Carfinco Announces 2014 First Quarter Results


Readers are referred to the cautionary notes regarding Forward-Looking Statements and Non-IFRS Financial Measures at the end of this release.  All figures are expressed in Canadian dollars.

EDMONTON, May 13, 2014 /CNW/ - Carfinco Financial Group Inc. ("Carfinco" or the "Company") announces financial results for the first quarter ended March 31, 2014.

The first quarter of fiscal 2014 has been a positive one for Carfinco Financial Group Inc. with a 5.5% increase in net earnings and $1.1 million of growth in the finance receivable portfolio over the prior quarter.


  • Earnings per share of 20.0 cents;
  • Dividends per share of 12.0 cents;
  • Return on shareholders' equity of 30.8%1;
  • Revenue of $24.0 million;
  • Loan originations of $45.2 million;
  • Loan originations have now reached over $1 billion since commencement of operations;
  • Record finance receivables of $245.3 million; and
  • 31+ day delinquent accounts were 4.0% at the quarter end.

Net earnings of the Company increased to $5.4 million, up $0.3 million, or 5.5%, in the quarter from $5.1 million in the prior quarter. During the quarter, Carfinco distributed 12.0 cents per share to its shareholders, consistent with each quarter in the prior fiscal year.  The dividend of 12.0 cents for the quarter equates to a payout ratio of 32.8% of the Company's distributable cash, a decline from the 47.3% payout ratio in the prior quarter.  The decline in the payout ratio in the current quarter, as compared to the prior quarter, was due to an increase in the Company's distributable cash of 44.2%.  This increase was due to various positive short-term changes in the Company's operating assets and liabilities.

Revenues of $24.0 million for the first quarter of 2014 represented a decrease of $0.9 million, or 3.5%, from revenues of $24.8 million for the fourth quarter of 2013.  Included in the fourth quarter of 2013 was a one-time breakup fee of $0.4 million related to the terminated acquisition of Western Funding Incorporated ("WFI").  In addition, a portion of the decline in revenues quarter over quarter was due to fewer days in the first quarter of fiscal 2014 versus the fourth quarter of fiscal 2013 as a result of the short month of February, which lowered interest revenues by approximately $0.4 million.  Excluding these items, revenues were relatively flat quarter over quarter.  In comparison to the prior year, revenues increased $4.8 million, or 25.1% from revenues of $19.2 million.

While the first quarter of the year can be a slower time for loan origination growth, Carfinco was able to achieve finance receivable portfolio growth of $1.1 million by way of $45.2 million of loan originations in the quarter. This is a 23.6% increase over $36.6 million of loan originations over the same period in the prior year, and only a slight decrease of $0.8M over the fourth quarter of 2013. Certain of the company's finance programs have experienced slower growth than originally forecasted for the quarter with the addition of new competitors in those areas that are aggressively searching for entry into the market.

Carfinco continuously evaluates the competitiveness of our credit policies and programs, as we strive to focus on the long-term strength of our finance receivable portfolio and future earnings growth potential, rather than short-term gains. We have seen the long-term value of this strategy in the past and expect its continued success going forward. Carfinco also continues to add financing programs that are beneficial to both its dealership group and to its business strategy, such as a loyalty program designed to retain our valued customers who have established a positive payment history with Carfinco.

Finance receivables for the first quarter of 2014 were $245.3 million, an increase of 0.4% from $244.2 million in the fourth quarter of fiscal 2013 and an increase of 31.1% from $187.1 million in the first quarter of 2013.  Excluding the USA operating segment, which did not exist at the end of first quarter of fiscal 2013, finance receivables increased $19.4 million, or 10.4%, over the prior year comparable period.

During the quarter, the annualized loss rate on the finance receivables increased to 15.2% versus 14.7% in the fourth quarter of 2013, and 13.8% in the first quarter of 2013.  Historically, the annualized loss rate has ranged from as low as the 11.2% in the second quarter of fiscal 2012 to as high as 20.7%2 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.  The majority of the increase in annualized loss rates comes from lower growth in our finance receivable portfolio in the quarter, and from increased charge-offs in our Canadian dealer participation program where we retain a minimum 18% purchase discount against the amount financed by the consumer at loan inception.  This purchase discount effectively minimizes the Company's losses on consumer defaults as the capital at risk has been limited.  Overall, credit losses were within management's expectations.

