##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
 For the quarterly period ended March 31, 2006
 OR
 o
    
    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 000-50866
 DOLLAR FINANCIAL CORP.
  DELAWARE
(State or Other Jurisdiction of Incorporation or Organization)
    
    23-2636866
(I.R.S. Employer Identification No.)
 1436 LANCASTER AVENUE,
BERWYN, PENNSYLVANIA 19312
 610-296-3400
 None
 Ö þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
 o þ




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##### 



DOLLAR FINANCIAL CORP.
 INDEX
 Page No.PART I. FINANCIAL INFORMATIONItem 1. Financial StatementsInterim Consolidated Balance Sheets as of June 30, 2005
and March 31, 2006 (unaudited)
    
    
    3Interim Unaudited Consolidated Statements of Operations for the Three and Nine
Months Ended March 31, 2005 and 2006
    
    
    4Interim Consolidated Statements of Shareholders Equity as of June 30, 2005
and March 31, 2006 (unaudited)
    
    
    5Interim Unaudited Consolidated Statements of Cash Flows for the Nine Months
Ended March 31, 2005 and 2006
    
    
    6Notes to Interim Unaudited Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    29Item 3. Quantitative and Qualitative Disclosures
About Market Risk
    
    
    39Item 4. Controls and Procedures
    
    
    40PART
II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    41Item 4. Submission of Matters to a Vote of Security Holders
    
    
    43Item 6. Exhibits
    
    
    44Signature
    
    
    45CERTIFICATION OF CHIEF EXECUTIVE OFFICERCERTIFICATION OF PRESIDENTCERTIFICATION OF CHIEF FINANCIAL OFFICERCERTIFICATION OF CHIEF EXECUTIVE OFFICERCERTIFICATION OF PRESIDENTCERTIFICATION OF CHIEF FINANCIAL OFFICER
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 DOLLAR FINANCIAL CORP.
 
 INTERIM CONSOLIDATED BALANCE SHEETS
(In thousands except share and per share amounts)
 June 30,
    
    
    March 31,2005
    
    
    2006(unaudited)ASSETSCash and cash equivalents
    
    $
    92,504
    
    
    $
    111,308Loans receivableLoans receivable
    
    
    40,226
    
    
    
    51,329Less: Allowance for loan losses
    
    
    (2,747
    )
    
    
    (4,732
    )Loans receivable, net
    
    
    37,479
    
    
    
    46,597Other consumer lending receivables, net
    
    
    9,163
    
    
    
    5,370Other receivables
    
    
    4,399
    
    
    
    9,317Income taxes receivable
    
    
    1,053
    
    
    
    1,603Prepaid expenses
    
    
    6,858
    
    
    
    7,355Deferred tax asset, net of valuation allowance of $37,460 and $43,116
    
    
    71
    
    
    
    72Property and equipment, net of accumulated
depreciation of $62,555 and $69,986
    
    
    35,611
    
    
    
    37,921Goodwill and other intangibles, net of accumulated
amortization of $23,079 and $20,853
    
    
    186,190
    
    
    
    210,490Debt issuance costs, net of accumulated
amortization of $2,633 and $4,131
    
    
    10,558
    
    
    
    9,871Other
    
    
    3,970
    
    
    
    2,146$
    387,856
    
    
    $
    442,050LIABILITIES AND SHAREHOLDERS EQUITYAccounts payable
    
    $
    19,256
    
    
    $
    19,185Foreign income taxes payable
    
    
    4,648
    
    
    
    7,541Accrued expenses and other liabilities
    
    
    26,909
    
    
    
    35,238Accrued interest payable
    
    
    3,291
    
    
    
    9,891Deferred tax
liabilities
    
    
    2,352
    
    
    
    4,172Revolving credit facilities
    
    
    
    
    
    
    27,5009.75% Senior Notes due 2011
    
    
    271,764
    
    
    
    271,556Other long-term debt
    
    
    
    
    
    
    642Shareholders equity:Common stock, $0.001 par value: 55,500,000 shares authorized;
18,080,652 shares and 18,178,511 shares issued and outstanding at
June 30, 2005 and March 31, 2006, respectively
    
    
    18
    
    
    
    18Additional paid-in capital
    
    
    160,997
    
    
    
    161,480Accumulated deficit
    
    
    (121,885
    )
    
    
    (116,859
    )Accumulated other comprehensive income
    
    
    20,506
    
    
    
    21,686Total shareholders equity
    
    
    59,636
    
    
    
    66,325$
    387,856
    
    
    $
    442,050
  3




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 
 INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except share and per share amounts)
 Three Months Ended
    
    
    Nine Months EndedMarch 31,
    
    
    March 31,2005
    
    
    2006
    
    
    2005
    
    
    2006Revenues:Check cashing
    
    $
    32,708
    
    
    $
    36,288
    
    
    $
    95,803
    
    
    $
    105,859Consumer lending:Fees from consumer lending
    
    
    37,225
    
    
    
    41,343
    
    
    
    113,970
    
    
    
    118,675Provision for loan losses
and adjustment to
servicing income
    
    
    (4,308
    )
    
    
    (6,352
    )
    
    
    (22,517
    )
    
    
    (22,873
    )Consumer lending, net
    
    
    32,917
    
    
    
    34,991
    
    
    
    91,453
    
    
    
    95,802Money transfer fees
    
    
    3,722
    
    
    
    4,460
    
    
    
    10,915
    
    
    
    12,680Franchise fees and royalties
    
    
    1,763
    
    
    
    2,728
    
    
    
    3,977
    
    
    
    8,131Other
    
    
    5,343
    
    
    
    7,992
    
    
    
    12,844
    
    
    
    19,119Total revenues
    
    
    76,453
    
    
    
    86,459
    
    
    
    214,992
    
    
    
    241,591Store and regional expenses:Salaries and benefits
    
    
    23,775
    
    
    
    27,095
    
    
    
    67,118
    
    
    
    78,290Occupancy
    
    
    5,834
    
    
    
    6,914
    
    
    
    16,840
    
    
    
    20,384Depreciation
    
    
    1,777
    
    
    
    1,843
    
    
    
    5,352
    
    
    
    5,510Returned checks, net and cash shortages
    
    
    2,733
    
    
    
    2,697
    
    
    
    7,955
    
    
    
    9,084Telephone and communications
    
    
    1,654
    
    
    
    1,405
    
    
    
    4,604
    
    
    
    4,271Advertising
    
    
    1,988
    
    
    
    1,943
    
    
    
    7,109
    
    
    
    6,765Bank charges
    
    
    1,022
    
    
    
    1,279
    
    
    
    2,935
    
    
    
    3,523Armored carrier expenses
    
    
    934
    
    
    
    1,069
    
    
    
    2,648
    
    
    
    3,091Other
    
    
    7,170
    
    
    
    8,701
    
    
    
    21,441
    
    
    
    24,700Total store and regional expenses
    
    
    46,887
    
    
    
    52,946
    
    
    
    136,002
    
    
    
    155,618Store and regional margin
    
    
    29,566
    
    
    
    33,513
    
    
    
    78,990
    
    
    
    85,973Corporate and other expenses:Corporate expenses
    
    
    9,147
    
    
    
    11,453
    
    
    
    26,897
    
    
    
    31,035Management fee
    
    
    108
    
    
    
    
    
    
    
    636
    
    
    
    Other depreciation and amortization
    
    
    801
    
    
    
    878
    
    
    
    2,882
    
    
    
    2,689Interest expense, net of interest income
    
    
    7,766
    
    
    
    7,566
    
    
    
    27,237
    
    
    
    22,245Reserve for litigation settlement
    
    
    
    
    
    
    5,800
    
    
    
    
    
    
    
    5,800Loss on extinguishment of debt
    
    
    8,097
    
    
    
    
    
    
    
    8,097
    
    
    
    Termination of management services agreement
    
    
    2,500
    
    
    
    
    
    
    
    2,500
    
    
    
    Other
    
    
    189
    
    
    
    300
    
    
    
    133
    
    
    
    718Income before income taxes
    
    
    958
    
    
    
    7,516
    
    
    
    10,608
    
    
    
    23,486Income tax provision
    
    
    5,437
    
    
    
    7,807
    
    
    
    14,045
    
    
    
    18,460Net (loss) income
    
    $
    (4,479
    )
    
    $
    (291
    )
    
    $
    (3,437
    )
    
    $
    5,026Net (loss) income per share:Basic
    
    $
    (0.28
    )
    
    $
    (0.02
    )
    
    $
    (0.27
    )
    
    $
    0.28Diluted
    
    $
    (0.28
    )
    
    $
    (0.02
    )
    
    $
    (0.27
    )
    
    $
    0.27Weighted average shares outstanding:Basic
    
    
    15,935,660
    
    
    
    18,119,199
    
    
    
    12,569,815
    
    
    
    18,103,530Diluted
    
    
    15,935,660
    
    
    
    18,119,199
    
    
    
    12,569,815
    
    
    
    18,437,187
  4




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 
 INTERIM CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(In thousands, except share data)
 Accumulated
    
    
    
    
    
    
    
    
    
    
    TotalAdditional
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    Management
    
    
    ShareholdersCommon Stock
    
    
    
    
    
    
    Paid-in
    
    
    Accumulated
    
    
    Comprehensive
    
    
    Treasury
    
    
    Equity
    
    
    (Deficit)Shares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    (Loss) Income
    
    
    Stock
    
    
    Loan
    
    
    EquityBalance, June 30, 2004
    
    
    10,965,779
    
    
    $
    11
    
    
    $
    61,470
    
    
    $
    (120,916
    )
    
