Carfinco Announces Year End Results

TSX: CFN

EDMONTON, March 20, 2014 /CNW/ - Carfinco Financial Group Inc. ("Carfinco" or the "Company") announces financial results for the fourth quarter and year ended December 31, 2013.

The year 2013 was a busy one for Carfinco.   We expanded into the United States through the acquisition of Persian Acceptance Corp. ("PAC"), bid on a second U.S. company, Western Funding Incorporated ("WFI"), and continued to grow our ongoing business in Canada.

Our entry into the United States started in September of 2013 when Carfinco announced its acquisition of Massachusetts based Persian Acceptance Corp.  In November of 2013, we announced that Carfinco was the "stalking horse bidder" to acquire Las Vegas based Western Funding Incorporated.  While Carfinco was an active bidder, we ultimately chose not to provide the highest bid and did not acquire WFI.  We will however continue to evaluate potential acquisitions that we believe will benefit the Company and its shareholders.

Net earnings for 2013 were $20.2 million, a decrease of $0.4 million from $20.6 million in fiscal 2012. Net earnings for the Canada operating segment in fiscal 2013 were $21.7 million, an increase of $0.5 million from $21.2 million in the prior year. The USA operating segment contributed $0.7 million to earnings in the year. As mentioned, PAC was acquired in September and therefore only contributed to income for 118 days during the year. Overall, the remaining change in net earnings is included in the Corporate operating segment which incurred a loss of $2.2 million in fiscal 2013, an increase from the loss of $0.6 million in fiscal 2012. Included in this segment is a net expense of $1.2 million Carfinco incurred pursuing the acquisitions of PAC and WFI which is non-recurring in nature. The Corporate operating segment contains all assets, liabilities, revenues, and expenses not directly attributable to an operating segment, as well as all purchase price allocation entries associated with business combinations and other consolidation adjustments.

Net earnings of $5.1 million for the fourth quarter of 2013 are an increase of 17.9% from the $4.3 million for the third quarter of 2013 and an increase of 1.7% from the $5.0 million for the fourth quarter of 2012.

During 2013 Carfinco also introduced a number of new finance programs in Canada, giving its vehicle dealership base a wider range of products to offer to their customers requiring non-traditional forms of financing to purchase a vehicle.  The competitive landscape in the Canadian non-prime automotive finance industry increased significantly during the year with start-up finance companies introducing products which compete directly with Carfinco as well as competing with Canadian financial institutions providing near-prime financing. The non-prime auto finance industry in Canada has become one of the most competitive it has been historically which has had an impact on the Company's loan origination volume and growth.  Carfinco believes it is at a competitive advantage with the knowledge and data it has accumulated over its 17 years of doing business in this industry and will continue to implement business practices that have made the Company successful and profitable for our shareholders.

Loan originations for 2013 were $171.6 million, an increase of $22.0 million, or 14.7%, from $149.6 million for 2012.  Loan originations of $46.0 million for the fourth quarter of 2013 were a 1.1% decrease from the $46.5 million in loan originations for the third quarter of 2013 and an increase of 14.8% from the $40.1 million in the fourth quarter of 2012.  The decrease from the third quarter to the fourth quarter is primarily due to the decline in vehicles being financed during the holiday season and is consistent with the decrease of 0.8% for the same time period of 2012.

HIGHLIGHTS FOR THE YEAR AND YEAR ENDED

  • On September 4, 2013, the Company expanded into the United States with the acquisition of Persian Acceptance Corp.;
  • Earnings per share of 78 cents;
  • Distributions to shareholders of 48 cents per share;
  • Return on shareholders' equity of 36.0%;
  • Record loan originations of $171.6 million;
  • Record principal balance of finance receivables of $271.2 million;
  • 31+ day delinquent accounts of 4.0%.

