Carfinco Announces Record Year-End Results

TSX: CFN.UN

EDMONTON, March 16 /CNW/ - Carfinco Income Fund ("Carfinco" or the "Fund") announces financial results for the fourth quarter and year ended December 31, 2009.

We are proud to present the 2009 annual financial results. Carfinco reached $7.3 million in net earnings, the highest in our history, surpassing the previous record of $6.3 million set in 2006. The net earnings of $1.8 million, $2.2 million and $2.6 million respectively for each of the last three quarters of 2009 represented record net earnings each quarter.

On an annualized basis the Fund's fourth quarter of 2009 produced $10.4 million in net earnings, earnings per unit of 44 cents and a 43.7% Return on Unitholders' Equity.

    
    HIGHLIGHTS:

    -   Net Earnings were $7.3 million in 2009 versus a loss of $2.0 million
        in 2008.
    -   Total distributions to Unitholders equaled 24.4 cents per unit in
        2009 versus 8.1 cents per unit in 2008.
    -   Return on Unitholders equity was 33.6% for 2009.
    -   Debt to Equity ratio was 2.66:1 (well under the bank covenant maximum
        of 3.75:1)
    -   31+ days delinquent accounts decreased by 35.2% year over year to
        4.6% of the finance receivables in 2009.
    -   91+ days past due dollar amount of the finance receivables was nil in
        2009 versus $2.1 million in 2008.
    

The year 2009 can best be described as the "comeback" year for Carfinco, surviving the economic turmoil, which started in late 2007 and continued into 2009. Management and the Board of Trustees reacted quickly, implementing operational policies and procedures in 2008 to reflect the economic downturn and more specifically the deterioration of the credit environment in which the Fund conducts business.

As mentioned, the Fund recorded the highest quarterly net earnings in the Fund's history during the fourth quarter of 2009. The $2.6 million in net earnings represents an increase of $3.2 million over the net loss of $0.6 million recorded for the fourth quarter of 2008. Earnings of 11 cents per unit were recorded for the fourth quarter of 2009 versus a loss of 2 cents per unit for the fourth quarter of 2008. Total revenues of $8.6 million for the fourth quarter of 2009 are 6.6% higher than the total revenues of $8.0 million for the fourth quarter of 2008. Loan originations of $17.8 million during the fourth quarter of 2009 represents an increase of 18.4% over the loan originations of $15.0 million for the fourth quarter of 2008. G&A expenses for the fourth quarter of 2009 were $2.2 million, no change from the $2.2 million recorded for the fourth quarter of 2008.

During the economic downturn management's focus shifted from growth to operational efficiencies and performance of the finance receivables as evidenced by the following results:

    
    -   Loan Originations decreased 8.7% to $67.8 million in 2009 from
        $74.3 million in 2008.
    -   Finance Receivables increased a modest 4.8% year over year to
        $113.2 million in 2009 from $108.0 million in 2008.
    -   Revenues increased 3.1% to $32.6 million for 2009 from $31.6 million
        in 2008.
    -   Operating expenses decreased by 24.2% to $8.1 million for 2009 from
        $10.7 million in 2008.
    -   Operating expense ratio on portfolio assets decreased to 8.1% for
        2009 from 9.0% in 2008, representing the lowest operating expense
        ratio in the Fund's history.
    -   31+ days delinquent accounts decreased by 35.2% to 4.6% of finance
        receivables for 2009 from 7.1% of finance receivables for 2008.
    

Growth will again become a focus in 2010. We are targeting growth of 15% to 20% in 2010 versus the 4.8% in 2009. Carfinco is well positioned for this growth as the capital required is available from profits and current debt facility.

Looking forward, Carfinco believes it is well positioned to maintain its current monthly distribution of 2 cents per unit to Unitholders through 2011 and beyond, despite becoming a taxable entity. 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. As per the Fund's Deed of Trust, all taxable income for 2010 will be distributed to Unitholders. To the extent that the Fund generates taxable income in excess of the 2 cents per unit monthly cash distributions for any quarter, all or a portion of the excess taxable income will be distributed to Unitholders in the form of quarterly special distributions of either cash or shares.

