Press release from CNW Group
Cash Store Financial releases third quarter results
Wednesday, July 27, 2011
Cash Store Financial releases third quarter results17:49 EDT Wednesday, July 27, 2011EDMONTON, July 27, 2011 /CNW/ - The Cash Store Financial Services Inc. (Cash Store Financial) (TSX: CSF; NYSE: CSFS) today announced results for the three and nine months ended June 30, 2011. The following financial results are expressed in Canadian dollars.Highlights for the three months ended June 30, 2011 Quarterly revenue of $49.7 million, up 5.1% from $47.3 million for the same period last year.Loan fees of $33.9 million, or 68.2% of total revenue, down 3.7% from $35.2 million or 74.4% of total revenue for the same period last year.Other revenue of $15.8 million, or 31.8% of total revenue, up 29.5% from $12.2 million or 25.8% of total revenue in the same period last year.Loan volumes of $204.6 million, down 0.5% from $205.7 million for the same period last year.Branch operating income of $14.7 million, down 12.4% from $16.8 million for the same period last year.Diluted earnings per share before class action settlement costs and related taxes were $0.19 from $0.31 in the same quarter last year. Including these charges, diluted earnings per share $0.07 per share compared to $0.31 per share in the same period last year.Our effective tax rate was 46.9% in the three months ended June 30, 2011, compared to 32.8% for the same period last year. The effective tax rate is higher than the statutory tax rate of 28.6% due to a provision for certain prior year income matters.Net income before class action settlement costs and related taxes was $3.4 million from $5.5 million for the same quarter last year. Including these charges, net income was $1.2 million compared to $5.5 million in the same period last year.EBITDA before class action settlement costs was $7.8 million compared to $10.4 million for the same quarter last year. Including these charges, EBITDA of $4.6 million compared to $10.3 million for the same period last year.Same branch revenues for the 484 locations open since April 1, 2010 decreased 4.1% to $90,600 from $94,400 for the same quarter last year.Branch count was 582, up three net new branches (including two in the UK) from 579 at March 31, 2011.Highlights for the nine months ended June 30, 2011 (table of results at end of release)Revenue of $146.2 million, up 12.1% from $130.4 million for the same period last year.Loan fees of $103.1 million, or 70.5% of total revenue, up 2.4% from $100.7 million or 77.2% of total revenue compared to the same period last year.Record other revenue of $43.2 million, or 29.5% of total revenue up 45.5% from $29.7 million or 22.8% of total revenue in the same period last year.Loan volumes of $619.7 million, up 11.3% from $556.6 million compared to the same period last year.Branch operating income of $40.9 million, down 10.3% from $45.6 million for the same period last year.Diluted earnings per share before class action settlement costs and related taxes were $0.52 from $0.86 for the same period last year. Including these charges,diluted earnings per share was $0.40 per share compared to $0.75 per share in the same period last year.Our effective tax rate was 36.4% for the nine months ended June 30, 2011, compared to 33.7% for the same period last year. The effective tax rate is higher than the statutory tax rate of 28.6% due to a provision for certain prior year income matters.Net income before class action settlement costs and related taxes was $9.2 million, down from $15.1 million for the same period last year. Including these charges, net income of $7.0 million compared to $13.1 million in the same period last year.EBITDA adjusted for class action settlement costs was $21.5 million from $29.2 million for the same period last year. Including these charges, EBITDA of $18.3 million compared to $26.2 million for the same period last year.Same branch revenues for the 445 locations open since October 1, 2009 decreased 1.0% to $276,900 from $279,700 for the same period last year.Branch count was 582 up 38 net new branches from 544 at September 30, 2010."Third quarter overall revenue was up relative to the same period last year, with particularly strong performance achieved in the other revenue category, which has been an area of priority strategic focus for management. Earnings were strong but decreased relative to the same period last year due to rate caps in regulated provinces and an increased drag on earnings due to the addition of 57 new branches over the past 12 months. We anticipate that earnings will increase as newer branches mature and this drag is reduced, and loan volumes and revenues from other products continue to increase. Over 50% of our branches are less than three years of age and have therefore not yet achieved a mature stage of development. There remains significant untapped customer penetration in the market and the revenue and earnings potential of our overall network remains significant," said Gordon J. Reykdal, Chairman and CEO.Mr. Reykdal further added: "Our ongoing strategy to strengthen earnings of our existing network and to expand into underserved markets where revenue and margin potential are high. We have tested the U.K. market with 8 active branches. Despite earnings drag from newer branches added over the past 15 months in our Canadian operation, we are planning an accelerated expansion into the U.K. We have continued to invest in operations management infrastructure to support this strategy. Earnings in the quarter were impacted by these forward looking investments. Other factors impacting earnings include costs associated with on-balance sheet lending and legal costs related to class action matters and trademark infringement issues."Mr. Reykdal said: "A key component of our long-term business strategy has been product diversification. This strategy has and should continue to help offset the decrease in revenue and earnings