##### 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 September 30, 2005
 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 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 September 30, 2005 (unaudited)
    
    
    3Interim Unaudited Consolidated Statements of Operations for the Three
Months Ended September 30, 2004 and 2005
    
    
    4Interim Consolidated Statements of Shareholders Equity as of June 30, 2005
and September 30, 2005 (unaudited)
    
    
    5Interim Unaudited Consolidated Statements of Cash Flows for the Three Months
Ended September 30, 2004 and 2005
    
    
    6Notes to Interim Unaudited Consolidated Financial Statements
    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    25Item 3.
    
    Quantitative and Qualitative Disclosures
About Market Risk
    
    
    33Item 4.
    
    Controls and Procedures
    
    
    34PART
II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    35Item 6.
    
    Exhibits
    
    
    38Signature
    
    
    39Amendment of Marketing and Servicing AgreementRule 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,
    

    September 30,2005
    

    2005(unaudited)ASSETSCash and cash equivalents
    
    $
    92,504
    
    
    $
    99,735Loans receivableLoans receivable
    
    
    41,353
    
    
    
    51,781Less: Allowance for loan losses
    
    
    (2,707
    )
    
    
    (4,041
    )Loans receivable, net
    
    
    38,646
    
    
    
    47,740Other consumer lending receivables
    
    
    7,996
    
    
    
    2,568Other receivables
    
    
    4,399
    
    
    
    6,469Income taxes receivable
    
    
    1,053
    
    
    
    3,109Prepaid expenses
    
    
    6,858
    
    
    
    6,712Deferred tax asset, net of valuation allowance of $37,460 and $40,048
    
    
    71
    
    
    
    140Property and equipment, net of accumulated
depreciation of $62,555 and $65,730
    
    
    35,611
    
    
    
    36,951Goodwill and other intangibles, net of accumulated
amortization of $23,079 and $23,416
    
    
    186,190
    
    
    
    192,727Debt issuance costs, net of accumulated
amortization of $2,633 and $3,118
    
    
    10,558
    
    
    
    10,785Other
    
    
    3,970
    
    
    
    2,343$
    387,856
    
    
    $
    409,279LIABILITIES AND SHAREHOLDERS EQUITYAccounts payable
    
    $
    23,807
    
    
    $
    25,655Foreign income taxes payable
    
    
    4,648
    
    
    
    4,441Accrued expenses and other liabilities
    
    
    22,358
    
    
    
    16,190Accrued interest payable
    
    
    3,291
    
    
    
    9,874Deferred tax liability
    
    
    2,352
    
    
    
    2,779Revolving credit facilities
    
    
    
    
    
    
    11,9009.75% Senior Notes due 2011
    
    
    271,764
    
    
    
    271,695Shareholders equity:Common stock, $0.001 par value: 55,500,000 shares authorized; 18,080,652 shares
issued and outstanding at June 30, 2005 and 18,102,727 at September 30, 2005
    
    
    18
    
    
    
    18Additional paid-in capital
    
    
    160,997
    
    
    
    161,169Accumulated deficit
    
    
    (121,885
    )
    
    
    (119,586
    )Accumulated other comprehensive income
    
    
    20,506
    
    
    
    25,144Total shareholders equity
    
    
    59,636
    
    
    
    66,745$
    387,856
    
    
    $
    409,279
  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 EndedSeptember 30,2004
    
    
    2005Revenues:Check cashing
    
    $
    30,362
    
    
    $
    34,347Consumer lending:Fees from consumer lending
    
    
    37,207
    
    
    
    36,487Provision for loan losses and adjustment to servicing
income
    
    
    (9,437
    )
    
    
    (9,022
    )Consumer lending, net
    
    
    27,770
    
    
    
    27,465Money transfer fees
    
    
    3,508
    
    
    
    3,958Franchise fees and royalties
    
    
    839
    
    
    
    2,916Other
    
    
    3,654
    
    
    
    5,779Total revenues
    
    
    66,133
    
    
    
    74,465Store and regional expenses:Salaries and benefits
    
    
    20,887
    
    
    
    25,191Occupancy
    
    
    5,394
    
    
    
    6,718Depreciation
    
    
    1,754
    
    
    
    1,832Returned checks, net and cash shortages
    
    
    2,484
    
    
    
    3,259Telephone and communications
    
    
    1,473
    
    
    
    1,421Advertising
    
    
    2,832
    
    
    
    2,189Bank charges
    
    
    936
    
    
    
    1,109Armored carrier expenses
    
    
    824
    
    
    
    986Other
    
    
    7,092
    
    
    
    7,309Total store and regional expenses
    
    
    43,676
    
    
    
    50,014Store and regional margin
    
    
    22,457
    
    
    
    24,451Corporate and other expenses:Corporate expenses
    
    
    8,231
    
    
    
    9,172Management fee
    
    
    277
    
    
    
    Other depreciation and amortization
    
    
    931
    
    
    
    925Interest expense, net of interest income of $105 and $6
    
    
    9,669
    
    
    
    7,241Other
    
    
    86
    
    
    
    276Income before income taxes
    
    
    3,263
    
    
    
    6,837Income tax provision
    
    
    3,354
    
    
    
    4,538Net (loss) income
    
    $
    (91
    )
    
    $
    2,299Net (loss) income per share:Basic
    
    $
    (0.01
    )
    
    $
    0.13Diluted
    
    $
    (0.01
    )
    
    $
    0.12Weighted average shares outstanding:Basic
    
    
    10,965,779
    
    
    
    18,089,141Diluted
    
    
    10,965,779
    
    
    
    18,423,529
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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 officer
    
    
    (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 excercised
    
    
    11,100
    
    
    
    
    
    
    
    64
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    64Balance, June 30, 2005
    
    
    18,080,652
    
    
    
    18
    
    
    
    160,997
    
    
    
    (121,885
    )
    
    
    20,506
    
    
    
    
    
    
    
    
    
    
    
    59,636Comprehensive incomeForeign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,434
    
    
    
    
    
    
    
    
    
    
    
    4,434Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    204
    
    
    
    
    
    
    
    
    
    
    
    204Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,299
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,299Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,937Share options excercised
    
    
    22,075
    
    
    
    
    
    
    
    144
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    144Non-cash stock compensation
    

    
    
    
    
    
    
    
    
    
    28
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28Balance, September 30, 2005
(unaudited)
    
    
    18,102,727
    
    
    $
    18
    
    
    $
    161,169
    
    
    $
    (119,586
    )
    
    $
    25,144
    
    
    $
    
    
    
    $
    
    
    
    $
    66,745
  5




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 
 INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 Three Months EndedSeptember 30,2004
    
