EX-99 2 dfc2qearningsrelease.htm Q2 EARNINGS PRESS RELEASE

Exhibit 99.1

NEWS RELEASE

 

 

Contact: Dollar Financial Corp.

 

 

Financial Dynamics

 

Mark McCall (212) 850-5641

 

FOR IMMEDIATE RELEASE

 

 

 

DOLLAR FINANCIAL CORP. ANNOUNCES RECORD SECOND QUARTER RESULTS AND INCREASES GUIDANCE FOR FISCAL 2006;

THE COMPANY POSITIONS ITSELF FOR CONTINUING GROWTH THROUGH GEOGRAPHIC AND PRODUCT LINE EXPANSION

 

BERWYN, Pennsylvania, January 31, 2006 – Dollar Financial Corp. (NASDAQ:DLLR - News), a leading international financial services company serving under-banked customers, today announced results for the fiscal second quarter ended December 31, 2005.

 

Highlights for the quarter ended December 31, 2005, as compared to the quarter ended December 31, 2004 include:

Total net revenue was $80.7 million, an increase of 11.4% or $8.3 million and a record for a fiscal quarter.

Revenue from the Company’s international operations increased by 18.3% or $8.1 million.

Comparable store sales for the international business increased by 19.4% and total company comparable store sales increased by 8.8%. This quarter marks the 10th consecutive quarter in which the Company’s comparable store sales have increased by at least 8.0%.

The newly introduced CustomCash installment loan product in the U.S. market generated $3.9 million of net revenue for the quarter.

Net income before income taxes increased by $2.7 million to $9.1 million, representing a 43.0% increase and a record for a fiscal quarter.

Net income increased by $1.9 million to $3.0 million for the quarter and a record for a fiscal quarter.

Pro-forma fully diluted earnings per share assuming a 37.0% pro-forma effective tax rate was $0.31 for the quarter.

 

 



 

 

Total Company loan loss provision, as a percentage of gross consumer lending revenue, decreased to 18.9% for the second quarter from 22.2% for the same period in the prior year.

 

Commenting on the results, Jeff Weiss, the Company’s Chairman and Chief Executive Officer, stated, “Our primary focus this quarter was on positioning the company for continuing growth for the remainder of fiscal 2006 and beyond. During the quarter, we successfully launched our new installment loan product, CustomCash, in the U.S. market and are pleased to report the consumer’s demand for this product has exceeded our expectations. In addition, in December, we expanded our market reach in the U.K. by opening our first three store locations in Scotland. We believe this expansion presents an excellent opportunity for future growth as Scotland has a number of large population densities with demographics that fit our target customer profile. As evidenced by these initiatives, we remain committed to being the most geographically and product diversified company in the industry and will continue to explore opportunities to enter new markets and expand our product offerings. “

 

Mr. Weiss continued, “Owing to a significant decline in consumer bankruptcy filings and a slower pace of franchise store openings, our new We The People business did not meet our expectations and generated an operating loss of approximately $2.0 million for the quarter. We have made significant investments in people, systems and infrastructure to support the future growth of the We The People store and franchise network and expect improved bottom-line results from this business unit during the remainder of fiscal 2006.”

 

The Company’s international operations generated a $5.1 million or 32.8% increase in net consumer lending revenue. As expected, this was offset by the transition of the majority of the U.S. payday consumer loan business from a bank agency model to a company funded loan model which resulted in a $2.6 million decrease in net domestic consumer lending revenue.

 

International check cashing revenue increased by $1.9 million or 8.6%, while U.S. check cashing revenue increased by $617,000 or 5.6%. The other revenue category increased by $2.6 million, primarily due to $1.9 million of revenue from the We The People legal document preparation services line of business, as well as additional franchise revenue from the Canadian business.

