-----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, NMz+F/SJTf2U7+3uJUpu5Li4zwUXXU7hd48W5BqMn2RhmenL8HoabtDiGm0NVAWo 4JqCT3yZcMNo0n+WeweSJQ== 0001028643-01-000002.txt : 20010223 0001028643-01-000002.hdr.sgml : 20010223 ACCESSION NUMBER: 0001028643-01-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DOLLAR FINANCIAL GROUP INC CENTRAL INDEX KEY: 0001028643 STANDARD INDUSTRIAL CLASSIFICATION: FUNCTIONS RELATED TO DEPOSITORY BANKING, NEC [6099] IRS NUMBER: 132997911 STATE OF INCORPORATION: NY FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-18221 FILM NUMBER: 1542400 BUSINESS ADDRESS: STREET 1: 1436 LANCASTER AVE 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 10-Q 1 0001.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 -------------------- FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended December 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from _____ to _____ Commission file number 333-18221 DOLLAR FINANCIAL GROUP, INC. (Exact Name of Registrant as Specified in Its Charter) 13-2997911 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 1436 LANCASTER AVENUE, SUITE 210 BERWYN, PENNSYLVANIA 19312 (Address of Principal Executive Offices) (Zip Code) 610-296-3400 (Registrant's Telephone Number, Including Area Code) None (Former name, former address and former fiscal year, if changed since last report) Indicate by check whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes [ ] No [ ] APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. As of February 14, 2001, 100 shares of the registrant's common stock, par value $1.00 per share, were outstanding. 1 DOLLAR FINANCIAL GROUP, INC. INDEX PART I. FINANCIAL INFORMATION Page No. -------- Item 1. Financial Statements Interim Consolidated Balance Sheets as of June 30, 2000 and December 31, 2000 (unaudited)........................................................... 3 Interim Unaudited Consolidated Statements of Operations for the Three and Six Months Ended December 31, 1999 and 2000..................................................... 4 Interim Unaudited Consolidated Statements of Cash Flows for the Six Months Ended December 31, 1999 and 2000............................................................ 5 Notes to Interim Unaudited Consolidated Financial Statements................................ 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations....................................................................... 15 Item 3. Quantitative and Qualitative Disclosures About Market Risk........................................................................... 23 PART II. OTHER INFORMATION Item 1. Legal Proceedings........................................................................... 24 Item 2. Changes in Securities and Use of Proceeds................................................... 24 Item 3. Defaults Upon Senior Securities............................................................. 24 Item 4. Submission of Matters to a Vote of Security Holders......................................... 24 Item 5. Other Information........................................................................... 24 Item 6. Exhibits and Reports on Form 8-K............................................................ 24
2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS DOLLAR FINANCIAL GROUP, INC. INTERIM CONSOLIDATED BALANCE SHEETS (In thousands except share amounts)
June 30, December 31, 2000 2000 --------------------- ----------------- ASSETS (unaudited) Cash and cash equivalents....................................................... $ 73,288 $ 73,618 Accounts receivable............................................................. 13,134 19,895 Prepaid expenses................................................................ 5,661 5,979 Deferred income taxes........................................................... 759 759 Notes receivable - officers..................................................... 2,920 2,920 Due from parent................................................................. 878 1,214 Property and equipment, net of accumulated depreciation of $15,094 and $18,679...................................................... 23,625 27,712 Goodwill and other intangibles, net of accumulated amortization of $18,897 and $21,374......................................................... 128,115 131,952 Debt issuance costs, net of accumulated amortization of $3,184 and $3,905........................................................... 8,446 7,968 Other........................................................................... 2,888 2,252 --------------- ------------- $ 259,714 $ 274,269 =============== ============= LIABILITIES AND SHAREHOLDER'S EQUITY Accounts payable .............................................................. $ 16,331 $ 19,350 Income taxes payable............................................................ 603 1,173 Advance from money transfer agent............................................... 1,000 1,000 Accrued expenses................................................................ 21,429 9,233 Accrued interest payable........................................................ 1,610 1,508 Revolving credit facilities..................................................... 49,578 71,525 10-7/8 % Senior Notes due 2006.................................................. 109,190 109,190 Long term debt and subordinated notes payable................................... 20,378 20,190 Shareholder's equity: Common stock, $1 par value: 20,000 shares authorized; 100 shares issued and outstanding at June 30, 2000 and December 31, 2000......................................... - - Additional paid-in capital...................................................... 50,957 50,957 Accumulated deficit............................................................. (5,824) (3,254) Accumulated other comprehensive loss............................................ (5,538) (6,603) --------------- ------------- Total shareholder's equity.................................................. 39,595 41,100 --------------- ------------- $ 259,714 $ 274,269 =============== =============
See notes to interim unaudited consolidated financial statements. 3 DOLLAR FINANCIAL GROUP, INC. INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands)
Three Months Ended Six Months Ended December 31, December 31, -------------------------------- ---------------------------------- 1999 2000 1999 2000 ------------- ------------- ------------ -------------- Revenues .......................................................$ 39,881 $ 49,256 $ 74,713 $ 94,487 Store and regional expenses: Salaries and benefits........................................ 11,479 14,513 21,718 27,985 Occupancy.................................................... 3,141 4,275 6,069 8,256 Depreciation................................................. 1,068 1,477 1,952 2,845 Other........................................................ 9,246 13,080 16,475 23,642 ------------- ------------- ------------ -------------- Total store and regional expenses............................... 24,934 33,345 46,214 62,728 Corporate expenses.............................................. 4,743 5,311 9,283 11,525 Loss on store closings and sales................................ 27 41 71 75 Goodwill amortization........................................... 1,483 1,175 2,659 2,256 Other depreciation and amortization............................. 351 476 653 946 Interest expense (net of interest income of $42, $68, $61 and $142)................................................ 4,246 5,233 8,416 10,193 Recapitalization costs and other non-recurring items............ 133 - 133 - ------------- ------------- ------------ -------------- Income before income taxes...................................... 3,964 3,675 7,284 6,764 Income tax provision............................................ 3,064 2,152 5,172 4,194 ------------- ------------- ------------ -------------- Net income .....................................................$ 900 $ 1,523 $ 2,112 $ 2,570 ============= ============= ============ ==============
