<PAGE>
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, 2000
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 (I.R.S. Employer Identification No.)
of 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 x whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities 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
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page No.
--------
<S> <C> <C>
Item 1. Financial Statements
Interim Consolidated Balance Sheets as of June 30, 1999
and March 31, 2000 (unaudited)................................................ 3
Interim Unaudited Consolidated Statements of Operations for the Three and Nine
Months Ended March 31, 1999 and 2000.......................................... 4
Interim Unaudited Consolidated Statements of Cash Flows for the Nine Months
Ended March 31, 1999 and 2000................................................. 5
Notes to Interim Unaudited Consolidated Financial Statements.................. 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations......................................................... 16
Item 3. Quantitative and Qualitative Disclosures
About Market Risk............................................................. 24
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................................. 25
Item 2. Changes in Securities and Use of Proceeds..................................... 25
Item 3. Defaults Upon Senior Securities............................................... 25
Item 4. Submission of Matters to a Vote of Security Holders........................... 25
Item 5. Other Information............................................................. 25
Item 6. Exhibits and Reports on Form 8-K.............................................. 25
</TABLE>
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>
June 30, March 31,
1999 2000
----------- ---------
ASSETS (unaudited)
<S> <C> <C>
Cash and cash equivalents.......................................... $ 65,782 $ 76,398
Accounts receivable................................................ 9,854 14,208
Income taxes receivable............................................ 2,587 -
Prepaid expenses................................................... 2,174 5,672
Notes receivable - officers........................................ 2,851 2,921
Due from parent.................................................... - 710
Property and equipment, net of accumulated depreciation
of $7,546 and $12,326........................................... 12,754 21,918
Cost assigned to contracts acquired, net of accumulated
amortization of $581 and $630................................... 104 62
Cost in excess of net assets acquired, net of accumulated
amortization of $11,232 and $15,387............................. 96,125 120,005
Covenants not to compete, net of accumulated amortization
of $1,295 and $1,470............................................ 407 402
Debt issuance costs, net of accumulated amortization of
$1,917 and $2,949............................................... 9,416 8,770
Other.............................................................. 1,655 1,628
---------- ----------
$ 203,709 $ 252,694
========== ==========
LIABILITIES AND SHAREHOLDER'S EQUITY
Accounts payable................................................... $ 12,040 $ 17,672
Income taxes payable............................................... 2,483 1,746
Advance from money transfer agent.................................. 2,000 1,000
Accrued expenses................................................... 4,868 11,281
Accrued interest payable........................................... 3,162 6,039
Deferred tax liability............................................. 78 78
Due to parent...................................................... 578 -
Revolving credit facilities........................................ 12,162 42,789
10-7/8 % Senior Notes due 2006..................................... 109,190 109,190
Long term debt and subordinated notes payable...................... 20,814 20,467
Shareholder's equity:
Common stock, $1 par value: 20,000 shares
authorized; 100 shares issued and outstanding at
June 30, 1999 and March 31, 2000................................ - -
Additional paid-in capital......................................... 50,824 50,824
Accumulated deficit................................................ (11,224) (5,257)
Accumulated other comprehensive loss............................... (3,266) (3,135)
---------- ----------
Total shareholder's equity...................................... 36,334 42,432
---------- ----------
$ 203,709 $ 252,694
========== ==========
</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 Ended Nine Months Ended
March 31, March 31,
-------------------------- ---------------------------
1999 2000 1999 2000
-------------------------- ----------------------------
<S> <C> <C> <C> <C>
Revenues....................................................... $ 32,309 $ 46,199 $ 88,329 $ 120,912
Store and regional expenses:
Salaries and benefits....................................... 8,979 12,578 26,005 34,296
Occupancy................................................... 2,407 3,163 7,069 9,232
Depreciation................................................ 538 1,131 1,543 3,083
Other....................................................... 5,182 9,898 17,026 26,373
--------- --------- --------- ---------
Total store and regional expenses.............................. 17,106 26,770 51,643 72,984
Corporate expenses............................................. 3,506 5,643 9,852 14,927
Loss on store closings and sales............................... 25 34 75 105
Goodwill amortization.......................................... 1,185 1,459 3,461 4,118
Other depreciation and amortization............................ 209 358 756 1,011
Recapitalization costs and other non-recurring items........... - - 12,575 133
Interest expense............................................... 5,959 4,650 12,457 13,066
--------- --------- --------- ---------
Income (loss) before income taxes and extraordinary item....... 4,319 7,285 (2,490) 14,568
Income tax provision........................................... 2,057 3,430 1,694 8,601
--------- --------- --------- ---------
Income (loss) before extraordinary item........................ 2,262 3,855 (4,184) 5,967
Extraordinary loss on debt extinguishment (net of
income tax benefit of $45).................................. - - 85 -
--------- --------- --------- ---------
Net income (loss).............................................. $ 2,262 $ 3,855 $ (4,269) $ 5,967
========= ========= ========= =========
</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,
---------------------------------------------------
1999 2000
---------------------- --------------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income........................................................ $ (4,269) $ 5,967
Adjustments to reconcile net (loss) income to
cash provided by operating activities:
Depreciation and amortization....................................... 8,351 9,239
Loss on store closings and sales.................................... 75 105
Noncash recapitalization costs...................................... 9,883 133
Deferred tax benefit................................................ - (62)
Extraordinary loss on debt extinguishment (net of income tax
benefit of $45).................................................. 85 -
Change in assets and liabilities (net of effect of acquisitions):
Increase in accounts receivable and income taxes receivable...... (6,793) (402)
Increase in prepaid expenses and other........................... (854) (1,346)
Increase in accounts payable, income taxes payable, accrued
expenses and accrued interest payable........................... 3,369 6,988
--------- ---------
Net cash provided by operating activities................................ 9,847 20,622
Cash flows from investing activities:
Acquisitions, net of cash acquired..................................... (15,709) (29,355)
Additions to property and equipment.................................... (4,091) (9,748)
--------- ---------
Net cash used in investing activities.................................... (19,800) (39,103)
Cash flows from financing activities:
Other debt payments.................................................... (826) (953)
Payments to money transfer agent....................................... (1,000) (1,000)
Net increase in revolving credit facilities............................ 3,973 30,627
Proceeds from long term debt........................................... 18,107 1,893
Payment of debt issuance costs......................................... (8,106) (381)
Advances to officers................................................... (2,651) (64)
Payments of financed insurance premiums................................ (10) -
Net increase (decrease) in due to parent............................... 907 (1,288)
--------- ---------
Net cash provided by financing activities................................ 10,394 28,834
Effect of exchange rate changes on cash and cash equivalents............. (422) 263
--------- ---------
Net increase in cash and cash equivalents................................ 19 10,616
Cash and cash equivalents at beginning of period......................... 55,501 65,782
--------- ---------
Cash and cash equivalents at end of period............................... $ 55,520 $ 76,398
========= =========
</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 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 instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all information and footnotes required by generally accepted
accounting principles for complete financial statements and should be read in
conjunction with the Company's audited consolidated financial statements in its
Annual Report on Form 10-K for the fiscal year ended June 30, 1999 filed with
the Securities and Exchange Commission. In the opinion of management, all
adjustments, (consisting of normal recurring adjustments), considered necessary
for a fair presentation have been included. Operating results of interim
periods are not necessarily indicative of the results that may be expected for a
full fiscal year.
