<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, 2000
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 _____
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 5, 2000
------- -----------------------------
Common Stock 10,160,113 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, 2000 and June 30, 1999 3
Interim Unaudited Consolidated Statements of Earnings for the
Three and Nine Months Ended March 31, 2000 and 1999 4
Interim Unaudited Consolidated Statements of Cash Flows
for the Nine Months Ended March 31, 2000 and 1999 5
Notes to Interim Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
ITEM 1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS
ACE CASH EXPRESS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
March 31 , June 30,
----------- ----------
2000 1999
----------- ----------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 94,590 $ 59,414
Accounts and notes receivable, net 10,523 9,767
Prepaid expenses and other current assets 1,992 1,701
Inventories 1,411 1,511
------- ------
Total Current Assets 108,516 72,393
------- ------
Noncurrent Assets
Property and equipment, net 35,047 30,372
Covenants not to compete, net 1,571 1,656
Excess of purchase price over fair value of assets acquired, net 42,839 36,690
Other assets 3,439 4,122
------- -------
Total Assets $ 191,412 $ 145,233
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Revolving advances $ 69,800 $ 40,100
Accounts payable, accrued liabilities, and other current 19,743 15,903
liabilities
Money order principal payable 10,491 5,340
Current portion of senior secured notes payable 4,541 4,226
Term advances 906 1,969
Notes payable 1,167 330
------- -------
Total Current Liabilities 106,648 67,868
------- -------
Noncurrent Liabilities
Long-term portion of senior secured notes payable 12,000 16,000
Term advances 13,594 8,531
Other liabilities 4,047 4,560
------- -------
Total Liabilities 136,289 96,959
------- -------
Commitments and Contingencies
Shareholders' Equity:
Preferred stock, $1 par value, 1,000,000 shares authorized, none
issued and outstanding - -
Common stock, $.01 par value, 20,000,000 shares authorized,
10,100,888 and 10,055,528 shares issued and outstanding,
respectively 101 101
Additional paid-in capital 22,339 21,691
Retained earnings 33,480 26,482
Treasury stock, at cost, 55,200 and 0 shares, respectively (797) -
------- -------
Total Shareholders' Equity 55,123 48,274
------- -------
Total Liabilities and Shareholders' Equity $ 191,412 $ 145,233
======= =======
</TABLE>
See notes to the interim consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
ACE CASH EXPRESS, INC. AND SUBSIDIARIES
INTERIM UNAUDITED
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share data)
Three Months Ended Nine Months Ended
March 31, March 31,
------------------------ -----------------------
2000 1999 2000 1999
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Revenues $ 41,337 $ 36,009 $ 104,209 $ 90,688
Store expenses:
Salaries and benefits 10,154 8,967 27,506 24,224
Occupancy 5,401 4,622 15,751 13,481
Depreciation 1,419 1,200 3,937 3,453
Other 7,526 6,721 21,983 19,211
--------- --------- --------- ---------
Total store expenses 24,500 21,510 69,177 60,369
--------- --------- --------- ---------
Store gross margin 16,837 14,499 35,032 30,319
Region expenses 2,777 2,445 7,781 7,010
Headquarters expenses 2,364 2,230 6,021 5,664
Franchise expenses 286 372 797 1,016
Other depreciation and amortization 952 1,067 2,756 3,092
Interest expense, net 1,942 1,622 4,771 3,162
Other expenses 0 40 346 468
--------- --------- --------- ---------
Income before income taxes and cumulative effect
of accounting change 8,516 6,723 12,560 9,907
Income taxes 3,339 2,628 4,956 3,900
--------- --------- --------- ---------
Income before cumulative effect of accounting
change 5,177 4,095 7,604 6,007
Cumulative effect of accounting change, net of
income tax benefit of $402 -- -- (603) --
--------- --------- --------- ---------
Net income $ 5,177 $ 4,095 $ 7,001 $ 6,007
========= ========= ========= =========
EBITDA (1) (2) $ 12,829 $ 10,625 $ 24,385 $ 19,906
========= ========= ========= =========
BASIC EARNINGS PER SHARE:
Before cumulative effect of accounting change $ 0.51 $ 0.41 $ 0.76 $ 0.60
Cumulative effect of accounting change -- -- (.06) --
--------- --------- --------- ---------
Basic earnings per share $ 0.51 $ 0.41 $ 0.70 $ 0.60
========= ========= ========= =========
Weighted average number of common shares
outstanding - basic EPS 10,085 10,007 10,069 9,969
========= ========= ========= =========
DILUTED EARNINGS PER SHARE:
Before cumulative effect of accounting change $ 0.50 $ 0.40 $ 0.73 $ 0.59
Cumulative effect of accounting change -- -- (.06) --
--------- --------- --------- ---------
Diluted earnings per share $ 0.50 $ 0.40 $ 0.67 $ 0.59
========= ========= ========= =========
Weighted average number of common and
dilutive shares outstanding - diluted EPS 10,445 10,253 10,378 10,275
========= ========= ========= =========
</TABLE>
(1) Before cumulative effect of accounting change recorded in the three months
ended September 30, 1999.
(2) EBITDA also excludes non-cash expenses in connection with store closings
which were recorded in other expenses for the three and nine months ended March
31, 2000 and 1999.