    
    2005Cash flows from operating activities:Net (loss) income
    
    $
    (91
    )
    
    $
    2,299Adjustments to reconcile net (loss) income to net
cash provided by operating activities:Depreciation and amortization
    
    
    3,071
    
    
    
    3,175Non-cash stock compensation
    
    
    
    
    
    
    28Losses on store closings
    
    
    
    
    
    
    257Foreign currency loss on revaluation of
subordinated borrowings
    
    
    10
    
    
    
    7Deferred tax (benefit) provision
    
    
    (150
    )
    
    
    332Change in assets and liabilities (net of effect of acquisitions):Decrease (increase) in loans and other receivables
    
    
    546
    
    
    
    (5,014
    )Decrease (increase) in income taxes receivable
    
    
    574
    
    
    
    (2,056
    )(Increase) decrease in prepaid expenses and other
    
    
    (604
    )
    
    
    2,005Increase in accounts payable, income taxes payable,
accrued expenses and other liabilities and accrued interest payable
    
    
    7,129
    
    
    
    3,300Net cash provided by operating activities
    
    
    10,485
    
    
    
    4,333Cash flows from investing activities:Acquisitions, net of cash acquired
    
    
    (347
    )
    
    
    (4,922
    )Additions to property and equipment
    
    
    (2,116
    )
    
    
    (4,994
    )Net cash used in investing activities
    
    
    (2,463
    )
    
    
    (9,916
    )Cash flows from financing activities:Proceeds from the exercise of stock options
    
    
    
    
    
    
    144Other debt payments
    
    
    (32
    )
    
    
    Net increase in revolving credit facilities
    
    
    3,600
    
    
    
    11,900Payment of initial public stock offering costs
    
    
    (393
    )
    
    
    Payment of debt issuance costs
    
    
    (31
    )
    
    
    (1,119
    )Net cash provided by financing activities
    
    
    3,144
    
    
    
    10,925Effect of exchange rate changes on cash and cash equivalents
    
    
    1,479
    
    
    
    1,889Net increase in cash and cash equivalents
    
    
    12,645
    
    
    
    7,231Cash and cash equivalents at beginning of period
    
    
    69,270
    
    
    
    92,504Cash and cash equivalents at end of period
    
    $
    81,915
    
    
    $
    99,735
  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
  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 EndedSeptember 30,2004
    
    
    2005Net (loss) income
    
    $
    (91
    )
    
    $
    2,299Reconciliation of denominator:Weighted average of common shares outstanding  basic
    
    
    10,966
    
    
    
    18,089Effect of dilutive stock options 1
    
    
    
    
    
    
    334Weighted average number of common shares outstanding  diluted
    
    
    10,966
    
    
    
    18,423
 
 1
    
    The effect of dilutive stock options was determined under the treasury stock
method. Due to the net loss during the three months ended September 30, 2004 the effect of the
dilutive options were considered to be antidilutive, 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 EndedSeptember 30,2004
    
    
    2005Net (loss) income  as reported
    
    $
    (91
    )
    
    $
    2,299Add: Stock-based employee compensation expense included in reported
net (loss) income, net of related tax effects
    
    
    
    
    
    
    18Deduct: Total stock-option exepnse determined under the fair value based
method, net of related tax benefits
    
    
    (75
    )
    
    
    (18
    )Net (loss) income   pro forma
    
    $
    (166
    )
    
    $
    2,299Earnings per share:Net (loss) income per common share  basic  as reported
    
    $
    (0.01
    )
    
    $
    0.13Net (loss) income per common share  basic  pro forma
    
    $
    (0.02
    )
    
    $
    0.13Net (loss) income per common share  diluted  as reported
    
    $
    (0.01
    )
    
    $
    0.12Net (loss) income per common share  diluted  pro forma
    
    $
    (0.02
    )
    
    $
    0.12
  September 30,2005Expected volatility
    
    
    43.6
    %Expected life (years)
    
    
    6.0Risk-free interest rate
    
    
    4.11
    %Expected dividends
    
    NoneWeighted average fair value
    
    $
    5.38
 2. DEBT
  9




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 2. DEBT (continued)
   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.
  10




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 CONSOLIDATING BALANCE SHEETS
September 30, 2005
(In thousands)
 Dollar FinancialDollar
    

    Group, Inc.

    

    SubsidiaryFinancial
    

    and Subsidiary

    

    Non-Corp.
    

    Guarantors


    
    Guarantors

    

    Eliminations

    

    ConsolidatedASSETSCash and cash equivalents
    
    $
    199
    
    
    $
    38,923
    
    
    
    $
    60,613
    
    
    
    $
    
    
    
    
    $
    99,735Loans receivableLoans receivable
    
    
    
    
    
    
    11,445
    
    
    
    
    40,336
    
    
    
    
    
    
    
    
    
    51,781Less: Allowance for loan losses
    
    
    
    
    
    
    (1,222
    )
    
    
    
    (2,819
    )
    
    
    
    
    
    
    
    
    (4,041
    )Loans receivable, net
    
    
    
    
    
    
    10,223
    
    
    
    
    37,517
    
    
    
    
    
    
    
    
    
    47,740Other consumer lending receivables
    
    
    
    
    
    
    2,568
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,568Other receivables
    
    
    276
    
    
    
    2,263
    
    
    
    
    4,272
    
    
    
    
    (342
    )
    
    
    
    6,469Income taxes receivable
    
    
    
    
    
    
    3,109
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,109Prepaid expenses
    
    
    
    
    
    
    2,199
    
    
    
    
    4,513
    
    
    
    
    
    
    
    
    
    6,712Deferred tax asset
    
    
    
    
    
    
    
    
    
    
    
    140
    
    
    
    
    
    
    
    
    
    140Due from affiliates
    
    
    
    
    
    
    44,476
    
    
    
    
    
    
    
    
    
    (44,476
    )
    
    
    
    Due from parent
    
    
    
    
    
    
    2,371
    
    
    
    
    
    
    
    
    
    (2,371
    )
    
    
    
    Property and equipment, net
    
    
    
    
    
    
    12,747
    
    
    
    
    24,204
    
    
    
    
    
    
    
    
    
    36,951Goodwill and other intangibles, net
    
    
    
    
    
    
    92,131
    
    
    
    
    100,596
    
    
    
    
    
    
    
    
    
    192,727Debt issuance costs, net
    
    
    
    
    
    
    10,785
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,785Investment in subsidiaries
    
    
    66,696
    
    
    
    322,559
    
    
    
    
    
    
    
    
    
    (389,255
    )
    
    
    
    Other
    
    
    
    
    
    
    741
    
    
    
    
    1,602
    
    
    
    
    
    
    
    
    
