Dollar Financial Corp (NASDAQ:DLLR), a leading international
diversified financial services company primarily serving unbanked
and under-banked consumers for nearly 30 years, today announced its
results for the fiscal second quarter ended December 31, 2009.
Fiscal 2010 Second Quarter Highlights
- Consolidated total revenue grew
to a record $152.7 million for the fiscal second quarter, an
increase of $20.6 million or 15.6% compared to the prior year
period, even with the impact of higher unemployment and the
Company’s more conservative approach to consumer lending and
cashing riskier third-party checks in the midst of the weakened
global economy.
- On a sequential quarter basis,
consolidated total revenue for the three months ended December 31,
2009 increased by $10.9 million or 7.7% compared to the three
months ended September 30, 2009.
- The consolidated loan loss
provision, expressed as a percentage of gross consumer lending
revenue, improved to 14.8% for the fiscal second quarter compared
to 21.3% for the three months ended December 31, 2008. The
significant improvement reflects the Company’s continued
conservative approach to extending consumer credit in the midst of
the weakened economy, as well as the continuing implementation of
proprietary credit scoring models for the Company’s global loan
products.
- Consolidated operating margin
increased by $16.3 million or 36.9% compared to the second quarter
of the prior fiscal year driven by the Company’s strong revenue
growth, contribution from acquisitions, and improvements to
consumer lending and check cashing credit decisioning processes in
the midst of the long recession.
- Total consolidated adjusted
EBITDA was a record $43.1 million for the three months ended
December 31, 2009, representing an increase of $6.2 million or
16.9% compared to the three months ended December 31, 2008.
- Pro forma income before income
taxes was $26.0 million for the quarter compared to $22.7 million
for the three months ended December 31, 2008, and excludes
non-recurring charges, the adoption of ASC 470-20 (formerly FSP
APB-14-1 Accounting for Convertible Debt Instruments), and the
non-cash amortization associated with the mark-to-market valuation
of the Company’s cross-currency interest rate swap agreements,
while pro forma net income, considering a pro forma effective
income tax rate of 43.0%, was $14.8 million for the quarter
compared to $12.9 million for the second quarter of the prior
fiscal year.
- Including $10.2 million of net
one-time charges primarily related to the Company’s debt
refinancing activities during the quarter, income before income
taxes on a GAAP basis was $12.9 million for the quarter, compared
to $19.9 million for the three months ended December 31, 2008. Net
income, which was also impacted by the one-time charges and the
related tax effects thereof, was $7.1 million for the fiscal second
quarter compared to $9.5 million for the second quarter of the
prior fiscal year.
- Pro forma fully-diluted earnings
per share, considering a pro forma effective income tax rate of
43.0%, was $0.60 for the quarter compared to $0.54 for the second
quarter of the prior fiscal year, and excludes one-time charges,
the impact of adopting ASC 470-20, and also the non-cash
amortization associated with the mark-to-market valuation of the
cross-currency interest rate swap agreements.
- Fully-diluted earnings per share
on a GAAP basis, including the effects of the $10.2 million of net
one-time charges for the current quarter, was $0.29 for the three
months ended December 31, 2009 compared to $0.40 for the prior
year’s second quarter.
Discussion on Presentation of Information
The U.S. Dollar weakened during the quarter ended December 31,
2009, as compared to the prior year’s second quarter, with the
average value of the Canadian Dollar increasing approximately 15%
compared to the U.S. Dollar, while the British Pound Sterling
increased in value by about 4% to the U.S. currency. This naturally
affects year-over-year comparisons for the Company’s results and as
such the Company will also provide country comparisons on a local
currency basis. Furthermore, in an effort to better explain the
Company’s performance for the quarter considering more recent
economic trends, the Company is also providing comparisons of its
results for the December quarter on a sequential quarter basis, as
compared to the September 30, 2009 quarter. The currency exchange
rate between the U.S. dollar and the U.K. Pound Sterling was
relatively stable between the three months ended December 31, 2009
and the quarter ending September 30, 2009, while the Canadian
currency strengthened on average by approximately 4% over that same
time frame.
