##### 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 September 30, 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
    
    23-2636866(State or Other Jurisdiction of Incorporation or Organization)
    
    (I.R.S. Employer Identification No.)
 1436 LANCASTER AVENUE,
BERWYN, PENNSYLVANIA 19312
 610-296-3400
 None
 þ þ o
  o þ 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 September 30, 2007 (unaudited)
    
    
    3Interim Unaudited Consolidated Statements of Operations for the Three Months Ended September 30, 2006 and 2007
    
    
    4Interim
Unaudited Consolidated Statements of Shareholders Equity as of
September 30, 2007
    
    
    5Interim Unaudited Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2006 and 2007
    
    
    6Notes to Interim Unaudited Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    24Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    37Item 4. Controls and Procedures
    
    
    39PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    39Item 1A. Risk Factors
    
    
    39Item 6. Exhibits
    
    
    40Signature
    
    
    41ASSET PURCHASE AGREEMENTCERTIFICATION OF CHIEF EXECUTIVE OFFICERCERTIFICATION OF PRESIDENTCERTIFICATION 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,
    
    
    September 30,2007
    
    
    2007(unaudited)ASSETSCash and cash equivalents
    
    $
    294,518
    
    
    $
    296,979Restricted cash
    
    
    1,014
    
    
    
    2,178Loans receivable, net:Loans receivable
    
    
    90,552
    
    
    
    103,772Less: Allowance for loan losses
    
    
    (8,623
    )
    
    
    (10,461
    )Loans receivable, net
    
    
    81,929
    
    
    
    93,311Other consumer lending receivables
    
    
    1,056
    
    
    
    116Loans in default, net of an allowance of $18,045 and $20,942
    
    
    10,311
    
    
    
    11,972Other receivables
    
    
    10,337
    
    
    
    8,124Prepaid expenses
    
    
    12,146
    
    
    
    12,524Deferred tax asset, net of valuation allowance of $94,018 and $95,157
    
    
    4,545
    
    
    
    10,245Property and equipment, net of accumulated
depreciation of $81,494 and $87,054
    
    
    55,031
    
    
    
    58,831Goodwill and
other intangibles
    
    
    341,681
    
    
    
    369,071Debt issuance costs, net of accumulated
amortization of $1,244 and $2,154
    
    
    17,747
    
    
    
    17,500Other
    
    
    3,304
    
    
    
    4,189$
    833,619
    
    
    $
    885,040LIABILITIES AND SHAREHOLDERS EQUITYAccounts payable
    
    $
    39,808
    
    
    $
    44,100Income taxes payable
    
    
    11,293
    
    
    
    11,569Accrued expenses and other liabilities
    
    
    28,119
    
    
    
    29,827Deferred tax liability
    
    
    12,713
    
    
    
    16,907Fair value of derivatives
    
    
    18,793
    
    
    
    47,459Long-term debt
    
    
    576,910
    
    
    
    578,055Shareholders equity:Common stock, $0.001 par value: 55,500,000 shares authorized; 24,133,800 and
24,171,555 shares issued and outstanding at June 30, 2007 and
September 30, 2007, respectively
    
    
    24
    
    
    
    24Additional paid-in capital
    
    
    251,460
    
    
    
    252,618Accumulated deficit
    
    
    (147,123
    )
    
    
    (135,069
    )Accumulated other comprehensive income
    
    
    41,622
    
    
    
    39,550Total shareholders equity
    
    
    145,983
    
    
    
    157,123$
    833,619
    
    
    $
    885,040
  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 EndedSeptember 30,2006
    
    
    2007Revenues:Check cashing
    
    $
    38,389
    
    
    $
    45,663Consumer lending:Fees from consumer lending
    
    
    48,825
    
    
    
    68,509Provision for loan losses and adjustment to servicing income
    
    
    (9,572
    )
    
    
    (14,806
    )Consumer lending, net
    
    
    39,253
    
    
    
    53,703Money transfer fees
    
    
    4,667
    
    
    
