##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
 For the quarterly period ended December 31, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
 For the transition period from  to
 Commission file number 000-50866
 DOLLAR FINANCIAL CORP.
  DELAWARE
(State or Other Jurisdiction of Incorporation or Organization)
    
    23-2636866
(I.R.S. Employer Identification No.)
 1436 LANCASTER AVENUE,
BERWYN, PENNSYLVANIA 19312
  610-296-3400
 None
 ü  þ o
  o þ o o
  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, 2007
and December 31, 2007(unaudited)
    
    
    3Interim Unaudited Consolidated Statements of Operations for the Three and Six
Months Ended December 31, 2006 and 2007
    
    
    4Interim Unaudited Consolidated Statements of Shareholders Equity as of
December 31, 2007
    
    
    5Interim Unaudited Consolidated Statements of Cash Flows for the Six Months
Ended December 31, 2006 and 2007
    
    
    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
    
    
    44Item 4.
    
    Controls and Procedures
    
    
    45PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    46Item 1A.
    
    Risk Factors
    
    
    46Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    46Item 6.
    
    Exhibits
    
    
    47Signature
    
    
    
    
    48Rule 13a-14(a)/15d-14(a) Certification of Chief Executive OfficerRule 13a-14(a)/15d-14(a) Certification of PresidentRule 13a-14(a)/15d-14(a) Certification of Chief Financial OfficerSection 1350 Certification of Chief Executive OfficerSection 1350 Certification of PresidentSection 1350 Certification of Chief Financial Officer
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 
 DOLLAR FINANCIAL CORP.
 INTERIM CONSOLIDATED BALANCE SHEETS
(In thousands except share and per share amounts)
 June 30,
    
    
    December 31,2007
    
    
    2007(unaudited)ASSETSCash and cash equivalents
    
    $
    294,518
    
    
    $
    181,447Restricted cash
    
    
    1,014
    
    
    
    Loans receivable, net:Loans receivable
    
    
    90,552
    
    
    
    121,432Less: Allowance for loan losses
    
    
    (8,623
    )
    
    
    (11,981
    )Loans receivable, net
    
    
    81,929
    
    
    
    109,451Other consumer lending receivables
    
    
    1,056
    
    
    
    86Loans in default, net of an allowance of $18,045 and $21,756
    
    
    10,311
    
    
    
    12,142Other receivables
    
    
    10,337
    
    
    
    9,912Prepaid expenses
    
    
    12,146
    
    
    
    12,179Deferred tax asset, net of valuation allowance of $94,018 and $96,105
    
    
    4,545
    
    
    
    11,710Property and equipment, net of accumulated
depreciation of $81,494 and $90,723
    
    
    55,031
    
    
    
    66,197Goodwill and other intangibles, net of accumulated
amortization of $21,778 and $22,199
    
    
    341,681
    
    
    
    474,624Debt issuance costs, net of accumulated
amortization of $1,244 and $3,000
    
    
    17,747
    
    
    
    16,981Other
    
    
    3,304
    
    
    
    4,989$
    833,619
    
    
    $
    899,718LIABILITIES AND SHAREHOLDERS EQUITYAccounts payable
    
    $
    39,808
    
    
    $
    45,834Income taxes payable
    
    
    11,293
    
    
    
    10,764Accrued expenses and other liabilities
    
    
    28,119
    
    
    
    31,759Fair value of derivatives
    
    
    18,793
    
    
    
    48,469Deferred tax liability
    
    
    12,713
    
    
    
    19,474Long-term debt
    
    
    576,910
    
    
    
    576,219Shareholders equity:Common stock, $0.001 par value: 55,500,000 shares authorized;24,133,800 shares and 24,203,595 shares issued and outstanding at
June 30, 2007 and December 31, 2007, respectively
    
    
    24
    
    
    
    24Additional paid-in capital
    
    
    251,460
    
    
    
    253,493Accumulated deficit
    
    
    (147,123
    )
    
    
    (122,105
    )Accumulated other comprehensive income
    
    
    41,622
    
    
    
    35,787Total shareholders equity
    
    
    145,983
    
    
    
    167,199$
    833,619
    
    
    $
    899,718
  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 31,2006
    
    
    2007
    
    
    2006
    
    
    2007Revenues:Check cashing
    
    $
    41,518
    
    
    $
    48,859
    
    
    $
    79,907
    
    
    $
    94,522Consumer lending:Fees from consumer lending
    
    
    56,799
    
    
    
    73,594
    
    
    
    105,624
    
    
    
    142,103Provision for loan losses and adjustment to
servicing income
    
    
    (10,532
    )
    
    
    (16,070
    )
    
    
    (20,104
    )
    
    
    (30,876
    )Consumer lending, net
    
    
    46,267
    
    
    
    57,524
    
    
    
    85,520
    
    
    
    111,227Money transfer fees
    
    
    5,437
    
    
    
    7,079
    
    
    
    10,104
    
    
    
    13,039Franchise fees and royalties
    
    
    1,571
    
    
    
    1,162
    
    
    
    4,024
    
    
    
    2,503Other
    
    
    7,305
    
    
    
    11,027
    
    
    
    14,256
    
    
    
    20,410Total revenues
    
    
    102,098
    
    
    
    125,651
    
    
    
    193,811
    
    
    
    241,701Store and regional expenses:Salaries and benefits
    
    
    32,127
    
    
    
    38,646
    
    
    
    61,095
    
    
    
    73,883Occupancy
    
    
    7,931
    
    
    
    10,157
    
    
    
    15,583
    
    
    
    19,431Depreciation
    
    
    2,157
    
    
    
    3,214
    
    
    
    4,211
    
    
    
    6,023Returned checks, net and cash shortages
    
    
    3,765
    
    
    
    4,597
    
    
    
    7,397
    
    
    
    9,253Telephone and communications
    
    
    1,473
    
    
    
    1,798
    
    
    
    3,017
    
    
    
    3,450Advertising
    
    
    3,196
    
    
    
