Cash Store Financial releases fourth quarter and annual financial results

PR Newswire

EDMONTON, Dec. 11, 2013 /PRNewswire/ - The Cash Store Financial Services Inc. ("Cash Store Financial" or "the Company") (TSX: CSF; NYSE: CSFS) today released financial results for the three months and year ended September 30, 2013.  Summary financial tables are included with this release.

Results conference call and webcast details

Thursday, December 12, 2013 at 11:00 a.m. EST (9:00 a.m. MST).
1-888-231-8191 ID #16023132.
http://cnw.ca/Yxz5e

A replay of the conference call will be available until December 19, 2013 by dialing toll-free 1-855-859-2056 and providing the conference ID #16023132.

Highlights for the three months ended September 30, 2013:

  • Loan fees increased to $39.5 million from $37.7 million in the third quarter and increased from $38.4 million in the same quarter last year.
  • Loan volume was $199.8 million compared to $192.2 million in the third quarter and $207.2 million in the same quarter last year.
  • Total revenue of $48.3 million, up from $46.3 million in the third quarter and down from $50.8 million in the same quarter last year.
  • Same branch revenue was $88,000 compared to $83,000 in the third quarter and $92,000 in the same quarter last year.
  • Sales expenses were $28.1 million compared to $28.3 million in the third quarter and $27.3 million in the same quarter last year.
  • Adjusted EBITDA was $2.5 million compared to $4.7 million in the third quarter and $10.1 million in the same quarter last year.
  • Diluted loss per share of $1.29 compared to a loss of $0.39 in the third quarter and income of $0.01 in the same quarter last year.

Highlights for the year ended September 30, 2013 compared to the year ended September 30, 2012:

  • Loan fees increased to $152.4 million from $138.0 million.
  • Loan volume was $781.8 million compared to $797.7 million.
  • Total revenue of $190.8 million, up from $187.4 million.
  • Same branch revenue of $348,000 compared to $332,000.
  • Other income of $38.3 million, down from $49.4 million.
  • Branch operating margin increased to $32.1 million from $25.9 million.
  • Adjusted EBITDA of $22.7 million compared to $25.7 million.
  • Diluted loss per share of $2.02 compared to a loss of $2.50.

"Fiscal 2013 was an important year for our company," said Gordon Reykdal, CEO. "We have made significant strides in improving our branch operating margins this year and that bodes very well for the future of the company. Our 24% branch operating margin improvement is all the more impressive given that we achieved this while transitioning our core consumer lending and brokered products to lines of credit in Manitoba and Ontario.  These unique products offer our customers an opportunity to lower their costs and rebuild their credit rating, while giving us a competitive edge. We are very encouraged by the loan volume and revenue generated from these new products."

"We also made a number of changes to the Board and management in 2013, welcoming new directors and executives with the experience and expertise to help lead us through the execution of our ambitious plans in 2014. We are looking to grow our online operations, make operational improvements, continue to refine our lines of credit, grow revenues from other financial products, all the while further reducing our corporate overhead costs.  We have also secured a credit facility to fund these important growth initiatives."

The Board of Directors has determined not to issue a quarterly dividend in respect of the fourth quarter of fiscal 2013, the period ended September 30, 2013. While loans are outstanding under the credit agreement dated November 29, 2013, payment of dividends is restricted and subject to the approval of the lenders under this credit agreement.

About Cash Store Financial

Cash Store Financial is the only lender and broker of short-term advances and provider of other financial services in Canada that is listed on the Toronto Stock Exchange (CSF.TO). Cash Store Financial also trades on the New York Stock Exchange (CSFS). Cash Store Financial operates 510 branches across Canada under the banners "Cash Store Financial", "Instaloans" and "The Title Store". Cash Store Financial also operates 27 branches in the United Kingdom.

Cash Store Financial and Instaloans primarily act as lenders and brokers to facilitate short-term advances and provide other financial services to income-earning consumers who may not be able to obtain them from traditional banks. Cash Store Financial also provides a private-label debit card (the "Freedom" card) and a prepaid credit card (the "Freedom MasterCard") as well as other financial services, including bank accounts.

Cash Store Financial employs approximately 1,850 associates and is headquartered in Edmonton, Alberta.

Cash Store Financial is a Canadian corporation that is not affiliated with Cottonwood Financial Ltd. or the outlets Cottonwood Financial Ltd. operates in the United States under the name "Cash Store."  Cash Store Financial does not do business under the name "Cash Store" in the United States and does not own or provide any consumer lending services in the United States.

Forward-Looking Information
In order to help investors understand the Company's current results and future prospects, this new release includes "forward-looking information" and "forward-looking statements" within the meaning of applicable Canadian and United States federal securities legislation. Management refers to these types of statements collectively, as "forward-looking information". Forward-looking information includes, but is not limited to: information with respect to our objectives, strategies, operations and financial results, competition; initiatives to grow revenue or reduce retention payments and other costs and the quotation from Mr. Reykdal, CEO.

