UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___TO___
COMMISSION FILE NUMBER 0-20774
ACE CASH EXPRESS, INC.
(Exact name of registrant as specified in its charter)
TEXAS 75-2142963
(State or other jurisdiction (I.R.S. Employer Identification No.)
of 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 October 28, 1997
----- ----------------------------------
Common Stock 6,490,701 shares
ACE CASH EXPRESS, INC.
PART I. FINANCIAL INFORMATION PAGE NO.
Item 1. Interim Consolidated Financial Statements:
Consolidated Balance Sheets as of
September 30, 1997, and June 30, 1997 3
Interim Unaudited Consolidated Statements of Earnings for the
Three Months Ended September 30, 1997 and 1996 4
Interim Unaudited Consolidated Statements of Cash Flows
for the Three Months Ended September 30, 1997 and 1996 5
Notes to Interim Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
2
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)
September 30, June 30,
------------------------------
1997 1997
------------ ------------
(unaudited)
ASSETS
Cash and cash equivalents $ 52,870 $ 55,494
Accounts and notes receivable, net 7,147 7,459
Prepaid expenses 660 573
Inventories 1,813 2,052
Property and equipment, net 24,756 23,920
Covenants not to compete, net 2,724 2,775
Excess of purchase price over fair value of assets acquired, net 28,996 28,469
Other assets 3,626 3,608
------------ ------------
$ 122,592 $ 124,350
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Money order principal payable $ 46,858 $ 41,281
Senior secured notes payable 20,692 20,231
Revolving advances from money order supplier 1,831 7,166
Accounts payable and accrued liabilities 9,124 11,031
Notes payable 357 637
Term advances from money order supplier 7,763 8,209
Other liabilities 4,301 4,739
Commitments and contingencies
Stockholders' equity:
Preferred stock, $1 par value, 1,000,000 shares authorized, none
issued and outstanding - -
Common stock, $.01 par value, 10,000,000 shares authorized,
6,487,351 and 6,445,741 shares issued and outstanding,
respectively 65 64
Additional paid-in capital 19,161 19,162
Retained earnings 12,440 11,830
------------ ------------
Total shareholders' equity 31,666 31,056
------------ ------------
$ 122,592 $ 124,350
============ ============
See notes to the interim consolidated financial statements.
3
ACE CASH EXPRESS, INC. AND SUBSIDIARIES
INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS
THREE MONTHS ENDED
SEPTEMBER 30,
---------------------------------
1997 1996
------------- -------------
(in thousands, except per share data)
Revenues $ 21,694 $ 19,021
Store expenses:
Salaries and benefits 6,167 5,755
Occupancy 3,721 3,287
Depreciation 961 772
Other 4,698 4,192
------------- -------------
Total store expenses 15,547 14,006
------------- -------------
Store gross margin 6,147 5,015
Region expenses 2,041 1,764
Headquarters expenses 1,495 1,227
Franchise expenses 212 238
Other depreciation and amortization 862 656
Interest expense, net 497 548
Other expenses 31 16
------------- -------------
Income before income taxes 1,009 566
Income taxes 399 221
------------- -------------
Net income $ 610 $ 345
============= =============
Earnings per share $ .09 $ .05
============= =============
Weighted average number of common and common
equivalent shares outstanding 6,771 6,490
============= =============
See notes to the interim consolidated financial statements.
4
ACE CASH EXPRESS, INC. AND SUBSIDIARIES
INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
SEPTEMBER 30,
---------------------------------
1997 1996
------------- -------------
(in thousands)
Cash flows from operating activities:
Net income $ 610 $ 345
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 1,823 1,065
Recognition of deferred revenue (305) (350)
Changes in assets and liabilities:
Accounts and notes receivable, net 312 740
Prepaid expenses (87) (67)
Inventories 239 419
Other assets (18) (71)
Accounts payable and other liabilities (1,578) (952)
------------- -------------
Net cash provided by operating activities 996 1,129
Cash flows from investing activities:
Purchases of property and equipment, net
Cost of net assets acquired
(1,820) (1,063)
Net cash used by investing activities (1,316) (3,755)
------------- -------------
(3,136) (4,818)
Cash flows from financing activities:
Net borrowings from money order supplier
Term advances from money order supplier 242 4,695
Payments of term advances from money order supplier -- 2,478
Net (decrease) increase in notes payable (446) 1,531
Proceeds from stock options exercised (280) 326
Net cash (used) provided by financing activities -- 32
------------- -------------
Net (decrease) increase in cash and cash equivalents (484) 9,062
------------- -------------
Cash and cash equivalents, beginning of period (2,624) 5,373
Cash and cash equivalents, end of period 55,494 56,603
------------- -------------
$ 52,870 $ 61,976
============= =============
Supplemental disclosures of cash flows information:
Cash paid for:
Interest $ 202 $ 485
Income taxes 58 1,574
See notes to the interim consolidated financial statements.
