<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
OR
[ ] 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 0-20774
ACE CASH EXPRESS, INC.
(Exact name of registrant as specified in its charter)
TEXAS 75-2142963
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1231 GREENWAY DRIVE, SUITE 800
IRVING, TEXAS 75038
(Address of principal executive offices)
(972) 550-5000
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding as of May 12 , 1997
----- --------------------------------
Common Stock 6,418,447 shares
<PAGE>
ACE CASH EXPRESS, INC.
PART I. FINANCIAL INFORMATION PAGE NO.
Item 1. Interim Consolidated Financial Statements:
Consolidated Balance Sheets as of
March 31, 1997 and June 30, 1996 3
Interim Unaudited Consolidated Statements of Earnings for the
Three Months and Nine Months Ended March 31, 1997 and 1996 4
Interim Unaudited Consolidated Statements of Cash Flows
for the Nine Months Ended March 31, 1997 and 1996 5
Notes to Interim Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 13
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS
ACE CASH EXPRESS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
MARCH 31, 1997 JUNE 30, 1996
-------------- -------------
(UNAUDITED)
(in thousands)
<S> <C> <C>
Cash and cash equivalents $ 66,451 $ 56,603
Accounts and notes receivable, net 6,888 4,891
Prepaid expenses 411 328
Inventories 1,064 2,084
Property and equipment, net 22,671 19,469
Covenants not to compete, net 2,890 2,372
Excess of purchase price over fair 28,230 23,124
value of assets acquired, net
Other assets 3,491 2,616
Net assets held for sale 1,080 3,197
-------- --------
$133,176 $114,684
======== ========
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S> <C> <C>
Money order principal payable $ 45,439 $ 35,488
Revolving advances from money order 14,654 21,157
supplier
Senior secured notes payable 20,587 --
Accounts payable and accrued liabilities 13,258 10,411
Notes payable 644 2,320
Term advances from money order supplier 5,564 16,969
Other liabilities 3,941 3,103
Commitments and contingencies
Shareholders' equity:
Preferred stock, $1 par value,
1,000,000 shares authorized, -- --
none issued and outstanding
Common stock, $.01 par value,
10,000,000 shares
authorized, 6,408,999 and 64 63
6,324,306 shares issued
and outstanding, respectively
Additional paid-in capital 18,529 18,109
Retained earnings 10,496 7,064
-------- --------
Total shareholders' equity 29,089 25,236
-------- --------
$133,176 $114,684
======== ========
</TABLE>
See notes to the interim consolidated financial statements.
3
<PAGE>
ACE CASH EXPRESS, INC. AND SUBSIDIARIES
INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, NINE MONTHS ENDED MARCH 31,
-----------------------------------------------------------
1997 1996 1997 1996
-----------------------------------------------------------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Revenues $26,218 $20,544 $65,337 $49,202
Store expenses:
Salaries and benefits 7,157 5,785 18,966 15,022
Occupancy 3,598 2,954 10,292 8,168
Depreciation 858 719 2,441 1,990
Other 4,787 3,481 13,139 9,588
------- ------- ------- -------
Total store expenses 16,400 12,939 44,838 34,768
Region expenses 1,920 1,562 5,479 4,076
Headquarters expenses 1,981 1,559 4,616 3,611
Franchise expenses 241 181 767 181
Other depreciation and amortization 776 571 2,162 1,541
Interest expense 623 564 1,736 1,239
Other expenses 45 61 88 79
------- ------- ------- -------
Income before income taxes 4,232 3,107 5,651 3,707
Income taxes 1,663 1,180 2,219 1,407
------- ------- ------- -------
Net income $ 2,569 $ 1,927 $ 3,432 $ 2,300
======= ======= ======= =======
Earnings per share $.39 $.30 $.52 $.36
Weighted average number of common and
common equivalent shares outstanding 6,600 6,421 6,541 6,390
</TABLE>
See notes to the interim consolidated financial statements.