See notes to the interim consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
ACE CASH EXPRESS, INC. AND SUBSIDIARIES
INTERIM UNAUDITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Nine Months Ended
March 31,
------------------------
2000 1999
----------- ----------
Cash flows from operating activities:
<S> <C> <C>
Net income $ 7,001 $ 6,007
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 6,693 6,549
Cumulative effect of accounting change 1,004 --
Deferred revenue (2,393) (1,584)
Changes in assets and liabilities:
Accounts and notes receivable, net (755) 1,081
Prepaid expenses and other current assets (747) (842)
Inventories 100 770
Other assets (553) (15)
Accounts payable and other liabilities 5,720 4,024
-------- --------
Net cash provided by operating activities 16,070 15,990
Cash flows from investing activities:
Purchases of property and equipment, net (9,601) (6,516)
Cost of net assets acquired (7,143) (9,085)
-------- --------
Net cash used by investing activities (16,744) (15,601)
Cash flows from financing activities:
Net borrowings from (repayments to) money order supplier 5,151 (41,475)
Net borrowings from revolving line-of-credit 29,700 37,468
Term advances from syndicate of banks 4,000 10,500
Payment of term advances from previous money order supplier -- (7,073)
Net borrowings of acquisition-related notes payable 837 --
Net (repayments) borrowings under long-term notes payable (3,685) 298
Proceeds from stock options exercised 644 757
Purchase of treasury stock (797) --
-------- --------
Net cash provided by financing activities 35,850 475
-------- --------
Net increase in cash and cash equivalents 35,176 864
Cash and cash equivalents, beginning of period 59,414 60,168
-------- --------
Cash and cash equivalents, end of period $ 94,590 $ 61,032
======== ========
Supplemental disclosures of cash flows information:
Interest paid $ 5,128 $ 2,748
Income taxes paid 1,708 2,351
</TABLE>
See notes to the interim consolidated financial statements.
<PAGE>
ACE CASH EXPRESS, INC. AND SUBSIDIARIES
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.
EARNINGS PER SHARE DISCLOSURES
Basic earnings per share are computed by dividing net income by the
weighted average number of common shares outstanding. Diluted earnings per share
are computed by dividing net income by the weighted average number of common
shares outstanding, after adjusting for the dilutive effect of stock options.
The following table presents the reconciliation of the numerator and denominator
used in the calculation of basic and diluted earnings per share, as required by
Statement of Financial Accounting Standards No. 128, "Earnings Per Share."
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
----------------- -----------------
2000 1999 2000 1999
------ ------ ------ ------
(in thousands)
<S> <C> <C> <C> <C>
Numerator:
Income before cumulative effect of accounting
change $5,177 $4,095 $7,604 $6,007
Cumulative effect of accounting change, net of
income tax benefit of $402 - - (603) -
------ ------ ------ ------
Net income (numerator) $5,177 $4,095 $7,001 $6,007
====== ====== ====== ======
Denominator:
Weighted average number of common shares
outstanding - basic EPS 10,085 10,007 10,069 9,969
Effect of dilutive stock options 360 246 309 306
------ ------ ------ -----
Weighted average number of common and
dilutive shares outstanding - diluted EPS 10,445 10,253 10,378 10,275
====== ====== ====== ======
</TABLE>
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
As required, the Company adopted a new accounting standard, AICPA
Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities," in
the first quarter ended September 30, 1999. This standard requires that
previously capitalized start-up costs be recognized as a cumulative effect of
change in accounting principle and expensed fully in the quarter. Start-up
costs, net of tax, of $0.6 million were expensed in the first quarter ended
September 30, 1999.
The Company is also required to adopt Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities," by its first quarter ending September 30, 2001. This standard
requires the Company to record the fair value of its interest-rate swap as an
asset or liability in the consolidated balance sheet. Changes in the fair value
of the interest-rate swap will be reported as a component of shareholders'
equity in the consolidated balance sheet. The fair value of the Company's
existing interest-rate swap is $0.8 million as of March 31, 2000.
<PAGE>
<TABLE>
<CAPTION>
ACE CASH EXPRESS, INC. AND SUBSIDIARIES
SUPPLEMENTAL STATISTICAL DATA
Three Months Ended Nine Months Ended
March 31, March 31, Year Ended June 30,
---------------------- -------------------- -------------------------
2000 1999 2000 1999 1999 1998 1997
-------- --------- -------- -------- ------- ------ -------
(unaudited) (unaudited)
SUPPLEMENTAL STATISTICAL DATA:
Company-owned stores in operation:
<S> <C> <C> <C> <C> <C> <C> <C>
Beginning of period 817 735 798 683 683 617 544
Acquired 20 10 23 29 35 15 46
Opened 32 28 64 75 99 62 45
Closed 0 (1) (16) (15) (19) (11) (18)
-------- -------- ------- -------- -------- -------- --------
End of period 869 772 869 772 798 683 617
======== ======== ======= ======== ======== ======== ========
Percentage increase in comparable store
revenues from prior period:
Exclusive of tax-related revenues (1) 3.6% 9.5% 6.4% 11.2% 10.6% 8.0% 5.5%
Total revenues (2) 5.5% 11.4% 6.8% 11.7% 10.8% 6.9% 6.3%
Capital expenditures (in thousands) $ 5,768 $ 2,956 $ 9,601 $ 6,516 $ 10,089 $ 5,742 $ 4,868
Cost of net assets acquired (in thousands) $ 6,091 $ 2,851 $ 7,143 $ 9,085 $ 8,378 $ 4,708 $ 10,766
