SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended June 30, 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 of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1436 Lancaster Avenue, Suite 210
Berwyn, Pennsylvania 19312-1288
(Address of Principal Executive (Zip Code)
Offices)
Registrant's telephone number, including area code (610) 296-3400
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities 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[ ].
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K: [ ]
There is no market for the common stock of Dollar Financial Group, Inc. and all
of such stock is held by the registrant's parent, DFG Holdings, Inc. See "Item
12 - Security Ownership of Certain Beneficial Owners and Management."
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APPLICABLE ONLY TO REGISTRANTS 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 REGISTRANTS)
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date. As of September 28,
2000, 100 shares of the registrant's common stock, par value $1.00 per share,
were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information required by Part IV is incorporated by reference to
the Registrant's Registration Statement on Form S-4 (Registration No. 333-18221)
declared effective March 11, 1997, Registrant's Statement on Form 10Q filed
February 16, 1999, Registrant's Statement on Form 8K/A filed April 26, 1999,
Registrant's Statement on Form 8K/A filed September 30, 1999 and Registrant's
Statement on Form 8K/A filed February 28, 2000.
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DOLLAR FINANCIAL GROUP, INC.
Table of Contents
2000 Report on Form 10-K
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PART I
Item 1. Business.................................................................................. 4
Item 2. Properties................................................................................ 19
Item 3. Legal Proceedings......................................................................... 20
Item 4. Submission of Matters to a Vote of Security Holders....................................... 20
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters..................... 21
Item 6. Selected Financial Data................................................................... 21
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................................. 25
Item 7A. Quantitative and Qualitative Disclosures About Market Risk................................ 34
Item 8. Financial Statements and Supplementary Data............................................... 35
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.................................................................. 60
PART III
Item 10. Directors and Executive Officers of the Registrant........................................ 60
Item 11. Executive Compensation.................................................................... 62
Item 12. Security Ownership of Certain Beneficial Owners and Management............................ 66
Item 13. Certain Relationships and Related Transactions............................................ 66
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K........................... 69
</TABLE>
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Item 1. BUSINESS
General
Dollar Financial Group, Inc., a New York corporation (the "Company" or "DFG"),
was organized in 1979 under the name Monetary Management Corporation. 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 the United Kingdom. The Company provides a diverse range of consumer
financial products and services primarily consisting of check cashing, consumer
loans, money orders, money transfers and various other related services. As of
June 30, 2000, the Company has a total network of 891 stores in 17 states, the
District of Columbia, Canada and the United Kingdom including 546 Company-owned
stores with revenues for the fiscal year ended June 30, 2000 of $165.8 million,
and with earnings before interest, income taxes, depreciation, amortization,
recapitalization costs and other non-recurring items, writedown of goodwill and
loss on store closings and sales ("Adjusted EBITDA") for the fiscal year ended
June 30, 2000 of $48.4 million.
The Company's primary customers are working, lower-income individuals and
families who require basic consumer financial services and are underserved by
traditional retail banking networks. The increased expense and decreased
availability of traditional retail banking services have left an increasing
number of individuals and families (estimated at 9.5% of U.S. households)
without banking relationships. Management believes that growth in the
lower-income segment of the population combined with the decreasing availability
of traditional retail banking services provides the Company with significant
growth opportunities.
The Company's stores currently operate under the following locally established
brand names: Any Kind Check Cashing Centers(R), Cash A Cheque, Cash Centres,
Check Mart(R), Money Mart(R), The Money Shop and Loan Mart(R). During the fiscal
year 1999, the Company initiated a rebranding of its North American stores to
Money Mart. Through a relationship with a bank, the Company's subsidiary
moneymart.com(TM) originates short-term consumer loans through 150 independent
agents in eighteen states.
Industry Overview
United States
The check cashing industry in the United States is highly fragmented, consisting
of approximately 9,500 stores as of January 2000, an increase from the
approximately 1,350 national listings in 1986 according to an industry survey.
The Company believes it is one of only seven U.S. check cashing store networks
that have more than 100 locations, the remaining being local store networks and
single-unit operators. The Company believes that industry growth has been fueled
by several demographic and socioeconomic trends, including a decline in the
number of households with bank deposit accounts, an increase in the number of
low-paying service sector jobs and an overall increase in the lower-income
population.
A January 2000 Federal Reserve study estimated that 9.5% of families in the U.S.
in 1998 did not maintain a banking relationship. The primary reason cited for
not maintaining a checking account was that not enough checks are written to
make it beneficial. Other reasons include the inability of many families and
individuals to maintain the minimum account balances required by many banks and
thrifts, high bank service charges and general dislike of banks.
The increase in the fees charged by banks on deposit accounts over time has
contributed to the decline in the number of families and individuals holding
such accounts. The U.S. Public Interest Research Group has conducted a national
study which shows that, from 1995 to 1999, the annual cost to maintain a regular
checking account grew by 7% to $217 and the average monthly balance requirements
to avoid regular checking fees was $1,253. In general, the findings indicate
that banks have increased their fees significantly on a real and
inflation-adjusted basis.
Many banks have elected over time to close their less profitable or
lower-traffic locations. These closings have tended to occur in lower-income,
urban and minority neighborhoods. As banks continue this trend, wage earners in
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these lower-income areas will have fewer, if any, convenient alternatives other
than local check cashing stores to perform basic financial transactions.
Lower-income individuals represent a large segment of the U.S. population. A
recent U.S. census survey revealed that over 37 million U.S. households have
income less than $30,000 a year. This low-wage population, from which the
Company draws most of its customers, is the fastest-growing segment of the
workforce. As the low-wage population continues to grow, the Company believes
that this population will increasingly rely on the check cashing industry and
the financial services that the Company provides as the primary source for their
consumer financial products and services.
Canada
In contrast to the domestic market, the Canadian check cashing market is
significantly more concentrated, with the Company's 220 owned and franchised
stores accounting for 60% of the total number of check cashing stores in Canada.
A 1998 survey conducted for the Company shows that a significant number of
customers choose to patronize the Company's locations because of the convenient
operating hours, fast and courteous service, and broad product offerings.
United Kingdom
In the United Kingdom ("UK"), check cashing is a relatively new and highly
fragmented business that developed with the passage of the Checks Act in 1992
which prohibits non-financial institutions from cashing checks (a check cashing
establishment is considered to be a financial institution for purposes of
compliance with the Checks Act). Traditionally, check cashing had been offered
as an "add-on" service to certain retail establishments. Management believes
that while there are between 700 - 800 listed check cashing locations in the UK,
only 125 - 175 are free-standing check cashing locations. A study conducted by
the New Policy Institute stated that 9 million people, or approximately 25% of
the adult population in the UK are without a bank account. Additionally, 46% of
households have annual income less than $26,500.
Growth and Consolidation
Management believes that significant opportunities for growth exist in the check
cashing industry as a result of: (i) the growth of the lower-income population
sector; (ii) the failure of commercial banks and other traditional financial
service providers to address the needs of lower-income individuals, and; (iii)
the trend toward consolidation in the check cashing industry. Management
believes that as the lower-income population segment increases, and as trends
within the retail banking industry create a less accessible environment for
these members of society, the check cashing industry and other retail financial
services will realize a significant increase in demand for its products and
services. However, despite these growth dynamics, the Company believes that the
industry is undergoing a period of consolidation. The Company believes that this
consolidation trend has resulted from a number of factors, including; (i) the
economies of scale available to larger operators; (ii) the use of technology as
a means to better serve customers and control large store networks; (iii) the
inability of smaller operators to form the alliances necessary to deliver new
products, and; (iv) increased licensing and regulatory burdens. This
consolidation process should provide the Company, as one of the largest store
networks, with opportunities for continued growth through selective
acquisitions.
Competitive Strengths
The Company believes that it has the following competitive strengths:
Store locations in favorable demographic areas. The Company has carefully chosen
metropolitan areas with growing low-income populations. Within the markets
served by the Company, the Company's stores are located in desirable locations
near its targeted customer base. Management adheres to a strict set of market
survey and location guidelines when selecting acquisition targets and new store
sites. The Company's store base is a mix of urban sites, which are located in
high-traffic shopping areas, and suburban sites, which are located in strip
malls near multi-family housing complexes.
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High-quality customer service. As part of its retail and customer-driven
strategy, the Company focuses on providing friendly customer service in a clean
and attractive environment. Operating hours vary by location, but are typically
extended and designed to cater to those customers who, due to their work
schedules, cannot make use of "normal" banking hours. As part of its employee
training program, the Company's employees are encouraged and instructed to treat
customers in a friendly and courteous manner, which management believes results
in repeat business.
Broad offering of products and services. Company stores offer a wide range of
consumer financial products and services to meet the demands of their locale,
including check cashing, money orders, money transfers and short-term consumer
loans through its Cash `Til Payday(R) loan program where DFG acts as an agent to
a federally chartered bank to offer unsecured short-term loans. The Company also
offers a variety of ancillary products, including photo ID, lottery tickets,
electronic tax filing, pagers, cellular phones, photocopy and fax services and
pre-paid telecommunication products including local and long-distance phone
cards.
Economies of scale. As a result of its acquisition strategy in the United
States, Canada and the United Kingdom, the Company has reached a size that
enables it to benefit from economies of scale and to negotiate more favorable
contracts with its suppliers. In addition, the Company's market position enables
it to enter into favorable relationships with strategic partners like Western
Union. Management believes that the Company's size also allows it to gain
greater access to capital than its smaller competitors.
Management expertise. The regional managers of the Company have extensive
experience and expertise in the check cashing industry as well as other retail
industries, which the Company believes provides it with a competitive advantage.
Furthermore, the Company has been largely successful in retaining the
operational managers employed by the companies acquired in acquisitions. The
Company's senior management has extensive experience in banking, retailing and
financial services. In addition, the Company's management has significant
experience in acquiring and integrating businesses into the Company, and employs
a disciplined approach to making such acquisitions.
Well-diversified credit risk. For the twelve months ended June 30, 2000, the
Company cashed 8.3 million checks totaling $2.8 billion with an average face
value of $334. The Company actively manages its customer risk profile and
collection efforts in order to maximize check cashing revenues while maintaining
losses within a targeted range. Management has instituted control mechanisms
that it believes have been effective in managing risk, including: (i) check
verification procedures; (ii) customer identification cards; (iii) customer
files, including customer photographs, addresses, employment information and
transaction history; (iv) point-of-sale database systems; and (v) background
checks, among others. As a result, management believes that the Company is
unlikely to sustain a material credit loss from a single transaction or series
of transactions.
Although the Company believes that these competitive strengths will enable it to
achieve its strategic objectives, the Company may not be able to capitalize on
them. Changing demographics in areas surrounding the Company's stores could
negatively impact the quality of the store base. Regulatory and technological
changes could affect the products offered or the prices charged for such
products. The Company provides an extensive training program for all of its
employees, however, as the Company continues to grow, an inability to attract,
train, and recruit talented field personnel and corporate management could
negatively impact Company performance.
Strategy
The Company's business strategy is to capitalize on its competitive strengths by
increasing the revenues and profitability of its existing operations, by
continuing to grow through the acquisition of check cashing store networks and
the development of alternative store formats. Key elements of the Company's
business strategy include the following:
Maintaining and instilling a customer-driven retail philosophy. The Company has
focused on increasing its customer base through a service-oriented approach
designed to meet the needs of working, lower-income individuals and families in
need of basic consumer financial services. The Company believes it has
differentiated itself from its competitors by focusing on customer service. The
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Company offers extended operating hours in clean, well-lit, and convenient store
locations to enhance appeal and stimulate store traffic. The Company's research
indicates that, although approximately 30% of its customers have bank accounts,
its customers prefer immediate access to cash without waiting for check
clearance. In addition, the Company believes that many of its customers find
great value in their ability to cash a payroll or government check immediately,
for a fee, at a location within close proximity to their home or workplace at
nearly any time of day. The Company's surveys have indicated that over 90% of
its customers are repeat users of its services. The surveys also indicated that
the widespread availability of ATM machines does not alter a customer's decision
to "bank" at Company locations. The Company uses locally targeted advertising,
including television and radio, to promote awareness of its products and its
customer service. The Company will continue to develop ways to improve service
to its customers.
Introducing new products and services. The Company has developed a "one-stop
shop" concept to offer many consumer financial products and services to its
targeted customer base. The Company believes that its check cashing customers
enjoy the convenience of other services offered by the Company, such as the sale
of money orders, money transfer services, short-term consumer loans, as well as
a variety of related products and services that assist marginally banked or
credit-impaired customers to more effectively manage their personal finances. As
it has completed acquisitions, the Company has expanded the product and services
offerings of its newly acquired check cashing store networks and intends to
continue this strategy with future acquisitions. In particular, the Company has
continued to expand its successful Cash `Til Payday(R) short-term loan program
by adding this service to newly acquired or opened stores.
Growing through targeted acquisitions. Acquisitions have played an integral role
in the Company's growth. Since June 1995, the Company has acquired an aggregate
of over 660 owned or franchised stores. As a result of increasing industry
consolidation, the Company may be required to shift its acquisition strategy to
smaller check cashing store networks. Management will continue to seek
opportunistic acquisitions of well-managed check cashing store networks located
in areas with favorable demographics, including the southeastern and western
parts of the United States, Canada and the United Kingdom as well as profitable
check cashing stores in areas that complement the Company's existing geographic
markets.
Developing alternative retailing platforms. In an effort to capitalize more
fully on the success of its Cash `Til Payday(R) product, in September 1997 the
Company began opening stores under the name Loan Mart(R), which offer primarily
Cash `Til Payday(R) unsecured short-term loans in a friendly office-like
environment. The Company's management believes the Loan Mart stores appeal to a
broader market segment than that which currently utilizes the Company's check
cashing stores. The Company currently operates 70 Loan Mart(R) stores in the
Seattle, Fresno, Tucson, Salt Lake City, Las Vegas, Denver, Oklahoma City,
Tulsa, Portland and Phoenix areas and may develop stores in additional
geographic areas. Management believes that, if successful, a network of Loan
Mart(R) stores will allow the Company to access new customers and significantly
increase the Company's revenues and profitability. While there can be no
assurance that this new format will be successful, management believes that this
and other platforms being explored by the Company complement the strategy and
operations of the existing check cashing stores.
Capitalizing on economies of scale. Because of the scale of its operation in an
otherwise highly fragmented industry, the Company is well positioned to take
advantage of the current trend toward consolidation in the check cashing
industry. The Company believes it is able to operate more profitably than
smaller competitors as a result of its broader product offerings, greater
purchasing power, improved operating efficiencies and greater access to capital.
Managing credit risk. The Company's check cashing service consists of high
volumes of small individual transactions requiring credit risk decisions on
individual checks and customers. During the fiscal year ended June 30, 2000, the
Company cashed 8.3 million checks totaling $2.8 billion with an average face
amount of $334. The Company actively manages its customer risk profile and
collection efforts in order to maximize check cashing revenues while maintaining
losses within a targeted range. Management has instituted control mechanisms
that it believes have been effective in managing risk, including: (i) check
verification procedures; (ii) customer identification cards; (iii) customer
files, including customer photographs, addresses, employment information and
transaction history; (iv) point-of-sale database systems; and (v) background
checks, among others. As a result, management believes that the Company is
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unlikely to sustain a material credit loss from a single transaction or series
of transactions. The Company has experienced relatively low net write-offs as a
percentage of the face amount of checks cashed. For the fiscal year ended June
30, 2000, net write-offs as a percentage of face amount of checks cashed were
0.21%.
While the Company intends to continue to distribute public assistance benefits
pursuant to existing government contracts, management has no plans to expand
this service and expects revenues from this channel as a percentage of total
revenue to continue to decline in the future.
Customers
Based upon a 1997 consumer survey conducted in several of the Company's markets
and the Company's operating experience, the Company believes that its core
customer group is comprised of individuals between the ages of 18 and 49. The
majority of these individuals rent their home, are employed and have annual
household incomes between $10,000 and $35,000 with a median income of $22,500.
Operating experience indicates that over 90% of the customers were repeat
patrons and that over 50% use the Company's services more than 10 times. The
Company believes that consumers value attention to customer service, and their
choice of check cashing stores is influenced by the Company's convenient
locations and extended operating hours.
Based on a customer survey performed for the Company's Canadian subsidiary,
Money Mart, in 1998, the Company believes that the demographics of Money Mart
customers are similar to those of the Company's existing U.S. customers. The
survey found that approximately 72% of Money Mart's customers have annual
incomes below $30,000 and 64% are under the age of 35. Although 68% of the
surveyed customers have a bank account, these consumers continue to use Money
Mart due to the fast and courteous service and the stores' extended operating
hours. In the UK, a study was recently conducted stating that 9 million people,
or approximately 25% of the adult population, in the UK are without a bank
account. Additionally, 46% of households have annual income less than $26,500.
The Company believes that many of its customers are workers or independent
contractors who receive payment on an irregular basis and generally in the form
of a check. The Company's core customer group lacks sufficient income to
accumulate assets or to build savings. These customers rely on their current
income to cover immediate living expenses and cannot afford the delays inherent
in waiting for checks to clear through the commercial banking system.
Furthermore, the Company believes that many of its customers use its check
cashing services in order to gain immediate access to cash without having to
maintain a minimum balance in a checking account and incur the cost of
maintaining a checking account. In addition, although research conducted for the
Company indicates that approximately 40% of its customers do have bank accounts,
these customers use check cashing stores because they find the locations and
extended business hours of the Company's stores more convenient than those of
banks and value the ability to receive cash immediately, without waiting for a
check to clear.
Products and Services
The Company's Retail Stores Division is responsible for DFG's check cashing and
Loan Mart(R) store networks; the Merchant Services Division manages an
electronic benefits distribution network in New York State.
Retail Stores Division
DFG's check cashing stores provide a broad range of consumer financial products
and services to its customers at convenient locations with extended operating
hours. Customers typically use DFG's stores to cash checks (payroll, government,
and personal) and utilize one or more of the additional financial services
available at most locations. In addition, customers use a variety of ancillary
products, including Cash 'Til Payday(R) loans, electronic tax filing, pagers,
cellular phones, ATM services, photocopy and fax services and pre-paid
telecommunication products including local and long-distance phone cards.
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Check Cashing
Customers may cash all types of checks at DFG check cashing locations, including
payroll checks, government checks, and personal checks. In exchange for a
verified check, customers receive cash immediately and are not required to wait
several days for the check to clear. Both the customer's identification and the
validity of the check are verified by multiple sources pursuant to the Company's
standard verification procedures before any cash is distributed. Customers are
charged a fee for this service (typically a small percentage of the face value
of the check) which varies depending upon the type of check cashed and whether
or not the customer has a previous record of cashing checks at that location.
For the twelve months ended June 30, 2000, check cashing fees averaged
approximately 3.50% of the face value of checks cashed.
The following chart presents a summary of check cashing data for the periods
indicated below:
CHECK CASHING FEE SUMMARY
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For the Years Ended June 30,
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1996 1997 1998
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Face amount of checks cashed....................... $728,123,000 $1,878,587,000 $2,301,861,000
Number of checks cashed............................ 3,051,037 6,492,495 7,991,128
Average face amount per check...................... $238.65 $289.35 $288.05
Average fee per check.............................. $6.65 $8.00 $8.80
Average fee as a % of face amount.................. 2.79% 2.76% 3.05%
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For the Years Ended June 30,
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1999 2000
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Face amount of checks cashed....................... $2,319,847,000 $2,784,267,000
Number of checks cashed............................ 7,490,406 8,328,176
Average face amount per check...................... $309.71 $334.32
Average fee per check.............................. $10.14 $11.69
Average fee as a % of face amount.................. 3.28% 3.50%
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If a check cashed by the Company is not paid for any reason, the full face value
of the check is recorded as a loss in the period during which the check was
returned. The check is then sent to the store for collection and, if it remains
uncollected, it is then sent to the Company's internal collections department,
which contacts the maker and/or payee of each returned check and, if necessary,
commences legal action. During fiscal 2000, approximately 74.8% of the face
value of checks returned during that year were ultimately collected by the
Company.
The following chart presents a summary of the Company's returned check
experience for the periods indicated below:
RETURNED CHECK EXPERIENCE
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For the Years Ended June 30,
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1996 1997 1998
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Face amount of returned checks..................... $3,763,000 $9,618,000 $13,823,000
Collections on returned checks..................... 2,598,000 6,411,000 9,908,000
Net write-offs of returned checks.................. 1,165,000 3,207,000 3,915,000
Collections as a percentage of returned checks..... 69.0% 66.7% 71.7%
Net write-offs as a percentage of check
cashing revenues................................ 5.7% 6.2% 5.6%
Net write-offs as a percentage of face amount
of checks cashed................................ 0.16% 0.17% 0.17%
</TABLE>
<TABLE>
<CAPTION>
For the Years Ended June 30,
---------------------------------
1999 2000
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<S> <C> <C>
Face amount of returned checks..................... $16,607,000 $22,866,000
Collections on returned checks..................... 12,505,000 17,097,000
Net write-offs of returned checks.................. 4,102,000 5,769,000
Collections as a percentage of returned checks..... 75.3% 74.8%
Net write-offs as a percentage of check
cashing revenues................................ 5.4% 5.9%
Net write-offs as a percentage of face amount
of checks cashed................................ 0.18% 0.21%
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Cash `Til Payday(R) Originations
DFG acts as an agent for a bank offering unsecured short-term loans to customers
with established bank accounts and verifiable employment. Loans are made for
amounts up to $500, with terms of 14 or 28 days which can be extended a maximum
of four times. Under this program, the Company earns origination and servicing
fees. The bank originated or extended approximately $210 million of loans
through the Company's locations during the fiscal year ended June 30, 2000. The
Company's agreement with the bank contains a provision which permits the bank to
establish a reserve for losses. The reserve results in a reduction of the
Company's origination fees.
The Company currently operates 70 stores under the Loan Mart(R) name which offer
primarily Cash `Til Payday(R) unsecured short-term loans. The Company's
management believes the stores appeal to a broader market segment than that
which currently utilizes the Company's check cashing stores. Unlike many of the
Company's check cashing customers, the Company's targeted Loan Mart(R) customer
has, and is required to have, a bank account but experiences temporary shortages
in cash from time to time. By offering this service on a stand-alone basis in
Loan Mart(R) stores, the Company hopes to attract this target customer who might
not otherwise utilize check cashing services. The first Loan Mart(R) stores were
opened in late September 1997 and since then an additional 65 stores have been
opened. These stores are located in Seattle, Fresno, Phoenix, Tucson, Salt Lake
City, Denver, Portland, Tulsa, Oklahoma City, and Las Vegas.
