##### 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 December 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
    
    23-2636866(State or Other Jurisdiction of Incorporation or Organization)
    
    (I.R.S. Employer Identification No.)
 1436 LANCASTER AVENUE,
BERWYN, PENNSYLVANIA 19312
 610-296-3400
 None
 Ö þ o
  o þ o
 o þ




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 INDEX
 Page No.PART I. FINANCIAL INFORMATIONItem 1.Financial StatementsInterim Consolidated Balance Sheets as of June 30, 2006
and December 31, 2006 (unaudited)
    
    
    3Interim Unaudited Consolidated Statements of Operations for the Three and Six
Months Ended December 31, 2005 and 2006
    
    
    4Interim Consolidated Statements of Shareholders Equity as of June 30, 2006
and December 31, 2006 (unaudited)
    
    
    5Interim Unaudited Consolidated Statements of Cash Flows for the Six Months
Ended December 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
    
    
    28Item 3. Quantitative and Qualitative Disclosures
About Market Risk
    
    
    38Item 4. Controls and Procedures
    
    
    39PART II.OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    39Item 4. Submission of Matters to a Vote of Security Holders
    
    
    41Item 6. Exhibits
    
    
    42Signature
    
    
    43RULE 13a-14(a)15d-14(a) CERTIFICATION OF CEORULE 13a-14(a)15d-14(a) CERTIFICATION OF PRESIDENTRULE 13a-14(a)15d-14(a) CERTIFICATION OF CFOSECTION 1350 CERTIFICATION OF CEOSECTION 1350 CERTIFICATION OF PRESIDENTSECTION 1350 CERTIFICATION OF CFO
 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,
    
    
    December 31,2006
    
    
    2006(unaudited)ASSETSCash and cash equivalents
    
    $
    120,221
    
    
    $
    124,701Restricted Cash
    
    
    80,750
    
    
    
    2,502Loans receivable, net:Loans receivable
    
    
    58,997
    
    
    
    88,177Less: Allowance for loan losses
    
    
    (5,365
    )
    
    
    (8,540
    )Loans receivable, net
    
    
    53,632
    
    
    
    79,637Other consumer lending receivables, net of an allowance of $11,693
and $13,929
    
    
    7,545
    
    
    
    12,151Other receivables
    
    
    8,680
    
    
    
    8,444Prepaid expenses
    
    
    10,166
    
    
    
    8,843Deferred tax asset, net of valuation allowance of $47,516 and $86,588
    
    
    185
    
    
    
    1,495Property and equipment, net of accumulated
depreciation of $73,714 and $77,054
    
    
    40,625
    
    
    
    47,542Goodwill and other intangibles, net of accumulated
amortization of $21,307 and $21,054
    
    
    218,566
    
    
    
    321,292Debt issuance costs, net of accumulated
amortization of $4,630 and $381
    
    
    9,437
    
    
    
    9,465Other
    
    
    2,018
    
    
    
    2,524$
    551,825
    
    
    $
    618,596LIABILITIES AND SHAREHOLDERS EQUITYAccounts payable
    
    $
    23,438
    
    
    $
    37,646Income taxes payable
    
    
    10,963
    
    
    
    10,589Accrued expenses and other liabilities
    
    
    36,583
    
    
    
    30,618Accrued interest payable
    
    
    3,312
    
    
    
    2,898Deferred tax liability
    
    
    4,539
    
    
    
    5,018Revolving credit facilities
    
    
    39,000
    
    
    
    38,428Total long-term debt
    
    
    272,037
    
    
    
    378,169Shareholders equity:Common stock, $0.001 par value: 55,500,000 shares authorized;
23,399,107 shares and 23,759,900 shares issued and outstanding at
June 30, 2006 and December 31, 2006, respectively
    
    
    23
    
    
    
    24Additional paid-in capital
    
    
    242,594
    
    
    
    246,569Accumulated deficit
    
    
    (114,920
    )
    
    
    (169,096
    )Accumulated other comprehensive income
    
    
    34,256
    
    
    
    37,733Total shareholders equity
    
    
    161,953
    
    
    
    115,230$
    551,825
    
    
    $
    618,596
  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
    
    
    Six Months EndedDecember 31,
    
    
    December 31,2005
    
    
    2006
    
    
    2005
    
    
    2006Revenues:Check cashing
    
    $
    35,224
    
    
    $
    41,518
    
    
    $
    69,571
    
    
    $
    79,907Consumer lending:Fees from consumer lending
    
    
    41,094
    
    
    
    56,799
    
    
    
    77,332
    
    
    
    105,624Provision for loan losses and adjustment to
servicing income
    
    
    (7,748
    )
    
    
    (10,532
    )
    
    
    (16,521
    )
    
    
    (20,104
    )Consumer lending, net
    
    
    33,346
    
    
    
    46,267
    
    
    
    60,811
    
    
    
    85,520Money transfer fees
    
    
    4,262
    
    
    
    5,437
    
    
    
    8,220
    
    
    
    10,104Franchise fees and royalties
    
    
    2,487
    
    
    
    1,571
    
    
    
    5,403
    
    
    
    4,024Other
    
    
    5,348
    
    
    
    7,305
    
    
    
    11,127
    
    
    
    14,256Total revenues
    
    
    80,667
    
    
    
    102,098
    
    
    
    155,132
    
    
    
    193,811Store and regional expenses:Salaries and benefits
    
    
    26,004
    
    
    
    32,127
    
    
    
    51,195
    
    
    
    61,095Occupancy
    
    
    6,752
    
    
    
    7,931
    
    
    
    13,470
    
    
    
    15,583Depreciation
    
    
    1,835
    
    
    
    2,157
    
    
    
    3,667
    
    
    
    4,211Returned checks, net and cash shortages
    
    
    3,128
    
    
    
    3,765
    
    
    
    6,387
    
    
    
    7,397Telephone and communications
    
    
    1,445
    
    
    
    1,473
    
    
    
    2,866
    
    
    
    3,017Advertising
    
    
    2,633
    
    
    
    3,196
    
    
    
    4,822
    
    
    
    5,458Bank charges and armored carrier services
    
    
    2,171
    
    
    
    2,569
    
    
    
    4,266
    
    
    
    4,837Other
    
    
    8,690
    
    
    
    11,422
    
    
    
    15,999
    
    
    
    20,885Total store and regional expenses
    
    
    52,658
    
    
    
    64,640
    
    
    
    102,672
    
    
    
    122,483Store and regional margin
    
    
    28,009
    
    
    
    37,458
    
    
    
    52,460
    
    
    
