##### 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, 2008
 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
 Ö þ o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




---



##### 



DOLLAR FINANCIAL CORP.
INDEX
 Page No.PART I. FINANCIAL INFORMATIONItem 1. Financial StatementsInterim Consolidated Balance Sheets as of June 30, 2008 and December 31, 2008 (unaudited)
    
    
    3Interim Unaudited Consolidated Statements of Operations for the Three and Six Months
Ended December 31, 2007 and 2008
    
    
    4Interim Consolidated Statements of Stockholders Equity as of June 30, 2008 and
December 31, 2008 (unaudited)
    
    
    5Interim Unaudited Consolidated Statements of Cash Flows for the Six Months Ended
December 31, 2007 and 2008
    
    
    6Notes to Interim Unaudited Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    26Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    42Item 4. Controls and Procedures
    
    
    43PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    44Item 1A. Risk Factors
    
    
    44Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    46Item 4. Submission of Matters to a Vote of Security Holders
    
    
    46Item 6. Exhibits
    
    
    47Signature
    
    
    48
 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




---



##### 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 31,2008
    
    
    2008(unaudited)ASSETSCurrent AssetsCash and cash equivalents
    
    $
    209,714
    
    
    $
    209,364Loans receivable, net:Loans receivable
    
    
    123,683
    
    
    
    100,267Less: Allowance for loan losses
    
    
    (8,466
    )
    
    
    (8,412
    )Loans receivable, net
    
    
    115,217
    
    
    
    91,855Loans in default, net of an allowance of $21,967 and $20,143
    
    
    11,930
    
    
    
    14,368Other receivables
    
    
    11,031
    
    
    
    11,833Prepaid expenses and other current assets
    
    
    18,938
    
    
    
    15,871Current deferred tax asset, net of valuation allowance of $4,335 and $4,335
    
    
    471
    
    
    
    126Total current assets
    
    
    367,301
    
    
    
    343,417Deferred tax asset, net of valuation allowance of $93,355 and $95,780
    
    
    11,720
    
    
    
    15,136Property and equipment, net of accumulated depreciation of $98,302 and $93,309
    
    
    68,033
    
    
    
    55,112Goodwill and other intangibles
    
    
    470,731
    
    
    
    422,005Debt issuance costs, net of accumulated amortization of $4,656 and $5,688
    
    
    15,108
    
    
    
    12,273Fair value of derivatives
    
    
    
    
    
    
    16,211Other
    
    
    10,030
    
    
    
    12,210Total Assets
    
    $
    942,923
    
    
    $
    876,364LIABILITIES AND STOCKHOLDERS EQUITYCurrent LiabilitiesAccounts payable
    
    $
    51,054
    
    
    $
    28,888Income taxes payable
    
    
    12,194
    
    
    
    9,700Accrued expenses and other liabilities
    
    
    32,189
    
    
    
    26,379Debt due within one year
    
    
    9,187
    
    
    
    43,584Current deferred tax liability
    
    
    
    
    
    
    65Total current liabilities
    
    
    104,624
    
    
    
    108,616Fair value of derivatives
    
    
    37,214
    
    
    
    2,981Long-term deferred tax liability
    
    
    22,352
    
    
    
    20,706Long-term debt
    
    
    574,017
    
    
    
    566,522Other non-current liabilities
    
    
    11,391
    
    
    
    10,922Stockholders equity:Common stock, $.001 par value: 55,500,000 shares authorized;
24,229,178 shares and 24,066,072 shares issued and outstanding at
June 30, 2008 and December 31, 2008, respectively
    
    
    24
    
    
    
    24Additional paid-in capital
    
    
    255,197
    
    
    
    254,634Accumulated deficit
    
    
    (95,950
    )
    
    
    (70,919
    )Accumulated other comprehensive income (loss)
    
    
    34,054
    
    
    
    (17,122
    )Total stockholders equity
    
    
    193,325
    
    
    
    166,617Total Liabilities and Stockholders Equity
    
    $
    942,923
    
    
    $
    876,364
  3




---



##### 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 31,2007
    
    
    2008
    
    
    2007
    
    
    2008Revenues:Check cashing
    
    $
    48,859
    
    
    $
    41,624
    
    
    $
    94,522
    
    
    $
    90,156Fees from consumer lending
    
    
    73,594
    
    
    
    70,005
    
    
    
    142,103
    
    
    
    151,503Money transfer fees
    
    
    7,079
    
    
    
    6,784
    
    
    
    13,039
    
    
    
    14,394Franchise fees and royalties
    
    
    1,162
    
    
    
    1,110
    
    
    
    2,503
    
    
    
    2,287Other
    
    
    11,027
    
    
    
    12,650
    
    
    
    20,410
    
    
    
    26,909Total revenues
    
    
    141,721
    
    
    
    132,173
    
    
    
    272,577
    
    
    
    285,249Store and regional expenses:Salaries and benefits
    
    
    38,646
    
    
    
    36,275
    
    
    
    73,883
    
    
    
    77,078Provision for loan losses
    
    
    16,070
    
    
    
    14,899
    
    
    
    30,876
    
    
    
    30,150Occupancy
    
    
    10,157
    
    
    
    10,316
    
    
    
    19,431
    
    
    
    21,640Depreciation
    
    
    3,214
    
    
    
    3,170
    
    
    
    6,023
    
    
    
    6,762Returned checks, net and cash
shortages
    
    
    4,597
    
    
    
    4,227
    
    
    
    9,253
    
    
    
    10,362Telephone and communications
    
    
    1,798
    
    
    
    1,798
    
    
    
    3,450
    
    
    
    3,877Advertising
    
    
    2,721
    
    
    
    2,396
    
    
    
    4,824
    
    
    
    5,208Bank charges and armored
carrier service
    
    
    3,287
    
    
    
    3,130
    
    
    
    6,343
    
    
    
    6,763Other
    
    
    11,980
    
    
    
    11,688
    
    
    
    22,452
    
    
    
    25,325Total store and regional expenses
    
    
    92,470
    
    
    
    87,899
    
    
    
    176,535
    
    
    
    187,165Store and regional margin
    
    
    49,251
    
    
    
    44,274
    
    
    
    96,042
    
    
    
    98,084Corporate and other expenses:Corporate expenses
    
    
    17,531
    
    
    
    17,594
    
    
    
    34,729
    
    
    
