<PAGE> 1
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 DECEMBER 31, 1999
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 February 4, 2000
Common Stock 10,136,662 shares
<PAGE> 2
ACE CASH EXPRESS, INC.
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NO.
<S> <C> <C>
Item 1. Interim Consolidated Financial Statements:
Consolidated Balance Sheets as of
December 31, 1999, and June 30, 1999 3
Interim Unaudited Consolidated Statements of Earnings for the
Three and Six Months Ended December 31, 1999 and 1998 4
Interim Unaudited Consolidated Statements of Cash Flows
for the Six Months Ended December 31, 1999 and 1998 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 15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 15
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
</TABLE>
2
<PAGE> 3
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)
<TABLE>
<CAPTION>
December 31, June 30,
------------- -------------
1999 1999
------------- -------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 96,844 $ 59,414
Accounts and notes receivable, net 11,062 9,767
Prepaid expenses and other current assets 1,399 1,701
Inventories 1,457 1,511
------------- -------------
Total Current Assets 110,762 72,393
------------- -------------
Noncurrent Assets
Property and equipment, net 31,721 30,372
Covenants not to compete, net 1,236 1,656
Excess of purchase price over fair value of assets acquired, net 37,482 36,690
Other assets 3,725 4,122
------------- -------------
Total Assets $ 184,926 $ 145,233
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Revolving advances $ 85,100 $ 40,100
Accounts payable, accrued liabilities, and other current
liabilities 13,029 15,903
Money order principal payable 6,609 5,340
Current portion of senior secured notes payable 4,180 4,226
Term advances 656 1,969
Notes payable 210 330
------------- -------------
Total Current Liabilities 109,784 67,868
------------- -------------
Noncurrent Liabilities
Long-term portion of senior secured notes payable 12,000 16,000
Term advances 9,844 8,531
Other liabilities 3,584 4,560
------------- -------------
Total Liabilities 135,212 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,
10,070,187 and 10,055,528 shares issued and outstanding,
respectively 101 101
Additional paid-in capital 21,308 21,691
Retained earnings 28,305 26,482
------------- -------------
Total Shareholders' Equity 49,714 48,274
------------- -------------
Total Liabilities and Shareholders' Equity $ 184,926 $ 145,233
============= =============
</TABLE>
See notes to the interim consolidated financial statements.
3
<PAGE> 4
ACE CASH EXPRESS, INC. AND SUBSIDIARIES
INTERIM UNAUDITED
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
----------------------- ------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues $ 32,284 $ 28,656 $ 62,872 $ 54,679
Store expenses:
Salaries and benefits 8,829 8,095 17,352 15,257
Occupancy 5,089 4,537 10,360 8,859
Depreciation 1,205 1,145 2,518 2,253
Other 7,445 6,361 14,447 12,490
---------- ---------- ---------- ----------
Total store expenses 22,568 20,138 44,677 38,859
---------- ---------- ---------- ----------
Store gross margin 9,716 8,518 18,195 15,820
Region expenses 2,631 2,377 5,004 4,565
Headquarters expenses 1,808 1,871 3,657 3,434
Franchise expenses 270 404 511 644
Other depreciation and amortization 887 1,052 1,804 2,025
Interest expense, net 1,519 889 2,830 1,540
Other expenses 263 67 346 428
---------- ---------- ---------- ----------
Income before income taxes and cumulative effect
of accounting change 2,338 1,858 4,043 3,184
Income taxes 935 742 1,617 1,272
---------- ---------- ---------- ----------
Income before cumulative effect of accounting
change 1,403 1,116 2,426 1,912
Cumulative effect of accounting change, net of
income tax benefit of $402 -- -- (603) --
---------- ---------- ---------- ----------
Net income $ 1,403 $ 1,116 $ 1,823 $ 1,912
========== ========== ========== ==========
EBITDA (1) (2) $ 6,212 $ 4,987 $ 11,556 $ 9,282
========== ========== ========== ==========
BASIC EARNINGS PER SHARE:
Before cumulative effect of accounting change $ 0.14 $ 0.11 $ 0.24 $ 0.19
Cumulative effect of accounting change -- -- (.06) --
---------- ---------- ---------- ----------
Basic earnings per share $ 0.14 $ 0.11 $ 0.18 $ 0.19
========== ========== ========== ==========
Weighted average number of common shares
outstanding - basic EPS 10,060 9,965 10,060 9,950
========== ========== ========== ==========
DILUTED EARNINGS PER SHARE
Before cumulative effect of accounting change $ 0.14 $ 0.11 $ 0.24 $ 0.19
Cumulative effect of accounting change -- -- (.06) --
---------- ---------- ---------- ----------
Diluted earnings per share $ 0.14 $ 0.11 $ 0.18 $ 0.19
========== ========== ========== ==========
Weighted average number of common and
dilutive shares outstanding - diluted EPS 10,367 10,283 10,343 10,284
========== ========== ========== ==========
</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
six months ended December 31, 1999 and 1998.
See notes to the interim consolidated financial statements.
4
<PAGE> 5
ACE CASH EXPRESS, INC. AND SUBSIDIARIES
INTERIM UNAUDITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
--------------------------
1999 1998
---------- ----------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,823 $ 1,912
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 4,322 4,282
Cumulative effect of accounting change 1,004 0
Deferred revenue (1,300) (941)
Changes in assets and liabilities:
Accounts and notes receivable, net (1,295) (885)
Prepaid expenses and other current assets 302 (1,238)
Inventories 54 848
Other assets (730) (1,651)
Accounts payable and other liabilities (2,549) 1,737
---------- ----------
Net cash provided by operating activities 1,631 4,064
Cash flows from investing activities:
Purchases of property and equipment, net (4,825) (3,560)
Cost of net assets acquired (1,095) (6,234)
---------- ----------
Net cash used by investing activities (5,920) (9,794)
Cash flows from financing activities:
Net borrowings from (repayments to) money order supplier 1,269 17,629
Net borrowings from revolving line-of-credit 45,000 10,500
Term advances from money order supplier 0 0
Payment of term advances from money order supplier 0 (7,073)
Net borrowings (repayments) of acquisition-related notes payable (120) 0
Net decrease in notes payable (4,046) (97)
Proceeds from stock options exercised 414 373
Stock repurchase (797) 0
---------- ----------
Net cash provided by financing activities 41,720 21,332
---------- ----------
Net increase in cash and cash equivalents 37,430 15,602
Cash and cash equivalents, beginning of period 59,414 60,168
---------- ----------
Cash and cash equivalents, end of period $ 96,844 $ 75,770
========== ==========
Supplemental disclosures of cash flows information:
Interest paid $ 3,222 $ 1,523
Income taxes paid 727 1,233
</TABLE>
See notes to the interim consolidated financial statements.
