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, 1998
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
Incorporation or Organization) (I.R.S. Employer Identification No.)
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 [x] 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, 1998
(unaudited), and June 30, 1997.......................................3
Interim Unaudited Consolidated Statements of Operations for the
Three and Nine Months Ended March 31, 1998 and 1997..................4
Interim Unaudited Consolidated Statements of Cash Flows for the
Nine Months Ended March 31, 1998 and 1997............................5
Notes to Interim Unaudited Consolidated Financial Statements.........6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................14
Item 3. Quantitative and Qualitative Disclosures
About Market Risk....................................................23
PART II. OTHER INFORMATION
Item 1. Legal Proceedings....................................................24
Item 2. Changes in Securities................................................24
Item 3. Defaults Upon Senior Securities......................................24
Item 4. Submission of Matters to a Vote of Security Holders..................24
Item 5. Other Information....................................................24
Item 6. Exhibits and Reports on Form 8-K.....................................24
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, June 30,
1998 1997
--------------- --------------
ASSETS (unaudited)
<S> <C> <C>
Cash and cash equivalents $59,352 $55,205
Accounts receivable 6,031 8,101
Prepaid expenses 2,094 1,647
Deferred income taxes 707 805
Note receivable -- officer 200 200
Properties and equipment, net of
accumulated depreciation
of $5,180 and $3,686 7,964 7,934
Cost assigned to contracts acquired,
net of accumulated amortization of $419
and $235 273 457
Cost in excess of net assets acquired,
net of accumulated amortization of
$7,484 and $4,754 101,773 103,313
Covenants not to compete, net of
accumulated amortization
of $797 and $418 919 1,558
Debt issuance costs, net of
accumulated amortization of
$729 and $306 5,002 5,370
Other 1,774 1,398
--------- ---------
$186,089 $185,988
========= =========
LIABILITIES AND SHAREHOLDER'S EQUITY
Accounts payable $15,064 $14,130
Advance from money transfer agent 3,000 3,000
Accrued expenses 7,115 3,365
Accrued interest payable 5,117 1,942
Revolving credit facilities --- 12,187
Long-term debt and subordinated notes 2,769 2,804
payable
10-7/8 % Senior Notes due 2006 110,000 110,000
Shareholder's equity:
Common stock, $1 par value: 20,000
shares Authorized; 100 shares
issued and outstanding at
March 31, 1998 and June 30, 1997 --- ---
Additional paid-in capital 40,941 40,941
Retained earnings (accumulated
deficit) 3,298 (2,078)
Foreign currency translation (1,215) (303)
--------- --------
Total shareholder's equity 43,024 38,560
--------- --------
$186,089 $185,988
========= =========
</TABLE>
See notes to interim unaudited consolidated financial statements.
3
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
March 31, March 31,
------------- --------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $30,154 $23,977 $83,159 $56,871
Store and regional expenses:
Salaries and benefits 8,466 7,402 25,190 18,576
Occupancy 2,386 2,218 7,295 5,535
Depreciation 450 421 1,335 991
Other 5,098 5,789 18,014 14,332
------ ------ ------ ------
Total store and regional
expenses 16,400 15,830 51,834 39,434
Corporate expenses 2,612 2,137 8,263 5,160
Loss on store closings and
sales 30 25 20 32
Other depreciation and 1,184 1,153 3,576 2,743
amortization
Interest expense 3,203 3,123 9,595 6,829
------ ------ ------ ------
Income before taxes 6,725 1,709 9,871 2,673
Income tax provision 2,751 1,387 4,495 2,003
------ ------ ------ ------
Income before extraordinary
item 3,974 322 5,376 670
Extraordinary loss on debt
extinguishment
(net of income tax
benefit of $1,042) --- --- --- (2,023)
------ ------ ------ ------
Net income (loss) $3,974 $322 $5,376 ($1,353)
====== ====== ====== ======
</TABLE>
See notes to interim unaudited 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,
--------------------------
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 5,376 $(1,353)
Adjustments to reconcile net income
(loss) to net cash provided by operating
activities:
Depreciation and amortization 5,335 4,038
Loss on store closings and sales 20 32
Extraordinary loss on debt
extinguishment --- 2,023
Deferred tax provision 98 216
Change in assets and liabilities
(net of effect of acquisitions):
Decrease (increase) in accounts
receivable 2,077 (958)
Increase in prepaid expenses
and other assets (461) (982)
Increase in accounts payable and
accrued expenses 7,814 6,964
------- ------
Net cash provided by operating activities 20,259 9,980
Cash flows from investing activities:
Acquisitions, net of cash acquired (1,751) (59,924)
Gross proceeds from sale of fixed assets 202 ---
Additions to properties and equipment (1,698) (1,252)
-------- -------
Net cash used in investing activities (3,247) (61,176)
Cash flows from financing activities:
Payments on long-term debt --- (66,788)
Payments on subordinated notes payable (132) (344)
Net decrease in revolving credit
facilities (12,187) (7,738)
Proceeds from long-term debt --- 145,000
Proceeds from advance from money transfer
agent --- 3,000
Payments of debt issuance costs (56) (7,407)
Payments on financed insurance premiums (229) ---
Proceeds from equity contribution from
parent --- 21,652
------- -------
Net cash (used in) provided by financing
activities (12,604) 87,375
------- -------
Effect of exchange rate changes on cash (261) (166)
------- -------
Net increase in cash and cash equivalents 4,147 36,013
Cash and cash equivalents at beginning of
period 55,205 22,545
------- -------
Cash and cash equivalents at end of
period $59,352 $58,558
======= =======
Supplemental disclosures of cash flow
information:
Interest paid $6,425 $1,841
Income taxes paid $1,591 $21
Supplemental schedule of noncash
investing and financing activities:
Capital contribution from parent in
connection with acquisition of
AnyKind Check Cashing Centers, Inc. $ --- $2,000
Financing provided for insurance premiums $ 327 $166
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
</TABLE>
See notes to interim unaudited consolidated financial statements.