    37,114Other depreciation and amortization
    
    
    890
    
    
    
    938
    
    
    
    1,809
    
    
    
    1,978Interest expense, net
    
    
    8,977
    
    
    
    8,570
    
    
    
    17,066
    
    
    
    18,019Loss on store closings
    
    
    106
    
    
    
    555
    
    
    
    193
    
    
    
    5,493Other (income) expense, net
    
    
    (153
    )
    
    
    (5,412
    )
    
    
    (165
    )
    
    
    (5,160
    )Income before income taxes
    
    
    21,900
    
    
    
    22,029
    
    
    
    42,410
    
    
    
    40,640Income tax provision
    
    
    8,936
    
    
    
    10,383
    
    
    
    17,392
    
    
    
    15,609Net income
    
    $
    12,964
    
    
    $
    11,646
    
    
    $
    25,018
    
    
    $
    25,031Net income per share:Basic
    
    $
    0.54
    
    
    $
    0.49
    
    
    $
    1.04
    
    
    $
    1.04Diluted
    
    $
    0.53
    
    
    $
    0.49
    
    
    $
    1.02
    
    
    $
    1.04Weighted average shares outstanding:Basic
    
    
    24,087,742
    
    
    
    23,941,455
    
    
    
    24,071,458
    
    
    
    24,058,984Diluted
    
    
    24,684,158
    
    
    
    23,980,968
    
    
    
    24,619,744
    
    
    
    24,156,745
  4




---



##### 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
    
    
    Comprehensive
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    (Deficit)
    
    
    Income (loss)
    
    
    EquityBalance, June 30, 2008
(audited)
    
    
    24,229,178
    
    
    $
    24
    
    
    $
    255,197
    
    
    $
    (95,950
    )
    
    $
    34,054
    
    
    $
    193,325Comprehensive income:Foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (36,894
    )
    
    
    (36,894
    )Cash flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,282
    )
    
    
    (14,282
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,031
    
    
    
    
    
    
    
    25,031Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (26,145
    )Restricted stock grants
    
    
    138,361Stock options exercised
    
    
    251,220
    
    
    
    
    
    
    
    3,257
    
    
    
    
    
    
    
    
    
    
    
    3,257Vested portion of granted
restricted stock and
restricted stock units
    
    
    
    
    
    
    
    
    
    
    2,522
    
    
    
    
    
    
    
    
    
    
    
    2,522Purchase and retirement of
company shares
    
    
    (535,799
    )
    
    
    
    
    
    
    (7,492
    )
    
    
    
    
    
    
    
    
    
    
    (7,492
    )Retirement of common stock
    
    
    (16,888
    )Other stock compensation
    
    
    
    
    
    
    
    
    
    
    1,150
    
    
    
    
    
    
    
    
    
    
    
    1,150Balance, December 31, 2008
(unaudited)
    
    
    24,066,072
    
    
    $
    24
    
    
    $
    254,634
    
    
    $
    (70,919
    )
    
    $
    (17,122
    )
    
    $
    166,617
  5




---



##### Table of Contents



DOLLAR FINANCIAL CORP.
 
 INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 Six Months EndedDecember 31,2007
    
    
    2008Cash flows from operating activities:Net income
    
    $
    25,018
    
    
    $
    25,031Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    9,516
    
    
    
    10,367Loss on extinguishment of debt
    
    
    97
    
    
    
    Provision for loan losses
    
    
    30,876
    
    
    
    30,150Non-cash stock compensation
    
    
    1,359
    
    
    
    3,672Losses on store closings
    
    
    124
    
    
    
    1,813Deferred tax provision
    
    
    2,457
    
    
    
    2,176Other, net
    
    
    341
    
    
    
    Change in assets and liabilities (net of effect of acquisitions):Increase in loans and other receivables
    
    
    (43,745
    )
    
    
    (33,739
    )Increase in prepaid expenses and other
    
    
    (5,078
    )
    
    
    (2,164
    )Increase (decrease) in accounts payable, accrued expenses and other liabilities
    
    
    9,873
    
    
    
    (20,636
    )Net cash provided by operating activities
    
    
    30,838
    
    
    
    16,670Cash flows from investing activities:Acquisitions, net of cash acquired
    
    
    (135,641
    )
    
    
    (2,041
    )Additions to property and equipment
    
    
    (14,697
    )
    
    
    (7,715
    )Net cash used in investing activities
    
    
    (150,338
    )
    
    
    (9,756
    )Cash flows from financing activities:Decrease in restricted cash
    
    
    1,014
    
    
    
    Proceeds from the exercise of stock options
    
    
    674
    
    
    
    3,257Purchase of company stock
    
    
    
    
    
    
    (7,492
    )Other debt payments
    
    
    (4,396
    )
    
    
    (1,834
    )Net increase in revolving credit facilities
    
    
    
    
    
    
    36,043Payment of debt issuance and other costs
    
    
    (432
    )
    
    
    (114
    )Net cash (used in) provided by financing activities
    
    
    (3,140
    )
    
    
    29,860Effect of exchange rate changes on cash and cash equivalents
    
    
    7,350
    
    
    
    (37,124
    )Net decrease in cash and cash equivalents
    
    
    (115,290
    )
    
    
    (350
    )Cash and cash equivalents at beginning of period
    
    
    290,945
    
    
    
    209,714Cash and cash equivalents at end of period
    
    $
    175,655
    
    
    $
    209,364
  6




---



##### Table of Contents



DOLLAR FINANCIAL CORP.
 
