QC Holdings (QCCO)

LIQUIDITY AND CAPITAL RESOURCES

Summary cash flow data is as follows (in thousands):

Cash Flow Discussion. Our primary source of liquidity is cash provided by operations. On December 7, 2007, we entered into an Amended and Restated Credit Agreement with a syndicate of banks that provides for a term loan of $50 million and a revolving line of credit (including provisions permitting the issuance of letters of credit and swingline loans) in the aggregate principal amount of up to $45 million. The credit facility expires on December 6, 2012. The maximum borrowings under the amended credit facility may be increased to $120 million pursuant to bank approval in accordance with the terms set forth in the first amendment to the credit facility as of March 7, 2008. We used the proceeds of the term loan to pay a $2.50 per common share special cash dividend in December 2007.

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Recently, the capital and credit markets have become increasingly volatile as a result of adverse conditions that have caused the failure or near failure of a number of large financial services companies. If the capital and credit markets continue to experience volatility and the availability of funds remains limited, it is possible that our ability to access the capital and credit markets may be limited at a time when we would like or need to do so, which could have an impact on our ability to fund our operations, refinance maturing debt or react to changing economic and business conditions. At this time, we believe that our available short-term and long-term capital resources are sufficient to fund our working capital requirements, scheduled debt payments, interest payments, capital expenditures, income tax obligations, anticipated dividends to our stockholders, and anticipated share repurchases for the foreseeable future.

Net cash provided by operating activities for the three months ended March 31, 2009 was $20.7 million, approximately $800,000 lower than the $21.5 million in comparable 2008. This decrease is primarily attributable to changes in working capital items, which can vary from period to period based on the timing of cash receipts and cash payments.

Net cash used by investing activities for the three months ended March 31, 2009 was $4.7 million, which consisted of approximately $4.1 million for the acquisition of two buy here, pay here locations in Missouri and $584,000 for capital expenditures. The capital expenditures primarily included $242,000 for renovations to existing and acquired branches and $239,000 for technology and other furnishings at the corporate office. Net cash used by investing activities for the three months ended March 31, 2008 was $771,000, which primarily consisted of approximately $571,000 for capital expenditures and approximately $205,000 in acquisition costs. The capital expenditures included $70,000 to open two de novo branches in 2008, $349,000 for renovations to existing and acquired branches, $22,000 for technology and other furnishings at the corporate office, $98,000 for branches not yet open as of March 31, 2008 and $32,000 for other expenditures.

Net cash used for financing activities for the three months ended March 31, 2009 was $18.7 million, which primarily consisted of $20.8 million in repayments of indebtedness under the credit facility, $4.6 million in repayments on the term loan, $900,000 in dividend payments to stockholders and $544,000 for the repurchase of 117,000 shares of common stock. These items were partially offset by proceeds received from the borrowing of $8.0 million under the credit facility. Cash used for financing activities for the three months ended March 31, 2008 was $30.5 million, which primarily consisted of $24.5 million in repayments of indebtedness under the credit facility, $1.0 million in repayments on the term loan and $8.5 million for the repurchase of 1.1 million shares of common stock. These items were partially offset by proceeds received from the borrowing of $3.5 million under the credit facility.

The normal seasonality of our business results in a substantial decrease in loans receivable in the first quarter of each calendar year and a corresponding increase in cash or reduction of our revolving credit facility.

Future Capital Requirements. We believe that our available cash, expected cash flow from operations, and borrowings available under our revolving credit facility will be sufficient to fund our liquidity and capital expenditure requirements during 2009. Expected short-term uses of cash include funding of any increases in payday loans, automotive inventory, debt repayments (including any mandatory prepayment of our term loan), interest payments on outstanding debt, dividend payments, to the extent approved by the board of directors, repurchases of company stock, financing of new branch expansion and acquisitions, if any. We funded the purchase of the assets associated with two buy here, pay here locations that we acquired with a draw on our credit facility. We expect that the majority of our cash requirements will be satisfied through internally generated cash flows, with any shortfall being funded through borrowings under our revolving credit facility.

In November 2008, our board of directors established a regular quarterly dividend of $0.05 per common share. The declaration of dividends is subject to the discretion of our board of directors and will depend on our operating results, financial condition, cash and capital requirements and other factors that the board of directors deems relevant. On May 5, 2009, our board of directors declared a quarterly dividend of $0.05 per common share. The quarterly dividend is payable June 2, 2009, to stockholders of record as of May 19, 2009.

