EDMONTON, May 8, 2012 /CNW/ - Carfinco Financial Group Inc. ("Carfinco" or the "Company") announces financial results for the first quarter ended March 31, 2012.
This quarter marks another record of normalized pre-tax earnings for Carfinco, with the first quarter of 2012 coming in at $6.6 million. A trend of record normalized earnings started in the third quarter of 2009 with $2.0 million.
This quarter is also the first reporting quarter for the public corporation, Carfinco Financial Group Inc., following the successful completion of the conversion from Carfinco Income Fund on January 1st of this year. The conversion to a corporation was a result of the Department of Finance announcing the Specified Investment Flow-Through rules ("SIFT Rules") which, through subsequent legislation, changed the manner in which publicly traded income trusts and their distributions were taxed. The SIFT Rules became applicable to the Fund in the first quarter of 2011.
In the first quarter of 2012, Carfinco recorded net earnings of $4.6 million versus net earnings of $4.1 million in the first quarter of 2011, an increase of 12.3%.
During first quarter of 2012 the Company achieved an annualized, return on shareholder's equity (ROE) of 51.2% versus 59.0% for the first quarter of 2011 and 51.0% for the fourth quarter of 2011.
- During the first quarter of 2012 Carfinco distributed 9.0 cents per share to its shareholders. This equates to a pay-out ratio of 42.1%
- Revenues of $16.8 million for the first quarter of 2012 represent an increase of 24.1% from the $13.5 million for the first quarter of 2011;
- Earnings before taxes for the quarter were $6.3 million, up 15.0% from the $5.5 million for the first quarter of 2011;
- Earnings per share for the quarter were 19 cents, up 11.8% from the 17 cents per unit recorded for the first quarter of 2011;
- Return on shareholder's equity for the quarter on an annualized basis was 51.2%;
- Shareholder's equity increased 6.9% to $37.4 million during the quarter
- Loan originations for the quarter were $32.4 million, a 32.6% increase from the $24.4 million for the first quarter of 2011;
- Principal balance of finance receivables was $172.5 million, increasing 18.3% from the first quarter of 2011;
- 31+ days delinquent accounts for the quarter were 2.5%, a decrease of 24.2% from 3.3% at the end of the first quarter of 2011.
Management continues to target monthly loan originations at a level that will achieve approximately 20% growth in finance receivables for the year. The majority of our current loan originations continue to come from Carfinco's pre-existing underwriting programs that have been in place for a number of years. Even though we have developed tiered risk-based pricing programs, they continue to remain a minimal portion of our loan portfolio that we feel has substantial opportunity for future growth. We have seen positive results in loan originations with the addition of new dealer representatives in strategic areas. We continue to focus on cultivating our existing dealership relationships and adding new dealerships to provide Carfinco's finance programs. Loan originations for the quarter were $32.4 million, a 32.6% increase from the $24.4 million for the first quarter of 2011.
During the quarter, Carfinco entered into an interest rate swap agreement with a notional amount of $100,000,000, a fixed bankers' acceptance rate of 1.55% and a three year term that ends on March 9, 2015. This swap agreement is beneficial for both the Company and its shareholders as it reduces the business risk of increasing interest rates on $100 million of our senior debt over the next three years.
Subsequent to the first quarter of 2011 the board of directors of Carfinco announced an increase in monthly dividends of 0.5 cents bringing the monthly cash dividend to 3.5 cents per share.
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.
|Selected Quarterly Information and Key Financial Ratios|
|($000's for stated value, except percentages, shares/units outstanding and per share/unit amounts)|
|March 31, 2012||December 31, 2011||March 31, 2011|
|Normalized earnings before taxes||$||6,615||$||6,263||$||5,415|
|Earnings per share/unit - basic and diluted||$||0.19||$||0.18||$||0.17|
|Book value per share/unit||$||1.52||$||1.42||$||1.19|
|Cash dividend/distribution per share/unit||$||0.090||$||0.140||$||0.065|
|Financial leverage ratio||2.97:1||3.15:1||3.28:1|
|Return on shareholders'/unitholders' equity||51.2%||51.0%||59.0%|
|Average portfolio yield||43.9%||45.0%||42.5%|
|Annualized loss rate||12.8%||13.2%||12.9%|
|Return on portfolio assets||12.1%||12.0%||13.0%|
|Pre-tax return on portfolio assets||16.5%||16.1%||17.3%|
|Average cost of borrowing||5.1%||5.2%||5.1%|
|Operating and other expense ratio|
|on portfolio assets||9.4%||10.4%||8.2%|
|Consolidated Statements of Financial Position|
|March 31,||December 31,|
|Allowance for credit losses||(7,500,000)||(7,150,000)|
|Finance receivables - net||147,612,172||143,313,909|
|Deferred tax assets||297,678||264,702|
|Bank credit facility||$||108,680,966||$||102,675,941|
|Accounts payable and accrued liabilities||915,588||1,205,892|
|Provision for deferred dealer obligation||2,117,914||2,068,762|
|Derivative financial instruments||510,511||250,317|
|Deferred lease inducement||188,129||-|
|Share capital/fund unit equity||35,119,425||35,119,425|
|Retained earnings (deficit)||2,253,156||(158,942)|
|Consolidated Statements of Earnings, and Comprehensive Income|
|March 31,||March 31,|
|For the three months ended||2012||2011|
|Fee and servicing income||1,497,554||758,018|
|Provision for credit losses||5,258,053||4,315,009|
|Loss (gain) on derivative financial instruments||260,194||(81,909)|
|Net financial income before operating and other expenses and taxes||9,899,782||8,088,385|
|Operating and other expenses|
|General and administrative||3,498,464||2,535,663|
|Depreciation of equipment||46,481||56,216|
|Loss on share/unit based payment obligation||-||1,780|
|Earnings before taxes||6,317,268||5,494,726|
|Net earnings and comprehensive income||$||4,630,169||$||4,124,116|
|Earnings per share/unit|
|Basic and diluted||$||0.19||$||0.17|
|Consolidated Statements of Changes in Equity|
|Fund unit equity||(deficit)||Total|
|Balance, December 31, 2010||$||35,119,425||$||(8,416,613)||$||26,702,812|
|Cash distributions on fund unit equity||-||(8,863,949)||(8,863,949)|
|Balance, December 31, 2011||35,119,425||(158,942)||34,960,483|
|Cash dividends on shares||-||(2,218,071)||(2,218,071)|
|Balance, March 31, 2012||$||35,119,425||$||2,253,156||$||37,372,581|
|Consolidated Statements of Cash Flows|
|March 31,||March 31,|
|For the three months ended||2012||2011|
|Increase (decrease) in cash|
|Non-cash items included in net earnings||(6,668,648)||(5,901,761)|
|Changes in operating assets and liabilities||(5,038,275)||(4,857,866)|
|Income taxes paid||(6,311,653)||-|
|Net cash (used in) provided by operating activities||(3,970,007)||1,506,114|
|Purchase of equipment||(112,445)||(7,657)|
|Net cash used in investing activities||(112,445)||(7,657)|
|Advances on bank credit facility||8,770,509||1,824,246|
|Repayments on bank credit facility||(2,800,000)||(2,050,000)|
|Share/fund unit cash dividend/distributions||(2,218,071)||(1,599,773)|
|Net cash provided by (used in) financing activities||3,752,438||(1,825,527)|
|Net decrease in cash||(330,014)||(327,070)|
|Cash, beginning of period||937,994||839,620|
|Cash, end of period||$||607,980||$||512,550|
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