    2,343$
    67,171
    
    
    $
    545,095
    
    
    
    $
    233,457
    
    
    
    $
    (436,444
    )
    
    
    $
    409,279LIABILITIES AND SHAREHOLDERS EQUITYAccounts payable
    
    $
    51
    
    
    $
    13,528
    
    
    
    $
    12,076
    
    
    
    $
    
    
    
    
    $
    $25,655Foreign income taxes payable
    
    
    
    
    
    
    
    
    
    
    
    4,441
    
    
    
    
    
    
    
    
    
    4,441Accrued expenses and other liabilities
    
    
    4
    
    
    
    5,702
    
    
    
    
    10,727
    
    
    
    
    (243
    )
    
    
    
    16,190Accrued interest payable
    
    
    
    
    
    
    9,874
    
    
    
    
    99
    
    
    
    
    (99
    )
    
    
    
    9,874Deferred tax liability
    
    
    
    
    
    
    2,097
    
    
    
    
    682
    
    
    
    
    
    
    
    
    
    2,779Due to affiliate
    
    
    371
    
    
    
    
    
    
    
    
    46,476
    
    
    
    
    (46,847
    )
    
    
    
    Revolving credit facilities
    
    
    
    
    
    
    11,900
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,9009.75% Senior Notes due 2011
    
    
    
    
    
    
    271,695
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    271,695426
    
    
    
    314,796
    
    
    
    
    74,501
    
    
    
    
    (47,189
    )
    
    
    
    342,534Shareholders equity:Common stock
    
    
    18
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18Additional paid in capital
    
    
    150,072
    
    
    
    95,125
    
    
    
    
    20,599
    
    
    
    
    (104,627
    )
    
    
    
    161,169(Accumulated deficit) retained earnings
    
    
    (108,489
    )
    
    
    106,425
    
    
    
    
    117,539
    
    
    
    
    (235,061
    )
    
    
    
    (119,586
    )Accumulated other comprehensive income
    
    
    25,144
    
    
    
    28,749
    
    
    
    
    20,818
    
    
    
    
    (49,567
    )
    
    
    
    25,144Total shareholders equity
    
    
    66,745
    
    
    
    230,299
    
    
    
    
    158,956
    
    
    
    
    (389,255
    )
    
    
    
    66,745$
    67,171
    
    
    $
    545,095
    
    
    
    $
    233,457
    
    
    
    $
    (436,444
    )
    
    
    $
    409,279
 11




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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
    
    
    
    
    
    
    6,243
    
    
    
    
    35,110
    
    
    
    
    
    
    
    
    
    41,353Less: Allowance for loan losses
    
    
    
    
    
    
    (470
    )
    
    
    
    (2,237
    )
    
    
    
    
    
    
    
    
    (2,707
    )Loans receivable, net
    
    
    
    
    
    
    5,773
    
    
    
    
    32,873
    
    
    
    
    
    
    
    
    
    38,646Other consumer lending receivables
    
    
    
    
    
    
    7,996
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,996Other receivables
    
    
    276
    
    
    
    1,370
    
    
    
    
    2,969
    
    
    
    
    (216
    )
    
    
    
    4,399Income taxes receivable
    
    
    
    
    
    
    1,053
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,053Prepaid expenses
    
    
    
    
    
    
    2,948
    
    
    
    
    3,910
    
    
    
    
    
    
    
    
    
    6,858Notes and interest receivable-officers
    
    
    
    
    
    
    
    
    
    
    
    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
    
    $
    
    
    
    $
    11,849
    
    
    
    $
    11,958
    
    
    
    $
    
    
    
    
    $
    23,807Foreign income taxes payable
    
    
    
    
    
    
    
    
    
    
    
    4,648
    
    
    
    
    
    
    
    
    
    4,648Accrued expenses and other liabilities
    
    
    5
    
    
    
    10,282
    
    
    
    
    12,071
    
    
    
    
    
    
    
    
    
    22,358Accrued 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
 12




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 CONSOLIDATING STATEMENTS OF OPERATIONS
Three Months Ended September 30, 2005
(In thousands)
 Dollar FinancialDollar
    
    
    Group, Inc.

    
    SubsidiaryFinancial
    
    
    and Subsidiary

    
    Non-Corp.
    
    
    Guarantors

    
    Guarantors

    
    Eliminations

    
    ConsolidatedRevenues:Check cashing

    $
    
    
    

    $
    11,353
    
    

    $
    22,994
    
    

    $
    
    
    

    $
    34,347Consumer lending:Fees from consumer lending

    
    
    
    
    

    14,242
    
    
    

    22,245
    
    
    

    
    
    
    

    36,487Provision for loan losses and adjustment
to servicing income

    
    
    
    

    
    (4,934
    )
    

    
    (4,088
    )
    
    

    
    
    

    
    (9,022
    )Consumer lending, net

    
    
    
    
    

    9,308
    
    
    

    18,157
    
    
    

    
    
    
    

    27,465Money transfer fees

    
    
    
    
    
    1,025
    
    
    
    2,933
    
    
    
    
    
    
    
    3,958Franchise fees and royalties
    
    
    
    
    
    1,295
    
    
    
    1,621
    
    
    
    
    
    
    
    2,916Other

    
    

    
    
    
    2,559
    
    
    

    3,220
    
    
    

    
    
    
    

    5,779Total revenues

    
    
    
    
    
    25,540
    
    
    
    48,925
    
    
    
    
    
    
    
    74,465Store and regional expenses:Salaries and benefits
    

    
    
    
    
    12,780
    
    
    
    12,411
    
    
    
    
    
    
    
    25,191Occupancy
    

    
    
    
    
    3,499
    
    
    
    3,219
    
    
    
    
    
    
    
    6,718Depreciation
    

    
    
    
    
    913
    
    
    
    919
    
    
    
    
    
    
    
    1,832Returned checks, net and cash shortages

    
    
    
    
    
    1,483
    
    
    
    1,776
    
    
    
    
    
    
    
    3,259Telephone and telecommunication

    
    
    
    
    
    852
    
    
    
    569
    
    
    
    
    
    
    
    1,421Advertising

    
    
    
    
    
    1,038
    
    
    
    1,151
    
    
    
    
    
    
    
    2,189Bank charges

    
    
    
    
    
    492
    
    
    
    617
    
    
    
    
    
    
    
    1,109Armored carrier services
    

    
    
    
    
    402
    
    
    
    584
    
    
    
    
    
    
    
    986Other

    
    
    
    
    
    3,276
    
    
    
    4,033
    
    
    
    
    
    
    
    7,309Total store and regional expenses
 
    
    
    
    
    24,735
    
    
    
    25,279
    
    
    