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Our credit agreement requires us to maintain a fixed charge coverage ratio (computed in accordance with the credit agreement) of not less than 1.25 to 1. Under our credit agreement, we are required to subtract any cash dividends paid on our common stock from our operating cash flow (as defined in the agreement) amount used in computing our fixed charge coverage ratio. Thus, our credit agreement may restrict our ability to pay cash dividends in the future.

As part of our business strategy, we intend to open de novo branches and consider acquisitions in existing and new markets. We believe our current cash position, the availability under the credit facility and our expected cash flow from operations should provide the capital needed to fund this level of branch growth, assuming no material acquisitions in 2009.

The capital costs of opening a de novo branch include leasehold improvements, signage, computer equipment and security systems, and the costs vary depending on the branch size, location and the services being offered. During 2007 and 2008, we opened 32 de novo branches. The average cost of capital expenditures for these new branches was approximately $44,000 per branch. Existing branches require minimal ongoing capital expenditure, with the majority of any expenditures related to discretionary re-build or relocate projects.

As of December 31, 2008, we had three buy here, pay here locations. In addition, we purchased two buy here, pay here lots in January 2009 for approximately $4.1 million and we plan on opening from one to three additional lots during 2009. During the start-up of these operations, capital requirements are not material. As the business grows, however, the business requires ongoing replenishment of automotive inventory. Sales of automobiles are typically completed through a small down payment and an installment loan. As a result, the initial phase of a buy here, pay here operation is cash flow negative. Based on initial information and industry research, it appears that a typical location requires approximately $2.5 million to $3.5 million of capital availability over a two to four year period. As this business progresses, we will evaluate the capital requirements and the associated return on investment. We have the ability to manage the capital needs of the business through reduction of the number of automobiles held at each location, although reduced inventory levels may limit sales because of the appearance of limited vehicle selection for the customer.

Concentration of Risk. Our branches located in the states of Missouri, California, Kansas, Arizona, South Carolina and Illinois represented approximately 25%, 12%, 9%, 8%, 7% and 5%, respectively, of total revenues for the three months ended March 31, 2009. Our branches located in the states of Missouri, Arizona, California, Illinois, South Carolina, and Kansas represented approximately 26%, 12%, 10%, 7%, 7% and 7%, respectively, of total branch gross profit for the three months ended March 31, 2009. To the extent that laws and regulations are passed that affect our ability to offer payday loans or the manner in which we offer payday loans in any one of those states, our financial position, results of operations and cash flows could be adversely affected. The current Arizona payday loan statutory authority expires by its terms in June 2010.

LIQUIDITY AND CAPITAL RESOURCES

Summary cash flow data is as follows (in thousands):

Cash Flow Discussion. Our primary source of liquidity is cash provided by operations. On December 7, 2007, we entered into an Amended and Restated Credit Agreement with a syndicate of banks, that provides for a term loan of $50 million and a revolving line of credit (including provisions permitting the issuance of letters of credit and swingline loans) in the aggregate principal amount of up to $45 million. The credit facility expires on December 6, 2012. The maximum borrowings under the amended credit facility may be increased to $120 million pursuant to bank approval in accordance with the terms set forth in the first amendment to the credit facility as of March 7, 2008. We used the proceeds of the term loan to pay a $2.50 per common share special cash dividend in December 2007.

Recently, the capital and credit markets have become increasingly volatile as a result of adverse conditions that have caused the failure or near failure of a number of large financial services companies. If the capital and credit markets continue to experience volatility and the availability of funds remains limited, it is possible that our ability to access the capital and credit markets may be limited at a time when we would like or need to do so, which could have an impact on our ability to fund our operations, refinance maturing debt or react to changing economic and business conditions. At this time, we believe that available short-term and long-term capital resources are sufficient to fund our working capital requirements, scheduled debt payments, interest payments, capital expenditures, income tax obligations, dividends to our stockholders, and anticipated share repurchases for the foreseeable future.

Net cash provided by operating activities for the nine months ended September 30, 2008 was $15.7 million, approximately $6.7 million lower than the $22.4 million in comparable 2007. This decrease is primarily attributable to changes in working capital items, which can vary from period to period based on the timing of cash receipts and cash payments.