Fiscal 2010 Second Quarter Overview
Commenting on the second quarter results, Jeff Weiss, the
Company’s Chairman and Chief Executive Officer, stated, “This has
been a landmark quarter in which we have strongly positioned our
Company to continue to execute our multi-country, multi-product and
multi-channel business model for many years to come. Despite the
significantly weakened economy, all of our global business units
continued to deliver strong earnings growth and cash flow during
the quarter. We continue to see early signs of economic recovery
across all of our global markets. Customers we haven’t seen for a
while are starting to return to our stores to take advantage of the
many products and services we provide. We are also pleased with the
progress of the regulatory environment in Canada. To date,
provinces which comprise more than 90% of the Company’s Canadian
company-operated store base have all announced maximum lending
rates that are above our existing price structure, but generally
below the pricing of many competitors. As a result, we recently
resumed our television advertising campaigns in Canada and are
beginning to witness an increase in the number of new customers
conducting transactions in our Canadian stores. In addition,
reflecting a strong focus on enhancing the operating efficiency of
our global store base, as well as improvements to our consumer
lending and check cashing credit decisioning processes in the midst
of the long recession, consolidated operating margin improved to
39.7% of total revenue for the quarter compared to 33.5% for the
three months ended December 31, 2008. The amount of profit we
derive from each incremental dollar of revenue has never been
stronger in the history of the Company.
“In addition to further diversifying our business to new
customer segments, the recent acquisitions we made provide
additional sources of revenue growth with little or no credit risk.
During the second quarter, approximately 45% of our total
consolidated revenue was comprised of products or services which
generally carry little or no credit risk, such as check cashing,
money transfer, gold purchase and pawn lending, and revenue from
the recent acquisitions of MCE and DFS. As we continue to diversify
our global business footprint, we expect the profit contribution
from fee based services will increase.”
Jeff Weiss continued, “The completion of our $600.0 million
senior unsecured note offering, through our Canadian subsidiary,
National Money Mart, marks the culmination of our initiative to
enhance our liquidity, and extend the maturity and realign the
Company’s debt structure to better support our long-term growth
strategies. These transactions effectively extend the majority of
the Company’s long-term debt maturities to December 2016 or about
seven years from now, and provide enhanced flexibility for the
Company to pursue acquisitions and make capital investments in the
global expansion of our business.”
Mr. Weiss concluded, “Since the formation of the Company 20
years ago, our annual revenue and adjusted EBITDA have grown at a
compound annual rate of about 20.0% and 25.0% per year,
respectively. This is indeed a very exciting time for our Company
with strong performance in all of our businesses, a deep pipeline
of acquisition and investment opportunities, and the capital
structure, liquidity, and available cash to continue to expand our
multi-country, multi-product and multi-channel business strategy
well into the future.”
Second Quarter Business Update
In Canada, where the Company’s largest and most profitable
business unit resides, the transition to provincial regulation is
in its final stages. To date, the provinces of Ontario, Nova
Scotia, British Colombia, Alberta, and Saskatchewan, which comprise
more than 90% of the Company’s Canadian company-operated store
base, have all announced maximum lending rates that are above the
Company’s existing price structures, but generally below the
pricing of many competitors. The Company continues to leverage its
position as the lowest cost provider in the industry as well as its
multi-product store platform, by offering products and services at
prices below many of its competitors in an effort to enhance its
share of the Canadian market. As a result, consumer lending revenue
in Canada increased by 10.9% in the second quarter compared to the
prior year period. Check cashing fees, which were impacted by
significantly higher unemployment and a reduction in the number of
hours in the average work week compared to this point in time last
year, decreased by 8.6% for the quarter. However, as the Company
continues to see signs of moderate employment recovery amongst its
customer base over the last several months, on a sequential quarter
basis total check cashing revenue in Canada grew slightly compared
to the three months ended September 30, 2009. The recently launched
gold purchase product in Canada added C$2.1 million of additional
revenue in the second quarter, while also serving to bring new
customers into the stores. Furthermore, the Company is piloting an
internet lending product in certain Canadian provinces, which it
will seek to expand as it gains experience with the credit
performance of these loans.
