Carfinco Announces Tenth Consecutive Quarter of Record Pre-tax Earnings

TSX: CFN.UN

EDMONTON, Nov. 8, 2011 /CNW/ - We are pleased to report $6.0 million in earnings before income taxes for the third quarter of 2011, making it the 10th consecutive quarter of record pre-tax earnings for the Fund.

With current and deferred income tax expenses totaling $1.6 million, net earnings for the quarter were $4.3 million, a 0.8% increase from the second quarter of 2011.  During the third quarter of 2011 the Fund achieved an annualized, after-tax return on unitholder's equity ("ROE") of 52.6%.

As announced earlier this year, the Fund was awarded a servicing contract to administer a substantial portfolio of Canadian automotive loans owned by a US entity.  In preparation to service this portfolio, the Fund incurred additional operating expenses during the quarter without having the benefit of additional revenues for servicing the portfolio, other than the receipt of a start-up fee.  These operating expenses include such items as opening an office in Laval, Quebec and hiring and training over 20 new employees.  Carfinco commenced servicing the portfolio on October 1, 2011, and the fourth quarter of 2011 will be the first quarter of recognizing servicing fee income from this portfolio.  Servicing this portfolio will generate additional revenue for the Fund over the next 24 to 36 months as the loans mature.  The service center in Quebec will also benefit the Fund in terms of managing its own portfolio as it builds its presence in the province of Quebec and continues to increase its finance receivables in the other provinces in Eastern Canada.

Similar to the previous two quarters, the third quarter of 2011 is now reported under International Financial Reporting Standards ("IFRS").  Certain comparative figures for 2010 differ from previously reported figures presented under Canadian GAAP in order to conform to IFRS and be comparable to Q3 2011 figures.

Highlights

  • Pre-tax earnings for the quarter were $6.0 million, up 21.5% from the $4.9 million for the third quarter of 2010;
  • Earnings per fund unit for the quarter was 18 cents;
  • Unitholder's equity increased 7.4% to $34.0 million during the quarter;
  • Loan originations for the quarter were $31.7 million, a 22.7% increase from the $25.8 million for the third quarter of 2010;
  • Principal balance of finance receivables was $160.3 million, increasing 5.1% during the quarter and 13.6% for the first nine months of 2011, putting us close to our target of 20% growth for the year;
  • 31+ days delinquent accounts for the quarter were 2.7%, similar to the 2.6% for the second quarter of 2011 and a decrease from 3.0% for the third quarter of 2010.

For the first nine months of 2011 the Fund has distributed $5.4 million in cash to its Unitholders, which equates to 42.5% of net earnings.  In retaining 57.5% of net earnings the Fund's book value per unit has increased 27.8% during the first nine months of 2011.

Revenues of $15.2 million for the third quarter of 2011 represent an increase of 20.7% from the $12.6 million for the third quarter of 2010 and a 5.7% increase from the $14.4 million for the second quarter of 2011.

Pre-tax earnings for the quarter were $6.0 million, up 21.5% from the $4.9 million for the third quarter of 2010 and 3.2% from the $5.8 million for the second quarter of 2011.

Loan originations for the third quarter of 2011 were $31.7 million, a 22.7% increase from the $25.8 million for the third quarter of 2010 and a 13.3% increase from the $28.0 million for the second quarter of 2011.

Significant Events

On October 17, 2011, the Board of Trustees of the Fund unanimously approved a proposed transaction providing for the conversion of the Fund from an income trust to a corporation.  On November 21, 2011 there will be a special meeting of Unitholders of Carfinco Income Fund where Unitholders will vote on a plan of arrangement (the "Arrangement") that would result in the conversion of the Fund on a tax-deferred basis to a corporate entity expected to be effective January, 2012.   The new public corporation would be named Carfinco Financial Group Inc. and will trade on the TSX.  If the Arrangement is approved, the Board of Directors of Carfinco Financial Group Inc. intend to implement a dividend policy, effective January 2012, of 3.0 cents per month per share which is the same as the Fund's current cash distribution policy of 3.0 cents per month per unit held.

About Carfinco Income Fund

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 units of the Fund trade on The Toronto Stock Exchange under the symbol "CFN.UN".

Caution Regarding Forward-Looking Statements - This news release contains certain forward-looking statements, including statements regarding the business and anticipated financial performance of the Fund.  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.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION      
  September 30, December 31, January 1,
(unaudited) 2011 2010 2010
       
Assets      
Finance receivables $ 143,196,071 $ 125,228,265 $ 101,403,463
     Allowance for credit losses (6,410,000) (5,383,100) (7,236,000)
Finance receivables - net 136,786,071 119,845,165 94,167,463
Cash 617,702 839,620 467,674
Inventories 191,808 147,000 287,800
Other assets 1,077,888 896,982 520,206
Equipment 322,041 352,407 373,433
Deferred tax assets 440,674 1,160,352 180,519
  2,650,113 3,396,361 1,829,632
  $ 139,436,184 $ 123,241,526 $ 95,997,095
       
