SOURCE: AutoChina International Ltd.

AutoChina International Ltd.

April 30, 2013 16:05 ET

AutoChina International Reports 2012 Third, Fourth Quarter and Year-End Financial Results

SHIJIAZHUANG, CHINA--(Marketwired - Apr 30, 2013) - 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 ended September 30, 2012, and for the fourth quarter and year ended December 31, 2012.

Q3 2012 Financial Highlights (comparisons are year over year)

  • Total revenues of $73.3 million, compared to $168.6 million
  • Adjusted Net Income of $4.5 million, compared to $11.9 million
  • Adjusted EBITDA of $11.9 million, compared to $21.8 million

Q4 2012 Financial Highlights (comparisons are year over year)

  • Total revenues of $51.9 million, compared to $107.4 million
  • Adjusted Net Income of $2.6 million, compared to $6.9 million
  • Adjusted EBITDA of $6.8 million, compared to $16.2 million

Full-year 2012 Financial Highlights (comparisons are year over year)

  • Total revenues of $333.1 million, compared to $598.1 million
  • Gross profit of $88.8 million, compared to $107.5 million
  • Net income of $23.5 million, compared to $25.2 million (which included loss on change in fair value of earn-out obligation of $17.3 million)
  • Adjusted Net Income of $23.5 million, compared to $43.5 million
  • Adjusted EBITDA of $50.3 million, compared to $80.0 million

Operational Highlights

  • 1,154 commercial vehicles leased in the third quarter of 2012, and 816 in the fourth quarter of 2012
  • 5,385 commercial vehicles leased in 2012
  • AutoChina opened nine new commercial vehicle financing and service centers in the third quarter of 2012 and 11 new centers in the fourth quarter of 2012. As of December 31, 2012, the Company operated 534 financing and service centers, compared to 506 at December 31, 2011.
  • AutoChina expects continued margin expansion as finance and insurance income grows as a percentage of revenue
  • Construction of the Company's new office space in the Kai Yuan Center building in Shijiazhuang was completed in April 2013, and AutoChina has moved its headquarters into the new space.

Operational and Market Review
Mr. Yong Hui Li, Chairman and CEO of AutoChina, stated, "During the second half of 2012, we were pleased to announce the launch of AutoChina's new website, which now serves as a 24/7-accessible information portal for our customers with new offerings such as logistics services, consulting on and access to various types of insurance, and an online used truck marketplace. We expect the new website to be a key channel by which we expand and diversify our business via an asset-light model that will complement our existing heavy truck leasing business and allow AutoChina to better serve its customers. As China's heavy truck market continues to be impacted by weakened demand, we have taken the opportunity to strengthen the Company by building upon our existing heavy-truck leasing business with these new service offerings, while continuing to expand our geographic presence through our leasing and finance center network. We remain optimistic about the long-term prospects of China's heavy truck industry, which recently welcomed another large manufacturer in January when Sweden's Volvo announced its heavy-truck joint venture with Dongfeng Motor Group Co. Given concerns with pollution and measures to meet more stringent emission standards, demand for liquefied natural gas-fueled heavy trucks is expected to increase over the next few years. We will continue to focus on serving our customers, adapting and growing our business to address their needs."

Heavy Truck Sales
The Company leased 1,154 commercial vehicles in the third quarter of 2012, compared to 3,126 in the third quarter of 2011, and 816 commercial vehicles in the fourth quarter of 2012, compared to 1,804 in the fourth quarter of 2011. The decrease in commercial vehicle sales and servicing and leasing was primarily due to a general slowdown in the economy that led to unfavorable investment sentiment for purchasers of commercial vehicles. Additionally, the Company adopted a stricter leasing policy, which caused it to repossess more vehicles for late payment and reject a higher number of new applicants.

Since launching its commercial vehicle sales and leasing business in March 2008, the Company has leased over 37,000 trucks, as of December 31, 2012. The Company repossessed 789 vehicles whose lessees had defaulted on installment payments, sold 611 of these vehicles, and recorded 18 vehicles as total losses during the year ended December 31, 2012. There were 160 vehicles repossessed, 118 vehicles sold and 15 loss vehicles recorded in the year ended December 31, 2011. Additionally in 2012, the Company adopted a stricter leasing policy, which caused it to repossess more vehicles for late payment and reject a higher number of new applicants.

