CLEARLINK'TM' Reports 2nd Quarter Fiscal 2005 Results.MISSISSAUGA, Ontario For the First Nation, see . Mississauga (pronounced: [ˌmɪsɪˈsɑgə] listen -- (TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension : CNK CNK Crash Nitro Kart (Playstation 2 video game) CNK Coated Natural Kraft (MeadWestvaco paperboard) CNK Compute Node Kernel CNK Cryptonet Key ): CLEARLINK Capital Corporation today reported results for its second quarter of operations in Fiscal 2005. Operating performance in the second quarter of Fiscal 2005 continued to reflect profitable, stable operations but at a level constrained con·strain tr.v. con·strained, con·strain·ing, con·strains 1. To compel by physical, moral, or circumstantial force; oblige: felt constrained to object. See Synonyms at force. 2. by market factors in the technology sector. Activity levels are increasing in most areas of the business, but at modest levels indicative indicative: see mood. of a slow rebound rebound (rē´bownd), n/v 1. a recovery from illness. n 2. an outbreak of fresh reflex activity after withdrawal of a stimulus rebound adjective in technology spending. Net income for the second quarter of Fiscal 2005 was $1.6 million or $0.17 per share, down from the $1.8 million or $0.20 per share achieved in Q2 of Fiscal 2004. All per share values are fully diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. . On a year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. basis, net income was $3.1 million or $0.34 per share, a reduction from the $3.7 million or $0.42 per share earned in the corresponding periods last year. The year-over-year shortfalls were attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to reduced leasing margins. On a rolling 12 month basis, net income was approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $6.6 million or $0.73 per share. Net book value on a fully diluted basis was $14.07 as compared to $13.68 last year. Gross margin in the leasing area was $3.8 million in the quarter and $7.4 million on a year-to-date basis, a reduction from the $4.5 million and $9.6 million earned in the respective periods last year. The primary components of the 23% reduction are the impacts of a much smaller income-generating portfolio and lower residual Residual See:Residual value performance. The lease portfolio, owned and securitized securitized Of, related to, or being debt securities that are secured with assets. For example, mortgage purchase bonds are secured by mortgages that have been purchased with the bond issue's proceeds. , on a year-over-year basis has declined on average by 21% to approximately $285 million with a corresponding reduction to run rate. Lease margin as a percentage of owned and securitized assets has stayed relatively constant at 4.8%. Residual realizations on a year-to-date basis were 141% on $7.8 million of residuals Residuals (1) Part of stock returns not explained by the explanatory variable (the market index return). Residuals measure the impact of firm-specific events during a particular period. . This compares with a 152% realization (specification) realization - A UML semantic relationship between a classifier that specifies a contract and another classifier that guarantees to carry it out. [Handout by Mr. David Gillibrand]. rate on $7.6 million of expiries in the first half of last year. While some reduction in realization rates has occurred this year, it continues to be high by historical standards reflecting ongoing customer uncertainty and hesitation to acquire new equipment. Gross margin in the equipment trading area was $702,000 in the quarter and approximately $1.5 million year-to-date. This is up significantly from the $450,000 earned in the second quarter of Fiscal 2004 and $917,000 achieved year-to-date last year. The Connecticut Connecticut, state, United States Connecticut (kənĕt`ĭkət), southernmost of the New England states of the NE United States. It is bordered by Massachusetts (N), Rhode Island (E), Long Island Sound (S), and New York (W). trading group continues to show improvement in activity levels with year-to-date volumes of $15.3 million vs. last year's equivalent value of $12.1 million, a 26% increase. Margins on these activities remained strong at approximately 10%. Investment income generated in the quarter was $706,000 and approximately $1.3 million year-to-date, an increase from $621,000 and $1.15 million earned in the respective periods last year. The investment portfolio was $38.8 million at September September: see month. 30, 2004, approximately 13% greater than last year's equivalent value and portfolio yield has remained fairly constant. Expense levels in the quarter totalled $2.8 million and $5.7 million on a year-to-year basis, slightly better than last year's corresponding values of $2.9 million and 5.9 million reflecting the impacts of historic infrastructure reductions in response to declining activity levels. The Corporation is also announcing that it will pay a dividend of $0.10 per common share, payable January January: see month. 13, 2005 to the shareholders of record on December December: see month. 30, 2004. Issuer bid activity remained low in the quarter with 10,200 shares purchased for cancellation cancellation (See: cancel) CANCELLATION. Its general acceptation, is the act of crossing a writing; it is used sometimes to signify the manual operation of tearing or destroying the instrument itself. Hyde v. Hyde, 1 Eq. Cas. Abr. 409; Rob. at an average cost of $9.30 per share. CLEARLINK Capital Corporation is a leading provider of innovative financial solutions in technology and equipment leasing Equipment Leasing is a financing option to lease equipment for a certain amount of time. Leasing Benefits
 r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). .CLEARLINKTM is a trademark of CLEARLINK Capital Corporation.