5
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying condensed interim unaudited 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 unaudited consolidated financial
statements be read in conjunction with the Company's audited financial
statements in its Annual Report on Form 10-K for the fiscal year ended June 30,
1997 filed with the Securities and Exchange Commission. 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, 1998 are not necessarily indicative
of the results that may be expected for the year ending June 30, 1998.
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. 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 422 locations (of which 352 are company owned) operating as Check
Mart(R), Money Mart, Loan 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 Check Cashing, Quikcash and The Service Centers
in thirteen 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, consumer loans, 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.
The Company has contracts with various governmental agencies for benefits
distribution and retail merchant services which contributed 13.3% and 17.9% of
consolidated gross revenues for the three months ended March 31, 1998 and 1997,
respectively and 13.8% and 20.8% of consolidated gross revenues for the nine
months ended March 31, 1998 and 1997, respectively. The Company's contracts with
the Commonwealth of Pennsylvania, which are included in this amount, contributed
7.5% and 7.6% of consolidated gross revenues for the three months ended March
31, 1998 and 1997, respectively and 6.8% and 9.7% of consolidated gross revenues
for the nine months ended March 31, 1998 and 1997, respectively. The
Commonwealth of Pennsylvania initiated the implementation of an electronic
benefit transfer (EBT) system in January 1998 and, based on communication with
the Commonwealth,
6
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
implementation is expected to be substantially completed by June 30, 1998. Upon
completion, this plan would result in the termination of all of the Company's
contracts with the Commonwealth of Pennsylvania. During the quarter ended March
31, 1998, the Company signed an agreement with the Commonwealth of Pennsylvania
which provides for the payment of $2.5 million to compensate the Company for the
decline in transactional revenues during the implementation period. The Company
will recognize the payment during the EBT implementation period and has
recognized $1.0 million during the three months ended March 31, 1998. Management
believes the installation of such systems will not have a material adverse
affect on the Company's results of operations or financial condition. The
Company intends to operate many of these locations as stand-alone check cashing
sites.
2. ACQUISITIONS
During fiscal 1997, the Company acquired the entities described below
(collectively referred to as the "Acquisitions"), which were accounted for by
the purchase method of accounting. The results of operations of the acquired
companies are included in the Company's statements of operations for the periods
in which they were owned by the Company. The total purchase price for each
acquisition has been allocated to assets acquired and liabilities assumed based
on the estimated fair values.
In August 1996, the Company purchased all of the outstanding capital stock of
Any Kind Check Cashing Centers, Inc. ("Any Kind") for an aggregate purchase
price of $31.0 million consisting of $29.0 million in cash and $2.0 million in
Holdings' common stock. Any Kind operated 63 check cashing stores in seven
states and the District of Columbia.
In August 1996, the Company purchased certain assets and liabilities of ABC
Check Cashing Inc. ("ABC") for a purchase price of $6.0 million in cash. ABC
operated 15 check cashing stores in Cleveland, Ohio.
In November 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). Money
Mart owned 36 check cashing stores and franchised 107 check cashing stores, all
of which operated in Canada under the "Money Mart" name.
In November 1996, the Company acquired substantially all of the assets of
Cash-N-Dash Check Cashing, Inc. ("Cash-N-Dash") for approximately $7.3 million,
consisting of $6.0 million in cash, the issuance to the seller of $500,000 of
Holdings' common stock, and a revenue-based earn-out of up to $750,000 payable
over four years. Cash-N-Dash operated 32 check cashing stores in northern
California under the "Cash-N-Dash" name.
In November 1996, the Company acquired C&C Check Cashing, Inc. ("C&C") pursuant
to a stock purchase agreement for approximately $3.8 million, consisting of $3.5
million in cash and a revenue-based earn-out of up to $300,000 payable over
three years. C&C operated 22 check cashing stores in northern California under
the "C&C Check Cashing" name.
In April 1997, the Company acquired all of the outstanding stock of a company
which owned all of the operating assets of Canadian Capital Corporation
("Canadian Capital"). Canadian Capital was the largest Money Mart franchisee and
operated 43 check cashing retail stores in Ontario, Canada under the name "Money
Mart." Total consideration for the purchase was $13.3 million.
