Element Reports $0.35 per share of After-tax Adjusted EPS in Q4-2015 Exceeding Consensus Estimates
Q4 free operating cash flow per share increased to $0.40 versus $0.32 in the previous period
(firmenpresse) - TORONTO, ONTARIO -- (Marketwired) -- 03/02/16 --
Element Financial Corporation (TSX: EFN) ("Element" or the "Company"), one of North America's leading equipment finance companies, today reported financial results for the three-months and year ending December 31, 2015. For the three months ended December 31, 2015 after tax adjusted operating income was $143.5 million or $0.35 per share (basic), exceeding consensus estimates, versus $55.4 million or $0.19 per share for the same period last year. Free operating cash flow was $161.5 million, or $0.40 per share, compared to $71.8 million, or $0.25 per share for the same period last year.
"This quarter provides investors with a first look at Element's Fleet management business with the acquired GE portfolio fully loaded into these results," noted Bradley Nullmeyer, Element's President. "The process of integrating the acquired GE fleet operations is now well advanced and we are pleased report that we now expect to achieve US$100 million of savings from this integration. As a result, our Fleet business enters 2016 with an adjusted ROAA of 3.2% and is on track to exit the year at 4% plus," added Mr. Nullmeyer.
Overall, new originations amounted to $2.5 billion for the three-month period ended December 31, 2015 representing a 47 percent increase over the $1.7 billion reported for the same period last year. Fleet Management accounted for $1,620 million of Q4 originations, while the Rail Finance vertical contributed $198 million. Aviation Finance accounted for $306 million of Q4 originations, while the Commercial & Vendor vertical accounted for $422 million. Full year origination volumes amounted to $7.7 billion, which was well ahead of plan with respect to the Company's previous full-year guidance of $6.5 billion of new originations during 2015, and represented an increase of 63 percent over the prior year.
Financial revenue for the three-month period ended December 31, 2015 was $409.2 million, or 8.3 percent of average earning assets versus, $175.7 million or 8.2 percent of average earning assets in the same period last year. Management fees and other revenue included in financial revenue amounted to $123.9 million during the fourth quarter of 2015 versus $54.8 million in the same period last year, representing an increase of 126 percent.
Interest expense was $119.5 million for the three-month period ended December 31, 2015 compared to $50.0 million for the same period last year. The average cost of borrowing was 2.69 percent during Q4-2015 versus 2.53 percent reported during the previous quarter and 2.66 percent for the same period last year. The cost increase, in each case, was due to the use of more expensive acquisition bank financing to fund the purchase of the GE Fleet operations in September 2015, with less expensive and permanent financing for these assets put in place during late December 2016.
Net financial income for the three-month period ended December 31, 2015 was $289.7 million versus $125.7 million for the same period last year. Adjusted operating expenses for the three-month period ended December 31, 2015 were $128.2 million, or 2.61 percent of average earning assets, versus $53.8 million, or 2.52 percent of average earning assets, in the same period last year with the relative cost increase largely due to the higher cost base of Fleet to provide services that generate service fee income in addition to net yields from leasing activities.
Total earning assets increased to $20.5 billion as at December 31, 2015 versus $19.3 billion as at the end of the preceding quarter and $9.0 billion as at the end of the same period last year. The year-over-year increase was due largely to the acquisition of the GE Fleet operations during Q3, 2015, representing $7.8 billion of earning assets.
Total debt increased to $18.7 billion as at December 31, 2015 from $17.4 billion as at September 30, 2015 and $8.1 billion as at December 31, 2014. The Company's tangible leverage ratio increased in line with our strategic objective of increasing return on equity to 4.57:1 as at December 31, 2015 versus 4.53:1 as at September 30, 2015, and from 3.72:1 as at the prior year end.
Using a discount rate of 6.5 percent, the Company estimates that the present value of its deferral of cash income tax liabilities for the next 12 plus years represents additional unleveraged value of $4.50 per share.
"I am extremely pleased with the reception received from all of our stakeholders to the announcement we made last month that we are separating Element into two stand-alone public entities," noted Steven Hudson, Element's Chief Executive Officer. "From this process will emerge the world's largest publicly traded fleet management company with stable growth, pristine credit quality and recurring high-margin fee income as well as a high-growth commercial finance business that will transition by the end of the year to an asset management business with a strong investment-grade balance sheet," added Mr. Hudson.
Dividends Declared
The Company's Board of Directors has authorized and declared a quarterly dividend of $0.025 per outstanding common share of Element for the first quarter of 2016. The dividend will be paid on April 15, 2016 to shareholders of record at the close of business on March 31, 2016. These dividends are designated to be eligible dividends for purposes of section 89(1) of the Income Tax Act (Canada).