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.

    
    Selected Annual Information and Key Financial Ratios
    -------------------------------------------------------------------------

    ($000's for stated value, except percentages and per fund unit amounts)

                                                  December 31,   December 31,
                                                         2009           2008
                                                -------------- --------------

    Total revenue                               $      32,631  $      31,649
    Net (loss) earnings                         $       7,341  $      (1,988)
    Earnings (loss) per fund unit -
     basic and diluted                          $        0.31  $       (0.08)
    Loan originations                           $      67,820  $      74,279
    Unitholders' equity                         $      23,467  $      20,222
    Fund units outstanding                             23,934         23,323
    Book value per unit                         $        0.98  $        0.87
    Cash distributions per fund unit            $       0.180  $       0.081
    Financial leverage ratio                           2.66:1         2.86:1
    Return on average unitholders' equity               33.6%         (9.0)%
    Return on average finance receivables                6.6%         (2.0)%
    Average cost of borrowing                            6.0%           7.3%
    Operating expense ratio on portfolio assets          8.1%           9.0%
    Operating expense ratio on financial revenue        27.5%          28.9%



    Consolidated Balance Sheets
    -------------------------------------------------------------------------

                                                  December 31,   December 31,
                                                         2009           2008
                                                -------------- --------------

    Assets
      Finance receivables                       $ 113,222,303  $ 108,016,961
        Allowance for credit losses               (12,400,000)   (12,190,000)
        Dealer reserve                             (5,237,091)    (2,454,715)
                                                -------------- --------------
      Finance receivables - net                    95,585,212     93,372,246
                                                -------------- --------------

      Cash                                            467,674         29,162
      Other assets                                  1,093,006        633,178
      Equipment                                       373,433        456,841
      Future income taxes                             167,361              -
                                                -------------- --------------
                                                    2,101,474      1,119,181
                                                -------------- --------------

                                                $  97,686,686  $  94,491,427
                                                -------------- --------------
                                                -------------- --------------

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

    Liabilities
      Bank credit facility                      $  68,438,145  $  67,878,411
      Accounts payable and accrued liabilities        694,519        502,989
      Deferred dealer obligation                    1,847,863      1,604,385
      Derivatives                                   1,096,128      1,983,486
      Subordinated debentures                       2,143,000      2,300,000
                                                -------------- --------------
                                                   74,219,655     74,269,271
                                                -------------- --------------
    Unitholders' Equity
      Unitholders' capital                         31,186,595     29,583,463
      Deficit                                      (7,719,564)    (9,361,307)
                                                -------------- --------------
                                                   23,467,031     20,222,156
                                                -------------- --------------

                                                $  97,686,686  $  94,491,427
                                                -------------- --------------
                                                -------------- --------------



    Consolidated Statements of Earnings (Loss), Comprehensive Income (Loss)
    -------------------------------------------------------------------------

                                                  December 31,   December 31,
                                                         2009           2008
                                                -------------- --------------

    Financial Revenue
      Interest revenue                          $  30,480,877  $  29,666,447
      Administration fees                           2,149,964      1,982,663
                                                -------------- --------------
                                                   32,630,841     31,649,110
    Financial Expenses
      Interest expense                              4,190,830      4,689,214
                                                -------------- --------------
    Net financial income before provision
     for credit losses                             28,440,011     26,959,896
      Provision for credit losses                  13,114,756     18,262,438
                                                -------------- --------------
    Net financial income before operating
     expenses and income taxes                     15,325,255      8,697,458
                                                -------------- --------------
    Operating Expenses
      General and administrative                    8,803,418      9,004,718
      Gain (loss) on derivatives                     (887,358)     1,543,192
      Amortization of equipment                       183,198        137,111
                                                -------------- --------------
                                                    8,099,258     10,685,021
                                                -------------- --------------
    Net earnings (loss) before income taxes         7,225,997     (1,987,563)
                                                -------------- --------------