Other Services and Product Extensions
In addition to check cashing and short-term loans, DFG customers are able to
choose from a variety of products and services when conducting business at the
Company's check cashing or Loan Mart (R) locations. These services include photo
ID, electronic tax filing, pagers, cellular phones, ATM services, photocopy and
fax services and pre-paid telecommunications products including local and
long-distance phone cards. A survey of the Company's customers by an independent
third party revealed that over 50% of customers use other services in addition
to check cashing. Management believes that providing these services helps to
implement the Company's customer-driven strategy by creating a convenient
"one-stop" shopping atmosphere for its customers' financial service needs.
Among the most significant products and services other than check cashing
and short-term loans offered by the Company are the following:
o Money Orders--DFG's check cashing stores exchange money orders for cash
and/or checks for a minimal fee, with an average fee and face amount of
$0.83 and $120, respectively, for the fiscal year ended June 30, 2000.
Money orders are typically used as a means of payment of rent and utility
bills for customers who do not have checking accounts. For the twelve
months ended June 30, 2000, DFG's check cashing stores sold a total of 3.6
million money orders, generating total money order revenues of $3.0
million.
o Money Transfers--Through a strategic alliance with Western Union, customers
can transfer funds to any location providing Western Union money transfer
services. Western Union currently has 23,000 agents in more than 130
countries throughout the world. DFG receives a percentage of the fee
charged by Western Union for the transfer as its commission. For the twelve
months ended June 30, 2000, the Company performed, primarily at its check
cashing stores, approximately 1.0 million wire transfers generating total
wire transfer fees of $7.9 million.
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Government Benefits Distribution
In addition to the other consumer financial products and services offered by the
Company, DFG stores in California provide for the distribution of food coupons.
The Company believes that many state and local governments have elected to
employ this method of distribution as a means of reducing administrative
overhead and fraud which is often prevalent when benefits are issued through the
mail. DFG's government contracts require the Company to provide continuous,
uninterrupted operation of a benefits transfer system during normal business
hours in its check cashing locations. The Company is paid on a per-transaction
basis by the contracting governmental agency. The initial terms of these
contracts range from one to five years and, in some cases, provide the
government agencies the opportunity to extend the contract for additional
periods.
A number of state and local government 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
EBT system in January 1998 which was fully implemented during fiscal 1998. As a
result, all of the Company's contracts with the Commonwealth of Pennsylvania
were terminated during fiscal 1998. The Company has not recorded revenue from
these contracts since fiscal year ended June 30, 1998 for which it recorded $6.8
million. During the fiscal year ended June 30, 1998, the Company signed an
agreement with the Commonwealth of Pennsylvania which provided for a payment of
$2.5 million to compensate the Company for the decline in transactional revenues
during the implementation period and to offset additional costs incurred by the
Company. The installation of such systems did not have a material adverse effect
on the Company's results of operations or financial condition.
Merchant Services Division
The Company's Merchant Services Division provides support and operating services
for the distribution of public assistance benefits through a contract with New
York State. EBT systems equip participating merchants with point-of-sale ("POS")
devices that are on-line with the contracting agency's recipient database. DFG
acts as a subcontractor to Citibank, N.A. ("Citibank") to maintain and service
Citibank's network of electronic government benefits distribution to merchants
throughout the state.
In 1988, the State of New York began issuing food stamp benefits through its
Electronic Benefits Issuance and Control System to 330,000 recipients on a
monthly basis through grocery stores and other merchants in 57 counties outside
of New York City. This package of benefits is currently distributed
electronically through POS devices located in approximately 1,100 grocery,
convenience and check cashing stores. These devices are directly connected to
the state's welfare recipient database and operate in a manner similar to ATM
machines by providing immediate verification when a recipient's magnetically
encoded card is scanned through the system.
Although Citibank provides the POS devices to the merchants, it has little
direct follow-up contact with either the distribution points or the benefits
recipients. DFG operates as a subcontractor to Citibank and is responsible for
monitoring and maintaining the network. The Company employs field agents and
administrative personnel headquartered in Albany, New York to train merchants in
the use of Citibank's POS terminals, monitor merchants for security compliance
and quality control, and maintain accounting procedures to reconcile benefit
transactions at each site. The Company is paid a fixed monthly fee for its
services. The Company's revenues under this contract were approximately $4.8
million, $4.2 million and $3.9 million for the years ended June 30, 2000, 1999
and 1998, respectively.
The Company's contract expiration date with Citibank was December 31, 1998 but
the Company negotiated an extension to the contract through June 30, 2000 with
two six-month extensions exercisable by the state. The state has exercised the
first six-month extension extending the Company's contract with Citibank to
December 31, 2000. The Company has received information from the State of New
York pertaining to a statewide implementation of EBT which contemplates
completion by March 2001. Upon successful implementation of the EBT program,
the Company's existing contract with Citibank would be terminated.
12
<PAGE>
Store Operations
Locations
The following chart sets forth the number of stores in operation as of the dates
indicated:
<TABLE>
<CAPTION>
June 30,
--------------------------------------------
Markets 1996 1997 1998 1999 2000
-------
--------------------------------------------
<S> <C> <C> <C> <C> <C>
CALIFORNIA
Southern......................... 27 49 41 41 44
Northern......................... 13 73 77 79 92
PENNSYLVANIA
Philadelphia..................... 20 26 11 10 11
Pittsburgh....................... 11 11 10 10 10
OHIO
Cleveland........................ 11 26 24 22 21
Other Ohio cities (1)............ 9 8 8 5 7
ARIZONA
Phoenix.......................... 8 17 16 25 34
Tucson........................... 0 0 0 0 7
Texas............................ 11 28 23 3 3
Michigan......................... 13 12 0 0 0
Virginia......................... 14 14 14 14 15
Washington....................... 9 9 15 15 17
Utah............................. 4 3 3 3 7
MD/DC............................ 0 4 4 4 4
New Mexico....................... 3 3 4 4 4
Louisiana........................ 0 3 3 3 3
Hawaii........................... 0 3 3 3 3
Wisconsin........................ 1 1 1 1 1
Colorado......................... 0 0 0 0 6
Oklahoma......................... 0 0 0 0 8
Oregon........................... 0 0 0 0 2
Nevada........................... 0 0 0 0 1
Franchised locations............. 0 3 3 3 0
UNITED KINGDOM................... 0 0 0 11 107
Franchised locations............. 0 0 0 0 264
CANADA........................... 0 76 86 101 139
Franchised locations............. 0 67 70 80 81
--------------------------------------------
Total Stores..................... 154 436 416 437 891
============================================
</TABLE>
[FN]
(1) These other cities include Akron, Canton, Youngstown, and Cincinnati.
</FN>
Management adheres to a strict set of market survey and location guidelines when
selecting acquisition targets and new store sites. The Company's store base is a
mix of urban sites, which are located in high-traffic shopping areas, and
suburban locations, which are in strip malls near multi-family housing
complexes.
13
<PAGE>
Layout and Facilities
As part of its retail and customer-driven strategy, the Company presents a clean
and attractive environment and an appealing format for its check cashing stores.
Size varies by location, but the stores are generally 1,000 to 1,400 square feet
with approximately half of that space allocated to the teller and back office
areas. There are typically three to five teller lanes available for customer
transactions.
Operating hours vary by location, but are typically extended and designed to
cater to those customers who, due to work schedules, cannot make use of "normal"
banking hours. A typical store operates from 9:00 A.M. to 9:00 P.M. during
weekdays and Saturdays and 10:00 A.M. to 5:00 P.M. on Sundays. In certain
locations, the Company operates stores on a 24-hour, seven-days-per-week basis.
All of the Company's individual stores are leased, generally under leases
providing for an initial multi-year term and renewal terms from one to five
years. The Company generally assumes the responsibility for required leasehold
improvements, including signage, teller partitions, alarm systems, computers,
time-delayed safes, and other office equipment. The leases relating to stores
that provide government benefits distribution typically allow for the
termination of a store's lease in the event of the loss of a material government
contract.
Technology
The Company currently has an enterprise-wide transaction processing computer
network. The Company believes that this system has improved customer service by
reducing transaction time and enabling the Company to better manage returned
check losses and comply with regulatory record keeping and reporting
requirements.
The Company is currently implementing a Point-of-Sale ("POS") transaction
processing system comprised of a networked hardware and software package with
integrated database and reporting capabilities. Management believes that the POS
system will provide its stores with instantaneous customer information, thereby
reducing transaction time and improving the efficiency of the Company's credit
verification process. The POS system is expected to enhance the Company's
ability to offer new products and services and to improve its customer service.
During fiscal 2000, the Company spent $1.4 million to purchase the necessary
equipment and implement the POS system. Management expects to continue
enhancement of this system during fiscal 2001.
Security
All check cashing operations are exposed to two major classes of theft: robbery
and internal theft. DFG management has implemented extensive security systems,
dedicated security personnel and management information systems which address
both areas of potential loss. Management believes that its systems are among the
most effective in the industry. Total net security losses represented less than
0.9% of both total revenues and face value of checks cashed for the twelve
months ended June 30, 2000.
Most store employees operate behind bullet-resistant glass and steel partitions
and the back office, safe and computer areas are locked and closed to customers.
Each store's security measures include safes, electronic alarm systems monitored
by third parties, control over entry to teller areas, detection of entry through
perimeter openings, walls, and ceilings and the tracking of all employee
movement in and out of secured areas. In addition, employees use cellular phones
to insure safety and security of the staff whenever they are outside the secure
teller area. This centralized system includes the following security measures in
addition to those mentioned above: identical alarm systems in all stores, remote
control over alarm systems, arming/disarming and changing user codes and
mechanically and electronically controlled time-delay safes.
14
<PAGE>
Due to the high volumes of cash, food stamps, and negotiable instruments handled
at the Company's locations, daily monitoring, unannounced audits, and immediate
response to irregularities are critical in combating theft and fraud. The
Company has an internal auditing program which includes periodic unannounced
store audits and cash counts at randomly selected locations.
Advertising and Marketing
The Company is continually surveying and researching its customer trends and
purchasing patterns in order to place the most effective advertising for each
market. The Company's corporate marketing department's promotions typically
include point-of-sale materials, advertising support, and store personnel
instructions on the use of the materials. The Company also arranges cooperative
advertising for its products and services. For example, the Company does
cooperative advertising with Western Union. Store managers are also provided
with local store marketing training that sets standards for promotions and
marketing their store on a local level. A national yellow page company is
utilized to place all yellow page advertising as effectively and prominently as
possible. The Company does research into directory selection to assure effective
communication to its target customers.
Competition
The check cashing industry in the United States is highly competitive and will
become even more so as the industry consolidates. An industry survey has
reported that as of January 2000, a total of approximately 9,500 check cashing
stores were operating in the United States.
DFG, with 891 stores, is the second largest check cashing store network in the
United States and the largest such network in Canada and the United Kingdom. ACE
Cash Express, Inc. operates the largest check cashing store network in the
United States, operating 1,072 stores in 32 states as of June 30, 2000.
According to the industry survey, the seven largest chains control less than 20%
of the total stores, which reflects the fragmented nature of the check cashing
industry.
In addition to other check cashing stores in the U.S., Canada, and United
Kingdom, DFG competes with banks and other financial services entities, and
retail businesses, such as grocery and liquor stores, which will cash checks for
their customers. Some competitors, primarily grocery stores, do not charge a fee
to cash a check. However, these merchants provide this service to a limited
number of customers with superior credit ratings, and will typically only cash
"first party" checks, or those written on the customer's account and made
payable to the store.
The Company also competes with companies that offer automated check cashing
machines, franchised kiosk units that provide check-cashing and money order
services to customers, that can be located at places such as convenience stores,
bank lobbies, grocery stores, discount retailers and shopping malls.
Regulation
The Company is subject to regulation in several of the jurisdictions in which it
operates, including jurisdictions that regulate check cashing fees, require
prompt remittance of money order proceeds to money order suppliers, or require
the registration of check cashing companies. In addition, the Company is subject
to federal and state regulation which requires the reporting and recording of
certain currency transactions and certain of the Company's operations are also
subject to federal and state regulations governing consumer protection and
lending practices.
The Company acts as an agent for a bank offering unsecured short-term loans. The
bank is subject to federal and state banking regulations. Legislation has been
introduced at the federal level that could affect the Company's ability to
generate origination fees as an agent for the bank as well as the Company's
ability to offer the Cash `Til Payday(R) product. While the Company does not
believe that the legislation will be passed, if enacted the Company would not be
able to offer the short-term loan product as currently structured.
15
<PAGE>
The Department of the Treasury issued a final rule concerning the application of
the Bank Secrecy Act ("BSA") to those non-bank financial institutions called
"money servicer businesses" ("MSB's"). The rule generally applies to five
classes of financial businesses. These types of businesses include check cashers
and sellers of money orders. Registration of MSB's is required by the Money
Laundering Suppression Act of 1994. Under the final rule, MSB's must register by
December 31, 2001 and renew every two years thereafter. In addition, MSB's must
maintain a list of their agents and update the list annually with the list being
prepared by January 1, 2002 and made available for examination.
State Regulation
To date, the regulation of check cashing fees has been restricted to the state
level. The Company is currently subject to fee regulation in six states,
Pennsylvania, Ohio, California, Hawaii, Arizona, Maryland (effective October 1,
2000) and the District of Columbia where regulations set maximum fees for
various types of checks in an attempt to prevent usurious pricing practices. The
Company's fees comply with all state regulations.
The following chart presents a summary of current state fee regulations for
check cashing operations in those states where the Company's check cashing
stores are currently located:
CURRENT CHECK CASHING FEE REGULATIONS
<TABLE>
<S> <C>
California: Maximum of 3.0% fee for government and payroll checks (3.5% without specified
identification) or $3.00, whichever is greater. Permits one-time $10.00 fee to
issue identification and no more than $5.00 for identification replacement.
Ceiling fees set in 1992.
Ohio: Maximum of 3.0% fee for government checks. Ceiling fees set in 1993.
Washington, D.C.: Maximum of 5.0% fee for government and payroll
checks, 7.0% fee for an insurance check, 10.0% fee for
personal checks or $4.00 whichever is greater. Ceiling
fees set in 1998.
Hawaii: Maximum of 3.0% fee for government checks or $5.00
whichever is greater, 5.0% fee for payroll checks, 10.0%
fee for personal checks or $5.00 whichever is greater.
Permits one-time $10.00 fee to issue identification and
no more than $5.00 for identification replacement.
Ceiling fees set in 1999.
Pennsylvania: Maximum of 2.5% for government checks, 3.0% for payroll checks and 10.0% for
personal checks. Ceiling fees set in 1998.
Arizona: Maximum of 3.0% fee for government checks or $5.00 whichever is greater. Ceiling
fees set in 2000.
Maryland (1): Maximum of 2.0% fee for government checks or $5.00 whichever is greater,
4.0% fee for payroll checks or $5.00 whichever is greater, 10.0% fee for
personal checks. Permits for one-time $5.00 membership fee.
</TABLE>
[FN]
(1) Effective October 1, 2000.
</FN>
The Company operates a total of 139 stores in California and Maryland. These
states are among those that have so-called "prompt remittance" statutes. Such
statutes specify a maximum time for the payment of proceeds from the sale of
money orders to the issuer of such money orders thereby limiting the number of
days or "float" which the Company has use of the money from the sale of such
money orders. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources."
In addition, certain states, including California, Ohio, Arizona, Pennsylvania,
Wisconsin and the District of Columbia, have enacted licensing requirements for
check cashing stores. Other states, including Ohio, require the conspicuous
16
<PAGE>
posting of the fees charged by each store. A number of states, including Ohio,
also have imposed recordkeeping requirements while others require check cashing
stores to file fee schedules with the state.
The adoption of check cashing fee regulations and prompt remittance statutes in
additional jurisdictions or the reduction of maximum allowable fees in the
jurisdictions currently regulating check cashing could have an adverse effect on
the Company's business and could restrict the ability of the Company to expand
its operations into certain states. As the Company develops new products and
services in the consumer finance areas, it may become subject to additional
federal and state regulations governing those areas.
In addition to fee regulations and prompt remittance statutes, certain
jurisdictions have also (i) placed limitations on the commingling of money order
proceeds and (ii) established minimum bonding or capital requirements. The
Company's consumer lending activities are subject to certain state and federal
regulations, including, but not limited to, regulations governing lending
practices and terms, such as truth in lending and usury laws.
There can be no assurance that the Company will not be materially adversely
affected by legislation or regulations enacted in the future or that existing
regulations will not restrict the ability of the Company to continue its current
methods of operations or to expand its operations.
Federal Regulation
Pursuant to regulations promulgated under the Bank Secrecy Act by the U.S.
Treasury Department, transactions involving currency in an amount greater than
$10,000 or the purchase of monetary instruments for cash in amounts from $3,000
to $10,000 must be reported. In general, every financial institution, including
the Company, must report each deposit, withdrawal, exchange of currency or other
payment or transfer, whether by, through, or to the financial institution that
involves currency in an amount greater than $10,000. In addition, multiple
currency transactions must be treated as single transactions if the financial
institution has knowledge that the transactions are by, or on behalf of, any one
person and result in either cash-in or cash-out totaling more than $10,000
during any one business day. Management believes that the Company's POS system
and employee training programs are essential to the Company's compliance with
these regulatory requirements.
In Canada, the federal government does not directly regulate the check cashing
industry nor do provincial governments impose any regulations specific to the
industry. The exception is in the Province of Quebec where check cashing stores
are not permitted to charge a fee to cash government checks.
In the United Kingdom, the Office of Fair Trading ("OFT") is responsible for
regulating competition policy and consumer protection. To date, the OFT has not
enacted any regulations specific to the industry.
Proprietary Rights
The Company has the rights to a variety of service marks relating to products or
services it provides in its stores. In addition, the Company has trademarks
relating to the various names under which the Company's stores operate. The
Company does not believe that any of its service marks or trademarks are
material to its business.
Insurance Coverage
The Company maintains insurance coverage against losses, including theft, to
protect its earnings and properties. In addition, the Company maintains
insurance coverage against criminal acts, which coverage has a $25,000 per
occurrence deductible.
Employees
As of June 30, 2000, the Company employed 2,912 persons worldwide, comprised of:
(i) 266 persons employed in the Company's accounting, management information
systems, legal, human resources, treasury, finance and administrative
departments including Canada and the UK; (ii) 2,614 persons employed by the
Retail Stores Division, including tellers, store managers, regional supervisors,
17
<PAGE>
operations directors, and administrative personnel; and (iii) 32 persons
employed by the Merchant Services Division who oversee operations, coordinate
the activities of field personnel and manage the benefits distribution system in
New York State.
None of the Company's employees is represented by labor unions, and management
believes that its relations with its employees are good.
Cautionary 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
strategies and other factors detailed from time to time in the Company's annual
and other reports filed with the Securities and Exchange Commission.
18
<PAGE>
Item 2. PROPERTIES
The Company leases all store premises, which typically have initial terms of 5
to 20 years and contain provisions for renewal options; additional rental
charges based on revenue, and payment of real estate taxes and common area
charges. With respect to leased stores open as of June 30, 2000, the following
table shows the number of store leases expiring during the periods indicated,
assuming the exercise of the Company's renewal options:
<TABLE>
<CAPTION>
Period Ending Number of
June 30, Leases Expiring
--------- ---------------
<S> <C> <C>
2001 63
2002 - 2005 249
2006 - 2010 160
2011 - 2015 70
2016 - 2020 4
------
546
</TABLE>
19
<PAGE>
Item 3. LEGAL PROCEEDINGS
On December 28, 1999, the Company entered into a settlement of a purported
class-action lawsuit which had been commenced in February 1999. The plaintiff,
who represents "payday loan" borrowers for purposes of the settlement, 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 to the
settlement class of $5.5 million. The settlement was preliminarily approved by
the court on August 10, 2000 and is awaiting final court approval, on which
management expects a ruling in October 2000. During the year ended June 30,
2000, the Company recorded its best estimate, based on the information then
available, of the costs of the settlement and of legal and administrative costs
associated with the settlement. The amount of the provision is subject to
revision, and it is possible that the final cost of the settlement could differ
materially from the amount currently provided.
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 reversed the
amount of accrual that was in excess of 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.
The Company is not a party to any other material litigation and is not aware of
any pending or threatened litigation, other than routine litigation and
administrative proceedings arising in the ordinary course of business, that
would have a material adverse effect on the Company.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
20
<PAGE>
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is no established public trading market for the Company's common stock.
DFG Holdings, Inc. is the sole owner of record as well as the beneficial owner
of all of the Company's outstanding common stock.
The Indenture dated November 15, 1996 between the Company and State Street Bank
and Trust Company, as trustee (the "Indenture"), relating to the 10 7/8% Senior
Notes due 2006, the agreement dated December 18, 1998 relating to the 10 7/8%
Senior Subordinated Notes due 2006 as well as the Company's credit agreement
contain restrictions as to the declaration and payment of dividends. See "Item 7
- Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the notes to consolidated financial statements included
elsewhere in this report.
Item 6. SELECTED FINANCIAL DATA
The selected consolidated historical financial information below should be read
in conjunction with the consolidated financial statements and notes thereto and
the information contained in "Item 7 - Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
report. The balance sheet and statement of operations data of the Company as of
and for the years ended June 30, 1996, 1997, 1998, 1999 and 2000 have been
derived from historical consolidated financial statements of the Company.
