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DirectCash Payments Inc. Announces Results of Operations for the Three Months and Year Ended December 31, 2011

Wednesday, March 21, 2012

DirectCash Payments Inc. Announces Results of Operations for the Three Months and Year Ended December 31, 201107:30 EDT Wednesday, March 21, 2012CALGARY, ALBERTA--(Marketwire - March 21, 2012) - DirectCash Payments Inc. (TSX:DCI) ("DirectCash" or the "Corporation") today announced consolidated financial results for the three months and year ended December 31, 2011. DCPayments's consolidated financial statements for the year ended December 31, 2011 and Management's Discussion & Analysis, as well as additional information about the Corporation are available on SEDAR (www.sedar.com). 2011 Financial and Operational Highlights compared to 2010: Increased Net Income 318% to $20.3 million Improved Funds from Operations payout ratio from 89% to 56% Commenced operations in the prepaid card business in Australia and United Kingdom Increased EBITDA 5% to $36.7 million Increased Gross Profits 9% to $56.5 million Acquired $1.8 million of ATM assets ($21.0 million in 2010), bringing the total number of active ATMs to 7,863 Acquired Dexit Inc.(a prepaid business)Management's Commentary"We have continued to demonstrate our ability to generate positive returns for our shareholders through strong financial performance and are pleased with our continued improvements in EBITDA, Net Income and payout ratio" said Jeffrey Smith, DirectCash's President and Chief Executive Officer. The primary drivers for the improvements over the prior year period are the contributions from the acquisitions completed and new bank product offerings. Consistent performance and strong growth has been seen throughout all of DirectCash's lines of business.DirectCash will continue to pursue growth through additional accretive acquisitions as opportunities arise. DirectCash's stable, contracted revenue stream and dominant market positions will continue to provide consistent cash dividends to DirectCash's Shareholders. DirectCash continues to focus on its Canadian and Mexican operations, and consider new geographic markets to add to recurring services revenue growth and gross profit margins.Conversion CompletionThe Fund successfully completed a previously announced plan of arrangement under the Business Corporations Act (Alberta) pursuant to which the Fund was converted from an income trust to a dividend paying corporation operating under the name "DirectCash Payments Inc.".Beginning after January 1, 2011 (starting with the January 31, 2011 record date), shareholders of DCPayments have received monthly payments of $0.115 per Common Share in the form of dividends.International Financial Reporting StandardsResults are reported in Canadian dollars and have been prepared in accordance with International Financial Reporting Standards ("IFRS") for the period ended September 30, 2011.For reconciliations of equity and total comprehensive income for comparative periods and of equity at the date of transition reported under previous Canadian GAAP to those reported for those periods and at the date of transition under IFRS see the notes to the Year End 2011 Financial Statements available for download from www.SEDAR.com.Results of Operations for the three months and year ended December 31, 2011:Three months endedYear endedDecember 31December 312011201020112010Number of machinesATM terminals - active17,8637,5267,8637,526Debit terminals - active13,4033,2533,4033,253Number of transactionsATM transactions8,437,8488,604,12634,435,99132,243,199Debit terminal transactions2,825,0932,795,62911,368,17311,287,704Prepaid cash card activations818,863786,0423,118,3223,215,054Prepaid cash card transactions1,753,2201,862,7617,629,5847,523,5691DirectCash has included statistics only for sites that recorded a transaction in the last calendar month of the period indicated.Compared to the prior year, the number of active ATMs increased by 337. The net increase is primarily a result of an acquisition which occurred during the fourth quarter of 2011. Additional growth can be attributed to organic growth in Canada and Mexico.ATM transactions increased during the year ended December 31, 2011 compared to the prior year due to the increased number of ATMs deployed. During the fourth quarter of 2011 ATM transactions declined compared to the prior year period as a result of transactions per ATM in Canada declining in line with industry trends and in Mexico due to declined tourism. Based on statistics provided by Interac, ATM transactions in the Canadian industry as a whole continued their historical decline on a per ATM basis (this results from a combination of a decrease in total transactions and an increase in the number of ATMs deployed). On an industry wide basis, as more ATMs have been added to the Canadian marketplace there has been no corresponding increase in overall industry transactions. DirectCash's prepaid products business and entrance into new geographic markets