EX-99.1 2 exhibit1.htm EX-99.1 EX-99.1

EX 99.1

NEWS RELEASE

Contact: Dollar Financial Corp

Financial Dynamics

Mark McCall/Julie Prozeller (212) 850-5600

FOR IMMEDIATE RELEASE

DOLLAR FINANCIAL CORP ANNOUNCES RECORD SECOND QUARTER RESULTS
PRO FORMA FULLY DILUTED EARNINGS PER SHARE INCREASED 44.7 PERCENT TO $0.55;
1,000
th COMPANY-OPERATED STORE MARK SURPASSED WITH CONTINUED INTERNATIONAL FOOTPRINT
EXPANSION

BERWYN, Pennsylvania, January 31, 2008 – Dollar Financial Corp (NASDAQ:DLLR — News), a leading international financial services company serving under-banked consumers, today announced results for the fiscal second quarter ended December 31, 2007.

Fiscal second quarter highlights (compared to the prior year period):

    Consolidated revenue was $125.7 million, an increase of 23.1% or $23.6 million.

    Store and regional margin, as a percentage of total revenue, increased to 39.2%, compared to 36.8% for the prior year’s quarter.

    The consolidated loan loss provision, as a percentage of gross consumer lending revenue, was stable at 21.8%.

    Consolidated Adjusted EBITDA was $36.0 million, an increase of 28.8% or $8.0 million.

    Pro forma pre-tax income increased by 48.3% to $22.1 million as compared to the prior year period.

    Net income was $13.0 million compared to a loss of $52.4 million for the prior year’s quarter and fully-diluted earnings per share was $0.52 compared to a loss of $2.23 for the prior year period.

    The Company acquired 120 stores and opened 20 de novo stores across the U.S., Canadian and U.K. markets.

Commenting on the results for the quarter, Jeff Weiss, the Company’s Chairman and Chief Executive Officer, stated, “The second quarter marks a significant milestone in the Company’s history as we surpassed the 1,000th company-operated store mark with 1,088 company locations and 1,442 total system locations worldwide. In the second quarter, we continued to execute on our accelerated store development plan by opening 20 de novo stores and completing the acquisition of 120 additional financial services stores across the U.S., Canada, and United Kingdom.”

Mr. Weiss continued, “In addition, we are very pleased to announce another quarter of record results. Consolidated revenue growth for the quarter was 23.1% while pro forma net income increased by 48.3%. These results demonstrate the continued execution of our multi-country, multi-product, multi-channel growth strategy coupled with our ability to successfully identify and integrate acquisitions. We also continued to leverage our existing infrastructure and cost structure during the quarter, enabling us to increase our store and regional margin, as a percentage of total revenue, to 39.2% for the quarter compared to 36.8% for the prior year’s quarter. Our intention is to continue to focus our resources on the most strategic investment opportunities across all three of our geographic markets while delivering superior customer service and innovative products to the under-banked population.”

On the topic of regulation in Canada, Don Gayhardt, the Company’s President, stated, “The Company continues to support the Canadian Payday Loan Association as it works closely with the provincial governments to establish reasonable regulations and maximum allowable fees. We are very pleased with the progress that the provinces, in particular Manitoba and Nova Scotia, are making thus far and their willingness to work openly and with all interested parties to achieve a resolution. We would of course wish for regulation to move more quickly, but we believe the provincial governments are doing a commendable job given the complexity of the issue and the necessity to balance consumer protection with reasonable returns for the industry companies.”

Consolidated check cashing revenue increased by 17.7%, or $7.3 million, year-over-year. The Canadian business segment grew by 28.8%, while the U.K. business realized growth of 14.9% over the previous year’s period. Check cashing fees in the U.S. increased by 4.4% over the prior year. On a consolidated basis, the face amount of the average check cashed increased 14.2% to $538 for the quarter compared to $471 for the prior year period, and the average fee per check cashed increased by 15.3% to $20.63.

