DirectCash Income Fund announces results of operations for the three months and year ended December 31, 2007



    TSX: DCI.UN

    CALGARY, March 18 /CNW/ - DirectCash Income Fund ("DirectCash" or the
"Fund") today announced consolidated financial results for the three months
and year ended December 31, 2007. The Fund's audited consolidated financial
statements for the year ended December 31, 2007 and Management's Discussion &
Analysis, as well as additional information about the Fund are available on
SEDAR (www.sedar.com).

    Management's Commentary

    "DirectCash continued its consistent financial performance during the
fourth quarter and year ended December 31, 2007," said Jeffrey Smith,
DirectCash's President and Chief Executive Officer. "Distributable cash
flow(1) was consistent for both the fourth quarter and full year when compared
to the prior year period and in line with our expectations. We are pleased
with our launch of the prepaid MasterCard product and look forward to seeing
its continued rollout in 2008.
    In our ATM business we have maintained aggregate transaction levels, but
have seen a slight decline in average transactions on a per ATM basis. Our
focus in this line of business will be to continue to add sites both
organically and via accretive acquisitions, and to maximize site profitability
through cost and quality control. We are also entering into new markets,
including Mexico in 2008, whose market is at a similar stage of development as
Canada's was in 1997. We expect to operate in this market at a break-even pace
in our first year of operations, with strong gains in profitability
thereafter.
    The rollout of our prepaid MasterCard product during the third quarter
picked up traction during the fourth quarter, and is expected to increase its
contribution going forward. We believe the prepaid products business is well
positioned to make strong gains, particularly as our prepaid MasterCard
product continues to mature. We continue to add new products and relationships
outside of our traditional market focus. It is our intent to lever our
relationship with DirectCash Bank to provide additional products and services
previously unavailable as we lacked the necessary business relationship with a
Canadian chartered bank for these services.
    Both the ATM and prepaid product lines of business showed solid gains in
gross profits during the fourth quarter, with higher SG&A costs partially
offsetting these gross profit improvements. Two one-time events had an impact
on fourth quarter results, both of which occurred immediately prior to
year-end. Excluding the impact of these two events, our distributable cash
flow would have been 40.5 cents per unit versus the 39.8 cents reported.
    We expect to continue to aggressively grow top-line revenue in the debit
terminal business, with a stronger focus on our rental program and improved
per transaction profitability. Our SG&A costs, which have been a challenge to
maintain in the hot Alberta marketplace are expected to slowly improve as a
percentage of gross profits.
    On an overall basis, we are pleased with the results of 2007 operations.
We will continue to provide solid returns for our Unitholders while continuing
to pursue reasonable, sustainable growth. We estimate that cash distributions
paid to Unitholders will be between 80% and 85% of distributable cash flow for
2008."

    
    Operational Achievements 2007

    -   We rolled out our prepaid MasterCard product to merchants.
    -   We established a relationship with DirectCash Bank, a newly
        incorporated chartered bank.
    -   We added 438 ATMs to our network representing an 8% increase over
        2006 numbers (5,613 as at December 31, 2007 from 5,175 as at
        December 31, 2006).
    -   The number of ATM transactions processed increased 4%.
    -   We completed acquisitions totalling $5.4 million in 2007
    -   The number of Debit transactions processed increased 70%
    -   The number of prepaid cash card activations increased 19%
    -   The number of prepaid cash card transactions processed increased 28%

    Financial Highlights 2007

    -   Revenues increased 10% from $73.9 million in 2006 to $81.5 million
        in 2007
    -   Gross profit increased 8% from $33.4 million in 2006 to $36.1 million
        in 2007
    -   EBITDA increased 3% from $22.6 million in 2006 to $23.4 million in
        2007
    -   Acquired $5.4 million of ATM and debit terminal assets

    Financial Highlights Q4 - 2007

    -   Revenues increased 10% from $18.9 million in 2006 to $20.9 million
        in 2007
    -   Gross profit increased 6% from $8.5 million in 2006 to $9.0 million
        in 2007
    -   EBITDA increased 1% from $5.8 million in 2006 to $5.9 million in 2007
    -   Settled a contract dispute for $1.7 million recorded as other income
    -   Incurred a loss of $1.9 million related to a password compromise in
        our prepaid products line of business


    THE YEAR IN REVIEW

    Selected financial information
    -------------------------------------------------------------------------
                              Three months ended            Years ended
    (thousands of Canadian        December 31               December 31
     dollars, except per
     unit amounts)             2007         2006         2007         2006
    -------------------------------------------------------------------------
    Financial Highlights   (unaudited)  (unaudited)  (unaudited)  (unaudited)

