UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For
the transition period from to
 Commission File Number 000-50866
 DOLLAR FINANCIAL CORP.
 (Exact Name of Registrant as Specified in Its Charter)
 Delaware
    
    23-2636866(State or Other Jurisdiction of Incorporation or Organization)
    
    (I.R.S. Employer Identification No.)
 1436 LANCASTER AVENUE,
 BERWYN, PENNSYLVANIA 19312
  610-296-3400
 None
 Ö þ o
  Large accelerated filer
þ
    
    Accelerated filer
o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



DOLLAR FINANCIAL CORP.
INDEX
 Page No.PART I. FINANCIAL INFORMATIONItem 1. Financial StatementsInterim Consolidated Balance Sheets as of June 30, 2008 and September 30, 2008 (unaudited)
    
    
    3Interim Unaudited Consolidated Statements of Operations for the Three Months
Ended September 30, 2008 and 2007
    
    
    4Interim Consolidated Statements of Stockholders Equity as of June 30, 2008 and September
30, 2008 (unaudited)
    
    
    5Interim Unaudited Consolidated Statements of Cash Flows for the Three Months Ended
September 30, 2007 and 2008
    
    
    6Notes to Interim Unaudited Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    26Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    40Item 4. Controls and Procedures
    
    
    41PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    42Item 1A. Risk Factors
    
    
    42Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    44Item 6. Exhibits
    
    
    45Signature
    
    
    46Rule 13a-14(a)/15d-14(a) Certification of Chief Executive OfficerRule 13a-14(a)/15d-14(a) Certification of Executive Vice President and Chief Financial OfficerRule 13a-14(a)/15d-14(a) Certification of Senior Vice President of Finance and Corporate ControllerSection 1350 Certification of Chief Executive OfficerSection 1350 Certification of Executive Vice President and Chief Financial OfficerSection 1350 Certification of Senior Vice President of Finance and Corporate Controller




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##### 



PART 1. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 DOLLAR FINANCIAL CORP.
 
 INTERIM CONSOLIDATED BALANCE SHEETS
 (In thousands except share and per share amounts)
 June 30,
    
    
    September 30,2008
    
    
    2008(unaudited)ASSETSCurrent AssetsCash and cash equivalents
    
    $
    214,028
    
    
    $
    204,695Loans receivable, net:Loans receivable
    
    
    123,683
    
    
    
    123,377Less: Allowance for loan losses
    
    
    (8,466
    )
    
    
    (9,053
    )Loans receivable, net
    
    
    115,217
    
    
    
    114,324Loans in default, net of an allowance of $21,967 and $22,943
    
    
    11,930
    
    
    
    14,560Other receivables
    
    
    11,031
    
    
    
    11,554Prepaid expenses and other current assets
    
    
    18,938
    
    
    
    19,419Current deferred tax asset, net of valuation allowance of $4,335 and $4,335
    
    
    471
    
    
    
    365Total current assets
    
    
    371,615
    
    
    
    364,917Deferred tax asset, net of valuation allowance of $93,355 and $94,407
    
    
    11,720
    
    
    
    8,797Property and equipment, net of accumulated depreciation of $98,302 and $97,277
    
    
    68,033
    
    
    
    63,196Goodwill and other intangibles
    
    
    470,731
    
    
    
    455,348Debt issuance costs, net of accumulated amortization of $4,656 and $5,345
    
    
    15,108
    
    
    
    13,984Other
    
    
    10,030
    
    
    
    13,368Total Assets
    
    $
    947,237
    
    
    $
    919,610LIABILITIES AND STOCKHOLDERS EQUITYCurrent LiabilitiesAccounts payable
    
    $
    51,054
    
    
    $
    44,464Income taxes payable
    
    
    12,194
    
    
    
    9,418Accrued expenses and other liabilities
    
    
    32,189
    
    
    
    30,982Debt due within one year
    
    
    13,501
    
    
    
    16,874Current deferred tax liability
    
    
    
    
    
    
    182Total current liabilities
    
    
    108,938
    
    
    
    101,920Fair value of derivatives
    
    
    37,214
    
    
    
    16,647Long-term deferred tax liability
    
    
    22,352
    
    
    
    21,152Long-term debt
    
    
    574,017
    
    
    
    567,957Other non-current liabilities
    
    
    11,391
    
    
    
    10,999Stockholders equity:Common stock, $.001 par value: 55,500,000 shares authorized;
24,229,178 shares and 24,270,259 shares issued and outstanding at
June 30, 2008 and September 30, 2008, respectively
    
    
    24
    
    
    
    24Additional paid-in capital
    
    
    255,197
    
    
    
    257,277Accumulated deficit
    
    
    (95,950
    )
    
    
    (82,565
    )Accumulated other comprehensive income
    
    
    34,054
    
    
    
    26,199Total stockholders equity
    
    
    193,325
    
    
    
    200,935Total Liabilities and Stockholders Equity
    
    $
    947,237
    
    
    $
    919,610
  3




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##### 



DOLLAR FINANCIAL CORP.
 
 INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands except share and per share amounts)
 Three Months EndedSeptember 30,2007
    
    
    2008Revenues:Check cashing
    
    $
    45,663
    
    
    $
    48,532Fees from consumer lending
    
    
    68,509
    
    
    
    81,498Money transfer fees
    
    
    5,960
    
    
    
    7,610Franchise fees and royalties
    
    
    1,341
    
    
    
    1,177Other
    
    
    9,383
    
    
    
    14,259Total revenues
    
    
    130,856
    
    
    
    153,076Store and regional expenses:Salaries and benefits
    
    
    35,237
    
    
    
    40,803Provision for loan losses
    
    
    14,806
    
    
    
    15,251Occupancy
    
    
    9,274
    
    
    
    11,324Depreciation
    
    
    2,809
    
    
    
    3,592Returned checks, net and cash shortages
    
    
    4,656
    
    
    
    6,135Telephone and communications
    
    
    1,652
    
    
    
    2,079Advertising
    
    
    2,103
    
    
    
    2,812Bank charges and armored carrier service
    
    
    3,056
    
    
    
    3,633Other
    
    
    10,472
    
    
    
    13,637Total store and regional expenses
    
    
    84,065
    
    
    
    99,266Store and regional margin
    
    
    46,791
    
    
    
    53,810Corporate and other expenses:Corporate expenses
    
    
    17,863
    
    
    
    19,734Other depreciation and amortization
    
    
    919
    
    
    
    1,040Interest expense, net
    
    
    8,089
    
    
    
    9,449Loss on store closings and other, net
    
    
    (590
    )
    
    
    4,976Income before income taxes
    
    
    20,510
    
    
    
    18,611Income tax provision
    
    
    8,456
    
    
    
    5,226Net income
    
    $
    12,054
    
    
    $
    13,385Net income per share:Basic
    
    $
    0.50
    
    
    $
    0.55Diluted
    
    $
    0.49
    
    
    $
    0.55Weighted average shares outstanding:Basic
    
    
    24,054,916
    
    
    
    24,178,350Diluted
    
    
    24,547,964
    
    
    
    24,371,126
  4




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##### 



DOLLAR FINANCIAL CORP.
 
 INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 (In thousands, except share data)
 AccumulatedOther
        
        
        TotalCommon Stock
        
        
        Additional
        
        
        Accumulated
        
        
        Comprehensive
        
        
        StockholdersOutstanding
        
        
        Paid-in
        
        
        (Deficit)
        
        

Income
        
        
        EquityShares
        
        
        Amount
        
        
        Capital
        
        
        Income
        
        

(Loss)
        
        
        (Deficit)Balance, June 30,
            2008 (audited)
        
        
        24,229,178
        
        
        $
        24
        
        
        $
        255,197
        
        
        $
        (95,950
        )
        
        $
        34,054
        
        
        $
        193,325Comprehensive income:Foreign currency translation
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        (11,196
        )
        
        
        (11,196
        )Cash Flow Hedges
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        3,341
        
        
        
        3,341Net Income
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        13,385
        
        
        
        
        
        
        
        13,385Total comprehensive
            income
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        5,530Restricted stock grants
        
        
        20,615Stock options exercised
        
        
        251,220
        
        
        
        
        
        
        
        3,257
        
        
        
        
        
        
        
        
        
        
        
        3,257Vested portion of granted
            restricted stock and restricted stock units
        
        
        
        
        
        
        
        
        
        
        1,895
        
        
        
        
        
        
        
        
        
        
        
        1,895Purchase and retirement
            of treasury shares
        
        
        (221,400
        )
        
        
        
        
        
        
        (3,469
        )
        
        
        
        
        
        
        
        
        
        
        (3,469
        )Retirement of common
            stock
        
        
        (9,354
        )Other stock compensation
        
        
        
        
        
        
        
        
        
        
        397
        
        
        
        
        
        
        
        
        
        
        
        397Balance, September 30,
            2008 (unaudited)
        
        
        24,270,259
        
        
        $
        24
        
        
        $
        257,277
        
        
        $
        (82,565
        )
        
        $
        26,199
        
        
        $
        200,935
  5




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##### 



DOLLAR FINANCIAL CORP.
 
 INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 Three Months EndedSeptember 30,2007
    
    
    2008Cash flows from operating activities:Net income
    
    $
    12,054
    
    
    $
    13,385Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    4,562
    
    
    
    5,474Provision for loan losses
    
    
    14,806
    
    
    
    15,251Non-cash stock compensation
    
    
    836
    
    
    
    2,292Losses on store closings
    
    
    53
    
    
    
    1,761Deferred tax provision
    
    
    1,127
    
    
    
    380Other, net
    
    
    245
    
    
    
    Change in assets and liabilities (net of effect of acquisitions):Increase in loans and other receivables
    
    
    (17,290
    )
    
    
    (23,460
    )Increase in prepaid expenses and other
    
    
    (3,911
    )
    
    
    (3,507
    )Increase (decrease) in accounts payable, accrued expenses and other liabilities
    
    
    6,414
    
    
    
    (7,222
    )Net cash provided by operating activities
    
    
    18,896
    
    
    
    4,354Cash flows from investing activities:Acquisitions, net of cash acquired
    
    
    (17,747
    )
    
    
    Additions to property and equipment
    
    
    (6,300
    )
    
    
    (5,233
    )Net cash used in investing activities
    
    
    (24,047
    )
    
    
    (5,233
    )Cash flows from financing activities:Decrease in restricted cash
    
    
    (1,164
    )
    
    
    Proceeds from the exercise of stock options
    
    
    321
    
    
    
    3,257Purchase of company stock
    
    
    
    
    
    
    (3,469
    )Other debt payments
    
    
    (1,138
    )
    
    
    (990
    )Net increase in revolving credit facilities
    
    
    
    
    
    
    4,297Payment of debt issuance and other costs
    
    
    (114
    )
    
    
    (103
    )Net cash (used in) provided by financing activities
    
    
    (2,095
    )
    
    
    2,992Effect of exchange rate changes on cash and cash equivalents
    
    
    8,717
    
    
    
    (11,446
    )Net increase (decrease) in cash and cash equivalents
    
    
    1,471
    
    
    
    (9,333
    )Cash and cash equivalents at beginning of period
    
    
    290,945
    
    
    
    214,028Cash and cash equivalents at end of period
    
    $
    292,416
    
    
    $
    204,695
  6




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##### 



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




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##### 



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 1. Summary of Significant Accounting Policies (continued)
 Earnings per Share (continued)
 Three Months EndedSeptember 30,2007
    
    2008Net income
    
    $
    12,054
    
    
    $
    13,385Reconciliation of denominator:Weighted average of common shares outstanding  basic 1
    
    
    24,055
    
    
    
    24,178Effect of dilutive stock options 2
    
    
    469
    
    
    
    164Effect of unvested restricted stock and restricted stock unit grants 2
    
    
    24
    
    
    
    29Weighted average of common shares outstanding  diluted
    
    
    24,548
    
    
    
    24,371
 
 (1)
    
    Excludes 97,614 shares and 40,614 shares of unvested
restricted stock, which is included in total outstanding
common shares as of September 30, 2007 and 2008,
respectively. The dilutive effect of restricted stock is
included in the calculation of diluted earnings per share
using the treasury stock method.(2)
    
    The effect of dilutive stock options, restricted stock
and restricted stock units was determined under the treasury stock method. 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 EndedSeptember 30,2007(1)
    
    2008Expected volatility
    
    
    N/A
    
    
    
    43.9
    %Expected life (years)
    
    
    N/A
    
    
    
    6.0Risk-free interest rate
    
    
    N/A
    
    
    
    3.42
    %Expected dividends
    
    
    N/A
    
    
    NoneWeighted average fair value
    
    
    N/A
    
    
    $
    7.84
 
 (1)
    
    There were no awards granted during the three months ended
September 20, 2007.  WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateExercise
    
    
    Contractual
    
    
    Intrinsic ValueOptions
    
    
    Price
    
    
    Term (years)
    
    
    ($ in millions)Options outstanding at June 30,
2008 (1,028,778 shares
exercisable)
    
    
    1,542,363
    
    
    $
    16.25
    
    
    
    7.8
    
    
    $
    1.6Granted
    
    
    21,825
    
    
    $
    16.71Exercised
    
    
    (251,220
    )
    
    $
    12.97Forfeited or expired
    
    
    (18,007
    )
    
    $
    18.24Options outstanding at September
30, 2008
    
    
    1,294,961
    
    
    $
    16.87
    
    
    
    7.8
    
    
    $
    1.0Exercisable at September 30, 2008
    
    
    814,503
    
    
    $
    15.61
    
    
    
    6.9
    
    
    $
    1.0
    9




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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)
 WeightedAverageRestricted
    
    
    Grant-DateStock Awards
    
    
    Fair-ValueOutstanding at June 30, 2008
    
    
    52,305
    
    
    $
    21.90Vested
    
    
    (9,363
    )
    
    
    19.52Forfeited
    
    
    (2,328
    )
    
    
    18.53Outstanding at September 30, 2008
    
    
    40,614
    
    
    $
    22.64
   WeightedRestricted
    
    
    AverageStock Unit
    
    
    Grant-DateAwards
    
    
    Fair-ValueOutstanding at June 30, 2008
    
    
    226,802
    
    
    $
    21.32Granted
    
    
    8,734
    
    
    $
    16.71Vested
    
    
    (20,615
    )
    
