Industry News
Dollar Financial Corp. Announces 2006 Fiscal First Quarter Results; Revenue Growth of 12.6% Drives Growth in Net Income
Dollar
Financial Corp. (NASDAQ:DLLR), a leading international financial services
company serving under-banked customers, today announced results for the fiscal
first quarter ended September 30, 2005.
Highlights for the quarter ended September 30, 2005, as compared to the quarter
ended September 30, 2004 include:
-- Total net revenue was $74.5 million, an increase of 12.6% or $8.3 million.
-- Total net revenue from the Company's international operations increased by
23.0% or $9.2 million to $48.9 million.
-- Comparable store sales for the international business increased by 20.1% and
total company comparable store sales increased by 8.4%.
-- Check cashing
revenue increased by 13.1% or $4.0 million.
-- Net income increased by $2.4 million to $2.3 million for the quarter.
-- Fully diluted earnings per share were $0.12 as compared to a loss of $0.01
per share for the prior year period.
-- Net charge-offs on company funded consumer loans, as a percentage of total
company funded consumer loan originations, were 2.1% for the first quarter, as
compared to 2.7% for the same period in the prior year.
Commenting on the results, Jeff Weiss, the Company's Chairman and Chief
Executive Officer, stated, "We delivered significant revenue and income growth
for the quarter, while successfully managing through the transition of the
majority of the U.S. loan portfolio to the company funded loan model, as well as
the extended business interruption associated with nine stores in Louisiana
affected by Hurricane's Katrina and Rita. The quarter's results underscore the
strength and flexibility of the Company's long-term strategy of balancing growth
across multiple countries and product lines. As the most diversified company in
our sector, both in terms of products and geographies, we continue to believe
that this multinational, multi-product and multi-channel strategy allows us to
effectively manage specific product line and regulatory risks while providing a
broader foundation on which to deliver sustainable earnings growth and
shareholder value."
In early October, the Company completed the launch of a new installment loan
product in California, Pennsylvania, Texas, Ohio, and Washington State.
Collectively, these states represent 199 or 57.5% of the total U.S. company
operated financial services store base. This new loan product will have a fee
structure substantially similar to the core
payday loan product, however the loan
term is four months, with up to eight payments due on corresponding customer
pay days. Loans are
offered in principal amounts ranging from $300 to $1,500. Commenting on this new
product introduction, Don Gayhardt, the Company's President, stated, "We are
excited about our customer's response to the new installment loan product.
Demand has been very strong but it will likely be several months before we can
assess the credit performance of these loans compared to our core
payday loan product."
The Company's international operations generated a $4.3 million or 31.5%
increase in net consumer lending revenue, which was offset by a $4.7 million
decrease in the U.S. consumer lending business. The lower consumer lending
revenue in the U.S. was expected as a result of the transition of the majority
of the U.S. consumer lending business from the bank agency model to a company
funded loan model. The U.S. consumer lending business was also impacted by the
planned downsizing of the direct-to-customer lending business. International
check cashing revenue
increased by $3.4 million or 17.1%, while U.S.
check cashing revenue increased by
$632,000 or 5.9%. The other revenue category increased by $4.2 million, which is
primarily composed of $2.7 million of revenue from the recently acquired We The
People legal document preparation services line of business, as well as
additional franchise revenue from the Canadian business.
Company funded loan originations were $244.5 million for the first quarter ended
September 30, 2005 representing an increase of 45.2% or $76.1 million over the
same period in the prior year. The increase was primarily a result of the
Company transitioning the majority of its domestic loan portfolio from a bank
agency model to a company funded loan model. The resulting transition caused the
U.S. company funded loan originations to increase by 264.4% or $49.1 million.
Loan originations in the U.K. market grew by 11.8% or $5.0 million, while loan
originations in Canada grew by 20.5% or $22.0 million. Net charge-offs on
company funded consumer loans, as a percentage of total company funded consumer
loan originations, were 2.1% for the first quarter, as compared to 2.7% for the
same period in the prior year. As a percentage of consumer lending revenue,
total company loan losses were 24.7% for the current quarter compared to 25.4%
for the previous year.
Comparable store sales increased by 8.4% for the quarter and on a constant
currency basis increased by 5.5%. On a local currency basis, U.K. comparable
store sales increased by 24.2%, Canadian same store sales increased by 9.3%,
while U.S. comparable store sales decreased by 16.0%. The decrease in U.S.
comparable store sales is a direct result of the consumer loan transition.
For the 2006 fiscal first quarter, the face amount of the average check cashed
increased 8.7% to $439 compared to $404 for the prior year. The average fee per
check cashed increased 9.5% to $16.45 for the quarter, as compared to $15.02 for
the same period in the prior year.
For the three months ended September 30, 2005, the Company realized a store and
regional margin of $24.5 million or 32.8% of total revenues as compared to $22.5
million or 34.0% of total revenues for the same period in the prior year. The
decrease in the store and regional margin percentage is primarily attributable
to the decrease in domestic consumer loan revenue, as well as additional store
development costs associated with the recently acquired We The People stores.