    5,960Franchise fees and royalties
    
    
    2,453
    
    
    
    1,341Other
    
    
    6,951
    
    
    
    9,383Total revenues
    
    
    91,713
    
    
    
    116,050Store and regional expenses:Salaries and benefits
    
    
    28,968
    
    
    
    35,237Occupancy
    
    
    7,652
    
    
    
    9,274Depreciation
    
    
    2,054
    
    
    
    2,809Returned checks, net and cash shortages
    
    
    3,632
    
    
    
    4,656Telephone and communications
    
    
    1,544
    
    
    
    1,652Advertising
    
    
    2,262
    
    
    
    2,103Bank charges and armored carrier expenses
    
    
    2,268
    
    
    
    3,056Other
    
    
    9,346
    
    
    
    10,472Total store and regional expenses
    
    
    57,726
    
    
    
    69,259Store and regional margin
    
    
    33,987
    
    
    
    46,791Corporate and other expenses:Corporate expenses
    
    
    12,950
    
    
    
    17,863Other depreciation and amortization
    
    
    830
    
    
    
    919Interest expense, net
    
    
    6,302
    
    
    
    8,089Loss on extinquishment of debt
    
    
    7,987
    
    
    
    Other, net
    
    
    88
    
    
    
    (590
    )Income before income taxes
    
    
    5,830
    
    
    
    20,510Income tax provision
    
    
    7,574
    
    
    
    8,456Net (loss) income
    
    $
    (1,744
    )
    
    $
    12,054Net (loss) income per share:Basic
    
    $
    (0.07
    )
    
    $
    0.50Diluted
    
    $
    (0.07
    )
    
    $
    0.49Weighted average shares outstanding:Basic
    
    
    23,300,313
    
    
    
    24,054,916Diluted
    
    
    23,300,313
    
    
    
    24,776,716
  4




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 
 INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(In thousands, except share data)
 AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    TotalCommon Stock
    
    
    Paid-in
    
    
    Accumulated
    
    
    Comprehensive
    
    
    ShareholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Income
    
    
    EquityBalance, June 30, 2007
    
    
    24,133,800
    
    
    
    24
    
    
    
    251,460
    
    
    
    (147,123
    )
    
    
    41,622
    
    
    
    145,983Comprehensive incomeForeign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,293
    
    
    
    3,293Cash flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,365
    )
    
    
    (5,365
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,054
    
    
    
    
    
    
    
    12,054Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,982Restricted stock grants
    
    
    8,190
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Restricted stock vested
    
    
    
    
    
    
    
    
    
    
    315
    
    
    
    
    
    
    
    
    
    
    
    315Share options exercised
    
    
    30,944
    
    
    
    
    
    
    
    322
    
    
    
    
    
    
    
    
    
    
    
    322Retirement of common stock
    
    
    (1,379
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-cash stock compensation
    
    
    
    
    
    
    
    
    
    
    521
    
    
    
    
    
    
    
    
    
    
    
    521Balance, September 30, 2007 (unaudited)
    
    
    24,171,555
    
    
    $
    24
    
    
    $
    252,618
    
    
    $
    (135,069
    )
    
    $
    39,550
    
    
    $
    157,123
  5




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 
 INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 Three Months EndedSeptember 30,2006
    
    
    2007Cash flows from operating activities:Net (loss) income
    
    $
    (1,744
    )
    
    $
    12,054Adjustments to reconcile net (loss) income to net
cash provided by operating activities:Depreciation and amortization
    
    
    3,269
    
    
    
    4,562Non-cash stock compensation
    
    
    335
    
    
    
    836Loss on extinguishment of debt
    
    
    7,987
    
    
    
    Provision for loan losses and adjustment to servicing revenue
    
    
    9,572
    
    
    
    14,806Losses on store closings
    
    
    149
    
    
    
    53Deferred tax provision
    
    
    404
    
    
    
    1,127Other, net
    
    
    
