SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-------------------
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934. FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934. FOR THE TRANSITION PERIOD FROM _____ TO _____
COMMISSION FILE NUMBER 333-18221
DOLLAR FINANCIAL GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)
NEW YORK 13-2997911
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
1436 LANCASTER AVENUE, SUITE 210
BERWYN, PENNSYLVANIA 19312
(Address of Principal Executive Offices) (Zip Code)
610-296-3400
(Registrant's Telephone Number, Including Area Code)
NONE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities and
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes [x] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date. 100
-----
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements........................................... 3
Interim Consolidated Balance Sheets as of March 31, 1997,
and June 30, 1996...............................................3
Interim Unaudited Consolidated Statements of Operations
for the Three and Nine Months Ended March 31, 1997 and 1996.....4
Interim Unaudited Consolidated Statements of Cash Flows
for the Nine Months Ended March 31, 1997 and 1996...............5
Notes to Interim Consolidated Financial Statements..............6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations...........................................14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings...............................................22
Item 6. Exhibits and Reports on Form 8-K................................22
2
<PAGE>
PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DOLLAR FINANCIAL GROUP, INC.
INTERIM CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
March 31, 1997 June 30, 1996
------------------- -------------------
ASSETS (unaudited)
<S> <C> <C>
Cash and cash equivalents.................................................. $58,558 $22,545
Accounts receivable 7,445 4,441
Prepaid expenses ................................................... 2,887 1,790
Deferred income taxes 1,645 1,861
Note receivable -- officer................................................. 200 200
Properties and equipment, net of accumulated depreciation
of $3,126 at 3/31/97 and $1,926 at 6/30/96............................ 7,095 3,345
Cost assigned to contracts acquired, net of accumulated
amortization of $953 at 3/31/97 and $660 at 6/30/96................... 539 140
Cost in excess of net assets acquired, less accumulated
amortization of $4,183 at 3/31/97 and $1,964 at 6/30/96 92,546 31,989
Debt issuance costs, less accumulated amortization of
$174 at 3/31/97 and $394 at 6/30/96................................... 4,726 717
Other...................................................................... 808 416
---------- ----------
$176,449 $67,444
========== ==========
LIABILITIES AND SHAREHOLDER'S EQUITY
Accounts payable ................................................... $11,554 $6,844
Advance from money transfer agent.......................................... 3,000 ---
Accrued expenses........................................................... 7,277 4,137
Accrued interest payable................................................... 4,906 226
107/8 % Senior Notes due 2006.............................................. 110,000 ---
Revolving credit facility.................................................. --- 7,738
Other long-term debt and subordinated notes payable........................ 2,827 34,792
Shareholder's equity:
Common stock, $1 par value, 20,000 shares
authorized, 100 shares issued and outstanding at
March 31, 1997 and June 30, 1996...................................... --- ---
Foreign currency translation............................................... (142) ---
Additional paid-in capital................................................. 39,888 15,215
Accumulated deficit (2,861) (1,508)
---------- ----------
Total shareholder's equity............................................ 36,885 13,707
---------- ----------
$176,449 $67,444
========== ==========
</TABLE>
See notes to interim consolidated financial statements.
3
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
--------------------------------- ------------------------------------
1997 1996 1997 1996
---------------- ------------- --------------- ----------------
<S> <C> <C> <C> <C>
Revenues ............................................ $23,977 $11,068 $56,871 $31,568
Store and regional expenses:
Salaries and benefits................................ 7,402 3,653 18,576 10,411
Occupancy............................................ 2,218 1,035 5,535 3,037
Depreciation......................................... 421 199 991 688
Other................................................ 5,789 2,923 14,332 8,739
---------------- ------------- --------------- ----------------
Total store and regional expenses....................... 15,830 7,810 39,434 22,875
Corporate expenses...................................... 2,137 1,338 5,160 3,935
Loss on store closings and sales........................ 25 21 32 4,476
Other depreciation and amortization..................... 1,153 459 2,743 1,392
Interest expense........................................ 3,123 884 6,829 2,558
---------------- ------------- --------------- ----------------
Income (loss) before taxes.............................. 1,709 556 2,673 (3,668)
Income tax provision (benefit).......................... 1,387 622 2,003 (1,028)
---------------- ------------- --------------- ----------------
Income (loss) before extraordinary item................. 322 (66) 670 (2,640)
Extraordinary loss on debt extinguishment (net of
income tax benefit of $1,042) --- --- (2,023) ---
---------------- ------------- --------------- ----------------
Net income (loss)....................................... $322 ($66) ($1,353). ($2,640)
================ ============= =============== ================
</TABLE>
See notes to interim consolidated financial statements.
4
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
----------------------------------------------
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss...................................................................... $ (1,353) $ (2,640)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization........................................... 4,038 2,080
Losses on store closings and sales...................................... 32 4,476
Extraordinary loss on debt extinguishment............................... 2,023 ---
Deferred tax provision (benefit)........................................ 216 (965)
Change in assets and liabilities (net of effect of acquisitions):
Increase in accounts receivable...................................... (958) (1,001)
Increase in prepaid expenses and other assets........................ (982) (299)
Increase in accounts payable and accrued expenses.................... 6,964 1,176
------------------ -------------------
Net cash provided by operating activities..................................... 9,980 2,827
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions, net of cash acquired............................................ (59,924) (6,743)
Additions to properties and equipment......................................... (1,252) (590)
------------------ -------------------
Net cash used in investing activities......................................... (61,176) (7,333)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt.................................................... (66,788) (2,365)
Payments on subordinated notes payable........................................ (344) (275)
Net increase (decrease) in revolving credit facility.......................... (7,738) 799
Proceeds from long-term debt.................................................. 145,000 9,182
Proceeds from advance from money transfer agent............................... 3,000 ---
Payments of debt issuance costs............................................... (7,407) (200)
Proceeds from equity contribution from parent................................. 21,652 210
------------------ -------------------
Net cash provided by financing activities..................................... 87,375 7,351
------------------ -------------------
Effect of exchange rate changes on cash....................................... (166) ---
------------------ -------------------
Net increase in cash and cash equivalents..................................... 36,013 2,845
Cash and cash equivalents at beginning of period.............................. 22,545 19,778
================== ===================
Cash and cash equivalents at end of period.................................... $ 58,558 $ 22,623
================== ===================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid................................................................. $ 1,841 $ 2,447
Income taxes.................................................................. 21 54
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Subordinated notes payable issued in connection with acquisitions............. --- 80
Capital contribution from parent in connection with acquisition of
AnyKind Check Cashing Centers, Inc......................................... 2,000 ---
Capital contribution from parent in connection with acquisition of
Cash-N-Dash Check Cashing, Inc............................................. 500 ---
Capital contribution from parent in connection with acquisition of
National Money Mart, Inc..................................................... 520 ---
Financing provided for insurance premiums..................................... 166 ---
</TABLE>
See notes to interim consolidated financial statements.
