UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2014

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number 000-50866

DFC GLOBAL CORP.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	23-2636866
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

1436 LANCASTER AVENUE,

BERWYN, PENNSYLVANIA 19312

(Address of Principal Executive Offices) (Zip Code)

610-296-3400

(Registrant’s Telephone Number, Including Area Code)

None

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer, accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act: (Check one):

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined) in Rule 12b-2 of the Exchange Act)    Yes  ¨    No  x

As of May 9, 2014, 38,635,364 shares of the registrant’s common stock, par value $0.001 per share, were outstanding.

DFC GLOBAL CORP.

INDEX

		Page No.
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Interim Consolidated Balance Sheets as of June 30, 2013 and March 31, 2014 (unaudited)		3
	Interim Unaudited Consolidated Statements of Operations for the Three and Nine Months Ended March 31, 2013 and 2014		4
	Interim Unaudited Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended March 31, 2013 and 2014		5
	Interim Unaudited Consolidated Statements of Stockholders’ Equity as of June  30, 2013 and March 31, 2014		6
	Interim Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2013 and 2014		7
	Notes to Interim Unaudited Consolidated Financial Statements		8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		54
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		83
Item 4.	Controls and Procedures		85
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings		86
Item 1A.	Risk Factors		86
Item 2.	Unregistered Purchases of Equity Securities and Use of Proceeds		89
Item 3.	Defaults Upon Senior Securities		89
Item 4.	Mine Safety Disclosures		89
Item 5.	Other Information		90
Item 6.	Exhibits		91
Signature			92
Rule 13(a)-14(a)/15d-14(a) Certification of Chief Executive Officer
Rule 13(a)-14(a)/15d-14(a) Certification of Executive Vice President and Chief Financial Officer
Rule 13(a)-14(a)/15d-14(a) Certification of Senior Vice President of Finance, Chief Accounting Officer and Corporate Controller
Section 1350 Certification of Chief Executive Officer
Section 1350 Certification of Executive Vice President and Chief Financial Officer
Section 1350 Certification of Senior Vice President of Finance, Chief Accounting Officer and Corporate Controller

2

PART 1. FINANCIAL INFORMATION

Item 1. Financial Statements

DFC GLOBAL CORP.

INTERIM CONSOLIDATED BALANCE SHEETS

(In millions, except share and per share amounts)

	June 30, 2013			March 31, 2014
				(unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	196.2		$	236.9
Consumer loans, net:
Consumer loans		229.9			220.2
Less: Allowance for consumer loan losses		(39.7	)		(45.4	)
Consumer loans, net		190.2			174.8
Pawn loans, net of an allowance of $6.5 and $2.8		154.4			153.4
Loans in default, net of an allowance of $69.6 and $93.4		31.2			25.5
Other receivables		30.2			35.4
Prepaid expenses and other current assets		56.6			51.0
Current deferred tax asset		4.9			1.5
Total current assets		663.7			678.5
Fair value of derivatives		31.2			—
Property and equipment, net of accumulated depreciation of $185.7 and $210.4		122.8			127.6
Goodwill and other intangibles, net		866.4			766.6
Debt issuance costs, net of accumulated amortization of $14.8 and $12.8		16.6			15.3
Other		21.0			23.6
Total Assets	$	1,721.7		$	1,611.6
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	52.7		$	39.4
Income taxes payable		17.7			24.7
Accrued expenses and other liabilities		93.2			100.6
Current portion of long-term debt		67.0			92.7
Current deferred tax liability		—			0.5
Total current liabilities		230.6			257.9
Fair value of derivatives		—			12.5
Long-term deferred tax liability		49.8			47.0
Long-term debt		975.0			951.7
Other non-current liabilities		35.6			30.7
Stockholders’ equity:
Common stock, $.001 par value: 100,000,000 shares authorized; 40,112,266 shares and 38,635,364 shares issued and outstanding at June 30, 2013 and March 31, 2014, respectively		—			—
Additional paid-in capital		447.3			433.4
Accumulated deficit		(1.5	)		(159.0	)
Accumulated other comprehensive (loss) income		(15.1	)		37.4
Total stockholders’ equity	$	430.7		$	311.8
Total Liabilities and Stockholders’ Equity	$	1,721.7		$	1,611.6

See accompanying notes to interim unaudited consolidated financial statements.

3

DFC GLOBAL CORP.

INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except share and per share amounts)

	Three Months Ended March 31,						Nine Months Ended March 31,
	2013			2014			2013			2014
Revenues:
Consumer lending	$	181.7		$	159.2		$	549.8		$	498.8
Check cashing		31.9			28.9			97.4			89.6
Pawn service fees and sales		21.4			24.0			62.8			70.8
Money transfer fees		8.4			8.2			27.9			26.1
Gold sales		17.8			8.6			51.0			31.3
Other		22.4			19.4			64.3			55.6
Total revenues		283.6			248.3			853.2			772.2
Operating expenses:
Salaries and benefits		61.3			63.6			181.0			187.4
Provision for loan losses		49.7			44.2			128.2			148.4
Occupancy		17.6			19.0			51.4			55.8
Purchased gold costs		15.3			7.8			40.4			28.3
Advertising		18.5			15.1			50.4			45.3
Depreciation		6.5			6.7			19.9			19.6
Maintenance and repairs		4.6			5.4			13.3			15.7
Bank charges and armored carrier service		5.9			5.7			17.5			16.2
Returned checks, net and cash shortages		2.6			2.7			7.5			7.4
Other		28.7			25.8			76.9			72.8
Total operating expenses		210.7			196.0			586.5			596.9
Operating margin		72.9			52.3			266.7			175.3
Corporate and other expenses:
Corporate expenses		27.9			25.9			91.4			77.1
Other depreciation and amortization		6.1			4.4			18.8			12.7
Interest expense, net		28.4			27.1			91.3			85.0
Goodwill and other intangible assets impairment charge		31.1			127.3			36.6			127.3
Unrealized foreign exchange loss		2.1			18.6			0.4			8.3
Provision for litigation settlements		—			0.1			2.7			0.1
Loss on store closings		0.3			0.3			0.9			0.3
Other expense, net		12.7			1.5			12.3			2.7
(Loss) income before income taxes		(35.7	)		(152.9	)		12.3			(138.2	)
Income tax provision		0.7			6.2			20.6			19.3
Net loss		(36.4	)		(159.1	)		(8.3	)		(157.5	)
Less: Net loss attributable to non-controlling interests		—			—			(0.2	)		—
Net loss attributable to DFC Global Corp.	$	(36.4	)	$	(159.1	)	$	(8.1	)	$	(157.5	)
Net loss per share attributable to DFC Global Corp.:
Basic	$	(0.86	)	$	(4.08	)	$	(0.19	)	$	(4.00	)
Diluted	$	(0.86	)	$	(4.08	)	$	(0.19	)	$	(4.00	)
Weighted average shares outstanding:
Basic		42,132,520			38,960,472			42,819,974			39,394,628
Diluted		42,132,520			38,960,472			42,819,974			39,394,628

See notes to interim unaudited consolidated financial statements.

4

DFC GLOBAL CORP.

INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In millions)

	Three Months Ended March 31,						Nine Months Ended March 31,
	2013			2014			2013			2014
Net loss	$	(36.4	)	$	(159.1	)	$	(8.3	)	$	(157.5	)
Other comprehensive (loss) income
Foreign currency translation adjustment, net (1)		(22.3	)		6.8			(5.9	)		47.9
Fair value adjustments of derivatives, net (2)		5.3			0.3			7.2			4.2
Amortization of accumulated other comprehensive loss related to ineffective and discontinued cash flow hedges, net (3)		—			0.4			1.6			0.4
Other comprehensive (loss) income		(17.0	)		7.5			2.9			52.5
Comprehensive (loss) income		(53.4	)		(151.6	)		(5.4	)		(105.0	)
Net loss applicable to non-controlling interests		—			—			(0.2	)		—
Comprehensive (loss) income attributable to DFC Global Corp.	$	(53.4	)	$	(151.6	)	$	(5.2	)	$	(105.0	)

(1) Net of $0.8 million and $1.6 million of tax for the three and nine months ended March 31, 2014, respectively.

(2) Net of $(0.4) million and $0.0 million of tax for the three months ended March 31, 2013 and March 31, 2014, respectively. For the nine months ended March 31, 2013 and March 31, 2014, the tax was $1.1 million and $1.2 million, respectively.

(3) Net of $0.0 million and $0.1 million of tax for the three months ended March 31, 2013 and March 31, 2014, respectively. For the nine months ended March 31, 2013 and March 31, 2014, the tax was $0.6 million and $0.1 million, respectively.

See notes to interim unaudited consolidated financial statements.

5

DFC GLOBAL CORP.

INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In millions, except share data)

	Common Stock Outstanding					Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive (Loss) Income			Total Stockholders’ Equity
	Shares			Amount
Balance, June 30, 2013		40,112,266		$	—	$	447.3		$	(1.5	)	$	(15.1	)	$	430.7
Comprehensive (loss) income
Net loss										(157.5	)					(157.5	)
Other comprehensive income													52.5			52.5
Total comprehensive loss																(105.0	)
Restricted stock grants		283,248
Stock options exercised		53,722					0.4									0.4
Vested portion of granted restricted stock and restricted stock units							5.0									5.0
Repurchase of common stock		(1,712,365	)				(21.5	)								(21.5	)
Retirement of common stock		(101,507	)
Other stock compensation							2.2									2.2
Balance, March 31, 2014		38,635,364		$	—	$	433.4		$	(159.0	)	$	37.4		$	311.8

See accompanying notes to interim unaudited consolidated financial statements.

6

DFC GLOBAL CORP.

INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

	Nine Months Ended March 31,
	2013			2014
Cash flows from operating activities:
Net loss	$	(8.3	)	$	(157.5	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		43.4			36.5
Goodwill and other intangible assets impairment charges		36.6			127.3
Provision for loan losses		128.2			148.4
Non-cash stock compensation		7.9			7.2
Gain on sale of subsidiary		—			(1.6	)
Loss on disposal of fixed assets		4.0			0.3
Unrealized foreign exchange loss		0.4			8.3
Deferred tax benefit		(1.7	)		(2.3	)
Accretion of debt discount and deferred issuance costs		15.8			13.5
Change in assets and liabilities (net of effect of acquisitions):
(Increase) decrease in pawn loan fees and service charges receivable		(2.2	)		0.2
Increase in finance and service charges receivable		(18.8	)		(21.9	)
Increase in other receivables		(1.3	)		(8.2	)
(Increase) decrease in prepaid expenses and other		(0.2	)		7.0
Increase (decrease) in accounts payable, accrued expenses and other liabilities		11.3			(5.4	)
Net cash provided by operating activities		215.1			151.8
Cash flows from investing activities:
Net increase in consumer loans		(120.3	)		(81.9	)
Originations of pawn loans		(225.7	)		(230.6	)
Repayment of pawn loans		219.3			239.2
Acquisitions, net of cash acquired		(25.1	)		(26.3	)
Additions to property and equipment		(32.7	)		(25.5	)
Proceeds from sale of subsidiary, net of cash disposed		—			7.2
Net cash used in investing activities		(184.5	)		(117.9	)
Cash flows from financing activities:
Proceeds from the exercise of stock options		1.1			0.4
Proceeds from termination of cross currency swaps		—			38.8
Net decrease in revolving credit facilities		(5.0	)		(4.5	)
Repayment of long-term debt		—			(10.0	)
Repurchase of common stock		(30.1	)		(21.5	)
Purchase of 2.875% Senior Convertible Notes due 2027		(8.6	)		—
Payment of acquisition installment payments and contingent consideration		(3.9	)		—
Payment of debt issuance and other costs		(0.2	)		(3.0	)
Net cash (used in) provided by financing activities		(46.7	)		0.2
Effect of exchange rate changes on cash and cash equivalents		(0.6	)		6.6
Net (decrease) increase in cash and cash equivalents		(16.7	)		40.7
Cash and cash equivalents at beginning of period		224.0			196.2
Cash and cash equivalents at end of period	$	207.3		$	236.9

See accompanying notes to interim unaudited consolidated financial statements.

7

DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim consolidated financial statements are of DFC Global Corp. (“DFC”) and its wholly owned and majority owned subsidiaries (collectively with DFC, the “Company”). DFC is the parent company of Dollar Financial Group, Inc. (“DFG”). The activities of DFC consist primarily of its investment in DFG. DFC has no employees or operating activities. The Company’s unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Company’s audited consolidated financial statements in DFC’s Annual Report on Form 10-K (File No. 0-50866) for the fiscal year ended June 30, 2013 filed with the Securities and Exchange Commission on August 29, 2013. In the opinion of management, all adjustments of a normal recurring nature considered necessary for a fair presentation have been included. Operating results of interim periods are not necessarily indicative of the results that may be expected for a full fiscal year.

DFC Global Corp. is a Delaware corporation formed in 1990. The Company, through its subsidiaries, provides retail financial services to the general public through a network of 1,535 locations (of which 1,525 are company owned) operating principally as The Money Shop^®, Money Mart^®, InstaCheques^®, Suttons & Robertsons^®, The Check Cashing Store^®, Sefina^®, Helsingin Pantti^SM, Super Efectivo^®, MoneyNow!^®, Express Credit Amanet^® and Monte Caja Oro^® in the United Kingdom, Canada, the United States, Sweden, Finland, Poland, Spain, Romania and the Republic of Ireland. This network of stores offers a variety of financial services including unsecured short-term consumer loans, secured pawn services, gold buying, check cashing, money transfer services and various other related services. The Company also offers Internet-based short-term consumer loans in the United Kingdom primarily under the brand names Payday UK^® and Payday Express^®, in Canada under the kyzoo and paydayloan.ca^SM brand names, and primarily under the OK Money brand name in the Czech Republic, Spain, Sweden and Poland (where we also offer a product branded kyzoo). The Company offers longer term unsecured loans in Poland through in-home servicing under the trade name Optima^®, an installment loan in the United Kingdom branded as Ladder Loans^®, and a consumer line of credit in Finland offered by DFC Nordic Oyj. In addition, the Company’s DFS subsidiary provides fee-based services to enlisted military personnel applying for loans to purchase new and used vehicles that are funded and serviced primarily under an agreement with a third-party lender through its branded Military Installment Loan and Education Services, or MILES^®, program.

The Company’s common stock trades on the NASDAQ Global Select Market under the symbol “DLLR”.

As discussed in Note 14, on April 1, 2014, the Company entered into an Agreement and Plan of Merger pursuant to which, upon the terms and subject to the conditions therein, LSF8 Sterling Merger Company, LLC (“Merger Sub”), a wholly owned subsidiary of LSF8 Sterling Parent, LLC (“Parent”), will merge with and into DFC Global Corp. (the “Merger”), with DFC Global Corp. being the surviving corporation and a wholly owned subsidiary of Parent. Parent and Merger Sub are affiliates of Lone Star Funds.

Under the terms of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each issued and outstanding share of common stock of the Company (other than shares (i) held in treasury by the Company, (ii) owned by Parent, Merger Sub, the Company or any subsidiary of the Company, or (iii) held by any holder who has not voted in favor of the Merger and who is entitled to demand and properly demands appraisal of such shares pursuant to the Delaware General Corporation Law) that is outstanding immediately prior to the Effective Time shall be cancelled and converted automatically into the right to receive $9.50 per share in cash, without interest (the “Merger Consideration”). Furthermore, upon the change in control, substantially all of the Company’s outstanding indebtedness becomes payable and due.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. On an ongoing basis, management evaluates its estimates and judgments, including those related to revenue recognition, allowance for consumer and pawn loan losses, loss reserves, valuation allowance for deferred income taxes, litigation reserves, valuation of derivative financial instruments and impairment assessment of goodwill and other intangible assets. Management bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates.

8

DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Reclassifications

Certain prior year amounts have been reclassified to conform to current year presentation. These reclassifications have no effect on net income or stockholders’ equity.

Note 13—Subsidiary Guarantor Financial Information has been corrected in order to revise the presentation in the consolidating condensed statements of cash flows for the nine months ended March 31, 2013 to reflect intercompany activity, which had previously been included in cash flows from investing activities, as cash flows from operating activities, cash flows from investing activities and cash flows from financing activities.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company. All intercompany transactions and balances have been eliminated in consolidation. The Company’s investments in 50% or less owned joint ventures are accounted for by the equity method of accounting. Such investments are not significant to the Company’s consolidated results of operations, financial position or cash flows.

Revenue Recognition

With respect to company-operated stores, revenues from the Company’s check cashing, money order sales, money transfer and other miscellaneous services reported in other revenues on its consolidated statement of operations are all recognized when the transactions are completed at the point-of-sale in the store.

For short-term unsecured consumer loans, which generally have terms ranging from 1 to 45 days, revenues are recognized using the interest method. Loan origination fees are recognized as an adjustment to the yield on the related loan. The Company’s allowance policy regarding these loans is summarized below in “Consumer Loan Loss Allowance Policy.”

Secured pawn loans are offered at most of the Company’s retail financial services locations in the United Kingdom, Poland, Sweden, Finland, Spain and Romania, as well as certain of its U.S. and Canadian stores. Pawn loans are short-term in nature and are secured by the customer’s personal property (“pledge”). At the time of pledge, the loan is recorded and interest and fees, net of costs are accrued for over the life of the loan. If the loan is not repaid, the collateral is deemed forfeited and the pawned item will be sold. If the item is sold, proceeds are used to recover the loan value, interest accrued and fees. Generally, excess funds received from the sale are repaid to the customer. Pawn revenues are recognized using the interest method and loan origination fees, net, are recognized as an adjustment to the yield on the related loan.

DFS fee income associated with originated loan contracts is recognized as revenue by the Company concurrent with the funding of loans by the third party lender. The Company also earns additional fee income from sales of service agreement and guaranteed asset protection (“GAP”) insurance contracts. DFS may be charged back (“chargebacks”) for service agreement and GAP fees in the event contracts are prepaid, defaulted or terminated. Service agreement and GAP contract fees are recorded at the time the contracts are sold and a reserve for future chargebacks is established based on historical operating results and the termination provisions of the applicable contracts. Service warranty and GAP contract fees, net of estimated chargebacks, are included in Other Revenues in the accompanying consolidated statements of operations.

Consumer Loans, Net

Unsecured short-term and longer-term installment loans that the Company originates are reflected on the consolidated balance sheets in consumer loans, net. Consumer loans, net are reported net of a reserve as described below in “Consumer Loan Loss Allowance Policy.”

Loans in Default

Loans in default consist of unsecured short-term consumer loans originated by the Company which are in default status. An allowance for the defaulted loans receivable is established and is included in the loan loss provision in the period that the loan is placed in default status. The reserve is reviewed monthly and any change to the loan loss allowance as a result of historical loan performance, current and expected collection patterns and current economic trends is included with the Company’s loan loss provision. If the loans remain in a defaulted status for an extended period of time, typically 180 days, an allowance for the entire amount of the loan is recorded and the receivable is charged off.

9

DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Consumer Loan Loss Allowance

The Company maintains a loan loss allowance for estimated losses for unsecured consumer loans. To estimate the appropriate level of loan loss allowance, the Company considers known relevant internal and external factors that affect loan collectability, including the amount of outstanding unsecured loans owed to the Company, historical loans charged off, current collection patterns and current economic trends. The Company’s current loan loss allowance is based on its net charge-offs, typically expressed as a percentage of loan amounts originated for the last twelve months applied against the principal balance of outstanding loans. Management also considers internal and external factors such as the regulatory environment, credit quality trends, underwriting and collection practices and other risks as necessary to estimate credit losses in the portfolio. Such qualitative factors are used to reflect changes in the loan portfolios collectability characteristics not captured by historical loss data. As these conditions change, the Company may need to record additional allowances in future periods.

Generally, when a short-term loan is originated, the customer receives the cash proceeds in exchange for a post-dated check or a written authorization to initiate a charge to the customer’s bank account on the stated maturity date of the loan. If the check or the debit to the customer’s account is returned from the bank unpaid, the loan is placed in default status and an allowance for this defaulted loan receivable is established and is included in loan loss provision expense in the period that the loan is placed in default status. This reserve is reviewed monthly and any additional provision to the loan loss reserve as a result of historical loan performance, current collection patterns and current economic trends is included in loan loss provision expense. If a loan remains in defaulted status for an extended period of time, typically 180 days, an allowance for the entire amount of the loan is recorded and the loan is charged off. Recoveries on loans that were completely charged off are credited to the allowance when collected.

During fiscal year 2013, the Office of Fair Trading (“OFT”) announced significant proposed changes to marketing, rollover and collection practices which have had and, together with any new changes required by the Financial Conduct Authority, which will assume regulatory oversight from the OFT in April 2014, are expected to have a significant impact on the Company’s short-term loan portfolio within its United Kingdom businesses. The Company’s allowance for loan losses as of March 31, 2014 has been calculated to reflect management’s best estimate and judgment of the likely impact of these changes on probable loan losses. However, these estimates are inherently uncertain, especially given that these regulatory changes have only recently been implemented by the Company. As the ultimate impact of these regulatory actions and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in those estimates resulting from the Company’s additional experience operating under the revised regulations within the United Kingdom will be reflected in the financial statements in future periods.

Due to a significant decline in gold prices during the fourth quarter of the fiscal year ended June 30, 2013, the Company recorded a $7.1 million provision for expected unredeemed pledges with a carrying value higher than current market gold prices. The Company recorded an additional $2.3 million and $13.3 million provision during the three and nine months ended March 31, 2014, respectively, as a result of a continued weakness in the market price of gold in local currencies. Pawn loans are secured by the customer’s pledged item, which is generally 50% to 80% of the estimated fair value of the pledged item, thus reducing the Company’s exposure to losses on defaulted pawn loans. The Company’s historical redemption rate on pawn loans is in excess of 80%, which means that for more than 80% of its pawn loans, the customer repays the amount borrowed, plus interest and fees, and the Company returns the pledged item to the customer. In the instance where the customer defaults on a pawn loan (fails to redeem), the pledged item is either sold at auction, sold to a gold smelter or sold to a third party in the Company’s retail stores within several weeks of the customer default. Generally, excess amounts received over and above the Company’s recorded asset and auction-related administrative fees are returned to the customer. Included in prepaid expenses and other current assets is unredeemed pawn inventory, consisting primarily of gold-based merchandise, of $23.1 million and $24.0 million at June 30, 2013 and March 31, 2014, respectively.

Goodwill and Indefinite-Lived Intangible Assets

Goodwill is the excess of cost over the fair value of the net assets of the business acquired. In accordance with ASC 350, goodwill is assigned to reporting units, which the Company has determined to be United States Retail, Canada Retail, United Kingdom Retail, Europe Retail, eCommerce and DFS. The Company also has a corporate reporting unit which consists of costs related to corporate management, oversight and infrastructure, investor relations and other governance activities. Because of the limited activities of the corporate reporting unit, no goodwill has been assigned to it. Goodwill is assigned to the reporting unit that benefits from the synergies arising from each particular business combination. The Company determines reporting units based on a review of operating segments, and to the extent present, the underlying components. To the extent that two or more components within the same operating segment have similar economic characteristics, their results are aggregated into one

10

DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

reporting unit. Goodwill is evaluated for impairment on an annual basis on June 30 or between annual tests if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. To accomplish this, the Company is required to determine the carrying value of each reporting unit by assigning the assets and liabilities, including the existing goodwill and intangible assets, to those reporting units. The Company is then required to determine the fair value of each reporting unit and compare it to the carrying amount of the reporting unit. To the extent the carrying amount of a reporting unit exceeds the fair value of the reporting unit, the Company would be required to perform a second step to the impairment test. An impairment loss would be recognized in an amount equal to the excess of the carrying value of the reporting unit’s goodwill over its implied fair value.

Indefinite-lived intangible assets consist of reacquired franchise rights, trade names and the DFS’ MILES program brand name, which are deemed to have indefinite useful lives and are not amortized. Non-amortizable intangibles with indefinite lives are tested for impairment annually as of December 31, or whenever events or changes in business circumstances indicate that an asset may be impaired. If the estimated fair value is less than the carrying amount of the intangible assets with indefinite lives, then an impairment charge would be recognized to reduce the asset to its estimated fair value.

The Company considers the goodwill impairment and indefinite intangible impairment testing process to be one of the critical accounting estimates used in the preparation of its consolidated financial statements. The Company estimates the fair value of its reporting units by using a discounted cash flow analysis or a market-based approach, or a combination thereof. The discounted cash flow analysis requires the Company to make various assumptions about revenues, operating margins, growth rates, and discount rates. These assumptions are based on the Company’s budgets, business plans, economic projections, anticipated future cash flows and marketplace data. Assumptions are also made for perpetual growth rates for periods beyond the period covered by the Company’s long term business plan. The Company performs its goodwill impairment test annually as of June 30, and its other intangibles impairment test annually as of December 31. The Company may be required to evaluate the recoverability of goodwill and other intangible assets prior to the required annual assessment if the Company experiences a significant disruption to its business, unexpected significant declines in its operating results, divestiture of a significant component of its business, a sustained decline in market capitalization, particularly if it falls below the Company’s book value, or a significant change to the regulatory environment in which the Company operates. While the Company believes it has made reasonable estimates and assumptions to calculate the fair value of its reporting units and indefinite-lived intangible assets, it is possible that a material change could occur, including if actual experience differs from the assumptions and considerations used in the Company’s analyses. These differences could have a material adverse impact on the consolidated results of operations and could result in a material impairment of the Company’s goodwill.

Stockholders’ Equity

On December 14, 2011, the Company’s Board of Directors approved a stock repurchase plan, authorizing the Company to repurchase in the aggregate up to 5.0 million shares of its outstanding common stock. On September 20, 2012, the Company’s Board of Directors reconfirmed the plan through September 30, 2013. On August 21, 2013, the Company’s Board of Directors authorized an increase of 5.0 million shares under the plan. Under the repurchase plan, the Company can repurchase shares of its outstanding common stock on a discretionary basis. During the fiscal year ended June 30, 2013, the Company repurchased 3,499,881 shares of its outstanding common stock for an aggregate purchase price of $54.4 million. During the nine months ended March 31, 2014, the Company repurchased an additional 1,712,365 shares of its outstanding common stock for an aggregate purchase price of $21.5 million. As of March 31, 2014, an additional approximately 3.8 million shares may be repurchased under the stock repurchase plan.

11

DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Earnings per Share

Basic earnings per share are computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding. Diluted earnings per share are computed by dividing net income by the weighted average number of shares of common stock outstanding, after adjusting for the dilutive effect of stock options, restricted stock, restricted stock units, convertible debt and warrants. The following table presents the reconciliation of the numerator and denominator used in the calculation of basic and diluted earnings per share (in millions):

	Three Months Ended March 31,						Nine Months Ended March 31,
	2013			2014			2013			2014
Net loss attributable to DFC Global Corp.	$	(36.4	)	$	(159.1	)	$	(8.1	)	$	(157.5	)
Reconciliation of denominator:
Weighted average number of common shares outstanding — basic		42.1			39.0			42.8			39.4
Effect of dilutive stock options (1)		—			—			—			—
Effect of unvested restricted stock and restricted stock unit grants (1)		—			—			—			—
Weighted average number of shares of common stock outstanding—diluted		42.1			39.0			42.8			39.4

(1) The effect of the dilutive stock options was determined under the treasury stock method. Due to net losses during the three and nine months ended March 31, 2013 and 2014, the effect of the dilutive options and unvested shares of restricted stock and restricted stock unit grants were considered to be anti-dilutive, and therefore were not included in the calculation of diluted earnings per share.

Stock Based Compensation

The DFC Global Corp. 2005 Stock Incentive Plan (the “2005 Plan”) states that 2,578,043 shares of the Company’s common stock may be awarded to employees or consultants of the Company. The awards may be issued at the discretion of the Company’s Board of Directors as nonqualified stock options, incentive stock options or restricted stock awards. The number of shares issued under the 2005 Plan is subject to adjustment as specified in the 2005 Plan provisions. No options may be granted under the 2005 Plan after January 24, 2015.

On November 15, 2007, the Company’s stockholders adopted the DFC Global Corp. 2007 Equity Incentive Plan (the “2007 Plan”). The 2007 Plan provides for the grant of stock options, stock appreciation rights, stock awards, restricted stock unit awards and performance awards (collectively, the “Awards”) to non-employee members of the Company’s Board of Directors and officers, employees, independent consultants and contractors of the Company and any subsidiary of the Company. On November 11, 2010, the Company’s stockholders approved an amendment to the 2007 Plan. Under the terms of the amendment, the maximum aggregate number of shares of the Company’s common stock that may be issued pursuant to Awards granted under the 2007 Plan is 10,500,000; provided, however, that 1.67 shares will be deducted from the number of shares available for grant under the 2007 Plan for each share that underlies an Award granted under the 2007 Plan on or after November 11, 2010 for restricted stock, restricted stock units, performance awards or other Awards for which the full value of such share is transferred by the Company to the award recipient. The shares that may be issued under the 2007 Plan may be authorized, but unissued or reacquired shares of the Company’s common stock. No grantee may receive an Award relating to more than 750,000 shares in the aggregate per fiscal year under the 2007 Plan.

Stock options and stock appreciation rights granted under the aforementioned plans have an exercise price equal to the closing price of the Company’s common stock on the date of grant. To date, no stock appreciation rights have been granted.

The Company accounts for stock-based compensation under the provisions of ASC Topic 718 (ASC 718), Compensation—Stock Compensation. The Company has elected to apply the with-and-without method to assess the realization of excess tax benefits. Compensation expense related to share-based compensation included in the consolidated statements of operations for the three months ended March 31, 2013 and 2014 was $1.9 million and $1.6 million, respectively, net of related tax, and $6.1 million and $4.7 million, respectively, net of related tax effects for the nine months ended March 31, 2013 and 2014, respectively.

12

DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The weighted average fair value of each employee option grant was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants in the periods presented:

	Three Months Ended March 31,						Nine Months Ended March 31,
	2013			2014			2013			2014
Expected volatility		48.5	%		50.6	%		49.1	%		48.8	%
Expected life (years)		5.6			5.6			5.6			5.8
Risk-free interest rate		1.31	%		2.16	%		1.07	%		1.95	%
Expected dividends		None			None			None			None
Weighted average fair value	$	8.69		$	3.71		$	7.55		$	6.34

A summary of the status of stock option activity for the nine months ended March 31, 2014 follows:

	Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value ($ in millions)
Options outstanding at June 30, 2013 (2,634,198 shares exercisable)		3,080,697		$	13.27		5.6	$	8.2
Granted		749,149		$	13.41
Exercised		(53,722	)	$	8.27
Forfeited and expired		(195,606	)	$	16.35
Options outstanding at March 31, 2014		3,580,518		$	13.21		5.6	$	1.7
Exercisable at March 31, 2014		2,895,277		$	12.90		4.8	$	1.7

The aggregate intrinsic value in the above table reflects the total pre-tax intrinsic value (the difference between closing stock price of DFC’s common stock on the last trading day of the period and the exercise price of the options, multiplied by the number of in-the-money stock options) as of March 31, 2014. The intrinsic value of DFC’s common stock options changes based on the closing price of DFC’s common stock. The total intrinsic value of options exercised for the three and nine months ended March 31, 2014 was $0.0 million and $0.2 million, respectively. As of March 31, 2014, the total unrecognized compensation cost over a weighted-average period of 1.9 years, related to stock options, is expected to be $4.2 million. Cash received from stock options exercised for the three and nine months ended March 31, 2014 was $0.0 million and $0.4 million, respectively.

Restricted stock awards granted under the 2005 Plan and 2007 Plan become vested (i) upon the Company attaining certain annual pre-tax earnings targets (“performance-based”), and (ii) after a designated period of time (“time-based”), which is generally three years. Compensation expense is recorded ratably over the requisite service period based upon an estimate of the likelihood of achieving the performance goals. Compensation expense related to restricted stock awards is measured based on the fair value using the closing market price of DFC’s common stock on the date of the grant. There were no outstanding restricted stock awards at March 31, 2014.

Restricted stock unit awards (“RSUs”) granted under the 2005 Plan and 2007 Plan become vested after a designated period of time (“time-based”), which is generally on a quarterly basis over three years. Compensation expense is recorded ratably over the requisite service period. Compensation expense related to RSUs is measured based on the fair value using the closing market price of DFC’s common stock on the date of the grant.

13

DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Information concerning unvested restricted stock unit awards is as follows:

	Restricted Stock Unit Awards			Weighted Average Grant-Date Fair-Value
Outstanding at June 30, 2013		499,565		$	18.69
Granted		585,525		$	13.18
Vested		(349,373	)	$	17.16
Forfeited		(141,323	)	$	15.70
Outstanding at March 31, 2014		594,394		$	14.88

As of March 31, 2014, there was $8.8 million of total unrecognized compensation cost related to unvested restricted share-based compensation arrangements granted under the plans. That cost is expected to be recognized over a weighted average period of 1.7 years. The total fair value of shares vested during the three and nine months ended March 31, 2014 was $1.8 million and $6.0 million, respectively.

Recent Accounting Pronouncements

In July 2012, the Financial Accounting Standards Board (“FASB”) issued ASU 2012-2, Testing Indefinite-Lived Intangible Assets for Impairment (“ASU 2012-2”). This update is intended to simplify indefinite-lived asset impairment testing by adding an optional qualitative review step to assess whether the required quantitative impairment analysis that exists under GAAP is necessary. ASU 2012-2 is effective for the Company for interim and annual indefinite-lived intangible asset impairment tests performed for fiscal years beginning on or after September 15, 2012. The Company adopted ASU 2012-2 on July 1, 2013. The adoption of ASU 2012-2 did not have a material effect on the Company’s financial position or results of operations.

In February 2013, the FASB issued ASU No. 2013-2, Reporting Amounts Reclassified Out of Accumulated Other Comprehensive Income (“ASU 2013-2”). ASU 2013-2 requires companies to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the income statement or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under GAAP that provide additional detail about those amounts. ASU 2013-2 is effective for the Company for fiscal years, and interim periods within those years, beginning after December 15, 2012. The Company adopted ASU 2013-2 on July 1, 2013. The adoption of ASU 2013-2 did not have a material effect on the Company’s financial position or results of operations.

In March 2013, the FASB issued ASU 2013-5, Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity. ASU 2013-5 clarifies the accounting for the release of the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a business within a foreign entity. The ASU also clarifies the treatment of business combinations achieved in stages involving a foreign entity. The amendment is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013. The Company does not anticipate that the adoption of ASU 2013-5 will have a material effect on its financial position or results of operations.

In July 2013, the FASB issued ASU No. 2013-10, Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes (“ASU 2013-10”). The amendments in this update permit the Fed Funds Effective Swap Rate (“OIS”) to be used as a U.S. benchmark interest rate for hedge accounting purposes, in addition to Treasury obligations of the U.S. government (“UST”) and the London Interbank Offered Rate (“LIBOR”). The amendments also remove the restriction on using different benchmark rates for similar hedges. This update is effective prospectively for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013. The Company does not anticipate that the adoption of ASU 2013-10 will have a material effect on its financial position or results of operations.