In the U.K., total revenue for the quarter on a year-over-year
basis increased by £8.1 million or 38.6%. Check cashing fees
decreased by £0.9 million for the quarter, and like Canada was
unfavorably impacted by smaller and fewer payroll checks being
cashed compared to the prior year period. Reflecting more recent
trends, on a sequential quarter basis, check cashing fees in the
U.K. were essentially flat as compared to the three months ended
September 30, 2009. Consumer lending revenue grew by 49.4% for the
quarter compared to the second quarter of the prior fiscal year,
reflecting strong performance from the internet lending business
acquired this past April and the continued robust performance of
the brick and mortar store based business. The loan loss rates for
the internet lending product continue to be in line with our
expectations, and the Company anticipates a significant opportunity
to continue to grow the internet lending product in the U.K., which
has limited competition in what the Company believes is a
significantly underserved market. The U.K. pawn lending business
and the recently introduced gold purchase product continued to
expand and combined to contribute £4.8 million of revenue for the
quarter, more than doubling the £2.2 million for the second quarter
of the prior fiscal year. The Company continued its store expansion
program in the U.K., opening 11 de novo stores and acquiring 3
stores from competitors during the quarter.
In the U.S., the Company closed a number of older and
underperforming financial services stores during the fiscal year
ended June 30, 2009 and significantly reduced the related field
management and store support functions. These store closures were
part of the Company’s previously announced plan to divest
underperforming stores and focus the now significantly reduced
domestic store footprint in states with more favorable and stable
regulatory environments. This strategy considerably reduces the
relevance of any potential changes to U.S. lending regulations on
the Company’s operations and consolidated financial results. As a
result of the successful implementation of the store consolidation
plan, operating margin for the U.S. financial services business
increased by $1.5 million compared to the second quarter of the
prior fiscal year, despite $7.3 million of lower revenue. On a
sequential quarter basis, total financial services revenue in the
U.S. increased by $0.5 million to $33.2 million compared to the
three months ended September 30, 2009.
On October 21, 2009, the Company announced the acquisition of
Merchant Cash Express or “MCE”, a merchant cash advance business
operating in the United Kingdom. MCE primarily provides access to
working capital for small retail businesses by providing cash
advances against a percentage of future credit card sales. As part
of the business model, the merchant’s credit card processor,
typically a third party bank, directs a predetermined percentage of
the merchant’s future daily credit card receipts to MCE until the
advance is repaid in full. MCE was “first to market” in the United
Kingdom in 2007 and is still the only significant participant in
this emerging industry. This acquisition further expands the
Company’s diversified international business model into the small
business financial services market. The Company believes this is a
significantly under-served market with a potential opportunity
encompassing approximately 400,000 small retail merchants in the
United Kingdom alone.
On December 23, 2009, the Company completed the acquisition of
Dealers’ Financial Services, LLC, or “DFS”. DFS provides services
to military personnel who apply for auto loans to purchase new and
low mileage used vehicles. The approved auto loans are funded and
serviced under an exclusive agreement with a major third party
national bank based in the United States, according to underwriting
protocols specified by the third party bank lender and servicer.
The bank funds and maintains the loan portfolio on its balance
sheet, as well as bears any risk of repayment default. DFS’s
revenues come from fees paid to DFS by the third party lender and
by the sale of ancillary products such as service contracts and GAP
insurance coverage. DFS markets its branded “MILES” program for
military personnel through an established network of arrangements
with franchised and independent new and used car dealerships.
