Carfinco Announces 2013 First Quarter Results

TSX: CFN

EDMONTON, May 7, 2013 /CNW/ - Carfinco Financial Group Inc. ("Carfinco" or the "Company") announces financial results for the first quarter ended March 31, 2013.

Net earnings for the first quarter of fiscal 2013 were $5.0 million, an increase of 8.5% from $4.6 million for the first quarter of fiscal 2012, and consistent with the net earnings from the fourth quarter of fiscal 2012.  During the quarter, Carfinco distributed 12.0 cents per share to its shareholders versus 9.0 cents in the first quarter of fiscal 2012, an increase of 33%.  The dividend of 12.0 cents equates to a payout ratio of 45.1% of the Company's distributable cash.

Return on shareholders' equity for the first quarter of fiscal 2013 was 44.7% versus 51.2% and 45.8% for the first quarter and fourth quarter of fiscal 2012, respectively.

HIGHLIGHTS

  • Earnings per share of 20 cents;
  • Dividends to shareholders of 12.0 cents per share;
  • Return on shareholders' equity of 44.7%;
  • Loan originations of $36.6 million, up 12.9% from the first quarter of fiscal 2012;
  • Record finance receivables of $187.1 million; and
  • 31+ day delinquent accounts for the first quarter of 2013 of 3.3%.

Revenues of $19.2 million for the first quarter of 2013 represented an increase of 14.4% from the revenues of $16.8 million for the first quarter of 2012.

Loan originations for the quarter were $36.6 million, a 12.9% increase from $32.4 million in the prior year comparative.  Loan originations during the first quarter were 8.8% lower than the prior quarter which is typical in Carfinco's experience due to a recovery period from the holiday season and February having fewer business days.  Subsequent to the first quarter of 2013, the month of April produced loan originations for the company of $15.2 million, a record for the company.  Management continues to target finance receivable growth of approximately 15% to 20% for fiscal 2013 while focusing on maintaining acceptable levels of delinquencies and credit losses. 

Finance receivables at the end of the first quarter were $187.1 million, an increase of 20.6% from $155.1 million in the first quarter of fiscal 2012. 31+ days delinquent accounts for the first quarter of 2013 were 3.3% versus 2.5% for the first quarter of 2012 and 3.2% for the fourth quarter of 2012.

The annualized loss rate on the finance receivables decreased to 13.8% during the first quarter.  In the fourth quarter of fiscal 2012, the annualized loss rate was 15.1%, up from 12.8% in the third quarter of fiscal 2012.  While the annualized loss rate for the fourth quarter was within management's expectations and historical operating results, the Company modified certain credit policies within different geographic regions across the country during the fourth quarter of 2012 and first quarter of 2013.  Historically, the annualized loss rate has ranged from as low as 11.2% in the second quarter of fiscal 2012 to as high as 20.7%1 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.

To partially offset credit losses, the Company frequently purchases loans from vehicle dealerships at a negotiated price that is less than the principal amount being financed by the debtor.  When contracts are discounted, the discounts range from 4% to 60% of the principal amount being financed which enables the Company to minimize its effective losses arising on consumer defaults as it limits the Company's own invested capital at risk.  Loans that are anticipated to experience higher annualized losses are purchased at higher discounts with the average purchase discount in the finance receivable portfolio being 10.3% as at March 31, 2013 (December 31, 2012 - 10.7%).

The Company believes that several opportunities exist to expand our market share and presence and continues to evaluate future opportunities for growth.  This includes continued expansion of our tiered finance programs which remain a minimal portion of our loan portfolio, and the evaluation of potential acquisition opportunities.  To provide the Company with improved flexibility to pursue our growth strategy, on April 16, 2013, the Company announced the closing of a Treasury Offering (the "Offering") which was conducted at a purchase price of $9.75 per common share, on a bought deal basis, for total gross proceeds of $17,267,250, before underwriting and legal expenses.  The net proceeds of the Offering were used to repay existing indebtedness of the Company. 

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, 2013 and 2012, please visit www.carfinco.com or SEDAR at www.sedar.com

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.

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, 2013 and 2012 for definitions and reconciliations of these non-IFRS measures to measures prescribed by IFRS.

_______________________________
1 Presented under previous Canadian GAAP


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,
    2013     2012     2012
Total revenue  $  19,175   $  19,177   $  16,766
Normalized earnings before taxes  $  6,948   $ 6,463   $  6,615
Net earnings and comprehensive income  $  5,024   $  4,992   $  4,630
Earnings per share - basic and diluted  $  0.20   $  0.20   $  0.19
                 
Finance receivables  $  187,090   $  182,843   $  155,112
Loan originations  $  36,554   $  40,082   $  32,371
Annualized loss rate           13.8%     15.1%      12.8%
Delinquency percentage     3.3%      3.2%      2.5%
                 
Shareholders' equity  $  46,034   $  43,968   $  37,373
Shares outstanding     24,645     24,645     24,645
Book value per share  $  1.87   $  1.78   $  1.52
Cash dividends per share  $  0.120   $  0.170   $  0.090
Payout ratio     45.1%      76.2%      42.1%
                 
