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Press release from CNW Group

Carfinco Announces Third Quarter 2012 Results

Wednesday, November 07, 2012

Carfinco Announces Third Quarter 2012 Results18:16 EST Wednesday, November 07, 2012Year-to-Date Loan Originations up 30.2% Over 2011 TSX: CFNEDMONTON, Nov. 7, 2012 /CNW/ - Carfinco Financial Group Inc. ("Carfinco" or the "Company") announces financial results for the third quarter ended September 30, 2012.We are pleased to report net earnings of $5.6 million for the quarter, up from $5.4 million in the second quarter of 2012, an increase of 2.7%. Year-to-date net earnings are $15.6 million, an increase of 22.6% over the net earnings for the first three quarters of 2011 of $12.7 million.  Record loan originations of $40.4 million were achieved in the quarter, a 9.8% increase from $36.8 million in the second quarter of 2012 and, on a year-to-date basis, were $109.5 million, a 30.2% increase, from $84.1 million recorded in the comparable 2011 period.Normalized earnings before taxes for the quarter were $7.1 million as compared to $7.7 million recorded for the second quarter of 2012 and $6.6 million recorded for the first quarter of 2012. The decrease from the second quarter to the third quarter can be attributed to below average charge offs during the second quarter of 2012. The annualized loss rate for the second quarter was 11.2% while the annualized loss rates for both the first and third quarter of 2012 were 12.8%.  The annualized loss rate of 12.8% for the third quarter of 2012 is down from the 13.3% annualized loss rate for the third quarter of 2011.  Please see the section entitled Summary of Quarterly Information contained in the Management's Discussion and Analysis for the third quarter of 2012 for further information.HIGHLIGHTSDuring the third quarter of 2012 Carfinco distributed 10.5 cents per share to its shareholders equating to a payout ratio of 43.1% of distributable cash;Revenues of $18.2 million for the third quarter of 2012 represent an increase of 3.1% from the $17.7 million for the second quarter of 2012 and an increase of 19.9% from the $15.2 million for the third quarter of 2011;Earnings before taxes for the quarter were $7.4 million, up 2.6% from $7.2 million for the second quarter of 2012 and up 24.5% from $6.0 million for the third quarter of 2011;Normalized earnings before taxes for the quarter were $7.1 million, down 7.0% from the $7.7 million in the second quarter of 2012 and up 20.7% from the $5.9 million for the third quarter of 2011;Earnings per share for the quarter were 23 cents, up 4.5% from the 22 cents per share recorded for the second quarter of 2012 and up 27.8% from the 18 cents per unit recorded for the third quarter of 2011;Return on shareholder's equity (ROE) for the quarter on an annualized, after tax, basis was 53.3% versus 55.8% for the second quarter of 2012 and 52.6% for the third quarter of 2011;Shareholder's equity increased 7.4% to $43.2 million during the quarter;Loan originations for the quarter were $40.4 million, a 9.8% increase from the $36.8 million for the second quarter of 2012 and an increase of 27.4% from the $31.7 million for the third quarter of 2011;Principal balance of finance receivables was $193.0 million, increasing 6.6% in the quarter;31+ days delinquent accounts remain under 3%, recording 2.7% at the end of the quarter, in comparison to 2.2% at the end of the second quarter of 2012 and 2.5% at the end of the first quarter of 2012.On October 9, 2012, the Board of Directors of Carfinco announced an increase in the monthly dividend of 0.5 cents, bringing the monthly cash dividend to 4.0 cents per share, effective October 2012.  The increase of the dividend reflects the Company's strong financial results for the year, and our confidence in achieving our objective of approximately 20% annual growth in the finance receivable portfolio. For the third quarter, the payout ratio was 43.1% of distributable cash.On November 5, 2012 the Board of Directors of Carfinco announced that its lending syndicate approved an increase of $50 million to Carfinco's senior credit facility, bringing the total available facility to $180 million.  The interest rate and financial covenants remain unchanged.  The increase in the facility provides the Company with the access to capital needed to achieve our objective of approximately 20% growth in the finance receivable portfolio per annum.  Current growth in loan originations comes from the Company's pre-existing underwriting programs that have been in place for a number of years.  Carfinco has also developed tiered, risk-based pricing programs that constitute a small portion of the portfolio, but provide significant areas for development and future growth opportunities.  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.