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 subsidiaries. All significant intercompany accounts and transactions have
been eliminated.
Reclassification
Certain prior year amounts have been reclassified to the current presentation.
Operations
Dollar Financial Group, Inc., organized in 1979 under the laws of the State of
New York, is a wholly owned subsidiary of DFG Holdings, Inc. ("Holdings"). The
activities of Holdings consist primarily of its investment in the Company and
additional third party debt. Holdings has no employees or operating activities
as of March 31, 2000. The Company, through its subsidiaries, provides retail
financial and government contractual services to the general public through a
network of 818 (of which 506 are company owned) locations operating as Any Kind
Check Cashing Centers, Cash A Cheque, Cash Centres, Check Mart, Financial
Exchange Company, Money Mart, The Money Shop and Loan Mart in thirteen states,
the District of Columbia, Canada and the United Kingdom. The services provided
at the Company's retail locations include check cashing, sale of money orders,
money transfer services, consumer loans and various other related services.
Additionally, the Company, through its merchant services division, maintains and
services a network of electronic government benefits distribution to
approximately 1,200 retail locations throughout the State of New York. Also,
the Company's subsidiary moneymart.com, provides payday loans through 150
independent agents in 18 states.
6
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
2. SUBSIDIARY GUARANTOR UNAUDITED FINANCIAL INFORMATION
The Company's payment obligations under the 10 7/8% Senior Notes due November
2006 ("Senior Notes") and Senior Subordinated Notes due 2006 ("Senior
Subordinated Notes") are jointly and severally guaranteed on a full and
unconditional basis by all of the Company's existing and future subsidiaries
(the "Guarantors"). 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 new revolving
credit facility and any successor credit facilities. Pursuant to the Senior
Notes or Senior Subordinated Notes, every direct and indirect wholly owned
subsidiary of the Company serves as a guarantor of the Senior Notes and Senior
Subordinated Notes.
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 consolidating balance sheet at March 31, 2000, and the
consolidating statement of operations and cash flows for the nine month period
ended March 31, 2000 of the Company (on a parent-company basis), combined
domestic Guarantors, combined foreign Guarantors and the consolidated Company.
7
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
CONSOLIDATING BALANCE SHEET
March 31, 2000
(In thousands)
<TABLE>
<CAPTION>
Dollar Domestic Foreign
Financial Subsidiary Subsidiary
Group, Inc. Guarantors Guarantors Eliminations Consolidated
------------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents...................... $ 3,330 $ 41,705 $ 31,363 $ - $ 76,398
Accounts receivable............................ 12,091 4,818 7,213 (9,914) 14,208
Income taxes receivable........................ - 590 - (590) -
Prepaid expenses............................... 817 1,693 3,162 - 5,672
Notes receivable-officers...................... 2,851 - 70 - 2,921
Due from affiliates............................ 75,667 - - (75,667) -
Due from parent................................ 710 - - - 710
Property and equipment, net.................... 3,799 8,187 9,932 - 21,918
Cost assigned to contracts acquired, net....... - 62 - - 62
Cost in excess of net assets acquired, net..... - 56,410 63,595 - 120,005
Covenants not to compete, net.................. - 402 - - 402
Debt issuance costs, net....................... 8,770 - - - 8,770
Investment in subsidiaries..................... 111,641 - - (111,641) -
Other.......................................... 558 472 598 - 1,628
---------- ---------- ---------- ---------- ----------
$ 220,234 $ 114,339 $ 115,933 $ (197,812) $ 252,694
========== ========== ========== ========== ==========
LIABILITIES AND SHAREHOLDER'S EQUITY
Accounts payable............................... $ - $ 9,497 $ 8,175 $ - $ 17,672
Income taxes payable........................... 323 - 2,013 (590) 1,746
Advance from money transfer agent.............. 1,000 - - - 1,000
Accrued expenses............................... 6,365 2,507 2,409 - 11,281
Accrued interest payable....................... 5,069 - 10,884 (9,914) 6,039
Deferred tax liability (benefit)............... 140 (62) - - 78
Due to affiliates.............................. - 10,335 65,332 (75,667) -
Revolving credit facilities.................... 34,100 - 8,689 - 42,789
10-7/8% Senior Notes due 2006.................. 109,190 - - - 109,190
Long term debt and subordinated notes payable.. 20,000 - 467 - 20,467
---------- ---------- ---------- ---------- ----------
176,187 22,277 97,969 (86,171) 210,262
Shareholder's equity:
Common stock................................... - - - - -
Additional paid-in capital..................... 50,824 46,614 10,797 (57,411) 50,824
(Accumulated deficit) retained earnings........ (5,257) 45,942 8,288 (54,230) (5,257)
Accumulated other comprehensive loss........... (1,520) (494) (1,121) - (3,135)
---------- ---------- ---------- ---------- ----------
Total shareholder's equity..................... 44,047 92,062 17,964 (111,641) 42,432
---------- ---------- ---------- ---------- ----------
$ 220,234 $ 114,339 $ 115,933 $ (197,812) $ 252,694
========== ========== ========== ========== ==========
</TABLE>
8
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
CONSOLIDATING STATEMENT OF OPERATIONS
Nine Months Ended March 31, 2000
(In thousands)
<TABLE>
<CAPTION>
Dollar Domestic Foreign
Financial Subsidiary Subsidiary
Group, Inc. Guarantors Guarantors Eliminations Consolidated
------------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues................................................... $ - $ 75,304 $ 45,608 $ - $ 120,912
Store and regional expenses:
Salaries and benefits................................... - 21,899 12,397 - 34,296
Occupancy............................................... - 5,770 3,462 - 9,232
Depreciation............................................ - 1,644 1,439 - 3,083
Other................................................... - 17,019 9,354 - 26,373
---------- ---------- --------- -------- ---------
Total store and regional expenses.......................... - 46,332 26,652 - 72,984
Corporate expenses......................................... 10,601 - 4,326 - 14,927
