Carfinco Announces 2007 Third Quarter Results



    Online Portals Contribute to Record Loan Originations

    TSX: CFN.UN

    EDMONTON, Nov. 8 /CNW/ - Carfinco Income Fund, Canada's leading
automotive specialty finance income fund, today announced its results for the
third quarter of 2007.

    
    Highlights:

    -   Record loan originations, due in part to significant contributions
        from the online portal
    -   Continued momentum in quarterly revenue growth
    -   Distributable cash increases 24.4% year-to-date versus the same
        period of 2006
    -   Completed pilot testing and national roll out of DealerAccess, a
        second online portal
    

    "Carfinco delivered another excellent quarter, in respect to accelerated
growth in loan originations, revenues and finance receivables," said Tracy
Graf, President and CEO of Carfinco. "There continues to be high demand in our
niche, with over 1,350 vehicle dealerships signed up across the country to use
Carfinco's programs. With our proven ability in this distinct market, one of
our biggest challenges is reaching customers from coast-to-coast, and we have
made progress in this regard throughout 2007."
    Carfinco achieved record loan originations in the third quarter of
$21.0 million, up 46.1% versus the same quarter one year ago, and an increase
of 9.0% over the second quarter of 2007. These results reflect increasing
business from the online portal Curomax, with the roll out of another online
portal, DealerAccess, during the fourth quarter of 2007.
    At quarter end, finance receivables were $92.1 million, a year-over-year
increase of 26.0%. Revenues for the quarter were $7.0 million, up 21.6%
compared to the third quarter of 2006, and continuing Carfinco's quarterly
growth momentum, with an increase of 9.1% versus the second quarter of 2007.
    Carfinco's impressive growth in finance receivables is having a positive
impact on revenues; however, the impact of non-cash contributions to the
allowance for credit losses is having a short-term negative impact on
accounting earnings. Although the Fund's Regular Program (under which most of
the new loans fall) incurs the lowest losses of all its programs, there is a
requirement to increase the Fund's allowance for credit losses, which is
recorded as an expense through the provision for credit losses. During the
third quarter of 2007, this non-cash expense totaled $819,500 compared to
$160,000 for the third quarter of 2006.
    Net earnings were also affected by a second non-cash expense entry of
$250,770 to the account "Loss on Derivatives." During the quarter, Carfinco
entered into two interest rate swap agreements to effectively lock the
interest rate on $20.0 million of its debt facility at rates equivalent to a
prime rate of 6.5% for terms of three and five years on $10.0 million,
respectively. While this was prudent operationally, it resulted in the
non-cash entry to reflect the market value of these instruments based on the
future interest rate yield curve.
    As a result of the two non-cash expenses above, net earnings for the
quarter were $754,322, or 3 cents per unit, compared to $1,648,737, or 9 cents
per unit in 2006, both basic and diluted. Prior to non-cash expenses for the
increase in the allowance for credit losses and the loss on derivatives, net
earnings for the three months ended September 30, 2007 were $1.8 million
compared with $1.8 million for the comparable period in 2006.
    For the nine months ended September 30, 2007, loan originations were
$53.0 million compared to $40.8 million last year; an increase of 29.8%.
Revenues were $19.4 million, up 22.2% versus the first nine months of 2006.
Net earnings for the nine months ended September 30, 2007 were $3.9 million,
or 18 cents per unit, compared to $4.6 million, or 24 cents per unit, both
basic and diluted. Prior to non-cash expenses for the increase in the
allowance for credit losses and the loss on derivatives, net earnings for the
nine months ended September 30, 2007 were $5.0 million compared with
$4.9 million year-to-date in 2006. As previously mentioned, net earnings were
negatively affected by these two non-cash accounting entries.
    Carfinco continued its monthly distributions to Unitholders of 2.7 cents
per month with year-to-date cash distribution per unit, as at October 31, 2007
totaling 27.0 cents. The distributable cash for the nine months ended
September 30, 2007 was $5.2 million compared to $4.2 million for the nine
months ended September 30, 2006; an increase of 24.4%. The payout ratio for
the nine months ended September 30, 2007 was 101.3% compared to 80.5% for the
nine months ended September 30, 2006.
    During the quarter, Carfinco completed pilot testing of a second online
portal, DealerAccess. This portal is now fully operational in the fourth
quarter and has already had a positive impact on loan originations, which
continues to grow since its roll out in the first quarter of 2007.
    "The Board of Trustees and Management continue to place high importance
on the growth of the finance receivables without sacrificing underwriting
policies. We are achieving this with the assistance of the portals, as well as
our dealer representatives visiting dealerships across Canada," said Mr. Graf.
"While this accelerated growth in the finance receivables and revenues is
beneficial to the long term goals and success of the Fund, it is putting
pressure on net earnings with the necessity to contribute to the Allowance for
Credit Losses. The time frame of this pressure on net earnings will be
determined by timing and amount of growth in new loan originations."