Consolidated net consumer lending revenue was $57.5 million for the second quarter, representing an increase of 24.3% or $11.3 million compared to the prior year period. The increase was primarily driven by strong performance in our international markets as the U.K. business realized growth of 71.7%, while the Canadian market, which includes the effect of an eighty-two store franchise acquisition in the second quarter of the prior fiscal year, grew by 27.6% over the previous year’s quarter. The consolidated loan loss provision for the second quarter, as a percentage of gross consumer lending revenue, was in line with the Company’s expectations at 21.8% compared to 21.6% for the first quarter of fiscal 2008.

Total Company funded loan originations were $479.5 million for the quarter, representing an increase of 47.2%, or $153.8 million, compared to the prior year period. Company funded loan originations in Canada increased by 32.1% or $61.6 million and U.K. loan originations increased by 55.3% or $34.5 million. U.S. loan originations for the quarter increased by 80.7% or $57.7 million compared to the prior year’s quarter, driven primarily by the transition of a portion of the U.S. loan portfolio from bank-funded to Company funded loans as well as the recent acquisitions in Florida and the mid-western states.

Money transfer fees for the quarter increased 30.2% year-over-year, driven by growth in all of the Company’s markets. Other revenue increased by 37.3% for the quarter, principally due to growth in the foreign currency, MasterCard® and Visa® branded debit-card products.

The Company’s store and regional margin of $49.3 million for the quarter represented an increase of 31.1% or $11.7 million over the prior year’s quarter. As a percentage of total revenue, store and regional margin increased to 39.2%, compared to 36.8% for the prior year period. Corporate expenses, as a percentage of total revenue, increased to 14.0% as compared to the previous year’s quarter of 13.0%, reflecting increased regulatory and lobbying costs, and additional investment in infrastructure to support the Company’s global de novo store growth, and management and integration of recent acquisitions.

Pro forma income before income taxes, which primarily excludes $51.6 million of refinancing and restructuring costs in the prior year, increased $7.2 million, or 48.3% to $22.1 million, and pro forma fully-diluted earnings per share was $0.55 for the quarter compared to $0.38 per share for the prior year period. For more detail, please reference the pro forma reconciliation table included below.

The Company generated net income of $13.0 million in the fiscal 2008 second quarter compared to a loss of $52.4 million for the previous year’s quarter. Fully-diluted earnings per share increased to $0.52 for the fiscal 2008 second quarter compared to a loss of $2.23 per share for the prior year’s quarter.

Guidance
The Company is reaffirming its fiscal 2008 guidance of revenue between $510.0 million and $530.0 million, Adjusted EBITDA of between $145.0 million and $152.0 million, income before income taxes of between $91.0 million and $96.0 million, and earnings per share of between $2.15 and $2.30.

The reconciliation between Adjusted EBITDA and income before income taxes is consistent with the historical reconciliation which is 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 31, 2008 at 5:00 pm ET to discuss the Company’s results for the 2008 fiscal second quarter. 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, 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, 2008 through February 7, 2008. If you wish to listen to the replay of this conference call, please dial 706-645-9291 and enter passcode “31722490”.

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. 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, Western Union money order and money transfer products, reloadable VISA® and MasterCard® branded debit cards, electronic tax filing, bill payment services, and legal document processing services.

At December 31, 2007, the Company’s global store network consisted of 1,442 stores, including 1,088 company-operated financial services stores and 354 franchised and agent locations in 32 states, the District of Columbia, throughout Canada and in the United Kingdom. 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 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 future results, growth, guidance and operating strategy; the developing regulatory environment in Canada; the impact of future development strategy, new stores and acquisitions; and of the performance of new products 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 environment, current and potential future litigation, the integration and performance of acquired stores, the performance of new stores, the implementation and results of restructuring initiatives, the impact of debt financing transactions, the results of certain ongoing income tax appeals, 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, including those described under the heading “Risk Factors” in Form S-3 for the Company’s Senior Convertible Note offering filed with the SEC on September 20, 2007 and its fiscal 2007 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.