 

Total company funded loan originations were $252.7 million for the second quarter ended December 31, 2005 representing an increase of 40.9% or $73.4 million over the same period in the prior year. The increase was primarily a result of the Company transitioning the majority of

 



 

its domestic payday loan portfolio from a bank agency model to a company funded loan model. The resulting transition caused U.S. company funded loan originations to increase by 234.8% or $43.5 million. Loan originations in Canada grew by 22.0% or $26.0 million, while loan originations in the U.K. grew by 9.3% or $4.0 million. As a percentage of gross consumer lending revenue, total company loan losses decreased to 18.9% for the current quarter compared to 22.2% for the previous year.

 

For the second quarter ended December 31, 2005, the face amount of the average check cashed increased 5.5% to $441 compared to $418 for the prior year period. The average fee per check cashed also increased by 6.5% to $16.50 for the quarter.

 

Comparable store sales increased by 8.8% or $6.2 million for the quarter and on a constant currency basis increased by 8.7% or $6.1 million. On a local currency basis, U.K. comparable store sales increased by 22.5%, with an increase of 17.2% in Canada, while U.S. comparable store sales decreased by 11.0%. The decrease in U.S. comparable store sales is a direct result of the transition of the U.S. payday loan portfolio to the company funded loan model, and is net of the revenue generated by the newly introduced CustomCash product.

 

For the three months ended December 31, 2005, the Company realized store and regional margin of $28.0 million or 34.7% of total revenue as compared to $27.0 million or 37.2% of total revenue for the same period in the prior year. The primary reasons for the decrease in store and regional margin, as a percentage of revenue, were the expected lower aggregate consumer lending revenue in the U.S., additional expenses associated with the launch of the CustomCash product, and additional store and other operating expenses associated with the acquired We The People stores.

 

Corporate expenses were $10.4 million for the three months ending December 31, 2005 compared to $9.5 million for the previous year, which represents a decline to 12.9% of total revenue for the current quarter from 13.1% for the previous year. The increase in the amount, as compared to the prior years’ quarter, is principally attributable to increased insurance and other public company costs. Interest expense for the second quarter decreased to $7.4 million from $9.8 million for the previous year.

 

Income before income taxes for the quarter was $9.1 million, an increase of $2.7 million or 43.0% over the prior year. The Company realized net income of $3.0 million for the quarter, as

 



 

compared to $1.1 million for the previous year. For calendar year 2005, the Company’s income before income taxes and net income were $26.0 million and $3.9 million respectively.

 

The Company’s income tax provision for the fiscal 2006 second quarter was $6.1 million, which reflects an effective income tax rate of 67.0%. Included in the income tax provision is a valuation allowance against the tax benefit of the Company’s U.S. income tax operating losses, which represents 30.0% of income before income taxes. The valuation allowance is recorded pursuant to U.S. generally accepted accounting principles, and will continue until such time as the Company can demonstrate that the benefit from such tax operating losses can be realized. If the Company was able to demonstrate that the benefit from the U.S. income tax operating loss for the quarter could be realized, and thereby could recognize the benefit thereof under U.S. generally accepted accounting principles, the pro-forma effective income tax rate for the quarter would have been approximately 37.0%. The 37.0% pro-forma effective income tax rate would have resulted in earnings per share for the quarter of $0.31.

 

In the second quarter of fiscal 2006, the Company opened six new company operated stores in both the U.K. and Canadian markets, and also acquired two company operated We The People stores in the U.S. market. The Company also closed one under-performing company operated financial services store in the U.S. market and nine company operated We The People stores. The closed We The People stores were acquired in the first quarter, were generally in poor locations, and were targeted for closure. We anticipate developing more profitable company operated or franchise stores at better sites within these territories in the future.

 

The Company added five franchise financial services locations in Canada, one in the U.S., and a net total of eight in the U.K. market. There was a net reduction of four franchise We The People locations in the U.S. market.