Used Vehicle Leasing
Under the Company's used commercial vehicle sale-leaseback program, 824 used trucks were leased in the year ended December 31, 2012. 

Insurance Agency Services
The Company launched its own insurance agency business in December 2011 and has signed agreements with four major insurance companies in China to sell insurance: China United Property Insurance Company Limited, Sinosafe General Insurance Co. Ltd. (Hua An Insurance), Ping An Insurance (Group) Company of China, Ltd., and China Life Property and Casualty Insurance Company Limited. AutoChina's 534 store locations are each licensed to sell insurance from these carrier partners, and, as of December 31, 2012, the Company also operated 23 new insurance agency branch offices in appropriate markets that are solely dedicated to this service.

Expansion of Specialty Finance Store Network
During the 2012 third quarter, AutoChina opened nine new commercial vehicle financing and service centers and 11 during the 2012 fourth quarter. As of December 31, 2012, the Company operated 534 financing and service centers, compared to 506 centers at December 31, 2011. 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.

New Headquarters
During the second half of 2012, AutoChina closed on a transaction to purchase 23 floors of newly constructed office space in the Kai Yuan Center building, which was built by the Company's Chairman and CEO Mr. Li and is the tallest building in Shijiazhuang at 245 meters in height. The new office space was purchased for approximately $56.4 million, and the Company also assumed approximately $102.9 million in debt as part of the acquisition, resulting in a total transaction value of approximately $159.3 million.

Construction of the Kai Yuan Center has been completed, and, in April 2013, AutoChina moved its headquarters into the new building, which now serves as the control center for each of the Company's 534 commercial vehicle financing and service centers located throughout China. The Company does not anticipate that it will occupy the entire office space purchased, and expects to lease out the unoccupied space, the proceeds from which will be reported as rental income.

Financial Review

Note: As part of the transaction to purchase the Kai Yuan Center office space, AutoChina, through its wholly owned subsidiary AutoChina Group Inc., acquired 100% of the equity of Heat Planet Holdings Limited ("Heat Planet") and its subsidiaries, which was controlled by Mr. Li. Heat Planet's primary asset consists of the 23 floors, or over 60,000 square meters, of newly constructed office space in the Kai Yuan Center building. The acquisition closed on September 11, 2012. As both AutoChina and the acquired companies were under the common control of Mr. Li immediately before and after the merger, the transaction was accounted for as common control merger, and using merger accounting as if the merger had been consummated at the beginning of the earliest period presented, and no gain or loss is recognized. The Company has adjusted its financial statements for the years ended December 31, 2011, and December 31, 2010, to account for operating results of Heat Planet and its subsidiaries to reflect the merger under common control.

2012 Third Quarter

  • Revenues for the third quarter ended September 30, 2012, were $73.3 million, compared to $168.6 million in the third quarter of 2011. The decrease in revenues primarily resulted from lower demand for heavy trucks, which was partially offset by higher finance and insurance income during the period. The Company reported $52.5 million in commercial vehicle revenues, and $20.8 million, or 28.4% of total revenues, in revenues related to finance and insurance. 

  • Cost of sales during the period totaled $51.5 million, with an average cost per commercial vehicle of $44,000. Gross margin increased to 29.7% for the three months ended September 30, 2012, from 17.1% for the prior-year period, primarily due to a higher contribution to revenues from finance and insurance versus direct sales of commercial vehicles.

  • Net income in the three months ended September 30, 2012, was $4.5 million, or $0.19 per share based on 23.5 million diluted weighted average shares outstanding, compared to $48.6 million, or $2.07 per share based on 23.5 million diluted weighted average shares outstanding, in the three months ended September 30, 2011. The year-over-year decrease primarily resulted from the absence of a gain on change ($36.3 million) in fair value of an earn-out obligation, which was cancelled.

  • Adjusted Net Income, which is net income excluding the gain/loss on change in fair value of the earn-out obligation and income/loss from discontinued operations, was $4.5 million, compared to $11.9 million for the third quarter of 2011.

  • Adjusted EBITDA, which is EBITDA excluding the gain/loss on change in fair value of the earn-out obligation, income/loss from discontinued operations, stock-based compensation, and accretion of stock repurchase obligation, was $11.9 million for the quarter ended September 30, 2012, compared to $21.8 million in the prior-year quarter.