The following unaudited pro forma information for the nine months ended March
31, 1997 presents the results of operations as if the Acquisitions had occurred
on July 1, 1996. Amounts shown for the nine months ended March 31, 1998
represent actual operating results. The pro forma operating results include the
results of operations for these acquisitions for the indicated period and
reflect the amortization of intangible assets arising from the acquisitions and
increased interest expense on acquisition debt. Pro forma results of operations
7
<PAGE>
are not necessarily indicative of the results of operations that would have
occurred had the purchase been made on the date above or the results which may
occur in the future.
NINE MONTHS ENDED
MARCH 31,
(UNAUDITED)
------------------------------
1998 1997
------------- -------------
(DOLLARS IN THOUSANDS)
Revenues .................. $83,159 $76,423
Net income (loss)........... $ 5,376 $ (366)
3. SUBSIDIARY GUARANTOR CONDENSED FINANCIAL INFORMATION
In November 1996, the Company raised approximately $110 million of gross
proceeds by issuing 10 7/8% Senior Notes due in November 2006 (the "Notes"). The
Company's payment obligations under the Notes are jointly and severally
guaranteed on a full and unconditional basis by all of the Company's existing
and future domestic subsidiaries. The subsidiaries' 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 Company's
existing credit facility and any successor credit facility. Pursuant to the
indenture governing the Notes, every direct and indirect subsidiary of the
Company, each of which is wholly owned, serves as a guarantor of the notes,
including the Company's Canadian subsidiary formed in fiscal year 1997.
The Company is a holding company with no assets, independent operations, or cash
flows other than its investment in its subsidiaries. There are no restrictions
on the Company's and the Guarantors' ability to obtain funds from their
subsidiaries by dividend or by loan. Separate financial statements of each
Guarantor have not been presented because management has determined that they
would not be material to investors. The accompanying tables set forth the
condensed consolidating balance sheet at March 31, 1998, and the consolidating
statements of operations and cash flows for the nine month period ended March
31, 1998 of the Company (on a parent-company basis), combined domestic
subsidiary Guarantors, Canadian subsidiary Guarantor, and the consolidated
Company.
8
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
CONSOLIDATING BALANCE SHEET
(IN THOUSANDS)
At March 31, 1998:
<TABLE>
<CAPTION>
Dollar Domestic Canadian
Financial Subsidiary Subsidiary
Group, Guarantors Guarantor Eliminations Consolidated
Inc.
----------- ----------- ----------- ------------- ------------
ASSETS
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents............................ $981 $45,459 $12,912 $--- $59,352
Accounts receivable.................................. 3,056 4,237 1,218 (2,480) 6,031
Prepaid expenses..................................... 662 1,219 213 --- 2,094
Deferred income taxes................................ 645 62 --- --- 707
Note receivable-officer.............................. 200 --- --- --- 200
Due from affiliates.................................. 71,975 --- --- (71,975) ---
Properties and equipment, net........................ 937 4,995 2,032 --- 7,964
Intangible assets, net............................... --- 73,746 29,219 --- 102,965
Debt issuance costs, net............................. 5,002 --- --- --- 5,002
Investment in subsidiaries........................... 79,745 --- --- (79,745) ---
Other................................................ 1,089 539 146 --- 1,774
----------- ----------- ----------- ------------- ------------
$164,292 $130,257 $45,740 ($154,200) $186,089
=========== =========== =========== ============= ============
LIABILITIES AND SHAREHOLDER'S EQUITY
Accounts payable and accrued expenses................$10,800 $13,716 $8,260 ($2,480) $30,296
Due to affiliates.................................... --- 47,168 24,807 (71,975) ---
Revolving credit facilities.......................... --- --- --- --- ---
Long term debt and subordinated notes payable........110,097 2,672 --- --- 112,769
----------- ----------- ----------- ------------- ------------
120,897 63,556 33,067 (74,455) 143,065
Shareholder's equity:
Common stock......................................... --- --- --- --- ---
Additional paid-in capital........................... 40,941 46,614 10,797 (57,411) 40,941
Retained earnings.................................... 3,298 20,087 2,247 (22,334) 3,298
Foreign currency translation......................... (844) --- (371) --- (1,215)
----------- ----------- ----------- ------------- ------------
Total shareholder's equity........................... 43,395 66,701 12,673 (79,745) 43,024
=========== =========== =========== ============= ============
$164,292 $130,257 $45,740 ($154,200) $186,089
=========== =========== =========== ============= ============
</TABLE>
9
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
CONSOLIDATING STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended March 31, 1998: Dollar Domestic Canadian
Financial Subsidiary Subsidiary
Group, Inc. Guarantors Guarantor Eliminations Consolidated
----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues............................................. $4 $65,107 $18,048 $--- $83,159
Store and regional expenses:
Salaries and benefits............................. --- 20,047 5,143 --- 25,190
Occupancy......................................... --- 5,729 1,566 --- 7,295
Depreciation...................................... --- 1,036 299 --- 1,335
Other............................................. --- 15,468 2,546 --- 18,014
----------- ----------- ------------ ------------ ------------
Total store and regional expenses.................... --- 42,280 9,554 --- 51,834
Corporate expenses................................... 6,611 --- 1,652 --- 8,263
(Gain) loss on store closings and sales.............. 90 (72) 2 --- 20
Other depreciation and amortization.................. 223 2,474 879 --- 3,576
Interest expense..................................... 7,239 187 2,169 --- 9,595
-----------
----------- ------------ ------------ ------------
Income (loss) before taxes.......................... (14,159) 20,238 3,792 --- 9,871
Income taxes provision (benefit)..................... (1,754) 4,227 2,022 --- 4,495
----------- ----------- ------------ ------------ ------------
Income (loss) before equity in net income of
subsidiaries...................................... (12,405) 16,011 1,770 --- 5,376
Equity in net income of subsidiaries:
Domestic subsidiary guarantors....................... 16,011 --- --- (16,011) ---
Canadian subsidiary guarantor........................ 1,770 --- --- (1,770) ---
=========== =========== ============ ============ ============
Net income........................................... $5,376 $16,011 $1,770 ($17,781) $5,376
=========== =========== ============ ============ ============
</TABLE>
10
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
CONSOLIDATING STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended March 31, 1998: Dollar Domestic Canadian
Financial Subsidiary Subsidiary
Group, Guarantors Guarantor Eliminations Consolidated
Inc.