Net cash used by investing activities for the nine months ended September 30, 2008 was $4.0 million, which consisted of approximately $3.8 million for capital expenditures and approximately $205,000 for acquisition costs. The capital expenditures included $1.6 million for the purchase of an auto sales facility, which included three buildings and approximately 1.6 acres of land, $485,000 to open nine de novo branches in 2008, $906,000 for renovations to existing and acquired branches, $547,000 for technology and other furnishings at the corporate office and $340,000 for other expenditures. Net cash used by investing activities for the nine months ended September 30, 2007 was $5.9 million, which primarily consisted of approximately $2.4 million for capital expenditures and approximately $3.6 million in acquisition costs. The capital expenditures included $353,000 to open de novo branches in 2007, $939,000 for renovations to existing and acquired branches, $930,000 for technology and other furnishings at the corporate office, and $140,000 for other expenditures.

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Cash used for financing activities for the nine months ended September 30, 2008 was $19.4 million, which primarily consisted of $27.3 million in repayments of indebtedness under the credit facility, $3.0 million in repayments on the term loan and $11.9 million for the repurchase of 1.5 million shares of common stock. These items were partially offset by proceeds received from the borrowing of $25.1 million under the credit facility. Cash used for financing activities for the nine months ended September 30, 2007 was $16.8 million, which primarily consisted of $16.3 million in repayments of indebtedness under the credit facility, dividend payments to stockholders totaling $5.9 million and share repurchases of approximately 832,000 shares of our common stock for $12.0 million. These items were partially offset by proceeds received from borrowings under our credit facility totaling $15.5 million to fund operations and proceeds from the exercise of stock options by employees.

Future Capital Requirements. On November 4, 2008, our board of directors established a regular quarterly dividend of $0.05 per common share. Together with this regular quarterly dividend, the board of directors declared a special cash dividend of $0.10 per common share. The quarterly dividend and special dividend are payable on December 2, 2008 to stockholders of record as of November 20, 2008. We estimate that the total amount of the dividends will be approximately $2.7 million.

The level of cash required to operate a particular payday branch varies based on the products and services provided by that branch. For each branch location, cash is comprised of: (i) a certain amount of cash needed in the branch location; (ii) an operating reserve amount at the local bank used by that branch; and (iii) in-transit amounts within the banking system. As a general guideline, a typical branch offering only the payday loan product requires an average of approximately $10,000 to $15,000, while a branch that also includes check cashing requires an average of approximately $35,000 to $45,000.

As part of our business strategy, we intend to open de novo branches and consider acquisitions in existing and new markets. During 2005, 2006 and 2007, we had de novo unit branch growth of 46.9%, 8.6% and 3.3%, respectively. In addition, we acquired 10 branches in 2005, 51 branches in 2006 and 13 branches in 2007. We expect to open from 5 to 10 payday loan branches in 2009. We believe our current cash position, the availability under the credit facility and our expected cash flow from operations should provide the capital needed to fund this level of branch growth, assuming no material acquisitions in 2009.

The capital costs of opening a de novo branch include leasehold improvements, signage, computer equipment and security systems, and the costs vary depending on the branch size, location and the services being offered. During 2006 and 2007, we opened 66 de novo branches. The average cost of capital expenditures for these new branches was approximately $56,000 per branch.

On March 11, 2008, our board of directors increased our $40 million common stock repurchase program to $60 million. As noted above, we repurchased $11.9 million of our common stock during first nine months of 2008, which leaves approximately $10.0 million that may yet be purchased under the current program. We will continue to weigh common stock repurchase opportunities with other capital allocation alternatives based on liquidity, total capital available, existing debt covenants and stock price fluctuations.

We had two buy-here, pay-here automobile lots opened as of September 30, 2008 and we opened a third lot in October 2008. In addition, we plan on opening from three to five additional lots during 2009. During the start-up of these operations, capital requirements are not material. As the business grows, however, the business requires accumulation of automobile inventory. Sales of automobiles are typically completed through a small down payment and an installment loan. As a result, the initial phase of a buy-here, pay-here operation is cash flow negative. Based on initial information and industry research, it appears that a typical location requires approximately $2.5 million to $3.5 million of capital availability over a two to three year period. As this business progresses, we will evaluate the capital requirements and the associated return on investment. The current Arizona payday loan statutory authority expires by its terms in July 2010.

