-----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, GDGPUTCbMDey90lDj8SRrmyx+5+b/0p8giuMdP+otyszRjBDeIpRqixw9ZCWflAl OMjJ4VFDKvtuVm2ovZsY1Q== 0001028643-02-000025.txt : 20021119 0001028643-02-000025.hdr.sgml : 20021119 20021119155009 ACCESSION NUMBER: 0001028643-02-000025 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20020930 FILED AS OF DATE: 20021119 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: 1934 Act SEC FILE NUMBER: 333-18221 FILM NUMBER: 02833097 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 a10q093002.txt DFG 9/30/02 10Q 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 September 30, 2002 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from _____ to _____ Commission file number 333-18221 DOLLAR FINANCIAL GROUP, INC. (Exact Name of Registrant as Specified in Its Charter) NEW YORK 13-2997911 (State or Other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) 1436 LANCASTER AVENUE, SUITE 210 BERWYN, PENNSYLVANIA 19312 (Address of Principal Executive Offices) (Zip Code) 610-296-3400 (Registrant's Telephone Number, Including Area Code) None (Former name, former address and former fiscal year, if changed since last report) Indicate by check 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 November 14, 2002, 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, 2002 and September 30, 2002 (unaudited).......................................................... 3 Interim Unaudited Consolidated Statements of Operations for the Three Months Ended September 30, 2001 and 2002.................................................... 4 Interim Unaudited Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2001 and 2002........................................................... 5 Notes to Interim Unaudited Consolidated Financial Statements................................ 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations....................................................................... 17 Item 3. Quantitative and Qualitative Disclosures About Market Risk........................................................................... 24 PART II. OTHER INFORMATION Item 1. Legal Proceedings........................................................................... 25 Item 2. Changes in Securities and Use of Proceeds................................................... 25 Item 3. Defaults Upon Senior Securities............................................................. 25 Item 4. Submission of Matters to a Vote of Security Holders......................................... 25 Item 5. Other Information........................................................................... 25 Item 6. Exhibits and Reports on Form 8-K............................................................ 25
2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS DOLLAR FINANCIAL GROUP, INC. INTERIM CONSOLIDATED BALANCE SHEETS (In thousands except share amounts) June 30, September 30, 2002 2002 -------------- -------------- ASSETS (unaudited) Cash and cash equivalents.......................................................$ 86,633 $ 77,288 Loans and other receivables, net................................................ 20,542 28,533 Income taxes receivable......................................................... - 282 Prepaid expenses .............................................................. 6,745 6,515 Notes receivable - officers..................................................... 2,756 2,756 Due from parent................................................................. 3,606 3,886 Property and equipment, net of accumulated depreciation of $30,119 and $31,780..................................................... 30,510 28,500 Goodwill and other intangibles, net of accumulated amortization of $21,070 and $21,089......................................... 132,264 131,567 Debt issuance costs, net of accumulated amortization of $6,153 and $6,593.......................................................... 6,292 5,916 Other........................................................................... 1,964 1,811 ------------- -------------- $ 291,312 $ 287,054 ============= ============== LIABILITIES AND SHAREHOLDER'S EQUITY Accounts payable ..............................................................$ 18,249 $ 16,650 Income taxes payable............................................................ 1,831 - Accrued expenses ............................................................... 7,932 8,242 Accrued interest payable........................................................ 1,539 5,104 Deferred tax liability.......................................................... 55 463 Revolving credit facilities..................................................... 78,936 74,454 10-7/8 % Senior Notes due 2006.................................................. 109,190 109,190 Subordinated notes payable and other............................................ 20,065 20,021 Shareholder's equity: Common stock, $1 par value: 20,000 shares authorized; 100 shares issued and outstanding at June 30, 2002 and September 30, 2002........................................ - - Additional paid-in capital...................................................... 50,957 50,957 Retained earnings............................................................... 6,903 7,714 Accumulated other comprehensive loss............................................ (4,345) (5,741) ------------- -------------- Total shareholder's equity.................................................. 53,515 52,930 ------------- -------------- $ 291,312 $ 287,054 ============= ==============
