DirectCash Income Fund announces results of operations for the three months
and year ended December 31, 2009
TSX: DCI.UN
CALGARY, March 29 /CNW/ - DirectCash Income Fund ("DirectCash" or the "Fund") today announced consolidated financial results for the three months and year ended December 31, 2009. The Fund's consolidated financial statements for the year ended December 31, 2009 and Management's Discussion & Analysis, as well as additional information about the Fund are available on SEDAR (www.sedar.com).
2009 Financial and Operational Highlights compared to 2008: ----------------------------------------------------------- - Increased EBITDA 13% to $28.9 million - Increased Net Earnings 640% to $14.9 million - Increased distributable cash flow 14% to $25.7 million - Distributable cash flow payout ratio has been reduced to 73% from 76% after special distribution of $0.12 per unit - Increased the number of prepaid cash card activations by 16%
Management's Commentary
"Our strong financial performance in 2009 has continued to demonstrate our ability to generate positive returns for our Unitholders. We are excited about our continued improvements in EBITDA and Distributable Cash Flow over the same period last year" said Jeffrey Smith, DirectCash's President and Chief Executive Officer. The primary drivers for the improvements over the prior year period are the contributions from Mexican ATM operations, the year over year impact of the 2008 ATM acquisitions, and the higher year over year activity in prepaid cash card activations and transactions. The ATM business, which is the backbone of DirectCash's business, continues to generate consistent performance while strong growth has also been seen from DirectCash's prepaid products and debit terminal businesses.
DirectCash will continue to focus on growth in a sustainable manner via organic means and through additional accretive acquisitions as opportunities arise. DirectCash's stable, contracted revenue stream, dominant market positions, and continued growth will continue to provide consistent cash distributions to DirectCash's Unitholders. DirectCash is considering new geographic markets, such as the Mexican operation which is now adding to recurring services revenue growth and gross profit margins. In addition, DirectCash is currently evaluating its options for conversion to a high dividend paying corporation, and plans to approach Unitholders during Q3 2010.
For purposes of comparison, DirectCash provides the following selected operational and financial data:
Operational Highlights ------------------------------------------------------------------------- Three months ended Year ended December 31 December 31 2009 2008 2009 2008 ------------------------------------------------------------------------- (unaudited) (unaudited) (unaudited) (unaudited) Number of machines ATM terminals - active(1) 6,279 5,884 6,279 5,884 Debit terminals - active(1) 3,038 3,138 3,038 3,138 Number of transactions ATM transactions 7,518,751 7,665,953 30,351,475 30,607,721 Debit terminal transactions 2,653,856 2,485,586 10,396,045 9,574,896 Prepaid cash card activations 739,954 664,441 3,022,138 2,611,462 Prepaid cash card transactions 1,627,990 1,567,138 6,913,884 6,461,591 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (1) DirectCash has included statistics only for sites that recorded a transaction in the last calendar month of the period indicated.
On a year over year basis, the number of active ATMs increased by 395. The net increase is a result of the gain of a customer with approximately 90 locations during the third quarter, an acquisition made at the end of the second quarter and additional ATMs placed in Mexico.
ATM revenues increased when compared to 2008 due to the impact of Mexican ATM operations and the overall increase in the number of ATMs in operation during the period.
The slight decrease in ATM transactions reflects the impact of a maturing ATM market in Canada. Based on statistics provided by Interac, ATM transactions in the Canadian industry as a whole continued their historical decline on a per ATM basis (this results from a combination of a decrease in total transactions and an increase in the number of ATMs that the total transactions are spread among).
DirectCash's goal in the ATM business is to continue to add sites and grow aggregate transactions both organically and through accretive acquisitions and to maximize site profitability through cost and quality control. In addition, DirectCash is considering new geographic markets, such as the Mexican operation which is now adding to recurring services revenue growth and gross profit margins.
