CKN Cash Systems

Cash Systems, Inc. (Amex: CKN), a provider of cash access solutions for the gaming industry, today announced financial results for the third quarter 2005. Revenue for the third quarter increased 34% to $17.1 million from $12.8 million in the third quarter of fiscal 2004. The increase reflects the continued expansion of products and services to gaming customers. Operating expenses for the third quarter increased 46% to $17.1 million from $11.8 million in the prior year period. The increase in operating expenses in the third quarter of 2005 compared to the third quarter of 2004 is primarily due to the Company's expanded operations, Sarbanes Oxley compliance efforts, information technology cost increases and the costs related to the build-out of the Company's accounting and finance infrastructure. Net loss was ($71,108) or breakeven per diluted share, compared to net income of $582,744 or $0.04 per diluted share in the prior year period. Michael Rumbolz, President and Chief Executive Officer of Cash Systems, Inc. stated, "The Company has undergone a significant transformation in the last six months as we made necessary investments in the business to create a platform for sustainable growth. While these investments have impacted our near-term operating results, we believe we made the right decisions in solidifying our systems, operations, team and infrastructure so that we can effectively capitalize on the significant growth opportunities we have identified." Liquidity The Company finished the third quarter of 2005 with cash and cash equivalents of $20.4 million. Current cash balances and operating cash flow are expected to provide the Company with sufficient resources to meet its existing obligations, currently planned capital expenditure requirements and funding for internal growth initiatives. Guidance The Company now expects 2005 revenue of approximately $62-$63 million, compared to previous revenue guidance of $60-$62 million, and continues to expect diluted loss per share of ($0.10) in 2005. Earnings Conference Call The Company will conduct a conference call to discuss financial results on November 14, 2005 at 5:00 p.m. ET. The call can be accessed live over the phone by dialing 1-877-502-9274 or for international callers by dialing 1-913-981-5584. A simultaneous webcast of the call will be available by visiting http://www.cashsystemsinc.com/ir/companyoverview.asp. A replay will be available one hour after the call and can be accessed by dialing (888) 203-1112 or (719) 457-0820 for international callers; the password is 6404464. The replay will be available from November 14, 2005, through November 21, 2005. About Cash Systems, Inc. Cash Systems, Inc., located in Las Vegas and Minneapolis, is a provider of cash access and related services to the retail and gaming industries. Cash Systems' products include its proprietary cash advance systems, ATMs and check cashing solutions. Please visit http://www.cashsystemsinc.com for more information. Forward-Looking Statements This press release may contain forward-looking statements, including the Company's beliefs about its business prospects and future results of operations. These statements involve risks and uncertainties. Among the important additional factors that could cause actual results to differ materially from those forward-looking statements are risks associated with the overall economic environment, the successful execution of the Company's plan of operation, changes in the Company's anticipated earnings, continuation of current contracts, gaming and other applicable regulations, and other factors detailed in the Company's filings with the Securities and Exchange Commission, including its most recent Forms 10-KSB and 10-Q. In addition, the factors underlying Company forecasts are dynamic and subject to change and therefore those forecasts speak only as of the date they are given. The Company does not undertake to update any forecasts that it may make available to the investing public. -0- *T CASH SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS September 30, December 31, 2005 2004 (Unaudited) (Audited) ------------- ------------- ASSETS CURRENT ASSETS Cash $ 20,441,677 $ 13,043,874 Due from related party 54,603 183,560 Current portion of prepaid commissions 450,685 348,601 Current portion of loans receivable 1,148,236 1,849,420 Other receivables - 645,006 Deferred income taxes 1,789,000 336,000 Settlements due from credit card processors 871,458 1,889,856 Other current assets 3,336,921 2,638,759 ------------ ------------ Total Current Assets 28,092,580 20,935,076 ------------ ------------ PROPERTY AND EQUIPMENT, NET 4,926,030 3,373,170 OTHER ASSETS Long-term prepaid commissions, net of current portion 262,376 523,827 Long-term loans receivable, net of current portion 60,229 350,835 ------------ ------------ Total Other Assets 322,605 874,662 ------------ ------------ TOTAL ASSETS $ 33,341,215 $ 25,182,908 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Checks issued in excess of cash in bank $ 9,771,303 $ 3,331,381 Accounts payable - trade 889,431 436,322 Credit card cash advance fees payable 839,579 655,036 ATM commissions payable 1,019,951 629,328 Credit card chargebacks payable 231,914 80,000 Check cashing commissions payable 119,143 102,801 Due to related party - 211,846 Other accrued expenses 286,032 197,869 ------------ ------------ Total Current Liabilities 13,157,353 5,644,583 ------------ ------------ LONG-TERM LIABILITIES