See notes to interim unaudited consolidated financial statements. 3 DOLLAR FINANCIAL GROUP, INC. INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands) Three Months Ended September 30, ------------------------------------- 2001 2002 ------------------------------------- Revenues................................................................$ 49,223 $ 52,653 Store and regional expenses: Salaries and benefits................................................ 15,044 17,147 Occupancy............................................................ 4,625 4,799 Depreciation......................................................... 1,482 1,619 Other................................................................ 11,980 12,857 ------------- -------------- Total store and regional expenses....................................... 33,131 36,422 Corporate expenses...................................................... 5,730 7,248 Loss on store closings and sales........................................ 88 488 Other depreciation and amortization..................................... 537 843 Interest expense (net of interest income of $96 and $42)............... 4,754 4,931 ------------- -------------- Income before income taxes................................................................... 4,983 2,721 Income tax provision.................................................... 3,139 1,910 ------------- -------------- Net income .............................................................$ 1,844 $ 811 ============= ==============
See notes to interim unaudited consolidated financial statements. 4 DOLLAR FINANCIAL GROUP, INC. INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Three Months Ended September 30, ------------------------------------- 2001 2002 ---------------- -------------- Cash flows from operating activities: Net income......................................................................... $ 1,844 $ 811 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization................................................ 2,384 2,902 Loss on store closings and sales............................................. 88 488 Deferred tax provision....................................................... 676 408 Change in assets and liabilities (net of effect of acquisitions): Decrease (increase) in loans and other receivables and income taxes receivable.............................................................. 2,891 (8,298) (Increase) decrease in prepaid expenses and other......................... (22) 411 (Decrease) increase in accounts payable, income taxes payable, accrued expenses and accrued interest payable........................... (495) 576 -------------- -------------- Net cash provided by (used in) operating activities................................ 7,366 (2,702) Cash flows from investing activities: Acquisitions, net of cash acquired............................................... (104) - Additions to property and equipment.............................................. (1,700) (1,092) ---------------- -------------- Net cash used in investing activities.............................................. (1,804) (1,092) Cash flows from financing activities: Other debt payments ............................................................. (38) (45) Net decrease in revolving credit facilities...................................... (4,050) (4,482) Payment of debt issuance costs................................................... - (64) Net increase in due to parent.................................................... (265) (280) ---------------- -------------- Net cash used in financing activities.............................................. (4,353) (4,871) Effect of exchange rate changes on cash and cash equivalents....................... (660) (680) ---------------- -------------- Net increase (decrease) in cash and cash equivalents............................... 549 (9,345) Cash and cash equivalents at beginning of period................................... 72,452 86,633 ---------------- -------------- Cash and cash equivalents at end of period......................................... $ 73,001 $ 77,288 ================ ==============
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, 2002 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 accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. 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 September 30, 2002. The Company, through its subsidiaries, provides retail financial services to the general public through a network of 1,057 locations (of which 639 are Company owned) operating as Money Mart(R), The Money Shop and Loan Mart(R) in seventeen 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, the Company's subsidiary, Money Mart(R) Express (formerly known as moneymart.com(TM)), services and originates short-term consumer loans through 651 independent document transmitters in 16 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' guarantee 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, each of which is wholly-owned, 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 condensed consolidating balance sheet at September 30, 2002, and the consolidating statements of operations and cash flows for the three month period ended September 30, 2002 of the Company (on a parent-company basis), combined domestic Guarantors, combined foreign subsidiaries and the consolidated Company. 7 DOLLAR FINANCIAL GROUP, INC. NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) CONSOLIDATING BALANCE SHEETS September 30, 2002 (In thousands) Dollar Domestic Foreign Financial Subsidiary Subsidiary Group, Inc. Guarantors Guarantors Eliminations Consolidated ------------ ------------- ------------- --------------- ------------- ASSETS Cash and cash equivalents.........................$ 12,393 $ 27,101 $ 37,794 $ - $ 77,288 Loans and other receivables, net.................. 10,383 4,623 14,445 (918) 28,533 Income taxes receivable........................... 11,042 - - (10,760) 282 Prepaid expenses.................................. 697 1,978 3,840 - 6,515 Deferred income taxes............................. 1,166 - - (1,166) - Notes receivable-officers......................... 2,756 - - - 2,756 Due from affiliates............................... 14,341 52,764 - (67,105) - Due from parent................................... 3,886 - - - 3,886 Property and equipment, net....................... 6,332 10,721 11,447 - 28,500 Goodwill and other intangibles, net............... 143 56,357 75,067 - 131,567 Debt issuance costs, net.......................... 5,916 - - - 5,916 Investment in subsidiaries........................ 188,519 9,801 6,705 (205,025) - Other............................................. 92 598 1,121 - 1,811 ------------ ------------- ------------- -------------- ------------- $ 257,666 $ 163,943 $ 150,419 $ (284,974) $ 287,054 ============ ============= ============= ============== ============= LIABILITIES AND SHAREHOLDER'S EQUITY Accounts payable..................................