5
<PAGE> 6
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 Six Months Ended
December 31, December 31,
------------------- -------------------
1999 1998 1999 1998
------- ------- ------- -------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Net income (numerator) $ 1,403 $ 1,116 $ 1,823 $ 1,912
======= ======= ======= =======
Reconciliation of denominator:
Weighted average number of common shares
outstanding - basic EPS 10,060 9,965 10,060 9,950
Effect of dilutive stock options 307 318 283 334
------- ------- ------- -------
Weighted average number of common and
dilutive shares outstanding - diluted EPS 10,367 10,283 10,343 10,284
======= ======= ======= =======
</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 the previously
capitalized start-up costs to 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 $1.0 million as of December 31, 1999.
6
<PAGE> 7
ACE CASH EXPRESS, INC. AND SUBSIDIARIES
SUPPLEMENTAL STATISTICAL DATA
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31, Year Ended June 30,
--------------------- --------------------- ----------------------------------
1999 1998 1999 1998 1999 1998 1997
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
COMPANY OPERATING AND STATISTICAL DATA:
Company-owned stores in operation:
Beginning of period 804 723 798 683 683 617 544
Acquired 1 2 3 19 35 15 46
Opened 20 17 31 47 99 62 45
Closed (8) (7) (15) (14) (19) (11) (18)
-------- -------- -------- -------- -------- -------- --------
End of period 817 735 817 735 798 683 617
======== ======== ======== ======== ======== ======== ========
Percentage increase in comparable store
revenues from prior period (1) 7.4% 11.3% 7.4% 11.8% 10.8% 6.9% 6.3%
Capital expenditures (in thousands) $ 3,077 $ 1,916 $ 4,825 $ 3,560 $ 10,089 $ 5,742 $ 4,868
Cost of net assets acquired (in thousands) $ 45 $ 1,969 $ 1,095 $ 6,234 $ 8,378 $ 4,708 $ 10,766
OPERATING DATA:
Face amount of checks cashed (in millions) $ 909 $ 831 $ 1,746 $ 1,564 $ 3,373 $ 2,898 $ 2,621
Face amount of money orders sold
(in millions) $ 387 $ 529 $ 783 $ 1,012 $ 1,905 $ 1,849 $ 1,812
Face amount of money orders sold as a
percentage of the face amount of
checks cashed 42.5% 63.7% 44.8% 64.7% 56.5% 63.8% 69.1%
Face amount of average check $ 315 $ 303 $ 314 $ 302 $ 320 $ 305 $ 291
Average fee per check $ 7.02 $ 6.63 $ 7.00 $ 6.68 $ 7.47 $ 7.26 $ 6.97
Number of checks cashed (in thousands) 2,886 2,744 5,551 5,182 10,556 9,496 9,020
Number of money orders sold (in thousands) 3,034 3,806 6,146 7,397 14,495 14,146 13,608
COLLECTIONS DATA:
Face amount of returned checks (in
thousands) $ 4,207 $ 3,142 $ 8,061 $ 5,830 $ 12,442 $ 10,193 $ 10,399
Collections (in thousands) 2,541 1,832 4,801 3,492 7,423 6,301 6,554
-------- -------- -------- -------- -------- -------- --------
Net write-offs (in thousands) $ 1,666 $ 1,310 $ 3,260 $ 2,338 $ 5,019 $ 3,892 $ 3,845
======== ======== ======== ======== ======== ======== ========
Collections as a percentage of returned
checks 60.4% 58.3% 59.6% 59.9% 59.7% 61.8% 63.0%
Net write-offs as a percentage of revenues 5.3% 4.6% 5.3% 4.3% 4.1% 3.9% 4.4%
Net write-offs as a percentage of the face
amount of checks cashed .18% .16% .19% .15% .15% .13% .15%
</TABLE>
(1) Calculated based on the change in revenues of all stores open for both the
full year and the interim periods compared.
7
<PAGE> 8
ACE CASH EXPRESS, INC. AND SUBSIDIARIES
SUPPLEMENTAL STATISTICAL DATA, CONTINUED
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended Year Ended
December 31, December 31, June 30,
--------------------------------------------------------------------------------
1999 1998 1999 1998 1999 1998 1997
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
SMALL CONSUMER LOANS:
OPERATING DATA:
Volume (in thousands) $ 30,196 $ 26,892 $ 61,963 $ 53,808 $105,765 $ 69,182 $ 39,336
Average advance $ 217 $ 198 $ 214 $ 197 $ 200 $ 177 $ 147
Average finance charge $ 33.53 $ 30.20 $ 31.62 $ 29.80 $ 30.30 $ 27.51 $ 25.03
Number of loans made (in thousands) 121 118 253 237 460 338 229
COLLECTIONS DATA:
Charge-offs (in thousands) $ 3,232 $ 2,044 $ 6,842 $ 3,947 $ 8,283 $ 3,761 $ 2,307
Recoveries (in thousands) 2,262 1,281 4,820 2,044 5,497 1,954 1,124
-------- -------- -------- -------- -------- -------- --------
Net charge-offs (in thousands) $ 970 $ 763 $ 2,022 $ 1,903 $ 2,786 $ 1,807 $ 1,183
======== ======== ======== ======== ======== ======== ========
Charge-offs as a percentage of
small consumer loan volume 10.7% 7.6% 11.0% 7.3% 7.8% 5.4% 5.9%
Recoveries as a percentage of
charge-offs 70.0% 62.7% 70.4% 51.8% 66.4% 52.0% 48.7%
Net charge-offs as a percentage of
small consumer loan volume 24.0% 21.4% 25.4% 26.9% 20.0% 19.5% 20.7%
Net charge-offs as a percentage of
small consumer loan volume 3.2% 2.8% 3.3% 3.5% 2.6% 2.6% 3.0%
</TABLE>
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
REVENUE ANALYSIS
- -----------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED DECEMBER 31, SIX MONTHS ENDED DECEMBER 31,
-------------------------------------- --------------------------------------
(IN THOUSANDS) (PERCENTAGE OF (IN THOUSANDS) (PERCENTAGE OF
REVENUE) REVENUE)
1999 1998 1999 1998 1999 1998 1999 1998
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Check cashing fees $20,215 $18,118 62.6% 63.2% $38,730 $34,317 61.6% 62.8%
Loan fees and interest 4,042 3,649 12.5 12.7 7,965 7,397 12.7 13.5
Tax check fees 90 77 0.3 0.3 309 279 0.5 0.5
Bill payment services 2,388 2,144 7.4 7.5 4,722 3,866 7.5 7.1
Money transfer services 1,951 1,802 6.0 6.3 3,920 3,398 6.2 6.2
Money order fees 1,739 873 5.4 3.1 3,508 1,611 5.6 2.9
New customer fees 541 583 1.7 2.0 1,070 1,128 1.7 2.1
Franchise revenues 649 630 2.0 2.2 1,252 1,126 2.0 2.1
Other fees 669 780 2.1 2.7 1,396 1,557 2.2 2.8
------- ------- ------- ------- ------- ------- ------- -------
Total revenue $32,284 $28,656 100.0% 100.0% $62,872 $54,679 100.0% 100.0%
======= ======= ======= ======= ======= ======= ======= =======
Average revenue per store
(excluding franchise revenues) $ 39.0 $ 38.4 $76.3 $ 75.5
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
QUARTER COMPARISON
Total revenues increased $3.6 million, or 13%, to $32.3 million in the second
quarter of fiscal 2000 from $28.7 million in the second quarter of the last
fiscal year. This revenue growth resulted, in part, from a $1.9 million, or
7.4%, 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 82, or 11%, from 735 stores opened at December
31, 1998, to 817 stores opened at December 31, 1999. The increase in total check
cashing fees accounted for 58% of the total revenue increase; the increase in
money order fees accounted for 24% of the increase; the increase in loan fees
and interest accounted for 11% of the total revenue increase; and the increase
in bill payment services accounted for 7% of the total revenue increase.