    2,721
    
    
    
    5,458
    
    
    
    4,824Bank charges and armored carrier services
    
    
    2,569
    
    
    
    3,287
    
    
    
    4,837
    
    
    
    6,343Other
    
    
    11,307
    
    
    
    11,980
    
    
    
    20,653
    
    
    
    22,452Total store and regional expenses
    
    
    64,525
    
    
    
    76,400
    
    
    
    122,251
    
    
    
    145,659Store and regional margin
    
    
    37,573
    
    
    
    49,251
    
    
    
    71,560
    
    
    
    96,042Corporate and other expenses:Corporate expenses
    
    
    13,287
    
    
    
    17,599
    
    
    
    26,237
    
    
    
    35,462Other depreciation and amortization
    
    
    846
    
    
    
    890
    
    
    
    1,676
    
    
    
    1,809Interest expense, net
    
    
    8,687
    
    
    
    8,977
    
    
    
    14,989
    
    
    
    17,066Loss on extinguishment of debt
    
    
    23,797
    
    
    
    97
    
    
    
    31,784
    
    
    
    97Goodwill impairment and other charges
    
    
    24,464
    
    
    
    
    
    
    
    24,464
    
    
    
    Mark to market  term loans
    
    
    6,619
    
    
    
    
    
    
    
    6,619
    
    
    
    Proceeds from litigation settlements
    
    
    (3,256
    )
    
    
    
    
    
    
    (3,256
    )
    
    
    Other, net
    
    
    91
    
    
    
    (212
    )
    
    
    179
    
    
    
    (802
    )Income (loss) before income taxes
    
    
    (36,962
    )
    
    
    21,900
    
    
    
    (31,132
    )
    
    
    42,410Income tax provision
    
    
    15,470
    
    
    
    8,936
    
    
    
    23,044
    
    
    
    17,392Net income (loss)
    
    $
    (52,432
    )
    
    $
    12,964
    
    
    $
    (54,176
    )
    
    $
    25,018Net income (loss) per share:Basic
    
    $
    (2.23
    )
    
    $
    0.54
    
    
    $
    (2.32
    )
    
    $
    1.04Diluted
    
    $
    (2.23
    )
    
    $
    0.52
    
    
    $
    (2.32
    )
    
    $
    1.01Weighted average shares outstanding:Basic
    
    
    23,470,302
    
    
    
    24,087,742
    
    
    
    23,385,308
    
    
    
    24,071,458Diluted
    
    
    23,470,302
    
    
    
    24,856,446
    
    
    
    23,385,308
    
    
    
    24,798,417
  4




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(In thousands, except share data)
 AccumulatedAdditional
    
    
    Accumulated
    
    
    Other
    
    
    TotalCommon Stock
    
    
    Paid-in
    
    
    Income
    
    
    Comprehensive
    
    
    ShareholdersShares
    
    
    Amount
    
    
    Capital
    
    
    (Deficit)
    
    
    Income
    
    
    EquityBalance, June 30, 2007
    
    
    24,133,800
    
    
    $
    24
    
    
    $
    251,460
    
    
    $
    (147,123
    )
    
    $
    41,622
    
    
    $
    145,983Comprehensive income:Foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    287
    
    
    
    287Cash flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,122
    )
    
    
    (6,122
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,018
    
    
    
    
    
    
    
    25,018Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,183Secondary stock offering
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Restricted stock grants
    
    
    32,908
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Vested portion of granted restricted stock and
restricted stock units
    
    
    
    
    
    
    
    
    
    
    628
    
    
    
    
    
    
    
    
    
    
    
    628Stock options exercised
    
    
    52,794
    
    
    
    
    
    
    
    674
    
    
    
    
    
    
    
    
    
    
    
    674Retirement of common stock
    
    
    (15,907
    )Other stock compensation
    
    
    
    
    
    
    
    
    
    
    731
    
    
    
    
    
    
    
    
    
    
    
    731Balance, December 31, 2007 (unaudited)
    
    
    24,203,595
    
    
    $
    24
    
    
    $
    253,493
    
    
    $
    (122,105
    )
    
    $
    35,787
    
    
    $
    167,199
  5




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 Six
Months Ended
December 31,2006
    
    
    2007Cash flows from operating activities:Net (loss) income
    
    $
    (54,176
    )
    
    $
    25,018Adjustments to reconcile net (loss) income to net
cash provided by operating activities:Depreciation and amortization
    
    
    6,781
    
    
    
    9,516Loss on extinguishment of debt
    
    
    31,784
    
    
    
    97Provision for loan losses and adjustment to servicing income
    
    
    20,104
    
    
    
    30,876Non-cash stock compensation
    
    
    877
    
    
    
    1,359Losses on store closings
    
    
    494
    
    
    
    124Goodwill impairment
    
    
    28,482
    
    
    
    Foreign currency loss on revaluation of debt
    
    
    6,619
    
    
    
    Deferred tax provision
    
    
    240
    
    
    
    2,457Other, net
    
    
    
    
    
    
    341Change in assets and liabilities (net of effect of acquisitions):Increase in loans and other receivables
    
    
    (37,616
    )
    
    
    (43,745
    )Decrease (increase) in prepaid expenses and other
    
    
    2,116
    
    
    
    (2,859
    )Increase in accounts payable, accrued expenses
and other liabilities
    
    
    2,684
    
    
    
    9,873Net cash provided by operating activities
    
    
    8,389
    
    
    
    33,057Cash flows from investing activities:Acquisitions, net of cash acquired
    
    
    (147,151
    )
    
    
    (135,641
    )Additions to property and equipment
    
    
    (9,711
    )
    
    
    (14,697
    )Net cash used in investing activities
    
    
    (156,862
    )
    
    
    (150,338
    )Cash flows from financing activities:Decrease in restricted cash
    
    
    78,248
    
    
    
    1,014Proceeds from term loans
    
    
    375,000
    
    
    
    Secondary offering costs
    
    
    (41
    )
    