 

Fiscal 2006 Earnings Guidance

Because of the strong performance of the newly introduced CustomCash product in the U.S. market and the growing strength of the international business in the second quarter, the Company is increasing its earnings guidance for fiscal 2006. Dollar is now projecting revenue of between $312.0 and $317.0 million and EBITDA of $80.0 million to $82.0 million. Income before income taxes, for fiscal 2006, is now projected to be between $38.0 and $40.0 million.

 

Investors Conference Call

 

 



 

 

Dollar Financial Corp. will be holding an investor’s conference call on Tuesday, January 31, 2006 at 5:00 pm ET to discuss the Company’s results for the fiscal second quarter and its guidance for fiscal year 2006. Investors can participate in the conference by dialing 888-896-0863 (U.S. and Canada) or 973-935-8507 (International); use the confirmation code “Dollar”. Hosting the call will be Jeff Weiss, Chairman and CEO, Don Gayhardt, President, and Randy Underwood, Executive Vice President and CFO. For your convenience, the conference call can be replayed in its entirety beginning at 7:00 pm Eastern Time on January 31, 2006 through February 7, 2006. If you wish to listen to the replay of this conference call, please dial 973-341-3080 and enter passcode “6904467”.

 

The conference call will also be broadcast live through a link on the Investor Relations page on the Dollar Financial web site at http://www.dfg.com. Please go to the web site at least 15 minutes prior to the call to register, download and install any necessary audio software.

 

About Dollar Financial Corp.

Dollar Financial Corp. is a leading international financial services company serving under-banked consumers. Our customers are typically lower- and middle-income working-class individuals who require basic financial services but, for reasons of convenience and accessibility, purchase some or all of their financial services from the Company rather than from banks and other financial institutions. To meet the needs of these customers, the Company provides a range of consumer financial products and services primarily consisting of check cashing, short-term consumer loans, Western Union money order and money transfer products, reloadable VISA® branded debit cards, electronic tax filing, bill payment services, and legal document preparation services.

 

At December 31, 2005, the Company operated a network of 1,329 stores, including 165 We the People legal document preparation locations, and 725 company-operated financial services stores in 36 states, the District of Columbia, Canada and the United Kingdom. The store network is the largest network of its kind in each of Canada and the United Kingdom and the second-largest network of its kind in the United States. The Company’s customers, many of whom receive income on an irregular basis or from multiple employers, are drawn to the convenient neighborhood locations, extended operating hours and high-quality customer service. The Company’s products and services, principally check cashing and short-term consumer loan programs, provide immediate access to cash for living expenses or other needs. For more information, please visit the Company's website at www.dfg.com.

 

Forward Looking Statement

 

 



 

 

This news release contains forward looking statements, including statements regarding the Company’s future results, growth and operating strategy, the impact of hurricanes and of the performance of new products. These forward looking statements involve risks and uncertainties, including risks related to the regulatory environment, the integration of acquired stores, the performance of new stores, the new installment loan products and other new product lines on the Company’s business, results of operations, financial condition and prospects. There can be no assurance that the Company will be able to meet its expected results, successfully integrate any of its acquisitions, or that the various FDIC, Federal, state or foreign legislative or regulatory activities affecting the Company or the banks with which the Company does business will not negatively impact the Company’s operations. A more complete description of these and other risks, uncertainties and assumptions is included in the Company’s filings with the Securities and Exchange Commission, including those described under the heading “Risk Factors” in the final prospectus from the Company’s initial public offering filed with the SEC on January 31, 2005 and its annual report on Form-10K. You should not place any undue reliance on any forward-looking statements. We disclaim any obligation to update any such factors or to publicly announce results of any revisions to any of the forward-looking statements contained herein to reflect future events or developments.

 



 

 

 

DOLLAR FINANCIAL CORP.