    Revenue
      Recurring services
       revenue            $    14,397  $    12,611  $    55,380  $    47,854
      Products revenue          6,281        6,213       25,343       25,736
      Interest income             197           96          753          324
    -------------------------------------------------------------------------
    Total revenue         $    20,874  $    18,921  $    81,476  $    73,915
    -------------------------------------------------------------------------

    Gross profit -
     Recurring services
     and interest         $     8,467  $     7,983  $    33,843  $    31,038
      Gross profit margin       58.0%        62.8%        60.3%        64.4%
    Gross profit -
     products                     528          474        2,277        2,329
      Gross profit margin        8.4%         7.6%         9.0%         9.1%
    -------------------------------------------------------------------------
    Total gross profit    $     8,995  $     8,457  $    36,120  $    33,367
      Total gross
       profit margin            43.1%        44.7%        44.3%        45.1%

    Expense and other
     income:
      Selling, general
       and administrative       2,676        2,383       11,130        9,318
      Long-term
       incentive plan             338          285        1,467        1,415
      Interest                    613          431        2,208        1,448
      Depreciation of
       equipment                  599          520        2,367        1,802
      Amortization of
       intangible assets        4,725        4,257       18,244       16,427
      Other expense             1,855            -        1,855            -
      Other income             (1,739)           -       (1,739)           -
    -------------------------------------------------------------------------

    Earnings/(loss) before
     minority interest            (73)         580          589        2,958
    Minority interest               -         (116)           -         (592)
    -------------------------------------------------------------------------
    Net (loss)/earnings   $       (73) $       464  $       589  $     2,366
      Net (loss)/earnings
       per unit           $     (0.01) $      0.05  $      0.05  $      0.24

    Add back:
      Minority interest             -          116            -          592
      Interest                    613          431        2,208        1,448
      Depreciation of
       equipment                  599          520        2,367        1,802
      Amortization of
       intangible assets        4,725        4,257       18,244       16,427
    -------------------------------------------------------------------------

    EBITDA                $     5,865  $     5,788  $    23,408  $    22,634
      EBITDA margin             28.1%        30.6%        28.7%        30.6%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Total assets at
     December 31          $   135,586  $   137,825  $   135,586  $   137,825
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total debt at
     December 31          $    35,680  $    28,329  $    35,680  $    28,329
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total debt net of
     cash at December 31  $    19,644  $    14,431  $    19,644  $    14,431
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    -------------------------------------------------------------------------
                              Three months ended            Years ended
                                  December 31               December 31

                               2007         2006         2007         2006
    -------------------------------------------------------------------------
    Operational
     Highlights            (unaudited)  (unaudited)  (unaudited)  (unaudited)

    Number of machines
     - end of period
      ATM terminals             5,613        5,175        5,613        5,175
      ATM terminals -
       active in past
       30 days(2)               5,273        4,914        5,273        4,914
      Debit terminals           2,963        2,256        2,963        2,256
      Debit terminals -
       active in past
       30 days(2)               2,879        2,177        2,879        2,177

    Number of transactions
     for the period
      ATM transactions      7,153,294    7,161,491   29,042,773   28,009,592
      Debit terminal
       transactions         2,130,176    1,224,090    7,441,176    4,371,463
      Prepaid cash card
       activations            569,709      470,390    2,191,135    1,839,887
      Prepaid cash card
       transactions         1,319,069    1,041,086    4,970,375    3,868,763
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (2) In addition to total ATM and Debit terminal counts, DirectCash has
        included statistics for sites that only recorded a transaction in the
        past calendar month in order to provide comparison to other industry
        players in the financial transaction processing business, who record
        sites as active in this manner. This has the impact of eliminating
        some seasonal sites or sites temporarily dormant for a number of
        reasons from the count, resulting in a net decrease in ATM and Debit
        terminal totals of 340 (2006 - 261) and 84 (2006 - 79) respectively.
    