Dollar is operating DFS as a standalone business unit, as it
foresees leveraging the existing dealership network and lending
platform to other customer segments in the future, through a number
of proprietary strategic growth initiatives. The current DFS
operating platform is expected to contribute $20.0 to $23.0 million
of incremental EBITDA to the Company during the 2010 calendar
year.
The Company’s Recent Refinancing Activities
Commenting on the Company’s recent debt refinancing activities,
Randy Underwood, the Company’s Executive Vice President and Chief
Financial Officer, stated, “The Company recently executed a planned
series of refinancing transactions that effectively extended the
majority of its debt maturities to December 2016, while also
providing the Company with increased liquidity and enhanced
operating and financial flexibility to continue to expand its
global footprint into new countries, sales platforms, and products
and services. The Company’s previous debt agreement, which was
developed a number of years ago when the Company was more
geographically concentrated with a solely retail store based
platform, was no longer suitable as the Company became more widely
diversified and an expanding global enterprise.”
The Company’s recent debt refinancing activities included the
following:
- On December 8, 2009, the Company
announced exchange agreements with several holders of the Company’s
$200.0 million tranche of 2.875% Senior Convertible Notes due 2027.
Pursuant to the exchange agreements, $120.0 million in aggregate
principal amount of the existing notes were exchanged for an equal
principal amount of new 3.0% Senior Convertible Notes of the
Company due 2028. The new notes have substantially the same terms
as the exchanged notes, other than the maturity of the new notes is
April 1, 2028, the conversion price of the new notes is $28.956 per
share, and the first date at which the holders of the new notes
will have the right to require the Company to repurchase the
securities at par value was extended twenty-seven months to April
1, 2015.
- On December 23, 2009, the
Company amended and restated the terms of the Company’s historical
senior secured credit facilities. The amendments revised the
covenants and terms and conditions under the senior secured credit
facilities to give the Company greater operating and financial
flexibility. The amendments also extended the maturity of nearly
all of the Company’s revolving credit facilities in the U.S. and
Canada and its term loans in Canada and the United Kingdom to
December 2014, subject to the aggregate principal amount of the
Company’s 2.875% senior convertible notes, which presently have an
outstanding balance of $80.0 million, being reduced to an
outstanding amount less than or equal to $50.0 million prior to
October 30, 2012. If this condition is not met, the maturity of the
extended revolving credit and term loans will be October 30,
2012.
- On December 23, 2009, the
Company announced the completion of its $600.0 million offering of
senior unsecured notes by the Company’s indirect wholly owned
Canadian subsidiary, National Money Mart Company. The notes pay
interest semi-annually at a fixed rate of 10.375% per annum and do
not have any scheduled principal repayment obligations until the
notes mature on December 15, 2016. There is a stipulation that the
aggregate principal amount of the Company’s 2.875% senior
convertible notes, which presently have an outstanding balance of
$80.0 million, must be reduced to an amount less than or equal to
$50.0 million prior to October 30, 2012. If this condition is not
met, the maturity of the senior unsecured notes will be November
2012.
- As previously stated, the
Company used a portion of the net proceeds of the senior unsecured
note offering to simultaneously prepay $350.0 million of the
approximately $369.6 million outstanding under the term loan
portion of its amended and restated senior secured credit facility,
thereby reducing the outstanding balance to approximately $19.6
million. In addition, the Company also used a portion of the net
proceeds of the offering to concurrently complete the previously
announced acquisition of Dealers’ Financial Services, LLC. After
transaction costs, the Company retained about $112.0 million of
cash from the transactions for general corporate purposes.
Following the completion of these transactions, the Company now has
approximately $200.0 million of excess investable cash which can be
deployed for future acquisitions, and to support the continued
expansion of its operating platforms and the growth of its global
diversified business strategies.