Revenues of $85.0 million for 2013 increased 18.4% from the revenues of $71.8 million for 2012.  Revenues of $24.8 million for the fourth quarter of 2013 represent an increase of 16.0% from the $21.4 million for the third quarter of 2013 and a 29.6% increase from the $19.2 million for the fourth quarter of 2012.

Finance receivables at the end of 2013 were $244.2 million, an increase of 33.6% from $182.8 million at the end of 2012.  This increase includes the acquisition of PAC in 2013 which had $37.2 million of finance receivables outstanding as of December 31, 2013.

31+ days delinquent accounts for the fourth quarter of 2013 were 4.0% versus 3.2% for the fourth quarter of 2012. On a segmented basis, 31+ days delinquent accounts in the Canadian segment were 3.2% and were 8.7% for the USA segment as of December 31, 2013. In the prior year, all 31+ days delinquent accounts were in the Canadian segment. The USA segment aging is affected by three different items from Canada, which can lead to a lower aging presentation including: their accounts are on a weekly payment schedule, they have a set payment day each week that may not coincide with the month-end cut-off day, and they do not charge off accounts at 90 days delinquent, but rather at the point of liquidation.

During 2013, we distributed $12.5 million to shareholders, or 48 cents per share, and this represents 48.1% of distributable cash.  Carfinco continues to maintain a dividend to its shareholders, paying 4.0 cents per share per month for the past 18 months.

In April of 2013, Carfinco closed a common share financing, issuing 1,771,000 common shares of Carfinco from treasury at a price of $9.75 per share of which a portion of the proceeds raised were used for the acquisition of PAC.  The combination of the common share financing, along with shares issued as purchase consideration on acquisition of PAC, the Company's number of shares outstanding increased to 26,471,453 during the year, up 7.4%.

Management continues to target organic and potential acquisition growth of the finance receivables while focusing on maintaining acceptable levels of delinquencies and credit losses.

Thank you to all our shareholders for your continued support and to our staff for your continued efforts.

Tracy Graf,
Chief Executive Officer

SEGMENTED REPORTING                      
                       
Year ended December 31, 2013       Canada     USA     Corporate     Total
Interest revenue     $  75,051,065   $  5,003,676   $  (493,378)   $  79,561,363
Fee and servicing income       4,736,748     300,421     388,252     5,425,421
Total financial revenue     79,787,813     5,304,097     (105,126)     84,986,784
Interest expense       6,457,342     632,115     -     7,089,457
Provision for credit losses       29,503,440     1,819,106     -     31,322,546
Gain on interest rate swap       (74,517)     -     -      (74,517)
Loss on contingent consideration       -     -     80,935     80,935
Depreciation of equipment       201,689     19,043      -     220,732
Amortization of intangibles       -     20,639     74,482     95,121
General and administrative expenses      14,911,470     1,734,214     2,707,112     19,352,796
Earnings (loss) before taxes     28,788,389     1,078,980     (2,967,655)     26,899,714
Taxes (recovery)       7,107,027     377,139     (783,628)     6,700,538
Net earnings (loss)    $  21,681,362   $  701,841   $  (2,184,027)   $  20,199,176
                       
Year ended December 31, 2012       Canada     USA     Corporate     Total
Interest revenue     66,193,874   $  -   $  -   $  66,193,874
Fee and servicing income       5,614,878     -     -     5,614,878
Total financial revenue     71,808,752     -     -     71,808,752
Interest expense       5,917,276     -     -     5,917,276
Provision for credit losses       23,651,197     -     -     23,651,197
Loss on interest rate swap       234,348     -     -      234,348
Depreciation of equipment       175,451     -     -      175,451
General and administrative expenses      13,610,476     -     607,597     14,218,073
Earnings before taxes      28,220,004     -     (607,597)     27,612,407
Taxes       6,983,687      -     38,101     7,021,788
Net earnings    $  21,236,317   $  -   $  (645,698)   $  20,590,619

For additional information relating to the Company, including the Company's financial statements and management's discussion and analysis as at December 31, 2013 and 2012, please visit www.carfinco.com or SEDAR at www.sedar.com.