MFP FINANCIAL SERVICES LTD.
Consolidated Balance Sheets
(in thousands of dollars)
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September 30, March 31,
2004 2004
ASSETS (Unaudited) (Audited)
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CASH (NOTE 2) $ 6,543 $ 20,636
MARKETABLE SECURITIES (NOTE 3) 38,839 34,448
LEASES (NOTE 4) 284,496 328,161
EQUIPMENT HELD FOR LEASING OR SALE 4,909 3,153
RECEIVABLES, NET OF ALLOWANCES 23,914 22,272
LONG-TERM TAXES RECOVERABLE 25,000 31,300
CAPITAL ASSETS (NOTE 6) 2,278 2,876
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$ 385,979 $ 442,846
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LIABILITIES
DEBT (NOTE 7) $ 172,475 $ 209,808
ACCOUNTS PAYABLE AND
ACCRUED CHARGES 51,836 72,847
FUTURE INCOME TAX LIABILITIES 35,160 34,644
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259,471 317,299
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CONTINGENCIES AND COMMITMENTS (NOTE 9)
SHAREHOLDERS' EQUITY
SHARE CAPITAL (NOTE 8) 48,760 48,454
FOREIGN CURRENCY TRANSLATION
ADJUSTMENT 380 949
RETAINED EARNINGS 77,368 76,144
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126,508 125,547
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$ 385,979 $ 442,846
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MFP FINANCIAL SERVICES LTD.
Consolidated Statements of Operations and Retained Earnings
(in thousands of dollars except per share data)
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Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
September September September September
30, 004 30, 2003 30, 2004 30 2003
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
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REVENUE
LEASING $ 17,736 $ 23,756 $ 41,491 $ 47,902
EQUIPMENT TRADING 7,206 5,604 15,320 12,076
INVESTMENT 706 621 1,333 1,155
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25,648 29,981 58,144 61,133
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EXPENSES
LEASING -
AMORTIZATION AND
OTHER COSTS 10,847 14,869 27,587 29,273
INTEREST 3,128 4,352 6,503 9,015
EQUIPMENT TRADING 6,504 5,154 13,808 11,159
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20,479 24,375 47,898 49,447
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GROSS MARGIN 5,169 5,606 10,246 11,686
SELLING, GENERAL AND
ADMINISTRATION 2,836 2,882 5,680 5,919
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NET INCOME FROM
OPERATIONS 2,333 2,724 4,566 5,767
PROVISION FOR INCOME
TAXES 770 953 1,507 2,018
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NETINCOMEFORTHEPERIOD $ 1,563 $ 1,771 $ 3,059 $ 3,749
RETAINED EARNINGS,
BEGINNING OF PERIOD 76,743 71,208 76,144 69,364
DIVIDENDS (899) - (1,796) -
PREMIUM ON
CANCELATION OF
SHARES (39) (359) (39) (493)
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RETAINED EARNINGS,
END OF PERIOD $ 77,368 $ 72,620 $ 77,368 $ 72,620
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EARNINGS PER COMMON SHARE
BASIC $ 0.17 $ 0.20 $ 0.34 $ 0.42
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FULLY DILUTED $ 0.17 $ 0.20 $ 0.34 $ 0.42
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SHARES OUTSTANDING
BASIC 8,980,726 8,967,443 8,969,344 9,027,818
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FULLY DILUTED 8,981,891 8,996,892 8,972,014 9,054,518
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MFP FINANCIAL SERVICES LTD.
