Carfinco Announces 2013 First Quarter Results
TSX: CFN
EDMONTON, May 7, 2013 /CNW/ - Carfinco Financial Group Inc. ("Carfinco" or the "Company") announces financial results for the first quarter ended March 31, 2013.
Net earnings for the first quarter of fiscal 2013 were $5.0 million, an increase of 8.5% from $4.6 million for the first quarter of fiscal 2012, and consistent with the net earnings from the fourth quarter of fiscal 2012. During the quarter, Carfinco distributed 12.0 cents per share to its shareholders versus 9.0 cents in the first quarter of fiscal 2012, an increase of 33%. The dividend of 12.0 cents equates to a payout ratio of 45.1% of the Company's distributable cash.
Return on shareholders' equity for the first quarter of fiscal 2013 was 44.7% versus 51.2% and 45.8% for the first quarter and fourth quarter of fiscal 2012, respectively.
HIGHLIGHTS
- Earnings per share of 20 cents;
- Dividends to shareholders of 12.0 cents per share;
- Return on shareholders' equity of 44.7%;
- Loan originations of $36.6 million, up 12.9% from the first quarter of fiscal 2012;
- Record finance receivables of $187.1 million; and
- 31+ day delinquent accounts for the first quarter of 2013 of 3.3%.
Revenues of $19.2 million for the first quarter of 2013 represented an increase of 14.4% from the revenues of $16.8 million for the first quarter of 2012.
Loan originations for the quarter were $36.6 million, a 12.9% increase from $32.4 million in the prior year comparative. Loan originations during the first quarter were 8.8% lower than the prior quarter which is typical in Carfinco's experience due to a recovery period from the holiday season and February having fewer business days. Subsequent to the first quarter of 2013, the month of April produced loan originations for the company of $15.2 million, a record for the company. Management continues to target finance receivable growth of approximately 15% to 20% for fiscal 2013 while focusing on maintaining acceptable levels of delinquencies and credit losses.
Finance receivables at the end of the first quarter were $187.1 million, an increase of 20.6% from $155.1 million in the first quarter of fiscal 2012. 31+ days delinquent accounts for the first quarter of 2013 were 3.3% versus 2.5% for the first quarter of 2012 and 3.2% for the fourth quarter of 2012.
The annualized loss rate on the finance receivables decreased to 13.8% during the first quarter. In the fourth quarter of fiscal 2012, the annualized loss rate was 15.1%, up from 12.8% in the third quarter of fiscal 2012. While the annualized loss rate for the fourth quarter was within management's expectations and historical operating results, the Company modified certain credit policies within different geographic regions across the country during the fourth quarter of 2012 and first quarter of 2013. Historically, the annualized loss rate has ranged from as low as 11.2% in the second quarter of fiscal 2012 to as high as 20.7%1 in the second quarter of fiscal 2009, during the height of the economic downturn. Management estimates the annualized loss rate to range from 13% to 16% on a normalized basis depending on the Company's portfolio mix.
To partially offset credit losses, the Company frequently purchases loans from vehicle dealerships at a negotiated price that is less than the principal amount being financed by the debtor. When contracts are discounted, the discounts range from 4% to 60% of the principal amount being financed which enables the Company to minimize its effective losses arising on consumer defaults as it limits the Company's own invested capital at risk. Loans that are anticipated to experience higher annualized losses are purchased at higher discounts with the average purchase discount in the finance receivable portfolio being 10.3% as at March 31, 2013 (December 31, 2012 - 10.7%).
The Company believes that several opportunities exist to expand our market share and presence and continues to evaluate future opportunities for growth. This includes continued expansion of our tiered finance programs which remain a minimal portion of our loan portfolio, and the evaluation of potential acquisition opportunities. To provide the Company with improved flexibility to pursue our growth strategy, on April 16, 2013, the Company announced the closing of a Treasury Offering (the "Offering") which was conducted at a purchase price of $9.75 per common share, on a bought deal basis, for total gross proceeds of $17,267,250, before underwriting and legal expenses. The net proceeds of the Offering were used to repay existing indebtedness of the Company.
For additional information relating to the Company, including the Company's financial statements and management's discussion and analysis as at and for the three months ended March 31, 2013 and 2012, please visit www.carfinco.com or SEDAR at www.sedar.com.
About Carfinco Financial Group Inc.
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 shares of the company trade on The Toronto Stock Exchange under the symbol "CFN".
Caution Regarding Forward-Looking Statements - This news release contains certain forward-looking statements, including statements regarding the business and anticipated financial performance of the company. 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.