4
<PAGE>
ACE CASH EXPRESS, INC. AND SUBSIDIARIES
INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED MARCH 31,
------------------------------
1997 1996
------------------------------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,432 $ 2,300
Adjustments to reconcile net income
to net cash provided
by operating activities:
Depreciation and amortization 4,614 3,556
Loss on disposal of property and -- 79
equipment
Recognition of deferred revenue (989) (215)
Changes in assets and liabilities:
Accounts and notes receivable, net (2,370) 1,142
Prepaid expenses (83) 29
Inventories 1,020 (668)
Other assets (875) (1,424)
Accounts payable and other 4,674 3,908
liabilities -------- --------
Net cash provided by
operating activities 9,423 8,707
Cash flows from investing activities:
Purchases of property and equipment, (3,444) (3,154)
net
Cost of net assets acquired (9,996) (7,567)
Proceeds from disposition of net
assets held for sale 2,490 --
-------- --------
Net cash used by investing
activities (10,950) (10,721)
Cash flows from financing activities:
Net borrowings from money order
supplier 3,449 6,701
Borrowings of senior secured notes
payable 20,587 --
Term advances from money order
supplier 8,335 10,011
Payments of term advances from money
order supplier (19,740) (1,021)
Net decrease in notes payable (1,676) (1,671)
Proceeds from stock options exercised 420 78
-------- --------
Net cash provided by financing
activities 11,375 14,098
-------- --------
Net increase in cash and cash
equivalents 9,848 12,084
Cash and cash equivalents, beginning 56,603 49,249
of period -------- --------
Cash and cash equivalents, end of period $ 66,451 $ 61,333
======== ========
Supplemental disclosures of cash flows
information:
Cash paid for:
Interest $ 1,174 $ 361
Income taxes 3,040 44
</TABLE>
See notes to the interim consolidated financial statements.
5
<PAGE>
ACE CASH EXPRESS, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying condensed unaudited interim consolidated financial
statements of Ace Cash Express, Inc. (the "Company" or "ACE") and its
subsidiaries have been prepared in accordance with generally accepted accounting
principles for interim financial information and the rules and regulations of
the Securities and Exchange Commission. They do not include all information and
footnotes required by generally accepted accounting principles for complete
financial statements. Although management believes that the disclosure is
adequate to prevent the information from being misleading, the interim
consolidated financial statements should be read in conjunction with the
Company's audited financial statements in its Annual Report on Form 10-K filed
with the Securities and Exchange Commission. In the opinion of Company
management, all adjustments, consisting of normal recurring accruals, considered
necessary for a fair presentation have been included.
Certain prior period accounts have been reclassified to conform to the
current year's presentation.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
OPERATIONS
Ace Cash Express, Inc. was incorporated under the laws of the State of
Texas in March, 1982. The Company operates in one business segment and provides
check cashing, money order, wire transfer, loans and other transactional
services to customers for a fee. As of March 31, 1997, the Company owned and
operated 601 stores in 27 states and the District of Columbia and had 88
additional franchised stores in 11 states.
NET ASSETS HELD FOR SALE
As of March 31, 1997, the Company sold a portion of its automobile loan
portfolio for $3.3 million, receiving cash of $2.5 million and recording a
receivable of $0.8 million. As collection of the receivable is based on the
terms of a buy back agreement with the buyer, a reserve of $0.5 million was
established for certain estimated uncollectible accounts. The automobile loan
portfolio was a component of the Check Express acquisition in 1996, and has been
classified as net assets held for sale in the consolidated balance sheets.
Since it has been the Company's intent to divest itself of this business
segment, the loss from this sale of approximately $0.5 million has been treated
as an adjustment of the original purchase price allocation and an increase to
goodwill and therefore, has no impact on the accompanying statement of
operations.