    $
    21.86Forfeited
    
    
    (7,009
    )
    
    $
    22.61Outstanding at September 30, 2008
    
    
    207,912
    
    
    $
    21.03
  Recent Accounting Pronouncements
 Fair Value
Measurements
 The Fair
Value Option for Financial Assets and Financial Liabilities  Including an Amendment of FASB
Statement No. 115 Accounting
for Certain Investments in Debt and Equity Securities
 10




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##### 



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
 Disclosures
about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133
 Accounting for Convertible Debt
Instruments That May Be Settled Upon Conversion (Including Partial Cash Settlement)
 11




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##### 



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




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##### 



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 2. Acquisitions (continued)
  Balance at June 30, 2007
    
    $
    293.5Acquisitions:APL  U.S.
    
    
    22.0CCS  U.S.
    
    
    88.0Cash Your Cheque  U.K.
    
    
    3.8Unicash  Canada
    
    
    1.2Other
    
    
    4.7Purchase adjustments:82 Store Canadian Acquisition
    
    
    (0.1
    )Money Corner
    
    
    1.0Foreign currency adjustment
    
    
    5.3Balance at June 30, 2008
    
    $
    419.4Foreign currency adjustment
    
    
    (13.2
    )Balance at September 30, 2008
    
    $
    406.2
  Three months endedSeptember 30,2007
    
    2008(Unaudited in thousandsexcept per share amounts)Revenue
    
    $
    145,903
    
    
    $
    153,076Net income
    
    $
    15,825
    
    
    $
    13,385Net income per common share  basic
    
    $
    0.66
    
    
    $
    0.55Net income per common share  diluted
    
    $
    0.64
    
    
    $
    0.55
 3. Goodwill and Other Intangibles
  United
    
    
    
    
    
    
    UnitedStates
    
    
    Canada
    
    
    Kingdom
    
    
    TotalBalance at June 30, 2007
    
    $
    94,459
    
    
    $
    179,665
    
    
    $
    67,557
    
    
    $
    341,681Acquisition
    
    
    111,047
    
    
    
    1,870
    
    
    
    8,940
    
    
    
    121,857Foreign currency translation adjustments
    
    
    
    
    
    
    7,894
    
    
    
    (701
    )
    
    
    7,193Balance at June 30, 2008
    
    $
    205,506
    
    
    $
    189,429
    
    
    $
    75,796
    
    
    $
    470,731Acquisition
    
    
    3
    
    
    
    
    
    
    
    6
    
    
    
    9Foreign currency translation adjustments
    
    
    
    
    
    
    (7,371
    )
    
    
    (8,021
    )
    
    
    (15,392
    )Balance at September 30, 2008
    
    $
    205,509
    
    
    $
    182,058
    
    
    $
    67,781
    
    
    $
    455,348
 13




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##### 



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 3. Goodwill and Other Intangibles (continued)
  June 30,
    
    
    September 30,2008
    
    
    2008Gross 
Carrying
    
    
    Gross 
CarryingAmount
    
    
    AmountNon-amortized intangible assets:Goodwill
    
    $
    419,351
    
    
    $
    406,190Reacquired franchise rights
    
    
    51,380
    
    
    
    49,158$
    470,731
    
    
    $
    455,348
 Goodwill and Other Intangible Assets
     4. Contingent Liabilities
  Canadian Legal Proceedings
  14




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##### 



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




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##### 



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




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##### 



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




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##### 



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




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##### 



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 5. Capital Stock
   
 6. Fair Value Measurements
 The Fair Value Option for
Financial Assets and Financial Liabilities
 Fair Value
Measurement
 Fair Value Hierarchy Tables
  Derivative Instruments
  19




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##### 



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 6. Fair Value Measurements (continued)
  Assets and Liabilities Measured at Fair Value on a Recurring Basis at September 30, 2008
( in thousands)
 Quoted Prices inActive Markets
    
    Significantfor Identical
    
    Other
    
    Significant
    
    Balance atAssets and
    
    Observable
    
    Unobservable
    
    September 30,Liabilities (Level 1)
    
    Inputs (Level 2)
    
    Inputs (Level 3)
    
    2008AssetsDerivative
financial
instruments
    
    $
    
    
    
    $
    949
    
    
    $
    
    
    
    $
    949LiabilitiesDerivative
financial
instruments
    
    $
    
    
    
    $
    16,647
    
    
    $
    
    
    
    $
    16,647
  7. Loss on Store Closing and Other Restructuring
    20




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##### 



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 7. Loss on Store Closing and Other Restructuring (continued)
  Severance andOther
    
    
    Store ClosureRetention Benefits
    
    
    Costs
    
    
    TotalBalance at June 30, 2008
    
    $
    0.2
    
    
    $
    
    
    
    $
    0.2Charge recorded in earnings
    
    
    0.6
    
    
    
    4.3
    
    
    
    4.9Amounts paid
    
    
    (0.6
    )
    