14

DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

In July 2013, the FASB issued ASU No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”). This update provides explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. Specifically, this update specifies that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, with certain exceptions. This update is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The Company does not anticipate that the adoption of ASU 2013-11 will have a material effect on its financial position or results of operations.

2. Financing Receivables

The Company offers a variety of short-term loan products and credit services to customers who typically cannot access other traditional sources of credit and have non-traditional loan histories. Accordingly, the Company has implemented proprietary predictive scoring models that are designed to limit the dollar amount of loans it offers to customers who statistically would likely be unable to repay their loan. The Company has instituted control mechanisms and a credit analytics function designed to manage risk in its unsecured consumer loan activities. Collection activities are also an important aspect of the Company’s operations, particularly with respect to its unsecured consumer loan products due to the relatively high incidence of unpaid balances beyond stated terms. The Company operates centralized collection centers to coordinate a consistent approach to customer service and collections in each of its markets. The Company’s risk control mechanisms include, among others, the daily monitoring of initial return rates with respect to payments made on its consumer loan portfolio. Because the Company’s revenue from its unsecured consumer lending activities is generated through a high volume of small-dollar financial transactions, its exposure to loss from a single customer transaction is minimal.

The following reflects the credit quality of the Company’s loans receivable. Generally, loans are determined to be nonperforming when they are one day past due without a payment for short term consumer loans and 180 days past due without a payment for longer-term (less than one year) installment loans:

Consumer Credit Exposure Credit Risk Profile Based on Payment Activity (in millions)
	Retail-based Consumer Loans				As of June 30, 2013 Internet-based Consumer Loans				Pawn Loans
	Gross		Allowance		Gross		Allowance		Gross		Allowance
Performing	$	130.4	$	11.3	$	99.5	$	28.4	$	160.9	$	6.5	(1)
Non-performing		60.6		44.5		40.2		25.1		—		—
	$	191.0	$	55.8	$	139.7	$	53.5	$	160.9	$	6.5

	Retail-based Consumer Loans				As of March 31, 2014 Internet-based Consumer Loans				Pawn Loans
	Gross		Allowance		Gross		Allowance		Gross		Allowance
Performing	$	120.7	$	14.3	$	99.5	$	31.1	$	156.2	$	2.8	(1)
Non-performing		70.3		59.0		48.5		34.3		—		—
	$	191.0	$	73.3	$	148.0	$	65.4	$	156.2	$	2.8

(1) The Company recorded an allowance as of June 30, 2013 and March 31, 2014 against the Company’s pawn loans receivable due to a significant decline in gold prices.

Included in consumer loans, net on the Company’s consolidated balance sheet at June 30, 2013 and March 31, 2014 are $25.2 million of loans, with a related allowance of $15.6 million, and $31.6 million of loans, with a related allowance of $19.6 million, respectively, to customers of the Company’s United Kingdom-based operations who have entered into payment plans. The Company does not recognize revenue on consumer loans in payment plan status; however, it does consider them as performing loans.

15

DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The following presents the aging of the Company’s past due loans receivable as of June 30, 2013 and March 31, 2014:

Age Analysis of Past Due Loans Receivable (in millions)
As of June 30, 2013
	1-30 days Past Due		30-59 days Past Due		60-89 days Past Due		Greater Than 90 days Past Due		Total Past Due		Current		Total Financing Receivables		Recorded Investment > 90 Days and Accruing
Retail-based consumer loans	$	16.7	$	11.1	$	8.2	$	32.6	$	68.6	$	122.4	$	191.0	$	2.1
Internet-based consumer loans		10.4		7.0		6.0		16.8		40.2		99.5		139.7		—
Pawn loans		—		—		—		—		—		160.9		160.9		—
Total	$	27.1	$	18.1	$	14.2	$	49.4	$	108.8	$	382.8	$	491.6	$	2.1

As of March 31, 2014
	1-30 days Past Due		30-59 days Past Due		60-89 days Past Due		Greater Than 90 days Past Due		Total Past Due		Current		Total Financing Receivables		Recorded Investment > 90 Days and Accruing
Retail-based consumer loans	$	16.4	$	11.0	$	11.1	$	43.4	$	81.9	$	109.1	$	191.0	$	2.8
Internet-based consumer loans		10.8		6.5		5.8		25.4		48.5		99.5		148.0		—
Pawn loans		—		—		—		—		—		156.2		156.2		—
Total	$	27.2	$	17.5	$	16.9	$	68.8	$	130.4	$	364.8	$	495.2	$	2.8

The following details the Company’s loans receivable that are on nonaccrual status as of June 30, 2013 and March 31, 2014:

Loans Receivable on Nonaccrual Status (in millions) As of June 30, 2013
Retail-based consumer loans	$	60.6
Internet-based consumer loans		40.2
Pawn loans		—
Total	$	100.8

As of March 31, 2014
Retail-based consumer loans	$	70.3
Internet-based consumer loans		48.5
Pawn loans		—
Total	$	118.8

16

DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The following table presents changes in the allowance for consumer and pawn loans credit losses (in millions):

	Three Months Ended March 31,						Nine Months Ended March 31,
	2013			2014			2013			2014
Allowance for Consumer Loan Losses:
Beginning Balance	$	103.0		$	139.1		$	75.7		$	109.3
Provision for loan losses		49.7			42.0			128.2			135.1
Charge-offs		(53.8	)		(51.3	)		(124.4	)		(138.7	)
Recoveries		7.3			9.1			23.5			24.7
Effect of foreign currency translation		(4.8	)		(0.1	)		(1.6	)		8.4
Ending Balance	$	101.4		$	138.8		$	101.4		$	138.8

	Three Months Ended March 31, 2014			Nine Months Ended March 31, 2014
Allowance for Pawn Loan Losses:
Beginning Balance	$	4.2		$	6.5
Provision for loan losses		2.3			13.3
Charge-offs		(0.5	)		(2.7	)
Reclassed to prepaid expenses for unredeemed pawn inventory		(3.2	)		(14.5	)
Effect of foreign currency translation		—			0.2
Ending Balance	$	2.8		$	2.8

During the three and nine months ended March 31, 2014, the Company applied CAD 6.9 million (approximately $6.3 million) and CAD 16.2 million (approximately $15.1 million), respectively, of credits awarded under the class action settlements discussed in Note 10 – Contingent Liabilities against defaulted loan balances, which resulted in a reduction of the provision for loan losses of the same amount.

During the three and nine months ended March 31, 2014, the Company sold approximately $4.3 million and $9.6 million, respectively, of non-performing consumer loans for proceeds of approximately $1.9 million and $3.0 million, respectively, and recorded a reduction in the provision from loan losses of $0.9 million and $1.5 million, respectively. The Company has no continuing involvement with the sold consumer loans.

3. Acquisitions

During fiscal 2013, the Company completed the acquisition of Express Credit Amanet, a pawn loan provider operating 32 stores in Romania. The aggregate purchase price of this acquisition was $18.7 million, which resulted in an increase in goodwill of $13.3 million, calculated as the excess purchase price over the preliminary fair value of the identifiable assets acquired. Additionally, the Company completed various small acquisitions in Canada and the United Kingdom that resulted in an aggregate increase in goodwill of $16.5 million. Management’s valuations of the fair value of tangible and intangible assets acquired and liabilities assumed, is based on estimates and assumptions subject to the finalization of the Company’s fair value allocations.

During fiscal 2014, the Company acquired the entire issued share capital of Gemgain Limited, which operates 14 pawnbroking stores in the United Kingdom trading under the name TGS Pawnbrokers. The aggregate purchase price was $12.5 million, which resulted in an increase in goodwill of $4.2 million, calculated as the excess purchase price over the preliminary fair value of the identifiable assets acquired. Additionally, the Company completed two acquisitions in Spain, the first being Crirama, S.A. which operates 27 pawnbroking stores. The aggregate purchase price was $8.2 million, which resulted in an increase in goodwill of $5.7 million, calculated as the excess purchase price over the preliminary fair value of the identifiable assets acquired. The second acquisition in Spain was Belen Oro, S. L. which operates one pawnbroking store in Madrid. The aggregate purchase price was $5.6 million, which resulted in an increase in goodwill of $3.5 million, calculated as the excess purchase price over the preliminary fair value of the identifiable assets acquired. Management’s valuations of the fair value of tangible and intangible assets acquired and liabilities assumed, is based on estimates and assumptions subject to the finalization of the Company’s fair value allocations.

17

DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

One of the core strategies of the Company is to capitalize on its competitive strengths and enhance its leading market positions. One of the key elements in the Company’s strategy is the intention to grow its network through acquisitions. The Company believes that acquisitions provide it with increased market penetration or in some cases the opportunity to enter new platforms and geographies with de novo expansion following thereafter. The purchase price of each acquisition is primarily based on a multiple of historical earnings. The Company’s standard business model, particularly in its unsecured consumer lending business, and that of its industry, is one that does not rely heavily on tangible assets and, therefore, it is common to have a majority of the purchase price allocated to goodwill, or in some cases, intangible assets.

18

DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

4. Goodwill and Other Intangibles

The changes in the carrying amount of goodwill by reportable segment for the nine months ended March 31, 2014 are as follows (in millions):

	Europe Retail			Canada Retail			United States Retail		eCommerce			Other			Total
Balance at June 30, 2013:
Goodwill	$	190.2		$	182.0		$	205.7	$	161.9		$	52.1		$	791.9
Accumulated impairment charges		—			—			—		—			(30.1	)		(30.1	)
		190.2			182.0			205.7		161.9			22.0			761.8
Acquisitions		13.8			—			—		—			—			13.8
Disposals		(1.0	)		—			—		—			—			(1.0	)
Goodwill impairment		(52.7	)		—			—		(52.5	)		(16.3	)		(121.5	)
Foreign currency translation adjustments		13.6			(8.9	)		—		14.9			—			19.6
Balance at March 31, 2014:
Goodwill		216.6			173.1			205.7		176.8			52.1			824.3
Accumulated impairment charges		(52.7	)		—			—		(52.5	)		(46.4	)		(151.6	)
	$	163.9		$	173.1		$	205.7	$	124.3		$	5.7		$	672.7

The following table reflects the components of intangible assets (in millions):

	June 30, 2013			March 31, 2014
Non-amortizing intangible assets:
Goodwill	$	761.8		$	672.7
Reacquired franchise rights		51.7			50.0
DFS MILES program		10.9			5.1
Tradenames		3.4			3.6
	$	827.8		$	731.4
Amortizable intangible assets:
Purchased technology	$	46.4		$	50.8
Various contracts		31.6			32.8
Reacquired franchise rights		6.1			5.9
Accumulated amortization:
Purchased technology		(14.1	)		(22.1	)
Various contracts		(28.9	)		(28.8	)
Reacquired franchise rights		(2.5	)		(3.4	)
Total intangible assets	$	866.4		$	766.6

Goodwill is the excess of purchase price over the fair value of the net assets of the business acquired.

Goodwill is evaluated for impairment on an annual basis on June 30 or between annual tests if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. To perform the impairment testing, the Company first assesses qualitative factors to determine whether it is more likely than not that the fair values of its reporting units is less than their carrying amounts as a basis for determining whether or not to perform the quantitative two-step goodwill impairment test. The Company then estimates the fair value of each reporting unit not meeting the qualitative criteria and compares their fair values to their carrying values. If the carrying value of a reporting unit exceeds its fair value, the Company determines the implied fair value of goodwill for that reporting unit by deducting the estimated fair value of its assets, other than goodwill, from its overall fair value. If the fair value of goodwill is less than its carrying amount, the Company recognizes an impairment loss for the difference.

Other indefinite-lived intangible assets consist of reacquired franchise rights, DFS’ MILES program brand name and the Sefina and Purpose U.K. trade names, which are deemed to have an indefinite useful life and are not amortized. Non-amortizable intangibles with indefinite lives are tested for impairment annually as of December 31, or whenever events or

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DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

changes in business circumstances indicate that an asset may be impaired. If the estimated fair value is less than the carrying amount of the intangible assets with indefinite lives, then an impairment charge would be recognized to reduce the asset to its estimated fair value. As prescribed under ASC 805, beginning with franchisee acquisitions consummated in fiscal 2010 or later, reacquired franchise rights are no longer considered indefinite-lived; rather they are amortized over the remaining contractual life of the franchise agreement. Changes in foreign exchange rates period over period impact the recorded value of the indefinite lived reacquired franchise rights.

During the three months ended March 31, 2014, the Company completed an interim test for goodwill impairment as a result of events and circumstances occurring during this interim period that would more likely than not reduce the fair value of certain reporting units below their respective carrying amount. The Company identified interim impairment indicators resulting from: (i) a further decline in the Company’s stock price and market capitalization since the prior fiscal quarter; (ii) a significant reduction in forecasted earnings and cash flows based on projections developed during the month of March 2014 and announced on April 2, 2014; and (iii) the Company’s agreement to be acquired by an affiliate of Lone Star Funds dated April 1, 2014 for $9.50 per share, which was significantly below the Company’s book value of stockholders’ equity at March 31, 2014, prior to the recognition of the impairment charges discussed herein. The significant reduction in earnings resulted in part from the communications with the OFT in February and March 2014 regarding the Company’s compliance with the enhanced regulatory requirements of the FCA.

As disclosed in the Company’s annual consolidated financial statements for the fiscal year ended June 30, 2013, goodwill is assigned to reporting units, which the Company has determined to be United States Retail, Canada Retail, United Kingdom Retail, Europe Retail, eCommerce and DFS. The Company also has a corporate reporting unit which consists of corporate debt and costs related to corporate management, oversight and infrastructure, investor relations and other governance activities. Because of the limited activities of the corporate reporting unit, no goodwill has been assigned to it. Goodwill is assigned to the reporting unit which benefits from the synergies arising from each particular business combination. As a result of the events and circumstances noted above, the Company performed its interim goodwill impairment test by determining the carrying value of each reporting unit, which requires the assignment of the assets and liabilities, including the existing goodwill and intangible assets, to those reporting units. The Company then estimated the fair value of each reporting unit and compared it to the carrying amount of the respective reporting unit.

The fair values of reporting units are estimated using a weighted average of a discounted future cash flows technique (income approach) and a guideline public company market multiples technique (market approach). The most significant assumptions used in the discounted cash flow fair value technique are the projections used to derive future cash flows and the weighted average cost of capital used to discount such projections. The discounted cash flow analysis requires the Company to make various assumptions about revenues, operating margins, growth rates, and discount rates. These assumptions are based on the Company’s budgets, business plans, economic projections, regulatory guidelines, anticipated future cash flows and marketplace data. Assumptions are also made for perpetual growth rates for periods beyond the period covered by our long term business plan.

The Company completed Step 1 of its interim goodwill impairment test during the three months ended March 31, 2014 and concluded that the fair values of the DFS, Europe Retail and eCommerce reporting units were less than their respective carrying values. As a result, a preliminary Step 2 of the goodwill impairment test was performed for these reporting units. The Company recognized a preliminary goodwill impairment charge of approximately $121.5 million during the three months ended March 31, 2014, which represents its best estimate of the impairment loss based on the latest information and cash flow projections available. Additionally, the Company recognized an impairment charge of $5.8 million related to DFS’ MILES program indefinite-lived intangible asset. The MILES program indefinite-lived intangible valuation was calculated using a relief from royalty valuation method. The significant assumptions used in determining the fair value of the MILES program asset were a 23% discount rate, a pre-tax royalty rate of 10%, a 22% annual revenue growth rate and a 3% long-term growth rate.

The impairment charges related to the Company’s DFS reporting unit were the result of an increase in discount rates due to the increased risk of not meeting future projections, as well as reduced projections. The estimates of future cash flows for the DFS reporting unit are in large part dependent on increased market share as a result of more competitive financing alternatives to DFS’ service member customers. These estimates are inherently uncertain.

The Company estimates that the final goodwill impairment charge will be in the range of $120.0 million to $140.0 million. In the fourth quarter of the fiscal year ending June 30, 2014, the Company will perform its annual impairment tests of goodwill, and will finalize the interim estimated impairment of the DFS, Europe Retail and eCommerce goodwill. The Company has not been able to finalize the impairment due to the significant amount of work required to calculate the implied value of goodwill, including the valuation of recognized and unrecognized intangible assets, calculation of deferred taxes and due to the timing of the interim impairment indicator. The actual goodwill impairment charge could be materially different from the estimated charge recognized.

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DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Since the Company estimates the fair value of its reporting units by using a combination of an income approach and a market approach, the fair value estimates are sensitive to the selection of the following inputs: the weighted-average cost of capital rate used to discount the projected cash flows, and the market multiples applied to earnings, but are especially sensitive to the projected future cash flows of the respective reporting unit. The Company’s estimates of future cash flows in its eCommerce reporting unit include the following significant yet inherently uncertain growth and profitability assumptions:

• Expansion of the Company’s on-line lending platforms in additional jurisdictions where the Company does not currently operate;

• Growth within the Company’s on-line lending business in jurisdictions in which the Company has recently entered and where the Company has recently experienced significant growth, such as Canada, Spain, Poland and the Czech Republic;

• Moderation of loan losses, as its borrowers and potentially some of its competitors adjust to the impending revised regulations within the United Kingdom for renewals and collections;

• Growth in market share resulting from consolidation within the industry as a number of existing competitors will unlikely make the necessary investments to comply with the impending revised payday loan regulations within the United Kingdom.

• Improved margins within the Company’s United Kingdom businesses principally resulting from revised underwriting criteria in conjunction with its expectation of servicing more credit worthy customers which is expected to improve credit quality from current levels.

• Introduction of a multi-payment loan (“MPL”) product in certain jurisdictions

The significant decline in fair value of the eCommerce reporting unit since the most recent interim impairment test resulted principally from a significant increase in the weighted average cost of capital to reflect the increasing uncertainties in forecasted earnings resulting from the regulatory changes promulgated and proposed in the United Kingdom, as well as the decline in market valuations.

The fair value of the Company’s U.K. Retail reporting unit is approximately 8% above its carrying value at March 31, 2014. A combination of an increase of 2.5% in the discount rate (from 14.5%) and a decrease in the long-term growth rate of 1.0% (from 3.0%) would have led to the carrying value of U.K. Retail being less than its fair value. The carrying amount of goodwill for the U.K. reporting unit was approximately $100.4 million at March 31, 2014.

The Company’s estimate of future cash flows for its U.K. Retail reporting unit include the following significant and inherently uncertain growth and profitability assumptions:

• Moderation of loan losses, as its borrowers and potentially some of its competitors adjust to the impending revised regulations within the United Kingdom for renewals and collections;

• Growth in market share resulting from consolidation within the industry as a number of existing competitors will unlikely make the necessary investments to comply with the impending revised payday loan regulations within the United Kingdom.

• Improved margins, principally resulting from revised underwriting criteria in conjunction with its expectation of servicing more credit worthy customers which is expected to improve credit quality from current levels.

• Introduction of an MPL product

While these assumptions are inherently uncertain, especially given the fluidity of the proposed regulatory changes within the United Kingdom, the Company believes that such assumptions are reasonable and appropriate when considering all available market information as of the date of the interim impairment test, as well as the Company’s past experiences in similar jurisdictions such as Canada and the United States, which had previously implemented significant changes to regulations for single payment loans. Furthermore, the weighted average cost of capital that has been applied to the cash flows of the respective reporting units when calculating the fair value of the reporting units have been adjusted to reflect the inherent risks and uncertainties addressed herein.

As of March 31, 2014, the fair value of the Company’s Europe Retail reporting unit is negatively impacted principally by the reduction in gold prices and start up costs associated with new store openings in Poland and Spain. The estimates of future cash flows for the Europe Retail reporting unit are in large part dependent on the projected growth and profitability of our store-based operations in Spain and Poland, which are inherently uncertain.

The significant decline in the fair value of the Europe Retail reporting unit since the most recent interim impairment test resulted from (i) a significant increase in the weighted average cost of capital to reflect the increasing uncertainties in forecasted earnings, (ii) reductions in forecasted earnings to reflect the expectation of continued depressed gold prices, greater competition in emerging markets and less contribution from store openings, and (iii) reductions in market valuations.

The failure to achieve one or more of the Company’s anticipated business model assumptions described herein, or the impact of the implementation of final single payment loan regulations in the United Kingdom that are different than those contemplated in the Company’s forecast could lead to additional goodwill impairment of the Company’s reporting units, and any such impairments may be material.

On October 1, 2013, the Company sold its shares of Merchant Cash Express Limited and recorded a gain of $1.6 million.

Amortization expense of intangible assets was $3.9 million and $2.4 million for the three months ended March 31, 2013 and 2014, respectively. Amortization expense of intangible assets was $12.8 million and $6.5 million for the nine months ended March 31, 2013 and 2014, respectively.

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DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Estimated amortization expense of intangible assets during the next five fiscal years is shown below (in millions):

Fiscal Year Ended June 30,	Amount
2014	$	10.9
2015		9.6
2016		8.9
2017		7.2
2018		5.1
	$	41.7

5. Debt

The Company had debt obligations at June 30, 2013 and March 31, 2014 as follows (in millions):

	June 30,			March 31,
	2013			2014
Global Revolving credit facility	$	50.0		$	46.0
National Money Mart Company 10.375% Senior Notes due December 15, 2016		600.0			600.0
Issuance discount on 10.375% Senior Notes due 2016		(2.1	)		(1.7	)
DFC Global Corp. 3.25% Senior Convertible Notes due 2017		189.9			196.9
DFC Global Corp. 2.875% Senior Convertible Notes due 2027		36.2			36.2
DFC Global Corp. 3.000% Senior Convertible Notes due 2028		105.0			111.1
Scandinavian credit facilities		54.9			47.0
Other		8.1			8.9
Total debt		1,042.0			1,044.4
Less: current portion of debt		(67.0	)		(92.7	)
Long-term debt	$	975.0		$	951.7

Senior Notes

On December 23, 2009, the Company’s wholly owned indirect Canadian subsidiary, National Money Mart Company (“NMM”), issued $600.0 million aggregate principal amount of its 10.375% Senior Notes due December 15, 2016 (the “2016 Notes”). The 2016 Notes were issued pursuant to an indenture, dated as of December 23, 2009, among NMM, as issuer, and DFC and certain of its direct and indirect wholly owned U.S. and Canadian subsidiaries, as guarantors, and U.S. Bank National Association, as trustee. The 2016 Notes bear interest at the rate of 10.375% per year, payable on June 15 and December 15 of each year, commencing on June 15, 2010. The 2016 Notes will mature on December 15, 2016. Upon the occurrence of certain change-of-control transactions, NMM will be required to make an offer to repurchase the 2016 Notes at 101% of the principal amount thereof, plus any accrued and unpaid interest to the repurchase date, unless certain conditions are met. The consummation of the acquisition of the Company by Lone Star addressed in Note 14 represents such a change-of-control transaction. On or after December 15, 2013, NMM has the right to redeem the 2016 Notes, in whole at any time or in part from time to time (i) at a redemption price of 105.188% of the principal amount thereof if the redemption occurs prior to December 15, 2014, (ii) at a redemption price of 102.594% of the principal amount thereof if the redemption occurs between December 15, 2014 and December 15, 2015, and (iii) at a redemption price of 100% of the principal amount thereof if the redemption occurs after December 15, 2015.

Convertible Notes

Senior Convertible Notes due 2027

On June 27, 2007, DFC issued $200.0 million aggregate principal amount of its 2.875% Senior Convertible Notes due 2027 (the “2027 Notes”). The 2027 Notes were issued under an indenture between DFC and U.S. Bank National Association, as trustee, dated as of June 27, 2007 (the “2027 Indenture”).

In February 2010, DFC repurchased $35.2 million aggregate principal amount of the 2027 Notes in privately negotiated transactions with three of the holders of the 2027 Notes. The purchase price paid by DFC in the transactions was 91% of the stated principal amount of the repurchased 2027 Notes, for an aggregate price of $32.0 million.

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DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The 2027 Notes are general unsecured obligations of DFC and rank equally in right of payment with all of its other existing and future obligations that are unsecured and unsubordinated. The 2027 Notes bear interest at the rate of 2.875% per year, payable in cash in arrears on June 30 and December 31 of each year beginning on December 31, 2007. The 2027 Notes mature on June 30, 2027, unless earlier converted, redeemed or repurchased by DFC. Holders of the 2027 Notes may require DFC to repurchase in cash some or all of the 2027 Notes at any time before the 2027 Notes’ maturity following a “fundamental change” (as defined in the 2027 Indenture).

The 2027 Indenture includes a “net share settlement” provision that allows DFC, upon redemption or conversion, to settle the principal amount of the 2027 Notes in cash and the additional conversion value, if any, in shares of DFC’s common stock. Holders of the 2027 Notes may convert their 2027 Notes based at an initial conversion rate of 38.6641 shares per $1,000 principal amount of 2027 Notes, which is equal to an initial conversion price of $25.86 per share, subject to adjustment, prior to stated maturity under the following circumstances:

• during any calendar quarter commencing after September 30, 2007, if the closing sale price of DFC’s common stock is greater than or equal to 130% of the applicable conversion price for at least 20 trading days in the period of 30 consecutive trading days ending on the last day of the preceding calendar quarter;

• during the five-day period following any five consecutive trading day period in which the trading price of the 2027 Notes for each day of such period was less than 98.0% of the product of the closing sale price per share of DFC’s common stock on such day and the conversion rate in effect for the 2027 Notes on each such day;

• if the 2027 Notes are called for redemption; or

• upon the occurrence of specified corporate transactions as described in the 2027 Indenture.

If a “fundamental change” (as defined in the 2027 Indenture) occurs prior to December 31, 2014 and a holder elects to convert its 2027 Notes in connection with such transaction, DFC will pay a make-whole provision, as defined in the 2027 Indenture. The consummation of the Company’s acquisition by Lone Star that is discussed in Note 14 is considered a fundamental change.

Prior to December 31, 2014, DFC may redeem for cash all or part of the 2027 Notes, if during any period of 30 consecutive trading days ending not later than December 31, 2014, the closing sale price of a share of DFC’s common stock is for at least 120 trading days within such period of 30 consecutive trading days greater than or equal to 120% of the conversion price on each such day. On or after December 31, 2014, DFC may redeem for cash all or part of the 2027 Notes upon at least 30 but not more than 60 days’ notice before the redemption date by mail to the trustee, the paying agent and each holder of 2027 Notes. The amount of cash paid in connection with each such redemption will be 100% of the principal amount of the 2027 Notes to be redeemed, plus accrued and unpaid interest, including any additional amounts, up to but excluding the redemption date.

Holders had the right to require DFC to purchase all or a portion of the 2027 Notes on December 31, 2012, (the “Repurchase Option”) and will have the same right on each of December 31, 2014, June 30, 2017 and June 30, 2022 for a purchase price payable in cash equal to 100% of the principal amount of the 2027 Notes purchased plus any accrued and unpaid interest, up to but excluding the purchase date.

On December 31, 2012, an aggregate principal amount of $8.6 million of the 2027 Notes were surrendered and repurchased pursuant to the Repurchase Option. Any 2027 Notes not repurchased pursuant to the Repurchase Option remain outstanding and continue to be subject to the terms and conditions of the 2027 Notes and the indenture governing the 2027 Notes. The Company has classified its 2.875% Senior Convertible Notes due 2027 as current due to the holders of the notes having the right to require DFC to purchase all or a portion of the 2027 Notes on December 31, 2014.

If a “fundamental change” (as defined in the 2027 Indenture) occurs before maturity of the 2027 Notes, holders will have the right, subject to certain conditions, to require DFC to repurchase for cash all or a portion of the 2027 Notes at a repurchase price equal to 100% of the principal amount of the 2027 Notes being repurchased, plus accrued and unpaid interest, including any additional amounts, up to but excluding the date of repurchase. The consummation of the Company’s acquisition by Lone Star that is discussed in Note 14 is considered a fundamental change.

Senior Convertible Notes due 2028

In December 2009, DFC entered into privately negotiated exchange agreements with certain holders of its 2027 Notes, pursuant to which such holders exchanged an aggregate of $120.0 million aggregate principal amount of the 2027 Notes for an equal aggregate principal amount of 3.0% Senior Convertible Notes due 2028 issued by DFC (the “2028 Notes”).

23

DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The 2028 Notes are general unsecured obligations of DFC and rank equally in right of payment with all of DFC’s other existing and future obligations that are unsecured and unsubordinated. The 2028 Notes accrue interest at a rate of 3.00% per annum, payable in cash in arrears on April 1 and October 1 of each year beginning on April 1, 2010. The maturity date of the 2028 Notes is April 1, 2028. The 2028 Notes were issued under an indenture between DFC and U.S. Bank National Association, as trustee, dated as of December 21, 2009 (the “2028 Indenture”).

The 2028 Indenture includes a “net share settlement” provision that allows DFC, upon redemption or conversion, to settle the principal amount of the 2028 Notes in cash and the additional conversion value, if any, in shares of DFC’s common stock. Holders of the 2028 Notes may convert their 2028 Notes based at an initial conversion rate of 51.8032 shares per $1,000 principal amount of 2028 Notes, which is equal to an initial conversion price of $19.30 per share, subject to adjustment, prior to stated maturity under the following circumstances:

• during any calendar quarter commencing after December 31, 2009, if the closing sale price of DFC’s common stock is greater than or equal to 130% of the applicable conversion price for at least 20 trading days in the period of 30 consecutive trading days ending on the last day of the preceding calendar quarter;

• during the five-day period following any five consecutive trading day period in which the trading price of the 2028 Notes for each day of such period was less than 98.0% of the product of the closing sale price per share of DFC’s common stock on such day and the conversion rate in effect for the 2028 Notes on each such day;

• if the 2028 Notes are called for redemption;

• at any time on or after December 31, 2026; or

• upon the occurrence of specified corporate transactions as described in the 2028 Indenture.

If a “fundamental change” (as defined in the 2028 Indenture) occurs prior to December 31, 2014 and a holder elects to convert its 2028 Notes in connection with such transaction, DFC will pay a make-whole provision, as defined in the 2028 Indenture. The consummation of the Company’s acquisition by Lone Star that is discussed in Note 14 is considered a fundamental change.

On or after April 5, 2015, DFC may redeem for cash all or part of the 2028 Notes upon at least 30 but not more than 60 days’ notice before the redemption date by mail to the trustee, the paying agent and each holder of 2028 Notes. The amount of cash paid in connection with each such redemption will be 100% of the principal amount of the 2028 Notes to be redeemed, plus accrued and unpaid interest, including any additional amounts, up to but excluding the redemption date.

Holders of the 2028 Notes have the right to require DFC to purchase all or a portion of the 2028 Notes on each of April 1, 2015, April 1, 2018 and April 1, 2023 for a purchase price payable in cash equal to 100% of the principal amount of the 2028 Notes to be purchased plus any accrued and unpaid interest, up to but excluding the date of purchase.

If a “fundamental change” (as defined in the 2028 Indenture) occurs before the maturity of the 2028 Notes, the holders will have the right, subject to certain conditions, to require DFC to repurchase for cash all or a portion of the 2028 Notes at a repurchase price equal to 100% of the principal amount of the 2028 Notes being repurchased, plus accrued and unpaid interest, up to but excluding the date of repurchase. The consummation of the Company’s acquisition by Lone Star that is discussed in Note 14 is considered a fundamental change.

Senior Convertible Notes due 2017

On April 16, 2012, DFC issued $230.0 million aggregate principal amount of its senior convertible notes due 2017 (the “2017 Notes”). The 2017 Notes are general unsecured obligations of DFC and rank equally in right of payment with all of DFC’s other existing and future obligations that are unsecured and unsubordinated. The notes bear interest at a rate of 3.25% per annum, payable in cash in arrears on April 15 and October 15 of each year beginning on October 15, 2012. The 2017 Notes were issued under an indenture between DFC and U.S. Bank National Association, as trustee, dated as of April 16, 2012 (the “2017 Indenture”).

The 2017 Indenture includes a “net share settlement” provision that allows DFC, upon redemption or conversion, to settle the principal amount of the 2017 Notes in cash and the additional conversion value, if any, in shares of DFC’s common stock. Holders of the 2017 Notes may convert their 2017 Notes based at an initial conversion rate of 46.8962 shares of common stock per $1,000 principal amount of notes, which is equal to an initial conversion price of $21.32 per share, subject to adjustment, prior to stated maturity under the following circumstances:

• during any calendar quarter commencing after June 30, 2012, if the closing sale price of DFC’s common stock is greater than or equal to 130% of the applicable conversion price for at least 20 trading days in the period of 30 consecutive trading days ending on the last day of the preceding calendar quarter;

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DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

• during the five-day period following any five consecutive trading day period in which the trading price of the 2017 Notes for each day of such period was less than 98.0% of the product of the closing sale price per share of DFC’s common stock on such day and the conversion rate in effect for the 2017 Notes on each such day;

• at any time on or after October 15, 2016; or

• upon the occurrence of specified corporate transactions as described in the 2017 Indenture.

If a “fundamental change” (as defined in the 2017 Indenture) occurs and a holder elects to convert its 2017 Notes in connection with such transaction, that holder may be entitled to a make-whole premium (as defined in the 2017 Indenture) in the form of an increase in the conversion rate. The consummation of the Company’s acquisition by Lone Star that is discussed in Note 14 is considered a fundamental change.

If a “fundamental change” (as defined in the 2017 Indenture) occurs before the maturity of the 2017 Notes, the holders will have the right, subject to certain conditions, to require DFC to repurchase for cash all or a portion of their 2017 Notes at a repurchase price equal to 100% of the principal amount of the 2017 Notes being repurchased, plus accrued and unpaid interest, up to but excluding the date of repurchase. The consummation of the Company’s acquisition by Lone Star that is discussed in Note 14 is considered a fundamental change.

The 2017 Notes are not redeemable at DFC’s option prior to their maturity date.

In connection with the offering of the 2017 Notes, DFC and its primary holding subsidiary in the United Kingdom entered into convertible note hedge transactions in respect of its common stock with affiliates of the initial purchasers of the 2017 Notes, and separate warrant transactions with the option counterparties, which effectively increase the conversion price of the 2017 Notes to $26.45 per share. The convertible note hedge transactions cover the number of shares of common stock required to be issued upon the conversion of the 2017 notes, at a strike price that corresponds to the initial conversion price of the 2017 Notes, subject to adjustment, and are exercisable upon conversion of the 2017 Notes.

The Company paid $43.8 million and $6.5 million for the convertible note hedge transactions entered into on April 10, 2012 and April 11, 2012. As described in more detail below, these costs were partially offset by the proceeds from the sale of the warrants in separate transactions.

The convertible note hedge transactions are intended generally to reduce the potential dilution to the Company’s common stock upon conversion of the 2017 Notes in the event that the market price per share of the common stock is greater than the strike price.

The convertible note hedge transactions are separate transactions and are not part of the terms of the 2017 Notes. Holders of the 2017 Notes have no rights with respect to the convertible note hedge transactions.

