AACE Ace Cash Express

DALLAS, Oct. 27 /PRNewswire-FirstCall/ -- ACE Cash Express, Inc. (NASDAQ:AACE) announced fiscal first quarter 2006 net income of $2.9 million and earnings per share of $0.21, compared to fiscal first quarter 2005 net income of $5.1 million and earnings per share of $0.37. Net income for the fiscal first quarter 2006 includes an after-tax charge of $1.0 million, or approximately $0.07 per diluted share related to losses from Hurricane Katrina. This charge includes the write-off of fixed assets and an addition to the loan loss provision related to current and past due loans to customers of these stores. During the first quarter of 2006, ACE's total revenue increased 7 percent to $66.2 million from $62.0 million in the prior year period, due primarily to a 12 percent increase in bill payment services, a 9 percent increase in loan fees and interest, and a 5 percent increase in check cashing fees. "We remain confident in our long-term disciplined growth strategy. We continue to balance our de novo store development program, through which we have opened 158 stores during the last 24 months, with accretive acquisitions and new products and services. The recently announced agreement to acquire 111 Popular Cash Express stores is a perfect example of how we can acquire stores that complement our existing store base and add new products and services to these stores," said Jay B. Shipowitz, President and Chief Executive Officer. Among ACE's accomplishments during the fiscal first quarter 2006 were: * The total ACE store network, including franchised stores, had a first quarter record 10.2 million customer visits and processed approximately $2.4 billion in transactions. * ACE company-owned stores cashed 3.3 million checks, with a face value in excess of $1.2 billion, resulting in check-cashing fees for the quarter of $29.6 million, up 5 percent from $28.1 million in the first quarter of fiscal 2005. * ACE company-owned stores processed over 563,000 loan transactions, disbursed over $181 million in loan proceeds and generated interest income and fees of $25.2 million. Comparable store loan fees in company-owned stores increased 3.3 percent over the prior year's first quarter, and in states not impacted by the FDIC Revised Guidelines, increased by 11.3 percent. * ACE company-owned stores processed over 1.9 million bill payment and debit card transactions, producing a revenue increase of 12 percent, to $5.3 million, from $4.7 million in the prior year period. * ACE company-owned stores sold approximately 42,000 prepaid debit cards in the first quarter of fiscal 2006, resulting in over one million cards sold since the product was introduced in fiscal 2003. "Following the end of the quarter, we were recognized by Forbes Magazine as one of the country's 200 Best-Run Small Companies," commented Mr. Shipowitz. "I believe this recognition is a testament to the talent and hard work of all of our associates, and I thank them for their commitment to ACE." Store Openings During the fiscal first quarter 2006, the Company opened 29 company-owned stores, including 11 ACE Cash Advance stores, and acquired two stores. ACE franchisees also opened an additional six stores during the quarter. Hurricane Katrina During the quarter, ACE recorded an after-tax charge of $1.0 million related to losses from Hurricane Katrina. This charge includes the write-off of fixed assets and an addition to the loan loss provision. At this time, 14 of the company's 22 stores in the greater New Orleans market remain closed. ACE is in discussions with its insurance carrier to determine how much, if any, of these losses will be covered by its casualty insurance and the extent of its business interruption coverage. Acquisition of 111 Popular Cash Express Stores On September 21, 2005, ACE announced the execution of an asset purchase agreement to acquire 111 stores owned and operated by Popular Cash Express for $36 million and a plan to invest approximately $5 million on capital improvements to the acquired stores during the next 24 months. ACE expects to acquire approximately 40 stores located in Florida, Texas and Arizona between October 31, 2005 and November 30, 2005, and all remaining stores by December 31, 2005. The Company does not expect