-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Okikmv6rD2YmYc/YjVK4zUWbwi0blNMbtxlhKdxTgPu+NrsR4AfkNmFHlzocsrJT 5UG4ZkhtG56e52fGzEKPlQ== 0000909518-97-000275.txt : 19970513 0000909518-97-000275.hdr.sgml : 19970513 ACCESSION NUMBER: 0000909518-97-000275 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970418 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970512 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DOLLAR FINANCIAL GROUP INC CENTRAL INDEX KEY: 0001028643 STANDARD INDUSTRIAL CLASSIFICATION: FUNCTIONS RELATED TO DEPOSITORY BANKING, NEC [6099] STATE OF INCORPORATION: NY FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 333-18221 FILM NUMBER: 97600626 BUSINESS ADDRESS: STREET 1: 1436 LANCASTER AVENUE STREET 2: STE 210 CITY: BERWYN STATE: PA ZIP: 19312-1288 BUSINESS PHONE: 6102963400 MAIL ADDRESS: STREET 1: 1436 LANCASTER AVENUE STREET 2: STE 210 CITY: BERWYN STATE: PA ZIP: 19312-1288 8-K/A 1 AMENDMENT NO 1 TO 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ------------------- FORM 8-K/A AMENDMENT NO. 1 TO CURRENT REPORT PURSUANT TO RULE 12B-15 AND SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 -------------------- APRIL 18, 1997 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) DOLLAR FINANCIAL GROUP, INC. (Exact Name of Registrant as Specified in its Charter) NEW YORK 333-18221 13-2997911 (State or Other Jurisdiction (Commission (IRS Employer of Incorporation) File Number) Identification No.) 1436 LANCASTER AVENUE, SUITE 210 BERWYN, PENNSYLVANIA 19312-1288 (Address of Principal Executive Offices) 610-296-3400 (Registrant's telephone number, including area code) This Amendment No. 1 (this "Amendment") amends and restates in its entirety each of Item 2 and Item 7 of the Current Report on Form 8-K of Dollar Financial Group, Inc. (the "Company"), as filed with the Securities and Exchange Commission on May 5, 1997 (the "Form 8-K"). ITEM 2: ACQUISITION OR DISPOSITION OF ASSETS The Company, Dollar Financial Canada, LTD., an indirect wholly owned subsidiary of the Company (the "Acquiror"), Canadian Capital Corporation ("CCC"), Dollar Ontario LTD., an indirect wholly owned subsidiary of the Company ("Dollar Ontario"), and Gus E. Baril, Leslie A. Baril and the Baril Family Trust (collectively, the "Barils") entered into a Purchase Agreement (the "Agreement") dated as of March 31, 1997. Pursuant to the Agreement, on April 18, 1997, the Acquiror acquired from the Barils and CCC all of the outstanding capital stock of Dollar Ontario (the "Acquisition") for cash consideration of C$18.6 million (or US$13.3 million using the exchange rate of US$1.00 = C$1.397 as of April 18, 1997) plus initial working capital of approximately C$2.5 million (US$1.8 million). The Acquisition was funded with cash from the Company. The purchase price of Dollar Ontario was determined through arm's length negotiations among the Company, the Barils and CCC. Prior to the Acquisition, Dollar Ontario acquired from CCC and the Barils, CCC's Canadian check cashing and consumer financial product business, consisting of CCC's 43 stores that operate in Ontario, Canada under the name "Money Mart". These 43 stores are franchisees of National Money Mart Inc., an indirect wholly owned subsidiary of the Company. ITEM 7: FINANCIAL STATEMENTS AND EXHIBITS. (a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED. The following financial statements of CCC are attached hereto and made a part hereof: (i) Auditors' Report (ii) Balance Sheets as of May 31, 1995 and 1996 and Interim Unaudited Balance Sheet as of February 28, 1997 (iii) Statement of Operations and Retained Earnings for the years ended May 31, 1995 and 1996 and Interim Unaudited Statement of Operations and Retained Earnings for the nine months ended February 29, 1996 and February 28, 1997 (iv) Statement of Cash Flows for the years ended May 31, 1996 and 1995 and Interim Unaudited Statement of Cash Flows for the nine months ended February 29, 1996 and February 28, 1997 (v) Notes to Audited Financial Statements and Interim Unaudited Financial Statements 2 (b) PRO FORMA FINANCIAL INFORMATION. The following unaudited condensed combined pro forma financial statements of the Company, reflecting the acquisition of Dollar Ontario, are attached hereto and made a part hereof: (i) Unaudited Condensed Combined Pro Forma Financial Data (ii) Unaudited Condensed Combined Pro Forma Balance Sheet as of December 31, 1996 (iii) Unaudited Condensed Combined Pro Forma Income Statement for the Fiscal Year ended June 30, 1996 (iv) Unaudited Condensed Combined Pro Forma Income Statement for the six months ended December 31, 1996 (v) Notes to Unaudited Condensed Combined Pro Forma Financial Data (c) EXHIBITS. 2.1 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. 3 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, as amended, the registrant has duly caused this Amendment to be signed on its behalf by the undersigned hereunto duly authorized. DOLLAR FINANCIAL GROUP, INC. Date: May 9, 1997 By: /s/ Donald F. Gayhardt --------------------------------- Donald F. Gayhardt, Executive Vice President and Chief Financial Officer 4 AUDITORS' REPORT To the Directors of Canadian Capital Corporation We have audited the balance sheets of Canadian Capital Corporation as at May 31, 1996 and 1995 and the statements of operations and retained earnings and cash flows for the two years then ended. 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 generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance 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. In our opinion, these financial statements present fairly, in all material respects, the financial position of the company as at May 31, 1996 and 1995 and the results of its operations and the changes in its cash flows for the years then ended in accordance with generally accepted accounting principles. /s/ BDO DUNWOODY Chartered Accountants Toronto, Ontario July 26, 1996 5 CANADIAN CAPITAL CORPORATION CONSOLIDATED BALANCE SHEETS