Concentration of Risk. Our branches located in the states of Missouri, California, Arizona, South Carolina, Kansas and Illinois represented approximately 24%, 13%, 8%, 8%, 5% and 5%, respectively, of total revenues for the nine months ended September 30, 2008. Our branches located in the states of Missouri, Arizona, California, Illinois, South Carolina, and Kansas represented approximately 29%, 12%, 11%, 8%, 6% and 6%, respectively, of total branch gross profit for the nine months ended September 30, 2008. To the extent that laws and regulations are passed that affect our ability to offer payday loans or the manner in which we offer payday loans in any one of those states, our financial position, results of operations and cash flows could be adversely affected. The current Arizona payday loan statutory authority expires by its terms in July 2010.

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LIQUIDITY AND CAPITAL RESOURCES

Summary cash flow data is as follows (in thousands):

Cash Flow Discussion. Our primary source of liquidity is cash provided by operations. On December 7, 2007, we entered into an amended and restated credit agreement with a syndicate of banks, which provides for a term loan of $50 million and a revolving line of credit (including provisions permitting the issuance of letters of credit and swingline loans) in the aggregate principal amount of up to $45 million. The maximum borrowings under the amended credit facility may be increased to $120 million pursuant to bank approval in accordance with the terms set forth in the first amendment to the credit facility as of March 7, 2008. We used the proceeds of the term loan to pay a $2.50 per common share special cash dividend in December 2007.

Net cash provided by operating activities for the six months ended June 30, 2008 was $15.5 million, approximately $700,000 lower than the $16.2 million in comparable 2007. This decrease is primarily attributable to changes in working capital items, which can vary from period to period based on the timing of cash receipts and cash payments.

Net cash used by investing activities for the six months ended June 30, 2008 was $1.6 million, which consisted of approximately $1.4 million for capital expenditures and approximately $206,000 for acquisition costs. The capital expenditures included $264,000 to open six de novo branches in 2008, $620,000 for renovations to existing and acquired branches, $407,000 for technology and other furnishings at the corporate office, $71,000 for branches not yet open as of June 30, 2008 and $45,000 for other expenditures. Net cash used by investing activities for the six months ended June 30, 2007 was $4.9 million, which primarily consisted of approximately $1.7 million for capital expenditures and approximately $3.3 million in acquisition costs. The capital expenditures included $326,000 to open 22 de novo branches in 2007, $711,000 for renovations to existing and acquired branches, $577,000 for technology and other furnishings at the corporate office, and $85,000 for other expenditures.

Cash used for financing activities for the six months ended June 30, 2008 was $20.3 million, which primarily consisted of $25.3 million in repayments of indebtedness under the credit facility, $2.0 million in repayments on the term loan and $11.1 million for the repurchase of 1.4 million shares of common stock. These items were partially offset by proceeds received from the borrowing of $19.1 million under the credit facility. Cash used for financing activities for the six months ended June 30, 2007 was $15.4 million, which primarily consisted of $16.3 million in repayments of indebtedness under the credit facility, dividend payments to stockholders totaling $4.0 million and share repurchases of approximately 504,000 shares of our common stock for $7.4 million. These items were partially offset by proceeds received from borrowings under our credit facility totaling $10.5 million to fund operations and proceeds from the exercise of stock options by employees.

Future Capital Requirements. We believe that our available cash, expected cash flows from operations and borrowings available under our credit facility will be sufficient to fund our liquidity and capital expenditure requirements for the foreseeable future. Expected future uses of cash include funding of anticipated increases in payday loans, dividend payments, common stock repurchases, financing of new branch expansion and acquisitions and, if amounts are borrowed under the credit facility, debt repayments and interest payments on the outstanding debt.

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On August 5, 2008, our board of directors declared a cash dividend of $0.10 per common share. The dividend is payable on September 4, 2008 to stockholders of record as of August 20, 2008. We estimate that the total amount of the dividend will be approximately $1.8 million.

The level of cash required to operate a particular payday branch varies based on the products and services provided by that branch. For each branch location, cash is comprised of: (i) a certain amount of cash needed in the branch location; (ii) an operating reserve amount at the local bank used by that branch; and (iii) in-transit amounts within the banking system. As a general guideline, a typical branch offering only the payday loan product requires an average of approximately $10,000 to $15,000, while a branch that also includes check cashing requires an average of approximately $35,000 to $45,000.

As part of our business strategy, we intend to open de novo branches and consider acquisitions in existing and new markets. During 2005, 2006 and 2007, we had de novo unit branch growth of 46.9%, 8.6% and 3.3%, respectively. In addition, we acquired 10 branches in 2005, 51 branches in 2006 and 13 branches in 2007. We expect to open approximately 15 to 20 branches in 2008. We believe our current cash position, the availability under the credit facility and our expected cash flow from operations should provide the capital needed to fund this level of branch growth, assuming no material acquisitions in 2008.