    
    
    
    
    50,014Store and regional margin
    
    
    
    
    
    805
    
    
    
    23,646
    
    
    
    
    
    
    
    24,451Corporate and other expenses:Corporate expenses

    
    
    
    
    
    4,505
    
    
    
    4,667
    
    
    
    
    
    
    
    9,172Management fee

    
    
    
    
    
    (436
    )
    
    
    436
    
    
    
    
    
    
    
    Other depreciation and amortization
    

    
    
    
    
    472
    
    
    
    453
    
    
    
    
    
    
    
    925Interest expense, net

    
    
    
    
    
    6,667
    
    
    
    574
    
    
    
    
    
    
    
    7,241Other
    

    
    
    
    
    277
    
    
    
    (1
    )
    
    
    
    
    
    
    276Equity in subsidiary

    
    (2,299
    )
    
    
    
    
    
    
    
    
    
    
    2,299
    
    
    
    Income (loss) before income taxes

    
    2,299
    
    
    
    (10,680
    )
    
    
    17,517
    
    
    
    (2,299
    )
    
    
    6,837Income tax (benefit) provision

    
    
    
    
    
    (1,849
    )
    
    
    6,387
    
    
    
    
    
    
    
    4,538Net income (loss)

    $
    2,299
    
    
    $
    (8,831
    )
    
    $
    11,130
    
    
    $
    (2,299
    )
    
    $
    2,299
 13




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 CONSOLIDATING STATEMENTS OF OPERATIONS
Three Months Ended September 30, 2004
(In thousands)
 Dollar FinancialDollar
    
    
    Group, Inc.

    
    SubsidiaryFinancial
    
    
    and Subsidiary

    
    Non-Corp.
    
    
    Guarantors

    
    Guarantors

    
    Eliminations

    
    ConsolidatedRevenues:Check cashing
    $
    
    
    
    
    $
    10,721
    
    
    
    $
    19,641
    
    
    
    $
    
    
    
    
    $
    30,362Consumer lending:Fees from consumer lending
    
    
    
    
    
    
    19,690
    
    
    
    
    17,517
    
    
    
    
    
    
    
    
    
    37,207Provision for loan losses and adjustment
to servicing income
    
    
    
    
    
    
    (5,730
    )
    
    
    
    (3,707
    )
    
    
    
    
    
    
    
    
    (9,437
    )Consumer lending, net
    
    
    
    
    
    
    13,960
    
    
    
    
    13,810
    
    
    
    
    
    
    
    
    
    27,770Money transfer fees
    
    
    
    
    
    
    1,058
    
    
    
    
    2,450
    
    
    
    
    
    
    
    
    
    3,508Franchise fees and royalties
    
    
    
    
    
    
    
    
    
    
    
    839
    
    
    
    
    
    
    
    
    
    839Other
    
    
    
    
    
    
    628
    
    
    
    
    3,026
    
    
    
    
    
    
    
    
    
    3,654Total revenues
    
    
    
    
    
    
    26,367
    
    
    
    
    39,766
    
    
    
    
    
    
    
    
    
    66,133Store and regional expenses:Salaries and benefits
    
    
    
    
    
    
    10,828
    
    
    
    
    10,059
    
    
    
    
    
    
    
    
    
    20,887Occupancy
    
    
    
    
    
    
    2,825
    
    
    
    
    2,569
    
    
    
    
    
    
    
    
    
    5,394Depreciation
    
    
    
    
    
    
    954
    
    
    
    
    800
    
    
    
    
    
    
    
    
    
    1,754Returned checks, net and cash shortages
    
    
    
    
    
    
    1,139
    
    
    
    
    1,345
    
    
    
    
    
    
    
    
    
    2,484Telephone and telecommunication
    
    
    
    
    
    
    970
    
    
    
    
    503
    
    
    
    
    
    
    
    
    
    1,473Advertising
    
    
    
    
    
    
    1,066
    
    
    
    
    1,766
    
    
    
    
    
    
    
    
    
    2,832Bank charges
    
    
    
    
    
    
    493
    
    
    
    
    443
    
    
    
    
    
    
    
    
    
    936Armored carrier services
    
    
    
    
    
    
    368
    
    
    
    
    456
    
    
    
    
    
    
    
    
    
    824Other
    
    
    
    
    
    
    3,358
    
    
    
    
    3,734
    
    
    
    
    
    
    
    
    
    7,092Total store and regional expenses
    
    
    
    
    
    
    22,001
    
    
    
    
    21,675
    
    
    
    
    
    
    
    
    
    43,676Store and regional margin
    
    
    
    
    
    
    4,366
    
    
    
    
    18,091
    
    
    
    
    
    
    
    
    
    22,457Corporate and other expenses:Corporate expenses
    
    
    
    
    
    
    3,889
    
    
    
    
    4,342
    
    
    
    
    
    
    
    
    
    8,231Management fee
    
    277
    
    
    
    
    (678
    )
    
    
    
    678
    
    
    
    
    
    
    
    
    
    277Other depreciation and amortization
    
    
    
    
    
    
    573
    
    
    
    
    358
    
    
    
    
    
    
    
    
    
    931Interest expense, net
    
    3,185
    
    
    
    
    5,422
    
    
    
    
    1,062
    
    
    
    
    
    
    
    
    
    9,669Other
    
    
    
    
    
    
    86
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    86Equity in subsidiary
    
    (3,371
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,371
    
    
    
    
    (Loss) income before income taxes
    
    (91
    )
    
    
    
    (4,926
    )
    
    
    
    11,651
    
    
    
    
    (3,371
    )
    
    
    
    3,263Income tax (benefit) provision
    
    
    
    
    
    
    (882
    )
    
    
    
    4,236
    
    
    
    
    
    
    
    
    
    3,354Net (loss) income
    $
    (91
    )
    
    
    $
    (4,044
    )
    
    
    $
    7,415
    
    
    
    $
    (3,371
    )
    
    
    $
    (91
    )
 14




---



##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 CONSOLIDATING STATEMENTS OF CASH FLOWS
Three Months Ended September 30, 2005
(In thousands)
 Dollar FinancialDollar
    
    
    Group, Inc.
    
