AACE Ace Cash Express

ACE Cash Express Reports Record Fiscal Third Quarter Net Income; Net Income Increased 28 Percent Excluding Lease Accounting Charge DALLAS, April 28 /PRNewswire-FirstCall/ -- ACE Cash Express, Inc. (NASDAQ:AACE) announced record fiscal third quarter 2005 net income of $9.9 million, or $0.71 per diluted share, compared to fiscal third quarter 2004 net income of $8.2 million, or $0.72 per diluted share. As previously disclosed, fiscal third quarter 2005 results include a one-time after-tax charge of approximately $600,000, or $0.04 per diluted share, related to a cumulative change to the company's lease accounting practices. Excluding this one-time charge, ACE's fiscal third quarter 2005 net income increased 28 percent over the fiscal third quarter 2004 earnings to $10.4 million and earnings per diluted share increased to $0.75. Including the lease accounting charge, net income increased 21 percent over the fiscal third quarter 2004. During the fiscal third quarter of 2005, ACE's total revenue increased 7 percent to $78.5 million, versus $73.7 million in the prior year period, due primarily to a 16 percent increase in loan fees and a 19 percent increase in bill payment and debit card revenue. "We are pleased to report another strong quarter, which was led by increases in comparable store loan fees as well as double-digit bill payment services growth," said Jay B. Shipowitz, President and Chief Executive Officer, "We continue to remain focused on operational improvements, increased product offerings and our commitment to delivering convenient and quality services to our customers." Among the Company's accomplishments during the fiscal third quarter of 2005 were: * The total ACE store network, including franchised stores, had a record 10.3 million customer visits and processed approximately $3.1 billion in transactions. * ACE company-owned stores cashed 3.4 million checks resulting in check- cashing fees of $45.3 million, up from $44.6 million in the fiscal third quarter of 2004. ACE's check cashing volume was over $1.7 billion, a 5.1 percent increase over the fiscal third quarter of 2004 and a record for any quarter in ACE's history. * ACE company-owned stores processed approximately 470,000 loan transactions that resulted in an 8.3 percent increase in comparable store loan fees in company-owned stores over the prior year period. * ACE company-owned stores completed approximately 2.2 million bill- payment and debit card transactions that resulted in a bill payment services revenue increase of 19 percent to $5.4 million, compared to $4.5 million in the prior year period. * ACE company-owned stores sold approximately 48,000 prepaid debit cards, a 21 percent increase over the fiscal third quarter of 2004, and has now sold over 110,000 ACE MasterCards since introducing that product earlier in fiscal 2005. * Gross margin improved to 40.9 percent of revenue, or 42.3 percent excluding the lease accounting charge, in the fiscal third quarter of 2005, compared to 40.5 percent in the previous year period. During the fiscal third quarter of 2005, ACE added 53 stores to its network consisting of 13 newly constructed stores, including six ACE Cash Advance stores, 34 acquired stores, and six stores opened by ACE franchisees. ACE also closed 14 company-owned stores and at the end of the quarter had a network of 1,331 stores consisting of 1,118 company-owned stores and 213 franchised stores. Results for the Nine Months Ended March 31, 2005 For the first nine months of fiscal 2005, ACE's total revenue increased 9 percent to $205.2 million from $188.6 million in the first nine months of fiscal 2004. Net income for the first nine months of fiscal 2005 was $20.8 million, or $1.49 per diluted share, compared to net income of $14.9 million, or $1.36 per share, for the first nine months of fiscal 2004. Excluding the one-time after-tax charge of approximately $600,000, or $0.04 per diluted share, related to its previously announced cumulative change to the company's lease accounting practices, net income increased 43 percent in the first nine months of fiscal 2005 to $21.3 million and earnings per diluted share increased to $1.53. Including the lease accounting charge, net income in the first nine months of fiscal 2005 increased 39 percent compared to the prior year period. During the first nine months of fiscal 2005, ACE opened 51 newly constructed company-owned stores, including nine ACE Cash Advance