As at As at May 31, February 28, ----------------------------------------- ----------------------- 1995 1996 1997 ------------------ ------------------ ----------------------- $CN $CN $CN (unaudited) ASSETS Current Cash.......................................... 3,925,080 4,134,716 2,743,104 Accounts receivable........................... 279,704 334,630 442,763 Prepaid expenses.............................. 320,500 452,748 247,668 Loan receivable (Note 2)...................... 28,545 36,375 2,373,039 Income taxes receivable ...................... 1,560 --- --- ------------------ ------------------ ----------------------- 4,555,389 4,958,469 5,806,574 Capital assets (Note 3).......................... 4,329,415 4,367,409 4,232,914 Other assets (Note 4)............................ 455,500 424,234 400,784 Deferred taxes................................... 22,759 9,290 9,290 ------------------ ------------------ ----------------------- 9,363,063 9,759,402 10,449,562 ================== ================== ======================= LIABILITIES AND SHAREHOLDERS' EQUITY Current Accounts payable.............................. 2,136,586 1,907,243 1,623,124 Management salaries payable................... 2,610,000 3,050,000 3,000,000 Income taxes payable.......................... --- 6,320 14,416 Current portion of long-term debt (Note 5).... 500,664 391,466 70,469 ------------------ ------------------ ----------------------- 5,247,250 5,355,029 4,708,009 Long-term debt (Note 5) 391,979 --- --- Due to shareholders (Note 6) 3,490,804 4,290,683 4,848,363 Other Liabilities (Note 7)....................... --- --- 688,285 ------------------ ------------------ ----------------------- Total liabilities................................ 9,130,033 9,645,712 10,244,657 ------------------ ------------------ ----------------------- Shareholders' equity Share capital ................................ 105 105 105 Retained earnings 232,925 113,585 204,800 ------------------ ------------------ ----------------------- Total shareholders' equity....................... 233,030 113,690 204,905 ------------------ ------------------ ----------------------- 9,363,063 9,759,402 10,449,562 ================== ================== =======================
On behalf of the board: ____________________________Director ____________________________Director The accompanying notes are an integral part of these financial statements. 6 CANADIAN CAPITAL CORPORATION STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
Year ended May 31, Nine months ended ------------------------------------------ --------------------------------------- February 29, February 28, 1995 1996 1996 1997 ------------------- ------------------ ------------------- --------------- $CN $CN $CN $CN (unaudited) Revenue................................... 13,689,864 14,847,823 10,873,798 11,770,158 Expenses Amortization........................... 292,936 309,325 215,196 244,494 Amortization of goodwill............... 31,266 31,266 23,450 23,450 Franchise royalties.................... 976,196 1,046,015 783,358 826,604 General and administrative............. 3,174,509 3,324,246 2,238,719 2,144,252 Interest and bank charges ............. 523,910 508,469 376,510 321,176 Interest on long-term debt............. 99,650 55,372 46,804 11,375 Loss on disposal of capital assets..... 9,023 --- --- 11,886 Management salaries.................... 2,610,000 3,050,000 2,287,500 3,000,000 Rent................................... 1,183,054 1,139,382 838,136 943,415 Salaries and benefits ................. 4,600,769 5,208,762 3,738,270 4,043,213 ------------------- ------------------ ------------------- ---------------- 13,501,313 14,672,837 10,547,943 11,569,865 ------------------- ------------------ ------------------- ---------------- Income before income taxes................ 188,551 174,986 325,855 200,293 ------------------- ------------------ ------------------- ---------------- Income taxes Current................................ 45,181 48,857 43,959 44,078 Deferred............................... 5,080 13,469 --- --- ------------------- ------------------ ------------------- ---------------- 50,261 62,326 43,959 44,078 ------------------- ------------------ ------------------- ---------------- Net income................................ 138,290 112,660 281,896 156,215 Retained earnings, beginning of year...... 159,635 232,925 232,925 113,585 ------------------- ------------------ ------------------- ---------------- 297,925 345,585 514,821 269,800 ------------------- ------------------ ------------------- ---------------- Dividends Common shares ......................... --- 167,000 167,000 --- Preference shares...................... 65,000 65,000 65,000 65,000 ------------------- ------------------ ------------------- ---------------- 65,000 232,000 232,000 65,000 ------------------- ------------------ ------------------- ---------------- Retained earnings, end of year............ 232,925 113,585 282,821 204,800 =================== ================== =================== ================
The accompanying notes are an integral part of these financial statements. 7 CANADIAN CAPITAL CORPORATION STATEMENTS OF CASH FLOWS