    
    (0.8
    )
    
    
    (1.4
    )Non-cash charges
    
    
    
    
    
    
    (1.8
    )
    
    
    (1.8
    )Balance at September 30, 2008
    
    $
    0.2
    
    
    $
    1.7
    
    
    $
    1.9
 21




---



##### 



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 8. Geographic Segment Information
  United
    
    
    
    
    
    
    UnitedStates
    
    
    Canada
    
    
    Kingdom
    
    
    TotalAs of and for the three months ended
September 30, 2007Identifiable assets
    
    $
    266,438
    
    
    $
    454,332
    
    
    $
    164,270
    
    
    $
    885,040Goodwill and other intangibles, net
    
    
    106,985
    
    
    
    191,731
    
    
    
    70,355
    
    
    
    369,071Sales to unaffiliated customers:Check cashing
    
    
    11,041
    
    
    
    20,115
    
    
    
    14,507
    
    
    
    45,663Fees from consumer lending
    
    
    15,988
    
    
    
    37,971
    
    
    
    14,550
    
    
    
    68,509Money 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
    
    
    29,992
    
    
    
    68,306
    
    
    
    32,558
    
    
    
    130,856Interest expense, net
    
    
    980
    
    
    
    5,232
    
    
    
    1,877
    
    
    
    8,089Depreciation and amortization
    
    
    1,094
    
    
    
    1,430
    
    
    
    1,204
    
    
    
    3,728Loss on store closings and other, net
    
    
    64
    
    
    
    (479
    )
    
    
    (175
    )
    
    
    (590
    )(Loss) income before income taxes
    
    
    (3,628
    )
    
    
    19,309
    
    
    
    4,829
    
    
    
    20,510Income tax provision (benefit)
    
    
    (431
    )
    
    
    7,414
    
    
    
    1,473
    
    
    
    8,456
 United
    
    
    
    
    
    
    UnitedStates
    
    
    Canada
    
    
    Kingdom
    
    
    TotalAs of and for the three months ended
September 30, 2008Identifiable assets
    
    $
    286,222
    
    
    $
    461,286
    
    
    $
    172,102
    
    
    $
    919,610Goodwill and other intangibles, net
    
    
    205,509
    
    
    
    182,058
    
    
    
    67,781
    
    
    
    455,348Sales to unaffiliated customers:Check cashing
    
    
    14,437
    
    
    
    20,543
    
    
    
    13,552
    
    
    
    48,532Fees from consumer lending
    
    
    22,803
    
    
    
    37,197
    
    
    
    21,498
    
    
    
    81,498Money transfer fees
    
    
    1,592
    
    
    
    4,409
    
    
    
    1,609
    
    
    
    7,610Franchise fees and royalties
    
    
    538
    
    
    
    639
    
    
    
    
    
    
    
    1,177Other
    
    
    2,860
    
    
    
    7,525
    
    
    
    3,874
    
    
    
    14,259Total sales to unaffiliated customers
    
    
    42,230
    
    
    
    70,313
    
    
    
    40,533
    
    
    
    153,076Interest expense, net
    
    
    4,264
    
    
    
    3,267
    
    
    
    1,918
    
    
    
    9,449Depreciation and amortization
    
    
    1,457
    
    
    
    1,716
    
    
    
    1,459
    
    
    
    4,632Loss on store closings and other, net
    
    
    3,156
    
    
    
    1,826
    
    
    
    (6
    )
    
    
    4,976Income before income taxes
    
    
    (8,867
    )
    
    
    18,650
    
    
    
    8,828
    
    
    
    18,611Income tax provision (benefit)
    
    
    (51
    )
    
    
    3,171
    
    
    
    2,106
    
    
    
    5,226
 22




---



##### 



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 9. Derivative Instruments and Hedging Activities
 Put Options
  Cross-Currency Interest Rate Swaps
    23




---



##### 



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 10. Comprehensive Income
  Three months endedSeptember 30,2007
    
    
    2008Net income
    
    $
    12,054
    
    
    $
    13,385Foreign currency translation adjustment(3)
    
    
    3,293
    
    
    
    (11,196
    )Fair value adjustments for cash flow hedges, net(1)(2)
    
    
    (5,365
    )
    
    
    3,341Total comprehensive income
    
    $
    9,982
    
    
    $
    5,530
 
 (1)
    
    Net of $2.4 million and $1.7 million of tax for the three months ended September
30, 2007 and 2008, respectively.(2)
    
    Net of $0.4 million and $0.3 million which were reclassified into earnings for
the three months ended September 30, 2007 and 2008, respectively.(3)
    
    The ending balance of the foreign currency translation adjustments included in
accumulated other comprehensive income on the balance sheet at September 30, 2007 and 2008
were $40.9 million and $26.7 million, respectively.  11. Income Taxes
   DTA
    
