Element Financial Corporation
TSX : EFN

Element Financial Corporation

November 10, 2015 16:52 ET

Element Reports $0.32 Per Share of Free Operating Cash Flow and Initiates Quarterly Dividend of $0.025 Per Share

- U.S. portion of GE Fleet transaction closed August 31st creating a North American leader in fleet management

- Australia, New Zealand and Mexico portions of GE Fleet transaction closed on September 30th

- After tax adjusted operating income per share of $0.26 (basic) versus consensus of $0.25

- Originations increased to $1.9 billion in Q3-2015 up 61% from $1.2 billion in the same period last year

- Average earning assets increased to $13.0 in Q3-2015 up 65% from $7.9 billion in the same period last year

- U.S. market accounted for 73% of Q3 period end (earning assets) versus 63% for the same period end last year

- Pre-tax adjusted return on average common equity at 12.3% pro forma in Q3-2015 versus 9.7% for the same period last year

- Tangible leverage increased to 4.53:1 from 3.07:1 at the end of previous period

TORONTO, ONTARIO--(Marketwired - Nov. 10, 2015) - Element Financial Corporation (TSX:EFN) ("Element" or the "Company"), one of North America's leading fleet management and equipment finance companies, today reported financial results for the three-month and nine-month periods ending September 30, 2015 with free operating cash flow $107.1 million or $0.32 per share for the three-month period and after tax adjusted operating income of $87.2 million or $0.26 per share (basic) for the three-month period versus the consensus estimate of $0.25 per share.

"Free operating cash flow per share came in at $0.32 for the quarter and has now increased for the eighth consecutive quarter," noted Steven K. Hudson, Element's Chief Executive Officer. "During that two year period we have consciously and meaningfully shifted the mix of our earning assets into our core business, fleet management - a business where we have the scale, the visibility and the predictable growth in pre-tax cash flow that now backstops the initiation of our quarterly dividend at $0.025 per share," added Mr. Hudson.

Reported earnings and metrics for the third quarter exclude the full benefit of the 55 basis point reduction in Element's cost of funding arising from closing the GE Fleet transaction and the achievement of an investment grade rating. In addition, reported EPS and return on equity metrics did not fully benefit from the deployment of the 119.7 million common shares which became part of the capital structure on August 31st but were not fully engaged in the funding of earning assets until September 30th when the Australia, New Zealand and Mexico parts of the GE Fleet acquisition were closed. Pro-forma the above two adjustments, Element would have reported an after-tax adjusted operating income per share of $0.28, versus the reported $0.26 per share, an average pre-tax yield on average earning assets of 3.40% versus the reported 3.30% and a return on average equity of 12.3% versus the reported 11.2%.

Overall, new originations amounted to $1.9 billion for the three-month period ended September 30, 2015 representing a 60.9 percent increase over the $1.2 billion reported for the same period last year. Fleet Management accounted for $867.9 million of Q3 originations, while the Rail Finance vertical contributed $358.4 million. Aviation Finance accounted for $83.7 million of Q3 originations, while the Commercial & Vendor vertical accounted for $579.9 million. Year-to-date origination volumes amount to $5.1 billion, which is slightly ahead of plan with respect to the Company's previous full-year guidance of $6.5 billion of new originations during 2015 and represents an increase of 68.7 percent over the same period last year.

Financial revenue for the three-month period ended September 30, 2015 was $258.5 million or 8.0 percent of average earning assets versus $157.0 million or 8.0 percent of average earning assets in the same period last year. Management fees and other revenue included in financial revenue amounted to $65.9 million versus $47.3 million in the same period last year representing an increase of 39.2 percent.

Interest expense was $73.6 million for the three-month period ended September 30, 2015 compared to $45.8 million for the same period last year. The average cost of borrowing was 2.53 percent in Q3-2015 versus 2.56 percent reported during the previous quarter and 2.68 percent for the same period last year.

Net financial income for the three-month period ended September 30, 2015 was $184.9 million versus $111.2 million for the same period last year. Adjusted operating expenses for the three-month period ended September 30, 2015 were $77.8 million or 2.39 percent of average earning assets versus $51.2 million or 2.61 percent of average earning assets in the same period last year.

