CLEARLINK Capital Corporation
TSX : CNK

CLEARLINK Capital Corporation

October 26, 2005 16:40 ET

CLEARLINK'R' Reports 2nd Quarter Fiscal 2006 Results

MISSISSAUGA, ONTARIO--(CCNMatthews - Oct. 26, 2005) - CLEARLINK Capital Corporation (TSX:CNK) today reported results for its second quarter of operations in Fiscal 2006. Operating performance in the second quarter of Fiscal 2006 continued to reflect profitable, stable operations but at a level constrained by market factors and portfolio size. Activity levels are increasing in most areas of the business.

Net income for the second quarter of Fiscal 2006 was $1.5 million or $0.17 per share, down marginally from the $1.6 million or $0.17 per share achieved in Q2 of Fiscal 2005. All per share values are fully diluted. On a year-to-date basis, net income was $3.0 million or $0.34 per share, a reduction from the $3.1 million or $0.34 per share earned in the corresponding periods last year. The year-over-year shortfalls in lease margin were for the most part offset by increases in investment income and expense reductions. On a rolling 12 month basis, net income was approximately $6.2 million or $0.70 per share.

Gross margin in the leasing area was $2.9 million in the quarter and $5.9 million on a year-to-date basis, a reduction from the $3.8 million and $7.4 million earned in the respective periods last year. The primary reason for the year-over-year shortfall is a much smaller income-generating portfolio as the owned lease portfolio declined on average by 27% to approximately $203 million. Residual realizations on a year-to-date basis were 157% on $4.6 million of residuals. This compares with a 141% realization rate on $7.8 million of expiries in the first half of last year. Realization rates continue to be high by historical standards reflecting historical customer uncertainty. New lease originations were $24 million in the quarter and $39 million year-to-date up from the $21 million and $38 million generated in the corresponding periods last year.

Gross margin in the equipment trading area was $664,000 in the quarter and $1.4 million year-to-date. This is down slightly from the $702,000 earned in the second quarter of Fiscal 2005 and $1.5 million achieved year-to-date last year. The Connecticut trading group continues to generate significant activity levels with year-to-date volumes of $16.3 million vs. last year's equivalent value of $15.3 million. Margin reductions on these activities has created the shortfall.

Investment income generated in the quarter was $1.2 million and $2.2 million year-to-date, an increase from $706,000 and $1.3 million earned in the respective periods last year. The investment portfolio reduced to $38.4 million at September 30, 2005, reflecting disposals required for litigation payments. Gains realized on the dispositions plus continued strong portfolio yield account for the year-over-year increase.

Expense levels in the quarter totalled $2.5 million and $5.0 million on a year-to-date basis, better than last year's corresponding values of $2.8 million and $5.7 million, reflecting the impacts of infrastructure reductions in response to declining activity levels.

Significant progress in resolving litigation matters also occurred in the second quarter of Fiscal 2006. In July, the Corporation settled unconditionally its litigation regarding the regional landfill along with the majority of the dollar exposure on its equipment lease disputes with the City of Windsor. In addition, in September, the Corporation agreed to settle unconditionally its litigation with the City of Toronto. All of these matters are being settled within the financial parameters of our litigation reserves and receivable balances. The Toronto settlement provides a strong measure of vindication for the Corporation's conduct throughout this matter. The resolution of these two high profile, substantial litigation concerns, goes a long way to allowing the Corporation to re-establish a more normal business environment.

The Corporation is also announcing that it will pay a dividend of $0.10 per common share, payable January 13, 2006 to the shareholders of record on December 31, 2005. Issuer bid activity remained low in the quarter. On a year-to-date basis, 17,600 shares were purchased for cancellation at an average cost of $10 per share. Net book value per share was $12.44 at September 30, 2005.

CLEARLINK Capital Corporation is a leading provider of innovative financial solutions in technology and equipment leasing, and equipment trading. Based in Mississauga, Ontario, CLEARLINK operates throughout North America and Europe.

CLEARLINK® is a registered trademark of CLEARLINK Capital Corporation.



CLEARLINK CAPITAL CORPORATION
Consolidated Balance Sheets
(in thousands of dollars)
---------------------------------------------------------------------
---------------------------------------------------------------------


September 30, March 31,
2005 2005
ASSETS (Unaudited) (Audited)
------------- ------------

CASH $ 9,053 $ 22,206

MARKETABLE SECURITIES 38,363 41,731

LEASES, NET 202,684 243,111

EQUIPMENT HELD FOR LEASING OR SALE 2,515 3,319

RECEIVABLES, NET OF ALLOWANCES 20,702 18,054

LONG-TERM TAXES RECOVERABLE 14,000 14,000

CAPITAL ASSETS 1,068 1,600
------------- ------------
$ 288,385 $ 344,021
------------- ------------
------------- ------------
LIABILITIES

DEBT $ 113,658 $ 147,419

ACCOUNTS PAYABLE AND ACCRUED CHARGES 48,454 70,125

FUTURE INCOME TAX LIABILITIES 16,259 15,731
------------- ------------

178,371 233,275
------------- ------------

SHAREHOLDERS' EQUITY

SHARE CAPITAL 48,002 48,098

FOREIGN CURRENCY TRANSLATION
ADJUSTMENT (3,996) (2,207)

RETAINED EARNINGS 66,008 64,855
------------- ------------
110,014 110,746
------------- ------------

$ 288,385 $ 344,021
------------- ------------
------------- ------------



CLEARLINK CAPITAL CORPORATION
Consolidated Statements of Operations and Retained Earnings
(in thousands of dollars except per share data)
---------------------------------------------------------------------
---------------------------------------------------------------------

Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
2005 2004 2005 2004
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
------------ ------------- ------------ -------------

REVENUE
LEASING $ 16,401 $ 17,736 $ 30,684 $ 41,491
EQUIPMENT
TRADING 7,682 7,206 16,325 15,320
INVESTMENT 1,169 706 2,191 1,333
------------ ------------- ------------ -------------

25,252 25,648 49,200 58,144
------------ ------------- ------------ -------------

EXPENSES
LEASING -
AMORTIZATION
AND OTHER
COSTS 11,820 10,847 21,516 27,587
INTEREST 1,660 3,128 3,294 6,503
EQUIPMENT
TRADING 7,018 6,504 14,936 13,808
------------ ------------- ------------ -------------

20,498 20,479 39,746 47,898
------------ ------------- ------------ -------------
GROSS MARGIN 4,754 5,169 9,454 10,246

SELLING,
GENERAL AND
ADMINISTRATION 2,521 2,836 5,037 5,680
------------ ------------- ------------ -------------


NET INCOME
FROM
OPERATIONS 2,233 2,333 4,417 4,566

PROVISION FOR
INCOME TAXES 714 770 1,413 1,507
------------ ------------- ------------ -------------

NET INCOME
FOR THE
PERIOD $ 1,519 $ 1,563 $ 3,004 $ 3,059

RETAINED
EARNINGS,
BEGINNING
OF PERIOD 65,375 76,743 64,855 76,144

DIVIDENDS (885) (899) (1,771) (1,796)
PREMIUM ON
CANCELATION
OF SHARES (1) (39) (80) (39)
------------ ------------- ------------ -------------
RETAINED
EARNINGS,
END OF
PERIOD $ 66,008 $ 77,368 $ 66,008 $ 77,368
------------ ------------- ------------ -------------
------------ ------------- ------------ -------------

EARNINGS PER
COMMON SHARE
BASIC $ 0.17 $ 0.17 $ 0.34 $ 0.34
------------ ------------- ------------ -------------
------------ ------------- ------------ -------------
FULLY
DILUTED $ 0.17 $ 0.17 $ 0.34 $ 0.34
------------ ------------- ------------ -------------
------------ ------------- ------------ -------------

SHARES
OUTSTANDING
BASIC 8,846,427 8,980,726 8,852,610 8,969,344
------------ ------------- ------------ -------------
------------ ------------- ------------ -------------
FULLY
DILUTED 8,846,427 8,981,891 8,852,610 8,972,014
------------ ------------- ------------ -------------
------------ ------------- ------------ -------------



CLEARLINK CAPITAL CORPORATION
Consolidated Statements of Cash Flows
(in thousands of dollars)
---------------------------------------------------------------------
---------------------------------------------------------------------

Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
2005 2004 2005 2004
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
------------ ------------- ------------ -------------

NET INFLOW
(OUTFLOW) OF
CASH RELATED
TO THE
FOLLOWING
ACTIVITIES

OPERATING
NET INCOME
FOR THE PERIOD $ 1,519 $ 1,563 $ 3,004 $ 3,059
ITEMS NOT
AFFECTING CASH
AMORTIZATION
OF LEASING AND
OTHER ASSETS 4,157 4,590 8,133 10,845
GAIN ON SALE
OF LEASING
ASSETS (487) (884) (1,484) (1,820)
INTEREST
ACCRUED AND
OTHER ITEMS
RELATED TO
MARKETABLE
SECURITIES 180 (293) 498 24
FUTURE INCOME
TAX EXPENSE 120 259 643 618
------------ ------------- ------------ -------------
5,489 5,235 10,794 12,726

NET INCREASE
IN EQUIPMENT
HELD
FOR LEASING
OR SALE,
RECEIVABLES,
ACCOUNTS
PAYABLE AND
ACCRUED
CHARGES (23,069) (19,801) (24,054) (25,208)
DECREASE IN
LONG-TERM TAXES
RECOVERABLE - 6,300 - 6,300
------------ ------------- ------------ -------------
(17,580) (8,266) (13,260) (6,182)
------------ ------------- ------------ -------------

FINANCING
INCREASE
IN DEBT 22,715 12,605 29,746 25,017
REPAYMENT
OF DEBT (16,972) (24,103) (61,676) (60,607)
(REPURCHASE)
ISSUE OF
SHARES, NET (2) 105 (176) 268
DIVIDENDS PAID (886) (897) (1,772) (897)
------------ ------------- ------------ -------------
4,855 (12,290) (33,878) (36,219)
------------ ------------- ------------ -------------

INVESTING
ADDITIONS AND
INVESTMENTS IN
LEASES (26,620) (19,333) (45,129) (41,196)
REDUCTIONS AND
DISPOSALS OF
LEASES 22,940 31,498 76,932 74,016
DISPOSALS OF
(ADDITIONS TO)
MARKETABLE
SECURITIES, NET 4,291 (1,103) 2,870 (4,415)
ADDITIONS TO
OTHER ASSETS,
NET (33) (61) (120) (100)
------------ ------------- ------------ -------------
578 11,001 34,553 28,305
------------ ------------- ------------ -------------

EFFECT OF
EXCHANGE RATE
CHANGES (681) (367) (568) 3
------------ ------------- ------------ -------------

NET CASH
OUTFLOW (12,828) (9,922) (13,153) (14,093)

CASH,
BEGINNING OF
PERIOD 21,881 16,465 22,206 20,636
------------ ------------- ------------ -------------

CASH, END OF
PERIOD $ 9,053 $ 6,543 $ 9,053 $ 6,543
------------ ------------- ------------ -------------
------------ ------------- ------------ -------------



Contact Information