##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended December 31, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from            to
 Commission File Number 000-50866
 DOLLAR FINANCIAL CORP.
 (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
 610-296-3400
 None
 þ þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



DOLLAR FINANCIAL CORP.
INDEX
 Page No.PART I.
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial StatementsInterim Consolidated Balance Sheets as of June 30, 2009 and December 31, 2009 (unaudited)
    
    
    3Interim Unaudited Consolidated Statements of Operations for the Three and Six Months
Ended December 31, 2009 and 2008
    
    
    4Interim Unaudited Consolidated Statements of Stockholders Equity as of June 30, 2009 and December
31, 2009 (unaudited)
    
    
    5Interim Unaudited Consolidated Statements of Cash Flows for the Six Months Ended
December 31, 2009 and 2008
    
    
    6Notes to Interim Unaudited Consolidated Financial Statements
    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    35Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    61Item 4.
    
    Controls and Procedures
    
    
    63PART II.
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    63Item 1A.
    
    Risk Factors
    
    
    63Item 4.
    
    Submission of Matters to a Vote  of Security Holders
    
    
    73Item 6.
    
    Exhibits
    
    
    74Signature
    
    
    
    
    76
  Rule 13a-14(a)/15d-14(a) Certification of Chief Executive OfficerRule 13(a)-14(a)/15d-14a Certification of Executive Vice President and Chief Financial OfficerRule 13a-14(a)/15d-14(a) Certification of Senior Vice President of Finance and Corporate ControllerSection 1350 Certification of Chief Executive OfficerSection 1350 Certification of Executive Vice President and Chief Financial OfficerSection 1350 Certification of Senior Vice President of Finance and Corporate Controller
 2




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##### Table of Contents



PART 1. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 DOLLAR FINANCIAL CORP.
 
 INTERIM CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
 June 30,
    
    
    December 31,2009
    
    
    2009(unaudited)ASSETSCurrent AssetsCash and cash equivalents
    
    $
    209,602
    
    
    $
    345,444Loans receivable, net:Loans receivable
    
    
    126,826
    
    
    
    142,364Less: Allowance for loan losses
    
    
    (12,132
    )
    
    
    (15,765
    )Loans receivable, net
    
    
    114,694
    
    
    
    126,599Loans in default, net of an allowance of $17,000 and $17,085
    
    
    6,436
    
    
    
    7,256Other receivables
    
    
    7,299
    
    
    
    22,283Prepaid expenses and other current assets
    
    
    22,794
    
    
    
    22,592Current deferred tax asset, net of valuation allowance of $4,816 and $4,816
    
    
    39
    
    
    
    602Total current assets
    
    
    360,864
    
    
    
    524,776Deferred tax asset, net of valuation allowance of $84,972 and $77,757
    
    
    27,062
    
    
    
    28,254Property and equipment, net of accumulated depreciation of $99,803 and $112,214
    
    
    58,614
    
    
    
    61,572Goodwill and other intangibles
    
    
    454,347
    
    
    
    591,945Debt issuance costs, net of accumulated amortization of $6,815 and $2,111
    
    
    9,869
    
    
    
    20,606Other
    
    
    10,709
    
    
    
    17,093Total Assets
    
    $
    921,465
    
    
    $
    1,244,246LIABILITIES AND STOCKHOLDERS EQUITYCurrent LiabilitiesAccounts payable
    
    $
    36,298
    
    
    $
    30,748Income taxes payable
    
    
    14,834
    
    
    
    18,433Accrued expenses and other liabilities
    
    
    70,588
    
    
    
    92,307Debt due within one year
    
    
    5,880
    
    
    
    193Current deferred tax liability
    
    
    71
    
    
    
    2,357Total current liabilities
    
    
    127,671
    
    
    
    144,038Fair value of derivatives
    
    
    10,223
    
    
    
    47,207Long-term deferred tax liability
    
    
    18,876
    
    
    
    18,163Long-term debt
    
    
    530,425
    
    
    
    759,232Other non-current liabilities
    
    
    25,192
    
    
    
    22,963Stockholders equity:Common stock, $.001 par value: 55,500,000 shares authorized;
24,102,985 shares and 24,228,074 shares issued and outstanding at
June 30, 2009 and December 31, 2009, respectively
    
    
    24
    
    
    
    24Additional paid-in capital
    
    
    311,301
    
    
    
    334,145Accumulated deficit
    
    
    (110,581
    )
    
    
    (98,178
    )Accumulated other comprehensive income
    
    
    8,018
    
    
    
    16,372Total Dollar Financial Corp. stockholders equity
    
    
    208,762
    
    
    
    252,363Non-controlling interest
    
    
    316
    
    
    
    280Total stockholders equity
    
    
    209,078
    
    
    
    252,643Total Liabilities and Stockholders Equity
    
    $
    921,465
    
    
    $
    1,244,246
  3




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 
 INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
 Three Months Ended
    
    
    Six Months EndedDecember 31,
    
    
    December 31,2008
    
    
    2009
    
    
    2008
    
    
    2009Revenues:Check cashing
    
    $
    41,624
    
    
    $
    38,537
    
    
    $
    90,156
    
    
    $
    76,339Fees from consumer lending
    
    
    67,254
    
    
    
    82,746
    
    
    
    145,607
    
    
    
    160,188Money transfer fees
    
    
    6,784
    
    
    
    7,091
    
    
    
    14,394
    
    
    
    13,914Pawn service fees and sales
    
    
    3,430
    
    
    
    4,655
    
    
    
    7,302
    
    
    
    8,488Other
    
    
    13,081
    
    
    
    19,712
    
    
    
    27,790
    
    
    
    35,620Total revenues
    
    
    132,173
    
    
    
    152,741
    
    
    
    285,249
    
    
    
    294,549Operating expenses:Salaries and benefits
    
    
    36,275
    
    
    
    37,723
    
    
    
    77,078
    
    
    
    74,459Provision for loan losses
    
    
    14,899
    
    
    
    12,662
    
    
    
    30,150
    
    
    
    24,358Occupancy
    
    
    10,316
    
    
    
    10,838
    
    
    
    21,640
    
    
    
    21,685Depreciation
    
    
    3,170
    
    
    
    4,071
    
    
    
    6,762
    
    
    
    7,445Returned checks, net and cash shortages
    
    
    4,227
    
    
    
    2,630
    
    
    
    10,362
    
    
    
    4,894Maintenance and repairs
    
    
    2,804
    
    
    
    2,880
    
    
    
    6,220
    
    
    
    5,695Advertising
    
    
    2,396
    
    
    
    4,667
    
    
    
    5,208
    
    
    
    8,114Bank charges and armored carrier service
    
    
    3,130
    
    
    
    3,457
    
    
    
    6,763
    
    
    
    6,923Other
    
    
    10,682
    
    
    
    13,203
    
    
    
    22,982
    
    
    
    24,470Total operating expenses
    
    
    87,899
    
    
    
    92,131
    
    
    
    187,165
    
    
    
    178,043Operating margin
    
    
    44,274
    
    
    
    60,610
    
    
    
    98,084
    
    
    
    116,506Corporate and other expenses:Corporate expenses
    
    
    17,594
    
    
    
    22,949
    
    
    
    37,114
    
    
    
    43,300Other depreciation and amortization
    
    
    938
    
    
    
    1,110
    
    
    
    1,978
    
    
    
    2,162Interest expense, net
    
    
    10,667
    
    
    
    12,842
    
    
    
    22,214
    
    
    
    24,466Loss on extinguishment of debt
    
    
    
    
    
    
    8,813
    
    
    
    
    
    
    
    8,813Unrealized foreign exchange (gain) loss
    
    
    
    
    
    
    (3,915
    )
    
    
    
    
    
    
    3,912Loss on derivatives not designated as hedges
    
    
    
    
    
    
    3,285
    
    
    
    
    
    
    
    3,275Provison for litigation settlements
    
    
    
    
    
    
    
    
    
    
    509
    
    
    
    1,267Loss on store closings
    
    
    555
    
    
    
    1,332
    
    
    
    5,493
    
    
    
    1,650Other (income) expense, net
    
    
    (5,412
    )
    
    
    1,254
    
    
    
    (5,669
    )
    
    
    1,424Income before income taxes
    
    
    19,932
    
    
    
    12,940
    
    
    
    36,445
    
    
    
    26,237Income tax provision
    
    
    10,383
    
    
    
    5,904
    
    
    
    15,609
    
    
    
    13,870Net income
    
    
    9,549
    
    
    
    7,036
    
    
    
    20,836
    
    
    
    12,367Less: Net loss attributable to non-controlling
interests
    
    
    
    
    
    
    (94
    )
    
    
    
    
    
    
    (36
    )Net income attributable to Dollar Financial Corp.
    
    $
    9,549
    
    
    $
    7,130
    
    
    $
    20,836
    
    
    $
    12,403Net income per share:Basic
    
    $
    0.40
    
    
    $
    0.30
    
    
    $
    0.87
    
    
    $
    0.52Diluted
    
    $
    0.40
    
    
    $
    0.29
    
    
    $
    0.86
    
    
    $
    0.50Weighted average shares outstanding:Basic
    
    
    23,941,455
    
    
    
    24,046,559
    
    
    
    24,058,984
    
    
    
    24,022,458Diluted
    
    
    23,980,968
    
    
    
    24,849,876
    
    
    
    24,156,745
    
    
    
    24,657,334
  4




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##### Table of Contents



DOLLAR
FINANCIAL CORP.
 INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(In thousands, except share data)
 AccumulatedCommon Stock
    
    
    Additional
    
    
    Accumulated
    
    
    
    
    
    
    Other
    
    
    TotalOutstanding
    
    
    Paid-in
    
    
    Income
    
    
    Non-Controlling
    
    
    Comprehensive
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    (Deficit)
    
    
    Interest
    
    
    Income (loss)
    
    
    EquityBalance, June 30, 2009
(audited)
    
    
    24,102,985
    
    
    $
    24
    
    
    $
    311,301
    
    
    $
    (110,581
    )
    
    $
    316
    
    
    $
    8,018
    
    
    $
    209,078Comprehensive income:Foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,676
    
    
    
    7,676Cash flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    678
    
    
    
    678Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,403
    
    
    
    
    
    
    
    
    
    
    
    12,403Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,757Restricted stock grants
    
    
    138,620Stock options exercised
    
    
    6,586
    
    
    
    
    
    
    
    100
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100Vested portion of granted restricted stock and restricted stock units
    