    
    SubsidiaryFinancial
    
    
    and Subsidiary
    
    
    Non-Corp.
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income (loss)
    
    $
    2,299
    
    
    $
    (8,831
    )
    
    $
    11,130
    
    
    $
    (2,299
    )
    
    $
    2,299Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:Undistributed income of subsidiary
    
    
    (2,299
    )
    
    
    
    
    
    
    
    
    
    
    2,299
    
    
    
    Depreciation and amortization
    
    
    
    
    
    
    1,801
    
    
    
    1,374
    
    
    
    
    
    
    
    3,175Non-cash stock compensation
    
    
    28
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28Losses on store closings and sales
    
    
    
    
    
    
    257
    
    
    
    
    
    
    
    
    
    
    
    257Foreign currency loss on revaluation of
subordinated notes payable
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    7Deferred tax provision (benefit)
    
    
    
    
    
    
    340
    
    
    
    (8
    )
    
    
    
    
    
    
    332Change in assets and liabilities (net of effect
of acquisitions):Decrease (increase) in loans and other receivables
    
    
    
    
    
    
    85
    
    
    
    (5,441
    )
    
    
    342
    
    
    
    (5,014
    )Increase in income taxes receivable
    
    
    
    
    
    
    (3,847
    )
    
    
    
    
    
    
    1,791
    
    
    
    (2,056
    )Decrease in prepaid expenses and other
    
    
    
    
    
    
    535
    
    
    
    1,470
    
    
    
    
    
    
    
    2,005Increase (decrease) in accounts payable, income taxes,
payable, accrued expenses and other liabilities and
accrued interest payable
    
    
    50
    
    
    
    6,287
    
    
    
    (904
    )
    
    
    (2,133
    )
    
    
    3,300Net cash provided by (used in) operating activities
    
    
    78
    
    
    
    (3,366
    )
    
    
    7,621
    
    
    
    
    
    
    
    4,333Cash flows from investing activities:Acquisitions, net of cash acquired
    
    
    
    
    
    
    (4,618
    )
    
    
    (304
    )
    
    
    
    
    
    
    (4,922
    )Additions to property and equipment
    
    
    
    
    
    
    (2,317
    )
    
    
    (2,677
    )
    
    
    
    
    
    
    (4,994
    )Net decrease in due from affiliates
    
    
    
    
    
    
    13,270
    
    
    
    
    
    
    
    (13,270
    )
    
    
    Net cash provided by (used in) investing activities
    
    
    
    
    
    
    6,335
    
    
    
    (2,981
    )
    
    
    (13,270
    )
    
    
    (9,916
    )Cash flows from financing activities:Proceeds from the exercise of stock options
    
    
    144
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    144Net increase in revolving credit facilities
    
    
    
    
    
    
    11,900
    
    
    
    
    
    
    
    
    
    
    
    11,900Payment of debt issuance costs
    
    
    
    
    
    
    (1,119
    )
    
    
    
    
    
    
    
    
    
    
    (1,119
    )Net decrease in due to affiliates and due from parent
    
    
    (27
    )
    
    
    (4,876
    )
    
    
    (8,367
    )
    
    
    13,270
    
    
    
    Net cash provided by (used in) financing activities
    
    
    117
    
    
    
    5,905
    
    
    
    (8,367
    )
    
    
    13,270
    
    
    
    10,925Effect of exchange rate changes on cash and
cash equivalents
    
    
    
    
    
    
    
    
    
    
    1,889
    
    
    
    
    
    
    
    1,889Net increase (decrease) in cash and cash equivalents
    
    
    195
    
    
    
    8,874
    
    
    
    (1,838
    )
    
    
    
    
    
    
    7,231Cash and cash equivalents at beginning of period
    
    
    4
    
    
    
    30,049
    
    
    
    62,451
    
    
    
    
    
    
    
    92,504Cash and cash equivalents at end of period
    
    $
    199
    
    
    $
    38,923
    
    
    $
    60,613
    
    
    $
    
    
    
    $
    99,735
 15




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 CONSOLIDATING STATEMENTS OF CASH FLOWS
Three Months Ended September 30, 2004
(In thousands)
 Dollar FinancialDollar
    
    
    Group, Inc.
    
    
    SubsidiaryFinancial
    
    
    and Subsidiary
    
    
    Non-Corp.
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net (loss) income
    
    $
    (91
    )
    
    $
    (4,044
    )
    
    $
    7,415
    
    
    $
    (3,371
    )
    
    $
    (91
    )Adjustments to reconcile net (loss) income to net
cash (used in) provided by operating activities:Undistributed income of subsidiary
    
    
    (3,371
    )
    
    
    
    
    
    
    
    
    
    
    3,371
    
    
    
    Depreciation and amortization
    
    
    8
    
    
    
    1,905
    
    
    
    1,158
    
    
    
    
    
    
    
    3,071Foreign currency loss on revaluation of
subordinated borrowings
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    10Deferred tax benefit
    
    
    
    
    
    
    
    
    
    
    (150
    )
    
    
    
    
    
    
    (150
    )Change in assets and liabilities (net of effect
of acquisitions):Increase in loans and other receivables
    
    
    (65
    )
    
    
    (650
    )
    
    
    (172
    )
    
    
    1,433
    
    
    
    546(Increase) decrease in income taxes receivable
    
    
    
    
    
    
    (510
    )
    
    
    1,511
    
    
    
    (427
    )
    
    
    574Increase in prepaid expenses and other
    
    
    
    
    
    
    (537
    )
    
    
    (67
    )
    
    
    
    
    
    
    (604
    )Increase in accounts payable, income taxes payable,
accrued expenses and other liabilities and accrued
interest payable
    
    
    3,491
    
    
    
    4,306
    
    
    
    338
    
    
    
    (1,006
    )
    
    
    7,129Net cash (used in) provided by operating activities
    
    
    (28
    )
    
    
    480
    
    
    
    10,033
    
    
    
    
    
    
    
    10,485Cash flows from investing activities:Acquisitions, net of cash acquired
    
    
    
    
    
    
    
    
    
    
    (347
    )
    
    
    
    
    
    
    (347
    )Additions to property and equipment
    
    
    
    
    
    
    (385
    )
    
    
    (1,731
    )
    
    
    
    
    
    
    (2,116
    )Net decrease in due from affiliates
    
    
    
    
    
    
    1,707
    
    
    
    
    
    
    
    (1,707
    )
    
    
    Net cash provided by (used in) investing activities
    
    
    
    
    
    
    1,322
    
    
    
    (2,078
    )
    
    
    (1,707
    )
    
    
    (2,463
    )Cash flows from financing activities:Other debt payments
    
    
    
    
    
    
    (26
    )
    
    
    (6
    )
    
    
    
    
    
    
    (32
    )Net increase in revolving credit facilities
    
    
    
    
    
    
    3,600
    
    
    
    
    
    
    
    
    
    
    
    3,600Payment of initial public stock offering costs
    
    
    (393
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (393
    )Payment of debt issuance costs
    
    
    
    
    
    
    (31
    )
    
    
    
    
    
    
    
    
    
    
    (31
    )Net increase (decrease) in due to affiliates and due from parent
    
    
    421
    
    
    
