EDMONTON, March 21, 2012 /CNW/ - Carfinco Financial Group Inc. ("Carfinco" or the "Company") announces financial results for the fourth quarter and year ended December 31, 2011.
2011 was another record setting year with Carfinco achieving pre‐tax earnings of $23.1 million versus $18.2 million for 2010. This includes a one‐time expense of $0.7 million paid in 2011 for Carfinco to convert from an income fund to a publicly traded corporation.
- Record pre-tax earnings for 2011 of $23.1 million;
- After tax earnings per fund unit for 2011 of 70 cents;
- After tax return on unitholder's equity for the year of 55.5%;
- Record loan originations of $116.3 million for 2011;
- Record principal balance of finance receivables at the end of 2011 of $167.6 million;
- 31+ day delinquent accounts for the fourth quarter of 2011 were 2.90%.
2011 was witness to significant changes for Carfinco with the adoption of International Financial Reporting Standards ("IFRS") and becoming a taxable entity as of January 1, 2011, per the changes to the tax treatment of income funds, as announced by the Federal Government in the fall of 2006.
Net earnings for 2011 were $17.1 million, a decrease of $2.1 million from $19.2 million for 2010. The change in net earnings is mainly due to Carfinco becoming a taxable entity in 2011. During 2011 Carfinco incurred tax expenses of $6.0 million versus a tax recovery of almost $1.0 million in 2010, a $7.0 million differential to our net earnings as a result of taxes.
Pre‐tax return on average unitholder's equity for 2011 was 70.8%, with an after tax return on unitholder's equity of 55.5%.
The fourth quarter of 2011 continued to meet our objectives, being the eleventh consecutive quarter of record pre‐tax earnings, excluding the one‐time cost of $0.7 million to convert from an income fund to a corporation. Pre‐tax earnings for the quarter were $5.9 million, $6.6 million excluding the one‐time conversion costs, versus $6.0 million in the third quarter of 2011.
Revenues of $59.6 million for 2011 increased 23.5% from the revenues of $48.2 million for 2010. Revenues of $16.5 million for the fourth quarter of 2011 represent an increase of 8.7% from the $15.2 million for the third quarter of 2011 and a 28.0% increase from the $12.9 million for the fourth quarter of 2010.
Loan originations for 2011 were $116.3 million, a 19.9% increase from $97.0 million in 2010. Loan originations of $32.2 million for the fourth quarter of 2011 was a 1.6% increase from the $31.7 in loan originations for the third quarter of 2011 and an increase of 31.3% from the $24.5 million in the fourth quarter of 2010.
Finance receivables at the end of 2011 were $150.5 million, an increase of 20.2% from $125.2 million for 2010, which was in line with our goal of 20% annual growth.
31+ days delinquent accounts for the fourth quarter of 2011 were 2.9% versus 3.1% for the fourth quarter of 2010.
As previously communicated, Carfinco became a taxable entity as of January 1, 2011, as per the changes to the tax treatment of income funds, announced by the Federal Government in the fall of 2006. On January 1, 2012, Carfinco converted from an income fund to a public corporation with the name changed to Carfinco Financial Group Inc. The shares were listed on the TSX on January 3, 2012 under the symbol CFN.
During 2011, as an income fund, Carfinco distributed 44.9% of its free cash flow to its unitholders. Upon conversion to a corporation in January of this year Carfinco continues to distribute a dividend to its shareholders, currently set at 3.0 cents per share per month.
Management continues to target growth of the finance receivables in the neighborhood of 20% during 2012 while focusing on maintaining acceptable levels of delinquencies and credit losses.
Subsequent to year‐end, 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.