$ 95 $ 7,913 $ 8,642 $ - $ 16,650 Income taxes payable.............................. - 8,604 2,156 (10,760) - Accrued expenses.................................. 2,520 1,644 4,078 - 8,242 Accrued interest payable.......................... 5,076 - 946 (918) 5,104 Deferred tax liability............................ - 1,629 - (1,166) 463 Due to affiliates................................. - - 67,105 (67,105) - Revolving credit facilities....................... 65,700 - 8,754 - 74,454 10-7/8% Senior Notes due 2006..................... 109,190 - - - 109,190 Subordinated notes payable and other.............. 20,000 - 21 - 20,021 ------------ ------------- ------------- -------------- ------------- 202,581 19,790 91,702 (79,949) 234,124 Shareholder's equity: Common stock...................................... - - - - - Additional paid-in capital........................ 50,957 81,800 27,304 (109,104) 50,957 Retained earnings................................. 7,714 62,810 33,111 (95,921) 7,714 Accumulated other comprehensive loss.............. (3,586) (457) (1,698) - (5,741) ------------ ------------- ------------- --------------- ------------- Total shareholder's equity........................ 55,085 144,153 58,717 (205,025) 52,930 ------------ ------------- ------------- --------------- ------------- $ 257,666 $ 163,943 $ 150,419 $ (284,974) $ 287,054 ============ ============= ============= =============== =============
8 DOLLAR FINANCIAL GROUP, INC. NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) CONSOLIDATING STATEMENTS OF OPERATIONS Three Months Ended September 30, 2002 (In thousands) Dollar Domestic Foreign Financial Subsidiary Subsidiary Group, Inc. Guarantors Guarantors Eliminations Consolidated ------------ ------------ ----------- ------------ ------------ Revenues............................................. $ - $ 26,080 $ 26,573 $ - $ 52,653 Store and regional expenses: Salaries and benefits............................. - 10,633 6,514 - 17,147 Occupancy......................................... - 2,950 1,849 - 4,799 Depreciation...................................... - 839 780 - 1,619 Other............................................. - 8,091 4,766 - 12,857 ------------ ------------ ----------- ----------- ------------ Total store and regional expenses.................... - 22,513 13,909 - 36,422 Corporate expenses................................... 4,289 88 2,871 - 7,248 Management fees...................................... (1,787) 2,020 (233) - - Loss on store closings and sales..................... 60 419 9 - 488 Other depreciation and amortization.................. 465 14 364 - 843 Interest expense (income)............................ 4,190 2,640 (1,899) - 4,931 ------------ ------------ ----------- ----------- ------------ (Loss) income before income taxes ................... (7,217) (1,614) 11,552 - 2,721 Income tax (benefit) provision ...................... (2,586) 92 4,404 - 1,910 ------------ ------------ ----------- ----------- ------------ (Loss) income before equity in net (loss) income of subsidiaries................................. (4,631) (1,706) 7,148 - 811 Equity in net (loss) income of subsidiaries: Domestic subsidiary guarantors....................... (1,706) - - 1,706 - Foreign subsidiary guarantors........................ 7,148 - - (7,148) - ------------ ------------ ----------- ----------- ------------ Net income (loss).................................... $ 811 $ (1,706) $ 7,148 $ (5,442) $ 811 ============ ============ =========== =========== ============
9 DOLLAR FINANCIAL GROUP, INC. NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) CONSOLIDATING STATEMENTS OF CASH FLOWS Three Months Ended September 30, 2002 (In thousands) Dollar Domestic Foreign Financial Subsidiary Subsidiary Group, Guarantors Guarantors Eliminations Consolidated Inc. ----------- ----------- ------------ ------------ ------------ Cash flows from operating activities: Net income (loss).................................... $ 811 $ (1,706) $ 7,148 $ (5,442) $ 811 Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: Undistributed income of subsidiaries.......... (5,442) - - 5,442 - Depreciation and amortization................. 905 854 1,143 - 2,902 Loss on store closings and sales.............. 60 419 9 - 488 Deferred tax provision........................ - 408 - - 408 Change in assets and liabilities (net of effect of acquisitions): (Increase) decrease in loans and other receivables and income taxes receivable.... (9,208) 2,767 (505) (1,352) (8,298) Decrease (increase) in prepaid expenses and 166 (65) 310 - 411 other...................................... Increase (decrease) in accounts payable, income taxes payable, accrued expenses and accrued interest payable................... 1,122 562 (2,460) 1,352 576 ----------- ----------- ------------ ------------ ------------ Net cash (used in) provided by operating activities.. (11,586) 3,239 5,645 - (2,702) Cash flows from investing activities: Additions to property and equipment............. (223) (122) (747) - (1,092) Net decrease (increase) in due from affiliates.. 25,700 (17,421) - (8,279) - ----------- ----------- ------------ ------------ ------------ Net cash provided by (used in) investing activities.. 25,477 (17,543) (747) (8,279) (1,092) Cash flows from financing activities: Other debt payments............................. - - (45) - (45) Net decrease in revolving credit facilities..... (2,900) - (1,582) - (4,482) Payment of debt issuance costs.................. (64) - - - (64) Net increase in due from parent................. (280) - - - (280) Net decrease in due to affiliates............... - - (8,279) 8,279 - ----------- ----------- ------------ ------------ ------------ Net cash used in financing activities................ (3,244) - (9,906) 8,279 (4,871) Effect of exchange rate changes on cash and cash equivalents..................................... - - (680) - (680) ----------- ----------- ------------ ------------ ------------ Net increase (decrease) in cash and cash equivalents. 10,647 (14,304) (5,688) - (9,345) Cash and cash equivalents at beginning of period..... 1,746 41,405 43,482 - 86,633 ----------- ----------- ------------ ------------ ------------ Cash and cash equivalents at end of period........... $ 12,393 $ 27,101 $ 37,794 $ - $ 77,288 =========== =========== ============ ============ ============
