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

SOURCE Carfinco Financial Group Inc.

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 OR The Howard Group Inc., Jeff Walker/Dave Burwell, Investor Relations, Telephone: 1-888-221-0915, Telephone: 403-221-0915, E-mail: Info@howardgroupinc.com, Website: www.howardgroupinc.com

Organization Profile

Carfinco Financial Group Inc.

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890