Carfinco Announces Increase In Net Earnings For Second Quarter of 2009



    TSX: CFN.UN

    EDMONTON, Aug. 6 /CNW/ - Carfinco Income Fund, Canada's leading
automotive specialty finance income fund, today announced its results for the
second quarter of 2009.
    Second quarter revenues were $8.1 million compared to $7.9 million in the
same period last year. Net earnings were $1.8 million (8 cents per unit), an
increase of $2.5 million (11 cents per unit) from the net loss of $0.7 million
in the second quarter one year ago.
    "The changes that we made to our credit policies and loan programs in
July 2008 are starting to bear fruit in terms of significantly improved
delinquency rates," said Tracy Graf, President and CEO of Carfinco. "Given the
economy, we are maintaining a level of caution and prudence; but the direction
of our business through the first half of 2009 now has us optimistic about the
months ahead."
    For the first half of 2009, revenues were $16.2 million compared to $15.5
million last year, an increase of 4.3%. Net earnings for the first six months
were $2.5 million (11 cents per unit), an increase of $4.6 million (20 cents
per unit) from the net loss of $2.1 million one year ago.
    In the second quarter, loan originations were $16.7 million, an increase
of 8.4% over the first quarter of 2009, but a decrease of 22.0% from $21.4
million for the same period in 2008. The economic slowdown in Alberta has had
an impact on loan originations in the first half of 2009, as Carfinco had
taken necessary, proactive measures to lessen the risk of increased
delinquencies in this province due to the lay-offs and uncertainty in the oil
and gas industry.
    As of June 30, finance receivables were $109.5 million versus $105.8
million one year ago, an increase of 3.5%.
    In 2008, the Fund experienced higher overall delinquency and charge off
levels, due to increases in energy and gas prices, a decrease in used vehicle
prices at auction, as well as higher unemployment levels. Carfinco responded
to the economic conditions by implementing changes to credit criteria, to
ensure that customers are better able to meet their payment obligations, and
changes to collection procedures, to more efficiently process collection
activities.
    During the second quarter of 2009, Carfinco implemented an automated
predictive dialer system for use by account management personnel. The dialer
system is a powerful tool for Carfinco in terms of increasing efficiency on
customer service and collection calls.
    The Fund continues to utilize GPS and "Starter Interrupt" technology in
vehicles on its GO Plan program, where the dealer has a vested interest in the
performance of finance receivables, and can receive additional purchase
consideration based on the collection performance of these receivables. This
technology provides a significant deterrent to delinquency.
    "We are pleased that the actions taken to rectify the Fund's challenges
in 2008 are starting to show in our financial performance," added Graf. "We
hope to see the full effect of these initiatives by the fourth quarter of this
year. Carfinco is now positioned to generate business which should provide the
returns witnessed by the Fund prior to the economic downturn, regardless
of--and, in part, due to--the current economy, which generates additional
demand for our distinct lending niche."

    About Carfinco

    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.

    
    Carfinco Income Fund
    Consolidated Balance Sheets
    -------------------------------------------------------------------------

                                                       June 30,  December 31,
                                                          2009          2008
                                                  ------------- -------------
                                                    (unaudited)     (audited)

    Assets
      Finance receivables                         $109,486,712  $108,016,961
        Allowance for credit losses                (12,400,000)  (12,190,000)
        Dealer reserve                              (3,890,356)   (2,454,715)
                                                  ------------- -------------
          Finance receivables - net                 93,196,356    93,372,246
                                                  ------------- -------------

      Cash                                             157,232        29,162
      Other assets                                     472,525       633,178
      Equipment                                        420,301       456,841
                                                  ------------- -------------
                                                     1,050,058     1,119,181
                                                  ------------- -------------

                                                  $ 94,246,414  $ 94,491,427
                                                  ------------- -------------
                                                  ------------- -------------

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

    Liabilities
      Bank credit facility                        $ 65,532,058  $ 67,878,411
      Accounts payable and accrued liabilities         687,641       502,989
      Deferred dealer obligation                     1,588,806     1,604,385
      Derivatives                                    1,473,587     1,983,486
      Long term debt                                 2,143,000     2,300,000
                                                  ------------- -------------
                                                    71,425,092    74,269,271
                                                  ------------- -------------

    Unitholders' Equity
      Unitholders' capital                          29,635,129    29,583,463
      Deficit                                       (6,813,807)   (9,361,307)
                                                  ------------- -------------
                                                    22,821,322    20,222,156
                                                  ------------- -------------

                                                  $ 94,246,414  $ 94,491,427
                                                  ------------- -------------
                                                  ------------- -------------

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



    Carfinco Income Fund
    Consolidated Statements of Earnings (Loss), Comprehensive Income (Loss)
    and Deficit
    -------------------------------------------------------------------------

                      Three months ended June 30    Six months ended June 30
                      --------------------------- ---------------------------
                            2009          2008          2009          2008
                      ------------- ------------- ------------- -------------
                        (unaudited)   (unaudited)   (unaudited)   (unaudited)

    Financial Revenue
      Interest        $  7,642,954  $  7,448,636  $ 15,194,825  $ 14,523,762
      Administration
       fees                476,214       479,200       974,531       980,038
                      ------------- ------------- ------------- -------------
                         8,119,168     7,927,836    16,169,356    15,503,800