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 1. Summary of Significant Accounting Policies
 Basis of Presentation
  ® ® ® ®
  Use of Estimates
  Principles of Consolidation
  Reclassification
  Earnings per Share
  7




---



##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 1. Summary of Significant Accounting Policies (continued)
 Earnings per Share(continued)
 Three Months Ended
    
    
    Six Months EndedDecember 31,
    
    
    December 31,2007
    
    
    2008
    
    
    2007
    
    
    2008Net income
    
    $
    12,964
    
    
    $
    11,646
    
    
    $
    25,018
    
    
    $
    25,031Reconciliation of denominator:Weighted average of common shares outstanding
 basic 1
    
    
    24,088
    
    
    
    23,941
    
    
    
    24,071
    
    
    
    24,059Effect of dilutive stock options 2
    
    
    548
    
    
    
    3
    
    
    
    512
    
    
    
    53Effect of unvested restricted stock and
restricted stock unit grants
    
    
    48
    
    
    
    37
    
    
    
    37
    
    
    
    45Weighted average of common shares outstanding
 diluted
    
    
    24,684
    
    
    
    23,981
    
    
    
    24,620
    
    
    
    24,157
 
 (1)
    
    Excludes 88,741 and 123,687 shares of unvested restricted stock, which are
included in total outstanding common shares as of December 31, 2007 and December 31, 2008,
respectively.(2)
    
    The effect of dilutive stock options was determined under the treasury stock
method. Stock Based Employee Compensation
   .
   8




---



##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 1. Summary of Significant Accounting Policies (continued)
 Stock Based Employee Compensation (continued)
   Three Months Ended
    
    Six Months EndedDecember 31,
    
    December 31,2007
    
    2008
    
    2007
    
    2008Expected volatility
    
    
    49.0
    %
    
    
    49.7
    %
    
    
    49.0
    %
    
    
    49.4
    %Expected life (years)
    
    
    6.0
    
    
    
    5.8
    
    
    
    6.0
    
    
    
    5.8Risk-free interest rate
    
    
    3.96
    %
    
    
    2.47
    %
    
    
    3.96
    %
    
    
    2.52
    %Expected dividends
    
    None
    
    None
    
    None
    
    NoneWeighted average fair value
    
    $
    15.03
    
    
    $
    3.51
    
    
    $
    15.03
    
    
    $
    3.73
  WeightedWeighted
    
    AverageAverage
    
    Remaining
    
    AggregateExercise
    
    Contractual
    
    Intrinsic ValueOptions
    
    Price
    
    Term (years)
    
    ($ in millions)Options outstanding at June 30, 2008
(1,028,778 shares exercisable)
    
    
    1,542,363
    
    
    $
    16.25
    
    
    
    7.8
    
    
    $
    1.6Granted
    
    
    423,659
    
    
    $
    8.64Exercised
    
    
    (251,220
    )
    
    $
    12.97Forfeited and expired
    
    
    (136,982
    )
    
    $
    16.41Options outstanding at December 31, 2008
    
    
    1,577,820
    
    
    $
    14.72
    
    
    
    8.2
    
    
    $
    0.9Exercisable at December 31, 2008
    
    
    777,175
    
    
    $
    16.21
    
    
    
    6.9
    
    
    $
    
   9




---



##### 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, 2008
    
    
    52,305
    
    
    $
    21.90Granted
    
    
    96,752
    
    
    $
    9.38Vested
    
    
    (22,751
    )
    
    $
    21.34Forfeited
    
    
    (2,619
    )
    
    $
    18.51Outstanding at December 31, 2008
    
    
    123,687
    
    
    $
    12.28
   WeightedRestricted
    
    AverageStock Unit
    
    Grant-DateAwards
    
    Fair-ValueOutstanding at June 30, 2008
    
    
    226,802
    
    
    $
    21.32Granted
    
    
    295,518
    
    
    $
    7.88Vested
    
    
    (56,729
    )
    
    $
    23.10Forfeited
    
    
    (9,718
    )
    
    $
    22.02Outstanding at December 31, 2008
    
    
    455,873
    
    
    $
    12.37
  Recent Accounting Pronouncements
 Fair Value Measurements
 The Fair
Value Option for Financial Assets and Financial Liabilities  Including an Amendment of FASB
Statement No. 115 Accounting
for Certain Investments in Debt and
 10




---



##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 1. Summary of Significant Accounting Policies (continued)
 Recent Accounting Pronouncements (continued)
 Equity Securities
 Business
Combinations (a revision of Statement No. 141),
 Noncontrolling Interests in Consolidated Financial
Statements  an amendment of ARB No.51
 Disclosures
about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133
 Accounting for Convertible Debt
Instruments That May Be Settled Upon Conversion (Including Partial Cash Settlement)
 11




---



##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 1. Summary of Significant Accounting Policies (continued)
 Recent Accounting Pronouncements (continued)
  2. Acquisitions
        12




---



##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 2. Acquisitions (continued)
 
  Balance at June 30, 2008
    
    $
    419.4Acquisitions:Various small acquisitions
    
    
    0.7Foreign currency adjustment
    
    
    (43.4
    )Balance at December 31, 2008
    
    $
    376.7
  Three months ended
    
    Six months endedDecember 31,
    
    December 31,2007
    
    2008
    
    2007
    
    2008(Unaudited in thousands
    
    (Unaudited in thousandsexcept per share amounts)
    
    except per share amounts)Revenue
    
    $
    151,918
    
    
    $
    132,173
    
    
    $
    297,821
    
    
    $
    285,249Net income
    
    $
    14,252
    
    
    $
    11,646
    
    
    $
    28,603
    
    
    $
    25,031Net income per common share  basic
    
    $
    0.59
    
    
    $
    0.49
    
    
    $
    1.19
    
    
    $
    1.04Net income per common share  diluted
    
    $
    0.58
    
    
    $
    0.49
    
    
    $
    1.16
    
    
    $
    1.04
 3. Goodwill and Other Intangibles
  United
    
    
    
    
    
    
    UnitedStates
    
    
    Canada
    
    
    Kingdom
    
    
    TotalBalance at June 30, 2008
    
    $
    205,506
    
    
    $
    189,429
    
    
    $
    75,796
    
    
    $
    470,731Acquisition
    
    
    519
    
    
    
    
    
    
    
    3,131
    
    
    
    3,650Foreign currency translation adjustments
    
    
    
    
    
    
    (31,858
    )
    
    
    (20,518
    )
    
    
    (52,376
    )Balance at December 31, 2008
    
    $
    206,025
    
    
    $
    157,571
    
    
    $
    58,409
    
    
    $
    422,005
 13




---



##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 3. Goodwill and Other Intangibles (continued)
  June 30,
    
    
    December 31,2008
    
    
    2008Gross Carrying
    
    
    Gross CarryingAmount
    
    
    AmountNon-amortized intangible assets:Goodwill
    
    $
    419,351
    
    
    $
    376,692Reacquired franchise rights
    
    
    51,380
    
    
    
    45,313$
    470,731
    
    
    $
    422,005
 Goodwill and Other Intangible Assets
     4. Contingent Liabilities
  Canadian Legal Proceedings
  14