Fiscal 2010 Second Quarter Results Reflect Non-Cash
Charges
Effective July 1, 2009, the Company adopted ASC 470-20 (formerly
FSP APB-14-1 Accounting for Convertible Debt Instruments), which
resulted in $2.4 million of additional non-cash interest expense
being recorded in the fiscal second quarter associated with the
Company’s $200.0 million U.S. convertible notes. Since the Company
does not currently receive a tax benefit from additional charges in
the U.S., as a result of its historical net operating loss
position, the unfavorable earnings per share impact from the
adoption of ASC 470-20 was $0.10 per fully-diluted share for the
quarter on a GAAP basis. The Company’s prior year financial
statements have also been similarly restated to reflect the
adoption of ASC 470-20.
Including $10.2 million of net one-time charges related to the
Company’s refinancing activities, mark-to-market gains on the
Company’s term loans and intercompany debt, and other non-recurring
charges incurred during the quarter, income before income taxes, on
a GAAP basis, for the three months ended December 31, 2009, was
$12.9 million compared to $19.9 million for the second quarter of
the previous fiscal year. Accordingly, the effects of these net
non-recurring charges reduced net income for the three months ended
December 31, 2009 to $7.1 million compared to $9.5 million for the
prior year’s fiscal second quarter.
Excluding non-recurring charges, the non-cash impact of adopting
ASC 470-20, and also the non-cash amortization associated with the
mark-to-market valuation of the cross-currency interest rate swap
agreements, pro forma income before income taxes increased by 14.8%
to $26.0 million for the quarter, compared to $22.7 million for the
three months ended December 31, 2008. Likewise, pro forma net
income, considering a pro forma effective income tax rate of 43.0%,
was $14.8 million for the second quarter representing an increase
of 14.8% compared to the three months ended December 31, 2008,
while pro forma fully-diluted earnings per share was $0.60 for the
quarter compared to $0.54 for the second quarter of the prior
fiscal year.
Fiscal 2010 Outlook
As a result of the anticipated earnings contribution from the
recently acquired Dealers’ Financial Services business in the U.S.
and the merchant cash advance business in the U.K., combined with
the expected continued strong operating performance of its core
business units in the U.S., Canada, U.K., and now Poland, the
Company is increasing its Adjusted EBITDA guidance for fiscal 2010
to between $173.0 million and $183.0 million.
The Company recorded $10.2 million of net one-time charges
primarily related to the refinancing transactions during the fiscal
quarter ended December 31, 2009, which will decrease the Company’s
reported fully-diluted earnings per share for the fiscal year ended
June 30, 2010 on a GAAP basis. Furthermore, the prepayment of the
majority of the Company’s Canadian term loans is expected to result
in approximately $6.7 million of annual non-cash amortization
associated with the mark-to-market adjustment of the Company’s
cross-currency interest rate swap agreements at the time the debt
was terminated in December, which will likely continue until the
swap instruments expire in October 2012.
Therefore, as a result of the stronger anticipated operating
business performance and contributions from the recent
acquisitions, offset by the additional interest expense to be
incurred resulting from the recent refinancing transactions, the
Company anticipates pro forma fully-diluted earnings per share for
fiscal 2010 will be between $1.80 and $2.00. This range excludes
one-time charges, the impact of adopting ASC 470-20 and the
non-cash amortization associated with the mark-to-market valuation
of the cross-currency interest rate swap agreements, and assumes a
43% pro forma tax rate. Looking forward, the Company expects to
begin to deploy the approximately $200.0 million of excess cash the
Company presently has on its balance sheet in opportunities that
the Company expects will further enhance earnings per share and
expand the business globally.
The reconciliation between adjusted EBITDA and income before
income taxes, and the calculation of pro forma fully-diluted
earnings per share is consistent with the historical reconciliation
presented at the end of this news release.