INTERIM UNAUDITED CONSOLIDATED BALANCE SHEETS

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2005

 

December 31, 2005

 

 


 


Assets:

 

 

 

 

Cash and cash equivalents

 

$                                 92,504

 

$                              100,102

Loans receivable:

 

 

 

 

Loans receivable

 

41,353

 

56,539

Less: Allowance for loan losses

 

(2,707)

 

(4,096)

 

 


 


Loans receivable, net

 

38,646

 

52,443

Other consumer lending receivables

 

7,996

 

3,976

Prepaid expenses and other receivables

 

12,310

 

15,434

Deferred tax asset, net

 

71

 

90

Property and equipment, net

 

35,611

 

36,103

Goodwill and other intangibles, net

 

186,190

 

194,598

Debt issuance costs, net

 

10,558

 

10,374

Other assets

 

3,970

 

3,014

 

 


 


Total Assets

 

$ 387,856

 

$                                 416,134

 

 


 


 

 

 

 

 

Liabilities:

 

 

 

 

Accounts payable

 

$ 19,256

 

$ 23,016

Foreign income taxes payable

 

4,648

 

4,912

Accrued expenses and other liabilities

 

26,909

 

22,581

Accrued interest payable

 

3,291

 

3,314

Deferred tax liability

 

2,352

 

3,194

Revolving credit facilities

 

-

 

20,500

9.75% Senior Notes due 2011

 

271,764

 

271,626

Other long-term debt

 

-

 

733

 

 


 


Total Liabilities

 

328,220

 

349,876

 

 


 


 

 

 

 

 

Shareholders' equity:

 

 

 

 

Common stock

 

18

 

18

Additional paid-in capital

 

160,997

 

161,195

Accumulated deficit

 

(121,885)

 

(116,568)

Accumulated other comprehensive income

 

20,506

 

21,613

 

 


 


Total shareholders' equity

 

59,636

 

66,258

 

 


 


Total Liabilities and Shareholders' Equity

 

$ 387,856

 

$ 416,134

 

 


 


 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

DOLLAR FINANCIAL CORP.

 

INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

 

(In thousands except share and per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

December 31,

 

December 31,

 

 


 


 

 

2004

2005

 

2004

2005

 

 



 



Revenues:

 

 

 

 

 

 

Check cashing

$               32,733

$                 35,224

 

$               63,095

$                 69,571

 

Consumer lending:

 

 

 

 

 

 

Fees from consumer lending

39,538

41,094

 

76,745

77,332

 

Provision for loan losses and adjustment

 

 

 

 

 

 

to servicing revenue

(8,772)

(7,748)

 

(18,209)

(16,521)

 

 



 



 

Consumer lending, net

30,766

33,346

 

58,536

60,811

 

Money transfer fees

3,685

4,262

 

7,193

8,220

 

Other

5,222

7,835

 

9,715

16,530

 



 



Total revenues

72,406

80,667

 

138,539

155,132

 



 



 

 

 

 

 

 

 

Store and regional expenses:

 

 

 

 

 

Salaries and benefits

22,456

26,004

 

43,343

51,195

 

Occupancy

5,612

6,752

 

11,006

13,470

 

Depreciation

1,821

1,835

 

3,575

3,667

 

Returned checks, net and cash shortages

2,738

3,128

 

5,222

6,387

 

Telephone and telecommunication

1,477

1,445

 

2,950

2,866

 

Advertising

2,289

2,633

 

5,121

4,822

 

Bank charges and armored carrier services

1,867

2,171

 

3,627

4,266

 

Other

7,179

8,690

 

14,271

15,999

 

 



 



Total store and regional expenses

45,439

52,658

 

89,115

102,672

 



 



Store and regional margin

26,967

28,009

 

49,424

52,460

 



 



 

 

 

 

 

 

 

Corporate and other expenses:

 

 

 

 

 

Corporate expenses

9,519

10,410

 

17,750

19,582

 

Management fees and other

109

142

 

472

418

 

Other depreciation and amortization

1,150

886

 

2,081

1,811

 

Interest expense, net

9,802

7,438

 

19,471

14,679

 

 



 



Income before income taxes

6,387

9,133

 

