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Cash Store Financial releases first quarter financial results

EDMONTON, Feb. 3, 2014 /PRNewswire/ - The Cash Store Financial Services Inc. ("Cash Store Financial" or "the Company") (TSX: CSF; NYSE: CSFS) today released financial results for the three months ended December 31, 2013.  Summary financial tables are included with this release.

Results conference call and webcast details

Tuesday, February 4, 2014 at 9:00 a.m. EST (7:00 a.m. MST).
1-888-231-8191 ID #38529606.

A replay of the conference call will be available until February 11, 2014, by dialing toll-free 1-855-859-2056 and providing the conference ID #38529606.

Selected financial information for the three months ended December 31, 2013:

  • Loan fees were $36.9 million compared to $39.5 million in the fourth quarter and $38.0 million in the same quarter last year.

  • Loan volume was $196.8 million compared to $199.8 million in the fourth quarter and $203.5 million in the same quarter last year.

  • Total revenue was $45.2 million compared to $48.3 million in the fourth quarter and $49.5 million in the same quarter last year.

  • Same branch revenue was $83,000 compared to $105,000 in the fourth quarter and $91,000 in the same quarter last year.

  • Sales expenses were $27.6 million compared to $28.1 million in the fourth quarter and $26.8 million in the same quarter last year.

  • Adjusted EBITDA was $4.2 million, up from $2.5 million in the fourth quarter and down from $9.2 million in the same quarter last year.

  • Diluted loss per share of $0.43 compared to a loss of $1.29 in the fourth quarter and as loss of $0.10 in the same quarter last year.

"The first quarter marked the kick off of our strategic and tactical plan," said Gordon Reykdal, CEO. "For the remainder of the fiscal year we remain focused on improving our overall financial results through revenue growth and corporate expense reductions. The success of these initiatives, combined with our recent improvements in branch operating margins, will be instrumental in the Company's return to profitable growth."

"We are also focused on ensuring the Company's compliance with new regulatory requirements in Ontario which, effective February 15, 2014, will require that the Company have licenses pursuant to the Payday Loans Act. These licenses will again enable the Company to offer payday loans in Ontario."

On December 12, 2013, the Company filed its annual report for the year ended September 30, 2013 on Form 20-F with the SEC. The Form 20-F, including the audited financial statements included therein, is available at Hard copies of the audited financial statements are available free of charge on request by calling (780) 408-5110 or writing to:

Attn: Investor Inquiries
The Cash Store Financial Services Inc.
15511-123 Avenue
Edmonton, Alberta, Canada, T5V 0C3

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 509 branches across Canada under the banners "Cash Store Financial", "Instaloans" and "The Title Store". Cash Store Financial also operates 26 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 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 First Quarter Information

    Three Months Ended
($000s, except for per share amounts,
number of loans and branch count)
  Dec 31, 2012     Dec 31, 2013       %
Consolidated Results                  
No. of branches   Canada   511     510       %
    United Kingdom   25     27       8 %
      536     537       0 %
Loan volume   Direct   $ 180,599     $ 113,363       (37) %
    Brokered   22,864     83,413       265 %
      203,463     196,776       (3) %
Loan fees       $ 38,018     $ 36,861       (3) %
Other income       11,485     8,385       (27) %
      49,503     45,246       (9) %
Sales expenses                  
Salaries and benefits       14,462     15,167       5 %
Rent       4,434     4,473       1 %
Selling, general and administrative       4,969     4,879       (2) %
Advertising and promotion       1,369     1,537       12 %
Depreciation of property and equipment   1,560     1,583       1 %
      26,794     27,639       3 %
Provision for credit losses       9,254     5,499       (41) %
Retention payments       1,769     4,365       147 %
Corporate expenses       6,745     8,375       24 %
Interest expense       4,603     4,787       4 %
Other depreciation and amortization     2,172     2,126       (2) %
Income before income taxes     $ (1,834)     $ (7,545)       311 %
Net income (loss) and comprehensive income (loss)       (1,702)     (7,470)       339 %
EBITDA       6,501     951       (85) %
Adjusted EBITDA       9,152     4,165       (54) %
Weighted average number of shares outstanding   - basic   17,542     17,572       1 %
    - diluted   17,542     17,572       1 %
Basic earnings (loss) per share       $ (0.10)     (0.43)       330 %
Diluted earnings (loss) per share       (0.10)     (0.43)       330 %
Consolidated Balance Sheet Information                
Working capital     59,886     42,385       (29) %
Total assets     203,390     176,255       (13) %
Total long-term financial liabilities     129,754     142,882       10 %
Total long-term liabilities     137,233     149,005       9 %