    VA
    
    Net DTABalance at June 30, 2008
    
    $
    109.9
    
    
    $
    97.7
    
    
    $
    12.2Increase in US DTA/VA
    
    
    1.1
    
    
    
    1.1
    
    
    
    Decrease in Foreign DTA/VA
    
    
    (3.1
    )
    
    
    (0.1
    )
    
    
    (3.0
    )Balance at September 30, 2008
    
    $
    107.9
    
    
    $
    98.7
    
    
    $
    9.2
    24




---



##### 



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 11. Income Taxes (continued)
   25




---



##### 



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Executive Summary
  ®
       26




---



##### 



Discussion of Critical Accounting Policies
   Revenue Recognition
    Company-Funded Consumer Loan Loss Reserves Policy
   27




---



##### 



Check Cashing Returned Item Policy
  Goodwill and Other Intangibles
 Goodwill and Other Intangible Assets
    Income Taxes
  Accounting for Uncertainty in Income Taxes an interpretation of SFAS 109 Accounting for Income
Taxes
 28




---



##### 



Results of Operations
 Revenue Analysis
 Three Months Ended September 30,(Percentage of total($ in thousands)
    
    
    revenue)2007
    
    
    2008
    
    
    2007
    
    
    2008Check cashing
    
    $
    45,663
    
    
    $
    48,532
    
    
    
    34.9
    %
    
    
    31.7
    %Consumer lending, net
    
    
    68,509
    
    
    
    81,498
    
    
    
    52.4
    %
    
    
    53.2
    %Money transfer fees
    
    
    5,960
    
    
    
    7,610
    
    
    
    4.6
    %
    
    
    5.0
    %Franchise fees and royalties
    
    
    1,341
    
    
    
    1,177
    
    
    
    1.0
    %
    
    
    0.8
    %Other revenue
    
    
    9,383
    
    
    
    14,259
    
    
    
    7.1
    %
    
    
    9.3
    %Total revenue
    
    $
    130,856
    
    
    $
    153,076
    
    
    
    100.0
    %
    
    
    100.0
    %
 The Three Months Ended September 30, 2008 compared to the Three Months Ended September 30, 2007
   ® ®
 29




---



##### 



Store and Regional Expense Analysis
 Three Months Ended September 30, 2008(Percentage of total($ in thousands)
    
    
    revenue)2007
    
    
    2008
    
    
    2007
    
    
    2008Salaries and benefits
    
    $
    35,237
    
    
    $
    40,803
    
    
    
    26.9
    %
    
    
    26.7
    %Provision for Loan Losses
    
    
    14,806
    
    
    
    15,251
    
    
    
    11.3
    %
    
    
    10.0
    %Occupancy
    
    
    9,274
    
    
    
    11,324
    
    
    
    7.1
    %
    
    
    7.4
    %Depreciation
    
    
    2,809
    
    
    
    3,592
    
    
    
    2.1
    %
    
    
    2.3
    %Returned checks, net and cash shortages
    
    
    4,656
    
    
    
    6,135
    
    
    
    3.6
    %
    
    
    4.0
    %Telephone and communications
    
    
    1,652
    
    
    
    2,079
    
    
    
    1.3
    %
    
    
    1.4
    %Advertising
    
    
    2,103
    
    
    
    2,812
    
    
    
    1.6
    %
    
    
    1.8
    %Bank Charges and armored carrier expenses
    
    
    3,056
    
    
    
    3,633
    
    
    
    2.3
    %
    
    
    2.4
    %Other
    
    
    10,472
    
    
    
    13,637
    
    
    
    8.0
    %
    
    
    8.8
    %Total store and regional expenses
    
    $
    84,065
    
    
    $
    99,266
    
    
    
    64.2
    %
    
    
    64.8
    %
 The Three Months Ended September 30, 2008 compared to the Three Months Ended September 30, 2007
  Corporate and Other Expense Analysis
 Three Months Ended September 30, 2008(Percentage of total($ in thousands)
    
    revenue)2007
    
    2008
    
    2007
    
    2008Corporate expenses
    
    $
    17,863
    
    
    $
    19,734
    
    
    
    13.7
    %
    
    
    12.9
    %Other depreciation and amortization
    
    
    919
    
    
    
    1,040
    
    
    
    0.7
    %
    
    
    0.7
    %Interest expense, net
    
    
    8,089
    
    
    
    9,449
    
    
    
    6.2
    %
    
    
    6.2
    %Loss on Store Closings and Other, net
    
    
    (590
    )
    
    
    4,976
    
    
    
    (0.5)
    %
    
    
    3.3
    %Income tax provision
    
    
    8,456
    
    
    
    5,226
    
    
    
    6.5
    %
    
    
    3.4
    %
 30




---



##### 



The Three Months Ended September 30, 2008 compared to the Three Months Ended September 30, 2007
 Corporate Expenses
  Other Depreciation and Amortization
  Interest Expense
  Loss on store closings
  Income Tax Provision
   DTA
    