6
<PAGE>
SUPPLEMENTAL STATISTICAL DATA
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31, YEAR ENDED JUNE 30,
------------------------------------------------------------------------
COMPANY OPERATING DATA: 1997 1996 1997 1996 1996 1995 1994
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Stores in operation:
Beginning of period 592 466 544 452 452 343 276
Acquired 9 60 43 64 69 77 32
Opened 4 7 29 21 33 40 47
Closed (4) (3) (15) (7) (10) (8) (12)
------ ------ ------- ------ ------- ------- ------
End of period 601 530 601 530 544 452 343
====== ====== ======= ====== ======= ======= ======
Percentage increase in comparable
store revenues from prior period:
Exclusive of tax-related revenues(1) 5.0% 7.5% 6.4% 4.4% 4.1% 2.9% 1.3%
Total(2) 9.6% 15.4% 8.0% 7.8% 4.7% 1.6% 1.0%
Capital expenditures (in thousands) $1,258 $1,414 $ 3,444 $3,154 $ 3,435 $ 4,187 $4,367
Cost of acquired stores (in thousands) $2,087 $8,805 $ 7,711 $9,297 $14,432 $14,000 $4,846
- -----------------------------------------------------------------------------------------------------------------
OPERATING DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Face amount of checks cashed
(in millions) $ 762 $ 620 $ 1,947 $1,569 $ 2,144 $ 1,567 $1,309
Face amount of money orders sold
(in millions) $ 475 $ 409 $ 1,356 $1,111 $ 1,531 $ 1,213 $1,042
Face amount of money orders sold
as a percentage of the face
amount of checks cashed 62.3% 66.0% 69.6% 70.8% 71.4% 77.4% 79.6%
Face amount of average check $ 328 $ 313 $ 291 $ 287 $ 285 $ 284 $ 286
Average fee per check $ 8.46 $ 7.96 $ 7.05 $ 6.82 $ 6.81 $ 6.79 $ 6.94
Number of checks cashed
(in thousands) 2,326 1,980 6,696 5,471 7,535 5,516 4,585
Number of money orders sold
(in thousands) 3,539 3,111 10,161 8,650 11,835 9,334 8,266
- -----------------------------------------------------------------------------------------------------------------
COLLECTIONS DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Face amount of returned checks
(in thousands) $2,652 $2,191 $ 7,699 $6,318 $ 8,661 $ 6,206 $5,196
Collections (in thousands) 1,627 1,280 4,725 3,745 5,004 3,786 3,304
------ ------ ------- ------ ------- ------- ------
Net write-offs (in thousands) $1,025 $ 911 $ 2,974 $2,573 $ 3,657 $ 2,420 $1,892
====== ====== ======= ====== ======= ======= ======
Collections as a percentage of
returned checks 61.3% 58.4% 61.4% 59.3% 57.8% 61.0% 63.6%
Net write-offs as a percentage of
revenues 3.9% 4.4% 4.6% 5.2% 5.3% 5.1% 4.7%
Net write-offs as a percentage of
the face amount of checks cashed .13% .15% .15% .16% .17% .15% .14%
</TABLE>
(1) Change in revenues computed excluding electronic tax filing and tax refund
check cashing for both periods compared.
(2) Calculated based on the changes in revenues of all stores open for both of
the full year and nine month period compared.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS
REVENUE ANALYSIS THREE MONTHS ENDED MARCH 31, NINE MONTHS ENDED MARCH 31,
- -----------------------------------------------------------------------------------------------------------------------
($ in thousands) (Percentage of Revenue) ($ in thousands) (Percentage of Revenue)
---------------------------------------------------------------------------------------------
1997 1996 1997 1996 1997 1996 1997 1996
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Check fees $13,425 $11,259 51.2% 54.8% $40,622 $32,510 62.2% 66.1%
Tax check fees 6,252 4,511 23.8 22.0 6,566 4,788 10.0 9.7
Money transfer services 1,404 1,085 5.4 5.3 4,924 3,068 7.5 6.2
Loan fees and interest 1,472 651 5.6 3.2 4,042 1,552 6.2 3.2
Money order sales 729 642 2.8 3.1 2,063 1,759 3.2 3.6
New customer fees 606 392 2.3 1.9 1,535 957 2.3 2.0
Bill payment services 637 376 2.4 1.8 1,571 939 2.4 1.9
Electronic tax filings 291 301 1.1 1.4 299 313 0.5 0.6
Franchise fees 285 246 1.1 1.2 901 246 1.4 0.5
Food stamp distribution 192 181 0.7 0.9 594 658 0.9 1.3
Other fees 925 900 3.6 4.4 2,220 2,412 3.4 4.9
------- ------- ----- ----- ------- ------- ----- -----
Total revenue $26,218 $20,544 100.0% 100.0% $65,337 $49,202 100.0% 100.0%
======= ======= ===== ===== ======= ======= ===== =====
Average revenue per store $44.0 $41.3 $114.1 $100.2
</TABLE>
QUARTER COMPARISONS
Revenues increased $5.7 million, or 28%, from $20.5 million in the third quarter
of the last fiscal year to $26.2 million in the third quarter of fiscal 1997.