Deferred income taxes 1,012,000 797,000 ------------ ------------ Total Liabilities 14,169,353 6,441,583 ------------ ------------ COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Common stock, par value of $0.001, 50,000,000 shares authorized, 16,876,738 and 16,173,445 shares issued and outstanding 16,877 16,173 Additional paid-in capital 18,770,081 16,838,356 Retained earnings 384,904 1,886,796 ------------ ------------ Total Stockholders' Equity 19,171,862 18,741,325 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 33,341,215 $ 25,182,908 ============ ============ *T -0- *T CASH SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, ------------------------- ------------------------- 2005 2004 2005 2004 ------------ ------------ ------------ ------------ Commissions on credit card cash advances, ATMs and check cashing services $17,050,788 $12,773,387 $46,737,656 $35,620,314 Operating expenses Commissions 8,365,053 6,388,588 22,909,965 17,201,364 Processing costs 3,412,956 2,143,906 10,540,434 6,378,394 Check cashing costs 1,042,135 745,022 3,698,742 2,018,186 Armored carrier services 93,499 148,507 337,637 348,717 Payroll, benefits and related taxes 2,273,642 1,342,571 5,776,805 3,872,833 Professional fees 613,440 151,817 1,649,255 517,497 Compensation expense related to warrants and options - 23,197 - 91,377 Other 1,020,561 569,474 3,226,054 2,040,271 Depreciation and amortization 325,584 249,350 925,720 500,338 ------------ ------------ ------------ ------------ Total operating expenses 17,146,870 11,762,432 49,064,612 32,968,977 ------------ ------------ ------------ ------------ Income (loss) from operations (96,082) 1,010,955 (2,326,956) 2,651,337 ------------ ------------ ------------ ------------ Other income (expense) Interest expense (122,635) (43,172) (346,869) (190,823) Interest income 99,609 3,457 228,333 4,713 ------------ ------------ ------------ ------------ Total other income (expense) (23,026) (39,715) (118,536) (186,110) ------------ ------------ ------------ ------------ Income (loss) before income taxes (119,108) 971,240 (2,445,492) 2,465,227 Provision for (benefit from) income taxes (48,000) 388,496 (943,600) 986,496 ------------ ------------ ------------ ------------ Net income (loss) $ (71,108) $ 582,744 $(1,501,892) $ 1,478,731 ============ ============ ============ ============ Net income (loss) per common share: Basic $ (0.00) $ 0.04 $ (0.09) $ 0.10 ============ ============ ============ ============ Diluted $ (0.00) $ 0.04 $ (0.09) $ 0.09 ============ ============ ============ ============ Weighted average common shares outstanding: Basic 16,672,815 15,586,001 16,514,792 14,803,792 ============ ============ ============ ============ Diluted 16,672,815 16,509,087 16,514,792 15,918,983 ============ ============ ============ ============ *T -0- *T CASH SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended September 30, ------------------------- 2005 2004 ------------ ------------ Cash flows from operating activities: Net income (loss) $(1,501,892) $1,478,731 Adjustments to reconcile net income (loss) to cash flows from operating activities: Depreciation and amortization 925,720 497,753 Compensation expense related to non-employee stock options - 91,377 Tax benefit associated with employee stock option exercises 390,000 - Deferred income taxes (1,238,000) 289,000 Interest receivable on loans receivable (153,548) (3,182) Changes in operating assets and liabilities: Due from related party 128,957 25,000 Prepaid commissions (102,084) (646,350) Other receivables 645,006 (22,817) Settlements due from credit card processors 1,018,398 - Other current assets (698,162) (452,784) Long-term prepaid commissions 261,451 (66,033) Long-term receivable - 453,295 Accounts payable - trade 453,109 (1,224,676) Credit card cash advance fees payable 184,543 (119,738) ATM commissions payable 390,623 282,766 Credit card chargebacks payable 151,914 30,911 Check cashing commissions payable 16,342 14,657 Due to related party (211,846) - Other accrued expenses 88,163 507,682 ------------ ------------ Cash flows provided by operating activities 748,694 1,135,592 ------------ ------------ Cash flows from investing activities: Purchases of property and equipment (2,478,580) (1,592,816) Loans receivable, net 1,145,338 (375,000) ------------ ------------ Cash flows used in investing activities (1,333,242) (1,967,816) ------------ ------------ Cash flows from financing activities: Checks issued in excess of cash in bank 6,439,922 (686,118) Payments on long-term debt - (713,035) Issuance of common stock, net of expenses - 11,309,156 Exercise of stock options 1,351,529 157,000 Exercise of warrants 190,900 214,750 ------------ ------------ Cash flows provided by financing activities 7,982,351 10,281,753 ------------ ------------ Increase in cash 7,397,803 9,449,529 Cash, beginning of period 13,043,874 3,035,747 ------------ ------------ Cash, end of period $20,441,677 $12,485,276 ============ ============ SUPPLEMENTAL CASH FLOWS INFORMATION: Cash paid for financing costs and interest expense, net of amortization of original issue discount $ 318,827 $ 180,927 ============ ============ Cash received (paid) from income taxes $ 609,322 $ (146,019) ============ ============ NONCASH INVESTING AND FINANCING ACTIVITIES: Reclassification of other current assets to proceeds from issuance of common stock $ - $ 11,604 ============ ============ Note receivable issued in connection with sale of ATMs $ 242,000 ============ *T