    71,328Corporate and other expenses:Corporate expenses
    
    
    10,410
    
    
    
    13,172
    
    
    
    19,582
    
    
    
    26,005Other depreciation and amortization
    
    
    886
    
    
    
    846
    
    
    
    1,811
    
    
    
    1,676Interest expense, net of interest income
    
    
    7,438
    
    
    
    8,687
    
    
    
    14,679
    
    
    
    14,989Loss on extinguishment of debt
    
    
    
    
    
    
    23,797
    
    
    
    
    
    
    
    31,784Proceeds from legal settlement
    
    
    
    
    
    
    (3,256
    )
    
    
    
    
    
    
    (3,256
    )Goodwill impairment and other charges
    
    
    
    
    
    
    24,464
    
    
    
    
    
    
    
    24,464Mark to market  term loans
    
    
    
    
    
    
    6,619
    
    
    
    
    
    
    
    6,619Other, net
    
    
    142
    
    
    
    91
    
    
    
    418
    
    
    
    179Income (loss) before income taxes
    
    
    9,133
    
    
    
    (36,962
    )
    
    
    15,970
    
    
    
    (31,132
    )Income tax provision
    
    
    6,115
    
    
    
    15,470
    
    
    
    10,653
    
    
    
    23,044Net income (loss)
    
    $
    3,018
    
    
    $
    (52,432
    )
    
    $
    5,317
    
    
    $
    (54,176
    )Net income (loss) per share:Basic
    
    $
    0.17
    
    
    $
    (2.23
    )
    
    $
    0.29
    
    
    $
    (2.32
    )Diluted
    
    $
    0.16
    
    
    $
    (2.23
    )
    
    $
    0.29
    
    
    $
    (2.32
    )Weighted average shares outstanding:Basic
    
    
    18,102,727
    
    
    
    23,470,302
    
    
    
    18,095,881
    
    
    
    23,385,308Diluted
    
    
    18,358,187
    
    
    
    23,470,302
    
    
    
    18,392,674
    
    
    
    23,385,308
  4




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 
 INTERIM CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(In thousands, except share data)
 AccumulatedAdditional
    
    
    Accumulated
    
    
    Other
    
    
    TotalCommon Stock
    
    
    Paid-in
    
    
    Income
    
    
    Comprehensive
    
    
    Shareholders Shares
    
    
    Amount
    
    
    Capital
    
    
    (Deficit)
    
    
    Income
    
    
    EquityBalance, June 30, 2005
    
    
    18,080,652
    
    
    $
    18
    
    
    $
    160,997
    
    
    $
    (121,885
    )
    
    $
    20,506
    
    
    $
    59,636Comprehensive income:Foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,088
    
    
    
    14,088Other comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (338
    )
    
    
    (338
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,965
    
    
    
    
    
    
    
    6,965Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,715Secondary public stock offering
    
    
    5,000,000
    
    
    
    5
    
    
    
    80,099
    
    
    
    
    
    
    
    
    
    
    
    80,104Restricted stock grants
    
    
    107,841
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Share options excercised
    
    
    210,614
    
    
    
    
    
    
    
    1,363
    
    
    
    
    
    
    
    
    
    
    
    1,363Non-cash stock compensation
    
    
    
    
    
    
    
    
    
    
    135
    
    
    
    
    
    
    
    
    
    
    
    135Balance, June 30, 2006
    
    
    23,399,107
    
    
    
    23
    
    
    
    242,594
    
    
    
    (114,920
    )
    
    
    34,256
    
    
    
    161,953Comprehensive income:Foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,254
    
    
    
    2,254Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,223
    
    
    
    1,223Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (54,176
    )
    
    
    
    
    
    
    (54,176
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (50,699
    )Secondary public stock offering
    
    
    
    
    
    
    
    
    
    
    (41
    )
    
    
    
    
    
    
    
    
    
    
    (41
    )Restricted stock grants
    
    
    14,718
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Restricted stock vested
    
    
    
    
    
    
    
    
    
    
    197
    
    
    
    
    
    
    
    
    
    
    
    197Stock options excercised
    
    
    346,075
    
    
    
    1
    
    
    
    3,139
    
    
    
    
    
    
    
    
    
    
    
    3,140Non-cash stock compensation
    
    
    
    
    
    
    
    
    
    
    680
    
    
    
    
    
    
    
    
    
    
    
    680Balance, December 31, 2006 (unaudited)
    
    
    23,759,900
    
    
    $
    24
    
    
    $
    246,569
    
    
    $
    (169,096
    )
    
    $
    37,733
    
    
    $
    115,230
  5




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 
 INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 Six Months EndedDecember 31,2005
    
    
    2006Cash flows from operating activities:Net income (loss)
    
    $
    5,317
    
    
    $
    (54,176
    )Adjustments to reconcile net income (loss) to net
cash provided by operating activities:Depreciation and amortization
    
    
    6,347
    
    
    
    6,781Loss on extinguishment of debt
    
    
    
    
    
    
    31,784Non-cash stock compensation
    
    
    54
    
    
    
    877Losses on store closings
    
    
    524
    
    
    
    494Goodwill impairment
    
    
    
    
    
    
    28,482Foreign currency loss on revaluation of debt
    
    
    8
    
    
    
    6,619Deferred tax provision
    
    
    799
    
    
    
    240Change in assets and liabilities (net of effect of acquisitions):Increase in loans and other receivables
    
    
    (12,670
    )
    
    
    (22,270
    )Increase in income taxes receivable
    
    
    (1,032
    )
    
    
    Decrease in prepaid expenses and other
    
    
    1,642
    
    
    
    2,116(Decrease) increase in accounts payable, accrued expenses
and other liabilities
    
    
    (765
    )
    
    
    7,442Net cash provided by operating activities
    
    
    224
    
    
    
    8,389Cash flows from investing activities:Acquisitions, net of cash acquired
    
    
    (6,141
    )
    
    
    (147,151
    )Additions to property and equipment
    
    
    (7,702
    )
    
    
    (9,711
    )Net cash used in investing activities
    
    
    (13,843
    )
    
    
    (156,862
    )Cash flows from financing activities:Decrease in restricted cash
    
    
    
    
    
    
    78,248Proceeds from term loans
    
    
    
    
    
    
    375,000Secondary offering costs
    
    
    
    
    
    
    (41
    )Proceeds from the exercise of stock options
    
    
    144
    
    
    
    3,139Other debt borrowings (payments)
    
    
    733
    
    
    
    (919
    )Partial prepayment of 9.75% Senior Notes due 2011
    
    
    
    
    
    
    (292,424
    )Net increase (decrease) in revolving credit facilities
    
    
    20,500
    
    
    