    (1,287
    )
    
    
    (841
    )
    
    
    1,707
    
    
    
    Net cash provided by (used in) financing activities
    
    
    28
    
    
    
    2,256
    
    
    
    (847
    )
    
    
    1,707
    
    
    
    3,144Effect of exchange rate changes on cash and
cash equivalents
    
    
    
    
    
    
    
    
    
    
    1,479
    
    
    
    
    
    
    
    1,479Net increase in cash and cash equivalents
    
    
    
    
    
    
    4,058
    
    
    
    8,587
    
    
    
    
    
    
    
    12,645Cash and cash equivalents at beginning of period
    
    
    4
    
    
    
    27,124
    
    
    
    42,142
    
    
    
    
    
    
    
    69,270Cash and cash equivalents at end of period
    
    $
    4
    
    
    $
    31,182
    
    
    $
    50,729
    
    
    $
    
    
    
    $
    81,915
 16




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 4. GOODWILL AND OTHER INTANGIBLES
  AmountFiscal
Year Ending September 30,
    
    
    
    
    
    (in thousands)2006
    
    
    
    
    
    $
    71.02007
    
    
    
    
    
    
    66.92008
    
    
    
    
    
    
    66.92009
    
    
    
    
    
    
    66.92010
    
    
    
    
    
    
    66.9Thereafter
    
    
    
    
    
    
    269.5$
    608.1
  United
    
    
    
    
    
    
    UnitedStates
    
    
    Canada
    
    
    Kingdom
    
    
    TotalBalance at June 30, 2004
    
    $
    56,514
    
    
    $
    38,821
    
    
    $
    53,783
    
    
    $
    149,118Amortization of other intangibles
    
    
    (56
    )
    
    
    
    
    
    
    
    
    
    
    (56
    )Acquisition
    
    
    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
    
    
    (21
    )
    
    
    
    
    
    
    
    
    
    
    (21
    )Acquisition
    
    
    4,617
    
    
    
    
    
    
    
    
    
    
    
    4,617Foreign currency translation adjustments
    
    
    
    
    
    
    2,647
    
    
    
    (706
    )
    
    
    1,941Balance at September 30, 2005
    
    $
    92,131
    
    
    $
    45,106
    
    
    $
    55,490
    
    
    $
    192,727
  June 30, 2005
    
    
    September 30, 2005Gross Carrying
    
    
    Accumulated
    
    
    Gross Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Amount
    
    
    AmortizationNon-amortized intangible assets:Cost in excess of net assets acquired
    
    $
    205,572
    
    
    $
    20,532
    
    
    $
    212,949
    
    
    $
    20,830Amortized intangible assets:Covenants not to compete
    
    $
    2,510
    
    
    $
    2,510
    
    
    $
    2,548
    
    
    $
    2,548Franchise agreements
    
    
    1,187
    
    
    
    37
    
    
    
    646
    
    
    
    38$
    3,697
    
    
    $
    2,547
    
    
    $
    3,194
    
    
    $
    2,586
 17




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 5. COMPREHENSIVE INCOME
  Three months EndedSeptember 30,2004
    
    
    2005Net income (loss)
    
    $
    (91
    )
    
    $
    2,299Foreign currency translation adjustment
    
    
    4,758
    
    
    
    4,434Fair value adjustments for cash flow hedges
    
    
    (290
    )
    
    
    204Total comprehensive income
    
    $
    4,377
    
    
    $
    6,937
 6. GEOGRAPHIC SEGMENT INFORMATION
 All 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 September 30, 2004Identifiable assets
    
    $
    136,521
    
    
    $
    99,068
    
    
    $
    99,253
    
    
    $
    334,842Goodwill and other intangibles, net
    
    
    56,506
    
    
    
    41,173
    
    
    
    53,968
    
    
    
    151,647Sales to unaffiliated customers:Check cashing
    
    
    10,721
    
    
    
    10,399
    
    
    
    9,242
    
    
    
    30,362Consumer lending:Fees from consumer lending
    
    
    19,690
    
    
    
    11,481
    
    
    
    6,036
    
    
    
    37,207Provision for loan losses and adjustments
to servicing revenue
    
    
    (5,730
    )
    
    
    (1,918
    )
    
    
    (1,789
    )
    
    
    (9,437
    )Consumer lending, net
    
    
    13,960
    
    
    
    9,563
    
    
    
    4,247
    
    
    
    27,770Money transfer fees
    
    
    1,058
    
    
    
    1,620
    
    
    
    830
    
    
    
    3,508Franchise fees and royalties
    
    
    
    
    
    
    839
    
    
    
    
    
    
    
    839Other
    
    
    628
    
    
    
    2,278
    
    
    
    748
    
    
    
    3,654Total sales to unaffiliated customers
    
    
    26,367
    
    
    
    24,699
    
    
    
    15,067
    
    
    
    66,133Interest expense, net
    
    
    8,607
    
    
    
    324
    
    
    
    738
    
    
    
    9,669Depreciation and amortization
    
    
    1,527
    
    
    
    690
    
    
    
    468
    
    
    
    2,685(Loss) income before income taxes
    
    
    (8,389
    )
    
    
    8,462
    
    
    
    3,190
    
    
    
    3,263Income tax provision
    
    
    (882
    )
    
    
    3,241
    
    
    
    995
    
    
    
    3,354
 18




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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 September 30, 2005Identifiable assets
    
    $
    175,822
    
    
    $
    121,905
    
    
    $
    111,552
    
    
    $
    409,279Goodwill and other intangibles, net
    
    
    92,131
    
    
    
    45,106
    
    
    
    55,490
    
    
    
    192,727Sales to unaffiliated customers:Check cashing
    
    
    11,353
    
    
    
    12,200
    
    
    
    10,794
    
    
    
    34,347Consumer lending:Fees from consumer lending
    
    
    14,242
    
    
    
    14,856
    
    
    
    7,389
    
    
    
    36,487Provision for loan losses and adjustmentsto servicing revenue
    
    
    (4,934
    )
    
    
    (2,525
    )
    
    
    (1,563
    )
    
    
    (9,022
    )Consumer lending, net
    
    
    9,308
    
    
    
    12,331
    
    
    
    5,826
    
    
    
    27,465Money transfer fees
    
    
    1,025
    
    
    
    1,914
    
    
    
    1,019
    
    
    
    3,958Franchise fees and royalties
    
    
    1,621
    
    
    
    1,295
    
    
    
    
    
    
    
    2,916Other
    
    
    2,233
    
    
    
    2,618
    
    
    
    928
    
    
    
    5,779Total sales to unaffiliated customers
    
    
    25,540
    
    
    