    Income Taxes
      Current                                               -              -
      Future (recovery)                              (115,050)             -
                                                -------------- --------------
                                                     (115,050)             -
    Net earnings (loss) and comprehensive
     income (loss)                              $   7,341,047  $  (1,987,563)
                                                -------------- --------------
                                                -------------- --------------

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

    Weighted average fund units basic and diluted  23,932,316     23,918,055
                                                -------------- --------------
                                                -------------- --------------
    Earnings (loss) per fund unit
     basic and diluted                          $        0.31  $       (0.08)
                                                -------------- --------------
                                                -------------- --------------

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



    Consolidated Statements of Deficit
    -------------------------------------------------------------------------

                                                  December 31,   December 31,
                                                         2009           2008
                                                -------------- --------------

    Deficit, beginning of year                  $  (9,361,307) $  (5,483,698)
      Net earnings (loss)                           7,341,047     (1,987,563)
      Unit distributions on fund equity            (1,499,078)             -
      Cash distributions on fund unit equity       (4,200,226)    (1,890,046)
                                                -------------- --------------

    Deficit, end of year                        $  (7,719,564) $  (9,361,307)
                                                -------------- --------------
                                                -------------- --------------

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



    Consolidated Statements of Cash Flows

                                                  December 31,   December 31,
                                                         2009           2008
                                                -------------- --------------

    Increase (decrease) in cash
    Operating activities
      Net earnings (loss)                       $   7,341,047  $  (1,987,563)

      Items not affecting cash:
        Provision for credit losses                13,114,756     18,262,438
        Amortization of equipment                     183,198        137,111
        Amortization of deferred
         transaction costs                            247,535        249,955
        Gain (loss) on derivatives                   (887,358)     1,543,192
        Future income taxes                          (115,050)        51,393
        Unit based compensation expense                 4,600              -
        Changes in non-cash balances related
         to operations                              1,572,331        101,721
                                                -------------- --------------

    Net cash provided by operating activities      21,461,059     18,358,247
                                                -------------- --------------
    Investing Activities
      Funds advanced on finance receivables       (54,522,337)   (64,939,145)
      Principal collections on finance
       receivables                                 42,760,615     43,038,541
      Change in finance receivables reserves
       and transaction costs                       (5,163,151)    (5,861,182)
      Purchase of equipment                           (99,790)      (227,000)
                                                -------------- --------------

    Net cash used in investing activities         (17,024,663)   (27,988,786)
                                                -------------- --------------
    Financing Activities
      Advances on bank credit facility              7,037,913     20,059,716
      Repayments on bank credit facility           (6,700,000)   (10,100,000)
      Deferred transaction costs                      (25,714)      (544,356)
      Issuance of subordinated debentures                   -      2,300,000
      Repayments on subordinated debentures          (157,000)             -
      Proceeds on unit purchase financing              51,666         51,666
      Fund unit issue costs                            (4,523)       (51,393)
      Fund unit cash distributions                 (4,200,226)    (1,890,046)
                                                -------------- --------------
    Net cash (used in) provided by
     financing activities                          (3,997,884)     9,825,587
                                                -------------- --------------

    Net increase in cash                              438,512        195,048
    Cash, beginning of year                            29,162       (165,886)
                                                -------------- --------------

    Cash, end of year                           $     467,674  $      29,162
                                                -------------- --------------
                                                -------------- --------------

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

    Supplemental cash flow information:
      Interest paid                             $   3,943,316  $   4,426,908
                                                -------------- --------------
                                                -------------- --------------

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

%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, E-mail: Info@howardgroupinc.com, Website: www.howardgroupinc.com

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Carfinco Financial Group Inc.

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