5
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying condensed unaudited interim consolidated financial statements
of Dollar Financial Group, Inc. (the "Company") have been prepared in accordance
with generally accepted accounting principles for interim financial information
and the rules and regulations of the Securities and Exchange Commission. They do
not include all information and footnotes required by generally accepted
accounting principles for complete financial statements. Although management
believes that the disclosure is adequate to prevent the information from being
misleading, it is suggested that the interim consolidated financial statements
be read in conjunction with the Company's audited financial statements in its
Registration Statement on Form S-4 (Registration No. 333-18221), as filed with
the Securities and Exchange Commission and declared effective on March 11, 1997
(the "Registration Statement"). In the opinion of management, all adjustments,
consisting of normal recurring accruals, considered necessary for a fair
presentation have been included. Operating results for the three- and nine-month
periods ended March 31, 1997 are not necessarily indicative of the results that
may be expected for the year ending June 30, 1997.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the consolidated financial statements and
accompanying notes. Actual results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
OPERATIONS
Dollar Financial Group, Inc., known until January 1996 as Monetary Management
Corporation, was organized in 1979 under the laws of the State of New York. The
Company is a wholly owned subsidiary of DFG Holdings, Inc. ("Holdings"). The
activities of Holdings consist primarily of its investment in the Company and
there are no differences between the consolidated results of operations of
Holdings and those of the Company. Holdings has no employees or operating
activities. The Company, through its subsidiaries, provides retail financial and
government contractual services to the general public through a network of
approximately 329 locations operating as Check Mart(R), Money Mart, Chex$Cashed,
QwiCash(R), Almost-A-Banc, Financial Exchange Company(R), ABC Check Cashing,
AnyKind Check Cashing Centers, C&C Check Cashing, Cash-N-Dash and The Service
Centers in fourteen states, the District of Columbia and Canada. The services
provided at the Company's retail locations include check cashing, sale of money
orders, money transfer services, issuance of food stamps and other welfare
benefits, and various other related services. Additionally, the Company, through
its merchant services division, maintains and services a network of electronic
government benefits distribution to more than 1200 retail locations throughout
the State of New York.
2. REFINANCING AND ACQUISITIONS
In November 1996, the Company implemented a financing plan which included the
offering (the "Offering") of $110.0 million of 10 7/8 % Senior Notes due 2006
(the "Senior Notes") and the establishment of a new revolving credit facility
6
<PAGE>
(the "New Revolving Credit Facility") of $25.0 million. Amounts outstanding
under the New Revolving Credit Facility are secured by a first priority lien on
substantially all of the cash and accounts receivable of the Company and its
current and future domestic subsidiaries and National Money Mart Company
("NMM"), a wholly owned Canadian subsidiary of the Company (including all of the
capital stock of the Company's domestic subsidiaries and NMM and 65% of the
capital stock of the Company's future foreign subsidiaries, if any). The
proceeds of the Offering were used to repay all of the Company's existing
indebtedness under its credit agreements ($71.4 million) and to fund the
November 1996 acquisitions of Money Mart, Cash-N-Dash and C&C (each as defined
in "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--Acquisitions"). In connection with the retirement of the Company's
existing indebtedness under its credit agreements, all related debt issuance
costs were written off, resulting in an extraordinary loss, net of taxes, of
$2.0 million.
Pursuant to a Prospectus (forming a part of the Registration Statement), the
Company offered to exchange (the "Exchange Offer") an aggregate principal amount
of up to $110.0 million of 10 7/8 % Series A Senior Notes due 2006 (the "New
Notes") of the Company, which have been registered under the Securities Act of
1933, as amended (the "Securities Act"), for a like principal amount of the
issued and outstanding Senior Notes from the registered holders thereof
(hereinafter, the term "Notes" shall refer collectively to both the Senior Notes
and the New Notes). The terms of the New Notes are identical in all material
respects to the Senior Notes, except for certain transfer restrictions relating
to the Senior Notes. The New Notes will evidence the same class of debt as the
Senior Notes and will be issued pursuant to, and entitled to the benefits of,
the Indenture (the "Indenture") governing the Senior Notes. The initial
expiration date of the Exchange Offer was April 9, 1997 and was extended to
April 10, 1997. As of April 10, 1997, $109.8 million in aggregate principal
amount of the Senior Notes had been tendered pursuant to the Exchange Offer.
The following unaudited pro forma results of operations for the year ended June
30, 1996 and for the nine months ended March 31, 1996 and 1997 have been
prepared assuming that the acquisitions of Money Mart, Cash-N-Dash and C&C,
along with Chex$Cashed, AnyKind and ABC (each as defined in "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--Acquisitions"), had taken place as of July 1, 1995:
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED JUNE 30, FOR THE NINE MONTHS ENDED MARCH 31,
(UNAUDITED) (UNAUDITED)
--------------------- ------------------------------------------
1996 1996 1997
--------------------- ------------------ -------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Total revenues $91,730 $68,638 $68,312
Income (Loss) before extraordinary item.......... $(2,270) $ (2,628) $ 184
</TABLE>
The pro forma information includes adjustments for interest expense on the
Senior Notes, and the amortization of intangible assets arising from the
acquisitions. This pro forma financial information is not necessarily indicative
of the results of operations as if the acquisitions had been effected on July 1,
1995.