See notes to interim unaudited consolidated financial statements. 4 DOLLAR FINANCIAL GROUP, INC. INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Six Months Ended December 31, ------------------------------------------ 1999 2000 ------------------- ------------------- Cash flows from operating activities: Net income .....................................................................$ 2,112 $ 2,570 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.............................................. 5,932 6,744 Loss on store closings and sales........................................... 71 75 Noncash recapitalization costs............................................. 133 - Change in assets and liabilities (net of effect of acquisitions): Decrease (increase) in accounts receivable and income taxes receivable........................................................... 1,267 (5,868) (Increase) decrease in prepaid expenses and other........................ (479) 364 Increase (decrease) in accounts payable, income taxes payable, accrued expenses and accrued interest payable........................ 618 (272) ------------------- ------------------ Net cash provided by operating activities....................................... 9,654 3,613 Cash flows from investing activities: Acquisitions, net of cash acquired............................................ (21,258) (17,110) Gross proceeds from sale of property and equipment............................ - 110 Additions to property and equipment........................................... (6,279) (7,168) ------------------- ------------------ Net cash used in investing activities........................................... (27,537) (24,168) Cash flows from financing activities: Other debt payments........................................................... (866) (188) Net increase in revolving credit facilities................................... 20,404 21,947 Proceeds from long term debt.................................................. 1,893 - Payment of debt issuance costs................................................ (350) (247) Advances to officers.......................................................... (64) - Net increase in due from parent............................................... (1,120) (336) ------------------- ------------------ Net cash provided by financing activities....................................... 19,897 21,176 Effect of exchange rate changes on cash and cash equivalents.................... 482 (291) ------------------- ------------------ Net increase in cash and cash equivalents....................................... 2,496 330 Cash and cash equivalents at beginning of period................................ 65,782 73,288 ------------------- ------------------ $ 68,278 $ 73,618 =================== ==================
See notes to interim unaudited consolidated financial statements. 5 DOLLAR FINANCIAL GROUP, INC. NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited interim consolidated financial statements of Dollar Financial Group, Inc. (the "Company") have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and footnotes required by accounting principles generally accepted in the United States for complete financial statements and should be read in conjunction with the Company's audited consolidated financial statements in its Annual Report on Form 10-K for the fiscal year ended June 30, 2000 filed with the Securities and Exchange Commission. In the opinion of management, all adjustments, (consisting of normal recurring adjustments), considered necessary for a fair presentation have been included. Operating results of interim periods are not necessarily indicative of the results that may be expected for a full fiscal year. Use of Estimates The preparation of financial statements in conformity with 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 consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. Reclassification Certain prior year amounts have been reclassified to the current presentation. Operations Dollar Financial Group, Inc., organized in 1979 under the laws of the State of New York, is a wholly owned subsidiary of DFG Holdings, Inc. ("Holdings"). The activities of Holdings consist primarily of its investment in the Company and additional third party debt. Holdings has no employees or operating activities as of December 31, 2000. The Company, through its subsidiaries, provides retail financial and government contractual services to the general public through a network of 1,001 (of which 637 are company owned) locations operating as Any Kind Check Cashing Centers(R), The Money Shop, Cash A Cheque, Cash Centres, Fastcash, Check Mart(R), Money Mart(R), and Loan Mart(R) in 17 states, the District of Columbia, Canada and the United Kingdom. The services provided at the Company's retail locations include check cashing, short-term consumer loans, sale of money orders, money transfer services and various other related services. Also, through a relationship with a bank, the Company's subsidiary moneymart.com(TM) originates short-term consumer loans through 528 independent agents in 21 states. 6 DOLLAR FINANCIAL GROUP, INC. NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) 2. SUBSIDIARY GUARANTOR UNAUDITED FINANCIAL INFORMATION The Company's payment obligations under the 10 7/8% Senior Notes due November 2006 ("Senior Notes") and Senior Subordinated Notes due 2006 ("Senior Subordinated Notes") are jointly and severally guaranteed on a full and unconditional basis by all of the Company's existing and future subsidiaries (the "Guarantors"). The subsidiaries' guarantees rank pari passu in right of payment with all existing and future senior indebtedness of the Guarantors, including the obligations of the Guarantors under the Company's revolving credit facility and any successor credit facilities. Pursuant to the Senior Notes or Senior Subordinated Notes, every direct and indirect wholly owned subsidiary of the Company serves as a guarantor of the Senior Notes and Senior Subordinated Notes. There are no restrictions on the Company's and the Guarantors' ability to obtain funds from their subsidiaries by dividend or by loan. Separate financial statements of each Guarantor have not been presented because management has determined that they would not be material to investors. The accompanying tables set forth the consolidating balance sheet at December 31, 2000, and the consolidating statements of operations and cash flows for the six month period ended December 31, 2000 of the Company (on a parent-company basis), combined domestic Guarantors, combined foreign Guarantors and the consolidated Company. 7 DOLLAR FINANCIAL GROUP, INC. NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) CONSOLIDATING BALANCE SHEET December 31, 2000 (In thousands)