Check cashing fees and tax check fees combined increased $2.1 million, or 12%,
to $20.3 million in the second quarter of fiscal 2000 from $18.2 million in the
second quarter of the last fiscal year. This increase resulted from a
combination of a 5% 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 $0.9 million, or 99%, 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
declined during the second quarter of this fiscal year, compared to the same
period last fiscal year, as a result of increased retail pricing on money
orders. Loan fees and interest increased $0.4 million, or 11%, as a result of an
increase in the number of stores offering the Company's small consumer loans to
339 stores at December 31, 1999, as compared to 290 stores at December 31, 1998.
Bill payment services increased $0.2 million, or 11%, principally as a result of
growth in payment revenue from existing bill payment contracts.
SIX MONTH COMPARISON
Total revenues increased $8.2 million, or 15%, to $62.9 million in the first six
months of fiscal 2000 from $54.7 million in the first six months of the last
fiscal year. This revenue growth resulted, in part, from a $3.7 million, or
7.4%, 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
total check cashing fees accounted for 54% of the total revenue increase; the
increase in money order fees accounted for 23% of the increase; the increase in
bill payment services accounted for 10% of the total revenue increase; the
increase in loan fees and interest accounted for 7% of the total revenue
increase; and the increase in money transfer services accounted for 6% of the
total revenue increase.
9
<PAGE> 10
Check cashing fees and tax check fees combined increased $4.4 million, or 13%,
to $39.0 million in the first six months of fiscal 2000 from $34.6 million in
the first six months of the last fiscal year. This increase resulted from a
combination of a 6% increase in the total number of checks cashed and a 5%
increase in the average fee per check due to an increase in the average size
check. Money order fees increased $1.9 million, or 118%, 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 declined during the second quarter of this fiscal year, compared to
the same period of the last fiscal year, as a result of increased retail pricing
on money orders. Loan fees and interest increased $0.6 million, or 8%, as a
result of an increase in the number of stores offering the Company's small
consumer loans to 339 stores at December 31, 1999, as compared to 290 stores at
December 31, 1998. Bill payment services increased $0.9 million, or 22%,
principally as a result of growth in payment revenue from existing bill payment
contracts.
<TABLE>
<CAPTION>
STORE EXPENSE ANALYSIS
- -----------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED DECEMBER 31, SIX MONTHS ENDED DECEMBER 31,
----------------------------------------------- ------------------------------------------
(PERCENTAGE OF (PERCENTAGE OF
(IN THOUSANDS) REVENUE) (IN THOUSANDS) REVENUE)
1999 1998 1999 1998 1999 1998 1999 1998
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Salaries and benefits $ 8,828 8,095 $ 27.4% 28.2% $ 17,352 $ 15,257 27.6% 27.9%
Occupancy 5,089 4,537 15.8 15.8 10,360 8,859 16.5 16.2
Armored and security 1,402 1,278 4.3 4.5 2,813 2,464 4.5 4.5
Returns and cash shorts 2,365 2,235 7.3 7.8 4,836 3,964 7.7 7.3
Loan losses 970 763 3.0 2.7 2,023 1,902 3.2 3.5
Depreciation 1,205 1,145 3.7 4.0 2,518 2,253 4.0 4.1
Other 2,710 2,085 8.4 7.3 4,776 4,160 7.6 7.6
-------- -------- -------- -------- -------- -------- -------- --------
Total store expenses $ 22,568 $ 20,138 69.9% 70.3% $ 44,677 $ 38,859 71.1% 71.1%
======== ======== ======== ======== ======== ======== ======== ========
Average per store expense $ 27.8 $ 27.6 $ 55.3 $ 54.8
</TABLE>
QUARTER COMPARISON
Total store expenses increased $2.4 million, or 12%, to $22.6 million in the
second quarter of fiscal 2000 from $20.2 million in the second quarter of the
last fiscal year. Store expenses decreased as a percentage of revenues,
decreasing to 69.9% in the second quarter of fiscal 2000 from 70.3% in the
second quarter of the last fiscal year. Salaries and benefits expenses,
occupancy costs, and armored and security expenses increased primarily as a
result of the increased number of stores in operation. Returned checks, (net of
collections), loan losses and cash shortages increased $0.3 million in the
second quarter of fiscal 2000, compared to the second quarter of the last fiscal
year as a result of the increased number of stores. Other store expenses
increased $0.6 million, or 30%, 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.
SIX MONTH COMPARISON
Total store expenses increased $5.8 million, or 15%, to $44.7 million in the
first six months of fiscal 2000 from the $38.9 million in the first six months
of the last fiscal year. Store expenses remained flat as a percentage of
revenues at 71.1% for the first six months of fiscal 2000 compared to the first
six months of the last fiscal year. Salaries and benefits expenses, occupancy
costs, and armored and security expenses increased 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 22%, in the first six months of
fiscal 2000, compared to the first six months of fiscal 1999, 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 six-month period.
Returned checks, net of collections, and cash shortages increased as a
percentage of revenues to 7.7% in the first six months of fiscal 2000 from 7.3%
in the first six months of fiscal 1999. Other store expenses increased $0.6
million, or 15%, 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.
10
<PAGE> 11
<TABLE>
<CAPTION>
OTHER EXPENSES ANALYSIS
- -------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED DECEMBER 31, SIX MONTHS ENDED DECEMBER 31,
---------------------------------------------- ----------------------------------------------
(IN THOUSANDS) (PERCENTAGE OF (IN THOUSANDS) (PERCENTAGE OF
REVENUE) REVENUE)
1999 1998 1999 1998 1999 1998 1999 1998
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Region expenses $ 2,631 $ 2,377 8.2% 8.3% $ 5,004 $ 4,565 8.0% 8.3%
Headquarters expenses 1,808 1,871 5.6 6.5 3,657 3,434 5.8 6.3
Franchise expenses 270 404 0.8 1.4 511 644 0.8 1.2
Other depreciation and
amortization 887 1,052 2.8 3.7 1,804 2,025 2.9 3.7
Interest expense, net 1,519 889 4.7 3.1 2,830 1,540 4.5 2.8
Other expenses 263 67 0.8 0.2 346 428 0.5 0.8
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
QUARTER COMPARISON
Region Expenses
Region expenses increased $0.3 million, or 11%, in the second quarter of fiscal
2000 over the second 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 8.2%
in the second quarter of fiscal 2000 from 8.3% in the second quarter of the last
fiscal year.