In April 2012, DFC also entered into privately negotiated warrant transactions with affiliates of the initial purchasers of the 2017 Notes, whereby DFC sold warrants to acquire, subject to customary anti-dilution adjustments, 9,379,240 shares and 1,406,886 shares, respectively, of DFC common stock at a strike price of $26.45 per share, also subject to adjustment. As consideration for the warrants, the Company received $26.4 million and $4.0 million, respectively.

If the market value per share of DFC common stock, as measured under the warrants, exceeds the strike price of the warrants at the time the warrants are exercisable, the warrants will have a dilutive effect on the Company’s earnings per share.

The convertible note hedge transactions expire April 15, 2017, or the last day on which any of the 2017 Notes remain outstanding. The warrants expire in daily installments from July 17, 2017 to November 6, 2017. Both the convertible note hedge transactions and the warrant transactions require net-share settlement and are accounted for as equity instruments.

Accounting for Convertible Notes

The Company follows the guidance issued in ASC 470-20, which clarifies the accounting for convertible debt instruments that may be settled in cash (including partial cash settlement) upon conversion. This accounting standard requires issuers of convertible debt that can be settled in cash to separately account for (i.e., bifurcate) a portion of the debt associated with the conversion feature and reclassify this portion to stockholders’ equity. The liability portion, which represents the fair value of the debt without the conversion feature, is accreted to its face value using the effective interest method by amortizing the discount between the face amount and the fair value. The amortization is recorded as non-cash interest expense. The Company is required to record the liability portion of the 2027 Notes, the 2028 Notes and the 2017 Notes (collectively, the “Convertible

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DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Notes”) at their fair value as of the date of issuance and amortize the discount into interest expense over the life of the Convertible Notes during the periods in which the Notes are outstanding. The Company recorded a discount of $50.3 million to Additional paid-in capital for the 2017 Notes at the time of issuance. As of March 31, 2014, the discount on the 2027 Notes has been fully amortized using the effective interest method, the remaining discount of $8.9 million on the 2028 Notes similarly will be amortized through April 1, 2015, and the remaining discount of $33.1 million on the 2017 Notes similarly will be amortized through April 15, 2017. There is no effect, however, on the Company’s cash interest payments.

The Company has considered the guidance in the Debt topic of the FASB Codification, and has determined that the Convertible Notes do not contain a beneficial conversion feature, as the fair value of DFC’s common stock on the date of issuance was less than the initial conversion price.

Upon conversion, DFC will have the option to either deliver:

1. cash equal to the lesser of the aggregate principal amount of the Convertible Notes to be converted ($1,000 per note) or the total conversion value; and shares of DFC’s common stock in respect of the remainder, if any, of the conversion value over the principal amount of the Convertible Notes; or

2. shares of DFC’s common stock to the holders, calculated at the initial conversion price which is subject to any of the conversion price adjustments discussed above.

The Company has made a policy election to settle the principal amount of the Convertible Notes in cash. As such, in accordance with the Earnings Per Share topic of the FASB Codification, the Convertible Notes will be excluded from the Company’s calculation of diluted earnings per share. However, any conversion premium associated with the Convertible Notes would have an impact on the Company’s diluted earnings per share.

Credit Facility

Senior Secured Credit Facility 

On October 25, 2013, we replaced our existing bank facility and entered into a new senior secured credit facility (the “Revolving Facility”) with a syndicate of lenders, with Deutsche Bank AG, New York Branch, serving as the administrative agent (the “Agent”). The Revolving Facility provides for a five-year $180.0 million global revolving credit facility, with potential to further increase the credit facility to up to $230.0 million. Availability under the Revolving Facility is based on a borrowing base comprised of cash and consumer receivables of the borrowers and guarantors, as described below. There is a sublimit for borrowings in the United States based on the borrowing base assets of the U.S. borrower and guarantors.

Borrowings under the Revolving Facility may be denominated in United States Dollars, British Pounds Sterling, Euros or Canadian Dollars (and other currencies as may be approved by the lenders). Interest on borrowings under the Revolving Facility will be derived from a pricing grid based on our total secured leverage ratio, which currently allows borrowing for fixed interest periods at an interest rate equal to the LIBO Rate or Canadian Dollar Offer Rate (as applicable based on the currency of borrowing) plus 400 basis points. The credit agreement executed in connection with the entry into the Revolving Facility (the “Credit Agreement”) also allows for borrowing at daily rates equal to ABR (the greater of the US prime rate, the one-month LIBO Rate plus 1.00% and the federal funds rate plus 1/2 of 1%) plus 300 basis points in the case of borrowing in United States Dollars, Canadian prime rate (equal to the greater of the published Canadian dollar prime rate or one-month CDOR plus 1.00%) plus 300 basis points in the case of borrowings in Canadian Dollars, or a weekly LIBO Rate plus 400 basis points in the case of borrowings in British Pounds Sterling or Euros.

The Revolving Facility allows for borrowings by DFG, National Money Mart Company, an indirect Canadian subsidiary of DFC (“NMM”), Dollar Financial U.K. Limited, an indirect U.K. subsidiary of DFC (“DFUK”) and DF Eurozone (UK) Limited, an indirect U.K. subsidiary of DFC (“DF Eurozone”). Borrowings by DFG under the Revolving Facility are guaranteed by DFC and certain direct and indirect U.S. subsidiaries of DFC. Borrowings by non-U.S. borrowers under the Revolving Facility are guaranteed by DFC and DFG and substantially all of their U.S. subsidiaries, by NMM and substantially all of its direct and indirect Canadian subsidiaries, and by DFUK, DF Eurozone and Instant Cash Loans Limited, a U.K. subsidiary of DFUK. The obligations of the respective borrowers and guarantors under the Revolving Facility are secured by substantially all the assets of such borrowers and guarantors.

The Revolving Facility will mature on October 25, 2018, subject to earlier maturity in the event that the outstanding unsecured notes issued by NMM are not refinanced by September 14, 2016 or the outstanding 3.25% convertible notes issued by DFC are not refinanced by January 15, 2017.

26

DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

As of March 31, 2014, there was $46.0 million outstanding under the Revolving Facility. The Credit Agreement contains customary covenants, representations and warranties and events of default. The agreement contains two primary financial maintenance covenants: a secured leverage ratio and a fixed charge ratio. As of March 31, 2014, we were in compliance with all such covenants. Furthermore, based on the Company’s forecasted earnings as of March 31, 2014, the Company expects to be in compliance with such covenants for the succeeding twelve months. However, it is reasonably possible that the Company could violate one or more covenants in the future if actual earnings are less than forecasted earnings or if other actions contemplated in the Company’s forecast are not executed. If the Company was to breach the covenants under the senior secured Credit Agreement, the lenders would be entitled to declare all amounts borrowed under it immediately due and payable. This acceleration of debt, if not paid by the Company, would be an event of default under, each of the indentures governing the senior and convertible notes issued or guaranteed by the Company (described above), and give rise to the right, in respect of each tranche of senior and convertible notes, of the trustee and of holders of at least 25% in aggregate principal amount of such notes, to demand immediate repayment of such tranche of notes.

Global Revolving Credit Facility

Prior to entering into the Revolving Facility, the Company had a senior secured credit facility with a syndicate of lenders, the administrative agent for which was Wells Fargo Bank, National Association. The facility consisted of a $235.0 million global revolving credit facility (the “Global Revolving Credit Facility”), with the potential to further increase the Company’s available borrowings under the facility to $250.0 million. Availability under the Global Revolving Credit Facility was based on a borrowing base comprised of cash and consumer loan receivables in the Company’s U.S., Canadian and U.K.-based retail operations, and its U.K.-based pawn loan receivables. There was a sublimit for borrowings in the United States based on the lesser of the U.S. borrowing base under the Global Revolving Credit Facility or $75 million.

Borrowings under the Global Revolving Credit Facility were to be denominated in United States Dollars, British Pounds Sterling, Euros or Canadian Dollars, as well as any other currency as may be approved by the lenders. Interest on borrowings under the Global Revolving Credit Facility was derived from a pricing grid based on the Company’s consolidated leverage ratio, which as of March 31, 2014 allows borrowing at an interest rate equal to the applicable London Inter-Bank Offered Rate (LIBOR) or Canadian Dollar Offer Rate (based on the currency of borrowing) plus 400 basis points, or in the case of borrowings in U.S. Dollars only, at an alternate base rate which was the greater of the prime rate or the federal funds rate plus 1/2 of 1%, plus 300 basis points. The Global Revolving Credit Facility was due to mature on March 1, 2015.

On each of December 23, 2011 and December 31, 2012, the Company entered into amendments to the senior secured credit agreement governing the Company’s Global Revolving Credit Facility, which increased the Company’s flexibility with respect to its business operations, transactions and reporting.

On June 25, 2013, the Company entered into the Third Amendment (the “Amendment”) to the Second Amended and Restated Credit Agreement dated as of March 3, 2011 with Wells Fargo Bank, National Association and the lenders party thereto. The Amendment amended certain financial and operating covenants in order to provide additional flexibility to the Company. The Amendment also added a new liquidity covenant, and prohibited the payment of cash dividends.

The Global Revolving Credit Facility allowed for borrowings by DFG, NMM, Dollar Financial U.K. Limited, an indirect U.K. subsidiary of DFC, and Instant Cash Loans Limited, a direct U.K. subsidiary of Dollar Financial U.K. Limited. Borrowings by DFG under the Global Revolving Credit Facility were guaranteed by DFC and certain direct and indirect domestic U.S. subsidiaries of DFC. Borrowings by non-U.S. borrowers under the Global Revolving Credit Facility were guaranteed by DFC and DFG and substantially all of their domestic U.S. subsidiaries, by NMM and substantially all of the Company’s other direct and indirect Canadian subsidiaries, and by Dollar Financial U.K. Limited and Instant Cash Loans Limited. The obligations of the respective borrowers and guarantors under the Global Revolving Credit Facility were secured by substantially all the assets of such borrowers and guarantors.

As of June 30, 2013, there was $50.0 million outstanding under the Global Revolving Credit Facility. Historically, the Company had classified all borrowings under the Global Revolving Credit Facility as current, due to the Company’s intention to repay all amounts outstanding within one year.

Scandinavian Credit Facilities

As a result of its December 2010 acquisition of Sefina, the Company assumed borrowings under Sefina’s existing secured credit facilities in Sweden and Finland, consisting of two working capital facilities in Sweden of SEK 185 million and SEK 55 million and overdraft facilities in Sweden and Finland with commitments of up to SEK 85 million and EUR 17.5 million, respectively.

27

DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

In February 2012, the Company refinanced the Finnish overdraft facility with a new secured credit facility consisting of a revolving credit facility with a commitment of up to EUR 10.75 million, of which EUR 5.4 million (approximately $7.4 million) was outstanding as of March 31, 2014, and a term loan facility of EUR 8.0 million ($11.0 million), all of which was outstanding as of March 31, 2014. In February 2014, the Company refinanced the EUR 10.75 million Finnish revolving credit facility extending the maturity date from February 15, 2014 to February 15, 2016. The facility will now bear an interest rate of one month Euribor plus 200 basis points (2.28% at March 31, 2014) with unused fees of 100 basis points on the unused portion of the facility.

The Finnish term loan is due in February 2016, and has an interest rate of the six month Euribor plus 300 basis points (3.28% at March 31, 2014). The Finnish loans are secured by the assets of the Company’s pawn lending operating subsidiary in Finland.

In June 2012, the Company entered into a secured credit facility which replaced and refinanced the outstanding borrowings under the prior Swedish facilities. On September 27, 2013, the Company entered into an amendment to the secured credit facility. The amendment amends certain financial and operating covenants in order to provide additional flexibility to the Company, and resulted in a SEK 65 million (approximately $10.0 million) prepayment of the term loan portion of the facility, and reduced the capacity under the revolving credit facility by SEK 10 million (approximately $1.6 million). The Swedish credit facility now consists of a term loan facility of SEK 175 million (approximately $27.0 million), all of which was outstanding at March 31, 2014, and a revolving credit facility of SEK 115 million (approximately $17.8 million at March 31, 2014), of which SEK 10 million (approximately $1.6 million) was outstanding as of March 31, 2014. The Swedish term loan is due June 2016 and carries an interest rate of the three month Stockholm Interbank Offered Rate (STIBOR) plus 300 basis points (3.80% at March 31, 2014). The Swedish revolving credit facility is due June 2014 and carries an interest rate of the three month STIBOR plus 200 basis points (2.80% at March 31, 2014). The Swedish loans are secured primarily by the value of the Company’s pawn pledge stock in Sweden.

Other Debt

Other debt consists of $8.9 million of debt assumed as part of the Suttons & Robertsons acquisition, consisting of a $3.0 million revolving loan and a $5.9 million term loan, all of which matures in May 2014. The Company is in the process of negotiating an extension of this facility, and has a month-to-month arrangement in place until the extension is finalized.

Interest Expense

Interest expense, net was $28.4 million and $27.1 million for the three months ended March 31, 2013 and 2014, respectively. For the nine months ended March 31, 2013 and 2014, interest expense, net was $91.3 million and $85.0 million, respectively. Included in interest expense for the three months ended March 31, 2013 and 2014 is approximately $5.4 million and $6.1 million, respectively, of non-cash interest expense related to the amortization of unrealized losses related to the discontinuance of hedge accounting for the Company’s cross currency interest rate swaps, the non-cash interest expense associated with its Convertible Notes and the amortization of various deferred issuance costs. For the nine months ended March 31, 2013 and 2014, this non-cash interest is approximately $20.1 million and $17.8 million, respectively.

6. Fair Value Measurements

The Fair Value Measurements and Disclosures Topic of the FASB Codification establishes a fair value hierarchy that distinguishes between observable and unobservable market participant assumptions. Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Level 2 inputs include quoted prices for similar assets and liabilities in active markets and inputs other than quoted prices that are observable for the asset or liability. Level 3 inputs are unobservable inputs for the asset or liability and include situations where there is little, if any, market activity for the asset or liability. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value in its entirety requires judgment and considers factors specific to the asset or liability.

28

DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Currently, the Company uses foreign currency options and cross currency interest rate swaps to manage certain of its interest rate and foreign currency risk and a gold collar to manage certain of its exposure to variability in gold prices. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity and uses observable market-based inputs, including interest rate curves, foreign exchange rates, gold forward curves and implied volatilities. The Company incorporates credit valuation adjustments to reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees. Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of March 31, 2014, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

During fiscal 2011, the Company recorded a liability for contingent consideration of $16.6 million arising from the acquisition of Sefina which was payable over two years. During the fiscal years ended June 30, 2012 and 2013, the Company made contingent consideration payments of $15.3 million. The fair value of the contingent consideration was determined at the acquisition date using a probability weighted income approach based on the net present value of estimated payments and is re-measured in each reporting period. The contingent consideration was classified within Level 3 as management assumptions for the valuation included discount rates and estimated probabilities of achievement of pre-tax income levels which are unobservable in the market. The assumed discount rate was 4.9%. The fair value of the contingent consideration was not significantly affected by changes in the discount rate, due to the short-term nature of the liability. Changes in the fair value of the contingent consideration due to time value were recorded in other operating expenses. As of March 31, 2014, the balance of the contingent consideration was fully paid.

The table below presents the Company’s assets and liabilities measured at fair value on a recurring basis as of June 30, 2013 and March 31, 2014, aggregated by the level in the fair value hierarchy within which those measurements fall.

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis at June 30, 2013

(in millions)
	Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at June 30, 2013
Assets
Derivative financial instruments	$	—	$	31.2	$	—	$	31.2
Assets held in funded deferred compensation plan	$	2.0	$	13.0	$	—	$	15.0
Liabilities
Derivative financial instruments	$	—	$	0.1	$	—	$	0.1

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis at March 31, 2014

(in millions)
	Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at March 31, 2014
Assets
Assets held in funded deferred compensation plan	$	2.1	$	13.6	$	—	$	15.7
Liabilities
Derivative financial instruments	$	—	$	12.5	$	—	$	12.5

29

DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The following table reconciles the change in the Level 3 liabilities for the nine months ended March 31, 2013 (in millions):

	Nine Months Ended March 31, 2013
Beginning balance	$	4.1
Changes in fair value of contingent consideration		(1.4	)
Payments		(3.3	)
Unrealized foreign exchange loss on contingent consideration		0.5
Foreign currency translation adjustment		0.1
Ending balance	$	—

Assets and Liabilities Measured at Fair Value on a Non-recurring Basis at March 31, 2014

(in millions)
	Balance at March 31, 2014		Quoted Prices in Active Markets in Identical Assets and Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Gains (Losses)
DFS goodwill	$	5.7	$	—	$	—	$	5.7	$	(16.3	)(1)
DFS MILES Program		5.1		—		—		5.1		(5.8	)(2)
Europe Retail goodwill		63.5		—		—		63.5		(52.7	)(1)
E-Commerce goodwill		124.3		—		—		124.3		(52.5	)(1)

(1) In accordance with ASC-350-20, goodwill with a carrying amount of $22.0 million, $116.2 million and $176.8 million, for DFS, Europe Retail and E-commerce reporting units, respectively, were written down to their implied fair value of $5.7 million, $63.5 million and $124.3 million, respectively, resulting in impairment charges of $16.3 million, $52.7 million and $52.5 million, respectively, which are included in earnings for the period.

(2) In accordance with ASC 360-10, the MILES program indefinite-lived intangible asset was written down to its fair value of $5.1 million, resulting in an impairment charge of $5.8 million, which is included in earnings for the period.

30

DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The table below presents the Company’s financial assets and liabilities that are not measured at fair value in the consolidated balance sheets as of June 30, 2013 and March 31, 2014.

Financial Assets and Liabilities Not Measured at Fair Value at June 30, 2013 and March 31, 2014

(in millions)
			Estimated Fair Value
	Carrying Value June 30, 2013		Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		June 30, 2013
Financial assets:
Cash and cash equivalents	$	196.2	$	196.2	$	—	$	—	$	196.2
Consumer loans, net		190.2		—		—		190.2		190.2
Pawn loans, net		154.4		—		—		154.4		154.4
Loans in default		31.2		—		—		31.2		31.2
Total financial assets	$	572.0	$	196.2	$	—	$	375.8	$	572.0
Financial liabilities:
Global revolving credit facility	$	50.0	$	—	$	50.0	$	—	$	50.0
10.375% Senior notes (1)		600.0		636.0		—		—		636.0
3.25% Senior convertible notes (1)		230.0		225.8		—		—		225.8
2.875% Senior convertible notes		36.2		35.6		—		—		35.6
3.00% Senior convertible notes (1)		120.0		123.6		—		—		123.6
Scandinavian credit facilities		54.9		—		54.9		—		54.9
Other debt		8.1		—		8.1		—		8.1
Total financial liabilities	$	1,099.2	$	1,021.0	$	113.0	$	—	$	1,134.0

			Estimated Fair Value
	Carrying Value March 31, 2014		Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		March 31, 2014
Financial assets:
Cash and cash equivalents	$	236.9	$	236.9	$	—	$	—	$	236.9
Consumer loans, net		174.8		—		—		174.8		174.8
Pawn loans, net		153.4		—		—		153.4		153.4
Loans in default		25.5		—		—		25.5		25.5
Total financial assets	$	590.6	$	236.9	$	—	$	353.7	$	590.6
Financial liabilities:
Global revolving credit facility	$	46.0	$	—	$	46.0	$	—	$	46.0
10.375% Senior notes (1)		600.0		603.0		—		—		603.0
3.25% Senior convertible notes (1)		230.0		196.1		—		—		196.1
2.875% Senior convertible notes		36.2		34.6		—		—		34.6
3.00% Senior convertible notes (1)		120.0		110.2		—		—		110.2
Scandinavian credit facilities		47.0		—		47.0		—		47.0
Other debt		8.9		—		8.9		—		8.9
Total financial liabilities	$	1,088.1	$	943.9	$	101.9	$	—	$	1,045.8

(1) The carrying values above exclude any discount.

31

DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Cash equivalents are defined as short-term, highly liquid investments both readily convertible to known amount of cash and so near maturity that there is insignificant risk of changes in values because of changes in interest rates.

Consumer loans are carried on the consolidated balance sheet net of the allowance for estimated loan losses, which is calculated by applying historical loss rates combined with current collection patterns and current economic trends to the gross consumer loan balance. The unobservable inputs used to calculate the carrying value of consumer loans include historical loss rates and the current collection patterns and current economic trends. Consumer loans generally have terms ranging from 1 to 45 days. The carrying value of consumer loans approximates the fair value.

Pawn loans are short-term in nature and are secured by the customer’s personal property (“pledge”). Pawn loans are secured by the customer’s pledged item, which is generally 50% to 80% of the appraised fair value of the pledged item, thus reducing the Company’s exposure to losses on defaulted pawn loans. The Company’s historical redemption rate on pawn loans is in excess of 80%, which means that for more than 80% of its pawn loans, the customer pays back the dollars borrowed, plus interest and fees, and the Company returns the pledged item to the customer. In the instance where the customer defaults on a pawn loan (fails to redeem), the pledged item either sold at auction or sold to a third party in the Company’s retail stores within several weeks of the customer default. Generally, excess amounts received over and above the Company’s recorded asset and auction-related administrative fees are returned to the customer. The unobservable inputs used to calculate the carrying value of pawn loans include historical redemption rates and the current redemption patterns and current economic trends, such as gold prices. The carrying value of pawn loans approximates the fair value.

Loans in default consist of unsecured short-term consumer loans originated by the Company which are in default status. An allowance for the defaulted loans receivable is established and is included in the loan loss provision in the period that the loan is placed in default status. The reserve is reviewed monthly and any change to the loan loss allowance as a result of historical loan performance, current and expected collection patterns and current economic trends is included with the Company’s loan loss provision. If the loans remain in a defaulted status for an extended period of time, typically 180 days, an allowance for the entire amount of the loan is recorded and the receivable is ultimately charged off. The unobservable inputs used to calculate the carrying value of loans in default include historical loss rates and the current collection patterns and current economic trends. The carrying value of loans in default approximates the fair value.

The outstanding borrowings under the Company’s Global Revolving Credit Facility and Scandinavian Credit Facilities are variable interest debt instruments and their fair value approximates their carrying value.

The fair value of the 10.375% Senior Notes, the 3.25% Senior Convertible Notes, the 2.875% Senior Convertible Notes, and the 3.00% Senior Convertible Notes are based on quoted market prices.

7. Derivative Instruments and Hedging Activities

Risk Management Objective of Using Derivatives

The Company is exposed to risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its debt funding and by the use of derivative financial instruments. The primary risks managed by using derivative instruments are interest rate risk, foreign currency exchange risk and commodity price risk. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates, foreign exchange rates or commodity prices.

The Company’s operations in Canada and Europe expose the Company to fluctuations in foreign exchange rates. The Company’s goal is to reduce its exposure to such foreign exchange risks on its foreign currency cash flows and fair value fluctuations on recognized foreign currency denominated assets, liabilities and unrecognized firm commitments to acceptable levels primarily through the use of foreign exchange-related derivative financial instruments. From time to time, the Company enters into derivative financial instruments to protect the value or fix the amount of certain obligations in terms of its functional currency, the U.S. dollar.

32

DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The Company maintains gold inventory in quantities expected to be sold in a reasonable period of time in the normal course of business. The Company generally enters into agreements for forward delivery. The prices paid in the forward delivery contracts are generally variable within a capped or collared price range. Forward derivative contracts on gold are entered into to manage the price risk associated with forecasted sales of gold inventory in the Company’s pawn shops.

Cash Flow Hedges of Foreign Exchange Risk

Operations in Europe and Canada have exposed the Company to changes in foreign exchange rates. From time to time, the Company’s U.K. and Canadian subsidiaries purchase investment securities denominated in a currency other than their functional currency. The subsidiaries from time to time hedge the related foreign exchange risk typically with the use of out of the money put options because they cost less than completely averting risk using at the money put options, and the maximum loss is limited to the purchase price of the contracts.

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges of foreign exchange risk is recorded in other comprehensive income and subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivative, as well as amounts excluded from the assessment of hedge effectiveness, is recognized directly in earnings. As of June 30, 2013 and March 31, 2014, the Company did not have any outstanding foreign currency derivatives that were designated as hedges.

Cash Flow Hedges of Multiple Risks

Between December 18, 2013 and December 20, 2013, the Company terminated the cross-currency swaps which its Canadian subsidiary had entered into in order to hedge the U.S. Dollar exposure associated with the $600.0 million senior unsecured notes issued by NMM. The termination of the swaps was effected pursuant to negotiated transactions with the respective counter-parties to such swaps. The Company received net proceeds in the aggregate amount of approximately $38.8 million as a result of the terminations. The proceeds were used to pay down outstanding balances under our global revolving credit facility. In accordance with the Derivatives and Hedging Topic of the FASB Codification, the Company is required to continue to report the net loss related to the discontinued cash flow hedge in accumulated other comprehensive income included in shareholders’ equity and subsequently reclassify such amounts into earnings over the remaining original term of the derivative when the hedged forecasted transactions are recognized in earnings. The amount of loss included in accumulated other comprehensive income related to these terminated hedges was approximately $5.3 million ($3.9 million net of tax) as of March 31, 2014, which will be reclassified into earnings over the remaining original term of the derivatives (December 2016), or approximately $2.0 million, net of tax annually.

Prior to the Company’s termination of the cross-currency swaps in December 2013, the Company entered into swap agreements to hedge the U.S. Dollar exposure associated with its $600.0 million tranche of senior unsecured notes issued by its Canadian subsidiary on April 27, 2012. The swaps eliminated the non-cash mark-to-market volatility that had historically been impacting the income statement as a result of the cross-currency swap instruments that were no longer eligible for cash flow hedge accounting and therefore had their changes in fair value recorded directly in earnings, and lock in the Canadian Dollar and U.S. Dollar exchange value of the notes at maturity. The swaps were to mature on December 15, 2016. In addition, on April 20, 2012, the Company’s UK subsidiary entered into swap agreements to hedge currency exchange risk related to intercompany transactions stemming from the convertible notes issued in April 2012. The swaps mature on April 12, 2017.

The intercompany cross-currency swap is designated as a cash flow hedge of interest payments and principal repayments on its foreign denominated debt due to changes in foreign exchange rates. Because this derivative is designated as a cash flow hedge, the Company records the effective portion of the after-tax gain or loss in other comprehensive income, which is subsequently reclassified to earnings in interest expense as an offset to the accrual of interest expense and in unrealized foreign exchange loss (gain) as an offset to the remeasurement of the foreign loan balances. For the three months and nine months ended March 31, 2014, there was no ineffectiveness on these cash flow hedges.

As of March 31, 2014, the Company had the following outstanding derivatives:

Foreign Currency Derivatives	Number of Instruments		Pay Notional			Receive Notional			Average Pay Fixed Strike Rate			Average Receive Fixed Strike Rate
GBP-USD Cross Currency Swaps		2		GBP	125,415,438		USD	200,000,000		10.057	%		9.00	%

33

DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Non-designated Hedges of Commodity Risk

In the normal course of business, the Company maintains inventories of gold at its pawn and retail shops. From time to time, the Company enters into derivative financial instruments to manage the price risk associated with forecasted gold inventory levels. Derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to commodity price risk but do not meet the strict hedge accounting requirements of the Derivatives and Hedging Topic of the FASB Codification. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings.

As of March 31, 2014, the Company’s subsidiary in the United Kingdom had the following outstanding derivatives.

Commodity Options	Number of Instruments		Notional (ounces of gold buillon)		Floor Price	Cap Price
Gold Collars (XAU/GBP)		13		5,500	£675-£700	£792-£916

The tables below present the fair values of the Company’s derivative financial instruments on the consolidated balance sheets as of June 30, 2013 and March 31, 2014 (in millions). The Company’s accounting policy is to present the fair value of all derivative instruments on a gross basis on the consolidated balance sheets and in the table below even if right of offset exists per executed master netting agreements with counterparties.

Tabular Disclosure of Fair Values of Derivative Instruments

	Asset Derivatives As of June 30, 2013			Liability Derivatives As of June 30, 2013
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments:
Cross Currency Swaps	Derivatives	$	31.2	Derivatives	$	—
Derivatives not designated as hedging instruments:
Commodity Options	Derivatives	$	0.1	Derivatives	$	—

	Asset Derivatives As of March 31, 2014			Liability Derivatives As of March 31, 2014
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments:
Cross Currency Swaps	Derivatives	$	—	Derivatives	$	12.5

34

DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The table below presents the effect of the Company’s derivative financial instruments designated as cash flow hedges on the consolidated statement of operations for the nine months ended March 31, 2013 and 2014 (in millions):

Tabular Disclosure of the Effect of Derivative Instruments on the Consolidated Statements of Operations for the Nine Months Ended March 31, 2013 and 2014

Derivatives in Cash Flow Hedging Relationships	Amount of Gain or (Loss) Recognized in OCI on Derivatives (Effective Portion)			Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
Nine months ended March 31, 2013
Cross Currency Swaps	$	3.2		Interest Expense	$	(10.2	)
				Unrealized foreign exchange gain (loss)		4.6
Total	$	3.2			$	(5.6	)
Nine months ended March 31, 2014
Cross Currency Swaps	$	(9.7	)	Interest Expense	$	(5.8	)
				Unrealized foreign exchange gain (loss)		(9.9	)
Total	$	(9.7	)		$	(15.7	)

As of March 31, 2014, the Company anticipates reclassifying approximately $3.0 million of losses from accumulated other comprehensive loss to earnings during the next twelve months.

Credit-risk-related Contingent Features

The Company has agreements with each of its derivative counterparties that contain a provision where if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations.

The Company’s agreements with certain of its derivative counterparties also contain provisions requiring it to maintain certain minimum financial covenant ratios related to its indebtedness. Failure to comply with the covenant provisions would result in the Company being in default on any derivative instrument obligations covered by the agreement.

As of March 31, 2014, the termination value of derivatives is a net liability position of $17.0 million. This amount includes accrued interest but excludes any adjustment for non-performance risk.

The table below presents the effect of the Company’s derivative financial instruments not designated as hedges on the consolidated statements of operations for the nine months ended March 31, 2013 and 2014 (in millions).

Derivatives Not Designated as Hedging Instruments	Location of Gain or (Loss) Recognized in Income on Derivatives	Amount of Gain or (Loss) Recognized in Income on Derivatives
		2013			2014
Commodity Options	Purchased gold costs	$	—		$	—
Cross Currency Swaps	Interest expense		(2.2	)(1)		(0.6	)(1)
	Income tax provision		0.6	(1)		0.1	(1)
Total		$	(1.6	)	$	(0.5	)

(1) Amounts reclassified out of accumulated other comprehensive income

35

DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

8. Income Taxes

Income Tax Provision

The provision for income taxes was $20.6 million for the nine months ended March 31, 2013 compared to a provision of $19.3 million for the nine months ended March 31, 2014. The Company’s effective tax rate was 167.8% for the nine months ended March 31, 2013 and was (14.0)% for the nine months ended March 31, 2014. The increase in the effective tax rate for the nine months ended March 31, 2014 as compared to the prior year was primarily a result of lower pretax income principally resulting from goodwill impairment losses in the UK, Sweden, Poland, Spain, Romania, Finland, and the United States, as well as operating losses within the UK, Finland, and the United States. Substantially all of the goodwill impairment was non-deductible. The provision for income taxes for the nine months ended March 31, 2014 also included the initial recognition of full valuation allowances on deferred tax assets from operations in the UK, and valuation allowances in Finland, Poland and the United States as it is not more-likely-than-not that deferred tax assets within these jurisdictions will be realized. Furthermore, the provision for income taxes for both periods also includes recognition of additional tax reserves for uncertain tax positions within Canada.

At June 30, 2013 and March 31, 2014, the Company had unrecognized tax benefit reserves related to uncertain tax positions of $20.7 million and $21.6 million, respectively, which primarily related to transfer pricing matters which, if recognized, would decrease the effective tax rate. The total decrease for the quarter, from $21.8 million at December 31, 2013 to $21.6 million at March 31, 2014, was $0.2 million, and is comprised of a decrease of $0.0 million in interest and a decrease of $0.2 million in unrecognized tax benefit reserves. The cumulative interest at June 30, 2013 and March 31, 2014 was $2.6 million and $2.9 million, respectively.

9. Accumulated Other Comprehensive Income (Loss)

In accordance with ASU 2013-2, the reclassification adjustments from accumulated other comprehensive income (loss) to net income were as follows (in millions):

	Three Months Ended March 31, 2014					Nine Months Ended March 31, 2014
	Derivatives			Foreign currency translation adjustment		Derivatives			Foreign currency translation adjustment
Balance at beginning of period	$	(7.3	)	$	37.2	$	(11.2	)	$	(3.9	)
Other comprehensive income before reclassifications, net		(1.3	)		6.8		(8.5	)		47.9
Amounts reclassified from accumulated other comprehensive income, net		2.0			—		13.1			—
Balance at end of period	$	(6.6	)	$	44.0	$	(6.6	)	$	44.0

The reclassifications are recorded to interest expense and unrealized foreign-exchange gain (loss) as described in Note 7, net of tax effect of approximately $(0.5) million and $(3.1) million for the three and nine months ended March 31, 2014, respectively.

36

DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

10. Contingent Liabilities

Contingent Liabilities

The Company is subject to various asserted and unasserted claims during the course of business. Due to the uncertainty surrounding the litigation process, except for those matters for which an accrual is described below, the Company is unable to reasonably estimate the range of loss, if any, in connection with the asserted and unasserted legal actions against it. Although the outcome of many of these matters is currently not determinable, the Company believes that it has meritorious defenses and that the ultimate cost to resolve these matters will not have a material impact on the Company’s consolidated financial position, results of operations or cash flows. In addition to the legal proceedings discussed below, the Company is involved in routine litigation and administrative proceedings arising in the ordinary course of business.

The Company assesses the materiality of litigation by reviewing a range of qualitative and quantitative factors. These factors include the size of the potential claims, the merits of the Company’s defenses and the likelihood of plaintiffs’ success on the merits, the regulatory environment that could impact such claims and the potential impact of the litigation on our business. The Company evaluates the likelihood of an unfavorable outcome of the legal or regulatory proceedings to which it is a party in accordance with ASC Topic 450, Contingencies. An accrual for a loss contingency is recorded if it is probable that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. When the liability with respect to a matter is reasonably possible, the Company estimates the possible loss or range of loss or determines why such an estimate cannot be made. This assessment is subjective based on the status of the legal proceedings and is based on consultation with in-house and external legal counsel. The actual outcomes of these proceedings may differ from the Company’s assessments.

Purported Canadian Class Actions

In 2003 and 2006, purported class actions were brought against NMM and Dollar Financial Group, Inc. in the Court of Queen’s Bench of Alberta, Canada on behalf of a class of consumers who obtained short-term loans from NMM in Alberta, alleging, among other things, that the charge to borrowers in connection with such loans was usurious under Canadian federal law (the “Alberta Litigation”). The actions seek restitution and damages, including punitive damages. In April 2010, the plaintiffs in both actions indicated that they would proceed with their claims. Demands for arbitration were served on the plaintiff in each of the actions, and NMM has filed motions to enforce the arbitration clause and to stay the actions. NMM’s motions to compel arbitration and to stay the actions were dismissed. Money Mart appealed those decisions and in July 2013, the Court of Appeal dismissed NMM’s appeal. In September 2013, NMM filed an application for leave to appeal to the Supreme Court of Canada, but on January 30, 2014, the Supreme Court of Canada denied the application for leave to appeal. Motions for class certification of these actions are scheduled for September 18 and 19, 2014. To date, neither case has been certified as a class action nor consolidated with the other action. The Company is defending these actions vigorously.