Caution Regarding Non-IFRS Financial Measures - Carfinco uses certain measures in this press release which do not have a standardized meaning as prescribed by International Financial Reporting Standards ("IFRS"), and are unlikely to be comparable to similar measures presented by other issues. These non-IFRS measures have been presented in this press release in order to provide shareholders and potential investors with additional information regarding the Company but should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS. Please refer to the Company's management's discussion and analysis as at and for the three months ended March 31, 2013 and 2012 for definitions and reconciliations of these non-IFRS measures to measures prescribed by IFRS.
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1 Presented under previous Canadian GAAP
| Selected Quarterly Information and Key Financial Ratios | |||||||||
| ($000's for stated value, except percentages, shares outstanding and per share amounts) | |||||||||
| March 31, | December 31, | March 31, | |||||||
| 2013 | 2012 | 2012 | |||||||
| Total revenue | $ | 19,175 | $ | 19,177 | $ | 16,766 | |||
| Normalized earnings before taxes | $ | 6,948 | $ | 6,463 | $ | 6,615 | |||
| Net earnings and comprehensive income | $ | 5,024 | $ | 4,992 | $ | 4,630 | |||
| Earnings per share - basic and diluted | $ | 0.20 | $ | 0.20 | $ | 0.19 | |||
| Finance receivables | $ | 187,090 | $ | 182,843 | $ | 155,112 | |||
| Loan originations | $ | 36,554 | $ | 40,082 | $ | 32,371 | |||
| Annualized loss rate | 13.8% | 15.1% | 12.8% | ||||||
| Delinquency percentage | 3.3% | 3.2% | 2.5% | ||||||
| Shareholders' equity | $ | 46,034 | $ | 43,968 | $ | 37,373 | |||
| Shares outstanding | 24,645 | 24,645 | 24,645 | ||||||
| Book value per share | $ | 1.87 | $ | 1.78 | $ | 1.52 | |||
| Cash dividends per share | $ | 0.120 | $ | 0.170 | $ | 0.090 | |||
| Payout ratio | 45.1% | 76.2% | 42.1% | ||||||
| Financial leverage ratio | 2.87:1 | 2.97:1 | 2.97:1 | ||||||
| Return on shareholders' equity | 44.7% | 45.8% | 51.2% | ||||||
| Return on portfolio assets | 10.9% | 11.2% | 12.1% | ||||||
| Return on invested capital | 22.1% | 20.8% | 22.3% | ||||||
| Average portfolio yield | 41.5% | 42.9% | 43.9% | ||||||
| Average cost of borrowing | 5.1% | 5.2% | 5.1% | ||||||
| Operating and other expense ratio | |||||||||
| on portfolio assets | 8.2% | 8.1% | 9.4% | ||||||
| Consolidated Statements of Financial Position | ||||||
| March 31, | December 31, | |||||
| 2013 | 2012 | |||||
| (unaudited) | (audited) | |||||
| Assets | ||||||
| Finance receivables | $ | 187,089,647 | $ | 182,842,663 | ||
| Allowance for credit losses | (9,700,000) | (9,250,000) | ||||
| Finance receivables - net | 177,389,647 | 173,592,663 | ||||
| Cash | 662,231 | 459,498 | ||||
| Inventories | 95,209 | 313,014 | ||||
| Other assets | 1,231,360 | 1,172,998 | ||||
| Equipment | 559,377 | 550,261 | ||||
| Deferred tax assets | 682,672 | 453,340 | ||||
| 3,230,849 | 2,949,111 | |||||
| $ | 180,620,496 | $ | 176,541,774 | |||
| Liabilities | ||||||
| Bank credit facility | $ | 130,850,979 | $ | 126,787,937 | ||
| Accounts payable and accrued liabilities | 667,528 | 697,672 | ||||
| Taxes payable | 179,034 | 2,363,670 | ||||
| Deferred dealer obligation | 2,075,817 | 2,076,396 | ||||
| Interest rate swaps | 657,681 | 484,665 | ||||
| Deferred lease inducement | 155,411 | 163,590 | ||||
| 134,586,450 | 132,573,930 | |||||
| Shareholders' Equity | ||||||
| Share capital | 35,119,425 | 35,119,425 | ||||
| Retained earnings | 10,914,621 | 8,848,419 | ||||
| 46,034,046 | 43,967,844 | |||||
| $ | 180,620,496 | $ | 176,541,774 | |||
| Consolidated Statements of Earnings, and Comprehensive Income | ||||||
| March 31, | March 31, | |||||
| For the three months ended | 2013 | 2012 | ||||