Summary of Quarterly Results

    2012     2013     2014
($000's, except for per share amounts
and branch figures)
  Q2     Q3     Q4     Q1     Q2     Q3     Q4     Q1
Consolidated Results                                
No. of branches   Canada   569     529     511     511     513     510     510     510
    United Kingdom   25     25     25     25     25     27     27     27
        594     554     536     536     538     537     537     537
Loan volume   Direct   $ 120,487     $ 188,485     $ 195,027     $ 180,599     $ 127,050     $ 113,244     $ 119,534     $ 113,363
    Brokered   70,543     11,376     12,183     22,864     59,272     78,958     80,277     83,413
        191,030     199,861     207,210     203,463     186,322     192,202     199,811     196,776
   Loan fees       $ 30,545     $ 36,204     $ 38,353     $ 38,018     $ 37,268     $ 37,657     $ 39,487     $ 36,861
   Other income       11,544     12,454     12,464     11,485     9,389     8,671     8,790     8,385
        42,089     48,658     50,817     49,503     46,657     46,328     48,277     45,246
Sales expenses                                    
   Salaries and benefits   17,672     16,493     14,921     14,462     14,325     14,902     14,964     15,167
   Rent       4,911     4,719     4,548     4,434     4,457     4,343     4,998     4,473
   Selling, general and administrative   6,406     5,725     4,971     4,969     5,076     5,733     4,671     4,879
   Advertising and promotion   1,063     1,212     1,215     1,369     1,437     1,693     1,808     1,537
   Depreciation of property and equipment   1,785     1,675     1,607     1,560     1,568     1,589     1,649     1,583
        31,837     29,824     27,262     26,794     26,863     28,260     28,090     27,639
        10,252     18,834     23,555     22,709     19,794     18,068     20,187     17,607
Provision for credit losses   10,798     10,104     9,434     9,254     7,289     7,587     12,477     5,499
Retention payments   2,271     554     586     1,769     1,665     2,444     5,781     4,365
Corporate expenses   6,626     5,394     5,706     6,745     9,247     8,602     13,548     8,375
Interest expense   3,068     4,536     4,566     4,603     4,644     4,660     4,676     4,787
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
Other depreciation and amortization   1,503     1,770     2,117     2,172     1,994     2,796     2,349     2,126
Net income (loss) before income taxes   (53,851)     (4,432)     72     (1,834)     (5,045)     (8,567)     (19,457)     (7,545)
Taxes   (12,691)     (861)     (177)     (132)     (765)     (1,673)     2,850     (75)
Net income (loss) and comprehensive
income (loss)
  $ (41,160)     $ (3,571)     $ 249     $ (1,702)     $ (4,280)     $ (6,894)     $ (22,307)     $ (7,470)
EBITDA       (47,495)     3,549     8,362     6,501     3,161     478     (10,783)     951
Adjusted EBITDA       721     5,516     10,066     9,152     6,681     4,673     2,494     4,165
Basic earnings (loss) per share   $ (2.36)     $ (0.20)     $ 0.01     $ (0.10)     $ (0.24)     $ (0.39)     $ (1.29)     $ (0.43)
Diluted earnings (loss) per share   $ (2.36)     $ (0.20)     $ 0.01     $ (0.10)     $ (0.24)     $ (0.39)     $ (1.29)     $ (0.43)

EBITDA and Adjusted EBITDA Reconciliation

      Q2     Q3     Q4     Q1     Q2     Q3     Q4     Q1
Consolidated Results                                  
  Net income (loss) and comprehensive
income (loss)
    (41,160)     (3,571)
    249     (1,702)     (4,280)     (6,894)     (22,307)     (7,470)
  Interest expense and other interest     3,068     4,536     4,566     4,603     4,644     4,660     4,676     4,787
  Income tax     (12,691)     (861)     (177)     (132)     (765)     (1,673)     2,850     (75)
  Depreciation of property and equipment
and amortization of intangible assets
    3,288     3,445     3,724     3,732     3,562     4,385     3,998     3,709
  EBITDA     (47,495)     3,549     8,362     6,501     3,161     478     (10,783)     951
  Stock-based compensation     193     189     158     145     119     99     76     423
  Expense to settle pre-existing relationships
with third-party lenders
  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 issued financial statements
                904     125     589        
  Expenses related to the special investigation                     1,666     326        
  Impairment of January 31, 2012 acquired
loan portfolio
  Provision on aged receivables from a vendor                             4,807    
  Employee Severance Costs                             466     75
  Regulatory penalties and compliance orders                                 873
  Effective interest component of retention
    1,885     554     472.316     1,602     1,610     1,625     1,897     1,843
  Adjusted EBITDA     721     5,516     10,066     9,152     6,681     4,673     2,494     4,165


SOURCE The Cash Store Financial Services Inc.

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