Consolidated Statements of Cash Flows
(in thousands of dollars)
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Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
September September September September
30, 2004 30, 2003 30, 2004 30, 2003
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
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NET INFLOW (OUTFLOW) OF CASH RELATED
TO THE FOLLOWING ACTIVITIES
OPERATING
NET INCOME FOR THE
PERIOD $ 1,563 $ 1,771 $ 3,059 $ 3,749
ITEMS NOT AFFECTING CASH
AMORTIZATION OF
LEASING AND OTHER
ASSETS 4,590 6,661 10,845 14,670
PARTICIPATION IN
LIMITED PARTNERSHIP
LOSS (INCOME) - 460 - (314)
GAIN ON SALE OF
LEASING ASSETS (884) (618) (1,820) (2,190)
INTEREST ACCRUED AND
OTHER ITEMS RELATED
TO MARKETABLE
SECURITIES (293) (421) 24 (201)
FUTURE INCOME TAX
EXPENSE 259 743 618 1,302
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5,235 8,596 12,726 17,016
NET(INCREASE) DECREASE
IN EQUIPMENT HELD
FOR LEASING OR SALE,
RECEIVABLES, ACCOUNTS
PAYABLE AND ACCRUED
CHARGES (19,801) 20,092 (25,208) 19,118
DECREASE (INCREASE)
IN LONG-TERM TAXES
RECOVERABLE 6,300 (5,500) 6,300 (10,000)
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(8,266) 23,188 (6,182) 26,134
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FINANCING
INCREASE IN DEBT 12,605 18,727 25,017 40,251
REPAYMENT OF DEBT (24,103) (29,712) (60,607) (89,857)
ISSUE (REPURCHASE)
OF SHARES, NET 105 (1,271) 268 (1,799)
DIVIDENDS PAID (897) - (897) -
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(12,290) (12,256) (36,219) (51,405)
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INVESTING
ADDITIONS AND
INVESTMENTS IN
LEASE (19,333) (31,503) (41,196) (55,995)
REDUCTIONS AND
DISPOSALS OF LEASES 31,498 33,687 74,016 95,714
(ADDITIONS TO)
DISPOSALS OF
MARKETABLE
SECURITIES, NET (1,103) 5,218 (4,415) 2,918
(DISTRIBUTION FROM)
INVESTMENT IN
LIMITED
PARTNERSHIPS, NET - (163) - 1,930
ADDITIONS TO OTHER
ASSETS, NET (61) (9) (100) (16)
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11,001 7,230 28,305 44,551
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EFFECT OF EXCHANGE
RATE CHANGES (367) (130) 3 (830)
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NET CASH (OUTFLOW)
INFLOW (9,922) 18,032 (14,093) 18,450
CASH, BEGINNING OF
PERIOD 16,465 13,849 20,636 13,431
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CASH, END OF PERIOD $ 6,543 $ 31,881 $ 6,543 $ 31,881
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SUPPLEMENTAL CASH FLOW
DATA:
CASH PAID DURING THE
YEAR FOR:
INTEREST $ 3,294 $ 4,526 $ 6,814 $ 9,358
INCOME TAXES $ 14,621 $ 523 $ 14,768 $ 731
MFP Financial Services Ltd.
Notes to the Consolidated Financial Statements
September 30, 2004
(all dollar amounts are in thousands)
1. BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES These financial statements should be read in conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with the Consolidated Financial Statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge included in the Corporation's Annual Report for 2004 which provides information necessary or useful to understanding the Corporation's businesses and financial statement presentation. In particular, the Corporation's significant accounting policies and practices were presented in Note 2 to the Consolidated Financial Statements in the Annual Report. The quarterly financial statements are unaudited. Financial information in the Second Quarter Report reflects any adjustments that are, in the opinion of management, necessary to a fair presentation of the financial position of the Corporation and the results of its operations and cash flows for the interim periods, in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting ("GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ") in Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of . The results reported in these financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. 2. CASH The Corporation's banking facilities operate under the terms of a cash concentration agreement and are presented on a net basis. No bank credit facilities credit facilities npl → facilidades fpl de crédito credit facilities npl → facilités fpl de paiement credit facilities are currently in existence. The Corporation maintains a margin account with its investment dealer secured by the marketable securities Marketable Securities Very liquid securities that can be converted into cash quickly at a reasonable price. Notes: Marketable securities are very liquid as they tend to have maturities less than one year, and the rate at which these securities can be bought or sold has . 3. MARKETABLE SECURITIES
Marketable securities are as follows:
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September 30, March 31,
2004 2004
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Publicly traded debt instruments $ 21,114 $ 21,644
Publicly traded income trusts and
energy partnership units 12,520 9,812
Other debt instruments 5,205 2,992
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$38,839 $ 34,448
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The purchase price discount or premium on debt instruments is
amortized to income to generate a constant return on the investments
to maturity. The quoted market value of the publicly traded portfolio
approximates carrying value. The fair value of the other debt
instruments approximates their carrying value.