Headquarters Expenses
Headquarters expenses decreased $0.1 million, or 3%, in the second quarter of
fiscal 2000 from the second quarter of the last fiscal year, principally as a
result of lower legal, travel and office supplies expenses. Headquarters
expenses decreased as a percentage of revenues to 5.6% in the second quarter of
fiscal 2000 from 6.5% in the second quarter of the last fiscal year.
Franchise Expenses
Franchise expenses decreased $0.1 million in the second quarter of fiscal 2000
from the second quarter of the last fiscal year, primarily due to decreased
legal expenses.
Other Depreciation and Amortization
Other depreciation and amortization decreased $0.2 million, or 16%, in the
second quarter of fiscal 2000 from the second 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 $0.6 million, or 71%, in the
second quarter of fiscal 2000 as compared to the second quarter of the last
fiscal year. This increase was principally the result of an increase in
borrowings used 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 $0.9 million was provided for income taxes in the second quarter of
fiscal 2000, up from $0.7 million in the second 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. The effective income tax
rate was 40.0% for the second quarter of fiscal 2000, unchanged from the second
quarter of the last fiscal year.
11
<PAGE> 12
SIX MONTH COMPARISON
Region Expenses
Region expenses increased $0.4 million, or 10%, in the first six months of
fiscal 2000 over the first six months of the last fiscal year, primarily due to
the addition of region personnel. Region expenses decreased as a percentage of
revenues to 8.0% in the first six months of fiscal 2000 from 8.3% in the first
six months of the last fiscal year.
Headquarters Expenses
Headquarters expenses increased $0.2 million, or 6%, in the first six months of
fiscal 2000 over the first six 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 six months of fiscal 2000 from
6.3% in the first six months of the last fiscal year.
Franchise Expenses
Franchise expenses decreased $0.1 million for the first six months of fiscal
2000, compared to the first six months of the last fiscal year, primarily due to
decreased legal expenses.
Other Depreciation and Amortization
Other depreciation and amortization decreased $0.2 million, or 11%, in the first
six months of fiscal 2000 from the first six 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 $1.3 million, or 84%, in the
first six months of fiscal 2000 as compared to the first six months of the last
fiscal year. This increase was principally the result of an increase in
borrowings used 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 $1.6 million was provided for income taxes in the first six months of
fiscal 2000, up from $1.3 million in the first six 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. The effective income tax
rate was 40.0% for the first six months of fiscal 2000, unchanged from the first
six months of the last fiscal year.
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 six months ended December 31, 1999 and 1998, cash and cash
equivalents increased $37.4 million and $15.6 million, respectively.
Property and equipment increased by $1.3 million, and the excess purchase price
over the fair value of net assets acquired increased $0.8 million, as a result
of the 31 stores opened and the three stores acquired during the six months
ended December 31, 1999, offset by related depreciation and amortization.
12
<PAGE> 13
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows from Operating Activities
During the six months ended December 31, 1999 and 1998, the Company had net cash
provided by operating activities of $1.6 million and $4.1 million, respectively.
The reduction in cash provided from operating activities in the six months ended
December 31, 1999 was primarily the result of a $3.2 million decrease in
salaries and benefits accrual required at year end.
Cash Flows from Investing Activities
During the six months ended December 31, 1999 and 1998, the Company used $4.8
million and $3.6 million, respectively, for purchases of property and equipment
related principally to new store openings and remodeling existing stores.
Capital expenditures for acquisitions were $1.1 million and $6.2 million,
respectively, for the six months ended December 31, 1999 and 1998, related to
the three stores acquired during the six months ended December 31, 1999 and the
19 stores acquired during the six months ended December 31, 1998.
Cash Flows from Financing Activities
Net cash provided by financing activities for the six months ended December 31,
1999, was $41.7 million. The Company increased its borrowings under its bank
credit agreement by $45.0 million due to the timing of remittances on money
order sales and end-of-year cash needs. Senior secured notes payable of $16.2
million decreased $4.2 million for the six months ended December 31, 1999,
because of the Company's payment of the first annual installment of principal of
$4.0 million in November 1999. Acquisition-related notes payable to sellers
decreased by $0.1 million during the six months ended December 31, 1999. Net
cash provided by financing activities for the six months ended December 31,
1998, was $21.3 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
$85.1 million under its revolving facility and $10.5 million under its term-loan
facility as of December 31, 1999.
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 in calendar year 1999, 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 is
5.14% for calendar year 1999 and 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 is 6.23% for calendar year 1999 and 6.38% for calendar year 2000.
13
<PAGE> 14
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
$1.0 million as of December 31, 1999.
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
December 31, 1999, the Company had purchased 55,200 shares at an average price
of $14.45 per share.
YEAR 2000 ISSUE UPDATE
The "Year 2000 Issue" is the result of computer programs that use two digits
instead of four to record the applicable year. Computer programs that have
date-sensitive software might recognize a date using "00" as the year 1900
instead of the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including, among other
events, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities.
The Company has addressed its Year 2000 Issue and has modified or replaced
portions of its software or hardware as appropriate, so that its computer
systems will properly recognize dates beyond December 31, 1999. The Company has
also modified or replaced its hardware and software with upgraded or new
hardware and software at a cost that has not been material to the Company's
operations or financial condition. Further, the Company's operations were not
disrupted to any material extent by the Year 2000 Issue with its existing
software or hardware or by its activities to address the Year 2000 Issue.
RENEWAL OF CREDIT FACILITIES
The Company's credit facilities were renewed by an amendment to its credit
agreement effective December 15, 1999. The credit facilities are now available
to the Company until mid-December 2000. In addition, the revolving
line-of-credit facility was increased from $110 million to $130 million.
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
14
<PAGE> 15
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 $1.0 million as
of December 31, 1999.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In the lawsuit filed against the Company in California, Bryan Meegan v. Ace Cash
Express, Inc., the court approved the negotiated settlement with the plaintiff
and the purported class on November 22, 1999.
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.
In the lawsuit filed against the Company in Florida, Gary M. Kane and Wendy
Betts v. Ace Cash Express, Inc., et al., by order entered on January 13, 2000,
the court declined to certify the lawsuit as a class action and dismissed the
plaintiffs' state-law claims from the lawsuit.
On December 17, 1999, a lawsuit regarding the Company's "payday loan" service,
Eva J. Rowings v. Ace Cash Express, Inc., was filed against the Company in the
United States District Court for the Southern District of Indiana. The
plaintiff, for herself and others similarly situated since December 17, 1998,
alleges that the Company's disclosures to recipients of payday loans in Indiana
do not comply with the requirements of the Truth in Lending Act and Regulation Z
under federal law and of the Uniform Consumer Credit Code in Indiana. The
plaintiff seeks monetary damages as specified by statute as well as attorneys'
fees and court costs from the Company. Because this lawsuit purports to be a
class action, the amount of damages for which the Company may be responsible is
necessarily uncertain. That amount would depend on proof of the allegations, on
the number of recipients of payday loans who constitute the class of plaintiffs
(if permitted by the court), and on proof of actual damages sustained by the
plaintiffs. Under each of the federal Truth in Lending Act and the Indiana
Uniform Consumer Credit Code, if the court were to certify this lawsuit as a
class action and if the Company were found to have violated that statute, the
Company's maximum liability would be the sum of (1) any actual damages sustained
by the plaintiffs as a result of the violation, (2) the lesser of $500,000 or 1%
of the Company's net worth, and (3) reasonable attorneys' fees and court costs.