    
    
    
    
    
    
    
    
    
    1,905
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,905Retirement of common stock
    
    
    (20,117
    )
    
    
    
    
    
    
    Other stock compensation
    
    
    
    
    
    
    
    
    
    
    1,612
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,612Net income attributable to non-controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (36
    )
    
    
    
    
    
    
    (36
    )Debt Discount
    
    
    
    
    
    
    
    
    
    
    37,346
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37,346Retirement of Debt Discount
    
    
    
    
    
    
    
    
    
    
    (18,119
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18,119
    )Balance, December 31, 2009 (unaudited)
    
    
    24,228,074
    
    
    $
    24
    
    
    $
    334,145
    
    
    $
    (98,178
    )
    
    $
    280
    
    
    $
    16,372
    
    
    $
    252,643
  5




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##### Table of Contents



DOLLAR FINANCIAL CORP.  INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 Six Months EndedDecember 31,2008
    
    
    2009Cash flows from operating activities:Net income
    
    $
    20,836
    
    
    $
    12,403Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    10,199
    
    
    
    11,160Loss on extinguishment of debt
    
    
    
    
    
    
    8,813Change in fair value of derivatives not designated as hedges
    
    
    
    
    
    
    2,885Provision for loan losses
    
    
    30,150
    
    
    
    24,358Non-cash stock compensation
    
    
    3,672
    
    
    
    3,517Minority interest
    
    
    
    
    
    
    (36
    )Losses on store closings
    
    
    1,813
    
    
    
    211Unrealized foreign exchange loss
    
    
    
    
    
    
    3,681Deferred tax provision
    
    
    2,176
    
    
    
    (3,072
    )Acretion of debt discount and deferred issuance costs
    
    
    4,363
    
    
    
    5,686Change in assets and liabilities (net of effect of acquisitions):Increase in loans and other receivables
    
    
    (33,739
    )
    
    
    (42,580
    )Increase in prepaid expenses and other
    
    
    (2,164
    )
    
    
    (603
    )(Decrease) increase in accounts payable, accrued expenses and other liabilities
    
    
    (20,636
    )
    
    
    8,160Net cash provided by operating activities
    
    
    16,670
    
    
    
    34,583Cash flows from investing activities:Acquisitions, net of cash acquired
    
    
    (2,041
    )
    
    
    (123,484
    )Additions to property and equipment
    
    
    (7,715
    )
    
    
    (11,688
    )Net cash used in investing activities
    
    
    (9,756
    )
    
    
    (135,172
    )Cash flows from financing activities:Proceeds from the issuance 10.375% Senior Notes
    
    
    
    
    
    
    596,388Proceeds from the exercise of stock options
    
    
    3,257
    
    
    
    100Purchase of company stock
    
    
    (7,492
    )
    
    
    Repayment of term loan notes
    
    
    (1,834
    )
    
    
    (351,057
    )Other debt payments
    
    
    
    
    
    
    (6,992
    )Net increase in revolving credit facilities
    
    
    36,043
    
    
    
    Payment of debt issuance and other costs
    
    
    (114
    )
    
    
    (19,056
    )Net cash provided by financing activities
    
    
    29,860
    
    
    
    219,383Effect of exchange rate changes on cash and cash equivalents
    
    
    (37,124
    )
    
    
    17,048Net (decrease) increase in cash and cash equivalents
    
    
    (350
    )
    
    
    135,842Cash and cash equivalents at beginning of period
    
    
    209,714
    
    
    
    209,602Cash and cash equivalents at end of period
    
    $
    209,364
    
    
    $
    345,444
  6




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##### Table of Contents



DOLLAR
FINANCIAL CORP.
 
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 1. Summary of Significant Accounting Policies
 Basis of Presentation
  ® ® ®
   Subsequent Events
  Use of Estimates
  7




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##### Table of Contents



DOLLAR FINANCIAL CORP.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 1. Summary of Significant Accounting Policies (continued)
 Principles of Consolidation
  Reclassification
  Fair Value of Financial Instruments
   Earnings per Share
  Three Months Ended
    
    
    Six Months EndedDecember 31,
    
    
    December 31,2008
    
    
    2009
    
    
    2008
    
    
    2009Net income
    
    $
    9,549
    
    
    $
    7,130
    
    
    $
    20,836
    
    
    $
    12,403Reconciliation of denominator:Weighted average of common shares outstanding  basic 1
    
    
    23,941
    
    
    
    24,047
    
    
    
    24,059
    
    
    
    24,022Effect of dilutive stock options 2
    
    
    3
    
    
    
    477
    
    
    
    53
    
    
    
    337Effect of unvested restricted stock and restricted stock unit grants
    
    
    37
    
    
    
    326
    
    
    
    45
    
    
    
    298Weighted average of common shares outstanding  diluted
    
    
    23,981
    
    
    
    24,850
    
    
    
    24,157
    
    
    
    24,657
 
 (1)
    
    Excludes 124 and 101 shares of unvested restricted stock, which are included in total
outstanding common shares as of December 31, 2008 and 2009, respectively. The dilutive
effect of restricted stock is included in the calculation of diluted earnings per share
using the treasury stock method.(2)
    
    The effect of dilutive stock options was determined under the treasury stock method. 8




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##### Table of Contents



DOLLAR FINANCIAL CORP.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 1. Summary of Significant Accounting Policies (continued)
 Stock Based Employee Compensation
      Three Months Ended
    
    Six Months EndedDecember 31,
    
    December 31,2008
    
    2009
    
    2008
    
    2009Expected volatility
    
    
    49.7
    %
    
    
    54.5
    %
    
    
    49.4
    %
    
    
    54.9
    %Expected life (years)
    
    
    5.8
    
    
    
    5.7
    
    
    
    5.8
    
    
    
    5.9Risk-free interest rate
    
    
    2.47
    %
    
    
    3.01
    %
    
    
    2.52
    %
    
    
    3.23
    %Expected dividends
    
    None
    
    None
    
    None
    
    NoneWeighted average fair value
    
    $
    3.51
    
    
    $
    11.87
    
    
    $
    3.73
    
    
    $
    9.48
  WeightedWeighted
    
    AverageAverage
    
    Remaining
    
    AggregateExercise
    
    Contractual
    
    Intrinsic ValueOptions
    
    Price
    
    Term (years)
    
    ($ in millions)Options outstanding at June 30,
2009 (911,623 shares exercisable)
    
    
    1,575,184
    
    
    $
    14.56
    
    
    
    7.8
    
    
    $
    3.0Granted
    
    
    257,667
    
    
    $
    17.42Exercised
    
    
    (6,586
    )
    
    $
    15.23Forfeited and expired
    
    
    (20,067
    )
    
    $
    16.12Options outstanding at December 31, 2009
    
    
    1,806,198
    
    
    $
    14.95
    
    
    
    7.6
    
    
    $
    16.1Exercisable at December 31, 2009
    
    
    1,094,015
    
    
    $
    15.77
    
    
    
    6.8
    
    
    $
    9.0
 9




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##### Table of Contents



DOLLAR FINANCIAL CORP.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 1. Summary of Significant Accounting Policies (continued)
 Stock Based Employee Compensation (continued)
    WeightedAverageRestricted
    
    Grant-DateStock Awards
    
    Fair-ValueOutstanding at June 30, 2009
    
    
    105,458
    
    
    $
    11.03Granted
    
    
    31,899
    
    
    $
    22.86Vested
    
    
    (36,795
    )
    
    $
    11.83Outstanding at December 31, 2009
    
    
    100,562
    
    
    $
    14.49
   WeightedRestricted
    
    AverageStock Unit
    
    Grant-DateAwards
    
    Fair-ValueOutstanding at June 30, 2009
    
    
    413,926
    
    
    $
    11.25Granted
    
    
    233,599
    
    
    $
    16.73Vested
    
    
    (190,822
    )
    
    $
    12.26Forfeited
    
    
    (13,493
    )
    
    $
    16.86Outstanding at December 31, 2009
    
    
    443,210
    
    
    $
    13.53
  10




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##### Table of Contents



DOLLAR FINANCIAL CORP.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 1. Summary of Significant Accounting Policies (continued)
 Recent Accounting Pronouncements
 Business Combinations
 Non-controlling Interests in
Consolidated Financial Statements
 Accounting for Convertible Debt
Instruments That May Be Settled Upon Conversion (Including Partial Cash Settlement)
 Disclosures about Fair Value of
Financial Instruments
 Accounting Standards Codification
and the Hierarchy of Generally Accepted Accounting Principles
 2. Acquisitions
   11




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##### Table of Contents



DOLLAR FINANCIAL CORP.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 2. Acquisitions (continued)
        12




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##### Table of Contents



DOLLAR FINANCIAL CORP.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 2. Acquisitions (continued)
  Cash
    
    $
    4,464Other receivables
    
    
    1,471Other assets
    
    
    2,883Prepaid expenses and other current assets
    
    
    1,990Property and equipment
    
    
    559Accounts payable
    
    
    (690
    )Accrued expenses and other liabilities
    
    
    (1,896
    )Other non-current liabilities
    
    
    (2,974
    )Net tangible assets acquired
    
    
    5,807Definite-lived intangible assets acquired
    
    
    28,890Indefinite-lived intangible assets acquired
    
    
    35,501Goodwill
    
    
    53,125Total estimated purchase price
    
    $
    123,323
   13




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##### Table of Contents



DOLLAR FINANCIAL CORP.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 2. Acquisitions (continued)
  EstimatedEstimated Fair
    
    
    Useful LivesValue
    
    
    (Years)Third-party bank financing contract
    
    $
    15,177
    
    
    
    5Service warranty provider contract
    
    
    7,164
    
    
    
    5Auto dealer relationships
    
    
    4,253
    
    
    
    5GAP insurance provider contract
    
    
    1,538
    
    
    
    3Payment processing contract
    
    
    421
    
    
    
    5Non-compete contracts
    
    
    337
    
    
    
    2Tradename/Program (DFS MILES Program)
    
    
    35,501
    
    
    Indefinite$
    64,391
   14




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##### Table of Contents



DOLLAR FINANCIAL CORP.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 2. Acquisitions (continued)
  Balance at June 30, 2009
    
    $
    406.5Acquisitions:Military Financial Services, LLC
    
    
    53.1Merchant Cash Express
    
    
    2.0Various small acquisitions
    
    
    0.2Purchase accounting adjustments:Robert Biggar Limited
    
    
    0.3Optima, S.A.
    