In 2004, an action was filed against NMM in Manitoba on behalf of a purported class of consumers who obtained short-term loans from NMM. In early February 2012, a separate action was filed against NMM and Dollar Financial Group, Inc. in Manitoba on behalf of a purported class of consumers which substantially overlaps with the purported class in the 2004 action. In April 2013, NMM filed a motion to enforce the arbitration/mediation terms in the second action. In July 2013, the Court denied the motion to compel arbitration. The Company is evaluating an appeal to the appellate court. In October 2013, NMM filed an appeal with the appellate court. The appellate court held a hearing on January 10, 2014 on NMM’s appeal and is taking the matter under advisement. The appeal is still under advisement with the Court. The allegations in each of these actions are substantially similar to those in the Alberta Litigation and, to date, neither action has been certified as a class action. The Company intends to defend these actions vigorously.

As of March 31, 2014, an aggregate of approximately CAD 14.3 million is included in the Company’s accrued liabilities relating to the purported Canadian class action proceedings pending in Alberta and Manitoba and for the settled class actions in Ontario, British Columbia, New Brunswick, Nova Scotia and Newfoundland that were settled by the Company in 2010. The settlements in those class action proceedings consisted of a cash component and vouchers to the class members for future services. The component of the accrual that relates to vouchers is approximately CAD 5.0 million, the majority of which is expected to be non-cash. Although we believe that we have meritorious defenses to the claims in the purported class proceedings in Alberta and Manitoba described above and intend vigorously to defend against such remaining pending claims, the ultimate cost of resolution of such claims may exceed the amount accrued at March 31, 2014 and additional accruals may be required in the future. During the three and nine months ended March 31, 2014, the Company applied CAD 6.9 million and CAD 16.2 million, respectively, of credits awarded under the class action settlements against defaulted loan balances, which resulted in a corresponding decrease to the provision for loan losses. In April 2014, the Company made its final payments totaling approximately CAD 5.8 million in respect of the settled Ontario class action litigation.

37

DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Other Canadian Litigation

In 2006, two former employees commenced companion actions against NMM and Dollar Financial Group, Inc. The actions, which are pending in the Superior Court of Ontario, allege negligence on the part of the defendants in security training procedures and breach of fiduciary duty to employees in violation of applicable statutes. The companion lawsuits seek combined damages of CAD 5.0 million plus interest and costs. NMM and Dollar Financial Group, Inc. filed a motion for summary judgment that was initially scheduled for January 2014, but has now been rescheduled to May 2014. The plaintiffs’ claims were settled in April 2014 and we anticipate the court will dismiss the action in due course. The payments associated with the settlements were covered under the Company’s insurance policies.

In 2010, The Cash Store Financial Services, Inc. and its subsidiaries, The Cash Store Inc. and Instaloans Inc. (“Cash Store”), filed a complaint and motion for injunctive relief in Ontario Superior Court against NMM alleging trademark violations and false and misleading advertising, along with claims for CAD 60 million in damages, regarding NMM’s print, television and internet advertising featuring Cash Store’s higher payday loan costs compared to those of NMM. NMM filed its opposition to Cash Store’s motion based, in part, on data gathered from Cash Store loan transactions that supported NMM’s advertising statements. Prior to the hearing on the motion, the Cash Store abandoned its position to enjoin NMM’s advertising, and the Court granted NMM’s request for reimbursement from the Cash Store of NMM’s attorneys’ fees incurred to defeat Cash Store’s injunction motion. NMM filed a Statement of Defense to the action in May 2011, and no further action in the case has been taken by Cash Store. In December 2012, in response to the plaintiff’s failure to honor NMM’s request to meet and confer, NMM filed a motion with the Court asking that it impose a discovery plan on the parties to move the case along. In April 2013, the Court, rather than granting NMM’s motion, instructed the parties to meet and confer on a discovery plan. The parties were scheduled to complete discovery and witness examinations in November 2013, but the Cash Store did not conduct its required discovery during the required time period. NMM evaluated its procedural options. NMM intended to vigorously defend this matter and its advertising. In March 2014, the parties settled their dispute and the case was dismissed by the court in March 2014. No payments were made by either party as a result of the settlement.

Administrative Action by Consumer Financial Protection Bureau

In 2012, the Consumer Financial Protection Bureau (“CFPB”), as part of its short-term lending supervision program, commenced an onsite review of the Company’s U.S. lending operations. CFPB announced that it planned to gather information from short-term lenders to evaluate their policies and procedures, assess whether lenders are in compliance with consumer financial laws, and identify risks to consumers throughout the lending process. The CFPB completed its exam in fiscal year 2013. In July 2013, personnel for the Company’s US lending operations met with the CFPB to discuss a process for meeting certain compliance and reporting standards as cited in the CFPB’s examination report. In October 2013, the Company submitted its plans for compliance enhancements to the CFPB. On a quarterly basis, the Company provides updates to the CFPB regarding the enhancements to its compliance management system.

The CFPB performed an examination of DFS during the fiscal year ended June 30, 2013. As a result of this examination, DFS was informed by the CFPB that it intended to initiate an administrative proceeding against DFS relating to its marketing of certain vehicle service and insurance products and to the requirement that MILES program loans be repaid via a military allotment. DFS cooperated in the CFPB examination. In June 2013, DFS agreed to provide, and the CFPB agreed to accept, a $3.3 million “redress” fund for affected DFS customers. The $3.3 million was paid in February 2014. DFS signed a Consent Order and Stipulation with the CFPB on June 25, 2013. In July 2013, DFS met with the CFPB to discuss the process for meeting certain compliance management system requirements as agreed to in its Consent Order. Subsequently, DFS submitted its customer redress plan and its compliance plan to the CFPB. The CFPB issued a non-objection to DFS’ customer redress plan. On a quarterly basis, the Company provides updates to the CFPB regarding the enhancements to its compliance management system.

Purported U.S. Class Actions

In November 2013, the Company was served with a purported shareholder class action lawsuit filed against it and certain of its senior executives in the United States District Court for the Eastern District of Pennsylvania (the “Court”). The complaint, which purports to be brought as a class action on behalf of purchasers of the Company’s common stock between January 28, 2011 and August 22, 2013, alleges violations of federal securities laws regarding disclosures made by the Company with respect to its compliance with U.K. regulatory requirements, U.K. lending practices, and its earnings guidance during the relevant period. On April 9, 2014, the Court named as lead plaintiff in this purported class action a group consisting of the West Palm Beach Police Pension Fund, the Arkansas Teachers Retirement System, the Macomb County Employees Retirement System and the Laborers’ District Council and Contractors’ Pension Fund of Ohio. The complaint seeks unspecified monetary damages and other relief. The Company believes that the complaint is without merit and intends to defend against it vigorously.

38

DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

In March 2014, the Company was served with a separate purported class action lawsuit filed against it, certain of its senior executives and directors, and the two underwriters who served as joint book-running managers for the Company’s April 7, 2011 common stock offering (the “2011 Offering”) in the United States District Court for the Eastern District of Pennsylvania. The named plaintiff is the Arkansas Teachers Retirement System, and its complaint, which purports to be brought as a class action on behalf of purchasers of the Company’s common stock in the 2011 Offering, alleges violations of federal securities laws regarding disclosures made by the Company with respect to its prospectus and registration statement relating to the 2011 Offering (the “Offering Materials”), and the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2010 and the Annual Report on Form 10-K for the fiscal year ended June 30, 2010 which were incorporated by reference into the Offering Materials. The complaint seeks unspecified monetary and other relief. The Company believes that the complaint is without merit and intends to defend against it vigorously.

On April 21, 2014, the Court consolidated the above referenced West Palm Beach Police Pension Fund and Arkansas Teachers Retirement System complaints based on the similarity of alleged facts and alleged overlap of putative class members, along with a scheduling order.

Litigation Relating to the Proposed Merger

Six purported class action lawsuits challenging the proposed merger (the “Merger”) of the Company with an affiliate of Lone Star Funds (“Lone Star”) were filed in the Delaware Chancery Court between April 8 and May 2, 2014: Michael Marcus v. DFC Global Corp., et al., Civil Action No. 9520-VCP; Maxine Phillips v. DFC Global Corp., et al., Civil Action No. 9558-VCP; Mark Silverstein v. DFC Global Corp., et al., Civil Action No. 9564-VCP; Noh-Joon Choo v. DFC Global Corp., et al., Civil Action No. 9572-VCP; Cordell Jeffrey and Sheila A. Jeffrey v. DFC Global Corp., et al., Civil Action No. 9590-VCP; and KC Gamma Opportunity Fund, LP v. DFC Global Corp., et al., Civil Action No. 9601-VCP.

The initial complaints in the six lawsuits are substantively identical, naming the same defendants and seeking the same relief based on the same asserted claims. The complaints allege that the merger consideration is unfair, that the merger is the result of an unfair process and that the terms of the merger are inadequate. The defendants include the Company and its directors, Jeffrey A. Weiss, John Gavin, Clive Kahn, Michael Kooper, Ronald McLaughlin, Edward A. Evans, and David Jessick as defendants along with LSF8 Sterling Parent, LLC (“Parent”) and LSF8 Sterling Merger Company, LLC, a wholly-owned subsidiary of Parent (“Purchaser” and, collectively with Parent, the “Purchasing Parties”).

The first count in each of the complaints is brought against the Company’s directors, alleging that they breached their fiduciary duties to stockholders by approving the merger. The second count in each of the complaints is brought against the Company and the Purchasing Parties alleging that those entities aided and abetted the individual defendants’ alleged breaches of fiduciary duty. Each of the complaints seeks class-action certification with the respective named plaintiff as class representative. The complaints seek preliminary and permanent injunctions barring the merger and, if the merger is completed, rescission of the merger or damages. Each of the complaints also seeks an award of attorneys’ fees and expenses.

On April 25, 2014, plaintiff Maxine Phillips filed an amended complaint, adding allegations that the Company’s preliminary proxy statement filed with the SEC on April 18, 2014 is materially false, incomplete and/or misleading, and seeking disclosure of additional information before the stockholder vote. The amended complaint also seeks a constructive trust in favor of plaintiff and the class upon any benefits improperly received by defendants as a result of their alleged wrongful conduct and an accounting and damages. On April 28, 2014, plaintiff Michael Marcus filed an amended complaint adding similar allegations.

On May 7, 2014, plaintiffs Michael Marcus and KC Gamma Opportunity Fund, LP filed motions to consolidate the six actions, with themselves as co-lead plaintiffs and their respective counsel as co-lead counsel. In addition, the two plaintiffs filed motions for expedited proceedings, seeking a preliminary injunction hearing in advance of the stockholder vote scheduled for June 6, 2014.

DFC Global and its directors believe that the allegations of the complaints are without merit.

39

DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

11. Restructuring Activities

During the year ended June 30, 2013, the Company initiated a restructuring plan to better align its global retail and Internet platforms. The restructuring plan included workforce reductions as well as the closure of retail store locations and asset write-offs. For the year ended June 30, 2013, the Company recognized $7.1 million of costs associated with the restructuring plan, all of which was included in Other income (expense) on the consolidated statement of operations. The plan was substantially completed as of June 30, 2013.

Of the $7.1 million accrued for restructuring during the year ended June 30, 2013, $3.9 million has been paid and $2.2 million of property and equipment has been written off, leaving an accrual of $1.0 million as of March 31, 2014. The Company expects the majority of this amount will be paid by June 30, 2014.

40

DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

12. Segment Information

Through the third quarter of the fiscal year ended June 30, 2013, the Company had been organized based on geographic location and the types of products and services offered. Under this structure, the Company had three reportable segments: Europe, Canada and the United States. The Company’s Chief Operating Decision Maker (CODM) evaluated performance and allocated resources based upon review of the segment information.

During the fourth quarter of the year ended June 30, 2013, the Company implemented changes in its operating segments resulting from changes in the processes employed for allocating resources across the Company and reviewing operating results to assess performance by its CODM. These changes, which resulted in part from the reorganization of the Company’s business operations that were initiated during the third quarter of fiscal 2013, were fully implemented in the fourth quarter of fiscal year 2013 to align the Company’s operating and reportable segments with how the Company manages the business and view the markets the Company serves.

The Company reports its financial performance based on the following four reportable segments: Europe Retail, Canada Retail, United States Retail and eCommerce. The Europe Retail reportable segment includes the Company’s UK Retail and Europe Retail operating segments. These operating segments generally offer the same services distributed in similar fashions, have the same types of customers, have similar economic characteristics and are subject to similar regulatory requirements, allowing these operations to be aggregated into one reporting segment. As required by ASC Topic 280, all segment information for the three and nine months ended March 31, 2013 has been recast to conform to the current segment composition.

The amounts reported as “Other”, includes Dealers’ Financial Services as well as all corporate headquarters expenses that support the expansion of the global business that have not been charged out to the reportable segments.

(In millions)
	Europe Retail			Canada Retail		United States Retail		eCommerce			Other			Total
As of and for the three months ended March 31, 2013
Total assets	$	623.3		$	439.6	$	262.6	$	318.7		$	92.3		$	1,736.5
Goodwill and other intangibles, net		219.4			240.1		206.1		167.8			34.0			867.4
Sales to unaffiliated customers:
Consumer lending		44.0			45.6		16.6		75.5			—			181.7
Check cashing		5.5			15.8		10.6		—			—			31.9
Pawn service fees and sales		21.3			0.1		—		—			—			21.4
Money transfer fees		2.7			4.7		1.0		—			—			8.4
Gold sales		14.8			2.3		0.7		—			—			17.8
Other		6.8			10.1		3.5		0.1			1.9			22.4
Total sales to unaffiliated customers		95.1			78.6		32.4		75.6			1.9			283.6
Operating margin		23.9			37.5		9.5		2.1			(0.1	)		72.9
Provision for loan losses		10.0			4.9		2.3		32.5			—			49.7
Depreciation and amortization		4.2			2.2		0.5		4.0			1.7			12.6
Interest expense, net		10.8			15.8		—		(0.5	)		2.3			28.4
Goodwill and other intangible assets impairment charge		—			—		—		—			31.1			31.1
Unrealized foreign exchange loss (gain)		2.0			0.2		—		—			(0.1	)		2.1
Loss on store closings		0.1			0.1		0.1		—			—			0.3
Other expense, net		0.3			0.9		0.3		2.4			8.8			12.7
(Loss) income before income taxes		(2.7	)		9.5		8.0		(6.6	)		(43.9	)		(35.7	)
Income tax (benefit) provision		(0.7	)		3.0		0.1		(1.7	)		—			0.7

41

DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(In millions)
	Europe Retail		Canada Retail			United States Retail		eCommerce			Other			Total
For the nine months ended March 31, 2013
Sales to unaffiliated customers:
Consumer lending	$	124.0	$	144.5		$	52.2	$	229.1			—		$	549.8
Check cashing		18.3		53.0			26.1		—			—			97.4
Pawn service fees and sales		62.7		0.1			—		—			—			62.8
Money transfer fees		8.4		16.1			3.4		—			—			27.9
Gold sales		40.7		7.7			2.6		—			—			51.0
Other		24.7		23.8			9.9		0.2			5.7			64.3
Total sales to unaffiliated customers		278.8		245.2			94.2		229.3			5.7			853.2
Operating margin		76.4		121.8			24.1		45.1			(0.7	)		266.7
Provision for loan losses		25.5		14.3			8.2		80.2			—			128.2
Depreciation and amortization		12.0		6.8			1.6		12.3			6.0			38.7
Interest expense, net		30.4		54.3			—		(1.6	)		8.2			91.3
Goodwill and other intangible assets impairment charge		—		—			—		—			36.6			36.6
Unrealized foreign exchange loss (gain)		0.8		(0.3	)		—		—			(0.1	)		0.4
Provision for litigation settlements		—		—			2.7		—			—			2.7
Loss on store closings		0.4		0.2			0.3		—			—			0.9
Other expense (income), net		1.1		(0.5	)		0.3		2.4			9.0			12.3
Income (loss) before income taxes		5.1		31.5			17.1		25.1			(66.5	)		12.3
Income tax provision		2.2		9.9			4.1		4.4			—			20.6

42

DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(In millions)
	Europe Retail			Canada Retail			United States Retail		eCommerce			Other			Total
As of and for the three months ended March 31, 2014
Total assets	$	581.3		$	394.8		$	257.4	$	288.6		$	89.5		$	1,611.6
Goodwill and other intangibles, net		169.7			219.4			206.0		160.0			11.5			766.6
Sales to unaffiliated customers:
Consumer lending		43.9			43.0			16.4		55.9			—			159.2
Check cashing		4.4			13.7			10.8		—			—			28.9
Pawn service fees and sales		23.8			0.2			—		—			—			24.0
Money transfer fees		2.7			4.5			1.0		—			—			8.2
Gold sales		7.2			1.1			0.3		—			—			8.6
Other		5.2			9.2			3.2		0.1			1.7			19.4
Total sales to unaffiliated customers		87.2			71.7			31.7		56.0			1.7			248.3
Operating margin		6.9			36.8			7.9		0.7			—			52.3
Provision for loan losses		16.8			(0.2	)		2.6		25.0			—			44.2
Depreciation and amortization		4.3			2.1			0.5		3.2			1.0			11.1
Interest expense, net		12.8			12.8			—		(1.5	)		3.0			27.1
Goodwill and other intangible assets impairment charge		52.7			—			—		52.5			22.1			127.3
Unrealized foreign exchange (gain) loss		(4.8	)		23.3			—		—			0.1			18.6
Provision for litigation settlements		—			—			0.1		—			—			0.1
Loss on store closings		0.1			0.1			—		—			0.1			0.3
Other expense (income), net		0.3			(0.3	)		—		0.1			1.4			1.5
(Loss) income before income taxes		(65.5	)		(6.7	)		6.8		(53.9	)		(33.6	)		(152.9	)
Income tax (benefit) provision		(1.7	)		1.2			6.0		0.7			—			6.2

43

DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(In millions)
	Europe Retail			Canada Retail			United States Retail		eCommerce			Other			Total
For the nine months ended March 31, 2014
Sales to unaffiliated customers:
Consumer lending	$	131.9		$	139.9		$	53.0	$	174.0		$	—		$	498.8
Check cashing		15.2			48.6			25.8		—			—			89.6
Pawn service fees and sales		70.3			0.4			0.1		—			—			70.8
Money transfer fees		8.2			14.7			3.2		—			—			26.1
Gold sales		26.0			4.1			1.2		—			—			31.3
Other		20.9			20.8			9.3		0.3			4.3			55.6
Total sales to unaffiliated customers		272.5			228.5			92.6		174.3			4.3			772.2
Operating margin		22.2			122.2			21.7		10.1			(0.9	)		175.3
Provision for loan losses		65.7			2.8			9.6		70.3			—			148.4
Depreciation and amortization		12.7			6.4			1.4		8.8			3.0			32.3
Interest expense, net		36.8			43.0			—		(4.0	)		9.2			85.0
Goodwill and other intangible assets impairment charge		52.7			—			—		52.5			22.1			127.3
Unrealized foreign exchange (gain) loss		(12.9	)		21.5			—		—			(0.3	)		8.3
Provision for (proceeds from) litigation settlements		—			0.1			0.1		—			(0.1	)		0.1
Loss (gain) on store closings		0.2			(0.1	)		0.1		—			0.1			0.3
Other expense (income), net		0.4			(1.4	)		—		—			3.7			2.7
(Loss) income before income taxes		(88.8	)		32.8			19.0		(51.4	)		(49.8	)		(138.2	)
Income tax (benefit) provision		(5.8	)		14.0			8.1		3.0			—			19.3

44

DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

13. Subsidiary Guarantor Financial Information

National Money Mart Company’s payment obligations under its 10.375% Senior Notes due 2016 are jointly and severally guaranteed (such guarantees, the “Guarantees”) on a full and unconditional basis by DFC and certain of its direct and indirect wholly owned U.S. and Canadian subsidiaries (the “Guarantors”).

The Guarantees of the 2016 Notes are:

• senior unsecured obligations of the applicable Guarantor;

• rank equal in right or payment with existing and future unsubordinated indebtedness of the applicable Guarantor;

• rank senior in right of payment to all existing and future subordinated indebtedness of the applicable Guarantor; and

• effectively junior to any indebtedness of such Guarantor, including indebtedness under the Company’s Global Revolving Credit Facility, which is secured by assets of such Guarantor to the extent of the value of the assets securing such Indebtedness.

Separate financial statements of each subsidiary Guarantor have not been presented because they are not required by applicable law and management has determined that they would not be material to investors. The accompanying tables set forth the condensed consolidating balance sheets at June 30, 2013 and March 31, 2014, the condensed consolidating statements of operations and comprehensive income (loss) for the three and nine months ended March 31, 2013 and 2014, and the condensed consolidating statements of cash flows for the nine months ended March 31, 2013 and 2014 of DFC Global Corp., National Money Mart Company, the combined Guarantors, the combined Non-Guarantors and the consolidated Company.

45

DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Consolidating Condensed Balance Sheets June 30, 2013 (In millions)
	DFC Global Corp.		National Money Mart Company		DFG and Guarantors		Non- Guarantors		Eliminations			Consolidated
Assets
Cash and cash equivalents	$	0.9	$	63.9	$	25.4	$	106.0		—		$	196.2
Consumer loans, net		—		40.1		25.7		124.4		—			190.2
Pawn loans		—		0.9		—		153.5		—			154.4
Loans in default, net		—		4.5		—		26.7		—			31.2
Other receivables		—		8.4		8.8		13.0		—			30.2
Prepaid expenses and other current assets		—		5.0		9.7		46.8		—			61.5
Total current assets		0.9		122.8		69.6		470.4		—			663.7
Fair value of derivatives		—		27.5		—		3.7		—			31.2
Intercompany receivables		516.7		64.6		—		—		(581.3	)		—
Property and equipment, net		—		29.0		19.7		74.1		—			122.8
Goodwill and other intangibles, net		—		231.7		239.7		395.0		—			866.4
Debt issuance costs, net		5.9		8.6		1.5		0.6		—			16.6
Investment in subsidiaries		241.6		467.2		184.7		—		(893.5	)		—
Other		—		0.9		19.9		0.2		—			21.0
Total Assets	$	765.1	$	952.3	$	535.1	$	944.0	$	(1,474.8	)	$	1,721.7
Liabilities and Stockholders’ Equity
Accounts payable	$	0.3	$	17.7	$	11.4	$	23.3		—		$	52.7
Income taxes payable		—		14.3		1.1		2.3		—			17.7
Accrued expenses and other liabilities		3.0		37.2		27.1		25.9		—			93.2
Current portion of long-term debt		—		25.0		25.0		17.0		—			67.0
Total current liabilities		3.3		94.2		64.6		68.5		—			230.6
Long-term deferred tax liability		—		3.1		37.2		9.5		—			49.8
Long-term debt		331.1		597.9		—		46.0		—			975.0
Intercompany payables		—		—		187.7		393.6		(581.3	)		—
Other non-current liabilities		—		10.4		20.6		4.6		—			35.6
Total liabilities		334.4		705.6		310.1		522.2		(581.3	)		1,291.0
Mandatorily redeemable preferred shares		—		—		—		58.3		(58.3	)		—
Total DFC Global Corp. stockholders’ equity		430.7		246.7		225.0		363.5		(835.2	)		430.7
Total stockholders’ equity		430.7		246.7		225.0		363.5		(835.2	)		430.7
Total Liabilities and Stockholders’ Equity	$	765.1	$	952.3	$	535.1	$	944.0	$	(1,474.8	)	$	1,721.7

46

DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Consolidating Condensed Statements Of Operations and Comprehensive Income (Loss) Three Months ended March 31, 2013 (In millions)
	DFC Global Corp.			National Money Mart Company		DFG and Guarantors			Non- Guarantors			Eliminations			Consolidated
Revenues:
Consumer lending	$	—		$	48.1	$	16.6		$	117.0		$	—		$	181.7
Check cashing		—			15.7		10.7			5.5			—			31.9
Other		—			17.4		7.0			45.6			—			70.0
Total revenues		—			81.2		34.3			168.1			—			283.6
Operating expenses:
Salaries and benefits		—			17.3		12.1			31.9			—			61.3
Provision for loan losses		—			5.6		2.3			41.8			—			49.7
Occupancy		—			5.5		3.1			9.0			—			17.6
Purchased gold costs		—			1.4		0.4			13.5			—			15.3
Depreciation		—			1.5		0.5			4.5			—			6.5
Other		—			11.1		6.0			43.2			—			60.3
Total operating expenses		—			42.4		24.4			143.9			—			210.7
Operating margin		—			38.8		9.9			24.2			—			72.9
Corporate and other expenses:
Corporate expenses		—			5.4		14.9			7.6			—			27.9
Intercompany charges		—			5.0		(13.7	)		8.7			—			—
Other depreciation and amortization		—			0.6		1.7			3.8			—			6.1
Interest expense (income), net		2.9			17.2		(0.6	)		8.9			—			28.4
Goodwill and other intangible assets impairment charge		—			—		31.1			—			—			31.1
Unrealized foreign exchange gain		—			0.2		(0.1	)		2.0			—			2.1
Loss on store closings		—			0.1		0.1			0.1			—			0.3
Other expense (income), net		0.3			1.5		8.1			2.8			—			12.7
(Loss) income before income taxes		(3.2	)		8.8		(31.6	)		(9.7	)		—			(35.7	)
Income tax provision (benefit)		—			3.1		0.1			(2.5	)		—			0.7
Net (loss) income		(3.2	)		5.7		(31.7	)		(7.2	)		—			(36.4	)
Equity in net income (loss) of subsidiaries:
National Money Mart Company		5.7			—		—			—			(5.7	)		—
Guarantors		(31.7	)		—		—			—			31.7			—
Non-guarantors		(7.2	)		—		—			—			7.2			—
Net (loss) income attributable to DFC Global Corp.	$	(36.4	)	$	5.7	$	(31.7	)	$	(7.2	)	$	33.2		$	(36.4	)
Other comprehensive income (loss)		—			6.5		(6.0	)		(17.5	)		—			(17.0	)
Total comprehensive (loss) income	$	(36.4	)	$	12.2	$	(37.7	)	$	(24.7	)	$	33.2		$	(53.4	)

47

DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Consolidating Condensed Statements Of Operations and Comprehensive Income (Loss) Nine Months ended March 31, 2013 (In millions)
	DFC Global Corp.			National Money Mart Company			DFG and Guarantors			Non- Guarantors			Eliminations			Consolidated
Revenues:
Consumer lending	$	—		$	151.8		$	52.2		$	345.8		$	—		$	549.8
Check cashing		—			53.0			26.1			18.3			—		$	97.4
Other		—			47.9			21.6			136.5			—		$	206.0
Total revenues		—			252.7			99.9			500.6			—			853.2
Operating expenses:
Salaries and benefits		—			51.4			36.4			93.2			—			181.0
Provision for loan losses		—			16.7			8.2			103.3			—			128.2
Occupancy		—			16.3			9.6			25.5			—			51.4
Purchased gold costs		—			4.6			1.5			34.3			—			40.4
Depreciation		—			4.9			1.7			13.3			—			19.9
Other		—			33.5			18.5			113.6			—			165.6
Total operating expenses		—			127.4			75.9			383.2			—			586.5
Operating margin		—			125.3			24.0			117.4			—			266.7
Corporate and other expenses:
Corporate expenses		—			17.2			52.2			22.0			—			91.4
Intercompany charges		—			17.4			(42.1	)		24.7			—			—
Other depreciation and amortization		—			1.9			5.8			11.1			—			18.8
Interest expense (income), net		10.3			58.6			(2.0	)		24.4			—			91.3
Goodwill and other intangible assets impairment charge		—			—			36.6			—			—			36.6
Unrealized foreign exchange (gain) loss		—			(0.3	)		(0.1	)		0.8			—			0.4
Provision for litigation settlements		—			—			2.7			—			—			2.7
Loss on store closings		—			0.2			0.3			0.4			—			0.9
Other expense, net		0.3			1.7			7.1			3.2			—			12.3
(Loss) income before income taxes		(10.6	)		28.6			(36.5	)		30.8			—			12.3
Income tax provision		—			9.9			4.2			6.5			—			20.6
Net (loss) income		(10.6	)		18.7			(40.7	)		24.3			—			(8.3	)
Less: Net loss attributable to non-controlling interests		—			—			—			(0.2	)		—			(0.2	)
Equity in net (loss) income of subsidiaries:
National Money Mart Company		18.7			—			—			—			(18.7	)		—
Guarantors		(40.7	)		—			—			—			40.7			—
Non-guarantors		24.5			—			—			—			(24.5	)		—
Net (loss) income attributable to DFC Global Corp.	$	(8.1	)	$	18.7		$	(40.7	)	$	24.5		$	(2.5	)	$	(8.1	)
Other comprehensive income (loss)		—			6.6			(1.0	)		(2.7	)		—			2.9
Total comprehensive (loss) income	$	(8.1	)	$	25.3		$	(41.7	)	$	21.8		$	(2.5	)	$	(5.2	)

48

DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Consolidating Condensed Statements Of Cash Flows Nine Months Ended March 31, 2013 (In millions)
	DFC Global Corp.			National Money Mart Company			DFG and Guarantors			Non- Guarantors			Eliminations			Consolidated
Cash flows from operating activities:
Net (loss) income	$	(8.1	)	$	18.7		$	(40.7	)	$	24.3		$	(2.5	)	$	(8.3	)
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Undistributed income of subsidiaries		(2.5	)		—			—			—			2.5			—
Depreciation and amortization		1.3			9.1			8.2			24.8			—			43.4
Goodwill and other intangible assets impairment charges		—			—			36.6			—			—			36.6
Provision for loan losses		—			16.7			8.2			103.3			—			128.2
Non-cash stock compensation		7.9			—			—			—			—			7.9
Losses on disposal of fixed assets		—			0.7			0.8			2.5			—			4.0
Unrealized foreign exchange (gain) loss		—			(0.3	)		(0.1	)		0.8			—			0.4
Deferred tax provision (benefit)		—			2.0			3.4			(7.1	)		—			(1.7	)
Accretion of debt discount and deferred issuance costs		13.2			2.6			—			—			—			15.8
Change in assets and liabilities (net of effect of acquisitions):
Increase in pawn loan fees and service charges receivable		—			(0.1	)		—			(2.1	)		—			(2.2	)
Increase in finance and service charges receivable		—			(2.6	)		(1.0	)		(15.2	)		—			(18.8	)
Decrease (increase) in other receivables		0.3			(6.8	)		(0.8	)		6.0			—			(1.3	)
(Increase) decrease in prepaid expenses and other		—			(0.1	)		(2.8	)		2.7			—			(0.2	)
Increase (decrease) in accounts payable, accrued expenses and other liabilities		3.0			25.1			(3.9	)		(12.9	)		—			11.3
Intercompany advances		(4.9	)		(1.5	)		6.9			(0.5	)		—			—
Net cash provided by operating activities		10.2			63.5			14.8			126.6			—			215.1
Cash flows from investing activities:
Net increase in consumer loans		—			(13.4	)		(6.2	)		(100.7	)		—			(120.3	)
Originations of pawn loans		—			(0.7	)		—			(225.0	)		—			(225.7	)
Repayment of pawn loans		—			0.2			—			219.1			—			219.3
Acquisitions, net cash acquired		—			(10.0	)		—			(15.1	)		—			(25.1	)
Additions to property and equipment		—			(5.4	)		(4.9	)		(22.4	)		—			(32.7	)
Intercompany advances		27.6			(47.0	)		29.0			(2.5	)		(7.1	)		—
Net cash provided by (used in) investing activities		27.6			(76.3	)		17.9			(146.6	)		(7.1	)		(184.5	)
Cash flows from financing activities:
Proceeds from exercise of stock options		1.1			—			—			—			—			1.1
Net (decrease) increase in revolving credit facilities		—			—			(8.5	)		3.5			—			(5.0	)
Other debt payments		—			—			—			—			—			—
Purchase of 2.875% Senior Convertible Notes due 2027		(8.6	)		—			—			—			—			(8.6	)
Repurchase of common stock		(30.1	)		—			—			—			—			(30.1	)
Payment of contingent consideration and acquisition installment payments		—			—			—			(3.9	)		—			(3.9	)
Payment of debt issuance and other costs		(0.2	)		—			—			—			—			(0.2	)
Intercompany advances		—			(4.9	)		(27.7	)		25.5			7.1			—
Net cash (used in) provided by financing activities		(37.8	)		(4.9	)		(36.2	)		25.1			7.1			(46.7	)
Effect of exchange rate changes on cash and cash equivalents		—			1.2			—			(1.8	)		—			(0.6	)
Net (decrease) increase in cash and cash equivalents		—			(16.5	)		(3.5	)		3.3			—			(16.7	)
Cash and cash equivalents balance-beginning of period		0.3			96.2			35.2			92.3			—			224.0
Cash and cash equivalents balance-end of period	$	0.3		$	79.7		$	31.7		$	95.6		$	—		$	207.3

49

DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Consolidating Condensed Balance Sheets March 31, 2014 (In millions)
	DFC Global Corp.		National Money Mart Company		DFG and Guarantors		Non- Guarantors		Eliminations			Consolidated
Assets
Cash and cash equivalents	$	0.9	$	81.4	$	47.8	$	106.8	$	—		$	236.9
Consumer loans, net		—		36.7		22.5		115.6		—			174.8
Pawn loans, net		—		1.5		—		151.9		—			153.4
Loans in default, net		—		4.7		0.1		20.7		—			25.5
Other receivables		—		12.7		3.2		19.5		—			35.4
Prepaid expenses and other current assets		—		5.2		7.6		39.7		—			52.5
Total current assets		0.9		142.2		81.2		454.2		—			678.5
Intercompany receivables		504.9		103.4		—		—		(608.3	)		—
Property and equipment, net		—		26.2		19.5		81.9		—			127.6
Goodwill and other intangibles, net		—		219.4		217.5		329.7		—			766.6
Debt issuance costs, net		4.7		7.6		1.0		2.0		—			15.3
Investment in subsidiaries		151.3		401.0		109.2		—		(661.5	)		—
Other		—		0.9		22.2		0.5		—			23.6
Total Assets	$	661.8	$	900.7	$	450.6	$	868.3	$	(1,269.8	)	$	1,611.6
Liabilities and Stockholders’ Equity
Accounts payable	$	0.3	$	16.2	$	12.1	$	10.8	$	—		$	39.4
Income taxes payable		—		14.4		5.2		5.1		—			24.7
Accrued expenses and other liabilities		5.5		38.7		22.4		34.5		—			101.1
Current portion of long-term debt		36.2		9.1		27.0		20.4		—			92.7
Total current liabilities		42.0		78.4		66.7		70.8		—			257.9
Fair value of derivatives		—		—		—		12.5		—			12.5
Long-term deferred tax liability		—		0.4		38.4		8.2		—			47.0
Long-term debt		308.0		598.2		—		45.5		—			951.7
Intercompany payables		—		—		195.8		412.5		(608.3	)		—
Other non-current liabilities		—		4.4		18.8		7.5		—			30.7
Total liabilities		350.0		681.4		319.7		557.0		(608.3	)		1,299.8
Total DFC Global Corp. stockholders’ equity		311.8		219.3		130.9		311.3		(661.5	)		311.8
Total stockholders’ equity		311.8		219.3		130.9		311.3		(661.5	)		311.8
Total Liabilities and Stockholders’ Equity	$	661.8	$	900.7	$	450.6	$	868.3	$	(1,269.8	)	$	1,611.6