Forward-looking information can generally be identified by the use of words such as "plans", "expects", or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", or "does not anticipate", or "believes" or variations of such words and phrases. They may also be identified by statements that certain actions, events or results "may", "could", "would", "might", or "will be taken", "occur", or "be achieved".

Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied. These risks and uncertainties may include (but are not limited to) changes in economic and political conditions, legislative or regulatory developments, technological developments, third party arrangements, competition, litigation, market conditions, the availability of alternative transactions, shareholder, legal, regulatory and court approvals and third party consents and other factors described under the heading "Risks and Uncertainties" in our annual MD&A filed on www.sedar.com and  under the heading "Risk Factors" in our annual report on Form 20-F filed with the SEC in the United States. 

Management has attempted to identify the important factors that could cause actual results to differ materially from those contained in forward-looking information, but other factors unknown to us at the time of writing could cause results to vary. There can be no assurance that forward-looking information will prove to be accurate. Actual results could differ materially. Management cautions readers not to place undue reliance on forward-looking information. Unless required by law, the Company does not undertake to update any forward-looking information.

Non GAAP Measures
Throughout this news release, terms that are not specifically defined under U.S. GAAP are referenced and used. These non-U.S. GAAP measures may not be comparable to similar measures presented by other companies. These non-U.S. GAAP measures are presented because the Company believes that they provide investors with additional insight into the Company's financial results.The non-U.S. GAAP measures mentioned in this news release, along with the way in which management calculates them, are defined below.

  • Same Branch Revenue is used to explain changes in total revenue by comparing the average revenue for a particular group of branches in a current period to that same particular group of branches in a prior period, excluding income from centralized collections. Average revenue is defined as revenue for the period divided by the number of branches.

  • EBITDA and Adjusted EBITDA are used as a measure of cash income. EBITDA is calculated as net income (loss) and comprehensive income (loss) before interest expense, income tax expense, depreciation of property and equipment and amortization of intangible assets. Based on EBITDA, the effects of other items and/or non-cash expenses are removed to calculate Adjusted EBITDA. Please refer to the section entitled "EBITDA and Adjusted EBITDA Reconciliation" for a reconciliation of EBITDA and Adjusted EBITDA to net income (loss) and comprehensive income (loss).

    The interest component of retention payments line item presented on the Adjusted EBITDA reconciliation is intended to help investors to determine the Company's EBITDA under a scenario where funds provided by third-party lenders to lend to consumers were considered to be debt financing to the Company. The amount is calculated based on the total funds provided by third-party lenders multiplied by a rate of 17.5% per annum.

  • Working Capital is calculated as current assets less current liabilities.

Selected Annual Information

                 
($000s, except for per share amounts, number of loans
and branch count)
      Year Ended
September
30, 2012
    Year Ended
September
30, 2013
    2013 vs.
2012 %
change
Consolidated results                
No. of branches   Canada   511     510     %
    United Kingdom   25     27     8 %
        536     537     %
                 
Loan volume   Direct   $ 517,075     $ 540,427     5 %
    Brokered   280,637     241,371     (14) %
        797,712     781,798     (2) %
Revenue                
  Loan fees       $ 137,994     $ 152,430     10 %
  Other income       49,418     38,335     (22) %
        187,412     190,765     2 %
                 
Sales expenses                
  Salaries and benefits       65,944     58,653     (11) %
  Rent       18,940     18,581     (2) %
  Selling, general and administrative       23,595     20,449     (13) %
  Advertising and promotion       5,180     6,307     22 %
  Depreciation of property and equipment       6,843     6,366     (7) %
        120,502     110,356     (8) %
                 
Provision for credit losses       31,004     36,607     18 %
Retention payments       9,968     11,659     17 %
Corporate expenses       22,684     38,142     68 %
Interest expense       12,339     18,583     51 %
Branch closures costs       1,574     123     (92) %
Impairment of property and equipment       3,425     1,236     (64) %
Expense to settle pre-existing relationships with third-party lenders       36,820         (100) %
Class action settlements               %
Other depreciation and amortization       835     1,794     115 %
Loss before income taxes       $ (56,877)     $ (35,252)     (38) %
Net loss and comprehensive loss   (43,522)     (35,532)     (18) %
EBITDA       (31,722)     (992)     (97) %
Adjusted EBITDA       25,749     22,651     (12) %
Weighted average number of shares outstanding   - basic   17,432     17,564     1 %
    - diluted   17,432     17,564     1 %
Basic earnings (loss) per share       $ (2.50)     $ (2.02)     (19) %
Diluted earnings (loss) per share       $ (2.50)     $ (2.02)     (19) %
Consolidated Balance Sheet Information            
Working capital       58,720     35,564     (39) %
Total assets       202,444     164,585     (19) %
Total long-term financial liabilities       129,641     130,623     1 %
Total long-term liabilities       137,375     137,161     %

Summary of Quarterly Results

                                             
(thousands of dollars, except for per share
amounts and branch figures)
2012 2013
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Consolidated Results                
No. of branches Canada 0.573   0.569   0.529   0.511   0.511   0.513   0.51   510  
  United Kingdom 0.023   0.025   0.025   0.025   0.025   0.025   0.027   27  
    0.596   0.594   0.554   0.536   0.536   0.538   0.537   537  
                   
