News Article

Cash Store Financial releases Third Quarter results; declares dividend on continued positive performance

5/7/2008 12:00:00 AM

EDMONTON, May 7 /CNW/ - The Cash Store Financial Services Inc. ("Cash Store Financial" or the "Company") (TSX:CSF) today announced its results fo rthe three and nine month periods ended March 31, 2008.

Third Quarter Highlights from Continuing Operations (table of results at end of release)

•  Income from continuing operations increased 93% to $2.7 million from $1.4 million for the same quarter last year.
• Diluted earnings per share from continuing operations increased to $0.13 compared to $0.06 for the same quarter last year.
• Branch operating income was $8.8 million, compared to $7.6 million for the same quarter last year.
• Same branch sales were $86,700 compared to $84,600 for the same quarter last year.
• Revenue increased 5% to $31.3 million from $29.9 million for the same quarter last year.
• Retention payments decreased to $4.8 million (3.9% of loans brokered), from $5.7 million (4.7% of loans brokered) for the same quarter last year.
• Dividend declared for the quarter of 2.5 cents per common share.
• The Company completed the spin-off of its rental operations.

Year-To-Date Highlights (9 months)

• Income from continuing operations increased 39% to $9.3 million, compared to $6.7 million for the same period last year.
• Diluted earnings per share from continuing operations increased to $0.46 compared to $0.32 for the same period last year.
• Branch operating income was $28.2 million compared to $25.9 million for the same period last year.
• Revenue increased 4% to $96.3 million, compared to $92.1 million for the same period last year.
• Retention payments decreased to $15.9 million (4.1% of loans brokered), compared to $17.9 million (4.8% of loans brokered) for the same period last year.
• The Company's cash increased to $16.1 million, compared to $12.3 million as at December 31, 2007, and $18.2 million as at June 30, 2007.

Mr. Gordon Reykdal, Chairman and CEO commented, "I'm pleased to report continued strong performance in the third quarter of fiscal 2008. Revenues continue to increase relative to the previous year, retention payments are down as a percentage of loans brokered, and net income is up markedly from theprevious year. Subsequent to a year-long corporate-wide restructuring program,this quarter marks the fourth consecutive period of positive trending year-over-year and improvements to the same branch sales."

He added, "Management has, in recent periods, concentrated on the continuous training and development of branch associates, with positive overall results. We continue to take a hands-on approach to management of our operations and, along with our Chief Operating Officer, closed the third quarter by beginning a country-wide tour to meet personally with all branch managers to discuss strategic priorities and revenue goals. On this basis, we are confident that such an approach will improve our branch operations."

Mr. Reykdal further added, "The Company maintains strong cash and working capital positions and is fully able to initiate expansion initiatives as market conditions and opportunities arise, inclusive of dividends paid. The Company's cash holdings are fully liquid, held in current accounts with major Canadian banks. We are pleased to declare a third consecutive dividend of 2.5 cents per share for the third quarter of 2008." The cash dividend of $0.025 per common share will be payable on June 4,2008 to shareholders of record on May 20, 2008.

Rental Division Spin-off

On November 28, 2007, the Company's shareholders approved a plan to spin-off the Company's rental operations and certain of its assets and liabilities to Insta-Rent Inc., whose common shares were, upon the completion of this transaction, owned by the shareholders of the Company.

Insta-Rent Inc.is publicly traded on the TSX Venture Stock Exchange under the symbol "IRR". This spin-off transaction was completed on March 31, 2008 and,accordingly the Company ceased to consolidate those assets and liabilities ofthe rental division transferred to Insta-Rent Inc. and have presented the results of its operations and its cash flows for the three and nine months ended March 31, 2008 and 2007 as discontinued operations.

Class Action Lawsuit

 On April 21, 2008, the Company reached a conditional settlement in respect of a class action law suit initiated in the province of Ontario. The settlement is conditional upon the lawsuit being certified by the Court as a class proceeding under the Class Proceedings Act and as part of that process, the terms of settlement being approved by the court. The settlement does not constitute any admission of liability by the Company.