The capital costs of opening a de novo branch include leasehold improvements, signage, computer equipment and security systems, and the costs vary depending on the branch size, location and the services being offered. During 2006 and 2007, we opened 66 de novo branches. The average cost of capital expenditures for these new branches was approximately $56,000 per branch.

On March 11, 2008, our board of directors increased our $40 million common stock repurchase program to $60 million. As noted above, we repurchased $11.1 million of our common stock during first six months of 2008, which leaves approximately $10.7 million that may yet be purchased under the current program. We will continue to weigh common stock repurchase opportunities with other capital allocation alternatives based on liquidity, total capital available, existing debt covenants and stock price fluctuations.

We have two buy-here, pay-here automobile lots open as of June 30, 2008. We expect to open a third lot in the second half of 2008. During the start-up of these operations, capital requirements are not material. As the business grows, however, the business requires accumulation of automobile inventory. Sales of automobiles are typically completed through a small down payment and an installment loan. As a result, the initial phase of a buy-here, pay-here operation is cash flow negative. As this business progresses, we will evaluate the capital requirements and the associated return on investment.

Concentration of Risk. Our branches located in the states of Missouri, California, Arizona, South Carolina, Illinois and Kansas represented approximately 24%, 13%, 9%, 8%, 5% and 5%, respectively, of total revenues for the six months ended June 30, 2008. Our branches located in the states of Missouri, Arizona, California, Illinois, South Carolina, and Kansas represented approximately 29%, 12%, 10%, 8%, 7% and 6%, respectively, of total branch gross profit for the six months ended June 30, 2008. To the extent that laws and regulations are passed that affect our ability to offer payday loans or the manner in which we offer payday loans in any one of those states, our financial position, results of operations and cash flows could be adversely affected.

LIQUIDITY AND CAPITAL RESOURCES

Summary cash flow data is as follows (in thousands):

Cash Flow Discussion. Our primary source of liquidity is cash provided by operations. On December 7, 2007, we entered into an amended and restated credit agreement with a syndicate of banks, which provides for a term loan of $50 million and a revolving line of credit (including provisions permitting the issuance of letters of credit and swingline loans) in the aggregate principal amount of up to $45 million. The maximum borrowings under the amended credit facility may be increased to $120 million pursuant to bank approval in accordance with the terms set forth in the first amendment to the credit facility as of March 7, 2008. We used the proceeds of the term loan to pay a $2.50 per common share special cash dividend in December 2007.

Net cash provided by operating activities for the three months ended March 31, 2008 was $21.7 million, approximately $1.7 million higher than the $20.0 million in comparable 2007. This increase is primarily attributable to higher net income during first quarter 2008.

Net cash used by investing activities for the three months ended March 31, 2008 was $771,000, which consisted of approximately $571,000 for capital expenditures and approximately $205,000 for acquisition costs. The capital expenditures included $70,000 to open two de novo branches in 2008, $349,000 for renovations to existing and acquired branches, $22,000 for technology and other furnishings at the corporate office, $98,000 for branches not yet open as of March 31, 2008 and $32,000 for other expenditures. Net cash used by investing activities for the three months ended March 31, 2007 was $1.1 million for capital expenditures. The capital expenditures included $147,000 to open four de novo branches in 2007, $371,000 for renovations to existing and acquired branches, $234,000 for technology and other furnishings at the corporate office, $39,000 for branches not yet open as of March 31, 2007 and $138,000 for other expenditures.

Cash used for financing activities for the three months ended March 31, 2008 was $30.6 million, which primarily consisted of $24.5 million in repayments of indebtedness under the credit facility, $1.0 million in repayments on the term loan and $8.5 million for the repurchase of 1.1 million shares of common stock. These items were partially offset by proceeds received from the borrowing of $3.5 million under the credit facility. The normal seasonality of our business results in a substantial decrease in loans receivable in the first quarter of each calendar year and a corresponding increase in cash or reduction of our revolving credit facility. During the three months ended March 31, 2007, cash outflows for financing activities was $19.3 million, which primarily consisted of $16.3 million in repayments of indebtedness under the credit facility. In addition, we paid dividends to stockholders totaling $2.0 million and repurchased approximately 116,000 shares of our common stock for $1.6 million.

