AutoChina International Limited (“AutoChina” or the “Company”) (NASDAQ: AUTC), China’s largest commercial vehicle sales, servicing, leasing, and support network, today announced that it has concluded its appeal with the Office of the Chief Accountant (“OCA”) of the U.S. Securities and Exchange Commission (“SEC”) regarding the accounting treatment for the Earn-out Share Provision (“Earn-out”). The Company also announced that it has entered into an agreement to cancel the Earn-out for the year ending December 31, 2011.

On September 26, 2011, the OCA notified the Company that it still believed the Earn-out should be treated as a derivative financial instrument. This will result in a new liability being reported on the balance sheet, with changes in the valuation of this liability appearing on the income statement as non-cash adjustments. As a result, the Company now expects to restate its financial statements for the year ended December 31, 2009, and subsequent periods to recognize a derivative liability relating to the Earn-out.

Mr. Yong Hui Li, AutoChina’s Chairman and CEO, stated, “With the conclusion of the OCA appeal, we look forward to completing our audited financial results for the year ended December 31, 2010, and moving forward. It is important to note that this restatement relates to non-cash items, and we do not believe that these adjustments will negatively affect our operations or ability to grow our business.”

Cancellation of Earn-out for 2011

With regard to the Company’s cancellation of the Earn-out for the year ending December 31, 2011, Mr. Li commented, “The Company’s management team, Board of Directors, and I have agreed that it is in the Company’s best interests to eliminate the Earn-out for 2011, in addition to previously having eliminated the Earn-out for 2012 and 2013. Our management team is dedicated to aligning our interests with those of shareholders. With this cancellation, any overhang that may have existed from our initial business combination will end after we complete our audit for the year ended December 31, 2010, and issue Earn-out shares, if any, for that year in accordance with the amended thresholds we previously announced. We remain focused on the Company’s operations and building AutoChina’s leading position in the commercial vehicle finance market.”

Background on Earn-out

The Earn-out was part of the Share Exchange Agreement by which AutoChina completed its initial business combination in April 2009. Pursuant to the Earn-out, AutoChina was required to issue between 5% and 20% of the number of ordinary shares outstanding as of December 31 of the fiscal year immediately prior to each such Earn-out issuance for achieving certain EBITDA thresholds in each of the five years following the initial business combination, through the year ending December 31, 2013. Honest Best Int’l Ltd., the sole shareholder of the target acquired in the initial business combination and an entity affiliated with AutoChina’s founder, Chairman, and Chief Executive Officer Mr. Yong Hui Li, receives the shares issued, if any, pursuant to the Earn-out.

In February 2011, the Company announced the elimination of the Earn-out for 2012 and 2013, and the cancellation of the Earn-out provisions that provided for shares to be issued at EBITDA growth rates of less than 70% for 2010 and 2011.

With the announcement of this additional amendment cancelling the Earn-out for 2011, the Earn-out will be completely eliminated upon the completion of the Company’s audit for the year ended December 31, 2010, and issuance of shares, if any, pursuant to the amended Earn-out for 2010.

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. The Company owns and operates 354 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.

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