3. SUBSIDIARY GUARANTOR CONDENSED FINANCIAL INFORMATION
As of March 31, 1997, pursuant to the terms of the Indenture, the Company's
payment obligations under the Senior Notes were fully and unconditionally
guaranteed on a joint and several basis by the Company's domestic subsidiaries
(collectively, the "Guarantors"). Each of the Guarantors is a wholly owned
subsidiary of the Company. In connection with the CCC Acquisition (as defined in
Note 4), NMM has also subsequently become a guarantor of the Notes. The
subsidiary guarantees rank pari passu in right of payment with all existing and
future senior indebtedness of the Guarantors, including the obligations of the
Guarantors under the New Revolving Credit Facility and any successor credit
facility.
There are no restrictions on the Guarantors' or NMM's ability to make
distributions to the Company. Separate financial statements and other
disclosures with respect to each Guarantor have not been presented because
management has determined that such information is not material to investors.
The accompanying tables set forth the condensed consolidating balance sheet at
March 31, 1997, statement of operations for the nine month period ended March
31, 1997 and statement of cash flows for the nine month period ended March 31,
1997 of the Guarantors, all non-domestic subsidiaries (the "Non-Guarantor
Subsidiaries") and the consolidated Company.
7
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
CONSOLIDATING BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
At March 31, 1997: Dollar
Financial Subsidiary Non-Guarantor
Group, Inc. Guarantors Subsidiaries Eliminations Consolidated
---------- ----------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash................................................... $5,066 $48,085 $5,407 $--- $58,558
Accounts receivable.................................... 1,539 6,028 512 (634) 7,445
Prepaid expenses....................................... 1,217 1,578 92 --- 2,887
Deferred income taxes.................................. 1,583 62 --- --- 1,645
Note receivable-Officer................................ 200 --- --- --- 200
Due from affiliates.................................... 88,220 --- --- (88,220) ---
Properties and equipment, net.......................... 815 5,228 1,052 --- 7,095
Costs assigned to contracts acquired, net.............. --- 539 --- --- 539
Costs in excess of net assets acquired, net............ --- 75,649 16,897 --- 92,546
Debt issuance costs, net............................... 4,726 --- --- --- 4,726
Investment in subsidiaries............................. 53,732 --- --- (53,732) ---
Other.................................................. 206 502 100 --- 808
----------- ------------ ------------
=========== ===========
$157,304 $137,671 $24,060 ($142,586) $176,449
=========== =========== =========== ============ ============
LIABILITIES AND SHAREHOLDER'S EQUITY
Accounts payable and accrued expenses.................. $2,623 $14,205 $2,003 $--- $18,831
Advance from money transfer agent...................... 3,000 --- --- --- 3,000
Accrued interest payable............................... 4,519 387 634 (634) 4,906
Due to affiliates...................................... --- 71,996 16,224 (88,220) ---
Revolving credit facility.............................. --- --- --- --- ---
Long term debt and subordinated notes payable.......... 110,135 2,692 --- --- 112,827
-----------
----------- ----------- ------------ ------------
120,277 89,280 18,861 (88,854) 139,564
Shareholder's equity:
Common Stock........................................... --- --- --- --- ---
Foreign currency translation........................... --- --- (142) --- (142)
Additional paid-in capital............................. 39,888 46,613 5,541 (52,154) 39,888
Retained earnings (accumulated deficit)................ (2,861) 1,778 (200) (1,578) (2,861)
----------- ----------- ----------- ------------ ------------
Total shareholder's equity............................. 37,027 48,391 5,199 (53,732) 36,885
=========== =========== =========== ============ ============
$157,304 $137,671 $24,060 ($142,586) $176,449
=========== =========== =========== ============ ============
</TABLE>
9
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
CONSOLIDATING STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended March 31, 1997: Dollar
Financial Subsidiary Non-Guarantor
Group, Inc. Guarantors Subsidiaries Eliminations Consolidated
------------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues............................................................ $--- $53,059 $3,812 $--- $56,871
Store and regional expenses:
Salaries and benefits............................................ --- 17,593 983 --- 18,576
Occupancy........................................................ --- 5,207 328 --- 5,535
Depreciation..................................................... --- 875 116 --- 991
Other............................................................ --- 13,579 753 --- 14,332
---------- ---------- --------- ---------- ----------
Total store and regional expenses................................... --- 37,254 2,180 --- 39,434
Corporate expenses.................................................. 4,720 --- 440 --- 5,160
Management fee...................................................... (4,294) 4,294 --- --- ---
Loss on store closings and sales.................................... --- 32 --- --- 32
Other depreciation and amortization................................. 237 2,270 236 --- 2,743
Interest expense.................................................... 1,708 4,439 682 --- 6,829
---------- ---------- --------- ---------- ----------
Income before taxes (2,371) 4,770 274 --- 2,673
Income taxes provision (benefit).................................... (801) 2,330 474 --- 2,003
---------- ---------- --------- ---------- ----------
Income (loss) before extraordinary item............................. (1,570) 2,440 (200) --- 670
Extraordinary loss on debt extinguishment (net of income tax
benefit of $1,042).............................................. (2,023) --- --- --- (2,023)
---------- ---------- --------- ---------- ----------
Income (loss) before equity in net income (loss) of subsidiaries.... (3,593) 2,440 (200) --- (1,353)
Subsidiary Guarantors............................................... 2,440 --- --- (2,440) ---
Non-Guarantor Subsidiary............................................ (200) --- --- 200 ---
========== ========== ========= ========== ==========
Net income (loss)................................................... ($1,353) $2,440 ($200) ($2,240) ($1,353)
========== ========== ========= ========== ==========
</TABLE>
10
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
CONSOLIDATING STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended March 31, 1997: Dollar
Financial Subsidiary Non-Guarantor
Group, Inc. Guarantors Subsidiaries Eliminations Consolidated
---------- ---------- ------------ ------------- ------------
Cash flows from operating activities:
<S> <C> <C> <C> <C> <C>
Net income (loss)........................................... ($1,353) $2,440 ($200) ($2,240) ($1,353)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Undistributed income of subsidiaries.................. (2,240) --- --- 2,240 ---