    About Carfinco Income Fund

    A growth-oriented income trust, Carfinco focuses on providing consumer
car 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.

    
    -------------------------------------------------------------------------

    Carfinco Income Fund
    Consolidated Balance Sheets
    -------------------------------------------------------------------------
                                    September 30,  December 31, September 30,
                                            2007          2006          2006
                                    ------------- ------------- -------------
                                      (unaudited)     (audited)   (unaudited)

    Assets
      Finance receivables           $ 92,103,460  $ 75,988,710  $ 73,073,426
        Allowance for credit losses   (4,715,000)   (3,860,000)   (3,770,000)
        Dealer reserve                (2,249,823)   (2,700,751)   (2,690,192)
                                    ------------- ------------- -------------
          Finance receivables - net   85,138,637    69,427,959    66,613,234
                                    ------------- ------------- -------------

      Cash                                95,177       141,546       173,726
      Other assets                       551,193       102,519       115,686
      Capital assets                     376,900       341,987       306,155
      Deferred costs                      49,788       125,549        35,901
      Future income taxes                 51,393             -             -
                                    ------------- ------------- -------------
                                       1,124,451       711,601       631,468
                                    ------------- ------------- -------------

                                    $ 86,263,088  $ 70,139,560  $ 67,244,702
                                    ------------- ------------- -------------
                                    ------------- ------------- -------------

    -------------------------------------------------------------------------

    Liabilities
      Bank credit facility          $ 52,222,989  $ 47,392,821  $ 46,684,148
      Accounts payable and accrued
       liabilities                     1,422,988       651,248       873,736
      Deferred administration fees     3,551,619     2,824,982     2,798,374
      Deferred dealer obligation       2,704,883     2,448,348     2,380,917
      Deferred gain                       81,742       188,071       223,514
      Derivatives                        250,770             -             -
      Long term debt                           -             -     2,600,000
                                    ------------- ------------- -------------
                                      60,234,991    53,505,470    55,560,689
                                    ------------- ------------- -------------
    Unitholders' Equity
      Unitholders' capital            29,583,190    18,852,866    13,002,940
      Deficit                         (3,555,093)   (2,218,776)   (1,318,927)
                                    ------------- ------------- -------------
                                      26,028,097    16,634,090    11,684,013
                                    ------------- ------------- -------------

                                    $ 86,263,088  $ 70,139,560  $ 67,244,702
                                    ------------- ------------- -------------
                                    ------------- ------------- -------------

    -------------------------------------------------------------------------



    -------------------------------------------------------------------------

    Carfinco Income Fund
    Consolidated Statements of Earnings and Deficit
    -------------------------------------------------------------------------

                      Three months ended Sept. 30  Nine months ended Sept. 30
                      ------------- ------------- ------------- -------------
                            2007          2006          2007          2006
                      ------------- ------------- ------------- -------------
                        (unaudited)   (unaudited)   (unaudited)   (unaudited)

    Revenues
      Interest income $  5,751,661  $  4,749,313  $ 15,925,078  $ 12,902,365
      Administration
       fees              1,226,034       998,234     3,437,921     2,940,991
                      ------------- ------------- ------------- -------------
                         6,977,695     5,737,547    19,362,999    15,843,356
                      ------------- ------------- ------------- -------------
    Expenses
      Interest             833,581       826,613     2,458,375     2,102,016
      Loss on derivatives  250,770             -       250,770             -
      Financing fees        17,980        18,981        75,761        54,379
      Provision for
       credit losses     2,739,453     1,501,972     6,209,899     4,168,066
      Amortization of
       capital assets       28,143        24,099        80,784        60,056
      General and
       administrative    2,353,446     1,717,145     6,403,116     4,867,036
                      ------------- ------------- ------------- -------------
                         6,223,373     4,088,810    15,478,705    11,251,553
                      ------------- ------------- ------------- -------------

    Net earnings      $    754,322  $  1,648,737  $  3,884,294  $  4,591,803
                      ------------- ------------- ------------- -------------
                      ------------- ------------- ------------- -------------