21
<PAGE>
<TABLE>
<CAPTION>
Year ended June 30,
---------------------------------------------------------------------------------------
1996 (1) 1997 (2) 1998 1999(3), (4) 2000(5)
---------------------------------------------------------------------------------------
(dollars in thousands, except check cashing data)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:
Revenues from check cashing........ $ 20,290 $ 51,928 $ 70,306 $ 76,304 $ 97,350
Revenues from government services.. 15,936 16,141 14,311 6,753 6,375
Revenues from Cash 'Til Payday(R)
origination fees................ 539 1,471 7,448 18,559 34,787
Other revenues..................... 5,665 13,472 19,120 19,363 27,241
---------------------------------------------------------------------------------------
Total revenues........................ 42,430 83,012 111,185 120,979 165,753
Store and regional expenses:
Salaries and benefits.............. 13,975 26,817 33,670 35,329 47,058
Occupancy.......................... 4,031 7,951 9,656 9,609 12,800
Depreciation....................... 893 1,446 2,018 2,227 4,683
Other.............................. 11,709 20,452 24,002 23,764 36,503
---------------------------------------------------------------------------------------
Total store and regional expenses..... 30,608 56,666 69,346 70,929 101,044
Corporate expenses.................... 5,360 8,175 12,462 13,648 20,864
Loss on store closings and sales...... 4,501 381 45 103 249
Goodwill amortization................. 1,167 2,792 3,624 4,686 5,564
Other depreciation and amortization... 691 1,113 1,152 1,020 1,620
Interest expense...................... 3,385 10,007 12,945 16,401 17,491
Recapitalization costs and other
non-recurring items................ - - - 12,575 1,478
Writedown of goodwill................. - - 12,870 - -
---------------------------------------------------------------------------------------
(Loss) income before income taxes and
extraordinary item................. (3,282) 3,878 (1,259) 1,617 17,443
Income tax (benefit) provision ....... (1,214) 2,425 5,538 3,881 12,043
---------------------------------------------------------------------------------------
(Loss) income before extraordinary item (2,068) 1,453 (6,797) (2,264) 5,400
Extraordinary loss on debt
extinguishment (net of income tax
benefit of $1,042 and $45)......... - (2,023) - (85) -
---------------------------------------------------------------------------------------
Net (loss) income .................... $ (2,068) $ (570) $ (6,797) $ (2,349) $ 5,400
=======================================================================================
Operating and Other Data:
Adjusted EBITDA (6)................... $ 7,355 $ 19,724 $ 31,526 $ 38,619 $ 48,405
Adjusted EBITDA margin (6)............ 17.3% 23.8% 28.4% 31.9% 29.2%
Net cash provided by (used in):
Operating activities............... 3,669 9,319 18,003 15,951 16,792
Investing activities............... (8,146) (75,674) (4,237) (23,471) (44,526)
Financing activities............... 7,244 99,120 (12,699) 18,269 35,306
Stores in operation at end of period.. 154 436 416 437 891
Check Cashing Data:
Face amount of checks cashed.......... $ 728,123,000 $1,878,587,000 $2,301,861,000 $2,319,847,000 $2,784,267,000
Number of checks cashed............... 3,051,037 6,492,495 7,991,128 7,490,406 8,328,176
Average face amount per check cashed.. $238.65 $289.35 $288.05 $309.71 $334.32
Average fee per check................. $6.65 $8.00 $8.80 $10.14 $11.69
Average fee as a % of face amount..... 2.79% 2.76% 3.05% 3.28% 3.50%
Balance Sheet Data (at end of period):
Cash.................................. $ 22,545 $ 55,205 $ 55,501 $ 65,782 $ 73,288
Total assets.......................... 67,444 185,988 165,850 203,709 259,714
Total indebtedness.................... 42,530 124,991 112,675 142,166 179,146
Shareholder's equity.................. 13,707 38,560 29,454 36,334 39,595
</TABLE>
22
<PAGE>
[FN]
(1) On September 18, 1995, the Company purchased all of the outstanding stock
or certain assets of several entities which operated 19 check cashing
stores in California, Arizona, Ohio, and Wisconsin and operated under the
name "Chex$Cashed." Total consideration for the purchase was $7.4 million,
which was funded through borrowings under the Company's existing credit
facility. Approximately $6.7 million, the excess of the purchase price over
the fair market value of identifiable net assets, was recorded as goodwill.
(2) On August 8, 1996, the Company purchased all of the outstanding common
stock of Any Kind Check Cashing Centers, Inc. and all the partnership
interests in U.S. Check Exchange Limited Partnership which together
operated 63 check cashing stores in seven states and the District of
Columbia. Total consideration for the purchase was $31.0 million, of which
$2.0 million was in the form of Holdings' common stock, plus initial
working capital of approximately $6.0 million. On August 28, 1996, the
Company acquired the assets associated with the operations of "ABC Check
Cashing" which operated 15 check cashing centers within the Cleveland, Ohio
area for $6.0 million in cash. On November 15, 1996, the Company purchased
all of the outstanding common stock of National Money Mart, Inc. which
owned and operated 36 check cashing stores and franchised 107 check cashing
stores, all of which operate in Canada under the name "Money Mart." Total
consideration for the purchase was $17.7 million, of which approximately
$500,000 was in the form of Holdings' common stock, plus initial working
capital of approximately $900,000. On November 15, 1996, the Company
acquired the assets associated with the operations of Cash-N-Dash Check
Cashing, Inc. which operated 32 check cashing stores in northern California
under the name "Cash-N-Dash." Total consideration for the purchase was $7.3
million. On November 21, 1996, the Company purchased all the outstanding
stock of C&C Check Cashing, Inc. which operated 22 check cashing stores in
northern California under the name "C&C Check Cashing." Total consideration
for the purchase was $3.8 million plus initial working capital of
approximately $500,000. On April 18, 1997, the Company purchased all of the
outstanding common stock of Canadian Capital Corporation which operated 43
check cashing stores in Canada under a franchise agreement with Money Mart.
Total consideration for the purchase was $13.3 million plus initial working
capital of approximately $1.8 million. Each of the acquisitions described
above was accounted for under the purchase method of accounting.
Approximately $74.3 million, the acquisition costs in excess of the fair
market values of the net assets acquired, was recorded as goodwill. The
acquisitions were funded through borrowings, issuance of Holdings Common
Stock and revenue-based earn-outs totaling $1.1 million which are payable
over a period of up to four years with $600,000 paid out through June 30,
2000.
(3) On November 13, 1998, Holdings entered into an agreement and plan of merger
(the "Merger Agreement") with DFG Acquisition, Inc., ("Acquisition") a
Delaware corporation, controlled by Green Equity Investors II, L.P., a
Delaware limited partnership ("GEI II") 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").
Holdings and Acquisition consummated the Merger on December 18, 1998, and
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.
(4) On February 10, 1999, the Company acquired all of the outstanding shares of
Instant Cash Loans Limited ("ICL") which operated eleven stores in the
United Kingdom. The initial purchase price for this acquisition was $9.4
million plus initial working capital of approximately $2.0 million and was
funded with the issuance of the Company's 10 7/8% Senior Subordinated Notes
Due 2006. On February 17, 1999, National Money Mart Company, a subsidiary
of the Company, acquired 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 and was funded with the issuance of the Company's 10 7/8% Senior
Subordinated Notes Due 2006.
(5) On July 7, 1999, the Company acquired 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 initial purchase price for this
acquisition was $12.5 million and was funded through excess internal cash,
the Company's revolving credit facility and the Company's 10 7/8% Senior
Subordinated Notes Due 2006. The excess of the purchase price over the fair
value of the identifiable net assets acquired was $8.2 million. Additional
consideration of $10.0 million was subsequently recorded based under the
profit-based earn-out agreement. On November 18, 1999, the Company acquired
all of 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 acquired all of the
outstanding shares of Cash Centres Corporation Limited ("CCL"), 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. On February 10, 2000, the Company acquired 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
23
<PAGE>
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.
(6) Adjusted EBITDA is earnings before interest, income taxes, depreciation,
amortization, recapitalization costs and other non-recurring items,
writedown of goodwill and loss on store closings and sales. Adjusted EBITDA
does not represent cash flows as defined by accounting principles generally
accepted in the United States 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 accounting principles generally
accepted in the United States. 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.
</FN>
24
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General
The Company has historically derived its revenues primarily from providing check
cashing services and other consumer financial products and services including
money orders, money transfers, consumer loans and bill payment. In addition,
certain Company stores provide for the distribution of public assistance
benefits and food coupons. For the years ended June 30, 1998, 1999 and 2000,
check cashing revenues as a percentage of total revenues approximated 63.2%,
63.1%, and 58.7%, respectively.
The check cashing industry in the United States is highly fragmented, and has
experienced considerable growth as store locations have increased from
approximately 1,350 in 1986 to approximately 9,500 as of January 2000. The
Company believes it is one of only seven domestic check cashing store networks
with more than 100 locations. The industry is comprised of mostly local chains
and single-unit operators. The Company believes that industry growth has been
fueled by several demographic and socioeconomic trends, including a decline in
the number of households with bank deposit accounts, an increase in low-paying
service sector jobs and an overall increase in the lower-income population.
All of the Company's acquisitions have been accounted for under the purchase
method of accounting. Therefore, the historical consolidated results of
operations include the revenues and expenses of all of the acquired companies
since their respective dates of acquisition. The comparability of the historical
financial data is significantly impacted by the timing of the Company's
acquisitions. The following table sets forth information with respect to major
acquisitions completed by the Company during the periods discussed below:
<TABLE>
<CAPTION>
Number of Stores
Company Month Acquired Purchase Price
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Instant Cash Loans Limited................ 11 February 1999 $ 9.4 million
Calgary Money Mart Partnership............ 6 February 1999 $ 5.6 million
Cash A Cheque Holdings Great Britain
Limited.............................. 44 July 1999 $ 22.5 million
Cheques R Us, Inc......................... 6 November 1999 $ 1.2 million
Cash Centres Corporation Limited.......... 243 (1) December 1999 $ 8.4 million
CheckStop, Inc............................ N/A (2) February 2000 $ 2.7 million
</TABLE>
[FN]
(1) Includes 238 franchised stores.
(2) Operates through 150 independent agents.
</FN>
This Management's Discussion and Analysis of Financial Condition and Results of
Operations solely reflects the historical results of the Company. The
aforementioned purchase price for Instant Cash Loans Limited ("ICL") does not
include initial working capital of approximately $2.0 million. The
aforementioned purchase price for Cash A Cheque Holdings Great Britain Limited
("CAC") includes an additional amount due to the sellers of $10.0 million based
under a profit-based earn-out agreement. The aforementioned purchase prices for
Cash Centres Corporation Limited ("CCL") and CheckStop, Inc. ("CheckStop")
exclude potential contingent payments to the sellers of $2.7 million and
$350,000, respectively, based on future profitability. Any amounts paid under
the earn-out contingencies will be recorded as additional consideration of the
acquisition when the contingency is resolved.
25
<PAGE>
Due to the rapid growth of the Company, period-to-period comparisons of
financial data are not necessarily indicative of the results for subsequent
periods and should not be relied upon as an indicator of the future performance
of the Company.
On November 13, 1998, Holdings, entered into an agreement and plan of merger
(the "Merger Agreement") with DFG Acquisition, Inc., ("Acquisition"), an entity
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"). Holdings and
Acquisition consummated the Merger on December 18, 1998, and 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. Prior to the Merger between Holdings and
Acquisition, management of the Company exercised their options in Holdings which
were converted into equivalent amounts of stock. The Merger was accounted for as
a recapitalization of Holdings. Recapitalization costs consist primarily of
non-cash charges of $9.9 million and $133,000 for the years ended June 30, 1999
and 2000, respectively, relating to the exercise of Holdings' options by
management and other compensation received by the chief executive officer for
services rendered in connection with the recapitalization of Holdings.
The management (other than the employment of Donald F. Gayhardt, Jr. as the
President), Board of Directors and equity ownership of the Company did not
change in the Merger and Holdings continues to own one hundred percent of the
voting securities of the Company.
In connection with the Merger, Holdings, the Company and Jeffrey Weiss, the
current chief executive officer of Holdings and the Company, entered into an
employment agreement, dated November 13, 1998, effective concurrently with the
consummation of the Merger, pursuant to which Jeffrey Weiss will continue to
serve as the chief executive officer of Holdings and the Company. In addition,
the Company, Holdings and Donald F. Gayhardt, Jr., entered into an employment
agreement, dated December 18, 1998, pursuant to which Donald F. Gayhardt, Jr.
will serve as the President of Holdings and the Company. Donald F. Gayhardt, Jr.
formerly served as the executive vice president and chief financial officer of
the Company from 1992 to 1997.
The Company's revenues from government services as a percentage of total
revenues decreased for the years ended June 30, 1999 and 2000. The Company
expects that its revenues from the distribution of public assistance benefits
will continue to decline due to a number of factors, including a continued
reduction in the number of recipients eligible for benefits. Additionally, 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 an EBT system in January
1998 which was fully implemented during fiscal 1998. As a result, all of the
Company's contracts with the Commonwealth of Pennsylvania were terminated during
fiscal 1998. The Company has not recorded revenue from these contracts since
fiscal year June 30, 1998 for which these contracts contributed 6% of total
revenues. The installation of such systems did not have a material adverse
effect on the Company's results of operations or financial condition. See
"Government Benefits Distribution" on page 12.
26
<PAGE>
Results of Operations
The following table sets forth the Company's results of operations as a
percentage of revenues for the indicated periods:
<TABLE>
<CAPTION>
Year ended June 30,
----------------------------
1998 1999 2000
----------------------------
<S> <C> <C> <C>
Statement of Operations Data:
Revenues:
Revenues from check cashing........................................... 63.2% 63.1% 58.7%
Revenues from government services..................................... 12.9 5.6 3.8
Revenues from Cash 'Til Payday(R) origination fees.................... 6.7 15.3 21.0
Other revenues........................................................ 17.2 16.0 16.5
----------------------------
Total revenues............................................................ 100.0 100.0 100.0
Store and regional expenses:
Salaries and benefits................................................. 30.3 29.2 28.4
Occupancy............................................................. 8.7 7.9 7.7
Depreciation.......................................................... 1.8 1.8 2.8
Other................................................................. 21.6 19.6 22.0
----------------------------
Total store and regional expenses......................................... 62.4 58.5 60.9
Corporate expenses........................................................ 11.2 11.3 12.6
Loss on store closings and sales.......................................... - 0.1 0.2
Goodwill amortization..................................................... 3.3 3.9 3.3
Other depreciation and amortization....................................... 1.0 0.8 1.0
Interest expense.......................................................... 11.6 13.6 10.5
Recapitalization costs and other non-recurring items...................... - 10.4 0.9
Writedown of goodwill..................................................... 11.6 - -
----------------------------
(Loss) income before income taxes and extraordinary item.................. (1.1) 1.4 10.6
Income tax provision ..................................................... 5.0 3.2 7.3
----------------------------
(Loss) income before extraordinary item................................... (6.1) (1.8) 3.3
Extraordinary loss on debt extinguishment (net of income tax benefit)..... - (0.1) -
----------------------------
Net (loss) income......................................................... (6.1)% (1.9)% 3.3%
============================
</TABLE>
27
<PAGE>
Year Ended June 30, 2000 Compared to the Year Ended June 30, 1999
Total revenues were $165.8 million for the year ended June 30, 2000 as compared
to $121.0 million for the year ended June 30, 1999, an increase of $44.8
million, or 37.0%. Of this increase, $18.5 million resulted from the inclusion
of the results of operations of the entities acquired during fiscal 2000,
(collectively referred to hereafter as the "Acquisitions"). In addition,
revenues increased $4.8 million from new store openings during fiscal 2000. For
stores that were opened and owned by the Company during the entire period from
July 1, 1998 through June 30, 2000, revenues increased by 13.5%. This increase
resulted from an increase in Cash `Til Payday(R) revenues of 52.3% and an
increase in revenues from check cashing of 4.5%, offset in part by a decrease in
revenues from government services of 36.8%. The increase in Cash `Til Payday(R)
revenues resulted primarily from improvements in product design. Government
services revenues accounted for 3.8% of total revenues for the year ended June
30, 2000, a decrease from 5.6% of total revenues for the year ended June 30,
1999. The decrease in 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 systems. As state and local
government agencies implement EBT systems, the Company expects a continuing
decline in the Company's government services revenue.
Store and regional expenses were $101.0 million for the year ended June 30, 2000
as compared to $70.9 million for the year ended June 30, 1999, an increase of
$30.1 million, or 42.5%. The Acquisitions resulted in an increase in store and
regional expenses of $11.6 million and new store openings accounted for $7.9
million. Also, accounting for the increase in store and regional expenses were
acquisitions during fiscal year 1999 which incurred a full year of expenses in
fiscal year 2000. Store and regional expenses as a percentage of revenues
increased from 58.5% in the year ended June 30, 1999 to 60.9% in the year ended
June 30, 2000 due to increased start-up costs associated with new store openings
during the year ended June 30, 2000.
Salaries and benefits were $47.1 million for the year ended June 30, 2000 as
compared to $35.3 million for the year ended June 30, 1999, an increase of $11.8
million, or 33.4%. The Acquisitions accounted for an increase in salaries and
benefits of $4.2 million and new store openings accounted for $2.9 million.
Salaries and benefits expenses as a percentage of revenues decreased from 29.2%
for the year ended June 30, 1999 to 28.4% for the year ended June 30, 2000, as a
result of increases in revenues from the Cash `Til Payday(R) program and
revenues from check cashing.
Occupancy expense was $12.8 million for the year ended June 30, 2000 as compared
to $9.6 million for the year ended June 30, 1999, an increase of $3.2 million,
or 33.3%. The Acquisitions accounted for an increase of $1.2 million. In
addition, occupancy expenses increased $1.4 million from new store openings
during the year ended June 30, 2000. Occupancy expense as a percentage of
revenues decreased from 7.9% for the year ended June 30, 1999 to 7.7% for the
year ended June 30, 2000, due to an increase in same store revenues.
Depreciation expense was $4.7 million for the year ended June 30, 2000 as
compared to $2.2 million for the year ended June 30, 1999 an increase of $2.5
million, or 113.6%. The Acquisitions accounted for an increase of $1.1 million
and new store openings accounted for $600,000. Depreciation expense as a
percentage of revenues increased to 2.8% for the year ended June 30, 2000 from
1.8% for the year ended June 30, 1999.
Other store and regional expenses were $36.5 million for the year ended June 30,
2000 as compared to $23.8 million for the year ended June 30, 1999, an increase
of $12.7 million, or 53.4%. The Acquisitions and new store openings accounted
for an increase in other store and regional expenses of $5.1 million and $3.0
million respectively. Other store and regional expenses consist of bank charges,
armored security costs, net returned checks, cash shortages, cost of goods sold,
insurance, advertising and other costs incurred by the stores.
Corporate expenses were $20.9 million for the year ended June 30, 2000 as
compared to $13.6 million for the year ended June 30, 1999, an increase of $7.3
million, or 53.7%. This increase resulted from the additional corporate costs
associated with the Acquisitions and new store openings during fiscal 2000.
Corporate expenses as a percentage of revenues increased from 11.3% for the year
ended June 30, 1999 to 12.6% for the year ended June 30, 2000.
28
<PAGE>
Goodwill amortization was $5.6 million for the year ended June 30, 2000 as
compared to $4.7 million for the year ended June 30, 1999, an increase of
$900,000, or 19.1%. This increase was mainly due to the amortization of the
goodwill associated with Acquisitions during the year ended June 30, 2000.
Other depreciation and amortization expenses were $1.6 million for the year
ended June 30, 2000 as compared to $1.0 million for the year ended June 30,
1999, an increase of $600,000 or 60%. Of this increase, the Acquisitions
accounted for $100,000. Other depreciation and amortization as a percentage of
revenues increased to 1.0% for the year ended June 30, 2000 from .8% for the
year ended June 30, 1999.
Interest expense was $17.5 million for the year ended June 30, 2000 as compared
to $16.4 million for the year ended June 30, 1999, an increase of $1.1 million,
or 6.7%. This increase was primarily attributable to the increase of borrowings
under the Company's credit facilities to fund acquisitions, purchases of
property and equipment related to existing stores, recently acquired stores and
investments in technology and the increase in the borrowing rates of the
Company's revolving credit facilities.
Recapitalization costs and other non-recurring items were $1.5 million for the
year ended June 30, 2000 as compared to $12.6 million for the year ended June
30, 1999, a decrease of $11.1 million or 88.1%. Recapitalization costs and other
non-recurring items for the year ended June 30, 1999 consists primarily of a
non-cash charge of $9.9 million relating to the exercise of Holdings' options by
management and other compensation received by the chief executive officer for
services rendered in connection with the recapitalization of Holdings. For the
year ended June 30, 2000 the Company incurred a charge of $1.4 million for costs
associated with the planned acquisition of Direct General Corporation for which
a final agreement could not be reached and was terminated.
Year Ended June 30, 1999 Compared to the Year Ended June 30, 1998
Total revenues were $121.0 million for the year ended June 30, 1999 as compared
to $111.2 million for the year ended June 30, 1998, an increase of $9.8 million,
or 8.8%. Of this increase, $3.8 million resulted from the inclusion of the
results of operations of the entities acquired during fiscal 1999, (collectively
referred to hereafter as the "1999 Acquisitions"). In addition, revenues
increased $3.8 million from new store openings during fiscal 1999. For stores
that were opened and owned by the Company during the entire period from July 1,
1997 through June 30, 1999, revenues increased by 11.0%. This increase resulted
from an increase in Cash `Til Payday(R) revenues of 116.9% and an increase in
revenues from check cashing of 5.3%, offset in part by a decrease in revenues
from government services of 45.6%. The increase in Cash `Til Payday(R) revenues
resulted primarily from improvements in product design. Government services
revenues accounted for 5.6% of total revenues for the year ended June 30, 1999,
a decrease from 12.9% of total revenues for the year ended June 30, 1998. The
decrease in 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 systems. As state and local
government agencies implement EBT systems, the Company expects a continuing
decline in the Company's government services revenue.
Store and regional expenses were $70.9 million for the year ended June 30, 1999
as compared to $69.3 million for the year ended June 30, 1998, an increase of
$1.6 million, or 2.3%. The 1999 Acquisitions resulted in an increase in store
and regional expenses of $2.2 million. Store and regional expenses as a
percentage of revenues decreased from 62.4% for the year ended June 30, 1998 to
58.5% for the year ended June 30, 1999. This decrease was due primarily to the
continued improvement in store level profitability.
Salaries and benefits were $35.3 million for the year ended June 30, 1999 as
compared to $33.7 million for the year ended June 30, 1998, an increase of $1.6
million, or 4.7%. The 1999 Acquisitions accounted for an increase in salaries
and benefits of $1.1 million. Salaries and benefits expenses as a percentage of
revenue decreased from 30.3% for the year ended June 30, 1998 to 29.2% for the
year ended June 30, 1999, as a result of increases in revenues from the Cash
`Til Payday(R) program and revenues from check cashing.
Occupancy expense was $9.6 million for the year ended June 30, 1999 as compared
to $9.7 million for the year ended June 30, 1998, a decrease of $100,000, or
29
<PAGE>
1.0%. The 1999 Acquisitions accounted for an increase of $300,000 and the
closing of certain Pennsylvania stores due to the expiration of the government
contract with the Commonwealth of Pennsylvania accounted for a decrease of
$500,000. Occupancy expense as a percentage of revenues decreased from 8.7% for
the year ended June 30, 1998 to 7.9% for the year ended June 30, 1999, due to an
increase in same store revenues.