Dollar Domestic Foreign Financial Subsidiary Subsidiary Group, Inc. Guarantors Guarantors Eliminations Consolidated ------------ ------------- ------------ -------------- ------------- ASSETS Cash and cash equivalents...........................$ 788 $ 44,134 $ 28,696 $ - $ 73,618 Accounts receivable.................................. 15,905 7,336 8,979 (12,325) 19,895 Income taxes receivable.............................. 499 431 - (930) - Prepaid expenses..................................... 620 1,776 3,583 - 5,979 Deferred income taxes................................ 697 62 - - 759 Notes receivable-officers............................ 2,920 - - - 2,920 Due from affiliates.................................. 111,065 - - (111,065) - Due from parent...................................... 1,214 - - - 1,214 Property and equipment, net.......................... 5,242 11,400 11,070 - 27,712 Goodwill and other intangibles, net.................. - 57,759 74,193 - 131,952 Debt issuance costs, net............................. 7,968 - - - 7,968 Investment in subsidiaries........................... 99,740 9,801 6,705 (116,246) - Other................................................ 389 749 1,114 - 2,252 ------------ ------------- ------------ -------------- ------------- $ 247,047 $ 133,448 $ 134,340 $ (240,566) $ 274,269 ============ ============= ============ ============== ============= LIABILITIES AND SHAREHOLDER'S EQUITY Accounts payable....................................$ - $ 12,140 $ 7,210 $ - $ 19,350 Income taxes payable................................. - - 2,103 (930) 1,173 Advance from money transfer agent.................... 1,000 - - - 1,000 Accrued expenses..................................... 3,725 1,415 4,093 - 9,233 Accrued interest payable............................. 1,508 - 12,325 (12,325) 1,508 Due to affiliates.................................... - 42,689 68,376 (111,065) - Revolving credit facilities.......................... 66,300 - 5,225 - 71,525 10-7/8% Senior Notes due 2006........................ 109,190 - - - 109,190 Long term debt and subordinated notes payable........ 20,000 - 190 - 20,190 ------------ ------------ ------------- -------------- ------------- 201,723 56,244 99,522 (124,320) 233,169 Shareholder's equity: Common stock......................................... - - - - - Additional paid-in capital........................... 50,957 40,064 27,304 (67,368) 50,957 (Accumulated deficit) retained earnings.............. (3,254) 39,776 9,102 (48,878) (3,254) Accumulated other comprehensive loss................. (2,379) (2,636) (1,588) - (6,603) ------------ ------------- ------------ -------------- ------------- Total shareholder's equity........................... 45,324 77,204 34,818 (116,246) 41,100 ------------ ------------- ------------ -------------- ------------- $ 247,047 $ 133,448 $ 134,340 $ (240,566) $ 274,269 ============ ============= ============ ============== =============
8 DOLLAR FINANCIAL GROUP, INC. NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) CONSOLIDATING STATEMENT OF OPERATIONS Six Months Ended December 31, 2000 (In thousands)
Dollar Domestic Foreign Financial Subsidiary Subsidiary Group, Inc. Guarantors Guarantors Eliminations Consolidated ----------- ------------ ----------- ------------ ------------ Revenues............................................. $ - $ 55,928 $ 38,559 $ - $ 94,487 Store and regional expenses: Salaries and benefits............................. - 17,895 10,090 - 27,985 Occupancy......................................... - 5,351 2,905 - 8,256 Depreciation...................................... - 1,489 1,356 - 2,845 Other............................................. - 15,797 7,845 - 23,642 ----------- ------------ ----------- ------------ ------------ Total store and regional expenses.................... - 40,532 22,196 - 62,728 Corporate expenses................................... 7,889 - 3,636 - 11,525 Management fees...................................... (6,536) 4,540 1,996 - - Loss on store closings and sales..................... 50 - 25 - 75 Goodwill amortization................................ - 1,105 1,151 - 2,256 Other depreciation and amortization.................. 568 116 262 - 946 Interest expense..................................... 6,656 - 3,537 - 10,193 ----------- ------------ ----------- ------------ ------------ (Loss) income before income taxes ................... (8,627) 9,635 5,756 - 6,764 Income tax (benefit) provision ...................... (4,070) 5,643 2,621 - 4,194 ----------- ------------ ----------- ------------ ------------ (Loss) income before equity in net income of subsidiaries...................................... (4,557) 3,992 3,135 - 2,570 Equity in net income of subsidiaries: Domestic subsidiary guarantors....................... 3,992 - - (3,992) - Foreign subsidiary guarantors........................ 3,135 - - (3,135) - ----------- ------------ ----------- ------------ ------------ Net income........................................... $ 2,570 $ 3,992 $ 3,135 $ (7,127) $ 2,570 =========== ============ =========== ============ ============
9 DOLLAR FINANCIAL GROUP, INC. NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) CONSOLIDATING STATEMENT OF CASH FLOWS Six Months Ended December 31, 2000 (In thousands)
Dollar Domestic Foreign Financial Subsidiary Subsidiary Group, Inc. Guarantors Guarantors Eliminations Consolidated ----------- ----------- ----------- ------------ ------------- Cash flows from operating activities: Net income........................................... $ 2,570 $ 3,992 $ 3,135 $ (7,127) $ 2,570 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Undistributed income of subsidiaries.......... (7,127) - - 7,127 - Depreciation and amortization................. 1,294 2,710 2,740 - 6,744 Loss on store closings and sales.............. 50 - 25 - 75 Change in assets and liabilities (net of effect of acquisitions): Increase in accounts receivable and income taxes receivable......................... (3,847) (3,312) (626) 1,917 (5,868) Decrease (increase) in prepaid expenses and and other................................ 531 (238) 71 - 364 (Decrease) increase in accounts payable, income taxes payable, accrued expenses and accrued interest payable............. (2,131) 2,710 1,066 (1,917) (272) ----------- ----------- ----------- ------------ ------------- Net cash (used in) provided by operating activities.. (8,660) 5,862 6,411 - 3,613 Cash flows from investing activities: Acquisitions, net of cash acquired.............. - (2,750) (14,360) - (17,110) Gross proceeds from sale of property and equipment.................................... - - 110 - 110 Additions to property and equipment............. (1,508) (3,382) (2,278) - (7,168) Net increase in due from affiliates............. (14,773) (2,432) - 17,205 - ----------- ----------- ----------- ------------ ------------- Net cash used in investing activities................ (16,281) (8,564) (16,528) 17,205 (24,168) Cash flows from financing activities: Other debt payments............................. - - (188) - (188) Net increase (decrease) in revolving credit facilities................................... 23,800 - (1,853) - 21,947 Payments of debt issuance costs................. (247) - - - (247) Net increase in due from parent................. (336) - - - (336) Net increase in due to affiliates............... - 7,568 9,637 (17,205) - ----------- ----------- ----------- ------------ ------------- Net cash provided by financing activities............ 23,217 7,568 7,596 (17,205) 21,176 Effect of exchange rate changes on cash and cash equivalents..................................... - - (291) - (291) ----------- ----------- ----------- ------------ ------------- Net (decrease) increase in cash and cash equivalents. (1,724) 4,866 (2,812) - 330 Cash and cash equivalents at beginning of period..... 2,512 39,268 31,508 - 73,288 ----------- ----------- ----------- ------------ ------------- Cash and cash equivalents at end of period........... $ 788 $ 44,134 $ 28,696 $ - $ 73,618 =========== =========== =========== ============ =============
10 DOLLAR FINANCIAL GROUP, INC. NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) 3. COMPREHENSIVE INCOME Comprehensive income is the change in equity from transactions and other events and circumstances from non-owner sources, which includes foreign currency translation. The following shows the comprehensive income for the periods stated:
Three Months Ended Six Months Ended December 31, December 31, ----------------------------------- ------------------------------- 1999 2000 1999 2000 -------------- --------------- ------------ -------------- Net income $ 900 $ 1,523 $ 2,112 $ 2,570 Foreign currency translation adjustment 1,248 25 1,862 (1,065) -------------- -------------- ------------- -------------- Total comprehensive income $ 2,148 $ 1,548 $ 3,974 $ 1,505 ============== =============== ============ ==============
4. GEOGRAPHIC SEGMENT INFORMATION All operations for which geographic data is presented below are in one principal industry (check cashing and ancillary services) (in thousands):
United United States Canada Kingdom Total --------------- ---------------- ---------------- ---------------- As of and for the three months ended December 31, 1999 Identifiable assets $ 129,040 $ 59,837 $ 45,535 $ 234,412 Sales to unaffiliated customers 23,800 10,099 5,982 39,881 Income before income taxes 1,107 2,345 512 3,964 Income tax provision 2,210 713 141 3,064 --------------- ---------------- ---------------- ---------------- Net (loss) income $ (1,103) $ 1,632 $ 371 $ 900 =============== ================ ================ ================ For the six months ended December 31, 1999 Sales to unaffiliated customers $ 45,343 $ 19,238 $ 10,132 $ 74,713 Income before income taxes 1,381 4,344 1,559 7,284 Income tax provision 3,447 1,285 440 5,172 --------------- ---------------- ---------------- ---------------- Net (loss) income $ (2,066) $ 3,059 $ 1,119 $ 2,112 =============== ================ ================ ================ As of and for the three months ended December 31, 2000 Identifiable assets $ 146,634 $ 68,785 $ 58,850 $ 274,269 Sales to unaffiliated customers 29,795 12,309 7,152 49,256 Income (loss) before income taxes 1,156 2,811 (292) 3,675 Income tax provision 834 1,181 137 2,152 --------------- ---------------- ---------------- ---------------- Net income (loss) $ 322 $ 1,630 $ (429) $ 1,523 =============== ================ ================ ================
11 DOLLAR FINANCIAL GROUP, INC. NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) 4. GEOGRAPHIC SEGMENT INFORMATION (continued)
United United States Canada Kingdom Total --------------- ---------------- ---------------- ---------------- For the six months ended December 31, 2000 Sales to unaffiliated customers $ 55,928 $ 24,382 $ 14,177 $ 94,487 Income before income taxes 1,008 5,293 463 6,764 Income tax provision 1,573 2,328 293 4,194 --------------- ---------------- ---------------- ---------------- Net (loss) income $ (565) $ 2,965 $ 170 $ 2,570 =============== ================ ================ ================
5. 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 July 7, 1999, the Company purchased 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 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 identifiable net assets acquired was $8.2 million. Additional consideration of $9.7 million was paid in fiscal 2001 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 Cash Centres 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 purchased primarily all of the assets of CheckStop, Inc. ("CheckStop"), which was a short-term 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. On August 1, 2000, the Company purchased all of the outstanding shares of West Coast Chequing Centres, LTD ("WCCC") which operated six stores in British Columbia. The aggregate purchase price for this acquisition was 12 DOLLAR FINANCIAL GROUP, INC. NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) 5. ACQUISITIONS (Continued) $1.5 million and was funded through excess internal cash. The excess price over the fair value of identifiable net assets acquired was $1.4 million. On August 7, 2000, the Company purchased substantially all of the assets of Fast `n Friendly Check Cashing ("F&F"), which operated 8 stores in Maryland. The aggregate purchase price for this acquisition was $700,000 and was funded through the Company's revolving credit facility. The excess purchase price over fair value of identifiable net assets acquired was $660,000. The agreement also includes a maximum potential contingent payment to the sellers of $150,000 based on future revenue. On August 28, 2000, the Company purchased primarily all of the assets of Ram-Dur Enterprises, Inc., d/b/a AAA Check Cashing Centers ("AAA"), which operated five stores in Tucson, Arizona. The aggregate purchase price for this acquisition was $1.3 million and was funded through the Company's revolving credit facility. The excess purchase price over fair value of identifiable net assets acquired was $1.2 million. On December 5, 2000, the Company purchased all of the outstanding shares of Fastcash Ltd. ("FCL"), which operated 13 company owned stores and 27 franchises in The United Kingdom. The aggregate purchase price for this acquisition was $3.1 million and was funded through the Company's revolving credit facility. The excess of the purchase price over the fair value of the identifiable assets acquired was $2.7 million. The agreement also includes a maximum potential contingent payment to the sellers of $2.8 million based on future levels of profitability. The following unaudited pro forma information for the six months ended December 31, 1999 and 2000 presents the results of operations as if the Acquisitions had occurred as of the beginning of the periods presented. The pro forma operating results include the results of these acquisitions for the indicated period and reflect the amortization of intangible assets arising from the Acquisitions, increased interest expense on acquisition debt, the income tax impact and other immaterial activities discontinued as of the respective purchase dates of the Acquisitions. 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.