----------- ----------- ------------ ------------ ------------
Cash flows from operating activities:
<S> <C> <C> <C> <C> <C>
Net income........................................... $5,376 $16,011 $1,770 ($17,781) $5,376
Adjustments to reconcile net income to net
cash provided by operating activities:
Undistributed income of subsidiaries............ (17,781) --- --- 17,781 ---
Depreciation and amortization................... 647 3,510 1,178 --- 5,335
(Gains) losses on store closings and sales...... 90 (72) 2 --- 20
Deferred tax provision.......................... 98 --- --- --- 98
Change in assets and liabilities (net of
effect of Acquisitions):
(Increase) decrease in accounts
receivable.............................. (542) 1,945 (536) 1,210 2,077
(Increase) decrease in prepaid expenses
other assets............................ (396) (75) 10 --- (461)
Increase in accounts payable and
accrued expenses........................ 3,073 644 5,307 (1,210) 7,814
----------- ----------- ------------ ------------ ------------
Net cash provided by (used in) operating
activities (9,435) 21,963 7,731 --- 20,259
Cash flows from investing activities:
Gross proceeds from sale of fixed assets........ --- 202 --- --- 202
Additions to properties and equipment........... (272) (1,088) (338) --- (1,698)
Acquisitions, net of cash acquired.............. --- (399) (1,352) --- (1,751)
Net decrease in due from affiliates............. 22,823 --- --- (22,823) ---
----------- ----------- ------------ ------------ ------------
Net cash provided by (used in) investing
activities........................................... 22,551 (1,285) (1,690) (22,823) (3,247)
Cash flows from financing activities:
Payments on subordinated notes payable.......... (120) (12) --- --- (132)
Net decrease in revolving credit facilities..... (11,733) --- (454) --- (12,187)
Payment of debt issuance costs.................. (56) --- --- --- (56)
Payments on financed insurance premiums......... (229) --- --- --- (229)
Net decrease in due to parent and affiliates.... --- (19,267) (3,556) 22,823 ---
----------- ----------- ------------ ------------ ------------
Net cash used in financing activities............... (12,138) (19,279) (4,010) 22,823 (12,604)
Effect of exchange rate on cash...................... --- --- (261) --- (261)
----------- ----------- ------------ ------------ ------------
Net increase in cash and cash equivalents............ 978 1,399 1,770 --- 4,147
Cash and cash equivalents at beginning of period..... 3 44,060 11,142 --- 55,205
=========== =========== ============ ============ ============
Cash and cash equivalents at end of period........... $981 $45,459 $12,912 $--- $59,352
=========== =========== ============ ============ ============
</TABLE>
11
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
4. STORE CLOSINGS AND SALES
During the nine month period ended March 31, 1998, the Company sold all of its
stores in Michigan and sold or closed five locations in southern California
whose primary business was to provide services for the distribution of public
assistance benefits under contracts with state and local municipalities. As a
result of declining caseloads and increasing costs, the Company determined that
these locations could not provide acceptable levels of profitability. Included
in the accompanying consolidated statements of operations for the nine months
ended March 31, 1998 and 1997, are revenues of $437,000 and $1,924,000
respectively, and store expenses of $483,000 and $1,900,000 respectively,
related to these stores. The gain recognized in the nine months ended March 31,
1998 related to the sale and closure of these stores was not material.