Depreciation expense was $2.2 million for the year ended June 30, 1999 as
compared to $2.0 million for the year ended June 30, 1998 an increase of
$200,000, or 10.0%. The 1999 Acquisitions accounted for an increase of $100,000.
Depreciation expense as a percentage of revenues remained at 1.8% for the years
ended June 30, 1998 and June 30, 1999.
Other store and regional expenses were $23.8 million for the year ended June 30,
1999 as compared to $24.0 million for the year ended June 30, 1998, a decrease
of $200,000, or 0.8%. The 1999 Acquisitions accounted for an increase in other
store and regional expenses of $800,000 while closing of certain Pennsylvania
stores due to the expiration of the government contract with the Commonwealth of
Pennsylvania resulted in a decrease of $1.4 million. Other store and regional
expenses consist of bank charges, armored security costs, net returned checks,
cash shortages, cost of goods sold, insurance, advertising and other costs
incurred by the stores.
Corporate expenses were $13.6 million for the year ended June 30, 1999 as
compared to $12.5 million for the year ended June 30, 1998, an increase of $1.1
million, or 8.8%. This increase resulted from the additional corporate costs
associated with the 1999 Acquisitions completed during fiscal 1999. Corporate
expenses as a percentage of revenues increased from 11.2% for the year ended
June 30, 1998 to 11.3% for the year ended June 30, 1999.
Goodwill amortization was $4.7 million for the year ended June 30, 1999 as
compared to $3.6 million for the year ended June 30, 1998, an increase of $1.1
million, or 30.6%. This increase was mainly due to the accelerated amortization
of the remaining goodwill associated with the Company's government services line
of business which is being amortized over the remaining life of the future
undiscounted cash flows of the government services business.
Other depreciation and amortization expenses were $1.0 million for the year
ended June 30, 1999 as compared to $1.2 million for the year ended June 30,
1998, a decrease of $200,000 or 16.7%.
Interest expense was $16.4 million for the year ended June 30, 1999 as compared
to $12.9 million for the year ended June 30, 1998, an increase of $3.5 million,
or 27.1%. This increase was primarily attributable to $1.9 million in commitment
fee expense associated with the Recapitalization of Holdings and the issuance of
debt to fund current acquisitions.
Recapitalization costs and other non-recurring items in 1999 consist primarily
of a non-cash charge of $9.9 million relating to the exercise of Holding's
options by management and other compensation received by the chief executive
officer for services rendered in connection with the recapitalization of
Holdings.
Writedown of Goodwill
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
("SFAS 121"), establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles, and goodwill related to those assets
to be held and used and for long-lived assets and certain identifiable
intangibles to be disposed of. In accordance with SFAS 121, the Company reviews
for impairment of long-lived assets and related goodwill whenever events or
changes in circumstances occur which indicate that the carrying amount of an
asset may not be recoverable.
If an event or change in circumstance is present or an event or change in
circumstance indicates that the carrying amount of an asset that the Company
expects to hold and use may not be recoverable, the Company estimates the future
cash flows expected to result from the use of the asset and its eventual
disposition. If the sum of the expected undiscounted future cash flows is less
than the carrying amount of the asset, the Company recognizes an impairment loss
for the difference between the carrying amount of the asset and the estimated
fair value of the asset. The Company determines the estimated fair value of the
30
<PAGE>
asset by discounting the estimated future cash flows using a discount rate
commensurate with the risks involved in the use of such asset. In estimating
future cash flows, the Company groups assets at the lowest level for which there
are identifiable cash flows. The Company groups assets between its two primary
lines of business that generate independent cash flows: check cashing and
government services.
During the fourth quarter of fiscal year 1998, the Commonwealth of Pennsylvania
informed the Company that all of the Commonwealth's government services
contracts would be terminated at June 30, 1998 as a result of the successful
implementation of an Electronic Benefit Transfer (EBT) system in Pennsylvania.
Additionally, during the fourth quarter of fiscal year 1998, the State of New
York presented the Company with an EBT implementation plan. The Company's
contract expiration date was December 31, 1998 but the Company negotiated an
extension to the contract through June 30, 2000 with two six-month extensions
exercisable by the state. The state has exercised the first six-month extension
extending the Company's contract to December 31, 2000. The Company has received
information from the State of New York pertaining to a statewide implementation
of EBT which contemplates completion by March 2001. Upon successful
implementation of the EBT program, the Company's existing contract would be
terminated. Management of the Company concluded that the Company would not have
the opportunity to provide similar government services for the newly installed
EBT systems in either Pennsylvania or New York. Upon the occurrence of these
events, the Company determined that an impairment indicator was present.
Accordingly, the Company estimated future cash flows for the remaining
government services business and compared the undiscounted cash flows to the
carrying amount of assets and related goodwill separately identifiable with the
government services line of business. This analysis indicated that the goodwill
related to the government services business was impaired. As a result, the
Company measured the amount of impairment to be recorded by comparing the fair
value of the assets and related goodwill to the carrying value of the assets and
related goodwill. This analysis indicated that the fair value of the assets and
related goodwill was less than the carrying value by $12.9 million. Therefore,
the Company has written down the carrying value of the related goodwill by a
charge to income of $12.9 million. This charge relates to goodwill as the fixed
assets associated with the government services line of business have been fully
depreciated. The remaining unamortized goodwill of approximately $3.0 million
related to the government services business was amortized over the estimated
remaining life of the future undiscounted cash flows associated with the
government services business.
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 loan store expansion. For the years ended June 30,
1998, 1999 and 2000, the Company had net cash provided by operating activities
of $18.0 million, $16.0 million and $16.8 million, respectively, for purchases
of property and equipment related to existing stores, recently acquired stores,
investments in technology and acquisitions. The Company's budgeted capital
expenditures, excluding acquisitions, are currently anticipated to aggregate
approximately $9.6 million during its fiscal year ending June 30, 2001, for
remodeling and relocation of certain existing stores and for opening new stores.
In connection with the Merger, the Company terminated the Second Amended and
Restated Credit Agreement, dated as of November 15, 1996. The Company entered
into a Credit Agreement, dated as of December 18, 1998 obtaining a new $160
million credit facility. The Credit Agreement provides for a revolving credit
facility of up to $70 million and provided for two term loans aggregating up to
$90 million. The borrowings under the revolving credit facility as of June 30,
1999 and 2000 were $10.5 million and $42.5 million, respectively. The $90
million term loans were available to fund the Company's repurchase obligations
in excess of $20 million, if any, in connection with the change of control
provision of its 10 7/8% Senior Notes due 2006 (the "Senior Notes"). Repurchase
obligations in connection with the Senior Notes were $810,000 and as a result,
the $90 million term loan commitments expired on February 16, 1999.
Also, in connection with the Merger, the Company entered into an agreement dated
December 18, 1998, pursuant to which the Company may issue up to $20 million
aggregate principal amount of its 10 7/8% Senior Subordinated Notes Due 2006
(the "Senior Subordinated Notes"), to (i) fund the Company's repurchase
obligations, if any, in connection with its Senior Notes, or (ii) to finance or
31
<PAGE>
refinance acquisitions of the Company. In February 1999, the Company issued
$18.1 million of its Senior Subordinated Notes to fund the purchase of ICL,
Calgary and the repurchase obligations and related fees of $11.4 million, $5.6
million and $1.1 million, respectively. In August 1999, the Company issued the
remaining $1.9 million to partially fund the acquisition of CAC. Issuance costs
associated with the new Credit Agreement and the Senior Subordinated Notes paid
during fiscal 1999 and 2000 were $7.6 million and $500,000 respectively.
The Company's indebtedness included a seller-subordinated note of $2.6 million
at June 30, 1999 from a previous acquisition. The Company was seeking to
restructure its obligations under the original subordinated note issued to the
seller as part of the acquisition and had ceased making principal and interest
payments. In May 2000, the Company entered into a Stipulation of Settlement in
the matter. The parties agreed to release each other from all claims and the
Company's accrual was adequate to cover the settlement amount.
The Senior Notes, new revolving credit facility and the Senior Subordinated
Notes 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 has an overdraft credit facility to fund peak working capital needs
for its Canadian operations. The overdraft credit facility provides for a
commitment of up to approximately $4.7 million of which $2.5 million and $1.7
million were outstanding as of June 30, 2000 and 1999, respectively. Amounts
outstanding under the facility bear interest at a rate of Canadian prime plus
0.50% and are secured by the pledge of a cash collateral account of an
equivalent balance. For the Company's United Kingdom operations, the Company
also has an overdraft facility which provides for a commitment of up to
approximately $7.6 million of which $4.6 million and $0.0 million was
outstanding as of June 30, 2000 and June 30, 1999, respectively. 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 new 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 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 Senior 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 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 continued
expansion of the Cash 'Til Payday(R) loan program. The Company also expects
operating expenses to increase, although the rate of increase is expected to be
less than the rate of revenue growth. Furthermore, the Company does not believe
that additional acquisitions or expansion are necessary in order for it to be
able to cover its fixed expenses, including debt service. 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, 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.
Income Taxes
The Company's effective tax rates for fiscal 1998, 1999 and 2000 were (439.9)%,
240.0% and 69.0%, respectively. The effective rate differs from the federal
statutory rate of 34% due to state taxes, foreign taxes, nondeductible goodwill
amortization which resulted from the June 30, 1994 acquisition of the Company
and several subsequent acquisitions and writeoffs of goodwill.
32
<PAGE>
Seasonality and Quarterly Fluctuations
The Company's business is seasonal due to the impact of several 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, results of operations for any
fiscal quarter are not necessarily indicative of the results of operations 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 the addition of new stores.
Impact of Inflation
The Company believes that the results of its operations are not dependent upon
the levels of inflation.
Pending Accounting Pronouncements
In June 1999, the Financial Accounting Standards Board ("FASB") issued SFAS No.
137 "Accounting for Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of FASB Statement No. 133", Statement of Financial Accounting
Standards No. 133 "Accounting for Derivative and Hedging Activities" ("SFAS
133"), which delays the effective date of SFAS No. 133. Accordingly, SFAS 133
shall be effective for all fiscal years beginning after June 15, 2000. SFAS 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 is evaluating the impact of
SFAS No. 133 on the Company's future earnings and financial position, but does
not expect it to be material.
In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements ("SAB
101"). The SEC subsequently issued SAB 101B, which delays the effective date of
SAB101 until no later than the fourth fiscal quarter of fiscal years beginning
after December 15, 1999. SAB 101 is expected to have no effect on the Company's
results of operations, financial position, capital resources or liquidity.
33
<PAGE>
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Generally
In the operations of its subsidiaries and the reporting of its consolidated
financial results, the Company is affected by changes in interest rates and
currency exchange rates. The principal risks of loss arising from adverse
changes in market rates and prices to which the Company and its subsidiaries are
exposed relate to:
o interest rates on debt
o foreign exchange rates generating translation gains and losses
The Company and its subsidiaries have no market risk sensitive instruments
entered into for "trading purposes," as such term is defined by generally
accepted accounting principles. Information contained herein relates only to
instruments entered into for purposes other than trading.
Interest Rates
The Company's outstanding indebtedness, and related interest rate risk, is
managed centrally by the office of the Chief Financial Officer of the Company by
implementing the financing strategies approved by the Company's Board of
Directors. The Company's debt consists of fixed-rate senior notes and senior
subordinated notes. The Company's revolving credit facility and overdraft credit
facilities carry a variable rate of interest. As most of the Company's average
outstanding indebtedness carries a fixed rate of interest, a change in interest
rates is not expected to materially impact the consolidated financial position,
results of operations or cash flows of the Company.
Foreign Exchange Rates
Operations in the United Kingdom and Canada have exposed the Company to shifts
in currency valuations. As strategy is being finalized and policy created,
precautions have been taken should exchange rates shift. For the United Kingdom
subsidiary, put options with a notional value of 7.0 million British Pounds have
been purchased to protect quarterly earnings in the United Kingdom against
foreign exchange fluctuations. Each contract has a strike price of initially 5%
out of the money at the date of acquisition and each contract was out of the
money at June 30, 2000. Out of the money put options were purchased for the
following reasons: (1) lower cost than completely averting risk and (2) maximum
downside is limited to the difference between strike price and exchange rate at
date of purchase and price of the contracts. This strategy will continually be
evaluated as to its effectiveness and suitability to the Company.
The Canadian and the United Kingdom operations constitute approximately 38.6%
and 5.1%, respectively of the Company's fiscal year 2000 consolidated pre-tax
earnings. As currency exchange rates change, translation of the financial
results of the Canadian and United Kingdom operations into U.S. dollars will be
impacted. Changes in exchange rates have resulted in a translation adjustment of
$5.5 million to the Company's net assets.
The Company estimated that a 10% change in foreign exchange rates by itself
would impact reported pre-tax earnings from continuing operations by
approximately $763,000 and $572,000 for the years ended June 30, 2000 and 1999,
respectively. Such impact represents nearly 4.4% and 35.8% of the Company's
consolidated pre-tax earnings for fiscal year 2000 and 1999, respectively.
34
<PAGE>
Item 8. FINANCIAL STATEMENTS
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
DFG Holdings, Inc.
We have audited the accompanying consolidated balance sheets of Dollar Financial
Group, Inc. as of June 30, 2000 and 1999, and the related consolidated
statements of operations, shareholder's equity, and cash flows for each of the
three years in the period ended June 30, 2000. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Dollar Financial
Group, Inc. at June 30, 2000 and 1999, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
June 30, 2000, in conformity with accounting principles generally accepted in
the United States.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
August 28, 2000
35
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands except share amounts)
<TABLE>
<CAPTION>
June 30,
--------------------------------------
1999 2000
--------------------------------------
<S> <C> <C>
Assets
Cash and cash equivalents............................................ $ 65,782 $ 73,288
Accounts receivable.................................................. 9,854 13,134
Income taxes receivable.............................................. 2,587 -
Prepaid expenses..................................................... 2,174 5,661
Deferred income taxes................................................ - 759
Notes receivable--officers............................................ 2,851 2,920
Due from parent...................................................... - 878
Property and equipment, net of accumulated
depreciation of $7,546 and $15,094............................... 12,754 23,625
Goodwill and other intangibles, net of accumulated
amortization of $13,108 and $18,897.............................. 96,636 128,115
Debt issuance costs, net of accumulated
amortization of $1,917 and $3,184................................ 9,416 8,446
Other................................................................ 1,655 2,888
--------------------------------------
$ 203,709 $ 259,714
======================================
Liabilities and shareholder's equity
Accounts payable..................................................... $ 12,040 $ 16,331
Income taxes payable................................................. 2,483 603
Advance from money transfer agent.................................... 2,000 1,000
Accrued expenses..................................................... 4,868 21,429
Accrued interest payable............................................. 3,162 1,610
Deferred tax liability............................................... 78 -
Due to parent........................................................ 578 -
Revolving credit facilities.......................................... 12,162 49,578
10-7/8% Senior Notes due 2006........................................ 109,190 109,190
Long-term debt and subordinated notes payable........................ 20,814 20,378
Shareholder's equity:
Common stock, $1 par value: 20,000 shares authorized;
100 shares issued and outstanding at June 30, 1999
and 2000...................................................... - -
Additional paid-in capital....................................... 50,824 50,957
Accumulated deficit.............................................. (11,224) (5,824)
Accumulated other comprehensive loss............................. (3,266) (5,538)
--------------------------------------
Total shareholder's equity........................................... 36,334 39,595
--------------------------------------
$ 203,709 $ 259,714
======================================
</TABLE>
See accompanying notes.
36
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
<TABLE>
<CAPTION>
Year ended June 30,
-----------------------------------------------
1998 1999 2000
-----------------------------------------------
<S> <C> <C> <C>
Revenues..................................................... $ 111,185 $ 120,979 $ 165,753
Store and regional expenses:
Salaries and benefits.................................... 33,670 35,329 47,058
Occupancy 9,656 9,609 12,800
Depreciation............................................. 2,018 2,227 4,683
Other.................................................... 24,002 23,764 36,503
-----------------------------------------------
Total store and regional expenses............................ 69,346 70,929 101,044
Corporate expenses........................................... 12,462 13,648 20,864
Loss on store closings and sales............................. 45 103 249
Goodwill amortization........................................ 3,624 4,686 5,564
Other depreciation and amortization.......................... 1,152 1,020 1,620
Interest expense, net of interest income of $128,
$66 and $374............................................. 12,945 16,401 17,491
Recapitalization costs and other non-recurring items......... - 12,575 1,478
Writedown of goodwill........................................ 12,870 - -
-----------------------------------------------
(Loss) income before income taxes and extraordinary item..... (1,259) 1,617 17,443
Income tax provision......................................... 5,538 3,881 12,043
-----------------------------------------------
(Loss) income before extraordinary item...................... (6,797) (2,264) 5,400
Extraordinary loss on debt extinguishment
(net of income tax benefit of $45)....................... - (85) -
-----------------------------------------------
Net (loss) income............................................ $ (6,797) $ (2,349) $ 5,400
===============================================
</TABLE>
See accompanying notes.
37
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
(In thousands, except share data)
<TABLE>
<CAPTION>
Accumulated
Additional Other Total
Common Stock Paid-in Accumulated Comprehensive Shareholder's
----------------------
Shares Amount Capital Deficit Loss Equity
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1997...... 100 $ - $ 40,941 $ (2,078) $ (303) $ 38,560
Comprehensive loss..........
Translation adjustment
for the year ended
June 30, 1998.......... (2,309) (2,309)
Net loss for the year
ended June 30, 1998.... (6,797) (6,797)
---------------
Total comprehensive loss.... (9,106)
----------------------------------------------------------------------------------
Balance, June 30, 1998...... 100 - 40,941 (8,875) (2,612) 29,454
----------------------------------------------------------------------------------
Comprehensive loss..........
Translation adjustment
for the year ended
June 30, 1999........ (654) (654)
Net loss for the year
ended June 30, 1999.. (2,349) (2,349)
---------------
Total comprehensive loss.... (3,003)
Noncash compensation... 9,883 9,883
----------------------------------------------------------------------------------
Balance, June 30, 1999...... 100 - 50,824 (11,224) (3,266) 36,334
----------------------------------------------------------------------------------
Comprehensive income........
Translation adjustment
for the year ended
June 30, 2000........ (2,272) (2,272)
Net income for the year
ended June 30, 2000.. 5,400 5,400
---------------
Total comprehensive income.. 3,128
Non-cash compensation....... 133 133
----------------------------------------------------------------------------------
Balance, June 30, 2000...... 100 $ - $ 50,957 $ (5,824) $ (5,538) $ 39,595
==================================================================================
</TABLE>
See accompanying notes.
38
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year ended June 30,
------------------------------------------
1998 1999 2000
------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income........................................................ $ (6,797) $ (2,349) $ 5,400
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation and amortization..................................... 7,374 10,892 13,120
Loss on store closings and sales.................................. 45 103 249
Noncash recapitalization costs................................ - 9,883 133
Writedown of goodwill............................................. 12,870 - -
Extraordinary loss on debt extinguishment, net of income
tax benefit.................................................... - 85 -
Deferred tax (benefit) provision.................................. (265) 320 (837)
Change in assets and liabilities (net of effect of acquisitions):
Decrease (increase) in accounts receivable and income
taxes receivable........................................... 2,343 (3,730) (417)
Decrease (increase) in prepaid expenses and other.............. 753 (1,087) (2,760)
Increase in accounts payable, income taxes payable,
accrued expenses and accrued interest payable............... 1,680 1,834 1,904
------------------------------------------
Net cash provided by operating activities................................ 18,003 15,951 16,792
Cash flows from investing activities:
Acquisitions, net of cash acquired....................................... (1,870) (16,062) (30,586)
Gross proceeds from sales of property and equipment...................... 202 - -
Additions to property and equipment...................................... (2,569) (7,409) (13,940)
------------------------------------------
Net cash used in investing activities.................................... (4,237) (23,471) (44,526)
Cash flows from financing activities:
Other debt payments...................................................... (129) (840) (1,020)
Payments of advance from money transfer agent............................ - (1,000) (1,000)
Net (decrease) increase in revolving credit facilities................... (12,187) 11,719 37,416
Proceeds from long-term debt............................................. - 18,107 1,893
Payments of debt issuance costs.......................................... (66) (7,634) (463)
Advances to officers..................................................... - (2,651) (64)
Payments of financed insurance premiums.................................. (317) (10) -
Net increase (decrease) in due to parent................................. - 578 (1,456)
------------------------------------------
Net cash (used in) provided by financing activities...................... (12,699) 18,269 35,306
Effect of exchange rate changes on cash and cash equivalents............. (771) (468) (66)
------------------------------------------
Net increase in cash and cash equivalents................................ 296 10,281 7,506
Cash and cash equivalents at beginning of year........................... 55,205 55,501 65,782
------------------------------------------
Cash and cash equivalents at end of year................................. $ 55,501 $ 65,782 $ 73,288
==========================================
Supplemental disclosures of cash flow information:
Interest paid............................................................ $ 12,250 $ 12,538 $ 18,031
Income taxes paid........................................................ $ 4,314 $ 5,503 $ 12,957
Supplemental schedule of noncash investing and financing activities:
Noncash recapitalization costs........................................... $ - $ 9,883 $ 133
</TABLE>
See accompanying notes.
39
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
1. Organization and Business
The accompanying consolidated financial statements are those of Dollar Financial
Group, Inc. (the "Company") and its wholly-owned subsidiaries. The Company is a
wholly-owned subsidiary of DFG Holdings, Inc. ("Holdings"). The activities of
Holdings consist primarily of its investment in the Company. Holdings has no
employees or operating activities.
The Company, through its subsidiaries, provides retail financial services to the
general public through a network of 891 locations (of which 546 are
Company-owned) operating as Any Kind Check Cashing Centers(R), Check Mart(R),
Money Mart(R), The Money Shop, Loan Mart(R), Cash a Cheque and Cash Centres in
seventeen states, the District of Columbia, Canada and the United Kingdom. The
services provided at the Company's retail locations include check cashing,
consumer loans, sale of money orders, money transfer services and various other
related services. Additionally, the Company, through its merchant services
division, maintains and services the network of electronic government benefits
distribution in approximately 1,100 merchant locations throughout the State of
New York. Also, the Company's subsidiary moneymart.com(TM), originates payday
loans through 150 independent agents in eighteen states.
2. Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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 accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation.
Reclassification
Certain prior year amounts have been reclassified to the current presentation.