9,650

15,970

Income tax provision

5,254

6,115

 

8,608

10,653

 



 



Net Income

$                 1,133

$                   3,018

 

$                 1,042

$                   5,317

 



 



 

 

 

 

 

 

 

Net Income per share

 

 

 

 

 

 

Basic

$                   0.10

$                     0.17

 

$                   0.10

$                     0.29

 

Diluted

$                   0.10

$                     0.16

 

$                   0.09

$                     0.29

 

 

 

 

 

 

 

Weighted average shares outstanding

 

 

 

 

 

Basic

10,965,779

18,102,727

 

10,965,779

18,095,881

 

Diluted

11,367,575

18,358,187

 

11,367,575

18,392,674

 

 

 

 

 



 

 

EBITDA Reconciliation

EBITDA is not an item prepared in accordance with GAAP. EBITDA is earnings before interest expense, income tax provision, depreciation, amortization and other items described below. Dollar presents EBITDA as an indication of operating performance and its ability to service its debt and capital expenditure requirements. EBITDA does not indicate whether Dollar’s cash flow will be sufficient to fund all of its cash needs. EBITDA should not be considered in isolation or as a substitute for net income, cash flows from operating activities, or other measures of operating performance or liquidity determined in accordance with GAAP. Dollar believes that EBITDA amounts should be reviewed by prospective investors because Dollar uses them as one means of analyzing its ability to service its debt and capital expenditure requirements, and Dollar understands that they are used by some investors as one measure of a Company's historical ability to service its debt and capital expenditure requirements. Not all companies calculate EBITDA in the same fashion, and therefore these amounts as presented may not be comparable to other similarly titled measures of other companies. The table below reconciles income before income taxes as reported on Dollar’s Interim Unaudited Consolidated Statements of Operations to Adjusted EBITDA (dollars in thousands):

 

 

Three Months Ended

 

Six Months Ended

 

December 31,

 

December 31,

 


 


 

2004

2005

 

2004

2005

 



 



Income before income taxes

$               6,387

$          9,133

 

$           9,650

$         15,970

Add:

 

 

 

 

 

Depreciation and amortization

2,971

2,721

 

5,656

5,478

Interest expense

9,802

7,438

 

19,471

14,679

Management fees and other

109

142

 

472

418

Foreign currency (gain) loss

471

(100)

 

597

304

 



 



Adjusted EBITDA

$             19,740

$        19,334

 

$         35,846

$         36,849

 



 



 

 

 

 

 

 

 



 

 

 

Dollar Financial Corp.

Unaudited Store Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

 

 

December 31,

 

December 31,

 

 

 

 

 

2004

 

2005

 

2004

 

2005

 

 

 

 

 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Store Count

 

 

 

 

 

 

 

 

Beginning

 

1,122

 

1,316

 

1,110

 

1,335

 

 

 

Opened

 

10

 

12

 

21

 

18

 

 

 

Acquired

 

4

 

2

 

5

 

28

 

 

 

Closed or Sold

 

(8)

 

(11)

 

(8)

 

(15)

 

 

 

Franchise, net change

 

2

 

10

 

2

 

(37)

 

 

 

 

 


 


 


 


 

 

 

Ending

 

1,130

 

1,329

 

1,130

 

1,329

 

 

 

 

 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company-Operated Store Count

 

 

 

 

 

 

 

Beginning

 

650

 

744

 

638

 

716

 

 

 

Opened

 

10

 

12

 

21

 

18

 

 

 

Acquired

 

4

 

2

 

5

 

28

 

 

 

Closed or Sold

 

(8)

 

(11)

 

(8)

 

(15)

 

 

 

 

 


 


 


 


 

 

 

Ending

 

656

 

747

 

656

 

747

 

 

 

 

 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Franchise Store Count

 

 

 

 

 

 

 

 

 

Beginning

 

472

 

572

 

472

 

619

 

 

 

Financial Services, net change

 

2

 

14

 

2

 

(8)

 

 

 

We The People, net change

 

0

 

(4)

 

0

 

(29)

 

 

 

 

 


 


 


 


 

 

 

Ending

 

474

 

582

 

474

 

582

 

 

 

 

 


 


 


 


 

 



 

 

 

Dollar Financial Corp.