12
<PAGE>
SUPPLEMENTAL STATISTICAL DATA
March 31,
COMPANY OPERATING DATA: 1998 1997
---- ----
Stores in operation:
Company-Owned............... 352 329
Franchised Stores........... 70 110
-- ---
Total.......................... 422 439
=== ===
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
---------------------------- ----------------------------
OPERATING DATA: 1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Face amount of checks cashed (in millions)......... $ 587 $ 546 $ 1,720 $ 1,310
Face amount of average check....................... $ 289 $ 310 $ 277 $ 292
Face amount of average check (excluding Canada).... $ 301 $ 320 $ 285 $ 296
$ 9.30 $ 8.74 $ 8.49 $ 7.83
Average fee per check.............................. 2,030 1,759 6,200 4,481
Number of checks cashed (in thousands)............. $ 11,570 $ 6,433 $ 24,424 $ 13,277
Adjusted EBITDA1 38.4% 26.8% 29.4% 23.3%
Adjusted EBITDA Margin1............................
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
--------------------- -------------------
COLLECTIONS DATA: 1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Face amount of returned checks (in thousands)... $3,325 $2,647 $10,315 $6,655
Collections (in thousands)...................... 2,550 1,840 7,378 4,450
----- ----- ----- -----
Net write-offs (in thousands)................... $775 $ 807 $2,937 $2,205
==== ====== ====== ======
Collections as a percentage of
returned checks.............................. 76.7 69.5%% 71.5% 66.9
Net write-offs as a percentage of
check cashing revenues....................... 4.1 5.3%% 5.6% 6.3
Net write-offs as a percentage of the
face amount of checks cashed................. 0.1 0.1%% 0.2% 0.2
</TABLE>
- --------
1 Adjusted EBITDA is earnings before interest, taxes, depreciation,
amortization, noncash charges to earnings associated with foreign currency
translations, and loss on store closings and sales. Adjusted EBITDA does not
represent cash flows as defined by generally accepted accounting principles and
does not necessarily indicate that cash flows are sufficient to fund all of the
Company's cash needs. Adjusted EBITDA should not be considered in isolation or
as a substitute for net income (loss), cash flows from operating activities, or
other measures of liquidity determined in accordance with generally accepted
accounting principles. The Adjusted EBITDA margin represents Adjusted EBITDA as
a percentage of revenues. Management believes that these ratios should be
reviewed by prospective investors because the Company uses them as one means of
analyzing its ability to service its debt, the Company's lenders use them for
the purpose of analyzing the Company's performance with respect to the Company's
new revolving credit facility and the Indenture, and the Company understands
that they are used by certain investors as one measure of a company's historical
ability to service its debt. Not all companies calculate EBITDA in the same
fashion and therefore these ratios as presented may not be comparable to other
similarly titled measures of other companies.
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, bill payment and distribution of public assistance benefits.
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, 1998 and the results of operations for the three and nine
months ended March 31, 1998 and 1997. The results for the three and nine months
ended March 31, 1998 are not necessarily indicative of the results for the full
fiscal year.
The Company's revenues from government services decreased for the three and nine
months ended March 31, 1998 as compared to the three and nine months ended March
31, 1997. The Company expects that its revenues from the distribution of public
assistance benefits will continue to decline due to a number of factors. A
number of state and local governmental agencies have initiated processes to
install electronic benefits transfer systems designed to disburse public
assistance benefits directly to individuals (sometimes referred to as "EBT"
systems). The Commonwealth of Pennsylvania initiated the implementation of an
electronic benefit transfer system in January 1998 and, based on communication
with the Commonwealth, implementation is expected to be substantially completed
by June 30, 1998. Upon completion, this plan would result in the termination of
all of the Company's contracts with the Commonwealth of Pennsylvania. During the
quarter ended March 31, 1998, the Company signed an agreement with the
Commonwealth of Pennsylvania which provides for the payment of $2.5 million to
compensate the Company for the decline in transactional revenues during the
implementation period. The Company will recognize the payment during the EBT
implementation period and has recognized $1.0 million during the three months
ended March 31, 1998. Management believes the installation of such systems will
not have a material adverse affect on the Company's results of operations or
financial condition. The Company intends to operate many of these locations as
stand-alone check cashing sites. The Company's contracts with the Commonwealth
of Pennsylvania contributed 7.5% and 7.6% respectively of consolidated gross
revenues for the three months ended March 31, 1998 and 1997, respectively and
6.8% and 9.7% of consolidated gross revenues for the nine months ended March 31,
1998 and 1997, respectively.
ACQUISITIONS
The Company completed six major acquisitions during the fiscal year ended June
30, 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 operated 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 operated
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
14
<PAGE>
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 operated 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.
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
operated 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.
Canadian Capital Corporation On April 18, 1997, the Company acquired all of the
outstanding stock of a company which owned all of the operating assets of
Canadian Capital Corporation ("Canadian Capital") for approximately $13.3
million plus initial working capital of $1.8 million. Canadian Capital was the
largest Money Mart franchisee and operated 43 check cashing retail stores in
Ontario, Canada under the name "Money Mart", and had revenues for the twelve
month period ended June 30, 1996 of $11.0 million.
The comparability of the historical financial data and the comparisons in
Management's Discussion and Analysis is significantly impacted by the timing of
the acquisitions described above (collectively, the "Acquisitions").
All of the Acquisitions have been accounted for under the purchase method of
accounting. Therefore, the historical results of operations include the revenues
and expenses of all of the acquired companies since their respective dates of
acquisition.