CHECK CASHING AND MONEY ORDERS:
OPERATING DATA:
Face amount of checks cashed (in millions) $ 1,144 $ 970 $ 2,890 $ 2,534 $ 3,373 $ 2,898 $ 2,621
Face amount of money orders sold (in
millions) $ 413 $ 465 $ 1,196 $ 1,477 $ 1,905 $ 1,858 $ 1,812
Face amount of money orders sold as a
percentage of the face amount of
checks cashed 36.1% 47.9% 41.4% 58.3% 56.5% 63.8% 69.1%
Face amount of average check $ 395 $ 365 $ 342 $ 323 $ 320 $ 305 $ 291
Average fee per check $ 10.02 $ 9.34 $ 8.06 $ 7.58 $ 7.47 $ 7.26 $ 6.97
Number of checks cashed (in thousands) 2,897 2,657 8,448 7,839 10,556 9,496 9,020
Number of money orders sold (in thousands) 3,194 3,710 9,340 11,107 14,495 14,146 13,608
COLLECTIONS DATA:
Face amount of returned checks
(in thousands) $ 4,633 $ 3,309 $12,698 $ 9,139 $ 12,442 $ 10,193 $ 10,399
Collections (in thousands) 2,961 1,900 7,761 5,392 7,423 6,301 6,554
-------- -------- ------- -------- -------- -------- --------
Net write-offs (in thousands) $ 1,672 $ 1,409 $ 4,937 $ 3,747 $ 5,019 $ 3,892 $ 3,845
======== ======== ======= ======== ======== ======== ========
Collections as a percentage of returned 63.9% 57.4% 61.1% 59.0% 59.7% 61.8% 63.0%
checks
Net write-offs as a percentage of revenues 4.0% 4.0% 4.7% 4.2% 4.1% 3.9% 4.4%
Net write-offs as a percentage of the face
amount of checks cashed .15% .15% .17% .15% .15% .13% .15%
</TABLE>
1) Change in revenues computed excluding tax refund check cashing fees for both
the full year and the interim periods compared.
(2) Calculated based on the change in revenues of all stores open for both the
full year and the interim periods compared.
<PAGE>
<TABLE>
<CAPTION>
ACE CASH EXPRESS, INC. AND SUBSIDIARIES
SUPPLEMENTAL STATISTICAL DATA, continued
Three Months Ended Nine Months Ended
March 31, March 31, Year Ended June 30,
---------------------- ---------------------- -----------------------------
2000 1999 2000 1999 1999 1998 1997
-------- --------- -------- -------- ------ ------ -------
(unaudited) (unaudited)
SMALL CONSUMER LOANS:
OPERATING DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Volume (in thousands) $ 31,214 $ 24,964 $ 93,148 $ 78,772 $105,765 $ 69,182 $ 39,336
Average advance $ 227 $ 202 $ 218 $ 198 $ 200 $ 177 $ 147
Average finance charge $ 30.41 $ 30.65 $ 31.17 $ 30.08 $ 30.30 $ 27.51 $ 25.03
Number of small consumer loans made
(in thousands) 121 108 374 345 460 338 229
COLLECTIONS DATA:
Charge-offs (in thousands) $ 3,314 $ 1,915 $ 10,160 $ 5,862 $ 8,283 $ 3,761 $ 2,307
Recoveries (in thousands) 2,686 1,468 7,506 3,512 5,497 1,954 1,124
-------- -------- -------- -------- -------- -------- --------
Net charge-offs (in thousands) $ 628 $ 447 $ 2,654 $ 2,350 $ 2,786 $ 1,807 $ 1,183
======== ======== ======== ======== ======== ======== ==========
Charge-offs as a percentage of
small consumer loan volume 10.6% 7.7% 10.9% 7.4% 7.8% 5.4% 5.9%
Recoveries as a percentage of
charge-offs 81.1% 76.7% 73.9% 59.9% 66.4% 52.0% 48.7%
Net charge-offs as a percentage of
small consumer loan revenue 17.0% 13.6% 22.8% 22.7% 20.0% 19.5% 20.7%
Net charge-offs as a percentage of
small consumer loan volume 2.0% 1.8% 2.9% 3.0% 2.6% 2.6% 3.0%
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
REVENUE ANALYSIS
- ------------------------------------------------------------------------------------------------------------------------------------
Three Months Ended March 31, Nine Months Ended March 31,
------------------------------------------------- -------------------------------------------------
($ in thousands) (percentage of revenue) ($ in thousands) (percentage of revenue)
2000 1999 2000 1999 2000 1999 2000 1999
----------- ----------- ---------- ----------- ----------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Check cashing fees $ 18,973 $ 16,456 45.9% . 45.7% $ 57,702 $ 50,773 55.4% 56.0%
Loan fees and interest 3,692 3,293 8.9 9.1 11,657 10,690 11.2 11.8
Tax check fees 10,055 8,354 24.3 23.2 10,363 8,633 9.9 9.5
Bill payment services 2,440 2,142 5.9 6.0 7,163 6,008 6.9 6.6
Money transfer services 2,466 1,959 6.0 5.4 6,387 5,357 6.1 5.9
Money order fees 1,817 1,905 4.4 5.3 5,326 3,516 5.1 3.9
New customer fees 552 624 1.4 1.7 1,622 1,752 1.5 1.9
Franchise revenues 585 416 1.4 1.2 1,837 1,542 1.8 1.7
Other fees 757 860 1.8 2.4 2,152 2,417 2.1 2.7
------- -------- ------- ------ ------- ------- ------ ------
Total revenue $ 41,337 $ 36,009 100.0% 100.0% $104,209 $ 90,688 100.0% 100.0%
======= ======== ======= ====== ======= ======= ====== ======
Average revenue per store
(excluding franchise revenues) $48.3 $47.2 $122.7 $122.5
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
QUARTER COMPARISON
Total revenues increased $5.3 million, or 15%, to $41.3 million in the third
quarter of fiscal 2000 from $36.0 million in the third quarter of the last
fiscal year. This revenue growth resulted, in part, from a $1.8 million, or 6%,
increase in comparable store revenues (651 stores). The balance of the increase
came from stores which were opened or acquired after June 30, 1998, and were
therefore not open for both of the full periods compared. The number of
Company-owned stores increased by 97, or 13%, from 772 stores opened at March
31, 1999, to 869 stores opened at March 31, 2000. The increase in check cashing
fees and tax check fees combined accounted for 79% of the total revenue
increase; the increase in money transfer services accounted for 10% of the total
revenue increase; the increase in loan fees and interest accounted for 8% of the
total revenue increase; and the increase in bill payment services accounted for
6% of the total revenue increase.