    30,358
    
    
    
    18,567
    
    
    
    74,465Interest expense, net
    
    
    6,667
    
    
    
    (145
    )
    
    
    719
    
    
    
    7,241Depreciation and amortization
    
    
    1,385
    
    
    
    754
    
    
    
    618
    
    
    
    2,757(Loss) income before income taxes
    
    
    (10,680
    )
    
    
    12,750
    
    
    
    4,767
    
    
    
    6,837Income tax provision
    
    
    (1,849
    )
    
    
    4,998
    
    
    
    1,389
    
    
    
    4,538
 7. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
   19




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 8. CONTINGENT LIABILITIES
  Canadian Legal Proceedings
   Young MacKinnon
     California Legal Proceedings
 (Woods) (Castillo)
 20




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 8. CONTINGENT LIABILITIES (continued)
 California Legal Proceedings (continued)
 (Chin) (Williams) Woods Williams Chin Castillo Woods
  We The People Legal Proceedings
     21




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 9. ACQUISITIONS
      WTPPurchase price
    
    $
    14.0Net assets acquired:Purchased franchise agreements
    
    
    (1.2
    )Refundable deposits
    
    
    5.1Other (assets) and liabilities
    
    
    1.1Goodwill
    
    $
    19.0
  22




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 SUPPLEMENTAL STATISTICAL DATA
 September 30,2004
    
    
    2005Company Operating Data:Stores in operation:Company-owned
    
    
    650
    
    
    
    744Franchised stores and check cashing merchants
    
    
    472
    
    
    
    572Total
    
    
    1,122
    
    
    
    1,316
 Three Months EndedSeptember 30,2004
    
    2005Check Cashing Data:Face amount of checks cashed (in millions)
    
    $
    816
    
    
    $
    917Face amount of average check
    
    $
    404
    
    
    $
    439Face amount of average check (excluding Canada
and the United Kingdom)
    
    $
    369
    
    
    $
    389Average fee per check
    
    $
    15.02
    
    
    $
    16.45Number of checks cashed (in thousands)
    
    
    2,022
    
    
    
    2,088
 Three Months EndedSeptember 30,2004
    
    
    2005(in thousands)Check Cashing Collections Data:Face amount of returned checks
    
    $
    7,601
    
    
    $
    10,267Collections
    
    
    (5,374
    )
    
    
    (7,298
    )Net write-offs
    
    $
    2,227
    
    
    $
    2,969Collections as a percentage of returned checks
    
    
    70.7
    %
    
    
    71.1
    %Net write-offs as a percentage of check cashing
revenues
    
    
    7.3
    %
    
    
    8.6
    %Net write-offs as a percentage of the face amount
of checks cashed
    
    
    0.27
    %
    
    
    0.32
    %
 23




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##### Table of Contents



Three Months EndedSeptember 30,2004
    
    
    2005U.S. company-funded consumer loan originations (1)
    
    $
    18,562
    
    
    $
    67,636Canadian company-funded consumer loan originations (2)
    
    
    107,141
    
    
    
    129,092U.K. company-funded consumer loan originations (2)
    
    
    42,698
    
    
    
    47,738Total company-funded consumer loan originations
    
    $
    168,401
    
    
    $
    244,466Servicing revenues, net (3)
    
    $
    12,150
    
    
    $
    1,408U.S. company-funded consumer loan revenues (3)
    
    
    2,774
    
    
    
    10,245Canadian company-funded consumer loan revenues
    
    
    11,480
    
    
    
    14,856U.K. company-funded consumer loan revenues
    
    
    6,036
    
    
    
    7,389Provision for loan losses on company-funded loans
    
    
    (4,670
    )
    
    
    (6,433
    )Total consumer lending revenues, net
    
    $
    27,770
    
    
    $
    27,465Gross charge-offs of company-funded consumer loans (3)
    
    $
    16,078
    
    
    $
    24,645Recoveries of company-funded consumer loans (3)
    
    
    (11,468
    )
    
    
    (19,526
    )Net charge-offs on company-funded consumer loans
    
    $
    4,610
    
    
    $
    5,119Gross charge-offs of company-funded consumer loans
as a percentage of total company-funded consumer loan
originations
    
    
    9.5
    %
    
    
    10.1
    %Recoveries of company-funded consumer loans as a
percentage of total company-funded consumer loan
originations
    
    
    6.8
    %
    
    
    8.0
    %Net charge-offs on company-funded consumer loans
as a percentage of total company-funded consumer loan
originations
    
    
    2.7
    %
    
    
    2.1
    %
 
 (1)
    
    Our company operated stores 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 from the
bank-funded to the company-funded model. 24




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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 months ended September 30, 2005 and 2004. 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 September 30, 2005.
 Executive Summary
      Impact of Hurricanes Katrina and Rita on our Operations
   25




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##### Table of Contents



Discussion of Critical Accounting Policies
   Revenue Recognition
        26




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##### Table of Contents



Company-Funded Consumer Loan Loss Reserves Policy
   Check Cashing Returned Item Policy
  Goodwill
  Income Taxes
  27




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##### Table of Contents



Results of Operations
 Revenue Analysis
 Three Months Ended September 30,($ in thousands)
    
    
    (Percentage of total revenue)2004
    
    
    2005
    
    
    2004
    
    
    2005Check cashing
    
    $
    30,362
    
    
    $
    34,347
    
    
    
    45.9
    %
    
    
    46.1
    %Consumer lending revenue, net
    
    
    27,770
    
    
    
    27,465
    
    
    
    42.0
    %
    
    
    36.9
    %Money transfer fees
    
    
    3,508
    
    
    
    3,958
    
    
    
    5.3
    %
    
    
    5.3
    %Franchise fees and royalties
    
    
    839
    
    
    
    2,916
    
    
    
    1.3
    %
    
    
    3.9
    %Other revenue
    
    
    3,654
    
    
    
    5,779
    
    
    
    5.5
    %
    
    
    7.8
    %Total revenue
    
    $
    66,133
    
    
    $
    74,465
    
    
    
    100.0
    %
    
    
    100.0
    %
 The Three Months Ended September 30, 2005 compared to the Three Months Ended September 30,
2004
   28




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##### Table of Contents



Store and Regional Expense Analysis
 Three Months Ended September 30,(Percentage of total($ in thousands)
    
    
    revenue)2004
    
    
    2005
    
    
    2004
    
    
    2005Salaries and benefits
    
    $
    20,887
    
    
    $
    25,191
    
    
    
    31.6
    %
    
    
    33.8
    %Occupancy
    
    
    5,394
    
    
    
    6,718
    
    
    
    8.2
    %
    
    
    9.0
    %Depreciation
    
    
    1,754
    
    
    