Year ended May 31, Nine months ended --------------------------------- ------------------------------- February 29, February 28, 1995 1996 1996 1997 --------------- ---------------- ------------------------------- $CN $CN $CN $CN Cash provided by (used in) (unaudited) OPERATING ACTIVITIES Net income................................................. 138,290 112,660 281,896 156,215 Items not involving cash Amortization............................................ 324,202 340,591 238,646 267,944 Deferred income taxes................................... 5,080 13,469 --- --- Loss on disposal of capital assets...................... 9,023 --- --- --- --------------- ---------------- ---------------- ------------- 476,595 466,720 520,542 424,159 Changes in non-cash working capital balances Accounts receivable........................................ (150,718) (54,926) (19,212) (108,133) Prepaid expenses........................................... (4,776) (132,248) (172,871) 205,080 Accounts payable and other liabilities..................... 36,604 (229,343) (444,174) 404,166 Income taxes............................................... (7,996) 7,880 6,908 8,096 Management salaries payable................................ 200,000 440,000 (322,500) (50,000) --------------- ---------------- ---------------- ------------- 549,709 498,083 (431,307) 883,368 --------------- ---------------- ---------------- ------------- INVESTING ACTIVITIES Loans receivable........................................... 3,550 (7,830) (2,329,800) (2,336,664) Purchase of capital assets................................. (296,380) (347,319) (255,971) (109,999) --------------- ---------------- ---------------- ------------- (292,830) (355,149) (2,585,771) (2,446,663) --------------- ---------------- ---------------- ------------- FINANCING ACTIVITIES Long-term debt............................................. (500,110) (501,177) (375,839) (320,997) Due to shareholder......................................... 786,529 799,879 1,443,730 557,680 Dividends paid............................................. (65,000) (232,000) (232,000) (65,000) --------------- ---------------- ---------------- ------------- 221,419 66,702 835,891 171,683 --------------- ---------------- ---------------- ------------- Increase in cash.............................................. 478,298 209,636 (2,181,187) (1,391,612) Cash and equivalents, beginning of year....................... 3,446,782 3,925,080 3,925,080 4,134,716 --------------- ---------------- ---------------- ------------- Cash and equivalents, end of year............................. 3,925,080 4,134,716 1,743,893 2,743,104 =============== ================ ================ =============
The accompanying notes are an integral part of these financial statements. 8 CANADIAN CAPITAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED WITH RESPECT TO FEBRUARY 29, 1996 AND FEBRUARY 28, 1997 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Capital Assets Capital assets are stated at cost less accumulated amortization. Amortization is provided as follows: Buildings - 5% declining balance basis Furniture and fixtures - 20% declining balance basis Signs - 20% declining balance basis Automobiles - 30% declining balance basis Computer equipment - 30% declining balance basis Leasehold improvements - Straight line basis over term of lease plus one renewal period Franchise fees - Straight line basis over the ten year life of the franchise agreement Deferred Income Taxes Deferred income taxes result from recording amortization in the accounts in excess of capital cost allowance claimed for income tax purposes. Interim Financial Information The financial information presented as of and for the periods ending February 29, 1996 and February 28, 1997 has been prepared by management from the books and records without audit or review. Such financial information does not include all disclosures required by generally accepted accounting principles. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial informationfor the periods indicated have been included. The data disclosed in these notes to financial statements related to the interim information is also unaudited. 9 CANADIAN CAPITAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED WITH RESPECT TO FEBRUARY 29, 1996 AND FEBRUARY 28, 1997 2. LOAN RECEIVABLE
May 31, February 28, ----------------------------------------------- ----------------------- 1995 1996 1997 ------------------- ------------------- ----------------------- $CN $CN $CN (unaudited) Baril Equities LTD., affiliated company(a) 28,545 36,375 53,661 Willelco Financial, Inc., affiliated company --- --- 1,669,378 Commission Exchange, affiliated company --- --- 650,000 ------------------- ------------------- ----------------------- 28,545 36,375 2,373,039 ==================== =================== =======================
(a)The loan is interest free and due on demand. 3. CAPITAL ASSETS
May 31, -------------------------------------------------------------------------------------------- 1995 1996 ------------------------------------------ -------------------------------------------- Accumulated Accumulated Cost Amortization Cost Amortization ------------------ --------------------- -------------------- ------------------- $CN $CN $CN $CN Land 1,492,462 --- 1,492,462 --- Buildings....................... 2,419,496 429,385 2,419,496 532,841 Furniture and fixtures.......... 795,092 441,372 868,905 519,229 Signs ........................ 234,036 131,290 247,143 153,284 Automobiles..................... 24,168 18,365 24,163 20,106 Computer equipment.............. 193,919 141,155 413,168 175,584 Leasehold improvements.......... 493,737 252,213 534,891 301,708 Franchise fees.................. 233,613 143,328 233,613 163,680 ------------------ --------------------- -------------------- -------------------- 5,886,523 1,557,108 6,233,841 1,866,432 ------------------ --------------------- -------------------- -------------------- Net Book Value.................. 4,329,415 4,367,409 ===================== ====================