    $
    13,813
    
    
    $
    (956
    )
    
    $
    (4,309
    )
    
    $
    (50,887
    )Comprehensive incomeForeign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,729
    
    
    
    
    
    
    
    
    
    
    
    6,729Other comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (36
    )
    
    
    
    
    
    
    
    
    
    
    (36
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (357
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (357
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,336Initial public stock offering
    
    
    7,378,125
    
    
    
    7
    
    
    
    106,932
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    106,939Repayment of
notes receivable from officers
    
    
    (416,287
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,661
    )
    
    
    4,309
    
    
    
    (2,352
    )Accrued interest on notes receivable from officers
    
    
    
    
    
    
    
    
    
    
    (2,464
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,464
    )We The People acquisition
    
    
    141,935
    
    
    
    
    
    
    
    2,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,000Retirement of treasury stock
    
    
    
    
    
    
    
    
    
    
    (7,005
    )
    
    
    (612
    )
    
    
    
    
    
    
    7,617
    
    
    
    
    
    
    
    Share options exercised
    
    
    11,100
    
    
    
    
    
    
    
    64
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    64Balance, June 30, 2005
    
    
    18,080,652
    
    
    
    18
    
    
    
    160,997
    
    
    
    (121,885
    )
    
    
    20,506
    
    
    
    
    
    
    
    
    
    
    
    59,636Comprehensive incomeForeign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,189
    
    
    
    
    
    
    
    
    
    
    
    1,189Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9
    )
    
    
    
    
    
    
    
    
    
    
    (9
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,026
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,026Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,206Restricted stock grants
    
    
    42,309
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Share options exercised
    
    
    55,550
    
    
    
    
    
    
    
    395
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    395Non-cash stock compensation
    
    
    
    
    
    
    
    
    
    
    88
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    88Balance, March 31, 2006 (unaudited)
    
    
    18,178,511
    
    
    $
    18
    
    
    $
    161,480
    
    
    $
    (116,859
    )
    
    $
    21,686
    
    
    $
    
    
    
    $
    
    
    
    $
    66,325
  5




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 
 INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 Nine Months EndedMarch 31,2005
    
    
    2006Cash flows from operating activities:Net (loss) income
    
    $
    (3,437
    )
    
    $
    5,026Adjustments to reconcile net (loss) income to net
cash provided by (used in) operating activities:Depreciation and amortization
    
    
    9,380
    
    
    
    9,501Reserve for litigation settlement
    
    
    
    
    
    
    5,800Non-cash stock compensation
    
    
    
    
    
    
    88Loss on extinguishment of debt
    
    
    5,114
    
    
    
    (Gains) losses on store closings and sales
    
    
    (54
    )
    
    
    649Foreign currency loss on revaluation of
subordinated borrowings
    
    
    183
    
    
    
    5Deferred tax (benefit) provision
    
    
    (132
    )
    
    
    1,801Change in assets and liabilities (net of effect of acquisitions):Increase in loans and other receivables
    
    
    (5,312
    )
    
    
    (9,853
    )Decrease (increase) in income taxes receivable
    
    
    1,254
    
    
    
    (550
    )(Increase) decrease in prepaid expenses and other
    
    
    (2,135
    )
    
    
    1,238Increase in accounts payable, income taxes payable,
accrued expenses and other liabilities and accrued interest payable
    
    
    13,281
    
    
    
    8,527Net cash provided by operating activities
    
    
    18,142
    
    
    
    22,232Cash flows from investing activities:Acquisitions, net of cash acquired
    
    
    (25,358
    )
    
    
    (19,970
    )Additions to property and equipment
    
    
    (9,324
    )
    
    
    (11,899
    )Net cash used in investing activities
    
    
    (34,682
    )
    
    
    (31,869
    )Cash flows from financing activities:Proceeds from initial public stock offering
    
    
    109,786
    
    
    
    Proceeds from the exercise of stock options
    
    
    
    
    
    
    395Redemption of 16% Senior Notes due 2012
    
    
    (50,416
    )
    
    
    Redemption of 13.95% Senior Subordinated Notes due 2012
    
    
    (44,661
    )
    
    
    Other debt (payments) borrowings
    
    
    (93
    )
    
    
    642Net increase in revolving credit facilities
    
    
    11,000
    
    
    
    27,500Payment of initial public stock offering costs
    
    
    (1,309
    )
    
    
    Payment of debt issuance costs
    
    
    (167
    )
    
    
    (1,218
    )Net cash provided by financing activities
    
    
    24,140
    
    
    
    27,319Effect of exchange rate changes on cash and cash equivalents
    
    
    3,923
    
    
    
    1,122Net increase in cash and cash equivalents
    
    
    11,523
    
    
    
    18,804Cash and cash equivalents at beginning of period
    
    
    69,270
    
    
    
    92,504Cash and cash equivalents at end of period
    
    $
    80,793
    
    
    $
    111,308
  6




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation
  ® ® ® ®
 Use of Estimates
  Principles of Consolidation
  Reclassification
  Revenue Recognition
  7




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
   Earnings Per Share
  Three Months Ended
    
    
    Nine Months EndedMarch 31,
    
    
    March 31,2005
    
    
    2006
    
    
    2005
    
    
    2006Net income
    
    $
    (4,479
    )
    
    $
    (291
    )
    
    $
    (3,437
    )
    
    $
    5,026Reconciliation of denominator:Weighted average of common shares outstanding  basic(1)
    
    
    15,936
    
    
    
    18,119
    
    
    
    12,570
    
    
    
    18,104Effect of
dilutive stock options(2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    333Weighted
average number of common shares outstanding 
diluted(1)
    
    
    15,936
    
    
    
    18,119
    
    
    
    12,570
    
    
    
    18,437
 
 (1)
    
    Excludes 42,309 shares of unvested restricted stock, granted March 1, 2006
contingent upon certain fiscal year earnings targets, which is included in total
outstanding common shares as of March 31, 2006.(2)
    
    The effect of dilutive stock options was determined under the
treasury stock method. Due to the net loss during the three and nine
months ended March 31, 2005 and the three months ended
March 31, 2006, the effect of the dilutive options were
considered to be anti-dilutive, and therefore were not included in
the calculation of diluted earnings per share. Stock-Based Employee Compensation
 Share-Based Payment , Accounting for
Stock-Based Compensation ,
Accounting for Stock Issued to Employees
 8




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Stock-Based Employee Compensation (continued)
    Three Months Ended
    
    
    Nine Months EndedMarch 31,
    
    
    March 31,2005
    
    
    2006
    
    
    2005
    
    
    2006Net income  as reported
    
    $
    (4,479
    )
    
    $
    (291
    )
    
    $
    (3,437
    )
    
    $
    5,026Add: Stock-based employee compensation expense included in
reported net income, net of related tax effects
    
    
    
    
    
    
    18
    
    
    
    
    
    
    
    53Deduct: Total stock-option expense determined under the fair value
based method, net of related tax benefits
    
    
    (75
    )
    
    
    (18
    )
    
    
    (226
    )
    
    
    (53
    )Net income  pro forma
    
    $
    (4,554
    )
    
    $
    (291
    )
    
    $
    (3,663
    )
    
    $
    5,026Net income per common share  basic  as reported
    
    $
    (0.28
    )
    
    $
    (0.02
    )
    
    $
    (0.27
    )
    
    $
    0.28Net income per common share  basic  pro forma
    
    $
    (0.29
    )
    
    $
    (0.02
    )
    
    $
    (0.29
    )
    
    $
    0.28Net income per common share  diluted  as reported
    
    $
    (0.28
    )
    
    $
    (0.02
    )
    
    $
    (0.27
    )
    
    $
    0.27Net income per common share  diluted  pro forma
    
    $
    (0.29
    )
    
    $
    (0.02
    )
    
    $
    (0.29
    )
    
    $
    0.27
  Three Months Ended
    
    Nine Months EndedMarch 31, 2006
    
    March 31, 2006Expected volatility
    
    
    51.0
    %
    
    
    45.6
    %Expected life (years)
    
    
    6.5
    
    
    
    6.1Risk-free interest rate
    
    
    4.58
    %
    
    
    4.24
    %Expected dividends
    
    None
    
    NoneWeighted average fair value
    
    $
    8.37
    
    
    $
    6.20
 9




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##### Table of Contents



WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateExercise
    
    
    Contractual
    
    
    Intrinsic ValueOptions
    
    
    Price
    
    
    Term (years)
    
    
    ($ in millions)Options outstanding at June 30, 2005
(1,838,906 shares exercisable)
    
    
    1,843,906
    
    
    
    11.31Granted
    
    
    55,000
    
    
    
    12.26Exercised
    
    
    (55,550
    )
    
    
    7.11Forfeited and expired
    
    
    (5,150
    )
    
    
    16.00Options outstanding at March 31,
2006
    
    
    1,838,206
    
    
    
    11.45
    
    
    
    7.5
    
    
    
    11.6Exercisable at March 31, 2006
    
    
    1,778,236
    
    
    
    11.43
    
    
    
    7.4
    
    
    
    11.3
  10




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 2. DEBT
    3. SUBSIDIARY GUARANTOR UNAUDITED FINANCIAL INFORMATION
   
    
    rank equal in right of payment with all existing and future unsubordinated indebtedness of the Guarantors;
 
    
    rank senior in right of payment to all existing and future subordinated indebtedness of the Guarantors; and
 
    
    are effectively junior to any indebtedness of OPCO, including indebtedness under OPCOs senior secured revolving credit
facility, that is either (1) secured by a lien on the Collateral that is senior or prior to the second priority liens
securing the Guarantees of the notes or (2) secured by assets that are not part of the Collateral to the extent of the
value of the assets securing such indebtedness.
  11




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 CONSOLIDATING BALANCE SHEETS
March 31, 2006
(In thousands)
 Dollar FinancialDollar
    
    
    Group, Inc.
    