    1,832
    
    
    
    2.7
    %
    
    
    2.5
    %Returned checks, net and cash shortages
    
    
    2,484
    
    
    
    3,259
    
    
    
    3.8
    %
    
    
    4.4
    %Telephone and communications
    
    
    1,473
    
    
    
    1,421
    
    
    
    2.2
    %
    
    
    1.9
    %Advertising
    
    
    2,832
    
    
    
    2,189
    
    
    
    4.3
    %
    
    
    2.9
    %Bank charges
    
    
    936
    
    
    
    1,109
    
    
    
    1.4
    %
    
    
    1.5
    %Armored carrier expenses
    
    
    824
    
    
    
    986
    
    
    
    1.2
    %
    
    
    1.3
    %Other
    
    
    7,092
    
    
    
    7,309
    
    
    
    10.6
    %
    
    
    9.9
    %Total store and regional expenses
    
    $
    43,676
    
    
    $
    50,014
    
    
    
    66.0
    %
    
    
    67.2
    %
  Corporate and Other Expense Analysis
 Three Months Ended September 30,(Percentage of total($ in thousands)
    
    revenue)2004
    
    2005
    
    2004
    
    2005Corporate expenses
    
    $
    8,231
    
    
    $
    9,172
    
    
    
    12.4
    %
    
    
    12.3
    %Management fee
    
    
    277
    
    
    
    
    
    
    
    0.4
    %
    
    
    0.0
    %Other depreciation and amortization
    
    
    931
    
    
    
    925
    
    
    
    1.4
    %
    
    
    1.2
    %Interest expense
    
    
    9,669
    
    
    
    7,241
    
    
    
    14.6
    %
    
    
    9.7
    %Other
    
    
    86
    
    
    
    276
    
    
    
    0.1
    %
    
    
    0.4
    %Income tax provision
    
    
    3,354
    
    
    
    4,538
    
    
    
    5.1
    %
    
    
    6.1
    %
 29




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##### Table of Contents



Corporate Expenses
  Management Fees
  Other Depreciation and Amortization
  Interest Expense
  Income Tax Provision
  Changes in Financial Condition
  Liquidity and Capital Resources
   30




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##### Table of Contents



Revolving Credit Facilities.
 Domestic Revolving Credit Facility.On November 13, 2003, OPCO repaid, in full, all
borrowings outstanding under its previously existing credit facility using a portion of the
proceeds from the issuance of $220.0 million principal amount of OPCOs 9.75% senior notes
due 2011 and simultaneously entered into a new $55.0 million senior secured reducing
revolving credit facility. On July 8, 2005, OPCO entered into an amendment and restatement
of its credit facility to increase the maximum amount of the facility from $55 million to $80
million. The amendment and restatement reduced the rate of interest and fees payable under
the credit facility and eliminated the quarterly reductions to the commitment amount. In
addition, the amendment and restatement extended the term of the credit facility for one
additional year to November 12, 2009. At OPCOs request, existing lenders and/or additional
lenders may agree to increase the maximum amount of the credit facility to $100 million.
Under the credit facility, up to $30.0 million may be used in connection with letters of
credit. The commitment may be subject to reductions in the event we engage in certain
issuances of debt or equity securities or asset disposals. OPCOs borrowing capacity under
the credit facility is limited to the lesser of the total commitment of $80.0 million or 85%
of certain liquid assets. At September 30, 2005, the borrowing capacity was $69.3 million
which consisted of the $80.0 million commitment less letters of credit totaling $10.7 million
issued by Wells Fargo Bank, which guarantee the performance of certain of its contractual
obligations. There was $11.9 million outstanding under the facility at September 30, 2005.Canadian Overdraft Facility.Our Canadian operating subsidiary has a Canadian overdraft
facility to fund peak working capital needs for our Canadian operations. The Canadian
overdraft facility provides for a commitment of up to approximately $10.0 million in Canadian
equivalent, of which there was no outstanding balance on September 30, 2005. Amounts
outstanding under the Canadian overdraft facility bear interest at a rate of Canadian prime
and are secured by a $10.0 million letter of credit issued by Wells Fargo Bank under our
domestic revolving credit facility.
 Long-Term Debt
 Operating Leases.
 31




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##### Table of Contents



Payments Due by Period (in thousands)Less than
    
    
    1 - 3
    
    
    4 - 5
    
    
    After 5Total
    
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    YearsRevolving credit facilities
    
    $
    11,900
    
    
    $
    11,900
    
    
    $
    
    
    
    $
    
    
    
    $
    Long-term debt:9.75% Senior Notes due 2011(1)
    
    
    271,695
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    271,695Capital lease obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating lease obligations
    
    
    77,663
    
    
    
    20,157
    
    
    
    32,055
    
    
    
    18,103
    
    
    
    7,348Purchase obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other long-term liabilities reflected on
the registrants balance sheet under
GAAP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total contractual cash obligations
    
    $
    361,258
    
    
    $
    32,057
    
    
    $
    32,055
    
    
    $
    18,103
    
    
    $
    279,043
 
 (1)
    
    $1,695 is the unamortized premium on the 9.75% Senior Notes due 2011.  Balance Sheet Variations
 September 30, 2005 compared to June 30, 2005
        32




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##### Table of Contents



Seasonality and Quarterly Fluctuations
  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
  33




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##### Table of Contents




    
    interest rates on debt; and
    
    foreign exchange rates generating translation gains and losses.
  Interest Rates
  Foreign Exchange Rates
    
 Item 4. Controls and Procedures
 Evaluation of Disclosure Control and Procedures
  34




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##### Table of Contents



Changes in Internal Control Over Financial Reporting
  
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  Canadian Legal Proceedings
   Young MacKinnon
     California Legal Proceedings
 (Woods) (Castillo)
 35




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##### Table of Contents



(Chin) (Williams) Woods Williams Chin Castillo Woods
  We The People Legal Proceedings
     36




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##### Table of Contents



ex parte
   37




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##### Table of Contents



Item 6.Exhibits
 Exhibit No.
    
    Description of Document10.1
    
    
    Amendment of Marketing and Servicing Agreement, dated August 22, 2005*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
 
 *
    
    An application has been submitted to the Securities and Exchange Commission for
confidential treatment, pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, of
portions of this exhibit. These portions have been omitted from this exhibit. 38




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##### Table of Contents



SIGNATURE
  DOLLAR FINANCIAL CORP.Date:
November 9, 2005
    
    *By:
    
    /s/ Randy UnderwoodName:
    
    Randy UnderwoodTitle:
    
    Executive Vice President andChief Financial Officer(principal financial andchief 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. 39