    (72
    )Payment of debt issuance costs
    
    
    (1,218
    )
    
    
    (8,964
    )Net cash provided by financing activities
    
    
    20,159
    
    
    
    153,967Effect of exchange rate changes on cash and cash equivalents
    
    
    1,058
    
    
    
    (1,014
    )Net increase in cash and cash equivalents
    
    
    7,598
    
    
    
    4,480Cash and cash equivalents at beginning of period
    
    
    92,504
    
    
    
    120,221Cash and cash equivalents at end of period
    
    $
    100,102
    
    
    $
    124,701
  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
  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
    
    
    Six Months EndedDecember 31,
    
    
    December 31,2005
    
    
    2006
    
    
    2005
    
    
    2006Net income (loss)
    
    $
    3,018
    
    
    $
    (52,432
    )
    
    $
    5,317
    
    
    $
    (54,176
    )Reconciliation of denominator:Weighted average of common shares outstanding  basic 1
    
    
    18,103
    
    
    
    23,470
    
    
    
    18,096
    
    
    
    23,385Effect of dilutive stock options 2
    
    
    255
    
    
    
    
    
    
    
    297
    
    
    
    Weighted average number of common shares outstanding  diluted
    
    
    18,358
    
    
    
    23,470
    
    
    
    18,393
    
    
    
    23,385
 
 1
    
    Excludes 112,487 shares of unvested restricted stock, which is included in total
outstanding common shares as of December 31, 2006.2
    
    The effect of dilutive stock options and unvested restricted stock was determined
under the treasury stock method. Due to the net loss during the three- and six-month periods ended
December 31, 2006, the effect of the dilutive options and unvested shares of restricted stock 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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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
    
    Six months EndedDecember 31,
    
    December 31,2005
    
    2006
    
    2005
    
    2006Expected volatility
    
    
    
    
    
    
    49.6
    %
    
    
    43.6
    %
    
    
    48.0
    %Expected life (years)
    
    
    
    
    
    
    6.0
    
    
    
    6.0
    
    
    
    6.0Risk-free interest rate
    
    
    
    
    
    
    4.66
    %
    
    
    4.11
    %
    
    
    4.71
    %Expected dividends
    
    
    
    
    
    None
    
    None
    
    NoneWeighted average fair value
    
    $
    
    
    
    $
    14.33
    
    
    $
    5.38
    
    
    $
    11.02
  Weighted
    
    WeightedAverage
    
    Average Remaining
    
    AggregateExercise
    
    Contractual
    
    Intrinsic ValueOptions
    
    Price
    
    Term (years)
    

($ in millions)Options outstanding at June 30, 2006(1,622,642 shares exercisable)
    
    
    1,715,142
    
    
    $
    12.07Granted
    
    
    245,375
    
    
    $
    21.16Exercised
    
    
    (346,075
    )
    
    $
    9.07Forfeited and expired
    
    
    
    
    
    $
    Options outstanding at December 31, 2006
    
    
    1,614,442
    
    
    $
    14.10
    
    
    
    8.1
    
    
    $
    22.2Exercisable at December 31, 2006
    
    
    1,317,952
    
    
    $
    12.88
    
    
    
    7.8
    
    
    $
    19.7
  9




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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)
   WeightedAverageRestricted
    
    
    Grant-DateStock Awards
    
    
    Fair-ValueOutstanding at June 30, 2006
    
    
    107,841
    
    
    $
    18.36Granted
    
    
    21,174
    
    
    
    22.08Vested
    
    
    (10,072
    )
    
    
    19.29Forfeited
    
    
    (6,456
    )
    
    
    18.36Outstanding at December 31, 2006
    
    
    112,487
    
    
    $
    18.98
  Goodwill and Other Intangible Assets
 Goodwill and Other Intangible Assets.
    10




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
  Accounting for the Impairment or Disposal of Long-lived Assets.
  Recent Accounting Pronouncements
 Accounting for
Uncertainty in Income Taxes Accounting for Income Taxes
 Fair Value Measurements
 2. SUPPLEMENTARY CASH FLOW INFORMATION
 Non-cash transactions
  3. WE THE PEOPLE RESTRUCTURING PLAN
  11




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 3. WE THE PEOPLE RESTRUCTURING PLAN (continued)
  4. DEBT
    Refinancing of Existing Credit Facility
   12




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 4. DEBT (continued)
        13




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 5. LOSS ON EXTINGUISHMENT OF DEBT
  Three months Ended
    
    
    Six months EndedDecember 31,
    
    
    December 31,2005
    
    
    2006
    
    
    2005
    
    
    2006Call Premium
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    6.8Tender premium
    
    
    
    
    
    
    17.6
    
    
    
    
    
    
    
    17.6Write-off of previously capitalized deferred issuance costs, net
    
    
    
    
    
    
    7.2
    
    
    
    
    
    
    
    8.8Write-off of original issue premium
    
    
    
    
    
    
    (1.0
    )
    
    
    
    
    
    
    (1.4
    )$
    
    
    
    $
    23.8
    
    
    $
    
    
    
    $
    31.8
 6. ACQUISITIONS
      Canadian Acquisition:
  14




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 6. ACQUISITIONS (continued)
 Florida Acquisition:
   Three months Ended
    
    Six months EndedDecember 31,
    
    December 31,2005
    
    2006
    
    2005
    
    2006(in millions, except per share amounts)Revenues
    
    $
    92.8
    
    
    $
    106.6
    
    
    $
    181.2
    
    
    $
    211.6Net income (loss)
    
    $
    4.6
    
    
    $
    (51.9
    )
    
    $
    8.6
    
    
    $
    (52.4
    )Net income (loss) per common share  basic
    
    $
    0.25
    
    
    $
    (2.21
    )
    
    $
    0.48
    
    
    $
    (2.24
    )Net income (loss) per common share  diluted
    
    $
    0.25
    
    
    $
    (2.21
    )
    
    $
    0.47
    
    
    $
    (2.24
    )
 7. GOODWILL AND OTHER INTANGIBLES
  United
    
    
    
    
    
    
    UnitedStates
    
    
    Canada
    
    
    Kingdom
    
    
    TotalBalance at June 30, 2005
    
    $
    87,535
    
    
    $
    42,459
    
    
    $
    56,196
    
    
    $
    186,190Amortization of other intangibles
    
    
    (93
    )
    
    
    
    
    
    
    
    
    
    
    (93
    )Acquisitions
    
    
    10,418
    
    
    
    13,896
    
    
    
    1,618
    
    
    
    25,932Foreign currency translation adjustments
    
    
    