Loan volume Direct $ 13,076   $ 120,487   $ 188,485   $ 195,027   $ 180,599   $ 127,050   $ 113,244   $ 119,534  
  Brokered 186,535   70,543   11,376   12,183   22,864   59,272   78,958   80,277  
    199,611   191,030   199,861   207,210   203,463   186,322   192,202   199,811  
                   
Revenue                
  Loan fees $ 32,892   $ 30,545   $ 36,204   $ 38,353   $ 38,018   $ 37,268   $ 37,657   $ 39,487  
  Other income 12,956   11,544   12,454   12,464   11,485   9,389   8,671   8,790  
    45,848   42,089   48,658   50,817   49,503   46,657   46,328   48,277  
Sales Expenses                
  Salaries and benefits 16,856   17,672   16,493   14,921   14,462   14,325   14,902   14,964  
  Rent 4,766   4,911   4,719   4,548   4,434   4,806   4,343   4,998  
  Selling, general and administrative 6,489   6,406   5,725   4,971   4,969   5,076   5,733   4,671  
  Advertising and promotion 1,690   1,063   1,212   1,215   1,369   1,437   1,693   1,808  
  Depreciation of property and equipment 1,776   1,785   1,675   1,607   1,560   1,568   1,589   1,649  
    31,577   31,837   29,824   27,262   26,794   27,212   28,260   28,090  
  14,271   10,252   18,834   23,555   22,709   19,445   18,068   20,187  
                 
Provision for credit losses 668   10,798   10,104   9,434   9,254   7,289   7,587   12,477  
Retention payments 6,557   2,271   554   586   1,769   1,665   2,444   5,781  
Corporate expenses 4,960   6,626   5,394   5,706   6,745   9,247   8,602   13,548  
Interest expense 169   3,068   4,536   4,566   4,603   4,644   4,660   4,676  
Branch closures costs     908   666       24   99  
Impairment of property and equipment   3,017     408       522   714  
Expense to settle pre-existing relationships with third-party lenders   36,820              
Other depreciation and amortization 583   1,503   1,770   2,117   2,172   1,994   2,796   2,349  
Net income (loss) before income taxes and class action settlements 1,334   (53,851)   (4,432)   72   (1,834)   (5,394)   (8,567)   (19,457)  
Class action settlements                
Taxes $ 374   $ (12,691)   $ (861)   $ (177)   $ (132)   $ (765)   $ (1,673)   $ 2,850  
Net income (loss) and comprehensive income (loss) $ 960   $ (41,160)   $ (3,571)   $ 249   $ (1,702)   $ (4,629)   $ (6,894)   $ (22,307)  
EBITDA 3,862   (47,495)   3,549   8,362   6,501   2,812   478   (10,783)  
Adjusted EBITDA 9,446   721   5,516   10,066   9,152   6,332   4,673   2,494  
Basic earnings (loss) per share $ 0.06   $ (2.36)   $ (0.20)   $ 0.01   $ (0.10)   $ (0.24)   $ (0.39)   $ (1.29)  
Diluted earnings (loss) per share $ 0.05   $ (2.36)   $ (0.20)   $ 0.01   $ (0.10)   $ (0.24)   $ (0.39)   $ (1.29)

EBITDA and Adjusted EBITDA Reconciliation

                                                   
($000s) 2012 2013
  Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Consolidated Results                
  Net income (loss) and comprehensive income (loss) $ 960   $ (41,160)   $ (3,571)   $ 249   $ (1,702)   $ (4,629)   $ (6,894)   $ (22,307)  
  Interest expense and other interest 169   3,068   4,536   4,566   4,603   4,644   4,660   4,676  
  Income tax 374   (12,691)   (861)   (177)   (132)   (765)   (1,673)   2,850  
  Depreciation of property and equipment and amortization of intangible assets 2,359   3,288   3,445   3,724   3,732   3,562   4,385   3,998  
  EBITDA $ 3,862   $ (47,495)   $ 3,549   $ 8,362   $ 6,501   $ 2,812   $ 478   $ (10,783)  
  Adjustments:                
  Stock-based compensation 193   193   189   158   145   119   99   76  
  Expense to settle pre-existing relationships with third-party lenders   36,820              
  Impact of change in estimation methodology and other one-time additions to the provision for credit losses   3,091             5,218  
  Branch closures costs     908   666       24   99  
  Impairment of property and equipment   3,017     408       522   714  
  Revenue impact related to transitioning to a direct lending model   3,210   316            
  Expenses related to restatements of previously issues financial statements         904   125   589    
  Expenses related to the special investigation           1,666   326    
  Impairment of January 31, 2012 acquired loan portfolio             1,010    
  Provision on aged receivables from a vendor               4,807  
  Employee Severance Costs               466  
  Effective interest component of retention payments 5,391   1,885   554   472   1,602   1,610   1,625   1,897  
  Adjusted EBITDA $ 9,446   $ 721   $ 5,516   $ 10,066   $ 9,152   $ 6,332   $ 4,673   $ 2,494  

 

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