Westar Reports Record Quarterly Revenues
16 November 2000
Westar Financial Reports Record Quarterly Revenues of $60 Million and Widening Margins
OLYMPIA, Wash.--Nov. 15, 2000--Westar Financial Services Incorporated (OTC:WEST), the leading automobile e-finance portal, today reported continued accelerating revenue growth.The company generated record revenues of $60 million for its second fiscal quarter ended September 30, 2000, an increase of 82% from $33 million in the year ago period, and 62% from $37 million in the prior quarter of this year. For the first half of fiscal 2001, revenues increased 67% to $97 million compared to $58 million in the like period a year ago. Westar has reported record revenues for each of its most recent three quarters.
As expected, gross margins widened appreciably during the quarter as the company completed its initial penetration strategies for three of its new origination channels and began to propagate a series of price increases. The effect of those price increases, which continued beyond the end of the quarter, began to be realized as gross margins increased from the prior quarter by two percent of revenues. "We're at that happy point where volumes, prices and quality are all increasing while our cost of funds are stable or declining," said Cindy Kay, Vice President and Controller. "While it took us a couple of months longer than we anticipated, and the effects did not break neatly into accounting quarters, we are delighted with our current mix of volumes, margins and quality. The immediate costs of this strategy were significant; however, the tangible benefits will continue to flow through the foreseeable future."
Growth in portal activities led to a 138% increase in fiscal second quarter fee income to $1.4 million from $567 thousand in the second quarter a year ago. For the first half of fiscal 2001, fee income more than doubled to $2.2 million compared to $1.1 million in the like period a year ago.
As planned, overhead costs increased during the second quarter, but at a much slower rate than revenues or gross margins. General and administrative expenses were up 42% to $1.7 million from $1.2 million in the like period a year ago. In the first half of this year, overhead costs increased 39% to $3.3 million compared to $2.3 million in the first half of last year. "Even with the one-time expenses related to our move into new headquarters in The Financial Center in Tumwater and to a very substantial increase in our throughput capacities, growth of G & A expense has begun to slow appreciably. We are beginning to reap the benefits of Westar's investment in its strong operating leverage. We expect that these operating efficiencies will become very apparent with each succeeding quarter and each further increase in volume," said Kay.
Costs of its multi-market penetration strategy brought the second quarter net loss to $1.5 million or $.65 per share compared to $661 thousand or $.29 per share in the second quarter a year ago. For the first half of fiscal 2001, net losses totaled $3.8 million or $1.61 per share compared to $1.6 million or $.73 per share in the like period of fiscal 2000.
During the second quarter, Westar began providing its unique decisioning tools and high-speed communications systems to its second Private Label client, another one of the nation's 25 largest banks. "Our model for transforming a physical transaction into a financial instrument nearly instantaneously, and then placing that security with an investor, is proving to be highly scalable, as reflected in our revenue and margin growth and reduced G & A expense component. We see increasing interest by other leading financial institutions and affinity organizations for Westar's technology and expect to expand its use further during the coming year," stated R.W. Christensen, Jr., President and CEO. "If current growth rates continue, we could see revenues of $1 billion by the end of next year."
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. Through DriveOff.com, recently acquired by MSN CarPoint, Westar completed the first entirely electronic Internet automobile purchase and lease transaction in October 1999. The company operates its Dealer Direct Retail Leasing easing program in Western states and is rapidly expanding its e-finance activities nationally through alliances with DriveOff.com, AmSouth Bancorporation, Mellon Bank and others.