Depreciation and amortization......................... 542 3,144 352 --- 4,038
Losses on store closings and sales.................... --- 32 --- --- 32
Extraordinary loss on debt extinguishment............. 2,023 --- --- --- 2,023
Deferred tax benefit 208 8 --- --- 216
Change in assets and liabilities (net of effect of
acquisitions):
(Increase) decrease in accounts receivable...... (1,399) (108) (85) 634 (958)
(Increase) decrease in prepaid expenses and
other assets................................ (66) (1,011) 95 --- (982)
Increase (decrease) in accounts payable and
accrued expenses............................ 862 8,942 (2,206) (634) 6,964
------------ ---------- ----------- ----------- -----------
Net cash provided by (used in) operating activities......... (1,423) 13,447 (2,044) --- 9,980
Cash flows from investing activities:
Acquisitions, net of cash acquired.................... --- (46,334) (13,590) --- (59,924)
Capital contribution to subsidiaries.................. (8,537) --- --- 8,537 ---
Additions to properties and equipment................. (149) (1,073) (30) --- (1,252)
Increase in due from affiliates....................... (72,217) --- --- 72,217 ---
------------ ---------- ----------- ----------- -----------
Net cash used in investing activities....................... (80,903) (47,407) (13,620) 80,754 (61,176)
Cash flows from financing activities:
Payments on long term debt............................ (66,788) --- --- --- (66,788)
Payments on subordinated notes payable................ (341) (3) --- --- (344)
Net decrease in revolving credit facility............. (7,738) --- --- --- (7,738)
Proceeds from long term debt.......................... 145,000 --- --- --- 145,000
Proceeds from advance from money transfer agent....... 3,000 --- --- --- 3,000
Payment of debt issuance costs........................ (7,407) --- --- --- (7,407)
Net increase (decrease) in due to affiliate........... --- 56,002 16,215 (72,217) ---
Contribution of capital............................... 21,652 3,515 5,022 (8,537) 21,652
------------ ---------- ----------- ----------- -----------
Net cash provided by financing activities................... 87,378 59,514 21,237 (80,754) 87,375
Effect of exchange rate on cash............................. --- --- (166) --- (166)
------------ ---------- ----------- ----------- -----------
Net increase in cash........................................ 5,052 25,554 5,407 --- 36,013
Cash at beginning of period................................. 14 22,531 --- --- 22,545
============ ========== =========== =========== ===========
Cash at end of period....................................... $5,066 $48,085 $5,407 $--- $58,558
============ ========== =========== =========== ===========
</TABLE>
11
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
4. SUBSEQUENT EVENTS
On April 18, 1997, the Company purchased 43 Ontario-based locations from
Canadian Capital Corporation, the largest franchisee of National Money Mart,
Inc., a wholly owned subsidiary of the Company, for consideration of $13.3
million (the "CCC Acquisition"). The stores, which operate under the "Money
Mart" name, generated revenue of $10.6 million for the twelve months ended May
31, 1996. The CCC Acquisition was funded with the remaining proceeds from the
Offering. In connection with the CCC Acquisition, the Company's Canadian
subsidiaries (including the subsidiary which acquired the operating assets of
Canadian Capital Corporation) were amalgamated into NMM, which, at such time,
became a guarantor of the Notes. NMM's guarantee is full and unconditional and
joint and several with all of the Guarantors.
12
<PAGE>
SUPPLEMENTAL STATISTICAL DATA
<TABLE>
<CAPTION>
March 31,
---------------------------------
COMPANY OPERATING DATA: 1997 1996
--------------- ----------
<S> <C> <C> <C> <C>
Stores in operation:
Company-Owned................................ 329 143
Franchised Stores............................ 110 0
--------------- ----------
Total........................................... 439 143
=============== ==========
- --------------------------------------------------- ------------------ --- ------------------- ---- --------------- ---- -----------
Three Months Ended Nine Months Ended
March 31, March 31,
------------------------------------------ --------------------------------
OPERATING DATA: 1997 1996 1997 1996
------------------ ------------------- --------------- ----------
Face amount of checks cashed (in millions)...... $ 546 $ 210 $ 1,310 $ 576
Face amount of money orders sold (in millions).. $ 148 $ 67 $ 352 $ 201
Face amount of average check.................... $ 310 $ 288 $ 292 $ 256
Average fee per check........................... $ 8.74 $ 7.55 $ 7.83 $ 6.65
Number of checks cashed (in thousands).......... 1,759 729 4,481 2,251
Number of money orders sold (in thousands)...... 1,370 674 3,340 2,139
- --------------------------------------------------- ------------------ --- ------------------- ---- --------------- ---- -----------
Three Months Ended Nine Months Ended
March 31, March 31,
------------------------------------------ --------------------------------
COLLECTIONS DATA: 1997 1996 1997 1996
------------------ ------------------- --------------- ---------------
Face amount of returned checks (in thousands)... $2,647 $825 $6,655 $2,665
Collections (in thousands)...................... (1,840) (592) (4,450) (1,756)
================== =================== =============== ==========
Net write-offs (in thousands)................... $ 807 $ 233 $2,205 $ 909
================== =================== =============== ==========
Collections as a percentage of
returned checks.............................. 69.5% 71.8% 66.9% 65.9%
Net write-offs as a percentage of
check cashing revenues....................... 5.3% 4.2% 6.3% 6.1%
Net write-offs as a percentage of the
face amount of checks cashed................. 0.1% 0.1% 0.2% 0.2%
</TABLE>
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company is a consumer financial services company operating the second
largest check cashing store network in the United States and the largest such
network in Canada. The Company provides a diverse range of consumer financial
products and services primarily consisting of check cashing, money orders, money
transfers, consumer loans, insurance, bill payment and distribution of public
assistance benefits.
The Company's business is seasonal due to the impact of tax-related services,
including cashing tax refund checks. Historically, the Company has generally
experienced its highest revenues and earnings during its third fiscal quarter
ending March 31 when revenues from these tax-related services peak. Due to the
seasonality of the Company's business, therefore, results of operations for any
fiscal quarter are not necessarily indicative of the results that may be
achieved for the full fiscal year. In addition to seasonal fluctuations,
quarterly results of operations depend significantly upon the timing and amount
of revenues and expenses associated with acquisitions and the addition of new
stores.