stores, acquired 74 stores, and ACE franchisees opened 32 stores. ACE also closed or sold 33 company-owned locations in the normal course of business. Mr. Shipowitz added, "Year-to-date, we have added 125 company-owned stores and 32 franchised stores to the network. Additionally, we have executed leases for another 46 stores that we expect to open in the future. We have an active pipeline of new store and acquisition opportunities, which gives us strong confidence in achieving our goal of reaching over 1,600 stores by the end of fiscal 2008." Financial Guidance The Company is withdrawing its previously published earnings expectations for the fiscal year ending June 30, 2005 because of uncertainties surrounding the Federal Deposit Insurance Corporation's (FDIC) recently issued revised Guidelines for Payday Lending. The Guidelines provide guidance to banks that engage in payday lending, and include a requirement that such banks develop procedures to ensure that a payday loan is not provided to any customer with payday loans outstanding from any lender for more than three months in the previous 12 months. The implementation of the revised Guidelines and their impact on the Company's operations cannot be adequately estimated at this time. Through a marketing and services agreement with Republic Bank & Trust Company (NASDAQ:RBCAA), a Kentucky state chartered bank, the Company offers payday loans in 418 ACE locations in Texas, Pennsylvania and Arkansas, as of March 31, 2005. The Company recorded loan fees and interest generated from Republic payday loans totaling $26.8 million during the twelve months ended March 31, 2005, which represented approximately 10.2 percent of ACE's total revenues during such period. ACE believes that banks that engage in payday lending have submitted plans to the FDIC for compliance with the revised Guidelines, including the development of alternative products, and they are awaiting a response from the FDIC. At this point, the Company does not know when or to what extent its revenues will change as a result of the compliance plans that the FDIC may ultimately approve. Consequently, the Company cannot estimate with any degree of certainty the extent that the implementation of the revised Guidelines will have on the Company's revenues or earnings and is therefore withdrawing its previously published earnings expectations. About ACE Cash Express ACE Cash Express, Inc. is a leading retailer of financial services, including check cashing, short-term consumer loans and bill payment services, and the largest owner, operator and franchisor of check cashing stores in the United States. As of March 31, 2005, ACE had a network of 1,331 stores in 37 states and the District of Columbia, consisting of 1,118 company-owned stores and 213 franchised stores. ACE focuses on serving consumers who seek alternatives to traditional banking relationships in order to gain convenient and immediate access to check cashing services and short-term consumer loans. ACE's website is found at http://www.acecashexpress.com/ . Forward-Looking Statements This release contains certain "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 "expect," "anticipate," "estimate," "believe," "intend," "plan," "target," "goal," "should," "would," and terms with similar meanings. Although ACE believes that the current views and expectations reflected in these forward-looking statements are reasonable, these views and expectations, and the related statements, are inherently subject to risks, uncertainties, and other factors, many of which are not under ACE's control and may not even be predictable. Any inaccuracy in the assumptions, as well as those risks, uncertainties and other factors could cause the actual results to differ materially from these in the forward-looking statements. These risks, uncertainties, and factors include, but are not limited to, matters described in ACE's reports filed with the Securities and Exchange Commission, such as: * ACE's relationships with Republic Bank & Trust Company, with Travelers Express and its affiliates and with its bank lenders; * ACE's relationships with providers of services or products offered by ACE or property used in its operations; * federal and state governmental regulation of check cashing, short-term consumer lending and related financial services businesses; * any impact on the loans offered by Republic Bank & Trust Company at ACE's stores in Texas, Pennsylvania and