    
    
    
    245Change in assets and liabilities (net of effect of acquisitions):Increase in loans and other receivables
    
    
    (15,010
    )
    
    
    (17,290
    )Increase in income taxes receivable
    
    
    (524
    )
    
    
    Decrease (increase) in prepaid expenses and other
    
    
    886
    
    
    
    (2,921
    )Increase in accounts payable, accrued expenses and other liabilities
    
    
    2,902
    
    
    
    6,414Net cash provided by operating activities
    
    
    8,226
    
    
    
    19,886Cash flows from investing activities:Acquisitions, net of cash acquired
    
    
    (959
    )
    
    
    (17,747
    )Additions to property and equipment
    
    
    (4,706
    )
    
    
    (6,300
    )Net cash used in investing activities
    
    
    (5,665
    )
    
    
    (24,047
    )Cash flows from financing activities:Decrease (increase) in restricted cash
    
    
    80,750
    
    
    
    (1,164
    )Proceeds from the exercise of stock options
    
    
    344
    
    
    
    321Other debt payments
    
    
    (92
    )
    
    
    (1,138
    )Partial prepayment of 9.75% Senior Notes due 2011
    
    
    (76,825
    )
    
    
    Net decrease in revolving credit facilities
    
    
    (6,300
    )
    
    
    Payment of debt issuance costs
    
    
    (85
    )
    
    
    (114
    )Net cash used in financing activities
    
    
    (2,208
    )
    
    
    (2,095
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (197
    )
    
    
    8,717Net increase in cash and cash equivalents
    
    
    156
    
    
    
    2,461Cash and cash equivalents at beginning of period
    
    
    120,221
    
    
    
    294,518Cash and cash equivalents at end of period
    
    $
    120,377
    
    
    $
    296,979
  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 EndedSeptember 30,2006
    
    2007Net income (loss)
    
    $
    (1,744
    )
    
    $
    12,054Reconciliation of denominator:Weighted average of common shares outstanding  basic1
    
    
    23,300
    
    
    
    24,055Effect of unvested restricted stock and restricted stock unit grants
    
    
    
    
    
    
    212Effect of dilutive stock options2
    
    
    
    
    
    
    510Weighted average number of common shares outstanding  diluted
    
    
    23,300
    
    
    
    24,777
 
 1
    
    Excludes 120,221 and 211,719 shares of unvested restricted stock and
restricted stock units, which is included in total outstanding common shares as of
September 30, 2006 and September 30, 2007, respectively.2
    
    The effect of dilutive stock options and unvested restricted stock was
determined under the treasury stock method. Due to the net loss during the three months
ended September 30, 2006 the effect of the dilutive options, unvested restricted stock
and restricted stock units were considered to be antidilutive, and therefore were not
included in the calculation of diluted earnings per share. Stock Based Employee Compensation
  Share-Based Payment
 8




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Stock Based Employee Compensation (continued)
  Three months EndedSeptember 30,2006
    
    2007Expected volatility
    
    
    47.6
    %
    
    
    N/AExpected life (years)
    
    
    6.0
    
    
    
    N/ARisk-free interest rate
    
    
    4.72
    %
    
    
    N/AExpected dividends
    
    None
    
    
    N/AWeighted average fair value
    
    $
    10.24
    
    
    
    N/A
  WeightedWeighted
    
    AverageAverage
    
    Remaining
    
    AggregateExercise
    
    Contractual
    
    Intrinsic Value ($Options
    
    Price
    
    Term (years)
    
    in millions)Options outstanding at June 30, 2007
    
    
    1,297,600
    
    
    $
    15.58
    
    
    
    8.1
    
    
    $
    16.8(1,020,716 shares exercisable)Granted
    
    
    
    
    
    $
    Exercised
    
    
    (30,944
    )
    
    $
    10.38Forfeited and expired
    
    
    
    
    
    $
    Options outstanding at September 30, 2007
    
    
    1,266,656
    
    
    $
    15.71
    
    
    