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

2012 Fourth Quarter

  • Revenues for the fourth quarter ended December 31, 2012, were $51.9 million, compared to $107.4 million in the fourth quarter of 2011. As with the prior quarter, the decrease in revenues primarily resulted from lower demand for heavy trucks, which was partially offset by higher finance and insurance income during the period. The Company reported $34.8 million in commercial vehicle revenues, and $17.1 million, or 32.9% of total revenues, in revenues related to finance and insurance.

  • Cost of sales during the period totaled $34.7 million, with an average cost per commercial vehicle of $45,000. Gross margin increased to 33.1% for the three months ended December 31, 2012, from 24.7% for the prior-year period, primarily due to a higher contribution to revenues from finance and insurance versus direct sales of commercial vehicles.

  • Net income in the three months ended December 31, 2012, was $2.6 million, or $0.19 per share based on 23.5 million diluted weighted average shares outstanding, compared to $9.0 million, or $0.39 per share based on 23.5 million diluted weighted average shares outstanding, in the three months ended December 31, 2011.

  • Adjusted Net Income was $2.6 million, compared to $6.9 million for the fourth quarter of 2011. There was no gain/loss on change in fair value of the earn-out obligation for either period; however, there was $2.1 million in income from discontinued operations for the fourth quarter of 2011.

  • Adjusted EBITDA, which is EBITDA excluding the gain/loss on change in fair value of the earn-out obligation, income/loss from discontinued operations, stock-based compensation, and accretion of stock repurchase obligation, was $6.8 million for the quarter ended December 31, 2012, compared to $16.2 million in the prior-year quarter.

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

Full-year 2012

  • Revenues for the year ended December 31, 2012, were $333.1 million, compared to $598.1 million in the prior-year period. The decrease in revenues primarily resulted from a general slowdown in the economy, which led to lower demand for heavy trucks. The Company reported $249.0 million in commercial vehicle revenues, and $84.1 million, or 25.2% of total revenues, in revenues related to finance and insurance.

  • Gross profit for 2012 was $88.8 million, compared to $107.5 million in the prior-year period. Gross margin increased to 26.7% for the year ended December 31, 2012, from 18.0% for the prior-year period, primarily due to a higher contribution to revenues from finance and insurance versus direct sales of commercial vehicles.

  • Net income for year ended December 31, 2012, was $23.5 million, or $0.99 per share based on 23.8 million diluted weighted average shares outstanding, compared to $25.2 million, or $1.07 per share based on 23.6 million diluted weighted average shares outstanding, in the prior-year period, which included a loss on change in fair value of the earn-out obligation of $17.3 million.

  • Adjusted Net Income was $23.5 million, compared to $43.5 million in 2011.

  • Adjusted EBITDA for the year ended December 31, 2012, was $50.3 million, compared to $80.0 million in the prior year.

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

Balance Sheet Highlights
At December 31, 2012, AutoChina's cash and cash equivalents (not including restricted cash) were $75.8 million, working capital was $105.4 million, total debt was $170.3 million (including due to affiliates and accounts payable, related parties), and stockholders' equity was $228.4 million, compared to $43.0 million, $171.6 million, $237.1 million, and $291.2 million, respectively, at December 31, 2011. 

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, 2012, the Company owned and operated 534 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 STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Unaudited)  
(in thousands except share and per share data)  
   
    Three months ended September 30,     Nine months ended September 30,  
    2012     2011     2012     2011  
          As Adjusted           As Adjusted  
Revenues                                
  Commercial vehicles   $ 52,485     $ 143,711     $ 214,221     $ 422,196  
  Finance     16,381       22,565       56,659       62,330  
  Insurance     4,448       2,358       10,323       6,148  
    Total revenues     73,314       168,634       281,203       490,674  
                                 
Cost of sales                                
  Commercial vehicles     1,508       24,229       6,082       85,417  
  Commercial vehicles, related parties     49,233       115,630       202,212       324,330  
  Insurance     794       --       1,265       --  
    Total cost of sales     51,535       139,859       209,559       409,747  
                                 
Gross profit     21,779       28,775       71,644       80,927  
                                 
Operating expenses                                
  Selling and marketing     2,660       2,170       7,511       5,702  
  General and administrative     13,689       6,704       30,634       17,153  
  Interest expense     2,011       4,468       8,782       11,763  
  Interest expense, related parties     174       647       685       1,971  
  Other income, net     (4,044 )     (755 )     (4,934 )     (2,819 )
    Total operating expenses     14,490       13,234       42,678       33,770  
                                 
