Carfinco Announces Second Quarter 2012 Results Normalized Earnings Before Taxes up 28.0% Over 2011
TSX: CFN
EDMONTON, Aug. 9, 2012 /CNW/ - Carfinco Financial Group Inc. ("Carfinco" or the "Company") announces financial results for the second quarter ended June 30, 2012.
We are pleased to report net earnings of $5.4 million for the quarter, up from $4.6 million in the first quarter of 2012, an increase of 16.9%. Year-to-date earnings are $10.0 million, an increase of 19.4% over the first half of 2011 of $8.4 million. Record loan originations of $36.8 million were achieved in the quarter, a 13.6% increase from $32.4 million in the first quarter of 2012 and, on a year-to-date basis, were up to $69.1 million, or 32.0%, from $52.4 million in the first half of 2011.
As mentioned in our news release dated March 9, 2012, Carfinco entered into an interest rate swap agreement, with a notional amount of $100 million, a fixed bankers' acceptance rate of 1.55% and a three year term that ends March 9, 2015 during the first quarter of 2012. This is in addition to Carfinco's pre-existing interest rate swap agreement with a notional amount of $10 million due to expire in August of this year. For the six months ended June 30, 2012, Carfinco recorded a $710,232 non-cash expense related to adjustments on the fair market value of the interest rate swap agreements. This is in comparison to a non-cash gain of $140,726 in the comparable prior year period. Normalizing the impact of these entries and other significant non-cash and non-recurring expenses, Carfinco's pre-tax earnings for the six months ended were $14.3 million, up 28.0% from $11.2 million in the prior year comparative period.
HIGHLIGHTS
- During the second quarter of 2012 Carfinco distributed 10.5 cents per share to its shareholders equating to a payout ratio of 45.1% on distributable cash;
- Revenues of $17.7 million for the second quarter of 2012 represent an increase of 5.3% from the $16.8 million for the first quarter of 2012 and 22.9% from the $14.4 million for the second quarter of 2011;
- Earnings before taxes for the quarter were $7.2 million, up 14.3% from $6.3 million for the first quarter of 2012 and 25.2% from $5.8 million for the second quarter of 2011;
- Normalized earnings before taxes for the quarter were $7.7 million, up 15.9% from the $6.6 million in the first quarter of 2012 and 33.5% from the $5.7 million for the second quarter of 2011;
- Earnings per share for the quarter were 22 cents, up 15.8% from the 19 cents per share recorded for the first quarter of 2012 and 29.4% from the 17 cents per unit recorded for the second quarter of 2011;
- Return on shareholder's equity (ROE) for the quarter on an annualized, after tax, basis was 55.8% versus 56.3% for the second quarter of 2011;
- Shareholder's equity increased 7.6% to $40.2 million during the quarter;
- Loan originations for the quarter were $36.8 million, a 13.6% increase from the $32.4 million for the first quarter of 2012 and an increase of 31.4% from the $28.0 million for the second quarter of 2011;
- Principal balance of finance receivables was $181.1 million, increasing 5.0% in the quarter;
- 31+ days delinquent accounts for the quarter were 2.2%, a decrease from 2.5% at the end of the first quarter of 2012.
Management continues to target monthly loan originations at a level that will achieve approximately 20% growth in finance receivables for the year. The majority of our current loan originations continue to come from Carfinco's pre-existing underwriting programs that have been in place for a number of years. Even though we have developed tiered, risk-based pricing programs, they continue to remain a minimal portion of our loan portfolio as we have been able to achieve our growth targets with our pre-existing underwriting programs. The development of tiered, risk based pricing programs provides a substantial opportunity for future growth. We have seen positive results in loan originations with the addition of new dealer representatives in strategic areas, and we continue to focus on cultivating our existing dealership relationships and adding new dealerships to provide Carfinco's finance programs.
During the quarter, the board of directors of Carfinco announced an increase in the monthly dividend of 0.5 cents, bringing the monthly cash dividend to 3.5 cents per share. For the quarter, the payout ratio was 45.1% of distributable cash.
About Carfinco Financial Group Inc.
Carfinco focuses on providing consumer vehicle loans to borrowers unable to obtain financing through traditional lending sources. A network of select independent and franchise dealerships offer Carfinco's payment plan to their customers who must, along with the vehicle, meet Carfinco's underwriting guidelines. The shares of the company trade on The Toronto Stock Exchange under the symbol "CFN".