Check cashing fees and tax check fees combined increased $4.2 million, or 17%,
to $29.0 million in the third quarter of fiscal 2000 from $24.8 million in the
third quarter of the last fiscal year. This increase resulted from a combination
of a 9% increase in the total number of checks cashed and a 7% increase in the
average fee per check due to an increase in the average size check. Money
transfer service revenue increased $0.5 million, or 26%, as a result of the
annual MoneyGram bonus and new store opening incentives which are amortized over
the remaining contract period. Loan fees and interest increased $0.4 million, or
12%, as a result of an increase in the number of stores offering the Company's
small consumer loans to 355 stores at March 31, 2000, from 307 stores at March
31, 1999. Bill payment services increased $0.3 million, or 14%, principally as a
result of growth in payment revenue from existing bill payment agreements.
NINE MONTH COMPARISON
Total revenues increased $13.5 million, or 15%, to $104.2 million in the first
nine months of fiscal 2000 from $90.7 million in the first nine months of the
last fiscal year. This revenue growth resulted, in part, from a $5.5 million, or
7%, increase in comparable store revenues (651 stores). The balance of the
increase came from stores which were opened or acquired after June 30, 1998, and
were therefore not open for both of the full periods compared. The increase in
check cashing fees and tax check fees combined accounted for 64% of the total
revenue increase; the increase in money order fees accounted for 13% of the
increase; the increase in bill payment services accounted for 9% of the total
revenue increase; the increase in money transfer services accounted for 8% of
the total revenue increase; the increase in loan fees and interest accounted for
7% of the total revenue increase.
<PAGE>
Check cashing fees and tax check fees combined increased $8.7 million, or 15%,
to $68 million in the first nine months of fiscal 2000 from $59.4 million in the
first nine months of the last fiscal year. This increase resulted from a
combination of an 8% increase in the total number of checks cashed and a 6%
increase in the average fee per check due to an increase in the average size
check. Money order fees increased $1.8 million, or 52%, as a result of increased
money order pricing, which was enabled by the Company's credit agreement with a
syndicate of banks and its money order agreement with Travelers Express Company,
Inc., which both became effective in mid-December 1998. Money order volume for
the nine months ended March 31, 2000 declined compared to the same period of the
last fiscal year, as a result of increased retail pricing on money orders. Bill
payment services increased $1.2 million, or 19%, principally as a result of
growth in payment revenue from existing bill payment agreements. Money transfer
service revenue increased $1.0 million, or 19%, as a result of the annual
MoneyGram bonus and new store opening incentives which are amortized over the
remaining contract period. Loan fees and interest increased $1.0 million, or 9%,
as a result of an increase in the number of stores offering the Company's small
consumer loans to 355 stores at March 31, 2000, as compared to 307 stores at
March 31, 1999.
<TABLE>
STORE EXPENSE ANALYSIS
----------------------------------------------------------------------------------------------------------------------
Three Months Ended March 31, Nine Months Ended March 31,
------------------------------------------- -----------------------------------------------
($ in thousands) (percentage of ($ in thousands) (percentage of
revenue) revenue)
2000 1999 2000 1999 2000 1999 2000 1999
-------- --------- -------- ------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Salaries and benefits $10,154 $ 8,967 24.6% 24.9% $27,506 $24,224 26.4% 26.7%
Occupancy 5,401 4,622 13.1 12.8 15,751 13,481 15.1 14.9
Armored and security 1,548 1,312 3.8 3.7 4,361 3,776 4.2 4.2
Returns and cash shorts 2,614 2,476 6.3 6.9 7,446 6,440 7.1 7.1
Loan losses 628 448 1.5 1.2 2,654 2,350 2.6 2.6
Depreciation 1,419 1,200 3.4 3.3 3,937 3,453 3.8 3.8
Other 2,736 2,485 6.6 6.9 7,522 6,645 7.2 7.3
------- ------- ---- ---- ------- ------- ---- ----
Total store expenses $24,500 $21,510 59.3% 59.7% $69,177 $60,369 66.4% 66.6%
------- ======= ===== ==== ======= ======= ==== ====
Average per store expense $29.0 $28.5 $82.9 $83.0
</TABLE>
QUARTER COMPARISON
Total store expenses increased $3.0 million, or 14%, to $24.5 million in the
third quarter of fiscal 2000 from $21.5 million in the third quarter of the last
fiscal year. Store expenses decreased as a percentage of revenues, to 59.3% in
the third quarter of fiscal 2000 from 59.7% in the third quarter of the last
fiscal year. Salaries and benefits expenses, occupancy costs, and armored and
security expenses increased by a total of $2.2 million in the third quarter of
fiscal 2000, compared to the third quarter of the last fiscal year, primarily as
a result of the increased number of stores in operation. Returned checks, (net
of collections), cash shortages and loan losses increased $0.3 million in the
third quarter of fiscal 2000, compared to the third quarter of the last fiscal
year, as a result of the increased number of stores. Other store expenses
increased $0.3 million, or 10%, primarily as a result of the increased number of
stores in operation and the expensing of new store start-up costs which were
previously capitalized.