15
<PAGE>
RESULTS OF OPERATIONS
REVENUE ANALYSIS
<TABLE>
<CAPTION>
Three Months Ended March 31, Nine Months Ended March 31,
- ------------------------------------------------------------------------------------------------------------------------------------
(Percentage of (Percentage of
($ in thousands) Total Revenue) ($ in thousands) Total Revenue)
------------------------ ---------------------- ----------------------- ------------------------
1998 1997 1998 1997 1998 1997 1998 1997
---------- ---------- --------- --------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Check Cashing $18,879 $15,369 62.6% 64.1% $52,612 $35,079 63.3% 61.7%
Government Services 4,015 4,302 13.3 17.9 11,454 11,853 13.8 20.8
Other Revenue 7,260 4,306 24.1 18.0 19,093 9,939 22.9 17.5
---------- ---------- --------- --------- ----------- ---------- ---------- -----------
Total Revenue $30,154 $23,977 100.0% 100.0% $83,159 $56,871 100.0% 100.0%
========== ========== ========= ========= =========== ========== ========== ==========
</TABLE>
QUARTER COMPARISONS
Total revenues were $30.2 million for the three months ended March 31, 1998
compared to $24.0 million for the three months ended March 31, 1997, an increase
of $6.2 million or 25.8%. The Acquisitions accounted for an increase of $3.1
million.
Comparable retail store sales at those locations owned by the Company for the
entire period increased $3.1 million or 14.5%. Check cashing revenue increased
9.1% and other revenues increased 49.0%, primarily as a result of increased
revenues from the Cash `Til Payday loan product. Partially offsetting these
increases, however, was a 9.6% decline in revenues from government services
resulting from a decrease in the volume of benefits distributed by the Company.
Government services revenues accounted for 13.3% of total revenues for the three
months ended March 31, 1998, a decrease from 17.9% of total revenues for the
three months ended March 31, 1997.
NINE MONTH COMPARISONS
Total revenues were $83.2 million for the nine months ended March 31, 1998
compared to $56.9 million for the nine months ended March 31, 1997, an increase
of $26.3 million or 46.2%. The Acquisitions accounted for an increase of $24.1
million.
Comparable retail store sales at those locations owned by the Company for the
entire period increased $3.6 million or 14.7%. Check cashing revenue increased
13.8% and other revenues increased 47.5%, primarily as a result of increased
revenues from the Cash `Til Payday loan product. Partially offsetting these
increases, however, was a $0.4 million or 7.1% decline in revenues from
government services due to a decline in the volume of benefits distributed by
the Company.
16
<PAGE>
STORE AND REGIONAL EXPENSE ANALYSIS
<TABLE>
<CAPTION>
Three Months Ended March 31, Nine Months Ended March 31,
- -----------------------------------------------------------------------------------------------------
(Percentage of (Percentage of
($ in thousands) total revenue) ($ in thousands) total revenue)
------------------ ---------------- --------------- --------------
1998 1997 1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Salaries and benefits... $8,466 $7,402 28.1% 30.9% $25,190 $18,576 30.3% 32.7%
Occupancy............... 2,386 2,218 7.9 9.2 7,295 5,535 8.8 9.7
Depreciation............ 450 421 1.5 1.8 1,335 991 1.6 1.7
Other................... 5,098 5,789 16.9 24.1 18,014 14,332 21.6 25.2
------ ------ ---- ------ ------- ------- ------ -----
Total store and regional
expenses............. $16,400 $15,830 54.4% 66.0% $51,834 $39,434 62.3% 69.3%
======= ====== ===== ======= ======= ======== ======= =======
</TABLE>
QUARTER COMPARISONS
Store and regional expenses were $16.4 million for the three months ended March
31, 1998 compared to $15.8 million for the three months ended March 31, 1997, an
increase of $0.6 million or 3.8%. The Acquisitions accounted for an increase of
$1.9 million while stores closed or sold during the period accounted for a
decrease of $1.0 million. Total store and regional expenses for the three months
ended March 31, 1998 declined to 54.4% of total revenue compared to 66.0% of
total revenue for the three months ended March 31, 1997 due to an improvement in
store level profitability.
NINE MONTH COMPARISONS
For the nine months ended March 31, 1998, store and regional expenses were $51.8
million compared to $39.4 million for the nine months ended March 31, 1998, an
increase of $12.4 million or 31.5%. The Acquisitions accounted for an increase
of $12.1 million. A continued improvement in store level profitability has
resulted in a decrease in total store and regional expenses as a percentage of
total revenue from 69.3% for the nine months ended March 31, 1997 to 62.3% for
the same period in 1998.