Caution Regarding Forward-Looking Statements - This news release contains certain forward-looking statements, including statements regarding the business and anticipated financial performance of the company. These statements are subject to a number of risks and uncertainties. Actual results may differ materially from results contemplated by the forward-looking statements. When relying on forward-looking statements to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and should not place undue reliance on such forward-looking statements.
| Selected Quarterly Information and Key Financial Ratios (unaudited) | ||||||||
| ($000's for stated values, except percentages, shares/units outstanding and per share/unit amounts) | ||||||||
| June 30, 2012 | December 31, 2011 | June 30, 2011 | ||||||
| Total revenue | $ | 17,660 | $ | 16,514 | $ | 14,371 | ||
| Net earnings | $ | 5,410 | $ | 4,393 | $ | 4,284 | ||
| Normalized earnings before taxes | $ | 7,669 | $ | 6,263 | $ | 5,746 | ||
| Earnings per share/unit - basic and diluted | $ | 0.22 | $ | 0.18 | $ | 0.17 | ||
| Loan originations | $ | 36,774 | $ | 32,217 | $ | 27,984 | ||
| Shareholders'/unitholders' equity | $ | 40,195 | $ | 34,960 | $ | 31,665 | ||
| Shares/units outstanding | 24,645,230 | 24,645,230 | 24,611,896 | |||||
| Book value per share/unit | $ | 1.63 | $ | 1.42 | $ | 1.29 | ||
| Cash dividend/distribution per share/unit 1 | $ | 0.105 | $ | 0.140 | $ | 0.075 | ||
| Financial leverage ratio | 2.84:1 | 3.15:1 | 3.13:1 | |||||
| Return on shareholders'/unitholders' equity | 55.8% | 51.0% | 56.3% | |||||
| Average portfolio yield | 44.4% | 45.0% | 43.4% | |||||
| Annualized loss rate | 11.2% | 13.2% | 12.4% | |||||
| Return on portfolio assets | 13.6% | 12.0% | 12.9% | |||||
| Pre-tax return on portfolio assets | 18.1% | 16.1% | 17.4% | |||||
| Average cost of borrowing | 5.3% | 5.2% | 5.3% | |||||
| Operating and other expense ratio | ||||||||
| on portfolio assets | 9.0% | 10.4% | 8.4% | |||||
| |
(1) Cash distributions for the period ended December 31, 2011 include a special cash distribution of $0.05 per unit. |
| Consolidated Statements of Financial Position | ||||||
| June 30, 2012 |
December 31, 2011 |
|||||
| (unaudited) | (audited) | |||||
| Assets | ||||||
| Finance receivables | $ | 163,283,754 | $ | 150,463,909 | ||
| Allowance for credit losses | (7,950,000) | (7,150,000) | ||||
| Finance receivables - net | 155,333,754 | 143,313,909 | ||||
| Cash | 958,074 | 937,994 | ||||
| Inventories | 118,019 | 239,453 | ||||
| Other assets | 958,482 | 1,167,268 | ||||
| Equipment | 468,276 | 344,736 | ||||
| Deferred tax assets | 331,509 | 264,702 | ||||
| 2,834,360 | 2,954,153 | |||||
| $ | 158,168,114 | $ | 146,268,062 | |||
| Liabilities | ||||||
| Bank credit facility | $ | 112,698,272 | $ | 102,675,941 | ||
| Accounts payable and accrued liabilities | 902,455 | 1,205,892 | ||||
| Taxes payable | 1,129,022 | 5,106,667 | ||||
| Provision for deferred dealer obligation | 2,102,618 | 2,068,762 | ||||
| Derivative financial instruments | 960,550 | 250,317 | ||||
| Deferred lease inducement | 179,949 | - | ||||
| 117,972,866 | 111,307,579 | |||||
| Shareholders'/Unitholders' Equity | ||||||
| Share capital/fund unit equity | 35,119,425 | 35,119,425 | ||||
| Retained earnings (deficit) | 5,075,823 | (158,942) | ||||
| 40,195,248 | 34,960,483 | |||||
| $ | 158,168,114 | $ | 146,268,062 | |||
| Consolidated Statements of Earnings, and Comprehensive Income | |||||||||
| Three months ended | Six months ended | ||||||||
| (unaudited) |
June 30, 2012 |
June 30, 2011 |
June 30, 2012 |
June 30, 2011 |
|||||
| Financial revenue | |||||||||
| Interest revenue | $ | 16,179,672 | $ | 13,680,950 | $ | 31,448,361 | $ | 26,433,798 | |
| Fee and servicing income | 1,480,099 | 689,586 | 2,977,653 | 1,447,604 | |||||
| 17,659,771 | 14,370,536 | 34,426,014 | 27,881,402 | ||||||
| Financial expenses | |||||||||
| Interest expense | 1,465,347 | 1,255,168 | 2,813,561 | 2,444,549 | |||||
| Provision for credit losses | 4,923,313 | 4,635,948 | 10,181,366 | 8,950,957 | |||||