NINE MONTH COMPARISON
Total store expenses increased $8.8 million, or 15%, to $69.2 million in the
first nine months of fiscal 2000 from the $60.4 million in the first nine months
of the last fiscal year. Store expenses decreased as a percentage of revenues to
66.4% for the first nine months of fiscal 2000 from 66.6% for the first nine
months of the last fiscal year. Salaries and benefits expenses, occupancy costs,
and armored and security expenses increased by a total of $6.1 million in the
first nine months of fiscal 2000, compared to the first nine months of the last
fiscal year, primarily as a result of the increased number of stores in
operation. Returned checks, (net of collections), cash shortages and loan losses
increased $1.3 million, or 15%, in the first nine months of fiscal 2000,
compared to the first nine months of fiscal 1999, primarily because of the
increased number of stores and a higher number of forgeries (lost or stolen
checks), particularly in the first three months of the nine-month period.
Returned checks, (net of collections), cash shortages and loan losses as a
percentage of revenue remained unchanged at 9.7% for the first nine months of
fiscal 2000 compared to the first nine months of fiscal 1999. Other store
expenses increased $0.9 million, or 13%, primarily as a result of the increased
number of stores in operation and the expensing of new store start-up costs
which were previously capitalized.
<PAGE>
<TABLE>
OTHER EXPENSES ANALYSIS
- -------------------------------------------------------------------------------------------------------------------------------
Three Months Ended March 31, Nine Months Ended March 31,
------------------------------------------------- -----------------------------------------------
($ in thousands) (percentage of ($ in thousands) (percentage of
revenue) revenue)
2000 1999 2000 1999 2000 1999 2000 1999
------------ ---------- ---------- ----------- ---------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Region expenses $2,777 $2,445 6.7% 6.8% $7,781 $7,010 7.5% 7.7%
Headquarters expenses 2,364 2,230 5.7 6.2 6,021 5,664 5.8 6.3
Franchise expenses 286 372 0.7 1.0 797 1,016 0.8 1.1
Other depreciation and
amortization 952 1,067 2.3 3.0 2,756 3,092 2.6 3.4
Interest expense, net 1,942 1,622 4.7 4.5 4,771 3,162 4.6 3.5
Other expenses - 40 - 0.1 346 468 0.3 0.5
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
QUARTER COMPARISON
Region Expenses
Region expenses increased $0.3 million, or 14%, in the third quarter of fiscal
2000 over the third quarter of the last fiscal year, primarily due to additional
region personnel and the corresponding salaries, benefits and travel expenses.
Region expenses decreased slightly as a percentage of revenues to 6.7% in the
third quarter of fiscal 2000 from 6.8% in the third quarter of the last fiscal
year.
Headquarters Expenses
Headquarters expenses increased $0.1 million, or 6%, in the third quarter of
fiscal 2000 from the third quarter of the last fiscal year, principally as a
result of an increase in salaries and wages. Headquarters expenses decreased as
a percentage of revenues to 5.7% in the third quarter of fiscal 2000 from 6.2%
in the third quarter of the last fiscal year.
Franchise Expenses
Franchise expenses decreased $0.1 million in the third quarter of fiscal 2000
from the third quarter of the last fiscal year, primarily due to decreased legal
expenses.
Other Depreciation and Amortization
Other depreciation and amortization decreased $0.1 million, or 11%, in the third
quarter of fiscal 2000 from the third quarter of the last fiscal year,
principally due to the change in accounting principle adopted in the first
quarter of fiscal 2000, requiring start-up costs to be fully expensed instead of
capitalized.
Interest Expense
Interest expense, net of interest income, increased $0.3 million, or 20%, in the
third quarter of fiscal 2000 as compared to the third quarter of the last fiscal
year. This increase was the result of an increase in borrowings to cash tax
checks, which increase significantly during the quarter; an increase in interest
rates; increased borrowings to finance store openings and acquisitions; and
borrowings required to replace the deferred money order remittances formerly
used by the Company under its previous money order agreement (which was replaced
in mid-December 1998.)
Income Taxes
A total of $3.3 million was provided for income taxes in the third quarter of
fiscal 2000, up from $2.6 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 and
non-deductible goodwill resulting from acquisitions.
<PAGE>
NINE MONTH COMPARISON
Region Expenses
Region expenses increased $0.8 million, or 11%, in the first nine months of
fiscal 2000 over the first nine months of the last fiscal year, primarily due to
the addition of region personnel. Region expenses decreased as a percentage of
revenues to 7.5% in the first nine months of fiscal 2000 from 7.7% in the first
nine months of the last fiscal year.
Headquarters Expenses
Headquarters expenses increased $0.4 million, or 6%, in the first nine months of
fiscal 2000 over the first nine months of the last fiscal year, principally as a
result of an increase in salaries and wages. Headquarters expenses decreased as
a percentage of revenues to 5.8% in the first nine months of fiscal 2000 from
6.2% in the first nine months of the last fiscal year.