Total earning assets increased to $19.3 billion as at September 30, 2015 versus $10.6 billion as at the end of the preceding quarter and $8.3 billion as at the end of the same period last year. Finance receivables increased to $15.2 billion and Equipment under operating leases increased to $4.0 billion as at September 30, 2015 versus $8.6 billion and $1.9 billion, respectively, reported at the end of the preceding quarter reflecting closing of the GE Fleet transaction as well as organic growth by way of new origination volumes.

Total debt increased to $17.4 billion as at September 30, 2015 from $9.5 billion as at June 30, 2015 and $7.3 billion as at September 30, 2014. The Company's tangible leverage ratio increased to 4.53:1 as at September 30, 2015 versus 3.07:1 as at June 30, 2015 and 3.47:1 as at September 30, 2014.

Using a discount rate of 6.5 percent, the Company estimates that the present value of the deferral of cash income tax liabilities for the next 12 plus years represents additional unleveraged value of $4.50 per share.

"The process of integrating the acquired GE fleet operations is now well underway and we are pleased to reaffirm our guidance on achieving US$90 million to US$95 million of integration savings and on delivering $1.61 (basic) of after-tax adjusted operating income per share in 2016," said Bradley Nullmeyer, Element's President.

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 fourth quarter of 2015. The dividend will be paid on January 15, 2016 to shareholders of record at the close of business on December 31, 2015. 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 declared the following dividends on Element's preferred shares:

  • A quarterly dividend of $0.4125 per outstanding Cumulative 5-Year Rate Reset Preferred Share, Series A (TSX:EFN.PR.A) payable on December 31, 2015 to shareholders of record on the close of business on December 17, 2015. The dividend payment is for the quarterly period up to but excluding December 31, 2015.
  • A quarterly dividend of $0.40625 per outstanding Cumulative 5-Year Rate Reset Preferred Share, Series C (TSX:EFN.PR.C) payable on December 31, 2015 to shareholders of record on the close of business on December 17, 2015. The dividend payment is for the quarterly period up to but excluding December 31, 2015.
  • A quarterly dividend of $0.40 per outstanding Cumulative 5-Year Rate Reset Preferred Share, Series E (TSX:EFN.PR.E) payable on December 31, 2015 to shareholders of record on the close of business on December 17, 2015. The dividend payment is for the quarterly period up to but excluding December 31, 2015.
  • A quarterly dividend of $0.40625 per outstanding Cumulative 5-Year Rate Reset Preferred Share, Series G (TSX:EFN.PR.G) payable on December 31, 2015 to shareholders of record on the close of business on December 17, 2015. The dividend payment is for the quarterly period up to but excluding December 31, 2015.

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 Tuesday, November 10, 2015 at 5:00 p.m. Eastern Time. The conference call can be accessed by dialing the following numbers:

North America Toll-Free: 1-888-789-9572 passcode 2853666
Local: 416-340-2217 passcode 2853666
International: https://www.confsolutions.ca/ILT?oss=7P1R8887899572

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 www.elementcorp.com/investors/presentations-1.

The conference call will be recorded and can be accessed until December 10, 2015 by dialing 1-800-408-3053 or 905-694-9451 and entering the pass code 5908288.

Non-IFRS Measures

The Company's unaudited interim condensed 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 quarter ended September 30, 2015.

The following table provide a reconciliation of non-IFRS to IFRS measures related to the Company:

As at and for the
three months ended
As at and for the
nine months ended
$ thousands (except % and per share amounts) September
30, 2015
June
30, 2015
September
30, 2014
September
30, 2015
September
30, 2014
Reported and adjusted income measures
Net income (loss) A (4,656) 25,157 (19,959) 69,998 7,005
Adjustments:
Amortization of debenture synthetic discount 2,906 1,956 1,418 6,334 1,418
Share-based compensation 8,774 9,438 4,861 24,748 12,716
Amortization of intangible assets from acquisitions 4,972 5,202 746 14,917 2,607
Transaction and integration costs 128,068 39,287 82,688 168,536 95,795
Provision (recovery) of income taxes (32,943) 7,724 (9,758) (10,258) (1,909)
Adjusted operating income B 107,121 88,764 59,996 274,275 117,632
Provision for taxes applicable to adjusted operating income C (19,948) (20,833) (12,724) (58,172) (24,692)
After-tax adjusted operating income D=B-C 87,173 67,931 47,272 216,103 92,940
Cumulative preferred share dividends during the period Y 8,904 7,123 6,145 22,135 12,826
After-tax adjusted operating income attributable to common shareholders D1=
D-Y
78,269 60,808 41,127 193,968 80,114
Selected cash flow amounts
Adjusted operating income before income taxes B 107,121 88,764 59,996 274,275 117,632
Selected statement of financial position amounts
Finance receivables, before allowance for credit losses E 16,371,356 9,497,573 7,828,873 16,371,356 7,828,873
Allowance for credit losses F 24,135 19,313 16,308 24,135 16,308
Earning assets
Net investment in finance receivable G 15,174,976 8,564,167 7,182,608 15,174,976 7,182,608
Equipment under operating leases H 3,991,195 1,938,032 1,113,530 3,991,195 1,113,530
Investment in managed fund H1 144,340 129,896 - 144,340 -
Total earning assets I=
G+H+H1
19,310,511 10,632,095 8,296,138 19,310,511 8,296,138
Average earning assets, net J 12,997,240 9,990,215 7,853,916 10,877,528 5,004,100
Goodwill and intangible assets K 2,152,541 914,452 821,288 2,152,541 821,288
Accounts payable and accrued liabilities L 660,578 439,198 380,096 660,578 380,096
Secured borrowings M 16,576,204 8,682,200 6,994,852 16,576,204 6,994,852
Unsecured convertible debentures N 831,916 829,470 301,189 831,916 301,189
Total debt O=M+N 17,408,120 9,511,670 7,296,041 17,408,120 7,296,041
Average debt P 11,645,733 9,088,283 6,835,759 9,786,448 3,843,964
Total shareholders' equity Q 5,377,345 3,269,854 2,723,435 5,377,345 2,723,435
Preferred shares R 533,635 534,038 365,113 533,635 365,113
Common shareholders' equity S=Q-R 4,843,710 2,735,816 2,358,322 4,843,710 2,358,322
Average common shareholders' equity T 3,500,993 2,663,526 2,223,893 2,932,505 1,652,212
Average total shareholders' equity U 4,034,893 3,088,007 2,588,328 3,374,288 1,904,821

Non-IFRS and IFRS Key Annualized Operating Ratios and per Share Information:

As at and for the
three months ended
As at and for the
nine months ended
$ thousands (except % and per share amounts) September
30, 2015
June
30, 2015
September
30, 2014
September
30, 2015
September
30, 2014
Free operating cashflow per share [basic] (B-Y)/W $ 0.32 $ 0.31 $ 0.21 $ 0.91 $ 0.49
After-tax adjusted operating income per share [basic] (1) (D1)/W $ 0.26 $ 0.23 $ 0.16 $ 0.70 $ 0.38
After-tax proforma diluted adjusted operating income per share (D1+Z)/X $ 0.25 $ 0.22 $ 0.16 $ 0.67 $ 0.37
Key annualized operating ratios
Leverage ratios
Financial leverage ratio O/Q 3.24 2.91 2.68 3.24 2.68
Tangible leverage ratio 4.53 3.07 3.47 4.53 3.47
Average financial leverage ratio P/U 2.89 2.94 2.64 2.90 2.02
Average tangible leverage ratio 3.59 3.67 3.08 3.71 2.66
Other key operating ratios
Allowance for credit losses as a percentage of finance receivables F/E 0.15 % 0.20 % 0.21 % 0.15 % 0.21 %
Adjusted operating income on average common shareholders' equity (B-Y)/T 11.22 % 12.26 % 9.69 % 11.46 % 8.46 %
Adjusted operating income on average earning assets B/J 3.30 % 3.55 % 3.06 % 3.36 % 3.13 %
After-tax adjusted operating income on average common shareholders' equity (D-Y)/T 8.94 % 9.13 % 7.40 % 8.82 % 6.47 %
After-tax adjusted operating income on average earning assets D/J 2.68 % 2.72 % 2.41 % 2.65 % 2.48 %
Per share information
Number of shares outstanding (including special warrants) V 385,798 265,923 264,056 385,798 264,056
Weighted average number of shares outstanding [basic] W 305,073 264,516 258,381 278,035 212,366
Proforma diluted average number of shares outstanding X 356,149 301,074 263,426 315,925 217,411
Cumulative preferred share dividends during the period Y $ 8,904 $ 7,123 $ 6,145 $ 22,135 $ 12,826
Other effects of dilution adjusted operating income basis Z $ 9,029 $ 5,472 $ - $ 17,963 $ -
Net income (loss) per share [basic] (A-Y)/W $ (0.04 ) $ 0.07 $ (0.10 ) $ 0.17 $ (0.03 )
Net income (loss) per share [diluted] $ (0.04 ) $ 0.07 $ (0.10 ) $ 0.17 $ (0.03 )
Book value per share S/V $ 12.56 $ 10.29 $ 8.93 $ 12.56 $ 8.93
(1) Adjusted for the timing of the closing of the GE Fleet Operations in Mexico, Australia and New Zealand, the Company would report adjusted operating income per share of $0.28. Refer to Management's Financial Commentary on the GE Fleet Operations Acquisition on page 27 of the September 30, 2015 Management Discussion and Analysis.