The Company believes that this lawsuit is without merit; the Company denies all
of the plaintiffs' material allegations and intends to vigorously defend this
lawsuit.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
15
<PAGE> 16
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Shareholders on November 15, 1999. At
this meeting the Company's shareholders elected six directors of the Company to
serve until the next annual meeting or until their successors are elected and
qualified. The table below shows the votes cast in favor of the election of the
six directors and the votes withheld against their election. There were no
abstentions or broker non-votes.
<TABLE>
<CAPTION>
DIRECTOR VOTES FOR VOTES WITHHELD
- -------------------------------------------------------------------------------
<S> <C> <C>
Raymond C. Hemmig 8,325,392 244,306
Donald H. Neustadt 8,325,452 244,246
Howard W. Davis 8,325,192 244,506
Marshall B. Payne 8,324,122 245,576
Edward W. Rose III 8,324,352 245,346
C. Daniel Yost 8,325,552 244,146
</TABLE>
At the meeting, the Company's shareholders also approved an amendment to the
Company's 1997 Stock Option Plan for employees. Shareholders voted 7,929,042
shares for the amendment and 605,255 shares against the amendment, and 24,845
shares abstained.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit Number Exhibits
-------------- --------
<S> <C>
Exhibit 3.3* Certificate of Amendment to the Company's
Bylaws dated January 3, 2000.
Exhibit 10.45* Amendment No. 2 to Ace Cash Express, Inc.
1997 Stock Option Plan.
Exhibit 10.46* Second Amendment to Credit Agreement dated
as of December 15, 1999, among the Company,
the Credit Agent, and the lenders named
therein, with Schedules 2.01(a) and 2.01(b)
thereto.
Exhibit 27* Financial Data Schedule (EDGAR version only)
</TABLE>
-----------------
* 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.
February 11, 2000
By: /s/ Debra A. Bradford
Senior Vice President and
Chief Financial Officer
(Duly authorized officer and
principal financial and chief
accounting officer)
16
<PAGE> 17
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
<S> <C>
Exhibit 3.3* Certificate of Amendment to the Company's
Bylaws dated January 3, 2000.
Exhibit 10.45* Amendment No. 2 to Ace Cash Express, Inc.
1997 Stock Option Plan.
Exhibit 10.46* Second Amendment to Credit Agreement dated
as of December 15, 1999, among the Company,
the Credit Agent, and the lenders named
therein, with Schedules 2.01(a) and 2.01(b)
thereto.
Exhibit 27* Financial Data Schedule (EDGAR version only)
</TABLE>
-----------------
* Filed herewith
<PAGE> 1
EXHIBIT 3.3
CERTIFICATE OF AMENDMENT
TO BYLAWS
The undersigned hereby certifies that the following are amendments to
the Bylaws of Ace Cash Express, Inc. (the "Corporation"), adopted by the Board
of Directors of the Corporation at a meeting of the Board of Directors duly
called and held on December 22, 1999:
RESOLVED FURTHER, that Section 1 of Article V of the Bylaws be amended,
effective as of January 3, 2000, to read in its entirety as follows:
Section 1. General. The elected officers of the
Corporation shall be a President and a Secretary. The Board of
Directors may also elect or appoint a Chairman of the Board, a
Chief Executive Officer, one or more Vice Presidents, one or
more Assistant Vice Presidents, one or more Assistant
Secretaries, a Treasurer, one or more Assistant Treasurers,
and such other officers as may be deemed necessary, all of
whom shall also be officers. Two or more offices may be held
by the same person.
RESOLVED FURTHER, that Sections 3 and 4 of Article V of the Bylaws be
deleted and replaced in their entirety, effective as of January 3, 2000, by the
following:
Section 3. Chairman of the Board. The Board of
Directors may elect or appoint, from among its members, a
Chairman of the Board. The Chairman of the Board (if any),
when present, shall preside at all meetings of the
shareholders and of the Board of Directors of the Corporation.
The Chairman of the Board shall perform, under the direction
and subject to the control of the Board of Directors, all
duties incident to the office of the Chairman of the Board and
such other duties as the Board of Directors may assign to him
from time to time. The Chairman of the Board may sign stock
certificates representing shares of the Corporation.
Section 3A. Chief Executive Officer. The Chief
Executive Officer of the Corporation, subject to the
provisions of these Bylaws, shall have general supervision of
the affairs of the Corporation and shall have general and
active control of all its business. In the absence of the
Chairman of the Board (if any), he may preside, when present,
at all meetings of the shareholders (including the holders of
any class of shares of the Corporation) and of the Board of
Directors of the Corporation. He shall see that all orders and
resolutions of the Board of Directors and the shareholders are
carried into effect. He shall have general authority to
execute bonds, deeds and contracts in the name of the
Corporation and affix the corporate seal (if any) thereto; to
sign stock certificates; to cause the employment or
appointment of such employees and agents of the Corporation as
the proper conduct of operations may require, and to fix their
compensation, subject to the provisions of these Bylaws; to
remove or suspend any employee or agent who shall have been
employed or appointed under his authority or under authority
of an officer subordinate to him; to suspend for cause,
pending final action by the authority which shall have elected
or appointed him, any officer subordinate to the Chief
Executive Officer; and, in general, to exercise all the powers
and authority usually appertaining to the chief executive
officer of a corporation, except as otherwise provided in
these Bylaws.
Section 4. President. In the absence of a Chairman of
the Board or a Chief Executive Officer, the President shall be
the ranking and Chief Executive Officer of the Corporation,
and shall have the rights and powers, and the duties and
responsibilities, of the Chairman of the Board and the Chief
Executive Officer. The President shall be the Chief Operating
Officer of the Corporation and as such shall have, subject to
review and approval of the Board of Directors and the Chairman
of the Board (if any) and the Chief Executive Officer (if
any), the responsibility for the operations of the Corporation
and the authority of the Chairman of the Board and the Chief
Executive Officer.