    
    Proceeds from the exercise of stock options
    
    
    3,139
    
    
    
    674Other debt payments
    
    
    (919
    )
    
    
    (4,396
    )Prepayment of 9.75% Senior Notes due 2011
    
    
    (292,424
    )
    
    
    Convertible debt refinancing
    
    
    
    
    
    
    (127
    )Net decrease in revolving credit facilities
    
    
    (72
    )
    
    
    Payment of debt issuance costs
    
    
    (8,964
    )
    
    
    (305
    )Net cash provided by (used in) financing activities
    
    
    153,967
    
    
    
    (3,140
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (1,014
    )
    
    
    7,350Net increase (decrease) in cash and cash equivalents
    
    
    4,480
    
    
    
    (113,071
    )Cash and cash equivalents at beginning of period
    
    
    120,221
    
    
    
    294,518Cash and cash equivalents at end of period
    
    $
    124,701
    
    
    $
    181,447
  6




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation
  ® ® ® ®
  Use of Estimates
  Principles of Consolidation
  Reclassification
  7




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Earnings Per Share
  Three Months Ended
    
    
    Six Months EndedDecember 31,
    
    
    December 31,2006
    
    
    2007
    
    
    2006
    
    
    2007Net income (loss)
    
    $
    (52,432
    )
    
    $
    12,964
    
    
    $
    (54,176
    )
    
    $
    25,018Reconciliation of denominator:Weighted average of common shares outstanding  basic 1
    
    
    23,470
    
    
    
    24,088
    
    
    
    23,385
    
    
    
    24,071Effect of dilutive stock options2
    
    
    
    
    
    
    572
    
    
    
    
    
    
    
    531Effect of unvested restricted stock and restricted stock unit grants
    
    
    
    
    
    
    196
    
    
    
    
    
    
    
    196Weighted average number of common shares outstanding  diluted
    
    
    23,470
    
    
    
    24,856
    
    
    
    23,385
    
    
    
    24,798
 
 1
    
    Excludes 112 and 89 shares of unvested restricted stock, which is included in total
outstanding common shares as of December 31, 2006 and December 31, 2007, respectively.2
    
    The effect of dilutive stock options was determined under the treasury stock method.
Due to the net loss during the three- and six-month periods ended December 31, 2006, the effect of
the dilutive options and unvested shares of restricted stock were considered to be anti-dilutive,
and therefore were not included in the calculation of diluted earnings per share. Stock Based Employee Compensation
   8




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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 31,2006
    
    2007
    
    2006
    
    2007Expected volatility
    
    
    49.6
    %
    
    
    49.0
    %
    
    
    48.0
    %
    
    
    49.0
    %Expected life (years)
    
    
    6.0
    
    
    
    6.0
    
    
    
    6.0
    
    
    
    6.0Risk-free interest rate
    
    
    4.66
    %
    
    
    3.96
    %
    
    
    4.71
    %
    
    
    3.96
    %Expected dividends
    
    None
    
    None
    
    None
    
    NoneWeighted average fair value
    
    $
    14.33
    
    
    $
    15.03
    
    
    $
    11.02
    
    
    $
    15.03
  Weighted AverageWeighted
    
    Remaining
    
    Aggregate IntrinsicAverage
    
    Contractual Term
    
    Value ($ inOptions
    
    Exercise Price
    
    (years)
    
    millions)Options outstanding at June 30, 2007(1,020,716 shares exercisable)
    
    
    1,297,600
    
    
    $
    15.58
    
    
    
    8.1
    
    
    $
    16.8Granted
    
    
    34,906
    
    
    $
    29.19Exercised
    
    
    (52,794
    )
    
    $
    12.76Forfeited and expired
    
    
    (47,656
    )
    
    $
    17.18Options outstanding at December 31, 2007
    
    
    1,232,056
    
    
    $
    16.03
    
    
    
    7.7
    
    
    $
    18.1Exercisable at December 31, 2007
    
    
    997,353
    
    
    $
    14.46
    
    
    
    7.4
    
    
    $
    16.2
 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, 2007
    
    
    111,151
    
    
    $
    20.02Granted
    
    
    12,481
    
    
    
    29.42Vested
    
    
    (26,769
    )
    
    
    19.67Forfeited
    
    
    (8,122
    )
    
    
    18.36Outstanding at December 31, 2007
    
    
    88,741
    
    
    $
    21.60
  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)
 Stock Based Employee Compensation (continued)
  WeightedRestricted
    
    
    AverageStock Unit
    
    
    Grant-DateAwards
    
    
    Fair-ValueOutstanding at June 30, 2007
    
    
    124,438
    
    
    $
    28.53Granted
    
    
    13,406
    
    
    $
    28.78Vested
    
    
    (20,427
    )
    
    $
    28.53Forfeited
    
    
    (9,983
    )
    
    $
    28.53Outstanding at December 31, 2007
    
    
    107,434
    
    
    $
    28.56
  Recent Accounting Pronouncements
 Accounting for Uncertainty in Income Taxes Accounting for Income
Taxes
 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
 11




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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 (continued)
  Business
Combinations (a revision of Statement No. 141
 Noncontrolling Interests in Consolidated Financial Statements  an amendment of ARB No.51
 2. GOODWILL AND OTHER INTANGIBLES
  United
    
    
    
    
    
    
    UnitedStates
    
    
    Canada
    
    
    Kingdom
    
    
    TotalBalance at June 30, 2006
    
    $
    97,860
    
    
    $
    61,092
    
    
    $
    59,614
    
    
    $
    218,566Amortization of identifiable intangibles
    
    
    (58
    )
    
    
    
    
    
    
    
    
    
    
    (58
    )Acquisition
    
    
    25,126
    
    
    
    109,406
    
    
    
    2,779
    
    
    
    137,311Impairment loss
    
    
    (28,469
    )
    
    
    
    
    
    
    
    
    
    
    (28,469
    )Foreign currency translation adjustments
    
    
    