10 CANADIAN CAPITAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED WITH RESPECT TO FEBRUARY 29, 1996 AND FEBRUARY 28, 1997 3. CAPITAL ASSETS-CONTINUED February 28, 1997 -------------------------------------------- Accumulated Cost Amortization ------------------- ------------------- $CN $CN (unaudited) Land 1,492,462 --- Buildings....................... 2,436,495 606,657 Furniture and fixtures.......... 886,790 572,172 Signs ........................ 268,242 170,126 Computer equipment.............. 418,277 223,644 Leasehold improvements.......... 498,900 251,291 Franchise fees.................. 233,613 177,975 ------------------- ------------------- 6,234,779 2,001,865 ------------------- ------------------- Net Book Value.................. 4,232,914 =================== 4. OTHER ASSETS
May 31, ---------------------------------------------------------------------------------------------------- 1995 1996 ----------------------------------------------- ----------------------------------------------- Accumulated Accumulated Cost Amortization Cost Amortization -------------------- --------------------- --------------------- ------------------- $CN $CN $CN $CN Goodwill................... 535,805 107,161 535,805 133,951 Acquisition costs.......... 44,760 17,904 44,760 22,380 -------------------- --------------------- --------------------- ------------------- 580,565 125,065 580,565 156,331 -------------------- --------------------- --------------------- ------------------- Net book value............. 455,500 424,234 ===================== ===================
February 28, 1997 ----------------------------------------------- Accumulated Cost Amortization -------------------- --------------------- $CN $CN (unaudited) Goodwill.................... 535,805 154,044 Acquisition costs........... 44,760 25,737 -------------------- --------------------- 580,565 179,781 -------------------- --------------------- Net book value.............. 400,784 ===================== 11 CANADIAN CAPITAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED WITH RESPECT TO FEBRUARY 29, 1996 AND FEBRUARY 28, 1997 5. LONG-TERM DEBT
May 31, February 28, ------------------------------- --------------- 1995 1996 1997 ------------- ------------ ------------ $CN $CN $CN (unaudited) First mortgage, repayable $CN 550 per month plus interest at 7% per annum, secured by property at 1576 Queen Street, maturing September 1996 ........................................................ 82,795 76,282 --- First mortgage, repayable $CN 530 per month plus interest at 7% per annum, secured by property at 1576 Queen Street, maturing September --- --- 65,292 1998............................................................................. Royal Bank of Canada, repayable $CN 16,028 monthly plus interest at prime plus 3/4%, secured by property at 1022 Bloor Street West and 1702 Eglington Avenue West, and a second charge on 1576 Queen Street due December 1996............................................. 275,146 82,810 --- Royal Bank of Canada, repayable $CN 8,333 monthly plus interest at prime plus 3/4%, secured by property at 268 Parliament Street, due December 1996 120,339 44,343 --- Royal Bank of Canada, repayable $CN 9,722 monthly plus interest at prime plus 3/4%, secured by property at 492 Bloor Street West, due March 1997 204,170 87,506 --- Royal Bank of Canada, repayable $CN 9,139 monthly plus interest at prime plus 3/4%, secured by property at 7051-7055 Yonge Street, due April 1997.......................................................... 210,193 100,525 5,177 ------------- ------------ ------------- 892,643 391,466 70,469 Less: current portion 500,664 391,466 70,469 ------------- ------------ ------------- 391,979 --- --- ============= ============ =============
6. DUE TO SHAREHOLDERS
May 31, February 28, --------------------------------------------- --------------------------- 1995 1996 1997 ------------------ --------------------- --------------------------- $CN $CN $CN (unaudited) Interest bearing at 8% per annum ...... 1,586,150 2,219,029 2,781,718 Non-Interest bearing .................. 1,904,654 2,071,654 2,066,645 ------------------ --------------------- --------------------------- 3,490,804 4,290,683 4,848,363 ================== ===================== ===========================
The loans are secured by a second charge against the assets of the company. 12 CANADIAN CAPITAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED WITH RESPECT TO FEBRUARY 29, 1996 AND FEBRUARY 28, 1997 7. OTHER LIABILITIES In June 1996, the Company entered into a six year agreement with Western Union retroactive to January 1, 1996. A signing bonus of $CN 901,000 was received by the Company. The bonus will be recognized in income over the term of the Agreement. Revenue of $CN 62,500 and $CN 150,000 was recorded for the year ended May 31, 1996 and the unaudited nine months ended February 28, 1997, respectively. 8. SHARE CAPITAL Authorized Unlimited number of common shares Unlimited number of non-voting preference shares, redeemable and retractable at $CN 1,000 per share, non-cumulative dividends at 1/2% per month of the redemption amount Issued
May 31, February 28, ----------------------------------------------------- -------------------------- 1995 1996 1997 ------------------------- ------------------------ -------------------------- $CN $CN $CN (unaudited) 843 Common shares............. 88 88 88 1,300 Preference shares......... 17 17 17 ------------------------- ------------------------ -------------------------- 105 105 105 ========================= ======================== ==========================