    
    0.1Foreign currency adjustment
    
    
    13.2Balance at December 31, 2009
    
    $
    475.4
  Three months ended
    
    
    Six months endedDecember 31,
    
    
    December 31,2008
    
    
    2009
    
    
    2008
    
    
    2009(Unaudited in thousands except per
    
    
    (Unaudited in thousands except pershare amounts)

    
    
    share amounts)Revenue
    
    $
    142,242
    
    
    $
    158,549
    
    
    $
    305,244
    
    
    $
    308,098Net income
    
    $
    12,557
    
    
    $
    8,858
    
    
    $
    27,144
    
    
    $
    18,828Net income per common share  basic
    
    $
    0.52
    
    
    $
    0.37
    
    
    $
    1.13
    
    
    $
    0.78Net income per common share  diluted
    
    $
    0.52
    
    
    $
    0.36
    
    
    $
    1.11
    
    
    $
    0.76
 15




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##### Table of Contents



DOLLAR FINANCIAL CORP.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 3. Goodwill and Other Intangibles
  United
    
    
    Dealers Financial
    
    
    
    
    
    
    UnitedStates
    
    
    Services
    
    
    Canada
    
    
    Kingdom
    
    
    TotalBalance at June 30, 2009
    
    $
    210,335
    
    
    $
    
    
    
    $
    124,453
    
    
    $
    71,766
    
    
    $
    406,554Acquisitions and purchase accounting
adjustments
    
    
    46
    
    
    
    53,125
    
    
    
    
    
    
    
    2,467
    
    
    
    55,638Foreign currency translation adjustments
    
    
    620
    
    
    
    
    
    
    
    13,787
    
    
    
    (1,235
    )
    
    
    13,172Balance at December 31, 2009
    
    $
    211,001
    
    
    $
    53,125
    
    
    $
    138,240
    
    
    $
    72,998
    
    
    $
    475,364
  June 30,
    
    
    December 31,2009
    
    
    2009Gross
    
    
    GrossCarrying
    
    
    CarryingAmount
    
    
    AmountNon-amortized intangible assets:Goodwill
    
    $
    406,554
    
    
    $
    475,364Reacquired franchise rights
    
    
    47,793
    
    
    
    52,313DFS MILES Program
    
    
    
    
    
    
    35,501$
    454,347
    
    
    $
    563,178Amortizable intangible assets:Various contracts
    
    $
    
    
    
    $
    28,767Total intangible assets
    
    $
    454,347
    
    
    $
    591,945
     16




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##### Table of Contents



DOLLAR FINANCIAL CORP.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 4. Contingent Liabilities
   Canadian Legal Proceedings
   Day Young Young
  17




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##### Table of Contents



DOLLAR FINANCIAL CORP.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 4. Contingent Liabilities (continued)
 Canadian Legal Proceedings (continued)
 Parsons
     California Legal Proceedings
 Bufil Bufil
  We The People Legal Proceedings
  18




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##### Table of Contents



DOLLAR FINANCIAL CORP.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 4. Contingent Liabilities (continued)
 We The People Legal Proceedings (continued)
      19




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##### Table of Contents



DOLLAR FINANCIAL CORP.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 4. Contingent Liabilities (continued)
 We The People Legal Proceedings (continued)
      5. Debt
  June 30,
    
    
    December 31,2009
    
    
    2009National Money Mart Company 10.375% Senior Notes due 2016
    
    $
    
    
    
    $
    600,000Issuance discount on Senior Notes
    
    
    
    
    
    
    (3,635
    )Dollar Financial Corp. 2.875% Senior Convertible Notes due 2027
    
    
    161,315
    
    
    
    66,601Dollar Financial Corp. 3.000% Senior Convertible Notes due 2028
    
    
    
    
    
    
    77,801Term loans due October 2012
    
    
    368,722
    
    
    
    1,608Term loans due December 2014
    
    
    
    
    
    
    17,050Other
    
    
    6,268
    
    
    
    Total debt
    
    
    536,305
    
    
    
    759,425Less: current portion of debt
    
    
    (5,880
    )
    
    
    (193
    )Long-term debt
    
    $
    530,425
    
    
    $
    759,232
 Senior Notes
  20




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##### Table of Contents



DOLLAR FINANCIAL CORP.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 5. Debt (continued)
  Convertible Notes
 Senior Convertible Notes due 2027
    
    
    during any calendar quarter commencing after September 30, 2007, if the closing sale price
of the Company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 Old 2027 Notes for each day of such period was less than 98.0% of the
product of the closing sale price per share of the Companys common stock on such day and
the conversion rate in effect for the Old 2027 Notes on each such day;
    
    if such notes have been called for redemption; at any time on or after December 31, 2026; or
    
    upon the occurrence of specified corporate transactions as
described in the 2027 Notes Indenture.
   21




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##### Table of Contents



DOLLAR FINANCIAL CORP.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 5.  Debt (continued)
    Senior Convertible Notes due 2028
    
    
    during any calendar quarter commencing after December 31, 2009, if the closing sale price of
the Company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 New 2028 Notes for each day of such period was less than 98.0% of the product of the
closing sale price per share of the Companys common stock on such day and the conversion rate in
effect for the New 2028 Notes on each such day;
    
    if such notes have been 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 Notes Indenture.
     Treatment of Convertible Notes
 Debt
  1.
    
    cash equal to the lesser of the aggregate principal amount
of the series of Convertible Notes to be converted ($1,000 per note)
or the total conversion value; and shares of the Companys
common stock in respect of the remainder, if any, of the
conversion value over the principal amount such series of  the
Convertible Notes; or2.
    
    shares of the Companys common stock to the holders,
calculated at the initial conversion price which is
subject to any of the conversion price adjustments
discussed above.
 22




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##### Table of Contents



DOLLAR FINANCIAL CORP.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 5. Debt (continued)
 Earnings Per Share
 Credit Facility
         23




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##### Table of Contents



DOLLAR FINANCIAL CORP.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 6. Capital Stock
    7.  Fair Value Measurements
   24




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##### Table of Contents



DOLLAR FINANCIAL CORP.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 7. Fair Value Measurements (continued)
  Assets and Liabilities Measured at Fair Value on a Recurring Basis at December 31, 2009
( in thousands)
 Quoted Prices inActive Markets
    
    Significantfor Identical
    
    Other
    
    Significant
    
    Balance atAssets and
    
    Observable
    
    Unobservable
    
    December 31,Liabilities (Level 1)
    
    Inputs (Level 2)
    
    Inputs (Level 3)
    
    2009AssetsDerivative
financial
instruments
    
    $
    
    $
    53
    
    
    $
    
    $
    53LiabilitiesDerivative
financial
instruments
    
    $
    
    $
    47,207
    
    
    $
    
    $
    47,207
  8. Loss on Extinguishment of Debt
    Loss/(Gain)Write-off of previously capitalized Term Loan
deferred debt issuance costs, net
    
    $
    4,960Reclassification of other comprehensive income
related to U.K. term debt repayment
    
    
    3,866Miscellaneous foreign exchange expense related
to  term debt repayment
    
    
    230Gain on
exchange of 2.875% Senior Convertible Notes
    
    
    (1,821
    )Write-off of
previously capitalized 2.875% Senior Convertible
deferred debt issuance costs, net
    
    
    1,578$
    8,813
 25




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##### Table of Contents



DOLLAR FINANCIAL CORP.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 9. Segment Information
  26




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##### Table of Contents



DOLLAR FINANCIAL CORP.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 9.
Segment Information (continued)
 DealersUnited
    
    
    Financial
    
    
    
    
    
    
    UnitedStates
    
    
    Services
    
    
    Canada
    
    
    Kingdom
    
    
    TotalAs of and for the three months ended
December 31, 2008Total assets
    
    $
    299,322
    
    
    $
    
    
    
    $
    412,344
    
    
    $
    164,866
    
    
    $
    876,532Goodwill and other intangibles, net
    
    
    206,024
    
    
    
    
    
    
    
    157,572
    
    
    
    58,409
    
    
    
    422,005Sales to unaffiliated customers:Check cashing
    
    
    13,914
    
    
    
    
    
    
    
    17,346
    
    
    
    10,364
    
    
    
    41,624Fees from consumer lending
    
    
    22,188
    
    
    
    
    
    
    
    30,006
    
    
    
    15,060
    
    
    
    67,254Money transfer fees
    
    
    1,526
    
    
    
    
    
    
    
    3,767
    
    
    
    1,491
    
    
    
    6,784Pawn service fees and sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,430
    
    
    
    3,430Other
    
    
    3,381
    
    
    
    
    
    
    
    7,039
    
    
    
    2,661
    
    
    
    13,081Total sales to unaffiliated customers
    
    
    41,009
    
    
    
    
    
    
    
    58,158
    
    
    
    33,006
    
    
    
    132,173Provision for loan losses
    
    
    6,618
    
    
    
    
    
    
    
    6,197
    
    
    
    2,084
    
    
    
    14,899Interest expense, net
    
    
    4,693
    
    
    
    
    
    
    
    4,323
    
    
    
    1,651
    
    
    
    10,667Depreciation and amortization
    
    
    1,404
    
    
    
    
    
    
    
    1,419
    
    
    
    1,285
    
    
    
    4,108Loss on store closings
    
    
    422
    
    
    
    
    
    
    
    127
    
    
    
    6
    
    
    
    555Other income, net
    
    
    
    
    
    
    
    
    
    
    (4,027
    )
    
    
    (1,385
    )
    
    
    (5,412
    )(Loss) income before income taxes
    
    
    (7,236
    )
    
    
    
    
    
    
    18,942
    
    
    
    8,226
    
    
    
    19,932Income tax provision
    
    
    24
    
    
    
    
    
    
    
    8,467
    
    
    
    1,892
    
    
    
    10,383As of and for the six months ended December
31, 2008Sales to unaffiliated customers:Check cashing
    
    $
    28,351
    
    
    $
    
    
    
    $
    37,890
    
    
    $
    23,915
    
    
    $
    90,156Fees from consumer lending
    
    
    44,991
    
    
    
    
    
    
    
    67,203
    
    
    
    33,413
    
    
    
    145,607Money transfer fees
    
    
    3,118
    
    
    
    
    
    
    
    8,176
    
    
    
    3,100
    
    
    
    14,394Pawn service fees and sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,302
    
    
    
    7,302Other
    
    
    6,779
    
    
    
    
    
    
    
    15,202
    
    
    