This revenue growth resulted, in part, from a $1.7 million, or 9.6%, increase in
comparable store revenues (426 stores). The balance of the increase came from
stores which were opened or acquired after June 30, 1995, and were therefore not
open for both of the full periods compared. The number of Company-owned stores
increased by 71, or 13%, from 530 stores opened at March 31, 1996, to 601 stores
opened at March 31, 1997. The increase in total check cashing fees accounted
for 69% of the total revenue increase. Check cashing fees increased $3.9
million, or 25%, from the $15.8 million in the third quarter of the last fiscal
year to $19.7 million in the third quarter of fiscal 1997. This increase
resulted from a 17% increase in the total number of checks cashed, plus a 6%
increase in the average fee per check realized by the Company. Such fee
increase relates primarily to an increase in the average check size due to the
seasonal effects of tax refund checks. Money transfer services increased $0.3
million, or 29%, principally as a result of acquired stores and the related
revenue guarantees and continued promotion activities by the money transfer
services supplier.
Loan fees and interest for the third quarter more than doubled, to $1.5 million
from the $0.7 million recorded in the third quarter of fiscal 1996, as a result
of increased volume of the Company's small consumer loan program, currently
offered in 168 Company-owned stores in 13 states.
NINE MONTH COMPARISONS
Revenues increased $16.1 million, or 33%, from $49.2 million in the first nine
months of the last fiscal year to $65.3 million in the first nine months of
fiscal 1997. This revenue growth resulted, in part, from a $3.5 million, or
8.0%, increase in comparable store revenues (426 stores). The balance of the
increase, $12.6 million, came from stores which were opened or acquired after
June 30, 1995, and were therefore not open for both of the full periods
compared. The increase in total check cashing fees accounted for 61% of the
total revenue increase. Check cashing fees increased $9.9 million, or 27%, from
$37.3 million in the first nine months of the last fiscal year to $47.2 million
in the first nine months of fiscal 1997. This increase resulted from a 22%
increase in the total number of checks cashed, and from a 3% increase in the
average fee per check realized by the Company. Such fee increase relates
primarily to an increase in the average check size. Money transfer services
increased $1.9 million, or 60%, principally as a result of acquired stores and
the related revenue guarantees and continued promotion activities by the money
transfer services supplier.
Loan fees and interest increased $2.5 million, or 160%, as a result of the
increased volume of the Company's small consumer loan program, currently offered
in 168 Company-owned stores in 13 states.