    
    
    
    9,167
    
    
    
    5,164
    
    
    
    14,331Balance at June 30, 2007
    
    $
    94,459
    
    
    $
    179,665
    
    
    $
    67,557
    
    
    $
    341,681Acquisition
    
    
    111,260
    
    
    
    654
    
    
    
    8,274
    
    
    
    120,188Foreign currency translation adjustments
    
    
    
    
    
    
    13,727
    
    
    
    (972
    )
    
    
    12,755Balance at December 31, 2007
    
    $
    205,719
    
    
    $
    194,046
    
    
    $
    74,859
    
    
    $
    474,624
 12




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 2. GOODWILL AND OTHER INTANGIBLES (continued)
  June 30,
    
    
    December 31,2007
    
    
    2007Gross Carrying
    
    
    Gross CarryingAmount(1)
    
    
    AmountNon-amortized intangible assets:Goodwill
    
    $
    293,462
    
    
    $
    421,786Reacquired franchise rights
    
    
    48,219
    
    
    
    52,838$
    341,681
    
    
    $
    474,624
 
 (1)
    
    The Company reclassified accumulated amortization to goodwill and no longer carries
accumulated amortization on its balance sheet. The Company currently has no amortizing intangible
assets under SFAS 142. Goodwill and Other Intangible Assets
     13




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 3. COMPREHENSIVE INCOME (LOSS)
  Three months ended
    
    
    Six months endedDecember 31,
    
    
    December 31,2006
    
    
    2007
    
    
    2006
    
    
    2007Net (loss) income
    
    $
    (52,432
    )
    
    $
    12,964
    
    
    $
    (54,176
    )
    
    $
    25,018Foreign currency translation adjustment
    
    
    1,131
    
    
    
    (3,006
    )
    
    
    2,254
    
    
    
    287Fair value adjustments for cash flow hedges, net(1)(2)
    
    
    1,266
    
    
    
    (757
    )
    
    
    1,223
    
    
    
    (6,122
    )Total comprehensive income (loss)
    
    $
    (50,035
    )
    
    $
    9,201
    
    
    $
    (50,699
    )
    
    $
    19,183
 
 (1)
    
    Net of $0.1 million and $0.6 million of tax for the three months ended December 31,
2006 and 2007, respectively. For the six months ended December 31, 2006 and 2007, the fair value
adjustments for cash flow hedges were net of $0.1 million and $3.0 million of tax, respectively.(2)
    
    Net of $0.2 million and $0.2 million for the three months ended December 31, 2006
and 2007, respectively, which was reclassified into earnings. For the six months ended December
31, 2006 and 2007, the fair value adjustments for cash flow hedges were net of $0.4 million and
$0.6 million, respectively, which were reclassified into earnings.  14




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 4. GEOGRAPHIC SEGMENT INFORMATION
  United
    
    
    
    
    
    UnitedStates
    
    Canada
    
    Kingdom
    
    TotalAs of and for the three months
ended December 31, 2006Identifiable assets
    
    $
    102,411
    
    
    $
    365,008
    
    
    $
    151,177
    
    
    $
    618,596Goodwill and other intangibles, net
    
    
    94,677
    
    
    
    162,437
    
    
    
    64,178
    
    
    
    321,292Sales to unaffiliated customers:Check cashing
    
    
    11,641
    
    
    
    17,016
    
    
    
    12,861
    
    
    
    41,518Consumer lending:Fees from consumer lending
    
    
    20,004
    
    
    
    26,429
    
    
    
    10,366
    
    
    
    56,799Provision for loan losses and adjustments
to servicing revenue
    
    
    (6,067
    )
    
    
    (2,248
    )
    
    
    (2,217
    )
    
    
    (10,532
    )Consumer lending, net
    
    
    13,937
    
    
    
    24,181
    
    
    
    8,149
    
    
    
    46,267Money transfer fees
    
    
    1,091
    
    
    
    3,023
    
    
    
    1,323
    
    
    
    5,437Franchise fees and royalties
    
    
    778
    
    
    
    793
    
    
    
    
    
    
    
    1,571Other
    
    
    1,431
    
    
    
    4,285
    
    
    
    1,589
    
    
    
    7,305Total sales to unaffiliated customers
    
    
    28,878
    
    
    
    49,298
    
    
    
    23,922
    
    
    
    102,098Interest expense, net
    
    
    2,584
    
    
    
    4,651
    
    
    
    1,452
    
    
    
    8,687Depreciation and amortization
    
    
    1,057
    
    
    
    1,008
    
    
    
    938
    
    
    
    3,003(Loss) income before income taxes
    
    
    (48,722
    )
    
    
    7,412
    
    
    
    4,348
    
    
    
    (36,962
    )Income tax provision
    
    
    7,275
    
    
    
    6,968
    
    
    
    1,227
    
    
    
    15,470For the six months
ended December 31, 2006Sales to unaffiliated customers:Check cashing
    
    $
    22,773
    
    
    $
    31,747
    
    
    $
    25,387
    
    
    $
    79,907Consumer lending:Fees from consumer lending
    
    
    38,391
    
    
    
    47,280
    
    
    
    19,953
    
    
    
    105,624Provision for loan losses and adjustments
to servicing revenue
    
    
    (11,657
    )
    
    
    (4,267
    )
    
    
    (4,180
    )
    
    
    (20,104
    )Consumer lending, net
    
    
    26,734
    
    
    
    43,013
    
    
    
    15,773
    
    
    
    85,520Money transfer fees
    
    
    2,183
    
    
    
    5,434
    
    
    
    2,487
    
    
    
    10,104Franchise fees and royalties
    
    
    1,911
    
    
    
    2,113
    
    
    
    
    
    
    
    4,024Other
    
    
    3,052
    
    
    
    8,058
    
    
    
    3,146
    
    
    
    14,256Total sales to unaffiliated customers
    
    
    56,653
    
    
    
    90,365
    
    
    
    46,793
    
    
    
