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Press release from CNW Group

Element Financial Reports Strong Q1 2012 Financial Results with Origination Volumes and Profitability ahead of Plan

Tuesday, May 15, 2012

Element Financial Reports Strong Q1 2012 Financial Results with Origination Volumes and Profitability ahead of Plan00:01 EDT Tuesday, May 15, 2012/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES LAW./Element reported new business volumes of $156.6 million during the quarter ended March 31, 2012, an increase of $139.8 million over the volumes reported for the three-month period ended March 31, 2011.Newly launched Element Capital contributed $93.4 million to the new business volumes, ahead of plan, including a new vendor finance program with Bombardier Business Aircraft.Element Financial contributed $63.2 million in new business volumes, ahead of plan, including an expanded program with E-Z-Go golf cart dealers.Total revenues increased to $6.5 million during the current quarter, an increase of $5.8 million over the amount reported during the same quarter of the previous year.Positive net operating income from operations before non-cash share-based compensation expense was $0.9 million during the quarter compared to a loss of $0.8 million for the comparative quarter of the previous year, ahead of profitability targets.Earnings per share were $0.00 during the quarter compared to a loss of $0.26 for the quarter ended March 31, 2011.TORONTO, May 14, 2012 /CNW/ - Element Financial Corporation (TSX: EFN) ("Element"), one of Canada's leading independent equipment finance companies, today announced ahead of plan originations and profitability and financial results for the first quarter of calendar 2012."The financial results for the three-month-period ended March 31, 2012 reflect the transformation the Company underwent in the previous year and the continuation of our business strategy to expand into new verticals", stated Steven Hudson, Chairman and Chief Executive Officer of Element. "We are especially proud of the financial results of the Company during the current quarter which saw Element achieving before tax break-even status and a record level of originations all ahead of plan," further indicated Mr. Hudson. "We are also excited about the continued prospects for Element Capital including a significant new vendor finance program with Bombardier" added Mr. Hudson.Growth of Element CapitalDuring the quarter ended March 31, 2012, Element established Element Capital, a business unit dedicated to large equipment financing and leasing transactions, which originated $93.4 million in new business volumes during the current quarter exceeding the Company's originations target for the quarter. The new business unit is on track to continue its growth momentum for the balance of the year.Growth of Element FinancialElement Financial, the mid-ticket equipment leasing business unit, also reported strong originations of $63.2 million for the quarter in line with the Company's expectations and a 7% growth quarter over quarter. The Company expects continued growth in this business unit from increased brand awareness and as additional vendor programs are secured.Financial Results Three-Month Period Ended March 31, 2012Basis of presentationThe unaudited condensed consolidated financial statements for the three-month period ended March 31, 2012 have been prepared on the historical cost method in accordance with International Financial Reporting Standards ("IFRS") and are reported in Canadian dollars.The selected financial information included in this press release is summary only and should be read in conjunction with the Company's unaudited condensed consolidated financial statements as at and for the three-month period ended March 31, 2012 and the audited consolidated financial statements as at and for the nine-month period ended December 31, 2011, and the notes thereto, and accompanying management discussion and analysis of such results that have been filed on SEDAR at www.sedar.com.Highlights:Total originations reached a record $156.6 million during the quarter ended March 31, 2012, an increase of $139.8 million over total originations reported for the quarter ended March 31, 2011.Total originations during the quarter for $156.6 million already exceed total originations of $136.2 million generated during the previous twelve month period.Total revenues reached a record level of $6.5 million during the quarter ended March 31, 2012, an increase of $5.8 million over revenues reported for the same period of the previous year.The Company's net operating income from operations before non-cash share-based compensation expense for the three-month period ended March 31, 2012 was $0.9 million compared to a loss of $0.8 million for the same quarter of the previous year.The Company's net loss before income taxes for the three-month period ended March 31, 2012 was $16,000 compared to a net loss before income taxes of $0.9 million for the three-month period ended March 31, 2011.Basic and diluted earnings per share was $0.00 for the three-month period ended March 31, 2012 compared to loss of $0.06 for the previous and immediate quarter ended December 31, 2011, and a loss of $0.26 for the comparative quarter ended March 31, 2011.Selected Financial Information and Financial RatiosThe following table summarizes key financial data to be read in conjunction with the consolidated financial statements of the Company as at and for the three-month period ended March 31, 2012:(in $000's for stated values, except ratios and per share amounts)As at and for the three-month period endedMarch 31, 2012As at and for the three-month period endedMarch 31, 2011As at and for the nine-month period endedDecember 31, 2011 $$$Total revenue6,49271010,386Operating loss before transaction costs(16)(936)(1,587)Transaction costs--5,957Loss after transaction costs and before taxes(16)(936)(7,544)Net loss after taxes(261)(936)(6,071)Total assets428,16047,073416,715Finance receivables, net358,60837,586231,537Loan originations        Financial63,21116,837119,671     Capital93,394-- 156,60516,837119,671Loan Acquisition--158,474 156,60516,837278,145Total  non-current liabilities - Secured borrowings154,81233,250172,517Average outstanding finance receivable249,20929,134168,099Average outstanding debt158,97924,473119,624Number of Shares outstanding66,3844,41266,380Average number of shares outstanding66,3814,09233,302Total Shareholders' equity239,0148,001238,341Average total shareholders' equity238,4037,19897,269Net loss per share (basic and diluted)($0.00)($0.26)($0.18)  Results of Operations - Three-Month Period Ended March 31, 2012The following table sets forth a summary of the Company's results of operations for the three-month period ended March 31, 2012, and the three-month period ended March 31, 2011:(in 000's