50

DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Consolidating Condensed Statements Of Operations and Comprehensive Income (Loss) Three Months ended March 31, 2014 (In millions)
	DFC Global Corp.			National Money Mart Company			DFG and Guarantors			Non- Guarantors			Eliminations		Consolidated
Revenues:
Consumer lending	$	—		$	46.2		$	16.5		$	96.5		$	—	$	159.2
Check cashing		—			13.8			10.7			4.4			—		28.9
Other		—			14.9			6.3			39.0			—		60.2
Total revenues		—			74.9			33.5			139.9			—		248.3
Operating expenses:
Salaries and benefits		—			16.1			12.5			35.0			—		63.6
Provision for loan losses		—			0.6			2.6			41.0			—		44.2
Occupancy		—			5.1			3.1			10.8			—		19.0
Purchased gold costs		—			0.7			0.1			7.0			—		7.8
Depreciation		—			1.4			0.4			4.9			—		6.7
Other		—			12.2			6.3			36.2			—		54.7
Total operating expenses		—			36.1			25.0			134.9			—		196.0
Operating margin		—			38.8			8.5			5.0			—		52.3
Corporate and other expenses:
Corporate expenses		—			4.5			13.0			8.4			—		25.9
Intercompany charges		—			2.6			(6.3	)		3.7			—		—
Other depreciation and amortization		—			0.6			1.0			2.8			—		4.4
Interest expense (income), net		3.4			14.0			(0.3	)		10.0			—		27.1
Goodwill and other intangible assets impairment charge		—			—			22.1			105.2			—		127.3
Unrealized foreign exchange loss (gain)		—			23.4			0.1			(4.9	)		—		18.6
Provision for litigation settlements		—			—			0.1			—			—		0.1
Loss on store closings		—			—			0.2			0.1			—		0.3
Other (income) expense, net		—			0.1			0.9			0.5			—		1.5
Loss before income taxes		(3.4	)		(6.4	)		(22.3	)		(120.8	)		—		(152.9	)
Income tax provision (benefit)		—			1.1			6.0			(0.9	)		—		6.2
Net loss		(3.4	)		(7.5	)		(28.3	)		(119.9	)		—		(159.1	)
Equity in net income (loss) of subsidiaries:
National Money Mart Company		(7.5	)		—			—			—			7.5		—
Guarantors		(28.3	)		—			—			—			28.3		—
Non-guarantors		(119.9	)		—			—			—			119.9		—
Net income (loss) attributable to DFC Global Corp.	$	(159.1	)	$	(7.5	)	$	(28.3	)	$	(119.9	)	$	155.7	$	(159.1	)
Other comprehensive income (loss)		—			7.4			(0.7	)		0.8			—		7.5
Total comprehensive (loss) income	$	(159.1	)	$	(0.1	)	$	(29.0	)	$	(119.1	)	$	155.7	$	(151.6	)

51

DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Consolidating Condensed Statements Of Operations and Comprehensive Income (Loss) Nine Months ended March 31, 2014 (In millions)
	DFC Global Corp.			National Money Mart Company			DFG and Guarantors			Non- Guarantors			Eliminations			Consolidated
Revenues:
Consumer lending	$	—		$	149.8		$	53.1		$	295.9		$	—		$	498.8
Check cashing		—			48.6			25.8			15.2			—			89.6
Other		—			40.3			18.0			125.5			—			183.8
Total revenues		—			238.7			96.9			436.6			—			772.2
Operating expenses:
Salaries and benefits		—			49.1			35.4			102.9			—			187.4
Provision for loan losses		—			5.7			9.6			133.1			—			148.4
Occupancy		—			15.4			9.5			30.9			—			55.8
Purchased gold costs		—			2.5			0.7			25.1			—			28.3
Depreciation		—			4.4			1.4			13.8			—			19.6
Other		—			33.9			18.0			105.5			—			157.4
Total operating expenses		—			111.0			74.6			411.3			—			596.9
Operating margin		—			127.7			22.3			25.3			—			175.3
Corporate and other expenses:
Corporate expenses		—			13.9			40.1			23.1			—			77.1
Intercompany charges		—			10.4			(26.4	)		16.0			—			—
Other depreciation and amortization		—			2.0			2.9			7.8			—			12.7
Interest expense (income), net		9.9			46.9			(0.7	)		28.9			—			85.0
Goodwill and other intangible assets impairment charge		—			—			22.1			105.2			—			127.3
Unrealized foreign exchange loss (gain)		—			21.5			(0.3	)		(12.9	)		—			8.3
Provision for litigation settlements		—			0.1			—			—			—			0.1
(Gain) loss on store closings		—			(0.1	)		0.2			0.2			—			0.3
Other (income) expense, net		—			(8.0	)		1.9			8.8			—			2.7
(Loss) income before income taxes		(9.9	)		41.0			(17.5	)		(151.8	)		—			(138.2	)
Income tax provision (benefit)		—			13.9			8.2			(2.8	)		—			19.3
Net (loss) income		(9.9	)		27.1			(25.7	)		(149.0	)		—			(157.5	)
Equity in net (loss) income of subsidiaries:
National Money Mart Company		27.1			—			—			—			(27.1	)		—
Guarantors		(25.7	)		—			—			—			25.7			—
Non-guarantors		(149.0	)		—			—			—			149.0			—
Net (loss) income attributable to DFC Global Corp.	$	(157.5	)	$	27.1		$	(25.7	)	$	(149.0	)	$	147.6		$	(157.5	)
Other comprehensive income		—			11.6			6.0			34.9			—			52.5
Total comprehensive (loss) income	$	(157.5	)	$	38.7		$	(19.7	)	$	(114.1	)	$	147.6		$	(105.0	)

52

DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Consolidating Condensed Statements Of Cash Flows Nine Months Ended March 31, 2014 (In millions)
	DFC Global Corp.			National Money Mart Company			DFG and Guarantors			Non- Guarantors			Eliminations			Consolidated
Cash flows from operating activities:
Net (loss) income	$	(157.5	)	$	27.1		$	(25.7	)	$	(149.0	)	$	147.6		$	(157.5	)
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Undistributed income of subsidiaries		147.6			—			—			—			(147.6	)		—
Depreciation and amortization		1.3			8.5			4.5			22.2			—			36.5
Goodwill and other intangible assets impairment charge		—			—			22.1			105.2			—			127.3
Provision for loan losses		—			5.7			9.6			133.1			—			148.4
Non-cash stock compensation		7.2			—			—			—			—			7.2
Gain on sale of subsidiary		—			—			—			(1.6	)		—			(1.6	)
(Gain) loss on disposal of fixed assets		—			(0.1	)		0.1			0.3			—			0.3
Unrealized foreign exchange loss (gain)		—			21.5			(0.3	)		(12.9	)		—			8.3
Deferred tax (benefit) provision		—			(3.9	)		3.4			(1.8	)		—			(2.3	)
Accretion of debt discount and deferred issuance costs		13.1			0.4			—			—			—			13.5
Change in assets and liabilities (net of effect of acquisitions):
(Increase) decrease in pawn loans fees and service charges receivable		—			(0.2	)		—			0.4			—			0.2
Increase in finance and service charges receivable		—			(1.0	)		(1.2	)		(19.7	)		—			(21.9	)
(Increase) decrease in other receivables		—			(4.7	)		5.7			(9.2	)		—			(8.2	)
(Increase) decrease in prepaid expenses and other		—			(0.2	)		(2.0	)		9.2						7.0
Increase (decrease) in accounts payable, accrued expenses and other liabilities		2.5			(7.0	)		4.4			(5.3	)		—			(5.4	)
Intercompany advances		(4.5	)		(5.2	)		(6.3	)		16.0			—			—
Net cash provided by operating activities		9.7			40.9			14.3			86.9			—			151.8
Cash flows from investing activities:
Net increase in consumer loans		—			(3.9	)		(5.3	)		(72.7	)		—			(81.9	)
Originations of pawn loans		—			(1.3	)		—			(229.3	)		—			(230.6	)
Repayment of pawn loans		—			0.8			—			238.4			—			239.2
Acquisitions, net of cash acquired		—			—			—			(26.3	)		—			(26.3	)
Additions to property and equipment		—			(4.3	)		(5.9	)		(15.3	)		—			(25.5	)
Proceeds from sale of subsidiary, net of cash disposed		—			—			—			7.2			—			7.2
Intercompany advances		11.4			(45.9	)		30.7			—			3.8			—
Net cash provided by (used in) investing activities		11.4			(54.6	)		19.5			(98.0	)		3.8			(117.9	)
Cash flows from financing activities:
Proceeds from the exercise of stock options		0.4			—			—			—			—			0.4
Proceeds from termination of cross currency swap		—			38.8			—			—			—			38.8
Net (decrease) increase in revolving credit facilities		—			(15.7	)		2.0			9.2			—			(4.5	)
Repayment of long-term debt		—			—			—			(10.0	)		—			(10.0	)
Repurchase of common stock		(21.5	)		—			—			—			—			(21.5	)
Payment of debt issuance and other costs		—			(1.4	)		—			(1.6	)		—			(3.0	)
Intercompany advances		—			12.7			(13.4	)		4.5			(3.8	)		—
Net cash (used in) provided by financing activities		(21.1	)		34.4			(11.4	)		2.1			(3.8	)		0.2
Effect of exchange rate changes on cash and cash equivalents		—			(3.2	)		—			9.8			—			6.6
Net increase in cash and cash equivalents		—			17.5			22.4			0.8			—			40.7
Cash and cash equivalents balance-beginning of period		0.9			63.9			25.4			106.0			—			196.2
Cash and cash equivalents balance-end of period	$	0.9		$	81.4		$	47.8		$	106.8		$	—		$	236.9

53

DFC GLOBAL CORP.

NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

14. Subsequent Event

Subsequent Event

On April 1, 2014, the Company entered into a definitive agreement to be acquired by an affiliate of Lone Star Funds (“Lone Star”) for approximately $1.3 billion, including outstanding net debt. Upon completion of the transaction, the Company will become a privately held company. Under the terms of the agreement, the Company’s stockholders will receive $9.50 in cash for each share of the Company’s common stock they own. Furthermore, substantially all of the Company outstanding indebtedness will become due and payable as a result of the change in control resulting from the acquisition of the Company by Lone Star.

The transaction is a subject to customary closing conditions, including receipt of stockholder approval and certain approvals from both U.S. and foreign regulators. The acquisition requires the affirmative vote of the holders of a majority of the outstanding shares of the Company’s stock, which will be sought at a special meeting of stockholders on June 6, 2014. Assuming the stockholders vote to adopt the agreement and all other conditions are satisfied, or, to the extent permitted, waived, the Company expects to complete the transaction as soon as practicable after the special meeting.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q and the documents incorporated herein contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Those statements are therefore entitled to the protection of the safe harbor provisions of these laws. These forward-looking statements, which are usually accompanied by words such as “may,” “might,” “will,” “should,” “could,” “intends,” “estimates,” “predicts,” “potential,” “continue,” “believes,” “anticipates,” “plans,” “expects” and similar expressions, involve risks and uncertainties, and relate to, without limitation, statements about our market opportunities, anticipated improvements or challenges in operations, regulatory developments, our plans, earnings, cash flow and expense estimates, strategies and prospects, both business and financial. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from those expressed or forecasted in, or implied by, such forward-looking statements, particularly those factors discussed in “Item 1A — Risk Factors” in our Annual Report on Form 10-K for our fiscal year ended June 30, 2013, as amended by the risk factors included under “Part II – Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2013, the quarter ended December 31, 2013 and in this Quarterly Report on Form 10-Q.

Although we believe that the expectations reflected in these forward-looking statements are based upon reasonable assumptions, no assurance can be given that such expectations will be attained or that any deviations will not be material. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report on Form 10-Q may not occur and our actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. These forward-looking statements speak only as of the date on which they are made, and, except as otherwise required by law, we disclaim any obligation or undertaking to disseminate any update or revision to any forward-looking statement contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. If we do update or modify one or more forward-looking statements, you should not conclude that we will make additional updates or modifications with respect thereto or with respect to other forward-looking statements, except as required by law.

Unless the context otherwise requires, as used in this Quarterly Report on Form 10-Q, (i) the terms “fiscal year” and “fiscal” refer to the twelve-month period ended on June 30 of the specified year, (ii) references to “$,” “dollars,” “United States dollars” or “U.S. dollars” refer to the lawful currency of the United States of America, (iii) references to “CAD” refer to the Canadian dollar, the lawful currency of Canada, (iv) references to “GBP” refer to the British Pound Sterling, the

54

lawful currency of the United Kingdom of Great Britain and Northern Ireland, (v) references to “SEK” refer to the Swedish Krona, the lawful currency of Sweden, (vi) references to “EUR” refer to the Euro, the lawful currency of the European Union, (vii) references to “RON” refer to the Romanian New Leu, the lawful currency of Romania and (viii) references to “CZK” refer to the Czech Koruna, the lawful currency of the Czech Republic.

Executive Summary

Overview

We are a leading international non-bank provider of alternative financial services, principally unsecured short-term consumer loans, secured pawn loans, check cashing, gold buying, money transfers and reloadable prepaid debit cards, serving primarily unbanked and under-banked consumers. We serve our customers through our over 1,500 current retail storefront locations and our multiple Internet platforms in ten countries across Europe and North America: the United Kingdom, Canada, the United States, Sweden, Finland, Poland, Spain, Romania, the Czech Republic and the Republic of Ireland.

At March 31, 2014, our global retail operations consisted of 1,535 retail storefront locations, of which 1,525 are company-owned financial services stores, conducting business primarily under the names The Money Shop^®, Money Mart^®, InstaCheques^®, Suttons & Robertsons^®, The Check Cashing Store^®, Sefina^®, Helsingin Pantti^SM, MoneyNow!^®, Super Efectivo^® and Express Credit. In addition to our retail stores, we also offer Internet-based short-term consumer loans in the United Kingdom primarily under the brand names Payday UK^® and Payday Express^®, in Canada under the kyzoo and paydayloan.ca ^SM brand names, and primarily under the OK Money brand name in the Czech Republic, Spain, Sweden and Poland (where we also offer a product branded kyzoo^®). We offer longer term unsecured loans in Poland through in-home servicing under the trade name Optima^®, an installment loan in the United Kingdom branded as Ladder Loans^®, and a consumer line of credit and a goods and services payment card product in Finland offered by DFC Nordic Oyj. In addition, our DFS subsidiary provides fee-based services to enlisted military personnel applying for loans to purchase new and used vehicles that are funded and serviced primarily under an agreement with a third-party lender through our branded Military Installment Loan and Education Services, or MILES^®, program.

Our products and services, principally our unsecured short-term consumer loans, secured pawn loans, and check cashing and gold buying services, provide customers with immediate access to cash for living expenses or other needs. In addition to those core offerings, we strive to offer our customers additional high-value ancillary services, including Western Union^® money order and money transfer products, electronic tax filing, reloadable prepaid VISA^® and MasterCard^® debit cards and foreign currency exchange. Most of these ancillary services are provided through third-party vendors.

For our unsecured short-term consumer loans, we receive fees on the loans we provide. For our secured pawn loans, we receive interest and fees on the loans we provide. For our check cashing services, we charge our customers fees that are usually equal to a percentage of the amount of the check being cashed and are deducted from the cash provided to the customer.

Our expenses primarily relate to the operations of our retail store network and Internet lending operations, including the provision for loan losses, salaries and benefits for our employees, occupancy expense for our leased real estate, depreciation of our assets and corporate and other expenses, including costs related to opening and closing stores.

We continue to seek opportunities to expand upon and diversify from our core financial services businesses. We have expanded our Internet lending business since our fiscal 2011 acquisition of one of the largest online providers of unsecured short-term consumer loans by revenue in the United Kingdom, leveraging the scalable technology and back-office support capabilities of DFC Nordic Oyj to launch an Internet lending business in Poland in February 2012, the Czech Republic in October 2012 and Spain in March 2013. We expect to further extend our Internet lending capabilities into other countries in the future. We have also expanded our secured pawn lending businesses. We acquired Sefina Finance AB in December 2010, which we believe to be the largest pawn lender, measured by loan portfolio, in each of Sweden and Finland. In March 2012, we acquired a chain of eight retail pawn and gold buying stores in Spain. Through acquisitions in November 2013 and March 2014, we acquired 28 additional stores, primarily located in the Andalusian and Catalonian regions of Spain. Through these acquisitions, together with organic growth since 2012 (which added 22 new Super Efectivo retail locations and one high-end Suttons & Robertsons pawn store in Madrid), we have grown our total store count in Spain to 61 locations. Also, in May 2013, we acquired Express Credit Amanet S.R.L., a chain of 32 retail pawn and gold buying stores in Romania, offering secured pawn lending mainly on gold jewelry and small-size, high-value electronics in addition to gold buying services. We also offer secured pawn lending in a significant majority of our retail locations in the United Kingdom as well as through our high-end Suttons & Robertsons stores in the United Kingdom and Madrid, Spain, and grew our secured pawn lending in our Canadian retail stores during fiscal 2013. Also in 2013, we began offering secured pawn lending on gold jewelry as a pilot program in our U.S. retail stores and currently offer that product offering in 36 of our U.S. retail stores. Internet-based and secured pawn lending generated $56.1 million and $24.0 million, respectively, of revenue for the three months ended March 31, 2014, representing 22.6% and 9.7%, respectively, of our revenue for the third quarter of fiscal 2014.

55

Prior to the fourth quarter of fiscal 2013, we had been organized based on geographic locations and the types of products and services that we provided. Under this organizational structure, we had three reportable segments: our financial services offerings in each of Europe, Canada and the United States. During the fourth quarter of fiscal 2013, we implemented changes in our operating segments resulting from changes in the processes employed for allocating resources across the Company and reviewing operating results to assess performance by our Chief Operating Decision Maker. These changes, which resulted in part from the reorganization of our business operations that were initiated during the third quarter of fiscal 2013, were fully implemented in the fourth quarter of fiscal year 2013 to align our operating and reportable segments with how we manage the business and view the markets we serve.

We manage our business as four reportable segments — our retail-based financial services offerings in each of Europe, Canada and the United States, as well as our eCommerce reportable segment, which operates in Europe and Canada. Dealers’ Financial Services, LLC, or DFS, our subsidiary that offers products and services to enlisted military personnel and operates independently of our other businesses, is included in Other.

Trends and Competition in Internet-based Business

Since 2011, we have significantly expanded our online presence through our acquisition of one of the largest online providers of unsecured short-term consumer loans in the United Kingdom and leveraging the scalable technology and back-office support capabilities of DFC Nordic Oyj to expand our Internet lending offerings to Poland, the Czech Republic and Spain. We expect to continue to expand our online lending business in the future, both through strategic acquisitions and organic growth. Due to low barriers to entry for new non-bank lenders, particularly those who offer their services through the Internet, we have seen an increase in the number of competitors within the online markets in which we now operate (including a large increase in providers in the United Kingdom). We believe that the online loan market continues to be highly competitive. Additionally, we believe that recent and ongoing regulatory developments in the United Kingdom and other jurisdictions will likely result in some market consolidation and provide additional growth opportunities for companies with sufficient capital and sound operating platforms.

Recent Regulatory Developments

Set forth below is a brief discussion of recent legal and regulatory developments in markets in which we operate that may have a material impact on us and our results of operations.

Prior to April 1, 2014, in the United Kingdom, our consumer lending activities were primarily regulated by the Office of Fair Trading (the “OFT”), which was responsible for licensing and regulating companies that offer consumer credit. Effective April 1, 2014, the OFT transferred regulatory authority over the consumer credit industry to the new Financial Conduct Authority, (the “FCA”). The FCA is now the regulator for, among others, credit card issuers, payday loan companies, pawn brokers, rent-to-own companies, debt management and collection firms and providers of debt advice. The FCA is also responsible for regulating and setting conduct standards for banks, credit unions and similar institutions.

In October 2013, the FCA issued a consultation paper addressing how it proposed to regulate the consumer credit industry when it assumed regulatory authority on April 1, 2014. Although the positions announced in the consultation paper were not yet binding on the industry, they provided an indication of the positions that could be included in final FCA action, including significant changes in the marketing of short-term credit products, loan rollover restrictions and limitations on continuous payment authority and marketing practices for lenders in our industry. On February 28, 2014, the FCA published its Handbook, which confirmed and clarified the final form of the rules and limitations to which we would be subject under the FCA authority in the UK.

In February 2012, the OFT began an extensive review of the short-term lending sector in the United Kingdom to assess its compliance with the Consumer Credit Act and Irresponsible Lending Guidance. The review included 50 of the largest companies offering unsecured short-term consumer loans, including three of our U.K. consumer lending companies, MEM Consumer Finance Limited, Instant Cash Loans Limited and Express Finance (Bromley) Limited. The OFT issued its final report on the outcome of its sector review in March 2013, in which it indicated that the reviewed short-term consumer lenders would receive letters from the OFT that would include specific findings for each lender. Each of these three of our U.K. consumer lending companies received letters from the OFT dated in either March or April 2013, which specified required actions in a number of compliance areas, including advertising and marketing; pre-contract information and explanations; affordability assessments; rollovers (including deferred refinance and extended loans); and forbearance and debt collection.

56

These U.K. consumer lending companies engaged an independent consulting firm to advise on the requirements in the letters and provided responses to the OFT in May and July 2013. In December 2013, all three of these businesses received a follow up letter and request for information from the OFT. This supplemental loan and transaction data was submitted in early January 2014.

In February 2014, our U.K. management responsible for the transition from regulation by the OFT to regulation by the FCA attended a scheduled meeting with representatives of the OFT. During the meeting, our representatives provided an update to the OFT representatives as to the progress of our efforts to become compliant with the new rules and regulations that were anticipated to be implemented by the FCA once it assumed governing authority on April 1, 2014. The OFT representatives reviewed with us the readiness of our U.K. operations for the regulatory requirements under the FCA, and posed questions concerning our U.K. management structure and our operations relating to affordability assessments, rollovers, relending and forbearance. We received a follow-up letter from the OFT on February 28, 2014, indicating that the OFT had serious concerns about the ability of our U.K. operations to meet the enhanced regulatory requirements of the FCA. The letter requested additional information relating to certain areas of concern and requested a written response on these areas. The publication of the FCA Handbook and the receipt of the OFT letter caused management to assess required changes to our U.K. operations and the timing and likely consequences thereof. On March 24, 2014, we responded in writing to the concerns raised by the OFT in this letter. This response was in advance of an in-person meeting that our U.K. management team had arranged with OFT representatives to be held on March 26, 2014. In the written response, we outlined certain proposed changes to our U.K. business to comply with the rules and principles set forth in the Handbook and the impact that these changes would have on our business model and future operating results in the United Kingdom. On March 26, 2014, our senior U.S. and U.K. management met with representatives of the OFT to discuss the concerns raised by the OFT in its February 28, 2014 letter and our March 24, 2014 response letter. As a result of the information exchanged via documents and in the meeting in March 2014, we also received a follow up letter and request for further information from the regulator, and will respond within the required timeframe.

In November 2012, the OFT issued revised Debt Collection Guidance. Under the updated Debt Collection Guidance, we were required to more specifically disclose to customers the use of continuous payment authority (a type of automatic payment authorization that is linked to a credit card, debit card or some other funded account), and we were also required to suspend the use of, continuous payment authority to collect defaulted debts from a customer whom we believed to be experiencing financial hardship.

In November 2013, the HM Treasury announced its intention to introduce a cap on the total cost of credit in the U.K. and that it would be placing the duty on the FCA to introduce the cap. The FCA is engaging with stakeholders and is expecting to complete its analysis by May 2014, and publish a consultation paper in July 2014. The FCA will receive submissions and comments until September 2014, and is expected to publish a policy statement and final rules in November 2014. The cap on the cost of credit is expected to come into force on January 2, 2015.

In June 2013, the OFT referred the payday lending sector in the United Kingdom to the Competition and Markets Authority (the “CMA,” also formerly known as the Competition Commission) for review. In its inquiry, the CMA is required to decide whether any feature, or combination of features, of each relevant market prevents, restricts or distorts competition in the market on a number of grounds so as to negatively impact consumer outcomes. The CMA’s review of the sector may continue until June 2015, and we are cooperating in responding to requests for documents and other information regarding our business and sector.

These regulatory developments have resulted in modifications to our U.K. lending operations, including imposing additional limitations on our use of continuous payment authority and restricting the number of times a loan can be rolled over, considering broader affordability assessments and exercising greater forbearance for customers in financial difficulty. These changes, and any other changes we may consider or be required to make to our lending and collection practices in the United Kingdom, will likely negatively impact our business for the foreseeable future, but we are not able to estimate the impact of such changes at this time.

Like other businesses in the UK consumer finance sector regulated by the FCA for the first time, we have begun the process of applying for full authorization from the FCA for our consumer lending activities once we cease operating under the interim permission granted to all OFT-regulated businesses that pre-registered. We have been granted a window between December 2014 and February 2015 in which to make our application for authorization. There can be no assurance that our application for authorization will be approved by the FCA. In the event the FCA denies our application for authorization, this may result in a material adverse effect on our business and operations and may result in our ceasing to operate in the United Kingdom or a substantial change in our business there.

In the United States, the Consumer Financial Protection Bureau (the “CFPB”) has regulatory, supervisory and enforcement powers over certain non-bank providers of consumer financial products and services, such as us. Under the CFPB’s short-term lending supervision program, which aims to ensure that short-term lenders are following federal consumer financial laws in their U.S. operations, the CFPB gathers information from short-term lenders to evaluate their policies and procedures, assess whether lenders are in compliance with federal consumer financial laws, and identify risks to consumers throughout the lending process. The CFPB completed an on-site review of our U.S. retail operations in early fiscal 2013. As a result of the CFPB review, we are taking certain corrective action to address the CFPB’s findings by enhancing our operating and compliance procedures, controls and systems.

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Separately, the CFPB performed an examination of DFS during the fiscal year ended June 30, 2013. As a result of this examination, DFS was informed by the CFPB that it intended to initiate an administrative proceeding against DFS relating to its marketing of certain vehicle service and insurance products and to the requirement that MILES program loans be repaid via a military allotment. DFS cooperated in the CFPB examination. In June, DFS agreed to provide, and the CFPB agreed to accept, a $3.3 million redress fund for affected DFS customers. DFS signed a Consent Order and Stipulation with the CFPB on June 25, 2013. In July 2013, DFS met with the CFPB to discuss the process for meeting certain compliance management system requirements as agreed to in its Consent Order. Subsequently, DFS submitted its customer redress plan and its compliance plan to the CFPB. The $3.3 million redress fund was paid by DFS in January 2014.

In addition to these supervisory and enforcement powers, the CFPB may also exercise regulatory authority over the products and services that we offer in the United States. Until such time as the CFPB exercises its rulemaking powers, we cannot predict what effect any such regulation may have on our U.S. business.

In Finland, our consumer lending operations are regulated pursuant to the Finnish Consumer Protection Law, under the oversight of the Ministry of Justice. In 2011, following a parliamentary change and the submission to the Finnish Parliament of proposed legislation seeking to impose more stringent rules for the micro-lending market, including interest rate caps or other limitations on the availability of micro-loans online, the Ministry of Justice nominated a working group to review the existing regulatory framework in Finland, including regulations affecting our Finland-based subsidiary, DFC Nordic Oyj. The new law became effective on June 1, 2013, restricting the interest rate on loans less than EUR 2,000 to an annual percentage rate that cannot exceed the European Central Bank rate by more than 50%. As a result of this law, we ceased originating our Internet-based short-term consumer loan product in Finland and introduced a new consumer credit line product and a payment card product which is loaded through the issuance of a loan from DFC Nordic Oyj and can be used only for payment for goods and services (and not for cash withdrawals or funds transfers).

In Poland, the Ministry of Finance issued interest rate cap draft guidelines for a new act in the fall of 2013. Following a long period of consultation, in April 2014, the Ministry of Finance issued revised guidelines with significantly different terms. The guidelines allow for, among other things, loan costs of up to 25% of the loan amount plus a 30% annual percentage rate (or 2.5% per month), exclusive of interest. In addition, the guidelines include a provision that if more than one loan is extended within 120 days of the extension of the first loan (with the first loan still unpaid), the total loan amount may not exceed 100% of the first loan amount. The guidelines are on an agenda of the Council of Ministers for consideration in June 2014. Subsequently, a draft act to implement the proposed changes could be prepared on the basis of final guidelines and published for consultation, but there has not yet been established a timeline for such consultation. The trade association of which our Polish operating subsidiaries are a member has requested an extended consultation period to consider any proposal. We cannot yet anticipate the terms or applicability of any final legislative changes; however, a restrictive new final law could materially affect our product offerings in Poland and thus could adversely affect our business, results of operations and financial condition.

Recent Events

Proposed Merger

On April 1, 2014, we entered into an Agreement and Plan of Merger pursuant to which, upon the terms and subject to the conditions therein, LSF8 Sterling Merger Company, LLC (“Merger Sub”), a wholly owned subsidiary of LSF8 Sterling Parent, LLC (“Parent”), will merge with and into DFC Global Corp. (the “Merger”), with DFC Global Corp. being the surviving corporation and a wholly owned subsidiary of Parent. Parent and Merger Sub are affiliates of Lone Star Funds.

Under the terms of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each issued and outstanding share of common stock of the Company (other than shares (i) held in treasury by the Company, (ii) owned by Parent, Merger Sub, the Company or any subsidiary of the Company, or (iii) held by any holder who has not voted in favor of the Merger and who is entitled to demand and properly demands appraisal of such shares pursuant to the Delaware General Corporation Law) that is outstanding immediately prior to the Effective Time shall be cancelled and converted automatically into the right to receive $9.50 per share in cash, without interest (the “Merger Consideration”).

The Merger Agreement has been unanimously approved by the Company’s Board of Directors, acting upon the unanimous recommendation of a special committee of independent directors, which committee was formed for the purpose of facilitating the evaluation by the Company’s Board of Directors of whether a sale of the Company would be in the best interests of the Company and its stockholders. The transactions contemplated by the Merger Agreement are subject to the approval of the stockholders of the Company and other customary closing conditions, including, without limitation, the receipt of necessary regulatory approvals, that the FCA has not taken certain actions with respect to the Company, the expiration or early termination of the waiting period applicable to the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and compliance with certain foreign anti-competition filings, all as set forth in the Merger Agreement.

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Stock Repurchases

On December 14, 2011, our Board of Directors approved a stock repurchase plan, authorizing us to repurchase in the aggregate up to five million shares of our outstanding common stock. On September 30, 2012, our Board of Directors reconfirmed the plan through September 30, 2013. On August 21, 2013, our Board of Directors authorized an increase of 5.0 million shares under the plan. Under the repurchase plan, we can repurchase shares of our outstanding common stock on a discretionary basis. During the fiscal year ended June 30, 2013, we repurchased 3,499,881 shares of our outstanding common stock for an aggregate purchase price of $54.4 million. During the six months ended December 31, 2013, we repurchased an additional 1,712,365 shares of our outstanding common stock for an aggregate purchase price of $21.5 million. There were no repurchases made under the plan during the three months ended March 31, 2014.

Discussion of Critical Accounting Policies

In the ordinary course of business, we have made a number of estimates and assumptions relating to the reporting of results of operations and financial condition in the preparation of our financial statements in conformity with U.S. generally accepted accounting principles. We evaluate these estimates on an ongoing basis, including those related to revenue recognition, loan loss reserves and impairment of goodwill and intangible assets. We base these estimates on the information currently available to us and on various other assumptions that we believe are reasonable under the circumstances. Actual results could vary from these estimates under different assumptions or conditions.

Other than the items noted below, management believes there have been no significant changes during the three months ended March 31, 2014, to the items that we disclose as our critical accounting policies in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2013.

During the three months ended March 31, 2014, we completed an interim test for goodwill impairment as a result of events and circumstances occurring during this interim period that would more likely than not reduce the fair value of certain reporting units below their respective carrying amount. We identified interim impairment indicators resulting from: (i) a further decline in our stock price and market capitalization since the prior fiscal quarter; (ii) a significant reduction in forecasted earnings and cash flows based on projections developed during the month of March 2014; and (iii) our announcement on April 2, 2014 that we had entered into an agreement to be acquired by an affiliate of Lone Star Funds for $9.50 per share, which was significantly below our book value of stockholders’ equity at March 31, 2014, prior to the recognition of the impairment charge discussed herein.

As disclosed in our annual consolidated financial statements for the fiscal year ended June 30, 2013, goodwill is assigned to reporting units, which we have determined to be United States Retail, Canada Retail, United Kingdom Retail, Europe Retail, eCommerce and DFS. We also have a corporate reporting unit which consists of corporate debt and costs related to corporate management, oversight and infrastructure, investor relations and other governance activities. Because of the limited activities of the corporate reporting unit, no goodwill has been assigned to it. Goodwill is assigned to the reporting unit which benefits from the synergies arising from each particular business combination. As a result of the events and circumstances noted above, we performed our interim goodwill impairment test by determining the carrying value of each reporting unit, which requires the assignment of the assets and liabilities, including the existing goodwill and intangible assets, to those reporting units. We then estimated the fair value of each reporting unit and compared it to the carrying amount of the respective reporting unit.

The fair values of reporting units are estimated using a weighted average of a discounted future cash flows technique (income approach) and a guideline public company market multiples technique (market approach). The most significant assumptions used in the discounted cash flow fair value technique are the projections used to derive future cash flows and the weighted average cost of capital used to discount such projections. The discounted cash flow analysis requires us to make various assumptions about revenues, operating margins, growth rates, and discount rates. These assumptions are based on our budgets, business plans, economic projections, regulatory guidelines, anticipated future cash flows and marketplace data. Assumptions are also made for perpetual growth rates for periods beyond the period covered by our long term business plan.

We completed Step 1 of our interim goodwill impairment test during the three months ended March 31, 2014 and concluded that the fair values of our DFS, Europe Retail and eCommerce reporting units were less than their respective carrying values. As a result, a preliminary Step 2 of the goodwill impairment test was performed for these reporting units. We recognized a preliminary goodwill impairment charge of approximately $121.5 million during the three months ended March 31, 2014, which represents our best estimate of the impairment loss based on the latest information and cash flow projections available.