    -------------------------------------------------------------------------

    Deficit,
     beginning of
     period           $ (2,419,369) $ (1,500,813) $ (2,218,776) $ (1,714,418)
      Net earnings         754,322     1,648,737     3,884,294     4,591,803
      Cash distribution
       of fund unit
       equity           (1,890,046)   (1,466,851)   (5,220,611)   (4,196,312)
                      ------------- ------------- ------------- -------------
    Deficit, end of
     period           $ (3,555,093) $ (1,318,927) $ (3,555,093) $ (1,318,927)
                      ------------- ------------- ------------- -------------
                      ------------- ------------- ------------- -------------

    -------------------------------------------------------------------------

    Earnings per Fund
     Unit
      Basic and
       diluted        $       0.03  $       0.09  $       0.18  $       0.24
                      ------------- ------------- ------------- -------------
                      ------------- ------------- ------------- -------------

    -------------------------------------------------------------------------



    -------------------------------------------------------------------------

    Carfinco Income Fund
    Consolidated Statements of Cash Flows
    -------------------------------------------------------------------------

                      Three months ended Sept. 30  Nine months ended Sept. 30
                      --------------------------- ---------------------------
                            2007          2006          2007          2006
                      ------------- ------------- ------------- -------------
                        (unaudited)   (unaudited)   (unaudited)   (unaudited)

    Increase (decrease)
     in cash and cash
     equivalents

    Operating
      Net earnings    $    754,322  $  1,648,737  $  3,884,294  $  4,591,803

      Adjustments to
       reconcile net
       earnings to
       net cash from
       operations:
        Provision for
         credit losses   2,739,453     1,501,972     6,209,899     4,168,066
        Amortization of
         capital assets     28,143        24,099        80,784        60,056
        Accrued interest  (163,177)       (1,208)      (28,263)       (8,819)
        Administration
         fees
         receivable     (1,042,852)     (676,721)   (2,902,182)   (2,223,978)
        Deferred
         administration
         fees              356,136       169,956       726,637       331,914
        Deferred costs      17,980        18,981        75,761        26,210
        Deferred gain      (35,443)      173,800      (106,329)      146,935
        Deferred dealer
         obligation        225,000        75,000       375,000       330,000
        Derivatives        250,770             -       250,770             -
        Accounts payable
         and accrued
         liabilities       416,403       (84,295)      771,740       136,638
        Other assets        94,147         7,744      (448,674)      (72,476)
        Future income
         taxes                   -             -       (51,393)            -
                      ------------- ------------- ------------- -------------
                         3,640,882     2,858,065     8,838,044     7,486,349
                      ------------- ------------- ------------- -------------
    Investing
      Funds advanced
       on finance
       receivables     (18,939,684)  (12,319,648)  (47,232,772)  (34,155,648)
      Principal
       collections on
       finance
       receivables       9,549,692     7,247,114    28,124,175    21,388,096
      Purchase of
       capital assets      (12,144)      (71,353)     (115,697)     (138,942)
                      ------------- ------------- ------------- -------------
                        (9,402,136)   (5,143,887)  (19,224,294)  (12,906,494)
                      ------------- ------------- ------------- -------------

    Financing
      Advances on bank
       credit facility   9,169,230     4,505,890    18,330,168     9,924,562
      Repayments on bank
       credit facility  (1,500,000)   (1,700,000)  (13,500,000)   (2,300,000)
      Issuance of long
       term debt                 -     1,000,000             -     2,200,000
      Repayment of
       long term debt            -             -             -      (100,000)
      Repayments
       (advances) on
       unit purchase
       financing                 -             -        82,666     (186,000)
      Fund units issued
       on public
       offering                  -             -    11,500,065            -
      Fund unit issue
       costs                     -             -      (852,407)           -
      Fund unit cash
       distribution     (1,890,046)   (1,466,851)   (5,220,611)  (4,196,312)
                      ------------- ------------- ------------- -------------
                         5,779,184     2,339,039    10,339,881    5,342,250
                      ------------- ------------- ------------- -------------

    Net increase
     (decrease) in
     cash and cash
     equivalents            17,930        53,217       (46,369)     (77,895)

    Cash and cash
     equivalents
      Beginning of
       period               77,247       120,509       141,546      251,621
                      ------------- ------------- ------------- -------------

      End of period   $     95,177  $    173,726  $     95,177  $   173,726
                      ------------- ------------- ------------- -------------
                      ------------- ------------- ------------- -------------

    -------------------------------------------------------------------------

    Supplemental cash
     flow information:
      Interest paid   $    833,581  $    826,613  $   2,458,375 $  2,094,613
                      ------------- ------------- ------------- -------------
                      ------------- ------------- ------------- -------------

    -------------------------------------------------------------------------
    

    %SEDAR: 00019164E




For further information:

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

Organization Profile

Carfinco Financial Group Inc.

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