are offsetting this effect on DirectCash's business.DirectCash's goal in the ATM business is to continue to maintain existing customer relationships, add sites and grow aggregate transactions through accretive acquisitions and to maximize site profitability through cost and quality control. In addition, DirectCash is considering new geographic markets and adding new products and services, to add to recurring services revenue growth and gross profit margins.On a year over year basis, the number of active debit terminals has increased by 150 due primarily to organic growth. Debit terminal transactions are relatively flat for the three months and year ended December 31, 2011 as compared to the prior year periods. DirectCash continues to pursue organic growth in this business segment and to grow market share by providing retailers with unique products and services to enhance the business viability of the debit terminal for the retailer.Prepaid card activations declined by 3% for the year ended December 31, 2011 compared to the prior year period. The 4% increase in prepaid card activations for the three months ended December 31, 2011 is due primarily to Australian operations. Gross profit increased in this line of business due to the addition of new products, including the bank account product offered through DirectCash's strategic alliance with DC Bank and one of DirectCash's significant customers. The MasterCard prepaid card program continues to find traction and displace some debit card activations.The decline in prepaid card transactions for the three months ended December 31, 2011 is due to a promotion held by one of DirectCash's significant customers during the prior year period, as well as regulatory changes in the payday loan industry that limit the number of consecutive loans issued and fees that may be collected on payday loans, in which DirectCash has a significant customer. Further contributing to the decline was a regulatory change during the period in the tax rebate business in Ontario, in which DirectCash has a customer. The increase in prepaid card transactions for the year ended December 31, 2011 is due to growth within existing customer relationships and Australian operations, as prepaid products continue to gain customer acceptance and confidence. Activation and transaction volume figures include both prepaid debit and prepaid credit cards.The following table presents a summary of the DCPayments' selected consolidated financial information for the three months ended December 31, 2011 and 2010 and years ended December 31, 2011, 2010 and 2009: Financial HighlightsThree Months EndedYear EndedDecember 31December 31(thousands)20112010201120102009RevenuesRecurring services revenue22,55222,34992,59884,92974,463Products revenue4,4995,40219,53921,05522,248Interest income404920511292Total revenue27,09127,800112,342106,09696,803Gross ProfitRecurring services and interest$12,789$13,043$54,068$50,110$42,528Gross profit margin56.6%58.2%58.3%58.9%57.0%Products6513342,4571,5991,391Gross profit margin14.5%6.2%12.6%7.6%6.3%Total gross profit$13,440$13,377$56,525$51,709$43,919Total gross profit margin49.6%48.1%50.3%48.7%45.4%Operating Expenses & Net Finance costs:Personnel expenses2,7782,49610,9438,8297,755Employee profit sharing plan / Long-term incentive plan3264881,4421,7671,143Other expenses2,3011,9487,4716,1605,356Bargain purchase gain(6,303)-(6,303)(4,238)-Depreciation of property and equipment1,1821,0914,7503,5703,131Amortization of intangible assets2,9152,92911,2749,63310,516Finance costs4283871,6721,463910Distributions on Exchangeable partnership units-2,467-7,475-Net change in fair value of exchangeable partnership units-9,125-25,998-Foreign Exchange Translation Loss----266Unrealized loss (gain) on foreign exchange(1)(24)(4)115073,62620,90731,24560,66829,584Net income (loss) before income taxes$9,814$(7,530)$25,280$(8,959)$14,335Income taxes - Current(540)132255292246Deferred income tax1,8057254,70357(826)Net Income (loss)$8,549$(8,387)$20,322$(9,308)$14,915Net income per share, basic0.62(0.61)1.48(0.74)1.20Net income per share, diluted0.62(0.61)1.47(0.74)1.20Add back:Finance costs4283871,6721,463910Distributions on Exchangeable partnership units-2,467-7,475-Net change in fair value of exchangeable partnership units-9,125-25,998-Purchase gain on acquisition(6,303)-(6,303)(4,238)-Depreciation of equipment1,1821,0914,7503,5703,131Amortization of intangible assets2,9152,92911,2749,63310,516Income taxes - Current(540)132255292246Deferred income tax1,8057254,70357(826)EBITDA$8,036$8,469$36,673$34,942$28,892EBITDA margin29.7%30.5%32.6%32.9%29.8%Total assets$166,302$167,289$166,302$167,289$120,214Total debt52,05153,34252,05153,34240,272Total debt net of cash(4,229)1,905(4,229)1,90514,386Consolidated financial information prior to January 1, 2010 is reported in accordance with Canadian generally accepted accounting principles ("GAAP").RevenueTotal revenue decreased by 3% and increased by 6% respectively for the three months and year ended December 31, 2011, as compared to the prior