<PAGE> 2
RESOLVED FURTHER, that Section 1 of Article VI of the Bylaws be
amended, effective as of January 3, 2000, to read in its entirety as follows:
Section 1. Form of Certificates. The Corporation
shall deliver certificates representing all shares to which
shareholders are entitled. Certificates representing shares of
the Corporation shall be in such form as shall be approved and
adopted by the Board of Directors and shall be numbered
consecutively and entered in the share transfer records of the
Corporation as they are issued. Each certificate shall state
on the face thereof that the Corporation is organized under
the laws of the State of Texas, the name of the registered
holder, the number and class of shares, and the designation of
the series (if any) which the certificate represents, and
either the par value of the shares or a statement that the
shares are without par value. Each certificate shall also set
forth on the back thereof a full or summary statement of
matters required by the Act or the Articles of Incorporation
to be described on certificates representing shares, and shall
contain a conspicuous statement on the face thereof referring
to the matters set forth on the back thereof. Certificates
shall be signed by the Chairman of the Board, the Chief
Executive Officer, the President or any Vice President and by
the Secretary or any Assistant Secretary, and may be sealed
with the seal of the Corporation (if any). Either the seal of
the Corporation (if any) or the signatures of the
Corporation's officers, or both, may be facsimiles. In case
any officer or officers who have signed, or whose facsimile
signature or signatures have been used on, such certificate or
certificates shall cease to be such officer or officers of the
Corporation, whether because of death, resignation or
otherwise, before such certificate or certificates have been
delivered by the Corporation or its agents, such certificate
or certificates may nevertheless be issued and delivered as
though the person or persons who signed the certificate or
certificates or whose facsimile signature or signatures have
been used thereon had not ceased to be such officer or
officers of the Corporation.
---------------------------- -----------------------------------
Debra A. Bradford, Secretary
<PAGE> 1
EXHIBIT 10.45
AMENDMENT NO. 2
TO
ACE CASH EXPRESS, INC.
1997 STOCK OPTION PLAN
In accordance with Section 17 of the Ace Cash Express, Inc. 1997 Stock
Option Plan (the "Plan"), Section 5 of the Plan is hereby amended to read in its
entirety as follows:
5. SHARES SUBJECT TO PLAN. The Board may not grant options under the
Plan for more than 1,215,000 shares of Common Stock of the Company, including
(without limitation) to any key employee, but this number may be adjusted to
reflect, if deemed appropriate by the Committee, any stock dividend, stock
split, share combination, recapitalization, or the like of or by the Company.
Shares to be optioned and sold may be made available from either authorized but
unissued Common Stock or Common Stock held by the Company in its treasury.
Shares that by reason of the expiration of an option or otherwise are no longer
subject to purchase pursuant to an option granted under the Plan may be
re-offered under the Plan.
IN WITNESS WHEREOF, this instrument has been executed to be effective
as of the 23rd day of September, 1999.
ACE CASH EXPRESS, INC.
By:
--------------------------------
<PAGE> 1
EXHIBIT 10.46
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is made
and entered into effective as of the 15th day of December, 1999 (the "Effective
Date"). Reference is made to the Credit Agreement, dated as of July 31, 1998 (as
amended, supplemented or otherwise modified and in effect on the date hereof,
the "Credit Agreement") by and among ACE CASH EXPRESS, INC., a Texas corporation
(the "Borrower"), the lenders party hereto (collectively, together with all
successors and assigns, the "Lenders") and WELLS FARGO BANK (TEXAS), NATIONAL
ASSOCIATION, a national banking association, as Agent (the "Agent").
PRELIMINARY STATEMENTS
A. The Borrower has requested that the Lenders extend the Revolving
Credit Termination Date and the Scheduled Advance Term Loan Termination Date to
December 13, 2000.
B. The Borrower has also requested that the Revolving Credit Commitment
be increased from One Hundred Ten Million Dollars ($110,000,000) to One Hundred
Thirty Million Dollars ($130,000,000) and that the Swingline Loan facility be
increased from Twenty Million Dollars ($20,000,000) to Twenty-Five Million
Dollars ($25,000,000).
C. The parties hereto also desire to (i) add National City Bank (herein
so called) as a Lender and (ii) remove Guaranty Federal Bank, F.S.B. ("Guaranty
Federal") as a Lender, in each case, for all purposes of the Credit Agreement.
D. It is the intention of the parties hereto that the Loans outstanding
prior to the Effective Date to or for the account of the Borrower shall continue
and remain outstanding and not be repaid on the Effective Date, but shall be
assigned and reallocated among the Lenders as provided in Section 3.02 hereof,
and, accordingly, the Loans and Commitments hereunder are not in novation or
discharge of the outstanding Loans.
E. The Borrower and Lenders further desire to amend the Credit
Agreement as hereinafter set forth.
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties, intending to be legally bound, agree as
follows:
AGREEMENT
ARTICLE I. DEFINITIONS
SECTION 1.01 Certain Defined Terms. Capitalized terms used in this
Amendment are used as defined in the Credit Agreement, as amended hereby, unless
otherwise stated.
ARTICLE II. AMENDMENTS
SECTION 2.01 Amendment to Section 1.01 - Certain Defined Terms.
Effective as of the Effective Date, Section 1.01 of the Credit Agreement is
hereby amended by amending and restating the following definitions:
"`Final Maturity Date' shall mean December 15, 2004."
"`Revolving Credit Termination Date' shall mean the earlier to occur of
(a) December 13, 2000 and (b) such date as the Revolving Credit Loans
shall otherwise be payable in full and the Revolving Credit Commitment
shall terminate, expire or be canceled in accordance with the terms of
this Agreement."
"`Scheduled Advance Term Loan Termination Date' shall mean December 13,
2000."
SECTION 2.02 Amendment to Section 2.17 - Swingline Loans. Effective as
of the Effective Date, Section 2.17 of the Credit Agreement is hereby amended so
that the reference in such section to "Twenty Million Dollars ($20,000,000)"
shall read "Twenty-Five Million Dollars ($25,000,000)".
<PAGE> 2
SECTION 2.03 Amendment to Section 3.06 - Litigation; Compliance With
Laws; Etc. Effective as of the Effective Date, subsection (a) of Section 3.06 of
the Credit Agreement is hereby amended so that the phrase "Except as set forth
on Schedule 3.06 hereto," is added to the beginning of such subsection.
SECTION 2.04 Amendment to Section 5.05 - Financial Statements, Reports,
Etc. Effective as of the Effective Date, subsection (f) of Section 5.05 of the
Credit Agreement is hereby amended so that the reference in such section to "no
later than the beginning of each Fiscal Year" shall read "within ninety (90)
days after the beginning of each Fiscal Year".
SECTION 2.05 Amendment to Section 6.06 - Loans and Advances. Effective
as of the Effective Date, the "." at the end of subsection (d) of Section 6.06
of the Credit Agreement is hereby replaced with "; or", and a new subsection (e)
is added to Section 6.06 of the Credit Agreement which shall read as follows:
"(e) Loans and advances as contemplated by the Master Loan Agency
Agreement dated August 11, 1999 between Borrower and Goleta National
Bank, as in effect as of such date."
SECTION 2.06 Amendment to Section 6.18 - Limitation on Investments.
Effective as of the Effective Date, the "." at the end of subsection (e) of
Section 6.18 of the Credit Agreement is hereby replaced with "; and", and a new
subsection (f) is added to Section 6.18 of the Credit Agreement which shall read
as follows:
"(f) Purchase of participations in consumer loans originated by Goleta
National Bank in accordance with the terms and conditions of the Master
Loan Agency Agreement dated August 11, 1999 between Borrower and Goleta
National Bank, as in effect as of such date."
SECTION 2.07 Schedule 2.01(a) - Advance Term Loan Commitments.