Franchise Expenses
Franchise expenses decreased $0.2 million for the first nine months of fiscal
2000, compared to the first nine months of the last fiscal year, primarily due
to decreased legal expenses.
Other Depreciation and Amortization
Other depreciation and amortization decreased $0.3 million, or 11%, in the first
nine months of fiscal 2000 from the first nine months of the last fiscal year,
principally due to the change in accounting principle adopted in the first
quarter of fiscal 2000, requiring start-up costs to be fully expensed instead of
capitalized.
Interest Expense
Interest expense, net of interest income, increased $1.6 million, or 51%, in the
first nine months of fiscal 2000 as compared to the first nine months of the
last fiscal year. This increase was the result of an increase in borrowings to
cash the increased volume of tax checks; an increase in interest rates;
increased borrowings to finance store openings and acquisitions; and borrowings
required to replace the deferred money order remittances formerly used by the
Company under its previous money order agreement (which was replaced in
mid-December 1998.)
Income Taxes
A total of $5.0 million was provided for income taxes in the first nine months
of fiscal 2000, up from $3.9 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 and
non-deductible goodwill resulting from acquisitions.
Cumulative Effect of Accounting Change
Effective July 1, 1999, the Company adopted the new accounting standard, AICPA
Statement of Position 98-5, "Reporting on the Costs of Start-up Activities,"
resulting in a cumulative effect on net income of $0.6 million net of an income
tax benefit of $0.4 million.
BALANCE SHEET VARIATIONS
Cash and cash equivalents, the money order principal payable, and the revolving
advances vary because of seasonal and day-to-day requirements resulting from
maintaining cash for cashing checks and making loans, receipts of cash from the
sale of money orders, bill payments, loan volume, and remittances on money
orders sold. For the nine months ended March 31, 2000 and 1999, cash and cash
equivalents increased $35.2 million and $0.9 million, respectively. Property and
equipment increased by $4.7 million, and the excess purchase price over the fair
value of net assets acquired increased $6.1 million, as a result of the 64
stores opened and the 23 stores acquired during the nine months ended March 31,
2000, offset by related depreciation and amortization.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows from Operating Activities
During the nine months ended March 31, 2000 and 1999, the Company had net cash
provided by operating activities of $16.1 million and $16.0 million,
respectively.
Cash Flows from Investing Activities
During the nine months ended March 31, 2000 and 1999, the Company used $9.6
million and $6.5 million, respectively, for purchases of property and equipment
related principally to new store openings and remodeling existing stores.
Capital expenditures for acquisitions were $7.1 million and $9.1 million,
respectively, for the nine months ended March 31, 2000 and 1999, related to the
23 stores acquired during the nine months ended March 31, 2000 and the 29 stores
acquired during the nine months ended March 31, 1999.
Cash Flows from Financing Activities
Net cash provided by financing activities for the nine months ended March 31,
2000, was $35.9 million. The Company increased its borrowings under its bank
credit agreement by $29.7 million due to the decrease in the Company's
remittance period for money order sales and tax-season cash needs. Senior
secured notes payable of $16.5 million decreased $3.7 million for the nine
months ended March 31, 2000, due to the Company's payment of the first annual
installment of principal of $4.0 million in November 1999 offset by accrued
interest. Acquisition-related notes payable to sellers increased by $0.8 million
during the nine months ended March 31, 2000. Net cash provided by financing
activities for the nine months ended March 31, 1999, was $0.5 million.
The credit facilities available to the Company under its credit agreement with a
syndicate of banks, led by Wells Fargo Bank (Texas), National Association, are a
revolving line-of-credit facility of $130 million and a term-loan facility of
$35 million. The revolving line-of-credit facility replaced the deferred money
order remittances and revolving-advance facility formerly used by the Company
under the previous money order agreement, and the term-loan facility replaced
the term advance facility under the previous money order agreement. Borrowings
under the revolving line-of-credit facility may be used for working capital and
general corporate purposes, and borrowings under the term-loan facility may be
used for store construction and relocation and other capital expenditures,
including acquisitions, and refinancing other debt. The Company had borrowed
$69.8 million under its revolving facility and $14.5 million under its term-loan
facility as of March 31, 2000.
The Company's borrowings under the revolving line-of credit facility bear
interest at a variable annual rate equal to, at the Company's discretion, either
the prime rate publicly announced by Wells Fargo Bank or the London InterBank
Offered Rate (LIBOR) plus 0.75%. The Company's borrowings under the term-loan
facility bear interest at a variable annual rate equal to, at the Company's
discretion, either the prime rate publicly announced by Wells Fargo Bank plus
0.25% or LIBOR plus 1.75%. Interest is generally payable monthly, except on
LIBOR-rate borrowings; interest on LIBOR-rate borrowings is payable every 30,
60, or 90 days, depending on the period selected by the Company. Under the
credit agreement, the Company must also pay a commitment fee equal to 0.2% of
the unused portion of the revolving line-of-credit facility and 0.45% of the
unused portion of the term-loan facility.
To reduce its risk of greater interest expense upon a rise in the prime rate or
LIBOR, the Company has entered into three interest-rate swap agreements with
Bank of America. Those agreements effectively convert a portion of the Company's
floating-rate interest obligations to fixed-rate interest obligations. With
respect to the revolving line-of-credit facility, the first notional amount is
$33 million for a two-year period that began January 4, 1999, and the second
notional amount is $10 million for a sixteen-month period that began September
3, 1999. The third notional amount under the term-loan facility is currently
$10.25 million, with decreases in calendar year 2000. The notional amounts were
determined based on the Company's minimum projected borrowings during calendar
years 1999 and 2000. The fixed rate applicable to the notional amount of $33
million under the revolving line-of-credit facility was 5.14% for calendar year
1999 and is 5.23% for calendar year 2000. The fixed rate applicable to the
notional amount of $10 million under the revolving line-of-credit facility is
6.00% for calendar year 1999 and for calendar year 2000. The fixed rate
applicable to the notional amount under the term-loan facility was 6.23% for
calendar year 1999 and is 6.38% for calendar year 2000.
