EDMONTON, March 20, 2014 /CNW/ - Carfinco Financial Group Inc. ("Carfinco" or the "Company") announces financial results for the fourth quarter and year ended December 31, 2013.
The year 2013 was a busy one for Carfinco. We expanded into the United States through the acquisition of Persian Acceptance Corp. ("PAC"), bid on a second U.S. company, Western Funding Incorporated ("WFI"), and continued to grow our ongoing business in Canada.
Our entry into the United States started in September of 2013 when Carfinco announced its acquisition of Massachusetts based Persian Acceptance Corp. In November of 2013, we announced that Carfinco was the "stalking horse bidder" to acquire Las Vegas based Western Funding Incorporated. While Carfinco was an active bidder, we ultimately chose not to provide the highest bid and did not acquire WFI. We will however continue to evaluate potential acquisitions that we believe will benefit the Company and its shareholders.
Net earnings for 2013 were $20.2 million, a decrease of $0.4 million from $20.6 million in fiscal 2012. Net earnings for the Canada operating segment in fiscal 2013 were $21.7 million, an increase of $0.5 million from $21.2 million in the prior year. The USA operating segment contributed $0.7 million to earnings in the year. As mentioned, PAC was acquired in September and therefore only contributed to income for 118 days during the year. Overall, the remaining change in net earnings is included in the Corporate operating segment which incurred a loss of $2.2 million in fiscal 2013, an increase from the loss of $0.6 million in fiscal 2012. Included in this segment is a net expense of $1.2 million Carfinco incurred pursuing the acquisitions of PAC and WFI which is non-recurring in nature. The Corporate operating segment contains all assets, liabilities, revenues, and expenses not directly attributable to an operating segment, as well as all purchase price allocation entries associated with business combinations and other consolidation adjustments.
Net earnings of $5.1 million for the fourth quarter of 2013 are an increase of 17.9% from the $4.3 million for the third quarter of 2013 and an increase of 1.7% from the $5.0 million for the fourth quarter of 2012.
During 2013 Carfinco also introduced a number of new finance programs in Canada, giving its vehicle dealership base a wider range of products to offer to their customers requiring non-traditional forms of financing to purchase a vehicle. The competitive landscape in the Canadian non-prime automotive finance industry increased significantly during the year with start-up finance companies introducing products which compete directly with Carfinco as well as competing with Canadian financial institutions providing near-prime financing. The non-prime auto finance industry in Canada has become one of the most competitive it has been historically which has had an impact on the Company's loan origination volume and growth. Carfinco believes it is at a competitive advantage with the knowledge and data it has accumulated over its 17 years of doing business in this industry and will continue to implement business practices that have made the Company successful and profitable for our shareholders.
Loan originations for 2013 were $171.6 million, an increase of $22.0 million, or 14.7%, from $149.6 million for 2012. Loan originations of $46.0 million for the fourth quarter of 2013 were a 1.1% decrease from the $46.5 million in loan originations for the third quarter of 2013 and an increase of 14.8% from the $40.1 million in the fourth quarter of 2012. The decrease from the third quarter to the fourth quarter is primarily due to the decline in vehicles being financed during the holiday season and is consistent with the decrease of 0.8% for the same time period of 2012.
HIGHLIGHTS FOR THE YEAR AND YEAR ENDED
- On September 4, 2013, the Company expanded into the United States with the acquisition of Persian Acceptance Corp.;
- Earnings per share of 78 cents;
- Distributions to shareholders of 48 cents per share;
- Return on shareholders' equity of 36.0%;
- Record loan originations of $171.6 million;
- Record principal balance of finance receivables of $271.2 million;
- 31+ day delinquent accounts of 4.0%.
Revenues of $85.0 million for 2013 increased 18.4% from the revenues of $71.8 million for 2012. Revenues of $24.8 million for the fourth quarter of 2013 represent an increase of 16.0% from the $21.4 million for the third quarter of 2013 and a 29.6% increase from the $19.2 million for the fourth quarter of 2012.