    7.9
    
    
    $
    16.2Exercisable at September 30, 2007
    
    
    1,015,747
    
    
    $
    14.48
    
    
    
    7.7
    
    
    $
    14.3
  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
    
    
    
    
    
    
    Vested
    
    
    (13,537
    )
    
    
    19.65Forfeited
    
    
    
    
    
    
    Outstanding
at September 30, 2007
    
    
    97,614
    
    
    $
    20.01
   Restricted
    
    
    WeightedStock Unit
    
    
    AverageAwards
    
    
    GrantOustanding at June 30, 2007
    
    
    124,438
    
    
    $
    28.53Granted
    
    
    
    
    
    
    Vested
    
    
    (10,333
    )
    
    $
    28.53Forfeited
    
    
    
    
    
    
    Outstanding at September 30, 2007
    
    
    114,105
    
    
    $
    28.53
  10




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Recent Accounting Pronouncements
 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
 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
    
    
    12,526
    
    
    
    2,976
    
    
    
    1,681
    
    
    
    17,183Foreign currency translation
adjustments
    
    
    
    
    
    
    9,090
    
    
    
    1,117
    
    
    
    10,207Balance at September 30, 2007
    
    $
    106,985
    
    
    $
    191,731
    
    
    $
    70,355
    
    
    $
    369,071
  June 30, 2007
    
    
    September 30, 2007Gross Carrying
    
    
    Gross CarryingAmount(1)
    
    
    Amount(1)Non-amortized intangible assets:Goodwill
    
    $
    293,462
    
    
    $
    317,743Reacquired franchise rights
    
    
    48,219
    
    
    
    51,328$
    341,681
    
    
    $
    369,071
 
 (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
     12




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 3. COMPREHENSIVE INCOME (LOSS)
  Three months EndedSeptember 30,2006
    
    
    2007Net (loss) income
    
    $
    (1,744
    )
    
    $
    12,054Foreign currency translation adjustment
    
    
    1,123
    
    
    
    3,293Fair value adjustments for cash flow hedges, net (1)(2)
    
    
    (43
    )
    
    
    (5,365
    )Total comprehensive income (loss)
    
    $
    (664
    )
    
    $
    9,982
 
 (1)
    
    Net of $22 thousand and $2.4 million of tax for the three months ended September 30, 2006
and 2007, respectively.(2)
    
    Net of $0.1 million and $0.4 million for the three months ended
September 30, 2006 and 2007, respectively which was reclassified into earnings.  13




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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 September 30, 2006Identifiable assets
    
    $
    176,776
    
    
    $
    163,001
    
    
    $
    140,164
    
    
    $
    479,941Goodwill and other intangibles
    
    
    97,764
    
    
    
    60,661
    
    
    
    61,326
    
    
    
    219,751Sales to unaffiliated customers:Check cashing
    
    
    11,132
    
    
    
    14,731
    
    
    
    12,526
    
    
    
    38,389Consumer lending:Fees from consumer lending
    
    
    18,387
    
    
    
    20,851
    
    
    
    9,587
    
    
    
    48,825Provision for loan losses and adjustments
to servicing revenue
    
    
    (5,590
    )
    
    
    (2,019
    )
    
    
    (1,963
    )
    
    
    (9,572
    )Consumer lending, net
    
    
    12,797
    
    
    
    18,832
    
    
    
    7,624
    
    
    
    39,253Money transfer fees
    
    
    1,092
    
    
    
    2,411
    
    
    
    1,164
    
    
    
    4,667Franchise fees and royalties
    
    
    1,133
    
    
    
    1,320
    
    
    
    
    
    
    
    2,453Other
    
    
    1,621
    
    
    
    3,773
    
    
    
    1,557
    
    
    
    6,951Total sales to unaffiliated customers
    
    
    27,775
    
    
    
    41,067
    
    
    
    22,871
    
    
    
    91,713Interest expense (income), net
    
    
    5,783
    
    
    