Property and Equipment
Property and equipment are carried at cost less accumulated depreciation.
Depreciation is computed using either the straight-line or double declining
balance method over the estimated useful lives of the assets, which vary from
three to fifteen years.
Cash and Cash Equivalents
Cash includes cash in stores and demand deposits with financial institutions.
Cash equivalents are defined as short-term, highly liquid investments both
readily convertible to known amounts of cash and so near maturity that there is
insignificant risk of changes in value because of changes in interest rates.
40
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
2. Significant Accounting Policies (continued)
Intangible Assets
The cost in excess of net assets acquired or goodwill is amortized using the
straight-line method over a useful life of thirty years. The carrying value of
goodwill and other intangibles is reviewed periodically to determine whether the
facts and circumstances suggest that the value may be impaired. If this review
indicates that the value will not be recoverable, as determined based on
undiscounted cash flows from operations before interest, the carrying value will
be reduced to an amount determined on the basis of such discounted cash flows.
Debt Issuance Costs
Debt issuance costs are amortized using the straight-line method over the
remaining term of the related debt (see Note 7).
Store and Regional Expenses
The direct costs incurred in operating the Company's stores and providing
services under the Company's merchant services contracts have been classified as
store expenses. Store expenses include salaries and benefits of store and
regional employees, rent and other occupancy costs, depreciation of property and
equipment, bank charges, armored security costs, net returned checks, cash
shortages, cost of goods sold and other costs incurred by the stores. Excluded
from store operations are the corporate expenses of the Company, which include
salaries and benefits of corporate employees, professional fees and travel
costs.
Returned Checks
The Company charges operations for losses on returned checks in the period such
checks are returned, since ultimate collection of these items is uncertain.
Recoveries on returned checks are credited in the period when the recovery is
received. The net expense for bad checks included in other store expenses in the
accompanying consolidated statements of operations was $3,915,000, $4,102,000
and $5,769,000 for the years ended June 30, 1998, 1999 and 2000, respectively.
Income Taxes
The Company uses the liability method to account for income taxes. Accordingly,
deferred income taxes have been determined by applying current tax rates to
temporary differences between the amount of assets and liabilities determined
for income tax and financial reporting purposes.
The Company and its subsidiaries file a consolidated federal income tax return
with Holdings, but calculates its tax provision as if it were on a stand-alone
basis.
Deferred Acquisition Costs
The Company defers certain costs incurred associated with potential
acquisitions. In the event that the acquisition is not consummated, these costs
are expensed directly. The costs associated with completed acquisitions are
capitalized as part of the purchase price.
41
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
2. Significant Accounting Policies (continued)
Employees' Retirement Plan
Retirement benefits are provided to substantially all full-time employees who
have completed 1,000 hours of service through a defined contribution retirement
plan. The Company will match 50% of each employee's contribution, up to 8% of
the employee's compensation. In addition, a discretionary contribution may be
made if the Company meets its financial objectives. The amount of contributions
charged to expense was $368,000, $423,000 and $420,000 for the years ended June
30, 1998, 1999 and 2000, respectively.
Advertising Costs
The Company expenses advertising costs as incurred. Advertising costs charged to
expense were $2,078,000, $3,318,000, and $4,842,000 for the years ended June 30,
1998, 1999 and 2000, respectively.
Fair Value of Financial Instruments
The carrying values of the revolving credit facilities approximate fair values,
as these obligations carry a variable interest rate. The fair value of the
Company's Senior Notes is based on quoted market prices and the fair value of
the Senior Subordinated Notes is based on the value of the Senior Notes (see
Note 7).
Foreign Currency Translation and Transactions
National Money Mart Company ("Money Mart"), the Company's Canadian subsidiary
and Instant Cash Loans ("ICL"), Cash a Cheque ("CAC") and Cash Centres ("CCL"),
the Company's United Kingdom subsidiaries, operate check cashing and financial
services outlets in Canada and the United Kingdom, respectively. The financial
statements of these foreign subsidiaries have been translated into U.S. dollars
in accordance with accounting principles generally accepted in the United
States. All balance sheet accounts are translated at the current exchange rate
and income statement items are translated at the average exchange rate for the
period; resulting translation adjustments are made directly to a separate
component of shareholder's equity. Gains or losses resulting from foreign
currency transactions are included in results of operations and have been
insignificant.
Franchise Fees and Royalties
The Company recognizes initial franchise fees upon fulfillment of all
significant obligations to the franchisee. Royalties from franchisees are
accrued as earned. The standard franchise agreements grant to the franchisee the
right to develop and operate a store and use the associated trade names,
trademarks, and service marks within the standards and guidelines established by
the Company. Initial franchise fees included in revenues were $177,000, $179,000
and $184,000 for the years ended June 30, 1998, 1999 and 2000.
Pending Accounting Pronouncements
In June 1999, the Financial Accounting Standards Board ("FASB") issued SFAS No.
137 "Accounting for Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of FASB Statement No. 133", Statement of Financial Accounting
Standards No. 133 "Accounting for Derivative and Hedging Activities" ("SFAS
133"), which delays the effective date of SFAS No. 133. Accordingly, SFAS 133
shall be effective for all fiscal years beginning after June 15, 2000. SFAS 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 is evaluating the impact of
SFAS No. 133 on the Company's future earnings and financial position, but does
not expect it to be material.
42
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
2. Significant Accounting Policies (continued)
In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements ("SAB
101"). The SEC subsequently issued SAB 101B, which delays the effective date of
SAB101 until no later than the fourth fiscal quarter of fiscal years beginning
after December 15, 1999. SAB 101 is expected to have no effect on the Company's
results of operations, financial position, capital resources or liquidity.
3. DFG Holdings, Inc.
As discussed in Note 1, the Company is a wholly-owned subsidiary of Holdings.
The activities of Holdings consist primarily of its investment in the Company
and the issuance of $120.6 million aggregate principal amount of 13% Senior
Discount Notes which generated gross cash proceeds of $64.0 million used in
connection with the Merger (as defined below).
Recapitalization
On November 13, 1998, 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"). Holdings and Acquisition
consummated the Merger on December 18, 1998, and 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. Prior to the Merger between Holdings and
Acquisition, management of the Company exercised their options in Holdings which
were converted into equivalent amounts of stock. The Merger was accounted for as
a recapitalization of Holdings. Recapitalization costs consist primarily of
non-cash charges of $9.9 million and $133,000 for the years ended June 30, 1999
and 2000, respectively, relating to the exercise of Holding's options by
management and other compensation received by the chief executive officer for
services rendered in connection with the recapitalization of Holdings.
The management (other than the employment of Donald F. Gayhardt, Jr. as the
President), Board of Directors and equity ownership of the Company did not
change in the Merger and Holdings continues to own one hundred percent of the
voting securities of the Company.
The components of Holding's shareholders' equity are as follows:
Common Stock
Holdings issued 17,504.11 shares for $3,225 per share on December 18, 1998. Of
the 100,000 shares authorized, 19,864.93 shares were issued and outstanding at
June 30, 2000.
Dividends
Under the terms of the Company's new revolving credit facility discussed in Note
7, the Company is permitted to declare, pay, or make cash dividends to Holdings
under certain circumstances.
43
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
3. DFG Holdings, Inc. (continued)
Stock Options
As part of the Merger and Recapitalization of Holdings, the then existing Stock
Option Plan was terminated and any stock options not exercised were cancelled.
On February 15, 1999, Holdings adopted the DFG Holdings, Inc. 1999 Stock
Incentive Plan (the "Plan") whereby 1,413.32 shares of Holdings' common stock
may be awarded to employees or consultants of the Company. The awards, at the
discretion of Holdings' Board of Directors, may be issued as nonqualified stock
options or incentive stock options. Stock appreciation rights ("SAR") may also
be granted in tandem with the nonqualified stock options or the incentive stock
options. Exercise of the SARs cancels the option for an equal number of shares
and exercise of the nonqualified stock options or incentive stock options
cancels the SARs for an equal number of shares. The number of shares issued
under the Plan shall be subject to adjustment as specified in the Plan
provisions. No options may be granted after February 15, 2009. During the year
ended June 30, 1999, 979 nonqualified stock options were granted under the Plan
at an exercise price of $3,225 per share, the estimated fair market value of the
common stock at date of grant. No options were granted under the Plan during the
year ended June 30, 2000. The options are exercisable in 20% increments annually
on the first, second, third, fourth and fifth anniversary of the grant date and
have a term of ten years from the date of issuance.
Holdings has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related interpretations
in accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation," requires use of option valuation
models that were not developed for use in valuing employee stock options. Under
APB 25, because the exercise price of the Company's employee stock options
equals the estimated market price of the underlying stock on the date of grant,
no compensation expense is recognized.
Pro forma information regarding net income and earnings per share is required by
Statement No. 123, however, the effect of applying Statement No. 123 to
Holdings' stock-based awards results in net income that is not materially
different from amounts reported.
44
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
4. Acquisitions
The acquired entities described below (collectively referred to as the
"Acquisitions"), 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 estimated fair values.
On February 10, 1999, the Company purchased all of the outstanding shares of ICL
which operated eleven stores in the United Kingdom. The initial purchase price
for this acquisition was $9.4 million plus initial working capital of
approximately $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 purchased all of the outstanding shares of CAC,
which operated 44 company owned stores in the United Kingdom. The initial
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 excess of the
purchase price over the fair value of the identifiable net assets acquired was
$8.2 million. Additional consideration of $10.0 million was subsequently accrued
based upon a profit-based earn-out agreement.
On November 18, 1999, the Company purchased 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 purchased all of the outstanding shares of
CCL, 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.
On February 10, 2000, the Company purchased 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.
45
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
4. Acquisitions (continued)
The following unaudited pro forma information for the years ended 1999 and 2000
presents the results of operations as if the Acquisitions had occurred on July
1, 1998. The pro forma operating results include the results of operations for
these acquisitions for the indicated periods and reflect the amortization of
intangible assets arising from the acquisitions and increased interest expense
on acquisition debt. 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>
Year ended June 30,
(Unaudited)
-------------------------------------
1999 2000
-------------------------------------
(dollars in thousands)
<S> <C> <C>
Total revenue.............................. $ 142,763 $ 171,060
(Loss) income before extraordinary item.... $ (1,388) $ 5,463
Net (loss) income.......................... $ (1,473) $ 5,463
</TABLE>
During fiscal year 2000, the Company was in negotiations to acquire Direct
General Corporation. Upon receipt of Direct General's June 30, 2000 results the
planned acquisition was terminated. As a result, the Company incurred a charge
of $1.4 million for previously deferred costs associated with the acquisition.
These costs are reflected in the Company's statement of operations for the year
ended June 30, 2000 under the caption Recapitalization costs and other
non-recurring items.
5. Writedown of Goodwill
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
("SFAS 121"), establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles, and goodwill related to those assets
to be held and used and for long-lived assets and certain identifiable
intangibles to be disposed of. In accordance with SFAS 121, the Company reviews
for impairment of long-lived assets and related goodwill whenever events or
changes in circumstances occur which indicate that the carrying amount of an
asset may not be recoverable.
If an event or change in circumstance is present or an event or change in
circumstance indicates that the carrying amount of an asset that the Company
expects to hold and use may not be recoverable, the Company estimates the future
cash flows expected to result from the use of the asset and its eventual
disposition. If the sum of the expected undiscounted future cash flows is less
than the carrying amount of the asset, the Company recognizes an impairment loss
for the difference between the carrying amount of the asset and the estimated
fair value of the asset. The Company determines the estimated fair value of the
asset by discounting the estimated future cash flows using a discount rate
commensurate with the risks involved in the use of such asset. In estimating
future cash flows, the Company groups assets at the lowest level for which there
are identifiable cash flows. The Company groups assets between its two primary
lines of business that generate independent cash flows: check cashing and
government services.
During the fourth quarter of fiscal year 1998, the Commonwealth of Pennsylvania
informed the Company that all of the Commonwealth's government services
contracts would be terminated at June 30, 1998 as a result of the successful
implementation of an Electronic Benefit Transfer (EBT) system in Pennsylvania.
Additionally, during the fourth quarter of fiscal year 1998, the State of New
York presented the Company with an EBT implementation plan. The Company's
contract expiration date was December 31, 1998 but the Company negotiated an
extension to the contract through June 30, 2000 with two six-month extensions
exercisable by the state. The state has exercised the first six-month extension
extending the Company's contract to December 31, 2000. The Company has received
information from the State of New York pertaining to a statewide implementation
of EBT which contemplates
46
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. Writedown of Goodwill (continued)
completion by March 2001. Upon successful implementation of the EBT program, the
Company's existing contract would be terminated. Management of the Company
concluded that the Company would not have the opportunity to provide similar
government services for the newly-installed EBT systems in either Pennsylvania
or New York. Upon the occurrence of these events, the Company determined that an
impairment indicator was present. Accordingly, the Company estimated future cash
flows for the remaining government services business and compared the
undiscounted cash flows to the carrying amount of assets and related goodwill
separately identifiable with the government services line of business. This
analysis indicated that the goodwill related to the government services business
was impaired. As a result, the Company measured the amount of impairment to be
recorded by comparing the fair value of the assets and related goodwill to the
carrying value of the assets and related goodwill. This analysis indicated that
the fair value of the assets and related goodwill was less than the carrying
value by $12.9 million. Therefore, the Company has written down the carrying
value of the related goodwill by a charge to income of $12.9 million. This
charge relates to goodwill as the fixed assets associated with the government
services line of business have been fully depreciated. The remaining unamortized
goodwill of approximately $3.0 million related to the government services
business was amortized over the estimated remaining life of the future
undiscounted cash flows associated with the government services business.
6. Property and Equipment
Property and equipment at June 30, 1999 and 2000 consist of (in thousands):
<TABLE>
<CAPTION>
June 30,
--------------------------------
1999 2000
--------------------------------
<S> <C> <C>
Land and buildings....................... $ 173 $ 317
Leasehold improvements................... 6,424 11,529
Equipment and furniture.................. 13,703 26,873
--------------------------------
20,300 38,719
Less accumulated depreciation............ 7,546 15,094
--------------------------------
Total property and equipment............. $ 12,754 $ 23,625
================================
</TABLE>
Depreciation expense amounted to $2,434,000, $2,745,000 and $5,898,000 for the
years ended June 30, 1998, 1999 and 2000, respectively.
47
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
7. Debt
The Company has debt obligations at June 30, 1999 and 2000 as follows (in
thousands):
<TABLE>
<CAPTION>
June 30,
----------------------------
1999 2000
----------------------------
<S> <C> <C>
Revolving credit facility; interest at one-day Eurodollar, as defined, plus 3.0%
and 2.75% at June 30, 1999 and 2000, respectively, (8.25% and 9.44% at June
30, 1999 and 2000, respectively) of the outstanding daily balances payable
monthly; principal due in full on June 30, 2004; weighted average interest
rate of 7.92% and 8.98% for the years ended June 30, 1999 and 2000,
respectively................................................................. $ 10,500 $ 42,500
Canadian overdraft credit facility; interest at Canadian prime,
as defined, plus 0.50% (6.75% and 8.00% at June 30, 1999 and 2000
respectively) of the outstanding daily balances payable monthly; weighted
average interest rate of 7.00% and 7.58% for the years ended June 30, 1999
and 2000..................................................................... 1,662 2,498
United Kingdom overdraft facility; interest at Bank Base Rate,
as defined, plus 1.25% and 1.00% at June 30, 1999 and 2000, respectively
(6.25% and 7.00% at June 30, 1999 and 2000, respectively) of the outstanding
daily balances payable quarterly; weighted average interest rate of 6.60%
and 7.01% for the years ended June 30, 1999 and 2000........................ - 4,580
10-7/8% Senior Notes due November 15, 2006; interest payable semiannually on May
15 and November 15, commencing May 15, 1997.................................. 109,190 109,190
10-7/8% Senior Subordinated Notes due December 31, 2006; interest
payable semiannually on June 30 and December 30, commencing June 30, 1999. 18,107 20,000
Subordinated promissory note payable; interest at bank's
Reference Rate, as defined, plus 1% (8.75% at June 30, 1999) subject to a
ceiling of 10.50% and a floor of 8.50% payable monthly; weighted average
interest rate of 9.19% and 8.75% for the years ended June 30, 1999 and 2000,
respectively................................................................. 2,642 -
Other........................................................................... 65 378
----------------------------
$142,166 $179,146
============================
</TABLE>
48
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
7. Debt (continued)
In November 1996, the Company implemented a financing plan which included the
issuance of $110.0 million of 10-7/8% senior notes due 2006 in a private
placement. In March 1997, the Company exchanged substantially all of the senior
notes for $110.0 million 10-7/8% Series A senior notes due 2006 (collectively
referred to as the "Notes"), which were registered under the Securities Act of
1933, as amended. The payment obligations under the Notes are jointly and
severally guaranteed, on a full and unconditional basis, by each of the
Company's existing subsidiaries (the "Guarantors"). There are no restrictions on
the Company's and the guarantor subsidiaries' ability to obtain funds from their
subsidiaries by dividend or by loan. Separate financial statements of each
guarantor subsidiary have not been presented because management has determined
that they would not be material to investors.
Subject to restrictions under the new credit agreement discussed below, the
Notes are redeemable at the option of the Company, in whole or in part, at any
time on or after November 15, 2001, at the following redemption prices (plus
accrued and unpaid interest thereon, if any, to the date of redemption): during
the twelve-month period beginning November 2001 - 105.438%; 2002 - 103.625%;
2003 - 101.813%; and 2004 - 100.000%. Upon the occurrence of a change of
control, as defined, each holder of Notes has the right to require the Company
to repurchase all or any part of such holder's Notes at an offer price in cash
equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid
interest thereon, if any, to the date of purchase.
In connection with the Merger, the Company terminated the Second Amended and
Restated Credit Agreement, dated as of November 15, 1996 and entered into a new
credit agreement, dated as of December 18, 1998 obtaining a new $160 million
credit facility. The credit agreement provides for a revolving credit facility
of up to $70 million ("Revolving Credit Facility") and provided for two term
loans aggregating up to $90 million. The borrowings under the Revolving Credit
Facility were $10.5 million and $42.5 million as of June 30, 1999 and 2000,
respectively. The $90 million term loans were available to fund the Company's
repurchase obligations in excess of $20 million, if any, in connection with the
Notes. Repurchase obligations in connection with the change of control provision
of the Notes were $810,000 and as a result, the $90 million term loan
commitments expired on February 16, 1999.
Amounts outstanding under the Revolving Credit Facility bear interest at either
(i) the higher of (a) the federal funds rate plus 0.50% per annum and (b) the
rate publicly announced by Wells Fargo, San Francisco, as its "prime rate," plus
1.50% at June 30, 2000, (ii) the Libor Rate (as defined therein) plus 2.75% at
June 30, 2000, or (iii) the one day Eurodollar Rate (as defined therein) plus
2.75% at June 30, 2000, determined at the Company's option. Amounts outstanding
under the Revolving Credit Facility are secured by a first priority lien on
substantially all properties and assets of the Company and its current and
future subsidiaries. The Company's obligations under the Revolving Credit
Facility are guaranteed by Holdings and each of the Company's direct and
indirect subsidiaries.
Also, in connection with the Merger, the Company entered into an agreement dated
December 18, 1998, to which the Company may issue up to $20 million aggregate
principal amount of its 10 7/8% Senior Subordinated Notes Due 2006 (the "Senior
Subordinated Notes"), to (i) fund the Company's repurchase obligations, if any,
in connection with its Notes, or (ii) to finance or refinance acquisitions of
the Company. In February 1999, the Company issued $18.1 million of its Senior
Subordinated Notes to fund the purchase of ICL, Calgary, repurchase obligations
and related fees of $11.4 million, $5.6 million and $1.1 million, respectively.
In August 1999, the Company issued the remaining $1.9 million to partially fund
the acquisition of CAC. Issuance costs associated with the new Credit Agreement
and the Senior Subordinated Notes paid during fiscal 1999 and 2000 were $7.6
million and $500,000, respectively.
The Notes, the Revolving Credit Facility and the Senior Subordinated Notes
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.
49
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
7. Debt (continued)
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 operations. The overdraft credit facility, which has no stated
maturity date, provides for a commitment of up to approximately $4.8 million of
which $1.7 million and $2.5 million were outstanding as of June 30, 1999 and
2000, respectively. Amounts outstanding under the facility bear interest at
Canadian prime plus 0.50% and are secured by the pledge of a cash collateral
account of an equivalent balance. The Company's United Kingdom operations also
has an overdraft facility that bears interest at 1.00% over the lending bank's
base rate and which provides for a commitment of approximately $7.6 million of
which $0.0 and $4.6 million was outstanding as of June 30, 1999 and June 30,
2000, respectively. 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's indebtedness included a seller-subordinated note of $2.6 million
at June 30, 1999 from a previous acquisition. The Company was seeking to
restructure its obligations under the original subordinated note issued to the
seller as part of the acquisition and had ceased making principal and interest
payments. In May 2000, the Company entered into a Stipulation of Settlement in
the matter. The parties agreed to release each other from all claims and the
Company's accrual was adequate to cover the settlement amount.
The fair market value of the company's fixed rate debt at June 30, 1999 and 2000
was approximately $108,098,100 and $105,914,300, respectively, based on quoted
market prices.
Interest of $12,538,000, and $18,031,000 was paid for the years ended June 30,
1999 and 2000, respectively.
50
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
8. Income Taxes
The provision for income taxes for the years ended June 30, 1998, 1999 and 2000
consists of the following (in thousands):
<TABLE>
<CAPTION>
Year ended June 30,
--------------------------------------------------
1998 1999 2000
--------------------------------------------------
<S> <C> <C> <C>
Federal:
Current......................... $ 2,989 $ (226) $ 7,048
Deferred........................ 32 246 (540)
-------------------------------------------------
3,021 20 6,508
Foreign taxes:
Current......................... 2,172 3,669 4,797
Deferred........................ 14 51 -
-------------------------------------------------
2,186 3,720 4,797
State:
Current......................... 306 118 833
Deferred........................ 25 23 (95)
-------------------------------------------------
331 141 738
-------------------------------------------------
$ 5,538 $ 3,881 $ 12,043
=================================================
</TABLE>
The significant components of the Company's deferred tax assets and liabilities
at June 30, 1999 and 2000 are as follows (in thousands):
<TABLE>
<CAPTION>
June 30,
-----------------------------------
1999 2000
-----------------------------------
<S> <C> <C>
Deferred tax assets:
Depreciation........................................ $ 639 $ 558
Accrued compensation................................ 500 820
Reserve for store closings.......................... 227 270
Foreign tax credits................................. 230 230
Other accrued expenses.............................. - 898
Other............................................... 28 575
-----------------------------------
1,624 3,351
Deferred tax liabilities:
Amortization and other temporary differences........ 1,702 2,592
-----------------------------------
Net deferred tax (liability) asset..................... $ (78) $ 759
===================================
</TABLE>
51
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
8. Income Taxes (continued)
The Company did not record any valuation allowances against deferred tax assets
at June 30, 2000. Although realization is not assured, management has
determined, based on the Company's history of earnings and its expectation for
the future, that taxable income of the Company will more likely than not be
sufficient to fully utilize its deferred tax assets.