Management fees............................................ (1,368) - 1,368 - -
Loss on store closings and sales........................... 75 - 30 - 105
Goodwill amortization...................................... - 2,678 1,440 - 4,118
Other depreciation and amortization........................ 579 174 258 - 1,011
Recapitalization costs and other non-recurring items....... 1,795 (1,795) 133 - 133
Interest expense........................................... 9,877 117 3,072 - 13,066
---------- ---------- --------- -------- ---------
(Loss) income before income taxes.......................... (21,559) 27,798 8,329 - 14,568
Income tax provision....................................... 5,428 - 3,173 - 8,601
---------- ---------- --------- -------- ---------
(Loss) income before equity in net income of subsidiaries.. (26,987) 27,798 5,156 - 5,967
Equity in net income of subsidiaries:
Domestic subsidiary guarantors............................. 27,798 - - (27,798) -
Foreign subsidiary guarantors.............................. 5,156 - - (5,156) -
---------- ---------- --------- -------- ---------
Net income................................................. $ 5,967 $ 27,798 $ 5,156 $(32,954) $ 5,967
========== ========== ========= ======== =========
</TABLE>
9
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
CONSOLIDATING STATEMENT OF CASH FLOWS
Nine months ended March 31, 2000
(In thousands)
<TABLE>
<CAPTION>
Dollar Domestic Foreign
Financial Subsidiary Subsidiary
Group, Inc. Guarantors Guarantors Eliminations Consolidated
------------ ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income................................................... $ 5,967 $ 27,798 $ 5,156 $(32,954) $ 5,967
Adjustments to reconcile net income to net
cash (used in) provided by operating activities:
Undistributed income of subsidiaries.................. (32,954) - - 32,954 -
Depreciation and amortization......................... 1,616 4,486 3,137 - 9,239
Loss on store closings and sales..................... 75 - 30 - 105
Noncash recapitalization costs and other
non-recurring items.................................. 1,795 (1,795) 133 - 133
Deferred tax benefit.................................. - (62) - - (62)
Change in assets and liabilities (net of effect of
acquisitions):
Increase in accounts receivable and income taxes
receivable...................................... (1,833) (636) (678) 2,745 (402)
Increase in prepaid expenses and other............ (155) (422) (769) - (1,346)
Increase (decrease) in accounts payable, income
taxes payable, accrued expenses and accrued
interest payable................................. 6,384 (786) 4,135 (2,745) 6,988
--------- --------- --------- -------- ---------
Net cash (used in) provided by operating activities.......... (19,105) 28,583 11,144 - 20,622
Cash flows from investing activities:
Acquisitions, net of cash acquired.................. - (3,453) (25,902) - (29,355)
Additions to property and equipment................. (2,263) (3,202) (4,283) - (9,748)
Net increase in due from affiliates................. (1,260) - - 1,260 -
--------- --------- --------- -------- ---------
Net cash used in investing activities........................ (3,523) (6,655) (30,185) 1,260 (39,103)
Cash flows from financing activities:
Other debt payments................................. - (3) (950) - (953)
Payments to money transfer agent.................... (1,000) - - - (1,000)
Net increase in revolving credit facilities......... 23,600 - 7,027 - 30,627
Proceeds from long term debt........................ 1,893 - - - 1,893
Payments of debt issuance costs..................... (381) - - - (381)
Advances to officers................................ - - (64) - (64)
Net (decrease) increase in due to affiliates and
parent............................................. (1,288) (9,276) 10,536 (1,260) (1,288)
--------- --------- --------- -------- ---------
Net cash provided by (used in) financing activities.......... 22,824 (9,279) 16,549 (1,260) 28,834
Effect of exchange rate changes on cash and cash
equivalents......................................... - - 263 - 263
--------- --------- --------- -------- ---------
Net increase (decrease) in cash and cash equivalents......... 196 12,649 (2,229) - 10,616
Cash and cash equivalents at beginning of period............. 3,134 29,056 33,592 - 65,782
--------- --------- --------- -------- ---------
Cash and cash equivalents at end of period................... $ 3,330 $ 41,705 $ 31,363 $ - $ 76,398
========= ========= ========= ======== =========
</TABLE>
10
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
3. COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) is the change in equity from transactions and other
events and circumstances from non-owner sources, which includes foreign currency
translation. The following shows the comprehensive income (loss) for the
periods stated:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
------------------------------------------ --------------------------------------
1999 2000 1999 2000
------------------ ------------------ --------------- ---------------
<S> <C> <C> <C> <C>
Net income (loss) $2,262 $ 3,855 $(4,269) $5,967
Foreign currency translation adjustment 473 (1,731) (942) 131
------------------ ------------------ --------------- ---------------
Total comprehensive income (loss) $2,735 $ 2,124 $(5,211) $6,098
================== ================== =============== ===============
</TABLE>
4. GEOGRAPHIC SEGMENT INFORMATION
All operations for which geographic data is presented below are in one
principal industry (check cashing and ancillary services) (in thousands):
<TABLE>
<CAPTION>
United United
States Canada Kingdom Total
---------------------------------------------------------
<S> <C> <C> <C> <C>
As of and for the three months
ended March 31, 1999
Identifiable assets $ 125,837 $ 51,666 $ 18,976 $ 196,479
Sales to unaffiliated customers 24,657 6,833 819 32,309
Income before income taxes 3,015 1,092 212 4,319
Income tax provision 1,321 667 69 2,057
---------------------------------------------------
Net income $ 1,694 $ 425 $ 143 $ 2,262
===================================================
For the nine months ended March 31, 1999
Sales to unaffiliated customers $ 66,922 $ 20,588 $ 819 $ 88,329
(Loss) income before income taxes and extraordinary
item (6,424) 3,722 212 (2,490)
Income tax (benefit) provision (554) 2,179 69 1,694
Extraordinary loss on debt extinguishment (net of
income tax benefit of $45) 85 - - 85
---------------------------------------------------