Three Months Ended Six Months Ended December 31, December 31, (Unaudited) (Unaudited) ---------------------------- --------------------------------- 1999 2000 1999 2000 ------------ ------------ ------------- --------------- (dollars in thousands) (dollars in thousands) Revenues $ 43,611 $ 49,761 $ 82,368 $ 96,072 Net income $ 1,173 $ 1,531 $ 2,352 $ 2,573
6. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES Operations in the United Kingdom and Canada have exposed the Company to shifts in currency valuations. Precautions have been taken by the Company should certain exchange rates shift. For the United Kingdom subsidiary, put options with a notional value of 7.0 million British Pounds were purchased to protect quarterly earnings in the United Kingdom against foreign exchange fluctuations in fiscal year 2001. 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 December 31, 2000. The loss recognized in earnings for the three and six months ended was minimal. 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. 13 DOLLAR FINANCIAL GROUP, INC. NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) SUPPLEMENTAL STATISTICAL DATA
December 31, Company Operating Data: 1999 2000 ----------- -------------- Number of Locations: Company-Owned......................................... 456 637 Franchised Stores and Check Cashing Agents............ 314 364 --- --- Total.................................................... 770 1,001 === =====
Three Months Ended Six Months Ended December 31, December 31, ---------------------------- -------------------------- Operating Data: 1999 2000 1999 2000 ----------- ----------- ---------- ----------- Face amount of checks cashed (in millions)............... $ 648 $ 776 $ 1,260 $ 1,537 Face amount of average check............................. $ 320 $ 324 $ 319 $ 329 Face amount of average check (excluding Canada and the United Kingdom)...................................... $ 342 $ 366 $ 342 $ 366 Average fee per check.................................... $ 11.47 $ 10.73 $ 11.22 $ 10.92 Number of checks cashed (in thousands)................... 2,026 2,396 3,953 4,675 Adjusted EBITDA1 ....................................... $ 11,168 $ 12,037 $ 20,999 $ 23,283 Adjusted EBITDA Margin1.................................. 28.0% 24.4% 28.1% 24.6%
Three Months Ended Six Months Ended December 31, December 31, ------------------------- ------------------------------- Collections Data: 1999 2000 1999 2000 ----------- ---------- ----------- --------- Face amount of returned checks (in thousands)............ $ 5,668 $ 6,670 $ 10,722 $ 13,384 Collections (in thousands)............................... 4,039 4,488 7,677 9,358 -------- ------ -------- --------- Net write-offs (in thousands)............................ $ 1,629 $ 2,182 $ 3,045 $ 4,026 ======== ====== ======== ========= Collections as a percentage of returned checks....................................... 71.3% 67.3% 71.6% 69.9% Net write-offs as a percentage of check cashing revenues................................ 7.0% 8.5% 6.8% 7.9% Net write-offs as a percentage of the face amount of checks cashed.......................... 0.25% 0.28% 0.24% 0.26%
[FN] 1Adjusted EBITDA is earnings before interest, taxes, depreciation, amortization, noncash charges 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, 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. 14 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General The Company is a consumer financial services company operating the second largest check cashing store network in the United States and the largest such network in Canada and the United Kingdom. The Company provides a diverse range of consumer financial products and services primarily consisting of check cashing, short-term consumer loans, money orders, money transfers and various other related services. The Company, in its opinion, has included all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of its financial position as of December 31, 2000 and the results of operations for the three and six months ended December 31, 2000 and 1999. The results for the three and six months ended December 31, 2000 are not necessarily indicative of the results for the full fiscal year and should be read in conjunction with the Company's unaudited financial statements and its Annual Report on Form 10-K for the fiscal year ended June 30, 2000. The Company has contracts with various governmental agencies for benefits distribution and retail merchant services. The Company's contract expiration date with the State of New York 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 both six-month extensions extending the Company's contract to June 30, 2001. The Company has received information from the State of New York pertaining to a statewide implementation of an Electronic Benefit Transfer ("EBT") system 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 system in the State of New York. Acquisitions On July 7, 1999, the Company purchased 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 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 due 2006 ("Senior Subordinated Notes"). The excess of the purchase price over the fair value of identifiable net assets acquired was $8.2 million. Additional consideration of $9.7 million was paid in fiscal 2001 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 Cash Centres 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 purchased primarily all of the assets of CheckStop, Inc. ("CheckStop"), which was a short-term 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 15 includes a maximum potential contingent payment to the sellers of $350,000 based upon future results of operations. On August 1, 2000, the Company purchased all of the outstanding shares of West Coast Chequing Centres, LTD ("WCCC") which operated six stores in British Columbia. The aggregate purchase price for this acquisition was $1.5 million and was funded through excess internal cash. The excess price over the fair value of identifiable net assets acquired was $1.4 million. On August 7, 2000, the Company purchased substantially all of the assets of Fast `n Friendly Check Cashing ("F&F"), which operated 8 stores in Maryland. The aggregate purchase price for this acquisition was $700,000 and was funded through the Company's revolving credit facility. The excess purchase price over fair value of identifiable net assets acquired was $660,000. The agreement also includes a maximum potential contingent payment to the sellers of $150,000 based on future revenue. On August 28, 2000, the Company purchased