year. Revenue by line of business, which includes both recurring services and products revenue, is as follows:Revenue by Line of BusinessThree months endedYear endedDecember 31December 31(thousands) 2011201020112010ATM Business$12,644$12,942$52,598$45,934Prepaid products business13,88814,31557,68858,007Debit terminal business5595432,0562,155Total Revenue$27,091$27,800$112,342$106,096Revenue by typeRecurring services$22,552$22,349$92,598$84,929Products4,4995,40219,53921,055Interest4049205112Total Revenue$27,091$27,800$112,342$106,096Revenue - Recurring ServicesRecurring services revenue relates to revenue earned from transaction processing activities, including DirectCash's ATM, debit terminal and prepaid product lines of business.During the year ended December 31, 2011, recurring services revenue increased by 9% as compared to 2010.The decrease in prepaid products revenue comes primarily from the sale of low margin prepaid cellular and long distance airtime products. Additionally contributing to the decrease was the decline in prepaid card activations, which can be attributed to regulations in the payday loan industry, in which DirectCash has a significant customer, that restrict the number of consecutive loans a customer can be issued. Further contributing to the decline was a regulatory change during the period in the tax rebate business in Ontario, in which DirectCash has a customer. Notwithstanding the decline in activations, gross profit increased in this line of business due to the addition of new banking products and services offered through DirectCash's strategic alliance with DC Bank.The decrease in ATM recurring services revenue during the three months ended December 31, 2011 can be attributed to lower transactions per ATM during the period due to reduced transactions in both Canada and Mexico in line with industry trends. On a year over year basis, revenue in the ATM business has increased by 15%. ATM revenues include the revenue from the sale of ATM machines and parts, processing ATM transactions as well as miscellaneous revenues and interest received.The 5% decrease in debit terminal revenue for the year ended December 31, 2011 is a result of higher per transaction revenues and one time contract fees collected during 2010.There is historic seasonality in processing transaction volumes, with the highest ATM transaction activity in Canada typically occurring in the second and third quarters of the year. The first and fourth quarters are traditionally DirectCash's weakest quarters in terms of processing transactions and gross profitability. In Mexico, seasonality in the ATM business is the opposite of what is seen from DirectCash's Canadian operations. DirectCash has eliminated the impact of seasonal fluctuations in cash flows to shareholders by equalizing monthly cash dividends.Revenue - ProductsProduct revenue includes sales of ATM machines, debit terminals and related parts, as well as prepaid products, consisting of (a) prepaid cash cards (debit and credit) and (b) prepaid telephone cards (both physical ("hard cards") and electronic ("virtual vouchers")).For the three months and year ended December 31, 2011 revenue from product sales decreased by 17% and 7% respectively compared to the prior year period. The decrease is primarily due to a decline in the sale of prepaid cash cards and a decline in the sale of telephone cards offset by an increase in ATM products, as we sell more ATM parts. The decrease in the sale of prepaid cash cards is a result of timing of sales, as customers order intermittently in large quantities to benefit from volume discounts.ATM sales were up due to existing customer purchases of new terminals that meet industry standards.Interest IncomeDuring the year ended December 31, 2011 interest income increased significantly compared to the prior year period primarily as a result of the renegotiation of DirectCash's agreement with its bank in Mexico regarding funds held in relation to cash requirements for Mexican operations.Gross ProfitsOn an aggregate basis, gross profits have increased by 9% for the year ended December 31, 2011, as compared to the prior year period. Gross profit by line of business, which includes both recurring services and products revenue, is as follows:Gross profit by Line of BusinessThree months endedYear endedDecember 31December 31(thousands) 2011201020112010ATM Business$6,320$6,600$28,447$25,497gross profit margin50.0%51.0%54.1%55.5%Prepaid products business6,6696,36326,45824,542gross profit margin48.0%44.4%45.9%42.3%Debit terminal business4514141,6201,670gross profit margin80.7%76.2%78.8%77.5%Total Gross Profit$13,440$13,377$56,525$51,709gross profit margin49.6%48.1%50.3%48.7%Gross profit by typeRecurring services and interest$12,789$13,043$54,068$50,110gross profit margin56.6%58.2%58.3%58.9%Products6513342,4571,599gross profit margin14.5%6.2%12.6%7.6%Total Gross Profit$13,440$13,377$56,525$51,709gross profit margin49.6%48.1%50.3%48.7%Gross Profitability - Recurring ServicesTotal gross profits from recurring services