| (unaudited) | (unaudited) | |||||
| Financial revenue | ||||||
| Interest revenue | $ | 17,897,070 | $ | 15,268,689 | ||
| Fee and servicing income | 1,277,784 | 1,497,554 | ||||
| Total revenue | 19,174,854 | 16,766,243 | ||||
| Financial expenses | ||||||
| Interest expense | 1,627,330 | 1,348,214 | ||||
| Provision for credit losses | 6,826,631 | 5,258,053 | ||||
| Loss on interest rate swaps | 173,016 | 260,194 | ||||
| Total financial expenses | 8,626,977 | 6,866,461 | ||||
| Net financial income before operating and other expenses and taxes | 10,547,877 | 9,899,782 | ||||
| Operating and other expenses | ||||||
| General and administrative | 3,728,038 | 3,498,464 | ||||
| Depreciation of equipment | 44,642 | 46,481 | ||||
| Conversion costs | - | 37,569 | ||||
| Total operating and other expenses | 3,772,680 | 3,582,514 | ||||
| Earnings before taxes | 6,775,197 | 6,317,268 | ||||
| Taxes | ||||||
| Current | 1,980,899 | 1,720,076 | ||||
| Deferred (recovery) | (229,332) | (32,977) | ||||
| Total taxes | 1,751,567 | 1,687,099 | ||||
| Net earnings and comprehensive income | $ | 5,023,630 | $ | 4,630,169 | ||
| Earnings per share | ||||||
| Basic and diluted | $ | 0.20 | $ | 0.19 | ||
| Consolidated Statements of Changes in Equity | |||||||||||||
| Retained | |||||||||||||
| earnings | |||||||||||||
| Fund unit equity | Share capital | (deficit) | Total | ||||||||||
| Balance, December 31, 2011 | $ | 35,119,425 | $ | - | $ | (158,942) | $ | 34,960,483 | |||||
| Conversion under plan of | |||||||||||||
| arrangement | (35,119,425) | 35,119,425 | - | - | |||||||||
| Net earnings | - | - | 20,590,619 | 20,590,619 | |||||||||
| Cash dividends on shares | - | - | (11,583,258) | (11,583,258) | |||||||||
| Balance, December 31, 2012 | - | 35,119,425 | 8,848,419 | 43,967,844 | |||||||||
| Net earnings | - | - | 5,023,630 | 5,023,630 | |||||||||
| Cash dividends on shares | - | - | (2,957,428) | (2,957,428) | |||||||||
| Balance, March 31, 2013 | $ | - | $ | 35,119,425 | $ | 10,914,621 | $ | 46,034,046 | |||||
| Consolidated Statements of Cash Flows | ||||||
| March 31, | March 31, | |||||
| For the three months ended | 2013 | 2012 | ||||
| (unaudited) | (unaudited) | |||||
| Increase (decrease) in cash | ||||||
| Operating activities | ||||||
| Net earnings | $ | 5,023,630 | $ | 4,630,169 | ||
| Non-cash items included in net earnings | (7,473,884) | (6,668,648) | ||||
| Changes in operating assets and liabilities | (5,412,644) | (5,038,275) | ||||
| Interest received | 12,806,640 | 10,724,352 | ||||
| Interest paid | (1,557,656) | (1,305,952) | ||||
| Income taxes paid | (4,165,535) | (6,311,653) | ||||
| Net cash used in operating activities | (779,449) | (3,970,007) | ||||
| Investing activities | ||||||
| Purchase of equipment | (53,758) | (112,445) | ||||
| Net cash used in investing activities | (53,758) | (112,445) | ||||
| Financing activities | ||||||
| Advances on bank credit facility | 5,003,714 | 8,770,509 | ||||
| Repayments on bank credit facility | (1,000,000) | (2,800,000) | ||||
| Deferred transaction costs | (10,346) | - | ||||
| Cash dividends to shareholders | (2,957,428) | (2,218,071) | ||||
| Net cash provided by financing activities | 1,035,940 | 3,752,438 | ||||
| Net increase (decrease) in cash | 202,733 | (330,014) | ||||
| Cash, beginning of period | 459,498 | 937,994 | ||||
| Cash, end of period | $ | 662,231 | $ | 607,980 | ||
SOURCE: Carfinco Financial Group Inc.
Mr. Tracy A. Graf
CEO & Director of Carfinco Financial Group Inc.
Telephone: 1-888-486-4356
Facsimile: 1-888-486-7456
E-mail: [email protected]
Web site: www.carfinco.com
The Howard Group Inc.
Jeff Walker
Investor Relations
Telephone: 1-888-221-0915
E-mail: [email protected]
Web site: www.howardgroupinc.com
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