---



##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 4. Contingent Liabilities (continued)
 Canadian Legal Proceedings (continued)
  Mortillaro Smith
  Day Young Young
 Parsons
   15




---



##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 4. Contingent Liabilities (continued)
 Canadian Legal Proceedings (continued)
     California Legal Proceedings
 Bufil Bufil Bufil
  We The People Legal Proceedings
   16




---



##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 4. Contingent Liabilities (continued)
 We The People Legal Proceedings (continued)
       17




---



##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 4. Contingent Liabilities (continued)
 We The People Legal Proceedings (continued)
        5. Capital Stock
   18




---



##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 5. Capital Stock (continued)
   6. Fair Value Measurements
    19




---



##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 6. Fair Value Measurements (continued)
 Assets and Liabilities Measured at Fair Value on a Recurring Basis at December 31, 2008
( 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)
    
    2008AssetsDerivative
financial
instruments
    
    $
    
    
    
    $
    16,819
    
    
    $
    
    
    
    $
    16,819LiabilitiesDerivative
financial
instruments
    
    $
    
    
    
    $
    2,981
    
    
    $
    
    
    
    $
    2,981
  7. Loss on Store Closing and Other Restructuring
     Severance andOther
    
    
    Store ClosureRetention Benefits
    
    
    Costs
    
    
    TotalBalance at June 30, 2008
    
    $
    0.2
    
    
    $
    
    
    
    $
    0.2Charge recorded in earnings
    
    
    0.6
    
    
    
    4.9
    
    
    
    5.5Amounts paid
    
    
    (0.7
    )
    
    
    (2.6
    )
    
    
    (3.3
    )Non-cash charges
    
    
    
    
    
    
    (1.8
    )
    
    
    (1.8
    )Balance at December 31, 2008
    
    $
    0.1
    
    
    $
    0.5
    
    
    $
    0.6
 20




---



##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 8. Geographic Segment Information
  United
    
    
    
    
    
    
    UnitedStates
    
    
    Canada
    
    
    Kingdom
    
    
    TotalAs of and for the three months ended
December 31, 2007Total assets
    
    $
    267,787
    
    
    $
    466,137
    
    
    $
    165,794
    
    
    $
    899,718Goodwill and other intangibles, net
    
    
    205,719
    
    
    
    194,046
    
    
    
    74,859
    
    
    
    474,624Sales to unaffiliated customers:Check cashing
    
    
    12,159
    
    
    
    21,918
    
    
    
    14,782
    
    
    
    48,859Fees from consumer lending
    
    
    19,724
    
    
    
    38,455
    
    
    
    15,415
    
    
    
    73,594Money transfer fees
    
    
    1,350
    
    
    
    4,187
    
    
    
    1,542
    
    
    
    7,079Franchise fees and royalties
    
    
    582
    
    
    
    580
    
    
    
    
    
    
    
    1,162Other
    
    
    1,557
    
    
    
    6,897
    
    
    
    2,573
    
    
    
    11,027Total sales to unaffiliated customers
    
    
    35,372
    
    
    
    72,037
    
    
    
    34,312
    
    
    
    141,721Provision for loan losses
    
    
    7,046
    
    
    
    7,604
    
    
    
    1,420
    
    
    
    16,070Interest expense, net
    
    
    1,356
    
    
    
    5,638
    
    
    
    1,983
    
    
    
    8,977Depreciation and amortization
    
    
    1,163
    
    
    
    1,679
    
    
    
    1,262
    
    
    
    4,104Loss on store closings
    
    
    92
    
    
    
    14
    
    
    
    
    
    
    
    106Other (income) expense, net
    
    
    197
    
    
    
    (312
    )
    
    
    (38
    )
    
    
    (153
    )(Loss) income before income taxes
    
    
    (3,630
    )
    
    
    18,427
    
    
    
    7,103
    
    
    
    21,900Income tax provision
    
    
    11
    
    
    
    6,822
    
    
    
    2,103
    
    
    
    8,936As of and for the six months ended
December 31, 2007Sales to unaffiliated customers:Check cashing
    
    $
    23,200
    
    
    $
    42,033
    
    
    $
    29,289
    
    
    $
    94,522Fees from consumer lending
    
    
    35,712
    
    
    
    76,426
    
    
    
    29,965
    
    
    
    142,103Money transfer fees
    
    
    2,322
    
    
    
    7,875
    
    
    
    2,842
    
    
    
    13,039Franchise fees and royalties
    
    
    1,306
    
    
    
    1,197
    
    
    
    
    
    
    
    2,503Other
    
    
    2,824
    
    
    
    12,812
    
    
    
    4,774
    
    
    
    20,410Total sales to unaffiliated customers
    
    
    65,364
    
    
    
    140,343
    
    
    
    66,870
    
    
    
    272,577Provision for loan losses
    
    
    12,688
    
    
    
    14,562
    
    
    
    3,626
    
    
    
    30,876Interest expense, net
    
    
    2,336
    
    
    
    10,870
    
    
    
    3,860
    
    
    
    17,066Depreciation and amortization
    
    
    2,257
    
    
    
    3,110
    
    
    
    2,465
    
    
    
    7,832Loss on store closings
    
    
    144
    
    
    
    49
    
    
    
    
    
    
    
    193Other (income) expense, net
    
    
    209
    
    
    
    (347
    )
    
    
    (27
    )
    
    
    (165
    )(Loss) income before income taxes
    
    
    (7,258
    )
    
    
    37,736
    
    
    
    11,932
    
    
    
    42,410Income
tax (benefit)  provision
    
    
    (420
    )
    
    
    14,236
    
    
    
    3,576
    
    
    
    17,392
 21




---



##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 8. Geographic Segment Information (continued)
 United
    
    
    
    
    
    
    UnitedStates
    
    
    Canada
    
    
    Kingdom
    
    
    TotalAs of and for the three months ended
December 31, 2008Total assets
    
    $
    299,154
    
    
    $
    412,344
    
    
    $
    164,866
    
    
    $
    876,364Goodwill 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
    
    
    
    17,811
    
    
    
    70,005Money transfer fees
    
    
    1,526
    
    
    
    3,767
    
    
    
    1,491
    
    
    
    6,784Franchise fees and royalties
    
    
    446
    
    
    
    664
    
    
    
    
    
    
    
    1,110Other
    
    
    2,935
    
    
    