10 DOLLAR FINANCIAL GROUP, INC. NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) 3. GOODWILL AND OTHER INTANGIBLES In accordance with the adoption provisions of SFAS No. 142, the Company is required to perform goodwill impairment tests on at least an annual basis. There can be no assurance that future goodwill impairment tests will not result in a charge to earnings. The Company has covenants not to compete, which are deemed to have a definite life and will continue to be amortized. Amortization for these intangibles for the three months ended September 30, 2002 was $43,000. The estimated aggregate amortization expense for each of the five succeeding fiscal years ending June 30, is: Year Amount ------------------- ---------------- 2003 173,000 2004 95,000 2005 19,000 2006 - 2007 -
The following table reflects the components of intangible assets (in thousands): June 30, 2002 September 30, 2002 ------------------------------------------ ---------------------------------------- Gross Carrying Accumulated Gross Carrying Accumulated Amount Amortization Amount Amortization ------------------- ----------------- ------------------- ---------------- Non-amortized intangible assets: Cost in excess of net assets acquired $ 150,954 $ 18,977 $ 150,300 $ 18,977 Amortized intangible assets: Covenants not to compete 2,380 2,093 2,356 2,112
4. COMPREHENSIVE INCOME (LOSS) Comprehensive income (loss) is the change in equity from transactions and other events and circumstances from non-owner sources, which includes foreign currency translation. The following shows the comprehensive income (loss) for the periods stated: Three Months Ended September 30, ------------------------------- 2001 2002 -------------- ------------- Net income $ 1,844 $ 811 Foreign currency translation adjustment (1,111) (1,396) -------------- ------------- Total comprehensive income (loss) $ 733 $ (585) ============== ============= 11 DOLLAR FINANCIAL GROUP, INC. NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) 5. 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 September 30, 2001 Identifiable assets $ 143,374 $ 69,126 $ 61,768 $ 274,268 Sales to unaffiliated customers 27,264 13,501 8,458 49,223 (Loss) income before income taxes (166) 4,082 1,067 4,983 Income tax provision 1,597 1,359 183 3,139 Net (loss) income (1,763) 2,723 884 1,844 As of and for the three months ended September 30, 2002 Identifiable assets $ 143,340 $ 69,093 $ 74,621 $ 287,054 Sales to unaffiliated customers 26,080 16,374 10,199 52,653 (Loss) income before income taxes (8,831) 9,821 1,731 2,721 Income tax (benefit) provision (2,494) 3,882 522 1,910 Net (loss) income (6,337) 5,939 1,209 811
12 DOLLAR FINANCIAL GROUP, INC. NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) 6. PENDING ACCOUNTING PRONOUNCEMENTS In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS 146 requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. Examples of costs covered by the standard include lease termination costs and certain employee severance costs that are associated with a restructuring, discontinued operation, plant closing or other exit or disposal activity. SFAS No. 146 is effective prospectively for exit and disposal activities initiated after December 31, 2002, with earlier adoption encouraged. As the provisions of SFAS No. 146 are required to be applied prospectively after the adoption date, management cannot determine the potential effects that adoption of SFAS No. 146 will have on the Company's consolidated financial statements. 7. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES Operations in the United Kingdom and Canada have exposed the Company to shifts in currency valuations. In fiscal year 2002, for the United Kingdom and Canada subsidiaries, put options with a notional value of 8.0 million British Pounds and 36.0 million Canadian Dollars, respectively, were purchased to protect quarterly earnings in the United Kingdom and Canada against foreign exchange fluctuations. 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. These contracts expired at the end of the fiscal year 2002. The Company has evaluated the effectiveness and suitability of the strategy and has temporarily suspended purchasing additional contracts. The Company's revolving credit facility and overdraft credit facilities carry a variable rate of interest. Precautions have been taken should variable rates of interest fluctuate. An interest rate cap with a notional value of $20 million has been purchased to protect the Company against increases in interest rates. As most of the Company's average outstanding indebtedness carries a fixed rate of interest, a change in interest rates is not expected to have a material impact on the consolidated financial position, results of operations or cash flows of the Company. 8. CONTINGENT LIABILITIES The Company is involved in routine litigation and administrative proceedings arising in the ordinary course of business. In the opinion of management, the outcome of such litigation and proceedings will not materially affect the Company's Consolidated Financial Statements. 9. SUBSEQUENT EVENTS On October 18, 2002, the Company entered into a marketing and servicing Agreement with a federally insured bank. When the agreement goes into effect, the Company will market unsecured loans in certain U.S. regions for the bank and originate loans up to $500 for customers who meet the bank's credit criteria. The Company will also service the loans so originated. This agreement may have the effect of reducing the loans on the Company's balance sheet reflected in loans and other receivables. At September 30, 2002, the Company exceeded the limit on one of its financial covenants related to its First Amended and Restated Credit Agreement and Waiver. On November 15, 2002, the Company negotiated and executed the Second Amendment to the Amended and Restated Credit Agreement and Waiver, under which the Company's lenders waived and modified that requirement as of September 30, 2002, modified the pricing structure of the credit facility and provided for further reductions of the borrowing capacity under the credit facility. The modified pricing structure increases the Company's borrowing rate under the facility from interest at one-day Eurodollar, as defined, plus 3.50% to interest at one-day Eurodollar, as defined, plus 4.00%. The Company's restated Revolving Credit Facility also contains provisions for reductions in the facility of $5 million within the earlier of (i) November 29, 2002 or (ii) the sale of certain assets. The facility will be reduced upon the sale of such certain assets by 75% of the net cash proceeds received on the date of the consummation of the sale. Such reduction must be at least $3 million by June 30, 2003. The restated Revolving Credit Facility also contains a provision for further reductions of $1.5 million by September 30, 2003 and an additional $1.5 million by December 31, 2003. The Company believes it will remain in compliance with its debt covenants for the next twelve months. 