17
<PAGE>
<TABLE>
<CAPTION>
OTHER EXPENSE ANALYSIS
Three Months Ended March 31, Nine Months Ended March 31,
- ---------------------------------------------------------------------------------------------------------------
($ in thousands) (Percentage of ($ in thousands) (Percentage of
revenues) revenues)
------------------- --------------------- -------------------- -------------------
1998 1997 1998 1997 1998 1997 1998 1997
-------- --------- --------- -------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Corporate expenses...... $2,612 $2,137 8.7% 8.9% $8,263 5,160 9.9% 9.1%
Loss on store closings
and sales............ 30 25 0.1 0.1 20 32 n/a 0.1
Other depreciation and
amortization 1,184 1,153 3.9 4.8 3,576 2,743 4.3 4.8
Interest expense......... 3,203 3,123 10.6 13.0 9,595 6,829 11.5 12.0
Income taxes........... 2,751 1,387 9.1 5.8 4,495 2,003 5.4 3.5
</TABLE>
QUARTER COMPARISONS
Corporate Expense
Corporate expenses were $2.6 million for the three months ended March 31, 1998
compared to $2.1 million for the three months ended March 31, 1997, an increase
of $0.5 million or 23.8%. This increase resulted from the additional corporate
costs, primarily salaries and benefits, associated with the establishment of a
national collections department and the Acquisitions completed during fiscal
1996 and 1997. Additional costs have been incurred as a result of the
implementation of various strategic initiatives including full roll-out of the
Cash `Til Payday loan product and the opening of Loan Mart stores in the Seattle
market, which offer only Cash `Til Payday unsecured short-term loans.
Other Depreciation and Amortization
Other depreciation and amortization expenses was unchanged at $1.2 million for
the three months ended March 31, 1998 and March 31, 1997.
Interest Expense
Interest expense was $3.2 million for the three months ended March 31, 1998
compared to $3.1 million for the three months ended March 31, 1997, an increase
of $0.1 million or 3.2%. This increase was primarily attributable to increased
average outstanding indebtedness used to finance the Acquisitions.
Income Taxes
The provision for income taxes was $2.8 million for the three months ended March
31, 1998 compared to $1.4 million for the three months ended March 31, 1997, an
increase of $1.4 million. The Company's effective tax rate is significantly
greater than the federal statutory rate of 34% due to non-deductible goodwill
amortization, state taxes and foreign taxes.
18
<PAGE>
NINE MONTH COMPARISONS
Corporate Expense
Corporate expenses were $8.3 million for the nine months ended March 31, 1998
compared to $5.2 million for the nine months ended March 31, 1997, an increase
of $3.1 million or 59.6%. This increase resulted from the additional corporate
costs, primarily salaries and benefits associated with the establishment of a
national collections department and the Acquisitions completed during fiscal
1996 and 1997. Additional costs have been incurred as a result of the
implementation of various strategic initiatives including full roll-out of the
Cash `Til Payday loan product and the opening of Loan Mart stores in the Seattle
market, which offer only Cash `Til Payday unsecured short-term loans.
Loss on Store Closings and Sales
During the nine months ended March 31, 1998 the Company sold all of its stores
in Michigan and sold or closed five locations in southern California whose
primary business was to provide services for the distribution of public
assistance benefits under contracts with state and local municipalities. The
gain recognized in the nine months ended March 31, 1998 related to the sale and
closure of these stores was not material
Other Depreciation and Amortization
Other depreciation and amortization expenses increased $0.9 million or 33.3%
during the period, from $2.7 million for the nine months ended March 31, 1997 to
$3.6 million for the nine months ended March 31, 1998. This increase was
primarily attributable to the amortization expense associated with the goodwill
and other intangibles recorded as part of the Acquisitions.
Interest Expense
Interest expense of $9.6 million for the nine months ended March 31, 1998
represented an increase of $2.8 million, or 41.2% over the comparable period in
1997. This increase was primarily attributable to the increased average
outstanding indebtedness used to finance the Acquisitions.
Income Taxes
Income taxes expense was $4.5 million for the nine months ended March 31, 1998,
an increase of $2.5 million over the same period in 1997. The Company's
effective tax rate was 45.5% and 36.0% for the nine months ended March 31, 1998
and 1997, respectively, and is significantly greater than the federal statutory
rate of 34% due to non-deductible goodwill amortization, state taxes and foreign
taxes.
19
<PAGE>
CHANGES IN FINANCIAL CONDITION
Cash balances and the revolving credit facility balance fluctuate significantly
as a result of seasonal, monthly and day-to-day requirements for funding check
cashing and other operating activities. For the nine months ended March 31,
1998, cash increased by $4.7 million and the revolving credit facility balance
decreased by $12.2 million due to cash generated from operations of $20.3
million.
LIQUIDITY AND CAPITAL RESOURCES
In November 1996, the Company raised approximately $110 million of gross
proceeds by issuing 10 7/8% Senior Notes due in November 2006 (the "Notes"). The
Notes require semi-annual cash interest payments due in November and May.
Simultaneously with the offering of the Notes (the "Offering"), the Company
entered into a revolving credit facility (the "New Revolving Credit Facility")
which 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 agreement.