1

DOLLAR FINANCIAL CORP
UNAUDITED CONSOLIDATED BALANCE SHEETS
(In thousands)

                 
    June 30,   December 31,
    2007   2007
 
               
Assets:
               
Cash and cash equivalents
  $ 294,518     $ 181,447  
Restricted cash
    1,014        
Loans receivable, net:
               
Loans receivable
    90,552       121432  
Less: Allowance for loan losses
    (8,623 )     (11,981 )
 
               
Loans receivable, net
    81,929       109,451  
Other consumer lending receivables , net
    11,367       12,228  
Prepaid expenses and other receivables
    22,483       22,091  
Deferred tax assets, net
    4,545       11,710  
Property and equipment, net
    55,031       66,197  
Goodwill and other intangibles, net
    341,681       474,624  
Debt issuance costs and other assets, net
    21,051       21,970  
 
               
Total Assets
  $ 833,619     $ 899,718  
 
               
 
               
Liabilities:
               
Accounts Payable
  $ 39,808     $ 45,834  
Income taxes payable
    11,293       10,764  
Accrued expenses and other liabilities
    46,912       80,228  
Deferred tax liabilities
    12,713       19,474  
Long-term debt
    576,910       576,219  
 
               
Total Liabilities
    687,636       732,519  
 
               
 
               
Shareholders’ Equity:
               
Common Stock
    24       24  
Additional paid-in-capital
    251,460       253,493  
Accumulated deficit
    (147,123 )     (122,105 )
Accumulated other comprehensive income
    41,622       35,787  
 
               
Total shareholders’ equity
    145,983       167,199  
 
               
Total Liabilities and Shareholders’ Equity
  $ 833,619     $ 899,718  
 
               
 
               

2

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,
    2006   2007   2006   2007
 
                               
 
                               
Check cashing
  $ 41,518     $ 48,859     $ 79,907     $ 94,522  
Consumer lending:
                               
Fees from consumer lending
    56,799       73,594       105,624       142,103  
Provision for loan losses and adjustment
                               
to servicing revenue
    (10,532 )     (16,070 )     (20,104 )     (30,876 )
 
                               
Consumer lending, net
    46,267       57,524       85,520       111,227  
Money transfer fees
    5,437       7,079       10,104       13,039  
Other
    8,876       12,189       18,280       22,913  
 
                               
Total revenues
    102,098       125,651       193,811       241,701  
 
                               
 
                               
 
                               
Salaries and benefits
    32,127       38,646       61,095       73,883  
Occupancy
    7,931       10,157       15,583       19,431  
Depreciation
    2,157       3,214       4,211       6,023  
Returned checks, net and cash shortages
    3,765       4,597       7,397       9,253  
Telephone and telecommunication
    1,473       1,798       3,017       3,450  
Advertising
    3,196       2,721       5,458       4,824  
Bank charges and armored carrier services
    2,569       3,287       4,837       6,343  
Other
    11,307       11,980       20,653       22,452  
 
                               
Total store and regional expenses
    64,525       76,400       122,251       145,659  
 
                               
Store and regional Margin
    37,573       49,251       71,560       96,042  
 
                               
 
                               
Corporate and other expenses:
                               
Corporate expenses
    13,287       17,599       26,237       35,462  
Other depreciation and amortization
    846       890       1,676       1,809  
Interest expense, net
    8,687       8,977       14,989       17,066  
Debt financing costs
    30,416       97       38,403       97  
Goodwill impairment and other charges
    24,464             24,464        
Proceeds from litigation settlement
    (3,256 )           (3,256 )      
Other expenses
    91       (212 )     179       (802 )
 
                               
Income before income taxes
    (36,962 )     21,900       (31,132 )     42,410  
Income tax provision
    15,470       8,936       23,044       17,392  
 