    
    SubsidiaryFinancial
    
    
    and Subsidiary
    
    
    Non-Corp.
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedASSETSCash and cash equivalents
    
    $
    522
    
    
    $
    36,798
    
    
    $
    73,988
    
    
    $
    
    
    
    $
    111,308Loans receivableLoans receivable
    
    
    
    
    
    
    8,002
    
    
    
    43,327
    
    
    
    
    
    
    
    51,329Less: Allowance for loan losses
    
    
    
    
    
    
    (1,036
    )
    
    
    (3,696
    )
    
    
    
    
    
    
    (4,732
    )Loans receivable, net
    
    
    
    
    
    
    6,966
    
    
    
    39,631
    
    
    
    
    
    
    
    46,597Other consumer lending receivables, net
    
    
    
    
    
    
    1,266
    
    
    
    4,104
    
    
    
    
    
    
    
    5,370Other receivables
    
    
    276
    
    
    
    2,694
    
    
    
    6,751
    
    
    
    (404
    )
    
    
    9,317Income taxes receivable
    
    
    
    
    
    
    1,603
    
    
    
    
    
    
    
    
    
    
    
    1,603Prepaid expenses
    
    
    
    
    
    
    3,122
    
    
    
    4,233
    
    
    
    
    
    
    
    7,355Deferred tax asset
    
    
    
    
    
    
    
    
    
    
    72
    
    
    
    
    
    
    
    72Due from affiliates
    
    
    
    
    
    
    60,414
    
    
    
    
    
    
    
    (60,414
    )
    
    
    Due from parent
    
    
    
    
    
    
    2,412
    
    
    
    
    
    
    
    (2,412
    )
    
    
    Property and equipment, net
    
    
    
    
    
    
    12,095
    
    
    
    25,826
    
    
    
    
    
    
    
    37,921Goodwill and other intangibles, net
    
    
    
    
    
    
    97,880
    
    
    
    112,610
    
    
    
    
    
    
    
    210,490Debt issuance costs, net
    
    
    
    
    
    
    9,871
    
    
    
    
    
    
    
    
    
    
    
    9,871Investment in subsidiaries
    
    
    65,965
    
    
    
    333,133
    
    
    
    
    
    
    
    (399,098
    )
    
    
    Other
    
    
    
    
    
    
    653
    
    
    
    1,493
    
    
    
    
    
    
    
    2,146$
    66,763
    
    
    $
    568,907
    
    
    $
    268,708
    
    
    $
    (462,328
    )
    
    $
    442,050LIABILITIES AND SHAREHOLDERS EQUITYAccounts payable
    
    $
    26
    
    
    $
    9,540
    
    
    $
    9,619
    
    
    $
    
    
    
    $
    19,185Foreign income taxes payable
    
    
    
    
    
    
    
    
    
    
    7,541
    
    
    
    
    
    
    
    7,541Accrued expenses and other liabilities
    
    
    
    
    
    
    23,189
    
    
    
    12,049
    
    
    
    
    
    
    
    35,238Accrued interest payable
    
    
    
    
    
    
    10,295
    
    
    
    
    
    
    
    (404
    )
    
    
    9,891Deferred tax liability
    
    
    
    
    
    
    2,941
    
    
    
    1,231
    
    
    
    
    
    
    
    4,172Due to affiliate
    
    
    412
    
    
    
    
    
    
    
    62,414
    
    
    
    (62,826
    )
    
    
    Revolving credit facilities
    
    
    
    
    
    
    27,500
    
    
    
    
    
    
    
    
    
    
    
    27,5009.75% Senior Notes due 2011
    
    
    
    
    
    
    271,556
    
    
    
    
    
    
    
    
    
    
    
    271,556Other long-term debt
    
    
    
    
    
    
    642
    
    
    
    
    
    
    
    
    
    
    
    642438
    
    
    
    345,663
    
    
    
    92,854
    
    
    
    (63,230
    )
    
    
    375,725Shareholders equity:Common stock
    
    
    18
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18Additional paid in capital
    
    
    150,383
    
    
    
    95,125
    
    
    
    20,599
    
    
    
    (104,627
    )
    
    
    161,480(Accumulated deficit) retained earnings
    
    
    (105,762
    )
    
    
    103,711
    
    
    
    136,826
    
    
    
    (251,634
    )
    
    
    (116,859
    )Accumulated other comprehensive income
    
    
    21,686
    
    
    
    24,408
    
    
    
    18,429
    
    
    
    (42,837
    )
    
    
    21,686Total shareholders equity
    
    
    66,325
    
    
    
    223,244
    
    
    
    175,854
    
    
    
    (399,098
    )
    
    
    66,325$
    66,763
    
    
    $
    568,907
    
    
    $
    268,708
    
    
    $
    (462,328
    )
    
    $
    442,050
 12




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 CONSOLIDATING BALANCE SHEETS
June 30, 2005
(In thousands)
 Dollar FinancialDollar
    
    
    Group, Inc.
    
    
    SubsidiaryFinancial
    
    
    and Subsidiary
    
    
    Non-Corp.
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedASSETSCash and cash equivalents
    
    $
    4
    
    
    $
    30,049
    
    
    $
    62,451
    
    
    $
    
    
    
    $
    92,504Loans receivableLoans receivable
    
    
    
    
    
    
    5,076
    
    
    
    35,150
    
    
    
    
    
    
    
    40,226Less: Allowance for loan losses
    
    
    
    
    
    
    (470
    )
    
    
    (2,277
    )
    
    
    
    
    
    
    (2,747
    )Loans receivable, net
    
    
    
    
    
    
    4,606
    
    
    
    32,873
    
    
    
    
    
    
    
    37,479Other consumer lending receivables, net
    
    
    
    
    
    
    9,163
    
    
    
    
    
    
    
    
    
    
    
    9,163Other receivables
    
    
    276
    
    
    
    1,370
    
    
    
    2,969
    
    
    
    (216
    )
    
    
    4,399Income taxes receivable
    
    
    
    
    
    
    1,053
    
    
    
    
    
    
    
    
    
    
    
    1,053Prepaid expenses
    
    
    
    
    
    
    2,948
    
    
    
    3,910
    
    
    
    
    
    
    
    6,858Deferred tax asset
    
    
    
    
    
    
    
    
    
    
    71
    
    
    
    
    
    
    
    71Due from affiliates
    
    
    
    
    
    
    53,893
    
    
    
    
    
    
    
    (53,893
    )
    
    
    Due from parent
    
    
    
    
    
    
    2,398
    
    
    
    
    
    
    
    (2,398
    )
    
    
    Property and equipment, net
    
    
    
    
    
    
    12,456
    
    
    
    23,155
    
    
    
    
    
    
    
    35,611Goodwill and other intangibles, net
    
    
    
    
    
    
    87,535
    
    
    
    98,655
    
    
    
    
    
    
    
    186,190Debt issuance costs, net
    
    
    
    
    
    
    10,558
    
    
    
    
    
    
    
    
    
    
    
    10,558Investment in subsidiaries
    
    
    59,759
    
    
    
    317,853
    
    
    
    9,660
    
    
    
    (387,272
    )
    
    
    Other
    
    
    
    
    
    
    527
    
    
    
    3,443
    
    
    
    
    
    
    
    3,970$
    60,039
    
    
    $
    534,409
    
    
    $
    237,187
    
    
    $
    (443,779
    )
    
    $
    387,856LIABILITIES AND SHAREHOLDERS EQUITYAccounts payable
    
    $
    
    
    
    $
    7,298
    
    
    $
    11,958
    
    
    $
    
    
    
    $
    19,256Foreign income taxes payable
    
    
    
    
    
    
    
    
    
    
    4,648
    
    
    
    
    
    
    
    4,648Accrued expenses and other liabilities
    
    
    5
    
    
    
    14,833
    
    
    
    12,071
    
    
    
    
    
    
    
    26,909Accrued interest payable
    
    
    
    
    
    
    3,291
    
    
    
    216
    
    
    
    (216
    )
    
    
    3,291Deferred tax liability
    
    
    
    
    
    
    1,757
    
    
    
    595
    
    
    
    
    
    
    
    2,352Due to affiliate
    
    
    398
    
    
    
    
    
    
    
    55,893
    
    
    
    (56,291
    )
    
    
    9.75% Senior Notes due 2011
    
    
    
    
    
    
    271,764
    
    
    
    
    
    
    
    
    
    
    
    271,764403
    
    
    
    298,943
    
    
    
    85,381
    
    
    
    (56,507
    )
    
    
    328,220Shareholders equityCommon stock
    
    
    18
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18Additional paid in capital
    
    
    149,900
    
    
    
    104,926
    
    
    
    30,259
    
    
    
    (124,088
    )
    
    
    160,997(Accumulated deficit) retained earnings
    
    
    (110,788
    )
    
    
    105,740
    
    
    
    106,410
    
    
    
    (223,247
    )
    
    
    (121,885
    )Accumulated other comprehensive income
    
    
    20,506
    
    
    
    24,800
    
    
    
    15,137
    
    
    
    (39,937
    )
    
    
    20,506Total shareholders equity
    
    
    59,636
    
    
    
    235,466
    
    
    
    151,806
    
    
    
    (387,272
    )
    
    
    59,636$
    60,039
    
    
    $
    534,409
    
    
    $
    237,187
    
    
    $
    (443,779
    )
    
    $
    387,856
 13




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 CONSOLIDATING STATEMENTS OF OPERATIONS
Nine Months Ended March 31, 2006
 (In thousands)
 Dollar FinancialDollar
    
    
    Group, Inc.
    