The Company's Board of Directors also declared the following dividends on Element's preferred shares:
These dividends are designated to be eligible dividends for purposes of section 89(1) of the Income Tax Act (Canada).
Conference Call
A conference call to discuss the results with analysts will be held on Wednesday, March 2, 2016 at 5:00 p.m. Eastern Time. The conference call can be accessed by dialing the following numbers:
A series of presentation slides will be referenced by management during the conference call. These slides will be available on the Company's website in advance of the conference call and may be accessed at .
The conference call will be recorded and can be accessed until April 1, 2016 by dialing 1-800-408-3053 or 905-694-9451 and entering the pass code 1939049.
Non-IFRS Measures
The Company's consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and the accounting policies we adopted in accordance with IFRS.
The Company believes that certain Non-IFRS Measures can be useful to investors because they provide a means by which investors can evaluate the Company's underlying key drivers and operating performance of the business, exclusive of certain adjustments and activities that investors may consider to be unrelated to the underlying economic performance of the business of a given period. Throughout this Press Release, management used a number of terms and ratios which do not have a standardized meaning under IFRS and are unlikely to be comparable to similar measures presented by other organizations. A full description of these measures can be found in the Management Discussion & Analysis that accompanies the financial statements for the year and quarter ended December 31, 2015.
The following table provide a reconciliation of non-IFRS to IFRS measures related to the Company:
Non-IFRS and IFRS Key Annualized Operating Ratios and per Share Information:
Quarterly Selected Financial Information and Financial Ratios
The following tables summarize key financial data and key operating ratios for the three-month periods ended December 31, 2015, September 30, 2015 and December 31, 2014:
The following table summarizes key operating ratios as at and for the three months ended:
Annual Selected Financial Information and Financial Ratios
The following table summarizes key financial data as at and for the year ended December 31, 2015:
The following table summarizes key operating ratios as at and for the year ended:
Results of Operations - For the three months ended December 31, 2015, September 30, 2015 and December 31, 2014, and the twelve months ended December 31, 2015 and 2014
The following table sets forth a summary of the Company's results of operations for the three months ended December 31, 2015, September 30, 2015 and December 31, 2014 and twelve months ended December 31, 2015 and 2014:
Overall Performance Highlights for the Three-Months Ended December 31, 2015
The Company's earning assets, consisting of the Company's net investment in finance receivables, equipment under operating leases and investment in managed fund, have grown substantially during the period to December 31, 2015 to $20,470.0 million from $9,028.9 million reported at December 31, 2014. The growth over December 31, 2014 is primarily due to the combined effect of the acquisition of the GE Fleet Operations in August and September 2015, which contributed $7,785.5 million of finance receivables and equipment under operating leases, total new originations for the year in the amount of $7,693.3 million, helped by the large contribution of the Trinity vendor program and origination volume contributed by PHH Arval, net of repayments, syndication activities, amortization of equipment under operating leases and changes in foreign exchange rates of $4,027.6 million. Please refer to note 26 of the Company's Consolidated Financial Statements as at and for the year ended December 31, 2015 for a detailed roll-forward of finance receivables and equipment under operating leases during the year.
Net income before income taxes for the three months ended December 31, 2015 was $97.9 million compared to a net income before income taxes of $53.1 million reported for the three months ended December 31, 2014 and net loss before income taxes of $37.6 million reported in the immediately preceding quarter. The loss in the immediately preceding quarter is the result of the transaction and integration costs incurred in the current quarter related to the acquisition of the GE Fleet Operations.
As indicated previously, management believes that adjusted operating income, a Non-IFRS Measure, is the most appropriate operating measure of the Company's performance as it excludes non-cash items related to share-based compensation and business acquisition costs which do not relate to maintaining operating activities. Adjusted operating income for the three month period ended December 31, 2015 was $161.5 million, an increase of $89.7 million or 124.9% over the amount reported during the comparative quarter ended December 31, 2014 and an increase of $54.4 million or 50.8% over the amount reported during the immediately preceding quarter ended September 30, 2015. The increase over the comparative quarter ended December 31, 2014 and the immediately preceding quarter, is primarily the result of the acquisition of the GE Fleet Operations on August 31, 2015 and September 30, 2015, and of strong organic growth in the intervening periods.
As indicated previously, Management also believes that Free Operating Cash Flows and Free Operating Cash Flows per Share as described in the Non-IFRS Measures section of this MD&A are a key statistics to properly assess the operating performances of the Company to mostly reflect the substantial value being created by the very long deferral of cash income taxes and the investment value produced by that deferral. Thus, while the Company is reporting after-tax adjusted operating income per share (basic) of $0.35 for the three months ended December 31, 2015, free operating cash flows per share (basic) reaches $0.40, compared to $0.19 and $0.25, respectively, for the comparative three months ended December 31, 2014, and $0.26 and $0.32, respectively, for the immediately preceding quarter ended September 30, 2015.