Arkansas from the implementation of the revised Guidelines for Payday Lending announced on March 1, 2005 by the Federal Deposit Insurance Corporation, which revised Guidelines provide guidance to banks that engage in payday lending, and include a requirement that such banks develop procedures to ensure that a payday loan is not provided to any customer with payday loans outstanding from any lender for more than three months in the previous 12 months; * any litigation regarding ACE's short-term consumer lending activities; * theft and employee errors; * the availability of adequate financing, suitable locations, acquisition opportunities and experienced management employees to implement ACE's growth strategy; * increases in interest rates, which would increase ACE's borrowing costs; * the fragmentation of the check cashing industry and competition from various other sources, such as banks, savings and loans, short-term consumer lenders, and other similar financial services entities, as well as retail businesses that offer services offered by ACE; * the terms and performance of third-party services offered at ACE's stores; and * customer demand and response to services offered at ACE's stores. ACE expressly disclaims any obligation to update or revise any of these forward-looking statements, whether because of future events, new information, a change in ACE's views or expectations, or otherwise. ACE makes no prediction or statement about the performance of its common stock. ACE CASH EXPRESS, INC. AND SUBSIDIARIES INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS (in thousands, except per share amounts) Three Months Ended Nine Months Ended March 31, March 31, 2005 2004 2005 2004 Revenues $78,464 $73,674 $205,237 $188,561 Store expenses: Salaries and benefits 17,593 16,731 48,147 45,871 Occupancy 9,179 8,174 25,739 22,762 Provision for loan losses and doubtful accounts 6,293 5,411 20,755 18,673 Depreciation 2,744 1,741 6,202 5,215 Other 10,542 11,809 29,915 29,532 Total store expenses 46,351 43,866 130,758 122,053 Gross margin 32,113 29,808 74,479 66,508 Region expenses 6,110 4,942 17,135 14,256 Headquarters expenses 5,295 5,818 15,041 14,954 Franchise expenses 321 315 909 899 Other depreciation and amortization 857 1,027 2,242 3,066 Interest expense, net 2,828 4,362 4,215 8,830 Other (income) expense, net 256 (279) 322 (327) Income before income taxes 16,446 13,623 34,615 24,830 Provision for income taxes 6,578 5,449 13,846 9,931 Net income $ 9,868 $ 8,174 $ 20,769 $ 14,899 Earnings per share: Basic $ 0.72 $ 0.77 $ 1.54 $ 1.42 Diluted $ 0.71 $ 0.72 $ 1.49 $ 1.36 Weighted average number of common shares outstanding: Basic 13,620 10,650 13,485 10,462 Diluted 13,952 11,327 13,924 10,932 ACE CASH EXPRESS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts) March 31, June 30, 2005 2004 (unaudited) (A) ASSETS Current Assets Cash and cash equivalents $126,525 $123,041 Accounts receivable, net 4,068 5,555 Loans receivable, net 16,504 17,047 Prepaid expenses, inventories and other current assets 9,840 10,658 Total Current Assets 156,937 156,301 Noncurrent Assets Property and equipment, net 31,577 27,336 Covenants not to compete, net 1,804 1,067 Goodwill, net 98,685 81,719 Other assets 5,554 3,839 Total Assets $294,557 $270,262 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Revolving advances $ 51,000 $ 60,000 Accounts payable, accrued liabilities and other current liabilities 39,193 32,711 Money orders payable 5,193 4,495 Total Current Liabilities 95,386 97,206 Noncurrent Liabilities Deferred income tax 2,432 3,134 Deferred revenue 3,948 3,969 Other liabilities 4,311 3,351 Total Liabilities 106,077 107,660 Commitments and Contingencies --- --- Shareholders' Equity Preferred stock, $1 par value, 1,000,000 shares authorized, none issued and outstanding --- --- Common stock, $.01 par value, 50,000,000 shares authorized, 13,882,921 and 13,518,737 shares issued and 13,671,521 and 13,307,337 shares outstanding, respectively 137 133 Additional paid-in capital 102,144 95,941 Retained earnings 92,237 71,468 Accumulated comprehensive loss 4 (170) Treasury stock, at cost, 211,400 shares (2,707) (2,707) Unearned compensation - restricted stock (3,335) (2,063) Total Shareholders' Equity 188,480 162,602 Total Liabilities and Shareholders' Equity $294,557 $270,262 (A) The June 30, 2004 property and equipment net, deferred income tax, other liabilities, and retained earnings balances, have been adjusted to reflect