    
    
    
    4,737
    
    
    
    1,800
    
    
    
    6,537Balance at June 30, 2006
    
    
    97,860
    
    
    
    61,092
    
    
    
    59,614
    
    
    
    218,566Amortization of other intangibles
    
    
    (58
    )
    
    
    
    
    
    
    
    
    
    
    (58
    )Acquisitions
    
    
    25,344
    
    
    
    108,282
    
    
    
    986
    
    
    
    134,612Impairment loss
    
    
    (28,469
    )
    
    
    
    
    
    
    
    
    
    
    (28,469
    )Foreign currency translation adjustments
    
    
    
    
    
    
    (6,937
    )
    
    
    3,578
    
    
    
    (3,359
    )Balance at December 31, 2006
    
    $
    94,677
    
    
    $
    162,437
    
    
    $
    64,178
    
    
    $
    321,292
 15




---



##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 7. GOODWILL AND OTHER INTANGIBLES (continued)
  June 30, 2006
    
    
    December 31, 2006Gross Carrying
    
    
    Accumulated
    
    
    Gross Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Amount
    
    
    AmortizationNon-amortized intangible assets:Cost in excess of net assets acquired
    
    $
    232,279
    
    
    $
    21,191
    
    
    $
    298,607
    
    
    $
    21,054Territory rights
    
    
    5,361
    
    
    
    
    
    
    
    
    
    
    
    Reacquired franchise rights
    
    
    1,478
    
    
    
    
    
    
    
    43,739
    
    
    
    $
    239,118
    
    
    $
    21,191
    
    
    $
    342,346
    
    
    $
    21,054Amortized intangible assets:Franchise agreements
    
    $
    755
    
    
    $
    116
    
    
    $
    
    
    
    $
    $
    755
    
    
    $
    116
    
    
    $
    
    
    
    $
    
 Goodwill and Other Intangible Assets.
    16




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 7. GOODWILL AND OTHER INTANGIBLES (continued)
    Accounting for the Impairment or Disposal of Long-lived Assets.
  8. COMPREHENSIVE INCOME (LOSS)
  Three Months Ended
    
    
    Six Months EndedDecember 31,
    
    
    December 31,2005
    
    
    2006
    
    
    2005
    
    
    2006Net income (loss)
    
    $
    3,018
    
    
    $
    (52,432
    )
    
    $
    5,317
    
    
    $
    (54,176
    )Foreign currency translation adjustment
    
    
    (3,279
    )
    
    
    1,131
    
    
    
    1,155
    
    
    
    2,254Fair value adjustments for cash flow hedges
    
    
    (252
    )
    
    
    1,265
    
    
    
    (48
    )
    
    
    1,223Total comprehensive income (loss)
    
    $
    (513
    )
    
    $
    (50,036
    )
    
    $
    6,424
    
    
    $
    (50,699
    )
 17




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 9. GEOGRAPHIC SEGMENT INFORMATION
  United
    
    
    
    
    
    UnitedStates
    
    Canada
    
    Kingdom
    
    TotalAs of and for the three months
ended December 31, 2005Identifiable assets
    
    $
    178,244
    
    
    $
    124,556
    
    
    $
    113,334
    
    
    $
    416,134Goodwill and other intangibles, net
    
    
    95,788
    
    
    
    44,917
    
    
    
    53,893
    
    
    
    194,598Sales to unaffiliated customers:Check cashing
    
    
    11,662
    
    
    
    12,891
    
    
    
    10,671
    
    
    
    35,224Consumer lending:Fees from consumer lending
    
    
    15,967
    
    
    
    17,419
    
    
    
    7,708
    
    
    
    41,094Provision for loan losses and adjustments
to servicing revenue
    
    
    (3,398
    )
    
    
    (2,736
    )
    
    
    (1,614
    )
    
    
    (7,748
    )Consumer lending, net
    
    
    12,569
    
    
    
    14,683
    
    
    
    6,094
    
    
    
    33,346Money transfer fees
    
    
    1,019
    
    
    
    2,119
    
    
    
    1,124
    
    
    
    4,262Franchise fees and royalties
    
    
    1,306
    
    
    
    1,181
    
    
    
    
    
    
    
    2,487Other
    
    
    1,702
    
    
    
    2,688
    
    
    
    958
    
    
    
    5,348Total sales to unaffiliated customers
    
    
    28,258
    
    
    
    33,562
    
    
    
    18,847
    
    
    
    80,667Interest expense (income), net
    
    
    7,120
    
    
    
    (386
    )
    
    
    704
    
    
    
    7,438Depreciation and amortization
    
    
    1,222
    
    
    
    893
    
    
    
    606
    
    
    
    2,721(Loss) income before income taxes
    
    
    (3,388
    )
    
    
    11,505
    
    
    
    1,016
    
    
    
    9,133Income tax provision
    
    
    1,471
    
    
    
    4,385
    
    
    
    259
    
    
    
    6,115For the six months
ended December 31, 2005Sales to unaffiliated customers:Check cashing
    
    $
    23,015
    
    
    $
    25,091
    
    
    $
    21,465
    
    
    $
    69,571Consumer lending:Fees from consumer lending
    
    
    29,760
    
    
    
    32,476
    
    
    
    15,096
    
    
    
    77,332Provision for loan losses and adjustments
to servicing revenue
    
    
    (7,882
    )
    
    
    (5,462
    )
    
    
    (3,177
    )
    
    
    (16,521
    )Consumer lending, net
    
    
    21,878
    
    
    
    27,014
    
    
    
    11,919
    
    
    
    60,811Money transfer fees
    
    
    2,044
    
    
    
    4,033
    
    
    
    2,143
    
    
    
    8,220Franchise fees and royalties
    
    
    2,927
    
    
    
    2,476
    
    
    
    
    
    
    
    5,403Other
    
    
    3,935
    
    
    
    5,306
    
    
    
    1,886
    
    
    
    11,127Total sales to unaffiliated customers
    
    
    53,799
    
    
    
    63,920
    
    
    
    37,413
    
    
    
    155,132Interest expense (income), net
    
    
    13,787
    
    
    
    (531
    )
    
    
    1,423
    
    
    
    14,679Depreciation and amortization
    
    
    2,607
    
    
    
    1,647
    
    
    
    1,224
    
    
    
    5,478(Loss) income before income taxes
    
    
    (14,068
    )
    
    
    24,255
    
    
    
    5,783
    
    
    
    15,970Income tax provision (benefit)
    
    
    (378
    )
    
    
    9,383
    
    
    
    1,648
    
    
    