revenue and interest income for the three months and year ended December 31, 2011 decreased by 2% and increased 8% respectively over the prior year.The decrease in gross profit during the three months ended December 31, 2011 is a result of lower transactions per ATM during the period due to reduced transactions in both Canada and Mexico which is consistent with industry trends.The increase in gross profits during the year ended December 31, 2011 for recurring services can be attributed to the following factors:fees associated with bank accounts and related products offered by DirectCash Bank to prepaid customers;higher activity in prepaid credit card transactions, and;the impact of the ATM acquisitions made during 2010 and 2011.On a year over year comparison, gross profit margins were higher during the three months and year ended December 31, 2011.The debit terminal recurring services gross margins declined during the year ended December 31, 2011 as compared to the prior year as a result of one time contract fees collected during 2010.The introduction of bank accounts and associated products, as well as the increase in transaction levels and improved performance from the prepaid credit card product in the prepaid products line of business resulted in the increase in contribution from the recurring services business segment.Gross Profitability - ProductsGross profit from the sale of products for the three months and year ended December 31, 2011 increased by 95% and 54% respectively from 2010 levels. The increase can be explained primarily by higher margin contributions on the sale of prepaid cash cards and ATMs. The sale of ATMs has increased, as existing customers purchase new equipment that meets industry standards.DirectCash has a strategic goal of keeping ATM and debit terminal purchase prices as low as possible for the DirectCash customer in order to maximize the number of machines that can be placed. DirectCash also introduced financing options that enables customers to pay for machines and security upgrades over a period of time. DirectCash believes that this strategy will result in additional long-term revenue generating services contracts.Selling, General & Administrative Expenses ("SG&A")SG&A is made up of personnel and other expenses. For the three months and year ended December 31, 2011 SG&A expenses increased by 14% and 23% respectively from the prior year.The increase is the result of higher salaries and benefits incurred from the addition of employees brought on to assist in DirectCash's growth and implementation of network ATM chip upgrades required to be completed by the end of 2012 and the impact of the full year of expenses related to the Cashline acquisition at the third quarter of 2010, as well as additional fees associated with compliance related to Anti-Money Laundering and to the bank account product offered through DirectCash's strategic alliance with DirectCash Bank. Additionally, DirectCash has incurred increased costs related to acquisition due diligence and investigation that did not materialize within the period, additional professional fees associated with the conversion of the income trust to a dividend paying corporation, CSOX compliance and the reorganization of the business in regard to the acquisition of Mint and Dexit. Increased sales expenses were incurred as DirectCash moves to increase presence in the ATM and prepaid products businesses within northern Canada, which DirectCash believes is a strategic revenue opportunity.As a percentage of gross profits, SG&A was 38% (YTD - 33%) during the three months ended December 31, 2011 compared to 33% (YTD - 29%) for the same period last year.Employee Profit Sharing Plan ("EPSP")Details of the Employee Profit Sharing Plan can be found in the notes to the financial statements.During the year DirectCash established an EPSP under which it receives services from employees as consideration for cash payments paid to the EPSP plan trustee (which in turn are later used by the trustee to purchase shares of DCPayments or to make tax remittances on behalf of the employees). For 2011 and subsequent years, share-based payment plan awards are made pursuant to the EPSP. In 2010 and prior years, DirectCash operated a long-term incentive plan ("LTIP") and share-based payment plan awards were made pursuant to the LTIP plan.Finance CostsFor the year ended December 31, 2011 finance costs increased by 14% over the prior year period. The increase is primarily due to increased ATM vault cash requirements incurred as part of the acquisitions made during 2010 and 2011, as well as additional ATMs deployed.All DirectCash debt is currently on floating interest rates. A one percent change in interest rates would result in an approximate $527 thousand change in finance costs for the year.Net IncomeNet income for the three months and year ended December 31, 2011 increased by 202% and 318% respectively compared to the prior year period.The increase in net income during the quarter ended December 31, 2011 compared to the prior year period