    (234
    )
    
    
    753
    
    
    
    6,302Depreciation and amortization
    
    
    1,087
    
    
    
    967
    
    
    
    830
    
    
    
    2,884(Loss) income before income taxes
    
    
    (15,440
    )
    
    
    17,064
    
    
    
    4,206
    
    
    
    5,830Income tax (benefit) provision
    
    
    (134
    )
    
    
    6,356
    
    
    
    1,352
    
    
    
    7,574
 14




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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 September 30, 2007Identifiable assets
    
    $
    266,438
    
    
    $
    454,332
    
    
    $
    164,270
    
    
    $
    885,040Goodwill and other intangibles
    
    
    106,985
    
    
    
    191,731
    
    
    
    70,355
    
    
    
    369,071Sales to unaffiliated customers:Check cashing
    
    
    11,041
    
    
    
    20,115
    
    
    
    14,507
    
    
    
    45,663Consumer lending:Fees from consumer lending
    
    
    15,988
    
    
    
    37,971
    
    
    
    14,550
    
    
    
    68,509Provision for loan losses and adjustments
to servicing revenue
    
    
    (5,642
    )
    
    
    (6,958
    )
    
    
    (2,206
    )
    
    
    (14,806
    )Consumer lending, net
    
    
    10,346
    
    
    
    31,013
    
    
    
    12,344
    
    
    
    53,703Money transfer fees
    
    
    972
    
    
    
    3,688
    
    
    
    1,300
    
    
    
    5,960Franchise fees and royalties
    
    
    724
    
    
    
    617
    
    
    
    
    
    
    
    1,341Other
    
    
    1,267
    
    
    
    5,915
    
    
    
    2,201
    
    
    
    9,383Total sales to unaffiliated customers
    
    
    24,350
    
    
    
    61,348
    
    
    
    30,352
    
    
    
    116,050Interest expense (income), net
    
    
    980
    
    
    
    5,232
    
    
    
    1,877
    
    
    
    8,089Depreciation and amortization
    
    
    1,094
    
    
    
    1,430
    
    
    
    1,204
    
    
    
    3,728(Loss) income before income taxes
    
    
    (3,628
    )
    
    
    19,309
    
    
    
    4,829
    
    
    
    20,510Income tax (benefit) provision
    
    
    (431
    )
    
    
    7,414
    
    
    
    1,473
    
    
    
    8,456
 5. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
 Put Options
  15




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DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 5. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (continued)
 Cross-Currency Interest Rate Swaps
    6. CONTINGENT LIABILITIES
  Canadian Legal Proceedings
  16




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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)
 Mortillaro Smith
 
 Day Young Young
 Parsons
     17




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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
  18




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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
       19




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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)
    
      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 (continued)
   7. ACQUISITIONS
       21




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 7. ACQUISITIONS (continued)
  Balance at June 30, 2006
    
    $
    230.7Acquisitions:82 Store Canadian Acquisition
    
    
    69.3Money Corner Acquisition
    
    
    24.8Other
    
    
    2.2Impairment loss  WTP
    
    
    (22.5
    )Foreign currency adjustment
    
    
    10.7Balance at June 30, 2007
    
    
    315.2Acquisitions:APL
    
    
    12.6Other
    
    
    1.8Purchase adjustments:82 Store Canadian Acquisition
    
    
    (0.2
    )Foreign currency adjustment
    
    
    10.6Balance at September 30, 2007
    
    $
    340.0
  Three months endedSeptember 30,2006
    
    2007(Unaudited in thousandsexcept per share amounts)Revenue
    
    $
    93,809
    
    
    $
    117,496Net income
    
    $
    (987
    )
    
    $
    12,651Net income per common share  basic
    
    $
    (0.04
    )
    
    $
    0.53Net income per common share  diluted
    
    $
    (0.04
    )
    
