MicroFinancial Inc Reports Operating Results (10-Q)

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Aug 14, 2012
MicroFinancial Inc (MFI, Financial) filed Quarterly Report for the period ended 2012-06-30.

Microfinancial Incorporated has a market cap of $133.7 million; its shares were traded at around $9.07 with a P/E ratio of 14.6 and P/S ratio of 2.5. The dividend yield of Microfinancial Incorporated stocks is 2.6%. Microfinancial Incorporated had an annual average earning growth of 10.8% over the past 5 years.

Highlight of Business Operations:

Total revenues for the three months ended June 30, 2012, were $14.7 million, an increase of $1.2 million, or 9.2%, from the three months ended June 30, 2011. The overall increase was due to an increase of $0.8 million in income on financing leases, an increase of $0.3 million in rental income and an increase of $0.1 million in revenue from loss and damage fee waivers. The increase in income on financing leases is a result of the continued growth in new lease originations. The increase in loss and damage waiver fees is related to an increase in the number of leases subject to such fees as the overall lease portfolio grows. The increase in rental income is the result of TimePayment lease contracts coming to term and converting to rentals. Most of our service contract revenue is derived from our LeaseComm portfolio, for which we have not purchased any new security service contracts since 2004. Consequently, our service contract revenue represents a less significant portion of our revenue stream over time. However, during the three months ended June 30, 2012, TimePayment acquired a limited number of service contracts.

We maintain an allowance for credit losses on our investment in leases, service contracts and rental contracts at an amount that we believe is sufficient to provide adequate protection against losses in our portfolio. Our provision for credit losses increased by $0.3 million for the three months ended June 30, 2012, as compared to the three months ended June 30, 2011, while net charge-offs increased by 2.9% to $4.4 million. The provision was based on providing a general allowance on leases funded during the period and our analysis of actual and expected losses in our portfolio. The decrease in the allowance as a percentage of revenue reflects improvements in delinquency levels of the lease portfolio.

Total revenues for the six months ended June 30, 2012, were $28.9 million, an increase of $2.1 million, or 7.9%, from the six months ended June 30, 2011. The overall increase was due to an increase of $1.3 million in income on financing leases, an increase of $0.6 million in rental income and a $0.2 million increase in fees and other income. The increase in income on financing leases is a result of the continued growth in new lease originations. The increase in loss and damage waiver fees is related to an increase in the number of leases subject to such fees as the overall lease portfolio grows. The increase in rental income is the result of TimePayment lease contracts coming to term and converting to rentals.

We maintain an allowance for credit losses on our investment in leases, service contracts and rental contracts at an amount that we believe is sufficient to provide adequate protection against losses in our portfolio. Our provision for credit losses increased by $0.4 million for the six months ended June 30, 2012, as compared to the six months ended June 30, 2011. Net charge-offs increased by 3.8% to $9.6 million. The provision is based on providing a general allowance on leases funded during the period and our analysis of actual and expected losses in our portfolio. Although the overall allowance increased, the allowance as a percentage of revenue decreased from 33.6% at June 30, 2011, to 32.6% as of June 30, 2012. The reduction in the allowance as a percentage of revenue reflects improvements in delinquency levels of the lease portfolio and a reduction in charge-off levels.

We used net cash in investing activities of $45.7 million and $37.9 million during the six months ended June 30, 2012 and 2011, respectively. Investing activities primarily relate to the origination of leases, and the increase in cash used is consistent with our focused and targeted sales and marketing effort.

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