resulting from provincially regulated rate caps on payday loans. In the third quarter of 2010, through an agency agreement with DC Bank, a federally regulated Schedule 1 bank, we introduced a basic deposit account product. A new premium bank account that features unlimited free cheque cashing and free on-line bill payments was introduced in February 2011. Both types of account are insured by the Canada Deposit Insurance Corporation. On a national basis, consumer acceptance of both products has been high. Over future periods, we will continue our focus on the development and roll-out of new products."About Cash Store Financial Cash Store Financial is the only broker and lender 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 more than 574 branches across Canada under the banners: Cash Store Financial and Instaloans. Cash Store Financial also operates eight branches in the United Kingdom.Cash Store Financial and Instaloans primarily act as brokers and lenders 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 2,300 associates and is headquartered in Edmonton, Alberta.Summary Financial Information Thousands of dollars, except for per share amounts and branch figuresThree Months Ended Nine Months EndedConsolidated results June 30 2011 June 30 2010 June 30 2011 June 30 2010 No. of branchesCanada 574 523 574 523 United Kingdom 8 2 8 2 582 525 582 525Loan volumes Loan fees included $204,616 $205,659 $619,681 $556,590 Revenue Loan fees $33,944 $35,183 $103,071 $100,671 Other income 15,767 12,153 43,170 29,709 49,711 47,336 146,241 130,380 Branch expenses Salaries and benefits 14,591 13,695 43,086 37,595 Retention payments 6,774 5,833 20,541 16,133 Selling, general and administrative 5,368 4,361 17,125 12,730 Rent 4,589 3,790 13,560 10,595 Advertising and promotion 1,312 1,171 4,041 3,254 Provision for loan losses 662 200 1,979 302 Depreciation of property and equipment 1,711 1,477 5,058 4,185 35,007 30,527 105,390 84,794Branch operating income 14,704 16,809 40,851 45,586 Regional expenses 4,069 3,638 11,982 9,427Corporate expenses 4,800 4,514 13,098 11,943Other depreciation and amortization 455 405 1,542 1,471Income before income taxes and class action settlements 5,380 8,252 14,229 22,745Class action settlements 3,206 100 3,206 2,915EBITDA * 4,547 10,325 18,307 26,243Net income and comprehensive income $1,155 $5,476 $7,007 $13,142Weighted average number of shares outstanding - basic 17,339 17,012 17,207 16,873Basic earnings per share Income before class action settlement costs $0.19 $0.33 $0.53 $0.86 Net income and comprehensive income $0.07 $0.32 $0.41 $0.78Diluted earnings per share Income before class action settlement costs $0.19 $0.31 $0.52 $0.86 Net income and comprehensive income $0.07 $0.31 $0.40 $0.75Consolidated Balance Sheet Information Working capital $16,434 $7,450 $16,434 $7,450Total assets 118,875 104,630 118,875 104,630Total long-term liabilities 9,212 4,298 9,212 4,298Total liabilities 31,751 27,638 31,751 27,638Shareholders' equity $87,124 $76,992 $87,124 $76,992*EBITDA - earnings from operations before interest, income taxes, stock-based compensation, depreciation of property and equipment and amortization of intangible assets.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.This News Release contains "forward-looking information" within the meaning of applicable Canadian and United States securities legislation. Forward-looking information includes, but is not limited to, information with respect to our objectives, strategies, operations and financial results, competition as well as initiatives to grow revenue or reduce retention payments. Generally, forward-looking information can be identified by the use of forward-looking terminology 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 or state that certain actions, events or results "may", "could", "would", "might", or "will be taken", "occur", or "be achieved". In particular this News Release contains forward-looking statements in connection with the Cash Store Financials goals and strategic priorities, introduction of products, share repurchase initiatives and branch openings. 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 of Cash Store Financial, to be materially different from those expressed or implied by such forward-looking information, including, but not limited to, changes in economic and political conditions, legislative or regulatory developments, technological developments, third-party arrangements, competition, litigation, risks associated with but not limited to, market conditions, and other factors described in our Annual Information Form ("AIF") dated November 24, 2010 under the heading "Risk Factors". All material assumptions used in making forward-looking statements are based on management's knowledge of current business conditions and expectations of future business conditions and trends, including our knowledge of the current credit, interest rate and liquidity conditions affecting us and the Canadian economy. Although we believe the assumptions used to make such statements are reasonable at this time and have attempted to identify in our continuous disclosure documents important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. Certain material factors or assumptions are applied by us in making forward-looking statements, include without limitation, factors and assumptions regarding our continued ability to fund our payday loan business, rates of customer defaults, relationships with, and payments to, third party lenders, demand for our products, as well as our operating cost structure and current consumer protection regulations. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information. We do not undertake to update any forward-looking information, except in accordance with applicable securities laws. For further information: Gordon J. Reykdal, Chairman and Chief Executive Officer, (780) 408-5118; or, Nancy Bland, Chief Financial Officer, (780) 732-5683.