    $
    0.51
 8. ADOPTION OF FASB INTERPRETATION NO. 48
    9. SUBSEQUENT EVENTS
  22




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DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 9. SUBSEQUENT EVENTS (continued)
       23




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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 months ended September 30, 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
  ® ® ® ®
      24




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Discussion of Critical Accounting Policies
   Revenue Recognition
   25




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##### Table of Contents



® ®
  ® ®
 Company-Funded Consumer Loan Loss Reserves Policy
   26




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##### Table of Contents



Check Cashing Returned Item Policy
  Goodwill
 Goodwill and Other
Intangible Assets .
     Income Taxes
  27




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Results of Operations
 Revenue Analysis
 Three Months Ended September 30,(Percentage of total($ in thousands)
    
    
    revenue)2006
    
    
    2007
    
    
    2006
    
    
    2007Check cashing
    
    $
    38,389
    
    
    $
    45,663
    
    
    
    41.9
    %
    
    
    39.3
    %Consumer lending revenue, net
    
    
    39,253
    
    
    
    53,703
    
    
    
    42.8
    %
    
    
    46.3
    %Money transfer fees
    
    
    4,667
    
    
    
    5,960
    
    
    
    5.1
    %
    
    
    5.1
    %Franchise fees and royalties
    
    
    2,453
    
    
    
    1,341
    
    
    
    2.7
    %
    
    
    1.2
    %Other revenue
    
    
    6,951
    
    
    
    9,383
    
    
    
    7.5
    %
    
    
    8.1
    %Total revenue
    
    $
    91,713
    
    
    $
    116,050
    
    
    
    100.0
    %
    
    
    100.0
    %
 The Three Months Ended September 30, 2007 compared to the Three Months Ended September 30, 2006
    Store and Regional Expense Analysis
 Three Months Ended September 30,(Percentage of total($ in thousands)
    
    
    revenue)2006
    
    
    2007
    
    
    2006
    
    
    2007Salaries and benefits
    
    $
    28,968
    
    
    $
    35,237
    
    
    
    31.6
    %
    
    
    30.4
    %Occupancy
    
    
    7,652
    
    
    
    9,274
    
    
    
    8.3
    %
    
    
    8.0
    %Depreciation
    
    
    2,054
    
    
    
    2,809
    
    
    
    2.2
    %
    
    
    2.4
    %Returned checks, net and cash shortages
    
    
    3,632
    
    
    
    4,656
    
    
    
    4.0
    %
    
    
    4.0
    %Telephone and communications
    
    
    1,544
    
    
    
    1,652
    
    
    
    1.7
    %
    
    
    1.4
    %Advertising
    
    
    2,262
    
    
    
    2,103
    
    
    
    2.5
    %
    
    
    1.8
    %Bank charges and armored carrier expenses
    
    
    2,268
    
    
    
    3,056
    
    
    
    2.5
    %
    
    
    2.6
    %Other
    
    
    9,346
    
    
    
    10,472
    
    
    
    10.1
    %
    
    
    9.1
    %Total store and regional expenses
    
    $
    57,726
    
    
    $
    69,259
    
    
    
    62.9
    %
    
    
    59.7
    %
  28




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##### Table of Contents



Corporate and Other Expense Analysis
 Three Months Ended September 30,(Percentage of total($ in thousands)
    
    revenue)2006
    
    2007
    
    2006
    
    2007Corporate expenses
    
    $
    12,950
    
    
    $
    17,863
    
    
    
    14.1
    %
    
    15.4
    %Other depreciation and amortization
    
    
    830
    
    
    
    919
    
    
    
    0.9
    %
    
    
    0.8
    %Interest expense
    
    
    6,302
    
    
    
    8,089
    
    
    
    6.9
    %
    
    
    7.0
    %Loss on extinguishment of debt
    
    
    7,987
    
    
    
    
    
    
    
    8.7
    %
    
    
    0.0
    %Other
    
    
    88
    
    
    
    (590
    )
    
    
    0.1
    %
    
    
    0.5
    %Income tax provision
    
    
    7,574
    
    
    
