Westar Financial Scores Improved Results in Fiscal 1999
Accelerating Volumes and Margins Produce $8.9 Million in Positive Cash Flow
June 21, 1999 04:00 PM
OLYMPIA, Wash., June 21 /PRNewswire/ -- Westar Financial Services Incorporated WEST , a prime-credit auto lessor, today reported improving results for fiscal 1999 with accelerating lease volumes, gross margins and cash flow as well as lower net losses for the year ended March 31, 1999.
Substantially increased volumes contributed to strong positive operating cash flow and positive gross margins in fiscal 1999. Westar generated $8.9 million in operating cash flow for the year compared to negative operating cash flow of $12 million in fiscal 1998. The company posted a $2.0 million gross profit, or 3% of total revenues in fiscal 1999 compared to a negative gross profit of $55,000 in fiscal 1998. Net losses in fiscal 1999 narrowed to $1.7 million from $5.1 million in fiscal 1998. Net losses applicable to basic common shares after payment of preferred dividends were $1.9 million or $.85 per share compared to $5.5 million or $2.99 per share.
In fiscal 1999, Westar generated revenues of $67 million compared to $2 million in total revenues in fiscal 1998. Westar recognizes the majority of its revenues and profits when leases are sold in cash-flow positive Security-Based Assets Sales (SBAS). In fiscal 1999, $64 million in revenues were generated from sales and securitizations of leases compared to $804,000 in the prior year. Recently, the company completed its tenth transaction using its proprietary, reusable Carlson Trust, which provides significant cost savings.
"Lease volumes grew at a monthly rate of 15% and are now annualizing at well over $100 million per year," said Robert E. Kanatzar, Senior Vice President, Risk Management. "Lease volumes rapidly accelerated this year due to increasing demand from our established dealer network and strong growth in new dealer relationships. Our new Phoenix-based Southwestern Region is exceeding early forecasts and was among Arizona's top 10 auto lessors after only 100 days of operations." Fourth quarter originations totaled $20 million, a seven-fold increase from the fourth quarter a year ago. In fiscal 1999, lease volumes totaled $56 million a 431% increase compared to a year ago.
Direct costs increased during fiscal 1999 to $65 million, primarily due to costs related to SBAS transactions compared to $2 million in direct costs a year ago. General and administrative expenses increased 32% to $3 million in fiscal 1999 compared to $2 million in fiscal 1998. "While our information technology and infrastructure has tremendous capacity, we are continuing to build our management team and operations staff to continue to stay ahead of our very steep growth curve. As a result, we have doubled our staff levels to 39 employees today from 19 employees a year ago," stated R.W. Christensen, Jr., Chairman and CEO. "We recently recruited Scott Cavanaugh, a very experienced credit manager, to serve as Vice President of Collections.
"The investments we've made over the past several years have built a highly scalable operating platform, and our automotive lease program is positioned to become a highly profitable industry model in the coming decade," stated Christensen. "We believe we now have achieved the critical mass in terms of our dealer network and lease originations to expand gross margins and achieve sustained profitability in our core business in the coming fiscal year, even while continuing to invest in regional expansion and in new business opportunities like DriveOff.com. Our alliance to launch DriveOff.com with Navidec, supported by a $1 billion annual funding source from First Union is one example of the strengths of our business model." This new e-commerce model for Internet automotive transactions allows consumers to complete an automotive transaction and financing on-line.
The face value of leases Westar services, a reliable measure of the company's growth, more than doubled to $95 million at March 31, 1999 from $40 million one year ago. Credit performance remains excellent.
Westar Financial Services Incorporated is a fast-growing, Washington-based automobile finance company which has focused solely on the prime-credit segment of the $110-billion auto-lease finance market. Westar has announced its entry into automotive e-commerce through a $1 billion funding commitment to DriveOff.com, a 3rd generation e-commerce business model allowing consumers to buy and finance new automobiles in a single electronic transaction. Westar's shares are traded over-the-counter by Hill Thompson, Jersey City; Sharp Capital, New York, NY; and Monroe Securities, Rochester, NY.