is primarily attributable to improved gross profits and the additional effects of the transition to IFRS, including distributions on and the net change in fair value of exchangeable partnership units.The increase in net income during the year ended December 31, 2011 can be attributed to the following factors:improved gross profit margins during the year ended December 31, 2011; $4.2 million and $6.3 million purchase gains on acquisition incurred during the first quarter of 2010 and fourth quarter of 2011 respectively, and; the additional effects of the transition to IFRS, including distributions on and the net change in fair value of exchangeable partnership units that no longer impact earnings as a result of the conversion to a corporation.The disparity between net income and cash dividends is primarily due to amortization of intangible assets related to ATM, debit terminal and prepaid product contracts. Typically, these contracts include automatic renewals for a further 5-7 year period, and a right of first refusal to match a competitor's bona fide offer on renewal unless the customer terminates the contract within a specified time period. Thus, while a contract acquired by DirectCash may have a fixed initial term (which is the time period over which amortization of this intangible asset occurs) DirectCash's experience is that DirectCash is usually able to keep the applicable ATMs attached to the DirectCash network with no or little capital expenditure. Also, any ATM added by organic growth (i.e. through the DirectCash sales force) has a much lower capital cost than ATM locations added through acquisition.EBITDAFor the year ended December 31, 2011, EBITDA increased by 5% over prior year levels, which is lower than the respective 9% increase in gross profits. This reflects the higher gross profit contributions offset in part by the higher SG&A costs, as DirectCash has incurred increased costs related to acquisition due diligence and investigation that did not materialize within the period, and increased sales expenses as DirectCash moves to increase its presence within northern Canada. As a percentage of revenue, EBITDA was 33% during the years ended December 31, 2011 and 2010. For comparative purposes, the $6.3 million and $4.2 million purchase gains were eliminated from DCPayments' EBITDA calculations due to its non-recurring nature. Capital ExpendituresDirectCash incurred the following expenditures of a capital nature: Capital ExpendituresThree months endedYear endedDecember 31December 312011201020112010Per consolidated financial statements:Equipment$466$2,215$4,231$5,429Intangible assets111,6631324,598Acquisitions3,952-3,95216,668$4,429$3,878$8,315$26,695Split between growth and maintenance:Growth capital$4,172$3,460$6,509$24,496Maintenance capital2574181,8062,200$4,429$3,878$8,315$26,695Growth capital expenditures relate to acquisitions and other expenditures that increase DirectCash's productive capacity, while maintenance capital expenditures maintain productive capacity at existing levels.Productive capital maintenance expenditures for the full year are lower as compared to the prior year period due to increased security infrastructure and ATM hardware upgrade expenditures during 2010. Growth capital expenditures can vary widely between reporting periods due to the intermittent nature and varying size of acquisitions. Acquisition Asset Acquisitions The following summarizes the purchase price from acquisitions completed during the years ended December 31, 2011 and 2010 (allocations for 2011 are preliminary and subject to change pending receipt of final information).20112010Assets acquiredIntangible assets$1,696,470$4,556,712Equipment131,000374,458Total consideration$1,827,470$4,931,170Vault cash909,280775,730Total consideration plus vault cash$2,736,750$5,706,9002011On December 1, 2011, DirectCash acquired certain assets of a privately held corporation engaged in ATM services for consideration of $1.8 million plus vault cash, subject to a customary performance holdback and normal course purchase adjustments. The majority of the assets acquired consist of the residual rights in contracts to operate and place ATM machines at certain locations. These contracts are valued based on the remaining term of each agreement and the expected net cash flow from that agreement value is allocated to intangible assets and amortized in accordance with DirectCash Group's policy.2010On January 15, 2010, DirectCash acquired certain assets of a privately held corporation engaged in ATM services for consideration of $1.2 million, subject to a customary performance holdback and normal course purchase adjustments. The total consideration will be paid out over five years given certain minimum performance covenants and conditions are met. The assets acquired consist of the residual rights in contracts to operate and place ATM machines at certain locations as well as contracts not to compete with DirectCash and a profit sharing contract in Mexico. These contracts are valued based on the remaining