9. BANK LOAN FACILITY The Company has a revolving credit facility for operations which is secured by a general security agreement providing a first charge over all assets of the Company other than real estate, hypothecation of deposit balances, a debenture in the amount of $CN 3,000,000, a personal guarantee and a postponement of claim by two shareholders in the amount of $CN 4,905,000. The debenture, the guarantee and the postponement of claim are secured by personal and corporate owned real estate. The Company had outstanding loans of $CN 3,140,000, $CN 3,050,000 and $CN 2,760,000 at May 31, 1995 and 1996 and at February 28, 1997, respectively, under this facility which have been reflected in these financial statements as an offset against the compensating deposit balances. 13 CANADIAN CAPITAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED WITH RESPECT TO FEBRUARY 29, 1996 AND FEBRUARY 28, 1997 10. RELATED PARTY TRANSACTIONS During the year the Company paid and received the following amounts from related party transactions with a shareholder of the Company:
May 31, February 29, February 28, ------------------------------------------------ ----------------- --------------------- 1995 1996 1996 1997 -------------------- ------------------ ----------------- --------------------- $CN $CN $CN $CN (unaudited) Rent expense.................... 138,872 129,684 97,263 126,868 Interest expense................ 118,807 165,318 120,684 85,105 Rental income................... 31,880 35,460 24,595 20,895 Management fee income........... 18,719 12,000 16,306 14,200 ------ ------ ------ ------ 308,278 342,462 258,848 247,068 ======= ======= ======= =======
11. COMMITMENTS The Company has leased realty and other equipment at an annual rental for the next five years as follows: $CN 1997..................... 948,562 1998..................... 820,552 1999..................... 614,862 2000..................... 388,407 2001..................... 162,658 The Company has contracted to pay royalties in the amount of approximately 7% of revenue to the national franchisor. 12. CONTINGENT LIABILITIES The Company had outstanding letters of guarantee in the amount of $CN 196,000, $CN 245,000 and $CN 61,000 as at May 31, 1995 and 1996 and at February 28, 1997, respectively. 13. DIFFERENCES BETWEEN CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("CN GAAP") AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("US GAAP") (UNAUDITED) The accompanying consolidated financial statements have been prepared in accordance with CN GAAP, and are presented in Canadian Dollars. The accounting policies of the Company also comply, in all material respects, with US GAAP as at May 31, 1995 and 1996, and at February 28, 1997 and therefore the financial results would not require amendment if the financial statements were to be prepared in accordance with US GAAP. 14 CANADIAN CAPITAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED WITH RESPECT TO FEBRUARY 29, 1996 AND FEBRUARY 28, 1997 14. SUBSEQUENT EVENTS (UNAUDITED) On April 18, 1997, substantially all of the operating assets of the Company, other than land and buildings, were sold to Dollar Ontario LTD., a newly formed company owned by the Company's shareholders. All of the outstanding common stock of Dollar Ontario LTD was in turn acquired by Dollar Financial Canada, LTD., a wholly owned subsidiary of Dollar Financial Group Inc. The sale of the Company's operating assets was effected through an interim amalgamation of the Company and several other entities under common control. 15 UNAUDITED CONDENSED COMBINED PRO FORMA FINANCIAL DATA The following unaudited condensed combined pro forma balance sheet as of December 31, 1996 and the unaudited condensed combined pro forma statements of income for the fiscal year ended June 30, 1996 and for the six months ended December 31, 1996 set forth herein give effect to the acquisitions by Dollar Financial Group, Inc. (The "Company" or "DFG") of Chex$Cashed on September 18, 1995, Anykind Check Cashing Centers, Inc. ("Anykind") on August 8, 1996, ABC Check Cashing, Inc. ("ABC") on August 28, 1996, National Money Mart Inc. ("Money Mart") and Cash-N-Dash Check Cashing, Inc. ("Cash-N-Dash") on November 15, 1996, C&C Check Cashing, Inc. ("C&C") on November 21, 1996 and Dollar Ontario LTD. ("DOL") on April 18, 1997 (collectively the "Acquisitions"). The unaudited condensed combined balance sheet assumes the acquisition of DOL occurred on December 31, 1996. The unaudited condensed combined pro forma statements of income assume all of the Acquisitions occurred as of July 1, 1995. The unaudited condensed combined pro forma statements of income also give effect to the use of the net proceeds of $105.7 million from the November 15, 1996 issuance of 107/8% Senior Notes due 2006 (the "Offering") by the Company, a wholly owned subsidiary of DFG Holdings, Inc. ("Holdings"), and the net proceeds of $21.7 million from the sale of $22.0 million of Holdings Common Stock on August 8, 1996 (the "Equity Transaction") as if such transactions had occurred on July 1, 1995. See notes to the unaudited condensed combined pro forma financial statements for further explanation of these transactions. The unaudited condensed combined pro forma financial statements are not necessarily indicative of what the Company's results of operations and balance sheet would have been had the Acquisitions, the Equity Transaction and the Offering been consummated at the indicated dates, nor are they necessarily indicative of the Company's results of operations and balance sheet for any future period. For convenient translations purposes, an exchange rate of $1.00=C$1.364 as of December 31, 1996 has been utilized in connection with the acquisitions of Money Mart and DOL, both of which are Canadian corporations. For purposes of translating Money Mart's and DOL's operating results for the year ended June 30, 1996, an average exchange rate of $1.00=C$1.364 has been used; for purposes of translating Money Mart's and DOL's operating results for the six months ended December 31, 1996, an average exchange rate of $1.00=C$1.362 has been used. 16 UNAUDITED CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET AS OF DECEMBER 31, 1996 (DOLLARS IN THOUSANDS)