    193,811Interest expense, net
    
    
    8,367
    
    
    
    4,417
    
    
    
    2,205
    
    
    
    14,989Depreciation and amortization
    
    
    2,144
    
    
    
    1,975
    
    
    
    1,768
    
    
    
    5,887(Loss) income before income taxes
    
    
    (64,162
    )
    
    
    24,476
    
    
    
    8,554
    
    
    
    (31,132
    )Income tax provision
    
    
    7,141
    
    
    
    13,324
    
    
    
    2,579
    
    
    
    23,044
 15




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 4. GEOGRAPHIC SEGMENT INFORMATION (continued)
 United
    
    
    
    
    
    UnitedStates
    
    Canada
    
    Kingdom
    
    TotalAs of and for the three months
ended December 31, 2007Identifiable 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
    
    
    
    48,859Consumer lending:Fees from consumer lending
    
    
    19,724
    
    
    
    38,455
    
    
    
    15,415
    
    
    
    73,594Provision for loan losses and adjustments
to servicing revenue
    
    
    (7,046
    )
    
    
    (7,604
    )
    
    
    (1,420
    )
    
    
    (16,070
    )Consumer lending, net
    
    
    12,678
    
    
    
    30,851
    
    
    
    13,995
    
    
    
    57,524Money 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
    
    
    28,326
    
    
    
    64,433
    
    
    
    32,892
    
    
    
    125,651Interest expense, net
    
    
    1,356
    
    
    
    5,638
    
    
    
    1,983
    
    
    
    8,977Depreciation and amortization
    
    
    1,163
    
    
    
    1,679
    
    
    
    1,262
    
    
    
    4,104(Loss) income before income taxes
    
    
    (3,630
    )
    
    
    18,427
    
    
    
    7,103
    
    
    
    21,900Income tax provision
    
    
    11
    
    
    
    6,822
    
    
    
    2,103
    
    
    
    8,936For the six months
ended December 31, 2007Sales to unaffiliated customers:Check cashing
    
    $
    23,200
    
    
    $
    42,033
    
    
    $
    29,289
    
    
    $
    94,522Consumer lending:Fees from consumer lending
    
    
    35,712
    
    
    
    76,426
    
    
    
    29,965
    
    
    
    142,103Provision for loan losses and adjustments
to servicing revenue
    
    
    (12,688
    )
    
    
    (14,562
    )
    
    
    (3,626
    )
    
    
    (30,876
    )Consumer lending, net
    
    
    23,024
    
    
    
    61,864
    
    
    
    26,339
    
    
    
    111,227Money 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
    
    
    52,676
    
    
    
    125,781
    
    
    
    63,244
    
    
    
    241,701Interest expense, net
    
    
    2,336
    
    
    
    10,870
    
    
    
    3,860
    
    
    
    17,066Depreciation and amortization
    
    
    2,257
    
    
    
    3,110
    
    
    
    2,465
    
    
    
    7,832(Loss) income before income taxes
    
    
    (7,258
    )
    
    
    37,736
    
    
    
    11,932
    
    
    
    42,410Income tax provision (benefit)
    
    
    (420
    )
    
    
    14,236
    
    
    
    3,576
    
    
    
    17,392
 16




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 5. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
 Put Options
  Cross-Currency Interest Rate Swaps
   17




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 5. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (continued)
  6. CONTINGENT LIABILITIES
  Canadian Legal Proceedings
  Mortillaro Smith
  18




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 6. CONTINGENT LIABILITIES (continued)
 Canadian Legal Proceedings (continued)
 Day Young Young
 Parsons
     19




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 6. CONTINGENT LIABILITIES (continued)
 California Legal Proceedings
 (Woods) (Castillo) (Chin) (Williams). Chin Chin
 Woods Castillo Williams
 Bufil Chin Bufil Chin
 Bufil
  20




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 6. CONTINGENT LIABILITIES (continued)
 We The People Legal Proceedings
      21




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 6. CONTINGENT LIABILITIES (continued)
 We The People Legal Proceedings (continued)
       22




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 6. CONTINGENT LIABILITIES (continued)
 We The People Legal Proceedings (continued)
    7. ACQUISITIONS
    23




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 7. ACQUISITIONS (continued)
    Balance at June 30, 2007
    
    $
    293.5Acquisitions:APL  U.S.
    
    
    21.6CCS  U.S.
    
    
    89.7Cash Your Cheque  U.K.
    
    
    3.5Other
    
    
    4.3Purchase adjustments:82 Store Canadian Acquisition
    
    
    (0.1
    )Foreign currency adjustment
    
    
    9.3Balance at December 31, 2007
    
    $
    421.8
  Three months ended
    
    
    Six months endedDecember 31,
    
    
    December 31,2006
    
    
    2007
    
    
    2006
    
    
    2007(Unaudited in thousands
    
    
    (Unaudited in thousandsexcept per share amounts)
    
    
    except per share amounts)Revenue
    
    $
    117,069
    
    
    $
    135,392
    
    
    $
    223,661
    
    
    $
    265,661Net income
(loss)
    
    $
    (49,246
    )
    
    $
    13,918
    
    
    $
    (47,804
    )
    
    $
    25,232Net income (loss) per
common share 
basic
    
    $
    (2.10
    )
    
    $
    0.58
    
    
    $
    (2.04
    )
    
    $
    1.05Net income (loss) per
common share 
diluted
    
    $
    (2.10
    )
    
    $
    0.56
    
    
    $
    (2.04
    )
    
    $
    1.02
 24




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 8. ADOPTION OF FASB INTERPRETATION NO. 48
    25




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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, 2007 and 2006. 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




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##### Table of Contents



Discussion of Critical Accounting Policies
   27




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##### Table of Contents



Revenue Recognition
    ® ® ®
 Company-Funded Consumer Loan Loss Reserves Policy
   Check Cashing Returned Item Policy
  28




---



##### Table of Contents



Goodwill
 Goodwill and Other Intangible Assets
    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)2006
    