On a year over year basis, the number of active debit terminals has declined by 100. The net decrease can be attributed to the loss of one of DirectCash's major debit terminal customers in the first quarter of 2009, which impacted 185 debit terminal sites. Notwithstanding the year growth in the number of active debit terminal sites, DirectCash still posted respectable increases in transactions for the year ended December 31, 2009. DirectCash continues to pursue organic growth in this business segment and to grow market share by providing retailers with unique products and services to enhance the business viability of the debit terminal for the retailer.
The growth in prepaid card activations is a result of new customer relationships and growth within existing relationships. The MasterCard prepaid card program continues to find traction and displace some debit card activations.
The increase in prepaid card transactions is due to the same reasons noted above, as well as an increase in transactions per card as prepaid products continue to gain consumer acceptance and confidence. Activation and transaction volume figures include both prepaid debit and prepaid credit cards.
The following table presents a summary of the DirectCash's selected consolidated financial information for the three months and year ended December 31, 2009, 2008 and 2007:
Financial Highlights ------------------------------------------------------------------------- Three Months Ended Year Ended (thousands) December 31 December 31 2009 2008 2009 2008 2007 ------------------------------------------------------------------------- Revenues Recurring services revenue $ 18,853 $ 16,302 $ 74,463 $ 63,160 $ 55,380 Products revenue 5,351 5,822 22,248 25,081 25,343 Interest income 13 102 92 531 753 ------------------------------------------------------------------------- Total revenue $ 24,217 $ 22,226 $ 96,803 $ 88,772 $ 81,476 ------------------------------------------------------------------------- Gross Profit Recurring services and interest $ 10,677 $ 9,613 $ 42,528 $ 36,917 $ 33,843 Gross profit margin 56.6% 58.6% 57.0% 58.0% 60.3% Products 390 226 1,391 1,453 2,277 Gross profit margin 7.3% 3.9% 6.3% 5.8% 9.0% ------------------------------------------------------------------------- Total gross profit $ 11,067 $ 9,839 $ 43,919 $ 38,370 $ 36,120 Total gross profit margin 45.7% 44.3% 45.4% 43.2% 44.3% ------------------------------------------------------------------------- ------------------------------------------------------------------------- Expenses and other income: Selling, general and administrative 3,372 2,854 13,111 11,494 11,130 Long-term incentive plan 99 422 1,143 916 1,467 Interest 182 475 910 2,012 2,208 Foreign exchange translation loss 507 - 773 - - Depreciation of equipment 807 674 3,131 2,512 2,367 Amortization of intangible assets 1,991 5,071 10,516 19,420 18,244 Other expense - - - - 1,855 Other income - - - - (1,739) ------------------------------------------------------------------------- $ 6,958 $ 9,496 $ 29,584 $ 36,354 $ 35,532 ------------------------------------------------------------------------- Net earnings before income taxes $ 4,109 $ 343 $ 14,335 $ 2,016 $ 589 ------------------------------------------------------------------------- Income taxes - Current (Mexico) 67 - 246 - - Income taxes - Future (826) - (826) - - ------------------------------------------------------------------------- Net earnings $ 4,868 $ 343 $ 14,915 $ 2,016 $ 589 Net earnings per unit 0.39 0.03 1.20 0.16 0.05 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Add back: Interest 182 475 910 2,012 2,208 Depreciation of equipment 807 674 3,131 2,512 2,367 Amortization of intangible assets 1,991 5,071 10,516 19,420 18,244 Income taxes - Current 67 - 246 - - Income taxes - Future (826) - (826) - - ------------------------------------------------------------------------- EBITDA $ 7,089 $ 6,563 $ 28,892 $ 25,960 $ 23,408 EBITDA margin 29.3% 29.5% 29.8% 29.2% 28.7% ------------------------------------------------------------------------- ------------------------------------------------------------------------- Total assets $ 119,752 $ 121,927 $ 119,752 $ 121,927 $ 135,586 Total debt $ 40,272 $ 42,635 $ 40,272 $ 42,635 $ 35,680 Total debt net of cash $ 14,386 $ 20,731 $ 14,386 $ 20,731 $ 19,644 ------------------------------------------------------------------------- -------------------------------------------------------------------------
Revenue
Total revenue has increased by 9% for the three months and year ended December 31, 2009, as compared to the prior year period. Revenue by line of business, which includes both recurring services and products revenue, is as follows:
Revenue by Line of Business ------------------------------------------------------------------------- Three months ended Year ended (thousands) December 31 December 31 2009 2008 2009 2008 ------------------------------------------------------------------------- ATM Business $ 10,344 $ 9,733 $ 42,303 $ 38,220 Prepaid products business 13,375 12,021 52,600 48,791 Debit terminal business 498 472 1,900 1,761 ------------------------------------------------------------------------- Total Revenue $ 24,217 $ 22,226 $ 96,803 $ 88,772 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Revenue by type ------------------------------------------------------------------------- ------------------------------------------------------------------------- Recurring services $ 18,853 $ 16,302 $ 74,463 $ 63,160 Products 5,351 5,822 22,248 25,081 Interest 13 102 92 531 ------------------------------------------------------------------------- Total Revenue $ 24,217 $ 22,226 $ 96,803 $ 88,772 ------------------------------------------------------------------------- -------------------------------------------------------------------------
Revenue - Recurring Services
Recurring services revenue relates to revenue earned from transaction processing activities, including DirectCash's ATM, debit terminal and prepaid product lines of business.
The increase of 18% over 2008 in recurring services revenue is primarily attributable to the ATM and prepaid products line of businesses. The increase in ATM recurring services revenue is related to the revenues generated from Mexico and the year over year impact of the ATM acquisitions made during 2008. The increase in prepaid products recurring services revenue comes primarily from the MasterCard prepaid card product as customers show greater acceptance and use of this product. DirectCash's prepaid card merchant customers are also continuing to expand their customer base through the growth of their retail locations.
There is historic seasonality in processing transaction volumes, with the highest ATM transaction activity in Canada typically occurring in the second and third quarters of the year. The first and fourth quarters are traditionally DirectCash's weakest quarters in terms of processing transactions and gross profitability. In Mexico, seasonality in the ATM business is the opposite of what is seen from DirectCash's Canadian operations. DirectCash has eliminated the impact of seasonal fluctuations in cash flows to Unitholders by equalizing monthly cash distributions. This seasonality is considered when determining levels of available cash at the end of each reporting period.
Revenue - Products
Product revenue includes sales of ATM machines, debit terminals and related parts, as well as prepaid products, consisting of prepaid cards (debit and credit), prepaid telephone cards, both physical ("hard cards") and electronic ("virtual vouchers").
For the three months and year ended December 31, 2009 revenue from product sales was down 8% and 11% respectively compared to the prior year. The primary reason for the lower revenues is the decline in the sales of telephone cards. DirectCash has seen a reduction in the sale of long-distance telephone and cellular cards in Alberta, where a number of clients are dependent upon the transient oil and gas work force which has been reduced.
ATM sales were up due to sales in Mexico, while debit terminals sales were slightly lower on a year over year comparison. Part of the reason for lower debit terminal sales is a continuing customer preference to rent rather than purchase debit terminals.
Interest Income
Interest income declined significantly during the period on a year over year basis as a result of the impact of lower interest rates that can be realized on funds held in short term deposits.
Gross Profits
In total, gross profits have increased by 12% and 14% respectively for the three months and year ended December 31, 2009, as compared to the same periods last year. Gross profit by line of business, which includes both recurring services and products revenue, is as follows:
Gross profit by Line of Business ------------------------------------------------------------------------- Three months ended Year ended December 31 December 31 2009 2008 2009 2008 ------------------------------------------------------------------------- ATM Business $ 6,027 $ 5,442 $ 24,692 $ 22,327 gross profit margin 58.3% 55.9% 58.4% 58.4% Prepaid products business 4,665 4,050 17,839 14,876 gross profit margin 34.9% 34.4% 33.9% 30.5% Debit terminal business 375 347 1,388 1,167 gross profit margin 75.3% 73.5% 73.0% 66.3% ------------------------------------------------------------------------- Total Gross Profit $ 11,067 $ 9,839 $ 43,919 $ 38,370 gross profit margin 45.7% 44.3% 45.4% 43.2% ------------------------------------------------------------------------- ------------------------------------------------------------------------- Gross profit by type ------------------------------------------------------------------------- Recurring services and interest $ 10,677 $ 9,613 $ 42,528 $ 36,917 gross profit margin 56.6% 58.6% 57.0% 58.0% Products 390 226 1,391 1,453 gross profit margin 7.3% 3.9% 6.3% 5.8% ------------------------------------------------------------------------- Total Gross Profit $ 11,067 $ 9,839 $ 43,919 $ 38,370 gross profit margin 45.7% 44.3% 45.4% 43.2% -------------------------------------------------------------------------
Gross Profitability - Recurring Services
Total gross profits from recurring services revenue and interest income for the three months and year ended December 31, 2009 increased by 11% and 15% respectively over the prior year.