    
    SubsidiaryFinancial
    
    
    and Subsidiary
    
    
    Non-Corp.
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Check cashing
    
    $
    
    
    
    $
    37,000
    
    
    $
    68,859
    
    
    $
    
    
    
    $
    105,859Consumer lending:Fees from consumer lending
    
    
    
    
    
    
    44,598
    
    
    
    74,077
    
    
    
    
    
    
    
    118,675Provision for loan losses and
adjustment
to servicing income
    
    
    
    
    
    
    (10,492
    )
    
    
    (12,381
    )
    
    
    
    
    
    
    (22,873
    )Consumer lending, net
    
    
    
    
    
    
    34,106
    
    
    
    61,696
    
    
    
    
    
    
    
    95,802Money transfer fees
    
    
    
    
    
    
    3,471
    
    
    
    9,209
    
    
    
    
    
    
    
    12,680Franchise fees and royalties
    
    
    
    
    
    
    4,243
    
    
    
    3,888
    
    
    
    
    
    
    
    8,131Other
    
    
    
    
    
    
    6,091
    
    
    
    13,028
    
    
    
    
    
    
    
    19,119Total revenues
    
    
    
    
    
    
    84,911
    
    
    
    156,680
    
    
    
    
    
    
    
    241,591Store and regional expenses:Salaries and benefits
    
    
    
    
    
    
    38,433
    
    
    
    39,857
    
    
    
    
    
    
    
    78,290Occupancy
    
    
    
    
    
    
    10,401
    
    
    
    9,983
    
    
    
    
    
    
    
    20,384Depreciation
    
    
    
    
    
    
    2,482
    
    
    
    3,028
    
    
    
    
    
    
    
    5,510Returned checks, net and cash shortages
    
    
    
    
    
    
    3,909
    
    
    
    5,175
    
    
    
    
    
    
    
    9,084Telephone and telecommunication
    
    
    
    
    
    
    2,562
    
    
    
    1,709
    
    
    
    
    
    
    
    4,271Advertising
    
    
    
    
    
    
    2,593
    
    
    
    4,172
    
    
    
    
    
    
    
    6,765Bank charges
    
    
    
    
    
    
    1,481
    
    
    
    2,042
    
    
    
    
    
    
    
    3,523Armored carrier services
    
    
    
    
    
    
    1,201
    
    
    
    1,890
    
    
    
    
    
    
    
    3,091Other
    
    
    
    
    
    
    12,020
    
    
    
    12,680
    
    
    
    
    
    
    
    24,700Total store and regional expenses
    
    
    
    
    
    
    75,082
    
    
    
    80,536
    
    
    
    
    
    
    
    155,618Store and regional margin
    
    
    
    
    
    
    9,829
    
    
    
    76,144
    
    
    
    
    
    
    
    85,973Corporate and other expenses:Corporate expenses
    
    
    
    
    
    
    15,573
    
    
    
    15,462
    
    
    
    
    
    
    
    31,035Management fee
    
    
    
    
    
    
    (9,122
    )
    
    
    9,122
    
    
    
    
    
    
    
    Other depreciation and amortization
    
    
    
    
    
    
    1,269
    
    
    
    1,420
    
    
    
    
    
    
    
    2,689Interest expense, net
    
    
    
    
    
    
    20,888
    
    
    
    1,357
    
    
    
    
    
    
    
    22,245Reserve for litigation settlement
    
    
    
    
    
    
    5,800
    
    
    
    
    
    
    
    
    
    
    
    5,800Other
    
    
    
    
    
    
    702
    
    
    
    16
    
    
    
    
    
    
    
    718Equity in subsidiary
    
    
    (5,026
    )
    
    
    
    
    
    
    
    
    
    
    5,026
    
    
    
    Income (loss) before income taxes
    
    
    5,026
    
    
    
    (25,281
    )
    
    
    48,767
    
    
    
    (5,026
    )
    
    
    23,486Income tax provision
    
    
    
    
    
    
    109
    
    
    
    18,351
    
    
    
    
    
    
    
    18,460Net income (loss)
    
    $
    5,026
    
    
    $
    (25,390
    )
    
    $
    30,416
    
    
    $
    (5,026
    )
    
    $
    5,026
 14




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 CONSOLIDATING STATEMENTS OF OPERATIONS
Nine Months Ended March 31, 2005
(In thousands)
 Dollar FinancialDollar
    
    
    Group, Inc.
    
    
    SubsidiaryFinancial
    
    
    and Subsidiary
    
    
    Non-Corp.
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Check cashing
    
    $
    
    
    
    $
    35,262
    
    
    $
    60,541
    
    
    $
    
    
    
    $
    95,803Consumer lending:Fees from consumer lending
    
    
    
    
    
    
    59,338
    
    
    
    54,632
    
    
    
    
    
    
    
    113,970Provision for loan losses and adjustment
to servicing income
    
    
    
    
    
    
    (13,400
    )
    
    
    (9,117
    )
    
    
    
    
    
    
    (22,517
    )Consumer lending, net
    
    
    
    
    
    
    45,938
    
    
    
    45,515
    
    
    
    
    
    
    
    91,453Money transfer fees
    
    
    
    
    
    
    3,203
    
    
    
    7,712
    
    
    
    
    
    
    
    10,915Franchise fees and royalties
    
    
    
    
    
    
    805
    
    
    
    3,172
    
    
    
    
    
    
    
    3,977Other
    
    
    
    
    
    
    2,527
    
    
    
    10,317
    
    
    
    
    
    
    
    12,844Total revenues
    
    
    
    
    
    
    87,735
    
    
    
    127,257
    
    
    
    
    
    
    
    214,992Store and regional expenses:Salaries and benefits
    
    
    
    
    
    
    33,555
    
    
    
    33,563
    
    
    
    
    
    
    
    67,118Occupancy
    
    
    
    
    
    
    8,420
    
    
    
    8,420
    
    
    
    
    
    
    
    16,840Depreciation
    
    
    
    
    
    
    2,781
    
    
    
    2,571
    
    
    
    
    
    
    
    5,352Returned checks, net and cash shortages
    
    
    
    
    
    
    3,528
    
    
    
    4,427
    
    
    
    
    
    
    
    7,955Telephone and telecommunication
    
    
    
    
    
    
    2,949
    
    
    
    1,655
    
    
    
    
    
    
    
    4,604Advertising
    
    
    
    
    
    
    3,173
    
    
    
    3,936
    
    
    
    
    
    
    
    7,109Bank charges
    
    
    
    
    
    
    1,454
    
    
    
    1,481
    
    
    
    
    
    
    
    2,935Armored carrier services
    
    
    
    
    
    
    1,097
    
    
    
    1,551
    
    
    
    
    
    
    
    2,648Other
    
    
    
    
    
    
    10,198
    
    
    
    11,243
    
    
    
    
    
    
    
    21,441Total store and regional expenses
    
    
    
    
    
    
    67,155
    
    
    
    68,847
    
    
    
    
    
    
    
    136,002Store and regional margin
    
    
    
    
    
    
    20,580
    
    
    
    58,410
    
    
    
    
    
    
    
    78,990Corporate and other expenses:Corporate expenses
    
    
    
    
    
    
    13,738
    
    
    
    13,159
    
    
    
    
    
    
    
    26,897Management fees
    
    
    636
    
    
    
    (934
    )
    
    
    934
    
    
    
    
    
    
    
    636Other depreciation and amortization
    
    
    
    
    
    
    1,694
    
    
    
    1,188
    
    
    
    
    
    
    
    2,882Interest expense, net
    
    
    7,642
    
    
    
    16,615
    
    
    
    2,980
    
    
    
    
    
    
    
    27,237Loss on extinguishment of debt
    
    
    8,097
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,097Termination of management services agreement
    
    
    2,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,500Other
    
    
    141
    
    
    
    (128
    )
    
    
    120
    
    
    
    
    
    
    
    133Equity in subsidiary
    
    
    (15,579
    )
    
    
    
    
    
    
    
    
    
    
    15,579
    
    
    
    Income (loss) before income taxes
    
    
    (3,437
    )
    
    
    (10,405
    )
    
    
    40,029
    
    
    
    (15,579
    )
    
    
    10,608Income tax (benefit) provision
    
    
    
    
    
    
    (336
    )
    
    
    14,381
    
    
    
    
    
    
    
    14,045Net income
    
    $
    (3,437
    )
    
    $
    (10,069
    )
    
    $
    25,648
    
    
    $
    (15,579
    )
    
    $
    (3,437
    )
 15




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 CONSOLIDATING STATEMENTS OF CASH FLOWS
Nine Months Ended March 31, 2006
(In thousands)
 Dollar FinancialDollar
    
    
    Group, Inc.
    