    8,456
    
    
    
    8.3
    %
    
    
    7.3
    %
 Corporate Expenses.
  Other Depreciation and Amortization.
  Interest Expense
  29




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Loss on Extinguishment of Debt.
  Income Tax Provision
     Changes in Financial Condition
  Liquidity and Capital Resources
  30




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##### Table of Contents



New Credit Facilities.
  Revolving Credit Facilities.
 United States Revolving Credit Facility.
 Canadian Revolving Credit Facility.
 31




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##### Table of Contents



Long-Term Debt.
 Operating Leases.
  Payments Due by Period (in thousands)Less than
    
    
    1 - 3
    
    
    4 - 5
    
    
    After 5Total
    
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    YearsRevolving credit facilities
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Long-term debt:9.75% Senior Notes due 2011
    
    
    1,985
    
    
    
    
    
    
    
    
    
    
    
    1,985
    
    
    
    Term loans due 2012
    
    
    375,978
    
    
    
    3,750
    
    
    
    7,500
    
    
    
    7,500
    
    
    
    357,2282.875% Sr. Convertible Notes due 2027
    
    
    200,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200,000Operating lease obligations
    
    
    135,362
    
    
    
    32,381
    
    
    
    48,737
    
    
    
    26,964
    
    
    
    27,280Other long-term liabilities reflected on
the registrants balance sheet under
GAAP
    
    
    92
    
    
    
    92
    
    
    
    
    
    
    
    
    
    
    
    Total contractual cash obligations
    
    $
    713,417
    
    
    $
    36,223
    
    
    $
    56,237
    
    
    $
    36,449
    
    
    $
    584,508
  Balance Sheet Variations
 September 30, 2007 compared to June 30, 2007
     32




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Seasonality and Quarterly Fluctuations
  Recent Accounting Pronouncements
 Accounting for Uncertainty in Income Taxes Accounting for Income
Taxes
    Fair Value Measurements
 33




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##### Table of Contents



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
 Cautionary Statement for Purposes of the Safe Harbor Provisions of the Private Securities
Litigation Reform Act of 1995
   34




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 SUPPLEMENTAL STATISTICAL DATA
 September 30,2006
    
    2007Company Operating Data:Stores in operation:Company-owned
    
    
    785
    
    
    
    953Franchised stores and check cashing merchants
    
    
    480
    
    
    
    374Total
    
    
    1,265
    
    
    
    1,327
 Three Months EndedSeptember 30,2006
    
    2007Check Cashing Data:Face amount of checks cashed (in millions)
    
    $
    1,010
    
    
    $
    1,190Face amount of average check
    
    $
    476
    
    
    $
    525Average fee per check
    
    $
    18.10
    
    
    $
    20.16Number of checks cashed (in thousands)
    
    
    2,120
    
    
    
    2,265
 Three Months EndedSeptember 30,2006
    
    
    2007(in thousands)Check Cashing Collections Data:Face amount of returned checks
    
    $
    10,822
    
    
    $
    14,571Collections
    
    
    (7,712
    )
    
    
    (10,572
    )Net write-offs
    
    $
    3,110
    
    
    $
    3,999Collections as a percentage of returned checks
    
    
    71.3
    %
    
    
    72.6
    %Net write-offs as a percentage of check cashing
revenues
    
    
    8.1
    %
    
    
    8.8
    %Net write-offs as a percentage of the face amount
of checks cashed
    
    
    0.31
    %
    
    
    0.34
    %
 35




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##### Table of Contents



Three Months EndedSeptember 30,2006
    
    
    2007U.S. company-funded consumer loan originations(1)
    
    $
    62,234
    
    
    $
    95,950Canadian company-funded consumer loan originations(2)
    
    
    160,298
    
    
    
    260,438U.K. company-funded consumer loan originations(2)
    
    
    58,017
    
    
    
