Carfinco Announces Record Earnings For Second Quarter of 2010
TSX: CFN.UN
EDMONTON, July 28 /CNW/ - Carfinco Income Fund, Canada's leading automotive specialty finance income fund, today announced its results for the second quarter of 2010.
The second quarter of 2010 is the 5th consecutive quarter of record net earnings for the Fund. Net earnings of $0.18 per fund unit were recorded for the quarter.
Net earnings of $4.3 million during the second quarter of 2010, represents a 21.4% increase over the previous record of $3.6 million reached in the first quarter of 2010 and a 144.0% increase over the $1.8 million achieved in the second quarter of 2009. This continues the trend of record breaking quarterly earnings for the Fund: $1.8 million, $2.2 million, $2.6 million, $3.6 million and $4.3 respectively for the last five quarters.
HIGHLIGHTS - Net earnings for the quarter were $4.3 million, up 144.0% from the $1.8 million for the second quarter of 2009; - Earnings per fund unit for the quarter were 18 cents, or 72 cents on an annualized basis; - Return on unitholder's equity for the quarter on an annualized basis was 69.2%; - Total cash distributions to unitholders for the quarter were 16 cents per fund unit; - Loan originations were $25.1 million, a 50.6% increase from the second quarter of 2009; - Finance receivables were $125.5 million, increasing by 6.5% during the quarter; - 31+ days delinquent accounts for the quarter were 3.3% a decrease of 32.7% from 4.9% at the end of the second quarter of 2009.
Revenues of $9.2 million for the second quarter of 2010 represent an increase of 6.7% from the $8.6 million for the first quarter of 2010 and a 16.8% increase from the $7.9 million for the second quarter of 2009.
The net earnings of $4.3 million include a $250,000 non-cash reduction in the allowance for credit losses. The Fund continues to monitor its credit loss experience and with the increasing performance of its finance receivables it was deemed appropriate to decrease the allowance for credit losses during the quarter. Excluding this non-cash entry, net earnings for the quarter were $4.1 million, a 14.4% increase from the first quarter of 2010.
As previously mentioned, the earnings per fund unit for the second quarter were 18 cents, or 72 cents on an annualized basis. For the first six months of 2010 the earnings per fund unit were 33 cents, or 66 cents on an annualized basis.
Increased loan originations, within the current underwriting guidelines, are key to this growth. Loan originations of $25.1 million for the quarter represents an increase of 16.6% over the loan originations of $21.5 million for the first quarter of 2010 and an increase of 50.6% over the loan originations of $16.7 million for the second quarter of 2009.
With the increase in originations, our finance receivables grew by 6.5% during the second quarter of 2010. During the first six months of 2010 the finance receivables grew by 10.8%, or 21.6% annualized. This puts us at the higher end of management's stated goal of 15% to 20% growth in the finance receivables during 2010.
During the first six months of 2010 the Fund has paid out 25.5 cents in cash distributions per fund unit held. Combining the monthly distributions with the special distributions, the Fund distributed an average of 4.25 cents per month for the first six months of 2010. This represents an 82.6% payout ratio of the distributable cash earned for the period and a payout ratio of 77.2% of the net earnings for the first six months of 2010.
Based on this, Carfinco believes it is well positioned to maintain its current monthly distribution of 2 cents per unit to Unitholders after it becomes taxable in 2011. It is also important to note that once Carfinco becomes a taxable entity in 2011, cash distributions to Unitholders will receive a more favorable personal tax treatment than is currently the case. Distributions paid after January 1, 2011 will be treated as eligible Canadian dividends for tax purposes, resulting in a lower effective tax rate in the hands of a taxable investor.
Please review the MD&A for further financial comparisons and information.
In short, the Fund is currently on track to reach or exceed its growth targets, maintain acceptable delinquency levels and reach or exceed its financial performance targets for 2010.
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.
------------------------------------------------------------------------- Carfinco Income Fund Consolidated Balance Sheets ------------------------------------------------------------------------- June 30, December 31, -------------- -------------- 2010 2009 (unaudited) (audited) Assets Finance receivables $ 125,477,075 $ 113,222,303 Allowance for credit losses (12,150,000) (12,400,000) Dealer reserve (5,907,560) (5,237,091) -------------- -------------- Finance receivables - net 107,419,515 95,585,212 -------------- -------------- Cash 791,060 467,674 Other assets 1,076,592 1,093,006 Equipment 433,645 373,433 Future income taxes 179,278 167,361 -------------- -------------- 2,480,575 2,101,474 -------------- -------------- $ 109,900,090 $ 97,686,686 -------------- -------------- -------------- -------------- ------------------------------------------------------------------------- Liabilities Bank credit facility $ 81,359,994 $ 68,438,145 Accounts payable and accrued liabilities 701,854 694,519 Deferred dealer obligation 1,684,909 1,847,863 Derivatives 787,711 1,096,128 Subordinated debentures - 2,143,000 -------------- -------------- 84,534,468 74,219,655 -------------- -------------- Unitholders' Equity Unitholders' capital 31,278,061 31,186,595 Deficit (5,912,439) (7,719,564) -------------- -------------- 25,365,622 23,467,031 -------------- -------------- $ 109,900,090 $ 97,686,686 -------------- -------------- -------------- -------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- Carfinco Income Fund Consolidated Statements of Earnings, Comprehensive Income and Deficit ------------------------------------------------------------------------- Three