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) September 30, 2012  December 31, 2011September 30, 2011Total revenue $ 18,206 $ 16,514 $ 15,188Net earnings $ 5,558 $ 4,393 $ 4,320Normalized earnings before taxes $ 7,136 $ 6,263 $ 5,911Earnings per share/unit - basic and diluted $      0.23 $ 0.18 $ 0.18Loan originations $ 40,387 $ 32,217 $ 31,706Shareholders'/unitholders' equity $ 43,165 $ 34,960 $ 34,016Shares/units outstanding   24,645,230   24,645,230  24,611,896Book value per share/unit $ 1.75 $ 1.42 $ 1.38Cash dividend/distribution per share/unit 1 $ 0.105 $ 0.140 $ 0.080Financial leverage ratio   2.83:1   3.15:1  3.06:1Return on shareholders'/unitholders' equity   53.3%   51.0%   52.6%Average portfolio yield         43.1%   45.0%   43.6%Annualized loss rate         12.8%   13.2%  13.3%Return on portfolio assets         13.2%   12.0%  12.4%Pre-tax return on portfolio assets         17.6%   16.1%  17.1%Average cost of borrowing           5.3%   5.2%  5.3%Operating and other expense ratio on portfolio assets     8.5%   10.4%  8.7%(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  September 30,  December 31, 2012  2011 (unaudited)  (audited)Assets Finance receivables      $ 174,514,410 $ 150,463,909 Allowance for credit losses       (8,500,000)  (7,150,000)Finance receivables - net        166,014,410  143,313,909Cash        -  937,994Inventories        215,684  239,453Other assets        1,010,681  1,167,268Equipment        569,164  344,736Deferred tax assets       30,462  264,702  1,825,991  2,954,153 $ 167,840,401 $ 146,268,062Liabilities Bank indebtedness      $ 360,294 $ -Bank credit facility        118,836,332  102,675,941Accounts payable and accrued liabilities        1,012,417  1,205,892Taxes payable        1,475,301  5,106,667Provision for deferred dealer obligation        2,133,456  2,068,762Derivative financial instruments        685,037  250,317Deferred lease inducement       171,770  -  124,674,607  111,307,579Shareholders'/Unitholders' EquityShare capital/fund unit equity        35,119,425  35,119,425Retained earnings (deficit)       8,046,369  (158,942)  43,165,794  34,960,483 $ 167,840,401 $ 146,268,062Consolidated Statements of Earnings, and Comprehensive Income          Three months endedNine months ended September 30,September 30,September 30,September 30,(unaudited)   2012 2011 2012 2011Financial revenue         Interest revenue $ 16,840,381$ 14,243,145$ 48,288,742$ 40,676,943 Fee and servicing income   1,365,780   944,961   4,343,433   2,392,565  18,206,161   15,188,106   52,632,175   43,069,508Financial expenses         Interest expense   1,520,994   1,293,706   4,334,555   3,738,255 Provision for credit losses   5,961,918   4,946,714   16,143,284   13,897,671 (Gain) loss on derivative financial instruments   (275,512)   (43,914)   434,720   (184,640)  7,207,400   6,196,506   20,912,559   17,451,286Net financial income before operating and other expenses and taxes   10,998,761   8,991,600   31,719,616   25,618,222Operating and other expenses         General and administrative   3,551,090   2,989,748   10,599,235   8,212,501 Depreciation of equipment   36,316   47,023   135,147   149,209 Conversion costs    -   -   35,789   - Loss on unit based payment obligation   -   2,115   -   39,755  3,587,406   3,038,886   10,770,171   8,401,465         Earnings before taxes   7,411,355   5,952,714   20,949,445   17,216,757Taxes         Current   1,552,013   1,250,538   5,116,325   3,768,946 Deferred    301,047   382,070   234,240   719,678  1,853,060   1,632,608   5,350,565   4,488,624Net earnings and comprehensive income $ 5,558,295$ 4,320,106$ 15,598,880$ 12,728,133Earnings per share/unit         Basic and diluted $ 0.23$ 0.18$ 0.63$ 0.52Consolidated Statements of Changes in Equity       (unaudited)     Share capital/Fund unit equity Retained  earnings  (deficit)   TotalBalance, 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     -   15,598,880   15,598,880 Cash dividends on shares     -   (7,393,569)   (7,393,569)Balance, September 30, 2012    $ 35,119,425$ 8,046,369$ 43,165,794Consolidated Statements of Cash Flows     For the nine months endedSeptember 30,      2012  September 30,  2011  (unaudited)   (unaudited)Increase (decrease) in cash    Operating activities     Net earnings$ 15,598,880$ 12,728,133 Non-cash items included in net earnings       (21,890,471)   (18,548,069) Changes in operating assets and liabilities       (24,144,721)   (19,264,006) Interest received       33,792,280   28,806,796 Interest paid       (4,210,267)   (3,613,333) Income taxes paid       (8,747,689)   -Net cash (used in) provided by operating activities      (9,601,988)   109,521Investing activities     Purchase of equipment       (359,575)   (118,843)Net cash used in investing activities       (359,575)   (118,843)Financing activities     Advances on bank credit facility       21,631,844   10,740,314 Repayments on bank credit facility       (5,550,000)   (5,400,000) Deferred transaction costs       (25,000)   (138,293) Share/fund unit cash dividend/distributions      (7,393,569)   (5,414,617)Net cash provided by (used in) financing activities      8,663,275   (212,596)Net increase (decrease) in cash       (1,298,288)   (221,918)Cash, beginning of period       937,994   839,620Cash, end of period$ (360,294)$ 617,702 SOURCE: Carfinco Financial Group Inc.For further information: Mr. Tracy A. Graf  CEO & Director of Carfinco Financial Group Inc.  Telephone: 1-888-486-4356  Facsimile: 1-888-486-7456  E-mail: tracy.graf@carfinco.com  Web site: www.carfinco.com The Howard Group Inc. Jeff Walker / Dave Burwell Investor Relations Telephone: 1-888-221-0915 E-mail: Info@howardgroupinc.com Web site:  www.howardgroupinc.com