Carfinco Announces Record Earnings For Second Quarter of 2010
TSX: CFN.UN
EDMONTON, July 28 /CNW/ - Carfinco Income Fund, Canada's leading automotive specialty finance income fund, today announced its results for the second quarter of 2010.
The second quarter of 2010 is the 5th consecutive quarter of record net earnings for the Fund. Net earnings of $0.18 per fund unit were recorded for the quarter.
Net earnings of $4.3 million during the second quarter of 2010, represents a 21.4% increase over the previous record of $3.6 million reached in the first quarter of 2010 and a 144.0% increase over the $1.8 million achieved in the second quarter of 2009. This continues the trend of record breaking quarterly earnings for the Fund: $1.8 million, $2.2 million, $2.6 million, $3.6 million and $4.3 respectively for the last five quarters.
HIGHLIGHTS
- Net earnings for the quarter were $4.3 million, up 144.0% from the
$1.8 million for the second quarter of 2009;
- Earnings per fund unit for the quarter were 18 cents, or 72 cents on
an annualized basis;
- Return on unitholder's equity for the quarter on an annualized basis
was 69.2%;
- Total cash distributions to unitholders for the quarter were 16 cents
per fund unit;
- Loan originations were $25.1 million, a 50.6% increase from the second
quarter of 2009;
- Finance receivables were $125.5 million, increasing by 6.5% during the
quarter;
- 31+ days delinquent accounts for the quarter were 3.3% a decrease of
32.7% from 4.9% at the end of the second quarter of 2009.
Revenues of $9.2 million for the second quarter of 2010 represent an increase of 6.7% from the $8.6 million for the first quarter of 2010 and a 16.8% increase from the $7.9 million for the second quarter of 2009.
The net earnings of $4.3 million include a $250,000 non-cash reduction in the allowance for credit losses. The Fund continues to monitor its credit loss experience and with the increasing performance of its finance receivables it was deemed appropriate to decrease the allowance for credit losses during the quarter. Excluding this non-cash entry, net earnings for the quarter were $4.1 million, a 14.4% increase from the first quarter of 2010.
As previously mentioned, the earnings per fund unit for the second quarter were 18 cents, or 72 cents on an annualized basis. For the first six months of 2010 the earnings per fund unit were 33 cents, or 66 cents on an annualized basis.
Increased loan originations, within the current underwriting guidelines, are key to this growth. Loan originations of $25.1 million for the quarter represents an increase of 16.6% over the loan originations of $21.5 million for the first quarter of 2010 and an increase of 50.6% over the loan originations of $16.7 million for the second quarter of 2009.
With the increase in originations, our finance receivables grew by 6.5% during the second quarter of 2010. During the first six months of 2010 the finance receivables grew by 10.8%, or 21.6% annualized. This puts us at the higher end of management's stated goal of 15% to 20% growth in the finance receivables during 2010.
During the first six months of 2010 the Fund has paid out 25.5 cents in cash distributions per fund unit held. Combining the monthly distributions with the special distributions, the Fund distributed an average of 4.25 cents per month for the first six months of 2010. This represents an 82.6% payout ratio of the distributable cash earned for the period and a payout ratio of 77.2% of the net earnings for the first six months of 2010.
Based on this, Carfinco believes it is well positioned to maintain its current monthly distribution of 2 cents per unit to Unitholders after it becomes taxable in 2011. 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.
Please review the MD&A for further financial comparisons and information.
In short, the Fund is currently on track to reach or exceed its growth targets, maintain acceptable delinquency levels and reach or exceed its financial performance targets for 2010.
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.
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Carfinco Income Fund
Consolidated Balance Sheets
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June 30, December 31,
-------------- --------------
2010 2009
(unaudited) (audited)
Assets
Finance receivables $ 125,477,075 $ 113,222,303
Allowance for credit losses (12,150,000) (12,400,000)
Dealer reserve (5,907,560) (5,237,091)
-------------- --------------
Finance receivables - net 107,419,515 95,585,212
-------------- --------------
Cash 791,060 467,674
Other assets 1,076,592 1,093,006
Equipment 433,645 373,433
Future income taxes 179,278 167,361
-------------- --------------
2,480,575 2,101,474
-------------- --------------
$ 109,900,090 $ 97,686,686
-------------- --------------
-------------- --------------
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Liabilities
Bank credit facility $ 81,359,994 $ 68,438,145
Accounts payable and accrued liabilities 701,854 694,519
Deferred dealer obligation 1,684,909 1,847,863
Derivatives 787,711 1,096,128
Subordinated debentures - 2,143,000
-------------- --------------
84,534,468 74,219,655
-------------- --------------
Unitholders' Equity
Unitholders' capital 31,278,061 31,186,595
Deficit (5,912,439) (7,719,564)
-------------- --------------
25,365,622 23,467,031
-------------- --------------
$ 109,900,090 $ 97,686,686
-------------- --------------
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Carfinco Income Fund
Consolidated Statements of Earnings, Comprehensive Income and Deficit