Corporate expenses for the three months ended September 30, 2005 increased by
$941,000 over the previous year to $9.2 million or 12.3% of total revenues. The
increase of $941,000 was primarily due to higher insurance and other public
company costs, as well as an increase in compensation costs to support the
expansion of the global store network and new product offerings.
Interest expense for the three months ended September 30, 2005 decreased to $7.2
million, which represents a reduction of 25.1% or $2.4 million from the previous
year. Funds generated from the January 27, 2005 IPO were used to retire the
entire balance of two issues of senior notes and senior subordinated notes,
which including the accrued interest, totaled $92.7 million.
Income before income taxes was $6.8 million for the quarter, an increase of $3.6
million over the prior year. The Company realized net income of $2.3 million or
$0.12 per fully diluted share for the quarter, as compared to a net loss of
$91,000 or a loss of $0.01 per fully diluted share for the previous year.
The Company's income tax provision for the fiscal 2006 first quarter was $4.5
million, which reflects an effective income tax rate of 66.4%. 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 29.4% of income
before income taxes. This 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%.
In the first quarter of fiscal 2006, the Company opened three company operated
financial services stores in each of the U.S. and U.K. markets and also
completed the repurchase of twenty-six We The People franchise stores primarily
located in New York City. The Company also closed four non-performing company
operated financial services stores in the U.S. market.
The Company added five franchise financial services locations in Canada and two
in the U.K., as well as one We The People franchise location in the U.S. market.
The Company also terminated its relationship with twenty-nine franchise
locations in the U.K. due to their lack of performance. The Company continues to
assess its U.K. franchise relationships in connection with furthering its goal
of developing more profitable company operated stores. As of September 30, 2005,
the global store network included 1,316 locations.
Update on Hurricane Katrina and Hurricane Rita
The Company announced in a press release on September 16, 2005, that it operates
five financial services stores in New Orleans that were directly impacted by
Hurricane Katrina. Four of these stores are currently closed due to extensive
damage, while one store suffered only minor damage and was reopened at the end
of September. The Company anticipates refurbishing and reopening the remaining
four stores by the end of the third quarter of the current fiscal year. The
total financial impact in the first quarter, as a result of the disruption of
operations from Hurricane Katrina, was a reduction of approximately $300,000 of
revenue and $500,000 of income before income taxes. The first quarter impact is
consistent with the 2006 full year estimate of a reduction of between $700,000
and $1.0 million of income before income taxes.
The Company was also impacted by Hurricane Rita, which resulted in the temporary
closure of four stores in Lake Charles, Louisiana. These four stores all
suffered minor damage and were reopened by mid-October.
Investors Conference Call
Dollar Financial Corp. will be holding an investor's conference call scheduled
for Thursday, October 27, 2005 at 5:00 p.m. ET to discuss the Company's results
for the fiscal first quarter ended September 30, 2005 and the reconfirmation of
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 p.m. Eastern Time on October 27, 2005 through November 3,
2005. If you wish to listen to the replay of this conference call, please dial
973-341-3080 and enter passcode "6574455".
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 us rather than from banks and other financial
institutions. To meet the needs of these customers, we provide 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(R)
branded debit cards, electronic tax filing, bill payment services, and legal
document preparation services.
At September 30, 2005, the Company operated a network of 1,316 stores, including
176 We the People legal document preparation locations, and 715 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 our convenient
neighborhood locations, extended operating hours and high-quality customer
service. Our products and services, principally our
check cashing and short-term consumer
loan program, 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 FDIC guidance on
payday lending. These forward looking
statements involve risks and uncertainties, including risks related to the
regulatory environment, the integration of acquired stores, the new installment
loan product and new product lines, as well as the impact of the FDIC guidance
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
FDIC guidance or other 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 our filings with the Securities and Exchange Commission, including those
described under the heading "Risk Factors" in our recent final prospectus from
the Company's initial public offering filed with the SEC on January 31, 2005.
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.