    5,809
    
    
    
    27,790Total sales to unaffiliated customers
    
    
    83,239
    
    
    
    
    
    
    
    128,471
    
    
    
    73,539
    
    
    
    285,249Provision for loan losses
    
    
    13,595
    
    
    
    
    
    
    
    12,094
    
    
    
    4,461
    
    
    
    30,150Interest expense, net
    
    
    11,056
    
    
    
    
    
    
    
    7,589
    
    
    
    3,569
    
    
    
    22,214Depreciation and amortization
    
    
    2,862
    
    
    
    
    
    
    
    3,134
    
    
    
    2,744
    
    
    
    8,740Provision for litigation settlements
    
    
    509
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    509Loss on store closings
    
    
    3,070
    
    
    
    
    
    
    
    2,417
    
    
    
    6
    
    
    
    5,493Other expense (income), net
    
    
    
    
    
    
    
    
    
    
    (4,207
    )
    
    
    (1,462
    )
    
    
    (5,669
    )(Loss) income before income taxes
    
    
    (18,201
    )
    
    
    
    
    
    
    37,592
    
    
    
    17,054
    
    
    
    36,445Income tax provision
    
    
    (27
    )
    
    
    
    
    
    
    11,638
    
    
    
    3,998
    
    
    
    15,609
 27




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##### Table of Contents



DOLLAR FINANCIAL CORP.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 9.
Segment Information (continued)
 DealersUnited
    
    
    Financial
    
    
    
    
    
    
    UnitedStates
    
    
    Services(1)
    
    
    Canada
    
    
    Kingdom
    
    
    TotalAs of and for the three months ended December
31, 2009Total assets
    
    $
    313,015
    
    
    $
    129,241
    
    
    $
    576,078
    
    
    $
    225,912
    
    
    $
    1,244,246Goodwill and other intangibles, net
    
    
    211,297
    
    
    
    117,393
    
    
    
    184,556
    
    
    
    78,699
    
    
    
    591,945Sales to unaffiliated customers:Check cashing
    
    
    11,133
    
    
    
    
    
    
    
    18,149
    
    
    
    9,255
    
    
    
    38,537Fees from consumer lending
    
    
    19,984
    
    
    
    
    
    
    
    38,126
    
    
    
    24,636
    
    
    
    82,746Money transfer fees
    
    
    1,219
    
    
    
    
    
    
    
    4,219
    
    
    
    1,653
    
    
    
    7,091Pawn service fees and sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,655
    
    
    
    4,655Other
    
    
    2,954
    
    
    
    621
    
    
    
    8,692
    
    
    
    7,445
    
    
    
    19,712Total sales to unaffiliated customers
    
    
    35,290
    
    
    
    621
    
    
    
    69,186
    
    
    
    47,644
    
    
    
    152,741Provision for loan losses
    
    
    3,589
    
    
    
    
    
    
    
    4,520
    
    
    
    4,553
    
    
    
    12,662Interest expense, net
    
    
    4,743
    
    
    
    
    
    
    
    6,626
    
    
    
    1,473
    
    
    
    12,842Depreciation and amortization
    
    
    1,769
    
    
    
    123
    
    
    
    1,679
    
    
    
    1,610
    
    
    
    5,181Loss on extinguishment of debt
    
    
    450
    
    
    
    
    
    
    
    3,643
    
    
    
    4,720
    
    
    
    8,813Unrealized foreign exchange loss (gain)
    
    
    42
    
    
    
    
    
    
    
    (3,983
    )
    
    
    26
    
    
    
    (3,915
    )Loss on derivatives not designated as hedges
    
    
    
    
    
    
    
    
    
    
    3,285
    
    
    
    
    
    
    
    3,285Loss on store closings
    
    
    784
    
    
    
    
    
    
    
    541
    
    
    
    7
    
    
    
    1,332Other expense (income), net
    
    
    537
    
    
    
    (13
    )
    
    
    35
    
    
    
    695
    
    
    
    1,254(Loss) income before income taxes
    
    
    (5,464
    )
    
    
    273
    
    
    
    11,315
    
    
    
    6,816
    
    
    
    12,940Income tax provision
    
    
    1,435
    
    
    
    2
    
    
    
    2,567
    
    
    
    1,900
    
    
    
    5,904As of and for the six months ended December
31, 2009Sales to unaffiliated customers:Check cashing
    
    $
    22,039
    
    
    $
    
    
    
    $
    35,488
    
    
    $
    18,812
    
    
    $
    76,339Fees from consumer lending
    
    
    39,140
    
    
    
    
    
    
    
    73,342
    
    
    
    47,706
    
    
    
    160,188Money transfer fees
    
    
    2,495
    
    
    
    
    
    
    
    8,267
    
    
    
    3,152
    
    
    
    13,914Pawn service fees and sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,488
    
    
    
    8,488Other
    
    
    5,810
    
    
    
    621
    
    
    
    16,212
    
    
    
    12,977
    
    
    
    35,620Total sales to unaffiliated customers
    
    
    69,484
    
    
    
    621
    
    
    
    133,309
    
    
    
    91,135
    
    
    
    294,549Provision for loan losses
    
    
    7,795
    
    
    
    
    
    
    
    8,291
    
    
    
    8,272
    
    
    
    24,358Interest expense, net
    
    
    9,399
    
    
    
    
    
    
    
    11,995
    
    
    
    3,072
    
    
    
    24,466Depreciation and amortization
    
    
    3,061
    
    
    
    123
    
    
    
    3,258
    
    
    
    3,165
    
    
    
    9,607Loss on extinguishment of debt
    
    
    450
    
    
    
    
    
    
    
    3,643
    
    
    
    4,720
    
    
    
    8,813Unrealized foreign exchange loss (gain)
    
    
    56
    
    
    
    
    
    
    
    (4,073
    )
    
    
    7,929
    
    
    
    3,912Loss on derivatives not designated as hedges
    
    
    
    
    
    
    
    
    
    
    3,275
    
    
    
    
    
    
    
    3,275Provision for litigation settlements
    
    
    1,267
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,267Loss on store closings
    
    
    958
    
    
    
    
    
    
    
    749
    
    
    
    (57
    )
    
    
    1,650Other expense (income), net
    
    
    754
    
    
    
    (13
    )
    
    
    17
    
    
    
    666
    
    
    
    1,424(Loss) income before income taxes
    
    
    (12,957
    )
    
    
    273
    
    
    
    29,572
    
    
    
    9,349
    
    
    
    26,237Income tax provision
    
    
    2,770
    
    
    
    2
    
    
    
    8,321
    
    
    
    2,777
    
    
    
    13,870
 
 (1)
    
    The results of operations for Dealers Financial
Services is for the period December 23, 2009 through December 31,
2009.
 28




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##### Table of Contents



DOLLAR FINANCIAL CORP.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 10. Comprehensive Income
  Three months ended
    
    
    Six months endedDecember 31,
    
    
    December 31,2008
    
    
    2009
    
    
    2008
    
    
    2009Net income
    
    $
    9,549
    
    
    $
    7,130
    
    
    $
    20,836
    
    
    $
    12,403Foreign currency translation adjustment(1)
    
    
    (25,698
    )
    
    
    3,154
    
    
    
    (36,894
    )
    
    
    7,676Fair value adjustments for cash flow hedges,
net(2)(3)
    
    
    (17,623
    )
    
    
    1,115
    
    
    
    (14,282
    )
    
    
    678Total comprehensive income
    
    $
    (33,772
    )
    
    $
    11,399
    
    
    $
    (30,340
    )
    
    $
    20,757
 
 (1)
    
    The ending balance of the foreign
currency translation adjustments included in
accumulated other comprehensive income on
the balance sheet were gains of $1.0 million
and $28.9 million respectively as of
December 31, 2008 and 2009.(2)
    
    Net of $8.2 million and $0.6 million of
tax for the three months ended December 31,
2008 and 2009, respectively. For the six
months ended December 31, 2008 and 2009, the
fair value adjustments for cash flow hedges
were net of $10.3 million and $0.9 million of
tax, respectively.(3)
    
    Net of $0.3 million and $3.6 million which
were reclassified into earnings for the
three months ended December 31, 2008 and
2009, respectively. For the six months
ended December 31, 2008 and 2009, the fair
falue adjustments for cash flow hedges which
were reclassified into earnings were $0.7
million and $4.1 million, respectively.  11. Income Taxes
 Income Tax Provision
  29




---



##### Table of Contents



DOLLAR FINANCIAL CORP.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 11. Income Taxes (continued)
  Deferred
    
    
    Valuation
    
    
    Net DeferredTax Asset
    
    
    Allowance
    
    
    Tax AssetBalance at June 30, 2009
    
    $
    130.4
    
    
    $
    89.8
    
    
    $
    40.6U.S. increase/(decrease)
    
    
    (1.4
    )
    
    
    (5.9
    )
    
    
    4.5Foreign increase/(decrease)
    
    
    0.4
    
    
    
    (1.3
    )
    
    
    1.7Balance at December 31, 2009
    
    $
    129.4
    
    
    $
    82.6
    
    
    $
    46.8
      30




---



##### Table of Contents



DOLLAR FINANCIAL CORP.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 12. Derivative Instruments and Hedging Activities
 Risk Management Objective of Using Derivatives
   Cash Flow Hedges of Foreign Exchange Risk
   Cash Flow Hedges of Multiple Risks
    31




---



##### Table of Contents



DOLLAR FINANCIAL CORP.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 12. Derivative Instruments and Hedging Activities (continued)
   Pay Fixed
    
    
    Pay Fixed
    
    
    Receive Floating
    
    
    Receive FloatingForeign Currency Derivates
    
    Notional
    
    
    Strike Rate
    
    
    Notional
    
    
    IndexUSD-CAD Cross Currency Swap
    
    CAD183,555,348
    
    
    7.135
    %
    
    $
    159,637,500
    
    
    3 mo. LIBOR + 2.75% per annumUSD-CAD Cross Currency Swap
    
    CAD61,455,648
    
    
    7.130
    %
    
    $
    53,212,500
    
    
    3 mo. LIBOR + 2.75% per annumUSD-CAD Cross Currency Swap
    
    CAD83,838,713
    
    
    7.070
    %
    
    $
    72,562,500
    
    
    3 mo. LIBOR + 2.75% per annum
  Non-designated Hedges of Commodity Risk
  32




---



##### Table of Contents



DOLLAR FINANCIAL CORP.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 12. Derivative Instruments and Hedging Activities (continued)
  Tabular Disclosure of Fair Values of Derivative Instruments (1)
 Asset Derivatives
    