    
    SubsidiaryFinancial
    
    
    and Subsidiary
    
    
    Non-Corp.
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income (loss)
    
    $
    5,026
    
    
    $
    (25,390
    )
    
    $
    30,416
    
    
    $
    (5,026
    )
    
    $
    5,026Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:Undistributed income of subsidiary
    
    
    (5,026
    )
    
    
    
    
    
    
    
    
    
    
    5,026
    
    
    
    Depreciation and amortization
    
    
    
    
    
    
    5,053
    
    
    
    4,448
    
    
    
    
    
    
    
    9,501Reserve for litigation settlement
    
    
    
    
    
    
    5,800
    
    
    
    
    
    
    
    
    
    
    
    5,800Non-cash stock compensation
    
    
    88
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    88Losses on store closings and sales
    
    
    
    
    
    
    633
    
    
    
    16
    
    
    
    
    
    
    
    649Foreign currency loss on revaluation of
subordinated borrowings
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    5Deferred tax provision
    
    
    
    
    
    
    1,184
    
    
    
    617
    
    
    
    
    
    
    
    1,801Change in assets and liabilities (net of effect
of acquisitions):Decrease (increase) in loans and other receivables
    
    
    
    
    
    
    4,283
    
    
    
    (14,540
    )
    
    
    404
    
    
    
    (9,853
    )Increase in income taxes receivable
    
    
    
    
    
    
    (8,094
    )
    
    
    
    
    
    
    7,544
    
    
    
    (550
    )(Increase) decrease in prepaid expenses and other
    
    
    
    
    
    
    (300
    )
    
    
    1,538
    
    
    
    
    
    
    
    1,238Increase in accounts payable, income taxes
payable, accrued expenses and other liabilities and
accrued interest payable
    
    
    21
    
    
    
    15,913
    
    
    
    541
    
    
    
    (7,948
    )
    
    
    8,527Net cash provided by (used in) operating activities
    
    
    109
    
    
    
    (913
    )
    
    
    23,036
    
    
    
    
    
    
    
    22,232Cash flows from investing activities:Acquisitions, net of cash acquired
    
    
    
    
    
    
    (5,892
    )
    
    
    (14,078
    )
    
    
    
    
    
    
    (19,970
    )Additions to property and equipment
    
    
    
    
    
    
    (4,706
    )
    
    
    (7,193
    )
    
    
    
    
    
    
    (11,899
    )Net decrease in due from affiliates
    
    
    
    
    
    
    2,723
    
    
    
    
    
    
    
    (2,723
    )
    
    
    Net cash used in investing activities
    
    
    
    
    
    
    (7,875
    )
    
    
    (21,271
    )
    
    
    (2,723
    )
    
    
    (31,869
    )Cash flows from financing activities:Proceeds from the exercise of stock options
    
    
    395
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    395Other debt borrowings
    
    
    
    
    
    
    642
    
    
    
    
    
    
    
    
    
    
    
    642Net increase in revolving credit facilities
    
    
    
    
    
    
    27,500
    
    
    
    
    
    
    
    
    
    
    
    27,500Payment of debt issuance costs
    
    
    
    
    
    
    (1,218
    )
    
    
    
    
    
    
    
    
    
    
    (1,218
    )Net decrease in due to affiliates and due from parent
    
    
    14
    
    
    
    (11,387
    )
    
    
    8,650
    
    
    
    2,723
    
    
    
    Net cash provided by financing activities
    
    
    409
    
    
    
    15,537
    
    
    
    8,650
    
    
    
    2,723
    
    
    
    27,319Effect of exchange rate changes on cash and
cash equivalents
    
    
    
    
    
    
    
    
    
    
    1,122
    
    
    
    
    
    
    
    1,122Net increase in cash and cash equivalents
    
    
    518
    
    
    
    6,749
    
    
    
    11,537
    
    
    
    
    
    
    
    18,804Cash and cash equivalents at beginning of period
    
    
    4
    
    
    
    30,049
    
    
    
    62,451
    
    
    
    
    
    
    
    92,504Cash and cash equivalents at end of period
    
    $
    522
    
    
    $
    36,798
    
    
    $
    73,988
    
    
    $
    
    
    
    $
    111,308
 16




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 CONSOLIDATING STATEMENTS OF CASH FLOWS
Nine Months Ended March 31, 2005
(In thousands)
 Dollar FinancialDollar
    
    
    Group, Inc.
    
    
    SubsidiaryFinancial
    
    
    and Subsidiary
    
    
    Non-Corp.
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net (loss) income
    
    $
    (3,437
    )
    
    $
    (10,069
    )
    
    $
    25,648
    
    
    $
    (15,579
    )
    
    $
    (3,437
    )Adjustments to reconcile net (loss) income to net
cash provided by (used in) operating activities:Undistributed income of subsidiary
    
    
    (15,579
    )
    
    
    
    
    
    
    
    
    
    
    15,579
    
    
    
    Depreciation and amortization
    
    
    19
    
    
    
    5,600
    
    
    
    3,761
    
    
    
    
    
    
    
    9,380Loss on extinguishment of debt
    
    
    5,114
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,114(Gain) loss on store closings and sales
    
    
    
    
    
    
    (175
    )
    
    
    121
    
    
    
    
    
    
    
    (54
    )Foreign currency loss on revaluation of
subordinated borrowings
    
    
    
    
    
    
    183
    
    
    
    
    
    
    
    
    
    
    
    183Deferred tax benefit
    
    
    
    
    
    
    
    
    
    
    (132
    )
    
    
    
    
    
    
    (132
    )Change in assets and liabilities (net of effect
of acquisitions):(Increase) decrease in loans and other receivables
    
    
    (3,662
    )
    
    
    3,654
    
    
    
    (5,275
    )
    
    
    (29
    )
    
    
    (5,312
    )Decrease in income taxes receivable
    
    
    
    
    
    
    40,858
    
    
    
    1,196
    
    
    
    (40,800
    )
    
    
    1,254(Increase) decrease in prepaid expenses and other
    
    
    
    
    
    
    (2,605
    )
    
    
    470
    
    
    
    
    
    
    
    (2,135
    )Increase (decrease) in accounts payable, income taxes payable,
accrued expenses and other liabilities and accrued
interest payable
    
    
    3,959
    
    
    
    (33,388
    )
    
    
    1,881
    
    
    
    40,829
    
    
    
    13,281Net cash (used in) provided by operating activities
    
    
    (13,586
    )
    
    
    4,058
    
    
    
    27,670
    
    
    
    
    
    
    
    18,142Cash flows from investing activities:Acquisitions, net of cash acquired
    
    
    
    
    
    
    (21,633
    )
    
    
    (3,725
    )
    
    
    
    
    
    
    (25,358
    )Additions to property and equipment
    
    
    
    
    
    
    (2,832
    )
    
    
    (6,492
    )
    
    
    
    
    
    
    (9,324
    )Net decrease in due from affiliates
    
    
    
    
    
    
    57,773
    
    
    
    
    
    
    
    (57,773
    )
    
    
    Net cash provided by (used in) investing activities
    
    
    
    
    
    
    33,308
    
    
    
    (10,217
    )
    
    
    (57,773
    )
    
    
    (34,682
    )Cash flows from financing activities:Proceeds from initial public offering of common stock, net
    
    
    109,786
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    109,786Redemption of 16% Senior Notes due 2012
    
    
    (50,416
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (50,416
    )Redemption of 13.95% Senior Subordinated Notes due 2012
    
    
    (44,661
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (44,661
    )Other debt payments
    
    
    
    
    
    
    (77
    )
    
    
    (16
    )
    
    
    
    
    
    
    (93
    )Net increase in revolving credit facilities
    
    
    
    
    
    
    11,000
    
    
    
    
    
    
    
    
    
    
    
    11,000Payment of initial public stock offering costs
    
    
    (1,309
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,309
    )Payment of debt issuance costs
    
    
    (3
    )
    
    
    (164
    )
    
    
    
    
    
    
    
    
    
    
    (167
    )Net increase (decrease) in due to affiliates and due from
parent
    
    
    (3,421
    )
    
    
    (40,969
    )
    
    
    (13,383
    )
    
    
    57,773
    
    
    
    Dividend paid to parent
    
    
    3,610
    
    
    
    (3,610
    )
    
    
    
    
    
    
    
    
    
    
    Net cash (used in) provided by financing activities
    
    
    13,586
    
    
    
    (33,820
    )
    
    
    (13,399
    )
    
    
    57,773
    
    
    
    24,140Effect of exchange rate changes on cash and
cash equivalents
    
    
    
    
    
    
    
    
    
    
    3,923
    
    
    
    
    
    
    
    3,923Net increase in cash and cash equivalents
    
    
    
    
    
    
    3,546
    
    
    
    7,977
    
    
    
    
    
    
    
    11,523Cash and cash equivalents at beginning of period
    
    
    4
    
    
    
    27,124
    
    
    
    42,142
    
    
    
    
    
    
    
    69,270Cash and cash equivalents at end of period
    
    $
    4
    
    
    $
    30,670
    
    
    $
    50,119
    
    
    $
    
    
    
    $
    80,793
 17




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 4. GOODWILL AND OTHER INTANGIBLES
  Fiscal Year Ending
    
    AmountJune 30,
    
    (in thousands)2006
    
    $
    94.02007
    
    
    84.72008
    
    
    84.72009
    
    
    84.72010
    
    
    84.7Thereafter
    
    
    395.1$
    827.9
  United
    
    
    
    
    
    UnitedStates
    
    Canada
    
    Kingdom
    
    TotalBalance at June 30, 2004
    
    $
    56,514
    
    
    $
    38,821
    
    
    $
    53,783
    
    
    $
    149,118Amortization of other intangibles
    
    
    (56
    )
    
    
    
    
    
    
    
    
    
    
    (56
    )Acquisitions
    
    
    31,077
    
    
    
    
    
    
    
    3,223
    
    
    
    34,300Foreign currency translation
adjustments
    
    
    
    
    
    
    3,638
    
    
    
    (810
    )
    
    
    2,828Balance at June 30, 2005
    
    
    87,535
    
    
    
    42,459
    
    
    
    56,196
    
    
    
    186,190Amortization of other intangibles
    
    
    (73
    )
    
    
    
    
    
    
    
    
    