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DOLLAR FINANCIAL CORP. |
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INTERIM UNAUDITED CONSOLIDATED BALANCE SHEETS |
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(In thousands) |
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June 30, September |
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2005 30, 2005 |
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Assets: |
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Cash and cash equivalents $92,504 $99,735 |
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Loans receivable: |
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Loans receivable 41,353 51,781 |
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Less: Allowance for loan losses (2,707) (4,041) |
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Loans receivable, net 38,646 47,740 |
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Other consumer lending receivables 7,996 2,568 |
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Prepaid expenses and other receivables 12,310 16,290 |
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Deferred tax asset, net 71 140 |
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Property and equipment, net 35,611 36,951 |
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Goodwill and other intangibles, net 186,190 192,727 |
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Debt issuance costs, net 10,558 10,785 |
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Other 3,970 2,343 |
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Total Assets $387,856 $409,279 |
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Liabilities: |
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Accounts payable $23,807 $25,655 |
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Foreign income taxes payable 4,648 4,441 |
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Accrued expenses and other liabilities 22,358 16,190 |
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Accrued interest payable 3,291 9,874 |
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Deferred tax liability 2,352 2,779 |
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Revolving credit facilities - 11,900 |
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9.75% Senior Notes due 2011 271,764 271,695 |
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Shareholders' (deficit) equity: |
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Common stock 18 18 |
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Additional paid-in capital 160,997 161,169 |
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Accumulated deficit (121,885) (119,586) |
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Accumulated other comprehensive income 20,506 25,144 |
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Total shareholders' equity 59,636 66,745 |
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Total Liabilities and Shareholders' Equity $387,856 $409,279 |
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DOLLAR FINANCIAL CORP. |
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INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS |
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(In thousands except share and per share amounts) |
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Three Months Ended |
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September 30, |
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2004 2005 |
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Revenues: |
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Check cashing $30,362 $34,347 |
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Consumer lending: |
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Fees from consumer lending 37,207 36,487 |
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Provision for loan losses and adjustment |
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to servicing revenue (9,437) (9,022) |
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Consumer lending, net 27,770 27,465 |
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Money transfer fees 3,508 3,958 |
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Other 4,493 8,695 |
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Total revenues 66,133 74,465 |
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Store and regional expenses: |
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Salaries and benefits 20,887 25,191 |
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Occupancy 5,394 6,718 |
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Depreciation 1,754 1,832 |
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Returned checks, net and cash shortages 2,484 3,259 |
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Telephone and telecommunication 1,473 1,421 |
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Advertising 2,832 2,189 |
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Bank charges 936 1,109 |
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Armored carrier services 824 986 |
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Other 7,092 7,309 |
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Total store and regional expenses 43,676 50,014 |
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Store and regional margin 22,457 24,451 |
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Corporate and other expenses: |
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Corporate expenses 8,231 9,172 |
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Management fee 277 - |
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Other depreciation and amortization 931 925 |
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Interest expense, net 9,669 7,241 |
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Other 86 276 |
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Income before income taxes 3,263 6,837 |
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Income tax provision 3,354 4,538 |
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Net (loss) income ($91) $2,299 |
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Net (loss) income per share: |
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Basic ($0.01) $0.13 |
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Diluted ($0.01) $0.12 |
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Weighted average shares outstanding: |
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Basic 10,965,778 18,089,141 |
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Diluted 10,965,778 18,423,529 |
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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):
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Three Months Ended |
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September 30, |
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2004 2005 |
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Income before income taxes $3,263 $6,837 |
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Add: |
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Depreciation and amortization 2,685 2,757 |
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Interest expense 9,669 7,241 |
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Management fees 277 - |
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Foreign currency (gain) loss 126 404 |
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Loss on store closings & other 86 276 |
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Adjusted EBITDA $16,106 $17,515 |
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Dollar Financial Corp. |
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Unaudited Store Data |
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Three Months Ended |
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September 30, |
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2004 2005 |
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Consolidated Store Count |
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Beginning 1,110 1,335 |
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Opened 11 6 |
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Acquired 1 26 |
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Closed or Sold 0 (4) |
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Franchise, net change 0 (47) |
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Ending 1,122 1,316 |
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Company-Operated Store Count |
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Beginning 638 716 |
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Opened 11 6 |
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Acquired 1 26 |
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Closed or Sold 0 (4) |
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Ending 650 744 |
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Franchise Store Count |
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Beginning 472 619 |
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Financial Services, net change 0 (22) |
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We The People, net change 0 (25) |
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Ending 472 572 |
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Dollar Financial Corp. |
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Unaudited Selected Statistical Data |
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Three Months Ended |
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September 30, |
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2004 2005 |
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Check Cashing Data (Consolidated) |
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Face amount of checks cashed (in millions) $816 $917 |
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Number of checks cashed (in thousands) 2,022 2,088 |
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Face amount of average check $404 $439 |
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Average fee per check cashed $15.02 $16.45 |
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Net write-offs of returned checks (in thousands) $2,227 $2,969 |
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Net write offs as a percentage of check cashing |
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revenue 7.3% 8.6% |
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Consumer Loan Data - Originations |
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U.S. company funded consumer loan originations $18,562 $67,636 |
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Canadian company funded consumer loan originations 107,141 129,092 |
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U.K. company funded consumer loan originations 42,698 47,738 |
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Total company funded consumer loan originations $168,401 $244,466 |
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Consumer Loan Data - Net Revenues |
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U.S. servicing revenues, net $12,150 $1,408 |
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U.S. company funded consumer loan revenues 2,774 10,245 |
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Canadian company funded consumer loan revenues 11,480 14,856 |
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U.K. company funded consumer loan revenues 6,036 7,389 |
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Provision for loan losses on company funded loans (4,670) (6,433) |
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Total consumer lending revenues, net $27,770 $27,465 |
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Consumer Loan Net Charge-offs |
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Gross charge-offs of company funded consumer loans $16,078 $24,645 |
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Recoveries of company funded consumer loans (11,468) (19,526) |
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