    10,653
 18




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 9. GEOGRAPHIC SEGMENT INFORMATION (continued)
 United
    
    
    
    
    
    UnitedStates
    
    Canada
    
    Kingdom
    
    TotalAs of and for the three months
ended December 31, 2006Identifiable assets
    
    $
    102,411
    
    
    $
    365,008
    
    
    $
    151,177
    
    
    $
    618,596Goodwill and other intangibles, net
    
    
    94,677
    
    
    
    162,437
    
    
    
    64,178
    
    
    
    321,292Sales to unaffiliated customers:Check cashing
    
    
    11,641
    
    
    
    17,016
    
    
    
    12,861
    
    
    
    41,518Consumer lending:Fees from consumer lending
    
    
    20,004
    
    
    
    26,429
    
    
    
    10,366
    
    
    
    56,799Provision for loan losses and adjustments
to servicing revenue
    
    
    (6,067
    )
    
    
    (2,248
    )
    
    
    (2,217
    )
    
    
    (10,532
    )Consumer lending, net
    
    
    13,937
    
    
    
    24,181
    
    
    
    8,149
    
    
    
    46,267Money transfer fees
    
    
    1,091
    
    
    
    3,023
    
    
    
    1,323
    
    
    
    5,437Franchise fees and royalties
    
    
    778
    
    
    
    793
    
    
    
    
    
    
    
    1,571Other
    
    
    1,431
    
    
    
    4,285
    
    
    
    1,589
    
    
    
    7,305Total sales to unaffiliated customers
    
    
    28,878
    
    
    
    49,298
    
    
    
    23,922
    
    
    
    102,098Interest expense, net
    
    
    2,584
    
    
    
    4,651
    
    
    
    1,452
    
    
    
    8,687Depreciation and amortization
    
    
    1,057
    
    
    
    1,008
    
    
    
    938
    
    
    
    3,003(Loss) income before income taxes
    
    
    (48,722
    )
    
    
    7,412
    
    
    
    4,348
    
    
    
    (36,962
    )Income tax provision
    
    
    7,275
    
    
    
    6,968
    
    
    
    1,227
    
    
    
    15,470For the six months
ended December 31, 2006Sales to unaffiliated customers:Check cashing
    
    $
    22,773
    
    
    $
    31,747
    
    
    $
    25,387
    
    
    $
    79,907Consumer lending:Fees from consumer lending
    
    
    38,391
    
    
    
    47,280
    
    
    
    19,953
    
    
    
    105,624Provision for loan losses and adjustments
to servicing revenue
    
    
    (11,657
    )
    
    
    (4,267
    )
    
    
    (4,180
    )
    
    
    (20,104
    )Consumer lending, net
    
    
    26,734
    
    
    
    43,013
    
    
    
    15,773
    
    
    
    85,520Money transfer fees
    
    
    2,183
    
    
    
    5,434
    
    
    
    2,487
    
    
    
    10,104Franchise fees and royalties
    
    
    1,911
    
    
    
    2,113
    
    
    
    
    
    
    
    4,024Other
    
    
    3,052
    
    
    
    8,058
    
    
    
    3,146
    
    
    
    14,256Total sales to unaffiliated customers
    
    
    56,653
    
    
    
    90,365
    
    
    
    46,793
    
    
    
    193,811Interest expense, net
    
    
    8,367
    
    
    
    4,417
    
    
    
    2,205
    
    
    
    14,989Depreciation and amortization
    
    
    2,144
    
    
    
    1,975
    
    
    
    1,768
    
    
    
    5,887(Loss) income before income taxes
    
    
    (64,162
    )
    
    
    24,476
    
    
    
    8,554
    
    
    
    (31,132
    )Income tax provision
    
    
    7,141
    
    
    
    13,324
    
    
    
    2,579
    
    
    
    23,044
 10. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
 Put Options
  19




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 10. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (continued)
  Cross-Currency Interest Rate Swaps
     11. CONTINGENT LIABILITIES
  Canadian Legal Proceedings
  20




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 11. CONTINGENT LIABILITIES (continued)
  Mortillaro Smith
      United States Legal Proceedings
 (Woods) (Castillo) (Chin) (Williams).
 Chin
 21




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 11. CONTINGENT LIABILITIES (continued)
  Woods Castillo Williams Woods Castillo Williams Woods, Castillo Williams
 Bufil Chin Bufil
 Bufil
 We The People Legal Proceedings
    22




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 11. CONTINGENT LIABILITIES (continued)
     ex parte
  23




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 11. CONTINGENT LIABILITIES (continued)
         24




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 12. INCOME TAXES
  25




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 DOLLAR FINANCIAL CORP.
 SUPPLEMENTAL STATISTICAL DATA
 December 31,2005
    
    
    2006Company Operating Data:Stores in operation:Company-owned
    
    
    747
    
    
    
    885Franchised stores and check cashing merchants
    
    
    582
    
    
    
    397Total
    
    
    1,329
    
    
    
    1,282
 Three Months Ended
    
    Six Months EndedDecember 31,
    
    December 31,2005
    
    2006
    
    2005
    
    2006Check Cashing Data:Face amount of checks cashed (in millions)
    
    $
    941
    
    
    $
    1,082
    
    
    $
    1,858
    
    
    $
    2,092Face amount of average check
    
    $
    441
    
    
    $
    472
    
    
    $
    440
    
    
    $
    474Face amount of average check (excluding Canada
and the United Kingdom)
    
    $
    393
    
    
    $
    405
    
    
    $
    391
    
    
    $
    403Average fee per check
    
    $
    16.50
    
    
    $
    18.10
    
    
    $
    16.47
    
    
    $
    18.10Number of checks cashed (in thousands)
    
    
    2,135
    
    
    
    2,294
    
    
    
    4,223
    
    
    
    4,414
 Three Months Ended
    
    
    Six Months EndedDecember 31,
    
    
    December 31,2005
    
    
    2006
    
    
    2005
    
    
    2006Check Cashing Collections Data:Face amount of returned checks (in thousands)
    
    $
    9,626
    
    
    $
    11,911
    
    
    $
    19,846
    
    
    $
    22,733Collections (in thousands)
    
    
    (6,968
    )
    
    
    (8,688
    )
    
    
    (14,225
    )
    
    
    (16,400
    )Net write-offs (in thousands)
    