Overall Performance Highlights for the Year Ended December 31, 2015
The Company's earning assets, consisting of the Company's net investment in finance receivables, equipment under operating leases and investment in managed fund, have grown substantially during the period to December 31, 2015 to $20,470.0 million from $9,028.9 million reported at December 31, 2014. The growth over December 31, 2014 is primarily due to the combined effect of the acquisition of the GE Fleet Operations in August and September 2015, which contributed $7,785.5 million of finance receivables and equipment under operating leases, total new originations for the year in the amount of $7,693.3 million, helped by the large contribution of the Trinity vendor program and origination volume contributed by PHH Arval and the GE Fleet Operations, net of repayments, syndication activities, amortization of equipment under operating leases and changes in foreign exchange rates of $4,027.6 million. Please refer to note 26 of the Company's Consolidated Financial Statements as at and for the year ended December 31, 2015 for a detailed roll-forward of finance receivables and equipment under operating leases during the year.
Net income before income taxes was $157.7 million for the year ended December 31, 2015 compared to $58.2 million for the prior year resulting from a substantial growth in total finance receivable and equipment under operating leases during the year from both organic originations and from the GE Fleet Operations acquisition net of an increase of $125.0 million from increased business acquisition costs related to the acquisition of the GE Fleet Operations during the third quarter of 2015.
As indicated previously, management believes that adjusted operating income is the most appropriate operating measure of the Company's performance as it excludes non-cash items related to share-based compensation and business acquisition costs which do not relate to maintaining operating activities. Adjusted operating income for the year ended December 31, 2015 was $435.8 million, an increase of $246.3 million or 130.0% over the amount reported during the comparative year ended December 31, 2014. The increase over the comparative period ended December 31, 2014 is primarily the result of the acquisition of the PHH Arval on July 7, 2014 and the GE US Fleet Operations during Q3 2015, and strong organic growth.
As indicated previously, Management also believes that Free Operating Cash Flows and Free Operating Cash Flows per Share as described in the Non-IFRS Measures section of this MD&A are key statistics to properly assess the operating performances of the Company to mostly reflect the substantial value being created by the very long deferral of cash income taxes and the investment value produced by that deferral. Thus, while the Company is reporting after-tax adjusted operating income per share of $1.08 for the year ended December 31, 2015, free operating cash flows per share reaches $1.33 per share, compared to $0.57 and $0.76, respectively, for the comparative year ended December 31, 2014.
Consolidated Financial Position
The following table sets forth a summary of the Company's consolidated financial position as of the dates presented:
Element's audited financial statements and related management discussion and analysis as at and for the year ended December 31, 2015 have been filed on SEDAR ().
About Element Financial Corporation
With total assets of $25.2 billion, Element Financial Corporation is one of North America's leading fleet management and equipment finance companies. Element operates across North America in four verticals of the equipment finance market (Fleet Management, Rail Finance, Commercial & Vendor Finance, and Aviation Finance) and in Australia and New Zealand in the Fleet Management business.
This release includes forward-looking statements regarding Element and its business. Such statements are based on the current expectations and views of future events of Element's management. In some cases the forward-looking statements can be identified by words or phrases such as "may", "will", "expect", "plan", "anticipate", "intend", "potential", "estimate", "believe" or the negative of these terms, or other similar expressions intended to identify forward-looking statements, including, among others, statements regarding the integration and financial impact of the acquisition of various fleet management businesses from GE Capital, new originations in the current quarter, the anticipated pipeline of prospective transactions, and purchases of portfolios of finance assets. The forward-looking events and circumstances discussed in this release may not occur and could differ materially as a result of known and unknown risk factors and uncertainties affecting Element, including risks regarding the equipment finance industry, economic factors, risks related to completion of the proposed purchases of portfolios of finance assets, and many other factors beyond the control of Element. No forward-looking statement can be guaranteed. Forward-looking statements and information by their nature are based on assumptions and involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statement or information. Accordingly, readers should not place undue reliance on any forward-looking statements or information. A discussion of the material risks and assumptions associated with this outlook can be found in Element's 2015 MD&A, and 2014 Annual Information Form, all of which have been filed on SEDAR and can be accessed at . Accordingly, readers should not place undue reliance on any forward-looking statements or information. Except as required by applicable securities laws, forward-looking statements speak only as of the date on which they are made and Element undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.
Contacts:
Element Financial Corporation
John Sadler
Senior Vice President
(416) 646-5689
Element Financial Corporation
Michel Béland
Chief Financial Officer
(416) 646-5680
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Datum: 02.03.2016 - 22:14 Uhr
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