for stated values, except per unit amounts)Three-monthperiod endedMarch 31, 2012Three-monthperiod endedMarch 31, 2011 $$Financial revenue6,492710Financial expenses2,470450Net financial income4,022260Operating expenses3,1181,065Net operating income (loss) from operations before share-based compensation904(805)Share-based compensation920131Net loss before taxes(16)(936)Tax expense (recovery)245-Net loss for the period(261)(936)Basic and diluted loss per share($0.00)($0.26)   Financial revenueFinancial revenue was $6.5 million for the three-month period ended March 31, 2012, an increase of $5.8 million over the amount reported during the same quarter ended March 31, 2011, an increase of over 814%. Interest income representing $5.5 million of revenues, represents a yield on average outstanding assets of 8.89% in line with the Company's expectation resulting from the existing mix of business. Interest income grew substantially during the current period as a result of total new business volumes of $156.6 million compared to $16.8 million for the same quarter of the previous year resulting in average outstanding assets of $249.9 million during the current quarter compared to $29.1 million during the same quarter of the previous year.New business volumes for the quarter included $93.4 million originated by Element Capital, the new business vertical established back in January 2012. Element Capital is on target to meet its forecasted level of originations during the current year. Element Capital's origination platforms and volume are expected to continue to expand as  this business unit develops a broader base of vendor and direct customer relationships along with improved brand awareness in the market and from its expanding sales force.Other revenue for $1.0 million represents other interest income items on surplus cash on hand during the quarter and certain fees associated with the new business activities of Element Capital.Financial expenseFinancial expenses on average debt outstanding of $159.0 million during the current three-month period were $2.5 million during the quarter, compared to $0.5 million during the same quarter of the previous year. The increase is the result of increased average outstanding debt during the period in order to support the increased level of originations and related required financing. Interest expense was $1.4 million during the current three-month period representing a debt cost yield of 3.9% over average outstanding debt. The average yield on the outstanding debt is in line with the mix of financing available to the Company during the quarterOther financial expenses for $1.1 million represent the amortization of deferred debt origination costs and deferred lease origination costs and the provision for doubtful accounts.Operating ExpensesOperating expenses were $3.1 million for the three-month period ended March 31, 2012 an increase of $2.0 million or 191% compared to $1.2 million for the three-month period ended March 31, 2011. This increase reflects the additional investments made by the Company in its infrastructure and labor force as it positions itself for future growth. Operating expenses as a percentage of average finance assets were 5.01% for the three-month period ended March 31, 2012 a marked improvement compared to 14.72% for the three-month period ended March 31, 2011 reflecting the growing asset level and its impact on fixed operating costs. It is expected that these costs as a percentage of average assets will continue to decline in the future as the Company continues to expand its operations and as fixed operating costs become absorbed by a larger average earning asset base.Share-based compensationShare-based compensation represents non-cash value attributed to the options granted to the employees and directors, which value is being amortized over the vesting term of the underlying options. The amounts are calculated using the Black-Scholes option pricing model. Share-based compensation expenses were $0.9 million for the three-month period ended March 31, 2012 compared to $0.1 million for the three-month period ended March 31, 2011. The increase in share-based compensation for the three-month period ended March 31, 2012 is the single result of the additional grants provided to during the interim periods.About Element Financial CorporationElement Financial Corporation is an independent finance company that originates, manages and funds equipment leases. Element Financial Corporation operates in two specific segments of the equipment finance market through Element Capital, a business unit operating in the large ticket equipment leasing and Element Finance that, currently originates equipment finance assets within specific segments of the mid-ticket equipment finance market through its four specialized groups: manufacturing and industrial, transportation and construction, healthcare and golf equipment, each of which has national scope and coverage. Please visit www.elementfinancial.ca for more information.Forward Looking StatementsThis release includes forward-looking statements regarding Element and its business. Such statements are based on the current expectations and views of future events of Element's management. In some cases the forward-looking statements can be identified by words or phrases such as "may", "will", "expect", "plan", "anticipate", "intend", "potential", "estimate", "believe" or the negative of these terms, or other similar expressions intended to identify forward-looking statements. The forward-looking events and circumstances discussed in this release, including Element's intention to increase its market share, expand strategic vendor relationships (including its new relationship with Bombardier), establish a presence in additional equipment verticals, and assess potential acquisition opportunities, as well as the intended use of proceeds from the private placement,  may not occur and could differ materially as a result of known and unknown risk factors and uncertainties affecting the company, including risks regarding the equipment finance industry, economic factors and the equity markets generally and many other factors beyond the control of Element. No forward-looking statement can be guaranteed. Forward-looking statements and information by their nature are based on assumptions and involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statement or information. Accordingly, readers should not place undue reliance on any forward-looking statements or information. Except as required by applicable securities laws, forward-looking statements speak only as of the date on which they are made and Element undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.  For further information: Investor Contact: Jim MoreVice Chairman & Senior Executive Vice President   (416) 386-1067 ext. 219 jmore@elementfinancial.ca