Consolidated Statements of Operations For the three months and six
months ended September 30, 2000 and 1999
(Unaudited)
Three Months Ended Six Months Ended
2000 1999 2000 1999
Revenues:
Revenues from sales and
securitizations $57,063,616 $32,017,519 $92,533,466 $56,139,426
Revenues on direct
financing assets 23,390 23,390 494
Revenues from
operating leases 1,107,004 368,839 1,945,131 824,034
Administrative
fee income 1,173,080 485,872 1,913,570 937,264
Service fee income 179,530 81,965 330,483 143,791
Other income 82,684 129,341 98,373 133,225
----------- ----------- ----------- -----------
Gross revenues 59,629,304 33,083,536 96,844,413 58,178,234
Direct Costs:
Costs related to
sales and
securitizations 57,257,597 31,812,274 93,845,815 55,959,658
Interest 405,644 70,132 682,710 204,820
Depreciation expense
on operating leases 786,995 276,022 1,287,556 588,058
Origination fees 387,200 496,100
Provision for credit
losses 7,500 7,500 15,000 50,500
Other 361,316 169,200 507,516 330,005
----------- ----------- ----------- -----------
Total direct costs 59,206,252 32,335,128 96,834,697 57,133,041
----------- ----------- ----------- -----------
Gross Margin 423,052 748,408 9,716 1,045,193
General and
administrative
expenses 1,659,750 1,185,090 3,238,188 2,253,139
----------- ----------- ----------- -----------
Loss before subordinated
debt interest (1,236,698) (436,682) (3,228,472) (1,207,946)
Subordinated debt
interest expense (269,923) (191,438) (486,735) (362,836)
----------- ----------- ----------- -----------
Loss before
federal income
tax benefit (1,506,621) (628,120) (3,715,206) (1,570,782)
Income tax
benefit
----------- ----------- ----------- -----------
Net loss (1,506,621) (628,120) (3,715,206) (1,570,782)
Dividends on redeemable
preferred stock (28,906) (32,548) (57,498) (67,956)
----------- ----------- ----------- -----------
Net loss applicable
to common stock (1,535,527) (660,668) (3,772,704) (1,638,738)
=========== =========== ============ ===========
Weighted average
number of shares 2,348,120 2,277,889 2,348,120 2,277,889
=========== =========== ============ ===========
Net loss per
common share (.65) $(.29) (1.61) $(.73)
=========== =========== ============ ===========
Consolidated Balance Sheets
(Unaudited)
September 30, March 31,
2000 2000
Cash $947,920 $1,401,243
Accounts receivable,
net of allowance for credit losses 924,537 385,602
Credit enhancement receivable,
net of allowance for credit losses 2,648,308 2,218,897
Operating leases held for sale,
net of allowance for credit losses 2,064,816 2,827,830
Other receivable,
net of allowance for credit losses 2,943,332
Preferred tax asset, net of valuation
allowance
Of $5,976,201 and $4,709,778, respectively
Fixed and other assets 1,831,966 1,042,118
----------- -----------
$11,360,879 $7,875,690
=========== ===========
Accounts payable $3,324,457 $4,141,841
Notes payable to banks 7,854,846 3,842,471
Notes payable affiliates 12,223,075 8,822,514
Other liabilities 2,844,190 2,181,848
----------- -----------
26,246,568 18,988,674
----------- -----------
Redeemable preferred stock 1,250,000 1,250,000
----------- -----------
Common stock, no par value 3,716,177 3,716,177
Paid in capital - stock warrants 371,495 371,495
Accumulated deficit (20,223,361) (16,450,656)
----------- -----------
(16,135,689) (12,362,984)
----------- -----------
$11,360,879 $7,875,690
=========== ============
Consolidated Statements of Cash Flows
For the Six Months Ended September 30, 2000 and 1999
(Unaudited)
Increase (Decrease) in Cash and
Cash Equivalents 2000 1999
Net cash provided by (used in)
operating activities (6,775,431) $6,717,188
----------- -----------
Cash flows used in investing activities:
Other (1,090,828) (476,776)
----------- -----------
Net cash used in investing
activities (1,090,828) (476,776)
----------- -----------
Cash flows from financing activities:
Redemption of redeemable preferred stock
Proceeds from issuance of common stock 70,000
Additions to notes payable to banks 92,850,632 45,700,660
Payments on notes payable to banks (88,838,257) (53,470,341)
Additions to notes payable -
subordinated debt 4,014,944 1,315,771
Payments on notes payable -
subordinated debt (614,383) (234,557)
Dividends paid on preferred stock
Origination costs
----------- -----------
Net cash (used in) provided by
financing activities 7,412,936 (6,618,467)
----------- -----------
Net (decrease) increase in cash (453,323) (378,055)
Cash:
Beginning of period 1,401,243 925,204
----------- -----------
End of period $947,920 $547,149
=========== ===========
Statement regarding "Forward-Looking Statements": Statements concerning future performance, developments or events, including projected profit and loss levels, expansion of operations, growth of loan originations, quality of the company's lease portfolio, the 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.