The Company, in its opinion, has included all adjustments (consisting only of
normal recurring accruals) necessary for a fair presentation of its financial
position at March 31, 1997 and the results of operations for the three months
and nine months ended March 31, 1996 and 1997. The results for the three months
and nine months ended March 31, 1997 are not necessarily indicative of the
results for the full fiscal year.
ACQUISITIONS
The Company completed five major acquisitions during the nine months ended March
31, 1997:
AnyKind Check Cashing Centers On August 8, 1996, the Company purchased all of
the outstanding capital stock of AnyKind Check Cashing Centers, Inc. ("AnyKind")
for an aggregate purchase price of $31.0 million plus initial working capital of
approximately $6.0 million. AnyKind operates 63 check cashing stores in seven
states and the District of Columbia and had revenues for the twelve-month period
ended June 30, 1996 of $22.7 million.
ABC Check Cashing Inc. On August 28, 1996, the Company purchased certain assets
and liabilities of ABC Check Cashing Inc. ("ABC") for a purchase price of $6.0
million plus initial working capital of approximately $1.5 million. ABC operates
15 check cashing stores in Cleveland, Ohio and had revenues for the twelve-month
period ended June 30, 1996 of $4.8 million.
National Money Mart, Inc. On November 15, 1996, the Company acquired all of the
outstanding capital stock of National Money Mart, Inc. ("Money Mart") for
approximately $17.7 million (of which approximately $500,000 was in the form of
Holdings common stock ("Holdings Common Stock")) plus initial working capital of
approximately $900,000. Money Mart owns 36 check cashing stores and franchises
107 check cashing stores, all of which operate in Canada under the "Money Mart"
name, and had revenues for the twelve-month period ended June 30, 1996 of $9.4
million.
Cash-N-Dash Check Cashing, Inc. On November 15, 1996, the Company acquired
substantially all of the assets of Cash-N-Dash Check Cashing, Inc.
("Cash-N-Dash") for approximately $7.3 million (of which approximately $500,000
was in the form of Holdings Common Stock) which includes a revenue-based
earn-out of up to $750,000 payable over four years. Cash-N-Dash operates 32
check cashing stores in northern California under the "Cash-N-Dash" name and had
revenues for the twelve-month period ended June 30, 1996 of $6.2 million.
14
<PAGE>
C&C Check Cashing, Inc. On November 22, 1996, the Company acquired substantially
all of the assets of C&C Check Cashing, Inc. ("C&C") for approximately $3.8
million which includes a revenue-based earn-out of up to $300,000 payable over
three years, plus initial working capital of approximately $500,000. C&C
operates 22 check cashing stores in northern California under the "C&C Check
Cashing" name and had revenues for the twelve-month period ended June 30, 1996
of $4.8 million.
In addition to the acquisitions completed within the nine months ending March
31, 1997, the Company acquired 19 stores operating under the "Chex$Cashed" name
in September, 1995 and acquired 11 check cashing kiosks from The Southland
Corporation and entered into a related agreement (the "Southland Agreement") in
May, 1996, pursuant to which the Company has opened fourteen additional check
cashing kiosks.
The comparability of the historical financial data and the comparisons in
Management's Discussion and Analysis is significantly impacted by the timing of
the acquisitions described above (collectively, the "Acquisitions").
All of the Acquisitions have been accounted for under the purchase method of
accounting. Therefore, the historical results of operations include the revenues
and expenses of all of the acquired companies since their respective dates of
acquisition.
FINANCING
The acquisitions of AnyKind and ABC in August, 1996 were partially financed
through the issuance of $2.0 million of Holdings Common Stock to the seller of
AnyKind and the sale of $22.0 million of Holdings Common Stock to affiliates of
Weiss, Peck & Greer, L.L.C., Pegasus Partners, L.P. ("Pegasus") and a Pegasus
affiliate, and General Electric Capital Corporation.
On November 15, 1996, the Company completed the Offering. Of the gross proceeds
of $110.0 million, $71.4 million was used to repay existing indebtedness, $29.2
million was used for acquisitions including related working capital, $4.3
million was used for fees and expenses and the remaining $5.1 million was
available for general corporate purposes.
Concurrently with the Offering, the Company entered into the New Revolving
Credit Facility, under which the Company may borrow up to $25.0 million at any
one time if certain conditions are met. Loans under the New Revolving Credit
Facility constitute senior secured indebtedness of the Company and are
guaranteed by the Company's current and future domestic subsidiaries and NMM.
15
<PAGE>
RESULTS OF OPERATIONS
REVENUE ANALYSIS
<TABLE>
<CAPTION>
Three Months Ended March 31, Nine Months Ended March 31,
- ----------------------------------------------------------------------------------------------------------------------------
(Percentage of (Percentage of
($ in thousands) Total Revenue) ($ in thousands) Total Revenue)
------------------------- --------------------- ----------------------
1997 1996 1997 1996 1997 1996 1997 1996
----------- ------------ ---------- --------- --------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Check Cashing.......... $15,369 $5,502 64.1% 49.7% $35,079 $14,969 61.7% 47.4%
Government Services.... 4,041 3,756 16.9 33.9 11,069 11,315 19.4 35.8
Other Revenue.......... 4,568 1,812 19.0 16.4 10,729 5,289 18.9 16.8
=========== ============ ========== ========= ========= ========== ============ ===========
Total Revenue.......... $23,978 $11,070 100.0% 100.0% $56,877 $31,573 100.0% 100.0%
=========== ============ ========== ========= ========= ========== ============ ===========
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
QUARTER COMPARISONS
Total revenues were $24.0 million for the three months ended March 31, 1997
compared to $11.1 million for the three months ended March 31, 1996, an increase
of $12.9 million or 116.2%. The Acquisitions accounted for an increase of $12.9
million. Stores sold or closed accounted for a decrease of $0.5 million,
primarily related to nineteen stores acquired from ARI, Inc., which were closed
in fiscal year 1996.
Comparable retail store sales at those locations owned by the Company for the
entire period increased $0.7 million or 7.2%. Check cashing revenue increased
13.1% and other revenues increased 12.2%, primarily due to growth in the
consumer loan program. Partially offsetting these increases, however, was a 7.6%
decline in revenues from government services resulting from a decrease in the
volume of benefits distributed by the Company. Government services revenues
accounted for 16.9% of total revenues for the three months ended March 31, 1997,
a decrease from 33.9% of total revenues for the three months ended March 31,
1996.