The Offering generated gross proceeds of $110.0 million which were used to repay
all of the Company's existing indebtedness (including indebtedness incurred to
finance the August 1996 acquisitions of Any Kind and ABC), and to fund the
November 1996 acquisitions of Money Mart, Cash-N-Dash and C&C and to pay fees
and expenses. The remaining proceeds from the Offering were used to fund the
April 1997 acquisition of Canadian Capital Corporation. Availability under the
New Revolving Credit Facility is subject to certain restrictions. There were no
borrowings outstanding under the New Credit Facility as of March 31, 1998. The
New Revolving Credit Facility and the indenture governing the Notes contain
certain covenants and restrictions relating to, among other things, future
acquisitions, dividend payments, maintenance of certain financial ratios and the
incurrence of additional indebtedness. In connection with the Money Mart
acquisition in November 1996, the Company established an overdraft credit
facility to fund peak working capital needs for its Canadian operation, which
provides for borrowings up to $5.0 million.
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, 1998 and 1997, the Company had
net cash provided by operating activities of $20.3 million and $10.0 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 Company's total budgeted capital expenditures, excluding
acquisitions, are currently anticipated to aggregate approximately $2.5 million
during its fiscal year ending June 30, 1998. As of March 31, 1998, the Company
had made capital expenditures of $1.7 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 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), 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 charges, 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
20
<PAGE>
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.
SEASONALITY AND QUARTERLY FLUCTUATIONS
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.
RECENT ACCOUNTING PRONOUNCEMENTS
The Company adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") 121, "Accounting for the Impairment of Long-Lived Assets and
For Long-Lived Assets to be Disposed Of" for the fiscal year ended June 30,
1997. The adoption of this standard has not had a material impact on the
Company's financial statements.
The Financial Accounting Standards Board ("FASB") has issued Statement No. 129,
"Disclosure of Information about Capital Structure," which is applicable to all
companies. Statement No. 129 consolidates the existing guidance in authoritative
literature relating to a company's capital structure. The Statement is effective
for financial statements for periods ending after December 15, 1997. The Company
does not believe the adoption of this standard will have any impact on the
Company's financial statements.
In June 1997, the FASB issued Statement No. 130, "Reporting Comprehensive
Income," and Statement No. 131, "Disclosures about Segments of an Enterprise and
Related Information." Both Statements become effective for fiscal periods
beginning after December 15, 1997 with early adoption permitted. The Company is
evaluating the effects these Statements will have on its financial statements
and disclosures. The Statements are expected to have no effect on the Company's
results of operations, financial position, capital resources, or liquidity.
21
<PAGE>
IMPACT OF YEAR 2000
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions or engage in similar
normal business activities.
The Company has evaluated all tools, resources, databases, operating systems,
and appropriate hardware used by the Company and its subsidiaries. As a result,
management has defined what it believes to be the appropriate structure to
execute all necessary Year 2000 projects which include, but are not limited to,
improvements, replacement applications and conversions.
The Company's store operations, which includes its point-of-sale system, will
not be significantly affected by the Year 2000 Issue, however, the Company has
identified external systems that are currently not Year 2000 compliant and has
initiated communication with the vendors of such systems regarding their plans
to remedy the Year 2000 issues. Although the Company believes these vendors will
conform on a timely basis, there can be no guarantee that the systems of other
companies on which the Company's systems rely will be converted in a timely
manner and would not have an adverse effect on the Company's systems.
The Company expects the Year 2000 projects to be complete by early 1999 and does
not expect the costs to be material. The Company does not expect the projects to
have a significant effect on operations.
FORWARD-LOOKING STATEMENTS
This report may contain certain forward-looking statements regarding the
Company's expected performance for future periods, and actual results for such
periods may materially differ. Such forward-looking statements involve risks and
uncertainties, including risks of changing market conditions in the overall
economy and the industry, consumer demand, the success of the Company's
acquisition strategy and other factors detailed from time to time in the
Company's annual and other reports filed with the Securities and Exchange
Commission.
22
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
23
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Item 3. Legal Proceedings in the Company's audited financial
statements in its Annual Report of Form 10-K for the fiscal year ended
June 30, 1997.
ITEM 2. CHANGES IN SECURITIES
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
24
<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 14, 1998 *By: /s/ Richard S. Dorfman
-------------------------------
Name: Richard S. Dorfman
Title: Executive Vice President and
Chief Financial Officer,
(principal financial and
* The signatory hereto is the principal
financial and chief accounting
officer and has been duly authorized
to sign on behalf of the registrant.
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Description
- ---------- -----------
27.1 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from
the financial statements contained in the body of the accompanying
Form 10-Q and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 59,352
<SECURITIES> 0
<RECEIVABLES> 6,031
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 67,477
<PP&E> 13,144
<DEPRECIATION> 5,180
<TOTAL-ASSETS> 186,089
<CURRENT-LIABILITIES> 27,296
<BONDS> 115,769
0
0
<COMMON> 0
<OTHER-SE> 43,024
<TOTAL-LIABILITY-AND-EQUITY> 186,089
<SALES> 0
<TOTAL-REVENUES> 83,159
<CGS> 0
<TOTAL-COSTS> 60,097
<OTHER-EXPENSES> 3,596
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,595
<INCOME-PRETAX> 9,871
<INCOME-TAX> 4,495
<INCOME-CONTINUING> 5,376
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,376
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