The Company is required to adopt Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities," by its
first quarter ending September 30, 2001. This standard requires the Company to
record the fair value of its interest-rate swap as an asset or liability in the
consolidated balance sheet. Changes in the fair value of the interest-rate swap
will be reported as a component of shareholders' equity in the consolidated
balance sheet. The fair value of the Company's existing interest-rate swap is
$0.8 million as of March 31, 2000.
<PAGE>
Stock Repurchase Program
In August 1999, the Company's Board of Directors authorized the repurchase from
time to time of up to approximately $4 million of the company's Common Stock in
the open market or in negotiated transactions. This stock repurchase program
will remain in effect unless discontinued by the Board of Directors. As of March
31, 2000, the Company had repurchased 55,200 shares at an average price of
$14.45 per share.
OPERATING TRENDS
Seasonality
The Company's business is seasonal to the extent of the impact of cashing tax
refund checks and tax refund anticipation loan checks. The impact of these
services is in the third and fourth quarters of the Company's fiscal year.
Impact of Inflation
Management believes the Company's results of operations are not dependent upon
the levels of inflation.
FORWARD-LOOKING STATEMENTS
This Report may contain, and from time to time the Company or certain of its
representatives may make, "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These statements are generally
identified by the use of words such as "anticipate," "expect," "estimate,"
"believe," "intend," and terms with similar meanings. Although the Company
believes that the current views and expectations reflected in these
forward-looking statements are reasonable, those views and expectations, and the
related statements, are inherently subject to risks, uncertainties, and other
factors, many of which are not under the Company's control and may not even be
predictable. Those risks, uncertainties, and other factors could cause the
actual results to differ materially from those reflected in the forward-looking
statements. Those risks, uncertainties, and factors include, but are not limited
to, the following matters described in the Company's Annual Report on Form 10-K
filed with the Securities and Exchange Commission: governmental regulation of
the check-cashing industry; theft and employee errors; the availability of
suitable locations, acquisition opportunities, adequate financing, and
experienced management employees to implement the Company's growth strategy; the
fragmentation of the check-cashing industry and the competition from various
other sources, such as banks, savings and loans, and other financial services
entities, as well as retail businesses that offer products and services offered
by the Company; and customer demand and response to products and services
offered by the Company. The Company expressly disclaims any obligations to
release publicly any updates or revisions to these forward-looking statements to
reflect any change in its views or expectations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to financial market risks, particularly including changes
in interest rates that might affect the costs of its financing under its credit
agreement. To mitigate the risks of changes in interest rates, the Company
utilizes derivative financial instruments. The Company does not use derivative
financial instruments for speculative or trading purposes.
To reduce its risk of greater interest expense upon a rise in the prime rate or
LIBOR, the Company has entered into three interest-rate swap agreements with
Bank of America. Those agreements effectively convert a portion of the Company's
floating-rate interest obligations to fixed-rate interest obligations, as
described above under "Management's Discussion and Analysis of financial
Condition and Results of Operations - Liquidity and Capital Resources."
The fair value of the Company's existing interest-rate swap is $0.8 million as
of March 31, 2000.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no material developments in the lawsuit filed against the
Company in Arkansas, Mike Kenney and Angie Gwatney v. Ace Cash Express, Inc. See
"Part II, Item 1. Legal Proceedings" in the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended September 30, 1999.
There have been no material developments in the lawsuit filed against the
Company in Indiana, Eva J. Rowings v. Ace Cash Express, Inc. See "Part II, Item
1. Legal Proceedings" in the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended December 31, 1999.
On December 6, 1999, a complaint was filed in a lawsuit against the Company,
Eugene R. Clement v. Ace Cash Express, Inc., in a Florida state Circuit Court in
Hillsborough County, Florida. The plaintiff, for himself and others similarly
situated, alleged that the Company's collection activities regarding unpaid
payday loans in Florida violated the Florida Deceptive and Unfair Trade
Practices Act. In that complaint, the plaintiff did not seek damages, but sought
only an injunction against the alleged illegal activities, attorneys' fees, and
court costs. On March 15, 2000, however, the plaintiff amended his complaint in
this lawsuit to allege that the Company's lending activities violated the
federal Truth in Lending Act and to seek damages as provided by that Act. Under
that Act, if the court were to certify this lawsuit as a class action and if the
Company were found to have violated that Act, the Company's maximum liability
would be the sum of (1) any actual damages suffered by the class of customers in
Florida as a result of a violation, (2) the lesser of $500,000 or 1% of the
Company's net worth, and (3) reasonable attorneys' fees and court costs. On
March 27, 2000, this lawsuit was removed by the Company to the United States
District Court for the Middle District of Florida, where it is now pending.
On January 20, 2000, the plaintiffs in the lawsuit filed against the Company in
the United States District Court for the Middle District of Florida, Gary M.
Kane and Wendy Betts v. Ace Cash Express, Inc., et al., voluntarily dismissed
their remaining federal Truth in Lending Act claims, and therefore that lawsuit,
without prejudice. On March 22, 2000, however, those plaintiffs and an
additional plaintiff filed a lawsuit, Wendy Betts, John Cardegna and Gary M.
