Back to GetFilings.com
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