    80,373Total company-funded consumer loan originations
    
    $
    280,549
    
    
    $
    436,761U.S. Servicing revenues
    
    $
    8,290
    
    
    $
    794U.S. company-funded consumer loan revenues
    
    
    10,097
    
    
    
    15,194Canadian company-funded consumer loan revenues
    
    
    20,851
    
    
    
    37,971U.K. company-funded consumer loan revenues
    
    
    9,587
    
    
    
    14,550Provision for loan losses and adjustment to servicing revenue
    
    
    (9,572
    )
    
    
    (14,806
    )Total consumer lending revenues, net
    
    $
    39,253
    
    
    $
    53,703Gross charge-offs of company-funded consumer loans
    
    $
    31,888
    
    
    $
    51,757Recoveries of company-funded consumer loans
    
    
    (26,751
    )
    
    
    (41,422
    )Net charge-offs on company-funded consumer loans
    
    $
    5,137
    
    
    $
    10,335Gross charge-offs of company-funded consumer loans as a percentage
of total company-funded consumer loan originations
    
    
    11.4
    %
    
    
    11.9
    %Recoveries of company-funded consumer loans as a percentage
of total company-funded consumer loan originations
    
    
    9.6
    %
    
    
    9.5
    %Net charge-offs on company-funded consumer loans as a percentage
of total company-funded consumer loan originations
    
    
    1.8
    %
    
    
    2.4
    %
 
  (1)
    
    Our company operated stores in the United States originated company-funded
and bank-funded single-payment consumer loans during the three months ended September 30,
2006 and during the three months ended September 30, 2007 offer only company-funded
single-payment consumer loans in all markets, with the exception of
Texas and New Mexico. In Texas, we
offer single-payment consumer loans under a credit services
organization model and now offer company-funded longer term
instrument loans in New Mexico.(2)
    
    All consumer loans originated in Canada and the United Kingdom are company
funded. 36




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Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Generally
  
    
    interest rates on revolving credit facilities; and
    
    foreign exchange rates generating translation gains and losses.
  Interest Rates
  37




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Foreign Exchange Rates
 Put Options
    Cross-Currency Interest Rate Swaps
     38




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##### Table of Contents



Item 4. Controls and Procedures
 Evaluation of Disclosure Control and Procedures
  Changes in Internal Control Over Financial Reporting
  
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  39




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Item 6. Exhibits
  Exhibit No.
    
    Description of Document10.1:
    
    Dollar Financial Corp. 2005 Stock Incentive Plan (1)10.3:
    
    Dollar Financial Corp. Deferred Compensation Plan (1)10.4:
    
    Dollar Financial Corp. Supplemental Executive Conditional Deferred Award Plan for U.K. Participants (1).10.5:
    
    Dollar Financial Corp. Supplemental Executive Deferred Award Plan for Canadian Participants (2).10.6:
    
    Dollar Financial Corp. Special Retention Award Letter to Randy Underwood (2).10.7:
    
    Dollar Financial Corp. Special Retention Award Letter to Paul Mildenstein (2).10.8:
    
    Amended and Restated Service Agreement by and between Dollar Financial UK Ltd. And Paul Mildenstein dated September 11, 2007 (3).10.9:
    
    Employment Agreement by and among Jeffrey Weiss, Dollar Financial Corp. and Dollar Financial Group, Inc., dated October 5, 2007 (4).(1)
    
    Incorporated by reference to the Current Report on Form 8-K filed by Dollar Financial Corp. on July 5, 2007.(2)
    
    Incorporated by reference to the Current Report on Form 8-K filed by Dollar Financial Corp. on July 19, 2007.(3)
    
    Incorporated by reference to the Current Report on Form 8-K filed by Dollar Financial Corp. on September 11, 2007.(4)
    
    Incorporated by reference to the Current Report on Form 8-K filed by Dollar Financial Corp. on October 9, 2007.
 40




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SIGNATURE
  DOLLAR FINANCIAL CORP.Date:      November  8, 2007
    *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. 41