4. LEASES
The Corporation's investment in leases is comprised of the following:
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September 30, March 31,
2004 2004
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Equipment on operating leases:
Computer and other equipment
at cost less accumulated amortization
of $37,741 (March 31, 2004 - $42,396) $ 38,538 $ 36,839
Net investment in finance and
sales-type leases (net of unearned
interest income of $23,685 (March 31,
2004- $29,056)) 245,958 291,322
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$ 284,496 $ 328,161
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Estimated residual values at September 30, 2004 relating to the lease
portfolio amounted to $43,444 (March 31, 2004 - $48,049). Anticipated
residual expiries based on existing lease terms are as follows:
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12 months ending September 30,
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2005 $ 10,546
2006 11,627
2007 20,815
2008 456
2009 and beyond -
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$ 43,444
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5. ASSETS UNDER MANAGEMENT
Total assets under management are as follows:
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September 30, March 31,
2004 2004
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Owned assets (Note 4) $ 284,496 $ 328,161
Syndicated assets 111,918 120,986
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$ 396,414 $ 449,147
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Syndicated assets are financial assets which are brokered directly to
investors for cash. The Corporation continues to administer these
assets on behalf of the investors.
6. CAPITAL ASSETS
CAPITAL ASSETS
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September 30, March 31,
2004 2004
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Cost $ 6,356 $ 6,287
Accumulated amortization (4,078) (3,411)
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$ 2,278 $ 2,876
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7. DEBT
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September 30, March 31,
2004 2004
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Promissory notes and loans
bearing interest, at varying rates $ 172,475 $ 209,808
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Promissory notes and loans are non-recourse to the Corporation and
are secured by lease receivables, contracts and underlying equipment.
8. SHARE CAPITAL
Issued
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Common Shares
Number of Shares Amount
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Balance as at March 31, 2003
9,122,860 $ 49,455
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Issued shares
Purchased for cancellation 65,000 315
(242,400) (1,316)
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Balance as at March 31, 2004 8,945,460 48,454
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Issued shares 50,000 362
Purchased for cancellation (10,200) (56)
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Balance as at September 30, 2004 8,985,260 $ 48,760
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The shares were issued pursuant to the rights under the stock option plan. In addition to the exercise of these options, a further 125,000 options were forfeited for·feit n. 1. Something surrendered or subject to surrender as punishment for a crime, an offense, an error, or a breach of contract. 2. Games a. or reached natural expiry in the quarter. As of September 30, 2004, 188,000 stock options remain outstanding at exercise prices ranging from $11.49 to $14.34. 9. CONTINGENCIES Contingencies (ISSN 1048-9851) is the bimonthly magazine of the American Academy of Actuaries, providing a large and diverse readership with general interest and technical articles on a wide range of issues related to the actuarial profession. AND COMMITMENTS Litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. A detailed review of litigation matters is outlined in Note 14(a) to the 2004 Consolidated Financial Statements. There has been no significant change in the status of these matters from that outlined. The Corporation has established a liability for litigation matters representing the estimated costs to the Corporation of settling all remaining litigation in a reasonable manner applying principles consistent with those established in settlements reached in the past. Should such settlement negotiations prove unsuccessful, the Corporation intends to vigorously vig·or·ous adj. 1. Strong, energetic, and active in mind or body; robust. See Synonyms at healthy. 2. Marked by or done with force and energy. See Synonyms at active. defend these actions on the basis that the lease documents entered into are clear and complete and create binding obligations. Should the Corporation be unsuccessful in its defense or settlement of one or more of these legal actions, there could be a materially adverse effect on the Corporation's financial position and future operations. Income Tax Reassessment Reassessment The process of re-determining the value of property or land for tax purposes. Notes: Property is usually reassessed on an annual basis. You may request a "reassessment" if you disagree with your assessment. A detailed review of the federal and provincial Provincial has several meanings and may refer to:
Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. taxes recoverable as it represents the reversal reversal n. the decision of a court of appeal ruling that the judgment of a lower court was incorrect and is reversed. The result is that the lower court which tried the case is instructed to dismiss the original action, retry the case, or is ordered to change its of tax benefits received in prior years. The Corporation has filed Notices of Objection A formal attestation or declaration of disapproval concerning a specific point of law or procedure during the course of a trial; a statement indicating disagreement with a judge's ruling. in respect of these matters. Both management and tax counsel believe the Corporation's position is supportable. No new developments have occurred in regard to the relevant jurisprudence jurisprudence (j r'ĭspr d`əns), study of the nature and the origin and development of law. .10. SEGMENTED INFORMATION The Corporation derives substantially all of its revenues from the sale and lease of technology equipment and related products. The Corporation operates in three significant geographic geographic /geo·graph·ic/ (je?o-graf´ik) in pathology, of or referring to a pattern that is well demarcated, resembling outlines on a map. geographic pertaining to geography. segments:
CANADA U.S.