the previously announced corrections to ACE's lease accounting practices. ACE CASH EXPRESS, INC. AND SUBSIDIARIES SUPPLEMENTAL STATISTICAL DATA (unaudited) Three Months Nine Months Ended Ended Year Ended March 31, March 31, June 30, 2005 2004 2005 2004 2004 2003 Company Operating and Statistical Data: Company-owned stores in operation: Beginning of period 1,085 974 1,026 968 968 1,003 Acquired 34 --- 74 8 34 2 Opened 13 22 51 32 53 14 Sold --- (1) (3) (5) (5) (23) Closed (14) (7) (30) (15) (24) (28) End of period 1,118 988 1,118 988 1,026 968 Franchised stores in operation: Beginning of period 216 210 204 200 200 184 Opened 6 9 32 30 32 26 Acquired by ACE (8) --- (22) (8) (13) (2) Closed/Sold (1) (4) (1) (7) (15) (8) End of period 213 215 213 215 204 200 Total store network 1,331 1,203 1,331 1,203 1,230 1,168 Percentage increase (decrease) in comparable store revenues from prior period: (A) Total revenue (0.3%) 10.2% 3.6% 4.5% 5.0% 1.9% Check fees including tax check fees (5.2%) 1.6% (3.6%) 5.4% 4.1% 5.4% Loan fees and interest 8.3% 39.4% 14.4% 3.8% 7.8% (4.4%) Purchases of property and equipment, net (in thousands) $4,708 $2,061 $11,760 $4,090 $7,950 $4,771 Intangible assets related to acquired stores (in thousands) $11,850 $--- $18,402 $322 $6,403 $673 Check Cashing Data: Face amount of checks cashed (in millions) $1,721 $1,637 $4,069 $3,980 $5,103 $5,040 Face amount of average check $500 $482 $407 $398 $388 $383 Average fee per check $13.48 $13.46 $10.38 $10.22 $9.91 $9.65 Fees as a percentage of average check 2.70% 2.79% 2.55% 2.57% 2.55% 2.52% Number of checks cashed (in thousands) 3,443 3,395 10,000 9,991 13,151 13,148 Check Collections Data: Face amount of returned checks (in thousands) $6,990 $5,253 $19,839 $15,808 $21,705 $24,087 Collections (in thousands) 5,427 3,527 14,759 10,239 13,947 16,935 Net write-offs (in thousands) $1,563 $1,726 $5,080 $5,569 $7,758 $7,152 Collections as a percentage of returned checks 77.6% 67.1% 74.4% 64.8% 64.3% 70.3% Net write-offs as a percentage of revenues 2.0% 2.3% 2.5% 3.0% 3.1% 3.1% Net write-offs as a percentage of the face amount of checks cashed 0.09% 0.11% 0.12% 0.14% 0.15% 0.14% ACE CASH EXPRESS, INC. AND SUBSIDIARIES SUPPLEMENTAL STATISTICAL DATA, continued (unaudited) (in thousands, except averages and percents) Three Months Ended Nine Months Ended March 31, March 31, 2005 2004 2005 2004 Combined Short-Term Consumer Loans Operating Data: Volume - new loans and refinances $142,900 $122,953 $474,882 $390,560 Average advance $295 $279 $290 $278 Average finance charge $46.43 $43.77 $45.75 $43.73 Number of loan transactions - new loans and refinances 470 442 1,604 1,414 Matured loan volume $145,721 $127,810 $463,743 $387,014 Loan fees and interest $21,201 $18,350 $68,938 $57,194 Loan loss provision $6,247 $5,380 $20,651 $18,750 Gross margin on loans 70.5% 70.7% 70.0% 67.2% Loan loss provision as a percent of matured loan volume 4.3% 4.2% 4.5% 4.8% Loans Processed for Republic Bank: (B) Volume - new loans and refinances $38,985 $35,128 $138,393 $119,715 Average advance $323 $294 $319 $295 Average finance charge $56.94 $51.87 $56.30 $51.95 Number of loan transactions - new loans and refinances 121 120 434 407 Matured loan volume $40,850 $36,991 $137,355 $119,402 Loan fees and interest $6,130 $5,473 $20,988 $18,063 Provision for loan losses payable to Republic Bank $2,085 $1,619 $6,645 $5,897 ACE Loans Operating Data: (C) Volume - new loans and refinances $103,915 $87,825 $336,489 $270,845 Average advance $283 $272 $276 $269 Average finance charge $41.95 $39.85 $40.98 $39.45 Number of loan transactions - new loans and refinances 349 322 1,170 1,007 Matured loan volume $104,871 $90,819 $326,388 $267,612 Loan fees and interest $15,071 $12,877 $47,950 $39,131 Loan loss provision $4,162 $3,761 $14,006 $12,853 ACE Loans Balance Sheet Data: Gross loans receivable $28,577 $24,010 $28,577 $24,010 Less: Allowance for losses 12,073 10,657 12,073 10,657 Loans receivable, net of allowance $16,504 $13,353 $16,504 $13,353 Allowance for losses on loans receivable: Beginning of period $12,961 $11,108 $10,616 $8,734 Provision for loan losses 4,162 3,761 14,006 12,853 Charge-offs (5,639) (4,323) (14,266) (11,172) Recoveries 589 111 1,717 242 End of period $12,073 $10,657 $12,073 $10,657 Allowance as a percent of gross loans receivable 42.2% 44.4% 42.2% 44.4% Year Ended June 30, 2004 2003 Combined Short-Term Consumer Loans Operating Data: Volume - new loans and refinances $527,723 $484,026 Average advance $278 $274 Average finance charge $43.71 $44.55 Number of loan transactions - new loans and refinances 1,909 1,798 Matured loan volume $516,741 $488,940 Loan fees and interest $77,029 $70,806 Loan loss provision $24,280 $22,293 Gross margin on loans 68.5% 68.5% Loan loss provision as a percent of matured loan volume 4.7% 4.6% Loans Processed for Republic Bank: (B) Volume - new loans and refinances $159,692 $63,897 Average advance $296 $302 Average finance charge $52.11 $53.35 Number of loan transactions - new loans and refinances 541 211 Matured loan volume $157,018 $56,040 Loan fees and interest $24,036 $9,037 Provision for loan losses payable to Republic Bank $7,390 $2,932 ACE Loans Operating Data: (C) Volume - new loans and refinances $368,031 $420,129 Average advance $269 $268 Average finance charge $39.40 $42.71 Number of loan transactions - new loans and refinances 1,368 1,587 Matured loan volume $359,723 $432,900 Loan fees and interest $52,993 $61,769 Loan loss provision $16,890 $19,361 ACE Loans Balance Sheet Data: Gross loans receivable $27,663 $21,734 Less: Allowance for losses 10,616 8,734 Loans receivable, net of allowance $17,047 $13,000 Allowance for losses on loans receivable: Beginning of period $8,734 $12,213 Provision for loan losses 16,890 19,361 Charge-offs (15,295) (23,729) Recoveries 287 889 End of period $10,616 $8,734 Allowance as a percent of gross loans receivable 38.3% 40.2% (A) Calculated based on changes in revenue for all company-owned stores open in both periods and open for at least 13 months. (B) Republic Bank loans are short-term consumer loans made by Republic Bank & Trust Company at our company-owned stores in Arkansas, Pennsylvania and Texas since January 1, 2003. (C) Operating data for ACE loans include short-term consumer loans made by Goleta National Bank at our company-owned stores until we discontinued offering Goleta loans on December 31, 2002. ACE CASH EXPRESS, INC. AND SUBSIDIARIES REVENUE ANALYSIS (unaudited) Three Months Ended Nine Months Ended Year Ended March 31, March 31, June 30, 2005 2004 2005 2004 2004 2003 Revenues (in thousands): Check cashing fees $26,487 $26,111 $83,537 $81,786 $108,439 $104,175 Loan fees and interest 21,201 18,350 68,938 57,194 77,029 70,806 Tax check fees 18,854 18,491 19,164 19,279 20,755 21,528 Bill payment services 5,377 4,521 15,011 12,488 16,960 13,507 Money transfer services 3,002 2,805 8,710 8,310 11,136 10,898 Money order fees 1,783 1,601 5,209 4,772 6,330 6,960 Franchise revenues 763 808 2,365 2,180 2,774 2,346 Other fees 997 987 2,303 2,552 3,236 4,069 Total revenue $78,464 $73,674 $205,237 $188,561 $246,659 $234,289 Three Months Ended Nine Months Ended Year Ended March 31, March 31, June 30, 2005 2004 2005 2004 2004 2003 Percentage of Revenues: Check cashing fees 33.7% 35.4% 40.7% 43.4% 44.0% 44.5% Loan fees and interest 27.0 24.9 33.6 30.3 31.2 30.2 Tax check fees 24.0 25.1 9.3 10.2 8.4 9.2 Bill payment services 6.9 6.1 7.3 6.6 6.9 5.8 Money transfer services 3.8 3.8 4.3 4.4 4.5 4.6 Money order fees 2.3 2.2 2.5 2.5 2.6 3.0 Franchise revenues 1.0 1.1 1.2 1.2 1.1 1.0 Other fees 1.3 1.4 1.1 1.4 1.3 1.7 Total revenue 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% CONFERENCE CALL April 28, 2005 5 p.m. EDT An investor conference call will be held today, April 28, 2005 at 5 p.m. EDT, regarding the release of ACE Cash Express, Inc.'s fiscal 2005, third quarter earnings. The Company invites you to participate in the conference call by dialing (800) 442-9701. The confirmation code to access the call is 5384027. Jay B. Shipowitz, President and Chief Executive Officer and William S. McCalmont, Executive Vice President and Chief Financial Officer, will present the third quarter review. For your convenience, the conference call will be replayed in its entirety beginning at approximately 6 p.m. EDT on April 28th through 7 p.m. EDT on May 12th. If you wish to listen to a replay of this conference call, dial (800) 642-1687, provide your name and use confirmation number 5384027. If you have questions regarding this conference call, please contact Darla Ashby at (972) 550-5037. DATASOURCE: ACE Cash Express, Inc. CONTACT: William S. McCalmont, Executive Vice President & CFO, +1-972-753-2314, or , or Douglas Lindsay, Vice President of Finance, +1-972-753-2342, or , both of ACE Cash Express, Inc. Web site: http://www.acecashexpress.com/

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