    
    (73
    )Acquisitions
    
    
    10,418
    
    
    
    13,339
    
    
    
    18
    
    
    
    23,775Foreign currency translation
adjustments
    
    
    
    
    
    
    2,299
    
    
    
    (1,701
    )
    
    
    598Balance at March 31, 2006
    
    $
    97,880
    
    
    $
    58,098
    
    
    $
    54,513
    
    
    $
    210,490
 18




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 4. GOODWILL AND OTHER INTANGIBLES (continued)
  June 30, 2005
    
    
    March 31, 2006Gross Carrying
    
    
    Accumulated
    
    
    Gross Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Amount
    
    
    AmortizationNon-amortized intangible assets:Cost in
excess of net assets acquired
    
    $
    205,572
    
    
    $
    20,532
    
    
    $
    228,983
    
    
    $
    20,757Territory rights
    
    
    
    
    
    
    
    
    
    
    181
    
    
    
    Reacquired franchise rights
    
    
    
    
    
    
    
    
    
    
    1,424
    
    
    
    $
    205,572
    
    
    $
    20,532
    
    
    $
    230,588
    
    
    $
    20,757Amortized intangible assets:Covenants not to compete
    
    $
    2,510
    
    
    $
    2,510
    
    
    $
    
    
    
    $
    Franchise agreements
    
    
    1,187
    
    
    
    37
    
    
    
    755
    
    
    
    96$
    3,697
    
    
    $
    2,547
    
    
    $
    755
    
    
    $
    96
 5. COMPREHENSIVE INCOME (LOSS)
  Three Months Ended
    
    
    
    
    
    
    Nine Months EndedMarch 31,
    
    
    
    
    
    
    March 31,2005
    
    
    2006
    
    
    
    
    
    
    2005
    
    
    2006Net (loss) income
    
    $
    (4,479
    )
    
    $
    (291
    )
    
    
    
    
    
    $
    (3,437
    )
    
    $
    5,026Foreign currency translation adjustment
    
    
    (2,271
    )
    
    
    37
    
    
    
    
    
    
    
    12,573
    
    
    
    1,189Fair value adjustments for cash flow hedges
    
    
    161
    
    
    
    39
    
    
    
    
    
    
    
    (159
    )
    
    
    (9
    )Total comprehensive (loss) income
    
    $
    (6,589
    )
    
    $
    (215
    )
    
    
    
    
    
    $
    8,977
    
    
    $
    6,206
 19




---



##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 6.
    
    GEOGRAPHIC SEGMENT INFORMATIONAll operations for which geographic data is presented below are in one principal industry (check
cashing, consumer lending and ancillary services) (in thousands):
 United
    
    
    
    
    
    UnitedStates
    
    Canada
    
    Kingdom
    
    TotalAs of and for the three months
ended March 31, 2005Identifiable assets
    
    $
    152,465
    
    
    $
    107,917
    
    
    $
    111,748
    
    
    $
    372,130Goodwill and other intangibles, net
    
    
    83,282
    
    
    
    42,734
    
    
    
    59,178
    
    
    
    185,194Sales to unaffiliated customers:Check cashing
    
    
    13,497
    
    
    
    10,141
    
    
    
    9,070
    
    
    
    32,708Consumer lending:Fees from consumer lending
    
    
    18,970
    
    
    
    11,581
    
    
    
    6,674
    
    
    
    37,225Provision for loan losses and adjustments
to servicing income
    
    
    (2,116
    )
    
    
    (661
    )
    
    
    (1,531
    )
    
    
    (4,308
    )Consumer lending, net
    
    
    16,854
    
    
    
    10,920
    
    
    
    5,143
    
    
    
    32,917Money transfer fees
    
    
    1,126
    
    
    
    1,702
    
    
    
    894
    
    
    
    3,722Franchise fees and royalties
    
    
    689
    
    
    
    1,074
    
    
    
    
    
    
    
    1,763Other
    
    
    1,105
    
    
    
    3,540
    
    
    
    698
    
    
    
    5,343Total sales to unaffiliated customers
    
    
    33,271
    
    
    
    27,377
    
    
    
    15,805
    
    
    
    76,453Interest expense, net
    
    
    6,862
    
    
    
    134
    
    
    
    770
    
    
    
    7,766Depreciation and amortization
    
    
    1,379
    
    
    
    790
    
    
    
    409
    
    
    
    2,578(Loss) income before income taxes
    
    
    (11,929
    )
    
    
    9,122
    
    
    
    3,765
    
    
    
    958Income tax provision
    
    
    494
    
    
    
    3,839
    
    
    
    1,104
    
    
    
    5,437For the nine months
ended March 31, 2005Sales to unaffiliated customers:Check cashing
    
    $
    35,262
    
    
    $
    32,286
    
    
    $
    28,255
    
    
    $
    95,803Consumer lending:Fees from consumer lending
    
    
    59,337
    
    
    
    35,600
    
    
    
    19,033
    
    
    
    113,970Provision for loan losses and adjustments
to servicing income
    
    
    (13,399
    )
    
    
    (4,530
    )
    
    
    (4,588
    )
    
    
    (22,517
    )Consumer lending, net
    
    
    45,938
    
    
    
    31,070
    
    
    
    14,445
    
    
    
    91,453Money transfer fees
    
    
    3,202
    
    
    
    5,058
    
    
    
    2,655
    
    
    
    10,915Franchise fees and royalties
    
    
    805
    
    
    
    3,172
    
    
    
    
    
    
    
    3,977Other
    
    
    2,524
    
    
    
    8,092
    
    
    
    2,228
    
    
    
    12,844Total sales to unaffiliated customers
    
    
    87,731
    
    
    
    79,678
    
    
    
    47,583
    
    
    
    214,992Interest expense, net
    
    
    24,257
    
    
    
    726
    
    
    
    2,254
    
    
    
    27,237Depreciation and amortization
    
    
    4,474
    
    
    
    2,280
    
    
    
    1,480
    
    
    
    8,234(Loss) income before income taxes
    
    
    (29,422
    )
    
    
    28,360
    
    
    
    11,670
    
    
    
    10,608Income tax
(benefit) provision
    
    
    (335
    )
    
    
    10,928
    
    
    
    3,452
    
    
    
    14,045
 20




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 6. GEOGRAPHIC SEGMENT INFORMATION (continued)
 United
    
    
    
    
    
    UnitedStates
    
    Canada
    
    Kingdom
    
    TotalAs of and for the three months
ended March 31, 2006Identifiable assets
    
    $
    173,342
    
    
    $
    151,505
    
    
    $
    117,203
    
    
    $
    442,050Goodwill and other intangibles, net
    
    
    97,880
    
    
    
    58,097
    
    
    
    54,513
    
    
    
    210,490Sales to unaffiliated customers:Check cashing
    
    
    13,984
    
    
    
    12,633
    
    
    
    9,671
    
    
    
    36,288Consumer lending:Fees from consumer lending
    
    
    14,838
    
    
    
    17,909
    
    
    
    8,596
    
    
    
    41,343Provision for loan losses and adjustments
to servicing income
    
    
    (2,610
    )
    
    
    (1,314
    )
    
    
    (2,428
    )
    
    
    (6,352
    )Consumer lending, net
    
    
    12,228
    
    
    
    16,595
    
    
    
    6,168
    
    
    
    34,991Money transfer fees
    
    
    1,427
    
    
    
    2,013
    
    
    
    1,020
    
    
    
    4,460Franchise fees and royalties
    
    
    1,316
    
    
    
    1,412
    
    
    
    
    
    
    
    2,728Other
    
    
    2,157
    
    
    
    4,942
    
    
    
    893
    
    
    
    7,992Total sales to unaffiliated customers
    
    
    31,112
    
    
    
    37,595
    
    
    
    17,752
    
    
    
    86,459Interest expense, net
    
    
    7,101
    
    
    
    (243
    )
    
    
    708
    
    
    
    7,566Depreciation and amortization
    
    
    1,145
    
    
    
    896
    
    
    
    680
    
    
    
    2,721(Loss) income before income taxes
    
    
    (11,213
    )
    
    
    16,332
    
    
    
    2,397
    
    
    
    7,516Income tax provision
    
    
    487
    
    
    
    6,341
    
    
    
    979
    
    
    
    7,807For the nine months
ended March 31, 2006Sales to unaffiliated customers:Check cashing
    
    $
    36,999
    
    
    $
    37,724
    
    
    $
    31,136
    
    
    $
    105,859Consumer lending:Fees from consumer lending
    
    
    44,598
    
    
    
    50,385
    
    
    
    23,692
    
    
    
    118,675Provision for loan losses and adjustments
to servicing income
    
    
    (10,492
    )
    
    
    (6,776
    )
    
    
    (5,605
    )
    
    
    (22,873
    )Consumer lending, net
    
    
    34,106
    
    
    
    43,609
    
    
    
    18,087
    
    
    
    95,802Money transfer fees
    
    
    3,471
    
    
    
    6,046
    
    
    
    3,163
    
    
    
    12,680Franchise fees and royalties
    
    
    4,243
    
    
    
    3,888
    
    
    
    
    
    
    
    8,131Other
    
    
    6,092
    
    
    
    10,248
    
    
    
    2,779
    
    
    
    19,119Total sales to unaffiliated customers
    
    
    84,911
    
    
    
    101,515
    
    
    
    55,165
    
    
    
    241,591Interest expense (income), net
    
    
    20,888
    
    
    
    (774
    )
    
    
    2,131
    
    
    
    22,245Depreciation and amortization
    
    
    3,751
    
    
    
    2,544
    
    
    
    1,904
    
    
    