A reconciliation of the provision for income taxes with amounts determined by
applying the federal statutory tax rate to income (loss) before income taxes is
as follows (in thousands):
<TABLE>
<CAPTION>
Year ended June 30,
------------------------------------------
1998 1999 2000
------------------------------------------
<S> <C> <C> <C>
Tax (benefit) provision at federal statutory rate..... $ (441) $ 550 $ 6,105
Add (deduct):
State tax provision, net of federal tax benefit.. 147 93 655
Foreign taxes..................................... 552 1,552 2,304
Writedown of goodwill............................. 4,505 - -
US tax on foreign earnings........................ - 812 1,745
Amortization of nondeductible intangible assets... 826 904 1,062
Other permanent differences....................... (51) (30) 172
------------------------------------------
Tax provision at effective tax rate................... $ 5,538 $ 3,881 $ 12,043
==========================================
</TABLE>
Foreign, federal and state income taxes of approximately $4,314,000, $5,503,000
and $12,957,000 were paid during the years ended June 30, 1998, 1999 and 2000,
respectively.
52
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
9. Commitments
The Company occupies office and retail space and uses certain equipment under
operating lease agreements. Rent expense amounted to $7,837,000, $8,305,000, and
$11,034,000 for the years ended June 30, 1998, 1999 and 2000, respectively. Most
leases contain standard renewal clauses.
Minimum obligations under noncancelable operating leases for the year ended June
30 are as follows (in thousands):
Year Amount
---------------
2001............................. $ 12,057
2002............................. 9,711
2003............................. 7,315
2004............................. 5,290
2005............................. 3,272
Thereafter....................... 5,715
---------------
$ 43,360
===============
The Company has entered into employment agreements with certain key employees
which have terms of two to five years and call for aggregate minimum annual base
salaries. The agreements also provide for annual incentive cash bonuses which
are primarily based on revenues and earnings from operations.
The Company, through its agency agreement with its money transfer vendor,
received an advance of $3.0 million against future commissions. Repayments of
$1.0 million were made during fiscal 1999 and 2000 with the full advance to be
repaid on or before January 31, 2001. The outstanding balance was $2.0 million
and $1.0 million as of June 30, 1999 and 2000, respectively.
10. Contingent Liabilities
On December 28, 1999, the Company entered into a settlement of a purported
class-action lawsuit which had been commenced in February 1999. The plaintiff,
who represents "payday loan" borrowers for purposes of the settlement, 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 to the
settlement class of $5.5 million. The settlement was preliminarily approved by
the court on August 10, 2000 and is awaiting final court approval, on which
management expects a ruling in October 2000. During the year ended June 30,
2000, the Company recorded its best estimate, based on the information then
available, of the costs of the settlement and of legal and administrative costs
associated with the settlement. The amount of the provision is subject to
revision, and it is possible that the final cost of the settlement could differ
materially from the amount currently provided.
The Company is not a party to any other material litigation and is not aware of
any pending or threatened litigation, other than routine litigation and
administrative proceedings arising in the ordinary course of business, that
would have a material adverse effect on the Company.
11. Contractual Agreements
The Company has contracts with various governmental agencies for benefits
distribution and retail merchant services which contributed 13%, 6% and 4% of
consolidated gross revenues for the years ended June 30, 1998, 1999 and 2000,
respectively. The Company's contracts with the Commonwealth of Pennsylvania,
which are included in this amount, have not contributed any revenues since
fiscal year June 30, 1998 for which these contracts
53
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
11. Contractual Agreements (continued)
contributed 6% of total revenues. The Company's contract with the State of New
York contributed 4%, 4% and 3% of revenues for the years ended June 30, 1998,
1999 and 2000, respectively. Accounts receivable at June 30, 1999 and 2000
include $2,711,000 and $1,722,000, respectively, of amounts due from various
governmental agencies. The Company does not require any collateral on these
receivables nor are these agencies considered a credit risk. The Company's
contracts for governmental benefits distribution and merchant services
distribution with state and local governments generally have initial terms of
five years and currently expire on various dates through December 31, 2001. The
contracts provide the governmental agencies the opportunity to extend the
contract for additional periods and contain clauses which allow the governmental
agencies to cancel the contract at any time, subject to 30 to 60 days' written
advance notice.
12. Credit Risk
At June 30, 1999 and 2000, the Company had twenty-three bank accounts, in major
financial institutions in the aggregate amount of $9,053,000 and $8,417,000,
respectively, which exceeded Federal Deposit Insurance Corporation deposit
protection limits. The Canadian Federal Banking system provides customers with
similar deposit insurance through the Canadian Deposit Insurance Corporation,
"CDIC". At June 30, 1999 and 2000, the Company's Canadian subsidiary had fifteen
and thirteen bank accounts, respectively, totaling $6,730,000 and $7,681,000,
respectively, which exceeded CDIC limits. The United Kingdom banking system
provides $27,000 per customer of similar protections for certain depositors. At
June 30, 1999 and 2000 the Company's United Kingdom operations had three and
eighty four bank accounts, respectively, totaling $15,308,000 and $725,000 which
were excluded from the Deposit Protection Scheme administered by the Deposit
Protection Board. These financial institutions have strong credit ratings and
management believes credit risk relating to these deposits is minimal.
The Company acts as an agent for a bank in administering a consumer loan program
through certain of the Company's store locations. The loans offered under this
program generally have a two or four-week maturity and are referred to as
"payday loans." Under this program, the Company earns origination and servicing
fees. The bank originated or extended approximately $115.5 million and $210.5
million of loans through the Company's locations during the fiscal years ended
June 30, 1999 and 2000, respectively. The Company's agreement with the bank
contains a provision which permits the bank to establish a reserve for losses.
The reserve results in a reduction of the Company's origination fees.
13. Loss on Store Closings and Sales
During the fiscal years ended June 30, 2000 and 1999, the Company had no
material charges recorded related to store closures. During fiscal year ended
June 30, 1998, the Company decided to sell all of its stores in Michigan and
sell or close five locations in Southern California whose primary business was
to provide services for the distribution of public assistance benefits under
existing 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. The Company also closed
five kiosks in Texas due to contractual requirements with the Southland
Corporation. Included in the accompanying consolidated statements of operations
for the year ended June 30, 1998, are revenues of $733,000 and store expenses of
$710,000 related to these stores. The loss related to the sale and closure of
these stores was not material.
54
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
14. 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
1998 States Canada Kingdom Total
------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales to unaffiliated customers $ 86,304 $ 24,881 $ - $ 111,185
Interest revenue 127 1 - 128
Interest expense 9,107 3,966 - 13,073
Depreciation and amortization 4,981 1,813 - 6,794
(Loss) income before income taxes and
extraordinary items (3,925) 2,666 - (1,259)
Income tax provision 3,352 2,186 - 5,538
1999
Identifiable assets 120,235 56,177 27,297 203,709
Sales to unaffiliated customers 89,785 29,156 2,038 120,979
Interest revenue 38 13 15 66
Interest expense 12,595 3,562 310 16,467
Depreciation and amortization 5,985 1,774 174 7,933
(Loss) income before income taxes and
extraordinary item (4,033) 5,655 (5) 1,617
Income tax provision 161 3,625 95 3,881
Extraordinary loss on debt extinguishment (85) - - (85)
Recapitalization costs
and other non-recurring items 9,883 - - 9,883
2000
Identifiable assets 133,887 70,477 55,350 259,714
Sales to unaffiliated customers 102,073 39,897 23,783 165,753
Interest revenue 287 54 33 374
Interest expense 11,717 3,913 2,235 17,865
Depreciation and amortization 6,983 2,392 2,492 11,867
Income before income taxes 9,796 6,738 909 17,443
Income tax provision 7,246 4,103 694 12,043
Recapitalization costs
and other non-recurring items 1,345 133 - 1,478
</TABLE>
15. Related Party Transactions
During fiscal 1999, certain members of management received loans aggregating
$2.9 million which are secured by shares of Holdings stock. The loans accrue
interest at a rate of 6% per year and are due and payable in full on December
18, 2004 and December 31, 2005. In addition, as part of an employment agreement,
the Chief Executive Officer was issued a loan in the amount of $4.3 million to
purchase additional shares of Holdings stock. The loan accrues interest at a
rate of 6% per year and is due and payable in full on December 18, 2004. The
loan is secured by a pledge of shares in Holdings stock.
During fiscal 1998 and prior years the Company capitalized expenditures
aggregating $913,000 on behalf of certain then existing shareholders of Holdings
related to the initial activities of a company expected to be formed ("NEWCO")
by these certain Holdings' shareholders. Pursuant to a Memorandum of
Understanding between the Company and these certain Holdings' shareholders,
these expenditures would have been converted into shares of
55
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
15. Related Party Transactions (continued)
common stock of NEWCO on a basis pari passu with the investment by NEWCO's
equity investors, which were to include these certain shareholders. During the
year ended June 30, 1998, it was determined that NEWCO would not be formed and
the Company recognized $913,000 in expense in the accompanying consolidated
statement of operations for the year ended June 30, 1998. Such expense is
included in corporate expenses in the accompanying consolidated statement of
operations.
16. Subsidiary Guarantor Financial Information
As discussed in Note 7, the Company's payment obligations under the Senior 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 Revolving Credit Facility and any successor credit
facility. Pursuant to the Senior Notes or Senior Subordinated Notes, every
direct and indirect subsidiary of the Company, each of which is wholly owned,
serves as a guarantor of the Senior 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 condensed consolidating balance sheet at June 30, 2000, and the
consolidating statements of operations and cash flows for the fiscal year ended
June 30, 2000 of the Company (on a parent-company basis), combined domestic
Guarantors, combined foreign subsidiaries and the consolidated Company.
56
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
16. Subsidiary Guarantor Financial Information (continued)
Consolidating Balance Sheets
June 30, 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................... $ 2,512 $ 39,268 $ 31,508 $ - $ 73,288
Accounts receivable......................... 11,592 4,010 7,940 (10,408) 13,134
Income taxes receivable..................... 965 445 - (1,410) -
Prepaid expenses............................ 540 1,594 3,527 - 5,661
Deferred income taxes....................... 697 62 - - 759
Notes receivable--officers.................. 2,920 - - - 2,920
Due from affiliates......................... 96,270 - - (96,270) -
Due from parent............................. 878 - - - 878
Property and equipment, net................. 4,873 8,787 9,965 - 23,625
Goodwill and other intangibles, net......... - 56,448 71,667 - 128,115
Debt issuance costs, net.................... 8,446 - - - 8,446
Investment in subsidiaries.................. 92,612 7,370 6,291 (106,273) -
Other....................................... 995 673 1,220 - 2,888
---------------------------------------------------------------------------------
$ 223,300 $ 118,657 $ 132,118 $(214,361) $ 259,714
=================================================================================
Liabilities and shareholder's equity
Accounts payable............................ $ - $ 8,816 $ 7,515 $ - $ 16,331
Income taxes payable........................ - 1 2,012 (1,410) 603
Advance from money transfer agent........... 1,000 - - - 1,000
Accrued expenses............................ 5,925 2,038 13,466 - 21,429
Accrued interest payable.................... 1,597 - 10,421 (10,408) 1,610
Due to affiliates........................... - 34,330 61,940 (96,270) -
Revolving credit facilities................. 42,500 - 7,078 - 49,578
10 7/8% Senior Notes due 2006............... 109,190 - - - 109,190
Long-term debt and subordinated
notes payable............................ 20,000 - 378 - 20,378
---------------------------------------------------------------------------------
180,212 45,185 102,810 (108,088) 220,119
Shareholder's equity:
Common stock............................. - - - -
Additional paid-in capital............... 50,957 40,064 24,458 (64,522) 50,957
(Accumulated deficit) retained earnings . (5,824) 35,784 5,967 (41,751) (5,824)
Accumulated other comprehensive loss..... (2,045) (2,376) (1,117) - (5,538)
---------------------------------------------------------------------------------
Total shareholder's equity.................. 43,088 73,472 29,308 (106,273) 39,595
---------------------------------------------------------------------------------
$ 223,300 $ 118,657 $ 132,118 $(214,361) $ 259,714
=================================================================================
</TABLE>
57
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
16. Subsidiary Guarantor Financial Information (continued)
Consolidating Statements of Operations
Year ended June 30, 2000
(In thousands)
<TABLE>
<CAPTION>
Dollar Domestic Foreign
Financial Subsidiary Subsidiary
Group, Inc. Guarantors Guarantors Eliminations Consolidated
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $ - $ 102,073 $ 63,680 $ - $ 165,753
Store and regional expenses:
Salaries and benefits.................. - 29,832 17,226 - 47,058
Occupancy.............................. - 7,920 4,880 - 12,800
Depreciation........................... - 2,302 2,381 - 4,683
Other.................................. - 23,321 13,182 - 36,503
------------------------------------------------------------------------------
Total store and regional expenses......... - 63,375 37,669 - 101,044
Corporate expenses........................ 14,732 - 6,132 - 20,864
Management fee............................ (18,284) 14,831 3,453 - -
Loss on store closings and sales.......... 156 - 93 - 249
Goodwill amortization..................... - 3,592 1,972 - 5,564
Other depreciation and amortization....... 861 239 520 - 1,620
Interest expense.......................... 7,913 3,517 6,061 - 17,491
Recapitalization costs and other
non-recurring items..................... 3,140 (1,795) 133 - 1,478
------------------------------------------------------------------------------
(Loss) income before income taxes ........ (8,518) 18,314 7,647 - 17,443
Income taxes provision ................... 6,573 673 4,797 - 12,043
------------------------------------------------------------------------------
(Loss) income before equity in net income
of subsidiaries.......................... (15,091) 17,641 2,850 - 5,400
Equity in net income of subsidiaries:
Domestic subsidiary guarantors......... 17,641 - - (17,641) -
Foreign subsidiary guarantors.......... 2,850 - - (2,850) -
------------------------------------------------------------------------------
Net income .............................. $ 5,400 $ 17,641 $ 2,850 $(20,491) $ 5,400
==============================================================================
</TABLE>
58
<PAGE>
DOLLAR FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
16. Subsidiary Guarantor Financial Information (continued)
Consolidating Statements of Cash Flows
Year ended June 30, 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.......................................... $ 5,400 $ 17,641 $ 2,850 $ (20,491) $ 5,400
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Undistributed income of subsidiaries........... (20,491) - - 20,491 -
Distributed income of subsidiaries............. 6,550 (6,550) - - -
Depreciation and amortization.................. 2,247 6,118 4,755 - 13,120
Loss on store closings and sales............... 156 - 93 - 249
Noncash recapitalization costs................. 1,795 (1,795) 133 - 133
Deferred tax provision......................... (775) (62) - - (837)
Changes in assets and liabilities (net
of effect of acquisitions):
(Increase) decrease in accounts receivable
and income taxes receivable....... (2,299) 317 (1,674) 3,239 (417)
Increase in prepaid expenses and other..... (357) (523) (1,880) - (2,760)
Increase (decrease) in accounts payable,
income taxes payable, accrued
expenses and accrued interest payable.... 2,084 (1,935) 4,994 (3,239) 1,904
----------------------------------------------------------------------------
Net cash (used in) provided by operating
activities......................................... (5,690) 13,211 9,271 - 16,792
Cash flows from investing activities:
Acquisitions, net of cash acquired.................. - (4,001) (26,585) - (30,586)
Additions to property and equipment................. (3,582) (4,462) (5,896) - (13,940)
Net decrease in due from affiliates................. (22,260) (7,370) - 29,630 -
----------------------------------------------------------------------------
Net cash used in investing activities............... (25,842) (15,833) (32,481) 29,630 (44,526)
Cash flows from financing activities
Other debt payments................................. - (3) (1,017) - (1,020)
Repayment of advance from money transfer agent...... (1,000) - - - (1,000)
Net increase in revolving credit facilities......... 32,000 - 5,416 - 37,416
Proceeds from long term debt........................ 1,893 - - - 1,893
Payment of debt issuance costs...................... (463) - - - (463)
Advances to officers................................ (64) - - - (64)
Net (decrease) increase in due to affiliates........ (1,456) 12,837 16,793 (29,630) (1,456)
----------------------------------------------------------------------------
Net cash provided by financing activities........... 30,910 12,834 21,192 (29,630) 35,306
Effect of exchange rate changes on cash
and cash equivalents............................. - - (66) - (66)
----------------------------------------------------------------------------
Net (decrease) increase in cash and cash
equivalents...................................... (622) 10,212 (2,084) - 7,506
Cash and cash equivalents at beginning of year...... 3,134 29,056 33,592 - 65,782
----------------------------------------------------------------------------
Cash and cash equivalents at end of year............ $ 2,512 $ 39,268 $ 31,508 $ - $ 73,288
============================================================================
</TABLE>
59
<PAGE>
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors and Officers
The directors and officers of Holdings and their respective ages and positions
with Holdings are set forth below:
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Jeffrey Weiss...................... 57 Chairman of the Board of Directors, and Chief Executive
Officer
Donald Gayhardt.................... 36 President, Director
Richard Dorfman.................... 56 Executive Vice President, Chief Financial Officer,
Secretary, Director and Treasurer
Leonard Green...................... 66 Director
Jonathan Sokoloff.................. 43 Director
Greg Annick........................ 36 Director
Muneer Satter...................... 40 Director
</TABLE>
The directors and officers of DFG and their respective ages and positions with
DFG are set forth below:
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Jeffrey Weiss...................... 57 Chairman of the Board of Directors and
Chief Executive Officer
Donald Gayhardt.................... 36 President
Richard Dorfman.................... 56 Executive Vice President and Chief Financial Officer
Bernard Flaherty................... 50 Senior Vice President and Chief Operating Officer
Peter Sokolowski................... 39 Vice President--Finance
</TABLE>
Jeffrey Weiss has served as the Chairman, President, and Chief Executive Officer
of DFG and Holdings since the Company's acquisition by an affiliate of Bear
Stearns in May 1990. Until June 1992, Mr. Weiss was also a Managing Director at
Bear Stearns & Co. Inc. ("Bear Stearns") with primary responsibility for the
firm's investments in small to mid-sized companies, in addition to serving as
Chairman and Chief Executive Officer for several of these companies. Mr. Weiss
is the author of several popular financial guides.
Donald Gayhardt has served as President of DFG and Holdings since December 1998.
He also served as Executive Vice President and Chief Financial Officer of DFG
and Holdings from1992 to 1997. Prior to joining the company, Mr. Gayhardt was
employed by Bear Stearns from 1988 to 1993, most recently as an Associate
Director in the Principal Activities Group, where he had oversight
responsibility for the financial and accounting functions at a number of
manufacturing, distribution and retailing firms, including DFG. Prior to joining
Bear Stearns, Mr. Gayhardt held positions in the mergers and acquisitions
advisory and accounting fields.
Richard Dorfman has served as Executive Vice President and Chief Financial
Officer since July 1997. Prior to joining the Company, Mr. Dorfman served as
Chief Financial Officer of American Appliance for eight years. Prior to joining
American Appliance, Mr. Dorfman had twenty years of experience in financial
management within the retail industry.
60
<PAGE>
Bernard Flaherty joined DFG in May 1995 as Vice President--Store Operations. Mr.
Flaherty's 25 years of multi-unit retail experience includes both operations and
marketing responsibilities. Prior to joining the Company, Mr. Flaherty served as
Vice President of Sales/Marketing for Coastal Mart, Inc. for two years. Prior to
that, Mr. Flaherty had an extensive 20-year career with The Southland
Corporation.
Peter Sokolowski has been Vice President--Finance of DFG since June 1991 and has
overall responsibility for the Company's accounting systems and controls, as
well as financial management. Prior to joining the Company, Mr. Sokolowski
worked in various financial positions in the commercial banking industry.
Leonard Green has been a director of Holdings since December 1998. He has been
an executive officer of Leonard Green & Partners, L.P. ("LGP"), a merchant
banking firm that manages Green Equity Investors II, L.P. ("GEI"), since the
formation of LGP and GEI in 1994. Since 1989, Mr. Green has been, individually
or through a corporation, a partner in a merchant banking firm affiliated with
LGP. Prior to 1989, Mr. Green had been a partner of Gibbons, Green, van
Amerongen for more than five years. Mr. Green is also a director of several
private companies.
Jonathan Sokoloff has been a director of Holdings since December 1998. Mr.
Sokoloff has been an executive officer of LGP since its formation in 1994. Since
1990, Mr. Sokoloff has been a partner in a merchant banking firm affiliated with
LGP. Mr. Sokoloff was previously a Managing Director at Drexel Burnham Lambert
Incorporated. Mr. Sokoloff is also a director of Twinlab Corporation, Gart
Sports Company and several private companies.
Greg Annick has been a director of Holdings since December 1998. He has been an
executive officer of LGP, a merchant banking firm that manages GEI, since the
formation of LGP and GEI in 1994. He joined a merchant banking firm affiliated
with LGP as an associate in 1989, became a principal in 1993, and through a
corporation became a partner in 1994. From 1988 to 1989, Mr. Annick was an
associate with the merchant banking firm of Gibbons, Green, van Amerongen.
Before that time, Mr. Annick was a financial analyst in mergers and acquisitions
with Goldman, Sachs & Co. Mr. Annick is also a director of several private
companies.
Muneer Satter has been a director of Holdings since December 1998. Mr. Satter
has been a director of Holdings since December 1998. He is a Managing Director
in Goldman Sachs' Principal Investment Area (PIA) in New York. Prior to this
assignment, he was head of PIA in Europe and was based in London. He joined the
firm in 1988 and became a managing director in 1996.