    6,375
    
    
    
    3,340
    
    
    
    12,650Total 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
    
    
    2,596
    
    
    
    4,323
    
    
    
    1,651
    
    
    
    8,570Depreciation and amortization
    
    
    1,404
    
    
    
    1,419
    
    
    
    1,285
    
    
    
    4,108Loss on store closings
    
    
    422
    
    
    
    127
    
    
    
    6
    
    
    
    555Other (income) expense, net
    
    
    
    
    
    
    (4,027
    )
    
    
    (1,385
    )
    
    
    (5,412
    )(Loss)
income before income taxes(1)
    
    
    (5,139
    )
    
    
    18,942
    
    
    
    8,226
    
    
    
    22,029Income 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
    
    
    
    39,309
    
    
    
    151,503Money transfer fees
    
    
    3,118
    
    
    
    8,176
    
    
    
    3,100
    
    
    
    14,394Franchise fees and royalties
    
    
    984
    
    
    
    1,303
    
    
    
    
    
    
    
    2,287Other
    
    
    5,795
    
    
    
    13,899
    
    
    
    7,215
    
    
    
    26,909Total 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
    
    
    6,861
    
    
    
    7,589
    
    
    
    3,569
    
    
    
    18,019Depreciation and amortization
    
    
    2,862
    
    
    
    3,134
    
    
    
    2,744
    
    
    
    8,740Loss on store closings
    
    
    3,070
    
    
    
    2,417
    
    
    
    6
    
    
    
    5,493Other (income) expense, net
    
    
    509
    
    
    
    (4,207
    )
    
    
    (1,462
    )
    
    
    (5,160
    )(Loss)
income before income taxes(1)
    
    
    (14,006
    )
    
    
    37,592
    
    
    
    17,054
    
    
    
    40,640Income tax (benefit) provision
    
    
    (27
    )
    
    
    11,638
    
    
    
    3,998
    
    
    
    15,609
 
 
 22




---



##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 9. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
 Put Options
  Cross-Currency Interest Rate Swaps
    23




---



##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 10. Comprehensive Income (Loss)
  Three months ended
    
    
    Six months endedDecember 31,
    
    
    December 31,2007
    
    
    2008
    
    
    2007
    
    
    2008Net income
    
    $
    12,964
    
    
    $
    11,646
    
    
    $
    25,018
    
    
    $
    25,031Foreign currency translation adjustment(1)
    
    
    (3,006
    )
    
    
    (25,698
    )
    
    
    287
    
    
    
    (36,894
    )Fair value adjustments for cash flow hedges, net(2)(3)
    
    
    (757
    )
    
    
    (17,623
    )
    
    
    (6,122
    )
    
    
    (14,282
    )Total comprehensive income (loss)
    
    $
    9,201
    
    
    $
    (31,675
    )
    
    $
    19,183
    
    
    $
    (26,145
    )
 
 (1)
    
    The ending balance of the foreign currency translation
adjustments included in accumulated other comprehensive
income (loss) on the balance sheet were gains of $37.9
million and $1.0 million respectively as of December 31,
2007 and 2008.(2)
    
    Net of $0.6 million and $8.1 million of tax for the three
months ended December 31, 2007 and 2008, respectively. For
the six months ended December 31, 2007 and 2008, the fair
value adjustments for cash flow hedges were net of $3.0
million and $6.4 million of tax, respectively.(3)
    
    Net of $0.2 million and $0.3 million which were
reclassified into earnings for the three months ended
December 31, 2007 and 2008, respectively. For the six
months ended December 31, 2007 and 2008, the fair value
adjustments for cash flow hedges which were reclassified
into earnings were $0.6 million and $0.7 million,
respectively.  11. Income Taxes
  24




---



##### 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, 2008
    
    $
    109.9
    
    
    $
    97.7
    
    
    $
    12.2U.S. increase
    
    
    2.7
    
    
    
    2.7
    
    
    
    Foreign increase/(decrease)
    
    
    2.8
    
    
    
    (0.3
    )
    
    
    3.1Balance at December 31, 2008
    
    $
    115.4
    
    
    $
    100.1
    
    
    $
    15.3
     25




---



##### 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, 2008 and 2007. 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
  ®
     26




---



##### Table of Contents



Discussion of Critical Accounting Policies
   Revenue Recognition
    27




---



##### Table of Contents



Company-Funded Consumer Loan Loss Reserves Policy
   Check Cashing Returned Item Policy
  Goodwill and Other Intangibles
 Goodwill and Other Intangible Assets
      28




---



##### Table of Contents



Income Taxes
  Accounting for Uncertainty in Income Taxes an interpretation of SFAS 109 Accounting for Income
Taxes
 Results of Operations
 Revenue Analysis
 Three Months Ended December 31,
    
    
    Six Months Ended December 31,(Percentage of total
    
    
    
    
    
    
    
    
    
    
    (Percentage of total($ in thousands)
    
    
    revenue)
    
    
    ($ in thousands)
    
    
    revenue)2007
    
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2008Check cashing
    
    $
    48,859
    
    
    $
    41,624
    
    
    
    34.5
    %
    
    
    31.5
    %
    
    $
    94,522
    
    
    $
    90,156
    
    
    
    34.7
    %
    
    
    31.6
    %Fees from consumer lending
    
    
    73,594
    
    
    
    70,005
    
    
    
    51.9
    %
    
    
    53.0
    %
    
    
    142,103
    
    
    
    151,503
    
    
    
    52.1
    %
    
    
    53.1
    %Money transfer fees
    
    
    7,079
    
    
    
    6,784
    
    
    
    5.0
    %
    
    
    5.1
    %
    
    
    13,039
    
    
    
    14,394
    
    
    
    4.8
    %
    
    
    5.0
    %Franchise fees and royalties
    
    
    1,162
    
    
    
    1,110
    
    
    
    0.8
    %
    
    
    0.8
    %
    
    
    2,503
    
    
    
    2,287
    
    
    
    0.9
    %
    
    
    0.8
    %Other revenue
    
    
    11,027
    
    
    
    12,650
    
    
    
    7.8
    %
    
    
    9.6
    %
    
    
    20,410
    
    
    
    26,909
    
    
    
    7.5
    %
    
    
    9.5
    %Total revenue
    
    $
    141,721
    
    
    $
    132,173
    
    
    