    On a year over year basis, the number of ATMs under contract increased by
438, of which 127 were added via acquisition, and 311 were added via organic
means. ATM transactions for the three month period ended December 31, 2007
were flat compared to the prior year period. We believe ATM transactions have
declined in our network on a per unit basis due to new organic additions being
brought on at lower transaction levels, as more ATMs are added in the Canadian
marketplace without additional total transactions, as well as a decline in
same site year over year transactions for reasons noted above and a focus by
consumers in the past year on using their own financial institution ATM, the
use of cash back on debit services and increasing use of non-cash payment
means such as debit and credit services. On a full year basis, transactions
increased by 4% as a result of acquisitions and organic growth which mitigated
the above noted effects.
    The year over year increase in debit terminal count of 707 units is
primarily due to organic growth, although 189 debit terminals were added via
acquisition on March 30, 2007. The respective 74% and 70% respective growth in
transactions for the three months and year ended December 31, 2007 is
reflective of the higher numbers of devices deployed as well as higher per
average transactions in the newly acquired and newly deployed devices.
    The respective 21% and 19% respective growth in cash card activations for
the three months and year ended December 31, 2007 is a result of new customer
relationships and growth within existing relationships. Activation and
transaction figures include both prepaid debit and prepaid credit numbers. The
prepaid MasterCard program continues to find traction and displace some debit
card activations. The respective 27% and 28% increases in prepaid cash card
transactions for the three months and year ended December 31, 2007 is due to
the same reasons noted above for the increase in prepaid cash card activations
as well as an increase in transactions per card as prepaid products continue
to gain consumer acceptance and confidence.

    Results of Operations for the year ended December 31, 2007

    Revenue

    On an aggregate basis, revenues have increased by 10.3% and 10.2%
respectively for the three months and year ended December 31, 2007, as
compared to the prior year. Revenue by line of business, which includes both
recurring services and products revenue, is as follows:

    
    -------------------------------------------------------------------------
                            Three months ended             Years ended
                                December 31                December 31
    Revenue by LOB
     (thousands):         2007   % change   2006     2007   % change   2006
    -------------------------------------------------------------------------
    (unaudited)

    ATM Business        $ 9,193     6.5%  $ 8,633  $37,472    11.1%  $33,732
    Prepaid products
     business            11,295    14.0%    9,910   42,408     9.4%   38,771
    Debit terminal
     business               386     2.1%      378    1,596    13.1%    1,411
    -------------------------------------------------------------------------
    Total Revenue       $20,874    10.3%  $18,921  $81,476    10.2%  $73,915
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Revenue by type
     (thousands)
    Recurring services  $14,397    14.2%  $12,611  $55,380    15.7%  $47,854
    Products              6,281     1.1%    6,213   25,343    -1.5%   25,736
    Interest                197   105.2%       96      753   132.4%      324
    -------------------------------------------------------------------------
    Total Revenue       $20,874    10.3%  $18,921  $81,476    10.2%  $73,915
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Revenue - Recurring Services

    Recurring services revenue relates to revenue earned from transaction
processing activities, including ATM, debit terminal and prepaid product
transactions. For the three months and year ended December 31, 2007 recurring
services revenue rose by $1.8 million (14.2%) and $7.5 million (15.7%)
respectively over the prior year.
    For the three months ended December 31, 2007, approximately 70% of the
increase in recurring services revenue is attributable to prepaid products
revenue, with the balance primarily attributable to increases in ATM services
revenue, and to a modest extent, debit terminal revenues. The increase in
prepaid product recurring revenues is primarily attributable to the
introduction of the prepaid MasterCard product, which was partially offset by
displaced debit card revenues and lower pre authorized debit revenues
resulting from the loss of a large customer earlier in the year. The increase
in ATM revenues is attributable to a combination of acquisitions and organic
growth with acquisitions accounting for 29% of the additional ATMs in the
network on a year over year basis. The ATM business has also benefitted from
improvements in ancillary revenue streams such as warranty revenues. While ATM
transactions were flat for the quarter when compared to the prior year,
ancillary revenues have grown and allowed for continued overall revenue
growth.
    For the year ended December 31, 2007, the improvement in recurring
services revenue is roughly split between ATM services and prepaid products,
with debit terminal revenues contributing to a lesser extent. The reasons for
the improvement are for similar reasons as noted for the current quarter, with
the recent quarter being relatively stronger for the prepaid products business
due to the rollout of the MasterCard product having a greater impact in the
latter part of the year.
    There is historic seasonality of processing transaction volumes, with the
highest ATM transaction activity typically occurring in the months of March,
April, July and August, and the lowest activity typically occurring in the
months of November, December, January and February. The first and fourth
quarters are traditionally DirectCash's weakest quarters in terms of
processing transactions and gross profitability. The Fund has eliminated the
impact of seasonal fluctuations in cash flows to Unitholders by equalizing
monthly cash distributions. This seasonality is considered when determining
levels of available cash at the end of each reporting period.