5
ACE CASH EXPRESS, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying condensed unaudited interim consolidated financial
statements of Ace Cash Express, Inc. (the "Company" or "ACE") and its
subsidiaries have been prepared in accordance with generally accepted accounting
principles for interim financial information and the rules and regulations of
the Securities and Exchange Commission. They do not include all information and
footnotes required by generally accepted accounting principles for complete
financial statements. Although management believes that the disclosure is
adequate to prevent the information from being misleading, the interim
consolidated financial statements should be read in conjunction with the
Company's audited financial statements in its Annual Report on Form 10-K filed
with the Securities and Exchange Commission. In the opinion of Company
management, all adjustments, consisting of normal recurring accruals considered
necessary for a fair presentation, have been included.
Certain prior period accounts have been reclassified to conform to the
current year's presentation.
6
SUPPLEMENTAL STATISTICAL DATA
THREE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED JUNE 30,
------------------ ---------------------------------
1997 1996 1997 1996 1995
------ ------ ------- ------- -------
COMPANY OPERATING AND STATISTICAL DATA:
Company-owned stores in operation:
Beginning of period 617 544 544 452 343
Acquired 7 23 46 69 77
Opened 5 11 45 33 40
Closed (6) (2) (18) (10) (8)
------ ------ ------- ------- -------
End of period 623 576 617 544 452
====== ====== ======= ======= =======
Percentage increase in comparable store
revenues from prior period (1) 6.1% 5.9% 6.3% 4.7% 1.6%
Capital expenditures (in thousands) $1,820 $1,063 $ 4,868 $ 3,435 $ 4,187
Cost of net assets acquired (in thousands) $1,316 $3,755 $10,766 $14,432 $14,000
- ------------------------------------------------------------------------------------------------------------------------
OPERATING DATA:
Face amount of checks cashed (in millions) $ 651 $ 574 $ 2,621 $ 2,144 $ 1,567
Face amount of money orders sold (in millions) $ 453 $ 435 $ 1,812 $ 1,531 $ 1,213
Face amount of money orders sold as a
percentage of the face amount of checks cashed 69.6% 75.8% 69.1% 71.4% 77.4%
Face amount of average check $ 286 $ 271 $ 291 $ 285 $ 284
Average fee per check $ 6.60 $ 6.32 $ 6.78 $ 6.81 $ 6.79
Number of checks cashed (in thousands) 2,274 2,114 9,020 7,535 5,516
Number of money orders sold (in thousands) 3,388 3,253 13,608 11,835 9,334
- ------------------------------------------------------------------------------------------------------------------------
COLLECTIONS DATA:
Face amount of returned checks (in thousands) $2,618 $2,705 $10,399 $ 8,661 $ 6,206
Collections (in thousands) 1,519 1,571 6,554 5,004 3,786
------ ------ ------- ------- -------
Net write-offs (in thousands) $1,099 $1,134 $ 3,845 $ 3,657 $ 2,420
====== ====== ======= ======= =======
Collections as a percentage of returned checks 58.0% 58.1% 63.0% 57.8% 61.0%
Net write-offs as a percentage of revenues 5.1% 6.0% 4.4% 5.3% 5.1%
Net write-offs as a percentage of
the face amount of checks cashed .17% .20% .15% .17% .15%
(1) Calculated based on the changes in revenues of all stores open for both of
the full year and three month periods compared.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
REVENUE ANALYSIS
---------------------------------------------------------------------------
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------
1997 1996 1997 1996
-------- --------- --------- --------
($ IN THOUSANDS) (PERCENTAGE OF REVENUE)
Check fees $ 14,809 $ 13,135 68.3% 69.1%
Tax check fees 210 227 1.0 1.2
Money transfer services 1,435 1,421 6.6 7.5
Loan fees and interest 1,970 1,188 9.1 6.2
Money order sales 692 659 3.2 3.5
New customer fees 541 435 2.5 2.3
Bill payment services 693 471 3.2 2.4
Franchise revenues 488 362 2.2 1.9
Other fees 856 1,123 3.9 5.9
-------- --------- ----- -----
Total revenue $ 21,694 $ 19,021 100.0% 100.0%
======== ========= ===== =====
Average revenue per store $ 35.0 $ 34.0
Total revenues increased $2.7 million, or 14%, to $21.7 million in the first
quarter of fiscal 1998 from the $19.0 million in the first quarter of the last
fiscal year. This revenue growth resulted, in part, from a $1.1 million, or
6.4%, increase in comparable store revenues (519 stores). The balance of the
increase came from stores which were opened or acquired after June 30, 1996, and
were therefore not open for both of the full periods compared. The number of
Company-owned stores increased by 47, or 8%, from 576 stores open at September
30, 1996, to 623 stores open at September 30, 1997. The increase in total check
cashing fees accounted for 62% of the total revenue increase. Check cashing
fees increased $1.7 million, or 12%, from the $13.4 million in the first quarter
of the last fiscal year to $15.0 million in the first quarter of fiscal 1998.