Selected Financial Information and Financial Ratios

The following tables summarize key financial data and key operating ratios for the three-month and nine-month periods ended:

As at and for the
three months ended
As at and for the
nine months ended
(in $000's for stated values, except ratios and per share amounts) September
30, 2015

$
June
30, 2015
$
September
30, 2014
$
September
30, 2015

$
September
30, 2014
$
After tax adjusted operating income (loss) per share (basic) (1) 0.26 0.23 0.16 0.70 0.38
Free operating cash flows per share (basic) (1) 0.32 0.31 0.21 0.91 0.49
Financial revenue (1) 258,521 207,739 157,043 653,580 298,620
Adjusted operating income (1) 107,121 88,764 59,996 274,275 117,632
After tax adjusted operating income (1) 87,173 67,931 47,272 216,103 92,940
Income before taxes (37,599 ) 32,881 (29,717 ) 59,740 5,096
Net income (4,656 ) 25,157 (19,959 ) 69,998 7,005
Total assets 23,572,478 15,285,559 10,449,512 23,572,478 10,449,512
New originations 1,889,951 1,801,054 1,174,764 5,148,438 3,051,381
Finance receivables and equipment under operating lease from acquisitions (2) 7,791,853 - 4,298,224 7,791,853 4,298,224
Secured borrowings 16,576,204 8,682,200 6,994,852 16,576,204 6,994,852
Convertible debentures 831,916 829,470 301,189 831,916 301,189
Total debt 17,408,120 9,511,670 7,296,041 17,408,120 7,296,041
Average finance receivables (1) 10,808,794 8,378,176 6,914,799 9,138,840 4,237,733
Average equipment under operating leases (1) 2,051,627 1,595,173 939,117 1,688,287 766,367
Average investment in managed fund 136,819 16,866 - 50,401 -
Average earning assets (1) 12,997,240 9,990,215 7,853,916 10,877,528 5,004,100
Average debt outstanding (1) 11,645,733 9,088,283 6,835,759 9,786,448 3,843,964
Number of shares outstanding (including special warrants) 385,798 265,923 264,056 385,798 264,056
Weighted average number of shares outstanding (including special warrants) [basic] 305,073 264,516 258,381 278,035 212,366
Total shareholders' equity 5,377,345 3,269,854 2,723,435 5,377,345 2,723,435
Average common shareholders' equity (1) 3,500,993 2,663,526 2,223,893 2,932,505 1,652,212
Earnings per share [basic] (0.04 ) 0.07 (0.10 ) 0.17 (0.03 )
Earnings per share [diluted] (0.04 ) 0.07 (0.10 ) 0.17 (0.03 )
(1) For additional information, see "Description of Non-IFRS Measures" section.
(2) Three and nine-months ended September 2015, relates to the estimated fair value assigned to finance receivables equipment under operating lease from the acquisition of the GE Fleet Operations on August 31, 2015 and September 30, 2015 (three and nine-months ended September 30, 2014 relates fair value assigned to the finance receivable assets from the acquisition of PHH Arval on July 7, 2014).

