Renasant Financial Partners Ltd.
TSX : REN

Renasant Financial Partners Ltd.

October 25, 2006 17:39 ET

Renasant Reports 2nd Quarter Fiscal 2007 Results

MISSISSAUGA, ONTARIO--(CCNMatthews - Oct. 25, 2006) - Renasant Financial Partners Ltd. (the "Corporation") (TSX:REN) today reported results of operations for the second quarter ended September 30, 2006. The Corporation's performance reflects continued profitability and the achievement of goals associated with reduced levels of assets and further settlements of litigation matters. In October of 2006, the Corporation settled its remaining litigation with the City of Windsor within anticipated financial parameters.

Net income for the second quarter of Fiscal 2007 was $1.2 million or $0.14 per share, down from the $1.5 million or $0.17 per share achieved in the corresponding period last year. All per share values are fully diluted. On a year-to-date basis, net income of $2.4 million or $0.27 per share was earned as compared with net income of $3.0 million or $0.34 per share earned in the first two quarters of Fiscal 2006. Overall, the net return achieved on the investment portfolio was less than that generated historically from the leasing business.

Income from continuing operations was $1.1 million or $0.13 per share in the quarter and $2.1 million or $0.24 per share year-to-date, up significantly from the $0.4 million or $0.04 per share and $0.7 million or $0.08 per share earned in the corresponding periods last year. The prior year's value reflects a period when the focus remained on the leasing business. Income from the discontinued leasing business was $0.1 million or $0.01 per share in the current quarter and $0.3 million or $0.03 per share year-to-date versus $1.1 million or $0.13 per share in the second quarter of last year and $2.3 million or $0.26 per share year-to-date Fiscal 2006.

Investment income was $2.4 million in the quarter and $4.1 million year-to-date compared with $1.2 million and $2.2 million in the corresponding periods last year due to a much larger portfolio of marketable securities. A substantial portion of the investment portfolio was liquidated in September to finance the special dividend. Trading margin at $635,000 in the quarter was similar to last year on essentially the same volume. Year-to-date margin of $1.6 million was up from the $1.4 million earned last year due to improved returns on customer specific transactions generated in Q1. SG&A at $1.5 million in the quarter and $2.8 million year-to-date was equal to the costs incurred last year as the Corporation continues to incur a high level of fixed costs associated with being a public company.

The Corporation repurchased 175,000 shares for cancellation in the quarter at a price of $10.85 prior to the $7.00 per share dividend payment. Fully diluted net book value per share was $5.65 at September 30, 2006. The Board of Directors will continue to review the Corporation's financial position, profitability, cash flow and other factors with a view to future distributions.

The Corporation will continue to be focused on litigation management and reducing the discontinued business while generating profits from the trading business and remaining investments within appropriate risk parameters.



CONSOLIDATED BALANCE SHEETS
(in thousands of dollars)

Sept. 30, March 31,
2006 2006
(Unaudited) (Audited)
------------ -----------

ASSETS

Cash $ 10,237 $ 13,037
Marketable securities (Note 2) 28,305 98,829
Equipment held for sale 2,654 2,425
Receivables 5,258 7,047
Long-term taxes recoverable 14,000 14,000
Capital Assets 144 168
Discontinued lease assets (Note 3) 14,986 40,076
------------ -----------
$ 75,584 $ 175,582
------------ -----------
------------ -----------

LIABILITIES

Accounts payable and accrued charges $ 4,056 $ 18,163
Income tax payable 8,695 10,777
Future income tax liabilities 1,257 1,526
Discontinued lease liabilities (Note 3) 12,556 34,437
------------ -----------

26,564 64,903
------------ -----------

Contingencies and commitments (Note 6)

SHAREHOLDERS' EQUITY

Share Capital (Note 4) $ 47,048 $ 48,002
Foreign currency translation adjustment (Note 5) (2,271) (1,733)
Retained Earnings 4,243 64,410
------------ -----------

49,020 110,679
------------ -----------

$ 75,584 $ 175,582
------------ -----------
------------ -----------



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
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2006 2005 2006 2005
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ------------ ---------- ----------

REVENUE
Equipment trading $ 7,861 $ 7,682 $ 16,876 $ 16,325
Investment 2,368 1,169 4,150 2,191
Finance - 223 - 446
----------- ------------ ---------- ----------

10,229 9,074 21,026 18,962
----------- ------------ ---------- ----------

EXPENSES

Equipment trading 7,226 7,056 15,295 14,974
Interest - 223 - 446
----------- ------------ ---------- ----------
7,226 7,279 15,295 15,420
----------- ------------ ---------- ----------

GROSS MARGIN 3,003 1,795 5,731 3,542

Selling, general
and administration 1,465 1,382 2,817 2,797
----------- ------------ ---------- ----------