PRO FORMA PRO FORMA DFG DOL(a) ADJUSTMENTS(a) COMBINED --- --- -------------- -------- ASSETS: Cash..................................................... $61,911 --- $(13,457) $48,454 Accounts receivable...................................... 7,892 324 --- 8,216 Properties and equipment, net............................ 6,868 615 --- 7,483 Intangible assets........................................ 94,028 --- 13,000 107,028 Prepaid expenses and other assets........................ 11,189 120 --- 11,309 -------- ------ ----- -------- Total assets...................................... $181,888 $1,059 (457) $182,490 ======== ====== ===== ======== LIABILITIES AND SHAREHOLDER'S EQUITY: Accounts payable and accrued expenses.................... $32,259 $602 --- $32,861 Revolving credit facility................................ --- --- --- --- Long-term debt and subordinated notes payable............ 3,006 --- --- 3,006 10 7/8% Senior Notes due 2006............................. 110,000 --- --- 110,000 Shareholder's Equity..................................... 36,623 457 (457) 36,623 -------- ------ ------ -------- Total liabilities and shareholder's equity........ $181,888 $1,059 $(457) $182,490 ======== ====== ====== ========
17 UNAUDITED CONDENSED COMBINED PRO FORMA INCOME STATEMENT AND OTHER OPERATING DATA FOR THE FISCAL YEAR ENDED JUNE 30, 1996 (DOLLARS IN THOUSANDS)
HISTORICAL(b) -------------------------------------------------------------------------------------- CASH CHEX$ MONEY -N- DFG CASHED ANYKIND ABC MART DASH C&C DOL ---- ------- ------- - ---- ---- ---- ---- --- Revenues........................... $ 42,430 $ 1,269 $ 22,748 $ 4,807 $ 9,413 $ 6,232 $ 4,831 $10,968 Store and regional expenses: Salaries and benefits........... 13,975 441 6,757 1,564 2,233 1,837 1,882 3,052 Occupancy....................... 4,031 160 2,602 620 737 811 699 1,141 Depreciation.................... 893 12 201 156 295 129 196 138 Other........................... 11,709 229 5,624 1,072 2,243 1,119 1,219 2,567 ------- ---- ----- ----- ----- ----- ------ ----- Total store and regional expenses........................ 30,608 842 15,184 3,412 5,508 3,896 3,996 6,898 Corporate expenses................. 5,360 544 4,827 1,141 3,573 839 910 3,588 Loss on store closings and sales....................... 4,501(b) -- -- 3 -- -- -- --- Other depreciation and amortization.................... 1,858 1 7 34 68 57 21 115 Interest expense................... 3,385 27 509 129 174 83 53 233 ------ --- --- --- --- -- --- --- Income (loss) before income taxes.................... (3,282) (145) 2,221 88 90 1,357 (149) 134 -------- ----- ----- -- -- ----- ----- --- Income tax (benefit) provision ...................... (1,214)(i) (40) 639 2 18 26 (6) 43 ---------- ---- --- - -- -- --- -- Net income (loss).................. $ (2,068) $ (105) $ 1,582 $ 86 $ 72 $ 1,331 $ (143) $91 ======== ====== ======= ==== ==== ======= ====== === Pro forma Adjusted EBITDA (l)......................
{TABLE CONTINUED ON FOLLOWING PAGE] 18(a) [TABLE CONTINUED FROM PREVIOUS PAGE] ADJUSTMENTS FOR ACQUISITIONS, EQUITY PRO TRANSACTION FORMA AND THE AS OFFERING ADJUSTED --------- -------- Revenues........................... $(762)(d) $101,936 Store and regional expenses: Salaries and benefits........... -- 31,741 Occupancy....................... 190(e) 10,991 Depreciation.................... -- 2,020 Other........................... -- 25,782 --- ------ Total store and regional expenses........................ 190 70,534 Corporate expenses................. (11,427)(f) 9,355 Loss on store closings and sales....................... -- 4,504 Other depreciation and amortization.................... 3,075 (g) 5,236 Interest expense................... 8,197 (h) 12,790 --------- ------ Income (loss) before income taxes.................... (797) (483) ------ ----- Income tax (benefit) provision ...................... 1,191 (j) 659 --------- --- Net income (loss).................. $ (1,988) $ (1,142) ======== ========= Pro forma Adjusted EBITDA (l)...................... $ 24,067 18(b) UNAUDITED CONDENSED COMBINED PRO FORMA INCOME STATEMENT AND OTHER OPERATING DATA FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 (DOLLARS IN THOUSANDS)
HISTORICAL(c) ---------------------------------------------------------------------------------------- CASH MONEY -N- DFG ANYKIND ABC MART DASH C&C DOL ---- ------- ---- ---- ---- ---- --- Revenues........................... $ 32,900 $2,571 $727 $3,840 $2,170 $2,126 $5,889 Store and regional expenses: Salaries and benefits........... 11,174 518(k) 237 873 716 816 1,711 Occupancy....................... 3,317 291 99 327 314 288 585 Depreciation.................... 570 36 25 111 32 55 74 Other........................... 8,542 722 190 722 343 418 1,314 ----- --- --- --- --- --- ----- Total store and regional expenses........................ 23,603 1,567 551 2,033 1,405 1,577 3,684 Corporate expenses................. 3,023 2,032 182 1,711 337 493 1,869 Gain on store closings and sales....................... 7 -- -- -- -- -- -- Other depreciation and amortization.................... 1,590 1 4 26 57 11 49 Interest expense................... 3,712 8 5 47 29 18 61 ----- - - -- -- -- -- Income (loss) before income taxes and extraordinary item............. 965 (1,037) (15) 23 342 27 226 Income tax provision .............. 617 6 -- -- 5 1 22 --- - -- -- - - -- Income (loss) before ex- traordinary item 348 (1,043) (15) 23 337 26 204 Extraordinary loss on debt extinguishment (net of income tax benefit of $(1,042) (2,023) -- -- -- -- -- -- --------- -- -- -- -- -- -- Net income (loss).................. $ (1,675) $(1,043) $ (15) $ 23 $ 337 $ 26 $204 ========== ======== ======= ====== ======= ======= ==== Pro forma Adjusted EBITDA (l)......................