13 DOLLAR FINANCIAL GROUP, INC. NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) 9. SUBSEQUENT EVENTS (continued) On November 15, 2002, the Company entered into a Participation and Servicing Agreement with a third party to sell, without recourse subject to certain obligations, a participation interest in a portion of short-term consumer loans originated by the Company in the United Kingdom. Pursuant to the agreement, the Company will retain servicing responsibilities and earn servicing fees which are subject to reduction if the related loans are not collected. 14 DOLLAR FINANCIAL GROUP, INC. NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) SUPPLEMENTAL STATISTICAL DATA September 30, Company Operating Data: 2001 2002 ------------- -------------- Stores in operation: Company-Owned................................. 645 639 Franchised Stores and Check Cashing Merchants. 340 418 --- --- Total............................................ 985 1,057 === ===== - ------------------------------------------------------------------------------------------------------
Three Months Ended September 30, ----------------------------------- Operating Data: 2001 2002 ------------- -------------- Face amount of checks cashed (in millions)........................................................ $ 727 $ 762 Face amount of average check..................................... $ 329 $ 360 Face amount of average check (excluding Canada and the United Kingdom)...................................................... $ 352 $ 402 Average fee per check............................................ $ 11.38 $ 12.51 Number of checks cashed (in thousands)........................... 2,208 2,115 Adjusted EBITDA (in thousands)1.................................. $ 12,347 $ 10,704 Adjusted EBITDA Margin1.......................................... 25.1% 20.3% - ------------------------------------------------------------------------------------------------------
Three Months Ended September 30, ----------------------------------- Collections Data: 2001 2002 ------------- -------------- Face amount of returned checks (in thousands)......................$ 7,829 $ 6,869 Collections (in thousands)......................................... 5,786 4,943 ----------- ----------- Net write-offs (in thousands)......................................$ 2,043 $ 1,926 =========== =========== Collections as a percentage of returned checks................................................. 73.9% 71.8% Net write-offs as a percentage of check cashing revenues.......................................... 8.1% 7.3% Net write-offs as a percentage of the face amount of checks cashed.................................... 0.28% 0.25%
15 1Adjusted EBITDA is earnings before interest, income taxes, depreciation, amortization 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. The table below reconciles net income as reported on the Statement of Operations to Adjusted EBITDA: Three months ended September 30, ----------------------------------- 2001 2002 --------------- -------------- Net income $ 1,844 $ 811 Add: Loss on store closings and sales 88 488 Other depreciation and amortization 2,019 2,462 Interest expense 4,754 4,931 Other (Foreign currency loss) 503 102 Income tax provision 3,139 1,910 ----------------------------------- Adjusted EBITDA $ 12,347 $ 10,704 ===================================
16 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 at September 30, 2002 and the results of operations for the three months ended September 30, 2002 and 2001. The results for the three months ended September 30, 2002 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, 2002. Critical Accounting Principles and Estimates In response to the SEC's Release numbers 33-8040 "Cautionary Advice Regarding Disclosure About Critical Accounting Policies" and 33-8056, "Commission Statement about Management's Discussion and Analysis of Financial Condition and Results of Operations," the Company has identified the following critical accounting policies that affect the more significant judgments and estimates used in the preparation of its financial statements. The preparation of the Company's financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. On an ongoing basis, the Company evaluates these estimates, including those related to revenue recognition, loss reserves, intangible assets and income taxes. The Company states these accounting policies in the notes to the financial statements and at relevant sections in this discussion and analysis. The estimates are based on the information that is currently available to the Company and on various other assumptions that management believes to be reasonable under the circumstances. Actual results could vary from those estimates under different assumptions or conditions. The Company believes that the following critical accounting policies affect the more significant judgments and estimates used in the preparation of its financial statements: Revenue Recognition Revenue generally is recognized when services for the customer have been provided which, in the case of check cashing and other retail products, is at the point of sale. For the Cash 'Til Payday(R) unsecured short-term loan service, all revenues are recognized ratably over the life of the loan offset by net writeoffs. Loss Reserves The Company acts as a servicer for County Bank of Rehoboth Beach, Delaware ("County Bank"), marketing unsecured