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Additionally, we recognized an impairment charge of $5.8 million related to DFS’ MILES program indefinite-lived intangible asset. The MILES program indefinite-lived intangible valuation was calculated using a relief from royalty valuation method. The significant assumptions used in determining the fair value of the MILES program asset were a 23% discount rate, a pre-tax royalty rate of 10%, a 22% annual revenue growth rate and a 3% long-term revenue growth rate.

The impairment charges related to our DFS reporting unit were the result of an increase in discount rates due to the increased risk of not meeting future projections, as well as reduced future projections. The estimates of future cash flows for the DFS reporting unit are in large part dependent on increased market share as a result of more competitive financing alternatives to DFS’ service member customers. These estimates are inherently uncertain.

We estimate that the final goodwill impairment charge will be in the range of $120.0 million to $140.0 million. In the fourth quarter of the fiscal year ending June 30, 2014, we will perform our annual impairment tests of goodwill, and will finalize the interim estimated impairment of the DFS, Europe Retail and eCommerce goodwill. We have not been able to finalize the impairment due to the significant amount of work required to calculate the implied value of goodwill, including the valuation of recognized and unrecognized intangible assets, calculation of deferred taxes and due to the timing of the interim impairment indicator. The actual goodwill impairment charge could be materially different from the estimated charge recognized.

Since we estimate the fair value of our reporting units by using a combination of an income approach and a market approach, the fair value estimates are sensitive to the selection of the following inputs: the weighted-average cost of capital rate used to discount the projected cash flows, and the market multiples applied to earnings, but are especially sensitive to the projected future cash flows of the respective reporting unit. Our estimates of future cash flows in our eCommerce reporting unit include the following significant yet inherently uncertain growth and profitability assumptions:

• Expansion of our on-line lending platforms in additional jurisdictions where we do not currently operate;

• Growth within our on-line lending business in jurisdictions in which we have recently entered and where we have recently experienced significant growth, such as Canada, Spain, Poland and the Czech Republic;

• Moderation of loan losses, as our borrowers and potentially some of our competitors adjust to the impending revised regulations within the United Kingdom for renewals and collections;

• Growth in market share resulting from consolidation within the industry as a number of existing competitors will unlikely make the necessary investments to comply with the impending revised payday loan regulations within the United Kingdom.

• Improved margins within our United Kingdom businesses principally resulting from revised underwriting criteria in conjunction with our expectation of servicing more credit worthy customers which is expected to improve credit quality from current levels.

• Introduction of a multi-payment loan (“MPL”) product in certain jurisdictions

The significant decline in fair value of the eCommerce reporting unit since the most recent interim impairment test resulted principally from a significant increase in the weighted average cost of capital to reflect the increasing uncertainties in forecasted earnings resulting from the regulatory changed promulgated and proposed in the United Kingdom, as well as the decline in market valuations.

The fair value of our U.K. Retail reporting unit is approximately 8% above its carrying value at March 31, 2014. A combination of an increase of 2.5% in the discount rate (from 14.5%) and a decrease in the long-term growth rate of 1.0% (from 3.0%) would have led to the carrying value of U.K. Retail being less than its fair value. The carrying amount of goodwill for the U.K. reporting unit was approximately $100.4 million at March 31, 2014.

Our estimates of future cash flows in our U.K. Retail reporting unit include the following significant yet inherently uncertain growth and profitability assumptions:

• Moderation of loan losses, as our borrowers and potentially some of our competitors adjust to the impending revised regulations within the United Kingdom for renewals and collections;

• Growth in market share resulting from consolidation within the industry as a number of existing competitors will unlikely make the necessary investments to comply with the impending revised payday loan regulations within the United Kingdom.

• Improved margins within our United Kingdom businesses principally resulting from revised underwriting criteria in conjunction with our expectation of servicing more credit worthy customers which is expected to improve credit quality from current levels.

• Introduction of an MPL product

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While these assumptions are inherently uncertain, especially given the fluidity of the proposed regulatory changes within the United Kingdom, we believe that such assumptions are reasonable and appropriate when considering all available market information as of the date of the interim impairment test, as well as the Company’s past experiences in similar jurisdictions such as Canada and the United States, which had previously implemented significant changes to regulations for single payment loans. Furthermore, the weighted average cost of capital that has been applied to the cash flows of the respective reporting units when calculating the fair value of the reporting units have been adjusted to reflect the inherent risks and uncertainties addressed herein.

As of March 31, 2014, the fair value of our Europe Retail reporting unit is negatively impacted principally by the reduction in gold prices and start up costs associated with new store openings in Poland and Spain. The estimates of future cash flows for the Europe Retail reporting unit are in large part dependent on the projected growth and profitability of our store-based operations in Poland and Spain, which are inherently uncertain.

The significant decline in the fair value of the Europe Retail reporting unit since the most recent interim impairment test resulted from (i) a significant increase in the weighted average cost of capital to reflect the increasing uncertainties in forecasted earnings, (ii) reductions in forecasted earnings to reflect the expectation of continued depressed gold prices, greater competition in emerging markets and less contribution from store openings, and (iii) reductions in market valuations.

The failure to achieve one or more of our anticipated business model assumptions described herein, or the impact of the implementation of final single payment loan regulations in the United Kingdom that are different than those contemplated in our forecast could lead to additional goodwill impairment of our reporting units, and any such impairments may be material.

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Results of Operations

The percentages presented in the following table are based on each respective fiscal year’s total consolidated revenues:

	Three Months Ended March 31,										Nine Months Ended March 31,
	2013					2014					2013					2014
	(Dollars in millions, except per share amounts)
Total revenues:
Consumer lending	$	181.7		64.1	%	$	159.2		64.1	%	$	549.8		64.4	%	$	498.8		64.6	%
Check cashing		31.9		11.2	%		28.9		11.6	%		97.4		11.4	%		89.6		11.5	%
Pawn service fees and sales		21.4		7.5	%		24.0		9.7	%		62.8		7.4	%		70.8		9.2	%
Money transfer fees		8.4		3.0	%		8.2		3.3	%		27.9		3.3	%		26.1		3.4	%
Gold sales		17.8		6.3	%		8.6		3.5	%		51.0		6.0	%		31.3		4.1	%
Other		22.4		7.9	%		19.4		7.8	%		64.3		7.5	%		55.6		7.2	%
Total consolidated revenues		283.6		100.0	%		248.3		100.0	%		853.2		100.0	%		772.2		100.0	%
Operating Expenses:
Salaries and benefits		61.3		21.6	%		63.6		25.6	%		181.0		21.2	%		187.4		24.3	%
Provision for loan losses		49.7		17.5	%		44.2		17.8	%		128.2		15.0	%		148.4		19.2	%
Occupancy		17.6		6.2	%		19.0		7.7	%		51.4		6.0	%		55.8		7.2	%
Purchased gold costs		15.3		5.4	%		7.8		3.1	%		40.4		4.8	%		28.3		3.7	%
Advertising		18.5		6.6	%		15.1		6.0	%		50.4		5.9	%		45.3		5.9	%
Depreciation		6.5		2.3	%		6.7		2.7	%		19.9		2.3	%		19.6		2.5	%
Other		41.8		14.7	%		39.6		16.0	%		115.2		13.5	%		112.1		14.5	%
Total operating expenses		210.7		74.3	%		196.0		78.9	%		586.5		68.7	%		596.9		77.3	%
Operating Margin		72.9		25.7	%		52.3		21.1	%		266.7		31.3	%		175.3		22.7	%
Corporate expenses		27.9		9.8	%		25.9		10.5	%		91.4		10.7	%		77.1		10.0	%
Other depreciation and amortization		6.1		2.2	%		4.4		1.8	%		18.8		2.2	%		12.7		1.6	%
Interest expense, net		28.4		10.0	%		27.1		10.9	%		91.3		10.7	%		85.0		11.0	%
Goodwill and other intangible assets impairment charge		31.1		11.0	%		127.3		51.3	%		36.6		4.4	%		127.3		16.5	%
Unrealized foreign exchange loss		2.1		0.7	%		18.6		7.5	%		0.4		—	%		8.3		1.1	%
Provision for litigation settlements		—		—	%		0.1		—	%		2.7		0.3	%		0.1		—
Loss on store closings		0.3		0.1	%		0.3		0.1	%		0.9		0.1	%		0.3		—
Other income, net		12.7		4.5	%		1.5		0.6	%		12.3		1.4	%		2.7		0.4	%
Income (loss) before income taxes		(35.7	)	(12.6	)%		(152.9	)	(61.6	)%		12.3		1.5	%		(138.2	)	(17.9	)%
Income tax provision		0.7		0.2	%		6.2		2.4	%		20.6		2.4	%		19.3		2.5	%
Net loss		(36.4	)	(12.8	)%		(159.1	)	(64.0	)%		(8.3	)	(0.9	)%		(157.5	)	(20.4	)%
Less: Net loss attributable to non-controlling interests		—		—	%		—		—	%		(0.2	)	—	%		—		—
Net loss attributable to DFC Global Corp.	$	(36.4	)	(12.8	)%	$	(159.1	)	(64.0	)%	$	(8.1	)	0.9	%	$	(157.5	)	(20.4	)%
Net loss per share attributable to DFC Global Corp.:
Basic	$	(0.86	)			$	(4.08	)			$	(0.19	)			$	(4.00	)
Diluted	$	(0.86	)			$	(4.08	)			$	(0.19	)			$	(4.00	)

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Constant Currency Analysis

We maintain operations in Europe, Canada and the United States. Over 85% of our revenues are originated in currencies other than the U.S. Dollar, principally the British Pound Sterling and the Canadian Dollar. As a result, changes in our reported revenues and profits include the impacts of changes in foreign currency exchange rates. As additional information to the reader, we provide “constant currency” assessments in the following discussion and analysis to remove and/or quantify the impact of the fluctuation in foreign exchange rates and utilize constant currency results in our analysis of segment performance. Our constant currency assessment assumes foreign exchange rates in the current fiscal periods remained the same as in the prior fiscal year periods. All conversion rates below are based on the U.S. Dollar equivalent to one of the applicable foreign currency.

	Actual Average Exchange Rates Three Months Ended March 31,				Actual Average Exchange Rates Nine Months Ended March 31,
	2013		2014		2013		2014
British Pound Sterling		1.5518		1.6547		1.5795		1.6080
Canadian Dollar		0.9920		0.9065		1.0020		0.9410
Swedish Krona		0.1554		0.1547		0.1513		0.1537
Euro		1.3204		1.3702		1.2893		1.3521
Polish Zloty		0.3180		0.3274		0.3120		0.3216

We believe that our constant currency assessments are a useful measure, indicating the actual growth and profitability of our operations. Earnings from our subsidiaries are not generally repatriated to the United States; therefore, we do not incur significant economic gains or losses on foreign currency transactions with our subsidiaries. To the extent funds are transmitted between countries, we may be subject to realized foreign exchange gains or losses. To the extent liabilities are paid or assets are received in a currency other than the local currency, we would incur realized transactional foreign exchange gains or losses. Cash accounts are maintained in Europe and Canada in local currency, and as a result, there is little, if any diminution in value from the changes in currency rates. Therefore, cash balances are available on a local currency basis to fund the daily operations of the Europe and Canada business units.

Three Months Ended March 31, 2014 compared to Three Months Ended March 31, 2013

Revenues

Total revenues for the three months ended March 31, 2014 decreased by $35.3 million, or 12.5%, as compared to the three months ended March 31, 2013. The impact of new stores and acquisitions accounted for an increase of $6.7 million, while the impact of foreign currency accounted for an increase of $0.8 million. On a constant currency basis and excluding the impacts of new stores and acquisitions, total revenues decreased by $42.8 million, or 15.1%. The decrease was primarily the result of a $23.5 million decrease in revenues in eCommerce, related to consumer lending, a $17.4 million decrease in revenues in Europe Retail, primarily as a result of decreased gold sales, as well as a $1.1 million decrease in Canada Retail revenues, primarily as a result of decreased gold sales.

Consolidated fees from consumer lending were $159.2 million for the three months ended March 31, 2014 compared to $181.7 million for the three months ended March 31, 2013, a decrease of $22.5 million, or 12.4%. The impact of new stores and acquisitions accounted for an increase of $2.1 million, while the impact of foreign currency accounted for an increase of $1.3 million. On a constant currency basis and excluding the impacts of new stores and acquisitions, consumer lending revenues decreased by approximately $25.9 million. Consumer lending revenues in eCommerce, Europe Retail and United States Retail decreased by $23.5 million, $3.2 million and $0.2 million, respectively, while consumer lending revenues in Canada Retail increased by $1.0 million (on a constant currency basis and excluding the impacts of new stores and acquisitions). Consumer lending revenues were negatively impacted by decreased loan volume due to the regulatory transition in the United Kingdom. Loan originations decreased from $768.1 million for the three months ended March 31, 2013 to $639.5 million for the three months ended March 31, 2014.

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Consolidated check cashing revenue decreased $3.0 million, or 9.5%, for the three months ended March 31, 2014 compared to the three months ended March 31, 2013. The impact of new stores and acquisitions accounted for a $0.3 million increase, while the impact of foreign currency accounted for a decrease of $1.0 million. The remaining check cashing revenues were down $2.3 million, or 7.4%, for the three months ended March 31, 2014, primarily as a result of the gradual migration away from paper checks. On a constant currency basis and excluding the impacts of new stores and acquisitions, check cashing revenues declined 27.0% in Europe Retail and 6.3% in Canada Retail, while check cashing revenues in United States Retail increased 1.3%. There was an aggregate decline of 10.4% in the number of checks cashed for the three months ended March 31, 2014 as compared to the three months ended March 31, 2013.

Pawn service fees were $24.0 million for the three months ended March 31, 2014, representing an increase of $2.6 million, or 11.9%, compared to the three months ended March 31, 2013. The impact of new stores and acquisitions accounted for a $2.6 million increase, while the impact of foreign currency accounted for an increase of $1.0 million. On a constant currency basis and excluding the impacts of new stores and acquisitions, pawn service fees decreased by approximately $1.0 million. Pawn lending interest and the margin on the disposition of unredeemed pawn pledge inventory were unfavorably impacted by the year-over-year decline in gold prices.

For the three months ended March 31, 2014, money transfer fees, gold sales and all other revenues decreased by $12.4 million. On a constant currency basis and excluding the impacts of new stores and acquisitions, these revenues decreased by $13.5 million, or 27.8%, for the three months ended March 31, 2014 as compared to the three months ended March 31, 2013. The decrease was primarily due to lower gold sales, lower debit card fees in Canada, as well as the impact of the October 2013 sale of our Merchant Cash Advance Limited subsidiary in the United Kingdom.

Operating Expenses

Operating expenses were $196.0 million for the three months ended March 31, 2014 compared to $210.7 million for the three months ended March 31, 2013, a decrease of $14.7 million, or 7.0%. There was an increase in the current year’s operating expenses related to new stores and acquisitions of approximately $7.7 million. The impact of foreign currency fluctuations accounted for an increase of $4.2 million.

On a constant currency basis and excluding the impacts of new stores and acquisitions, operating expenses decreased by $26.6 million as compared to the prior year. For the three months ended March 31, 2014, total operating expenses increased to 78.9% of total revenue as compared to 74.3% of total revenue in the prior year, primarily due to reduced revenue. After adjusting for constant currency reporting and excluding the impacts of new stores and acquisitions, the percentage of total operating expenses as compared to total revenue was 76.5%.

The consolidated loan loss provision, excluding a $2.3 million provision related to pawn loans, expressed as a percentage of gross consumer lending revenue, was 26.3% for the three months ended March 31, 2014 compared to 27.3% for the three months ended March 31, 2013. The decrease in the loan loss provision was primarily the result of the application of $6.3 million of credits awarded under the Canadian class action settlements against defaulted loan balances, which reduced the provision for loan losses by the same amount. The loan loss provision for the three months ended March 31, 2014 was significantly impacted by higher loan defaults in the United Kingdom resulting from the implementation of the loan rollover limitation, as well as from a modification in our collection practices, which now place additional limitations on the number and duration of debit attempts to the customer’s account. We anticipate that loan losses will be higher over the near-term because of the implementation of the loan rollover limitation and the change in collection practices that were implemented during the fiscal year ended June 30, 2014. Our estimates of the allowance for loan losses are inherently uncertain as many of these changes to underwriting and collections have been implemented recently and we do not have significant historical information for the loss rates and collections experience in accordance with the recently established regulatory guidance.

Relative to our reportable segments, after excluding the impacts of foreign currency and new stores and acquisitions, operating expenses decreased by $3.7 million and $23.3 million in Canada Retail and eCommerce, respectively, while operating expenses in United States Retail increased by $0.7 million. Europe Retail operating expenses were flat when compared to the three months ended March 31, 2013. The decrease in operating expenses for eCommerce was primarily the result of a decrease in the provision for loan losses and advertising expenses, due to the lower consumer lending revenue noted above, as well as a decrease in franchise and other taxes, and the decrease in operating expenses for Canada Retail was primarily the result of a reduced provision for loan losses, as a result of the application of credits awarded under the class action settlements against defaulted loan balances noted above. An increase in the provision for loan losses in Europe Retail was offset by a decrease in purchased gold costs.

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Corporate Expenses

Corporate expenses were $25.9 million for the three months ended March 31, 2014 compared to $27.9 million for the three months ended March 31, 2013, a decrease of $2.0 million. The decrease in corporate expenses is primarily the result of reduced incentive compensation and lower headcount.

Other Depreciation and Amortization

Other depreciation and amortization was $4.4 million for the three months ended March 31, 2014 compared to $6.1 million for the three months ended March 31, 2013. The decrease of $1.7 million is primarily related to reduced amortization of DFS intangible assets as a result of the impairment charges recorded during the fiscal year ended June 30, 2013, as well as other acquired intangible assets becoming fully amortized.

Interest Expense

Interest expense, net was $27.1 million for the three months ended March 31, 2014 compared to $28.4 million for the three months ended March 31, 2013. Included in the interest expense for the three months ended March 31, 2014 is approximately $6.1 million of non-cash interest expense associated with our convertible debt and the amortization of various deferred issuance costs. This non-cash interest expense was approximately $5.5 million for the three months ended March 31, 2013, representing an increase of approximately $0.6 million. The increase was primarily related to the cross currency swaps we terminated in December 2013. Subsequent to the termination of the cross-currency swaps on our Canadian term debt in December 2013, we discontinued hedge accounting on these swaps. However, in accordance with the Derivatives and Hedging Topic of the FASB Codification, we continue to report the net loss related to the cash flow hedges in other accumulated comprehensive income and subsequently reclassify such amounts into earnings over the remaining original term of the derivatives when the hedged forecasted transactions are recognized in earnings. The non-cash loss to be recognized in earnings over the remaining term of the derivatives is approximately CAD 6.5 million (approximately $6.1 million), or CAD 2.2 million (approximately $2.0 million) annually.

Goodwill and Intangible Asset Impairment Charge

We recognized a preliminary goodwill impairment charge of approximately $121.5 million during the three months ended March 31, 2014, based on the estimated fair value and carrying value of our DFS, Europe Retail and eCommerce reporting units. Additionally, we recognized an impairment charge of $5.8 million related to DFS’ MILES program indefinite-lived intangible asset. The determination of estimated fair value requires management to make assumptions about estimated cash flows, including long-term forecasts, discount rates and terminal growth rates. The non-cash impairment charge is the result of our current expectations for future growth and profitability for these reporting units being lower than our previous estimates, higher discount rates and lower market valuations. The calculation of fair value was based on two valuation techniques, a discounted cash flow model (income approach) and a market adjusted multiple of earnings and revenues (market approach).

We recognized a preliminary goodwill impairment charge of approximately $15.2 million during the three months ended March 31, 2013, related to our DFS reporting unit. Additionally, we recognized an impairment charge of $15.9 million related to DFS’ other intangible assets, including the MILES program indefinite-lived intangible asset.

Unrealized Foreign Exchange Gain/Loss

The unrealized foreign exchange loss of $18.6 million for the three months ended March 31, 2014 is due primarily to unrealized foreign exchange losses on our $600 million Senior Notes. Subsequent to the termination of the cross-currency swaps on our Senior Notes in December 2013, we are exposed to unrealized foreign exchange gain or loss based on fluctuations in exchange rates between the Canadian Dollar and the US Dollar. This resulted in an unrealized foreign exchange loss of $23.0 million during the three months ended March 31, 2014. This unrealized foreign exchange loss was partially offset by unrealized foreign exchange gains on intercompany debt denominated in non-functional currencies.

The unrealized foreign exchange loss of $2.1 million for the three months ended March 31, 2013 is due primarily to unrealized foreign exchange losses on intercompany debt.

Other (Income) Expense, Net

During the three months ended March 31, 2014, we recorded net other expense of approximately $1.4 million, due to expenses associated with the Lone Star acquisition of $1.0 million, realized foreign exchange losses of $0.4 million and acquisition-related activities of $0.3 million, partially offset by other income items of $0.3 million.

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During the three months ended March 31, 2013, we recorded net other income of approximately $12.7 million. We incurred $7.0 million of restructuring and other charges for employee severance and other costs related to the reorganization of our business operations between global retail and Internet platforms. We also recorded $5.0 million of expenses related to the estimated liability associated with the CFPB administrative action at DFS. Additionally, we incurred expenses for acquisition-related activities of $0.9 million and other income items of $0.2 million.

Income Tax Provision

The provision for income taxes was $6.3 million for the three months ended March 31, 2014 compared to a provision of $0.7 million for the three months ended March 31, 2013. The Company’s effective tax rate was (4.1%) for the three months ended March 31, 2014 and was (1.9%) for the three months ended March 31, 2013. The increase in the effective tax rate for the three months ended March 31, 2014 as compared to the prior year was primarily a result of lower pretax income principally resulting from goodwill impairment losses in the UK, Sweden, Poland, Spain, Romania, Finland, and the United States, as well as operating losses within the UK, Finland, and the United States. Substantially all of the goodwill impairment was non-deductible. The provision for income taxes for the three months ended March 31, 2014 also included the initial recognition of full valuation allowances on deferred tax assets from operations in the UK, and valuation allowances in Finland, Poland and the United States as it is not more-likely-than-not that deferred tax assets within these jurisdictions will be realized. Furthermore, the provision for income taxes for both periods also includes recognition of additional tax reserves for uncertain tax positions within Canada.

At June 30, 2013, December 31, 2013 and March 31, 2014 the Company had unrecognized tax benefit reserves related to uncertain tax positions of $20.7 million, $21.8 million, and $21.6 million, respectively, which primarily related to transfer pricing matters which, if recognized, would decrease the effective tax rate. The total decrease for the quarter ended March 31, 2014 of $0.2 million is comprised of a decrease of $0.0 million in interest and a decrease of $0.2 million in unrecognized tax benefit reserves. The cumulative interest at June 30, 2013, December 31, 2013, and March 31, 2014 was $2.6 million, $2.9 million, and $2.9 million, respectively.

Nine Months Ended March 31, 2014 compared to Nine Months Ended March 31, 2013

Revenues

Total revenues for the nine months ended March 31, 2014 decreased by $81.0 million, or 9.5%, as compared to the nine months ended March 31, 2013. The impact of new stores and acquisitions accounted for an increase of $20.0 million, while the impact of foreign currency accounted for a decrease of $7.2 million. On a constant currency basis and excluding the impacts of new stores and acquisitions, total revenues decreased by $93.8 million, or 11.0%. The decrease was primarily the result of a $60.3 million decrease in revenues in eCommerce, related to consumer lending, an $25.7 million decrease in revenues in Europe Retail, primarily as a result of decreased gold sales, as well as a $4.8 million decrease in Canada Retail revenues, primarily as a result of decreased gold sales and debit card fees.

Consolidated fees from consumer lending were $498.8 million for the nine months ended March 31, 2014 compared to $549.8 million for the nine months ended March 31, 2013, a decrease of $51.0 million, or 9.3%. The impact of new stores and acquisitions accounted for an increase of $7.0 million, while the impact of foreign currency accounted for a decrease of $4.2 million. On a constant currency basis and excluding the impacts of new stores and acquisitions, consumer lending revenues decreased by approximately $53.8 million. Consumer lending revenues in eCommerce decreased by $60.4 million, while consumer lending revenues in Europe Retail, Canada Retail and United States Retail increased by $2.8 million, $2.9 million and $0.9 million, respectively (on a constant currency basis and excluding the impacts of new stores and acquisitions). Consumer lending revenues were negatively impacted by decreased loan volume due to the regulatory transition in the United Kingdom. Loan originations decreased from $2.39 billion for the nine months ended March 31, 2013 to $2.07 billion for the nine months ended March 31, 2014.

Consolidated check cashing revenue decreased $7.8 million, or 8.0%, for the nine months ended March 31, 2014 compared to the nine months ended March 31, 2013. The impact of new stores and acquisitions accounted for a $1.6 million increase, while the impact of foreign currency accounted for a decrease of $2.8 million. The remaining check cashing revenues were down $6.6 million, or 6.8%, for the nine months ended March 31, 2014, primarily as a result of the gradual migration away from paper checks. On a constant currency basis and excluding the impacts of new stores and acquisitions, check cashing revenues declined 21.4% in Europe Retail, 4.6% in Canada Retail and 0.9% in United States Retail. There was an aggregate decline of 8.4% in the number of checks cashed for the nine months ended March 31, 2014 as compared to the nine months ended March 31, 2013.

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Pawn service fees were $70.8 million for the nine months ended March 31, 2014, representing an increase of $8.0 million, or 12.6%, compared to the nine months ended March 31, 2013. The impact of new stores and acquisitions accounted for a $7.0 million increase, while the impact of foreign currency accounted for an increase of $1.7 million. Pawn lending interest and the margin on the disposition of unredeemed pawn pledge inventory was unfavorably impacted by the year-over-year decline in gold prices.

For the nine months ended March 31, 2014, money transfer fees, gold sales and all other revenues decreased by $30.2 million. On a constant currency basis and excluding the impacts of new stores and acquisitions, these revenues decreased by $32.9 million, or 23.0%, for the nine months ended March 31, 2014 as compared to the nine months ended March 31, 2013. The decrease was primarily due to lower gold sales, lower money transfer fees, reduced DFS revenues, lower debit card fees in Canada, as well as the impact of the October 2013 sale of our Merchant Cash Advance Limited subsidiary in the United Kingdom.

Operating Expenses

Operating expenses were $596.9 million for the nine months ended March 31, 2014 compared to $586.5 million for the nine months ended March 31, 2013, an increase of $10.4 million, or 1.8%. There was an increase in the current year’s operating expenses related to new stores and acquisitions of approximately $22.4 million. The impact of foreign currency fluctuations accounted for an increase of $1.1 million.

On a constant currency basis and excluding the impacts of new stores and acquisitions, operating expenses decreased by $13.1 million as compared to the prior year. For the nine months ended March 31, 2014, total operating expenses increased to 77.3% of total revenue as compared to 68.7% of total revenue in the prior year, primarily due to a higher provision for loan losses. After adjusting for constant currency reporting and excluding the impacts of new stores and acquisitions, the percentage of total operating expenses as compared to total revenue was 75.5%.

The consolidated loan loss provision, excluding a $13.3 million provision related to pawn loans, expressed as a percentage of gross consumer lending revenue, was 27.1% for the nine months ended March 31, 2014 compared to 23.3% for the nine months ended March 31, 2013. The increase in the loan loss provision for the nine months ended March 31, 2014 was significantly impacted by higher loan defaults in the United Kingdom resulting from the implementation of the loan rollover limitation, as well as from a modification in our collection practices, which now place additional limitations on the number and duration of debit attempts to the customer’s account. This increase was offset by the application of $15.1 million of credits awarded under the Canadian class action settlements against defaulted loan balances, which reduced the provision for loan losses by the same amount. We anticipate that loan losses will be higher over the near-term because of the implementation of the loan rollover limitation and the change in collection practices that were implemented during the fiscal year ended June 30, 2014. Our estimates of the allowance for loan losses are inherently uncertain as many of these changes to underwriting and collections have been implemented recently and we do not have significant historical information for the loss rates and collections experience in accordance with the recently established regulatory guidance.

Relative to our reportable segments, after excluding the impacts of foreign currency and new stores and acquisitions, operating expenses in Europe Retail increased by $28.2 million, while operating expenses decreased by $11.9 million and $28.4 million in Canada Retail and eCommerce, respectively. The increase in operating expenses in Europe Retail is primarily the result of the increase in the provision for loan losses noted above. The decrease in operating expenses for eCommerce was primarily the result of a a decrease in the provision for loan losses, due to the lower consumer lending revenue noted above, and a decrease in advertising expenses, and the decrease in operating expenses for Canada Retail was primarily the result of a reduced provision for loan losses, as a result of the application of credits awarded under the class action settlements against defaulted loan balances noted above.

Corporate Expenses

Corporate expenses were $77.1 million for the nine months ended March 31, 2014 compared to $91.4 million for the nine months ended March 31, 2013, a decrease of $14.3 million. The decrease in corporate expenses is primarily the result of reduced incentive compensation, as well as decreased franchise and other taxes.

Other Depreciation and Amortization

Other depreciation and amortization was $12.7 million for the nine months ended March 31, 2014 compared to $18.8 million for the nine months ended March 31, 2013. The decrease of $6.1 million is primarily related to reduced amortization of DFS intangible assets as a result of the impairment charges recorded during the fiscal year ended June 30, 2013, as well as other acquired intangible assets becoming fully amortized.

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Interest Expense

Interest expense, net was $85.0 million for the nine months ended March 31, 2014 compared to $91.3 million for the nine months ended March 31, 2013. Included in the interest expense for the nine months ended March 31, 2014 is approximately $17.8 million of non-cash interest expense associated with our convertible debt and the amortization of various deferred issuance costs. This non-cash interest expense was approximately $20.1 million for the nine months ended March 31, 2013, representing a decrease of approximately $2.3 million. The decrease was primarily related to our legacy cross currency swaps becoming fully amortized in October 2012.

Subsequent to the prepayment of the majority of our Canadian term debt on December 23, 2009 with a portion of the proceeds from our $600.0 million senior note offering completed in December 2009, we discontinued hedge accounting on our legacy cross-currency swaps because we no longer achieved the requirements of hedge accounting. However, in accordance with the Derivatives and Hedging Topic of the FASB Codification, we continued to report the net loss related to the discontinued cash flow hedge in other accumulated comprehensive income and subsequently reclassify such amounts into earnings over the remaining original term of the derivative when the hedged forecasted transactions are recognized in earnings. This resulted in a $2.2 million non-cash interest charge for the nine months ended March 31, 2013.

Goodwill and Other Intangible Assets Impairment Charge

We recognized a preliminary goodwill impairment charge of approximately $121.5 million during the three months ended March 31, 2014, based on the estimated fair value and book value of our DFS, Europe Retail and eCommerce reporting units. Additionally, we recognized an impairment charge of $5.8 million related to DFS’ MILES program indefinite-lived intangible asset.

We recognized a preliminary goodwill impairment charge of approximately $15.2 million during the three months ended March 31, 2013, related to our DFS reporting unit. Additionally, we recognized an impairment charge of $15.9 million related to DFS’ other intangible assets, including the MILES program indefinite-lived intangible asset.

Additionally, we recognized an intangible asset impairment charge of approximately $5.5 million for the nine months ended March 31, 2013, associated with the termination of our contract with the third-party lender that principally funded the loans for our Military Installment Loan and Education Services, or MILES^®, program.

Unrealized Foreign Exchange Gain/Loss

The unrealized foreign exchange loss of $8.3 million for the nine months ended March 31, 2014 is due primarily to an unrealized foreign exchange loss of $21.7 million on our Senior Notes, subsequent to the termination of the cross-currency swaps on the debt in December 2013, as a result of a weakening in the Canadian Dollar, partially offset by unrealized foreign exchange gains on intercompany debt denominated in non-functional currencies.

The unrealized foreign exchange loss of $0.4 million for the nine months ended March 31, 2013 is due primarily to unrealized foreign exchange losses on intercompany debt.

Provision for Litigation Settlements

The provision for litigation settlements during the nine months ended March 31, 2013 was $2.7 million and primarily related to higher than expected claim submissions by eligible customers from litigation previously settled in California.

Other (Income) Expense, Net

During the nine months ended March 31, 2014, we recorded net other expense of approximately $2.7 million, due to $2.1 million of debt refinancing expenses, $1.0 million of expenses associated with the Lone Star acquisition, acquisition-related activities of $0.7 million and realized foreign exchange losses of $2.0 million, partially offset by a gain on the sale of our Merchant Cash Advance Limited subsidiary of $1.6 million and other income items of $1.5 million.

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During the nine months ended March 31, 2013, we recorded net other expense of approximately $12.3 million. We incurred $7.0 million of restructuring and other charges for employee severance and other costs related to the reorganization of our business operations between global retail and Internet platforms. We also recorded $5.0 million of expenses related to regulatory activity. Additionally, we incurred expenses for acquisition-related activities of $1.9 million and other income items of $1.6 million.

Income Tax Provision

The provision for income taxes was $19.3 million for the nine months ended March 31, 2014 compared to a provision of $20.6 million for the nine months ended March 31, 2013. The Company’s effective tax rate was (14.0%) for the nine months ended March 31, 2014 and was 167.8% for the nine months ended March 31, 2013. The increase in the effective tax rate for the nine months ended March 31, 2014 as compared to the prior year was primarily a result of lower pretax income principally resulting from goodwill impairment losses in the UK, Sweden, Poland, Spain, Romania, Finland, and the United States, as well as operating losses within the UK, Finland, and the United States. Substantially all of the goodwill was non-deductible. The provision for income taxes for the nine months ended March 31, 2014 also included the initial recognition of full valuation allowances on deferred tax assets from operations in the UK, and valuation allowances in Finland, Poland and the United States as it is not more-likely-than-not that deferred tax assets within these jurisdictions will be realized. Furthermore, the provision for income taxes for both periods also includes recognition of additional tax reserves for uncertain tax positions within Canada.

At June 30, 2013 and March 31, 2014 the Company had unrecognized tax benefit reserves related to uncertain tax positions of $20.7 million and $21.6 million respectively, which primarily related to transfer pricing matters which, if recognized, would decrease the effective tax rate. The total increase for the nine months ended March 31, 2014 of $1.0 million is comprised of an increase of $0.3 million in interest and an increase of $0.7 million in unrecognized tax benefit reserves. The cumulative interest at June 30, 2013 and March 31, 2014 was $2.6 million and $2.9 million respectively.

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Results of Reportable Segments

The segment discussions that follow describe the significant factors contributing to the changes in results for each segment.

