui Li, Chairman and CEO of AutoChina, stated, “We continue to see rapid growth throughout our operations with triple-digit increases in revenue and net income. During the period, we continued to expand in southern China, opening 25 stores during the quarter and leasing 2,849 vehicles. We also secured additional bank financing with some of the largest and most reputable banks in China over the past four months, which has strengthened our capital position and helped us to continue purchasing trucks on behalf of our customers. Over the past 12 months, the largest contributor to AutoChina’s top-line growth has been its increased brand recognition throughout China. We model our business to be scalable and accessible, and thus far in 2010, our target market of small-scale entrepreneurial truck owner-operators has continued to grow. AutoChina assists its customers through the entire lifecycle of their commercial vehicle business, including financing for the purchase of the vehicle, tires, fuel, and insurance. We plan to continue to increase our service offering to provide even more tools to ensure the success of our customers.”

The revised outlook for 2010:

Mr. Li concluded, “We saw rapid growth in the heavy truck market in the first half of 2010. While the current market is still very strong, we saw a calming of this robust demand for heavy trucks in China during Q3, especially in relation to the year-over-year comparables. We attribute this slowdown partially to the summer seasonality inherent in Q3 and to our opening of fewer stores this quarter relative to last year’s third quarter. Despite this short-term cooling of demand, we are still confident in the market’s long-term prospects. Experts at ACT Research and China’s State Information Center have predicted that more than 1 million heavy-duty commercial vehicles will be sold in 2010, an increase of 62% from the 630,000 sold in 2009. As a result of a strong first six months and this continuing growth, we are reiterating our revenue and operational guidance for 2010. However, when we projected our net income for the year, we did not anticipate higher initial down payments from our customers. While this lowered the net income generated from the leases during the year, it also lowered AutoChina’s overall risk profile. In addition, we were expecting to assume a higher number of new truck leases and greater demand for the higher-margin value-added services in the second half of 2010. We have adjusted our internal projections, and, as a result, have also revised the corresponding net income guidance.”

Q2 2010 Financial Highlights:

• Total revenues of $201.5 million, up 219.7% from $63.0 million in the prior year period.
  
• Net income of $10.9 million, or $0.54 per diluted share, up 188.3% from net income of $3.8 million, or $0.38 per diluted share in the prior year period, which included $1.8 million of income from discontinued operations generated from the consumer auto business, which was disposed in December 2009.
  
• Adjusted EBITDA of $19.0 million, an increase of 119.6% year-over-year

Outlook for 2010

Mr. Li concluded, “The market for heavy trucks in China was very strong during the first half of 2010. As a result of higher than expected sales growth during the period, we expect to lease between 12,000 and 13,000 trucks for the year ending December 31, 2010, which is ahead of AutoChina’s previous guidance of at least 12,000. In the first four months of 2010, heavy truck sales in China grew 132% as compared to the same period last year, to 383,000 heavy-duty trucks. We remain confident about the long-term growth prospects for the heavy truck sector in China, and look forward to continuing to expand our unique commercial vehicle sales, servicing, leasing, and support business throughout the country.”

Through the first half of 2010, the Company achieved a faster than expected rate of truck sales. As a result, AutoChina is raising its revenue guidance range to $600 - $650 million from $550 - $600 million. The Company is also reiterating its net income guidance of between $42 million and $47 million, and expects continued gross and net margin expansion throughout the year as the contribution from finance and insurance income grows. The Company will continue to evaluate its financial projections on a regular basis and provide updates as necessary.