31+ days delinquent accounts at the end of the first quarter of 2014 were 4.0%, consistent with year-end 2013. The Canadian finance receivables 31+ days delinquent accounts were 3.1%, which is an improvement from 3.3% at the end of the fourth quarter of 2013.

Return on shareholders' equity for the first quarter of fiscal 2014 was 30.8% versus 30.2% for the fourth quarter of 2013 and 44.7% for the first quarter of 2013.  This decrease over the prior year comparable quarter is attributable to the additional equity raised by Carfinco in April of 2013, as well as the issuance of equity as part of the share purchase agreement for Persian Acceptance Corp. ("PAC") in September of 2013.   At the end of the first quarter, the financial leverage ratio was 2.14:1, down from 2.25:1 at the end of the prior quarter and 2.87:1 at the end of the first quarter of 2013.  During the quarter, the Company used the increase in distributable cash flows to make net repayments on our credit facilities of $2.9 million, bringing our consolidated financial leverage ratio down quarter over quarter.  Overall, the Company is significantly below the 3.50:1 allowed under our credit facilities and we believe we have adequate capital to support our growth targets for the next fiscal year.

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, 2014 and 2013, please visit or SEDAR at

A live conference call will be held on Wednesday, May 14, 2014 at 11:00am MT (1:00pm ET) and will include a discussion by management about Carfinco's first quarter results followed by a question and answer period. Participants can access the conference call by phone within Canada and the U.S. by dialing the following numbers:

North America Toll-Free:  1-888-389-5988
Internationally:    1-719-325-2177

Callers should dial in five to ten minutes prior to the scheduled start time.  An audio replay may be accessed through the Investor Relations section of our web site at shortly after the conclusion of the conference call.

About Carfinco Financial Group Inc.

Carfinco, through its Canadian and United States subsidiaries (collectively, "Carfinco"), focuses on providing indirect 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 plans to their customers who must, along with the vehicle, meet Carfinco's underwriting guidelines. The shares of Carfinco 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, 2014 and 2013 for definitions and reconciliations of these non-IFRS measures to measures prescribed by IFRS.

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,
    2014      2013      2013
Total revenue  23,978    24,850    19,175
Net earnings  5,358    5,078    5,024
Normalized earnings before taxes  7,352    7,656    6,948
Earnings per share - basic and diluted  0.20    0.19    0.20
Finance receivables  245,264    244,194    187,090
Loan originations  45,172    45,997    36,554
Annualized loss rate            15.2%      14.7%      13.8%
Delinquency percentage     4.0%      4.0%      3.3%
Shareholders' equity  $   70,877    68,340    46,034
Shares outstanding     26,471      26,471      24,645
Book value per share  2.68    2.58    1.87
Cash dividends per share  0.120    0.120    0.120
Payout ratio     32.8%      47.3%      45.1%
Financial leverage ratio     2.14:1      2.25:1      2.87:1
Return on shareholders' equity     30.8%      30.2%      44.7%
Return on portfolio assets     8.8%      8.4%      10.9%
Return on invested capital     22.1%      18.1%      22.1%
Average portfolio yield            39.2%      41.0%      41.5%
Average cost of borrowing              4.8%      5.1%      5.1%
Operating and other expense ratio                
  on portfolio assets     9.0%      10.3%      8.2%

Consolidated Statements of Financial Position

March 31, 

December 31,
    (unaudited)       (audited)
Finance receivables       245,263,592     244,194,281
  Allowance for credit losses         (11,625,000)       (11,475,000)
Finance receivables - net          233,638,592       232,719,281
Cash          1,355,251       1,626,552
Inventories          141,481       314,548
Other assets          1,725,421       2,397,347
Taxes receivable          257,892       -
Equipment          862,195       885,217
Goodwill          3,155,206       3,036,169
Intangible assets          1,268,751       1,267,796
Deferred tax assets         949,793       971,320
    9,715,990       10,498,949
  243,354,582    243,218,230
Bank credit facility       158,528,673     160,511,596
Accounts payable and accrued liabilities          1,606,747       1,891,534
Subordinated debentures          6,416,267       6,174,198
Taxes payable           276,640       249,288
Deferred tax liability          637,649       792,302
Deferred dealer obligation          2,881,517       2,927,085
Interest rate swaps          323,387       410,147
Deferred lease inducement         141,094       130,872
Contingent consideration         1,666,067       1,791,178
    172,478,041       174,878,200
Shareholders' Equity          
Share capital   51,630,280     51,630,280
Retained earnings   18,753,302     16,571,489
Accumulated other comprehensive income   492,959     138,261
    70,876,541     68,340,030
  $ 243,354,582   $ 243,218,230