Net (loss) income $ (5,955) $ 1,543 $ 143 $ (4,269)
====================================================
</TABLE>
11
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
<TABLE>
<CAPTION>
United United
States Canada Kingdom Total
----------------------------------------------------------
As of and for the three months
ended March 31, 2000
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Identifiable assets $ 136,761 $ 69,326 $ 46,607 $ 252,694
Sales to unaffiliated customers 29,961 9,731 6,507 46,199
Income before income taxes 4,859 1,820 606 7,285
Income tax provision 1,982 721 727 3,430
--------------------------------------------------
Net (loss) income $ 2,877 $ 1,099 $ (121) $ 3,855
==================================================
For the nine months ended March 31, 2000
Sales to unaffiliated customers $ 75,304 $ 28,969 $ 16,639 $ 120,912
Income before income taxes 6,239 6,164 2,165 14,568
Income tax provision 5,428 2,006 1,167 8,601
--------------------------------------------------
Net income $ 811 $ 4,158 $ 998 $ 5,967
==================================================
</TABLE>
5. ACQUISITIONS
On February 10, 1999, the Company entered into an agreement to acquire all of
the outstanding shares of Instant Cash Loans Limited ("ICL") which operated
eleven stores in the United Kingdom. The aggregate purchase price for this
acquisition was $12.6 million, consisting of $9.4 million in cash and a profit-
based earn out of up to $3.2 million payable over two years, plus initial
working capital of $2.0 million. The Company issued $11.4 million of its Senior
Subordinated Notes to fund the purchase. The excess of the purchase price over
the fair value of identifiable net assets acquired was $8.3 million.
On February 17, 1999, the Company purchased the remaining 86.5% partnership
interest in its Calgary Money Mart Partnership ("Calgary"). Calgary operated six
stores in Alberta, Canada. The aggregate purchase price for this acquisition
was $5.6 million. To fund the purchase, the Company issued $5.6 million of its
Senior Subordinated Notes. The excess of the purchase price over the fair value
of identifiable net assets acquired was $5.2 million.
On July 7, 1999, the Company entered into an agreement to acquire all of the
outstanding shares of Cash A Cheque Holdings Great Britain Limited ("CAC"),
which operated 44 company owned stores in the United Kingdom. The aggregate
purchase price for this acquisition was approximately $12.5 million and was
funded through excess internal cash, the Company's revolving credit facility
and $1.9 million of the Company's Senior Subordinated Notes. The agreement also
includes a maximum potential contingent payment to the sellers of $16.6 million
based on future levels of profitability. The excess of the purchase price over
the fair value of identifiable net assets acquired was $8.2 million.
On November 18, 1999, the Company entered into an agreement to acquire all the
outstanding shares of Cheques R Us, Inc. ("CRU") and Courtenay Money Mart Ltd.
("Courtenay"), which operated six stores in British Columbia. The aggregate
purchase price for this acquisition was $1.2 million and was funded through
excess internal cash. The excess of the purchase price over the fair value of
identifiable net assets acquired was $1.1 million.
On December 15, 1999, the Company entered into an agreement to acquire all of
the outstanding shares of Cash Centres Corporation Limited ("CCCL"), which
operated five company owned stores and 238 franchises in the United Kingdom.
The aggregate purchase price for this acquisition was $8.4 million and was
funded through the Company's revolving credit facility. The excess of the
purchase price over the fair value of identifiable net assets acquired was $7.7
million. The agreement also includes a maximum potential contingent payment to
the sellers of $2.7 million based on future levels of profitability.
12
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
On February 10, 2000, the Company entered into an agreement to acquire primarily
all of the assets of CheckStop, which is a payday loan business operating
through 150 independent agents in 17 states. The aggregate purchase price for
this acquisition was $2.6 million and was funded through the Company's revolving
credit facility. The excess of the purchase price over the fair value of
identifiable net assets acquired was $2.4 million. The agreement also includes
a maximum potential contingent payment to the sellers of $350,000 based upon
future results of operations.
The following unaudited pro forma information for the three months and nine
months ended March 31, 1999 and 2000 presents the results of operations as if
the acquisitions had occurred as of the beginning of the periods presented. The
pro forma operating results include the results of these acquisitions for the
indicated period and reflect the amortization of intangible assets arising from
the acquisitions, increased interest expense on acquisition debt, the income tax
impact and other immaterial activities discontinued as of the respective
purchase dates of ICL, Calgary, CAC, CRU, Courtenay, CCCL and CheckStop. Pro
forma results of operations 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.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
(Unaudited) (Unaudited)
1999 2000 1999 2000
-------- ------- ----------------------------
(dollars in thousands) (dollars in thousands)
<S> <C> <C> <C> <C>
Revenues $37,186 $46,553 $105,156 $126,219
Income (loss) before extraordinary item 2,275 3,810 (3,507) 6,030
Net income (loss) 2,275 3,810 (3,592) 6,030
</TABLE>
6. CONTINGENCIES AND LITIGATION
On December 28, 1999, the Company entered into a settlement of a lawsuit which
had been commenced in February 1999. The plaintiff, who purports to represent a
class of "payday loan" borrowers, had alleged violations of state and federal
usury and consumer-protection laws by Eagle National Bank (the lender in the
plaintiff's loan transaction), the Company and others. In entering into the
settlement, the Company specifically denied any wrongdoing. The terms of the
settlement set a maximum payout amount of up to $5.5 million. The settlement is
awaiting final court approval. Management has determined that a minimum loss
amount can be reasonably estimated. Accordingly, during the quarter ended
December 31, 1999, the Company recorded its best estimate, based on the
information available at the time, of the cost of providing relief to class
members and for legal and administrative costs associated with the settlement.