    
    VA
    
    
    Net DTABalance at June 30, 2008
    
    $
    109.9
    
    
    $
    97.7
    
    
    $
    12.2Increase in US DTA/VA
    
    
    1.1
    
    
    
    1.1
    
    
    
    Decrease in Foreign DTA/VA
    
    
    (3.1
    )
    
    
    (0.1
    )
    
    
    (3.0
    )Balance at September 30, 2008
    
    $
    107.9
    
    
    $
    98.7
    
    
    $
    9.2
  31




---



##### 



Changes in Financial Condition
  Liquidity and Capital Resources
    32




---



##### 



New Credit Facilities.
  Revolving Credit Facilities.
 United States Revolving Credit Facility.
 Canadian Revolving Credit Facility.
 33




---



##### 



United Kingdom Overdraft Facility
 Debt Due Within One Year
 Long-Term Debt.
 Operating Leases.
  Less than
    
    
    1-3
    
    
    4-5
    
    
    After 5Total
    
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    YearsRevolving credit facilities
    
    $
    13,080
    
    
    $
    13,080
    
    
    $
    
    
    
    $
    
    
    
    $
    Long-term debt:Term loans due 2012
    
    
    371,751
    
    
    
    3,794
    
    
    
    7,587
    
    
    
    360,370
    
    
    
    2.875% Senior Convertible Notes
due 2027
    
    
    200,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200,000Operating lease obligations
    
    
    144,201
    
    
    
    35,809
    
    
    
    51,576
    
    
    
    28,873
    
    
    
    27,943Total contractual cash obligations
    
    $
    729,032
    
    
    $
    52,683
    
    
    $
    59,163
    
    
    $
    389,243
    
    
    $
    227,943
  Balance Sheet Variations
 September 30, 2008 compared to June 30, 2008 .
  34




---



##### 



Seasonality and Quarterly Fluctuations
  Impact of Recent Accounting Pronouncement
 Fair Value
Measurements
 The Fair
Value Option for Financial Assets and Financial Liabilities  Including an Amendment of FASB
Statement No. 115 Accounting
for Certain Investments in Debt and Equity Securities
 35




---



##### 



Business
Combinations (a revision of Statement No. 141
 Noncontrolling Interests in Consolidated Financial
Statements  an amendment of ARB No.51
 Disclosures
about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133
 Accounting for Convertible Debt
Instruments That May Be Settled Upon Conversion (Including Partial Cash Settlement)
 Cautionary Statement for Purposes of the Safe Harbor Provisions of the Private Securities
Litigation Reform Act of 1995
   36




---



##### 



37




---



##### 



DOLLAR FINANCIAL CORP.
SUPPLEMENTAL STATISTICAL DATA
 September 30,2007
    
    2008Company Operating Data:Stores in operation:Company-owned
    
    
    953
    
    
    
    1,064Franchised stores and check cashing merchants
    
    
    374
    
    
    
    313Total
    
    
    1,327
    
    
    
    1,377
 Three Months EndedSeptember 30,2007
    
    2008Check Cashing Data:Face amount of checks cashed (in millions)
    
    $
    1,190
    
    
    $
    1,318Face amount of average check
    
    $
    525
    
    
    $
    521Average fee per check
    
    $
    20.16
    
    
    $
    19.19Number of checks cashed (in thousands)
    
    
    2,265
    
    
    
    2,529
 Three Months EndedSeptember 30,2007
    
    
    2008Check Cashing Collections Data (in thousands):Face amount of returned checks
    
    $
    14,571
    
    
    $
    19,161Collections
    
    
    (10,572
    )
    
    
    (13,938
    )Net write-offs
    
    $
    3,999
    
    
    $
    5,223Collections as a percentage of returned checks
    
    
    72.6
    %
    
    
    72.7
    %Net write-offs as a percentage of check cashing revenues
    
    
    8.8
    %
    
    
    10.8
    %Net write-offs as a percentage of the face amount of checks cashed
    
    
    0.34
    %
    
    
    0.40
    %
 38




---



##### 



Three Months EndedSeptember 30,2007
    
    
    2008U.S. company-funded consumer loan originations (1)
    
    $
    95,950
    
    
    $
    166,380Canadian company-funded consumer loan originations (2)
    
    
    243,448
    
    
    
    232,845U.K. company-funded consumer loan originations (2)
    
    
    79,512
    
    
    
    111,884Total company-funded consumer loan originations
    
    $
    418,910
    
    
    $
    511,109U.S. Servicing revenues
    
    $
    794
    
    
    $
    578U.S. company-funded consumer loan revenues
    
    
    15,194
    
    
    
    22,225Canadian company-funded consumer loan revenues
    
    
    37,971
    
    
    
    37,197U.K. company-funded consumer loan revenues
    
    
    14,550
    
    
    