Effective as of the Effective Date, all references in the Credit Agreement to
Schedule 2.01(a), which is entitled "Advance Term Loan Commitments", shall be
deemed references to the Schedule 2.01(a) which is attached hereto as Annex A.
SECTION 2.08 Schedule 2.01(b) - Revolving Credit Commitments. Effective
as of the Effective Date, all references in the Credit Agreement to Schedule
2.01(b), which is entitled "Revolving Credit Commitments", shall be deemed
references to the Schedule 2.01(b) which is attached hereto as Annex B.
SECTION 2.09 Schedule 3.06 - Litigation. Effective as of the Effective
Date, all references in the Credit Agreement to Schedule 3.06, which is entitled
"Litigation", shall be deemed references to the Schedule 3.06 which is attached
hereto as Annex C .
ARTICLE III. ADDITION AND REMOVAL OF LENDERS; REALLOCATION OF COMMITMENTS
SECTION 3.01 Addition and Removal of Lenders. From and after the
Effective Date, (a) National City Bank shall be a party to the Credit Agreement
and have the rights and obligations of a Lender thereunder and under the other
Credit Documents, and shall be bound by the provisions thereof, and (b) Guaranty
Federal shall relinquish its rights and be released from its obligations under
the Credit Agreement, and shall cease to be a party to the Credit Documents, but
shall nevertheless continue to be entitled to the benefits of Sections 2.10,
2.11, 2.12, 2.15 and 9.04 of the Credit Agreement.
SECTION 3.02 Reallocation of Loans and Commitments. On the Effective
Date, National City Bank (and each other Lender, if any, whose relative
proportion of its Commitment hereunder is increasing over the proportion of the
Commitment held by it prior to the Effective Date) shall, by assignments from
the Lenders which were parties to the Credit Agreement prior to the Effective
Date (the "Existing Lenders") (which assignments shall be deemed to occur
hereunder automatically, and without any requirement for additional
documentation, on the Effective Date) acquire a portion of the Loans and
Commitments of the Existing Lenders so designated in such amounts, and the
Lenders shall, through the Agent, make such other adjustments among themselves
as shall be necessary so that after giving effect to assignments and
adjustments, the Lenders shall hold all Loans outstanding under the Credit
Agreement ratably in accordance with their respective Commitments as reflected
on Schedule 2.01(a) and Schedule 2.01(b), attached hereto as Annex A and Annex
B, respectively. On the Effective Date, all Interest Periods under the Credit
Agreement in respect of any Eurodollar Loans under the Credit Agreement shall
automatically be terminated (and the Borrower shall on the Effective Date make
payments to the Existing Lenders that held such Eurodollar Loans under Section
2.09 and Section 2.12 of the Credit Agreement to compensate for such termination
as if such termination were a payment or prepayment referred to in said Sections
2.09 and 2.12), and subject
<PAGE> 3
to the other restrictions contained herein, the Borrower shall be permitted to
continue such Eurodollar Loans or to convert such Eurodollar Loans into
Alternate Base Loans hereunder.
SECTION 3.03 Adjustments Generally. On the day that is three (3)
Business Days prior to the Effective Date, the Agent shall notify each Lender of
the amount of Loans required to be made by such Lender (if any) to the Borrower
on the Effective Date, and of any other assignments or adjustments that the
Agent deems necessary and advisable such that after giving effect to the
transactions contemplated to occur on the Effective Date, each Lender's
Commitment shall be in accordance with the Commitments set forth opposite its
name on Schedule 2.01(a) and Schedule 2.01(b), attached hereto as Annex A and
Annex B, respectively. Each Lender's Loans to the Borrower shall not exceed its
pro rata portion of all Loans then outstanding to the Borrower, and the unused
Commitments of all Lenders plus all outstanding Loans under the Credit
Agreement, as amended hereby, shall not exceed the Total Commitment. Any such
assignments shall be deemed to occur hereunder automatically on the Effective
Date and without any requirement for additional documentation, and in the case
of any such assignment, the assigning party shall be deemed to represent and
warrant to each assignee that it has not created any adverse claim upon the
interest being assigned and that such interest is free and clear of any adverse
claim. Each Lender hereby agrees to give effect to the instructions of the Agent
to such Lender contained in the notice described above.
ARTICLE IV. CONDITIONS PRECEDENT
SECTION 4.01 Conditions to Effectiveness. The effectiveness of this
Amendment is subject to the satisfaction of the following conditions precedent:
(a) The Lenders shall have received (i) this Amendment, duly
executed by the Borrower and all Lenders, (ii) new Advance Term Notes,
dated as of the Effective Date but otherwise substantially in the form
of Exhibit A to the Credit Agreement, executed by the Borrower in favor
of each Lender reflecting the Advance Term Loan Commitments as amended
herein (the "New Advance Term Notes"), (iii) new Revolving Credit
Notes, dated as of the Effective Date but otherwise substantially in
the form of Exhibit B to the Credit Agreement, executed by the Borrower
in favor of each Lender reflecting the Revolving Credit Commitments as
amended herein (the "New Revolving Credit Notes"), (iv) a certificate
of the Secretary of the Borrower acknowledging (A) that the Borrower's
Board of Directors has adopted, approved, consented to and ratified
resolutions which authorize the execution, delivery and performance by
such Borrower of this Amendment, the New Advance Term Notes, the New
Revolving Credit Notes and all other Credit Documents to which the
Borrower is or is to be a party as a result of this Amendment, and (B)
the names of the officers of the Borrower authorized to sign this
Amendment, the New Advance Term Notes, the New Revolving Credit Notes,
and each of the other Credit Documents to which the Borrower is or is
to be a party as a result of this Amendment (including the certificates
contemplated herein) together with specimen signatures of such
officers, and (v) such additional documents, instruments and
information as the Lenders may reasonably request;
(b) Each of the Lenders listed below shall have received, in
consideration of this Amendment, an amendment fee (the "Amendment Fee")
equal to the amount corresponding to such Lender's name below:
<TABLE>
<CAPTION>
Lender Amendment Fee
------ -------------
<S> <C>
Wells Fargo Bank (Texas), National Association $24,000.00
Chase Bank of Texas, National Association $17,318.18
Paribas $11,193.18
First Union National Bank $29,193.18
Bank of America, N.A. $29,193.18
National City Bank $12,500.00
</TABLE>
(c) Confirmations of the existing Guaranty Agreements from
each Guarantor;
<PAGE> 4
(d) A legal opinion from counsel to the Borrower covering such
matters as the Agent may reasonably request;
(e) The representations and warranties contained herein and in
the Credit Agreement and the Credit Documents, as each is amended
hereby, shall be true and correct in all material respects as of the
date hereof, as if made on the date hereof (except insofar as such
representations and warranties relate expressly to an earlier date or a
date modified hereby);
(f) After giving effect to this Amendment, no Default or Event
of Default shall have occurred and be continuing; and
(g) All corporate proceedings taken in connection with the
transactions contemplated by this Amendment and all documents,
instruments and other legal matters incident thereto shall be
satisfactory to the Lenders and their legal counsel.