primarily all of the assets of Ram-Dur Enterprises, Inc., d/b/a AAA Check Cashing Centers ("AAA"), which operated five stores in Tucson, Arizona. The aggregate purchase price for this acquisition was $1.3 million and was funded through the Company's revolving credit facility. The excess purchase price over fair value of identifiable net assets acquired was $1.2 million. On December 5, 2000, the Company purchased all of the outstanding shares of Fastcash Ltd. ("FCL"), which operated 13 company owned stores and 27 franchises in The United Kingdom. The aggregate purchase price for this acquisition was $3.1 million and was funded through the Company's revolving credit facility. The excess of the purchase price over the fair value of the identifiable assets acquired was $2.7 million. The agreement also includes a maximum potential contingent payment to the sellers of $2.8 million based on future levels of profitability. All of the acquisitions described above (collectively, the "Acquisitions") have been accounted for under the purchase method of accounting. Therefore, the historical results of operations include the revenues and expenses of all the acquired companies since their respective dates of acquisition. 16 RESULTS OF OPERATIONS Revenue Analysis
Three Months Ended December 31, Six Months Ended December 31, (Percentage of (Percentage of ($ in thousands) Total Revenue) ($ in thousands) Total Revenue) ----------------------- --------------------- ---------------------- --------------------- 1999 2000 1999 2000 1999 2000 1999 2000 --------- --------- -------- -------- --------- --------- -------- -------- Check cashing.................... $23,431 $25,715 58.8% 52.2% $44,531 $51,068 59.6% 54.0% Cash`Til Payday(R) origination fees.......................... 7,720 15,526 19.4 31.5 14,029 27,206 18.8 28.8 Government services.............. 1,600 1,463 4.0 3.0 3,240 3,026 4.3 3.2 Money transfer fees.............. 1,832 2,274 4.6 4.6 3,649 4,451 4.9 4.7 Other revenue.................... 5,298 4,278 13.2 8.7 9,264 8,736 12.4 9.3 --------- --------- -------- --------- ---------- --------- -------- -------- Total revenue.................... $39,881 $49,256 100.0% 100.0% $74,713 $94,487 100.0% 100.0% ========= ========= ======== ========= ========== ========= ======== ========
QUARTER COMPARISON Total revenues were $49.3 million for the three months ended December 31, 2000 compared to $39.9 million for the three months ended December 31, 1999, an increase of $9.4 million or 23.6%. The Acquisitions and new store openings accounted for an increase of $4.8 million and $3.1 million, respectively. Comparable retail store sales at those locations owned by the Company for the entire period increased $2.6 million or 7.2%. Check cashing revenue decreased 7.0% and Cash `Til Payday(R) origination fees increased 58.5%. The increase in Cash `Til Payday(R) origination fees resulted primarily from improvements in product design. Partially offsetting this increase, however, was a 6.9% and 5.6% decline in revenues from government services and other revenue, respectively. SIX MONTH COMPARISON Total revenues were $94.5 million for the six months ended December 31, 2000 compared to $74.7 million for the six months ended December 31, 1999, an increase of $19.8 million or 26.5%. The Acquisitions and new store openings accounted for an increase of $9.0 million and $5.1 million, respectively. Comparable retail store sales at those locations owned by the Company for the entire period increased $5.1 million or 8.3%. Check cashing revenue decreased 4.4%, Cash `Til Payday(R) origination fees increased 53.7% and other revenues decreased 1.2%. The increase in Cash `Til Payday(R) origination fees resulted primarily from improvements in product design. Partially offsetting this increase, however, was a 12.2% decline in revenues from government services. 17 Store and Regional Expense Analysis
Three Months Ended December 31, Six Months Ended December 31, (Percentage of (Percentage of ($ in thousands) total revenue) ($ in thousands) total revenue) ----------------------- -------------------- ----------------------- ------------------------ 1999 2000 1999 2000 1999 2000 1999 2000 ---------- --------- -------- ------- ---------- --------- --------- --------- Salaries and benefits ...... $11,479 $14,513 28.8% 29.5% $21,718 $27,985 29.1% 29.6% Occupancy................... 3,141 4,275 7.9 8.7 6,069 8,256 8.1 8.7 Depreciation................ 1,068 1,477 2.7 3.0 1,952 2,845 2.6 3.0 Other....................... 9,246 13,080 23.2 26.6 16,475 23,642 22.1 25.0 --------- ---------- -------- ------- --------- --------- --------- --------- Total store and regional expenses................. $24,934 $33,345 62.6% 67.8% $46,214 $62,728 61.9% 66.3% ========= ========== ======== ======= ========= ========= ========= =========
QUARTER COMPARISON Store and regional expenses were $33.3 million for the three months ended December 31, 2000 compared to $24.9 million for the three months ended December 31, 1999, an increase of $8.4 million or 33.7%. The Acquisitions accounted for an increase of $4.3 million and new store openings resulted in an increase of $4.2 million. For the three months ended December 31, 2000 total store and regional expenses increased to 67.8% of total revenue compared to 62.6% of total revenue for the three months ended December 31, 1999 due to increased start-up costs associated with new store openings. SIX MONTH COMPARISON Store and regional expenses were $62.7 million for the six months ended December 31, 2000 compared to $46.2 million for the six months ended December 31, 1999, an increase of $16.5 million or 35.7%. Store and regional expenses associated with the Acquisitions were $7.3 million and new store openings accounted for an increase of $7.1 million. For the six months ended December 31, 1999 total store and regional expenses increased to $66.3% of total revenue compared to 61.9% of total revenue due to increased start-up costs associated with new store openings. 18 Other Expense Analysis
Three Months Ended December 31, Six Months Ended December 31, ($ in thousands) (Percentage of ($ in thousands) (Percentage of revenues) revenues) ------------------- ---------------------- -------------------- ---------------------- 1999 2000 1999 2000 1999 2000 1999 2000 ------- ------- ------- --------- -------- --------- -------- -------- Corporate expenses................ $4,743 $5,311 11.9% 10.8% $9,283 $11,525 12.4% 12.2% Loss on store closings and sales...................... 27 41 0.1 0.1 71 75 0.1 0.1 Goodwill amortization............. 1,483 1,175 3.7 2.4 2,659 2,256 3.6 2.4 Other depreciation and amortization................... 351 476 0.9 1.0 653 946 0.9 1.0 Interest expense.................. 4,246 5,233 10.6 10.6 8,416 10,193 11.3 10.8 Recapitalization costs and other non-recurring items............ 133 - 0.3 0.0 133 - 0.2 0.0 Income tax provision.............. 3,064 2,152 7.7 4.4 5,172 4,194 6.9 4.4