A live conference call will be held on Friday, March 21, 2014 at 11:00am MT (1:00pm ET) and will include a discussion by management about Carfinco's year end results followed by a question and answer period.

Participants can access the conference call by phone within Canada and the U.S. by dialing the following numbers:

North America Toll-Free:  1-888-400-3310
Internationally:    1-416-850-9144

Callers should dial in five to ten minutes prior to the scheduled start time.  An audio webcast may be accessed through the Investor Relations page on our web site at (www.carfinco.com). Audio replays will be available on our web site shortly after the conclusion of the conference call.

About Carfinco Financial Group Inc.

Carfinco, through its Canadian and United States subsidiaries (collectively, "Carfinco"), focuses on providing indirect 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 plans to their customers who must, along with the vehicle, meet Carfinco's underwriting guidelines. The shares of Carfinco 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 Annual Information and Key Financial Ratios          
           
($000's for stated value, except percentages, shares outstanding and per share amounts)
           
  December 31, 2013   December 31, 2012
Financial revenue  $  84,987   $  71,809
Normalized earnings before taxes  $  29,085   $  27,883
Earnings before taxes  $  26,900   $  27,612
Net earnings  $  20,199   $  20,591
           
Earnings per share - basic and diluted $  0.78   $  0.84
Cash dividends  $ 12,476   $  11,583
Cash dividends per share  $  0.480   $  0.470
Book value per share  $  2.58   $  1.78
           
Total assets   $ 243,218   $  176,542
Finance receivables  $  244,194   $  182,843
Loan originations  $ 171,625   $  149,613
Annualized loss rate     13.6%     12.9%
Delinquency percentage     4.00%     3.20%
           
Average portfolio yield     39.8%     43.1%
Average cost of borrowing     4.8%     5.2%
Operating and other expense ratio on portfolio assets     9.2%     8.6%
Financial leverage ratio     2.25:1     2.97:1
Return on shareholders' equity     36.0%     52.2%
Return on portfolio assets     9.5%     12.4%
Pre-tax return on portfolio assets     12.6%     16.6%



Consolidated Statements of Financial Position            
      December 31,     December 31,
      2013     2012
Assets            
Finance receivable         $  244,194,281   $  182,842,663
  Allowance for credit losses           (11,475,000)     (9,250,000)
Finance receivables - net            232,719,281     173,592,663
             
Cash           1,626,552     459,498
Inventories            314,548     313,014
Other assets            2,397,347     1,172,998
Equipment            885,217     550,261
Goodwill           3,036,169     -
Intangible assets           1,267,796      -
Deferred tax assets           971,320     453,340
      10,498,949      2,949,111
    $  243,218,230   $  176,541,774
             
Liabilities            
Bank credit facilities        $  160,511,596   $  126,787,937
Accounts payable and accrued liabilities            1,891,534     697,672
Subordinated debentures           6,174,198      -
Taxes payable            249,288     2,363,670
Deferred tax liability            792,302     -
Deferred dealer obligation           2,927,085     2,076,396
Interest rate swaps            410,147     484,665
Deferred lease inducement           130,872     163,590
Contingent consideration           1,791,178      -
      174,878,200     132,573,930
             
Shareholders' Equity            
Share capital           51,630,280     35,119,425
Retained earnings           16,571,489     8,848,419
Accumulated other comprehensive income           138,261     -
      68,340,030     43,967,844
    $  243,218,230   $  176,541,774



Consolidated Statements of Earnings, and Other Comprehensive Income            
             
      December 31,      December 31,
For the years ended           2013     2012
             
Financial revenue            
  Interest revenue        $  79,561,363   $  66,193,874
  Fee and servicing income           5,425,421     5,614,878
  Total revenue           84,986,784      71,808,752
             