Investors Conference Call
Dollar Financial Corp will be holding an investor’s conference
call on Thursday, January 28, 2010 at 5:00 pm ET to discuss the
Company’s results for the fiscal second quarter ended December 31,
2009 and the Company’s fiscal 2010 outlook. Investors can
participate in the conference by dialing (888) 200-2794 (U.S. and
Canada) or (973) 935-8766 (International); use the confirmation
code “Dollar”. Hosting the call will be Jeff Weiss, Chairman and
CEO and Randy Underwood, Executive Vice President and CFO. For your
convenience, the conference call can be replayed in its entirety
beginning from two hours after the end of the call through February
4, 2010. If you wish to listen to the replay of this conference
call, please dial (706) 645-9291 and enter passcode “51416196”.
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 diversified international
financial services company primarily serving unbanked and
under-banked consumers. Its customers are typically service sector
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, automobile loans and services, pawn lending, Western Union
money order and money transfer products, currency exchange, gold
buying, reloadable VISA® and MasterCard® branded debit cards,
electronic tax filing, and bill payment services.
At December 31, 2009, the Company’s global store network
consisted of 1,172 stores, including 1,043 company-operated
financial services stores and 129 franchised and agent locations in
the United States, Canada, United Kingdom, Republic of Ireland, and
Poland. The financial services 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 financial products and services,
principally check cashing, money transfer, pawn lending 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 following: the Company’s recent financing
activities and the use of proceeds therefrom, the Company’s future
results, growth, guidance, expansion plans, the financing of
potential acquisitions and operating strategy; the global economy;
the effects of currency exchange rates on reported operating
results; the developing regulatory environment in Canada, the U.K.,
Poland and the United States; the impact of future development
strategy, new stores and acquisitions; the implementation and
expected results of refinancing initiatives; and of the performance
of new products, business platforms, and services. These forward
looking statements involve risks and uncertainties, including
uncertainties related to the effects of changes in the value of the
U.S. dollar compared to foreign currencies, risks related to the
regulatory environments, current and potential future litigation,
the integration and performance of acquired stores and companies,
the performance of new stores, the implementation and expected
results of restructuring initiatives, the impact of debt financing
transactions, the results of certain ongoing income tax appeals,
the ability to comply with the requirements necessary to extend the
maturity of the senior secured credit facility and the senior
unsecured notes and the effects of new products and services on the
Company’s business, results of operations, financial condition,
prospects and guidance. There can be no assurance that the Company
will attain its expected results, successfully integrate any of its
acquisitions, attain its published guidance metrics, or that
ongoing and potential future litigation or that the various FDIC,
Federal, state, Canadian 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, the Company’s annual
reports and form 10-Q’s and 10-K’s. 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.
Presentation of Information in this Press Release
In an effort to provide investors with additional information
regarding the Company’s results, the Company has also disclosed in
this press release the following information which management
believes provides useful information to investors:
- Local currency results (the
reported results for each country in their respective native
currencies).
- Pro forma operating results
excluding non-recurring charges and adjusted for pro forma
effective income tax rates.
DOLLAR FINANCIAL CORP UNAUDITED
CONSOLIDATED BALANCE SHEETS (In thousands)
June 30, December 31, 2009 2009
Assets: Cash and cash equivalents $ 209,602 $ 345,444 Loans
receivable, net: Loans receivable 126,826 142,364 Less: Allowance
for loan losses (12,132 ) (15,765 ) Loans receivable,
net 114,694 126,599 Loans in default, net 6,436 7,256 Prepaid
expenses and other current assets 30,093 44,875 Deferred tax
assets, net 27,101 28,856 Property and equipment, net 58,614 61,572
Goodwill and other intangibles 454,347 591,945 Debt issuance costs,
net and other assets 20,578 37,699