6 Months 6 Months 6 Months 6 Months
Ended Ended Ended Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2004 2003 2004 2003
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
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INCOME STATEMENT
LEASING
REVENUES $ 22,080 $ 29,731 $ 19,411 $ 18,171
EXPENSES 17,524 22,202 16,566 16,086
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GROSS MARGIN 4,556 7,529 2,845 2,085
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EQUIPMENT TRADING
REVENUES $ - $ 40 $ 7,739 $ 7,005
EXPENSES - 10 7,298 6,642
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GROSS MARGIN - 30 441 363
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INVESTMENT REVENUE $ 1,333 $ 1,155 $ - $ -
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TOTAL GROSS MARGIN $ 5,889 $ 8,714 $ 3,286 $ 2,448
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Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2004 2003 2004 2003
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
BALANCE SHEET
LEASING ASSETS $ 201,631 $ 262,337 $ 82,865 $ 107,146
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RECEIVABLES $ 18,766 $ 21,567 $ 2,436 $ 1,434
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EQUIPMENT HELD FOR
LEASING OR SALE $ 166 $ 24 $ 2,413 $ 1,584
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MARKETABLE
SECURITIES $ 38,839 $ 22,823 $ - $ -
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EUROPE TOTAL
6 Months 6 Months 6 Months 6 Months
Ended Ended Ended Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2004 2003 2004 2003
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
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INCOME STATEMENT
LEASING
REVENUES $ - $ - $ 41,491 $ 47,902
EXPENSES 34,090 38,288
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GROSS MARGIN - - 7,401 9,614
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EQUIPMENT TRADING
REVENUES $ 7,581 $ 5,031 $ 15,320 $ 12,076
EXPENSES 6,510 4,507 13,808 11,159
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GROSS MARGIN 1,071 524 1,512 917
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INVESTMENT REVENUE $ - $ - $ 1,333 $ 1,155
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TOTAL GROSS MARGIN $ 1,071 $ 524 $ 10,246 $ 11,686
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Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2004 2003 2004 2003
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
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BALANCE SHEET
LEASING ASSETS $ - $ - $ 284,496 $ 369,483
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RECEIVABLES $ 2,712 $ 2,556 $ 23,914 $ 25,557
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EQUIPMENT HELD FOR
LEASING OR SALE $ 2,330 $ 1,340 $ 4,909 $ 2,948
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MARKETABLE
SECURITIES $ - $ - $ 38,839 $ 22,823
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11. COMPARATIVES Certain comparative figures have been reclassified to conform with current year's presentation. MANAGEMENT DISCUSSION & ANALYSIS This second quarter report reflects the consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: operating results of MFP (MultiFunction Printer, MultiFunction Peripheral) See all-in-one and MFD. Financial Services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. Ltd. for the periods to September 30, 2004 and its financial position as of that date. Effective October October: see month. 1, 2004, the Corporation changed its name to CLEARLINK Capital Corporation and will be issuing financial reports under the new name in the future. OVERVIEW Operating performance in the second quarter of Fiscal 2005 continued to reflect profitable operations but at a level constrained by market factors in the technology sector. Activity levels are increasing in most areas of the business, but at modest levels indicative of a slow rebound in technology spending. Despite a small shift this quarter in customer activity, uncertainty remains as new business levels continue to be low and residual performance high by historical standards. The Corporation is focused on its core leasing strategy with an infrastructure tailored to meet the existing market. It is poised to move forward from a position of strength in the industry once technology spending rebounds. Consistent with this strategy, the Corporation has invested its energies in the re-branding and re-energizing of the organization to meet the needs of its customers on a go forward basis. With a new name and renewed re·new v. re·newed, re·new·ing, re·news v.tr. 1. To make new or as if new again; restore: renewed the antique chair. 