Future Capital Requirements. We believe that our available cash, expected cash flows from operations and borrowings available under our credit facility will be sufficient to fund our liquidity and capital expenditure requirements for the foreseeable future. Expected future uses of cash include funding of anticipated increases in payday loans, dividend payments, common stock repurchases, financing of new branch expansion and acquisitions and, if amounts are borrowed under the credit facility, debt repayments and interest payments on the outstanding debt.

On April 29, 2008, our board of directors declared a cash dividend of $0.05 per common share. The dividend is payable on May 23, 2008 to stockholders of record as of May 16, 2008. We estimate that the total amount of the dividend will be approximately $900,000.

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The level of cash required to operate a particular payday branch varies based on the products and services provided by that branch. For each branch location, cash is comprised of: (i) a certain amount of cash needed in the branch location; (ii) an operating reserve amount at the local bank used by that branch; and (iii) in-transit amounts within the banking system. As a general guideline, a typical branch offering only the payday loan product requires an average of approximately $10,000 to $15,000, while a branch that also includes check cashing requires an average of approximately $35,000 to $45,000.

As part of our business strategy, we intend to open de novo branches and consider acquisitions in existing and new markets. During 2005, 2006 and 2007, we had de novo unit branch growth of 46.9%, 8.6% and 3.3%, respectively. In addition, we acquired 10 branches in 2005, 51 branches in 2006 and 13 branches in 2007. We expect to open approximately 20 branches in 2008. We believe our current cash position, the availability under the credit facility and our expected cash flow from operations should provide the capital needed to fund this level of branch growth, assuming no material acquisitions in 2008.

The capital costs of opening a de novo branch include leasehold improvements, signage, computer equipment and security systems, and the costs vary depending on the branch size, location and the services being offered. During 2006 and 2007, we opened 66 de novo branches. The average cost of capital expenditures for these new branches was approximately $56,000 per branch.

On March 11, 2008, our board of directors increased our $40 million common stock repurchase program to $60 million. As noted above, we repurchased $8.5 million of our common stock during first quarter 2008, which leaves approximately $13.3 million that may yet be purchased under the current program. We will continue to weigh common share repurchase opportunities with other capital allocation alternatives based on liquidity, total capital available, existing debt covenants and stock price fluctuations.

We have one buy-here, pay-here automotive lot open as of March 31, 2008. We expect to open a second lot in second quarter 2008 and possibly a third lot in third or fourth quarter of 2008. During the start-up of these operations, capital requirements are not material. As the business grows, however, the business requires accumulation of automobile inventory. Sales of automobiles are typically completed through a small down payment and an installment loan. As a result, the initial phase of a buy-here, pay-here operation is cash flow negative. As this business progresses, we will evaluate the capital requirements and the associated return on investment.

Concentration of Risk. Our branches located in the states of Missouri, California, Arizona, South Carolina, Illinois and Kansas represented approximately 24%, 13%, 9%, 7%, 5% and 5%, respectively, of total revenues for the three months ended March 31, 2008. Our branches located in the states of Missouri, Arizona, California, Illinois, South Carolina, and Kansas represented approximately 29%, 11%, 10%, 7%, 7% and 6%, respectively, of total branch gross profit for the three months ended March 31, 2008. To the extent that laws and regulations are passed that affect our ability to offer payday loans or the manner in which we offer payday loans in any one of those states, our financial position, results of operations and cash flows could be adversely affected.

LIQUIDITY AND CAPITAL RESOURCES

Summary cash flow data is as follows (in thousands):

Cash Flow Discussion. Our primary source of liquidity is cash provided by operations. In addition, we entered into a credit agreement on January 19, 2006, which provides a three-year revolving line of credit for borrowings up to $45.0 million (the credit facility). As of September 30, 2007, there was $15.5 million outstanding under the credit facility.

Net cash provided by operating activities for the nine months ended September 30, 2007 was $22.4 million, approximately $10.7 million higher than the $11.7 million in comparable 2006. This increase is primarily attributable to higher net income during first nine months 2007, plus certain non-cash charges associated with the branch closings during 2007.

Net cash used by investing activities for the nine months ended September 30, 2007 was $5.9 million, which primarily consisted of approximately $2.4 million for capital expenditures and approximately $3.6 million in acquisition costs. The capital expenditures included $353,000 to open de novo branches in 2007, $939,000 for renovations to existing and acquired branches, $930,000 for technology and other furnishings at the corporate office, and approximately $140,000 for other expenditures. Net cash used by investing activities for the nine months ended September 30, 2006 was $4.5 million, which primarily consisted of capital expenditures. The capital expenditures included $1.6 million to open 40 de novo branches in 2006, $1.7 million for renovations to existing and acquired branches, $524,000 for tenant improvements, furnishings and technology for the new corporate office space, $402,000 for branches not yet open as of September 30, 2006, $400,000 for the purchase of a building in St. Louis, Missouri that is used as a branch location and other expenditures.