| Loss (gain) on derivative financial instruments | 450,038 | (58,817) | 710,232 | (140,726) | |||||
| 6,838,698 | 5,832,299 | 13,705,159 | 11,254,780 | ||||||
| Net financial income before operating and other expenses and taxes | 10,821,073 | 8,538,237 | 20,720,855 | 16,626,622 | |||||
| Operating and other expenses | |||||||||
| General and administrative | 3,549,681 | 2,687,090 | 7,048,145 | 5,222,753 | |||||
| Depreciation of equipment | 52,350 | 45,970 | 98,831 | 102,186 | |||||
| Conversion costs (recovery) | (1,780) | - | 35,789 | - | |||||
| Loss on unit based payment obligation | - | 35,860 | - | 37,640 | |||||
| 3,600,251 | 2,768,920 | 7,182,765 | 5,362,579 | ||||||
| Earnings before taxes | 7,220,822 | 5,769,317 | 13,538,090 | 11,264,043 | |||||
| Taxes | |||||||||
| Current | 1,844,236 | 941,943 | 3,564,312 | 2,518,408 | |||||
| Deferred (recovery) | (33,830) | 543,463 | (66,807) | 337,608 | |||||
| 1,810,406 | 1,485,406 | 3,497,505 | 2,856,016 | ||||||
| Net earnings and comprehensive income | $ | 5,410,416 | $ | 4,283,911 | $ | 10,040,585 | $ | 8,408,027 | |
| Earnings per share/unit | |||||||||
| Basic and diluted | $ | 0.22 | $ | 0.17 | $ | 0.41 | $ | 0.34 | |
| Consolidated Statements of Changes in Equity | |||||||
| (unaudited) |
Share capital/ Fund unit equity |
Retained earnings (deficit) |
Total | ||||
| Balance, December 31, 2010 | $ | 35,119,425 | $ | (8,416,613) | $ | 26,702,812 | |
| Net earnings | - | 17,121,620 | 17,121,620 | ||||
| Cash distributions on fund unit equity | - | (8,863,949) | (8,863,949) | ||||
| Balance, December 31, 2011 | 35,119,425 | (158,942) | 34,960,483 | ||||
| Net earnings | - | 10,040,585 | 10,040,585 | ||||
| Cash dividends on shares | - | (4,805,820) | (4,805,820) | ||||
| Balance, June 30, 2012 | $ | 35,119,425 | $ | 5,075,823 | $ | 40,195,248 | |
| Consolidated Statements of Cash Flows | |||||||||
| Three months ended | Six months ended | ||||||||
| (unaudited) |
June 30, 2012 |
June 30, 2011 |
June 30, 2012 |
June 30, 2011 |
|||||
| Increase (decrease) in cash | |||||||||
| Operating activities | |||||||||
| Net earnings | $ | 5,410,416 | $ | 4,283,911 | $ | 10,040,585 | $ | 8,408,027 | |
| Non-cash items included in net earnings | (7,478,218) | (6,281,415) | (14,146,866) | (12,183,176) | |||||
| Changes in operating assets and liabilities | (7,460,366) | (6,447,746) | (12,498,641) | (11,305,612) | |||||
| Interest received | 11,247,492 | 9,522,845 | 21,971,844 | 18,821,659 | |||||
| Interest paid | (1,424,042) | (1,208,755) | (2,729,994) | (2,365,944) | |||||
| Income taxes paid | (1,230,304) | - | (7,541,957) | - | |||||
| Net cash (used in) provided by operating activities | (935,022) | (131,160) | (4,905,029) | 1,374,954 | |||||
| Investing activities | |||||||||
| Purchase of equipment | (109,926) | (37,800) | (222,371) | (45,457) | |||||
| Net cash used in investing activities | (109,926) | (37,800) | (222,371) | (45,457) | |||||
| Financing activities | |||||||||
| Advances on bank credit facility | 3,982,791 | 4,757,224 | 12,753,300 | 6,581,470 | |||||
| Repayments on bank credit facility | - | (2,600,000) | (2,800,000) | (4,650,000) | |||||
| Deferred transaction costs | - | (131,274) | - | (131,274) | |||||
| Share/fund unit cash dividend/distributions | (2,587,749) | (1,845,892) | (4,805,820) | (3,445,665) | |||||
| Net cash provided by (used in) financing activities | 1,395,042 | 180,058 | 5,147,480 | (1,645,469) | |||||
| Net increase (decrease) in cash | 350,094 | 11,098 | 20,080 | (315,972) | |||||
| Cash, beginning of period | 607,980 | 512,550 | 937,994 | 839,620 | |||||
| Cash, end of period | $ | 958,074 | $ | 523,648 | $ | 958,074 | $ | 523,648 | |
SOURCE: Carfinco Financial Group Inc.
Mr. Tracy A. Graf
CEO & Director of Carfinco Financial Group Inc.
Telephone: 1-888-486-4356
Facsimile: 1-888-486-7456
E-mail: [email protected]
Web site: www.carfinco.com
The Howard Group Inc.
Jeff Walker / Dave Burwell
Investor Relations
Telephone: 1-888-221-0915
E-mail: [email protected]
Web site: www.howardgroupinc.com
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