    
    Liability DerivativesAs of December 31, 2009
    
    
    As of December 31, 2009Balance Sheet Location
    
    
    Fair Value
    
    
    Balance Sheet Location
    
    
    Fair ValueDerivatives not designated as hedging instrumentsCross Currency Swaps
    
    
    
    
    
    $
    
    
    
    Derivatives
    
    $
    47,207Commodity options
    
    Prepaid expenses
    
    
    53Total derivatives not designated as hedging
instruments
    
    
    
    
    
    $
    53
    
    
    
    
    
    
    $
    47,207
 
 (1)
    
    The fair values of derivative instruments are presented in the above
table on a gross basis. Certain of the above derivative instruments
are subject to master netting arrangements and qualify for net
presentation in the Consolidated Balance Sheet.  Tabular Disclosure of the Effect of Derivative Instruments on the Consolidated Statement of Operations for the Six Months Ending  December 31, 2009
 Location ofGain or (Loss)Recognized in
    
    Amount of Gain orIncome on
    
    (Loss) RecognizedLocation of Gain
    
    
    
    
    
    Derivative
    
    in Income onor (Loss)
    
    
    
    
    
    (Ineffective
    
    DerivativeAmount of Gain or
    
    
    Reclassified from
    
    Amount of Gain or
    
    
    Portion and
    
    (Ineffective Portion(Loss) Recognized in
    
    
    Accumulated OCI
    
    (Loss) Reclassified
    
    
    Amount
    
    and AmountDerivatives in SFAS 133
    
    OCI on Derivative
    
    
    into Income
    
    from Accumulated
    
    
    Excluded from
    
    Excluded fromCash Flow Hedging
    
    (Effective Portion),
    
    
    (Effective
    
    OCI into Income
    
    
    Effectiveness
    
    EffectivenessRelationships
    
    net of tax
    
    
    Portion)
    
    (Effective Portion)
    
    
    Testing)
    
    Testing)Commodity options
    
    $
    
    
    
    
    
    $
    
    
    
    Other income /    (expense)
    
    $
    (47
    )Foreign Exchange Contracts
    
    
    (34
    )
    
    Foreign currency gain / (loss)
    
    
    
    
    
    Other income /(expense)
    
    
    Interest Expense
    
    
    (4,613
    )
    
    Other income /(expense)
    
    
    (3,275
    )Cross Currency Swaps
    
    
    (2,673
    )
    
    Corporate Expenses
    
    
    1,295Total
    
    $
    (2,707
    )
    
    
    
    $
    (3,318
    )
    
    
    
    $
    (3,322
    )
 33




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##### Table of Contents



DOLLAR FINANCIAL CORP.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 12. Derivative Instruments and Hedging Activities (continued)
 Tabular Disclosure of the Effect of Derivative Instruments on the Consolidated Statement of Operations for the Six Months Ending
 December 31, 2008
 Location ofGain or (Loss)Recognized in
    
    Amount of Gain orIncome on
    
    (Loss) RecognizedLocation of Gain
    
    
    
    
    
    Derivative
    
    in Income onor (Loss)
    
    
    
    
    
    (Ineffective
    
    DerivativeAmount of Gain or
    
    
    Reclassified from
    
    Amount of Gain or
    
    
    Portion and
    
    (Ineffective Portion(Loss) Recognized in
    
    
    Accumulated OCI
    
    (Loss) Reclassified
    
    
    Amount
    
    and AmountDerivatives in SFAS 133
    
    OCI on Derivative
    
    
    into Income
    
    from Accumulated
    
    
    Excluded from
    
    Excluded fromCash Flow Hedging
    
    (Effective Portion),
    
    
    (Effective
    
    OCI into Income
    
    
    Effectiveness
    
    EffectivenessRelationships
    
    net of tax
    
    
    Portion)
    
    (Effective Portion)
    
    
    Testing)
    
    Testing)Commodity options
    
    $
    
    
    
    
    
    $
    

    
    
    
    
    $
    Foreign Exchange Contracts
    
    
    201
    
    
    Foreign currency gain / (loss)
    
    
    
    
    
    Other income /(expense)
    
    
    Interest Expense
    
    
    
    
    
    Other income /(expense)
    
    
    Cross Currency Swaps
    
    
    (22,938
    )
    
    Corporate Expenses
    
    
    Total
    
    $
    (22,637
    )
    
    
    
    $
    
    
    
    
    
    $
    
 Credit-risk-related Contingent Features
    34




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##### Table of Contents



Item 2.

    Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following is a discussion and analysis of the financial condition and results of operations for
Dollar Financial Corp. for the three and six  months ended
December 31, 2009 and 2008. References in this
section to we, our, ours, or us are to Dollar Financial Corp. and its wholly owned
subsidiaries, except as the context otherwise requires. References to OPCO are to our wholly
owned operating subsidiary, Dollar Financial Group, Inc.
 Executive Summary
        35




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##### Table of Contents



Discussion of Critical Accounting Policies
  36




---



##### Table of Contents



Revenue Recognition
    Company-Funded Consumer Loan Loss Reserves Policy
   Check Cashing Returned Item Policy
  37




---



##### Table of Contents



Goodwill and Indefinite-Lived Intangible Assets
     38




---



##### Table of Contents



Derivative Instruments and Hedging Activities
   Income Taxes
   Constant Currency Analysis
   39




---



##### Table of Contents



Revenue Analysis
 Three Months Ended December 31,
    
    
    Six Months Ended December 31,(Percentage of total
    
    
    
    
    
    
    
    
    
    
    (Percentage of total($ in thousands)
    
    
    revenue)
    
    
    ($ in thousands)
    
    
    revenue)2008
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008
    
    
    2009Check cashing
    
    $
    41,624
    
    
    $
    38,537
    
    
    
    31.5
    %
    
    
    25.2
    %
    
    $
    90,156
    
    
    $
    76,339
    
    
    
    31.6
    %
    
    
    25.9
    %Fees from consumer lending
    
    
    67,254
    
    
    
    82,746
    
    
    
    50.9
    %
    
    
    54.2
    %
    
    
    145,607
    
    
    
    160,188
    
    
    
    51.0
    %
    
    
    54.4
    %Money transfer fees
    
    
    6,784
    
    
    
    7,091
    
    
    
    5.1
    %
    
    
    4.6
    %
    
    
    14,394
    
    
    
    13,914
    
    
    
    5.0
    %
    
    
    4.7
    %Pawn service fees and sales
    
    
    3,430
    
    
    
    4,655
    
    
    
    2.6
    %
    
    
    3.0
    %
    
    
    7,302
    
    
    
    8,488
    
    
    
    2.6
    %
    
    
    2.9
    %Other revenue
    
    
    13,081
    
    
    
    19,712
    
    
    
    9.9
    %
    
    
    13.0
    %
    
    
    27,790
    
    
    
    35,620
    
    
    
    9.8
    %
    
    
    12.1
    %Total revenue
    
    $
    132,173
    
    
    $
    152,741
    
    
    
    100.0
    %
    
    
    100.0
    %
    
    $
    285,249
    
    
    $
    294,549
    
    
    
    100.0
    %
    
    
    100.0
    %
 Three Months Ended December 31, 2009 compared to Three Months Ended December 31, 2008
     Six Months Ended December 31, 2009 compared to Six Months Ended December 31, 2008
  40




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##### Table of Contents



Operating Expense Analysis
 Three Months Ended December 31,
    
    
    Six Months Ended December 31,(Percentage of total
    
    
    
    
    
    
    
    
    
    
    (Percentage of total($ in thousands)
    
    
    revenue)
    
    
    ($ in thousands)
    
    
    revenue)2008
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008
    
    
    2009Salaries and benefits
    
    $
    36,275
    
    
    $
    37,723
    
    
    
    27.4
    %
    
    
    24.7
    %
    
    $
    77,078
    
    
    $
    74,459
    
    
    
    27.0
    %
    
    
    25.3
    %Provision for loan losses
    
    
    14,899
    
    
    
    12,662
    
    
    
    11.3
    %
    
    
    8.3
    %
    
    
    30,150
    
    
    
    24,358
    
    
    
    10.6
    %
    
    
    8.3
    %Occupancy
    
    
    10,316
    
    
    
    10,838
    
    
    
    7.8
    %
    
    
    7.1
    %
    
    
    21,640
    
    
    
    21,685
    
    
    
    7.6
    %
    
    
    7.4
    %Depreciation
    
    
    3,170
    
    
    
    4,071
    
    
    
    2.4
    %
    
    
    2.7
    %
    
    
    6,762
    
    
    
    7,445
    
    
    
    2.4
    %
    
    
    2.5
    %Returned checks, net
and cash shortages
    
    
    4,227
    
    
    
    2,630
    
    
    
    3.2
    %
    
    
    1.7
    %
    
    
    10,362
    
    
    
    4,894
    
    
    
    3.6
    %
    
    
    1.7
    %Maintenance and repairs
    
    
    2,804
    
    
    
    2,880
    
    
    
    2.1
    %
    
    
    1.9
    %
    
    
    6,220
    
    
    
    5,695
    
    
    
    2.2
    %
    
    
    1.9
    %Advertising
    
    
    2,396
    
    
    
    4,667
    
    
    
    1.8
    %
    
    
    3.1
    %
    
    
    5,208
    
    
    
    8,114
    
    
    
    1.8
    %
    
    
    2.8
    %Bank Charges and armored
carrier expenses
    
    
    3,130
    
    
    
    3,457
    
    
    
    2.4
    %
    
    
    2.3
    %
    
    
    6,763
    
    
    
    6,923
    
    
    
    2.4
    %
    
    
    2.4
    %Other
    
    
    10,682
    
    
    
    13,203
    
    
    
    8.1
    %
    
    
    8.5
    %
    
    
    22,982
    
    
    
    24,470
    
    
    
    8.0
    %
    
    
    8.1
    %Total operating expenses
    
    $
    87,899
    
    
    $
    92,131
    
    
    
    66.5
    %
    
    
    60.3
    %
    
    $
    187,165
    
    
    $
    178,043
    
    
    
    65.6
    %
    
    
    60.4
    %
 Three Months Ended December 31, 2009 compared to Three Months Ended December 31, 2008
  41




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##### Table of Contents



Six Months Ended December 31, 2009 compared to Six Months Ended December 31, 2008
   Corporate and Other Expense Analysis
 Three Months Ended December 31,
    