[TABLE CONTINUED ON FOLLOWING PAGE] 19(a) [TABLE CONTINUED FROM PREVIOUS PAGE] UNAUDITED CONDENSED COMBINED PRO FORMA INCOME STATEMENT AND OTHER OPERATING DATA FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 (DOLLARS IN THOUSANDS) ADJUSTMENTS FOR ACQUISITIONS, EQUITY PRO TRANSACTION FORMA AND THE AS OFFERING ADJUSTED -------- -------- Revenues........................... $(418)(d) $49,805 Store and regional expenses: Salaries and benefits........... -- 16,045 Occupancy....................... 95(e) 5,316 Depreciation.................... -- 903 Other........................... -- 12,251 -- ------ Total store and regional expenses........................ 95 34,515 Corporate expenses................. (5,279)(f) 4,368 Gain on store closings and sales....................... -- 7 Other depreciation and amortization.................... 814(g) 2,552 Interest expense................... 2,515(h) 6,395 -------- ----- Income (loss) before income taxes and extraordinary item............. 1,437 1,968 Income tax provision .............. 592(j) 1,243 ------ ----- Income (loss) before ex- traordinary item 845 725 Extraordinary loss on debt extinguishment (net of income tax benefit of $(1,042) -- (2,023) -- ------- Net income (loss).................. $845 $(1,298) ==== ======== Pro forma Adjusted EBITDA (l)...................... $11,825 19(b) NOTES TO UNAUDITED CONDENSED COMBINED PRO FORMA FINANCIAL DATA ACQUISITIONS As indicated below, the Company has made the following acquisitions since July 1995: BUSINESS DATE OF PURCHASE PURCHASE PRICE - ------------------ ------------------------- -------------------------- Chex$Cashed 9/95 $ 7.4 million AnyKind 8/96 31.0 million ABC ............ 8/96 6.0.million Money Mart........ 11/96 17.7.million Cash-N-Dash....... 11/96 7.3.million C&C ............ 11/96 3.8.million DOL............... 4/97 13.3 million The acquisitions of AnyKind and ABC were funded in part through the Equity Transaction, the issuance of $2.0 million of Holdings Common Stock to the selling shareholders of AnyKind and additional borrowings of $35.0 million under a credit facility then existing ("the "Existing Credit Facility"). The aforementioned purchase prices for Cash-N-Dash and C&C include contingent payments to the sellers of up to $750,000 payable over four years for Cash-N-Dash and up to $300,000 payable over three years for C&C based on future revenues of the Company. The acquisitions of ABC and Cash-N-Dash were made through the acquisition of assets and the assumption of certain liabilities, while the acquisitions of Chex$Cashed, AnyKind, Money Mart, C&C and DOL were made through the purchase of substantially all of the outstanding common stock of each company. Each acquisition was accounted for under the purchase method of accounting. The pro forma results of operations adjustments for the year ended June 30, 1996 and for the six months ended December 31, 1996 are those necessary to reflect the Company's net income as if the Acquisitions, the Equity Transaction and the Offering had taken place as of July 1, 1995. The pro forma adjustments are based upon available information and upon certain assumptions that the Company believes are reasonable. The unaudited pro forma financial statement data are provided for informational purposes only and do not purport to be indicative of the Company's results of operations that would actually have been obtained had such acquisitions been completed as of July 1, 1995, or that may be obtained in the future. OFFERING The Company has implemented a financing plan which included the Offering with gross proceeds of $110.0 million and the establishment of a new revolving credit facility (the "New Revolving Credit Facility"), which provides the Company with up to $25.0 million of availability. The proceeds of the Offering, together with borrowings under the New Revolving Credit Facility, were used to repay all outstanding indebtedness under the Existing Credit Facility, to fund the cash purchase price of the C&C, CND, Money Mart and DOL acquisitions, including initial working capital, and fees and expenses of the 20 Offering. The repayment of all of the Company's existing indebtedness under the Existing Credit Facility resulted in an extraordinary loss, net of taxes, in the six months ended December 31, 1996 of approximately $2.0 million. NOTES (a) Represents the recording of assets and liabilities of DOL under the purchase method of accounting as though the acquisition had occurred on December 31, 1996. These amounts include recording the excess of cost over the fair value of net assets acquired (goodwill). (b) Represents (i) the historical consolidated statement of income of the Company, (ii) the historical results of operations of Chex$Cashed for the period from July 1, 1995 to September 18, 1995 (date of acquisition) and (iii) the historical consolidated statements of income of AnyKind, ABC, Money Mart, Cash-N-Dash, C&C and DOL, respectively, for the twelve months ended June 30, 1996. The historical results of operations of the Company for the year ended June 30, 1996 include a pretax charge of approximately $4,400,000 associated with the sale and closure of 19 store locations purchased in February 1995. The charge includes $3,300,000 for the write-off of the goodwill associated with the original acquisition of these stores, $600,000 for the write-off of store fixtures and equipment, $350,000 for the early termination of store leases and $150,000 for the accrual for other costs related to closing these store locations. Included in the accompanying historical results of operations of the Company are revenues of $1,470,000, store expenses of $2,352,000 and amortization expense of $56,000 related to these stores. (c) Represents (i) the historical consolidated statement of income of the Company for the six months ended December 31, 1996, (ii) the historical results of operations of AnyKind for the period July 1, 1996 to August 8, 1996 (date of acquisition), (iii) the historical results of operations of ABC for the period from July 1, 1996 to August 28, 1996 (date of acquisition), (iv) the historical results of operations of Money Mart and Cash-N-Dash for the period from July 1, 1996 to November 15, 1996 (date of acquisitions), (v) the historical results of operations of C&C for the period from July 1, 1996 to November 21, 1996 (date of acquisition) and (vi) the historical results of operations of DOL for the period from July 1, 1996 to December 31, 1996. (d) Reflects a decrease in revenues by the franchise fees paid to Money Mart from DOL of $762,000 and $418,000 for the year ended June 30, 1996 and the six months ended December 31, 1996, respectively. (e) Reflects an increase in rent expense for properties owned by the previous shareholders of DOL but not acquired by the Company. Coincident with the acquisition of DOL, the Company has entered into lease agreements to rent the retail locations of these properties. The pro forma adjustment reflects rent expense associated with these leases. 21 (f) Corporate expenses were reduced by (dollars in thousands):