NINE MONTH COMPARISONS
Total revenues were $56.9 million for the nine months ended March 31, 1997
compared to $31.6 million for the nine months ended March 31, 1996, an increase
of $25.3 million or 80.1%. The Acquisitions accounted for an increase of $26.8
million. Stores sold or closed accounted for a decrease of $1.8 million,
primarily related to nineteen stores acquired from ARI, Inc., which were closed
in fiscal year 1996.
Comparable retail store sales at those locations owned by the Company for the
entire period increased $0.7 million or 3.0%. Check cashing revenue increased
5.6% and other revenues increased 18.5%, primarily due to growth in the consumer
loan program. Partially offsetting these increases, however, was a 7.5% decline
in revenues from government services resulting from a decrease in the volume of
benefits distributed by the Company. Government services revenues accounted for
19.4% of total revenues for the nine months ended March 31, 1997, a decrease
from 35.8% of total revenues for the nine months ended March 31, 1996.
16
<PAGE>
STORE AND REGIONAL EXPENSE ANALYSIS
<TABLE>
<CAPTION>
Three Months Ended March 31, Nine Months Ended March 31,
- ------------------------------------------------------------------------------------------------------------------------------------
(Percentage of (Percentage of
($ in thousands) total revenue) ($ in thousands) total revenue)
------------------------- --------------------- -----------------------
1997 1996 1997 1996 1997 1996 1997 1996
----------- ----------- -------- -------- --------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Salaries and benefits....... $7,402 $3,653 30.9% 33.0% $18,576 $10,411 32.7% 33.0 %
Occupancy................... 2,218 1,035 9.3 9.3 5,535 3,037 9.7 9.6
Depreciation................ 421 199 1.8 1.8 991 688 1.7 2.2
Other....................... 5,789 2,923 24.1 26.4 14,332 8,739 25.2 27.7
=========== =========== ======== ======== ========= ========== ========= ========
Total store and regional
expenses................. $15,830 $7,810 66.1% 70.5% $39,434 $22,875 69.3% 72.5%
=========== =========== ======== ======== ========= ========== ========= ========
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
QUARTER COMPARISONS
Store and regional expenses were $15.8 million for the three months ended March
31, 1997 compared to $7.8 million for the three months ended March 31, 1996, an
increase of $8.0 million or 102.6%. The Acquisitions accounted for an increase
of $8.8 million. Stores closed or sold accounted for a decrease of $0.7 million,
primarily related to nineteen stores acquired from ARI, Inc., which were closed
in fiscal year 1996. Total store and regional expenses for the three months
ended March 31, 1997 declined to 66.1% of total revenue compared to 70.5% of
total revenue for the three months ended March 31, 1996, primarily as a result
of the closure of the nineteen stores acquired from ARI, Inc.
NINE MONTH COMPARISONS
Store and regional expenses were $39.4 million for the nine months ended March
31, 1997 compared to $22.9 million for the nine months ended March 31, 1996, an
increase of $16.5 million or 72.1%. The Acquisitions accounted for an increase
of $18.9 million. Stores closed or sold accounted for a decrease of $2.5
million, primarily related to nineteen stores acquired from ARI, Inc., which
were closed in fiscal year 1996. Total store and regional expenses for the nine
months ended March 31, 1997 declined to 69.3% of total revenue compared to 72.5%
for the nine months ended March 31, 1996, primarily as a result of the closure
of the nineteen stores acquired from ARI, Inc.
17
<PAGE>
OTHER EXPENSE ANALYSIS
<TABLE>
<CAPTION>
Three Months Ended March 31, Nine Months Ended March 31,
- ------------------------------------------------------------------------------------------------------------------------------------
($ in thousands) (Percentage of revenues) ($ in thousands) (Percentage of revenues)
---------------------- ----------------------- ----------------- ------------------------
1997 1996 1997 1996 1997 1996 1997 1996
----------- ------- ------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Corporate expense...................... $2,137 $1,338 8.9% 12.1% $5,160 $3,935 9.1% 12.5%
Loss on store closings and sales....... 25 21 0.1 0.2 32 4,476 0.1 14.2
Other depreciation and amortization.... 1,153 459 4.8 4.1 2,743 1,392 4.8 4.4
Interest expense....................... 3,124 886 13.0 8.0 6,835 2,563 12.0 8.1
- --------------------------------------------------- ---------- --------------------- ----------- ------------ ----------------------
</TABLE>
QUARTER COMPARISONS
Corporate Expense
Corporate expenses were $2.1 million for the three months ended March 31, 1997
compared to $1.3 million for the three months ended March 31, 1996, an increase
of $0.8 million or 61.5%. This increase resulted from the additional corporate
costs, primarily salaries and benefits, associated with the Acquisitions
completed during fiscal 1996 and 1997. Corporate expenses as a percent of
revenues decreased from 12.1% for the three months ended March 31, 1996 to 8.9%
for the three months ended March 31, 1997.
Loss on Store Closings and Sales
There were no significant losses on store closings and sales for the three
months ended March 31, 1997 or for the three months ended March 31, 1996.
Other Depreciation and Amortization
Other depreciation and amortization expenses were $1.2 million for the three
months ended March 31, 1997 compared to $0.5 million for the three months ended
March 31, 1996, an increase of $0.7 million or 140.0%. This increase resulted
primarily from the amortization expense associated with the goodwill and other
intangibles recognized as part of the Acquisitions.
Interest Expense
Interest expense was $3.1 million for the three months ended March 31, 1997
compared to $0.9 million for the three months ended March 31, 1996, an increase
of $2.2 million or 244.4%. This increase was primarily attributable to increased
average outstanding indebtedness to finance the Acquisitions.
Income Taxes
The provision for income taxes was $1.4 million for the three months ended March
31, 1997 compared to $0.6 million for the three months ended March 31, 1996, an
increase of $0.8 million. The Company's effective tax rate is significantly
greater than the federal statutory rate of 34% due to non-deductible goodwill
amortization and state taxes.