Kane v. Ace Cash Express, Inc., et al., in a Florida state Circuit Court in
Orange County, Florida. This lawsuit was filed against the Company, its wholly
owned subsidiary Check Express, Inc., and persons who "own, organized,
developed, control, expanded, promoted, and profited from" alleged illegal
activities of the Company and Check Express, Inc. described in the complaint. In
this lawsuit the plaintiffs, for themselves and others similarly situated since
March 22, 1996, allege that the Company's lending and collection activities
regarding "payday loans" in Florida violated certain Florida lending practices
and usury statutes, the Florida Consumer Finance Act, the Florida Deceptive and
Unfair Trade Practices Act, and the Florida Civil Remedies for Criminal
Practices Act and constituted fraud. The plaintiffs seek an injunction against
any such further alleged illegal activities as well as actual and punitive
damages of various kinds, including forfeiture of the total amount of the payday
loans made to the purported class of customers in Florida, an amount equal to
twice the fees and charges received by the Company from those payday loans, an
amount equal to three times the damages suffered by the purported class, the
plaintiffs' attorneys' fees, and court costs.
On March 30, 2000, the Company was served with a lawsuit regarding the Company's
"payday loan" service in Louisiana, Shirley Porter and Joyce Davis v. Ace Cash
Express, Inc., filed in the United States District Court for the Eastern
District of Louisiana. This lawsuit was filed against the Company and persons
who "have owned, organized, developed, controlled and promoted and profited
from" alleged illegal activities of the Company described in the complaint. The
plaintiffs, for themselves and others similarly situated, allege that the
Company's lending and collection activities regarding payday loans in Louisiana
violated the Louisiana Small Loan Act, resulted in unconscionable (and therefore
unenforceable) contracts, involved the charging and collection of fees that were
excessive under the Louisiana Consumer Credit Law, involved charging and
collecting usurious interest under Louisiana law, and violated the federal
Racketeer Influenced and Corrupt Organizations (RICO) Act. The class that the
plaintiffs seek to represent would consist of customers of the Company's payday
loan service in Louisiana since February 25, 1999, regarding the Louisiana
state-law claims, and since February 25, 1996, regarding the RICO Act claim. The
plaintiffs seek an injunction against any such further alleged illegal
activities as well as actual and punitive damages of various kinds, including an
amount equal to all fees and charges received by the Company from the payday
loans made to the purported class of customers in Louisiana, an amount equal to
three times the damages suffered by the purported class, the plaintiffs'
attorneys' fees, and court costs.
<PAGE>
On April 14, 2000, another lawsuit was filed against the Company regarding its
"payday loan" service in Florida, Neil Gillespie v. Ace Cash Express, Inc., in
the United States District Court for the Middle District of Florida. The
plaintiff, for himself and others similarly situated, alleges that the Company's
lending activities regarding payday loans in Florida violated the federal Truth
in Lending Act, the Florida Usury Statutes, and the Florida Deceptive and Unfair
Trade Practices Act. The class that the plaintiff seeks to represent would
consist of customers of the Company's payday loan service in Florida since April
14, 1999, regarding the federal Truth in Lending Act claim, and since April 14,
2000, regarding the Florida state-law claims. The plaintiff seeks an injunction
against any such further alleged illegal activities as well as actual and
punitive damages of various kinds, including damages under the Truth in Lending
Act, an amount equal to twice the fees and charges received by the Company from
the payday loans made to the purported class of customers in Florida, the
plaintiffs' attorneys' fees, and court costs. The plaintiff's counsel in this
lawsuit is the same as the counsel in the Clement lawsuit described above, and
both lawsuits are pending in the same court.
Because each of these lawsuits purports to be a class action, the amount of
damages for which the Company might be responsible is necessarily uncertain.
Regarding each lawsuit, that amount would depend upon proof of the allegations,
on the number of customers of the payday loan service who constitute the class
of plaintiffs (if permitted by the court), and on proof of actual damages
sustained by the plaintiffs. The Company believes that each of these lawsuits is
without merit. The Company denies all of the plaintiffs' material allegations in
these lawsuits and intends to vigorously defend these lawsuits.
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
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit Number Exhibits
Exhibit 27* Financial Data Schedule (EDGAR version only)
-----------------
* Filed herewith
(b) Reports 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 11, 2000 by: /s/ Debra A. Bradford
Senior Vice President and
Chief Financial Officer
(Duly authorized officer
and principal financial and
chief accounting officer)
<TABLE> <S> <C>
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 94,590
<SECURITIES> 0
<RECEIVABLES> 10,605
<ALLOWANCES> 427
<INVENTORY> 1,411
<CURRENT-ASSETS> 108,516
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 191,412
<CURRENT-LIABILITIES> 106,648
<BONDS> 0
0
0
<COMMON> 101
<OTHER-SE> 55,022
<TOTAL-LIABILITY-AND-EQUITY> 191,412
<SALES> 104,209
<TOTAL-REVENUES> 104,209
<CGS> 0
<TOTAL-COSTS> 86,532
<OTHER-EXPENSES> 346
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<INTEREST-EXPENSE> 4,771
<INCOME-PRETAX> 12,560
<INCOME-TAX> 4,956
<INCOME-CONTINUING> 7,604
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<EXTRAORDINARY> 0
<CHANGES> (603)
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<EPS-BASIC> .70
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</TABLE>