                               
Net income (loss)
    ($52,432 )   $ 12,964       ($54,176 )   $ 25,018  
 
                               
 
                               
Net Income (loss) per share
                               
Basic
    ($2.23 )   $ 0.54       ($2.32 )   $ 1.04  
Diluted
    ($2.23 )   $ 0.52       ($2.32 )   $ 1.01  
 
                               
Weighted average shares outstanding
                               
Basic
    23,470,302       24,087,742       23,385,308       24,071,458  
Diluted
    23,470,302       24,846,790       23,385,308       24,788,761  

3

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 as described below. Dollar presents Pro forma Net Income as an indication of the Company’s financial performance excluding one-time charges so as 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)
(In thousands except share and per share amounts)

                                 
    Three Months Ended   Six Months Ended
    December 31,   December 31,
    2006   2007   2006   2007
 
                               
Income before income taxes — as reported
  $ (36,962 )   $ 21,900     $ (31,132 )   $ 42,410  
 
                               
One-time Charges:
                               
Loss on store closings
    242       106       465       193  
Debt refinancing costs
    30,416       97       38,403       97  
Goodwill impairment and other charges
    24,464             24,464        
Proceeds from litigation settlement
    (3,256 )           (3,256 )      
 
                               
Pro forma income before income taxes
    14,904       22,103       28,944       42,700  
Pro forma income taxes (38% effective tax rate)
    5,664       8,399       10,999       16,226  
 
                               
 
                               
Pro forma net income
  $ 9,240     $ 13,704     $ 17,945     $ 26,474  
 
                               
 
                               
Weighted average fully-diluted shares outstanding
    24,328,166       24,846,790       24,120,546       24,788,761  
 
                               
 
                               
GAAP fully-diluted earnings (loss) per share
  $ (2.23 )   $ 0.52     $ (2.32 )   $ 1.01  
 
                               
 
                               
Pro forma fully-diluted earnings per share
  $ 0.38     $ 0.55     $ 0.74     $ 0.07  
 
                               

4

Adjusted EBITDA Reconciliation

Adjusted EBITDA is not an item prepared in accordance with GAAP. Adjusted EBITDA is earnings before interest expense, income tax provision, depreciation, amortization, charges related to non-qualified stock options and restricted shares, and other items described below. Dollar presents Adjusted EBITDA as an indication of operating performance and 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. Dollar believes that Adjusted EBITDA amounts should be considered 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 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,
    2006   2007   2006   2007
 
                               
Income before income taxes
  $ (36,962 )   $ 21,900     $ (31,132 )   $ 42,410  
 
                               
Add:
                               
Depreciation and amortization
    3,003       4,104       5,887       7,832  
Interest expense
    8,687       8,977       14,989       17,066  
Foreign currency (gain) loss
    527       (1 )     718       240  
Stock compensation expense
    759       675       1,068       1,712  
Loss on store closings & other
    280       205       503       305  
Debt financing costs
    30,416       97       38,403       97  
Goodwill impairment and other charges
    24,464             24,464        
Proceeds from litigation settlement
    (3,256 )           (3,256 )      
 
                               
Adjusted EBITDA
  $ 27,918     $ 35,957     $ 51,644     $ 69,662  
 
                               
 
                               

5

Dollar Financial Corp
Unaudited Store Data

                                 
    Three Months Ended   Six Months Ended
    December 31,   December 31,
    2006   2007   2006   2007
Beginning Company-Operated Stores
                               
U.S.
    348       374     351   350
Canada
    252       377     242   360
U.K.
    185       202     172   192
 
                               
Total Beginning Company-Operated Stores
    785       953       765       902  
 
                               
 
                               
De novo Store Builds
                               
U.S.
    0       2       1       2  
Canada
    6       15       16       30  
U.K.
    4       3       12       8  
 
                               
Total
    10       20       29       40  
 
                               
 
                               
Acquired Stores
                               
U.S.
    23       98       23       124  
Canada
    82       5       82       8  
U.K.
    0       17       5       22  
 