Income from operations     7,289       15,541       28,966       47,157  
                                 
Other income (expense)                                
  Gain (loss) on change in fair value of earn-out obligation     --       36,300       --       (17,300 )
  Interest income     74       38       226       95  
    Total other income (expense)     74       36,338       226       (17,205 )
                                 
Income from continuing operations before income taxes     7,363       51,879       29,192       29,952  
                                 
Income tax provision     (2,837 )     (3,663 )     (8,240 )     (10,693 )
                                 
Income from continuing operations     4,526       48,216       20,952       19,259  
                                 
Income (loss) from discontinued operations     --       477       --       (4,149 )
  Income tax benefit (provision)     --       (120 )     --       1,037  
  Net loss attributable to non-controlling interests     --       --       --       30  
Income (loss) from discontinued operations, net of taxes     --       357       --       (3,082 )
                                 
Net income   $ 4,526     $ 48,573     $ 20,952     $ 16,177  
                                 
Foreign currency translation adjustment     (1,651 )     6,913       (2,082 )     11,510  
                                 
Comprehensive income   $ 2,875     $ 55,486     $ 18,870     $ 27,687  
                                 
                                 
                                 
AUTOCHINA INTERNATIONAL LIMITED AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Unaudited) - Continued  
(in thousands except share and per share data)  
   
    Three months ended September 30,   Nine months ended September 30,  
    2012   2011   2012   2011  
        As Adjusted       As Adjusted  
Earnings per share                          
  Basic                          
    Continuing operations   $ 0.19   $ 2.05   $ 0.89   $ 0.82  
    Discontinued operations     --     0.02     --     (0.13 )
    $ 0.19   $ 2.07   $ 0.89   $ 0.69  
  Diluted                          
    Continuing operations   $ 0.19   $ 2.05   $ 0.89   $ 0.81  
    Discontinued operations     --     0.02     --     (0.13 )
    $ 0.19   $ 2.07   $ 0.89   $ 0.68  
                           
Dividend declared per share   $ --   $ --   $ 0.25   $ --  
Weighted average shares outstanding                          
  Basic     23,538,919     23,538,919     23,538,919     23,538,919  
  Diluted     23,538,919     23,538,919     23,658,660     23,640,196  
                             
                             
                             
AUTOCHINA INTERNATIONAL LIMITED AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME  
(in thousands except share and per share data)  
   
    Three months ended December 31,     Year ended December 31,  
    2012     2011     2012     2011  
          As Adjusted           As Adjusted  
    (unaudited)     (unaudited)     (audited)     (audited)  
Revenues                                
  Commercial vehicles   $ 34,819     $ 83,422     $ 249,040     $ 505,618  
  Finance     13,145       21,770       69,804       84,100  
  Insurance     3,945       2,228       14,268       8,376  
    Total revenues     51,909       107,420       333,112       598,094  
                                 
Cost of sales                                
  Commercial vehicles     1,268       638       7,350       86,055  
  Commercial vehicles, related parties     32,569       80,242       234,781       404,572  
  Insurance     894       --       2,159       --  
    Total cost of sales     34,731       80,880       244,290       490,627  
                                     
Gross profit     17,178       26,540       88,822       107,467  
                                 
  Operating expenses                                
  Selling and marketing     2,615       2,353       10,126       8,055  
  General and administrative     11,317       10,051       41,951       27,204  
  Interest expense     1,839       4,157       10,621       15,920  
  Interest expense, related parties     184       1,049       869       3,020  
  Other income, net     (2,167 )     (596 )     (7,101 )     (3,415 )
    Total operating expenses     13,788       17,014       56,466       50,784  
                                 
Income from operations     3,390       9,526       32,356       56,683  
                                 
Other income (expense)                                
  Loss on change in fair value of earn-out obligation     --       --       --       (17,300 )
  Interest income     82       65       308       160  
    Total other income (expense)     82       65       308       (17,140 )
                                 
Income from continuing operations before income taxes     3,472       9,591       32,664       39,543  
                                 
Income tax provision     (875 )     (2,726 )     (9,115 )     (13,419 )
                                 