INCOME FROM
CONTINUING
OPERATIONS 1,538 413 2,914 745

Provision for
income taxes 447 32 840 36
----------- ------------ ---------- ----------

NET INCOME FROM
CONTINUING
OPERATIONS 1,091 381 2,074 709

NET INCOME FROM
DISCONTINUED
LEASING BUSINESS 131 1,138 293 2,295
----------- ------------ ---------- ----------

NET INCOME $ 1,222 $ 1,519 $ 2,367 $ 3,004

Retained earnings,
beginning of period 64,670 65,375 64,410 64,855

Dividends (60,698) (885) (61,583) (1,771)

Premium on
cancellation of
shares (951) (1) (951) (80)
----------- ------------ ---------- ----------
RETAINED EARNINGS,
END OF PERIOD $ 4,243 $ 66,008 $ 4,243 $ 66,008
----------- ------------ ---------- ----------
----------- ------------ ---------- ----------

EARNINGS PER COMMON
SHARE - BASIC AND
FULLY DILUTED

Continued operations $ 0.13 $ 0.04 $ 0.24 $ 0.08
Discontinued
operations $ 0.01 $ 0.13 $ 0.03 $ 0.26
----------- ------------ ---------- ----------
$ 0.14 $ 0.17 $ 0.27 $ 0.34
----------- ------------ ---------- ----------
----------- ------------ ---------- ----------

SHARES OUTSTANDING

Basic 8,758,760 8,846,427 8,802,510 8,852,610
----------- ------------ ---------- ----------
----------- ------------ ---------- ----------
Fully diluted 8,758,760 8,846,427 8,802,510 8,852,610
----------- ------------ ---------- ----------
----------- ------------ ---------- ----------



CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of dollars)

Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2006 2005 2006 2005
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ------------ ---------- ----------

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

OPERATING
Net income from
continuing
operations $ 1,091 $ 381 $ 2,074 $ 709
Items not
affecting cash
Amortization of
other assets 12 317 24 636
Interest accrued
and other items
related to
marketable
securites (1,092) 180 (1,081) 498
Future income
tax provision
(recovery) 223 (593) 233 (734)
Net increase
in equipment
held for sale,
receivables,
accounts payable
and accrued
charges (588) (19,011) (14,023) (20,703)
----------- ------------ ---------- ----------
(354) (18,726) (12,773) (19,594)
----------- ------------ ---------- ----------

FINANCING
Increase (repayment)
of debt - 212 - (26,429)
Repurchase of
shares, net (1,904) (2) (1,904) (176)
Dividends paid (61,583) (887) (62,468) (1,772)
----------- ------------ ---------- ----------
(63,487) (677) (64,372) (28,377)
----------- ------------ ---------- ----------

INVESTING
Increase (repayment)
in structured
finance contracts - (212) - 32,102
Reductions to
marketable
securities, net 61,540 4,290 71,605 2,870
Additions to
other assets, net - (33) - (120)
----------- ------------ ---------- ----------
61,540 4,045 71,605 34,852
----------- ------------ ---------- ----------

EFFECT OF EXCHANGE
RATES 52 (681) (123) (568)
----------- ------------ ---------- ----------

NET CASH OUTFLOW
FROM CONTINUING
OPERATIONS (2,249) (16,039) (5,663) (13,687)
----------- ------------ ---------- ----------

DISCONTINUED LEASING
OPERATIONS
Operating cash
flows (225) 1,146 (15,107) 6,332
Addition
(reduction) to debt 101 5,533 (6,814) (5,499)
Reduction
(addition) to lease 345 (3,468) 24,784 (299)
----------- ------------ ---------- ----------


NET CASH INFLOW FROM
DISCONTINUED
OPERATIONS 221 3,211 2,863 534
----------- ------------ ---------- ----------


NET CASH OUTFLOW (2,028) (12,828) (2,800) (13,153)

Cash, beginning
of period 12,265 21,881 13,037 22,206
----------- ------------ ---------- ----------

CASH, END OF PERIOD $ 10,237 $ 9,053 $ 10,237 $ 9,053
----------- ------------ ---------- ----------
----------- ------------ ---------- ----------

SUPPLEMENTAL CASH
FLOW DATA:

CONTINUING
OPERATIONS

Cash paid during
the year for:
Interest $ - $ 317 $ - $ 688
Income taxes $ 198 $ 1,234 $ 3,287 $ 1,310

DISCONTINUED
OPERATIONS

Cash paid during
the year for:
Interest $ 101 $ 1,508 $ 199 $ 2,983
Income taxes $ - $ - $ - $ -



Notes to the Consolidated Financial Statements
September 30, 2006
(all dollar amounts are in thousands)


1. BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES

These financial statements should be read in conjunction with the Consolidated Financial Statements included in the Corporation's Annual Report for 2006 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.