term of each agreement and the expected net cash flow from that agreement value is allocated to intangible assets and amortized in accordance with DirectCash Group's policy. As part of the consideration, DirectCash also agreed to provide up to 20 ATM machines to be used as incentive to extend existing contract length before transferring them to DirectCash.On June 1, 2010, DirectCash acquired certain assets of a privately held corporation engaged in ATM services for consideration of $1.8 million, subject to a customary performance holdback and normal course purchase adjustments. The majority of the assets acquired consisted of the residual rights in contracts to operate and place ATM machines at certain locations. These contracts were valued based on the remaining term of each agreement and the expected net cash flow from that agreement value was allocated to intangible assets and amortized in accordance with DirectCash Group's policy.On August 24, 2010, DirectCash acquired certain assets of a privately held corporation engaged in the Debit Terminal business for consideration of $262,500, subject to a customary performance holdback and normal course purchase adjustments. The majority of the assets acquired consisted of the residual rights in contracts to operate and place Debit Terminals at certain locations. These contracts were valued based on the remaining term of each agreement and the expected net cash flow from that agreement value was allocated to intangible assets and amortized in accordance with DirectCash Group's policy.On November 1, 2010, DirectCash acquired certain assets of a privately held corporation engaged in the ATM business for consideration of $1.3 million plus vault cash, subject to a customary performance holdback and normal course purchase adjustments. The majority of the assets acquired consisted of the residual rights to contracts to operate and place ATM machines at certain locations. These contracts are valued based on the remaining term of each agreement and the expected net cash flow from that agreement value is allocated to intangible assets and amortized in accordance with DirectCash Group's policy.During the fourth quarter of 2010, DirectCash acquired certain assets of a number of privately held corporations and individuals engaged in the ATM business for consideration of $554 thousand. These acquisitions were subject to customary performance holdback and normal course purchase adjustments. The majority of the assets acquired consisted of the residual rights to contracts to operate and place ATM machines at certain locations. These contracts were valued based on the remaining term of each agreement and the expected net cash flow from that agreement value was allocated to intangible assets and amortized in accordance with DirectCash Group's policy. Business Acquisitions The following summarizes the business acquisitions completed during the years ended December 31, 2011 and 2010 (allocations for 2011 are preliminary and subject to change pending receipt of final information).Identifiable assets acquired and liabilities assumed:20112010Assets acquiredDeferred tax asset$7,002,960$4,692,732Intangible assets1,425,00014,066,417Equipment-2,146,964Working capital31,822(87,122)Total$8,459,782$20,818,991Deferred payment125,000125,000Consideration2,031,82216,455,656Bargain purchase gain$6,302,960$4,238,3352011On October 28, 2011 DirectCash Acquisition Corp. completed an acquisition of 100% of the shares of Dexit Inc. (previously named Posera-HDX Inc.) ("Dexit"). The assets of Dexit included a business of a prepaid product - radio frequency identification device ("RFID") - payment system and RFID transaction processing system.The acquired prepaid business specializes in internet based RFID sales and loading, which is a similar and like business to DirectCash's prepaid cash card business. The assets consist mainly of contracts with various merchants to issue prepaid RFID hardware via the internet and the intellectual property required to operate the business. After determining the fair value of all identifiable assets and liabilities the resulting excess of $6.3 million has been recognized as a bargain purchase gain. The purchase gain mainly resulted from the availability of the tax pools. This acquisition was initially funded from DirectCash's working capital.2010On January 29, 2010, DirectCash acquired certain assets from Mint Technology Inc as well as 100% of the shares in three of its subsidiaries, Mint Inc., Mint Capital and Mint Shared Services for cash consideration of $480 thousand.The acquired prepaid business specializes in internet based prepaid MasterCard sales and loading, which is a similar and like business to DirectCash's prepaid cash card business. The assets consist mainly of contracts with customers to issue custom branded prepaid cards via the internet and the intellectual property required to operate the business.After determining the fair value of all identifiable assets and liabilities the resulting excess of $4.2 million was recognized