Cash Store Financial releases fourth quarter and annual financial results

EDMONTON, Dec. 11, 2013 /CNW/ - 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 (TSX: CSF). Cash Store Financial also trades on the New York Stock Exchange (NYSE: 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

 

SOURCE: The Cash Store Financial Services Inc.

For further information, please contact:

Gordon Reykdal, CEO, at 780-408-5118, or
Craig Warnock, CFO, at 780-732-5683