Cash used for financing activities for the nine months ended September 30, 2007 was $16.8 million, which primarily consisted of $16.3 million in repayments of indebtedness under the credit facility, dividend payments to stockholders totaling $5.9 million and share repurchases of approximately 832,000 shares of our common stock for $12.0 million. These items were partially offset by proceeds received from borrowings under our credit facility totaling $15.5 million to fund operations and proceeds received from the exercise of stock options by employees. During the nine months ended September 30, 2006, cash outflows were $14.9 million, which primarily consisted of the repurchase 1.3 million shares of our common stock for approximately $16.5 million partially offset by proceeds from the exercise of stock options by employees.

Future Capital Requirements. We believe that our available cash, expected cash flows from operations and borrowings available under our credit facility will be sufficient to fund our liquidity and capital expenditure requirements for the foreseeable future. Expected future uses of cash include funding of anticipated increases in payday and installment loans, dividend payments, common stock repurchases, financing of new branch expansion and acquisitions and, if amounts are borrowed under the credit facility, debt repayments and interest payments on the outstanding debt.

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On October 30, 2007, our board of directors declared a cash dividend of $0.10 per common share. The dividend is payable on November 19, 2007 to stockholders of record as of November 12, 2007. We estimate that the total amount of the dividend will be approximately $2.0 million, which will be funded from available cash.

The level of cash required to operate a particular branch varies based on the products and services provided by that branch. For each branch location, cash is comprised of: (i) a certain amount of cash needed in the branch location; (ii) an operating reserve amount at the local bank used by that branch; and (iii) in-transit amounts within the banking system. As a general guideline, a typical branch offering only payday loans requires an average cash balance of approximately $10,000 to $15,000, while a branch that also includes check cashing and other products requires an average of approximately $35,000 to $45,000.

As part of our business strategy, we intend to open de novo branches and consider acquisitions in existing and new markets. During 2005 and 2006, we were able to achieve de novo unit branch growth of 46.9% and 8.6%, respectively. In addition, we acquired 10 branches and 51 branches in 2005 and 2006, respectively. During the first nine months of 2007, we opened 16 branches and acquired 13 branches. In connection with one of our acquisitions, we elected to close six of the branches acquired and transfer the receivable balances to our existing branch locations. During the fourth quarter of 2007, we expect to open approximately 5 additional branches. We believe our current cash position and our expected cash flow from operations should provide the capital needed to fund this level of growth, assuming no material acquisitions.

The capital costs of opening a de novo branch include leasehold improvements, signage, computer equipment and security systems, and the costs vary depending on the branch size, location and the services being offered. In fiscal 2006, we opened 46 de novo branches. The average cost of capital expenditures for these new branches was approximately $56,000 per branch.

Common Stock Repurchase Program. In July 2007, our board of directors increased the authorization limit of the Company’s common stock repurchase program to $40 million. In June 2007, our board of directors extended the program through June 30, 2008. As of September 30, 2007, we have repurchased 2.5 million shares at a total cost of approximately $32.2 million.

Concentration of Risk. Our branches located in the states of Missouri, California, Arizona, South Carolina, Kansas and Illinois represented approximately 24%, 13%, 8%, 7%, 5% and 5%, respectively, of total revenues for the nine months ended September 30, 2007. To the extent that laws and regulations are passed that affect our ability to offer payday loans or the manner by which we offer our payday loans in any one of those states, our financial position, results of operations and cash flows could be affected.

LIQUIDITY AND CAPITAL RESOURCES

Summary cash flow data is as follows (in thousands):

Cash Flow Discussion. Our primary source of liquidity is cash provided by operations. In addition, we entered into a credit agreement on January 19, 2006, which provides a three-year revolving line of credit for borrowings up to $45.0 million (the credit facility). As of June 30, 2007, there was $10.5 million outstanding under the credit facility.

Net cash provided by operating activities for the six months ended June 30, 2007 was $16.2 million, approximately $9.4 million higher than the $6.8 million in comparable 2006. This increase is primarily attributable to higher net income during first six months 2007, plus certain non-cash charges associated with the branch closings during 2007.