8
<PAGE>
<TABLE>
<CAPTION>
STORE EXPENSE ANALYSIS THREE MONTHS ENDED MARCH 31, NINE MONTHS ENDED MARCH 31,
- ------------------------------------------------------------------------------------------------------------------------------
($ in thousands) (Percentage of Revenue) ($ in thousands) (Percentage of Revenue)
---------------------------------------------------------------------------------------------
1997 1996 1997 1996 1997 1996 1997 1996
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Salaries and benefits $ 7,157 $ 5,785 27.3% 28.2% $18,966 $15,022 29.0% 30.5%
Occupancy 3,598 2,954 13.7 14.4 10,292 8,168 15.8 16.6
Armored and security 959 734 3.7 3.6 2,577 2,129 3.9 4.3
Returned checks and cash shorts 1,555 1,257 5.9 6.1 4,545 3,663 7.0 7.5
Loan losses 245 103 1.0 0.5 896 282 1.4 0.6
Depreciation 858 719 3.3 3.5 2,441 1,990 3.7 4.0
Other 2,028 1,387 7.7 6.7 5,121 3,514 7.8 7.2
------- ------- ---- ---- ------- ------- ---- ----
Total store expense $16,400 $12,939 62.6% 63.0% $44,838 $34,768 68.6% 70.7%
======= ======= ==== ==== ======= ======= ==== ====
Average per store expense $27.5 $26.0 $78.3 $70.8
</TABLE>
QUARTER COMPARISONS
Store expenses increased $3.5 million, or 27%, in the third quarter of fiscal
1997 over the third quarter of the last fiscal year. Store expenses decreased
as a percentage of revenues from 63.0% in the third quarter of the last fiscal
year to 62.6% in the third quarter of fiscal 1997. Salaries and benefits
expenses and occupancy costs increased 24% and 22%, respectively, primarily as a
result of the increased number of stores in operation. Returned checks, net of
collections, and cash shortages increased 24% in the fiscal 1997 quarter, as
compared to the same quarter in the last fiscal year, principally as a result of
the increased number of stores. Returned checks, net of collections, and cash
shortages decreased as a percentage of revenues, to 5.9% in the fiscal 1997
quarter from 6.1% in the fiscal 1996 quarter, primarily as a result of tax-
related revenue growth.
Loan losses increased $0.1 million in the third quarter of fiscal 1997, as
compared to the third quarter of the last fiscal year, as a result of the
increased volume of loans made.
NINE MONTH COMPARISONS
Store expenses increased $10.1 million, or 29%, from the first nine months of
the last fiscal year to the first nine months of fiscal 1997. Store expenses
decreased as a percentage of revenues, from 70.7% in the first nine months of
the last fiscal year to 68.6% in the first nine months of fiscal 1997. Salaries
and benefits expenses and occupancy costs increased 26%, primarily as a result
of the increased number of stores in operation. Returned checks, net of
collections, and cash shortages increased $0.9 million, or 24%, in the first
nine months of the last fiscal year to the first nine months of fiscal 1997.
Returned checks, net of collections, and cash shortages decreased as a
percentage of revenues, from 7.5% in the first nine months of fiscal 1996 to
7.0% in the first nine months of fiscal 1997.
Loan losses increased $0.6 million in the first nine months of fiscal 1997, as
compared to the first nine months of the last fiscal year, as a result of the
increased volume of loans made.
9
<PAGE>
<TABLE>
<CAPTION>
OTHER EXPENSE ANALYSIS THREE MONTHS ENDED MARCH 31, NINE MONTHS ENDED MARCH 31,
- ------------------------------------------------------------------------------------------------------------------------------
($ in thousands) (Percentage of Revenue) ($ in thousands) (Percentage of Revenue)
-----------------------------------------------------------------------------------------
1997 1996 1997 1996 1997 1996 1997 1996
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Region expenses $1,920 $1,562 7.3% 7.6% $5,479 $4,076 8.4% 8.3%
Headquarters expenses 1,981 1,559 7.6 7.6 4,616 3,611 7.1 7.3
Franchise expenses 241 181 0.9 0.9 767 181 1.2 0.4
Other depreciation and amortization 776 571 3.0 2.8 2,162 1,541 3.3 3.1
Interest expense 623 564 2.4 2.7 1,736 1,239 2.7 2.5
Other expense 45 61 0.2 0.3 88 79 0.1 0.2
</TABLE>
QUARTER COMPARISONS
Region Expenses
Region expenses increased $0.4 million, or 23%, in the third quarter of fiscal
1997 over the third quarter of the last fiscal year, principally as a result of
the addition of region personnel, and centralized loan support personnel.
Region expenses decreased as a percentage of revenues, from 7.6% in the third
quarter of the last fiscal year to 7.3% in the third quarter of fiscal 1997.