Three Months Ended March 31, 2014 compared to the Three Months Ended March 31, 2013

	Three Months Ended March 31,						% Increase/ Decrease - Margin Change
	2013			2014
	(Dollars in millions)
Europe Retail revenues:
Consumer lending	$	44.0		$	43.9			(0.2	)%
Check cashing		5.5			4.4			(20.8	)%
Pawn service fees and sales		21.3			23.8			11.7	%
Money transfer fees		2.7			2.7			(0.1	)%
Gold sales		14.8			7.2			(51.7	)%
Other		6.8			5.2			(23.2	)%
Total Europe Retail revenues	$	95.1		$	87.2			(8.4	)%
Operating margin		25.1	%		8.0	%		(17.1 pts.	)
Canada Retail revenues:
Consumer lending	$	45.6		$	43.0			(5.8	)%
Check cashing		15.8			13.7			(12.9	)%
Pawn service fees and sales		0.1			0.2			n/m
Money transfer fees		4.7			4.5			(6.7	)%
Gold sales		2.3			1.1			(50.4	)%
Other		10.1			9.2			(9.3	)%
Total Canada Retail revenues	$	78.6		$	71.7			(8.9	)%
Operating margin		47.7	%		51.4	%		3.7 pts.
United States Retail revenues:
Consumer lending	$	16.6		$	16.4			(1.4	)%
Check cashing		10.6			10.8			1.3	%
Money transfer fees		1.0			1.0			9.2	%
Gold sales		0.7			0.3			(53.0	)%
Other		3.5			3.2			(8.1	)%
Total United States Retail revenues	$	32.4		$	31.7			(1.9	)%
Operating margin		29.4	%		24.8	%		(4.6 pts,	)
eCommerce revenues:
Consumer lending	$	75.5		$	55.9			(25.9	)%
Other		0.1			0.1			36.7	%
Total eCommerce revenues	$	75.6		$	56.0			(25.8	)%
Operating margin		2.7	%		1.3	%		(1.4 pts.	)
Other revenues:
Other	$	1.9		$	1.7			(9.3	)%
Total Other revenues (included in other revenue)	$	1.9		$	1.7			(9.3	)%
Operating margin		(5.9	)%		(0.8	)%		5.1 pts.
Total revenue	$	283.6		$	248.3			(12.5	)%
Operating margin	$	72.9		$	52.3			(28.2	)%
Operating margin %		25.7	%		21.1	%		(4.6 pts.	)

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The following table represents each reportable segment’s revenue as a percentage of total segment revenue and each reportable segment’s operating margin as a percentage of total segment operating margin:

	Three Months Ended March 31,
	Revenue						Operating Margin
	2013			2014			2013			2014
Europe Retail		33.6	%		35.1	%		32.8	%		13.3	%
Canada Retail		27.7	%		28.8	%		51.5	%		70.4	%
United States Retail		11.4	%		12.8	%		13.1	%		15.0	%
eCommerce		26.6	%		22.6	%		2.8	%		1.3	%
Other		0.7	%		0.7	%		(0.2	)%		—	%
		100.0	%		100.0	%		100.0	%		100.0	%

Europe Retail

Total revenues in Europe Retail were $87.2 million for the three months ended March 31, 2014, compared to $95.1 million for the three months ended March 31, 2013, a decrease of $7.9 million or 8.4%. The impact of new stores and acquisitions accounted for an increase of $4.7 million. On a constant currency basis and excluding the impact of new stores and acquisitions, year-over-year revenues in Europe Retail decreased by $17.4 million. Consumer lending revenue decreased by $3.2 million (on a constant currency basis and excluding new stores and acquisitions) for the three months ended March 31, 2014, as compared to the three months ended March 31, 2013. Europe Retail consumer lending revenue was negatively impacted by decreased loan volume due to the regulatory transition in the United Kingdom. Pawn service fees and sales decreased by $1.2 million on a constant currency basis and excluding new stores and acquisitions for the three months ended March 31, 2014, as compared to the three months ended March 31, 2013. Pawn service fees and sales were negatively impacted by continued weakness in the price of gold which resulted in lower auction and scrap margins on unredeemed pawn pledges during the three months ended March 31, 2014. Other revenues (gold sales, money transfer fees, foreign exchange products and debit cards) decreased by $11.6 million, primarily as a result of a decrease in gold sales. Other revenues were also negatively impacted by our October 2013 sale of our Merchant Cash Express Limited subsidiary. Check cashing revenues in Europe Retail were primarily impacted by the gradual migration away from paper checks to debit cards, and decreased by approximately $1.5 million, or 27.0% (also on a constant currency basis and excluding new stores and acquisitions).

Operating expenses in Europe Retail increased by $8.9 million, or 12.6%, from $71.3 million for the three months ended March 31, 2013 to $80.2 million for the three months ended March 31, 2014. On a constant currency basis and excluding new stores and acquisitions, Europe Retail operating expenses were flat as compared to the three months ended March 31, 2013. An increase in the provision for loan losses was offset by a decrease in purchased gold costs, as a result of lower gold sales.

There was an increase of 10.1 percentage points relating to the provision for loan losses as a percentage of consumer lending revenues, excluding a $2.3 million provision for pawn loans. The $2.3 million increase in the loan loss provision related to pawn loans was the result of continued weakness in gold prices, in local currencies, during the three months ended March 31, 2014. The loan loss provision for the three months ended March 31, 2014 was impacted by higher loan defaults in the United Kingdom resulting from the recent implementation of a loan rollover limitation, as well as from a modification of our collection practices, which now place additional limitations on the number and duration of electronic debit attempts to a customer’s account. On a constant currency basis, the provision for loan losses as a percentage of consumer lending revenues for the three months ended March 31, 2013 was 22.7%, while for the three months ended March 31, 2014, the rate increased to 32.8%. On a constant currency basis, the operating margin percentage in Europe Retail decreased from 25.1% for the three months ended March 31, 2013 to 8.0% for the three months ended March 31, 2014 primarily due to the increase in the provision for loan losses noted above.

The pre-tax loss in Europe Retail was $65.5 million for the three months ended March 31, 2014 compared to $2.7 million of pre-tax loss for the prior year, an increase of $62.8 million, and on a constant currency basis, the increase was $60.9 million. On a constant currency basis, pre-tax income was negatively impacted by a preliminary goodwill impairment charge of $52.7 million, decreased operating margins of $17.3 million and increased interest expense of $1.2 million, as a result of increased intercompany interest expense, partially offset by a decrease of $2.4 million in corporate expenses, increased unrealized foreign exchange gains of $6.6 million and a decrease of $0.8 million in restructuring and other charges incurred in the three months ended March 31, 2013.

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Canada Retail

Total revenues in Canada Retail were $71.7 million for the three months ended March 31, 2014, a decrease of $6.9 million, or 8.9%, as compared to the three months ended March 31, 2013. The impact of new stores and acquisitions accounted for an increase of $0.7 million. On a constant currency basis, total revenues in Canada Retail decreased by $0.3 million, or 0.4%, for the three months ended March 31, 2014, as compared to the three months ended March 31, 2013. Consumer lending revenues in Canada Retail increased by $1.4 million, or 3.1% (on a constant currency basis), for the three months ended March 31, 2014 as compared to the three months ended March 31, 2013. Other revenues (gold sales, money transfer fees, foreign exchange products and prepaid debit cards) decreased by $1.1 million (on a constant currency basis) primarily as a result of decreased gold sales. Check cashing revenues decreased $0.7 million in Canada Retail due to decreases in the number of checks cashed, partially offset by an increase in the average fee per check and average face amount per check (also on a constant currency basis).

Operating expenses in Canada Retail decreased $6.3 million, or 15.4%, from $41.1 million for the three months ended March 31, 2013 to $34.8 million for the three months ended March 31, 2014. The impacts of changes in foreign currency rates resulted in a decrease of $3.2 million. The constant currency decrease of approximately $3.1 million is primarily related to decreases in the provision for loan losses and purchased gold costs, partially offset by an increase in advertising expenses. On a constant currency basis, the provision for loan losses, as a percentage of loan revenues, decreased by 11.4 percentage points from 10.7% to (0.7)%, as a result of the application of $6.3 million of credits awarded under the class action settlements against defaulted loan balances, which reduced the provision for loan losses by the same amount. On a constant currency basis, Canada Retail’s operating margin percentage increased from 47.7% for the three months ended March 31, 2013 to 51.5% for the three months ended March 31, 2014. The increase in this area is primarily the result of the reduced operating expenses noted above.

Canada Retail pre-tax loss was $6.6 million for the three months ended March 31, 2014 compared to pre-tax income of $9.5 million for the three months ended March 31, 2013, a decrease of $16.1 million. On a constant currency basis, the pre-tax loss was $7.5 million. On a constant currency basis, the decrease in pre-tax income from the prior year is primarily attributable to increased unrealized foreign exchange losses of $25.5 million due to the depreciation in the Canadian Dollar and the termination of the Canadian cross-currency swaps in December 2013, partially offset by increased operating margins of $2.8 million, decreased interest expense of $1.7 million, decreased corporate expenses of $2.8 million and a decrease of $1.5 million in restructuring and other charges incurred in the three months ended March 31, 2013.

United States Retail

Total United States Retail revenues were $31.7 million for the three months ended March 31, 2014 compared to $32.4 million for the three months ended March 31, 2013, a decrease of $0.7 million, or 2.0%. From a product perspective, this decrease is primarily related to a decrease in gold sales of $0.4 million and a decrease in consumer lending revenues of $0.2 million. Check cashing revenues increased by $0.2 million or the three months ended March 31, 2014 as compared to the three months ended March 31, 2013, as a decrease in the number of checks cashed was offset by an increase in the average fee per check and average face amount per check.

Operating margins in United States Retail were 24.8% for the three months ended March 31, 2014, compared to 29.4% for the three months ended March 31, 2013. This decrease was primarily the result of an increase in the provision for loan losses due to higher initial returns and lower collections, as well as an increase in occupancy costs.

United States Retail pre-tax profit was $6.9 million for the three months ended March 31, 2014 compared to $8.1 million for the three months ended March 31, 2013. The decrease was primarily the result of a decrease of $1.7 million in operating margins, partially offset by a $0.2 million decrease in corporate expenses for the three months ended March 31, 2014, as compared to the three months ended March 31, 2013.

eCommerce

Total eCommerce revenues were $56.0 million for the three months ended March 31, 2014, compared to $75.6 million for the three months ended March 31, 2013, a decrease of $19.6 million or 25.8%. On a constant currency basis and excluding new markets, year-over-year revenues in eCommerce decreased by $23.5 million, or 31.1%. The decrease in consumer lending revenue primarily reflects decreased loan volume due to the regulatory transition in the United Kingdom.

Operating expenses in eCommerce decreased by $18.1 million, or 24.7%, from $73.5 million for the three months ended March 31, 2013 to $55.4 million for the three months ended March 31, 2014. On a constant currency basis and excluding new markets, eCommerce operating expenses decreased by $23.3 million, or 31.7%. There was an increase of 1.4 percentage points relating to the provision for loan losses as a percentage of consumer lending revenues. The loan loss provision for the

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three months ended March 31, 2014 was significantly impacted by higher loan defaults in the United Kingdom resulting from the implementation of the loan rollover limitation, as well as from a modification of our collection practices, which now place additional limitations on the number and duration of electronic debit attempts to a customer’s account. On a constant currency basis, the provision for loan losses as a percentage of consumer lending revenues for the three months ended March 31, 2013 was 43.1%, while for the three months ended March 31, 2014, the rate increased to 44.5%. On a constant currency basis, the operating margin percentage in eCommerce decreased from 2.7% for the three months ended March 31, 2013 to 1.6% for the three months ended March 31, 2014 primarily due to the increase in the provision for loan losses noted above, partially offset by decreased advertising expenses and franchise and other taxes.

The pre-tax loss in eCommerce was $53.9 million for the three months ended March 31, 2014 compared to a pre-tax loss of $6.6 million for the three months ended March 31, 2013, an increase of $47.3 million – on a constant currency basis, the increase was $42.4 million. Pre-tax income was negatively impacted by a preliminary goodwill impairment charge of $52.5 million and decreased operating margins of $1.2 million, partially offset by increased interest income of $0.9 million, decreased corporate expenses of $2.5 million, decreased other depreciation and amortization of $0.9 million, and a decrease of $2.0 million in restructuring and other charges incurred in the three months ended March 31, 2013.

Other

Included in Other are DFS revenues of $1.7 million for the three months ended March 31, 2014, compared to $1.9 million for the three months ended March 31, 2013, a decrease of $0.2 million, or 9.3%. Revenue for the DFS business unit was unfavorably impacted by competition that has re-entered the auto loan market with aggressive pricing options.

On June 27, 2013, DFS received a purported termination notice from the bank funding the MILES loans after DFS and the third-party lender each agreed separately to consent orders with the CFPB, without admitting or denying any of the facts or conclusions of the CFPB review. After restarting the discussions with various potential lending partners during the fourth quarter of fiscal 2013, in August 2013, DFS and a new third-party lender entered into a contract whereby the lender agreed to fund MILES program loans on terms we believe provide more competitive financing alternatives to DFS’ service member customers.

We recognized a preliminary goodwill impairment charge of approximately $16.3 million during the three months ended March 31, 2014, related to our DFS reporting unit. Additionally, we recognized an impairment charge of $5.8 million related to DFS’ MILES program indefinite-lived intangible asset.

We recognized a preliminary goodwill impairment charge of approximately $15.2 million during the three months ended March 31, 2013, related to our DFS reporting unit. Additionally, we recognized an impairment charge of $15.9 million related to DFS’ other intangible assets, including the MILES program indefinite-lived intangible asset.

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During the three months ended March 31, 2013, we incurred $2.4 million of restructuring and other charges included in Other for employee severance and other costs related to the reorganization of our business operations between global retail and Internet platforms, as well as $5.0 million of expenses related to regulatory activity.

	Nine Months Ended March 31,						% Increase/ Decrease - Margin Change
	2013			2014
	(Dollars in millions)
Europe Retail revenues:
Consumer lending	$	124.0		$	131.9			6.4	%
Check cashing		18.3			15.2			(17.1	)%
Pawn service fees and sales		62.7			70.3			12.1	%
Money transfer fees		8.4			8.2			(1.9	)%
Gold sales		40.7			26.0			(36.1	)%
Other		24.7			20.9			(15.3	)%
Total Europe Retail revenues	$	278.8		$	272.5			(2.2	)%
Operating margin		27.4	%		8.2	%		(19.2 pts	)
Canada Retail revenues:
Consumer lending	$	144.5		$	139.9			(3.2	)%
Check cashing		53.0			48.6			(8.4	)%
Pawn service fees and sales		0.1			0.4			n/m
Money transfer fees		16.1			14.7			(8.3	)%
Gold sales		7.7			4.1			(46.8	)%
Other		23.8			20.8			(12.4	)%
Total Canada Retail revenues	$	245.2		$	228.5			(6.8	)%
Operating margin		49.6	%		53.5	%		3.9 pts.
United States Retail revenues:
Consumer lending	$	52.2		$	53.0			1.6	%
Check cashing		26.1			25.8			(0.9	)%
Pawn service fees and sales		—			0.1			n/m
Money transfer fees		3.4			3.2			(8.5	)%
Gold sales		2.6			1.2			(52.2	)%
Other		9.9			9.3			(6.4	)%
Total United States Retail revenues	$	94.2		$	92.6			(1.7	)%
Operating margin		25.6	%		23.4	%		(2.2 pts,	)
eCommerce revenues:
Consumer lending	$	229.1		$	174.0			(24.1	)%
Other		0.2			0.3			17.2	%
Total eCommerce revenues	$	229.3		$	174.3			(24.0	)%
Operating margin		19.7	%		5.8	%		(13.9 pts.	)
Other revenues:
Other		5.7			4.3			(23.8	)%
Total Other revenues (included in other revenue)		5.7			4.3			(23.8	)%
Operating margin		(11.6	)%		(21.8	)%		(10.2 pts.	)
Total revenue	$	853.2		$	772.2			(9.5	)%
Operating margin	$	266.7		$	175.3			(34.2	)%
Operating margin %		31.3	%		22.7	%		(8.6 pts.	)

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	Nine Months Ended March 31,
	Revenue						Operating Margin
	2013			2014			2013			2014
Europe Retail		32.7	%		35.3	%		28.6	%		12.7	%
Canada Retail		28.7	%		29.6	%		45.7	%		69.7	%
United States Retail		11.0	%		12.0	%		9.0	%		12.4	%
eCommerce		26.9	%		22.6	%		16.9	%		5.8	%
Other		0.7	%		0.5	%		(0.2	)%		(0.6	)%
		100.0	%		100.0	%		100.0	%		100.0	%

Europe Retail

Total revenues in Europe Retail were $272.5 million for the nine months ended March 31, 2014, compared to $278.8 million for the nine months ended March 31, 2013, a decrease of $6.3 million or 2.2%. The impact of new stores and acquisitions accounted for an increase of $14.2 million. On a constant currency basis and excluding the impact of new stores and acquisitions, year-over-year revenues in Europe Retail decreased by $25.7 million. Consumer lending revenue increased by $2.8 million (on a constant currency basis and excluding new stores and acquisitions) for the nine months ended March 31, 2014, as compared to the nine months ended March 31, 2013. Europe Retail consumer lending revenue was negatively impacted by decreased loan volume due to the regulatory transition in the United Kingdom. The growth in consumer lending revenue reflects the growth in the store-based business during the three months ended September 30, 2013. Pawn service fees and sales decreased by $0.8 million on a constant currency basis and excluding new stores and acquisitions for the nine months ended March 31, 2014, as compared to the nine months ended March 31, 2013. Pawn service fees and sales were negatively impacted by a decline in the price of gold which resulted in lower auction and scrap margins on unredeemed pawn pledges during the nine months ended March 31, 2014. Other revenues (gold sales, money transfer fees, foreign exchange products and debit cards) decreased by $23.8 million, primarily as a result of a decrease in gold sales and money transfer fees, partially offset by increased currency exchange revenues. Other revenues were also negatively impacted by our October 2013 sale of our Merchant Cash Express Limited subsidiary. Check cashing revenues in Europe Retail were primarily impacted by the gradual migration away from paper checks to debit cards, and decreased by approximately $3.9 million, or 21.4% (also on a constant currency basis and excluding new stores and acquisitions).

Operating expenses in Europe Retail increased by $47.9 million, or 23.7%, from $202.4 million for the nine months ended March 31, 2013 to $250.3 million for the nine months ended March 31, 2014. On a constant currency basis and excluding new stores and acquisitions, Europe Retail operating expenses increased by $28.2 million or 13.9%. The increase is primarily the result of an increase in the provision for loan losses, offset by a decrease in purchased gold costs, as a result of lower gold sales.

There was an increase of 19.2 percentage points relating to the provision for loan losses as a percentage of consumer lending revenues, excluding a $13.3 million provision for pawn loans. The $13.3 million increase in the loan loss provision related to pawn loans was the result of continued weakness in gold prices, in local currencies, during the nine months ended March 31, 2014. The loan loss provision for the nine months ended March 31, 2014 was impacted by higher loan defaults in the United Kingdom resulting from the recent implementation of a loan rollover limitation, as well as from a modification of our collection practices, which now place additional limitations on the number and duration of electronic debit attempts to a customer’s account. On a constant currency basis, the provision for loan losses as a percentage of consumer lending revenues for the nine months ended March 31, 2013 was 20.6%, while for the nine months ended March 31, 2014, the rate increased to 39.8%. On a constant currency basis, the operating margin percentage in Europe Retail decreased from 27.4% for the nine months ended March 31, 2013 to 8.2% for the nine months ended March 31, 2014 primarily due to the increase in the provision for loan losses noted above.

The pre-tax loss in Europe Retail was $88.8 million for the nine months ended March 31, 2014 compared to $5.1 million of pre-tax income for the prior year, a decrease of $93.9 million, and on a constant currency basis, the decrease was $92.0 million. On a constant currency basis, pre-tax income was negatively impacted by a preliminary goodwill impairment charge of $52.7 million, decreased operating margins of $54.4 million and increased interest expense of $5.8 million, as a result of increased intercompany interest expense, partially offset by a decrease of $5.2 million in corporate expenses, increased unrealized foreign exchange gains of $13.4 million, and a decrease of $0.8 million in restructuring and other charges incurred in the three months ended March 31, 2013.

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Canada Retail

Total revenues in Canada Retail were $228.5 million for the nine months ended March 31, 2014, a decrease of $16.7 million, or 6.8%, as compared to the nine months ended March 31, 2013. The impact of new stores and acquisitions accounted for an increase of $2.9 million. On a constant currency basis, total revenues in Canada Retail decreased by $1.9 million, or 0.8%, for the nine months ended March 31, 2014, as compared to the nine months ended March 31, 2013. Consumer lending revenues in Canada Retail increased by $4.4 million, or 3.0% (on a constant currency basis), for the nine months ended March 31, 2014 as compared to the nine months ended March 31, 2013, related to the growth in our store-based business. Other revenues (gold sales, money transfer fees, foreign exchange products and prepaid debit cards) decreased by $5.2 million (on a constant currency basis) primarily as a result of decreased gold sales and debit card fees revenue. Check cashing revenues decreased $1.4 million in Canada Retail due to a decrease in the number of checks cashed, partially offset by an increase in the average fee per check and average face amount per check (also on a constant currency basis).

Operating expenses in Canada Retail decreased $17.2 million, or 13.9%, from $123.5 million for the nine months ended March 31, 2013 to $106.3 million for the nine months ended March 31, 2014. The impacts of changes in foreign currency rates resulted in a decrease of $7.0 million. The constant currency decrease of approximately $10.2 million is primarily related to decreases in the provision for loan losses and purchased gold costs, partially offset by an increase in advertising expenses. On a constant currency basis, the provision for loan losses, as a percentage of loan revenues, decreased by 8.0 percentage points from 9.9% to 1.9%, as a result of the application of $15.1 million of credits awarded under the class action settlements against defaulted loan balances, which reduced the provision for loan losses by the same amount. On a constant currency basis, Canada Retail’s operating margin percentage increased from 49.6% for the nine months ended March 31, 2013 to 53.4% for the nine months ended March 31, 2014. The increase in this area is primarily the result of the reduced operating expenses noted above.

Canada Retail pre-tax income was $32.8 million for the nine months ended March 31, 2014 compared to a pre-tax income of $31.5 million for the nine months ended March 31, 2013, an increase of $1.3 million. On a constant currency basis, pre-tax income was $33.9 million. On a constant currency basis, the increase in pre-tax income from the prior year is primarily attributable to increased operating margins of $8.3 million, decreased interest expense of $8.5 million, decreased corporate expenses of $8.7 million and a decrease of $1.5 million in restructuring and other charges incurred in the three months ended March 31, 2013, partially offset by increased unrealized foreign exchange losses of $24.1 million due to the depreciation in the Canadian Dollar and the termination of the Canadian cross-currency swaps in December 2013.

United States Retail

Total United States Retail revenues were $92.6 million for the nine months ended March 31, 2014 compared to $94.2 million for the nine months ended March 31, 2013, a decrease of $1.6 million, or 1.7%. From a product perspective, this decrease is primarily related to a decrease in gold sales of $1.4 million, decreased check cashing revenue of $0.3 million and decreased money transfer fees of $0.2 million, partially offset by an increase of $0.8 million in consumer lending revenues. Check cashing revenues decreased from $26.1 million for the nine months ended March 31, 2013 to $25.8 million for the nine months ended March 31, 2014, as a decrease in the number of checks cashed was partially offset by an increase in the average fee per check and average face amount per check.

Operating margins in United States Retail were 23.4% for the nine months ended March 31, 2014, compared to 25.6% for the nine months ended March 31, 2013. This decrease was primarily the result of an increase in the provision for loan losses due to higher initial returns and lower collections.

United States Retail pre-tax profit was $19.0 million for the nine months ended March 31, 2014 compared to $17.1 million for the nine months ended March 31, 2013. The increase was primarily the result of the nine months ended March 31, 2013 including a $2.7 million provision for litigation settlements, as well as a $1.2 million decrease in corporate expenses, partially offset by a decrease of $2.4 million in operating margins for the nine months ended March 31, 2014, as compared to the nine months ended March 31, 2013.

eCommerce

Total eCommerce revenues were $174.3 million for the nine months ended March 31, 2014, compared to $229.3 million for the nine months ended March 31, 2013, a decrease of $55.1 million or 24.0%. On a constant currency basis and excluding new markets, year-over-year revenues in eCommerce decreased by $60.3 million, or 26.3%. The decrease in consumer lending revenue primarily reflects decreased loan volume due to the regulatory transition in the United Kingdom.

Operating expenses in eCommerce decreased by $20.1 million, or 10.9%, from $184.2 million for the nine months ended March 31, 2013 to $164.1 million for the nine months ended March 31, 2014. On a constant currency basis and excluding new markets, eCommerce operating expenses decreased by $28.4 million or 15.4%. There was an increase of 5.2 percentage points relating to the provision for loan losses as a percentage of consumer lending revenues. The loan loss

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provision for the nine months ended March 31, 2014 was significantly impacted by higher loan defaults in the United Kingdom resulting from the implementation of the loan rollover limitation, as well as from a modification of our collection practices, which now place additional limitations on the number and duration of electronic debit attempts to a customer’s account. On a constant currency basis, the provision for loan losses as a percentage of consumer lending revenues for the nine months ended March 31, 2013 was 35.0%, while for the nine months ended March 31, 2014, the rate increased to 40.2%. On a constant currency basis, the operating margin percentage in eCommerce decreased from 19.7% for the nine months ended March 31, 2013 to 6.3% for the nine months ended March 31, 2014 primarily due to the increase in the provision for loan losses noted above, as well as increased salaries and benefits costs and increased advertising expenses (as a percentage of revenue).

The pre-tax loss in eCommerce was $51.4 million for the nine months ended March 31, 2014 compared to pre-tax income of $25.1 million for the nine months ended March 31, 2013, a decrease of $76.5 million—on a constant currency basis, the decrease was $71.0 million. Pre-tax income was negatively impacted by a preliminary goodwill impairment charge of $52.5 million and decreased operating margins of $34.3 million, partially offset by increased interest income of $2.3 million, decreased other depreciation and amortization of $3.1 million, decreased corporate expenses of $3.2 million, and a decrease of $2.0 million in restructuring and other charges incurred in the three months ended March 31, 2013.

Other

Included in Other are DFS revenues of $4.3 million for the nine months ended March 31, 2014, compared to $5.7 million for the nine months ended March 31, 2013, a decrease of $1.4 million, or 23.8%. Revenue for the DFS business unit was unfavorably impacted by the influx of competition that has re-entered the auto loan market with aggressive pricing options and the government shutdown during our fiscal second quarter.

We recognized a preliminary goodwill impairment charge of approximately $16.3 million during the three months ended March 31, 2014, related to our DFS reporting unit. Additionally, we recognized an impairment charge of $5.8 million related to DFS’ MILES program indefinite-lived intangible asset.

We recognized a preliminary goodwill impairment charge of approximately $15.2 million during the three months ended March 31, 2013, related to our DFS reporting unit. Additionally, we recognized an impairment charge of $15.9 million related to DFS’ other intangible assets, including the MILES program indefinite-lived intangible asset.

Additionally, we recognized an intangible asset impairment charge of approximately $5.5 million for the nine months ended March 31, 2013, associated with the termination of our contract with the third-party lender that principally funded the loans for our Military Installment Loan and Education Services, or MILES^®, program.

Additionally, during the three months ended March 31, 2013, we incurred $2.4 million of restructuring and other charges included in Other for employee severance and other costs related to the reorganization of our business operations between global retail and Internet platforms, as well as $5.0 million of expenses related to regulatory activity.

Changes in Financial Condition

On a constant currency basis, cash and cash equivalent balances and the revolving credit facilities balances fluctuate significantly as a result of seasonal, intra-month and day-to-day requirements for funding unsecured short-term consumer and secured pawn lending, check cashing and other operating and acquisition activities. For the nine months ended March 31, 2014, cash and cash equivalents increased $40.7 million, which is net of a $6.6 million increase as a result of the effect of exchange rate changes on foreign cash and cash equivalents. However, as these foreign cash accounts are maintained in Europe and Canada in local currency, there is little, if any, actual economic gain or loss from changes in currency rates, and as a result, the cash balances are available on a local currency basis to fund the daily operations of the Europe-based and Canada-based business units.

Consumer loans, net decreased by $15.4 million to $174.8 million at March 31, 2014 from $190.2 million at June 30, 2013. Consumer loans, gross decreased by $9.7 million and the related allowance for loan losses increased by $5.7 million. On a segment basis, Europe Retail realized a decrease in its consumer loans, gross balances of $3.0 million. On a constant currency basis, the consumer loans, gross balances in Europe Retail decreased by $8.5 million. The decrease in the Europe Retail consumer loans balances was primarily due to a decrease in loans in the United Kingdom store-based business. The Canada Retail segment showed a decrease in its consumer loans, gross balances of $3.8 million. On a constant currency basis, the Canada Retail segment had a decrease in consumer loans, gross balances of $1.9 million. The United States Retail segment had

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a decrease of $3.1 million in its consumer loans, gross balances. Consumer loans, gross balances for the eCommerce segment were flat when compared to June 30, 2013. On a constant currency basis, the consumer loans, gross balances in eCommerce decreased by $7.6 million, primarily due to a decrease in loans in the UK Internet business, partially offset by an increase in loans in the Scandinavian Internet business, as a result of the introduction of a new consumer credit line product to replace the short-term loan product in Finland.

On a constant currency basis, the allowance for loan losses increased by $1.6 million and increased as a percentage of the outstanding principal balance to 20.0% at March 31, 2014 from 17.3% at June 30, 2013. The following factors impacted this area:

• On a constant currency basis, Europe Retail’s ratio of allowance for loan losses as a percentage of consumer loans outstanding has increased from 15.3% at June 30, 2013 to 20.1% at March 31, 2014, primarily as a result of higher loss reserves applied to loans in the United Kingdom store-based business. The growth of the loan portfolio in Poland, which carries a higher loan loss reserve percentage than our legacy unsecured loan portfolio, continues to slightly increase the overall loan loss reserve as a percentage of gross consumer loans receivable.

• On a constant currency basis, the ratio of the allowance for loan losses in eCommerce as a percentage of consumer loans outstanding increased from 28.6% at June 30, 2013 to 31.3% at March 31, 2014, primarily as a result of higher loss reserves applied to loans in the United Kingdom Internet business. This increase was partially offset by the increase in loans in the Scandinavian Internet business noted above, which carry a lower loan loss reserve percentage than our other Internet businesses.

• On a constant currency basis, the ratio of allowance for loan losses in Canada Retail as a percentage of consumer loans outstanding increased from 2.2% at June 30, 2013 to 2.7% at March 31, 2014. This increase was primarily the result of a change in product mix, as well as higher initial returns.

• The ratio of the allowance for loan losses related to the United States Retail unsecured short-term consumer loans increased from 1.6% at June 30, 2013 to 2.4% at March 31, 2014. This increase was primarily the result of higher initial returns.

Liquidity and Capital Resources

Historically, our principal sources of cash have been from operations, borrowings under our credit facilities and issuance of debt and equity securities. We anticipate that our primary uses of cash will be to provide working capital, finance capital expenditures, meet debt service requirements, fund consumer loans and pawn loans, finance store expansion, finance acquisitions, repurchase shares of our common stock and finance the expansion of our products and services.

Net cash provided by operating activities was $151.8 million for the nine months ended March 31, 2014, compared to net cash provided by operating activities of $215.1 million for the nine months ended March 31, 2013. The decrease in net cash provided by operations during the nine months ended March 31, 2014 compared to the nine months ended March 31, 2013 was primarily the result of reduced net income.

Net cash used in investing activities was $117.9 million for the nine months ended March 31, 2014, compared to $184.5 million for the nine months ended March 31, 2013. Our investing activities primarily relate to loan originations and repayments, acquisitions, purchases of property and equipment for our stores and investments in technology. The decrease in net cash used in investing activities in 2014 compared to 2013 was primarily the result of the slower growth in our consumer lending portfolios, proceeds from the sale of our Merchant Cash Advance Limited subsidiary, as well as reduced capital expenditures, due to reduced store openings.

The actual amount of capital expenditures each year depends in part upon the number of new stores opened or acquired and the number of stores remodeled, as well as businesses acquired. During the nine months ended March 31, 2014, we made capital expenditures of $25.5 million and acquisitions of $26.3 million, compared to capital expenditures of $32.7 million and acquisitions of $25.1 million during the nine months ended March 31, 2013. We currently anticipate that our capital expenditures, excluding acquisitions, will aggregate approximately $30.0 million during our fiscal year ending June 30, 2014. The actual amount of capital expenditures each year depends in part upon the number of new stores opened or acquired and the number of stores remodeled.

Net cash provided by financing activities was $0.2 million for the nine months ended March 31, 2014, compared to net cash used in financing activities of $46.7 million for the nine months ended March 31, 2013.

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The cash provided by financing activities during the nine months ended March 31, 2014 was primarily a result of proceeds of $38.8 million related to the termination of our Canadian cross-currency swaps, partially offset by share repurchases of $21.5 million, a repayment of $10.0 million of long-term debt, a net paydown on our revolving credit facilities of $4.5 million and debt issuance cost payments of $3.0 million.

The cash used in financing activities during the nine months ended March 31, 2013 was primarily a result of share repurchases of $30.1 million, the repurchase of $8.6 million of our Convertible Notes due 2027, a net paydown on our revolving credit facilities of $5.0 million and a $3.9 million contingent consideration payment.

Senior Secured Credit Facility On October 25, 2013, we replaced our existing bank facility and entered into a new senior secured credit facility (the “Revolving Facility”) with a syndicate of lenders, with Deutsche Bank AG, New York Branch, serving as the administrative agent (the “Agent”). The Revolving Facility provides for a five-year $180.0 million global revolving credit facility, with potential to further increase the credit facility to up to $230.0 million. Availability under the Revolving Facility is based on a borrowing base comprised of cash and consumer receivables of the borrowers and guarantors, as described below. There is a sublimit for borrowings in the United States based on the borrowing base assets of the U.S. borrower and guarantors.

Borrowings under the Revolving Facility may be denominated in United States Dollars, British Pounds Sterling, Euros or Canadian Dollars (and other currencies as may be approved by the lenders). Interest on borrowings under the Revolving Facility will be derived from a pricing grid based on our total secured leverage ratio, which currently allows borrowing for fixed interest periods at an interest rate equal to the LIBO Rate or Canadian Dollar Offer Rate (as applicable based on the currency of borrowing) plus 400 basis points. The Credit Agreement also allows for borrowing at daily rates equal to ABR (the greater of the US prime rate, the one-month LIBO Rate plus 1.00% and the federal funds rate plus 1/2 of 1%) plus 300 basis points in the case of borrowing in United States Dollars, Canadian prime rate (equal to the greater of the published Canadian dollar prime rate or one-month CDOR plus 1.00%) plus 300 basis points in the case of borrowings in Canadian Dollars, or a weekly LIBO Rate plus 400 basis points in the case of borrowings in British Pounds Sterling or Euros.