    Revenue - Products

    Product revenue includes sales of ATMs and related parts, debit terminals
and related parts, and prepaid products, which includes the sale of cash cards
(debit and credit) and prepaid telecommunications products, both physical
("hard cards") and electronic ("virtual vouchers"). For the three months ended
December 31, 2007 revenue from product sales was relatively flat compared to
the prior year period, with slightly lower ATM product sales being offset by
slightly higher prepaid product sales.
    For the year, product revenues declined marginally compared to the prior
year. Lower ATM sales were partially offset by higher prepaid product sales.
The decline in ATM sales is due to an increased focus on placement sites
versus sold sites, while the improvement in prepaid product sales is primarily
attributable to a full year of hard card sales compared to the prior year, as
hard cards were not sold by DirectCash until March 1, 2006.

    Gross Profits

    On an aggregate basis, gross profits have increased by 6.4% and 8.3%
respectively for the three months and year ended December 31, 2007, as
compared to the prior year. Gross profit by line of business, which includes
both recurring services and products revenue, is as follows:

    
    -------------------------------------------------------------------------
                            Three months ended             Years ended
                                December 31                December 31
    Gross profit by
     LOB (thousands):     2007   % change   2006     2007   % change   2006
    -------------------------------------------------------------------------
    (unaudited)

    ATM Business        $ 5,487    10.1%  $ 4,982  $22,757    11.7%  $20,381
      gross profit
       margin             59.7%             57.7%    60.7%             60.4%
    Prepaid products
     business             3,288     2.8%    3,197   12,355     2.7%   12,028
      gross profit
       margin             29.1%             32.3%    29.1%             31.0%
    Debit terminal
     business               219   -21.2%      278    1,008     5.3%      957
      gross profit
       margin             56.7%             73.5%    63.2%             67.8%
    -------------------------------------------------------------------------
    Total Gross Profit  $ 8,995     6.4%  $ 8,457  $36,120     8.3%  $33,367
      gross profit
       margin             43.1%             44.7%    44.3%             45.1%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Gross profit by
     type (thousands)
    Recurring services
     and interest       $ 8,467     6.1%  $ 7,983  $33,843     9.0%  $31,038
      gross profit
       margin             58.0%             62.8%    60.3%             64.4%
    Products                528    11.4%      474    2,277    -2.2%    2,329
      gross profit
       margin              8.4%              7.6%     9.0%              9.1%
    -------------------------------------------------------------------------
    Total gross profit  $ 8,995     6.4%  $ 8,457  $36,120     8.3%  $33,367
      gross profit
       margin             43.1%             44.7%    44.3%             45.1%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Gross Profitability - Recurring Services

    Gross profit from recurring service and interest revenues for the three
months and year ended December 31, 2007 was 6.1% and 9.0% respectively higher
than the prior year, due to a combination of acquisitions and organic growth,
which was partially tempered by higher costs of goods sold and operating
costs. The gains for the three months and year ended December 31, 2007 are
primarily attributable to the ATM line of business, via acquisitions
undertaken and continued organic growth. In addition, improved ancillary gross
profits have offset a flattening transaction profile.
    The loss of a large customer in the prepaid products business resulted in
the loss of gross profits related to prepaid product revenues. The customer in
question had shifted their business practices early in 2007, which resulted in
a partial loss of business, and later terminated their contract with
DirectCash. DirectCash received a cash settlement from this former customer
which was recorded as other income in 2007 (see "Other income"). The loss of
gross profits related to this customer has been largely replaced by DirectCash
through solid growth related to new customer relationships and products. The
lower gross profit margins on a quarterly and YTD basis are primarily
attributable to the prepaid products line of business as a result of a product
mix shift towards lower margin transactions, including a shift in the business
practices and elimination of a large customer as noted above. Additional
revenues added in the debit terminal business via acquisition were also at
lower margins than existing DirectCash terminal accounts.

    Gross Profitability - Products

    Gross profit from product revenues for the three months and year ended
December 31, 2007 was relatively consistent with the prior year, as were gross
profit margins.

    Selling, General & Administrative expenses ("SG&A")

    For the three months and year ended December 31, 2007 SG&A expenses
increased 12.3% and 19.4% respectively over the prior year, which is a higher
rate of increase than our revenue growth. Upwards salary and other cost
pressures, particularly in the highly inflationary Alberta marketplace are
primarily responsible for the cost increases over and above those commensurate
with DirectCash's overall growth. As a percentage of gross profits, SG&A
increased during the three months ended December 31, 2007 to 29.8% (YTD -
30.8%) from 28.2% (YTD - 27.9%) during the prior year.