Net cash used by investing activities for the six months ended June 30, 2007 was $4.9 million, which primarily consisted of approximately $1.7 million for capital expenditures and approximately $3.3 million in acquisition costs. The capital expenditures included $326,000 to open 22 de novo branches in 2007, $711,000 for renovations to existing and acquired branches, $577,000 for technology and other furnishings at the corporate office, and $90,000 for other expenditures. Net cash used by investing activities for the six months ended June 30, 2006 was $3.7 million, which primarily consisted of capital expenditures. The capital expenditures included $1.2 million to open 27 de novo branches in 2006, $1.2 million for renovations to existing and acquired branches, $467,000 for tenant improvements, furnishings and technology for the new corporate office space and $402,000 for branches not yet open as of June 30, 2006, $400,000 for the purchase of a building in St. Louis, Missouri that is used as a branch location and other expenditures.

Cash used for financing activities for the six months ended June 30, 2007 was $15.4 million, which primarily consisted of $16.3 million in repayments of indebtedness under the credit facility, dividend payments to stockholders totaling $4.0 million and share repurchases of approximately 504,000 shares of our common stock for $7.4 million. These items were partially offset by proceeds received from borrowings under our credit facility totaling $10.5 million to fund operations and proceeds from the exercise of stock options by employees. During the six months ended June 30, 2006, cash outflows consisted of the repurchase 436,300 shares of our common stock for approximately $5.8 million partially offset by proceeds from the exercise of stock options by employees.

Future Capital Requirements. We believe that our available cash, expected cash flows from operations and borrowings available under our credit facility will be sufficient to fund our liquidity and capital expenditure requirements for the foreseeable future. Expected future uses of cash include funding of anticipated increases in payday loans, dividend payments, common stock repurchases, financing of new branch expansion and acquisitions and, if amounts are borrowed under the credit facility, debt repayments and interest payments on the outstanding debt.

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On July 31, 2007, our board of directors declared a cash dividend of $0.10 per common share. The dividend is payable on August 31, 2007 to stockholders of record as of August 15, 2007. We estimate that the total amount of the dividend will be approximately $2.0 million.

The level of cash required to operate a particular branch varies based on the products and services provided by that branch. For each branch location, cash is comprised of: (i) a certain amount of cash needed in the branch location; (ii) an operating reserve amount at the local bank used by that branch; and (iii) in-transit amounts within the banking system. As a general guideline, a typical payday only branch requires an average of approximately $10,000 to $15,000, while a branch that also includes check cashing requires an average of approximately $35,000 to $45,000.

As part of our business strategy, we intend to open de novo branches and consider acquisitions in existing and new markets. During 2005 and 2006, we were able to achieve de novo unit branch growth of 46.9% and 8.6%, respectively. In addition, we acquired 10 branches and 51 branches in 2005 and 2006, respectively. During the first six months of 2007, we opened 22 branches and acquired 13 branches. In connection with one of our acquisitions, we elected to close six of the branches acquired and transfer the receivable balances to our existing branch locations. During the second half of 2007, we expect to open between 10 and 15 additional branches. We believe our current cash position and our expected cash flow from operations should provide the capital needed to fund this level of growth, assuming no material acquisitions.

The capital costs of opening a de novo branch include leasehold improvements, signage, computer equipment and security systems, and the costs vary depending on the branch size, location and the services being offered. In fiscal 2006, we opened 46 de novo branches. The average cost of capital expenditures for these new branches was approximately $56,000 per branch.

Common Stock Repurchase Program. In July 2007, our board of directors increased the authorization limit of the Company’s common stock repurchase program to $40 million, subject to amendment of our credit facility. In June 2007, our board of directors extended the program through June 30, 2008. As of June 30, 2007, we have repurchased 2.1 million shares at a total cost of approximately $27.5 million.

Concentration of Risk. Our branches located in the states of Missouri, California, Arizona, South Carolina, Kansas and New Mexico represented approximately 24%, 13%, 8%, 7%, 5% and 5%, respectively, of total revenues for the six months ended June 30, 2007. To the extent that laws and regulations are passed that affect our ability to offer payday loans or the manner by which we offer our payday loans in any one of those states, our financial position, results of operations and cash flows could be affected.

As discussed above, there is new legislation in New Mexico that will become effective in November 2007, which will adversely affect our revenues and gross profit in our New Mexico branches.