    $
    2,658
    
    
    $
    3,223
    
    
    $
    5,621
    
    
    $
    6,333Collections as a percentage of returned checks
    
    
    72.4
    %
    
    
    72.9
    %
    
    
    71.7
    %
    
    
    72.1
    %Net write-offs as a percentage of check cashing
revenues
    
    
    7.6
    %
    
    
    7.8
    %
    
    
    8.1
    %
    
    
    7.9
    %Net write-offs as a percentage of the face amount
of checks cashed
    
    
    0.28
    %
    
    
    0.30
    %
    
    
    0.30
    %
    
    
    0.30
    %
 26




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##### Table of Contents



Three Months Ended
    
    Six Months EndedDecember 31,
    
    December 31,2005
    
    2006
    
    2005
    
    2006U.S. company-funded consumer loan originations (1)
    
    $
    61,960
    
    
    $
    71,566
    
    
    $
    129,596
    
    
    $
    133,800Canadian company-funded consumer loan originations
(2)
    
    
    143,981
    
    
    
    205,393
    
    
    
    273,073
    
    
    
    365,691U.K. company-funded consumer loan originations (2)
    
    
    50,854
    
    
    
    62,329
    
    
    
    102,776
    
    
    
    120,346Total company-funded consumer loan originations
    
    $
    256,795
    
    
    $
    339,288
    
    
    $
    505,445
    
    
    $
    619,837U.S. Servicing revenues
    
    $
    5,552
    
    
    $
    8,799
    
    
    $
    9,506
    
    
    $
    17,089U.S. company-funded consumer loan revenues
    
    
    10,415
    
    
    
    11,205
    
    
    
    20,254
    
    
    
    21,302Canadian company-funded consumer loan revenues
    
    
    17,419
    
    
    
    26,429
    
    
    
    32,476
    
    
    
    47,280U.K. company-funded consumer loan revenues
    
    
    7,708
    
    
    
    10,366
    
    
    
    15,096
    
    
    
    19,953Provision for loan losses and adjustments to servicing
revenues
    
    
    (7,748
    )
    
    
    (10,532
    )
    
    
    (16,521
    )
    
    
    (20,104
    )Total consumer lending revenues, net
    
    $
    33,346
    
    
    $
    46,267
    
    
    $
    60,811
    
    
    $
    85,520Gross charge-offs of company-funded consumer loans
    
    $
    26,691
    
    
    $
    36,199
    
    
    $
    52,564
    
    
    $
    68,087Recoveries of company-funded consumer loans
    
    
    (20,608
    )
    
    
    (29,991
    )
    
    
    (41,578
    )
    
    
    (55,683
    )Net charge-offs on company-funded consumer loans
    
    $
    6,083
    
    
    $
    6,208
    
    
    $
    10,986
    
    
    $
    12,404Gross charge-offs of company-funded consumer loans
as a percentage of total company-funded consumer loan
originations
    
    
    10.4
    %
    
    
    10.7
    %
    
    
    10.4
    %
    
    
    11.0
    %Recoveries of company-funded consumer loans as a
percentage of total company-funded consumer loan
originations
    
    
    8.0
    %
    
    
    8.9
    %
    
    
    8.2
    %
    
    
    9.0
    %Net charge-offs on company-funded consumer loans
as a percentage of total company-funded consumer loan
originations
    
    
    2.4
    %
    
    
    1.8
    %
    
    
    2.2
    %
    
    
    2.0
    %
 
 (1)
    
    Our company operated stores in the United States originated company-funded and bank-funded single-payment consumer loans during
the three and six months ended December 31, 2005 and now offer only company-funded single-payment consumer loans in all markets,
with the exception of Texas, during the three and six months ended
December 31, 2006. In Texas, the Company now offers single-payment consumer loans under a credit
services
organization model.(2)
    
    All consumer loans originated in Canada and the United Kingdom are company funded. 27




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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 six months ended December 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.
 Executive Summary
  ®
       28




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##### Table of Contents



Discussion of Critical Accounting Policies
   Revenue Recognition
    ®
   29




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##### Table of Contents



®
 Company-Funded Consumer Loan Loss Reserves Policy
   Check Cashing Returned Item Policy
  Goodwill and Other Intangible Assets
 Goodwill and
Other Intangible Assets.
     30




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##### Table of Contents



Accounting for the Impairment or Disposal of Long-lived Assets.
  Income Taxes
  Recent Accounting Pronouncements
 Accounting for
Uncertainty in Income Taxes Accounting for Income Taxes
 Fair Value Measurements
 31




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##### Table of Contents



Results of Operations
 Revenue Analysis
 Three Months Ended December 31,
    
    
    Six Months Ended December 31,(Percentage of total
    
    
    
    
    
    
    
    
    
    
    (Percentage of total($ in thousands)
    
    
    revenue)
    
    
    ($ in thousands)
    
    
    revenue)2005
    
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2006Check cashing
    
    $
    35,224
    
    
    $
    41,518
    
    
    
    43.7
    %
    
    
    40.7
    %
    
    $
    69,571
    
    
    $
    79,907
    
    
    
    44.8
    %
    
    
    41.2
    %Consumer lending revenue, net
    
    
    33,346
    
    
    
    46,267
    
    
    
    41.3
    %
    
    
    45.3
    %
    
    
    60,811
    
    
    
    85,520
    
    
    
    39.2
    %
    
    
    44.1
    %Money transfer fees
    
    
    4,262
    
    
    
    5,437
    
    
    
    5.3
    %
    
    
    5.3
    %
    
    
    8,220
    
    
    
    10,104
    
    
    
    5.3
    %
    
    
    5.2
    %Franchise fees and royalties
    
    
    2,487
    
    
    
    1,571
    
    
    
    3.1
    %
    
    
    1.5
    %
    
    
    5,403
    
    
    
    4,024
    
    
    
    3.5
    %
    
    
    2.1
    %Other revenue
    
    
    5,348
    
    
    
    7,305
    
    
    
    6.6
    %
    
    
    7.2
    %
    
    
    11,127
    
    
    
    14,256
    
    
    
    7.2
    %
    
    
    7.4
    %Total revenue
    
    $
    80,667
    
    
    $
    102,098
    
    
    
    100.0
    %
    
    
    100.0
    %
    
    $
    155,132
    
    
    $
    193,811
    
    
    
    100.0
    %
    
    
    100.0
    %
 The Three Months Ended December 31, 2006 compared to the Three Months Ended December 31, 2005
  ®
 The Six Months Ended December 31, 2006 compared to the Six Months Ended December 31, 2005
   32




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##### Table of Contents



Store and Regional Expense Analysis
 Three Months Ended December 31,
    
    Six Months Ended December 31,(Percentage of total
    
    
    
    
    
    
    
    
    
    (Percentage of total($ in thousands)
    
    revenue)
    