Income from continuing operations     2,597       6,865       23,549       26,124  
                                 
Income (loss) from discontinued operations     --       2,819       --       (1,330 )
  Income tax benefit (provision)     --       (704 )     --       333  
  Net loss attributable to non-controlling interests     --       (6 )     --       24  
Income (loss) from discontinued operations, net of taxes     --       2,109       --       (973 )
                                 
Net income   $ 2,597     $ 8,974     $ 23,549     $ 25,151  
                                 
Foreign currency translation adjustment     2,484       3,797       402       15,307  
                                 
Comprehensive income   $ 5,081     $ 12,771     $ 23,951     $ 40,458  
                                 
                                 
                                 
AUTOCHINA INTERNATIONAL LIMITED AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME - Continued  
(in thousands except share and per share data)  
   
    Three months ended December 31,   Year ended December 31,  
    2012   2011   2012   2011  
        As Adjusted       As Adjusted  
    (unaudited)   (unaudited)   (audited)   (audited)  
Earnings (loss) per share                          
  Basic                          
    Continuing operations   $ 0.11   $ 0.29   $ 1.00   $ 1.11  
    Discontinued operations     --     0.09     --     (0.04 )
    $ 0.11   $ 0.38   $ 1.00   $ 1.07  
  Diluted                          
    Continuing operations   $ 0.11   $ 0.29   $ 0.99   $ 1.11  
    Discontinued operations     --     0.09     --     (0.04 )
    $ 0.11   $ 0.38   $ 0.99   $ 1.07  
Weighted average shares outstanding                          
  Basic     23,538,919     23,538,919     23,538,919     23,538,919  
  Diluted     23,876,548     23,538,919     23,762,378     23,612,398  
                           
                           
                           
AUTOCHINA INTERNATIONAL LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands except share and per share data)
 
    December 31,
    2012   2011
        As Adjusted
ASSETS            
Current assets            
Cash and cash equivalents   $ 75,777   $ 43,048
Restricted cash     160     159
Accounts receivable, net of provision for doubtful accounts of $12,041 and $4,830, respectively     32,956     25,357
Inventories     6,728     2,529
Deposits for inventories     20     105
Deposits for inventories, related party     --     14,539
Due from an affiliate     --     7,904
Prepaid expenses and other current assets     4,512     12,100
Current maturities of net investment in direct financing and sales-type leases, net of provision for doubtful accounts of $296 and $714, respectively     196,213     329,111
Total current assets     316,366     434,852
             
Construction-in-progress     76,669     --
Property, equipment and leasehold improvements, net     4,985     3,356
Deferred income tax assets     2,547     1,811
Net investment in direct financing and sales-type leases, net of current maturities     38,739     114,447
             
Total assets   $ 439,306   $ 554,466
LIABILITIES AND EQUITY            
             
Current liabilities            
Short-term borrowings (including short-term borrowings of the consolidated VIEs without recourse to AutoChina of $75,412 and $111,095 as of December 31, 2012 and 2011, respectively)   $ 102,458   $ 149,979
Long-term borrowings, current (including long-term borrowings, current of the consolidated VIEs without recourse to AutoChina of nil and $44,438 as of December 31, 2012 and 2011, respectively)     --     44,438
Accounts payable (including accounts payable of the consolidated VIEs without recourse to AutoChina of $68 and $112 as of December 31, 2012 and 2011, respectively)     16,392     404
Accounts payable, related parties (including accounts payable, related parties of the consolidated VIEs without recourse to AutoChina of $706 and nil as of December 31, 2012 and 2011, respectively)     2,228     --
Other payables and accrued liabilities (including other payables and accrued liabilities of the consolidated VIEs without recourse to AutoChina of $4,857 and $4,415 as of December 31, 2012 and 2011, respectively)     15,049     13,653
Due to affiliates (including due to affiliates of the consolidated VIEs without recourse to AutoChina of $86 and $3,244 as of December 31, 2012 and 2011, respectively)     65,595     42,696
Customer deposits (including customer deposits of the consolidated VIEs without recourse to AutoChina of $161 and $508 as of December 31, 2012 and 2011, respectively)     1,956     1,152
Income tax payable (including income tax payable of the consolidated VIEs without recourse to AutoChina of $1,931 and $1,548 as of December 31, 2012 and 2011, respectively)     2,551     2,799
Deferred income tax liabilities (including deferred income tax liabilities of the consolidated VIEs without recourse to AutoChina of nil and $4,764 as of December 31, 2012 and 2011, respectively)     4,717     8,162
Total current liabilities     210,946     263,283
             