as a bargain purchase gain. The purchase gain mainly resulted from the availability of the tax pools. This acquisition was initially funded from DirectCash's working capital.On July 31, 2010, DirectCash acquired certain assets from Cashline Inc., a private corporation based in Victoria, British Columbia for cash consideration of $16.1 million. Cashline Inc. operated a portfolio of ATM's in Western Canada. A total of 830 ATM sites and related contracts were acquired.The acquired assets consisted mainly of the residual rights in contracts to operate and place ATM machines at certain locations and software to manage these machines. The assets also included equipment, inventory, accounts receivable and prepaid expenses.Liquidity and Capital ResourcesDirectCash believes that the funds generated from operations will be sufficient to allow DirectCash to meet ongoing requirements for working capital, maintenance capital expenditures including investments in technology capital, interest expense, and cash dividends to shareholders.DirectCash's actual cash generated from operations will be dependent upon future financial performance, which in turn will be subject to financial, tax, business and other factors.As of December 31, 2011, DirectCash utilized approximately $52 million of total available credit facilities of $100 million. A summary of DirectCash's available credit at December 31, 2011 is as follows:Credit facilities(thousands)UtilizedLimitAvailableRevolving credit facility$20,678$60,000$39,322Acquisition credit facility31,37340,0008,627$52,051$100,000$47,949The revolving credit facility is used for ATM cash loading, working capital requirements and commercial letters of credit. In addition, DirectCash has an outstanding letter of credit in favour of MasterCard International of US$ 2.5 million (CDN$ 2.54 million) relating to DCPayments' prepaid MasterCard program. This credit facility is demand in nature and since October 2011 bears interest at the Bank's prime lending rate plus 0.25%. The rate was reduced from prime plus 0.375%.The acquisition credit facility is demand in nature and is utilized for the acquisition of additional ATM and Debit Terminal network and Prepaid Product assets, and general corporate acquisitions in complimentary business lines. The facility bears interest at the Bank's prime lending rate plus 0.25% or at banker's acceptance rates plus 1.75% per annum. The rate was reduced from prime plus 0.375% in October 2011.Notwithstanding the demand nature of the facilities, there are no scheduled principal repayments.DirectCash is subject to the following primary lending covenants:Lending covenantsDecember 31Covenant LimitFunded Debt to Recurring Quarterly Revenue2.1:1< 10:1Fixed Charge Cover Ratio20.8:1> 4:1Senior Debt to EBITDA1.4:1< 2:1DirectCash operated well within its loan covenant limits and anticipates continuing to do so in the future. Breach of DirectCash's bank loan covenants could result in the triggering of remedies by DirectCash's lenders, which could negatively impact distribution payments.Additional InformationAdditional information about DirectCash, including DirectCash's Annual Information Form and other public filings is available on SEDAR (www.sedar.com) and on DirectCash's website (www.directcash.net).Non-IFRS MeasuresThere are a number of financial calculations that are not defined performance measurements under IFRS but which DCPayments believes are useful and accepted performance measurements utilized by the investing public in assessing the overall financial performance of corporations.Earnings before interest, taxes, depreciation and amortization ("EBITDA")EBITDA represents gross profits less selling, general and administrative expenses ("SG&A") and long-term incentive plan expenses, and is not a defined performancemeasure under IFRS. DCPayments believes that EBITDA is a useful supplementary disclosure commonly used by the investing community to assess and compare cash flows between entities. EBITDA specifically excludes depreciation, amortization, income taxes, purchase gain on acquisition, finance expense and IFRS changes related to exchangeable partnership units. DCPayments EBITDA may differ from similar computations as reported by other issuers and, accordingly, may not be comparable to EBITDA as reported by such issuers. The most directly comparable IFRS measure is Net Income. A reconciliation between EBITDA and Net Income is disclosed in the "Financial Highlights" schedule.Funds from operations and funds from operations per shareFunds from operations and funds from operations per unit are non-IFRS measures used by DCPayments as an indicator of financial performance. Readers are cautioned that funds from operations is not a defined performance measure under IFRS and that funds from operations cannot be assured to continue at equivalent levels in the future. DCPayments calculates funds from operations as equal to the net cash from operating activities before changes in non-cash working capital, after provision for productive capital