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 with generally accepted accounting principles ("GAAP") in Canada.

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. MARKETABLE SECURITIES

Marketable securities are as follows:
---------------------------------------------------------------------------
Sept. 30, Mar. 31,
2006 2006
---------------------------------------------------------------------------

Publicly-traded debt instruments $ 971 $ 69,460
Publicly-traded income trusts and energy
partnership units 1,814 15,172
Bridge loan fund 25,520 13,670
Other public instruments - 527
---------------------------------------------------------------------------
$ 28,305 $ 98,829
---------------------------------------------------------------------------
---------------------------------------------------------------------------


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 $2,900 (March 31, 2006 - $87,600). The fair value of the bridge loan fund instruments is assumed to approximate their carrying value as they generally involve variable rates that reprice frequently.

The Corporation maintains a margin account with the investment dealer secured by the publicly-traded marketable securities.

3. DISCONTINUED LEASING BUSINESS

On March 8, 2006, the Corporation completed the sale of its leasing business together with a substantial portion of its lease portfolio to ICON Capital Corporation ("ICON") an arms-length third party. The Corporation retained approximately $40.0 million in leases, along with corresponding debt and service obligations. The Corporation believes the remaining leases can be sold or liquidated in Fiscal 2007 for approximately book value and has designated all the leased assets and liabilities as discontinued.

The discontinued leasing business is comprised of the following:



---------------------------------------------------------------------------
Sept. 30, Mar. 31,
2006 2006
---------------------------------------------------------------------------

Discontinued Lease Assets:

Leases $ 14,959 $ 40,030
Receivables 27 46
---------------------------------------------------------------------------
$ 14,986 $ 40,076
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Discontinued Lease Liabilities:

Debt $ 5,536 $ 12,350
Accounts payable 2,225 17,468
Future income tax liabilities 4,795 4,619
---------------------------------------------------------------------------
$ 12,556 $ 34,437
---------------------------------------------------------------------------
---------------------------------------------------------------------------


The reduction in the year reflects a further sale to ICON of leases, net of related obligations.

The debt is non-recourse to the Corporation and is secured by the lease receivables, contracts and underlying equipment.

The Corporation continues to manage assets on behalf of investors. Certain of these relate to litigation customers and will cease once the litigation is settled. Total managed assets are:



---------------------------------------------------------------------------
Sept. 30, Mar. 31,
2006 2006
---------------------------------------------------------------------------

Managed assets $ 4,380 $ 51,161

---------------------------------------------------------------------------
---------------------------------------------------------------------------


Also included in managed assets are leased assets owned by a company affiliated with an indirect shareholder of the Corporation. In addition, the Corporation has a loan outstanding from this company, secured by the leases, in the amount of $130 (March 31, 2006 - $483).

The following outlines the revenues, income before taxes and net income for the discontinued leasing business:



---------------------------------------------------------------------------
Six Months Six Months
Ended Ended
Sept. 30, Sept. 30,
2006 2005
---------------------------------------------------------------------------

Revenues $ 586 $ 30,238
Costs and expenses 117 26,566
---------------------------------------------------------------------------
Income from discontinued leasing business 469 3,672
Provision for income taxes 176 1,377
---------------------------------------------------------------------------
Net income from discontinued leasing business $ 293 $ 2,295
---------------------------------------------------------------------------
---------------------------------------------------------------------------



4. SHARE CAPITAL

Common Shares

Number of Shares Amount
---------------------------------------------------------------------------
Balance as at March 31, 2005 8,863,860 $ 48,098
---------------------------------------------------------------------------
Issued shares - -
Purchased for cancellation (17,600) (96)
---------------------------------------------------------------------------
Balance as at March 31, 2006 8,846,260 48,002
---------------------------------------------------------------------------
Issued shares - -
Purchased for cancellation (175,000) (954)
---------------------------------------------------------------------------
Balance as at September 30, 2006 8,671,260 $ 47,048
---------------------------------------------------------------------------
---------------------------------------------------------------------------


On September 15, 2006, the Corporation paid a special dividend to shareholders in the amount of $7.00 per share.