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 Annual Information and Key Financial Ratios|
|($000's for stated value, except percentages, fund units outstanding and per fund unit amounts)|
|December 31, 2011||December 31, 2010|
|Normalized earnings before taxes||$||23,777||$||18,249|
|Earnings per fund unit - basic and diluted||$||0.70||$||0.78|
|Fund units outstanding||24,645,230||24,611,896|
|Book value per unit||$||1.42||$||1.08|
|Cash distributions per fund unit||$||0.360||$||0.595|
|Financial leverage ratio||3.15:1||3.52:1|
|Return on unitholders' equity||55.5%||79.4%|
|Average portfolio yield||43.2%||42.6%|
|Annualized loss rate||12.9%||16.3%|
|Return on portfolio assets||12.4%||17.0%|
|Pre-tax return on portfolio assets||16.8%||16.1%|
|Average cost of borrowing||5.2%||5.3%|
|Operating and other expense ratio on portfolio assets||8.9%||8.5%|
|Consolidated Statements of Financial Position|
|| December 31,
| December 31,
| January 1,
|Allowance for credit losses||(7,150,000)||(5,383,100)||(7,236,000)|
|Finance receivables - net||143,313,909||119,845,165||94,167,463|
|Deferred tax assets||264,702||1,160,352||180,519|
|Bank credit facility||$||102,675,941||$||93,159,937||$||68,438,145|
|Accounts payable and accrued liabilities||1,205,892||898,678||694,519|
|Provision for deferred dealer obligation||2,068,762||1,854,567||1,847,863|
|Derivative financial instruments||250,317||548,596||1,096,128|
|Unit based payment obligation||-||76,936||31,809|
|Fund unit equity||35,119,425||35,119,425||30,566,633|
|Consolidated Statements of Earnings, Comprehensive Income|
For the years ended
| December 31,
| December 31,
|Fee and servicing income||3,920,297||2,605,396|
|Provision for credit losses||19,486,096||16,607,583|
|Gain on derivative financial instruments||(298,279)||(547,532)|
|Net financial income before operating and other expenses and taxes||35,343,354||27,853,533|
|Operating and other expenses|
|General and administrative||11,506,221||9,519,640|
|Gain on unit based payment obligation||(143,604)||(88,205)|
|Depreciation of equipment||203,954||172,810|
|Earnings before taxes||23,123,938||18,249,288|
|Net earnings and comprehensive income||$||17,121,620||$||19,226,668|
|Earnings per fund unit|
|Basic and diluted||$||0.70||$||0.78|
|Consolidated Statements of Changes in Equity|
|| Fund unit
|Balance, January 1, 2010||$||30,566,633||$||(8,821,002)||$||21,745,631|
|Cash distributions on fund unit equity||-||(14,262,242)||(14,262,242)|
|Unit distributions on fund unit equity||4,560,037||(4,560,037)||-|
|Fund unit issuance costs, net of tax||(7,245)||-||(7,245)|
|Balance, December 31, 2010||35,119,425||(8,416,613)||26,702,812|
|Cash distributions on fund unit equity||-||(8,863,949)||(8,863,949)|
|Balance, December 31, 2011||$||35,119,425||$||(158,942)||$||34,960,483|
|Consolidated Statements of Cash Flows|
For the years ended
| December 31,
| December 31,
|Increase (decrease) in cash|
|Non-cash items included in net earnings||(25,360,389)||(26,140,912)|
|Changes in operating assets and liabilities||(26,164,461)||(28,975,728)|
|Net cash used in operating activities||(301,370)||(7,753,975)|
|Purchase of equipment||(196,283)||(151,784)|
|Net cash used in investing activities||(196,283)||(151,784)|
|Advances on bank credit facility||14,956,601||24,739,108|
|Repayments on bank credit facility||(5,400,000)||-|
|Repayments on subordinated debentures||-||(2,143,000)|
|Deferred transaction costs||(163,293)||(179,795)|
|Proceeds on exercise of fund unit options||66,668||133,332|
|Fund unit cash distributions||(8,863,949)||(14,262,242)|
|Fund unit issuance costs||-||(9,698)|
|Net cash provided by financing activities||596,027||8,277,705|
|Net increase in cash||98,374||371,946|
|Cash, beginning of year||839,620||467,674|
|Cash, end of year||$||937,994||$||839,620|
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