short-term loans to customers with established bank accounts and verifiable employment. Loans are made for amounts up to $500, with terms of 7 to 23 days. Under this program, the Company earns servicing fees which are subject to adjustment if the related loans are not collected. The Company maintains a reserve for these estimated adjustments. In addition, the Company maintains a reserve for anticipated losses for loans it makes directly. In order to estimate the appropriate level of these reserves, the Company analyzes the amount of outstanding loans owed to the Company, as well as loans owed to banks and serviced by the Company, the historical loans charged-off, current collection patterns and current economic trends. As these conditions change, additional allowances might be required in future periods. Intangible Assets The Company has significant intangible assets on its balance sheet that include goodwill and other intangibles related to acquisitions. The valuation and classification of these assets and the assignment of useful amortization lives involves significant judgments and the use of estimates. The testing of these intangibles under established accounting guidelines for impairment also requires significant use of judgment and assumptions. The Company's assets are tested and reviewed for impairment on an ongoing basis under the established accounting guidelines. Changes in business conditions could potentially require future adjustments to asset valuations. 17 Income Taxes As part of the process of preparing its consolidated financial statements the Company is required to estimate its income taxes in each of the jurisdictions in which it operates. This process involved estimating the actual current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within the consolidated balance sheet. An assessment is then made of the likelihood that the deferred tax assets will be recovered from future taxable income and to the extent the Company believes that recovery is not likely, it must establish a valuation allowance. The Company has not provided for a valuation allowance because it believes that its deferred tax assets will be recovered from future taxable income. RESULTS OF OPERATIONS Revenue Analysis Three Months Ended September 30, - ----------------------------------------------------------------------------------------------- (Percentage of ($ in thousands) total revenue) -------------------------- ------------------------ 2001 2002 2001 2002 ----------- ----------- -------- ---------- Check cashing...........................$ 25,124 $ 26,454 51.0% 50.2% Consumer lending revenues, net.......... 17,218 18,935 35.0 36.0 Money transfer fees..................... 2,460 2,788 5.0 5.3 Government services..................... 407 435 0.8 0.8 Other revenue........................... 4,014 4,041 8.2 7.7 ----------- ----------- -------- ---------- Total revenue...........................$ 49,223 $ 52,653 100.0% 100.0% =========== =========== ======== ========== - -----------------------------------------------------------------------------------------------
QUARTER COMPARISON Total revenues were $52.7 million for the three months ended September 30, 2002 compared to $49.2 million for the three months ended September 30, 2001, an increase of $3.5 million or 7.1%. Comparable retail store, franchised store and document transmitter sales for the entire period increased $2.7 million or 11.0%. New store openings accounted for an increase of $1.1 million while closed stores accounted for a decrease of $300,000. 18 Store and Regional Expense Analysis Three Months Ended September 30, - ------------------------------------------------------------------------------------------------ (Percentage of ($ in thousands) total revenue) -------------------------- -------------------------- 2001 2002 2001 2002 ----------- ----------- ---------- ---------- Salaries and benefits .............$ 15,044 $ 17,147 30.6% 32.6% Occupancy.......................... 4,625 4,799 9.4 9.1 Depreciation....................... 1,482 1,619 3.0 3.1 Other.............................. 11,980 12,857 24.3 24.4 ----------- ----------- ---------- ---------- Total store and regional expenses..$ 33,131 $ 36,422 67.3% 69.2% =========== =========== ========== ========== - ------------------------------------------------------------------------------------------------
QUARTER COMPARISON Store and regional expenses were $36.4 million for the three months ended September 30, 2002 compared to $33.1 million for the three months ended September 30, 2001, an increase of $3.3 million or 10.0%. New store openings accounted for an increase of $500,000 while closed stores accounted for a decrease of $500,000. Comparable retail store and franchised store expenses for the entire period increased $1.9 million. In addition, costs associated with Money Mart(R) Express' independent transmitters increased $1.2 million due to growth in that business. For the three months ended September 30, 2002 total store and regional expenses increased to 69.2% of total revenue compared to 67.3% of total revenue for the three months ended September 30, 2001. 19 Other Expense Analysis Three Months Ended September 30, - ---------------------------------------------------------------------------------------------- (Percentage of ($ in thousands) total revenue) -------------------------- ------------------------ 2001 2002 2001 2002 ---------- ------------ --------- --------- Corporate expenses...................$ 5,730 $ 7,248 11.6% 13.8% Loss on store closings and sales......................... 88 488 0.2 0.9 Other depreciation and amortization.. 537 843 1.1 1.6 Interest expense..................... 4,754 4,931 9.7 9.4 Income tax provision................. 3,139 1,910 6.4 3.6 - -------------------------------------------------------------------------------------------