5. FOREIGN CURRENCY TRANSLATION ADJUSTMENT

An analysis of the foreign currency translation adjustment included as a component of shareholders' equity is as follows:



---------------------------------------------------------------------------

Balance as at March 31, 2005 $ (2,207)
---------------------------------------------------------------------------
Translation of net assets of self-sustaining foreign operations (2,544)
Foreign currency loss realized on reduction of net investment
in self-sustaining foreign operations 3,018
---------------------------------------------------------------------------
Balance as at March 31, 2006 (1,733)
---------------------------------------------------------------------------
Translation of net assets of self-sustaining foreign operations (538)
Foreign currency loss realized on reduction of net investment
in self-sustaining foreign operations -
---------------------------------------------------------------------------
Balance as at September 30, 2006 $ (2,271)
---------------------------------------------------------------------------


6. CONTINGENCIES AND COMMITMENTS

Litigation

In October of 2006, the Corporation settled its remaining claims with the City of Windsor relating to approximately 50 equipment leases entered into between 1994 and 2001. A prior settlement with the City was reached in July 2005 regarding the regional landfill. Together, the settlements extinguish a $300 million litigation claim. The settlement requires the Corporation to convey $4.2 million to the City and modify several contracts to revise the purchase options to $1.00. The settlement was within the financial reserves established by the Corporation in its financial statements.

In August of 2006, a judicial decision was rendered to dismiss the claim by the City of Waterloo, involving several officers and employees of the Corporation who may ultimately claim over against the Corporation, in respect of the previously settled RIM Park financing. The City of Waterloo has subsequently appealed this decision.

In early June of 2006, the Corporation settled its litigation with the Municipality of Leamington together with several other townships comprising the Union Water Supply organization. Under the settlement, the Corporation paid a net contribution of $8.8 million which was within the financial parameters of the reserves established in prior years.

Also in June 2006, the Corporation attended a mediation in respect of the Nova Scotia litigation which was unsuccessful in resolving the outstanding issues.

There has been no other changes in the status of litigation matters. Detailed information is outlined in Note 13(a) to the 2006 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 earlier settlements. In 2003, a special provision of $25 million was established which was increased in Fiscal 2005 by $20 million to reflect revised expectations. Current year settlements were within the financial parameters of the reserves established. Should any settlement discussion prove unsuccessful, the Corporation intends to 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

A detailed review of the federal and provincial income tax reassessments received by the Corporation is outlined in Note 13(C) to the 2006 Consolidated Financial Statements. There has been no significant change in the status of these reassessments. Detailed negotiations with CRA have yet to commence.

7. 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 segments:



CANADA U.S.

6 MONTHS 6 MONTHS 6 MONTHS 6 MONTHS
ENDED ENDED ENDED ENDED
SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30,
2006 2005 2006 2005
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
---------- ---------- ---------- ----------

INCOME STATEMENT DATA

Equipment Trading
Revenues $ - $ - $ 12,984 $ 9,244
Expenses - 27 11,761 8,756
---------- ---------- ---------- ----------
Gross Margin - (27) 1,223 488
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------

Investment Revenue $ 4,150 $ 2,191 $ - $ -
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------

Structured Finance
Revenues $ - $ 446 $ - $ -
Expenses - 446 - -
Gross Margin - - - -
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------

Total Gross Margin $ 4,150 $ 2,164 $ 1,223 $ 488
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------


BALANCE SHEET DATA SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30,
2006 2005 2006 2005
(Unaudited) (Unaudited) (Unaudited) ( Unaudited)
---------- ---------- ---------- ----------

Receivables $ 1,388 $ 10,848 $ 3,051 $ 2,070
---------- ---------- ---------- ----------
Equipment Held for Sale $ - $ - $ 1,638 $ 1,347
---------- ---------- ---------- ----------
Marketable securities $ 28,305 $ 38,363 $ - $ -
---------- ---------- ---------- ----------
Structured Finance
Contracts $ - $ 11,638 $ - $ -
---------- ---------- ---------- ----------



EUROPE TOTAL

6 MONTHS 6 MONTHS 6 MONTHS 6 MONTHS
ENDED ENDED ENDED ENDED
SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30,
2006 2005 2006 2005
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
---------- ---------- ---------- ----------

INCOME STATEMENT DATA

Equipment Trading
Revenues $ 3,892 $ 7,081 $ 16,876 $ 16,325
Expenses 3,534 6,191 15,295 14,974
---------- ---------- ---------- ----------
Gross Margin 358 890 1,581 1,351
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------

Investment Revenue $ - $ - $ 4,150 $ 2,191
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------

Structured Finance
Revenues $ - $ - $ - $ 446
Expenses - - - 446
---------- ---------- ---------- ----------
Gross Margin - - - -
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------

Total Gross Margin $ 358 $ 890 $ 5,731 $ 3,542
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------


BALANCE SHEET DATA SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30,
2006 2005 2006 2005
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
---------- ---------- ---------- ----------

Receivables $ 819 $ 1,925 $ 5,258 $ 14,843
---------- ---------- ---------- ----------
Equipment Held for Sale $ 1,016 $ 1,132 $ 2,654 $ 2,479
---------- ---------- ---------- ----------
Marketable securities $ - $ - $ 28,305 $ 38,363
---------- ---------- ---------- ----------
Structured Finance
Contracts $ - $ - $ - $ 11,638
---------- ---------- ---------- ----------



Contact Information