61
<PAGE>
Item 11. EXECUTIVE COMPENSATION
The following table sets forth information with respect to the compensation of
the Chief Executive Officer and each of the other executive officers of the
Company who had annual compensation in fiscal year 2000 in excess of $100,000
(the "Named Executive Officers"):
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
---------------------------------------------------------------
Securities
Name and Other Annual Underlying All Other
Principal Position Year Salary Bonus Compensation Options (#) (2) Compensation
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey Weiss............... 2000 $500,000 $700,000 $170,601(1) - $ 5,288
Chairman and 1999 575,385 715,475 367,815(4) - 1,683,462(3)
Chief Executive Officer 1998 400,000 400,000 105,122(1) - 8,356
Donald Gayhardt............. 2000 225,000 270,000 - - 4,327
President 1999 117,692 169,047 - 399 -
1998 - - - - -
Richard Dorfman............. 2000 202,433 55,000 - - 3,143
Executive Vice President 1999 183,846 80,000 - 40 3,196
and Chief Financial 1998 156,116 25,000 - 200 6,500
Officer
Bernard Flaherty............ 2000 167,919 - - - 4,290
Senior Vice President and 1999 153,462 67,005 - 40 3,576
Chief Operating Officer 1998 140,000 53,200 - 100 4,758
</TABLE>
[FN]
(1) During the years ended June 30, 2000 and 1998, amounts include $64,618 and
$43,224, respectively, paid for life insurance premiums on policies where
the Company was not the named beneficiary. Perquisites and other personal
benefits provided to each other Named Executive Officer did not exceed the
lesser of $50,000 or 10% of the total salary and bonus for such Named
Executive Officer.
(2) The amounts shown in this column represent stock options with respect to
shares of Holdings' common stock which were issued in each fiscal year.
(3) Amount represents a fee paid to the named executive in connection with
the Merger and Recapitalization of Holdings.
(4) For 1999, amount includes $200,000 for a loan to the named executive
where the Company has waived repayment. During the year ended June 30,
1999, life insurance premiums did not exceed 25% of other annual
compensation.
</FN>
The following table sets forth information concerning options to purchase
Holdings' common stock held by each of the Named Executive Officers as of the
fiscal year ended June 30, 2000.
62
<PAGE>
Option/SAR Grants in Last Fiscal Year (1)
(1) No options/SARs were granted in the last fiscal year.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Shares Number of Securities Value of Unexercised
Acquired Value Underlying Unexercised In-the-Money Options at
Name on Exercise Realized Options at Fiscal Year End Fiscal Year End (1)
----
---------------------------------------------------------------------------------------
Exercisable/Unexercisable Exercisable/Unexercisable
<S> <C> <C> <C> <C>
Jeffrey Weiss...... 0 $ 0 0/0 $0/$0
Donald Gayhardt.... 0 0 123/276 $0/$0
Richard Dorfman.... 0 0 8/32 $0/$0
Bernard Flaherty... 0 0 8/32 $0/$0
</TABLE>
[FN]
(1) An assumed fair market value of $3,225 per share was used to calculate the
value of the options. As the shares are not traded in an established public
market, the value assigned is based on the price received in the most
recent equity transaction among shareholders.
</FN>
63
<PAGE>
Employment Agreements
Jeffrey Weiss
Mr. Weiss, Chairman and Chief Executive Officer of Holdings and DFG, is employed
pursuant to an Employment Agreement (the "Weiss Agreement") dated as of November
13, 1998, between Mr. Weiss, DFG, and Holdings (DFG and Holdings being
collectively referred to herein as the "Employer"). The Weiss Agreement provides
for an annual base salary of $500,000, to be reviewed bi-annually and may be
increased at the discretion of the Board of Directors of Holdings. In addition,
Mr. Weiss is eligible to receive an annual bonus and incentive compensation,
contingent upon the Employer achieving 100% of its targeted results (with
certain adjustments to the extent the Employer achieves results short of or in
excess of its targeted results). The total compensation paid or caused to be
paid to Mr. Weiss with respect to any fiscal year, including salary, bonuses and
annual incentive compensation shall not exceed $1,200,000. Under certain
circumstances, Mr. Weiss is entitled to the payment of a severance benefit equal
to the discounted value of any unpaid base salary for the term of the agreement.
The Weiss Agreement also provides for a five-year term, commencing on December
19, 1998, unless it is otherwise terminated pursuant to its terms. Mr. Weiss is
eligible to participate in all fringe benefit programs of the Employer offered
from time to time to its senior management employees.
Pursuant to the Weiss Agreement, Mr. Weiss has agreed that effective upon
termination, and in consideration for the payment of the compensation and other
benefits paid pursuant to the agreement, he will not compete with the Employer
within the United States, Canada or any other country in which the Company now
or hereafter conducts business for a period of two years.
Donald Gayhardt
Mr. Gayhardt, President of Holdings and DFG, is employed pursuant to an
Employment Agreement (the "Gayhardt Agreement") dated as of December 18, 1998,
between Mr. Gayhardt, DFG, and Holdings (DFG and Holdings being collectively
referred to herein as the "Employer"). The Gayhardt Agreement provides for an
annual base salary of $225,000, to be reviewed bi-annually and may be increased
at the discretion of the Board of Directors of Holdings. In addition, Mr.
Gayhardt is eligible to receive an annual bonus and incentive compensation,
contingent upon the Employer achieving 100% of its targeted results (with
certain adjustments to the extent the Employer achieves results short of or in
excess of its targeted results). The total compensation paid or caused to be
paid to Mr. Gayhardt with respect to any fiscal year, including salary, bonuses
and annual incentive compensation shall not exceed $495,000. Under certain
circumstances, Mr. Gayhardt is entitled to a severance payment in an amount up
to one year's base salary plus the pro rated portion of any bonus payments
earned.
The Gayhardt Agreement also provides for a two-year term, commencing on December
18, 1998, unless it is otherwise terminated pursuant to its terms. Mr. Gayhardt
is eligible to participate in all fringe benefit programs of the Employer
offered from time to time to its senior management employees. Pursuant to the
Gayhardt Agreement, Mr. Gayhardt was granted options to purchase up to two
percent (2%) of the Class A Common Stock of Holdings and such options shall vest
over a five (5) year period in equal monthly installments.
Pursuant to the Gayhardt Agreement, Mr. Gayhardt has agreed that effective upon
termination, and in consideration for the payment of the compensation and other
benefits paid pursuant to the agreement, he will not compete with the Employer
within the United States, Canada or any other country in which the Company now
or hereafter conducts business for a period of two years.
Richard Dorfman
Mr. Dorfman, Executive Vice President and Chief Financial Officer of Holdings
and DFG, is employed pursuant to an Employment Agreement (the "Dorfman
Agreement") dated as of July 21, 1997, between Mr. Dorfman and the Employer. The
Dorfman Agreement provides for an annual base salary of $165,000, to be adjusted
upward annually at the discretion of DFG. In addition, Mr. Dorfman was eligible
64
<PAGE>
to receive an annual bonus in an amount equal to $25,000 with respect to the
fiscal year ending June 30, 1998, in an amount equal to $35,000 with respect to
the fiscal year ending June 30, 1999, and in an amount equal to $45,000 with
respect to the fiscal year ending June 30, 2000, contingent upon the Employer
achieving 100% of its targeted results (with certain adjustments to the extent
the Employer achieves results short of or in excess of its targeted results).
Under certain circumstances, Mr. Dorfman is entitled to the payment of a
severance benefit equal to the sum of one year's base salary.
The Dorfman Agreement also provides for a four-year term, terminating on the
fourth anniversary of the date of the Employment Agreement. Pursuant to the
Dorfman Agreement, Mr. Dorfman was granted nonqualified options to acquire up to
200 shares of Holdings' common stock which were exercised in fiscal year 1999.
Mr. Dorfman is eligible to participate in all fringe benefit programs of the
Employer offered from time to time to its senior management employees.
Pursuant to the Dorfman Agreement, Mr. Dorfman has agreed that effective upon
termination, and in consideration for the payment of a severance benefit, he
will not compete with the Employer within the United States for a period of two
years.
65
<PAGE>
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
All of the issued and outstanding shares of capital stock of the Company are
owned by Holdings.
The following table sets forth as of June 30, 2000 the number of shares of
Holdings' common stock owned beneficially by (a) each person that is the
beneficial owner of more than 5% of Holdings' common stock, (b) all directors
and nominees, (c) the Named Executive Officers, and (d) all directors and
executive officers as a group. The address of each officer and director is c/o
the Company unless otherwise indicated. As of such date, there were a total of
19,864.93 shares of Holdings' common stock outstanding.
<TABLE>
<CAPTION>
Beneficial Owner Number Percent
---------------- ----------- -------
<S> <C> <C>
Green Equity Investors II, L.P. ............................. 13,014.94 64.74%
11111 Santa Monica Boulevard
Los Angeles, California 90025
Jeffrey Weiss................................................ 3,058.99 15.22
GS Mezzanine Partners, L.P. and
GS Mezzanine Partners Offshore, L.P. and associates..... 2,150.45 10.70
85 Broad Street
New York, New York 10004
Donald Gayhardt (1) ......................................... 287.59 1.04
Richard Dorfman (2).......................................... 114.71 0.57
Bernard Flaherty (2)......................................... 114.30 0.57
All directors and officers as a group (5 persons) (3)........ 3,633.94 18.08
</TABLE>
[FN]
(1) Includes options to purchase 123.03 shares of Holdings' common stock which
are currently exercisable.
(2) Includes options to purchase 8 shares of Holdings' common stock which are
currently exercisable.
(3) Includes options to purchase 144.03 shares of Holdings' common stock which
are currently exercisable.
</FN>
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Stockholders Agreement
Holdings entered into a Stockholders Agreement dated November 13, 1998 (the
"Stockholders Agreement") with certain stockholders signatory thereto (the
"Stockholders"), including Green Equity Investors II, L.P. (the "Purchaser"),
certain Executives of the Company (individually, the "Executive Stockholder",
and collectively, the "Executive Stockholders"), GS Mezzanine Partners, L.P. and
GS Mezzanine Partners Offshore, L.P (collectively, "GS Mezzanine"). Subsequent
to November 13, 1998 certain additional stockholders including Ares Leveraged
Investment Fund, L.P. and Ares Leveraged Investment Fund II, L.P. (collectively
"Ares"), C.L. and Sheila Jeffrey, Bridge Street Fund 1998, L.P. and Stone Street
Fund 1998, L.P. (collectively the "Additional Stockholders") agreed to be bound
by the terms of the Stockholders Agreement. The Stockholders Agreement shall
terminate ten (10) years from the date of the Stockholders Agreement (the
"Termination Date") with certain provisions terminating on the date of a Public
Offering Event which occurs prior to the Termination Date.
Transfer Restrictions
The Stockholders Agreement provides, among other things, for certain
restrictions on the disposition of Holdings' common stock. Unless a transfer of
Holdings' common stock which is subject to the Stockholders Agreement is made in
accordance with the terms of such agreement, such transfer will be void and of
no force or effect.
66
<PAGE>
Holdings' common stock may be transferred subject to the terms and conditions of
the Stockholders Agreement. Any shares of Holdings' common stock which are
subsequently transferred to a non-Stockholder transferee will remain subject to
the terms and conditions of the Stockholders Agreement.
Tag-Along and First Option Rights
If, at any time, the Purchaser proposes to enter into an agreement to sell or
otherwise dispose of for value shares of Holdings in excess of at least twenty
percent (20%) of the then outstanding shares (the "Tag-Along Sale") then the
Executives shall be afforded the opportunity to participate proportionately in
such Tag-Along Sale. This provision does not apply to certain transactions as
defined in the Stockholders Agreement. If, at any time, any Executive desires to
sell for cash all or any part of such shares held by such Executive, the Selling
Executive shall provide notice to each of (i) the Purchaser or its assigns and
(ii) Holdings (the "Potential Buyer") of the desire to sell for cash such
shares. Upon receiving notice, each Potential Buyer shall have the option to
purchase all, but not less than all, of such shares on the same terms and
conditions. If more than one Potential Buyer has exercised their option, the
priority shall first fall to the Purchaser.
Repurchase of Shares
Upon the termination of employment of an Executive Stockholder by reason of his
death or permanent disability (an "Option Event"), Holdings and the Purchaser
(with priority to Holdings) shall have the right and option to repurchase all of
the shares then owned by the Executive Shareholder. The price shall be at the
fair market value of the shares at the time of the Option Event as determined
pursuant to the terms of the Stockholders Agreement.
Registration Rights
The Stockholders Agreement also provides for demand and incidental (or
"piggyback") registration rights. The Purchaser has demand registration rights
pursuant to which on the earlier of (i) the date that is 90 days after the first
registration of shares of Holdings' common stock under the Securities Act and
(ii) the second anniversary of the Stockholders Agreement the Purchaser may make
a written request of Holdings to register all or part of such Purchaser's
Holdings' common stock. Each remaining Stockholder may then elect to include its
shares of Holdings' common stock in the demand registration. The Purchaser is
entitled to three demand registrations.
If Holdings proposes to register any equity securities under the Securities Act,
it must include in such registration all shares of Holdings' common stock which
the Stockholders request to have registered, subject to the condition that not
all of the shares may be registered if only a reduced number can be sold without
having a material adverse effect on the offering.
Additional Shareholder Rights
If the Purchaser agrees to sell all or substantially all of its shares to a
third party, then the Purchaser may demand that the Executive Stockholders sell
all, but not less than all, of Holdings' shares held by them at the same price
and on the same terms and conditions.
Grant of Proxy
Each Stockholder has agreed to vote their shares so that (1) so long as Jeffrey
Weiss is the Chief Executive Officer of Holdings , he is elected to the board of
directors of Holdings and (2) so long as Purchaser owns, directly or indirectly,
twenty percent (20%) or more of the then outstanding stock of Holdings, the
Purchaser shall be entitled to elect the remaining members of the boards of
directors.
67
<PAGE>
Loan to an Officer/Director
During fiscal 1999, certain members of management received loans aggregating
$2.9 million which are secured by shares of Holdings stock. The loans accrue
interest at a rate of 6% per year and are due and payable in full on December
18, 2004 and December 31, 2005. In addition, as part of an employment agreement
Jeffrey Weiss was issued a loan in the amount of $4.3 million to purchase
additional shares of Holdings stock. The loan accrues interest at a rate of 6%
per year and is due and payable in full on December 18, 2004. The loan is
secured by a pledge of shares in Holdings stock.
Management Agreement
Pursuant to the terms of a Management Services Agreement among the Purchaser,
Holdings and the Company, Holdings has agreed to pay the Purchaser an annual
management fee equal to 1.6% of the total sum invested by the Purchaser in
Holdings.
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<PAGE>
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) and (2)....List of Financial Statements and Schedules
Financial Statements: The following consolidated financial statements are
submitted in response to Item 14(a)(1):
<TABLE>
<CAPTION>
Dollar Financial Group, Inc. Page
---------
<S> <C>
Report of Independent Auditors................................................................ 35
Consolidated Balance Sheets, June 30, 1999 and 2000........................................... 36
Consolidated Statements of Operations, years ended June 30, 1998, 1999 and 2000............... 37
Consolidated Statements of Shareholder's Equity, years ended June 30, 1998, 1999 and 2000..... 38
Consolidated Statements of Cash Flows, years ended June 30, 1998, 1999 and 2000............... 39
Notes to Consolidated Financial Statements.................................................... 40
</TABLE>
All Financial Statement Schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are omitted
because such schedules are not required under the related instructions, are
inapplicable, or the required information is given in the financial statements.
[The remainder of this page intentionally left blank.]
69
<PAGE>
<TABLE>
<CAPTION>
(a)(3) Exhibits
Exhibit No. Description of Document
<S> <C>
3.1 (a)(i) Certificate of Incorporation of Dollar Financial Group, Inc. (Incorporated by reference
to Exhibit 3.1 to the Registrant's Statement on Form S-4 (Registration #333-18221)
declared effective March 11, 1997)
(a)(ii) Certificate of Change of Dollar Financial Group, Inc. (Incorporated by reference to
Exhibit 3.1 to the Registrant's Statement on Form S-4 (Registration #333-18221)
declared effective March 11, 1997)
(a)(iii) Certificate of Change of Certificate of Incorporation of Dollar Financial Group, Inc.
(Incorporated by reference to Exhibit 3.1 to the Registrant's Statement on Form S-4
(Registration #333-18221) declared effective March 11, 1997)
(a)(iv) Certificate of Amendment of the Certificate of Incorporation of Dollar Financial Group,
Inc. (Incorporated by reference to Exhibit 3.1 to the Registrant's Statement on Form
S-4 (Registration #333-18221) declared effective March 11, 1997)
(b)(i) Articles of Incorporation of Albuquerque Investments, Inc. (Incorporated by reference to
Exhibit 3.1 to the Registrant's Statement on Form S-4 (Registration #333-18221)
declared effective March 11, 1997)
(c)(i) Articles of Incorporation of Any Kind Check Cashing Centers, Inc. (Incorporated by
reference to Exhibit 3.1 to the Registrant's Statement on Form S-4 (Registration
#333-18221) declared effective March 11, 1997)
(c)(ii) Articles of Amendment to the Articles of Incorporation of Any Kind Check Cashing
Centers, Inc. (Incorporated by reference to Exhibit 3.1 to the Registrant's Statement
on Form S-4 (Registration #333-18221) declared effective March 11, 1997)
(d)(i) Articles of Incorporation of Check Mart of Louisiana, Inc. (Incorporated by reference to
Exhibit 3.1 to the Registrant's Statement on Form S-4 (Registration #333-18221)
declared effective March 11, 1997)
(e)(i) Certificate of Incorporation of Check Mart of New Jersey, Inc. (Incorporated by
reference to Exhibit 3.1 to the Registrant's Statement on Form S-4 (Registration
#333-18221) declared effective March 11, 1997)
(f)(i) Articles of Incorporation of Check Mart of New Mexico, Inc. (Incorporated by reference
to Exhibit 3.1 to the Registrant's Statement on Form S-4 (Registration #333-18221)
declared effective March 11, 1997)
(f)(ii) Articles of Amendment to the Articles of Incorporation of Check Mart of New Mexico, Inc.
(Incorporated by reference to Exhibit 3.1 to the Registrant's Statement on Form S-4
(Registration #333-18221) declared effective March 11, 1997)
(g)(i) Articles of Incorporation of Check Mart of Pennsylvania, Inc. (Incorporated by reference
to Exhibit 3.1 to the Registrant's Statement on Form S-4 (Registration #333-18221)
declared effective March 11, 1997)
(h)(i) Articles of Incorporation of Check Mart of Texas, Inc. (Incorporated by reference to
Exhibit 3.1 to the Registrant's Statement on Form S-4 (Registration #333-18221)
declared effective March 11, 1997)
(i)(i) Articles of Incorporation of Check Mart of Utah, Inc. (Incorporated by reference to
Exhibit 3.1 to the Registrant's Statement on Form S-4 (Registration #333-18221)
declared effective March 11, 1997)
(i)(ii) Articles of Amendment to the Articles of Incorporation of Check Mart of Utah, Inc.
(Incorporated by reference to Exhibit 3.1 to the Registrant's Statement on Form S-4
(Registration #333-18221) declared effective March 11, 1997)
(j)(i) Articles of Incorporation of Check Mart of Washington, Inc. (Incorporated by reference
to Exhibit 3.1 to the Registrant's Statement on Form S-4 (Registration #333-18221)
declared effective March 11, 1997)
(j)(ii) Articles of Amendment of Check Mart of Washington, Inc. (Incorporated by reference to
Exhibit 3.1 to the Registrant's Statement on Form S-4 (Registration #333-18221)
declared effective March 11, 1997)
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
(a)(3) Exhibits
Exhibit No. Description of Document
<S> <C>
(k)(i) Articles of Incorporation of Check Mart of Washington, D.C., Inc. (Incorporated by
reference to Exhibit 3.1 to the Registrant's Statement on Form S-4 (Registration
#333-18221) declared effective March 11, 1997)
(l)(i) Articles of Incorporation of Check Mart of Wisconsin, Inc. (Incorporated by reference to
Exhibit 3.1 to the Registrant's Statement on Form S-4 (Registration #333-18221)
declared effective March 11, 1997)
(m)(I) Certificate of Incorporation of DFG Warehousing Co., Inc. (Incorporated by reference to
Exhibit 3.1 to the Registrant's Statement on Form S-4 (Registration #333-18221)
declared effective March 11, 1997)
(n)(i) Articles of Incorporation of Dollar Financial Insurance Corp. (Incorporated by reference
to Exhibit 3.1 to the Registrant's Statement on Form S-4 (Registration #333-18221)
declared effective March 11, 1997)
(o)(i) Certificate of Incorporation of Dollar Insurance Administration Corp. (Incorporated by
reference to Exhibit 3.1 to the Registrant's Statement on Form S-4 (Registration
#333-18221) declared effective March 11, 1997)
(p)(i) Articles of Incorporation of Financial Exchange Company of Michigan, Inc. (Incorporated
by reference to Exhibit 3.1 to the Registrant's Statement on Form S-4 (Registration
#333-18221) declared effective March 11, 1997)
(p)(ii) Certificate of Amendment to the Articles of Incorporation of Financial Exchange Company
of Michigan, Inc. (Incorporated by reference to Exhibit 3.1 to the Registrant's
Statement on Form S-4 (Registration #333-18221) declared effective March 11, 1997)
(q)(i) Articles of Incorporation of Financial Exchange Company of Ohio, Inc. (Incorporated by
reference to Exhibit 3.1 to the Registrant's Statement on Form S-4 (Registration
#333-18221) declared effective March 11, 1997)
(q)(ii) Certificate of Amendment by Incorporator (Incorporated by reference to Exhibit 3.1 to
the Registrant's Statement on Form S-4 (Registration #333-18221) declared effective
March 11, 1997)
(q)(iii) Certificate of Amendment (by Shareholders) (Incorporated by reference to Exhibit 3.1
to the Registrant's Statement on Form S-4 (Registration #333-18221) declared
effective March 11, 1997)
(r)(i) Certificate of Incorporation of Financial Exchange Company of Pennsylvania, Inc.
(Incorporated by reference to Exhibit 3.1 to the Registrant's Statement on Form S-4
(Registration #333-18221) declared effective March 11, 1997)
(r)(ii) Amendment "1" to Certificate of Incorporation of Financial Exchange Company of
Pennsylvania, Inc. (Incorporated by reference to Exhibit 3.1 to the Registrant's
Statement on Form S-4 (Registration #333-18221) declared effective March 11, 1997)
(r)(iii) Amendment "2" to Certificate of Incorporation of Financial Exchange Company of
Pennsylvania, Inc. (Incorporated by reference to Exhibit 3.1 to the Registrant's
Statement on Form S-4 (Registration #333-18221) declared effective March 11, 1997)
(s)(i) Certificate of Incorporation of Financial Exchange Company of Pittsburgh, Inc.