    100
    %
    
    
    100
    %
    
    $
    272,577
    
    
    $
    285,249
    
    
    
    100
    %
    
    
    100
    %
 Constant Currency Analysis
   29




---



##### Table of Contents



The Three Months Ended December 31, 2008 compared to the Three Months Ended December 31, 2007
    The Six Months Ended December 31, 2008 compared to the Six Months Ended December 31, 2007
    30




---



##### Table of Contents



Store and Regional Expense Analysis
 Three Months Ended December 31,
    
    
    Six Months Ended December 31,(Percentage of total
    
    
    
    
    
    
    
    
    
    
    (Percentage of total($ in thousands)
    
    
    revenue)
    
    
    ($ in thousands)
    
    
    revenue)2007
    
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2008Salaries and benefits
    
    $
    38,646
    
    
    $
    36,275
    
    
    
    27.3
    %
    
    
    27.4
    %
    
    $
    73,883
    
    
    $
    77,078
    
    
    
    27.1
    %
    
    
    27.0
    %Provision for loan losses
    
    
    16,070
    
    
    
    14,899
    
    
    
    11.3
    %
    
    
    11.3
    %
    
    
    30,876
    
    
    
    30,150
    
    
    
    11.3
    %
    
    
    10.6
    %Occupancy
    
    
    10,157
    
    
    
    10,316
    
    
    
    7.2
    %
    
    
    7.8
    %
    
    
    19,431
    
    
    
    21,640
    
    
    
    7.1
    %
    
    
    7.6
    %Depreciation
    
    
    3,214
    
    
    
    3,170
    
    
    
    2.3
    %
    
    
    2.4
    %
    
    
    6,023
    
    
    
    6,762
    
    
    
    2.2
    %
    
    
    2.4
    %Returned checks, net
and cash shortages
    
    
    4,597
    
    
    
    4,227
    
    
    
    3.2
    %
    
    
    3.2
    %
    
    
    9,253
    
    
    
    10,362
    
    
    
    3.4
    %
    
    
    3.6
    %Telephone and communications
    
    
    1,798
    
    
    
    1,798
    
    
    
    1.3
    %
    
    
    1.4
    %
    
    
    3,450
    
    
    
    3,877
    
    
    
    1.3
    %
    
    
    1.4
    %Advertising
    
    
    2,721
    
    
    
    2,396
    
    
    
    1.9
    %
    
    
    1.8
    %
    
    
    4,824
    
    
    
    5,208
    
    
    
    1.8
    %
    
    
    1.8
    %Bank Charges and armored
carrier expenses
    
    
    3,287
    
    
    
    3,130
    
    
    
    2.3
    %
    
    
    2.4
    %
    
    
    6,343
    
    
    
    6,763
    
    
    
    2.3
    %
    
    
    2.4
    %Other
    
    
    11,980
    
    
    
    11,688
    
    
    
    8.5
    %
    
    
    8.8
    %
    
    
    22,452
    
    
    
    25,325
    
    
    
    8.3
    %
    
    
    8.8
    %Total store and regional
expenses
    
    $
    92,470
    
    
    $
    87,899
    
    
    
    65.2
    %
    
    
    66.5
    %
    
    $
    176,535
    
    
    $
    187,165
    
    
    
    64.8
    %
    
    
    65.6
    %
 The Three Months Ended December 31, 2008 compared to the Three Months Ended December 31, 2007
   The Six Months Ended December 31, 2008 compared to the Six Months Ended December 31, 2007
   31




---



##### Table of Contents



Corporate and Other Expense Analysis
 Three Months Ended December 31,
    
    Six Months Ended December 31,(Percentage of total
    
    
    
    
    
    
    
    
    
    (Percentage of total($ in thousands)
    
    revenue)
    
    ($ in thousands)
    
    revenue)2007
    
    2008
    
    2007
    
    2008
    
    2007
    
    2008
    
    2007
    
    2008Corporate expenses
    
    $
    17,531
    
    
    $
    17,594
    
    
    
    12.4
    %
    
    
    13.3
    %
    
    $
    34,729
    
    
    $
    37,114
    
    
    
    12.7
    %
    
    
    13.0
    %Other depreciation and amortization
    
    
    890
    
    
    
    938
    
    
    
    0.6
    %
    
    
    0.7
    %
    
    
    1,809
    
    
    
    1,978
    
    
    
    0.7
    %
    
    
    0.7
    %Interest expense, net
    
    
    8,977
    
    
    
    8,570
    
    
    
    6.3
    %
    
    
    6.5
    %
    
    
    17,066
    
    
    
    18,019
    
    
    
    6.3
    %
    
    
    6.3
    %Loss on store closings
    
    
    106
    
    
    
    555
    
    
    
    0.1
    %
    
    
    0.4
    %
    
    
    193
    
    
    
    5,493
    
    
    
    0.1
    %
    
    
    1.9
    %Other (income) expense
    
    
    (153
    )
    
    
    (5,412
    )
    
    
    (0.1
    )%
    
    
    (4.1
    )%
    
    
    (165
    )
    
    
    (5,160
    )
    
    
    (0.1
    )%
    
    
    (1.8
    )%Income tax provision
    
    
    8,936
    
    
    
    10,383
    
    
    
    6.3
    %
    
    
    7.9
    %
    
    
    17,392
    
    
    
    15,609
    
    
    
    6.4
    %
    
    
    5.5
    %
 The Three Months Ended December 31, 2008 compared to the Three Months Ended December 31, 2007
 Corporate Expenses
  Other Depreciation and Amortization
  Interest Expense
  Loss on Store Closings
  32




---



##### Table of Contents



Income Tax Provision
   Deferred
    
    
    Valuation
    
    
    Net DeferredTax Asset
    
    
    Allowance
    
    
    Tax AssetBalance at September 30, 2008
    
    $
    107.9
    
    
    $
    98.7
    
    
    $
    9.2U.S. increase
    
    
    1.6
    
    
    
    1.6
    
    
    
    Foreign increase/(decrease)
    
    
    5.9
    
    
    
    (0.2
    )
    
    
    6.1Balance at December 31, 2008
    
    $
    115.4
    
    
    $
    100.1
    
    
    $
    15.3
     The Six Months Ended December 31, 2008 compared to the Six Months Ended December 31, 2007
 Corporate Expenses
  33