The following table summarizes key operating ratios as at and for the three and nine months ended:

As at and for the
three-months ended
As at and for the
nine months ended
September
30, 2015
June
30, 2015
September
30, 2014
September
30, 2015
September
30, 2014
Leverage ratios
Standard Leverage (2) (3)
- Financial leverage ratio 3.24 2.91 2.68 3.24 2.68
- Average financial leverage ratio 2.89 2.94 2.64 2.90 2.02
Bank Covenant (2) (4)
- Tangible leverage ratio 4.53 3.07 3.47 4.53 3.47
- Average tangible leverage ratio 3.59 3.67 3.08 3.71 2.66
Other ratios and yields
Allowance for credit losses as a percentage of finance receivables (2) 0.15 % 0.20 % 0.21 % 0.15 % 0.21 %
Annualized credit loss provision as a percentage of average finance receivables (2) 0.17 % 0.16 % 0.22 % 0.16 % 0.34 %
Portfolio average remaining life (in months, excluding equipment under operating leases) (2) 24.2 28.9 27.1 24.2 27.1
Adjusted operating income on average common shareholders' equity (2) 11.22 % 12.26 % 9.69 % 11.46 % 8.46 %
Adjusted operating income on average earning assets (2) 3.30 % 3.55 % 3.06 % 3.36 % 3.13 %
After-tax adjusted operating income on average common shareholders' equity (2) 8.94 % 9.13 % 7.40 % 8.82 % 6.47 %
After-tax adjusted operating income on average earning assets (2) 2.68 % 2.72 % 2.41 % 2.65 % 2.48 %
Book value per share $ 12.56 $ 10.29 $ 8.93 $ 12.56 $ 8.93
(1) All are ratios presented on an annualized basis.
(2) For additional information, see "Description of Non-IFRS Measures" section.
(3) Financial leverage ratio is computed as total debt (the sum of secured borrowings and extendible convertible debentures) divided by total shareholders' equity.
(4) Computed under bank covenant.

Results of Operations - For the three months ended September 30, 2015, June 30, 2015 and September 30, 2014 and nine months ended September 30, 2015 and September 30, 2014

The following table sets forth a summary of the Company's results of operations for the three months ended September 30, 2015, June 30, 2015 and September 30, 2014 and nine months ended September 30, 2015 and September 30, 2014:

For the three-month
periods ended
For the nine-month
periods ended

(in 000's for stated values, except per unit amounts)
September
30, 2015

$
June
30, 2015
$
September
30, 2014
$
September
30, 2015

$
September
30, 2014
$
Net Financial Income
Interest income 161,210 119,521 96,249 392,324 196,341
Rental revenue, net (1) 36,173 28,592 17,306 90,746 41,981
Total interest income and rental revenue, net 197,383 148,113 113,555 483,070 238,322
Interest expense 73,590 58,108 45,819 185,300 90,337
Net interest income and rental revenue, net before provision for credit losses 123,793 90,005 67,736 297,770 147,985
Provision for credit losses 4,770 3,284 3,851 11,281 10,677
Net interest income and rental revenue, net 119,023 86,721 63,885 286,489 137,308
Management fees and other revenues 65,908 62,910 47,339 181,791 70,975
Net financial income 184,931 149,631 111,224 468,280 208,283
Operating Expenses
Salaries, wages and benefits 45,251 36,391 33,285 115,665 58,416
General and administration expenses 32,559 24,476 17,943 78,340 32,235
Amortization of debenture synthetic discount 2,906 1,956 1,418 6,334 1,418
Share-based compensation 8,774 9,438 4,861 24,748 12,716
89,490 72,261 57,507 225,087 104,785
Business acquisition costs
Amortization of intangibles from acquisition 4,972 5,202 746 14,917 2,607
Transaction and integration costs 128,068 39,287 82,688 168,536 95,795
133,040 44,489 83,434 183,453 98,402
Net income before taxes (37,599 ) 32,881 (29,717 ) 59,740 5,096
Tax expense (32,943 ) 7,724 (9,758 ) (10,258 ) (1,909 )
Net income for the period (4,656 ) 25,157 (19,959 ) 69,998 7,005
Earnings per share [basic] (0.04 ) 0.07 (0.10 ) 0.17 (0.03 )
Earnings per share [diluted] (0.04 ) 0.07 (0.10 ) 0.17 (0.03 )

(1) Rental revenue, net is equal to rental income earned on equipment under operating leases, less depreciation on equipment under operating leases.