Total Assets $ 921,465 $ 1,244,246
Liabilities: Accounts payable $ 36,298 $ 30,748
Income taxes payable 14,834 18,433 Accrued expenses and other
liabilities 95,780 115,269 Fair value of derivatives 10,223 47,207
Deferred tax liability 18,947 20,520 Long-term debt 536,305
759,425
Total Liabilities
712,387 991,602
Stockholders'
Equity: Common stock 24 24 Additional paid-in capital 311,301
334,145 Accumulated deficit (110,581 ) (98,177 ) Accumulated other
comprehensive income 8,018 16,372 Total
Dollar Financial Corp. Stockholders' Equity 208,762 252,364
Non-controlling interest 316 280 Total
Stockholders' Equity 209,078 252,644
Total Liabilities and Stockholders' Equity $ 921,465
$ 1,244,246
DOLLAR FINANCIAL CORP UNAUDITED
CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except
share and per share amounts)
Three Months Ended Six Months Ended December
31, December 31, 2008 2009 2008
2009 Revenues: Check cashing $ 41,624 $ 38,537 $
90,156 $ 76,339 Fees from consumer lending 70,005 85,817 151,503
164,806 Money transfer fees 6,784 7,091 14,394 13,914 Other
13,760 21,296 29,196
39,490 Total revenues 132,173 152,741
285,249 294,549 Operating
expenses: Salaries and benefits 36,275 37,723 77,078 74,459
Provision for loan losses 14,899 12,662 30,150 24,358 Occupancy
costs 10,316 10,838 21,640 21,685 Returned checks, net and cash
shortages 4,227 2,630 10,362 4,894 Depreciation 3,170 4,071 6,762
7,445 Bank charges and armored carrier services 3,130 3,457 6,763
6,923 Telephone and telecommunication costs 1,798 1,963 3,877 3,801
Advertising 2,396 4,667 5,208 8,114 Other 11,688
14,120 25,325 26,364
Total operating expenses 87,899 92,131
187,165 178,043 Operating margin
44,274 60,610 98,084
116,506 Corporate and other expenses: Corporate
expenses 17,594 22,949 37,114 43,300 Interest expense, net 10,667
12,842 22,214 24,466 Other depreciation and amortization 938 1,110
1,978 2,162 Unrealized foreign exchange (gain) loss - (3,915 ) -
3,912 Loss on extinguishment of debt - 8,813 8,813 Loss on
derivatives not designated as hedges 3,285 3,275 Reserve for
litigation settlements - - 509 1,267 Loss on store closings 555
1,332 5,493 1,650 Other (income) expense, net (5,412 )
1,254 (5,669 ) 1,424 Income
before income taxes 19,932 12,940 36,445 26,237 Income tax
provision 10,383 5,904 15,609
13,870 Net income $ 9,549 $ 7,036 $ 20,836 $
12,367 Less loss attributable to non-controlling interest $ 0
($94 ) $ 0 ($36 ) Net income
attributable to Dollar Financial Corp. $ 9,549 $ 7,130
$ 20,836 $ 12,403 Net income per share
Basic $ 0.40 $ 0.30 $ 0.87 $ 0.52 Diluted $ 0.40 $ 0.29 $ 0.86 $
0.50 Weighted average shares outstanding Basic 23,941,455
24,046,559 24,058,984 24,022,458 Diluted 23,980,968 24,849,876
24,156,745 24,657,334
Pro forma Net Income Reconciliation
Pro forma net income is not an item prepared in accordance with
GAAP. Pro forma net income is net income adjusted to exclude
one-time charges and credits as described below and also excludes
the impact of adopting ASC 470-20. Dollar presents pro forma net
income as an indication of the Company’s financial performance
excluding one-time and other net non-cash charges to show
comparative results of its operations. Not all companies calculate
pro forma net income 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 Unaudited
Consolidated Statements of Operations to pro forma net income
(dollars in thousands):
DOLLAR FINANCIAL CORP PRO FORMA NET INCOME
(EXCLUDING ONE-TIME CHARGES AND CREDITS & EFFECTS OF ASC
470-20) (In thousands except share and per share
amounts) Three Months Ended
Six Months Ended December 31, December 31,
2008 2009 2008 2009 Income
before income taxes - as reported $ 19,932 $ 12,940 $ 36,445 $
26,237 Pro forma adjustments: Adoption of ASC 470-20 2,182
2,394 4,363 4,787 Unrealized foreign exchange (gain) loss - (3,915
) - 3,912 Mark-to-market cross-currency swap amortization 492 856
Loss on extinguishment of debt - 8,813 - 8,813 Loss on derivatives
not designated as hedges 3,285 3,275 Reserve for litigation
settlements - - 509 1,267 Loss on store closings 555 1,332 5,493
1,650 Write-off of acquisition costs - 693
- 1,031 Pro forma income before
income taxes 22,669 26,034 46,810 51,828 Pro forma income taxes
9,748 11,195 20,128
22,286 Pro forma net income $ 12,921 $ 14,839
$ 26,682 $ 29,542 Pro forma effective income
tax rate 43.0 % 43.0 % 43.0 % 43.0 % Weighted average
fully-diluted shares outstanding 23,980,968
24,849,876 24,156,745 24,657,334
Pro forma fully-diluted earnings per share $ 0.54 $
0.60 $ 1.10 $ 1.20 GAAP fully-diluted
earnings per share $ 0.40 $ 0.29 $ 0.86 $ 0.50
Adjusted EBITDA Reconciliation
Adjusted EBITDA is not an item prepared in accordance with GAAP.