Given the uncertainties associated with estimating the reserve, it is reasonably
possible that the final cost of the settlement could differ materially from the
amount previously provided. The Company will continue to update its estimate of
the final cost of the settlement as the settlement process continues. The range
of any additional costs related to the settlement cannot be reasonably
estimated.
In May 2000, the Company entered into a Stipulation of Settlement in the matter
of Adrian Rubin v. Monetary Management Corp., et al. Pursuant to the terms of
the Stipulation, the parties have agreed to release each other from any and all
claims stemming from the lawsuit filed in May 1996. The Company's accrual was
adequate to cover the settlement amount paid to Adrian Rubin.
The net effect of these items is immaterial and is included in recapitalization
costs and other non recurring items.
13
<PAGE>
7. SUBSEQUENT EVENTS
On May 8, 2000, the Company entered into an agreement to acquire substantially
all of the assets of Fast `n Friendly Check Cashing, which operates 8 stores in
Maryland. The aggregate purchase price for this acquisition was $700,000 and
was funded through the Company's revolving credit facility. The agreement also
includes a maximum potential contingent payment to the sellers of $150,000 based
on future revenue.
14
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
SUPPLEMENTAL STATISTICAL DATA
<TABLE>
<CAPTION>
March 31,
Company Operating Data: 1999 2000
----------- -----------
<S> <C> <C>
Stores in operation:
Company-Owned................................................. 349 506
Franchised Stores............................................. 79 312
--- ---
Total............................................................ 428 818
=== ===
- -----------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
March 31, March 31,
----------------------------------------------------------------
Operating Data: 1999 2000 1999 2000
----------------------------------------------------------------
Face amount of checks cashed (in millions)....................... $ 606 $ 763 $ 1,722 $ 2,023
Face amount of average check..................................... $ 337 $ 369 $ 303 $ 336
Face amount of average check (excluding Canada and the United
Kingdom)........................................................ $ 382 $ 419 $ 327 $ 367
Average fee per check............................................ $ 11.61 $ 13.27 $ 9.84 $ 11.94
Number of checks cashed (in thousands)........................... 1,797 2,067 5,686 6,028
Adjusted EBITDA (in thousands)/1/................................ $ 12,154 $ 14,960 $ 28,464 $ 35,959
Adjusted EBITDA Margin/1/........................................ 37.6% 32.4% 32.2% 29.7%
- ----------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
March 31, March 31,
----------------------------------------------------------------
Collections Data: 1999 2000 1999 2000
----------------------------------------------------------------
Face amount of returned checks (in thousands).................... $ 3,960 $ 5,895 $ 12,374 $ 16,617
Collections (in thousands)....................................... 3,155 4,661 9,289 12,337
---------- ---------- ---------- ----------
Net write-offs (in thousands).................................... $ 805 $ 1,234 $ 3,085 $ 4,280
========== ========== ========== ==========
Collections as a percentage of
returned checks............................................... 79.7% 79.1% 75.1% 74.2%
Net write-offs as a percentage of
check cashing revenues........................................ 3.9% 4.5% 5.5% 5.9%
Net write-offs as a percentage of the
face amount of checks cashed.................................. .13% .16% .18% .21%
</TABLE>
/1/Adjusted EBITDA is earnings before interest, taxes, depreciation,
amortization, loss on store closings and sales, recapitalization costs and other
non-recurring items and extraordinary items. 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, 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 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.
15
<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, the largest such
network in Canada and stores in the United Kingdom. The Company provides a
diverse range of consumer financial products and services primarily consisting
of check cashing, money orders, money transfers, consumer loans and various
other related services.
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, 2000 and the results of operations for the three and nine
months ended March 31, 2000 and 1999. The results for the three and nine months
ended March 31, 2000 are not necessarily indicative of the results for the full
fiscal year and should be read in conjunction with the Company's unaudited
financial statements and its Annual Report on Form 10-K for the fiscal year
ended June 30, 1999.
In fiscal year 1999, DFG Holdings Inc. ("Holdings"), entered into an agreement
and plan of merger (the "Merger Agreement") with DFG Acquisition, Inc.,
("Acquisition") controlled by Green Equity Investors II, L.P., and the
stockholders of Holdings party thereto, providing for the merger of Acquisition
with and into Holdings, with Holdings as the surviving corporation (the
"Merger"). In the Merger, the senior members of management of Holdings retained
substantially all of their stock in the surviving corporation and the other
stockholders received cash in exchange for their shares of Holdings. The Merger
was accounted for as a recapitalization of Holdings.
Acquisitions
On February 10, 1999, the Company entered into an agreement to acquire all of
the outstanding shares of Instant Cash Loans Limited ("ICL") which operated
eleven stores in the United Kingdom. The aggregate purchase price for this
acquisition was $12.6 million, consisting of $9.4 million in cash and a profit-
based earn out of up to $3.2 million payable over two years, plus initial
working capital of $2.0 million. The Company issued $11.4 million of its Senior
Subordinated Notes to fund the purchase. The excess of the purchase price over
the fair value of identifiable net assets acquired was $8.3 million.
On February 17, 1999, the Company purchased the remaining 86.5% partnership
interest in its Calgary Money Mart Partnership ("Calgary"). Calgary operated six
stores in Alberta, Canada. The aggregate purchase price for this acquisition
was $5.6 million. The excess of the purchase price over the fair value of
identifiable net assets acquired was $5.2 million.
On July 7, 1999, the Company entered into an agreement to acquire all of the
outstanding shares of Cash A Cheque Holdings Great Britain Limited ("CAC"),
which operated 44 company owned stores in the United Kingdom. The aggregate
purchase price for this acquisition was approximately $12.5 million and was
funded through excess internal cash and the Company's revolving credit facility.