    
    Six Months Ended December 31,(Percentage of total
    
    
    
    
    
    
    
    
    
    
    (Percentage of total($ in thousands)
    
    
    revenue)
    
    
    ($ in thousands)
    
    
    revenue)2008
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008
    
    
    2009Corporate expenses
    
    $
    17,594
    
    
    $
    22,949
    
    
    
    13.3
    %
    
    
    15.0
    %
    
    $
    37,114
    
    
    $
    43,300
    
    
    
    13.0
    %
    
    
    14.7
    %Other depreciation and
amortization
    
    
    938
    
    
    
    1,110
    
    
    
    0.7
    %
    
    
    0.7
    %
    
    
    1,978
    
    
    
    2,162
    
    
    
    0.7
    %
    
    
    0.7
    %Interest expense, net
    
    
    10,667
    
    
    
    12,842
    
    
    
    8.1
    %
    
    
    8.4
    %
    
    
    22,214
    
    
    
    24,466
    
    
    
    7.8
    %
    
    
    8.3
    %Loss on extinguishment of debt
    
    
    
    
    
    
    8,813
    
    
    
    
    %
    
    
    5.8
    %
    
    
    
    
    
    
    8,813
    
    
    
    
    %
    
    
    3.0
    %Unrealized foreign exchange
loss
    
    
    
    
    
    
    (3,915
    )
    
    
    
    %
    
    
    (2.6)
    %
    
    
    
    
    
    
    3,912
    
    
    
    
    %
    
    
    1.3
    %Loss on derivatives not
designated as hedges
    
    
    
    
    
    
    3,285
    
    
    
    
    %
    
    
    2.2
    %
    
    
    
    
    
    
    3,275
    
    
    
    
    %
    
    
    1.1
    %Provision for litigation
settlements
    
    
    
    
    
    
    
    
    
    
    
    %
    
    
    
    %
    
    
    509
    
    
    
    1,267
    
    
    
    0.2
    %
    
    
    0.4
    %Loss on store closings
    
    
    555
    
    
    
    1,332
    
    
    
    0.4
    %
    
    
    0.9
    %
    
    
    5,493
    
    
    
    1,650
    
    
    
    1.9
    %
    
    
    0.6
    %Other (income) expense
    
    
    (5,412
    )
    
    
    1,254
    
    
    
    (4.1)
    %
    
    
    0.8
    %
    
    
    (5,669
    )
    
    
    1,424
    
    
    
    (2.0)
    %
    
    
    0.5
    %Income tax provision
    
    
    10,383
    
    
    
    5,904
    
    
    
    7.9
    %
    
    
    3.9
    %
    
    
    15,609
    
    
    
    13,870
    
    
    
    5.5
    %
    
    
    4.7
    %
 42




---



##### Table of Contents



Three Months Ended December 31, 2009 compared to Three Months Ended December 31, 2008
 Corporate Expenses
  Other Depreciation and Amortization
  Extinguishment of Debt and Loss on Derivatives Not Designated as Hedges
   Interest Expense
  Accounting for Convertible Debt Instruments That May Be
Settled Upon Conversion (Including Partial Cash Settlement)
 
    
    Subsequent to the early settlement in May 2009 of our two cross-currency interest rate
swaps hedging variable-rate borrowings at our foreign subsidiary in the United Kingdom, we
discontinued prospectively hedge accounting on these cross-currency swaps. In accordance
with the Derivatives and Hedging Topic of the FASB Codification, we were required to
continue to report the net loss related to the discontinued cash flow hedge in 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. This resulted in a $0.4 million
non-cash interest charge for the quarter ended December 31, 2009. As a result of the
prepayment of substantially all of the United Kingdoms term debt on December 23, 2009, we
reclassified primarily all of the U.K.s remaining net loss from other comprehensive income
into earnings. This resulted in a charge of $3.9 million which is included in Loss on
Extinguishment of Debt.
    
    Subsequent to the prepayment of substantially all of our Canadian term debt on December 23,
2009, we discontinued prospectively
 43




---



##### Table of Contents



hedge accounting on these cross-currency swaps. In accordance with the Derivatives and
Hedging Topic of the FASB Codification, we were required to continue to report the net loss
related to the discontinued cash flow hedge in 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. This resulted in a $0.1 million non-cash interest charge for the quarter ended
December 31, 2009.

Because we believe that the cash flows that
were originally hedged will continue to occur through the

  newly issued $600.0 million principal 10.375% Senior Notes due
2016 in Canada, we will continue to reclassify such amounts into earnings over the remaining
original term of the derivative.
 Unrealized Foreign Exchange Gain
  Loss on Store Closings
  Other Expense
  Income Tax Provision
   NetDeferred
    
    
    Valuation
    
    
    DeferredTax Asset
    
    
    Allowance
    
    
    Tax AssetBalance at September 30, 2009
    
    $
    130.8
    
    
    $
    92.0
    
    
    $
    38.8U.S. increase/(decrease)
    
    
    (2.7
    )
    
    
    (8.0
    )
    
    
    5.3Foreign increase/(decrease)
    
    
    1.3
    
    
    
    (1.4
    )
    
    
    2.7Balance at December 31, 2009
    
    $
    129.4
    
    
    $
    82.6
    
    
    $
    46.8
 44




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##### Table of Contents



Six Months Ended December 31, 2009 compared to Six Months Ended December 31, 2008
 Corporate Expenses
  Other Depreciation and Amortization
  45




---



##### Table of Contents



Extinguishment of Debt and Loss on Derivatives Not Designated as Hedges
   Interest Expense
  Accounting for Convertible Debt Instruments That May Be
Settled Upon Conversion (Including Partial Cash Settlement)
 
    
    Subsequent to the early settlement in May 2009 of our two cross-currency interest rate
swaps hedging variable-rate borrowings at our foreign subsidiary in the United Kingdom, we
discontinued prospectively hedge accounting on these cross-currency swaps. In accordance
with the Derivatives and Hedging Topic of the FASB Codification, we were required to
continue to report the net loss related to the discontinued cash flow hedge in 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. This resulted in a $0.7 million
non-cash interest charge for the six months ended December 31, 2009. As a result of the
prepayment of substantially all of the United Kingdoms term debt on December 23, 2009, we
reclassified primarily all of the U.K.s remaining net loss from other comprehensive income
into earnings. This resulted in a charge of $3.9 million which is included in Loss on
Extinguishment of Debt.
    
    Subsequent to the prepayment of substantially all of our Canadian term debt on December 23,
2009, we discontinued prospectively hedge accounting on these cross-currency swaps. In
accordance with the Derivatives and Hedging Topic of the FASB Codification, we were
required to continue to report the net loss related to the discontinued cash flow hedge in
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. This resulted in a $0.1 million
non-cash interest charge for the six months ended December 31, 2009. Due to the newly
issued $600.0 million principal 10.375% Senior Notes due 2016 in Canada, we will continue
to reclassify such amounts into earnings over the remaining original term of the
derivative.
 Unrealized Foreign Exchange Loss
  46




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Provision for Litigation Settlements
  Loss on Store Closings
  Other Expense
  Income Tax Provision
   NetDeferred
    
    
    Valuation
    
    
    DeferredTax Asset
    
    
    Allowance
    
    
    Tax AssetBalance at June 30, 2009
    
    $
    130.4
    
    
    $
    89.8
    
    
    $
    40.6U.S. increase/(decrease)
    
    
    (1.4
    )
    
    
    (5.9
    )
    
    
    4.5Foreign increase/(decrease)
    
    
    0.4
    
    
    
    (1.3
    )
    
    
    1.7Balance at December 31, 2009
    
    $
    129.4
    
    
    $
    82.6
    
    
    $
    46.8
  47




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##### Table of Contents



Discussion and analysis for each geographic segment
  48




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Three Months Ended December 31,

    
    
    Six Months Ended December 31,Percent/
    
    
    
    
    
    Percent/($ in thousands)
    
    
    Margin
    
    
    ($ in thousands)
    
    
    Margin2008
    
    
    2009
    
    
    Change
    
    
    2008
    
    
    2009
    
    
    ChangeRevenue:United States (1)
    
    $
    41,009
    
    
    $
    35,290
    
    
    
    (13.9)
    %
    
    $
    83,239
    
    
    $
    69,484
    
    
    
    (16.5
    )%Operating margin
    
    
    11.6
    %
    
    
    18.5
    %
    
    6.9 pts.
    
    
    10.8
    %
    
    
    16.4
    %
    
    5.6 pts.Dealers
Financial Services (2)
    
    $
    
    
    
    $
    621
    
    
    
    100.0
    %
    
    $
    
    
    
    $
    621
    
    
    
    100.0
    %Operating margin
    
    
    
    %
    
    
    61.6
    %
    
    61.6 pts.
    
    
    
    %
    
    
    61.6
    %
    
    61.6 pts.Canada
    
    $
    58,158
    
    
    $
    69,186
    
    
    
    19.0
    %
    
    $
    128,471
    
    
    $
    133,309
    
    
    
    3.8
    %Operating margin
    
    
    45.2
    %
    
    
    48.0
    %
    
    2.8 pts.
    
    
    46.2
    %
    
    
    49.5
    %
    
    3.3 pts.United Kingdom
    
    $
    33,006
    
    
    $
    47,644
    
    
    
    44.3
    %
    
    $
    73,539
    
    
    $
    91,135
    
    
    
    23.9
    %Operating margin
    
    
    40.0
    %
    
    
    43.0
    %
    
    3.0 pts.
    
    
    40.3
    %
    
    
    42.5
    %
    
    2.2 pts.Total Revenue
    
    $
    132,173
    
    
    $
    152,741
    
    
    
    15.6
    %
    
    $
    285,249
    
    
    $
    294,549
    
    
    
    3.3
    %Operating margin
    
    $
    44,274
    
    
    $
    60,610
    
    
    
    36.9
    %
    
    $
    98,084
    
    
    $
    116,506
    
    
    
    18.8
    %Operating margin percent
    
    
    33.5
    %
    
    
    39.7
    %
    
    6.2 pts.
    