    Financial Expense
      Interest           1,060,544     1,178,544     2,199,787     2,255,650
                      ------------- ------------- ------------- -------------
    Net financial
     income before
     provision for
     credit losses       7,058,624     6,749,292    13,969,569    13,248,150

      Provision for
       credit losses     3,222,147     5,353,889     7,001,011    10,336,692
                      ------------- ------------- ------------- -------------
    Net financial
     income before
     operating expenses  3,836,477     1,395,403     6,968,558     2,911,458
                      ------------- ------------- ------------- -------------
    Operating Expenses
      General and
      administrative    2,429,380      2,379,356     4,841,637     4,730,448
      (Gain) loss on
       derivatives       (416,316)      (292,990)     (509,898)      239,799
    Amortization of
     equipment             44,514         30,183        89,319        58,404
                      ------------- ------------- ------------- -------------
                        2,057,578      2,116,549     4,421,058     5,028,651
                      ------------- ------------- ------------- -------------

    Net earnings (loss)
     and comprehensive
     income (loss)    $ 1,778,899   $   (721,146) $  2,547,500  $ (2,117,193)
                      ------------- ------------- ------------- -------------
                      ------------- ------------- ------------- -------------

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

    Deficit,
     beginning of
     period           $(8,592,706)  $ (8,769,791) $ (9,361,307) $ (5,483,698)
    Net earnings
     (loss)             1,778,899       (721,146)    2,547,500    (2,117,193)
    Cash distribution
     of fund unit
     equity                     -              -             -    (1,890,046)
                      ------------- ------------- ------------- -------------
    Deficit, end of
     period           $(6,813,807)  $ (9,490,937) $ (6,813,807) $ (9,490,937)
                      ------------- ------------- ------------- -------------
                      ------------- ------------- ------------- -------------

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

    Earnings (Loss)
     per Fund Unit
      Basic and
       diluted        $       0.08  $      (0.03) $       0.11  $      (0.09)
                      ------------- ------------- ------------- -------------
                      ------------- ------------- ------------- -------------

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



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

                      Three months ended June 30    Six months ended June 30
                      ------------- ------------- ------------- -------------
                            2009          2008          2009          2008
                      ------------- ------------- ------------- -------------
                        (unaudited)   (unaudited)   (unaudited)   (unaudited)

    Increase (decrease)
     in cash

    Operating
      Net earnings
      (loss)          $  1,778,899  $   (721,146) $  2,547,500  $ (2,117,193)

      Adjustments to
       reconcile net
       earnings (loss)
       to net cash
       from
       operations:
        Provision for
        credit losses    3,222,147     5,353,889     7,001,011    10,336,692
       Amortization
        of equipment        44,514        30,183        89,319        58,404
       Accrued interest     87,753       (57,019)      199,567      (118,454)
       Deferred dealer
        obligation         450,000       300,000       900,000       525,000
       Derivatives        (416,316)     (292,990)     (509,898)      239,799
       Accounts
        payable and
        accrued
        liabilities        125,462        44,392       184,652    (1,006,185)
       Other assets         84,225       (41,171)      160,653        39,404
                      ------------- ------------- ------------- -------------
                         5,376,684     4,616,138    10,572,804     7,957,467
                      ------------- ------------- ------------- -------------
    Investing
      Funds advanced
       on finance
       receivables     (13,294,908)  (19,225,466)  (25,561,268)  (37,114,246)
      Principal
       collections on
       finance
       receivables      10,780,175    11,168,105    20,738,736    21,349,619
      Change in finance
       receivable
       reserves and
       transaction
       costs            (1,583,677)   (1,456,908)   (3,117,736)   (2,995,310)
      Purchase of
       equipment           (11,013)      (22,126)      (52,779)      (80,894)
                      ------------- ------------- ------------- -------------
                        (4,109,423)   (9,536,395)   (7,993,047)  (18,840,831)
                      ------------- ------------- ------------- -------------
    Financing
      Advances
       on bank credit
       facility          1,058,482     6,380,651     1,953,647    15,383,508
      Repayments on bank
       credit facility  (2,200,000)   (3,400,000)   (4,300,000)   (4,200,000)
      Issuance of long
       term debt                 -     1,800,000             -     1,800,000
      Repayment of long
       term debt          (157,000)            -      (157,000)            -
      Repayments on
       unit purchase
       financing                 -             -        51,666        51,666
      Fund unit cash
       distribution              -             -             -    (1,890,046)
                      ------------- ------------- ------------- -------------
                        (1,298,518)    4,780,651    (2,451,687)   11,145,128
                      ------------- ------------- ------------- -------------

    Net (decrease)
     increase in cash      (31,257)     (139,606)      128,070       261,764

    Cash
      Beginning of
       period              188,489       235,484        29,162      (165,886)
                      ------------- ------------- ------------- -------------

    End of period     $    157,232  $     95,878  $    157,232  $     95,878
                      ------------- ------------- ------------- -------------
                      ------------- ------------- ------------- -------------

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

    Supplemental cash
     flow information:
      Interest paid   $    986,783  $  1,101,250  $  2,049,922  $  2,147,271
                      ------------- ------------- ------------- -------------
                      ------------- ------------- ------------- -------------

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

    %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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