Financial leverage ratio     2.87:1     2.97:1      2.97:1
Return on shareholders' equity     44.7%      45.8%     51.2%
Return on portfolio assets           10.9%      11.2%      12.1%
Return on invested capital     22.1%      20.8%      22.3%
Average portfolio yield            41.5%     42.9%      43.9%
Average cost of borrowing            5.1%      5.2%       5.1%
Operating and other expense ratio                
  on portfolio assets     8.2%       8.1%       9.4%




Consolidated Statements of Financial Position
    March 31,     December 31,
    2013     2012
    (unaudited)     (audited)
Assets          
Finance receivables       $  187,089,647   $  182,842,663
  Allowance for credit losses         (9,700,000)      (9,250,000)
Finance receivables - net          177,389,647      173,592,663
Cash          662,231       459,498
Inventories          95,209      313,014
Other assets          1,231,360      1,172,998
Equipment          559,377       550,261
Deferred tax assets         682,672       453,340
    3,230,849       2,949,111
  $  180,620,496   $  176,541,774
Liabilities          
Bank credit facility       $  130,850,979   $  126,787,937
Accounts payable and accrued liabilities          667,528       697,672
Taxes payable           179,034       2,363,670
Deferred dealer obligation          2,075,817       2,076,396
Interest rate swaps          657,681      484,665
Deferred lease inducement        155,411      163,590
    134,586,450     132,573,930
Shareholders' Equity          
Share capital         35,119,425     35,119,425
Retained earnings        10,914,621       8,848,419
    46,034,046       43,967,844
  $  180,620,496   176,541,774




Consolidated Statements of Earnings, and Comprehensive Income
    March 31,      March 31,
For the three months ended         2013     2012
    (unaudited)      (unaudited)
Financial revenue          
  Interest revenue      $  17,897,070   $  15,268,689
  Fee and servicing income        1,277,784     1,497,554
  Total revenue         19,174,854     16,766,243
Financial expenses          
  Interest expense         1,627,330      1,348,214
  Provision for credit losses        6,826,631      5,258,053
  Loss on interest rate swaps         173,016       260,194
  Total financial expenses        8,626,977      6,866,461
Net financial income before operating and other expenses and taxes      10,547,877       9,899,782
Operating and other expenses          
  General and administrative         3,728,038      3,498,464
  Depreciation of equipment         44,642       46,481
  Conversion costs         -      37,569
  Total operating and other expenses         3,772,680      3,582,514
Earnings before taxes         6,775,197       6,317,268
Taxes          
  Current         1,980,899       1,720,076
  Deferred (recovery)        (229,332)       (32,977)
  Total taxes         1,751,567       1,687,099
Net earnings and comprehensive income      $  5,023,630    $  4,630,169
Earnings per share          
  Basic and diluted      $  0.20    $  0.19



Consolidated Statements of Changes in Equity
                Retained      
                earnings      
    Fund unit equity     Share capital     (deficit)     Total
Balance, December 31, 2011   $  35,119,425   $  -   $  (158,942)   $  34,960,483
  Conversion under plan of                      
    arrangement      (35,119,425)     35,119,425     -      -
  Net earnings     -     -     20,590,619     20,590,619
  Cash dividends on shares     -      -      (11,583,258)     (11,583,258)
Balance, December 31, 2012      -     35,119,425     8,848,419     43,967,844
  Net earnings     -     -     5,023,630     5,023,630
  Cash dividends on shares     -     -     (2,957,428)      (2,957,428)
Balance, March 31, 2013   $  -   $  35,119,425   $  10,914,621   $  46,034,046




Consolidated Statements of Cash Flows
    March 31,      March 31,
For the three months ended         2013     2012
    (unaudited)     (unaudited)
Increase (decrease) in cash          
Operating activities          
  Net earnings      $  5,023,630   $  4,630,169
  Non-cash items included in net earnings        (7,473,884)      (6,668,648)
  Changes in operating assets and liabilities        (5,412,644)      (5,038,275)
  Interest received        12,806,640       10,724,352
  Interest paid        (1,557,656)     (1,305,952)
  Income taxes paid         (4,165,535)      (6,311,653)
Net cash used in operating activities         (779,449)      (3,970,007)
Investing activities          
  Purchase of equipment         (53,758)      (112,445)
Net cash used in investing activities         (53,758)      (112,445)
Financing activities          
  Advances on bank credit facility         5,003,714     8,770,509
  Repayments on bank credit facility         (1,000,000)     (2,800,000)
  Deferred transaction costs         (10,346)      -
  Cash dividends to shareholders         (2,957,428)     (2,218,071)
Net cash provided by financing activities         1,035,940     3,752,438
Net increase (decrease) in cash         202,733      (330,014)
Cash, beginning of period         459,498     937,994
Cash, end of period      $  662,231   $  607,980

 

 

SOURCE: Carfinco Financial Group Inc.

Contact:

Mr. Tracy A. Graf 
CEO & Director of Carfinco Financial Group Inc. 
Telephone: 1-888-486-4356
Facsimile: 1-888-486-7456 
E-mail: tracy.graf@carfinco.com 
Web site: www.carfinco.com 

The Howard Group Inc.
Jeff Walker
Investor Relations
Telephone: 1-888-221-0915
E-mail: info@howardgroupinc.com
Web site:  www.howardgroupinc.com

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