The agreement also includes a maximum potential contingent payment to the
sellers of $16.6 million based on future levels of profitability. The excess of
the purchase price over the fair value of the identifiable net assets acquired
was $8.2 million.
On November 18, 1999, the Company entered into an agreement to acquire all the
outstanding shares of Cheques R Us, Inc. ("CRU") and Courtenay Money Mart Ltd.
("Courtenay"), which operated six stores in British Columbia. The aggregate
purchase price for this acquisition was $1.2 million and was funded through
excess internal cash. The excess of the purchase price over the fair value of
identifiable net assets acquired was $1.1 million.
On December 15, 1999, the Company entered into an agreement to acquire all of
the outstanding shares of Cash Centres Corporation Limited ("CCCL"), which
operated five company owned stores and 238 franchises in the United Kingdom.
The aggregate purchase price for this acquisition was $8.4 million and was
funded through the Company's revolving credit facility. The excess of the
purchase price over the fair value of identifiable net assets acquired was $7.7
million. The agreement also includes a maximum potential contingent payment to
the sellers of $2.7 million based on future levels of profitability.
16
<PAGE>
On February 10, 2000, the Company entered into an agreement to acquire primarily
all of the assets of CheckStop, Inc. ("CheckStop"), which is a payday loan
business operating through 150 independent agents in 17 states. The aggregate
purchase price for this acquisition was $2.6 million and was funded through the
Company's revolving credit facility. The excess of the purchase price over the
fair value of identifiable net assets acquired was $2.4 million. The agreement
also includes a maximum potential contingent payment to the sellers of $350,000
based upon future results of operations.
All of the acquisitions described above (collectively, the "Acquisitions") have
been accounted for under the purchase method of accounting. Therefore, the
historical results of operations include the revenues and expenses of all the
acquired companies since their respective dates of acquisition.
17
<PAGE>
RESULTS OF OPERATIONS
Revenue Analysis
<TABLE>
<CAPTION>
Three Months Ended March 31, Nine Months Ended March 31,
- --------------------------------------------------------------------------- --------------------------------------
(Percentage of (Percentage of
($ in thousands) Total Revenue) ($ in thousands) Total Revenue)
--------------------------------------- ---------------------------------------
1999 2000 1999 2000 1999 2000 1999 2000
--------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Check cashing....................... $20,866 $27,430 64.6% 59.4% $56,300 $ 71,961 63.7% 59.5%
Cash `Til Payday origination fees... 4,975 9,896 15.4 21.4 12,964 23,925 14.7 19.8
Government services................. 1,776 1,568 5.5 3.4 4,861 4,807 5.5 4.0
Other revenue....................... 4,692 7,305 14.5 15.8 14,204 20,219 16.1 16.7
------- ------- ----- ----- ------- -------- ----- -----
Total revenue....................... $32,309 $46,199 100.0% 100.0% $88,329 $120,912 100.0% 100.0%
======= ======= ===== ===== ======= ======== ===== =====
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
QUARTER COMPARISON
Total revenues were $46.2 million for the three months ended March 31, 2000
compared to $32.3 million for the three months ended March 31, 1999, an increase
of $13.9 million or 43.0%. The Acquisitions accounted for an increase of $6.9
million.
Comparable retail store sales at those locations owned by the Company for the
entire period increased $6.2 million or 21.4%. Check cashing revenue increased
9.0%, Cash `Til Payday(R) origination fees increased 66.7% and other revenues
increased 37.9%. Partially offsetting this increase, however, was a 33.9%
decline in retail store revenues from government services. The decrease in
retail store revenues from government services resulted primarily from the
reduction in the number of individuals receiving benefits under government
programs and due to the implementation of electronic benefits transfer systems
(sometimes referred to as "EBT" systems). The Company receives revenue on its
government contracts based primarily on the number of transactions it executes.
As state and local government agencies implement EBT systems, the Company
expects a continuing decline in the Company's government services revenue.
NINE MONTH COMPARISON
Total revenues were $120.9 million for the nine months ended March 31, 2000
compared to $88.3 million for the nine months ended March 31, 1999, an increase
of $32.6 million or 36.9%. The Acquisitions accounted for an increase of $18.5
million.
Comparable retail store sales at those locations owned by the Company for the
entire period increased $12.1 million or 15.2%. Check cashing revenue increased
6.3%, Cash `Til Payday(R) origination fees increased 55.1% and other revenues
increased 21.3%. The increase in Cash `Til Payday(R) origination fees resulted
primarily from improvements in product design. Partially offsetting this
increase, however, was a 33.3% decline in retail store revenues from government
services. The decrease in retail store revenues from government services
resulted primarily from the reduction in the number of individuals receiving
benefits under government programs and due to the implementation of EBT. The
Company receives revenue on its government contracts based primarily on the
number of transactions it executes. As state and local government agencies
implement EBT systems, the Company expects a continuing decline in the Company's
government services revenue.
18
<PAGE>
Store and Regional Expense Analysis
<TABLE>
<CAPTION>
Three Months Ended March 31, Nine Months Ended March 31,
- ---------------------------------------------------------------------------------------------------------------------------
(Percentage of (Percentage of
($ in thousands) total revenue) ($ in thousands) total revenue)
--------------------------------------------------------------------------------------------
1999 2000 1999 2000 1999 2000 1999 2000
------------ ----------- --------- --------- ----------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Salaries and benefits.......... $ 8,979 $12,578 27.8% 27.2% $26,005 $34,296 29.4% 28.4%
Occupancy...................... 2,407 3,163 7.4 6.8 7,069 9,232 8.0 7.6
Depreciation................... 538 1,131 1.7 2.4 1,543 3,083 1.7 2.5
Other.......................... 5,182 9,898 16.0 21.4 17,026 26,373 19.3 21.8
---------- ------- ---- ---- ------- ------- ---- ----
Total store and regional
expenses.................... $17,106 $26,770 52.9% 57.8% $51,643 $72,984 58.4% 60.3%
========== ======= ==== ==== ======= ======= ==== ====
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
QUARTER COMPARISON
Store and regional expenses were $26.8 million for the three months ended March
31, 2000 compared to $17.1 million for the three months ended March 31, 1999, an
increase of $9.7 million or 56.7%. The Acquisitions accounted for an increase
of $3.5 million. For the three months ended March 31, 2000 total store and
regional expenses increased to 57.8% of total revenue compared to 52.9% of total
revenue for the same period in the prior year due to increased start-up costs
associated with new store openings in the three months ended March 31, 2000.