    
    34.4
    %
    
    
    39.6
    %
    
    5.2 pts.
  Three Months Ended December 31,
    
    
    Six Months Ended December 31,Pre-tax
    
    
    
    
    
    
    
    
    
    
    Pre-taxRevenue
    
    
    Income/(Loss)
    
    
    Revenue
    
    
    Income/(Loss)2008
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008
    
    
    2009United
States (1)
    
    
    31.0
    %
    
    
    23.1
    %
    
    
    (36.3)
    %
    
    
    (42.2)
    %
    
    
    29.2
    %
    
    
    23.6
    %
    
    
    (49.9)
    %
    
    
    (49.4
    )%Dealers Financial Services
    
    
    
    %
    
    
    0.4
    %
    
    
    
    %
    
    
    2.1
    %
    
    
    
    %
    
    
    0.2
    %
    
    
    
    %
    
    
    1.0
    %Canada
    
    
    44.0
    %
    
    
    45.3
    %
    
    
    95.0
    %
    
    
    87.4
    %
    
    
    45.0
    %
    
    
    45.3
    %
    
    
    103.1
    %
    
    
    112.8
    %United Kingdom
    
    
    25.0
    %
    
    
    31.2
    %
    
    
    41.3
    %
    
    
    52.7
    %
    
    
    25.8
    %
    
    
    30.9
    %
    
    
    46.8
    %
    
    
    35.6
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
 
 (1)
    
    For the three and six months ended December 31, 2009 the results
of Poland are included with the United States results.(2)
    
    We acquired Dealer Financial Services on December 23, 2009
and accordingly, only eight days of activity has been
included with the results reported for three and six months ended
December 31, 2009. Three Months Ended December 31, 2009 compared to Three Months Ended December 31, 2008
 United States
  49




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Dealers Financial Services (DFS)
  Canada
   50




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United Kingdom
    Six Months Ended December 31, 2009 compared to Six Months Ended December 31, 2008
 United States
   51




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Dealers Financial Services (DFS)
  Canada
    52




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##### Table of Contents



United Kingdom
    Changes in Financial Condition
  Liquidity and Capital Resources
     53




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Credit
Facilities
   Revolving Credit Facilities
 United States Revolving Credit Facility
 Canadian Revolving Credit Facility.
 54




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##### Table of Contents



United Kingdom Overdraft Facility
 Debt Due Within One Year.
 Long-Term Debt.
   55




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Operating Leases.
  Less than
    
    
    1-3
    
    
    4-5
    
    
    After 5Total
    
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    YearsLong-term debt:10.375% Senior Notes due 2016
    
    $
    600,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    600,0002.875% Senior Convertible Notes due 2027
    
    
    80,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80,0003.0% Senior Convertible Notes due 2028
    
    
    120,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    120,000Term loans due 2012
    
    
    1,608
    
    
    
    17
    
    
    
    1,591
    
    
    
    
    
    
    
    Term loans due 2014
    
    
    17,050
    
    
    
    176
    
    
    
    353
    
    
    
    16,521
    
    
    
    Operating lease obligations
    
    
    143,819
    
    
    
    35,338
    
    
    
    51,418
    
    
    
    30,110
    
    
    
    26,953Total contractual cash obligations
    
    $
    962,477
    
    
    $
    35,531
    
    
    $
    53,362
    
    
    $
    46,631
    
    
    $
    826,953
  Balance Sheet Variations
 December 31, 2009 compared to June 30, 2009 .
   
    
    Continued improvements in U.S. collections and our actions, taken in an effort to
decrease our risk exposure by reducing the amount that we are willing to loan to certain
customer segments. The historical loss rates (expressed as a percentage of loan amounts
originated for the last twelve months applied against the principal balance of outstanding
loans) have continued to decline. The ratio of the allowance for loan losses related to
U.S. short-term consumer loans decreased by 20.4% from 4.6% at
 56




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##### Table of Contents



June 30, 2009 compared to 3.7% at December 31, 2009.
 
    
    In constant dollars, the Canadian ratio of allowance for loan losses has increased from
3.3% at June 30, 2009 to 4.6% at December 31, 2009. The primary factor driving this
increase relates to an increase to reserves associated with an
installment loan  product  that is
being discontinued. The general loans receivable classification continues to show
improvement with the loan loss reserve as a percentage of outstanding principle dropping
from 2.9% at June 30, 2009 to 2.4% at December 31, 2009.
    
    In constant dollars, the U.K.s allowance for loan losses increased from 8.5% of
outstanding principal at June 30, 2009 to 9.9% at December 31, 2009. This percentage
increase relates to the mix of loan products and the associated loss
rates.
        Seasonality and Quarterly Fluctuations
  Impact of Recent Accounting Pronouncement
 Improving Disclosures about Fair Value
Measurements. Fair Value Measurements and Disclosures
 57




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Cautionary Statement for Purposes of the Safe Harbor Provisions of the Private Securities
Litigation Reform Act of 1995
   58




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DOLLAR FINANCIAL CORP.
SUPPLEMENTAL STATISTICAL DATA
 December 31,2008
    
    
    2009Company Operating Data:Stores in operation:Company-owned
    
    
    1,078
    
    
    
    1,043Franchised stores and check cashing merchants
    
    
    292
    
    
    
    129Total
    
    
    1,370
    
    
    
    1,172
 Three Months Ended
    
    
    Six Months EndedDecember 31,
    
    
    December 31,2008
    
    
    2009
    
    
    2008
    
    
    2009Check Cashing Data:Face amount of checks cashed (in millions)
    
    $
    1,138
    
    
    $
    1,004
    (1)
    
    $
    2,455
    
    
    $
    1,987
    (1)Face amount of average check
    
    $
    464
    
    
    $
    491
    (2)
    
    $
    493
    
    
    $
    488
    (2)Average fee per check
    
    $
    16.99
    
    
    $
    18.87
    (3)
    
    $
    18.11
    
    
    $
    18.73
    (3)Number of checks cashed (in thousands)
    
    
    2,450
    
    
    
    2,043
    
    
    
    4,979
    
    
    
    4,075
 Three Months Ended
    
    
    Six Months EndedDecember 31,
    
    
    December 31,2008
    
    
    2009
    
    
    2008
    
    
    2009Check Cashing Collections Data (in thousands):Face amount of returned checks
    
    $
    14,239
    
    
    $
    8,532
    
    
    $
    33,400
    
    
    $
    17,965Collections
    
    
    (10,449
    )
    
    
    (6,526
    )
    
    
    (24,387
    )
    
    
    (13,880
    )Net write-offs
    
    $
    3,790
    
    
    $
    2,006
    
    
    $
    9,013
    
    
    $
    4,085Collections as a percentage of returned checks
    
    
    73.4
    %
    
    
    76.5
    %
    
    
    73.0
    %
    
    
    77.3
    %Net write-offs as a percentage of check cashing revenues
    
    
    9.1
    %
    
    
    5.2
    %
    
    
    10.0
    %
    
    
    5.4
    %Net write-offs as a percentage of the face amount of checks cashed
    
    
    0.33
    %
    
    
    0.20
    %
    
    
    0.37
    %
    
    
    0.21
    %
 
 (1)
    
    Net of a $68 and $18 increase as a result of the impact of exchange rates for the three and six months ended December 31, 2009, respectively.(2)
    
    Net of a $33 and $5 increase as a result of the impact of exchange rates for the three and six months ended December 31, 2009, respectively.(3)
    
    Net of a $1.30 and $0.05 increase as a result of the impact
of exchange rates for the three and six months ended December 31 2009, respectively. 59




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Three Months Ended
    
    
    Six Months EndedDecember 31th,
    
    
    December 31,2008
    
    
    2009
    
    
    2008
    
    
    2009U.S. company-funded consumer loan originations
    
    $
    161,067
    
    
    $
    139,419
    
    
    $
    327,447
    
    
    $
    275,222Canadian company-funded consumer loan originations
    
    
    192,739
    
    
    
    208,994
    (1)
    
    
    425,583
    
    
    
    408,161
    (1)U.K. company-funded consumer loan originations
    
    
    90,321
    
    
    
    111,078
    (2)
    
    
    202,205
    
    
    
    220,906
    (2)Total company-funded consumer loan originations
    
    $
    444,127
    
    
    $
    459,491
    
    
    $
    955,235
    
    
    $
    904,289U.S. Servicing revenues
    
    $
    539
    
    
    $
    
    
    
    $
    1,117
    
    
    $
    U.S. company-funded consumer loan revenues
    
    
    21,649
    
    
    
    18,180
    
    
    
    43,874
    
    
    
    36,038Canadian company-funded consumer loan revenues
    
    
    30,006
    
    
    
    38,107
    
    
    
    67,203
    
    
    
    73,322U.K. company-funded consumer loan revenues
    
    
    17,811
    
    
    
    21,424
    
    
    
    39,309
    
    
    
    41,114Total consumer lending revenues, net
    
    $
    70,005
    
    
    $
    77,711
    
    
    $
    151,503
    
    
    $
    150,474Gross charge-offs of company-funded consumer loans
    
    $
    48,781
    
    
    $
    38,169
    
    
    $
    108,258
    
    
    $
    79,886Recoveries of company-funded consumer loans
    
    
    (33,732
    )
    
    
    (29,285
    )
    
    
    (81,171
    )
    
    
    (62,234
    )Net charge-offs on company-funded consumer loans
    
    $
    15,049
    
    
    $
    8,884
    
    
    $
    27,087
    
    
    $
    17,652Gross charge-offs of company-funded consumer loans as
a percentage of total company-funded consumer loan
originations
    
    
    11.0
    %
    
    
    8.3
    %
    
    
    11.3
    %
    
    
    8.8
    %Recoveries of company-funded consumer loans as a
percentage of total company-funded consumer loan
originations
    
    
    7.6
    %
    
    
    6.4
    %
    
    
    8.5
    %
    
    
    6.8
    %Net charge-offs on company-funded consumer loans as a
percentage of total company-funded consumer loan
originations
    
    
    3.4
    %
    
    
    1.9
    %
    
    
    2.8
    %
    
    
    2.0
    %
 
 (1)
    
    Net of a $26.5 million and $16.0 million increase as a result of the impact of exchange rates for the three and six months ended
December 31, 2009.(2)
    
    Net of a $4.4 million increase and $12.3 million decrease as a result of the impact of exchange rates for the three and six months
December 31, 2009 60




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Item 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Generally
  
    
    interest rates on revolving credit facilities; and
    
    foreign exchange rates generating translation gains and losses.
  Interest Rate Risk
  Foreign Currency Exchange Rate Risk
 Put Options
   61




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Cross-Currency Interest Rate Swaps
        62




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Item 4.

    CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
  
 PART II  OTHER INFORMATION
 
 Item 1.

    Legal Proceedings
  
 Item 1A.
    