Liabilities      
Bank credit facility $ 98,450,139 $ 93,159,937 $ 68,438,145
Accounts payable and accrued liabilities 775,672 898,678 694,519
Taxes payable 3,768,946 - -
Deferred dealer obligation 1,944,452 1,854,567 1,847,863
Derivative financial instruments 363,956 548,596 1,096,128
Subordinated debentures - - 2,143,000
Unit based payment obligation 116,691 76,936 31,809
  105,419,856 96,538,714 74,251,464
Unitholders' Equity      
Fund unit equity 35,119,425  35,119,425 30,566,633
Contributed surplus 615,362 615,362 615,362
Deficit (1,718,459) (9,031,975) (9,436,364)
  34,016,328 26,702,812 21,745,631
  $ 139,436,184 $ 123,241,526 $ 95,997,095



CONSOLIDATED STATEMENTS OF EARNINGS, AND COMPREHENSIVE INCOME
 
  Three months ended Nine months ended
  September 30,   September 30,   September 30,   September 30,
(unaudited)   2011     2010     2011     2010
Financial revenue                      
  Interest revenue $ 14,243,145   $ 11,938,981   $ 40,676,943   $ 33,455,731
  Fee income   944,961     640,674     2,392,565     1,886,053
    15,188,106     12,579,655     43,069,508     35,341,784
Financial expenses                      
  Interest expense   1,293,706     1,122,662     3,738,255     3,155,299
  Provision for credit losses   4,946,714     4,131,768     13,897,671     12,574,774
  Gain on derivative financial instruments   (43,914)     (114,028)     (184,640)     (422,445)
Net financial income before operating expenses and taxes   8,991,600     7,439,253     25,618,222     20,034,156
Operating expenses                      
  General and administrative   2,989,748     2,433,806     8,212,501     7,096,649
  Loss on unit based payment obligation   2,115     63,712     39,755     20,884
  Depreciation of equipment   47,023     42,688     149,209     130,870
    3,038,886     2,540,206     8,401,465     7,248,403
                       
Earnings before taxes   5,952,714     4,899,047     17,216,757     12,785,753
Taxes                      
  Current   1,250,538     -     3,768,946     -
  Deferred (recovery)   382,070     (86,858)     719,678     (221,764)
    1,632,608     (86,858)     4,488,624     (221,764)
                       
Net earnings and comprehensive income $ 4,320,106   $ 4,985,905   $ 12,728,133   $ 13,007,517
                       
Earnings per fund unit                      
  Basic $ 0.18   $ 0.20   $ 0.52   $ 0.53
  Diluted $ 0.18   $ 0.20   $ 0.52   $ 0.53




CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
 
    Fund unit   Contributed        
(unaudited)   equity   surplus   Deficit   Total
Balance, January 1, 2010   $ 30,566,633   $ 615,362   $ (9,436,364)   $ 21,745,631
  Net earnings     -     -     13,007,517     13,007,517
  Cash distributions on fund unit equity     -     -     (9,942,414)     (9,942,414)
Balance, September 30, 2010     30,566,633     615,362     (6,371,261)     24,810,734
  Net earnings     -     -     6,219,151     6,219,151
  Cash distributions on fund unit equity     -     -     (4,319,828)     (4,319,828)
  Unit distributions on fund unit equity     4,560,037     -     (4,560,037)     -
  Fund unit issuance costs, net of tax     (7,245)     -     -     (7,245)
Balance, December 31, 2010     35,119,425     615,362     (9,031,975)     26,702,812
  Net earnings     -     -     12,728,133     12,728,133
  Cash distributions on fund unit equity     -     -     (5,414,617)     (5,414,617)
Balance, September 30, 2011   $  35,119,425    $ 615,362   $  (1,718,459)   $ 34,016,328



CONSOLIDATED STATEMENTS OF CASH FLOWS
     
    Nine months ended
    September 30,   September 30,
(unaudited)   2011   2010
             
Increase (decrease) in cash            
             
Operating activities            
  Net earnings   $ 12,728,133   $ 13,007,517
  Non-cash items included in net earnings     (18,548,069)     (18,218,113)
  Changes in operating assets and liabilities     (19,264,006)     (22,427,095)
  Interest received     28,806,796     23,652,272
  Interest paid     (3,613,333)     (3,017,950)
Net cash provided by (used in) operating activities     109,521     (7,003,369)
             
Investing activities            
             
  Purchase of equipment     (118,843)     (150,452)
Net cash used in investing activities     (118,843)     (150,452)
             
Financing activities            
  Advances on bank credit facility     10,740,314     19,398,675
  Repayments on bank credit facility     (5,400,000)     -
  Repayments on subordinated debentures     -     (2,143,000)
  Deferred transaction costs     (138,293)     (141,928)
  Proceeds on exercise of fund unit options     -     66,666
  Fund unit cash distributions     (5,414,617)     (9,942,414)
Net cash (used in) provided by financing activities     (212,596)      7,237,999
Net (decrease) increase in cash     (221,918)     84,178
Cash, beginning of period     839,620     467,674
Cash, end of period   $ 617,702   $ 551,852

 

 

SOURCE Carfinco Income Fund

For further information:

Mr. Tracy A. Graf
CEO & Trustee of Carfinco Income Fund
Telephone: 1-888-486-4356
Facsimile: 1-888-486-7456
E-mail: tgraf@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

 

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