    8,199(Loss) income before income taxes
    
    
    (25,281
    )
    
    
    40,587
    
    
    
    8,180
    
    
    
    23,486Income tax provision
    
    
    109
    
    
    
    15,724
    
    
    
    2,627
    
    
    
    18,460
 7. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
  21




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 7. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (continued)
   8. CONTINGENT LIABILITIES
  Canadian Legal Proceedings
      22




---



##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 8. CONTINGENT LIABILITIES (continued)
 Canadian
Legal Proceedings (continued)
   California Legal Proceedings
 (Woods) (Castillo) (Chin) (Williams) Chin Woods Castillo Williams Woods Castillo Williams Woods, Castillo Williams
 Chin
 We The People Legal Proceedings
    23




---



##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 8. CONTINGENT LIABILITIES (continued)
 We The People Legal Proceedings (continued)
      ex parte
 24




---



##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 8. CONTINGENT LIABILITIES (continued)
 We The People Legal Proceedings (continued)
     9. ACQUISITIONS
    25




---



##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 9. ACQUISITIONS (continued)
     WTPPurchase price
    
    $
    14.0Net assets acquired:Purchased franchise agreements
    
    
    (1.2
    )Refundable deposits
    
    
    7.6Other (assets) and liabilities
    
    
    1.1Goodwill
    
    $
    21.5
    26




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 10. SUPPLEMENTARY CASH FLOW INFORMATION
  11. SUBSEQUENT EVENT
  27




---



##### Table of Contents



DOLLAR FINANCIAL CORP.
 SUPPLEMENTAL STATISTICAL DATA
 March 31,2005
    
    2006Company Operating Data:Stores in operation:Company-owned
    
    
    700
    
    
    
    758Franchised stores and check cashing merchants
    
    
    642
    
    
    
    511Total
    
    
    1,342
    
    
    
    1,269
 Three Months Ended
    
    Nine Months EndedMarch 31,
    
    March 31,2005
    
    2006
    
    2005
    
    2006Check Cashing Data:Face amount of checks cashed (in millions)
    
    $
    843
    
    
    $
    946
    
    
    $
    2,542
    
    
    $
    2,804Face amount of average check
    
    $
    437
    
    
    $
    461
    
    
    $
    419
    
    
    $
    447Face amount of average check (excluding Canada
and the United Kingdom)
    
    $
    432
    
    
    $
    455
    
    
    $
    389
    
    
    $
    412Average fee per check
    
    $
    16.94
    
    
    $
    17.69
    
    
    $
    15.80
    
    
    $
    16.87Number of checks cashed (in thousands)
    
    
    1,930
    
    
    
    2,051
    
    
    
    6,065
    
    
    
    6,274
 Three Months Ended
    
    
    Nine Months EndedMarch 31,
    
    
    March 31,2005
    
    
    2006
    
    
    2005
    
    
    2006Check Cashing Collections Data:Face amount of returned checks (in thousands)
    
    $
    7,815
    
    
    $
    9,617
    
    
    $
    23,311
    
    
    $
    29,463Collections (in thousands)
    
    
    (5,762
    )
    
    
    (7,576
    )
    
    
    (16,618
    )
    
    
    (21,802
    )Net write-offs (in thousands)
    
    $
    2,053
    
    
    $
    2,041
    
    
    $
    6,693
    
    
    $
    7,661Collections as a percentage of returned checks
    
    
    73.7
    %
    
    
    78.8
    %
    
    
    71.3
    %
    
    
    74.0
    %Net write-offs as a percentage of check cashing
revenues
    
    
    6.28
    %
    
    
    5.62
    %
    
    
    6.99
    %
    
    
    7.24
    %Net write-offs as a percentage of the face amount
of checks cashed
    
    
    0.24
    %
    
    
    0.22
    %
    
    
    0.26
    %
    
    
    0.27
    %
 28




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##### Table of Contents



For the three months ended March 31,
    
    
    For the nine months ended March 31,2005
    
    
    2006
    
    
    2005
    
    
    2006U.S. company funded consumer loan originations (1) (3)
    
    $
    15,956
    
    
    $
    51,120
    
    
    $
    53,025
    
    
    $
    180,716Canadian company funded consumer loan originations (2)
    
    
    107,346
    
    
    
    132,116
    
    
    
    332,514
    
    
    
    405,189U.K. company funded consumer loan originations (2)
    
    
    46,245
    
    
    
    48,431
    
    
    
    136,356
    
    
    
    149,393Total company funded consumer loan originations
    
    $
    169,547
    
    
    $
    231,667
    
    
    $
    521,895
    
    
    $
    735,298U.S. servicing revenues (3)
    
    $
    16,288
    
    
    $
    6,350
    
    
    $
    51,171
    
    
    $
    15,855U.S. company funded consumer loan revenues (3)
    
    
    2,682
    
    
    
    8,489
    
    
    
    8,166
    
    
    
    28,743Canadian company funded consumer loan revenues
    
    
    11,581
    
    
    
    17,908
    
    
    
    35,600
    
    
    
    50,384U.K. company funded consumer loan revenues
    
    
    6,674
    
    
    
    8,596
    
    
    
    19,033
    
    
    
    23,693Provision for loan losses and adjustment to servicing
income
    
    
    (4,308
    )
    
    
    (6,352
    )
    
    
    (22,517
    )
    
    
    (22,873
    )Total consumer lending revenues, net
    
    $
    32,917
    
    
    $
    34,991
    
    
    $
    91,453
    
    
    $
    95,802Gross charge-offs of company funded consumer loans (3)
    
    $
    15,492
    
    
    $
    26,231
    
    
    $
    48,046
    
    
    $
    77,751Recoveries of company funded consumer loans (3)
    
    
    (13,871
    )
    
    
    (21,591
    )
    
    
    (37,251
    )
    
    
    (61,992
    )Net charge-offs on company funded consumer loans
    
    $
    1,621
    
    
    $
    4,640
    
    
    $
    10,795
    
    
    $
    15,759Gross charge-offs of company funded consumer loans
as a percentage of total company funded consumer loan
originations
    
    
    9.1
    %
    
    
    11.3
    %
    
    
    9.2
    %
    
    
    10.6
    %Recoveries of company funded consumer loans as a
percentage of total company funded consumer loan
originations
    
    
    8.1
    %
    
    
    9.3
    %
    
    
    7.1
    %
    
    
    8.4
    %Net charge-offs on company funded consumer loans
as a percentage of total company funded consumer loan
originations
    
    
    1.0
    %
    
    
    2.0
    %
    
    
    2.1
    %
    
    
    2.2
    %
 
 (1)
    
    Our company operated stores and document transmitter locations in the United States originate
company funded and bank funded short-term consumer loans.(2)
    
    All consumer loans originated in Canada and the United Kingdom are company funded.(3)
    
    The variance between the two periods is primarily related to our transition in the United States for short-term consumer loans
from the bank-funded to the company funded model. 29




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
 The following is a discussion and analysis of the financial condition and results of operations for
Dollar Financial Corp. for the three and nine months ended March 31, 2006 and 2005. References in
this section to we, our, ours, or
us are to Dollar Financial Corp. and its wholly-owned
subsidiaries, except as the context otherwise requires. References
toOPCO are to our wholly-owned
operating subsidiary, Dollar Financial Group, Inc. For a separate discussion and analysis of the
financial condition and results of operations of OPCO, see Managements Discussion and Analysis of
Financial Condition and Results of Operations included in OPCOs quarterly report on Form 10-Q
(File No. 333-18221) for the period ended March 31, 2006.
 Executive Summary
        30




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##### Table of Contents



Impact of Hurricanes Katrina and Rita on our Operations
   Discussion of Critical Accounting Policies
   Revenue Recognition
      31




---



##### Table of Contents



Company-Funded Consumer Loan Loss Reserves Policy
    Check Cashing Returned Item Policy
  32




---



##### Table of Contents





Goodwill




Income Taxes




Results of Operations


Revenue Analysis
 Three Months Ended March 31,
    
    
    Nine Months Ended March 31,(Percentage of total
    
    
    
    
    
    
    
    
    
    
    (Percentage of total($ in thousands)
    
    
    revenue)
    
    
    ($ in thousands)
    
    
    revenue)2005
    
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2006Check cashing
    
    $
    32,708
    
    
    $
    36,288
    
    
    
    42.8
    %
    
    
    42.0
    %
    
    $
    95,803
    
    
    $
    105,859
    
    
    
    44.6
    %
    
    
    43.8
    %Consumer lending revenue, net
    
    
    32,917
    
    
    
    34,991
    
    
    
    43.0
    %
    
    
    40.5
    %
    
    
    91,453
    
    
    
    95,802
    
    
    
    42.5
    %
    
    
    39.7
    %Money transfer fees
    
    
    3,722
    
    
    
    4,460
    
    
    
    4.9
    %
    
    
    5.1
    %
    
    
    10,915
    
    
    
    12,680
    
    
    
    5.1
    %
    
    
    5.2
    %Franchise fees and royalties
    
    
    1,763
    
    
    
    2,728
    
    
    
    2.3
    %
    
    
    3.2
    %
    
    
    3,977
    
    
    
    8,131
    
    
    
    1.8
    %
    
    
    3.4
    %Other revenue
    
    
    5,343
    
    
    
    7,992
    
    
    
    7.0
    %
    
    
    9.2
    %
    
    
    12,844
    
    
    
    19,119
    
    
    
    6.0
    %
    
    
    7.9
    %Total revenue
    
    $
    76,453
    
    
    $
    86,459
    
    
    
    100.0
    %
    
    
    100.0
    %
    
    $
    214,992
    
    
    $
    241,591
    
    
    