Headquarters Expenses
Headquarters expenses increased $0.4 million, or 27%, in the third quarter of
fiscal 1997 over the third quarter of the last fiscal year, principally as a
result of increased salaries and benefits and lease expense for additional space
at the Company's corporate headquarters.
Franchise Expenses
Franchise expenses consist primarily of salaries of the franchise support and
sales personnel and allocated occupancy costs since the acquisition of Check
Express, Inc. on February 1, 1996.
Other Depreciation and Amortization
Other depreciation and amortization increased $0.2 million, or 36%, in the
third quarter of fiscal 1997 from the third quarter of the last fiscal year,
principally due to increased amortization of intangibles related to the 52
stores acquired since the third quarter of fiscal 1996.
Interest Expense
Interest expense, net of interest income, increased $0.1 million, or 10%, in the
third quarter of fiscal 1997 as compared to the third quarter of the last fiscal
year. This increase was principally the result of increased borrowings used to
finance store acquisitions. The term advances from the money order supplier bear
interest at prime plus one percent, currently 9.5%, and the Senior Secured Notes
bear interest at 9.03% per year.
Other Expense
Other expense was $45,000 in the third quarter of fiscal 1997, as compared to
$61,000 in the third quarter of the last fiscal year. These consist primarily
of store closing costs.
Income Taxes
A total of $1.7 million was provided for income taxes in the third quarter of
fiscal 1997, up from $1.2 million in the third quarter of the last fiscal year.
The provision for income taxes was calculated based on a statutory federal
income tax rate of 34%, plus a provision for state income taxes.
10
<PAGE>
NINE MONTH COMPARISONS
Region Expenses
Region expenses increased $1.4 million, or 34%, in the nine month period of
fiscal 1997 over the comparable nine month period of fiscal 1996, principally as
a result of addition of region personnel, and centralized loan support
personnel. Region expenses increased slightly as a percentage of revenues, from
8.3% in first nine months of fiscal 1996 to 8.4% in the first nine months of
fiscal 1997.
Headquarters Expenses
Headquarters expenses increased $1.0 million, or 28%, in the first nine months
of fiscal 1997 over the first nine months of fiscal 1996, principally as a
result of increased salaries and benefits and lease expense for additional space
at the Company's corporate headquarters. Headquarters expenses decreased as a
percentage of revenues, from 7.3% in the first nine months of fiscal 1996 to
7.1% in the first nine months of fiscal 1997.
Other Depreciation and Amortization
Other depreciation and amortization increased $0.6 million, or 40%, in the first
nine months of fiscal 1997 over the first nine months of fiscal 1996,
principally due to increased amortization of intangibles related to additional
acquired stores.
Interest Expense
Interest expense, net of interest income, increased $0.5 million in the first
nine months of fiscal 1997 over the first nine months of the last fiscal year.
This increase was principally the result of an increase in borrowings used to
finance store acquisitions. The term advances from the money order supplier bear
interest at the prime rate, plus one percent, currently 9.5%, and the Senior
Secured Notes bear interest at 9.03% per year.
Other Expense
Other expense was $88,000 in the nine first months of fiscal 1997, as compared
to $79,000 in the first nine months of the last fiscal year. These consist of
store closing costs.
Income Taxes
A total of $2.2 million was provided for income taxes in the first nine months
of fiscal 1997, up from $1.4 million in the first nine months of the last fiscal
year. The provision for income taxes was calculated based on a statutory
federal income tax rate of 34%, plus a provision for state income taxes.
BALANCE SHEET VARIATIONS
Certain balance sheet accounts of the Company vary as a result of seasonal and
day-to-day requirements resulting from maintaining cash for the cashing of
checks, receipts of cash from the sale of money orders, and remittances on money
orders sold. For the nine months ended March 31, 1997, cash and cash
equivalents and money order principal payable increased principally as a result
of the increase in the number of Company-owned stores operated, from 544 at
June 30, 1996, to 601 at March 31, 1997, and the timing of scheduled remittances
of money orders.