QUARTER COMPARISON Corporate Expenses Corporate expenses were $7.2 million for the three months ended September 30, 2002 compared to $5.7 million for the three months ended September 30, 2001, an increase of $1.5 million or 26.3%. The increase was due to costs associated with the implementation of enhanced transaction processing systems, the establishment of new business development strategies, professional fees associated with the Company's new banking relationship for its consumer lending product and increased salaries and benefits associated with the growth of foreign operations. Loss on store closings and sales Loss on store closings and sales were $500,000 for the three months ended September 30, 2002 compared to $100,000 for the three months ended September 30, 2001. The Company anticipates closing certain of its unprofitable stores during fiscal year 2003 and is currently evaluating the locations to be closed. Interest Expense Interest expense was $4.9 million for the three months ended September 30, 2002 and was $4.8 million for the three months ended September 30, 2001, an increase of $100,000 or 2.1%. This increase is primarily attributable to the increase in the average borrowing rates of the Company's revolving credit facilities which fund acquisitions, purchases of property and equipment related to existing stores, recently acquired stores and investments in technology. Income Taxes The provision for income taxes was $1.9 million for the three months ended September 30, 2002 compared to $3.1 million for the three months ended September 30, 2001, a decrease of $1.2 million. The Company's effective tax rate is significantly greater than the federal statutory rate of 35% for the three months ended September 30, 2002 due to state and foreign taxes. 20 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 three months ended September 30, 2002, cash and cash equivalents decreased $9.3 million. Net cash used in operations was $2.7 million which was primarily a result of the timing of settlement payments related to the Company's consumer lending product and an increase in the loans the Company makes directly. Loans and other receivables increased due to the timing of settlement payments related to the Company's consumer lending product and an increase in Company funded unsecured short-term loans, primarily in California. Accrued interest increased due to the timing of the semi-annual interest payment on the 10 7/8% Senior Notes due in November 2006 (the "Senior Notes") and the Senior Subordinated Notes. Liquidity and Capital Resources The Company's principal sources of cash are from operations, borrowings under its credit facilities and sales of Holdings common stock. The Company anticipates its principal uses of cash will be to provide working capital, finance capital expenditures, meet debt service requirements, finance acquisitions, and finance store expansion. For the three months ended September 30, 2002 and 2001, the Company had net cash (used in) provided by operating activities of ($2.7) million and $7.4 million, respectively. The decrease in net cash provided by operations was primarily the result of increases in loans and other receivables due to the timing of settlement payments related to the Company's consumer lending product and an increase in Company funded unsecured short-term loans, primarily in California. For the three months ended September 30, 2002, the Company had made capital expenditures of $1.1 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 $6.8 million during its fiscal year ending June 30, 2003, for remodeling and relocation of certain existing stores and for opening new stores. On September 30, 2002, The Company negotiated and executed the First Amendment to the Amended and Restated Credit Agreement and Waiver ("Revolving Credit Facility"). This agreement increased the allowable short-term loans made by the Company from $15 million to $19 million through the earlier of: (i) November 29, 2002 or (ii) the sale of certain assets. If the sale of these certain assets is consummated prior to November 29, 2002, the total outstanding short-term loans is limited to $12 million for 30 calendar days upon which the limit is lowered to $10 million thereafter. The Company believes that through the sale of loans and management of originations and extensions, it will reduce short-term loans outstanding to the required amounts within the period specified and will remain in compliance with this debt covenant. At September 30, 2002, the Company exceeded the limit on one of its financial covenants related to its First Amended and Restated Credit Agreement and Waiver. On November 15, 2002, the Company negotiated and executed the Second Amendment to the Amended and Restated Credit Agreement and Waiver, under which the Company's lenders waived and modified that requirement as of September 30, 2002 and modified the pricing structure of the credit facility. The modified pricing structure increases the Company's borrowing rate under the facility from interest at one-day Eurodollar, as defined, plus 3.50% to interest at one-day Eurodollar, as defined, plus 4.00%. The Company's borrowing capacity under the Revolving Credit Facility is limited to the total commitment of $80 million less a letter of credit of $8.0 million issued by Wells Fargo Bank, which secures the United Kingdom overdraft facility. At September 30, 2002 the Company's borrowing capacity was $72 million. The Company's restated Revolving Credit Facility also contains provisions for reductions in the facility of $5 million within the earlier of (i) November 29, 2002 or (ii) the sale of certain assets. The facility will be reduced upon the sale of such certain assets by 75% of the net cash proceeds received on the date of the consummation of the sale. Such reduction must be at least $3 million by June 30, 2003. The restated Revolving Credit Facility also contains a provision for a further reductions of $1.5 million by September 30, 2003 and an additional $1.5 million by December 31, 2003. Additionally, the restated Revolving Credit Facility contains provisions for an additional reduction in the facility of $5 million during the period April 1 to December 14 of any calendar year following the (i) earlier of 180 days of the effective date of the agreement or (ii) the sale of certain assets. The borrowings under the Revolving Credit Facility as of September 30, 2002 were $65.7 million. The Senior Notes, Senior Subordinated Notes and the Revolving Credit Facility contain certain financial and other restrictive covenants, which, among other things, require the Company to achieve certain financial ratios, limit capital expenditures, restrict payment of dividends, and require certain approvals in the event the Company wants to increase the borrowings. The Company also has a Canadian dollar overdraft credit 21 facility to fund peak working capital needs for its Canadian operation. The overdraft facility provides for borrowings up to $4.4 million, of which there was no outstanding balance as of September 30, 2002. For the Company's United Kingdom operations, the Company also has a British pound overdraft facility which provides for a commitment of up to approximately $6.0 million; however $8.8 million was outstanding in accordance with an agreement with the bank to exceed the commitment at September 30, 2002. The Company believes it will remain in compliance with its debt covenants for the next twelve months. 