ARTICLE V. LIMITED CONSENT
SECTION 5.01. Limited Consent. By execution of this Amendment, the
Lenders hereby consent to the Borrower's entering into the Master Loan Agency
Agreement dated August 11, 1999 between the Borrower and Goleta National Bank,
as in effect on the date hereof (the "Goleta Agreement"), and hereby waive any
Default or Event of Default arising under Sections 6.06 or 6.18 and/or Article
VII(d) of the Credit Agreement solely as a result of Borrower's entering into
the Goleta Agreement and consummating the transactions contemplated thereby.
Except as specifically provided in the preceding sentence, nothing contained in
this Amendment shall be construed as a waiver by the Agent or the Lenders of any
covenant or provision of the Credit Agreement, the other Credit Documents, this
Amendment, or of any other contract or instrument between the Borrower, the
Agent and/or the Lenders, and the failure of the Agent or the Lenders at any
time or times hereafter to require strict performance by the Borrower of any
provision thereof shall not waive, affect or diminish any right of the Agent or
the Lenders to thereafter demand strict compliance therewith. The Agent and the
Lenders hereby reserve all rights granted under the Credit Agreement, the other
Credit Documents, this Amendment and any other contract or instrument between
the Borrower, the Agent and/or the Lenders.
ARTICLE VI. REPRESENTATIONS AND WARRANTIES
SECTION 6.01 Representations and Warranties. The Borrower hereby
represents and warrants to the Agent and the Lenders that (a) the
representations and warranties contained in the Credit Agreement, as amended
hereby, and in any other Credit Documents are true and correct in all material
respects on and as of the date hereof as though made on and as of the date
hereof (except insofar as such representations and warranties relate expressly
to an earlier date or a date modified hereby); (b) no Default of Event of
Default under the Credit Agreement, as amended hereby, has occurred and is
continuing; and (c) Borrower is in compliance in all material respects with all
covenants and agreements contained in the Credit Agreement and in the other
Credit Documents, as amended hereby.
ARTICLE VII. MISCELLANEOUS PROVISIONS
SECTION 7.01 Return of Previous Notes. Within five (5) Business Days
after the date on which any Lender has received its respective New Advance Term
Note and New Revolving Credit Note, such Lender shall return to the Agent the
Advance Term Note and the Revolving Credit Note executed by the Borrower in
favor of such Lender dated December 16, 1998 (individually, a "Previous Note" or
collectively, the "Previous Notes") (to the extent that such Previous Notes were
executed in favor of such Lender); provided, however, that Guaranty Federal
shall return the Previous Notes executed in its favor to the Agent within five
(5) Business Days after the Effective Date. Within five (5) Business Days after
the Agent receives any Previous Note, the Agent shall return such Previous Note
or Previous Notes to the Borrower for cancellation.
SECTION 7.02 Ratification of Credit Agreement and Other Credit
Documents. Except as expressly provided herein, (i) the Credit Agreement and all
other Credit Documents shall remain unmodified and in full force and effect as
supplemented and amended hereby, and (ii) the Borrower hereby affirms all the
provisions of the Credit Agreement, as amended hereby, and the other Credit
Documents, as amended hereby.
<PAGE> 5
SECTION 7.03 Confirmation of the Security Documents. The Borrower
hereby acknowledges and confirms that the Collateral (as defined in the Security
Documents) continues to secure the Liabilities (as defined in the Security
Documents), including those arising under the Credit Agreement, as amended
hereby.
SECTION 7.04 Counterparts. This Amendment may be executed in one or
more counterparts, each of which when so executed shall be deemed to be an
original, but all of which when taken together shall constitute one and the same
instrument.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 6
IN WITNESS WHEREOF, this Amendment has been executed as of the 18th day
of November, 1999, but is to be effective as of the Effective Date.
BORROWER:
ACE CASH EXPRESS, INC.
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
AGENT:
WELLS FARGO BANK (TEXAS),
NATIONAL ASSOCIATION
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
LENDERS:
WELLS FARGO BANK (TEXAS),
NATIONAL ASSOCIATION
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
FIRST UNION NATIONAL BANK
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
BANK OF AMERICA, N.A.,
formerly known as NationsBank, N.A.
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
<PAGE> 7
PARIBAS
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
NATIONAL CITY BANK
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
AGREED AND ACKNOWLEDGED:
GUARANTY FEDERAL BANK, F.S.B.
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
<PAGE> 8
ANNEX A
ADVANCE TERM LOAN COMMITMENTS
(See Attached)
<PAGE> 9
SCHEDULE 2.01(a)
ADVANCE TERM LOAN COMMITMENTS
<TABLE>
<CAPTION>
Percentage of
Lender Commitment Commitment
- ------ -------------- -------------
<S> <C> <C>
Wells Fargo Bank (Texas), National Association $10,181,818.17 29.091%
Chase Bank of Texas, National Association $ 6,190,082.61 17.686%
Paribas $ 4,126,721.88 11.791%
First Union National Bank $ 6,190,082.61 17.686%
Bank of America, N.A $ 6,190,082.61 17.686%
National City Bank $ 2,121,212.12 6.061%
-------------- -------------
Total Advance Term Loan Commitments $35,000,000.00 100.00%
============== =============
</TABLE>
<PAGE> 10
ANNEX B
REVOLVING CREDIT COMMITMENTS
(See Attached)
<PAGE> 11
SCHEDULE 2.01(b)
REVOLVING CREDIT COMMITMENTS
<TABLE>
<CAPTION>
Percentage of
Lender Commitment Commitment
- ------ ---------------- ----------------
<S> <C> <C>
Wells Fargo Bank (Texas), National Association $ 37,818,181.83 29.091%
Chase Bank of Texas, National Association $ 22,991,735.39 17.686%
Paribas $ 15,327,824.12 11.791%
First Union National Bank $ 22,991,735.39 17.686%
Bank of America, N.A $ 22,991,735.39 17.686%
National City Bank $ 7,878,787.88 6.061%
---------------- ----------------
Total Revolving Credit Commitments $ 130,000,000.00 100.00%
================ ================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 96,844
<SECURITIES> 0
<RECEIVABLES> 11,062
<ALLOWANCES> 443
<INVENTORY> 1,457
<CURRENT-ASSETS> 110,762
<PP&E> 52,292
<DEPRECIATION> 20,572
<TOTAL-ASSETS> 184,926
<CURRENT-LIABILITIES> 109,784
<BONDS> 0
0
0
<COMMON> 101
<OTHER-SE> 49,613
<TOTAL-LIABILITY-AND-EQUITY> 184,926
<SALES> 62,872
<TOTAL-REVENUES> 62,872
<CGS> 0
<TOTAL-COSTS> 55,653
<OTHER-EXPENSES> 346
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,830
<INCOME-PRETAX> 4,043
<INCOME-TAX> 1,617
<INCOME-CONTINUING> 2,426
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (603)
<NET-INCOME> 1,823
<EPS-BASIC> 0.18
<EPS-DILUTED> 0.18
</TABLE>