the stores acquired in its second quarter to meaningfully contribute to earnings during the second quarter. ACE expects to expense approximately $1.0 million of transition costs during the second quarter of fiscal 2006. ACE continues to expect the acquisition of these 111 stores to be between $0.26 and $0.30 accretive to earnings during the 12 months following the closing of the acquisition of all stores. Fiscal 2006 Business Guidance The statements preceded by bullet points below are the Company's outlook or forecast for the Company's business for the second quarter ending December 31, 2005 and the fiscal year ending June 30, 2006. These statements are made only as of October 27, 2005 and indicate only the expectations of the Company's management as of that date. These statements supersede any and all previous statements made by the Company regarding the matters addressed. These statements are "forward-looking statements," cannot be guaranteed and may prove to be wrong. * The Company expects to open 32 to 42 additional ACE Cash Express stores in the next three quarters for a total of 50 to 60 stores in fiscal 2006. * The Company expects to open 39 to 49 additional ACE Cash Advance stores in the next three quarters for a total of 50 to 60 stores in fiscal 2006. * The Company expects to complete the acquisition of approximately 40 Popular Cash Express stores located in Florida, Texas and Arizona between October 31, 2005 and November 30, 2005, and all remaining stores by the end of December, 2005. * The Company will incur approximately $1 million in transition expenses related to the Popular Cash Express acquisition in the second quarter of fiscal 2006. * The Company expects to close 11 to 21 additional stores in the next three quarters for a total of 20 to 30 stores in fiscal 2006. * The Company currently estimates franchisees will open approximately 30 stores in fiscal 2006. * The Company expects its fiscal 2006 tax rate to be 39 percent. * The Company began expensing stock options in fiscal 2006 and expects to record stock option expense of approximately $1 million. * The Federal Deposit Insurance Corporation's Revised Guidelines for Payday Lending, which took effect July 1, 2005, will adversely impact the Company's payday loan business in fiscal 2006. The Company cannot currently quantify this impact or the benefits that recently introduced alternative loan products may have on its revenue and profitability in fiscal 2006. At this time ACE currently offers its customers the following loan products: * Short-term consumer loans offered pursuant to state regulation (ACE Loan) in 20 states and the District of Columbia with an average term of approximately 14 days; * Short-term consumer loans in Texas, Arkansas and Pennsylvania offered by Republic Bank of Kentucky (RBT Loan) with a 14-day term; * On August 1, 2005, the Company began to offer installment loans in Texas, Arkansas and Pennsylvania made by First Bank of Delaware (FBD Loan) with a 20-week term. An FBD Loan generates loan fees and interest for ACE of approximately 55 percent to 80 percent of the loan fees and interest generated by an RBT Loan depending upon the number of days the FBD loan is outstanding. Customers are only offered an FBD loan if they do not qualify for an RBT Loan. 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 September 30, 2005, ACE had a network of 1,389 stores in 37 states and the District of Columbia, consisting of 1,163 company-owned stores and 226 franchised stores. ACE focuses on serving consumers, many of whom 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 satisfaction of the various conditions to the closing of the acquisition of the Popular Cash Express stores, as well as matters described in ACE's reports filed with the Securities and Exchange Commission, such as: * ACE's relationships with Republic Bank & Trust Company, First Bank of Delaware, Travelers Express and its affiliates, and 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 to ACE's earnings derived from the loans offered by each of Republic Bank & Trust Company and First Bank of Delaware 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 3 months in the previous 12 months; * any litigation; * 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 