NINE MONTH COMPARISON
Store and regional expenses were $73.0 million for the nine months ended March
31, 2000 compared to $51.6 million for the nine months ended March 31, 1999, an
increase of $21.4 million or 41.5%. Store and regional expenses associated with
the Acquisitions were $10.7 million. For the nine months ended March 31, 2000
total store and regional expenses increased to 60.3% compared to 58.4% for the
nine months ended March 31, 1999 due to increased start-up costs associated with
new store openings.
19
<PAGE>
Other Expense Analysis
<TABLE>
<CAPTION>
Three Months Ended March 31, Nine Months Ended March 31,
- -----------------------------------------------------------------------------------------------------------------------------------
($ in thousands) (Percentage of revenues) ($ in thousands) (Percentage of revenues)
--------------------------------------------------------------------------------------------
1999 2000 1999 2000 1999 2000 1999 2000
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Corporate expenses..................... $3,506 $5,643 10.9% 12.2% $ 9,852 $14,927 11.2% 12.3%
Loss on store closings
and sales........................... 25 34 0.1 .1 75 105 0.1 .1
Goodwill amortization.................. 1,185 1,459 3.7 3.2 3,461 4,118 3.9 3.4
Other depreciation and amortization.... 209 358 .6 .8 756 1,011 .9 .8
Recapitalization costs and other
non-recurring items................... - - - - 12,575 133 14.2 .1
Interest expense....................... 5,959 4,650 18.4 10.1 12,457 13,066 14.1 10.8
Income tax provision................... 2,057 3,430 6.4 7.4 1,694 8,601 1.9 7.1
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
QUARTER COMPARISON
Corporate Expenses
Corporate expenses were $5.6 million for the three months ended March 31, 2000
compared to $3.5 million for the three months ended March 31, 1999, an increase
of $2.1 million or 60.0%. The Acquisitions accounted for $700,000 of the
increase. Additional costs, primarily salaries and benefits, have been incurred
as a result of the implementation of various strategic initiatives including the
opening of additional Loan Mart(R) stores, which offer primarily Cash `Til
Payday(R) unsecured short-term loans.
Goodwill Amortization
For the three months ended March 31, 2000, goodwill amortization was $1.5
million compared to $1.2 million for the three months ended March 31, 1999, an
increase of $300,000. The increase is due to the additional goodwill associated
with the Acquisitions.
Other Depreciation and Amortization
Other depreciation and amortization expenses were $400,000 and $200,000 for the
three months ended March 31, 2000 and 1999, respectively, an increase of
$200,000. The increase is the result of non-store and regional depreciation
related to the Acquisitions.
Interest Expense
Interest expense was $4.7 million for the three months ended March 31, 2000 and
$6.0 million for the three months ended March 31, 1999, a decrease of $1.3
million or 21.7%. This decrease is primarily attributable to the write-off of
fees associated with the repayment of borrowings as a result of the Merger
during the three months ended March 31, 1999.
Income Taxes
The provision for income taxes was $3.4 million for the three months ended March
31, 2000 compared to a $2.1 million provision for the three months ended March
31, 1999, an increase of $1.3 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.
20
<PAGE>
NINE MONTH COMPARISON
Corporate Expenses
Corporate expenses were $14.9 million for the nine months ended March 31, 2000
compared to $9.9 million for the nine months ended March 31, 1999, an increase
of $5.0 million or 50.5%. The Acquisitions accounted for $2.0 million of the
increase. Additional costs, primarily salaries and benefits, have been incurred
as a result of the implementation of various strategic initiatives including the
opening of Loan Mart(R) stores, which offer primarily Cash `Til Payday(R)
unsecured short-term loans.
Goodwill Amortization
For the nine month periods ending March 31, 2000 and 1999, goodwill amortization
was $4.1 million and $3.5 million, respectively, an increase of $600,000. The
increase is due to the additional goodwill associated with the Acquisitions.
Other Depreciation and Amortization
Other depreciation and amortization expenses were $1.0 million and $800,000 for
the nine months ended March 31, 2000 and 1999, respectively, an increase of
$200,000. The increase is the result of non-store and regional depreciation
related to the Acquisitions.
Recapitalization Costs and Other Non-recurring Items
During the nine months ended March 31, 1999, the Company incurred $12.6 million
in expenses for the consummation of the Merger between Holdings and Acquisition
which was accounted for as a recapitalization of Holdings.
During the nine months ended March 31, 2000, the Company made a subsequent
adjustment of $133,000 for the recapitalization of Holdings.
Interest Expense
Interest expense was $13.1 million for the nine months ended March 31, 2000 and
$12.5 million for the nine months ended March 31, 1999. The increase is
primarily attributable to the increase in borrowings from the additional
Acquisitions offset in part by the write-off of fees associated with the
repayment of borrowings as a result of the Merger for the nine months ended
March 31, 1999.
Income Taxes
The provision for income taxes was $8.6 million for the nine months ended March
31, 2000 compared to a provision of $1.7 million for the nine months ended March
31, 1999, an increase of $6.9 million. This increase is primarily attributable
to the deductibility of expenses related to the merger and recapitalization of
Holdings in the nine months ended March 31, 1999. 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.
21
<PAGE>
Changes in Financial Condition
Cash and cash equivalent balances and the revolving credit facilities 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 March 31, 2000, cash and cash equivalents increased by $10.6
million. Revolving credit facilities increased $30.6 million primarily due to
the acquisitions of CAC, CCCL, CRU and Checkstop, the remodeling of certain
existing stores and new store openings. Net cash generated by operations
totaled $20.6 million.