18
<PAGE>
NINE MONTH COMPARISONS
Corporate Expense
Corporate expenses were $5.2 million for the nine months ended March 31, 1997
compared to $3.9 million for the nine months ended March 31, 1996, an increase
of $1.3 million or 33.3%. This increase resulted from the additional corporate
costs, primarily salaries and benefits, associated with the Acquisitions
completed during fiscal 1996 and 1997. Corporate expenses as a percent of
revenues decreased from 12.5% for the nine months ended March 31, 1996 to 9.1%
for the nine months ended March 31, 1997.
Loss on Store Closings and Sales
There were no significant losses on store closings and sales for the nine months
ended March 31, 1997 compared to $4.5 million for the nine months ended March
31, 1996 which was due primarily to the sale and closure in fiscal year 1996 of
nineteen stores acquired from ARI, Inc.
Other Depreciation and Amortization
Other depreciation and amortization expenses were $2.7 million for the nine
months ended March 31, 1997 compared to $1.4 million for the nine months ended
March 31, 1996, an increase of $1.3 million or 92.9%. This increase resulted
from the amortization expense associated with the goodwill and other intangibles
recognized as part of the Acquisitions.
Interest Expense
Interest expense was $6.8 million for the nine months ended March 31, 1997
compared to $2.6 million for the nine months ended March 31, 1996, an increase
of $4.2 million or 161.5%. This increase was primarily attributable to increased
average outstanding indebtedness to finance the Acquisitions.
Income Taxes
The provision for income taxes was $2.0 million for the nine months ended March
31, 1997 compared to a benefit of $1.0 million for the nine months ended March
31, 1996, an increase of $3.0 million. The Company's effective tax rate is
significantly greater than the federal statutory rate of 34% due to
non-deductible goodwill amortization and state taxes. Income tax expense
increased due to the increase in income before taxes from a loss of $3.7 million
for the nine months ended March 31, 1996 to income of $2.7 million for the nine
months ended March 31, 1997.
CHANGES IN FINANCIAL CONDITION
Changes in balance sheet accounts are not necessarily proportionate to the level
of operating activity during the periods presented, mainly as a result of
acquisitions and financing activities.
For the nine months ended March 31, 1997, cash increased due to the increase in
the number of stores operated from 154 at June 30, 1996 to 329 at March 31, 1997
and due to the proceeds of the Offering. Other working capital accounts
consisting of accounts receivable, prepaid expenses, accounts payable and
accrued expenses increased due to the increase in the number of stores operated
by the Company. Liabilities also increased due to a $3.0 million advance
received from the Company's money order supplier and accrued interest on the
Senior Notes which is payable semi-annually on May 15 and November 15.
For the nine months ended March 31, 1997, properties and equipment, cost
assigned to contracts acquired and cost in excess of net assets acquired
increased due to the Acquisitions completed during that time. Debt issuance
costs increased due to the issuance of the Senior Notes.
19
<PAGE>
The revolving credit facility balance fluctuates significantly based on the
timing of the cash needs of the Company's business. The $7.7 million decrease
from June 30, 1996 to March 31, 1997 is a result of normal cash variations and
the availability of proceeds from the Offering.
The increase in additional paid-in capital reflects a contribution from Holdings
in connection with the acquisition of AnyKind and the issuance of Holdings
Common Stock to the sellers of AnyKind, Money Mart and Cash-N-Dash.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of cash are from operations, borrowings under
its credit facilities and sales of Holdings Common Stock. The Company
anticipates its principal uses of cash will be to provide working capital,
finance capital expenditures, meet debt service requirements and finance
acquisitions. For the nine months ended March 31, 1997 and 1996, the Company had
net cash provided by operating activities of $10.0 million and $2.8 million,
respectively, which cash was used for purchases of property and equipment
related to existing stores, recently acquired stores, investments in technology,
and acquisitions. The Acquisitions were financed through borrowings under its
credit facilities, the issuance of Holdings Common Stock and the Offering. The
Company's total budgeted capital expenditures, excluding acquisitions, are
currently anticipated to aggregate approximately $1.7 million during its fiscal
year ending June 30, 1997, consisting of $1.2 million for relocation and
remodeling costs for certain existing stores and approximately $0.5 million to
open 14 new kiosk stores in 7-Eleven locations pursuant to the Southland
Agreement. As of March 31, 1997, the Company had made capital expenditures of
$0.9 million. The actual amount of capital expenditures will depend in part upon
the number of new stores acquired and the number of stores remodeled. In
addition, the Company intends to spend up to $2.0 million over the next two
years to purchase the equipment necessary to implement a point-of-sale system.
The Company has financed the Acquisitions and other capital requirements through
bank debt, seller subordinated debt and proceeds from the sale of Holdings
Common Stock and the Offering.
The Offering generated gross proceeds of $110.0 million which were used to repay
all of the Company's existing indebtedness under its existing credit agreement,
to fund the Money Mart, Cash-N-Dash and C&C acquisitions, and to pay fees and
expenses. Of the $7.3 million Cash-N-Dash purchase price, $5.1 million was
accrued and paid on January 2, 1997. The repayment of substantially all of the
Company's existing indebtedness resulted in an extraordinary loss, net of taxes,
in the three months ended December 31, 1996 of approximately $2.0 million. This
loss resulted from the deferred financing costs associated with the Company's
existing indebtedness.
On August 8, 1996, the Company acquired all of the outstanding capital stock of
AnyKind for $31.0 million, consisting of $29.0 million in cash and the issuance
of Holdings Common Stock. On August 28, 1996, the Company acquired the assets of
ABC for $6.0 million in cash. The Company also funded the working capital
requirements of AnyKind and ABC, which amounted to $6.0 million and $1.5
million, respectively.
In order to finance the acquisitions of AnyKind and ABC, Holdings issued
Holdings Common Stock for net proceeds of $21.7 million, which proceeds were
contributed to the Company. In addition, the Company amended and restated its
credit agreement to provide for $35.0 million additional borrowing availability.
The Company used a portion of the proceeds from the issuance of Holdings Common
Stock to fund the acquisitions of AnyKind and ABC and to pay related fees and
expenses.