    Long-term incentive plan

    DirectCash has adopted a long-term incentive plan ("LTIP") as a benefit
plan to provide eligible participants with compensation opportunities that
will encourage ownership of Units, enhance DirectCash's ability to attract,
retain and motivate key personnel, and reward senior management for
significant performance that results in the Fund exceeding its per Unit
distributable cash flow targets.
    For the year ended December 31, 2007, total LTIP expense was $1,466,968
(2006 - $1,414,526), comprised of $1,478,622 (2006 - $1,467,315) related to
financial performance, less net proceeds of $11,654 (2006 - $52,789) from
unvested Units sold in the open market. No unvested Units were reallocated to
other participants.

    EBITDA

    For the three months and year ended December 31, 2007, EBITDA increased
by 1.3% and 3.4% respectively from prior year levels, which is lower than the
respective 6.4% and 8.3% increases in gross profits, as a result of higher
SG&A costs. As a percentage of revenue, EBITDA has declined to 28.1% during
the fourth quarter, as compared to 30.6% during the prior year. For the full
year, EBITDA as a percentage of revenue has declined to 28.7% from 30.6%. The
EBITDA margin compression is a result of the increased SG&A costs, as well as
other expense items, which were partially offset by other income (See below).

    Interest expense

    For the three months and year ended December 31, 2007 interest expense
has increased 42.2% and 52.5% respectively over 2006 levels due to increased
usage of our acquisition and revolving credit facilities (See "Liquidity and
Capital Resources") and higher interest rates. The increase in our revolving
credit facility usage is primarily due to the increase in cash in circulation,
resulting from a higher proportion of DirectCash owned ATMs in our network.
This is the result of placement contracts purchased during the past year, as
well as an increased emphasis during 2006 on organic placement contracts,
which often require the use of DirectCash's cash versus ATMs sold to, and
loaded, by merchants. The increase in the use of our acquisition credit
facility is the result of acquisitions undertaken in 2006 and early 2007. All
DirectCash debt is currently on floating interest rates. A one percent change
in interest rates would result in an approximate $357 thousand change in
interest expense based upon current debt levels.

    Other income

    DirectCash has received payment of approximately $1.74 million in respect
of the settlement of an early contract termination dispute with one of
DirectCash's merchant customers in the pre-paid product business (regarding
the termination of the customer's contract with DirectCash in 2007). This
payment was made pursuant to a settlement agreement signed shortly before
year-end, and was included in the Fund's 2007 operating results as other
income.

    Other expense

    During the final days of 2007, an employee password was compromised that
resulted in the unauthorized increases of selected card balances for a number
of pre-paid credit cards issued under our recently introduced prepaid credit
card program. The impact was quantified to be a loss of approximately
$1.85 million. We have reviewed our systems and controls and have taken
corrective measures in order to avoid a similar incident occurring again.

    Net Earnings

    Net earnings before minority interest for the three months and year ended
December 31, 2007 were a loss of $73,257 and earnings of $589,276
respectively, versus earnings of $579,629 and $2,957,605 during the prior
year. Minority interest represents earnings attributable to holders of Class B
Subordinated Partnership Units and represented 20% of the outstanding units of
the Fund on a diluted basis, which is only relevant for the prior period since
all Class B Subordinated Partnership Units were converted to Exchangeable
Partnership Units on December 31, 2006. The disparity between net earnings and
cash distributions is primarily due to amortization of intangible assets. ATM,
debit terminal and prepaid product site contracts are currently valued at
approximately $37.3 million based on future cash flows of the ATM, Debit
Terminal and Prepaid Product contracts, resulting from the majority of
acquisition amounts (including IPO transaction) being allocated to contracts.
The disparity to the prior year is primarily due to higher amortization
charges in 2007. Typically, these contracts include automatic renewals for a
further minimum five-year period (new contracts are six years) unless the
customer terminates the contract within a specified time period and include a
right of first refusal to match a competitor's bona fide offer on renewal,
which Management believes could result in the assets having a longer life than
the period they are amortized over.

    
    Standardized Distributable Cash Flow and Distributable Cash Flow per Unit

    -------------------------------------------------------------------------
                              Three months ended            Years ended
    (thousands,                   December 31               December 31
     except for per
     unit amounts)             2007         2006         2007         2006
    -------------------------------------------------------------------------
    Per consolidated
     financial statements:

    Net earnings/(loss)   $       (73) $       464  $       589  $     2,366
    Add/(Deduct):
    Minority interest               -          116            -          591
    Depreciation of
     equipment                    599          520        2,367        1,802
    Amortization of
     intangible and
     other assets               4,725        4,257       18,244       16,427
    Changes in non-cash
     working capital              137          928         (756)         (46)
    -------------------------------------------------------------------------
    Cash provided by
     operations:          $     5,389  $     6,285  $    20,444  $    21,140
    Productive capacity
     maintenance                 (278)        (337)        (988)        (998)
    -------------------------------------------------------------------------
    Standardized
     distributable
     cash flow            $     5,111  $     5,948  $    19,456  $    20,142
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Per unit              $    0.4098  $    0.4769  $    1.5600  $    1.6151
    Changes in non-cash
     working capital             (137)        (928)         756           46
    Deferred rent expense          (6)           -          (27)           -
    -------------------------------------------------------------------------
    Distributable
     Cash Flow            $     4,967  $     5,020  $    20,185  $    20,188
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Per Unit              $    0.3983  $    0.4025  $    1.6185  $    1.6188
    Distributions
     declared             $     4,303  $     4,303  $    17,211  $    15,901
    Distributions
     declared per unit    $    0.3450  $    0.3450  $    1.3800  $    1.2750
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Standardized
     Distributable Cash
     Flow Payout ratio          84.2%        72.3%        88.5%        78.9%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Distributable Cash
     Flow Payout Ratio          86.6%        85.7%        85.3%        78.8%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


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

    (thousands,
     except for per
     unit amounts)       Cumulative(3)
    ----------------------------------
    Per consolidated
     financial statements:

    Net earnings/(loss)   $     3,943
    Add/(Deduct):
    Minority interest             838
    Depreciation of
     equipment                  5,302
    Amortization of
     intangible and
     other assets              49,142
    Changes in non-cash
     working capital           (2,513)
    ----------------------------------
    Cash provided by
     operations:          $    56,711
    Productive capacity
     maintenance               (2,729)
    ----------------------------------
    Standardized
     distributable
     cash flow            $    53,982
    ----------------------------------
    ----------------------------------
    Per unit              $    4.3284
    Changes in non-cash
     working capital            2,513
    Deferred rent expense         (27)
    ----------------------------------
    Distributable
     Cash Flow            $    56,468
    ----------------------------------
    ----------------------------------
    Per Unit              $    4.5278
    Distributions
     declared             $    46,490
    Distributions
     declared per unit    $    3.7277
    ----------------------------------
    ----------------------------------

    Standardized
     Distributable Cash
     Flow Payout ratio          86.1%
    ----------------------------------
    ----------------------------------

    Distributable Cash
     Flow Payout Ratio          82.3%
    ----------------------------------
    ----------------------------------

    (3)  Since the Fund's initial public offering in December, 2004.
    

    Distributions typically exceed net earnings as a result of non-cash
expenses, such as depreciation of equipment and amortization of intangible
assets. These non-cash expenses result in a reduction to net earnings, with no
impact on cash flow from operating activities. DirectCash's policy is to
distribute all available cash from operations after cash required to maintain
productive capacity, working capital reserves and other reserves as considered
advisable by DirectCash's Board, which reflects the difference between
distributions declared and distributable cash flow. The higher distributable
cash flow payout ratio in 2007 versus 2006 reflects higher distribution levels
in 2007 as compared to the prior year. Due to seasonality considerations,
first and fourth quarter payout ratios are typically the highest, excluding
future changes to distribution levels. Since inception, the Fund has
distributed 82.3% of its distributable cash flow to holders of units,
exchangeable partnership units and Class B subordinated partnership units.
    Cash distributions and productive maintenance capital programs have been
historically funded via cash from operations, while growth capital
expenditures have primarily been funded with debt. Over time, additional
borrowings and equity issues may be required to increase productive capacity.
    Neither standardized distributable cash flow nor distributable cash flow
can be assured. See Key Business Risks for a list of factors which could
negatively impact cash flows. The Fund intends to utilize its credit
facilities as part of its capital structure in order to fund future capital
growth, operating within the covenants of its credit facility, thus enhancing
distributable cash flow from operations.
    Since inception, 100% of the Fund's distributions declared are considered
other income. The consolidated excess of the carrying value of the Fund's
equipment, intangible and other assets over their tax basis is approximately
$17.9 million.