2. focus on the future, the Corporation believes it will access more of these new opportunities as they arise. INCOME Net income for the second quarter of Fiscal 2005 was $1.6 million or $0.17 per share, down from the $1.8 million or $0.20 per share achieved in Q2 of Fiscal 2004. All per share values are fully diluted. On a year-to-date basis, net income was $3.1 million or $0.34 per share, a reduction from the $3.7 million or $0.42 per share earned in the corresponding periods last year. The year-over-year shortfalls were attributable to reduced leasing margins. On a rolling 12 month basis, net income was approximately $6.6 million or $0.73 per share. Gross margin in the leasing area was $3.8 million in the quarter and $7.4 million on a year-to-date basis, a reduction from the $4.5 million and $9.6 million earned in the respective periods last year. The primary components of the 23% reduction are the impacts of a much smaller income-generating portfolio and lower residual performance. The lease portfolio, owned and securitized, on a year-over-year basis has declined on average by 21% to approximately $285 million with a corresponding reduction to run rate. Lease margin as a percentage of owned and securitized assets has stayed relatively constant at 4.8%. Residual realizations in the quarter were 137% on $4.7 million of residual expiries and on a year-to-date basis were 141% on $7.8 million of residuals. This compares with a 153% realization rate on $2.8 million of residual expiries in the corresponding quarter last year and 152% realization rate on $7.6 million of expiries in the first half of last year. While some reduction in realization rates has occurred this year, it continues to be high by historical standards reflecting ongoing customer uncertainty and hesitation to acquire new equipment. In terms of period income recognition, the month-to-month month-to-month adj. referring to a tenancy in which the tenant pays monthly rent and has no lease, and the tenancy can be terminated by the landlord at any time on thirty-days notice. (See: tenancy, landlord and tenant) contributions were down only marginally mar·gin·al adj. 1. Of, relating to, located at, or constituting a margin, a border, or an edge: the marginal strip of beach; a marginal issue that had no bearing on the election results. 2. on a year-over-year basis. The decline in absolute levels of residuals to $43.4 million at September 30, 2004 will continue to be a near term constraint Constraint A restriction on the natural degrees of freedom of a system. If n and m are the numbers of the natural and actual degrees of freedom, the difference n - m is the number of constraints. on lease margins. New business volumes in the quarter were $21 million and on a year-to-date basis were $38 million. This compares unfavourably with $29 million undertaken in the second quarter of last year and $56 million year-to-date in Fiscal 2004 but represents an improvement over last quarter's $17 million. The program agreement accumulation Accumulation 1) In the context of individual investing, it is the process of contributing cash to invest in securities over a period of time in order to build a portfolio of desired value. Dividends and capital gains are also reinvested during this process. balance stayed constant in the quarter at $15 million. At these volume levels, runoff Runoff The procedure of printing the end-of-day prices for every stock on an exchange onto ticker tape. Notes: If the "tape is late" then it can take a long time to print off all the closing prices. continues to significantly exceed new business and the portfolio declined by $20.4 million in the quarter. Gross margin in the equipment trading area was $702,000 in the quarter and approximately $1.5 million year-to-date. This is up significantly from the $450,000 earned in the second quarter of Fiscal 2004 and $917,000 achieved year-to-date last year. The Connecticut trading group continues to show improvement in activity levels with year-to-date volumes of $15.3 million vs. last year's equivalent value of $12.1 million, a 26% increase. Margins on these activities remained strong at approximately 10%. The increase results from a combination of economic factors and one-off (1) One at a time. CD-ROM recorders (CD-R drives) are commonly called one-off machines because they write one CD-ROM at a time. (2) Only once. Software that is written to solve a specific problem only one time is sometimes called a one-off. opportunities. Investment income generated in the quarter was $706,000 and approximately $1.3 million year-to-date, an increase from $621,000 and $1.15 million earned in the respective periods last year. The investment portfolio was $38.8 million at September 30, 2004, approximately 13% greater than last year's equivalent value and portfolio yield has remained fairly constant. Selling, General and Administrative ("SG&A") expenses were $2.8 million in the quarter, $0.1 million less than the expense base generated in Q2 of last year. On a year-to-date basis, SG&A was $5.7 million as compared with the prior year comparative balance of $5.9 million. The cost savings from infrastructure reduction initiatives previously undertaken are now fully reflected in both years and variances should not be significant. Payroll payroll a list of employees, their salary rates, tax deductions, amounts paid, payroll tax, long service leave entitlements. costs approximate ap·prox·i·mate v. To bring together, as cut edges of tissue. adj. 1. Relating to the contact surfaces, either proximal or distal, of two adjacent teeth; proximate. 