The increase in gross profits for recurring services can be attributed to the following factors:
(a) positive contribution from the Mexican ATM operations, (b) the impact of the ATM acquisitions made during 2008, and (c) higher activity in prepaid debit and credit card activations and transactions.
Gross profit margins on a year over year comparison increased by about two percentage points due to a relative shift in the relative weighting of contributions from lower margin prepaid phone cards to higher margin prepaid cash cards.
The ATM recurring services gross margins improved as a result of the Mexican ATM operations and the impact of the 2008 Canadian acquisitions resulting in more active machines and higher revenue per transaction.
The increase in activation and transaction levels in the prepaid products line of business resulted in the increase in contribution from the recurring services business segment.
Gross Profitability - Products
Gross profit from the sale of products for the three months and year ended December 31, 2009 increased by 73% and declined by 4% respectively from 2008.
The decline in the annual measure can be explained primarily by:
(a) lower margin contributions on the sales of ATMs and debit terminals as the customer preference continues to lean towards rental of units rather than full ownership; (b) lower margin contributions from the telephone cards as revenues declined on a year over year basis; and (c) higher inventory obsolescence write downs on ATMs due to increased security requirements in the ATM industry.
DirectCash has a strategic goal of keeping ATM and debit terminal purchase prices as low as possible for the DirectCash customer in order to maximize the number of machines that can be placed. DirectCash believes that this strategy will result in additional long-term revenue generating services contracts.
Selling, General & Administrative Expenses ("SG&A")
For the three months and year ended December 31, 2009 SG&A expenses increased by 18% and 14% respectively from the prior year.
The increase is the result of higher salaries and benefits incurred from Mexican operations, as well as the addition of some key staff members brought on to assist in DirectCash's growth.
As a percentage of gross profits, SG&A was 30% (YTD - 30%) during the three months ended December 31, 2009 compared to 29% (YTD - 30%) for the same period last year.
Long-term incentive plan ("LTIP")
Details of the Long-term incentive plan can be found in the notes to the financial statements.
For the year ended December 31, 2009, the board increased the base threshold from $1.51 to $1.65, effective from January 1, 2009. This resulted in lowering the expected LTIP expense for the year by $584,810.
Interest Expense
For the year ended December 31, 2009 interest expense has decreased significantly. DirectCash is benefiting from the lower interest rate environment as well as lower outstanding balance on DirectCash's credit facility.
All DirectCash debt is currently on floating interest rates. A one percent change in interest rates would result in an approximate $417 thousand change in interest expense for the period.
Net Earnings
Net earnings for the three months and year ended December 31, 2009 were significantly higher than prior year periods mainly due to amortization of intangible assets being lower by $3.1 million for the fourth quarter and $8.9 million for the year to date as compared to the prior year.
The disparity between net earnings and cash distributions is primarily due to amortization of intangible assets related to ATM, debit terminal and prepaid product contracts. Typically, these contracts include automatic renewals for a further minimum five year period (new contracts are six years) unless the customer terminates the contract within a specified time period and includes a right of first refusal to match a competitor's bona fide offer on renewal. Thus, while a contract acquired by DirectCash may have a fixed initial term (which is the time period over which amortization of this intangible asset occurs) DirectCash's experience is that DirectCash is usually able to keep the applicable ATMs attached to the DirectCash network with no or little capital expenditure. Also, any ATM added by organic growth (i.e. through the DirectCash sales force) has a much lower capital cost that ATM locations added through acquisition.