             
             
AUTOCHINA INTERNATIONAL LIMITED AND SUBSIDIARIES  
CONSOLIDATED BALANCE SHEETS - Continued  
(in thousands except share and per share data)  
   
    December 31,  
    2012     2011  
          As Adjusted  
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 - 23,538,919 shares at December 31, 2012, respectively; and $0.001 par value authorized - 50,000,000 shares; issued and outstanding - 23,538,919 shares at December 31, 2011, respectively     24       24  
Additional paid-in capital     323,856       404,745  
Statutory reserves     16,997       13,016  
Accumulated losses     (135,487 )     (149,170 )
Accumulated other comprehensive income     22,970       22,568  
Total equity     228,360       291,183  
                 
Total liabilities and equity   $ 439,306     $ 554,466  
                 
                 
                 
AUTOCHINA INTERNATIONAL LIMITED AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF CASH FLOWS  
(in thousands)  
   
    December 31,  
    2012     2011     2010  
          As Adjusted     As Adjusted  
Cash flow from continuing operating activities:                        
                         
Net income (loss)   $ 23,549     $ 25,151     $ (62,300 )
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:                        
Net loss (income) from discontinued operations     --       973       (604 )
Loss on change in fair value of earn-out obligation     --       17,300       100,400  
Depreciation and amortization     1,902       1,420       952  
Provision for bad debts     14,550       4,271       1,447  
Deferred income taxes     (4,180 )     6,261       (959 )
Stock-based compensation expenses     4,553       2,914       3,281  
Changes in operating assets and liabilities, net of acquisitions and divestitures:                        
Accounts receivable     (22,331 )     (5,997 )     (20,263 )
Notes receivable     --       --       222  
Net investment in direct financing and sales-type leases     209,063       2,175       (194,490 )
Inventories     (4,176 )     (1,024 )     (1,255 )
Deposits for inventories     85       923       16,567  
Deposits for inventories, related party     14,515       (14,177 )     --  
Prepaid expense and other current assets     7,586       (3,511 )     (1,828 )
Trade notes payable     --       --       (12,561 )
Accounts payable     15,922       (536 )     (2,756 )
Accounts payable, related parties     --       --       16,104  
Other payable and accrued liabilities     1,356       5,729       4,229  
Customers deposits     798       (100 )     (182 )
Income tax payable     (254 )     (4,568 )     4,912  
                         
Net cash provided by (used in) continuing operating activities     262,938       37,204       (149,084 )
                         
Cash flow from continuing investing activities:                        
                         
Capital expenditure on construction in progress     (76,353 )     --       --  
Purchase of property, equipment and leasehold improvements     (3,516 )     (1,967 )     (1,427 )
Cash received from sales of subsidiaries     --       7,589       --  
(Increase) decrease) in restricted cash     --       (155 )     12,561  
Decrease (increase) in due from an affiliate     7,891       9,000       (9,000 )
                         
Net cash (used in) provided by continuing investing activities     (71,978 )     14,467       2,134  
                         
                         
                         
AUTOCHINA INTERNATIONAL LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
(in thousands)
 
    December 31,
    2012     2011     2010
          As Adjusted     As Adjusted
Cash flow from continuing financing activities:                      
                       
Proceeds from borrowings     102,036       189,850       220,028
Repayments of borrowings     (194,093 )     (163,567 )     (73,269)
Proceeds from affiliates     137,052       320,641       403,384
Repayment to affiliates     (170,520 )     (372,259 )     (366,169)
Increase in accounts payable, related parties     234,781       404,492       394,578
Repayment to accounts payable, related parties     (232,562 )     (421,036 )     (513,690)
Dividend paid     (5,885 )     --       --
Capital distribution     (29,274 )     --       --
Issue of shares on exercise of warrants     --       --       10,296
Issue of shares for cash, net of offering costs of $3,758     --       --       66,242
Shares repurchase     --       --       (1,630)
                       
Net cash (used in) provided by continuing financing activities     (158,465 )     (41,879 )     139,770
                       