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006
    
    
    2007Check cashing
    
    $
    41,518
    
    
    $
    48,859
    
    
    
    40.7
    %
    
    
    38.9
    %
    
    $
    79,907
    
    
    $
    94,522
    
    
    
    41.2
    %
    
    
    39.1
    %Consumer lending, net
    
    
    46,267
    
    
    
    57,524
    
    
    
    45.3
    %
    
    
    45.8
    %
    
    
    85,520
    
    
    
    111,227
    
    
    
    44.1
    %
    
    
    46.0
    %Money transfer fees
    
    
    5,437
    
    
    
    7,079
    
    
    
    5.3
    %
    
    
    5.6
    %
    
    
    10,104
    
    
    
    13,039
    
    
    
    5.2
    %
    
    
    5.4
    %Franchise fees and royalties
    
    
    1,571
    
    
    
    1,162
    
    
    
    1.5
    %
    
    
    0.9
    %
    
    
    4,024
    
    
    
    2,503
    
    
    
    2.1
    %
    
    
    1.0
    %Other revenue
    
    
    7,305
    
    
    
    11,027
    
    
    
    7.2
    %
    
    
    8.8
    %
    
    
    14,256
    
    
    
    20,410
    
    
    
    7.4
    %
    
    
    8.5
    %Total revenue
    
    $
    102,098
    
    
    $
    125,651
    
    
    
    100.0
    %
    
    
    100.0
    %
    
    $
    193,811
    
    
    $
    241,701
    
    
    
    100.0
    %
    
    
    100.0
    %
 The Three Months Ended December 31, 2007 compared to the Three Months Ended December 31, 2006
  29




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##### Table of Contents



® ®
  The Six Months Ended December 31, 2007 compared to the Six Months Ended December 31, 2006
  ® ®
  30




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##### Table of Contents



Store and Regional Expense Analysis
 Three Months Ended December 31,
    
    Six Months Ended December 31,(Percentage of
    
    
    
    
    
    
    
    
    
    (Percentage of($ in thousands)
    
    total revenue)
    
    ($ in thousands)
    
    total revenue)2006
    
    2007
    
    2006
    
    2007
    
    2006
    
    2007
    
    2006
    
    2007Salaries and benefits
    
    $
    32,127
    
    
    $
    38,646
    
    
    
    31.5
    %
    
    
    30.8
    %
    
    $
    61,095
    
    
    $
    73,883
    
    
    
    31.5
    %
    
    
    30.6
    %Occupancy
    
    
    7,931
    
    
    
    10,157
    
    
    
    7.8
    %
    
    
    8.1
    %
    
    
    15,583
    
    
    
    19,431
    
    
    
    8.0
    %
    
    
    8.0
    %Depreciation
    
    
    2,157
    
    
    
    3,214
    
    
    
    2.1
    %
    
    
    2.6
    %
    
    
    4,211
    
    
    
    6,023
    
    
    
    2.2
    %
    
    
    2.5
    %Returned checks, net and cash shortages
    
    
    3,765
    
    
    
    4,597
    
    
    
    3.7
    %
    
    
    3.7
    %
    
    
    7,397
    
    
    
    9,253
    
    
    
    3.8
    %
    
    
    3.8
    %Telephone and telecommunication
    
    
    1,473
    
    
    
    1,798
    
    
    
    1.4
    %
    
    
    1.4
    %
    
    
    3,017
    
    
    
    3,450
    
    
    
    1.6
    %
    
    
    1.4
    %Advertising
    
    
    3,196
    
    
    
    2,721
    
    
    
    3.1
    %
    
    
    2.2
    %
    
    
    5,458
    
    
    
    4,824
    
    
    
    2.8
    %
    
    
    2.0
    %Bank charges and armored carrier
services
    
    
    2,569
    
    
    
    3,287
    
    
    
    2.5
    %
    
    
    2.6
    %
    
    
    4,837
    
    
    
    6,343
    
    
    
    2.5
    %
    
    
    2.6
    %Other
    
    
    11,307
    
    
    
    11,980
    
    
    
    11.1
    %
    
    
    9.4
    %
    
    
    20,653
    
    
    
    22,452
    
    
    
    10.7
    %
    
    
    9.4
    %Total store and regional expenses
    
    $
    64,525
    
    
    $
    76,400
    
    
    
    63.2
    %
    
    
    60.8
    %
    
    $
    122,251
    
    
    $
    145,659
    
    
    
    63.1
    %
    
    
    60.3
    %
 The Three Months Ended December 31, 2007 compared to the Three Months Ended December 31, 2006
  The Six Months Ended December 31, 2007 compared to the Six Months Ended December 31, 2006
  31




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##### 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)2006
    
    2007
    
    2006
    
    2007
    
    2006
    
    2007
    
    2006
    
    2007Corporate expenses
    
    $
    13,287
    
    
    $
    17,599
    
    
    
    13.0
    %
    
    
    14.0
    %
    
    $
    26,237
    
    
    $
    35,462
    
    
    
    13.5
    %
    
    
    14.7
    %Other depreciation and amortization
    
    
    846
    
    
    
    890
    
    
    
    0.8
    %
    
    
    0.7
    %
    
    
    1,676
    
    
    
    1,809
    
    
    
    0.9
    %
    
    
    0.7
    %Interest expense, net
    
    
    8,687
    
    
    
    8,977
    
    
    
    8.5
    %
    
    
    7.1
    %
    
    
    14,989
    
    
    
    17,066
    
    
    
    7.7
    %
    
    
    7.1
    %Loss on extinguishment of debt
    
    
    23,797
    
    
    
    97
    
    
    
    23.3
    %
    
    
    0.1
    %
    
    
    31,784
    
    
    
    97
    
    
    
    16.4
    %
    
    
    0.0
    %Goodwill impairment and other charges
    
    
    24,464
    
    
    
    
    
    
    
    24.0
    %
    
    
    0.0
    %
    
    
    24,464
    
    
    