Finance receivables at the end of 2013 were $244.2 million, an increase of 33.6% from $182.8 million at the end of 2012. This increase includes the acquisition of PAC in 2013 which had $37.2 million of finance receivables outstanding as of December 31, 2013.
31+ days delinquent accounts for the fourth quarter of 2013 were 4.0% versus 3.2% for the fourth quarter of 2012. On a segmented basis, 31+ days delinquent accounts in the Canadian segment were 3.2% and were 8.7% for the USA segment as of December 31, 2013. In the prior year, all 31+ days delinquent accounts were in the Canadian segment. The USA segment aging is affected by three different items from Canada, which can lead to a lower aging presentation including: their accounts are on a weekly payment schedule, they have a set payment day each week that may not coincide with the month-end cut-off day, and they do not charge off accounts at 90 days delinquent, but rather at the point of liquidation.
During 2013, we distributed $12.5 million to shareholders, or 48 cents per share, and this represents 48.1% of distributable cash. Carfinco continues to maintain a dividend to its shareholders, paying 4.0 cents per share per month for the past 18 months.
In April of 2013, Carfinco closed a common share financing, issuing 1,771,000 common shares of Carfinco from treasury at a price of $9.75 per share of which a portion of the proceeds raised were used for the acquisition of PAC. The combination of the common share financing, along with shares issued as purchase consideration on acquisition of PAC, the Company's number of shares outstanding increased to 26,471,453 during the year, up 7.4%.
Management continues to target organic and potential acquisition growth of the finance receivables while focusing on maintaining acceptable levels of delinquencies and credit losses.
Thank you to all our shareholders for your continued support and to our staff for your continued efforts.
Chief Executive Officer
|Year ended December 31, 2013||Canada||USA||Corporate||Total|
|Fee and servicing income||4,736,748||300,421||388,252||5,425,421|
|Total financial revenue||79,787,813||5,304,097||(105,126)||84,986,784|
|Provision for credit losses||29,503,440||1,819,106||-||31,322,546|
|Gain on interest rate swap||(74,517)||-||-||(74,517)|
|Loss on contingent consideration||-||-||80,935||80,935|
|Depreciation of equipment||201,689||19,043||-||220,732|
|Amortization of intangibles||-||20,639||74,482||95,121|
|General and administrative expenses||14,911,470||1,734,214||2,707,112||19,352,796|
|Earnings (loss) before taxes||28,788,389||1,078,980||(2,967,655)||26,899,714|
|Net earnings (loss)||$||21,681,362||$||701,841||$||(2,184,027)||$||20,199,176|
|Year ended December 31, 2012||Canada||USA||Corporate||Total|
|Fee and servicing income||5,614,878||-||-||5,614,878|
|Total financial revenue||71,808,752||-||-||71,808,752|
|Provision for credit losses||23,651,197||-||-||23,651,197|
|Loss on interest rate swap||234,348||-||-||234,348|
|Depreciation of equipment||175,451||-||-||175,451|
|General and administrative expenses||13,610,476||-||607,597||14,218,073|
|Earnings before taxes||28,220,004||-||(607,597)||27,612,407|
For additional information relating to the Company, including the Company's financial statements and management's discussion and analysis as at December 31, 2013 and 2012, please visit www.carfinco.com or SEDAR at www.sedar.com.
A live conference call will be held on Friday, March 21, 2014 at 11:00am MT (1:00pm ET) and will include a discussion by management about Carfinco's year end 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:||1-888-400-3310|
Callers should dial in five to ten minutes prior to the scheduled start time. An audio webcast may be accessed through the Investor Relations page on our web site at (www.carfinco.com). Audio replays will be available on our web site 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.