    ($ in thousands)
    
    revenue)2005
    
    2006
    
    2005
    
    2006
    
    2005
    
    2006
    
    2005
    
    2006Salaries and benefits
    
    $
    26,004
    
    
    $
    32,127
    
    
    
    32.2
    %
    
    
    31.5
    %
    
    $
    51,195
    
    
    $
    61,095
    
    
    
    33.0
    %
    
    
    31.5
    %Occupancy
    
    
    6,752
    
    
    
    7,931
    
    
    
    8.4
    %
    
    
    7.8
    %
    
    
    13,470
    
    
    
    15,583
    
    
    
    8.7
    %
    
    
    8.0
    %Depreciation
    
    
    1,835
    
    
    
    2,157
    
    
    
    2.3
    %
    
    
    2.1
    %
    
    
    3,667
    
    
    
    4,211
    
    
    
    2.4
    %
    
    
    2.2
    %Returned checks, net and cash shortages
    
    
    3,128
    
    
    
    3,765
    
    
    
    3.9
    %
    
    
    3.7
    %
    
    
    6,387
    
    
    
    7,397
    
    
    
    4.1
    %
    
    
    3.8
    %Telephone and communications
    
    
    1,445
    
    
    
    1,473
    
    
    
    1.8
    %
    
    
    1.4
    %
    
    
    2,866
    
    
    
    3,017
    
    
    
    1.8
    %
    
    
    1.6
    %Advertising
    
    
    2,633
    
    
    
    3,196
    
    
    
    3.3
    %
    
    
    3.1
    %
    
    
    4,822
    
    
    
    5,458
    
    
    
    3.1
    %
    
    
    2.8
    %Bank Charges and armored carrier expenses
    
    
    2,171
    
    
    
    2,569
    
    
    
    2.7
    %
    
    
    2.5
    %
    
    
    4,266
    
    
    
    4,837
    
    
    
    2.7
    %
    
    
    2.5
    %Other
    
    
    8,690
    
    
    
    11,422
    
    
    
    10.7
    %
    
    
    11.2
    %
    
    
    15,999
    
    
    
    20,885
    
    
    
    10.4
    %
    
    
    10.8
    %Total store and regional expenses
    
    $
    52,658
    
    
    $
    64,640
    
    
    
    65.3
    %
    
    
    63.3
    %
    
    $
    102,672
    
    
    $
    122,483
    
    
    
    66.2
    %
    
    
    63.2
    %
 The Three Months Ended December 31, 2006 compared to the Three Months Ended December 31, 2005
   The Six Months Ended December 31, 2006 compared to the Six Months Ended December 31, 2005
   33




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##### Table of Contents



Corporate and Other Expense Analysis
 Three Months Ended December 31,
    
    Six Months Ended December 31,(Percentage of total
    
    
    
    
    
    
    
    
    
    (Percentage of total($ in thousands)
    
    revenue)
    
    ($ in thousands)
    
    revenue)2005
    
    2006
    
    2005
    
    2006
    
    2005
    
    2006
    
    2005
    
    2006Corporate expenses
    
    $
    10,410
    
    
    $
    13,172
    
    
    
    12.9
    %
    
    
    12.9
    %
    
    $
    19,582
    
    
    $
    26,005
    
    
    
    12.6
    %
    
    
    3.4
    %Other depreciation and amortization
    
    
    886
    
    
    
    846
    
    
    
    1.1
    %
    
    
    0.8
    %
    
    
    1,811
    
    
    
    1,676
    
    
    
    1.2
    %
    
    
    0.9
    %Interest expense
    
    
    7,438
    
    
    
    8,687
    
    
    
    9.2
    %
    
    
    8.5
    %
    
    
    14,679
    
    
    
    14,989
    
    
    
    9.5
    %
    
    
    7.7
    %Loss on extinguishment of debt
    
    
    
    
    
    
    23,797
    
    
    
    0.0
    %
    
    
    23.3
    %
    
    
    
    
    
    
    31,784
    
    
    
    0.0
    %
    
    
    16.4
    %Proceeds from legal settlement
    
    
    
    
    
    
    (3,256
    )
    
    
    0.0
    %
    
    
    3.2
    %
    
    
    
    
    
    
    (3,256
    )
    
    
    0.0
    %
    
    
    1.7
    %Goodwill impairment and other charges
    
    
    
    
    
    
    24,464
    
    
    
    0.0
    %
    
    
    24.0
    %
    
    
    
    
    
    
    24,464
    
    
    
    0.0
    %
    
    
    12.6
    %Mark to market  term loans
    
    
    
    
    
    
    6,619
    
    
    
    0.0
    %
    
    
    6.5
    %
    
    
    
    
    
    
    6,619
    
    
    
    0.0
    %
    
    
    3.4
    %Other, net
    
    
    142
    
    
    
    91
    
    
    
    0.2
    %
    
    
    0.1
    %
    
    
    418
    
    
    
    179
    
    
    
    0.3
    %
    
    
    0.1
    %Income tax provision
    
    
    6,115
    
    
    
    15,470
    
    
    
    7.6
    %
    
    
    15.2
    %
    
    
    10,653
    
    
    
    23,044
    
    
    
    6.9
    %
    
    
    11.9
    %
 The Three Months Ended December 31, 2006 compared to the Three Months Ended December 31, 2005
 Corporate Expenses
  Other Depreciation and Amortization
  Interest Expense
  Loss on Extinguishment of Debt
   34




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##### Table of Contents



Three Months EndedDecember 31, 2006Tender premium
    
    $
    17.6Write-off of previously capitalized deferred issuance costs, net
    
    
    7.2Write-off of original issue premium
    
    
    (1.0
    )$
    23.8
 Proceeds from Legal Settlement
   Goodwill Impairment and Other Charges
   Mark to Market Term Loans
  Income Tax Provision
  35




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##### Table of Contents



The Six Months Ended December 31, 2006 compared to the Six Months Ended December 31, 2005
 Corporate Expenses
  Other Depreciation and Amortization
  Interest Expense
  Loss on Extinguishment of Debt
   Three months Ended
    
    
    Six months EndedDecember 31,
    
    
    December 31,2005
    
    
    2006
    
    
    2005
    
    
    2006Call Premium
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    6.8Tender premium
    
    
    
    
    
    
    17.6
    
    
    
    
    
    
    
    17.6Write-off of previously capitalized deferred issuance costs, net
    
    
    
    
    
    
    7.2
    
    
    
    
    
    
    
    8.8Write-off of original issue premium
    
    
    
    
    
    
    (1.0
    )
    
    
    
    
    
    
    (1.4
    )Total
    
    $
    
    
    
    $
    23.8
    
    
    $
    
    
    