---



##### Table of Contents



Other Depreciation and Amortization
 Interest Expense
  Loss on Store Closings
  Income Tax Provision
   Deferred
    
    
    Valuation
    
    
    Net DeferredTax Asset
    
    
    Allowance
    
    
    Tax AssetBalance at June 30, 2008
    
    $
    109.9
    
    
    $
    97.7
    
    
    $
    12.2U.S. increase
    
    
    2.7
    
    
    
    2.7
    
    
    
    Foreign increase/(decrease)
    
    
    2.8
    
    
    
    (0.3
    )
    
    
    3.1Balance at December 31, 2008
    
    $
    115.4
    
    
    $
    100.1
    
    
    $
    15.3
  34




---



##### Table of Contents



Changes in Financial Condition
  Liquidity and Capital Resources
     35




---



##### Table of Contents



New Credit Facilities.
  Revolving Credit Facilities.
 United States Revolving Credit Facility.
 Canadian Revolving Credit Facility.
 United Kingdom Overdraft Facility
 36




---



##### Table of Contents



Debt Due Within One Year.
 Long-Term Debt.
 Operating Leases.
  Less than
    
    
    1-3
    
    
    4-5
    
    
    After 5Total
    
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    YearsRevolving credit facilities
    
    $
    39,796
    
    
    $
    39,796
    
    
    $
    
    
    
    $
    
    
    
    $
    Long-term debt:Term loans due 2012
    
    
    370,310
    
    
    
    3,788
    
    
    
    7,577
    
    
    
    358,945
    
    
    
    2.875% Senior Convertible Notes
due 2027
    
    
    200,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200,000Operating lease obligations
    
    
    126,398
    
    
    
    32,174
    
    
    
    45,808
    
    
    
    25,060
    
    
    
    23,356Total contractual cash obligations
    
    $
    736,504
    
    
    $
    75,758
    
    
    $
    53,385
    
    
    $
    384,005
    
    
    $
    223,356
  Balance Sheet Variations
 December 31, 2008 compared to June 30, 2008 .
    37




---



##### Table of Contents



Seasonality and Quarterly Fluctuations
  Impact of Recent Accounting Pronouncement
 Fair Value
Measurements
 The Fair
Value Option for Financial Assets and Financial Liabilities  Including an Amendment of FASB
Statement No. 115 Accounting
for Certain Investments in Debt and Equity Securities
 Business
Combinations (a revision of Statement No. 141
 38




---



##### Table of Contents



Noncontrolling Interests in Consolidated Financial
Statements  an amendment of ARB No.51
 Disclosures
about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133
 Accounting for Convertible Debt
Instruments That May Be Settled Upon Conversion (Including Partial Cash Settlement)
 Cautionary Statement for Purposes of the Safe Harbor Provisions of the Private Securities
Litigation Reform Act of 1995
   39




---



##### Table of Contents



DOLLAR FINANCIAL CORP.
SUPPLEMENTAL STATISTICAL DATA
 December 31,2007
    
    
    2008Company Operating Data:Stores in operation:Company-owned
    
    
    1,088
    
    
    
    1,078Franchised stores and check cashing merchants
    
    
    354
    
    
    
    292Total
    
    
    1,442
    
    
    
    1,370
 Three Months Ended
    
    Six Months EndedDecember 31,
    
    December 31,2007
    
    2008
    
    2007
    
    2008Check Cashing Data:Face amount of checks cashed (in millions)
    
    $
    1,275
    
    
    $
    1,138
    (1)
    
    $
    2,465
    
    
    $
    2,455
    (1)Face amount of average check
    
    $
    538
    
    
    $
    464
    (2)
    
    $
    532
    
    
    $
    493
    (2)Average fee per check
    
    $
    20.63
    
    
    $
    16.99
    (3)
    
    $
    20.39
    
    
    $
    18.11
    (3)Number of checks cashed (in thousands)
    
    
    2,369
    
    
    
    2,450
    
    
    
    4,635
    
    
    
    4,979
 Three Months Ended
    
    
    Six Months EndedDecember 31,
    
    
    December 31,2007
    
    
    2008
    
    
    2007
    
    
    2008Check Cashing Collections Data (in thousands):Face amount of returned checks
    
    $
    14,440
    
    
    $
    14,239
    
    
    $
    29,012
    
    
    $
    33,400Collections
    
    
    (10,611
    )
    
    
    (10,449
    )
    
    
    (21,184
    )
    
    
    (24,387
    )Net write-offs
    
    $
    3,829
    
    
    $
    3,790
    
    
    $
    7,828
    
    
    $
    9,013Collections as a percentage of returned checks
    
    
    73.5
    %
    
    
    73.4
    %
    
    
    73.0
    %
    
    
    73.0
    %Net write-offs as a percentage of check
cashing revenues
    
    
    7.8
    %
    
    
    9.1
    %
    
    
    8.2
    %
    
    
    10.0
    %Net write-offs as a percentage of the face
amount of checks cashed
    
    
    0.30
    %
    
    
    0.33
    %
    
    
    0.32
    %
    
    
    0.37
    %
 
 (1)
    
    Net of a $170 and $185 decline as a result of the impact of exchange rates for the three and six months ended December 31, 2008, respectively.(2)
    
    Net of a $70 and $37 decline as a result of the impact of exchange rates for the three and six months ended December 31, 2008, respectively.(3)
    
    Net of a $1.91and $1.11 decline as a result of the impact of exchange rates for the three and six months ended December 31, 2008, respectively. 40




---



##### Table of Contents



Three Months Ended
    
    
    Six Months EndedDecember 31,
    
    
    December 31,2007
    
    
    2008
    
    
    2007
    
    
    2008U.S. company-funded consumer loan originations (1)
    
    $
    129,299
    
    
    $
    161,067
    (3)
    
    $
    225,249
    
    
    $
    327,447
    (3)Canadian company-funded consumer loan originations (2)
    
    
    253,444
    
    
    
    192,738
    (4)
    
    
    496,892
    
    
    
    425,583
    (4)U.K. company-funded consumer loan originations (2)
    
    
    87,876
    
    
    
    90,321
    (5)
    
    
    167,388
    
    
    