Year Ended Six Months Ended December June 30, 1996 31, 1996 ----------------------------- ----------------------------- Consulting and management fees paid to former shareholders of AnyKind............................... $4,154 $ 1,301 Money Mart............................ 1,946 1,046 ABC................................... 422 53 Chex$Cashed........................... 171 --- DOL................................... 2,236 1,469 Compensation and benefits paid to certain former executives of AnyKind.......................... $ 646 $ 419 ABC.............................. 281 58 C&C.............................. 682 428 Chex$Cashed...................... 127 87 Franchise fees paid to acquiror......... $ 762 $ 418 ------ ------ $11,427 $5,279 ======= ======
Pursuant to the respective purchase agreements, the above shareholders' and executives' consulting and/or employment agreements were cancelled or revised at the time of acquisition. The Company believes that the inclusion in the unaudited condensed combined pro forma income statements of the full amounts paid under these agreements would be inappropriate since they represent expenses incurred which the Company would not have recognized during the period had the Company acquired the companies at the beginning of the period. (g) Reflects an increase in amortization expense in excess of historical amounts as a result of the following factors: (i) aggregate excess of the purchase price over the fair value of identifiable net assets, or goodwill, of approximately $75.5 million, amortized using the straight-line method over a useful life of thirty years, resulting in additional amortization of approximately $2.5 million and (ii) other intangible assets of approximately $700,000 (primarily costs assigned to contracts acquired), amortized on a straight-line method over a the remaining contractual lives of the underlying contracts, resulting in additional amortization of approximately $600,000. The total purchase price for each acquisition has been allocated to the assets acquired, including identifiable intangible assets, and liabilities assumed based on estimated fair values. (h) Reflects an adjustment for interest expense ($11,963,000 and $5,981,000 for the year ended June 30, 1996 and for the six months ended December 31, 1996, respectively) to give effect to the Offering assuming an interest rate of 107/8% and gross proceeds of $110 million plus amortization of related deferred financing fees less elimination of interest expense ($4,290,000 and $3,728,000 for the year ended June 30, 1996 and for the six months ended December 31, 1996, respectively) as a result of the repayment of all outstanding indebtedness under the Existing Credit Facility and a reduction in principal of revolving indebtedness under the Existing Credit Facility through the use of the proceeds from the Equity transaction and the Offering, as if such transactions had occurred at July 1, 1995. This adjustment includes non-cash amortization of deferred financing fees associated with the Offering of $430,000 and $215,000 for the year ended June 30, 1996, respectively. The adjustment also includes the commitment fee of 3/8% on the estimated unused portion of the New Revolving Credit Facility of $25.0 million ($94,000 and $47,000 for the year ended June 30, 1996 and the six months ended December 31, 1996, respectively). 22 (i) The income tax expense for the twelve months ended June 30, 1996 includes a benefit of $456,000 due to the change in the Company's valuation allowance. 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 income tax assets. (j) Represents the income tax impact of the Acquisitions as if the acquired companies were wholly owned by the Company for the year ended June 30, 1996 and for the six months ended December 31, 1996, based on the Company's estimated tax rate of 34%, after giving effect to the pro forma adjustments including the non-deductible amortization of intangible assets (goodwill). The pro forma adjustment for income taxes is less than the statutory federal rate of 34% due to non deductible amortization of intangible assets and a provision for income taxes on the historical results of operations of certain acquired companies which previously elected to be taxed as "S" corporations as defined in the United States Internal Revenue Code of 1986, as amended, and for which no federal taxes were provided in their respective historical income statements. (k) The unaudited results of AnyKind for the period July 1, 1996 through August 8, 1996 (the date of the acquisition by the Company) are presented herein. The Company has determined that the salaries and benefits component of AnyKind's store expenses (approximately 20.1% of revenues) for this period immediately preceding the acquisition are abnormally low as compared to AnyKind's historical expense levels (29.7% of revenues for the twelve months ended June 30, 1996.) For the period August 8, 1996 through December 31, 1996, the salaries and benefits expenses of the acquired stores as a percentage of revenues was approximately 33.2%. Furthermore, the Company's consolidated store salaries and benefits expenses for the six months ended December 31, 1996 as a percentage of revenues were 34.0%. (l) Adjusted EBITDA is earnings before interest, taxes, depreciation, amortization, loss on store closings and sales, and extraordinary losses. Adjusted EBITDA does not represent cash flows as defined by generally accepted accounting principles and does not necessarily indicate that cash flows are sufficient to fund all of the Company's cash needs. Adjusted EBITDA should not be considered in isolation or as a substitute for net income (loss), cash flows from operating activities or other measures of liquidity determined in accordance with generally accepted accounting principles. Management believes that EBITDA should be reviewed by prospective investors because the Company uses EBITDA as one means of analyzing its ability to service its debt, the Company's lenders use EBITDA for the purpose of analyzing the Company's performance and the Company understands that EBITDA is 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 EBITDA as presented may not be comparable to other similarly titled measures of other companies. 23 Exhibit Index ------------- Exhibit Number Description - ------ ----------- 2.1 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.* - ------------------------------- * Incorporated by reference to the Form 8-K. 24 -----END PRIVACY-ENHANCED MESSAGE-----