Overall Performance Highlights for the Three and Nine-Months Ended September 30, 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 September 30, 2015 to $19,310.5 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 $7,791.9 million of finance receivables and equipment under operating leases, total new originations for the year in the amount of $5,148.4 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 $2,658.7 million.

Net loss before income taxes for the three months ended September 30, 2015 was $37.6 million compared to a net loss before income taxes of $29.7 million reported for the three months ended September 30, 2014 and net income before income taxes of $32.9 million reported in the immediately preceding quarter. The loss in the current quarter is the result of the transaction and integration costs incurred in the current quarter related to the acquisition of the GE Fleet Operations. Net income before income taxes for nine months ended September 30, 2015 was $59.7 million compared to a net income before income taxes of $5.1 million reported for the nine months ended September 30, 2014. The increase over the comparative nine months ended September 30, 2014, is a result of growth in assets and related income during the intervening period, net of increases in business acquisition costs related to the acquisition of the GE Fleet Operations that closed on August 31, 2015 and September 30, 2015.

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 September 30, 2015 was $107.1 million, an increase of $47.1 million or 78.5% over the amount reported during the comparative quarter ended September 30, 2014 and an increase of $18.3 million or 20.7% over the amount reported during the immediately preceding quarter ended June 30, 2015. The increase over the comparative quarter ended September 30, 2014 is the result of strong organic growth in the intervening periods and the acquisition of the GE US Fleet Operations on August 31, 2015. The increase over the immediately preceding quarter is primarily due to the acquisition of the GE US Fleet Operations on August 31, 2015, continued growth in average earning assets, offset by a reduction in capital advisory fees and related transactions. Adjusted operating income for the nine month period ended September 30, 2015 was $274.3 million, an increase of $156.7 million or 133.2% over the amount reported during the comparative period ended September 30, 2014. The increase over the comparative period ended September 30, 2014 is primarily the result of the acquisition of the PHH Arval on July 7, 2014 and the GE US Fleet Operations on August 31, 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 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 $0.26 for the three months ended September 30, 2015, free operating cash flows per share (basic) reaches $0.32, compared to $0.16 and $0.21, respectively, for the comparative three months ended September 30, 2014, and $0.23 and $0.31, respectively, for the immediately preceding quarter ended June 30, 2015. For the nine months ended September 30, 2015, after-tax adjusted operating income per share is $0.70, while free operating cash flows per share reaches $0.91 per share, compared to $0.38 and $0.49, respectively, for the comparative period ended September 30, 2014.

Consolidated Financial Position

The following table sets forth a summary of the Company's consolidated financial position as of the dates presented:

As at

(in 000's for stated values, except per unit amounts)
September
30, 2015

$
June
30, 2015
$
December
31, 2014
$
Cash 47,459 86,945 66,869
Restricted cash 466,540 488,202 443,238
Cash held in escrow - 1,997,329 -
Finance receivables 16,347,221 9,478,260 8,465,989
Equipment under operating leases 3,991,195 1,938,032 1,279,670
Investment in managed fund 144,340 129,896 -
Derivative financial instruments 15,831 45,632 5,746
Deferred tax assets 135,870 49,250 39,405
Non-portfolio assets 2,424,022 1,072,013 989,585
Total assets 23,572,478 15,285,559 11,290,502
Accounts payable and accrued liabilities 660,578 439,198 368,113
Subscription receipts escrow liability - 1,997,329 -
Secured borrowings 16,576,204 8,682,200 7,751,395
Convertible debentures 831,916 829,470 303,147
Derivative financial instruments 65,066 16,950 11,196
Deferred tax liabilities 61,369 50,558 25,700
Total liabilities 18,195,133 12,015,705 8,459,551
Shareholders' equity 5,377,345 3,269,854 2,830,951
Total liabilities and shareholders' equity 23,572,478 15,285,559 11,290,502

Element's unaudited interim financial statements and related management discussion and analysis as at and for the three-month and nine-month periods ended September 30, 2015 have been filed on SEDAR (www.sedar.com).

About Element Financial Corporation

With total assets in excess of $23.5 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.

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 2014 MD&A, and 2014 Annual Information Form, all of which have been filed on SEDAR and can be accessed at www.sedar.com. 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.

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