(Incorporated by reference to Exhibit 3.1 to the Registrant's Statement on Form S-4
(Registration #333-18221) declared effective March 11, 1997)
(t)(i) Certificate of Incorporation of Financial Exchange Company of Virginia, Inc.
(Incorporated by reference to Exhibit 3.1 to the Registrant's Statement on Form S-4
(Registration #333-18221) declared effective March 11, 1997)
(u)(i) Articles of Incorporation of L.M.S. Development Corporation (Incorporated by reference
to Exhibit 3.1 to the Registrant's Statement on Form S-4 (Registration #333-18221)
declared effective March 11, 1997)
</TABLE>
71
<PAGE>
<TABLE>
<CAPTION>
(a)(3) Exhibits
Exhibit No. Description of Document
<S> <C>
(v)(i) Articles of Incorporation of Monetary Management Corp. (Incorporated by reference to
Exhibit 3.1 to the Registrant's Statement on Form S-4 (Registration #333-18221)
declared effective March 11, 1997)
(w)(I) Certificate of Incorporation of Monetary Management Corporation of Pennsylvania, Inc.
(Incorporated by reference to Exhibit 3.1 to the Registrant's Statement on Form S-4
(Registration #333-18221) declared effective March 11, 1997)
(x)(i) Articles of Incorporation of Monetary Management of California, Inc. (Incorporated by
reference to Exhibit 3.1 to the Registrant's Statement on Form S-4 (Registration
#333-18221) declared effective March 11, 1997)
(y)(i) Articles of Incorporation of Monetary Management of Maryland, Inc. (Incorporated by
reference to Exhibit 3.1 to the Registrant's Statement on Form S-4 (Registration
#333-18221) declared effective March 11, 1997)
(z)(i) Certificate of Incorporation of Monetary Management of New York, Inc. (Incorporated by
reference to Exhibit 3.1 to the Registrant's Statement on Form S-4 (Registration
#333-18221) declared effective March 11, 1997)
(aa)(I) Articles of Incorporation of Pacific Ring Enterprises, Inc. (Incorporated by reference
to Exhibit 3.1 to the Registrant's Statement on Form S-4 (Registration #333-18221)
declared effective March 11, 1997)
(bb)(i) Limited Partnership Certificate and Agreement of U.S. Check Exchange Limited
Partnership (Incorporated by reference to Exhibit 3.1 to the Registrant's Statement
on Form S-4 (Registration #333-18221) declared effective March 11, 1997)
(bb)(ii) First Amendment to Certificate and Agreement of Limited Partnership of U.S. Check
Exchange Limited Partnership (Incorporated by reference to Exhibit 3.1 to the
Registrant's Statement on Form S-4 (Registration #333-18221) declared effective March
11, 1997)
(bb)(iii) Second Amendment Certificate of Limited Partnership (Incorporated by reference to
Exhibit 3.1 to the Registrant's Statement on Form S-4 (Registration #333-18221)
declared effective March 11, 1997)
(cc)(I) Articles of Incorporation of QTV Holdings, Inc. (Incorporated by reference to Exhibit
3.1 to the Registrant's Statement on Form S-4 (Registration #333-18221) declared
effective March 11, 1997)
3.2 (a)(i) Bylaws of Dollar Financial Group, Inc. (Incorporated by reference to Exhibit 3.2 to the
Registrant's Statement on Form S-4 (Registration #333-18221) declared effective March
11, 1997)
(b)(i) Bylaws of Albuquerque Investments, Inc. (Incorporated by reference to Exhibit 3.2 to the
Registrant's Statement on Form S-4 (Registration #333-18221) declared effective March
11, 1997)
(c)(i) Bylaws of Any Kind Check Cashing Centers, Inc. (Incorporated by reference to Exhibit 3.2
to the Registrant's Statement on Form S-4 (Registration #333-18221) declared effective
March 11, 1997)
(d)(i) Bylaws of Check Mart of Louisiana, Inc. (Incorporated by reference to Exhibit 3.2 to the
Registrant's Statement on Form S-4 (Registration #333-18221) declared effective March
11, 1997)
(e)(i) Bylaws of Check Mart of New Jersey, Inc. (Incorporated by reference to Exhibit 3.2 to the
Registrant's Statement on Form S-4 (Registration #333-18221) declared effective March
11, 1997)
(f)(i) Bylaws of Check Mart of New Mexico, Inc. (Incorporated by reference to Exhibit 3.2 to the
Registrant's Statement on Form S-4 (Registration #333-18221) declared effective March
11, 1997)
(g)(i) Bylaws of Check Mart of Pennsylvania, Inc. (Incorporated by reference to Exhibit 3.2 to
the Registrant's Statement on Form S-4 (Registration #333-18221) declared effective
March 11, 1997)
(h)(i) Bylaws of Check Mart of Texas, Inc. (Incorporated by reference to Exhibit 3.2 to the
Registrant's Statement on Form S-4 (Registration #333-18221) declared effective March
11, 1997)
(i)(i) Bylaws of Check Mart of Utah, Inc. (Incorporated by reference to Exhibit 3.2 to the
Registrant's Statement on Form S-4 (Registration #333-18221) declared effective March
11, 1997)
(j)(i) Bylaws of Check Mart of Washington, Inc. (Incorporated by reference to Exhibit 3.2 to the
Registrant's Statement on Form S-4 (Registration #333-18221) declared effective March
11, 1997)
(k)(i) Bylaws of Check Mart of Washington, D.C., Inc. (Incorporated by reference to Exhibit 3.2
to the Registrant's Statement on Form S-4 (Registration #333-18221) declared effective
March 11, 1997)
</TABLE>
72
<PAGE>
<TABLE>
<CAPTION>
(a)(3) Exhibits
Exhibit No. Description of Document
<S> <C>
(l)(i) Bylaws of Check Mart of Wisconsin, Inc. (Incorporated by reference to Exhibit 3.2 to the
Registrant's Statement on Form S-4 (Registration #333-18221) declared effective March
11, 1997)
(m)(i) Bylaws of DFG Warehousing Co., Inc. (Incorporated by reference to Exhibit 3.2 to the
Registrant's Statement on Form S-4 (Registration #333-18221) declared effective March
11, 1997)
(n)(i) Bylaws of Dollar Financial Insurance Corp. (Incorporated by reference to Exhibit 3.2 to
the Registrant's Statement on Form S-4 (Registration #333-18221) declared effective
March 11, 1997)
(o)(i) Bylaws of Dollar Insurance Administration Corp. (Incorporated by reference to Exhibit 3.2
to the Registrant's Statement on Form S-4 (Registration #333-18221) declared effective
March 11, 1997)
(p)(i) Bylaws of Financial Exchange Company of Michigan, Inc. (Incorporated by reference to
Exhibit 3.2 to the Registrant's Statement on Form S-4 (Registration #333-18221)
declared effective March 11, 1997)
(q)(i) Code of Regulations of Financial Exchange Company of Ohio, Inc. (Incorporated by
reference to Exhibit 3.2 to the Registrant's Statement on Form S-4 (Registration
#333-18221) declared effective March 11, 1997)
(r)(i) Bylaws of Financial Exchange Company of Pennsylvania, Inc. (Incorporated by reference to
Exhibit 3.2 to the Registrant's Statement on Form S-4 (Registration #333-18221)
declared effective March 11, 1997)
(s)(i) Bylaws of Financial Exchange Company of Pittsburgh, Inc. (Incorporated by reference to
Exhibit 3.2 to the Registrant's Statement on Form S-4 (Registration #333-18221)
declared effective March 11, 1997)
(t)(i) Bylaws of Financial Exchange Company of Virginia, Inc. (Incorporated by reference to
Exhibit 3.2 to the Registrant's Statement on Form S-4 (Registration #333-18221)
declared effective March 11, 1997)
(u)(i) Bylaws of L.M.S. Development Corporation (Incorporated by reference to Exhibit 3.2 to the
Registrant's Statement on Form S-4 (Registration #333-18221) declared effective March
11, 1997)
(v)(i) Bylaws of Monetary Management Corp. (Incorporated by reference to Exhibit 3.2 to the
Registrant's Statement on Form S-4 (Registration #333-18221) declared effective March
11, 1997)
(w)(i) Bylaws of Monetary Management Corporation of Pennsylvania, Inc. (Incorporated by
reference to Exhibit 3.2 to the Registrant's Statement on Form S-4 (Registration
#333-18221) declared effective March 11, 1997)
(x)(i) Bylaws of Monetary Management of California, Inc. (Incorporated by reference to Exhibit
3.2 to the Registrant's Statement on Form S-4 (Registration #333-18221) declared
effective March 11, 1997)
(y)(i) Bylaws of Monetary Management of Maryland, Inc. (Incorporated by reference to Exhibit 3.2
to the Registrant's Statement on Form S-4 (Registration #333-18221) declared effective
March 11, 1997)
(y)(ii) Amended and Restated Bylaws of Monetary Management of Maryland, Inc. (Incorporated by
reference to Exhibit 3.2 to the Registrant's Statement on Form S-4 (Registration
#333-18221) declared effective March 11, 1997)
(z)(i) Bylaws of Monetary Management of New York, Inc. (Incorporated by reference to Exhibit 3.2
to the Registrant's Statement on Form S-4 (Registration #333-18221) declared effective
March 11, 1997)
(aa)(i) Bylaws of Pacific Ring Enterprises, Inc. (Incorporated by reference to Exhibit 3.2 to the
Registrant's Statement on Form S-4 (Registration #333-18221) declared effective March
11, 1997)
(bb)(i) Bylaws of QTV Holdings, Inc. (Incorporated by reference to Exhibit 3.2 to the
Registrant's Statement on Form S-4 (Registration #333-18221) declared effective March
11, 1997)
4.1 Indenture, dated as of November 15, 1996, among the Company, the Guarantors, and Fleet
National Bank, as Trustee (Incorporated by reference to Exhibit 4.1 to the
Registrant's Statement on Form S-4 (Registration #333-18221) declared effective March
11, 1997)
4.2 Form of Notes (included in Exhibit 4.1) (Incorporated by reference to Exhibit 4.2 to the
Registrant's Statement on Form S-4 (Registration #333-18221) declared effective March
11, 1997)
4.3 A/B Exchange Registration Rights Agreement, dated as of November 15, 1996, by and
among the Company, the Guarantors, and the Initial Purchasers (Incorporated by
reference to Exhibit 4.3 to the Registrant's Statement on Form S-4 (Registration
#333-18221) declared effective March 11, 1997)
</TABLE>
73
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<TABLE>
<CAPTION>
(a)(3) Exhibits
Exhibit No. Description of Document
<S> <C>
10.1 (a) Asset Purchase Agreement, dated January 9, 1995, by and among the Company,
Happy's Check Cashing, and Adrian Rubin (Incorporated by reference to Exhibit 10.1(a)
to the Registrant's Statement on Form S-4 (Registration #333-18221) declared
effective March 11, 1997)
(b) Amendment No. 1 to the Asset Purchase Agreement, dated February 20, 1995, by and among
the Company, Happy's Check Cashing, Chase Money Loan, Inc., and Adrian Rubin
(Incorporated by reference to Exhibit 10.1(b) to the Registrant's Statement on Form
S-4 (Registration #333-18221) declared effective March 11, 1997)
10.2 Purchase Agreement, dated July 28, 1995, by and among Monetary Management Corporation,
NCCI Corporation, Larry M. Senderhauf, E. Rick Safford, and Fred T. Kampo, Jr.
(Incorporated by reference to Exhibit 10.2 to the Registrant's Statement on Form S-4
(Registration #333-18221) declared effective March 11, 1997)
10.3 (a) Site License and Services Agreement, dated April 30, 1996, by and between the
Company and The Southland Corporation (Incorporated by reference to Exhibit 10.3(a)
to the Registrant's Statement on Form S-4 (Registration #333-18221) declared
effective March 11, 1997)
(b) Asset Purchase Agreement, dated April 30, 1996, by and between the Company and The
Southland Corporation (Incorporated by reference to Exhibit 10.3(b) to the
Registrant's Statement on Form S-4 (Registration #333-18221) declared effective March
11, 1997)
10.4 Employment Agreement, dated as of November 13, 1998, between the Company, DFG
Holdings, Inc., and Jeffrey Weiss (Incorporated by reference to Exhibit 10.4 to the
Registrant's Statement on Form 10Q (Registration #333-18221) declared effective
December 31, 1998)
10.5 Employment Agreement, dated as of December 18, 1998, between the Company, DFG Holdings,
Inc., and Donald F. Gayhardt (Incorporated by reference to Exhibit 10.5 to the
Registrant's Statement on Form 10Q (Registration #333-18221) declared effective
December 31, 1998)
10.6* Employment Agreement, dated as of July 21, 1997 between the Company, DFG Holdings, Inc.,
and Richard S. Dorfman
10.7 Amended and Restated Shareholders Agreement, dated August 8, 1996, among WPG
Corporate Development Associates IV, L.P., WPG Corporate Development Associates IV
(Overseas), L.P., the individual fund shareholders signatory thereto, the GHB
Charitable Trust #1, Jeffrey Weiss, Donald F. Gayhardt, Pegasus Partners L.P., PAG
Dollar Investors, the warrant holders signatory thereto, General Electric Capital
Corporation, and DFG Holdings, Inc. (Incorporated by reference to Exhibit 10.7 to the
Registrant's Statement on Form S-4 (Registration #333-18221) declared effective March
11, 1997)
10.8 Purchase Agreement, dated as of August 8, 1996, by and among the Company, DFG Holdings,
Inc., Any Kind Check Cashing Centers, Inc., the shareholders signatory thereto, U.S.
Check Exchange Limited Partnership, the limited partners signatory thereto, and George
H. Brimhall (Incorporated by reference to Exhibit 10.8 to the Registrant's Statement
on Form S-4 (Registration #333-18221) declared effective March 11, 1997)
10.9 Asset Purchase Agreement, dated August 28, 1996, by and among Financial Exchange Company
of Ohio, Inc., ABC Check Cashing, Inc., and the shareholder signatory thereto
(Incorporated by reference to Exhibit 10.9 to the Registrant's Statement on Form S-4
(Registration #333-18221) declared effective March 11, 1997)
10.10 Asset Purchase Agreement, dated as of October 22, 1996, by and among the Company,
Cash-N-Dash Check Cashing, Inc., and the shareholders signatory thereto (Incorporated
by reference to Exhibit 10.10 to the Registrant's Statement on Form S-4 (Registration
#333-18221) declared effective March 11, 1997)
10.11 Stock Purchase Agreement, dated as of October 22, 1996, by and among the Company, Manor
Investment Co. Inc., and the shareholders signatory thereto (Incorporated by reference
to Exhibit 10.11 to the Registrant's Statement on Form S-4 (Registration #333-18221)
declared effective March 11, 1997)
</TABLE>
74
<PAGE>
<TABLE>
<CAPTION>
(a)(3) Exhibits
Exhibit No. Description of Document
<S> <C>
10.12 Amended and Restated Purchase Agreement, dated as of October 23, 1996, by and among
Dollar Financial Canada Ltd., DFG Holdings, Inc., National Money Mart, Inc., and the
shareholders signatory thereto (Incorporated by reference to Exhibit 10.12 to the
Registrant's Statement on Form S-4 (Registration #333-18221) declared effective March
11, 1997)
10.13 Credit Agreement, dated as of December 18, 1998, among the Company, DFG Holdings,
Inc. the lenders from time to time party thereto, Wells Fargo Bank, National
Association, as administrative agent, First Union Capital Markets and Wells Fargo as
arrangers, First Union National Bank, as syndication agent, and U.S. Bank National
Association, as documentation agent (Incorporated by reference to Exhibit 10.13 to
the Registrant's Statement on Form 10Q (Registration #333-18221) declared effective
December 31, 1998)
10.14 Purchase Agreement, dated as of March 31, 1997, among Dollar Financial Group, Inc.,
Dollar Financial Canada, LTD., Canadian Capital Corporation, Dollar Ontario LTD. And
Gus E. Baril, Leslie A. Baril and the Baril Family Trust. The schedules to the
Purchase Agreement and the exhibits thereto have been omitted. The Company will
furnish supplementally to the Commission any of the schedules or exhibits upon request
10.15 DFG Holdings, Inc. Stock Incentive Plan****
10.16 Termination Agreement, dated June 30, 1997 re: Donald F. Gayhardt, Jr.****
10.17 Pledge and Security Agreement, dated as of December 18, 1998, among the Company,
Wells Fargo Bank, National Association, as administrative agent for itself and the
Lenders under the Credit Agreement (Incorporated by reference to Exhibit 10.17 to the
Registrant's Statement on Form 10Q (Registration #333-18221) declared effective
December 31, 1998)
10.18 Subordination Agreement, dated as of December 18, 1998, among the Company, DFG
Holdings, Inc., and Wells Fargo Bank, National Association, as administrative agent
for itself and the Lenders under the Credit Agreement (Incorporated by reference to
Exhibit 10.18 to the Registrant's Statement on Form 10Q (Registration #333-18221)
declared effective December 31, 1998)
10.19 Supplemental Security Agreement (Trademarks), dated as of December 18, 1998, among
the Company and Wells Fargo Bank, National Association, as administrative agent for
itself and the Lenders under the Credit Agreement (Incorporated by reference to
Exhibit 10.19 to the Registrant's Statement on Form 10Q (Registration #333-18221)
declared effective December 31, 1998)
10.20 Purchase Agreement, dated as of December 18, 1998, among the Company, GS Mezzanine
Partners, L.P., GS Mezzanine Partners Offshore, L.P., Stone Street Fund 1998, L.P.
Bridge Street Fund 1998, L.P., Ares Leveraged Investment Fund, L.P., and Ares
Leveraged Investment Fund II, L.P., relating the the $20,000,000 aggregate principal
amount of 10 7/8% Senior Subordinated Notes Due 2006 (Incorporated by reference to
Exhibit 10.20 to the Registrant's Statement on Form 10Q (Registration #333-18221)
declared effective December 31, 1998)
10.21 Exchange and Registration Rights Agreement, dated as of December 18, 1998, among the
Company, GS Mezzanine Partners, L.P., GS Mezzanine Partners, L.P., GS Mezzanine
Partners Offshore, L.P., Stone Street Fund 1998, L.P., Bridge Street Fund 1998, L.P.,
Ares Leveraged Investment Fund, L.P., and Ares Leveraged Investment Fund II, L.P.,
relating to the $20,000,000 aggregate principal amount of 10 7/8% Senior Subordinated
Notes Due 2006 (Incorporated by reference to Exhibit 10.21 to the Registrant's
Statement on Form 10Q (Registration #333-18221) declared effective December 31, 1998)
10.22 Secured Note, dated December 18, 1998, made by Jeffrey Weiss in favor of the Company
(Incorporated by reference to Exhibit 10.22 to the Registrant's Statement on Form 10Q
(Registration #333-18221) declared effective December 31, 1998)
10.23 Pledge Agreement, dated December 18, 1998, between the Company and Jeffrey Weiss
(Incorporated by reference to Exhibit 10.23 to the Registrant's Statement on Form 10Q
(Registration #333-18221) declared effective December 31, 1998)
</TABLE>
75
<PAGE>
<TABLE>
<CAPTION>
(a)(3) Exhibits
Exhibit No. Description of Document
<S> <C>
10.24 Agreement for the sale and purchase of shares of Instant Cash Loans, LTD. dated
February 10, 1999 with Dollary Financial Group, Inc., DFG Acquisition, LTD., Henry
Hallam, Rachel Hallam and shareholders signatory thereto (Incorporated by reference
to Exhibit 10.24 of the Registrant's Form 8K/A filed April 26, 1999, declared
effective February 25, 1999)
10.25 Purchase Agreement dated February 17, 1999 by and among National Money mart Company
(a subsidiary of Dollar Financial Group, Inc.), King Mortgage LTD. and Denis Wilner
to purchase the remaining 86.5% partnership interest in Calgary Money Mart
Partnership (Incorporated by reference to Exhibit 10.25 of the Registrant's Form 8K/A
filed April 26, 1999, declared effective February 25, 1999)
10.26 Agreement for the sale and purchase of shares in Cash A Cheque Holdings Great Britain
Limited between Luke Johnson and others, Dollar Financial UK Limited and Dollar
Financial Group, Inc. (Incorporated by referenced to Exhibit 10.26 of the
Registrant's Form 8K/A filed September 20, 1999, declared effective July 22, 1999)
10.27 Agreement for the sale and purchase of shares in Cash Centres Corporation Limited
between Edward Ford and others, Dollar Financial UK Limited and Dollar Financial
Group, Inc. (Incorporated by reference to Exhibit 10.27 of the Registrant's Form 8K/A
filed February 28, 2000, declared effective December 30, 1999)
21.1 Subsidiaries of the Registrant (Incorporated by reference to Exhibit 21.1 to the
Registrant's Statement on Form 10Q (Registration #333-18221) declared effective
December 31, 1998)
27.1 Financial Data Schedule for the fiscal year ended June 30, 2000, which is being
submitted electronically to the Securities and Exchange Commission for information
purposes only**
</TABLE>
76
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[FN]
* Management contracts or compensatory plans or arrangements required
to be filed as exhibits to this Form 10-K by Item 601 of Regulation S-K.
** Filed herewith.
*** Filed previously. Portions of this agreement have been omitted pursuant
to Rule 406 under the Securities Act of 1933, as amended, and have been
filed confidentially with the Securities and Exchange Commission.
**** Filed previously.
</FN>
(b) Financial Statement Schedules
None.
77
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant named below has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Berwyn, Commonwealth of Pennsylvania on September 28, 2000.
DOLLAR FINANCIAL GROUP, INC.
By: /s/ RICHARD S. DORFMAN
-----------------------------------------------
Richard S. Dorfman
Executive Vice President and Chief Financial
Officer
<TABLE>
<CAPTION>
DOLLAR FINANCIAL GROUP, INC.
Signature Title Date
<S> <C> <C>
/s/ JEFFREY A. WEISS Chairman of the Board of Directors, September 28, 2000
-------------------------------------
Jeffrey A. Weiss President and Chief Executive Officer
(principal executive officer)
/s/ RICHARD S. DORFMAN Executive Vice President and Chief September 28, 2000
-------------------------------------
Richard S. Dorfman Financial Officer (principal financial
and accounting officer)
</TABLE>
78
<PAGE>