EBITDA
For the year ended December 31, 2009, EBITDA increased significantly over prior year levels, although slightly lower than the increase in gross profits. This reflects the higher gross profit contributions offset in part by higher SG&A costs. As a percentage of revenue, EBITDA was relatively flat compared to the prior periods for the three months and year ended December 31, 2009.
Capital Expenditures
DirectCash incurred the following expenditures of a capital nature:
Capital Expenditures ------------------------------------------------------------------------- Three months ended Year ended December 31 December 31 ------------------------------------------------------------------------- 2009 2008 2009 2008 ------------------------------------------------------------------------- Per consolidated financial statements: Equipment $ 1,181 $ 537 $ 3,656 $ 2,332 Intangible assets (109) 38 2,516 6,979 ------------------------------------------------------------------------- $ 1,072 $ 575 $ 6,172 $ 9,311 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Split between growth and maintenance: Growth capital $ 187 $ 252 $ 4,182 $ 7,897 Maintenance capital 885 323 1,990 1,414 ------------------------------------------------------------------------- $ 1,072 $ 575 $ 6,172 $ 9,311 ------------------------------------------------------------------------- -------------------------------------------------------------------------
Growth capital expenditures relate to acquisitions and other expenditures that increase DirectCash's productive capacity, while maintenance capital expenditures maintain productive capacity at existing levels.
Productive capital maintenance expenditures for the full year are higher than 2008 due to increased security infrastructure expenditure requirements. Growth capital expenditures can vary widely between reporting periods due to the intermittent nature and varying size of acquisitions.
Acquisition
For the year ended December 31, 2009, DirectCash has acquired certain assets of a number of privately held corporations and individuals engaged in ATM and prepaid services for cash consideration of $2.07 million (2008 - $6.85 million). These acquisitions are subject to customary performance holdbacks and normal course purchase adjustments. The majority of the assets acquired consist of the residual rights in contracts to operate and place ATM machines at certain locations. These contracts are valued based on the remaining term of each agreement and the expected net cash flow from that agreement value is allocated to intangible assets and amortized in accordance with DirectCash's policy.
These acquisitions were funded from DirectCash's revolving credit facility. The acquisitions were accounted for by the purchase method and the results of operations have been included in the Fund's consolidated statement of earnings from the acquisition dates.
The purchase prices for acquisitions are typically subject to adjustments after closing. Therefore, the initial recorded value of each acquisition is preliminary and subject to changes pending receipt of final information.
The fair values of the assets acquired during the year ended December 31, 2009 are as follows:
Acquisitions ------------------------------------------------------------------------- 2009 ------------------------------------------------------------------------- Assets acquired: Intangible assets $ 1,993,450 Equipment 71,540 Inventory 10 ------------------------------------------------------------------------- Total consideration 2,065,000 ------------------------------------------------------------------------- -------------------------------------------------------------------------
Liquidity and Capital Resources
DirectCash believes that the funds generated from operations will be sufficient to allow DirectCash to meet ongoing requirements for working capital, maintenance capital expenditures including investments in technology capital, interest expense, and cash distributions to Unitholders.
DirectCash's actual cash generated from operations will be dependent upon future financial performance, which in turn will be subject to financial, tax, business and other factors.
As of December 31, 2009, DirectCash utilized approximately $40 million of a total available credit facilities of $60.0 million. A summary of DirectCash's available credit at December 31, 2009 is as follows:
Credit facilities ------------------------------------------------------------------------- (thousands) Utilized Limit Available ------------------------------------------------------------------------- Revolving credit facility $ 7,772 $ 20,000 $ 12,228 Acquisition credit facility 32,500 40,000 7,500 ------------------------------------------------------------------------- $ 40,272 $ 60,000 $ 19,728 ------------------------------------------------------------------------- -------------------------------------------------------------------------
The revolving credit facility is used for ATM cash loading, working capital requirements and commercial letters of credit. A letter of credit in favour of MasterCard International was increased to US$ 1.5 million (CDN$ 1.57 million) due to the increase in volume in the MasterCard prepaid card program.