Adjusted EBITDA includes earnings before interest expense, income
tax provision, depreciation, amortization, charges related to
non-qualified stock options and restricted shares, reserves for
loss on store closings, litigation settlements, and other items
described below. Dollar presents Adjusted EBITDA as an indication
of operating performance, as well as its ability to service its
debt and capital expenditure requirements. Adjusted EBITDA does not
indicate whether Dollar’s cash flow will be sufficient to fund all
of its cash needs. Adjusted 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. Not all companies
calculate Adjusted 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 Unaudited
Consolidated Statements of Operations to Adjusted EBITDA (dollars
in thousands):
Three Months Ended Six Months
Ended December 31, December 31, 2008
2009 2008 2009 Income before
income taxes $ 19,932 $ 12,940 $ 36,445 $ 26,237 Add:
Depreciation and amortization 4,108 5,181 8,740 9,607 Interest
expense, net 10,667 12,842 22,214 24,466 Stock based compensation
expense 1,575 1,928 2,728 3,839 Unrealized foreign exchange (gain)
loss - (3,915 ) - 3,912 Loss on extinguishment of debt - 8,813 -
8,813
Loss on derivatives not designated
as hedges
3,285
3,275
Reserve for litigation settlements - - 509 1,267 Loss on store
closings 555 1,332 5,493 1,650 Write-off of acquisition costs - 693
- 1,031 Other (5 ) (34 ) (31 ) (82 )
Adjusted EBITDA $ 36,832 $ 43,065 $ 76,098 $
84,015
DOLLAR FINANCIAL CORP UNAUDITED
STORE DATA Three Months
Ended Six Months Ended December December
2008 2009 2008 2009 Beginning
Company-Operated Stores U.S. 418 352 467 358 Canada 402 399 419
399 U.K. 244 281 236 274 Total Beginning Company-Operated Stores
1,064 1,032 1,122 1,031
De novo Store Builds U.S. 0 0
3 0 Canada 0 0 0 1 U.K. 8 11 15 19 Total 8 11 18 20
Acquired Stores U.S. 2 0 2 0 Canada 0 0 0 0 U.K. 7 3 8 3
Total 9 3 10 3
Closed Stores U.S. 2 2 54 8 Canada 1 1
18 2 U.K. 0 0 0 1 Total 3 3 72 11
Ending Company-Operated
Stores U.S. 418 350 418 350 Canada 401 398 401 398 U.K. 259 295
259 295
Total Ending Company-Operated Stores 1,078
1,043 1,078 1,043 Ending
Franchise/Agent Stores U.S. 79 14 79 14 Canada 61 62 61 62 U.K.
152 53 152 53
Total Ending Franchise/Agent Stores 292
129 292 129 Total Ending Store
Count 1,370 1,172 1,370 1,172
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