Consolidated Statements of Earnings, and Comprehensive Income

For the three months ended      

March 31,

March 31,
    (unaudited)     (unaudited)
Financial revenue          
  Interest revenue      22,773,114   17,897,070
  Fee and servicing income         1,205,064     1,277,784
  Total revenue         23,978,178     19,174,854
Financial expenses          
  Interest expense         2,000,770     1,627,330
  Provision for credit losses         9,468,783     6,826,631
  (Gain) loss on interest rate swaps         (86,760)     173,016
  Total financial expenses         11,382,793     8,626,977
Net financial income before operating and other expenses and taxes      12,595,385     10,547,877
Operating and other expenses          
  General and administrative         5,535,922     3,728,038
  Depreciation of equipment         60,745     44,642
  Amortization of intangible assets         81,780     -
  Gain on contingent consideration         (197,067)     -
  Total operating and other expenses         5,481,380     3,772,680
Earnings before taxes         7,114,005     6,775,197
  Current         1,919,378     1,980,899
  Deferred (recovery)         (163,760)     (229,332)
  Total taxes         1,755,618     1,751,567
Net earnings       5,358,387   5,023,630
Other comprehensive income          
  Foreign currency translation differences on          
    foreign operation         354,698     -
Comprehensive income      5,713,085   5,023,630
Earnings per share          
  Basic and diluted      0.20    0.20

Consolidated Statements of Changes in Equity






Balance, December 31, 2012   $   35,119,425    8,848,419   $  - 43,967,844
  Share issuance, net of costs        16,029,594      -      -   16,029,594
  Share issuance on business                    
    acquisition, net of costs        481,261     -      -   481,261
  Net earnings       -     20,199,176      -   20,199,176
  Cash dividends on shares     -     (12,476,106)     -   (12,476,106)
  Foreign currency translation                    
    differences on foreign operation       -     -      138,261   138,261
Balance, December 31, 2013    $ 51,630,280   16,571,489    $  138,261 68,340,030
  Net earnings       -     5,358,387      -   5,358,387
  Cash dividends on shares     -     (3,176,574)     -   (3,176,574)
  Foreign currency translation                    
    differences on foreign operation       -     -      354,698   354,698
Balance, March 31, 2014    $   51,630,280   18,753,302    $  492,959  70,876,541

Consolidated Statements of Cash Flows

For the three months ended      

March 31,

March 31,
    (unaudited)      (unaudited)
Increase (decrease) in cash          
Operating activities          
  Net earnings      5,358,387   5,023,630
  Non-cash items included in net earnings          (9,689,245)      (7,473,884)
  Changes in operating assets and liabilities         (3,855,207)      (5,412,644)
  Interest received         18,118,397       12,806,640
  Interest paid         (1,947,676)      (1,557,656)
  Income taxes paid         (2,153,939)      (4,165,535)
Net cash provided by (used in) operating activities        5,830,717      (779,449)
Investing activities          
  Purchase of equipment          (27,058)       (53,758)
  Purchase of intangible assets          (33,098)      -
Net cash used in investing activities         (60,156)      (53,758)
Financing activities          
  Advances on bank credit facilities         3,470,731         5,003,714
  Repayments on bank credit facilities         (6,329,777)       (1,000,000)
  Deferred transaction costs         (40,776)       (10,346)
  Cash dividends to shareholders         (3,176,574)      (2,957,428)
Net cash (used in) provided by financing activities         (6,076,396)        1,035,940
Net (decrease) increase in cash         (305,835)        202,733
Cash, beginning of period         1,626,552        459,498
Effects of foreign exchange rate changes on cash held in foreign currency      34,534      -
Cash, end of period      1,355,251     $  662,231

1 Presented on an annualized basis
2 Presented under previous Canadian GAAP


SOURCE: Carfinco Financial Group Inc.

For further information:

Mr. Tracy A. Graf 
CEO & Director of Carfinco Financial Group Inc. 
Telephone: 1-888-486-4356 
Facsimile: 1-888-486-7456
Web site: 

The Howard Group Inc.
Jeff Walker
Investor Relations
Telephone: 1-888-221-0915
Web site:

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