This increase resulted from an 8% increase in the total number of checks cashed,
plus a 5% increase in the face amount of the average check.
Loan fees and interest increased $0.8 million, or 66%, as a result of an
increase in the number of stores offering the Company's loan products to 229
stores at September 30, 1997, as compared to 181 at September 30, 1996. Bill
payment services increased $0.2 million, or 47%, as a result of offering
additional new products, including prepaid local telephone service in certain
markets. Other fees decreased $0.3 million, or 24%, as a result of decreases in
food stamp distribution revenue and other miscellaneous product revenue.
8
STORE EXPENSE ANALYSIS
---------------------------------------------------------------------------
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------
1997 1996 1997 1996
-------- --------- --------- --------
($ IN THOUSANDS) (PERCENTAGE OF REVENUE)
Salaries and benefits $ 6,167 $ 5,755 28.4% 30.3%
Occupancy 3,721 3,287 17.2 17.3
Armored and security 957 774 4.4 4.1
Returns and cash shorts 1,596 1,642 7.3 8.6
Loan losses 407 297 1.9 1.5
Depreciation 961 772 4.4 4.0
Other 1,738 1,479 8.0 7.8
-------- --------- ----- -----
Total store expense $ 15,547 $ 14,006 71.6% 73.6%
======== ========= ===== =====
Average per store expense $ 25.1 $ 25.0
Total store expenses increased $1.5 million, or 11%, to $15.5 million in the
first quarter of fiscal 1998 from $14.0 million in the first quarter of the last
fiscal year. Total store expenses decreased as a percentage of revenues,
decreasing to 71.6% in the first quarter of fiscal 1998 from 73.6% in the first
quarter of the last fiscal year, primarily as a result of the increase in
average revenues per store. 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 decreased as a percentage of revenues to 7.3% in the first
quarter of fiscal 1998 from 8.6% in the first quarter of fiscal 1997.
Loan losses increased $0.1 million in the first quarter of fiscal 1998, as
compared to the first quarter of the fiscal 1997, as a result of the increased
volume of loans made.
OTHER EXPENSES ANALYSIS
------------------------------------------------------------------------------------
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------
1997 1996 1997 1996
-------- --------- --------- --------
($ IN THOUSANDS) (PERCENTAGE OF REVENUE)
Region expenses $ 2,041 $ 1,764 9.4% 9.3%
Headquarters expenses 1,495 1,227 6.9 6.4
Franchise expenses 212 238 1.0 1.3
Other depreciation and amortization 862 656 4.0 3.4
Interest expense, net 497 548 2.3 2.9
Other expenses 31 16 0.1 0.1
Region Expenses
Region expenses increased $0.3 million, or 16%, in the first quarter of fiscal
1998 over the first quarter of the last fiscal year, as a result of the addition
of region, loan operations, and operations support personnel. Region expenses
increased slightly as a percentage of revenues, from 9.3% in the first quarter
of the last fiscal year to 9.4% in the first quarter of fiscal 1998.
Headquarters Expenses
Headquarters expenses increased $0.3 million, or 22%, in the first quarter of
fiscal 1998 over the first quarter of the last fiscal year, principally as a
result of increased salaries and benefits expenses. Headquarters expenses
increased as a percentage of revenues from 6.4% in the first quarter of the last
fiscal year to 6.9% in the first quarter of fiscal 1998.
9
Franchise Expenses
Franchise expenses remained relatively unchanged for the first quarter of fiscal
1998 as compared to the first quarter of the last fiscal year.
Other Depreciation and Amortization
Other depreciation and amortization increased $0.2 million, or 31%, in the first
quarter of fiscal 1998 from the first quarter of the last fiscal year,
principally due to increased amortization of intangibles (goodwill and non-
competition agreements) related to the 10 stores acquired during the first
quarter of fiscal 1998 and the fourth quarter of fiscal 1997.