months ended June 30 Six months ended June 30 --------------------------- ---------------------------- 2010 2009 2010 2009 ------------- ------------- ------------- -------------- (unaudited) (unaudited) (unaudited) (unaudited) Financial Revenue Interest revenue $ 8,590,230 $ 7,404,860 $ 16,583,266 $ 14,770,184 Administration fees 612,725 476,214 1,245,379 974,531 ------------- ------------- ------------- -------------- 9,202,955 7,881,074 17,828,645 15,744,715 Financial Expenses Interest expense 1,020,380 1,060,544 2,005,222 2,199,787 ------------- ------------- ------------- -------------- Financial income before provision for credit losses 8,182,575 6,820,530 15,823,423 13,544,928 Provision for credit losses 1,558,393 3,222,147 3,453,090 7,001,011 ------------- ------------- ------------- -------------- Net financial income before operating expenses and income taxes 6,624,182 3,598,383 12,370,333 6,543,917 ------------- ------------- ------------- -------------- Operating Expenses General and administrative 2,355,021 2,191,286 4,687,643 4,416,996 Gain on derivatives (89,355) (416,316) (308,417) (509,898) Amortization of equipment 37,286 44,514 88,182 89,319 ------------- ------------- ------------- -------------- 2,302,952 1,819,484 4,467,408 3,996,417 ------------- ------------- ------------- -------------- Net earnings before income taxes 4,321,230 1,778,899 7,902,925 2,547,500 ------------- ------------- ------------- -------------- Income Taxes Future (18,580) - (11,917) - ------------- ------------- ------------- -------------- (18,580) - (11,917) - ------------- ------------- ------------- -------------- Net earnings and comprehensive income $ 4,339,810 $ 1,778,899 $ 7,914,842 $ 2,547,500 ------------- ------------- ------------- -------------- ------------- ------------- ------------- -------------- ------------------------------------------------------------------------- Earnings per fund unit Basic and diluted $ 0.18 $ 0.07 $ 0.33 $ 0.11 ------------- ------------- ------------- -------------- ------------- ------------- ------------- -------------- ------------------------------------------------------------------------- Deficit, beginning of period $ (6,418,218) $ (8,592,706) $ (7,719,564) $ (9,361,307) Net earnings 4,339,810 1,778,899 7,914,842 2,547,500 Cash distributions of fund unit equity (3,834,031) - (6,107,717) - ------------- ------------- ------------- -------------- Deficit, end of period $ (5,912,439) $ (6,813,807) $ (5,912,439) $ (6,813,807) ------------- ------------- ------------- -------------- ------------- ------------- ------------- -------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- Carfinco Income Fund Consolidated Statements of Cash Flows ------------------------------------------------------------------------- Three months ended June 30 Six months ended June 30 --------------------------- ---------------------------- 2010 2009 2010 2009 ------------- ------------- ------------- -------------- (unaudited) (unaudited) (unaudited) (unaudited) Increase (decrease) in cash Operating activities Net earnings $ 4,339,810 $ 1,778,899 $ 7,914,842 $ 2,547,500 Items not affecting cash: Provision for credit losses 1,558,393 3,222,147 3,453,090 7,001,011 Amortization of equipment 37,286 44,514 88,182 89,319 Amortization of deferred transaction costs 34,170 75,411 68,340 150,632 Gain on derivatives (89,355) (416,316) (308,417) (509,898) Future income taxes (18,580) - (11,917) - Unit based compensation expense 4,000 - 24,800 - Change in non-cash balances 637,979 747,440 1,079,876 1,444,872 ------------- ------------- ------------- -------------- Net cash provided by operating activities 6,503,703 5,452,095 12,308,796 10,723,436 ------------- ------------- ------------- -------------- Investing activities Funds advanced on finance receivables (20,646,197) (13,294,908) (38,230,608) (25,561,268) Principal collections on finance receivables 12,678,281 10,780,175 24,747,579 20,738,736 Change in finance receivable reserves and transaction costs (1,685,476) (1,583,677) (3,023,445) (3,117,736) Purchase of equipment (95,207) (11,013) (148,394) (52,779) ------------- ------------- ------------- -------------- Net cash used in investing activities (9,748,599) (4,109,423) (16,654,868) (7,993,047) ------------- ------------- ------------- -------------- Financing activities Advances on bank credit facility 9,494,858 983,071 12,958,509 1,803,015 Repayments on bank credit facility - (2,200,000) - (4,300,000) Repayments on subordinated debt (2,143,000) (157,000) (2,143,000) (157,000) Deferred transaction costs (105,000) - (105,000) - Proceeds on exercise of unit options 66,666 - 66,666 - Proceeds on unit purchase financing - - - 51,666 Fund unit cash distribution (3,834,031) - (6,107,717) - ------------- ------------- ------------- -------------- Net cash provided by (used in) financing activities 3,479,493 (1,373,929) 4,669,458 (2,602,319) ------------- ------------- ------------- -------------- Net increase (decrease) in cash 234,597 (31,257) 323,386 128,070 Cash, Beginning of period 556,463 188,489 467,674 29,162 ------------- ------------- ------------- -------------- Cash, End of period $ 791,060 $ 157,232 $ 791,060 $ 157,232 ------------- ------------- ------------- -------------- ------------- ------------- ------------- -------------- ------------------------------------------------------------------------- Supplemental cash flow information: Interest paid $ 998,540 $ 986,783 $ 1,949,212 $ 2,049,922 ------------- ------------- ------------- -------------- ------------- ------------- ------------- -------------- -------------------------------------------------------------------------
%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: [email protected] OR The Howard Group Inc., Jeff Walker/Dave Burwell, Investor Relations, Telephone: 1-888-221-0915, Telephone: 403-221-0915, E-mail: [email protected], Website: www.howardgroupinc.com
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