The acquisition credit facility is used to facilitate acquisitions and to fund business growth opportunities.
Both facilities are demand in nature. Notwithstanding the demand nature of the facilities, there are no scheduled principal repayments.
During the second quarter the Bank increased the interest rate charged to DirectCash due to current global market conditions on both facilities to Prime plus 1%. This increase is being phased in over four quarters in equal increments, starting July 1, 2009.
DirectCash is subject to the following primary lending covenants:
Lending covenants ------------------------------------------------------------------------- December 31 Covenant Limit ------------------------------------------------------------------------- Funded Debt to Recurring Quarterly Revenue 2.0:1 less than 10:1 Fixed Charge Cover Ratio 23.5:1 greater than 4:1 Senior Debt to EBITDA 1.4:1 less than 2:1 ------------------------------------------------------------------------- -------------------------------------------------------------------------
DirectCash operated well within its loan covenant limits and anticipates continuing to do so in the future. Breach of DirectCash's bank loan covenants could result in the triggering of remedies by DirectCash's lenders, which could negatively impact distribution payments.
Additional Information
Additional information about DirectCash, including DirectCash's Annual Information Form and other public filings is available on SEDAR (www.sedar.com) and on DirectCash's website (www.directcash.net).
Non-GAAP Measures
There are a number of financial calculations that are not defined performance measurements under GAAP but which DirectCash believes are useful and accepted performance measurements utilized by the investing public in assessing the overall financial performance of income trusts.
Earnings before interest, taxes, depreciation and amortization ("EBITDA")
EBITDA represents gross profits less selling, general and administrative expenses ("SG&A") and long-term incentive plan expenses, and is not a defined performance measure under GAAP. DirectCash believes that EBITDA is a useful supplementary disclosure commonly used by the investing community to assess and compare cash flows between entities. EBITDA specifically excludes depreciation, amortization, income taxes and interest expense. DirectCash's EBITDA may differ from similar computations as reported by other issuers and, accordingly, may not be comparable to EBITDA as reported by such issuers. The most directly comparable GAAP measure is Net Earnings. A reconciliation between EBITDA and Net Earnings is disclosed in the "Financial Highlights" schedule later on.
Standardized distributable cash flow and standardized distributable cash flow per unit
On July 6, 2007, the Canadian Securities Administrators ("CSA") published revised National Policy Statement 41-201 Income Trusts and Other Direct Offerings that includes guidance concerning distributable cash flow measures and their related disclosure. In accordance with the interpretive release issued by the Canadian Institute of Chartered Accountants ("CICA"), DirectCash has calculated a distributable cash flow measure called Standardized Distributable Cash Flow and has included it as an additional disclosure. Standardized Distributable Cash Flow is calculated as cash flow from operations including the effect of changes in non-cash working capital less total capital expenditures required to preserve productive capacity, and restrictions on distributions resulting from compliance covenants. Due to normal course changes of non-cash working capital between periods, Standardized Distributable Cash Flow has the potential to be volatile between periods compared to DirectCash's existing measure of Distributable Cash Flow, which is calculated as cash flow from operations excluding the impact of non-cash working capital changes less productive capital maintenance requirements (see discussion below). In order to reconcile the two measures, DirectCash has calculated Standardized Distributable Cash Flow and reconciled it to Distributable Cash Flow.
Distributable cash flow and distributable cash flow per unit
Distributable cash flow and distributable cash flow per unit are non-GAAP measures generally used by Canadian open-ended income funds as an indicator of financial performance. Readers are cautioned that distributable cash flow is not a defined performance measure under GAAP and that distributable cash flow cannot be assured to continue at equivalent levels in the future. DirectCash calculates distributable cash flow as equal to the consolidated funds flow from operations before changes in non-cash working capital, after provision for productive capital maintenance capital expenditures (see discussion below). DirectCash's distributable cash flow and distributable cash flow per unit may differ from similar computations as reported by other issuers and, accordingly, may not be comparable to distributable cash flow and distributable cash flow per unit as reported by such issuers.