    Non-Cash Working Capital

    The change in 2007 non-cash working capital is as follows:

    
    -------------------------------------------------------------------------
    (thousands)
    As of December 31:                      2007         2006        Change
    -------------------------------------------------------------------------
    Accounts receivable                $     4,398  $     2,789  $     1,609
    Loans receivable                           595          590            5
    Inventories                              4,923        3,976          947
    Prepaid expenses                           694          847         (153)
    Accounts payable and accrued
     liabilities                            (7,595)      (5,944)      (1,651)
    -------------------------------------------------------------------------
                                             3,014        2,257          757
    Acquisitions and other                                                (1)
    -------------------------------------------------------------------------
    Change in non-cash working capital                           $       756
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Non-cash working capital fluctuates between periods and is dependant upon
factors such as short term inventory requirements, the timing of bulk
inventory shipments, and the timing of accounts receivable collections and
payment of liabilities. In addition prepaid expenses can vary dependant upon
the requirement for deposits and the timing of prepaid interest on bankers
acceptances related to the acquisition credit facility. The increase in
accounts receivable is attributable to funds received in early 2008 related to
the 2007 settlement of a contract dispute. The increase in inventory relates
to additional inventory held resulting from a new location in Winnipeg and a
large build up at year-end to meet anticipated short term demand. Inventory
levels are expected to gradually subside from current levels. The increase in
accounts payable relates to the settlement in early 2008 of the other expense
item related to the password compromise previously noted.
    Since the Fund's inception in December, 2004 non-cash working capital has
grown by approximately $2.7 million for the reasons noted above as well as the
requirement for additional working capital as the Fund has grown its
operations. In addition, there were considerable accrued costs of going public
that were part of the Fund's initial working capital calculation, with the
subsequent payment resulting in an increase in non-cash working capital.
Fluctuations in the Fund's non-cash working capital requirements are funded
with DirectCash's revolving credit facility.

    
    Capital Expenditures

    -------------------------------------------------------------------------
                              Three months ended            Years ended
                                  December 31               December 31

                               2007         2006         2007         2006
    -------------------------------------------------------------------------
    Per consolidated
     financial statements:

    Acquisitions
     - net of cash        $       (42) $       447  $     5,385  $    11,944
    Other capital
     expenditures                 225          896        1,734        2,648
    Other intangible
     expenditures                  50          103          722          310
    -------------------------------------------------------------------------
                          $       233  $     1,447  $     7,841  $    14,902
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Split between growth
     and maintenance:

    Growth capital(1)     $       (45) $     1,110  $     6,853  $    13,904
    Productive capital
     maintenance(1)               278          337          988          998
    -------------------------------------------------------------------------
                          $       233  $     1,447  $     7,841  $    14,902
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Growth capital expenditures relate to acquisitions and other expenditures
that increase DirectCash's productive capacity, while productive capital
maintenance expenditures maintain productive capacity at existing levels.
Productive capital maintenance expenditures are reasonably predictable with
large lead times typically provided for project completion; however,
inter-period expenditures vary significantly depending upon project timing.
Growth capital expenditures vary widely between periods due to the volatility
of acquisition opportunities.

    Significant Customer

    DirectCash had a single customer which accounted for approximately 14% of
revenues for the three months and year ended December 31, 2007, as compared to
15% in the prior year. The revenues from this customer are spread across all
lines of business. DirectCash has long-term contractual agreements to provide
services to this customer.

    DirectCash Bank

    Late in 2007 DirectCash entered into various services and marketing
agreements with the DirectCash Bank (the "Bank"), whereby DirectCash will
provide transaction processing and technology services to the Bank. DirectCash
debit and credit cards issued by All Trans Credit Union will be transitioned
to DirectCash Bank. The relationship with the Bank will permit DirectCash to
expand its merchant base by offering new and innovative products. The Bank
received its order to commence business operations on January 24, 2008.
    The DirectCash Bank will (i) have access to the existing DirectCash ATM
network of over 5,600 ATMs in order to add a cardholder base, (ii) apply for
membership as an issuer in card associations such as MasterCard, and (iii)
enable DirectCash to enhance and expand its prepaid products business in
Canada. The Bank will be able to provide distinct banking services,
particularly to those customers in rural Canada who are currently underserved
by the Canadian banking industry. We believe this is an opportunity to
leverage and expand DirectCash's ATM and prepaid products businesses and offer
unique products and services for consumers and merchants in Canada through
collaboration with the DirectCash Bank. It is our expectation that as a result
of this relationship with a Canadian chartered bank, DirectCash will have the
opportunity to expand into markets and product offerings not previously
available to us.

    Board and Management Changes

    On November 7, 2007 Mr. Jeff Lawson resigned from the Board of DirectCash
Management Inc., the manager of the Fund, in order to pursue his new role as
Managing Director, Investment Banking with Blackmont Capital Inc. Blackmont
Capital Inc. provides research coverage on DirectCash. Mr. Lawson's position
on the Board and Audit Committee have been filled by Mr. Brad Hurtubise, who
most recently held the position of Managing Director, Investment Banking, at
Tristone Capital Inc.
    Effective December 31, 2007, Susan Gallacher resigned her position as
DirectCash's Vice President in order to take the position as DirectCash Bank's
President and CEO. Ms. Gallacher continues to serve as a member of DirectCash
Management Inc.'s Board. Prior to Ms. Gallacher's change in position,
DirectCash hired Mr. Todd Schneider to fill the newly created position of
Chief Operating Officer. Mr. Schneider has recently held high level posts for
DHL Express Canada, including that of Area Director - Prairie Region, and
Director of Sales - Western Canada.