    202,205
    (5)Total company-funded consumer loan originations
    
    $
    470,619
    
    
    $
    444,126
    
    
    $
    889,529
    
    
    $
    955,235U.S. Servicing revenues
    
    $
    635
    
    
    $
    539
    
    
    $
    1,429
    
    
    $
    1,117U.S. company-funded consumer loan revenues
    
    
    19,089
    
    
    
    21,649
    
    
    
    34,283
    
    
    
    43,874Canadian company-funded consumer loan revenues
    
    
    38,455
    
    
    
    30,006
    
    
    
    76,426
    
    
    
    67,203U.K. company-funded consumer loan revenues
    
    
    15,415
    
    
    
    17,811
    
    
    
    29,965
    
    
    
    39,309Total consumer lending revenues, net
    
    $
    73,594
    
    
    $
    70,005
    
    
    $
    142,103
    
    
    $
    151,503Gross charge-offs of company-funded consumer loans
    
    $
    54,181
    
    
    $
    48,781
    
    
    $
    105,938
    
    
    $
    108,258Recoveries of company-funded consumer loans
    
    
    (40,887
    )
    
    
    (33,732
    )
    
    
    (82,309
    )
    
    
    (81,171
    )Net charge-offs on company-funded consumer loans
    
    $
    13,294
    
    
    $
    15,049
    
    
    $
    23,629
    
    
    $
    27,087Gross charge-offs of company-funded consumer loans as a
percentage of total company-funded consumer loan originations
    
    
    11.5
    %
    
    
    11.0
    %
    
    
    11.9
    %
    
    
    11.3
    %Recoveries of company-funded consumer loans as a percentage
of total company-funded consumer loan originations
    
    
    8.7
    %
    
    
    7.6
    %
    
    
    9.2
    %
    
    
    8.5
    %Net charge-offs on company-funded consumer loans as a
percentage of total company-funded consumer loan originations
    
    
    2.8
    %
    
    
    3.4
    %
    
    
    2.7
    %
    
    
    2.8
    %
 
 (1)
    
    Our company operated stores in the United States offer company-funded single-payment consumer loans in all markets, with the exception of Texas. In Texas, the Company offers single-payment
consumer loans under a credit services organization model.(2)
    
    All consumer loans originated in Canada and the United Kingdom are company funded.(3)
    
    The increase for the three and six months ended December 31, 2008 is primarily related to the CCS and APL acquisitions in fiscal 2008.(4)
    
    Net of a $45.0 and $44.4 decline as a result of the impact of exchange rates for the three and six months ended December 31, 2008.(5)
    
    Net of a $27.3 and $35.1 decline as a result of the impact of exchange rates for the three and six months ended December 31, 2008 41




---



##### Table of Contents



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
    42




---



##### Table of Contents



Cross-Currency Interest Rate Swaps
     
 Item 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
  43




---



##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  Unexpected changes in foreign tax rates and political and economic conditions could negatively
impact our operating results.
  Demand for our products and services is sensitive to the level of transactions effected by our
customers, and accordingly, our revenues could be affected negatively by a recession or general
economic slowdown in the geographic markets in which we operate.
  The price of our common stock after may be volatile.
  If the national and world-wide financial crisis continues, potential disruptions in the credit
markets may negatively impact the availability and cost of short-term borrowing under our credit
facility, which could adversely affect our results of operations, cash flows and financial
condition.
  44




---



##### Table of Contents



Potential for Goodwill Impairment
  Risks Relating to Our Outstanding Convertible Notes
   45




---



##### Table of Contents



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
   ApproximateDollar Value ofShares thatTotal Number of
    
    May YetShares Purchased
    
    Be PurchasedAverage Price
    
    as Part of Publicly
    
    UnderTotal Number of
    
    Paid Per
    
    Announced Plans
    
    the Plans orPeriod
    
    Shares Purchased
    
    Share
    
    or Programs
    
    ProgramsJuly 21, 2008 
July 31, 2008 (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    7.5August 1, 2008 
August 31, 2008
    
    
    114,800
    
    
    $
    15.70
    
    
    
    114,800
    
    
    $
    5.7September 1, 2008 
September 30, 2008
    
    
    106,600
    
    
    $
    15.67
    
    
    
    106,600
    
    
    $
    4.0October 1, 2008 
October 31, 2008
    
    
    314,399
    
    
    $
    12.81
    
    
    
    314,399
    
    
    
    Total
    
    
    535,799
    
    
    $
    14.00
    
    
    
    535,799
    
    
    
    
 
 (1)
    
    On July 21, 2008, our board of directors authorized a stock repurchase plan providing for the
repurchase of up to $7.5 million of our outstanding common stock, which is the maximum amount of
our common stock we can repurchase pursuant to the terms of our credit facility. 
 Item 4. Sumission of Matters to a Vote of Security Holders
   Votes For:
    
    Votes Withheld:Jeffery Weiss
    
    
    21,237,772
    
    
    
    332,161Ronald McLaughlin
    
    
    21,268,636
    
    
    
    301,297
  Votes For
    
    
    21,416,456Votes Against
    
    
    151,019Abstentions
    
    
    2,457
 46




---



##### Table of Contents



Item 6.
Exhibits
 Exhibit No.
    
    Description of Document10.1
    
    Form of Restricted Stock Unit Award Agreement for 2007 Equity Incentive Plan (1)10.2
    
    Form of Stock Option Grant Notice for 2007 Equity Incentive Plan (1)10.3
    
    Form of Restricted Stock Unit Award Agreement for 2007 Equity Incentive Plan (International Grantee) (1)10.4
    
    Amendment No. 1 to the Employment Agreement dated December 18, 2008 by and among Dollar Financial
Corp., Dollar Financial Group, Inc. and Jeffrey Weiss (2)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 Controller32.1
    
    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
 
 (1)
    
    Incorporated by reference to the Current Report on Form 8-K filed by Dollar Financial Corp. on December 5, 2008.(2)
    
    Incorporated by reference to the Current Report on Form 8-K filed by Dollar Financial Corp. on December 22, 2008. 47




---



##### Table of Contents



SIGNATURE
  DOLLAR FINANCIAL CORP.Date: February 9, 2009
    
    *By:
    
    /s/ Randy UnderwoodName:
    
    Randy UnderwoodTitle:
    
    Executive Vice President and
Chief Financial Officer
(principal financial and
chief accounting officer)
 
 *
    
    The signatory hereto is the principal financial and chief
accounting officer and has been duly authorized to sign on
behalf of the registrant. 48