Interest Expense
Interest expense, net of interest income, decreased 9% in the first quarter of
fiscal 1998 as compared to the first quarter of the last fiscal year. This
decrease was principally the result of a $0.7 million principal reduction of
debt during the first quarter of fiscal 1998.
Income Taxes
A total of $0.4 million was provided for income taxes in the first quarter of
fiscal 1998, up from $0.2 million in the first 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 the acquisition of Check Express, Inc. The
effective income tax rate was 39.5% for the first quarter of fiscal 1998 and
39.0% for the first quarter of the last fiscal year.
BALANCE SHEET VARIATIONS
Cash and cash equivalents, the money order principal payable, and the revolving
advances from the Money Order Supplier vary as a result of seasonal and day-to-
day requirements resulting from maintaining cash for the cashing of checks,
receipts of cash from the sale of money orders, loan volume, and remittances on
money orders sold. For the three months ended September 30, 1997, cash and cash
equivalents decreased $2.6 million, compared to an increase of $5.4 million for
the three months ended September 30, 1996.
Property and equipment and the excess purchase price over the fair value of net
assets acquired increased $0.8 million and $0.5 million, respectively, as a
result of the 7 stores acquired and the 5 stores opened during the three months
ended September 30, 1997, offset by related depreciation and amortization.
Accounts payable and accrued liabilities decreased $1.9 million, primarily due
to the timing of fiscal year-end bonus payments and other salary-related
accruals.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows from Operating Activities
During the three months ended September 30, 1997 and 1996, the Company had net
cash provided by operating activities of $1.0 million and $1.1 million,
respectively.
Cash Flows from Investing Activities
During the three months ended September 30, 1997 and 1996, the Company used $1.8
million and $1.1 million, respectively, for purchases of property and equipment
related principally to new store openings and remodeling existing stores.
Capital expenditures related to acquisitions amounted to $1.3 million and $3.8
million, respectively, for the three months ended September 30, 1997 and 1996.
Cash Flows from Financing Activities
Net cash used by financing activities for the three months ended September 30,
1997 was $0.5 million. Net cash provided by financing activities for the three
months ended September 30, 1996 was $9.1 million.
10
For the three months ended September 30, 1997, the Company repaid $0.7 million
of Term Advances and notes payable and incurred revolving advances of only $0.2
million from the Money Order Supplier. For the three months ended September 30,
1996, the Company incurred $4.7 million revolving advances from the Money Order
Supplier and $4.0 million in net Term Advances from the Money Order Supplier.
Under the provisions of the Company's agreement with the Money Order Supplier
regarding advances for the acquisition and construction of additional locations
("Term Advances"), the repayment terms of each Term Advance call for the
principal amount to be paid in equal monthly installments on a 60-month
amortization through December 1998, at which time the remaining principal is
due. As of September 30, 1997, approximately $10.7 million of the Term Advances
commitment was available for acquisition and construction of additional
locations. Interest on the Term Advances accrues at the prime rate plus one
percent, which currently totals 9.5%.
The interest on revolving advances from the Money Order Supplier is based on a
per annum rate of 1.5% over the prime rate, which currently totals 10%. The
total amount of deferred money order remittances payable to the Money Order
Supplier may not exceed the Company's cash balances and cash equivalents
(including checks cashed by the Company that are being processed for payment).
The principal amount of the Company's outstanding 9.03% Senior Secured Notes is
due in five equal annual installments of $4 million each, beginning November 15,
1999. Interest payments are due semiannually, on each May 15 and November 15,
until maturity on November 15, 2003.
OPERATING TRENDS
Seasonality
The Company's business is seasonal because of the impact of cashing tax refund
checks and two other tax-related services--electronic tax filing and processing
applications for refund anticipation loans. In addition, results of operations
depend significantly upon the timing and amount of revenues and expenses
associated with the acquisition and addition of new stores.
IMPACT OF INFLATION
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 these in the forward-looking
statements. Those risks, uncertainties, and factors include, but are not
limited to, many of the following matters described in the Company's Annual
Report on Form 10-K filed with the Securities and Exchange Commission: the
Company's relationships with the Money Order Supplier and the supplier of
MoneyGram services; 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 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.
11
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27 Financial Data Schedule (EDGAR version only)
(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.
----------------------
October 29, 1997 By: /s/ Jay B. Shipowitz
Senior Vice President and CFO
(Duly authorized officer and
principal financial and chief
accounting officer)
By: /s/ Susan S. Pressler
Vice President and Controller
12