Financial Highlights
(Unaudited) March 31, March 31,
ASSETS 1999 1998
Cash and cash equivalents $925,204 $475,275
Accounts and other receivables, net of
allowance for credit losses of
$21,000 for both years 253,697 147,092
Credit enhancement receivable, net of
allowance for credit losses of
$90,894 for both years 886,486 855,848
Net investment in direct financing leases 102,539 18,533,096
Operating leases held for sale 9,640,013 --
Deferred tax asset 3,309,377 2,936,206
Less: valuation allowance (3,309,377) (2,936,206)
Other 640,749 484,066
Total Assets $ 12,448,688 $ 20,495,377
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $1,644,476 $692,126
Notes payable to banks 9,942,939 19,057,701
Notes payable to affiliates and
subordinated debt 6,438,359 2,756,635
Other liabilities 1,533,803 722,401
19,559,577 23,228,863
Redeemable preferred stock 1,548,000 4,073,000
Shareholders' Equity (Deficiency):
Common stock, no par value;
35,000,000 shares authorized;
2,187,300 and 1,712,300 shares issued
and outstanding 3,239,795 3,239,795
Paid in capital - stock warrants 371,495 371,495
Accumulated deficit (12,270,179) (10,417,776)
(8,658,889) ( 6,806,486)
Total Liabilities and Shareholders' Equity $ 12,448,688 $ 20,495,377
Consolidated Statements of Operations
Fourth Quarter Ended Fiscal Year Ended
March 31, March 31,
1999 1998 1999 1998
Revenues:
Revenues from sales
and securitizations $10,490,457 $346,146 $64,210,552 $804,160
Earned income
on direct
financing leases 1,593 330,964 631,102 1,114,050
Revenues from
operating leases 478,894 -- 1,112,845 --
Administrative fee
income 372,728 41,561 927,364 151,353
Service fee income 42,565 24,293 132,888 100,114
Other 22,138 60,899 88,746 75,912
Total Revenues 11,408,375 803,863 67,103,497 2,245,589
Direct costs:
Costs related to
securitizations
and sales 10,340,560 320,307 62,772,336 766,589
Interest 139,361 397,739 1,086,983 1,296,261
Depreciation on
operating leases 321,220 -- 737,436 --
Provision for credit
losses 5,989 18,795 62,289 65,000
Other 135,783 70,537 439,922 173,009
Total Direct Costs 10,942,913 807,378 65,098,966 2,300,859
Gross margin 465,462 (3,515) 2,004,531 (55,270)
General and
administrative
expenses 1,027,064 685,959 3,124,074 2,233,612
Loss before sub. debt
& non-cash
interest expense (561,602) (689,474) (1,119,543) (2,288,882)
Non-cash interest expense -- -- -- 371,496
Subordinated debt
interest expense 143,619 43,235 571,586 138,674
Loss before federal
income tax benefit (705,221) (732,709) (1,691,129) (2,799,052)
Income tax benefit
(expense) 239,776 (2,965,629) 574,984 (2,263,073)
Valuation allowance (239,776) - (574,984) -
Net loss (705,221) (3,698,338) (1,691,129) (5,062,125)
Dividends on redeemable
preferred stock (44,561) (96,339) (161,274) (390,673)
Net loss applicable to
common stock $(749,782) $(3,794,677)$(1,852,403) $(5,452,798)
Net loss per basic
and diluted common
share before
extraordinary item $ (0.35) $ (2.06) $ (0.85) $ (2.99)
Net loss per basic and
diluted common share $ (0.35) $ (2.06) $ (0.85) $ (2.99)
Weighted average number
of basic and diluted
shares outstanding 2,187,300 1,825,400 2,187,300 1,825,400
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