maintenance capital expenditures (see discussion below). DCPayments' funds from operations and funds from operations per share may differ from similar computations as reported by other issuers and, accordingly, may not be comparable to funds from operations and funds from operations per common share as reported by such issuers.Up until January 1, 2011, Unitholders of the Fund received cash distributions sourced from distributions made by DirectCash LP indirectly to the Fund. The Fund's policy was to distribute, to the maximum extent possible, the cash earned from operations to Fund Unitholders, less amounts estimated to be required for expenses, productive capital maintenance, cash redemptions or repurchases of Units, any current tax liability, or other obligations, debt repayments and any reasonable reserves established. The Fund made 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.From August 2006 to January 1, 2011, monthly distributions were paid at $0.115 per Unit per month ($1.38 per Unit annualized) and special distributions of $0.120 per Unit, $0.100 per Unit and $0.250 per Unit were paid December 31, 2009, June 30, 2010 and February 28, 2011 respectively.Beginning January 1, 2011 (starting with the January 31, 2011 record date), Shareholders of DCPayments have received monthly payments in the form of dividends, with the initial monthly dividend set at $0.115 per Common Share. All dividends are eligible dividends for the purpose of the Income Tax Act (Canada) unless indicated otherwise. Dividends are funded from cash flows generated by the operation of the business. As of January 1, 2011, all of the income generated at the level of the various subsidiaries within the DirectCash Group income is taxable by applicable government authorities with the remaining after-tax funds either being retained by the subsidiary or distributed/dividended up to DCPayments (where it can be made available for payment of dividends by DCPayments). Continued future distribution of dividends (and the amount of any dividends) is subject to DCPayments' Board of Directors approval. DCPayments' Board of Directors is not obligated to distribute all net available cash as dividends to shareholders.Productive capital maintenance expendituresDCPayments differentiates capital expenditures between growth and productive capital maintenance ("Maintenance Capital"). There is no such distinction under IFRS. However, DCPayments 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 DirectCash's existing productive capacity, while growth capital is expended to increase DirectCash's productive capacity by adding additional sources of revenue not currently in existence. Current measures of productive capacity that DCPayments 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 IFRS. DCPayments 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.Non-cash working capitalNon-cash working capital is not a defined IFRS measure. DCPayments calculates non- cash working capital as current assets less current liabilities, but excluding cash and credit facilities. A summary of this calculation is provided in the MD&A.Forward-looking StatementsThis Press Release contains certain forward-looking statements relating to future events. Forward-looking statements are subject to numerous risks and uncertainties, certain of which are beyond DirectCash Group's ability to control, including the impact to DirectCash Group's business, general economic conditions, consumer spending, borrowing trends and regulatory changes to name a few. Certain statements that contain words such as "could", "believe", "expects", "expected", "will", "intends", "projects", "anticipates", "estimates", "continues" or similar words relating to matters that are not historical facts constitute "forward-looking information" within the meaning of applicable Canadian securities legislation. In particular, forward-looking information and statements contained in this Press Release include statements related to DirectCash's projected growth in Canada and Mexico in the ATM business, projected growth in the prepaid and debit terminal business, accretive acquisitions on a go forward basis, expansion of DirectCash's merchant base through new and innovative products, entry into new geographic markets, ability to continue to acquire long-term recurring services contracts and expected increase in capital expenditures due to regulatory mandated security upgrade changes are all statements that have been stated or referred to throughout this Press Release. Readers are cautioned that actual results may vary from the forward-looking information provided.Additional information about DCPayments is available on SEDAR (www.sedar.com) or DCPayments website at www.directcash.net.FOR FURTHER INFORMATION PLEASE CONTACT: Brian B. KatholDirectCash Payments Inc.Chief Financial Officer(403) 387-2103(403) 451-3003 (FAX)bkathol@directcash.netORAmanda J. GallacherDirectCash Payments Inc.Investor Relations(403) 387-2158(403) 451-3058 (FAX)investorrelations@directcash.netwww.directcash.net