Financial expenses            
  Interest expense           7,089,457     5,917,276
  Provision for credit losses           31,322,546      23,651,197
  (Gain) loss on interest rate swaps           (74,517)     234,348
  Total financial expense           38,337,486      29,802,821
Net financial income before operating and other expenses and taxes        46,649,298      42,005,931
             
Operating and other expenses            
  General and administrative           19,352,796      14,182,284
  Depreciation of equipment           220,732      175,451
  Amortization of intangible assets           95,121      -
  Loss on contingent consideration           80,935      -
  Conversion costs           -      35,789
  Total operating and other expenses           19,749,584      14,393,524
Earnings before taxes           26,899,714      27,612,407
             
Taxes            
  Current           7,473,597     7,210,426
  Deferred (recovery)           (773,059)      (188,638)
  Total taxes           6,700,538      7,021,788
Net earnings        20,199,176   $  20,590,619
             
Other comprehensive income            
  Foreign currency translation differences on            
  foreign operation, net of tax of $10,390          138,261          -
Comprehensive income        20,337,437   $  20,590,619
             
Earnings per share            
  Basic and diluted        0.78   $  0.84



Consolidated Statements of Changes in Equity                                
                                 
                          Accumulated      
                    Retained      other      
        Fund unit      Share     earnings      comprehensive      
        equity      capital      (deficit)      income      Total
Balance, December 31, 2011      $  35,119,425    $  -   $  (158,942)    $  -   $  34,960,483
  Conversion under plan of                                
      arrangement         (35,119,425)      35,119,425       -     -      -
  Net earnings        -       -      20,590,619     -       20,590,619
  Cash dividends on shares         -     -      (11,583,258)      -       (11,583,258)
Balance, December 31, 2012         -     35,119,425      8,848,419      -       43,967,844
  Share issuance, net of costs         -     16,029,594     -      -     16,029,594
  Share issuance on business                                
      acquisition, net of costs         -      481,261     -      -      481,261
  Net earnings         -      -     20,199,176     -     20,199,176
  Cash dividends on shares         -      -      (12,476,106)     -     (12,476,106)
  Foreign currency translation                                
      differences on foreign operation         -     -      -      138,261     138,261
Balance December 31, 2013      $  -    $  51,630,280    $  16,571,489   $  138,261    $  68,340,030



Consolidated Statements of Cash Flows            
             
      December 31,     December 31,
For the years ended           2013     2012
Increase (decrease) in cash            
             
Operating activities            
  Net earnings        $  20,199,176   $  20,590,619
  Non-cash items included in net earnings           (34,126,551)      (29,193,814)
  Changes in operating assets and liabilities           (31,764,588)      (34,327,000)
  Interest received           57,945,614     46,147,154
  Interest paid           (6,867,332)     (5,729,732)
  Income taxes paid           (9,567,454)      (9,953,422)
Net cash used in operating activities           (4,181,135)      (12,466,195)
             
Investing activities            
  Purchase of equipment           (286,865)     (380,976)
  Purchase of intangible assets          (41,976)      -
  Business combination, net of cash acquired          (8,318,557)       -
Net cash used in investing activities           (8,647,398)      (380,976)
             
Financing activities            
  Advances on bank credit facilities         39,283,000       32,290,954
  Repayments on bank credit facilities          (28,633,126)      (8,050,000)
  Deferred transaction costs           (188,491)     (289,021)
  Cash dividends to shareholders           (12,476,106)      (11,583,258)
  Proceeds on treasury share issuance          17,267,250     -
  Share issuance costs           (1,244,721)     -
Net cash provided by financing activities           14,007,806      12,368,675
             
Net increase (decrease) in cash           1,179,273      (478,496)
Cash, beginning of year           459,498     937,994
Effects of foreign exchange rate changes on cash held in foreign currency        (12,219)     -
Cash, end of year        $  1,626,552   $  459,498

 

 

 

 

 

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
Investor Relations
Telephone: 1-888-221-0915
E-mail: jeff@howardgroupinc.com
Web site:  www.howardgroupinc.com