The Revolving Facility allows for borrowings by DFG, National Money Mart Company, an indirect Canadian subsidiary of DFC (“NMM”), Dollar Financial U.K. Limited, an indirect U.K. subsidiary of DFC (“DFUK”) and DF Eurozone (UK) Limited, an indirect U.K. subsidiary of DFC (“DF Eurozone”). Borrowings by DFG under the Revolving Facility are guaranteed by DFC and certain direct and indirect U.S. subsidiaries of DFC. Borrowings by non-U.S. borrowers under the Revolving Facility are guaranteed by DFC and DFG and substantially all of their U.S. subsidiaries, by NMM and substantially all of its direct and indirect Canadian subsidiaries, and by DFUK, DF Eurozone and Instant Cash Loans Limited, a U.K. subsidiary of DFUK. The obligations of the respective borrowers and guarantors under the Revolving Facility are secured by substantially all the assets of such borrowers and guarantors.

The Revolving Facility will mature on October 25, 2018, subject to earlier maturity in the event that the outstanding unsecured notes issued by NMM are not refinanced by September 14, 2016 or the outstanding 3.25% convertible notes issued by DFC are not refinanced by January 15, 2017.

As of March 31, 2014, there was $46.0 million outstanding under the Revolving Facility. The credit agreement executed in connection with the entry into the Revolving Facility (the “Credit Agreement”) contains customary covenants, representations and warranties and events of default. The agreement contains two primary financial maintenance covenants; a secured leverage ratio and a fixed charge ratio. As of March 31, 2014, we were in compliance with all such covenants. Furthermore, based on our forecasted earnings as of March 31, 2014, we expect to be in compliance with such covenants for the succeeding twelve months. However, it is reasonably possible that we could violate one or more covenants in the future if actual earnings are less than forecasted earnings or if other actions contemplated in our forecast are not executed. If we were to breach the covenants under the senior secured credit agreement, the lenders would be entitled to declare all amounts borrowed under it immediately due and payable. This acceleration of debt, if not paid by us, would be an event of default under, each of the indentures governing the senior and convertible notes issued or guaranteed by us (described below), and give rise to the right, in respect of each tranche of senior and convertible notes, of the trustee and of holders of at least 25% in aggregate principal amount of such notes, to demand immediate repayment of such tranche of notes.

April 2012 Convertible Debt Offering On April 16, 2012, we completed the offering of $230.0 million aggregate principal amount of senior convertible notes due 2017. The notes pay interest semi-annually at a rate of 3.25% per annum and are convertible at an initial conversion rate of 46.8962 shares of common stock per $1,000 principal amount of notes, which is equal to an initial conversion price of $21.32 per share. The notes are initially convertible into common stock beginning after June 30, 2012, depending on the closing price of our common stock. In connection with the offering, we entered into convertible note hedge transactions with respect to our common stock with affiliates of the initial purchasers of the notes, and separate warrant transactions with the option counter parties, which effectively increase the conversion price of the convertible notes to $26.45 per share. The notes mature on April 15, 2017.

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Scandinavian Credit Facilities As a result of our December 2010 acquisition of Sefina, we assumed borrowings under Sefina’s existing secured credit facilities in Sweden and Finland, consisting of two working capital facilities in Sweden of SEK 185 million and SEK 55 million and overdraft facilities in Sweden and Finland with commitments of up to SEK 85 million and EUR 17.5 million, respectively.

In February 2012, we refinanced the Finnish overdraft facility with a new secured credit facility consisting of a revolving credit facility with a commitment of up to EUR 10.75 million and a term loan facility of EUR 8.0 million. In February 2014, we refinanced the EUR 10.75 million Finnish revolving credit facility extending the maturity date from February 15, 2014 to February 15, 2016. The facility will now bear an interest rate of one month Euribor plus 200 basis points (2.28% at March 31, 2014) with unused fees of 100 basis points on the unused portion of the facility. There was EUR 5.4 million (approximately $7.4 million) outstanding under the Finnish revolving credit facility as of March 31, 2014.

The Finnish term loan is due in February 2016, and has an interest rate of the six month Euribor plus 300 basis points (3.28% at March 31, 2014). There was EUR 8.0 million ($11.0 million) outstanding on the Finnish term loan as of March 31, 2014. The Finnish loans are secured by the assets of our pawn lending operating subsidiary in Finland.

In June 2012, we entered into a secured credit facility which replaced, and refinanced the outstanding borrowings under the prior Swedish facilities. On September 27, 2013, we entered into an amendment to the secured credit facility. The amendment amends certain financial and operating covenants in order to provide additional flexibility to us, and resulted in a SEK 65 million (approximately $10.0 million) prepayment of the term loan portion of the facility, and reduced the capacity under the revolving credit facility by SEK 10 million (approximately $1.6 million). The Swedish credit facility now consists of a term loan facility of SEK 175 million (approximately $27.0 million), all of which was outstanding at March 31, 2014, and a revolving credit facility of SEK 115 million (approximately $17.8 million at March 31, 2014), of which SEK 10 million (approximately $1.6 million) was outstanding as of March 31, 2014. The Swedish term loan is due June 2016 and carries an interest rate of the three month Stockholm Interbank Offered Rate (STIBOR) plus 300 basis points (3.80% at March 31, 2014). The Swedish revolving credit facility is due June 2014 and carries an interest rate of the three month STIBOR plus 200 basis points (2.80% at March 31, 2014). The Swedish loans are secured primarily by the value of our pawn pledge stock in Sweden.

2.875% Senior Convertible Notes due 2027 On June 27, 2007, we issued $200.0 million aggregate principal amount of 2.875% Senior Convertible Notes due 2027, which we refer to as the 2027 notes. In February 2010, we repurchased $35.2 million aggregate principal amount of the 2027 Notes in privately negotiated transactions with six of the holders of the 2027 notes. Through a series of privately negotiated transactions with certain holders of the 2027 notes in December 2009, the holders exchanged an aggregate of $120.0 million principal amount of the 2027 notes held by such holders for an equal aggregate principal amount of our new 3.00% Senior Convertible Notes due 2028, which we refer to as the 2028 notes. On December 31, 2012, 2027 notes in an aggregate principal amount of $8.6 million aggregate were surrendered by holders and repurchased by us.

As a result of these repurchase transactions and the privately negotiated exchange transactions, $36.2 million and $120.0 million aggregate principal amount of 2027 notes and 2028 notes, respectively, remains outstanding as of March 31, 2014.

Other Debt Other debt consists of $8.9 million of debt assumed as part of the Suttons & Robertsons acquisition in April 2010, consisting of a $3.1 million revolving loan and a $5.8 million term loan, all of which matures in May 2014. We are currently in the process of negotiating an extension of this facility, and have a month-to-month arrangement in place with the lender until it is finalized.

Long-Term Debt On December 23, 2009, our Canadian subsidiary, National Money Mart Company, issued $600.0 million aggregate principal amount of the 2016 notes. The 2016 notes will mature on December 15, 2016.

As of March 31, 2014, our long-term debt consisted of the following: (i) $598.3 million (excluding discount of $1.7 million) of 10.375% senior notes due 2016 (the “2016 notes”), issued by our Canadian subsidiary, National Money Mart Company; (ii) $111.1 million (excluding discount of $8.9 million) of our 3.00% convertible notes due 2028 (the “2028 notes”); (iii) $196.9 million (excluding discount of $33.1 million) of our 3.25% convertible notes due 2017 (the “2017 notes”); and (iv) $45.5 million of borrowings under Sefina’s credit facilities.

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Future Obligations

Our future obligations include minimum lease payments under operating leases, principal repayments on our debt obligations and obligations under Canadian class action agreements payable in cash. Operating leases are scheduled payments on existing store and other administrative leases. These leases typically have initial terms of five years and may contain provisions for renewal options, additional rental charges based on revenue and payment of real estate taxes and common area charges.

We entered into the commitments described above and other contractual obligations in the ordinary course of business as a source of funds for asset growth and asset/liability management and to meet required capital needs. Our principal future obligations and commitments as of March 31, 2014, excluding periodic interest payments, include the following (in millions):

	Total		Less than 1 Year		1-3 Years		4-5 Years		After 5 Years
Revolving credit facilities	$	46.0	$	46.0	$	—	$	—	$	—
Long-term debt:
10.375% Senior Notes due 2016		600.0		—		600.0		—		—
3.25% Senior Convertible Notes due 2017		230.0		—		—		230.0		—
2.875% Senior Convertible Notes due 2027		36.2		36.2		—		—		—	(1)
3.0% Senior Convertible Notes due 2028		120.0		—		—		—		120.0	(2)
Scandinavian credit facilities		47.0		1.5		45.5		—		—
Other Notes Payable		8.9		8.9		—		—		—
Obligations under Litigation Settlement Agreements Payable in Cash		9.1		6.6		2.5		—		—
Operating lease obligations (3)		280.5		62.9		98.9		63.5		55.2
Total contractual cash obligations	$	1,377.7	$	162.1	$	746.9	$	293.5	$	175.2

(1) Holders have the right to require us to purchase all or a portion of the 2027 Notes on December 31, 2014 for a purchase price payable in cash equal to 100% of the principal amount outstanding.

(2) Holders have the right to require us to purchase all or a portion of the 2028 Notes on April 1, 2015 for a purchase price payable in cash equal to 100% of the principal amount outstanding.

(3) For purposes of the table, operating lease obligations include one lease renewal option period for leases with initial lease terms of five years or less.

We believe that, based on current levels of operations and anticipated improvements in operating results, cash flows from operations and borrowings available under our credit facilities will allow us to fund our short-term liquidity and capital expenditure requirements for the foreseeable future, build de novo stores and effectuate various acquisitions and service our obligations, other than potentially certain significant principal payments on our indebtedness. This belief is based upon our historical growth rate and the anticipated benefits we expect from operating efficiencies. We also expect operating expenses to increase, although the rate of increase is expected to be less than the rate of revenue growth for existing stores. Furthermore, we do not believe that additional acquisitions or expansion are necessary to cover our short-term fixed expenses. We expect to meet our long-term liquidity requirements, including our scheduled debt maturities, through cash from operations, borrowings under our credit facilities, refinancing our secured and unsecured indebtedness and potentially from the issuance of equity securities.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results or operations, liquidity, capital expenditures or capital resources that is material to investors.

Impact of Inflation

We do not believe that inflation has a material impact on our earnings from operations.

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Impact of Recent Accounting Pronouncements

In July 2012, the FASB issued ASU 2012-02, Testing Indefinite-Lived Intangible Assets for Impairment (“ASU 2012-02”). This update is intended to simplify indefinite-lived asset impairment testing by adding an optional qualitative review step to assess whether the required quantitative impairment analysis that exists under GAAP is necessary. ASU 2012-02 is effective for us for interim and annual indefinite-lived intangible asset impairment tests performed for fiscal years beginning on or after September 15, 2012. We adopted ASU 2012-02 on July 1, 2013. The adoption of ASU 2012-02 did not have a material effect on our financial position or results of operations.

In February 2013, the FASB issued ASU No. 2013-02, Reporting Amounts Reclassified Out of Accumulated Other Comprehensive Income (“ASU 2013-02”). ASU 2013-02 requires entities to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the income statement or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under GAAP that provide additional detail about those amounts. ASU 2013-02 is effective for us for fiscal years, and interim periods within those years, beginning after December 15, 2012. We adopted ASU 2013-02 on July 1, 2013. The adoption of ASU 2013-02 did not have a material effect on our financial position or results of operations.

In March 2013, the FASB issued ASU 2013-05, Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity. ASU 2013-05 clarifies the accounting for the release of the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a business within a foreign entity. The ASU also clarifies the treatment of business combinations achieved in stages involving a foreign entity. The amendment is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013. We do not anticipate that the adoption of ASU 2013-05 will have a material effect on our financial position or results of operations.

In July 2013, the FASB issued ASU No. 2013-10, Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes (“ASU 2013-10”). The amendments in this update permit the Fed Funds Effective Swap Rate (“OIS”) to be used as a U.S. benchmark interest rate for hedge accounting purposes, in addition to Treasury obligations of the U.S. government (“UST”) and the London Interbank Offered Rate (“LIBOR”). The amendments also remove the restriction on using different benchmark rates for similar hedges. This update is effective prospectively for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013. We do not anticipate that the adoption of ASU 2013-10 will have a material effect on our financial position or results of operations.

In July 2013, the FASB issued ASU No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”). This update provides explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. Specifically, this update specifies that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, with certain exceptions. This update is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. We do not anticipate that the adoption of ASU 2013-11 will have a material effect on our financial position or results of operations.

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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Generally

In the operations of our subsidiaries and the reporting of our consolidated financial results, we are affected by changes in interest rates, currency translation exchange rates and gold prices. The principal risks of loss arising from adverse changes in market rates and prices to which we and our subsidiaries are exposed relate to:

• interest rates on revolving credit facilities; and

• foreign exchange rates generating translation gains and losses.

We and our subsidiaries have no market risk sensitive instruments entered into for trading purposes, as defined by U.S. generally accepted accounting principles or GAAP. Information contained in this section relates only to instruments entered into for purposes other than trading.

Interest Rate Risk

Our outstanding indebtedness, and related interest rate risk, is managed centrally by our finance department by implementing the financing strategies approved by our board of directors. Our revolving credit facilities carry variable rates of interest. We had variable rate borrowings of $113.0 million at June 30, 2013 and $102.0 million at March 31, 2014. If prevailing interest rates (e.g., LIBOR) were to increase by 100 basis points over the rates at June 30, 2013 and March 31, 2014, and the variable rate borrowings remained constant, our interest expense would increase by $1.1 million and $1.0 million per year, respectively.

Foreign Currency Exchange Rate Risk

Foreign Currency Derivatives

We have a number of debt instruments with both variable and fixed interest rates and derivatives intended to hedge a portion of those fixed debt instruments. Our indirect wholly owned Canadian subsidiary, National Money Mart Company, holds $600.0 million senior unsecured 10.375% fixed interest rate notes. Because this debt is denominated in U.S. dollars, National Money Mart Company is required under generally accepted accounting principles to remeasure this debt into Canadian dollars and record a foreign exchange gain or loss through the statement of operations. On April 27, 2012, National Money Mart Company entered into cross currency interest rate swaps that synthetically convert the entire $600.0 million U.S. dollar denominated debt into Canadian dollars with a notional amount of CAD 592.2 million at a Canadian fixed interest rate of 12.445%. Prior to the termination of these cross-currency swaps in December 2013, these cross-currency interest rate swaps were designated as cash flow hedges of interest payments and the change in value of principal repayments on its foreign denominated debt due to changes in foreign exchange rates. Because the derivatives were designated as cash flow hedges, we recorded the effective portion of the after-tax gain or loss in other comprehensive income, which was subsequently reclassified to earnings in interest expense for the interest component and in unrealized foreign exchange loss (gain) as an offset to the re-measurement of the foreign loan balances.

We also are exposed to Canadian foreign currency risk due to our operations in Canada, as our net earnings of those operations are translated to US currency at the average exchange rate for the reporting period. Changes in exchange rates impact the US dollar equivalent amounts reported in our financial statements.

Hypothetically, a 10% change in the USD/CAD exchange rate would have affected pre-tax income by $4.3 million for the nine months ended March 31, 2014. A 10% change in the Canadian Dollar exchange rate would additionally impact reported pre-tax earnings from continuing operations by approximately $64.1 million related to the translational effect of net Canadian liabilities denominated in a currency other than the Canadian Dollar.

On April 20, 2012, our wholly-owned, indirect, United Kingdom subsidiary, Dollar Financial U.K. Ltd., entered into cross-currency interest rate swaps to hedge currency exchange risk related to a U.S. dollar denominated intercompany loan of $200.0 million from DFC Global Corp. If any of the counter-party banks associated with the cross-currency interest rate swaps were to default on their obligations we would be exposed to mark-to-market risk on the U.S. dollar denominated debt held by Dollar Financial U.K. Ltd. Assuming all of the counter-party banks were to default on the swap contracts and therefore were unable to perform under the terms of the contract, the mark-to-market revaluations of the US dollar denominated loan would be recorded through the statement of operations.

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We also are exposed to UK foreign currency risk due to our operations in the United Kingdom, as our net earnings of those operations are translated to US currency at the average exchange rate for the reporting period. Changes in exchange rates impact the US equivalent amounts reported in our financial statements.

Hypothetically, a 10% change in the USD/GBP exchange rate would have affected pre-tax loss by $7.7 million for the nine months ended March 31, 2014.

Fair Value Measurements

We currently use cross-currency interest rate swaps to manage our interest rate and foreign exchange risk and a gold collar to manage our exposure to the variability of gold prices related to anticipated unredeemed pawn gold products in the United Kingdom. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flow of each derivative. This analysis reflects the contractual terms of the derivatives including the period to maturity and uses observable market-based inputs, including interest curves, foreign exchange rates, gold forward curves and implied volatilities.

Fair Value of Fixed Interest Rate Debt Instruments

We currently hold a number of fixed rate debt instruments including $600.0 million 10.375% unsecured senior notes held by our wholly owned indirect Canadian subsidiary, National Money Mart Company, and three tranches of convertible debt issued by DFC Global Corp. While the fair value of these debt instruments is impacted by changes in interest rates and other market conditions, and as it relates to the convertible notes, changes in interest rates, market prices related to the convertible feature of the notes and other factors, changes in fair value of these debt instruments do not impact our financial position, cash flows or results of operations because they are held at historical cost. Generally, for the $600.0 million aggregate principal amount of 10.375% senior unsecured notes, the fair market value will increase as interest rates fall and decrease as interest rates rise. For our convertible debt notes along with changes in interest rates, the fair value may also increase as our stock price rises and decrease as the market of our stock price falls. Based on quoted market prices as of June 30, 2013 and March 31, 2014, the estimated fair value of our fixed rate debt instruments are as follows ($ in millions):

	June 30, 2013		March 31, 2014
$600.0 aggregate principal amount of 10.375% Senior Notes	$	636.0	$	603.0
$36.2 aggregate principal amount of 2.875% Senior Convertible Notes		35.6		34.6
$120.0 aggregate principal amount of 3.00% Senior Convertible Notes		123.6		110.2
$230.0 aggregate principal amount of 3.25% Senior Convertible Notes		225.8		196.1
	$	1,021.0	$	943.9

Cross-Currency Interest Rate Swaps 

On April 27, 2012, we entered into swap agreements to hedge the U.S. Dollar exposure associated with our $600.0 million tranche of senior unsecured notes. The swaps eliminated the non-cash mark-to-market volatility that had historically been impacting the income statement as a result of the cross-currency swap instruments that were no longer eligible for cash flow hedge accounting and therefore had their changes in fair value recorded directly in earnings, and will lock in the Canadian Dollar and U.S. Dollar exchange value of the notes at maturity. In addition, on April 20, 2012, we entered into swap agreements to hedge currency exchange risk related to intercompany transactions stemming from the convertible notes issued in April 2012.

In December 2013, we terminated the cross-currency swaps which our Canadian subsidiary, National Money Mart Company (“NMM”) had entered into in order to hedge the U.S. Dollar exposure associated with the $600.0 million senior unsecured notes (“Notes”) issued by NMM. The termination of the swaps was effected pursuant to negotiated transactions with the respective counter-parties to the swaps. Based on the value of the Canadian dollar in relation to the U.S. dollar at the time of the termination, the Company received net proceeds from the transaction of approximately $38.8 million. We used the proceeds to pay down outstanding balances under our global revolving credit facility. In accordance with the Derivatives and Hedging Topic of the FASB Codification, we are required to continue to report the net loss related to the discontinued cash flow hedge in accumulated other comprehensive income included in shareholders’ equity and subsequently reclassify such amounts into earnings over the remaining original term of the derivative when the hedged forecasted transactions are recognized in earnings. The amount of loss included in accumulated other comprehensive income related to these hedges was approximately CAD 6.5 million ($6.1 million), which will be reclassified into earnings over the remaining original term of the derivatives (December 2016).

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The aggregate fair market values of the remaining cross-currency interest rate swaps at March 31, 2014 are a liability of $12.5 million, and are included in fair value of derivatives on the balance sheet.

Non-designated Hedges of Commodity Risk

In the normal course of business, we maintain inventories of gold at our pawn shops. From time to time, we enter into derivative financial instruments to manage the price risk associated with forecasted gold inventory levels. Derivatives not designated as hedges are not speculative and are used to manage our exposure to commodity price risk but do not meet the strict hedge accounting requirements of the Derivatives and Hedging Topic of the FASB Codification. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings. As of March 31, 2014, our subsidiary in the United Kingdom had thirteen outstanding gold collars with a notional amount of 5,500 ounces of gold bullion.

Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, our management conducted an evaluation, with the participation of our Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based on this evaluation, our Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to management, including our Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting during the fiscal quarter ended March 31, 2014 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

The information required by this Item is incorporated by reference herein to the section Part 1 “Note 10. Contingent Liabilities” of this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors

Except as set forth below, there have been no material changes to the risk factors discussed in Part 1, “Item 1A. Risk Factors,” in our Annual Report on Form 10-K for the year ended June 30, 2013 (“Form 10-K”), as amended in our Quarterly Reports on Form 10-Q for the quarters ended September 30, 2013 and December 31, 2013. You should carefully consider the risks described therein, as amended below, which could materially affect our business, financial condition or future results. The risks described in our Form 10-K, in our Quarterly Reports on Form 10-Q for the quarters ended September 30, 2013 and December 31, 2013 and below are not the only risks we face. Regulatory and other risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results. If any of the risks actually occur, our business, financial condition, and/or results of operations could be negatively affected.

Changes in applicable laws and regulations governing our business may have a significant negative impact on our results of operations and financial condition.

Our business is subject to numerous foreign, federal, state and other local laws, ordinances and regulations in each of the countries in which we operate which are subject to change and which may impose significant costs or limitations on the way we conduct or expand our business. These regulations govern, or affect, among other things:

• lending and collection practices, such as truth in lending and short-term and installment lending and continuous payment authority;

• interest rates and usury;

• loan amount and fee limitations;

• check cashing fees;

• licensing and posting of fees;

• currency reporting;

• privacy of personal consumer information;

• prompt remittance of proceeds for the sale of money orders; and

• the location of our stores through various rules and regulations such as local zoning regulations and requirements for special use permits.

As we develop and introduce new products and services, we may become subject to additional laws and regulations. Future legislation or regulations may restrict our ability to continue our current methods of operation or expand our operations and may have a negative effect on our business, results of operations and financial condition. Governments at the national and local levels may seek to impose new licensing requirements or interpret or enforce existing requirements in new ways. We and other participants in our industry are currently, and may in the future be, subject to litigation and regulatory proceedings which could generate adverse publicity or cause us to incur substantial expenditures or modify the way we conduct our business. Changes in laws or regulations, changes in regulatory bodies with oversight for our business, or our failure to comply with applicable laws and regulations, may have a material adverse effect on our business, prospects, results of operations, and financial condition.

Our consumer lending products in particular are subject to regulations in each of the markets in which we operate that significantly impact the manner in which we conduct our business. In Canada, the Canadian Parliament amended the federal usury law in 2007 to permit each province to assume jurisdiction over and the development of laws and regulations regarding our industry. To date, Alberta, British Columbia, Manitoba, New Brunswick, Nova Scotia, Ontario and Saskatchewan have passed legislation regulating unsecured short-term consumer lenders and each has adopted, or is in the process of adopting, regulations and rates consistent with those laws. In general, these regulations require lenders to be licensed, set maximum fees and regulate collection practices. There can be no assurance that these regulations, or any amendments to these regulations which result from provincial review thereof, will not have a detrimental effect on our unsecured short-term lending business in Canada in the future.

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Prior to April 1, 2014, in the United Kingdom, our consumer lending activities were primarily regulated by the Office of Fair Trading (the “OFT”), which was responsible for licensing and regulating companies that offer consumer credit. Effective April 1, 2014, the OFT transferred regulatory authority over the consumer credit industry to the new Financial Conduct Authority, (the “FCA”). The FCA is now the regulator for, among others, credit card issuers, payday loan companies, pawn brokers, rent-to-own companies, debt management and collection firms and providers of debt advice. The FCA is also responsible for regulating and setting conduct standards for banks, credit unions and similar institutions.

In October 2013, the FCA issued a consultation paper addressing how it proposed to regulate the consumer credit industry when it assumed regulatory authority on April 1, 2014. Although the positions announced in the consultation paper were not yet binding on the industry, they provided an indication of the positions that could be included in final FCA action, including significant changes in the marketing of short-term credit products, loan rollover restrictions and limitations on continuous payment authority and marketing practices for lenders in our industry. On February 28, 2014, the FCA published its Handbook, which confirmed and clarified the final form of the rules and limitations to which we would be subject under the FCA authority in the UK.

In February 2012, the OFT began an extensive review of the short-term lending sector in the United Kingdom to assess its compliance with the Consumer Credit Act and Irresponsible Lending Guidance. The review included 50 of the largest companies offering unsecured short-term consumer loans, including three of our U.K. consumer lending companies, MEM Consumer Finance Limited, Instant Cash Loans Limited and Express Finance (Bromley) Limited. The OFT issued its final report on the outcome of its sector review in March 2013, in which it indicated that the reviewed short-term consumer lenders would receive letters from the OFT that would include specific findings for each lender. Each of these three of our U.K. consumer lending companies received letters from the OFT dated in either March or April 2013, which specified required actions in a number of compliance areas, including advertising and marketing; pre-contract information and explanations; affordability assessments; rollovers (including deferred refinance and extended loans); and forbearance and debt collection. These U.K. consumer lending companies engaged an independent consulting firm to advise on the requirements in the letters and provided responses to the OFT in May and July 2013. In December 2013, all three of these businesses received a follow up letter and request for information from the OFT. This supplemental loan and transaction data was submitted in early January 2014.

Also, in February 2014, our U.K. management responsible for the transition from regulation by the OFT to regulation by the FCA attended a scheduled meeting with representatives of the OFT. During the meeting, our representatives provided an update to the OFT representatives as to the progress of our efforts to become compliant with the new rules and regulations that were anticipated to be implemented by the FCA once it assumed governing authority on April 1, 2014. The OFT representatives reviewed with us the readiness of our U.K. operations for the regulatory requirements under the FCA, and posed questions concerning our U.K. management structure and our operations relating to affordability assessments, rollovers, relending and forbearance. We received a follow-up letter from the OFT on February 28, 2014, indicating that the OFT had serious concerns about the ability of our U.K. operations to meet the enhanced regulatory requirements of the FCA. The letter requested additional information relating to certain areas of concern and requested a written response on these areas. The publication of the FCA Handbook and the receipt of the OFT letter caused management to assess required changes to our U.K. operations and the timing and likely consequences thereof. On March 24, 2014, we responded in writing to the concerns raised by the OFT in this letter. This response was in advance of an in-person meeting that our U.K. management team had arranged with OFT representatives to be held on March 26, 2014. In the written response, we outlined certain proposed changes to our U.K. business to comply with the rules and principles set forth in the Handbook and the impact that these changes would have on our business model and future operating results in the United Kingdom. On March 26, 2014, our senior U.S. and U.K. management met with representatives of the OFT to discuss the concerns raised by the OFT in its February 28, 2014 letter and our March 24, 2014 response letter. As a result of the information exchanged via documents and in the meeting in March 2014, we also received a follow up letter and request for further information from the regulator, and will respond within the required timeframe.

In November 2012, the OFT issued revised Debt Collection Guidance. Under the updated Debt Collection Guidance, we were required to more specifically disclose to customers the use of continuous payment authority (a type of automatic payment authorization that is linked to a credit card, debit card or some other funded account), and we were also required to suspend the use of, continuous payment authority to collect defaulted debts from a customer whom we believed to be experiencing financial hardship.

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In November 2013, the HM Treasury announced its intention to introduce a cap on the total cost of credit in the U.K. and that it would be placing the duty on the FCA to introduce the cap. The FCA is engaging with stakeholders and is expecting to complete its analysis by May 2014, and publish a consultation paper in July 2014. The FCA will receive submissions and comments until September 2014, and is expected to publish a policy statement and final rules in November 2014. The cap on the cost of credit is expected to come into force on January 2, 2015.

In June 2013, the OFT referred the payday lending sector in the United Kingdom to the Competition and Markets Authority (the “CMA,” also formerly known as the Competition Commission) for review. In its inquiry, the CMA is required to decide whether any feature, or combination of features, of each relevant market prevents, restricts or distorts competition in the market on a number of grounds so as to negatively impact consumer outcomes. The CMA’s review of the sector may continue until June 2015, and we are cooperating in responding to requests for documents and other information regarding our business and sector.

These regulatory developments have resulted in modifications to our U.K. lending operations, including imposing additional limitations on our use of continuous payment authority, considering broader affordability assessments and exercising greater forbearance for customers in financial difficulty. In the near-term, we anticipate that loan losses will be higher because of the implementation of limitations on loan rollovers and the changes in our use of continuous payment authority in collections. Our estimates of the allowance for loan losses are inherently uncertain as many of these changes to underwriting and collections have been implemented recently and we do not have significant historical information for the loss rates and collections experience in accordance with the recent regulatory developments. These changes, and any other changes we may consider or be required to make to our lending and collection practices in the United Kingdom, together with additional compliance-related expenses, will likely negatively impact our business for the foreseeable future, and could result in a material adverse effect on our business, results of operations and financial condition.

Like other businesses in the UK consumer finance sector regulated by the FCA for the first time, we have begun the process of applying for full authorization from the FCA for our consumer lending activities once we cease operating under the interim permission granted to all OFT-regulated businesses that pre-registered. We have been granted a window between December 2014 and February 2015 in which to make our application for authorization. There can be no assurance that our application for authorization will be approved by the FCA. In the event the FCA denies our application for authorization, this may result in a material adverse effect on our business and operations and may result in our ceasing to operate in the United Kingdom or a substantial change in our business there.

Short-term consumer loans have come under heightened regulatory scrutiny in the United States in recent years resulting in increasingly restrictive regulations and legislation at the state levels that may make offering such loans less profitable or attractive to us. Legislative or regulatory activities may, among other things, limit the amount of total allowable fees charged in connection with unsecured short-term consumer loans, limit the number of times an unsecured short-term consumer loan may be rolled over by a customer, limit the maximum advance amount, set minimum and/or maximum loan durations and may require borrowers of certain unsecured short-term loan products to be listed on a database. Additionally, the U.S. Congress continues to receive significant pressure from consumer advocates and other industry opposition groups to adopt such legislation at the federal level.

In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted, which, among other things, created the Consumer Financial Protection Bureau (the “CFPB”). In the United States, the CFPB has regulatory, supervisory and enforcement powers over certain non-bank providers of consumer financial products and services, such as us. Under the CFPB’s short-term lending supervision program, which aims to ensure that short-term lenders are following federal consumer financial laws in their U.S. operations, the CFPB gathers information from short-term lenders to evaluate their policies and procedures, assess whether lenders are in compliance with federal consumer financial laws, and identify risks to consumers throughout the lending process. Any action by the CFPB with respect to short-term consumer loans could have an adverse impact on our business, results of operations and financial condition.

The CFPB completed an on-site review of our U.S. retail operations in early fiscal 2013. As a result of that review, we are taking certain corrective action to address the CFPB’s findings by improving our operating and compliance procedures, controls and systems. In October 2013, we submitted our plans for compliance enhancements to the CFPB, and are providing quarterly updates to the CFPB regarding those enhancements to our compliance management system. Separately, the CFPB reviewed DFS’ MILES program in fiscal 2013. As a result of this examination, the CFPB cited violations by DFS of the Consumer Financial Protection Act for deceptively marketing the prices and scope of certain add-on products. Without admitting or denying any of the facts or conclusions of the review, DFS agreed to a consent order with the CFPB to amend its practices to meet the requirements set forth by the CFPB, and to provide financial redress in the form of a $3.3 million restitution fund to be distributed to past and current DFS customers. DFS is also taking certain corrective action to address the CFPB’s findings by improving its operating and compliance procedures, controls and systems. The CFPB issued a non-objection to DFS’ customer redress plan. On a quarterly basis, DFS is providing updates to the CFPB regarding the enhancements of its compliance management system.

In addition to these supervisory and enforcement powers, the CFPB may also exercise regulatory authority over the products and services that we offer in the United States. Until such time as the CFPB exercises its rulemaking powers, we cannot predict what effect any such regulation may have on our U.S. business. The modification of existing laws or regulations in any of the jurisdictions in which we operate or in which we contemplate new operations, or the adoption of new laws or regulations restricting or imposing more stringent requirements, on our consumer lending or check cashing activities in particular, could increase our operating expenses, significantly limit our business activities in the affected markets, limit our expansion opportunities and/or could result in a material adverse effect on our business, results of operations, and financial condition.

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In Poland, the Ministry of Finance issued interest rate cap draft guidelines for a new act in the fall of 2013. Following a long period of consultation, in April 2014, the Ministry of Finance issued revised guidelines with significantly different terms. The guidelines allow for, among other things, loan costs of up to 25% of the loan amount plus a 30% annual percentage rate (or 2.5% per month), exclusive of interest. In addition, the guidelines include a provision that if more than one loan is extended within 120 days of the extension of the first loan (with the first loan still unpaid), the total loan amount may not exceed 100% of the first loan amount. The guidelines are on an agenda of the Council of Ministers for consideration in June 2014. Subsequently, a draft act to implement the proposed changes could be prepared on the basis of final guidelines and published for consultation, but there has not yet been established a timeline for such consultation. The trade association of which our Polish operating subsidiaries are a member has requested an extended consultation period to consider any proposal. We cannot yet anticipate the terms or applicability of any final legislative changes; however, a restrictive new final law could materially affect our product offerings in Poland and thus could adversely affect our business, results of operations and financial condition.

Item 2. Unregistered Purchases of Equity Securities and Use of Proceeds

Not applicable.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

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Item 5. Other Information.

Not applicable.

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Item 6. Exhibits

Exhibit No.	Description of Document
10.1 *	DFC Global Corp. Executive Retention Plan (1)
31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2	Rule 13a-14(a)/15d-14(a) Certification of Executive Vice President and Chief Financial Officer
31.3	Rule 13a-14(a)/15d-14(a) Certification of Senior Vice President of Finance, Chief Accounting Officer and Corporate Controller
32.1	Section 1350 Certification of Chief Executive Officer
32.2	Section 1350 Certification of Executive Vice President and Chief Financial Officer
32.3	Section 1350 Certification of Senior Vice President of Finance, Chief Accounting Officer and Corporate Controller
101	The following financial information from this Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2014, formatted in XBRL (Extensible Business Reporting Language) and filed electronically herewith: (i) the Condensed Balance Sheets; (ii) the Condensed Statements of Operations; (iii) the Condensed Statements of Comprehensive Income (Loss); (iv) the Condensed Statements of Stockholders’ Equity; (v) the Condensed Statements of Cash Flows; and (vi) the Notes to Financial Statements, tagged as blocks of text

(1) Incorporated by reference to the Current Report on Form 8-K filed by DFC Global Corp. on February 3, 2014 (File No. 000-50866)

*_ Management contract or compensatory plan or arrangement

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	DFC GLOBAL CORP.
Date: May 12, 2014	By:	/s/ William M. Athas
	Name:	William M. Athas
	Title:	Senior Vice President, Finance, Chief Accounting Officer and Corporate Controller (duly authorized officer and principal accounting officer)

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