As at March 31, 2008 the settlement had not been approved by the court. A decision is expected to be received before the end of the Company's fourth quarter. Under the terms of the conditional settlement in principle, the Companyis to pay to the Class an aggregate of $1.5 million in cash and $1.5 millionin credit vouchers to those customers of The Cash Store and Instaloans,outside of Alberta and British Columbia, who were advanced funds under a loan agreement and who repaid the payday loan plus the brokerage fees and interest in full ("the Class").

The credit vouchers may be used to pay existing outstanding brokerage fees and interest or to pay brokerage fees and interest which may arise in the future through new loans advanced to the customer. The credit vouchers are fully transferable and have no expiry date. In addition, the Company is to pay the legal fees and costs of the Class, in an amount to be approved by the court. The Company believes a settlement at this time is prudent and will lead to reduced legal costs and expenditures of management resources.

Due to the uncertainty surrounding the court process the Company is notable, at this time, to determine the likelihood of the settlement and therefore has not accrued any amounts.

Summary Financial Information 

 This press release should be read in conjunction with the unauditedinterim consolidated financial statements of The Cash Store for the three andnine month period ended March 31, 2008.

About The Cash Store Financial Services Inc. (formerly Rentcash Inc.)

Cash Store Financial is the only payday advance broker in Canada publiclytraded on the Toronto Stock Exchange (TSX:CSF). Cash Store Financial operatesmore than 370 branches across Canada under two banners: The Cash Store and Instaloans.

 The Cash Store and Instaloans act as brokers to facilitate payday advanceservices to income-earning consumers who may not be able to obtain them fromtraditional banks. Cash Store Financial also provides a private-label debitcard, The Freedom Card, and other ancillary products.

Cash Store Financial employs more than 1,500 associates and isheadquartered in Edmonton, Alberta.

This press release contains forward-looking statements within the meaningof the United States Private Securities Litigation Reform Act of 1995 andapplicable Canadian securities legislation. Generally, these forward-lookingstatements can be identified by the use of forward-looking terminology such asplans, anticipated, 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 certainactions, events or results may, could, would, might or will be taken, occur orbe achieved. The Cash Store Financial Services Inc. (formerly Rentcash Inc.)is subject to significant risks and uncertainties which may cause the actualresults, performance or achievements to be materially different from anyfuture results, performance or achievements expressed or implied by theforward-looking statements contained in this release. A description of theserisk factors can be found in the Management Information Circular of RentcashInc. dated October 30, 2007 and filed on SEDAR (www.sedar.com) under The CashStore Financial Services Inc.'s profile. The Cash Store Financial ServicesInc. cannot assure investors that actual results will be consistent with theseforward-looking statements and The Cash Store Financial Services Inc. assumesno obligation to update or revise the forward-looking statements contained inthis release to reflect actual events or new circumstances except as requiredby applicable securities laws. "EBITA" is earnings before interest, income taxes, stock-basedcompensation, amortization of capital and intangible assets. EBITA is not arecognized measure under Canadian generally accepted accounting principles("GAAP"). The Company believes that EBITA is a useful supplemental measure toincome (loss), as it provides investors with an indication of cash earningsprior to debt service, capital expenditures, income taxes and certain non-cashitems. Investors should be cautioned, however, that EBITA should not beconstrued as an alternative to net income (loss) determined in accordance withGAAP as an indicator of the Company's performance or to cash flows fromoperating, investing and financing activities as a measure of liquidity andcash flows. The Company's method of calculating EBITA may differ from themethods by which other companies calculate EBITA and, accordingly, the EBITAused herein may not be comparable to measures used by other companies. EBITAcan be reconciled to the sum of income before income taxes and interest,stock-based compensation, amortization of capital assets and intangibleassets.

For further information: Gordon J. Reykdal, Chairman and Chief ExecutiveOfficer, Cash Store Financial, (780) 408-5118; or Michael J.L. Thompson,Senior Vice President and Corporate Secretary, Cash Store Financial, (780)408-5595