Unitholders receive cash distributions sourced from distributions made by DirectCash LP indirectly to the Fund. DirectCash Group's policy is to distribute, to the maximum extent possible, the cash earned from operations to Unitholders, less amounts estimated to be required for expenses, productive capital maintenance, cash redemptions or repurchases of Units, any current tax liability, or other obligations, debt repayments and any reasonable reserves established. The Fund makes monthly cash distributions to Unitholders on the last business day of each month to Unitholders of record on the last business day of the preceding month.
Since August 2006, monthly distributions have been paid at $0.115 per Unit per month ($1.38 per Unit annualized). A special distribution of $0.120 per Unit was issued December 31, 2009. Distributions are funded from cash flows generated by the operation of the business.
Productive capital maintenance expenditures
DirectCash differentiates capital expenditures between growth and productive capital maintenance ("Maintenance Capital"). There is no such distinction under GAAP. However, DirectCash believes it is important to differentiate between them as maintenance capital expenditures represent a discretionary adjustment to distributable cash flow while growth capital does not.
Maintenance capital expenditures are defined as expenditures required to service and maintain DirectCash's existing productive capacity, while growth capital is expended to increase DirectCash's productive capacity by adding additional sources of revenue not currently in existence. Current measures of productive capacity that DirectCash utilizes include ATMs and debit terminals under contract (see "Operational Highlights"), Software and hardware upgrades to existing infrastructure, ATM and debit terminal equipment upgrades necessary to meet changing regulatory requirements, contract extension incentives, and fleet vehicle purchases and upgrades, are some examples of maintenance capital expenditures.
Examples of growth capital expenditures include the acquisition of a competitor's assets, the cost of an ATM in a new location, or technology costs related to new sources of revenue.
Readers are cautioned that productive capital maintenance expenditure is not a defined performance measure under GAAP. DirectCash's computation of productive maintenance capital expenditure may differ from similar computations as reported by other issuers and, accordingly, may not be comparable to maintenance capital expenditures as reported by such issuers.
Non-cash working capital
Non-cash working capital is not a defined GAAP measure. DirectCash calculates non-cash working capital as current assets less current liabilities, but excluding cash and credit facilities. A summary of this calculation is provided later in the MD&A.
Forward-looking Statements
This Press Release contains certain forward-looking statements relating to future events. Forward-looking statements are subject to numerous risks and uncertainties, certain of which are beyond DirectCash's ability to control, including the impact to DirectCash's business, general economic conditions, consumer spending, borrowing trends and regulatory changes to name a few. Certain statements that contain words such as "could", "believe", "expects", "expected", "will", "intends", "projects", "anticipates", "estimates", "continues" or similar words relating to matters that are not historical facts constitute "forward-looking information" within the meaning of applicable Canadian securities legislation. In particular, forward-looking information and statements contained in this Press Release include statements related to DirectCash's projected growth in Canada and Mexico in the ATM business, projected growth in the prepaid and debit terminal business, accretive acquisitions on a go forward basis, expansion of DirectCash's merchant base through new and innovative products, entry into new geographic markets, ability to continue to acquire long-term recurring services contracts and expected increase in capital expenditures due to regulatory mandated security upgrade changes are all statements that have been stated or referred to throughout this Press Release. Readers are cautioned that actual results may vary from the forward-looking information provided.
Additional information about the Fund is available on SEDAR (www.sedar.com) or the Fund's website at www.directcash.net.
For further information: The officer who may be contacted for further information is: Hendrik J. Lombard, C.F.O., DirectCash Management Inc., Manager of DirectCash Income Fund, Bay No. 6, 1420 - 28th Street N.E., Calgary, Alberta, T2A 7W6, Direct Telephone: (403) 387-2103, Fax: (403) 451-3003, E-mail: [email protected]
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