Concurrently with the Offering, the Company entered into the New Revolving
Credit Facility, which the Company expects to use primarily for working capital
needs. The New Revolving Credit Facility allows borrowings in an amount not to
exceed the lesser of $25.0 million or a borrowing base as set forth in the New
Revolving Credit Facility. Amounts outstanding under the New Revolving Credit
Facility bear interest at the Company's option of either (i) 0.50% plus the
agent's alternative reference rate or (ii) 1.75% plus the agent's reserve
adjusted Eurodollar rate, and are secured by a first priority lien on
20
<PAGE>
substantially all of the cash and accounts receivable of the Company and its
current and future domestic subsidiaries and NMM (including all of the capital
stock of the Company's domestic subsidiaries and NMM and 65% of the capital
stock of the Company's future foreign subsidiaries, if any). The Company had
$25.0 million of unborrowed availability under the New Revolving Credit Facility
immediately following the consummation of the Offering. There are no
restrictions on the Guarantors' or NMM's ability to make distributions to the
Company.
The Company is highly leveraged and borrowings under the New Revolving Credit
Facility will increase the Company's debt service requirements. Management
believes that, based on current levels of operations and anticipated
improvements in operating results, cash flows from operations and borrowings
available under the New Revolving Credit Facility will enable the Company to
fund its liquidity and capital expenditure requirements for the foreseeable
future, including scheduled payments of interest on the Notes and payment of
interest and principal on the Company's other indebtedness. The Company's belief
that it will be able to fund its liquidity and capital expenditure requirements
for the foreseeable future is based upon the historical growth rate of the
Company, including the operations acquired in the Acquisitions, and the
anticipated benefits resulting from operating efficiencies due to the
Acquisitions. Additional revenue growth is expected to be generated by increased
check cashing revenues (consistent with historical growth), an increase in the
number of operating units as a result of the Southland Agreement and an
expansion of the Company's Cash `Til Payday Loan Program. The Company also
expects operating expenses to increase, although the rate of increase is
expected to be less than the rate of revenue growth. Furthermore, the Company
does not believe that additional acquisitions or expansion are necessary in
order for it to be able to cover its fixed expenses, including debt service. As
a result of the foregoing assumptions, which the Company believes to be
reasonable, the Company expects to be able to fund its liquidity and capital
expenditure requirements for the foreseeable future, including scheduled
payments on the Notes and payments of interest and principal on other
indebtedness. There can be no assurance, however, that the Company's business
will generate sufficient cash flow from operations or that future borrowings
will be available under the New Revolving Credit Facility in an amount
sufficient to enable the Company to service its indebtedness, including the
Notes, or to make anticipated capital expenditures. It may be necessary for the
Company to refinance all or a portion of the principal of the Notes on or
prior to maturity, under certain circumstances, but there can be no assurance
that the Company will be able to effect such refinancing on commercially
reasonable terms or at all.
IMPACT OF INFLATION
The Company believes that the results of its operations are not dependent upon
the levels of inflation.
SUBSEQUENT EVENTS
On April 18, 1997, the Company completed the CCC Acquisition for consideration
of $13.3 million. See Note 4 of "NOTES TO INTERIM CONSOLIDATED FINANCIAL
STATEMENTS." The stores, which operate under the "Money Mart" name, generated
revenue of $10.6 million for the twelve months ended May 31, 1996. The
acquisition was funded with the remaining proceeds from the Offering.
21
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See "BUSINESS - Legal Proceedings" of the Registration Statement for
a discussion of certain litigation involving the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule
99.1 "BUSINESS -- Legal Proceedings" section of
the Registration Statement
(b) Reports on Form 8-K
No Current Reports on Form 8-K have been filed during
the quarter for which this Quarterly Report on Form 10-Q
is filed.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DOLLAR FINANCIAL GROUP, INC.
Dated: May 15, 1997 *By: /s/ Donald F. Gayhardt
--------------------------------------
Name: Donald F. Gayhardt
Title: Executive Vice President,
Chief Financial Officer,
Secretary and Treasurer
(principal financial and
chief accounting officer)
* The signatory hereto is
the principal financial and
chief accounting officer
and has been duly authorized
to sgn on behalf of the
registrant.
23
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1997
<CASH> 58,558
<SECURITIES> 0
<RECEIVABLES> 7,445
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 68,890
<PP&E> 7,095
<DEPRECIATION> 3,126
<TOTAL-ASSETS> 176,449
<CURRENT-LIABILITIES> 23,737
<BONDS> 110,000
0
0
<COMMON> 0
<OTHER-SE> 37,027
<TOTAL-LIABILITY-AND-EQUITY> 176,449
<SALES> 23,977
<TOTAL-REVENUES> 23,977
<CGS> 0
<TOTAL-COSTS> 19,145
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,123
<INCOME-PRETAX> 1,709
<INCOME-TAX> 1,387
<INCOME-CONTINUING> 322
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 322
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
EXHIBIT 99.1
The following information is incorporated into Item 1 of Part II of this
Quarterly Report on Form 10-Q, and is made a part thereof, by reference to the
"BUSINESS -- Legal Proceedings" section of the Company's Registration Statement
on Form S-4 (Registration No. 333-18221), as declared effective by the
Securities and Exchange Commission on March 11, 1997, the text of which is as
follows:
Legal Proceedings
In May 1996, a complaint was filed against the Company and one of
its subsidiaries (in the case styled Adrian Rubin v. Monetary Management Corp.,
Monetary Management Corporation, Monetary Management Holdings, Inc., Jeffrey A.
Weiss and Donald F. Gayhardt, Phila. Co. CCP, May Term, 1996, Civil Action No.
888) relating to the acquisition in February 1995 of the assets of 19 check
cashing stores from ARI, Inc. for consideration consisting, in part, of a $2.7
million note issued by such subsidiary (which note is not guaranteed by the
Company). The seller has sued for breach of contract, breach of oral guaranty,
fraudulent inducement, negligent misrepresentation and fraudulent
misrepresentation, for which he contends he is entitled to in excess of $2.7
million, plus punitive damages and attorney's fees. The Company intends to
actively contest each of the causes of action asserted in the complaint.
The Company is not a party to any other material litigation and
is not aware of any pending or threatened litigation, other than routine
litigation and administrative proceedings arising in the ordinary course of
business, that would have a material adverse effect on the Company.