2. Close together. 45% of total SG&A while infrastructure costs approximate a further 19%. BALANCE SHEET As previously indicated, the largest balance sheet change in the quarter relates to the $20 million reduction in the lease portfolio. A corresponding $15 million of debt reduction also arose for the lease payment portion. The balance reflects a combination of changes in clearing accounts and residual disposals. In terms of assets under management Assets Under Management (AUM) is a term used by financial services companies in the mutual fund and money management or investment management business to gauge how much money they are managing. , the portfolio is now approximately $396 million. This compares to $510 million in the same quarter last year. The more relevant income generating value of owned and securitized assets was $285 million as compared with $378 million in the corresponding quarter last year. Cash and investments reduced in the quarter by approximately $8.5 million to $45.4 million as approximately $16 million of payables Payables Related: Accounts payable were extinguished ex·tin·guish tr.v. ex·tin·guished, ex·tin·guish·ing, ex·tin·guish·es 1. To put out (a fire, for example); quench. 2. To put an end to (hopes, for example); destroy. See Synonyms at abolish. 3. , the majority of which were tax payments. The portion of the current tax liability which relates to the taxable income inclusion from the contested software leases of approximately $6.3 million was booked as a reduction to long term taxes recoverable as it reflects the reversal of tax benefits received in prior years. Receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed and inventory were also users of cash in the quarter. The increase in marketable securities of $4.4 million reflects an ongoing effort to increase the investment portion of surplus cash. Issuer bid activity remained relatively low in the quarter with 10,200 shares purchased for cancellation at an average cost of $9.30. This compares to a fully diluted net book value per share of $14.07. Net book value was negatively impacted by the drop in the U.S. dollar in the quarter. The at risk portion of the long term investment in the U.S. business reduced by approximately $1.5 million and was reflected through the FCTA FCTA Florida Cable Telecommunications Association FCTA Frederick County Teachers Association FCTA Fulton County Transit Authority (Kentucky, USA) FCTA Fibre Channel Trade Association FCTA Fibre Channel Tape Acceleration account. The declining dollar also had a negative impact on trading performance and U.S. lease activity. During the quarter, 150,000 stock options were either exercised, forfeited or expired ex·pire v. ex·pired, ex·pir·ing, ex·pires v.intr. 1. To come to an end; terminate: My membership in the club has expired. 2. naturally at the end of the 7 year term. The balance of stock options outstanding currently is 188,000 with exercise prices ranging from $11.49 to $14.34. The Corporation continued its divided policy by declaring a $0.10 per share dividend to the shareholders of record as of December 30, 2004. CONTINGENCIES There has been no significant change in the status of litigation matters outlined in Note 14(a) to the 2004 Consolidated Financial Statements. The Corporation has established a liability for litigation matters representing the estimated costs to the Corporation of settling all remaining litigation in a reasonable manner applying principles consistent with those established in settlements reached in prior years. Should any such settlement prove unsuccessful, the Corporation intends to vigorously defend these actions on the basis that the lease documents entered into are clear and complete and create binding obligations. Should the Corporation be unsuccessful in its defense or settlement of one or more of these legal actions, there could be a materially adverse effect on the Corporation's financial position and future operations. There has been no significant change in the status of the income tax reassessments received by the Corporation as outlined in Note 14(C) to the 2004 Consolidated Financial Statements. OUTLOOK In the short term, activity levels will continue to be impacted by economic factors and technology uncertainty. The Corporation will focus on its target markets, poised for growth in this sector while exploring new opportunities in order to achieve its profit objectives. 2281 North Sheridan Way Mississauga, Ontario, Canada L5K 2S3 Phone: (905) 855-2500 Fax: (905) 855-2725 CLEARLINK Capital Corporation (TSX:CNK) |
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