Property and equipment and the excess purchase price over the fair value of net
assets acquired increased $3.2 million and $5.1 million, respectively, for the
nine months ended March 31, 1997, as a result of the 43 stores acquired and the
29 stores opened during the nine months ended March 31, 1997, offset by related
depreciation and amortization.
11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended March 31, 1997 and 1996, the Company had net cash
provided by operating activities of $9.4 million and $8.7 million, respectively.
During the nine months ended March 31, 1997 and 1996, the Company used $11.0
million and $10.7 million, respectively, for purchases of property and equipment
related to new stores and other capital expenditures.
Net cash provided by financing activities for the nine months ended March 31,
1997 and 1996, were $11.4 million and $14.1 million, respectively. On December
4, 1996, the Company completed a private placement for $20 million of 9.03%
Senior Secured Notes to support its acquisition program. These notes are due
November 15, 2003, with annual principal payments of $4 million beginning
November 15, 1999. Proceeds from the private placement were used to pay down the
Company's outstanding term advances. Term advances from the Money Order Supplier
decreased by $11.4 million for the nine months ended March 31, 1997. This
change is comprised of advances of $8.3 million to fund new and acquired stores,
less payments of $19.7 million. The repayment terms of each term advance call
for the principal amount to be paid in equal monthly installments on a 60-month
amortization through December 1998, when the remaining principal is due. As of
March 31, 1997, $5.6 million was outstanding under this borrowing facility.
Borrowed amounts bear interest at the prime rate, plus one percent, which
currently totals 9.5%. In addition, net borrowings from the Money Order
Supplier, other than term advances, totaled $3.4 million for the nine months
ended March 31, 1997.
As of March 31, 1997, the Company sold a portion of its automobile loan
portfolio for $3.3 million, receiving cash of $2.5 million and recording a
receivable of $0.8 million. As collection of the receivable is based on the
terms of a buy back agreement with the buyer, a reserve of $0.5 million was
established for certain estimated uncollectible accounts. The automobile loan
portfolio was a component of the Check Express acquisition in 1996, and has been
classified as net assets held for sale in the consolidated balance sheets.
Since it has been the Company's intent to divest itself of this business
segment, the loss from this sale of approximately $0.5 million has been treated
as an adjustment of the original purchase price allocation and an increase to
goodwill and therefore, has no impact on the accompanying statement of
operations.
OPERATING TRENDS
Seasonality
The Company's business is seasonal because of the impact of cashing tax refund
checks and two other tax-related services--electronic tax filing and processing
applications for refund anticipation loans. In addition, results of operations
depend significantly upon the timing and amount of revenues and expenses
associated with the acquisition and addition of new stores.
IMPACT OF INFLATION
The Company believes that the results of its operations are not dependent upon
the levels of inflation.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
12
<PAGE>
ITEM 6. EXHIBITS AND REPORT ON FORM 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ACE CASH EXPRESS, INC.
----------------------
May 14, 1997 By: /s/ Susan S. Pressler
---------------------
Vice President-Controller
(Duly authorized officer and
principal financial and chief
accounting officer)
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF
EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 66,451
<SECURITIES> 0
<RECEIVABLES> 6,888
<ALLOWANCES> 0
<INVENTORY> 1,064
<CURRENT-ASSETS> 74,814
<PP&E> 37,888
<DEPRECIATION> 15,217
<TOTAL-ASSETS> 133,176
<CURRENT-LIABILITIES> 73,995
<BONDS> 0
0
0
<COMMON> 64
<OTHER-SE> 29,025
<TOTAL-LIABILITY-AND-EQUITY> 133,176
<SALES> 65,337
<TOTAL-REVENUES> 65,337
<CGS> 0
<TOTAL-COSTS> 57,862
<OTHER-EXPENSES> 88
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,736
<INCOME-PRETAX> 5,651
<INCOME-TAX> 2,219
<INCOME-CONTINUING> 3,432
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,432
<EPS-PRIMARY> .52
<EPS-DILUTED> .52
</TABLE>