Net cash provided by (used in) continuing operating, financing and investing activities     32,495       9,792       (7,180)
                       
Cash flow of discontinued operations:                      
                       
Cash provided by (used in) provided by operating activities     --       48,537       (84,184)
Cash provided by (used in) investing activities     --       172,922       (59,454)
Cash (used in) provided by financing activities     --       (222,289 )     144,087
                       
Net cash flow (used in) provided by discontinued operations     --       (830 )     449
                       
Effect of exchange rate fluctuation on cash and cash equivalents     234       3,138       894
                       
Net increase (decrease) in cash and cash equivalents     32,729       12,100       (5,837)
                       
Cash and cash equivalents, beginning of the year     43,048       30,948       36,785
                       
Cash and cash equivalents, end of the year   $ 75,777     $ 43,048     $ 30,948
                       
                       
Analysis of balances of cash and cash equivalents                      
Included in cash and cash equivalents per consolidated balance sheet     75,777       43,048       30,100
Included in assets of discontinued operations     --       --       848
      75,777       43,048       30,948
                       
                       
                       
AUTOCHINA INTERNATIONAL LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
(in thousands)
 
    December 31,
    2012   2011   2010
        As Adjusted   As Adjusted
Supplemental disclosure of cash flow information:                  
Continuing Operations                  
Interest paid   $ 15,194   $ 14,607   $ 15,619
Income taxes paid   $ 13,544   $ 11,348   $ 6,189
                   
Discontinued Operations                  
Interest paid   $ --   $ 3,943   $ 986
Income taxes paid   $ --   $ 8   $ 351
                   
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   $ 84,600
                   
                   
                   
Non-GAAP Financial Measures ($ in thousands)
 
A reconciliation of Adjusted Net Income to net income (loss) is provided below:
 
    Three Months Ended
September 30,
    Three Months Ended
December 31,
    Year Ended
December 31,
    2012   2011     2012   2011     2012   2011
Net income (loss)   $ 4,526   $ 48,573     $ 2,597   $ 8,974     $ 23,549   $ 25,151
                                         
(Income) loss from discontinued operations     --     (357 )     --     (2,109 )     --     973
                                         
(Gain) loss on change in fair value of earn-out obligation     --     (36,300 )     --     --       --     17,300
                                         
Adjusted Net Income   $ 4,526   $ 11,916     $ 2,597   $ 6,865     $ 23,549   $ 43,451
                                         
                                         
A reconciliation of Adjusted EBITDA to net income is provided below:  
   
    Three Months Ended
September 30,
    Three Months Ended
December 31,
    Year Ended
December 31,
 
    2012     2011     2012     2011     2012     2011  
Net income (loss)   $ 4,526     $ 48,573     $ 2,597     $ 8,974     $ 23,549     $ 25,151  
                                                 
(Income) loss from discontinued operations     --       (357 )     --       (2,109 )     --       973  
                                                 
Interest expenses     2,185       5,115       2,023       5,206       11,490       18,940  
                                                 
Interest income     (74 )     (38 )     (82 )     (65 )     (308 )     (160 )
                                                 
Income tax provision     2,837       3,663       875       2,726       9,115       13,419  
                                                 
(Gain) loss on change in fair value of earn-out obligation     --       (36,300 )     --       --       --       17,300  
                                                 
Stock-based compensation     1,979       901       926       936       4,553       2,914  
                                                 
Depreciation & Amortization     492       256       491       539       1,902       1,420  
                                                 
Adjusted EBITDA   $ 11,945     $ 21,813     $ 6,830     $ 16,207     $ 50,301     $ 79,957  
                                                 

USE OF NON-GAAP MEASURES
AutoChina defines Adjusted Net Income as net income (loss) before gain (loss) on change in fair value of earn-out obligation and before income/loss from discontinued operations, and Adjusted EBITDA as net income before interest expense (income), income taxes, depreciation and amortization, as well as the exclusion of Loss (gain) on change in fair value of earn-out obligation, (income) loss from discontinued operations, stock-based compensation and accretion of stock repurchase obligations. Adjusted Net Income and Adjusted EBITDA exclude 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 Net Income and 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 Net Income and 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 Net Income and Adjusted EBITDA also facilitates management's internal comparisons to AutoChina's historical performance and liquidity. AutoChina computes Adjusted Net Income and 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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