    
    
    
    
    12.6
    %
    
    
    0.0
    %Mark to market  term loans
    
    
    6,619
    
    
    
    
    
    
    
    6.5
    %
    
    
    0.0
    %
    
    
    6,619
    
    
    
    
    
    
    
    3.4
    %
    
    
    0.0
    %Proceeds from litigation settlements
    
    
    (3,256
    )
    
    
    
    
    
    
    (3.2
    )%
    
    
    0.0
    %
    
    
    (3,256
    )
    
    
    
    
    
    
    (1.7
    )%
    
    
    0.0
    %Other, net
    
    
    91
    
    
    
    (212
    )
    
    
    0.1
    %
    
    
    (0.2
    )%
    
    
    179
    
    
    
    (802
    )
    
    
    0.1
    %
    
    
    (0.3
    )%Income tax provision
    
    
    15,470
    
    
    
    8,936
    
    
    
    15.2
    %
    
    
    7.1
    %
    
    
    23,044
    
    
    
    17,392
    
    
    
    11.9
    %
    
    
    7.2
    %
 The Three Months Ended December 31, 2007 compared to the Three Months Ended December 31, 2006
 Corporate Expenses
  Other Depreciation and Amortization
  Interest Expense
  32




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##### Table of Contents



Loss on Extinguishment of Debt
   Three Months Ended
    
    
    Three Months EndedDecember 31, 2006
    
    
    December 31, 2007Tender premium
    
    $
    17.6
    
    
    $
    Call premium
    
    
    
    
    
    
    0.1Write-off of previously capitalized deferred issuance costs, net
    
    
    7.2
    
    
    
    Write-off of original issue premium
    
    
    (1.0
    )
    
    
    $
    23.8
    
    
    $
    0.1
 Proceeds from Legal Settlement
   Goodwill Impairment and Other Charges
   Mark to Market Term Loans
   33




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##### Table of Contents



Income Tax Provision
     The Six Months Ended December 31, 2007 compared to the Six Months Ended December 31, 2006
 Corporate Expenses
  Other Depreciation and Amortization
  34




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##### Table of Contents



Interest Expense
  Loss on Extinguishment of Debt
   Six Months Ended
    
    
    Six Months EndedDecember 31, 2006
    
    
    December 31, 2007Call premium
    
    $
    6.8
    
    
    $
    0.1Tender premium
    
    
    17.6
    
    
    
    Write-off of previously
capitalized deferred issuance
costs, net
    
    
    8.8
    
    
    
    Write-off of original issue premium
    
    
    (1.4
    )
    
    
    Total
    
    $
    31.8
    
    
    $
    0.1
 Proceeds from Legal Settlement
   35




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##### Table of Contents



Goodwill Impairment and Other Charges
   Mark to Market Term Loans
   Income Tax Provision
     36




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##### Table of Contents



Changes in Financial Condition
  Liquidity and Capital Resources
     New Credit Facilities.
  37




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##### Table of Contents



Revolving Credit Facilities.
 United States Revolving Credit Facility.
 Canadian Revolving Credit Facility.
 Long-Term Debt.
 Operating Leases.
  Less than
    
    
    1  3
    
    
    3  5
    
    
    After 5Total
    
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    YearsLong-term debt:Term loans due 2012
    
    $
    376,219
    
    
    $
    3,750
    
    
    $
    7,500
    
    
    $
    7,500
    
    
    $
    357,4692.875% Senior
Convertible Notes
due 2027
    
    
    200,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200,000Operating lease obligations
    
    
    146,272
    
    
    
    36,160
    
    
    
    54,405
    
    
    
    29,107
    
    
    
    26,600Total contractual cash obligations
    
    $
    722,491
    
    
    $
    39,910
    
    
    $
    61,905
    
    
    $
    36,607
    
    
    $
    584,069
  38




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##### Table of Contents



Balance Sheet Variations
 December 31, 2007 compared to June 30, 2007
         Seasonality and Quarterly Fluctuations
  Recent Accounting Pronouncements
 Accounting for Uncertainty in Income Taxes Accounting for Income
Taxes
 39




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##### Table of Contents



Fair Value Measurements
 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
   40




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##### Table of Contents



Cautionary Statement for Purposes of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995
   41




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 SUPPLEMENTAL STATISTICAL DATA
 December 31,2006
    
    2007Company Operating Data:Stores in operation:Company-owned
    
    
    885
    
    
    
    1,088Franchised stores and check cashing merchants
    
    
    397
    
    
    
    354Total
    
    
    1,282
    
    
    
    1,442
 Three Months Ended
    
    Six Months EndedDecember 31,
    
    December 31,2006
    
    2007
    
    2006
    
    2007Check Cashing Data:Face amount of checks cashed (in millions)
    
    $
    1,093
    
    
    $
    1,275
    
    
    $
    2,103
    
    
    $
    2,465Face amount of average check
    
    $
    471
    
    
    $
    538
    
    
    $
    474
    
    
    $
    532Average fee per check
    
    $
    17.90
    
    
    $
    20.63
    
    
    $
    18.00
    
    
    $
    20.39Number of checks cashed (in thousands)
    
    
    2,320
    
    
    
    2,369
    
    
    
    4,440
    
    
    
    4,635
 Three Months Ended
    
    
    Six Months EndedDecember 31,
    
    
    December 31,2006
    
    
    2007
    
    
    2006
    
    
    2007Check Cashing Collections Data:Face amount of returned checks (in thousands)
    
    $
    11,911
    
    
    $
    14,440
    
    
    $
    22,733
    
    
    $
    29,012Collections (in thousands)
    
    
    (8,688
    )
    
    
    (10,611
    )
    
    
    (16,400
    )
    
    
    (21,184
    )Net write-offs (in thousands)
    