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, finance
acquisitions and finance store expansions. For the nine months ended March 31,
2000 and 1999, the Company had net cash provided by operating activities of
$20.6 million and $9.8, respectively. Cash was primarily used for purchases of
property and equipment related to existing stores, recently acquired stores,
investments in technology and acquisitions. For the nine months ended March 31,
2000, the Company had made capital expenditures of $9.7 million.
The actual amount of capital expenditures for the year will depend in part upon
the number of new stores acquired or newly opened and the number of stores
remodeled. The Company's budgeted capital expenditures, excluding acquisitions,
are currently anticipated to aggregate approximately $14.0 million during the
fiscal year ending June 30, 2000, for remodeling and relocation of certain
existing stores and for opening new stores.
The Company's credit agreement provides for a revolving credit facility of up to
$70 million. The borrowings under the revolving credit facility as of March 31,
2000 were $34.1 million. In August 1999, the Company issued the remaining $1.9
million of its Senior Subordinated Notes. The Senior Notes, Senior Subordinated
Notes and the revolving credit facility contain certain financial and other
restrictive covenants, which, among other things, require the Company to achieve
certain financial ratios, limit capital expenditures, restrict payment of
dividends, and require certain approvals in the event the Company wants to
increase the borrowings. The Company also has an overdraft credit facility to
fund peak working capital needs for its Canadian operation. The overdraft
facility provides for borrowings up to $4.8 million, and had a $4.6 outstanding
balance as of March 31, 2000. In conjunction with the purchase of ICL, CAC and
CCCL, the Company established an overdraft credit facility to fund working
capital needs for its United Kingdom operations. The overdraft facility
provides for up to $8.0 million and had $4.1 million outstanding as of March 31,
2000. The overdraft facility is secured by an $8.0 million Letter of Credit
issued by Wells Fargo Bank under the revolving credit facility.
The Company is highly leveraged, and borrowings under the revolving credit
facility and the overdraft facilities 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 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 Senior Notes
and Senior Subordinated Notes and payment of interest and principal on the
Company's other indebtedness. This is based upon the historical growth rate of
the Company and the anticipated benefits resulting from operating efficiencies.
Additional revenue growth is expected to be generated by increased check cashing
revenues (consistent with historical growth), and an expansion of the Cash 'Til
Payday Loan(R) 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. 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 Senior Notes and Senior Subordinated Notes, or to make anticipated
capital expenditures. It may be necessary for the Company to refinance all or a
portion of its indebtedness 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.
22
<PAGE>
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, 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
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative and Hedging
Activities" ("SFAS No. 133"). SFAS No. 133 requires companies to record
derivatives on the balance sheet as assets or liabilities at fair value. It is
effective for financial statements for fiscal years beginning after June 15,
2000. The Company does not believe the adoption of SFAS No. 133 will have a
material impact on the Company's future earnings and financial position.
Cautioning Statement for Purposes of the "Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995
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.
23
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There were no material changes for Quantitative and Qualitative Disclosures
About Market Risk from the Company's audited financial statements in its Annual
Report on Form 10-K for the fiscal year ended June 30, 1999.
24
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On December 28, 1999, the Company entered into a settlement of a
lawsuit which had been commenced in February 1999. The plaintiff, who
purports to represent a class of "payday loan" borrowers, had alleged
violations of state and federal usury and consumer-protection laws by
Eagle National Bank (the lender in the plaintiff's loan transaction),
the Company and others. In entering into the settlement, the Company
specifically denied any wrongdoing. The terms of the settlement set a
maximum payout amount of up to $5.5 million. The settlement is awaiting
final court approval. Management has determined that a minimum loss
amount can be reasonably estimated. Accordingly, during the quarter
ended December 31, 1999, the Company recorded its best estimate, based
on the information available at the time, of the cost of providing
relief to class members and for legal and administrative costs
associated with the settlement. Given the uncertainties associated with
estimating the reserve, it is reasonably possible that the final cost
of the settlement could differ materially from the amount previously
provided. The Company will continue to update its estimate of the final
cost of the settlement as the settlement process continues. The range
of any additional costs related to the settlement cannot be reasonably
estimated.
In May 2000, the Company entered into a Stipulation of Settlement in
the matter of Adrian Rubin v. Monetary Management Corp., et al.
Pursuant to the terms of the Stipulation, the parties have agreed to
release each other from any and all claims stemming from the lawsuit
filed in May 1996. The Company's accrual was adequate to cover the
settlement amount paid to Adrian Rubin
The net effect of these items is immaterial and is included in
recapitalization costs and other non recurring items.
Item 2. Changes in Securities and Use of Proceeds
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
27.1 Financial Data Schedule
(b) Reports on Form 8-K
During the three month period ending March 31, 2000, the
Registrant filed one report on Form 8K dated February 25, 2000
reporting an Item 2 Event (Acquisition or Disposition of Assets)
and an amendment to Form 8K dated December 30, 1999 on February
28, 2000, reporting an Item 2 Event (Acquisition or Disposition
of Assets) with Item 7 (Financial Statements and Exhibits).
25
<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, 2000 *By: /s/ Richard S. Dorfman
-------------------------------
Name: Richard S. Dorfman
Title: Executive Vice President and
Chief Financial Officer,
(principal financial and
chief accounting officer)
* The signatory hereto is the principal financial and chief accounting officer
and has been duly authorized to sign on behalf of the registrant.
26
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<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 76,398
<SECURITIES> 0
<RECEIVABLES> 14,208
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 96,278
<PP&E> 34,244
<DEPRECIATION> 12,326
<TOTAL-ASSETS> 252,694
<CURRENT-LIABILITIES> 37,738
<BONDS> 129,657
0
0
<COMMON> 0
<OTHER-SE> 42,432
<TOTAL-LIABILITY-AND-EQUITY> 252,694
<SALES> 0
<TOTAL-REVENUES> 120,912
<CGS> 0
<TOTAL-COSTS> 72,984
<OTHER-EXPENSES> 20,294
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,066
<INCOME-PRETAX> 14,563
<INCOME-TAX> 8,601
<INCOME-CONTINUING> 5,967
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,967
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