    100.0
    %
    
    
    100.0
    %
 The Three Months Ended March 31, 2006 compared to the Three Months Ended March 31, 2005
   33




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##### Table of Contents



The Nine Months Ended March 31, 2006 compared to the Nine Months Ended March 31, 2005
   Store and Regional Expense Analysis
 Three Months Ended March 31,
    
    
    Nine Months Ended March 31,(Percentage of total
    
    
    
    
    
    
    
    
    
    
    (Percentage of total($ in thousands)
    
    
    revenue)
    
    
    ($ in thousands)
    
    
    revenue)2005
    
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2006Salaries and benefits
    
    $
    23,775
    
    
    $
    27,095
    
    
    
    31.1
    %
    
    
    31.3
    %
    
    $
    67,118
    
    
    $
    78,290
    
    
    
    31.2
    %
    
    
    32.4
    %Occupancy
    
    
    5,834
    
    
    
    6,914
    
    
    
    7.6
    %
    
    
    8.0
    %
    
    
    16,840
    
    
    
    20,384
    
    
    
    7.8
    %
    
    
    8.4
    %Depreciation
    
    
    1,777
    
    
    
    1,843
    
    
    
    2.3
    %
    
    
    2.1
    %
    
    
    5,352
    
    
    
    5,510
    
    
    
    2.5
    %
    
    
    2.3
    %Returned checks, net and cash shortages
    
    
    2,733
    
    
    
    2,697
    
    
    
    3.6
    %
    
    
    3.1
    %
    
    
    7,955
    
    
    
    9,084
    
    
    
    3.7
    %
    
    
    3.8
    %Telephone and communications
    
    
    1,654
    
    
    
    1,405
    
    
    
    2.2
    %
    
    
    1.6
    %
    
    
    4,604
    
    
    
    4,271
    
    
    
    2.1
    %
    
    
    1.8
    %Advertising
    
    
    1,988
    
    
    
    1,943
    
    
    
    2.6
    %
    
    
    2.2
    %
    
    
    7,109
    
    
    
    6,765
    
    
    
    3.3
    %
    
    
    2.8
    %Bank Charges
    
    
    1,022
    
    
    
    1,279
    
    
    
    1.3
    %
    
    
    1.5
    %
    
    
    2,935
    
    
    
    3,523
    
    
    
    1.4
    %
    
    
    1.5
    %Armored carrier expenses
    
    
    934
    
    
    
    1,069
    
    
    
    1.2
    %
    
    
    1.2
    %
    
    
    2,648
    
    
    
    3,091
    
    
    
    1.2
    %
    
    
    1.3
    %Other
    
    
    7,170
    
    
    
    8,701
    
    
    
    9.4
    %
    
    
    10.1
    %
    
    
    21,441
    
    
    
    24,700
    
    
    
    10.0
    %
    
    
    10.2
    %Total store and regional expenses
    
    $
    46,887
    
    
    $
    52,946
    
    
    
    61.3
    %
    
    
    61.1
    %
    
    $
    136,002
    
    
    $
    155,618
    
    
    
    63.2
    %
    
    
    64.5
    %
 The Three Months Ended March 31, 2006 compared to the Three Months Ended March 31, 2005
  The Nine Months Ended March 31, 2006 compared to the Nine Months Ended March 31, 2005
  34




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##### Table of Contents



Corporate and Other Expense Analysis
 Three Months Ended March 31,
    
    Nine Months Ended March 31,(Percentage of total
    
    
    
    
    
    
    
    
    
    (Percentage of total($ in thousands)
    
    revenue)
    
    ($ in thousands)
    
    revenue)2005
    
    2006
    
    2005
    
    2006
    
    2005
    
    2006
    
    2005
    
    2006Corporate expenses
    
    $
    9,147
    
    
    $
    11,453
    
    
    
    12.0
    %
    
    
    13.2
    %
    
    $
    26,897
    
    
    $
    31,035
    
    
    
    12.5
    %
    
    
    12.8
    %Management fee
    
    
    108
    
    
    
    
    
    
    
    0.1
    %
    
    
    0.0
    %
    
    
    636
    
    
    
    
    
    
    
    0.3
    %
    
    
    0.0
    %Other depreciation and amortization
    
    
    801
    
    
    
    878
    
    
    
    1.0
    %
    
    
    1.0
    %
    
    
    2,882
    
    
    
    2,689
    
    
    
    1.3
    %
    
    
    1.1
    %Interest expense
    
    
    7,766
    
    
    
    7,566
    
    
    
    10.2
    %
    
    
    8.8
    %
    
    
    27,237
    
    
    
    22,245
    
    
    
    12.7
    %
    
    
    9.2
    %Reserve for
litigation settlement
    
    
    
    
    
    
    5,800
    
    
    
    0.0
    %
    
    
    6.7
    %
    
    
    
    
    
    
    5,800
    
    
    
    0.0
    %
    
    
    2.4
    %Loss on extinguishment of debt
    
    
    8,097
    
    
    
    
    
    
    
    10.6
    %
    
    
    0.0
    %
    
    
    8,097
    
    
    
    
    
    
    
    3.8
    %
    
    
    0.0
    %Termination of management services agreement
    
    
    2,500
    
    
    
    
    
    
    
    3.3
    %
    
    
    0.0
    %
    
    
    2,500
    
    
    
    
    
    
    
    1.2
    %
    
    
    0.0
    %Other
    
    
    189
    
    
    
    300
    
    
    
    0.2
    %
    
    
    0.3
    %
    
    
    133
    
    
    
    718
    
    
    
    0.1
    %
    
    
    0.3
    %Income tax provision
    
    
    5,437
    
    
    
    7,807
    
    
    
    7.1
    %
    
    
    9.0
    %
    
    
    14,045
    
    
    
    18,460
    
    
    
    6.5
    %
    
    
    7.6
    %
 The Three Months Ended March 31, 2006 compared to the Three Months Ended March 31, 2005
 Corporate Exp s
  Management Fees
  Other Depreciation and Amortization
  35




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##### Table of Contents



Interest Expense
  Income Tax Provision
  The Nine Months Ended March 31, 2006 compared to the Nine Months Ended March 31, 2005
 Corporate Expenses
  Management Fees
  Other Depreciation and Amortization
  Interest Expense
  36




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##### Table of Contents







Income Tax Provision




Changes in Financial Condition




Liquidity and Capital Resources










37




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##### Table of Contents



Revolving Credit Facilities.
 Domestic Revolving Credit Facility.
 Canadian Overdraft Facility.
 Long-Term Debt
 Operating Leases.
  Payments Due by Period (in thousands)Less than
    
    
    1 - 3
    
    
    4 - 5
    
    
    After 5Total
    
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    YearsRevolving credit facilities
    
    $
    27,500
    
    
    $
    27,500
    
    
    $
    
    
    
    $
    
    
    
    $
    Long-term debt:9.75% Senior Notes due 2011(1)
    
    
    271,556
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    271,556Capital lease obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating lease obligations
    
    
    81,982
    
    
    
    20,141
    
    
    
    31,972
    
    
    
    16,723
    
    
    
    13,146Purchase obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other long-term liabilities reflected on
the registrants balance sheet under
GAAP
    
    
    642
    
    
    
    366
    
    
    
    276
    
    
    
    
    
    
    
    Total contractual cash obligations
    
    $
    380,104
    
    
    $
    47,793
    
    
    $
    31,731
    
    
    $
    16,165
    
    
    $
    284,415
 
 (1)
    
    $1,556 is the unamortized premium on the 9.75% Senior Notes due 2011.  38




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##### Table of Contents



Balance Sheet Variations
 March 31, 2006 compared to June 30, 2005
        Woods, Castillo Williams American
    Seasonality and Quarterly Fluctuations
  39




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##### Table of Contents



Sarbanes-Oxley Act of 2002: Section 404 Compliance
  Cautionary Statement for Purposes of the Safe Harbor Provisions of the Private Securities
Litigation Reform Act of 1995
    
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Generally
  
    
    interest rates on debt; and
    
    foreign exchange rates generating translation gains and losses.
  Interest Rates
  40




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##### Table of Contents



Foreign Exchange Rates
    
 Item 4. Controls and Procedures
 Evaluation of Disclosure Control and Procedures
  Changes in Internal Control Over Financial Reporting
  41




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  Canadian Legal Proceedings
       California Legal Proceedings
 (Woods) (Castillo) (Chin) (Williams) Chin Woods Castillo Williams Woods Castillo Williams
 42




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##### Table of Contents



Woods, Castillo Williams
 Chin
 We The People Legal Proceedings
        43




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##### Table of Contents



ex parte
     
 Item 4. Submission of Matters to a Vote of Security Holders
  44




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##### Table of Contents



Item 6. Exhibits
 Exhibit No.
    
    Description of Document31.1
    
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer31.2
    
    
    Rule 13a-14(a)/15d-14(a) Certification of President31.3
    
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer32.1
    
    
    Section 1350 Certification of Chief Executive Officer32.2
    
    
    Section 1350 Certification of President32.3
    
    
    Section 1350 Certification of Chief Financial Officer
 45




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##### Table of Contents



SIGNATURE
  DOLLAR FINANCIAL CORP.Date: May 9, 2006
    
    
    
    *By:
    
    /s/ Randy UnderwoodName:
    
    Randy UnderwoodTitle:
    
    Executive Vice President and
Chief Financial Officer(principal financial and
chief accounting officer)
 
 *
    
    The signatory hereto is the principal financial and chief accounting officer and has been
duly authorized to sign on behalf of the registrant. 46