Unaudited Selected Statistical Data

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

December 31,

 

December 31,

 

 

2004

 

2005

 

2004

 

2005

 

 


 


 


 


Check Cashing Data (Consolidated)

 

 

 

 

 

 

 

 

Face amount of checks cashed (in millions)

 

$             883

 

$            941

 

$         1,699

 

$         1,858

Number of checks cashed (in thousands)

 

2,113

 

2,135

 

4,135

 

4,223

Face amount of average check

 

$             418

 

$            441

 

$             411

 

$            440

Average fee per check cashed

 

$         15.49

 

$         16.50

 

$         15.26

 

$         16.47

Net write-offs of returned checks (in thousands)

 

$         2,414

 

$         2,646

 

$         4,640

 

$         5,615

Net write offs as a percentage of check cashing revenue

 

7.4%

 

7.5%

 

7.4%

 

8.1%

 

 

 

 

 

 

 

 

 

Consumer Loan Data – Net Revenues

 

 

 

 

 

 

 

 

U.S. company funded consumer loan originations

 

$       18,507

 

$       61,960

 

$       37,069

 

$     129,596

Canadian company funded consumer loan originations

 

118,027

 

143,981

 

225,168

 

273,073

U.K. company funded consumer loan originations

 

42,780

 

46,740

 

85,478

 

94,478

 

 


 


 


 


Total company funded consumer loan originations

 

$     179,314

 

$     252,681

 

$     347,715

 

$     497,147

 

 


 


 


 


 

 

 

 

 

 

 

 

 

Consumer Loan Data – Net Revenues

 

 

 

 

 

 

 

 

U.S. servicing revenues, net

 

$       13,868

 

$         3,933

 

$       26,018

 

$         5,341

U.S. company funded consumer loan revenues

 

2,711

 

10,415

 

5,485

 

20,254

Canadian company funded loan revenues

 

12,538

 

17,419

 

24,018

 

32,476

U.K. company funded consumer loan revenues

 

6,323

 

7,708

 

12,359

 

15,097

Provision for loan losses on company funded loans

 

(4,674)

 

(6,129)

 

(9,344)

 

(12,357)

 

 


 


 


 


Total consumer lending revenues, net

 

$       30,766

 

$       33,346

 

$       58,536

 

$       60,811

 

 


 


 


 


 

 

 

 

 

 

 

 

 

Consumer Loan Net Charge-offs

 

 

 

 

 

 

 

 

Gross charge-offs of company funded consumer loans

 

$       16,476

 

$       26,753

 

$       32,554

 

$       51,520

Recoveries of company funded consumer loans

 

(11,912)

 

(20,670)

 

(23,380)

 

(40,401)

 

 


 


 


 


Net charge-offs on company funded consumer loans

 

$         4,564

 

$         6,083

 

$         9,174

 

$       11,119

 

 


 


 


 


 

 

 

 

 

 

 

 

 

Gross charge-offs of company funded consumer loans

 

 

 

 

 

 

 

 

as a percentage of total company funded consumer loan

 

 

 

 

 

 

 

 

originations

 

9.2%

 

10.6%

 

9.4%

 

10.4%

Recoveries of company funded consumer loans as a

 

 

 

 

 

 

 

 

percentage of total company funded consumer loan

 

 

 

 

 

 

 

 

originations

 

6.7%

 

8.2%

 

6.8%

 

8.2%

Net charge-offs on company funded consumer loans as

 

 

 

 

 

 

 

 

a percentage of total company funded consumer loan

 

 

 

 

 

 

 

 

originations

 

2.5%

 

2.4%

 

2.6%

 

2.2%