Westar Financial Earns Record Profit as Revenues Quadruple in 3Q01
TUMWATER, Wash.--Feb. 16, 2001--Westar Financial Services Incorporated (OTC:WEST), the leading automobile e-finance portal, today reported that rapidly accelerating revenues contributed to record profits during its third fiscal quarter, ended December 31, 2000. Revenues were $110 million, an increase of 327% during the year and 85% over the immediately prior quarter. Revenue growth, coupled with widening margins, generated record operating profit of $726,000, or $.31 per share and net income of $420,000, or $.18 per share for the quarter.Revenues continued to accelerate substantially faster than growth in overhead. Gross margins widened appreciably during the quarter to 2.4% as the firm benefited from a series of price increases announced during the second quarter. Net margins were a positive 0.38% compared to a negative 2.2% in the year ago period. "We are delighted to report our first quarter of profitability for both operating and net income just five quarters after we initiated our innovative and unique e-commerce business model," said Cindy Kay, Vice President and Controller.
"Westar's proprietary technology for automating the origination, decisioning, commitment, fulfillment and servicing of consumer finance transactions is one of the most scalable operations in the financial services industry. In addition, our unique reusable securitization capabilities allow us direct and immediate access to the capital markets. The combination of these two innovations is the core of our financial portal, which we define as a conduit through which a physical transaction is nearly instantaneously transformed into a financial instrument. Westar's emergence into profitability proves the elegance of the design of the business model, the effectiveness of Team Westar's execution of it, and firmly establishes our financial portal as a leader in electronic enterprise," stated R.W. Christensen, Jr. President and CEO.
The company continued to expand financial portal activity during the quarter. Westar's newest and fastest growing channel is its Private Label operations, which can provide full-service portal capabilities to banks, thrifts and other financial services firms. "Volumes from our first Private Label clients are exceeding all expectations and continue to point to a $1 billion annual production potential," Christensen noted. "The ease of establishing our services within large institutions, the high levels of productivity achieved, and the efficiencies of the operation add up to a solid success and demonstrate some of the capabilities of our unique business model. We are negotiating with several other financial institutions which have shown strong interest in our Private Label offerings and we are excited about further selectively expanding our alliances in the banking industry."
The face value of the accounts serviced by the company was $371 million at December 31, 2000, with delinquencies of 1.60% and annualized credit losses of .57%. Credit quality continued to improve, with average FICO scores of 740 on contracts produced during the quarter compared to 709 in the third quarter a year ago.
As planned, overhead costs increased during the third quarter, but at a much slower rate than revenues or gross margins. General and administrative expenses, at $1.9 million, were up 66% from the like period a year ago and 15% from the prior quarter. "With our move to larger offices completed and new capacity in place, overhead growth has begun to slow appreciably. We are beginning to reap the benefits of Westar's investment in its strong operating leverage. We expect that Westar's operating efficiencies will become more apparent with each further increase in volume," said Kay.
For the first nine months of fiscal 2001, revenues more than doubled to $207 million and net losses were $3.3 million, or $1.43 per share compared to revenues of $84 million in the first nine months of fiscal 2000 and net losses of $2.1 million, or $.98 per share.
WEST is the leading publicly traded automobile-oriented financial portal. Westar originates, decisions, commits to and fulfills consumer financings for itself or others, using sophisticated decision tools and high-speed communications to assure transparency to all parties to the transaction.
FINANCIAL HIGHLIGHTS
--------------------
(unaudited) ($ in Three Months Ended Nine Months Ended
thousands, except
per share) December 31, December 31,
2000 1999 2000 1999
Revenues: --------------------- ---------------------
Revenues from
originations, sales
and securitizations $ 108,098 $ 25,285 $ 202,545 $ 82,361
Revenues from
operating leases 1,830 423 3,775 1,247
Earned interest on
direct financing assets 48 - 71 1
Service fee income 187 99 518 242
Other income 14 11 113 145
--------- --------- --------- ---------
TOTAL REVENUES 110,177 25,818 207,022 83,996
Direct Costs:
Cost related to sales
and securitizations 104,776 24,507 198,622 80,467
Interest 353 83 1,036 288
Depreciation expense
on operating leases 1,087 278 2,375 866
Origination fees 655 1,152 -
Provision for (recovery of)
credit losses 8 8 22 58
Other 636 134 1,143 464
--------- --------- --------- ---------
TOTAL DIRECT COSTS 107,515 25,010 204,350 82,143
GROSS MARGIN 2,662 808 2,672 1,853
General and
administrative
expenses 1,936 1,163 5,174 3,417
--------- --------- --------- ---------
OPERATING INCOME (LOSS) 726 (355) (2,502) (1,564)
Subordinated debt
interest expense (277) (191) (764) (553)
--------- --------- --------- ---------
NET INCOME (LOSS) 449 (546) (3,266) (2,117)
Dividends on redeemable
preferred stock (29) (29) (86) (97)
--------- --------- --------- ---------
NET INCOME (LOSS)
applicable to common
shares $ 420 $ (575) $ (3,352) $ (2,214)
========== ========== ========== =========
NET INCOME (LOSS) PER
SHARE $ 0.18 $ (0.26) $ (1.43) $ (0.98)
========== ========== ========== =========
Weighted average
number of shares 2,348 2,253 2,348 2,253
Consolidated Balance Sheet
($ in thousands)
(Unaudited, except
3/31/00) 31-Dec 31-Mar 31-Dec
2000 2000 1999
---------- ---------- ----------
Assets
Cash $ 4,089 $ 1,401 $ 801
Accounts receivable, net 1,547 386 375
Credit enhancement
receivable, net 2,613 2,219 2,237
Operating leases held
for sale, net 1,945 2,828 686
Direct finance leases
receivable, net 2,265 - -
Fixed or other assets 2,044 1,042 1,129
---------- ---------- -----------
Total Assets $ 14,503 $ 7,876 $ 5,228
========== ========== ===========
Liabilities and
Stockholders' Equity
Accounts payable 7,071 4,142 1,981
Notes payable - Banks 3,562 3,842 1,705
Notes payable - Other 11,899 8,823 7,584
Other liabilities 6,436 2,182 3,264
---------- ---------- ----------
Total liabilities 28,968 18,989 14,534
Redeemable Preferred Stock 1,250 1,250 1,273
Common stock, no par value 3,717 3,717 3,667
Paid in capital - stock
warrants 371 371 371
Accumulated deficit (19,803) (16,451) (14,617)
---------- ---------- ----------
Stockholders' equity (15,715) (12,363) (10,579)
========== ========== ==========
Total Liabilities and
Stockholders' Equity $ 14,503 $ 7,876 $ 5,228
========== ========== ==========
Other Portfolio Information
Managed contracts (at
cost) $ 353,490 $ 173,086 $ 143,478
Delinquencies (30 days
or more) 1.66% 1.71% 1.62%
Net annualized credit
losses 0.57% 0.70% 0.53%