Westar Financial Reports Q3 Lease Volumes Increase 50%
8 February 2000
Westar Financial Reports Third Quarter Lease Volumes Increase 50% With Strong Credit Quality
OLYMPIA, Wash.--Feb. 4, 2000--Westar Financial Services, Incorporated (OTCBB:WEST), a prime credit auto lessor and loan originator, today reported strong third quarter lease volumes, with higher credit scores and extremely low delinquencies. The company significantly expanded its distribution channels during the third quarter introducing Private Label and Intranet offerings.Westar originated 817 leases for $24 million in its third fiscal quarter ended December 31, 1999 compared to 568 leases for $16 million in the like quarter a year ago. Year-to-date lease volumes have more than doubled to 2,545 leases costing $72 million, compared to 1,260 leases costing $35 million. Third quarter revenues totaled $26 million, a 2% decrease over the third quarter a year ago, reflecting a slightly lower contribution from securitizations. Year-to-date revenues increased 51% to $84 million compared to $56 million in the first nine months of fiscal 1999.
"In spite of the year-end drop-off in Washington state auto sales resulting from the passage of Initiative-695 (a voter initiative passed in November and effective 1/1/2000 that substantially reduced vehicle licensing fees), our lease servicing portfolio more than doubled at the end of December to $166 million from $74 million a year ago," said R.W. Christensen, Jr. As a result of growth in both origination volumes and servicing, third quarter fee income rose 84% to $570,000 and year-to-date fee income was $1.8 million, a 150% increase above year ago levels. In addition, the quality of Westar's lease portfolio continued to improve with average credit scores increasing to 709 from 697 and total delinquencies declining to 1.62% of total leases compared to 2.06% a year ago.
"Our team has been extremely busy the past several months with the launch of new distribution channels and expansion of our Dealer Direct program into new territories. We've nearly completed piloting our origination and fulfillment roles for DriveOff.com. Now that we've proven Westar's capabilities in those areas, we look forward to the commencement of full-scale DriveOff.com operations in the current quarter. Our newly introduced Intranet product will provide favorably priced auto leases to members of large affinity organizations and our new Private Label service offers a turn-key auto leasing program for financial institutions. These two new channels complement our Dealer Direct program, started in 1994, and our Internet channel, launched with DriveOff.com in September," continued Christensen. "We expect strong contributions to our volumes from these new channels in the near future."
Gross margins in the third quarter were $808,000, or 3.1% of revenues, up from $748,000, or 2.3% of revenues in the prior quarter, and down from $1.2 million or 4.5% of revenues in the like quarter of 1999. Year-to-date, gross margins were $1.9 million, or 1.8% of revenues, versus $1.5 million or 2.8% of revenues in the first nine months of fiscal 1999. Operating cash flow year-to-date was $7.6 million.
Third quarter general and administrative expenses increased 51% to $1.2 million. Year-to-date, G&A totaled $3.4 million up 63% from year ago levels, including variable expenses of approximately $500,000 and $300,000 in non-recurring costs, both related to the DriveOff.com expansion. "The investments funded the Intranet and Private Label channels introduced in the quarter and open the door to tremendous expansion potential," Christensen said.
Net losses for the third quarter of fiscal 2000 were $546,000, reflecting the costs associated with expanding its channels of distribution, compared to a profit of $246,000 in the prior year quarter. After payment of preferred dividends, net losses applicable to common shares totaled $575,000, or $0.26 per share, compared to profits of $210,000, or $0.09 per share in the third quarter of fiscal 1999. For the first nine months of fiscal 2000, net losses after the payment of preferred dividends totaled $2.2 million, or $0.98 per share, including the $800,000 in DriveOff.com related expense, compared to a loss of $1.1 million, or $.50 per share, in the first nine months of fiscal 1999.
WEST is the only publicly traded automobile lease finance company focused solely on the prime-credit segment of the $112 billion auto-lease finance market. Westar entered into automotive e-finance through a $1 billion funding commitment to DriveOff.com, a 3rd generation e-commerce business model allowing consumers to buy and finance new automobiles in a single electronic transaction. Through DriveOff.com, Westar completed the first entirely electronic Internet automobile purchase and lease transaction in October 1999. The company operates its Dealer Direct leasing program in the Pacific Northwest, the Southwest, Northcentral US and now California and Minnesota. It is rapidly expanding its e-finance capabilities nationally through DriveOff.com.
Statement regarding "Forward Looking Statements": Statements concerning future performance, developments or events, including expansion of operations, growth of loan originations, ability to place securitizations, success of the e-commerce model, trends in interest rates, various statements concerning expectations for growth or profits and any other guidance on future periods, constitute forward-looking statements which are subject to a number of risks and uncertainties which might cause actual results to differ materially from stated expectations.
(unaudited) ($ in thousands)
Three Months Ended Six Months Ended
December 31, December 31,
1999 1998 1999 1998
Revenues:
Revenues from sales
and securitizations $ 24,825 $ 25,464 $ 80,964 $ 53,720
Earned income on
direct financing leases -- 6 -- 630
Revenues from
operating leases 423 437 1,247 634
Administrative fee
income 460 259 1,397 555
Service fee income 99 40 242 90
Other income 11 10 145 66
----------- --------- -------- ----------
Gross Revenues $ 25,818 $ 26,216 $ 83,995 $ 55,695
Direct Costs:
Cost related to sales
and securitizations 24,507 24,485 80,467 52,432
Interest 83 145 288 948
Depreciation expense
on operating leases 278 290 866 416
Provision for (recovery
of) credit losses 8 -- 58 56
Other 134 126 464 304
----------- --------- --------- ----------
Total Direct Costs $ 25,010 $ 25,046 $ 82,143 $ 54,156
Gross Margin $ 808 $ 1,170 $ 1,852 $ 1,539
General and administrative
expenses 1,163 768 3,416 2,097
----------- ---------- --------- ----------
Loss before subordinated
debt interest (355) 402 (1,564) (558)
Subordinated debt
interest expense (191) (156) (553) (428)
----------- ----------- -------- --------
Loss before federal
income tax benefit (546) 246 (2,117) (986)
Income tax benefit - - - -
Net Income (Loss) $ (546) $ 246 $ (2,117) $ (986)
Dividends on redeemable
preferred stock (29) (36) (97) (117)
----------- ----------- --------- --------
Net Income (Loss)
applicable to
common stock $ (575) $ 210 $ (2,214) $ (1,103)
Net Income(Loss)
per share $ (0.26) $ 0.09 $ (0.98) $ (0.50)
=========== ========= ========= =========
Weighted average
number of shares 2,252,961 2,187,300 2,252,961 2,187,300
31-Dec-99 31-Mar-99 31-Dec-98
(audited)
Total assets $ 5,228 $ 12,495 $ 3,347
Total liabilities 14,534 19,739 9,708
Redeemable preferred stock 1,273 1,548 1,548
Net deficit of common
stock equity (10,579) (8,791) (7,909)