    21,498Total consumer lending revenues, net
    
    $
    68,509
    
    
    $
    81,498Gross charge-offs of company-funded consumer loans
    
    $
    51,757
    
    
    $
    59,477Recoveries of company-funded consumer loans
    
    
    (41,422
    )
    
    
    (47,439
    )Net charge-offs on company-funded consumer loans
    
    $
    10,335
    
    
    $
    12,038Gross charge-offs of company-funded consumer loans as a
percentage of total company-funded consumer loan originations
    
    
    12.4
    %
    
    
    11.6
    %Recoveries of company-funded consumer loans as a percentage
of total company-funded consumer loan originations
    
    
    9.9
    %
    
    
    9.2
    %Net charge-offs on company-funded consumer loans as a
percentage of total company-funded consumer loan originations
    
    
    2.5
    %
    
    
    2.4
    %
 
 (1)
    
    Our company operated stores in the United States offer company-funded single-payment consumer loans in all markets,
with the exception of Texas. In Texas, the Company offers single-payment consumer loans under a credit services
organization model.(2)
    
    All consumer loans originated in Canada and the United Kingdom are company funded. 39




---



##### 



Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Generally
  
    
    interest rates on revolving credit facilities; and
    
    foreign exchange rates generating translation gains and losses.
  Interest Rate Risk
  Foreign Currency Exchange Rate Risk
 Put Options
   40




---



##### 



Cross-Currency Interest Rate Swaps
    
 
 Item 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  41




---



##### 



Changes in Internal Control Over Financial Reporting
  
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
 
 
 Item 1A. Risk Factors
  Unexpected changes in foreign tax rates and political and economic conditions could negatively
impact our operating results.
  Demand for our products and services is sensitive to the level of transactions effected by our
customers, and accordingly, our revenues could be affected negatively by a recession or general
economic slowdown in the geographic markets in which we operate.
  The price of our common stock after may be volatile.
  42




---



##### 



If the national and world-wide financial crisis continues, potential disruptions in the credit
markets may negatively impact the availability and cost of short-term borrowing under our credit
facility, which could adversely affect our results of operations, cash flows and financial
condition.
   Potential for Goodwill Impairment
  Risks Relating to Our Outstanding Convertible Notes
   43




---



##### 



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
   ApproximateDollar Value ofShares thatTotal Number of
    
    May YetShares Purchased
    
    Be PurchasedAverage Price
    
    as Part of Publicly
    
    UnderTotal Number of
    
    Paid Per
    
    Announced Plans
    
    the Plans orPeriod
    
    Shares Purchased
    
    Share
    
    or Programs
    
    ProgramsJuly 21, 2008 - July 31, 2008 (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    7.5August 1, 2008 - August 31, 2008
    
    
    114,800
    
    
    $
    15.70
    
    
    
    114,800
    
    
    $
    5.7September 1, 2008 - September 30, 2008
    
    
    106,600
    
    
    $
    15.67
    
    
    
    106,600
    
    
    $
    4.0
    (2)Total
    
    
    221,400
    
    
    $
    15.68
    
    
    
    221,400
    
    
    $
    4.0
 
 (1)
    
    On July 21, 2008, our board of directors authorized a stock repurchase plan providing for the
repurchase of up to $7.5 million of our outstanding common stock, which is the maximum amount of
our common stock we can repurchase pursuant to the terms of our credit facility.(2)
    
    In October 2008, we purchased an additional 314,399 shares of our common stock at a cost of
approximately $4.0 million, thus completing our stock repurchase plan. 44




---



##### 



Item 6. 
Exhibits
 Exhibit No.
    
    Description of Document10.1
    
    Dollar Financial Corp. Amended and Restated Deferred Compensation Plan (1)10.2
    
    Dollar Financial Corp. Amended and Restated Supplemental Executive Conditional Deferred Award Plan
for U.K. 
Participants (1)10.3
    
    Form of Restricted Stock Unit Award
Agreement for 2007 Equity Incentive Plan10.4
    
    Form of Stock option Grant Notice
for 2007 Equity Incentive Plan10.5
    
    Form of Restricted Stock Unit Award
Agreement for 2007 Equity Incentive Plan (International Grantee)31.1
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer31.2
    
    Rule 13a-14(a)/15d-14(a) Certification of Executive Vice President and Chief Financial Officer31.3
    
    Rule 13a-14(a)/15d-14(a) Certification of Senior Vice President of Finance and Corporate Controller32.1
    
    Section 1350 Certification of Chief Executive Officer32.2
    
    Section 1350 Certification of Executive Vice President and Chief Financial Officer32.3
    
    Section 1350 Certification of Senior Vice President of Finance and Corporate Controller
 
 (1)
    
    Incorporated by reference to the Current Report on Form 8-K filed by Dollar Financial Corp. on September 29, 2008. 45




---



##### 



SIGNATURE
  DOLLAR FINANCIAL CORP.Date: November 10, 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. 46