QUARTER COMPARISON Corporate Expenses Corporate expenses were $5.3 million for the three months ended December 31, 2000 compared to $4.7 million for the three months ended December 31, 1999, an increase of $600,000 or 12.8%. Additional costs have been incurred as a result of the Acquisitions and the opening of new stores. Goodwill Amortization For the three months ended December 31, 2000, goodwill amortization was $1.2 million compared to $1.5 million for the three months ended December 31, 1999, a decrease of $300,000 . The decrease is due to the completion of the accelerated amortization of the remaining goodwill associated with the pending expiration of the Company's government services lines of business, partially offset by the goodwill associated with the Acquisitions. Other Depreciation and Amortization Other depreciation and amortization expenses were $500,000 and $400,000 for the three months ended December 31, 2000 and 1999, respectively, an increase of $100,000. The increase is the result of non-store and regional depreciation related to the Acquisitions. Interest Expense Interest expense was $5.2 million for the three months ended December 31, 2000 and was $4.2 million for the three months ended December 31, 1999, an increase of $1.0 million or 23.8%. This increase is primarily attributable to the increase in borrowings under the Company's revolving credit facilities to fund acquisitions, purchases of property and equipment related to existing stores, recently acquired or opened 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 During the three months ended December 31, 1999, the Company, which is a wholly-owned subsidiary of DFG Holdings, Inc. ("Holdings") made a subsequent adjustment of $133,000 for the recapitalization of Holdings. Income Taxes The provision for income taxes was $2.2 million for the three months ended December 31, 2000 compared to $3.1 million for the three months ended December 31, 1999, a decrease of $900,000. The Company's effective tax rate is significantly greater than the federal statutory rate of 34% due to non-deductible goodwill amortization, state taxes and foreign taxes. 19 SIX MONTH COMPARISON Corporate Expenses Corporate expenses were $11.5 million for the six months ended December 31, 2000 compared to $9.3 million for the six months ended December 31, 1999, an increase of $2.2 million or 23.7%. Additional costs have been incurred as a result of the Acquisitions and the opening of new stores. Goodwill Amortization For the six months ended December 31, 2000 and 1999, goodwill amortization was $2.3 million and $2.7 million, respectively, a decrease of $400,000. The decrease is due to the completion of the accelerated amortization of the remaining goodwill associated with the pending expiration of the Company's government services lines of business, partially offset by the goodwill associated with the Acquisitions. Other Depreciation and Amortization Other depreciation and amortization expenses were $900,000 and $700,000 for the six months ended December 31, 2000 and 1999, respectively, an increase of $200,000. The increase is the result of non-store and regional depreciation related to the Acquisitions. Interest Expense Interest expense was $10.2 million for the six months ended December 31, 2000 and was $8.4 million for the six months ended December 31, 1999, an increase of $1.8 million or 21.4%. This increase is primarily attributable to the increase in borrowings under the Company's revolving credit facilities to fund acquisitions, purchases of property and equipment related to existing stores, recently acquired or opened stores and investments in technology and the increase in the borrowing rates of the Company's revolving credit facilities. Recapitalization and Other Non-recurring Items During the three months ended December 31, 1999, the Company, which is a wholly-owned subsidiary of DFG Holdings, Inc. ("Holdings") made a subsequent adjustment of $133,000 for the recapitalization of Holdings. Income Taxes The provision for income taxes was $4.2 million for the six months ended December 31, 2000 compared to $5.2 million for the six months ended December 31, 1999, a decrease of $1.0 million. The Company's effective tax rate is significantly greater than the federal statutory rate of 34% due to state taxes, foreign taxes and non-deductible goodwill amortization. Changes in Financial Condition Cash and cash equivalent balances and the revolving credit facilities balances fluctuate significantly as a result of seasonal, monthly and day-to-day requirements for funding check cashing and other operating activities. For the six months ended December 31, 2000, cash and cash equivalents increased $300,000. Revolving credit facilities increased $21.9 million due to the acquisitions of WCCC, F&F, AAA and FCL, the payment of additional consideration for CAC and the purchases of property and equipment totaling $7.2 million. Net cash generated by operations totaled $3.6 million. During the six months ended December 31, 2000, accounts receivable increased by $6.8 million. Accounts receivable is affected by the timing of payments received on the remaining government contracts, increases in outstanding consumer loans funded by the Company's foreign subsidiaries as well as timing of settlement payments related to the Company's Cash `Til Payday product. 20 Accrued expenses, during the six months ended December 31, 2000, decreased due to the payment of additional consideration of $9.7 million for CAC, which was recorded as of June 30, 2000. 