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 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, the anticipated benefits it expects from operating efficiencies and sales of certain assets. Additional revenue growth is expected to be generated by increased check cashing revenues, growth in the consumer lending loan business, the maturity of recently opened stores and the continued expansion of new stores. 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, 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. Controls and Procedures As of September 30, 2002, an evaluation was performed under the supervision and with the participation of the Company's management, including the CEO and CFO, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on that evaluation, the Company's management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of September 30, 2002. There have been no significant changes in the Company's internal controls or in other factors that could significantly affect internal controls subsequent to September 30, 2002. Contractual Obligations The Company enters into contractual obligations in the normal course of business as a source of funds for its asset growth and its asset/liability management, to fund acquisitions, and to meet required capital needs. These obligations require the Company to make cash payments over time as detailed in the table below: Payments Due by Period ------------------------------------------------------------------------------- Less than After Total 1 Year 1 - 3 Years 4 - 5 Years 5 Years ------------ ------------- ------------- ------------- ----------- Revolving credit facilities.......... $ 74,454 $ 8,754 $ 65,700 $ - $ - Long-term debt 10 7/8% Senior Notes due November 15, 2006................ 109,190 - - 109,190 - 10 7/8% Senior Subordinated Notes due December 31, 2006...... 20,000 - - 20,000 - Operating Leases..................... 47,616 10,728 20,886 7,770 8,232 Other................................ 21 21 - - - ------------ ------------- ------------- ------------- ----------- Total contractual cash obligations... $ 251,281 $ 19,503 $ 86,586 $ 136,960 $ 8,232 ============ ============= ============= ============= ===========
22 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. Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995 This report may contain certain forward-looking statements regarding the Company's expected performance for future periods, and actual results for such periods may materially differ. Such forward-looking statements involve risks and uncertainties, including risks of changing market conditions in the overall economy and the industry, consumer demand, the success of the Company's acquisition strategy and other factors detailed from time to time in the Company's annual and other reports filed with the Securities and Exchange Commission. 23 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, 2002. 24 PART II - OTHER INFORMATION Item 1. Legal Proceedings The Company is not a party to any material litigation and is not aware of any pending or threatened litigation, other than routine litigation and administrative proceedings arising in the ordinary course of business. 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 99.1 Certifications of Chief Executive Officer Pursuant to Title 18, United States Code, Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 99.2 Certifications of Chief Financial Officer Pursuant to Title 18, United States Code, Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 25 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. *By: /s/ DONALD GAYHARDT Dated: November 15, 2002 ------------------------------------ Name: Donald Gayhardt Title: President and Chief Financial Officer (principal financial and chief accounting officer) * The signatory hereto is the principal financial and chief accounting officer and has been duly authorized to sign on behalf of the registrant. 26 CERTIFICATIONS I, Jeffrey A. Weiss, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Dollar Financial Group, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 15, 2002 /s/JEFFREY A. WEISS - ----------------------------------- Jeffrey A. Weiss Chairman of the Board of Directors and Chief Executive Officer 27 I, Donald Gayhardt, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Dollar Financial Group, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): d) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and e) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 15, 2002 /s/ DONALD GAYHARDT - ----------------------------------- Donald Gayhardt President and Chief Financial Officer 28 EX-99 2 a991093002.txt EXHIBIT 99-1 093002 Exhibit 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Dollar Financial Group, Inc. (the "Company") on Form 10-Q for the period ended September 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, in the capacities and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Jeffrey A. Weiss Jeffrey A. Weiss Chairman of the Board of Directors and Chief Executive Officer November 15, 2002 EX-99 3 a992093002.txt EXHIBIT 99-2093002 Exhibit 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Dollar Financial Group, Inc. (the "Company") on Form 10-Q for the period ended September 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, in the capacities and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Donald Gayhardt Donald Gayhardt President and Chief Financial Officer November 15, 2002 -----END PRIVACY-ENHANCED MESSAGE-----