|Selected Annual Information and Key Financial Ratios|
|($000's for stated value, except percentages, shares outstanding and per share amounts)|
|December 31, 2013||December 31, 2012|
|Normalized earnings before taxes||$||29,085||$||27,883|
|Earnings before taxes||$||26,900||$||27,612|
|Earnings per share - basic and diluted||$||0.78||$||0.84|
|Cash dividends per share||$||0.480||$||0.470|
|Book value per share||$||2.58||$||1.78|
|Annualized loss rate||13.6%||12.9%|
|Average portfolio yield||39.8%||43.1%|
|Average cost of borrowing||4.8%||5.2%|
|Operating and other expense ratio on portfolio assets||9.2%||8.6%|
|Financial leverage ratio||2.25:1||2.97:1|
|Return on shareholders' equity||36.0%||52.2%|
|Return on portfolio assets||9.5%||12.4%|
|Pre-tax return on portfolio assets||12.6%||16.6%|
|Consolidated Statements of Financial Position|
|December 31,||December 31,|
|Allowance for credit losses||(11,475,000)||(9,250,000)|
|Finance receivables - net||232,719,281||173,592,663|
|Deferred tax assets||971,320||453,340|
|Bank credit facilities||$||160,511,596||$||126,787,937|
|Accounts payable and accrued liabilities||1,891,534||697,672|
|Deferred tax liability||792,302||-|
|Deferred dealer obligation||2,927,085||2,076,396|
|Interest rate swaps||410,147||484,665|
|Deferred lease inducement||130,872||163,590|
|Accumulated other comprehensive income||138,261||-|
|Consolidated Statements of Earnings, and Other Comprehensive Income|
|December 31,||December 31,|
|For the years ended||2013||2012|
|Fee and servicing income||5,425,421||5,614,878|
|Provision for credit losses||31,322,546||23,651,197|
|(Gain) loss on interest rate swaps||(74,517)||234,348|
|Total financial expense||38,337,486||29,802,821|
|Net financial income before operating and other expenses and taxes||46,649,298||42,005,931|
|Operating and other expenses|
|General and administrative||19,352,796||14,182,284|
|Depreciation of equipment||220,732||175,451|
|Amortization of intangible assets||95,121||-|
|Loss on contingent consideration||80,935||-|
|Total operating and other expenses||19,749,584||14,393,524|
|Earnings before taxes||26,899,714||27,612,407|
|Other comprehensive income|
|Foreign currency translation differences on|
|foreign operation, net of tax of $10,390||138,261||-|
|Earnings per share|
|Basic and diluted||$||0.78||$||0.84|
|Consolidated Statements of Changes in Equity|
|Balance, December 31, 2011||$||35,119,425||$||-||$||(158,942)||$||-||$||34,960,483|
|Conversion under plan of|
|Cash dividends on shares||-||-||(11,583,258)||-||(11,583,258)|
|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|
|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||$||68,340,030|
|Consolidated Statements of Cash Flows|
|December 31,||December 31,|
|For the years ended||2013||2012|
|Increase (decrease) in cash|
|Non-cash items included in net earnings||(34,126,551)||(29,193,814)|
|Changes in operating assets and liabilities||(31,764,588)||(34,327,000)|
|Income taxes paid||(9,567,454)||(9,953,422)|
|Net cash used in operating activities||(4,181,135)||(12,466,195)|
|Purchase of equipment||(286,865)||(380,976)|
|Purchase of intangible assets||(41,976)||-|
|Business combination, net of cash acquired||(8,318,557)||-|
|Net cash used in investing activities||(8,647,398)||(380,976)|
|Advances on bank credit facilities||39,283,000||32,290,954|
|Repayments on bank credit facilities||(28,633,126)||(8,050,000)|
|Deferred transaction costs||(188,491)||(289,021)|
|Cash dividends to shareholders||(12,476,106)||(11,583,258)|
|Proceeds on treasury share issuance||17,267,250||-|
|Share issuance costs||(1,244,721)||-|
|Net cash provided by financing activities||14,007,806||12,368,675|
|Net increase (decrease) in cash||1,179,273||(478,496)|
|Cash, beginning of year||459,498||937,994|
|Effects of foreign exchange rate changes on cash held in foreign currency||(12,219)||-|
|Cash, end of year||$||1,626,552||$||459,498|
SOURCE: Carfinco Financial Group Inc.
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