    RISK FACTORS
  Risks Related to Our Business and Industry
 If we do not generate a sufficient amount of cash, which depends on many factors beyond our
control, our liquidity and our ability to service our indebtedness and fund our operations would be
harmed.
  Changes in applicable laws and regulations governing consumer protection and lending practices,
both domestically and abroad, may have a significant negative impact on our business, results of
operations and financial condition.
  
    
    check cashing fees;
    
    licensing and posting of fees;
    
    lending practices, such as truth in lending and installment and single-payment lending;
    
    interest rates and usury;
 63




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##### Table of Contents




    
    loan amount and fee limitations;
    
    currency reporting;
    
    privacy of personal consumer information; and
    
    prompt remittance of proceeds for the sale of money orders.
     Public perception and press coverage of single-payment consumer loans as being predatory or abusive
could negatively affect our revenues and results of operations.
  If our estimates of loan losses are not adequate to absorb losses, our results of operations and
financial condition may be adversely affected.
  64




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Legal proceedings may have a material adverse impact on our results of operations or cash flows in
future periods.
  Competition in the financial services industry could cause us to lose market share and revenues.
  Unexpected changes in foreign tax rates could negatively impact our operating results.
  Risk and uncertainties related to political and economic conditions in foreign countries in which
we operate could negatively impact our operations.
  The international scope of our operations may contribute to increased costs and negatively impact
our operations.
  Foreign currency fluctuations may adversely affect our results of operations.
  65




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##### Table of Contents



Demand for our products and service is sensitive to the level of transactions effected by our
customers, and accordingly, our revenues could be affected negatively by a general economic
slowdown.
  If the national and worldwide financial crisis continues, potential disruptions in the credit
markets may negatively impact the availability and cost of short-term borrowing under our senior
secured credit facility, which could adversely affect our results of operations, cash flows and
financial condition.
    Our business model for our legal document processing services business is being challenged in the
courts, as well as by state legislatures, which could result in our discontinuation of these
services in any one or more jurisdictions.
   Changes in local rules and regulations such as local zoning ordinances could negatively impact our
business, results of operations and financial condition.
  66




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A reduction in demand for our products and services and failure by us to adapt to such
reduction could adversely affect our business and results of operations.
  Our business and results of operations may be adversely affected if we are unable to manage our
growth effectively.
  Our ability to open and acquire new stores is subject to outside factors and circumstances over
which we have limited control or that are beyond our control which could adversely affect our
growth potential.
  If we do not successfully integrate newly acquired businesses into our operations, our performance
and results of operations could be negatively affected.
  Our check cashing services may further diminish because of technological advances.
  67




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##### Table of Contents



Our business is seasonal in nature, which causes our revenues and earnings to fluctuate.
  Because we maintain a significant supply of cash in our stores, we may be subject to cash shortages
due to robbery, employee error and theft.
  If we lose key management or are unable to attract and retain the talent required for our business,
our operating results could suffer.
  A catastrophic event at our corporate or international headquarters or our centralized call-center
facilities in the United States, Canada and the United Kingdom could significantly disrupt our
operations and adversely affect our business, results of operations and financial condition.
  Any disruption in the availability of our information systems could adversely affect our business
operations.
  In the event that our cash flow from operations are not sufficient to meet our future liquidity
needs, a portion of the goodwill on our balance sheet could become impaired, which could
significantly impact our total shareholders equity.
  68




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##### Table of Contents



Risks Related to the Notes and Our Indebtedness
 We have a holding company structure and may not be able to generate sufficient cash to service all
of our indebtedness and may be forced to take other actions to satisfy our obligations under our
indebtedness, which may not be successful.
  The maturity date of our secured credit facility and 2016 N otes are subject to a springing maturity
which requires us to satisfy certain conditions for the springing maturity to become effective.
    We are subject to restrictive covenants imposed by our senior secured credit facility and by the
indenture governing the 2016 Notes.
  69




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##### Table of Contents




    
    dispose of assets;
    
    make capital expenditures;
    
    repurchase or redeem equity interests or subordinated indebtedness;
    
    make principal payments or prepayments on the notes;
    
    make certain investments;
    
    incur additional indebtedness;
    
    create liens;
    
    incur restrictions on the ability of our subsidiaries to grant liens or to pay dividends
or make other payments or transfers to us;
    
    merge or consolidate with or into any other person or transfer all or substantially all
of our assets;
    
    enter into new businesses unrelated to our existing businesses;
    
    enter into transactions with our affiliates;
    
    enter into swap agreements; and
    
    enter into sale and leaseback transactions.
   Despite the level of our indebtedness, we may still incur significantly more indebtedness. This
could further increase the risks associated with our indebtedness.
  Risks Related to the DFS Business
 The DFS business relies upon exclusive contractual relationships with its service providers, and
the DFS business would be harmed from the loss of any of these service providers or if alternate
service providers are needed but cannot be arranged or are not available.
 70




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##### Table of Contents



Potential disruptions in the credit markets may negatively impact the availability and cost of auto
loans which could adversely affect DFSs results of operations, cash flows and financial condition.
  The DFS business relies upon ongoing enlistment in the U.S. military and budget cuts that reduce
enlistments or reduce the number of active duty military personnel could harm the DFS business.
  Risks Relating to Our Capital Stock
 The price of our common stock may be volatile .
  We have never paid dividends on our common stock and do not anticipate paying any in the
foreseeable future.
  71




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Our anti-takeover provisions could prevent or delay a change in control of our company, even if
such change of control would be beneficial to our stockholders.
  
    
    a board of directors that is classified such that only one-third of directors are elected each year;
    
    authorizing the issuance of blank check preferred stock that could be issued by our board of
directors to increase the number of outstanding shares and thwart a takeover attempt;
    
    limitations on the ability of stockholders to call special meetings of stockholders;
    
    prohibiting stockholder action by written consent and requiring all stockholder actions to be taken
at a meeting of our stockholders; and
    
    establishing advance notice requirements for nominations for election to the board of directors or
for proposing matters that can be acted upon by stockholders at stockholder meetings.
  Risks Relating to Our Outstanding Convertible Notes
 Any change in the accounting method for convertible debt securities could have an adverse impact on
our reported or future financial results and could adversely affect the trading price of our
securities, including our common stock and the 2.875% Senior
Convertible Notes due 2027and the 3.0% Senior Convertible Notes Due 2028.
   72




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Item 4.

    Submission of Matters to a Vote of Security Holders
   Votes For:
    
    
    Votes Witheld:David Jessick
    
    
    19,447,167
    
    
    
    3,000,531Kenneth Schwenke
    
    
    14,209,406
    
    
    
    8,238,292Michael Kooper
    
    
    16,024,073
    
    
    
    6,423,625
  Votes For
    
    
    22,032,866Votes Against
    
    
    409,780Abstentions
    
    
    5,051
 73




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Item 6.  Exhibits
 Exhibit No.
    
    Description of Document2.1
    
    Purchase Agreement dated as of October 28, 2009 by and among Dollar Financial Corp., Military
Financial Services, LLC, Southfield Partners, LLC, Joseph S. Minor, Don Jacobs, Larry Mountford,
and Robert H. Nelson (incorporated by reference to the Current Report on Form 8-K filed by Dollar
Financial Corp. on December 2, 2009)2.2
    
    Amendment to Purchase Agreement dated as of December 23, 2009 by and among Dollar Financial
Corp., Military Financial Services, LLC, Southfield Partners, LLC, Joseph S. Minor, Don Jacobs,
Larry Mountford, and Robert H. Nelson (incorporated by reference to the Current Report on Form 8-K
filed by Dollar Financial Corp. on December 24, 2009)4.1
    
    Indenture dated December 23, 2009 by and among National Money Mart Company, Dollar Financial
Corp. and the guarantors party thereto and U.S. Bank National Association, as trustee, governing
the terms of the 10.375% Senior Notes due 2016 (incorporated by reference to the Current Report on
Form 8-K filed by Dollar Financial Corp. on December 24, 2009)4.2
    
    Registration Rights Agreement dated December 23, 2009 by and among National Money Mart
Company, Dollar Financial Corp. and the guarantors party thereto and Credit Suisse Securities
(USA) LLC and Wells Fargo Securities, LLC, as representatives of the initial purchasers
(incorporated by reference to the Current Report on Form 8-K filed by Dollar Financial Corp. on
December 24, 2009)4.3
    
    Indenture dated December 23, 2009 by and among Dollar Financial Corp. and U.S. Bank National
Association, as trustee, governing the terms of the 3.00% Senior Convertible Notes due 2028
(incorporated by reference to the Current Report on Form 8-K filed by Dollar Financial Corp. on
December 24, 2009)10.1
    
    Employment Agreement by and among Jeffrey Weiss, the Company and Dollar Financial Group,
Inc., dated October 30, 2009 (incorporated by reference to the Current Report on Form 8-K filed by
Dollar Financial Corp. on November 2, 2009)10.2
    
    Detailed Settlement Agreement by and among Kenneth Smith, as Estate Trustee of the last Will
and Testament of Margaret Smith, deceased and Ronald Adrien Oriet, as plaintiffs and National
Money Mart Company and Dollar Financial Group, Inc., as defendants, dated November 6,
2009 (incorporated by reference to the Quarterly Report on Form 10-Q filed by Dollar Financial
Corp. on November 9, 2009)10.3
    
    Form of Amended and Restated Credit Agreement (incorporated by reference to the Current
Report on Form 8-K filed by Dollar Financial Corp. on December 2, 2009)31.1
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer31.2
    
    Rule 13a-14(a)/15d-14(a) Certification of Executive Vice President and Chief Financial Officer31.3
    
    Rule 13a-14(a)/15d-14(a) Certification of Senior Vice President of Finance and Corporate Controller
 74




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##### Table of Contents



32.1
    
    Section 1350 Certification of Chief Executive Officer32.2
    
    Section 1350 Certification of Executive Vice President and Chief Financial Officer32.3
    
    Section 1350 Certification of Senior Vice President of Finance and Corporate Controller
 75




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##### Table of Contents



SIGNATURE
  DOLLAR FINANCIAL CORP.Date: February 9, 2010
    *By:
    /s/ Randy UnderwoodName:
    Randy UnderwoodTitle:
    Executive Vice
President and Chief
Financial Officer
(principal
financial and chief
accounting officer) 
 *
    
    The signatory hereto is the principal financial and chief accounting officer
and has been duly authorized to sign on behalf of the registrant. 76