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 six months ended December 31, 2000 and 1999, the Company had net cash provided by operating activities of $3.6 million and $9.7 million, respectively, for purchases of property and equipment related to existing stores, recently acquired and opened stores, investments in technology and acquisitions. The decrease in net cash provided by operations was primarily the result of increases in accounts receivable due to the timing of payments received on the Company's remaining government contracts, increases in outstanding consumer loans funded by the Company's foreign subsidiaries as well as timing of settlement payments related to the Company's Cash `Til Payday product. For the six months ended December 31, 2000, the Company had made capital expenditures of $7.2 million. The actual amount of capital expenditures for the year will depend in part upon the number of new stores acquired or opened and the number of stores remodeled. The Company's budgeted capital expenditures, excluding acquisitions, are currently anticipated to aggregate approximately $14.0 million during its fiscal year ending June 30, 2001, for remodeling and relocation of certain existing stores and for opening new stores. During the quarter, the Company negotiated and executed an amendment to its credit facility providing for an increase in the facility of $15 million up to $85 million with the same terms and conditions. The increase in the credit facility will be used primarily to fund the working capital needs of the acquisitions and new stores. The borrowings under the revolving credit facility as of December 31, 2000 were $66.3 million. The Senior Notes due 2006 ("Senior Notes"), Senior Subordinated Notes and the revolving credit facility contain certain financial and other restrictive covenants, which, among other things, require the Company to achieve certain financial ratios, limit capital expenditures, restrict payment of dividends, and require certain approvals in the event the Company wants to increase the borrowings. The Company also has an overdraft credit facility to fund peak working capital needs for its Canadian operation. The overdraft facility provides for borrowings up to $4.7 million, of which $500,000 was outstanding as of December 31, 2000. For the Company's United Kingdom operations, the Company also has an overdraft facility which provides for a commitment of up to approximately $7.5 million of which $4.7 million was outstanding as of December 31, 2000. The overdraft facility is secured by an $8.0 million letter of credit issued by Wells Fargo Bank under the revolving credit facility. The Company is highly leveraged, and borrowings under the revolving credit facility and the overdraft facilities will increase the Company's debt service requirements. Management believes that, based on current levels of operations and anticipated improvements in operating results, cash flows from operations and borrowings available under the revolving credit facility will enable the Company to fund its liquidity and capital expenditure requirements for the foreseeable future, including scheduled payments of interest on the Senior Notes and Senior Subordinated Notes and payment of interest and principal on the Company's other indebtedness. 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 the 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 revolving credit facility in an amount sufficient to enable the Company to service its indebtedness, including the Senior Notes and Senior Subordinated Notes, or to make anticipated capital expenditures. It may be necessary for the Company to refinance all or a portion of its indebtedness on or prior to maturity, under certain circumstances, but there can be no assurance that the Company will be able to effect such refinancing on commercially reasonable terms or at all. 21 Seasonality and Quarterly Fluctuations The Company's business is seasonal due to the impact of tax-related services, including cashing tax refund checks. Historically, the Company has generally experienced its highest revenues and earnings during its third fiscal quarter ending March 31 when revenues from these tax-related services peak. Due to the seasonality of the Company's business, therefore, results of operations for any fiscal quarter are not necessarily indicative of the results that may be achieved for the full fiscal year. In addition, quarterly results of operations depend significantly upon the timing and amount of revenues and expenses associated with acquisitions and the addition of new stores. Recent Accounting Pronouncements In 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. In June 1998, the FASB issued Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities". This statement was adopted effective July 1, 2000, and does not materially impact the Company's financial statements. Cautioning Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995 This report may contain certain forward-looking statements regarding the Company's expected performance for future periods, and actual results for such periods may materially differ. Such forward-looking statements involve risks and uncertainties, including risks of changing market conditions in the overall economy and the industry, consumer demand, the success of the Company's acquisition strategy and other factors detailed from time to time in the Company's annual and other reports filed with the Securities and Exchange Commission. 22 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There were no material changes for Quantitative and Qualitative Disclosures About Market Risk from the Company's audited financial statements in its Annual Report on Form 10-K for the fiscal year ended June 30, 2000. 23 PART II - OTHER INFORMATION Item 1. Legal Proceedings There were no material changes to Part II, Item 1 of the Registrant's Statement on Form 10Q filed November 14, 2000. Item 2. Changes in Securities and Use of Proceeds Not Applicable Item 3. Defaults Upon Senior Securities Not Applicable Item 4. Submission of Matters to a Vote of Security Holders Not Applicable Item 5. Other Information Not Applicable Item 6. Exhibits and Reports on Form 8-K 27.1 Financial Data Schedule (b) Reports on Form 8-K None 24 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DOLLAR FINANCIAL GROUP, INC. Dated: February 14, 2001 *By: /s/ Richard S. Dorfman ------------------------------------ Name: Richard S. Dorfman Title: Executive Vice President and Chief Financial Officer, (principal financial and chief accounting officer) * The signatory hereto is the principal financial and chief accounting officer and has been duly authorized to sign on behalf of the registrant. 25 EX-27.1 2 0002.txt FINANCIAL DATA SCHEDULE
5 This schedule contains summary information from the financial statements contained in the body of the accompanying Form 10-Q and is qualified in its entirety by reference to such financial statements. 1000 6-MOS JUN-30-2001 JUL-01-2000 DEC-31-2000 73,618 0 19,895 0 0 99,492 46,391 18,679 274,269 32,264 129,380 0 0 0 41,100 274,269 0 94,487 0 62,728 14,802 0 10,193 6,764 4,194 2,570 0 0 0 2,570 0 0
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