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Three months ended June 30 Six months ended June 30
--------------------------- ----------------------------
2010 2009 2010 2009
------------- ------------- ------------- --------------
(unaudited) (unaudited) (unaudited) (unaudited)
Financial
Revenue
Interest
revenue $ 8,590,230 $ 7,404,860 $ 16,583,266 $ 14,770,184
Administration
fees 612,725 476,214 1,245,379 974,531
------------- ------------- ------------- --------------
9,202,955 7,881,074 17,828,645 15,744,715
Financial
Expenses
Interest
expense 1,020,380 1,060,544 2,005,222 2,199,787
------------- ------------- ------------- --------------
Financial
income before
provision for
credit losses 8,182,575 6,820,530 15,823,423 13,544,928
Provision for
credit losses 1,558,393 3,222,147 3,453,090 7,001,011
------------- ------------- ------------- --------------
Net financial
income before
operating
expenses and
income taxes 6,624,182 3,598,383 12,370,333 6,543,917
------------- ------------- ------------- --------------
Operating Expenses
General and
administrative 2,355,021 2,191,286 4,687,643 4,416,996
Gain on
derivatives (89,355) (416,316) (308,417) (509,898)
Amortization of
equipment 37,286 44,514 88,182 89,319
------------- ------------- ------------- --------------
2,302,952 1,819,484 4,467,408 3,996,417
------------- ------------- ------------- --------------
Net earnings
before income
taxes 4,321,230 1,778,899 7,902,925 2,547,500
------------- ------------- ------------- --------------
Income Taxes
Future (18,580) - (11,917) -
------------- ------------- ------------- --------------
(18,580) - (11,917) -
------------- ------------- ------------- --------------
Net earnings and
comprehensive
income $ 4,339,810 $ 1,778,899 $ 7,914,842 $ 2,547,500
------------- ------------- ------------- --------------
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Earnings per
fund unit
Basic and
diluted $ 0.18 $ 0.07 $ 0.33 $ 0.11
------------- ------------- ------------- --------------
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Deficit,
beginning of
period $ (6,418,218) $ (8,592,706) $ (7,719,564) $ (9,361,307)
Net earnings 4,339,810 1,778,899 7,914,842 2,547,500
Cash
distributions
of fund unit
equity (3,834,031) - (6,107,717) -
------------- ------------- ------------- --------------
Deficit, end of
period $ (5,912,439) $ (6,813,807) $ (5,912,439) $ (6,813,807)
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Carfinco Income Fund
Consolidated Statements of Cash Flows
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Three months ended June 30 Six months ended June 30
--------------------------- ----------------------------
2010 2009 2010 2009
------------- ------------- ------------- --------------
(unaudited) (unaudited) (unaudited) (unaudited)
Increase (decrease)
in cash
Operating
activities
Net earnings $ 4,339,810 $ 1,778,899 $ 7,914,842 $ 2,547,500
Items not
affecting
cash:
Provision
for credit
losses 1,558,393 3,222,147 3,453,090 7,001,011
Amortization
of equipment 37,286 44,514 88,182 89,319
Amortization
of deferred
transaction
costs 34,170 75,411 68,340 150,632
Gain on
derivatives (89,355) (416,316) (308,417) (509,898)
Future income
taxes (18,580) - (11,917) -
Unit based
compensation
expense 4,000 - 24,800 -
Change in
non-cash
balances 637,979 747,440 1,079,876 1,444,872
------------- ------------- ------------- --------------
Net cash provided
by operating
activities 6,503,703 5,452,095 12,308,796 10,723,436
------------- ------------- ------------- --------------
Investing
activities
Funds advanced
on finance
receivables (20,646,197) (13,294,908) (38,230,608) (25,561,268)
Principal
collections
on finance
receivables 12,678,281 10,780,175 24,747,579 20,738,736
Change in
finance
receivable
reserves and
transaction
costs (1,685,476) (1,583,677) (3,023,445) (3,117,736)
Purchase of
equipment (95,207) (11,013) (148,394) (52,779)
------------- ------------- ------------- --------------
Net cash used in
investing
activities (9,748,599) (4,109,423) (16,654,868) (7,993,047)
------------- ------------- ------------- --------------
Financing
activities
Advances on
bank credit
facility 9,494,858 983,071 12,958,509 1,803,015
Repayments on
bank credit
facility - (2,200,000) - (4,300,000)
Repayments on
subordinated
debt (2,143,000) (157,000) (2,143,000) (157,000)
Deferred
transaction
costs (105,000) - (105,000) -
Proceeds on
exercise of
unit options 66,666 - 66,666 -
Proceeds on unit
purchase
financing - - - 51,666
Fund unit cash
distribution (3,834,031) - (6,107,717) -
------------- ------------- ------------- --------------
Net cash provided
by (used in)
financing
activities 3,479,493 (1,373,929) 4,669,458 (2,602,319)
------------- ------------- ------------- --------------
Net increase
(decrease) in cash 234,597 (31,257) 323,386 128,070
Cash, Beginning
of period 556,463 188,489 467,674 29,162
------------- ------------- ------------- --------------
Cash, End of
period $ 791,060 $ 157,232 $ 791,060 $ 157,232
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Supplemental cash
flow information:
Interest paid $ 998,540 $ 986,783 $ 1,949,212 $ 2,049,922
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%SEDAR: 00019164E
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: [email protected] OR The Howard Group Inc., Jeff Walker/Dave Burwell, Investor Relations, Telephone: 1-888-221-0915, Telephone: 403-221-0915, E-mail: [email protected], Website: www.howardgroupinc.com
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