                               
Total
    105       120       110       154  
 
                               
 
                               
Closed Stores
                               
U.S.
    15       4       19       6  
Canada
    0       0       0       1  
U.K.
    0       1       0       1  
 
                               
Total
    15       5       19       8  
 
                               
 
                               
Ending Company-Operated Stores
                               
U.S.
    356       470       356       470  
Canada
    340       397       340       397  
U.K.
    189       221       189       221  
 
                               
Total Ending Company-Operated Stores
    885       1,088       885       1,088  
 
                               
 
                               
Ending Franchise Stores
                               
U.S.
    126       102       126       102  
Canada
    51       59       51       59  
U.K.
    220       193       220       193  
 
                               
Total Ending Franchise Stores
    397       354       397       354  
 
                               
 
                               
Total Ending Store Count
    1,282       1,442       1,282       1,442  
 
                               

6

Dollar Financial Corp.
Unaudited Selected Statistical Data

                                 
    Three Months Ended   Six Months Ended
    December 31,   December 31,
    2006   2007   2006   2007
 
                               
Check Cashing Data (Consolidated)
                               
Face amount of checks cashed (in millions)
  $ 1,093     $ 1,275     $ 2,103     $ 2,465  
Number of checks cashed (in thousands)
    2,320       2,369       4,440       4,635  
Face amount of average check
  $ 471     $ 538     $ 474     $ 532  
Average fee per check cashed
  $ 17.90     $ 20.63     $ 18.00     $ 20.39  
Net write-offs of returned checks (in thousands)
  $ 3,223     $ 3,829     $ 6,333     $ 7,828  
Net write offs as a percentage of check cashing revenue
    7.8 %     7.8 %     7.9 %     8.3 %
 
                               
Consumer Loan Data — Originations (in thousands)
                               
U.S. company-funded consumer loan originations
  $ 71,566     $ 129,299     $ 133,800     $ 225,249  
Canadian company-funded consumer loan originations
    191,888       253,444       342,307       496,892  
U.K. company-funded consumer loan originations
    62,329       96,791       120,346       177,164  
 
                               
Total company-funded consumer loan originations
  $ 325,783     $ 479,534     $ 596,453     $ 899,305  
 
                               
 
                               
Consumer Loan Data — Net Revenues (in thousands)
                               
U.S. servicing revenues
  $ 8,799     $ 635     $ 17,089     $ 1,429  
U.S. company-funded consumer loan revenues
    11,205       19,089       21,302       34,283  
Canadian company-funded consumer loan revenues
    26,429       38,455       47,280       76,426  
U.K. company-funded consumer loan revenues
    10,366       15,415       19,953       29,965  
Provision for loan losses and adjustments to servicing revenues
    (10,532 )     (16,070 )     (20,104 )     (30,876 )
 
                               
Total consumer lending revenues, net
  $ 46,267     $ 57,524     $ 85,520     $ 111,227  
 
                               
 
                               
Consumer Loan Net Charge-offs (in thousands)
                               
Gross charge-offs of company-funded consumer loans
  $ 36,199     $ 54,181     $ 68,087     $ 105,938  
Recoveries of company-funded consumer loans
    (31,174 )     (40,887 )     (57,925 )     (82,309 )
 
                               
Net charge-offs on company-funded consumer loans
  $ 5,025     $ 13,294     $ 10,162     $ 23,629  
 
                               
 
                               
 
                               
Gross charge-offs of company-funded consumer loans as a
                               
percentage of total company-funded consumer loan originations
    11.1 %     11.3 %     11.4 %     11.8 %
 
                               
Recoveries of company-funded consumer loans as a percentage
                               
of total company-funded consumer loan originations
    9.6 %     8.5 %     9.7 %     9.2 %
 
                               
Net charge-offs on company-funded consumer loans as a
                               
percentage of total company-funded consumer loan originations
    1.5 %     2.8 %     1.7 %     2.6 %

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