    $
    31.8
 Proceeds from Legal Settlement
   36




---



##### Table of Contents



Goodwill Impairment and Other Charges
   Mark to Market Term Loans
  Income Tax Provision
  Changes in Financial Condition
  Liquidity and Capital Resources
    37




---



##### Table of Contents



New Credit Facilities
 Revolving Credit Facilities.
 United States Revolving Credit Facility.
 Canadian Revolving Credit Facility.
 Long-Term Debt.
 38




---



##### Table of Contents



Operating Leases.
  Payments Due by Period (in thousands)Less than
    
    
    1 - 3
    
    
    3 - 5
    
    
    After 5Total
    
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    YearsRevolving credit facilities
    
    $
    38,428
    
    
    $
    38,428
    
    
    $
    
    
    
    $
    
    
    
    $
    Long-term debt:9.75% Senior Notes due 2011
    
    
    1,985
    
    
    
    
    
    
    
    
    
    
    
    1,985
    
    
    
    Term loans due 2012
    
    
    375,817
    
    
    
    3,758
    
    
    
    11,162
    
    
    
    7,218
    
    
    
    353,679Capital lease obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating lease obligations
    
    
    115,283
    
    
    
    27,583
    
    
    
    42,956
    
    
    
    21,541
    
    
    
    23,203Purchase obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other long-term liabilities reflected on
the registrants balance sheet under
GAAP
    
    
    367
    
    
    
    367
    
    
    
    
    
    
    
    
    
    
    
    Total contractual cash obligations
    
    $
    531,880
    
    
    $
    70,136
    
    
    $
    54,118
    
    
    $
    30,744
    
    
    $
    376,882
  Balance Sheet Variations
 December 31, 2006 compared to June 30, 2006
     39




---



##### Table of Contents



Seasonality and Quarterly Fluctuations
  Recent Accounting Pronouncements
   40




---



##### Table of Contents



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
  Foreign Exchange Rates
  41




---



##### Table of Contents



Cross-Currency
Interest Rate Swaps
     
 Item 4. Controls and Procedures
 Evaluation of Disclosure Control and Procedures
  Changes in Internal Control Over Financial Reporting
  42




---



##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  Canadian Legal Proceedings
  Mortillaro Smith
      United States Legal Proceedings
  43




---



##### Table of Contents



(Woods) (Castillo) (Chin) (Williams).
 Chin
 Woods Castillo Williams Woods Castillo Williams Woods, Castillo Williams
 Bufil Chin Bufil
 Bufil
 We The People Legal Proceedings
    44




---



##### Table of Contents



ex parte
   45




---



##### Table of Contents



Item 4. Submission of Matters to a Vote of Security Holders.
  Votes For:
    
    Votes Withheld:David Golub
    
    
    20,344,154
    
    
    
    1,062,014David Jessick
    
    
    20,725,139
    
    
    
    681,029Kenneth Schwenke
    
    
    20,725,139
    
    
    
    681,029
  Votes For:
    
    
    20,950,623Votes Against:
    
    
    443,045Abstentions:
    
    
    12,500
 46




---



##### Table of Contents



Item 6.
Exhibits
 Exhibit No.
    
    Description of Document
 2.1
    
    Purchase Agreement, dated as of October 31, 2006, among National Money Mart Company, a
Nova Scotia unlimited company, 764815 Ontario Inc., 1556911 Ontario Limited, 6052746 Canada Inc.,
1068020 Ontario Inc. a company
Incorporated under the laws of the Province of Ontario, The David Robertson Family Trust and
David Robertson (1).2.2
    
    Purchase Agreement, dated as of October 31, 2006, among National Money Mart Company,
a Nova Scotia unlimited company, Canadian Capital Corporation, an Ontario Corporation, Gus Baril,
Leslie Baril, and Baril Family Trust #2 (1).2.3
    
    Purchase Agreement, dated as of October 31, 2006, among National Money Mart Company,
a Nova Scotia unlimited company, 0729648 B.C. Ltd., 1204594 Alberta Ltd., 360788 B.C.
Ltd.,1008485 Alberta Ltd., 769515 Alberta Ltd., 815028 Alberta Inc., 632758 Alberta Ltd., a
company incorporated under the laws of the Province of Alberta, Rich- Mar Securities Ltd., a
company incorporated under the laws of the Province of British Columbia, Mary Franchuk and
The Mary Franchuk Family Trust (1).2.4
    
    Purchase Agreement, dated as of October 31, 2006, among National Money Mart Company, a
Nova Scotia unlimited company, Jenica Holdings Inc. an Ontario Corporation, Shelley Stanga and
1210260 Ontario Limited, an Ontario Corporation (1).2.5
    
    Purchase Agreement, dated as of October 31, 2006, among National Money Mart Company, a
Nova Scotia unlimited company, 931669 Ontario Limited, 3081219 Nova Scotia Ltd., 3085725 Nova
Scotia Limited, 603000 N.B. Inc., 602268 N.B. Inc., 11242 Newfoundland Limited, 722906 Ontario
Limited, 2203850 Nova Scotia Limited, 3085726
Nova Scotia Limited, 511742 N.B. Inc., 602269 N.B. Inc., 10768 Newfoundland Limited, R Kruze
Holdings Ltd., a company incorporated under the laws of the Province of Alberta, 1016725 Ontario
Ltd., a company incorporated
under the laws of the Province of Ontario, 101090510 Saskatchewan Ltd., a company incorporated
under the laws
of the Province of Saskatchewan, Ron Kuzyk, Amber Kuzyk, Gerry Kilduff and Jeanette Kilduff
(1).4.1
    
    Fourth Supplemental Indenture, dated October 27, 2006 among Dollar Financial Group, Inc.,
a New York corporation, Dollar Financial Corp., a Delaware corporation, the guarantors named
therein and U.S. Bank National Association, as trustee (1).10.2
    
    Credit Agreement among Dollar Financial Corp., Dollar Financial Group, Inc.,
National Money Mart Company,
Dollar Financial U.K. Limited, the several lenders from time to time parties thereto, U.S.
Bank National Association, as documentation agent, Credit Suisse Securities (USA) LLC, as
syndication agent, and Wells Fargo Bank, National Association, as administrative agent and as
security trustee, dated as of October 30, 2006(1).31.1
    
    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
 
 (1)
    
    Incorporated by reference to the Current Report on Form 8-K filed by Dollar Financial
Corp. on November 2, 2006. 47




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##### Table of Contents



SIGNATURE
  DOLLAR FINANCIAL CORP.Date: February 9, 2007
    *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. 48