    $
    3,223
    
    
    $
    3,829
    
    
    $
    6,333
    
    
    $
    7,828Collections as a percentage of returned checks
    
    
    72.9
    %
    
    
    73.5
    %
    
    
    72.1
    %
    
    
    73.0
    %Net write-offs as a percentage of check cashing
revenues
    
    
    7.7
    %
    
    
    7.8
    %
    
    
    7.9
    %
    
    
    8.2
    %Net write-offs as a percentage of the face amount
of checks cashed
    
    
    0.29
    %
    
    
    0.30
    %
    
    
    0.30
    %
    
    
    0.32
    %
 42




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##### Table of Contents



Three Months Ended
    
    Six Months EndedDecember 31,
    
    December 31,2006
    
    2007
    
    2006
    
    2007U.S. company-funded consumer loan originations (1)
    
    $
    71,566
    
    
    $
    129,299
    
    
    $
    133,800
    
    
    $
    225,249Canadian company-funded consumer loan originations (2)
    
    
    191,888
    
    
    
    253,444
    
    
    
    342,307
    
    
    
    496,892U.K. company-funded consumer loan originations (2)
    
    
    62,329
    
    
    
    96,791
    
    
    
    120,346
    
    
    
    177,164Total company-funded consumer loan originations
    
    $
    325,783
    
    
    $
    479,534
    
    
    $
    596,453
    
    
    $
    899,305U.S. Servicing revenues
    
    $
    8,799
    
    
    $
    635
    
    
    $
    17,089
    
    
    $
    1,429U.S. company-funded consumer loan revenues
    
    
    11,205
    
    
    
    19,089
    
    
    
    21,302
    
    
    
    34,283Canadian company-funded consumer loan revenues
    
    
    26,429
    
    
    
    38,455
    
    
    
    47,280
    
    
    
    76,426U.K. company-funded consumer loan revenues
    
    
    10,366
    
    
    
    15,415
    
    
    
    19,953
    
    
    
    29,965Provision for loan losses and adjustments to servicing revenues
    
    
    (10,532
    )
    
    
    (16,070
    )
    
    
    (20,104
    )
    
    
    (30,876
    )Total consumer lending revenues, net
    
    $
    46,267
    
    
    $
    57,524
    
    
    $
    85,520
    
    
    $
    111,227Gross charge-offs of company-funded consumer loans
    
    $
    36,199
    
    
    $
    54,181
    
    
    $
    68,087
    
    
    $
    105,938Recoveries of company-funded consumer loans
    
    
    (31,174
    )
    
    
    (40,887
    )
    
    
    (57,925
    )
    
    
    (82,309
    )Net charge-offs on company-funded consumer loans
    
    $
    5,025
    
    
    $
    13,294
    
    
    $
    10,162
    
    
    $
    23,629Gross charge-offs of company-funded consumer loans
as a percentage of total company-funded consumer loan
originations
    
    
    11.1
    %
    
    
    11.3
    %
    
    
    11.4
    %
    
    
    11.8
    %Recoveries of company-funded consumer loans as a
percentage of total company-funded consumer loan
originations
    
    
    9.6
    %
    
    
    8.5
    %
    
    
    9.7
    %
    
    
    9.2
    %Net charge-offs on company-funded consumer loans
as a percentage of total company-funded consumer loan
originations
    
    
    1.5
    %
    
    
    2.8
    %
    
    
    1.7
    %
    
    
    2.6
    %
 
 (1)
    
    Our company operated stores in the United States originated bank-funded installment
consumer loans during the three and six months ended December 31, 2006 and now offer only
company-funded single-payment consumer loans in all markets, with the exception of Texas, during
the three and six months ended December 31, 2007. 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. 43




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##### 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 Rates
  Foreign Exchange Rates
 Put Options
   44




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##### Table of Contents



Cross-Currency Interest Rate Swaps
     
 Item 4. Controls and Procedures
 Evaluation of Disclosure Control and Procedures
  Changes in Internal Control Over Financial Reporting
  45




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 4. Submission of Matters to a Vote of Security Holders
   Votes For:
    
    Votes Withheld:Clive Kahn
    
    
    18,230,049
    
    
    
    2,570,679John Gavin
    
    
    18,230,049
    
    
    
    2,570,679
  Votes For:
    
    
    20,659,145Votes Against:
    
    
    141,582Abstentions:
    
    
    0
  Votes For:
    
    
    15,557,001Votes Against:
    
    
    3,094,308Abstentions:
    
    
    4,949Broker Non-Votes
    
    
    2,144,470
 46




---



##### Table of Contents



Item 6. Exhibits
 Exhibit No.
    
    Description of Document3.1
    
    Amended and Restated Bylaws of Dollar Financial Corp., as amended effective November 15, 2007(3)10.1
    
    Employment Agreement by and among Jeffrey Weiss, Dollar Financial Corp. and Dollar Financial
Group, Inc., dated October 5, 2007(1)10.2
    
    Asset Purchase Agreement dated as of October 11, 2007, by and among CCS Financial Services,
Inc., a Florida corporation; Allen Eager, the Allen Eager Revocable Trust, Paul P. Houser,
Barry E. Hershman, and the Barry E. Hershman Revocable Trust and Check Mart of Florida, a
Delaware corporation (2)10.3
    
    Dollar Financial Corp. 2007 Equity
Incentive Plan(3)31.1
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer31.2
    
    Rule 13a-14(a)/15d-14(a) Certification of President31.3
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer32.1
    
    Section 1350 Certification of Chief Executive Officer32.2
    
    Section 1350 Certification of President32.3
    
    Section 1350 Certification of Chief Financial Officer(1)
    
    Incorporated by reference to the Current Report on Form 8-K filed by Dollar Financial Corp. on
October 9, 2007.(2)
    
    Incorporated by reference to the Quarterly Report on Form 10-Q filed by Dollar Financial Corp.
on November 9, 2007.(3)
    
    Incorporated by reference to the Current Report on Form 8-K filed by Dollar Financial Corp. on
November 21, 2007.
 47




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##### Table of Contents



SIGNATURE
  DOLLAR FINANCIAL CORP.Date: February 11, 2008
    *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