    Additional Information

    Additional information about the Fund, including the Fund's Annual
Information Form and other public filings is available on SEDAR
(www.sedar.com) and on the Fund's website (www.directcash.net).

    (1) Non-GAAP measures
    -------------------------------
    There are a number of financial calculations that are not defined
performance measurements under Canadian generally accepted accounting
principles ("GAAP") but which Management believes are useful and accepted
performance measurements utilized by the investing public in assessing the
overall financial performance of Income Trusts.

    EBITDA

    EBITDA represents gross profits less SG&A and is not a defined
performance measure under GAAP. EBITDA specifically excludes depreciation,
amortization, income taxes and interest. The Fund's EBITDA may differ from
similar computations as reported by other issuers and, accordingly, may not be
comparable to EBITDA as reported by such issuers.

    Distributable cash flow and distributable cash flow per unit

    Distributable cash flow and distributable cash flow per unit are non-GAAP
measures generally used by Canadian open-ended income funds as an indicator of
financial performance. Readers are cautioned that distributable cash flow is
not a defined performance measure under GAAP, and that distributable cash flow
cannot be assured. The Fund calculates distributable cash flow as equal to the
consolidated funds flow from operations before changes in non-cash working
capital, after provision for maintenance capital expenditures (see discussion
below) and amortization of deferred rent expense. The Fund's distributable
cash flow and distributable cash flow per unit may differ from similar
computations as reported by other issuers and, accordingly, may not be
comparable to distributable cash flow and distributable cash flow per unit as
reported by such issuers.
    Unitholders receive cash distributions sourced from distributions made by
DirectCash LP indirectly to the Fund. The Fund's policy is to distribute, to
the maximum extent possible, the funds earned from operations to Unitholders,
less amounts estimated to be required for expenses, maintenance capital, cash
redemptions or repurchases of Units, any tax liability, or other obligations
and any reasonable reserves established. The Fund makes monthly cash
distributions to Unitholders on the last business day of each month to
Unitholders of record on the last business day of the preceding month.
Distributions are funded from cash flows generated by the operation of the
business.

    Productive capital maintenance expenditures

    DirectCash differentiates capital expenditures between growth and
productive capital maintenance ("maintenance capital"). There is no such
distinction under GAAP, however Management believes it is important to
differentiate between them as maintenance capital expenditures represent a
discretionary adjustment to distributable cash flow while growth capital does
not. Maintenance capital expenditures are defined as expenditures required to
service and maintain our existing productive capacity, while growth capital is
expended to increase our productive capacity by adding additional sources of
revenue not currently in existence. Current measures of productive capacity
that DirectCash utilizes include ATMs and debit terminals under contract (see
"Operational Highlights"). Software and hardware upgrades to existing
infrastructure, ATM and debit terminal equipment upgrades necessary to meet
changing regulatory requirements, contract extension incentives, and fleet
vehicle purchases and upgrades are some examples of maintenance capital
expenditures. Examples of growth capital expenditures include the acquisition
of a competitor's assets, the cost of an ATM in a new location, or technology
costs related to new sources of revenue.
    Readers are cautioned that productive capital maintenance expenditure is
not a defined performance measure under GAAP. The Fund's computation of
productive maintenance capital expenditure may differ from similar
computations as reported by other issuers and, accordingly, may not be
comparable to maintenance capital expenditures as reported by such issuers.

    Forward Looking Statements

    Except for the historical and present factual information, certain
statements contained herein are forward-looking. Such forward-looking
statements are not guarantees of future performance and involve a number of
known and unknown risks and uncertainties which may cause the actual results
of the Fund in future periods to differ materially from any projections
expressed or implied by such forward-looking statements and therefore should
not be relied upon. Any forward-looking statements are made as of the date
hereof and the Fund does not undertake any obligation to publicly update or
revise such statements to reflect new information, subsequent events or
otherwise, except as required pursuant to applicable securities laws.





For further information:

For further information: Arie Prins, Chief Financial Officer, DirectCash
Management Inc., Manager of DirectCash Income Fund, Direct: (403) 387-2103,
e-mail: arie@directcash.net

Organization Profile

DIRECTCASH INCOME FUND

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890