September 30, 2005 2004 Revenues $ 66,193 $ 62,026 Store expenses: Salaries and benefits 17,235 14,787 Occupancy 9,456 8,182 Provision for loan losses and doubtful accounts 8,159 7,468 Depreciation 2,066 1,687 Hurricane Katrina related expenses 1,655 --- Other 10,335 9,808 Total store expenses 48,906 41,932 Gross margin 17,287 20,094 Region expenses 5,918 5,219 Headquarters expenses 4,830 4,681 Franchise expenses 278 267 Other depreciation and amortization 821 706 Interest expense, net 810 593 Other expenses, net (67) 172 Income before income taxes 4,697 8,456 Provision for income taxes 1,832 3,383 Net income $ 2,865 $ 5,073 Earnings per share: Basic $ 0.21 $ 0.38 Diluted $ 0.21 $ 0.37 Weighted average number of common shares outstanding: Basic 13,471 13,366 Diluted 13,782 13,848 ACE CASH EXPRESS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts) September 30, June 30, 2005 2005 (unaudited) ASSETS Current Assets Cash and cash equivalents $ 124,174 $ 109,430 Accounts receivable, net 6,194 3,969 Loans receivable, net 24,772 20,787 Prepaid expenses, inventories and other current assets 13,487 13,685 Total Current Assets 168,627 147,871 Noncurrent Assets Property and equipment, net 38,085 37,657 Covenants not to compete, net 1,564 1,668 Goodwill, net 99,922 98,702 Other assets 6,806 6,723 Total Assets $ 315,004 $ 292,621 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Revolving advances $ 53,000 $ 43,300 Accounts payable, accrued liabilities and other current liabilities 40,690 36,117 Money orders payable 9,385 4,867 Total Current Liabilities 103,075 84,284 Noncurrent Liabilities Deferred income tax 4,051 4,302 Deferred revenue 3,112 3,271 Other liabilities 4,362 4,079 Total Liabilities 114,600 95,936 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, 13,946,361 and 13,912,045 shares issued and 13,734,961 and 13,700,645 shares outstanding, respectively 137 137 Additional paid-in capital 104,179 103,544 Retained earnings 101,701 98,836 Accumulated comprehensive income (loss) 76 (56) Treasury stock, at cost, 211,400 shares (2,707) (2,707) Unearned compensation - restricted stock (2,982) (3,069) Total Shareholders' Equity 200,404 196,685 Total Liabilities and Shareholders' Equity $ 315,004 $ 292,621 ACE CASH EXPRESS, INC. AND SUBSIDIARIES SUPPLEMENTAL STATISTICAL DATA (unaudited) Three Months Ended Year Ended September 30, June 30, 2005 2004 2005 2004 Company Operating and Statistical Data: Company-owned stores in operation: Beginning of period 1,142 1,026 1,026 968 Acquired 2 23 74 34 Opened 29 15 80 53 Sold (1) --- (6) (5) Closed (9) (9) (32) (24) End of period 1,163 1,055 1,142 1,026 Franchised stores in operation: Beginning of period 229 204 204 200 Opened 6 9 48 32 Acquired by ACE (2) (11) (22) (13) Closed (7) --- (1) (15) End of period 226 202 229 204 Total store network 1,389 1,257 1,371 1,230 Percentage increase (decrease) in comparable store revenues from prior period: (A) Total revenue 2.2% 7.9% 3.1% 5.0% Check fees including tax check fees (0.2%) (1.7%) (3.8%) 4.1% Loan fees and interest 3.3% 20.7% 12.7% 7.8% Cash Flow Data: (in thousands) Purchases of property and equipment, net $2,889 $2,697 $18,951 $7,439 Store acquisition costs: Property and equipment 32 339 958 511 Intangible assets 1,276 3,510 18,429 6,403 Check Cashing Data: Face amount of checks cashed (in millions) $1,230 $1,147 $5,277 $5,103 Face amount of average check $372 $358 $396 $388 Average fee per check $8.95 $8.78 $9.98 $9.91 Fees as a percentage of average check 2.41% 2.45% 2.52% 2.55% Number of checks cashed (in thousands) 3,310 3,204 13,325 13,151 Check Collections Data: (in thousands, except percentages) Face amount of returned checks $9,002 $5,952 $26,914 $21,705 Collections 7,101 4,041 20,951 13,947 Net write-offs $1,901 $1,911 $5,963 $7,758 Collections as a percentage of returned checks 78.9% 67.9% 77.8% 64.3% Net write-offs as a percentage of revenues 2.9% 3.1% 2.2% 3.1% Net write-offs as a percentage of the face amount of checks cashed 0.15% 0.17% 0.11% 0.15% ACE CASH EXPRESS, INC. AND SUBSIDIARIES SUPPLEMENTAL STATISTICAL DATA, continued (unaudited) (in thousands, except averages and percents) Three Months Ended Year Ended September 30, June 30, 2005 2004 2005 2004 Combined Short-Term Consumer Loans Operating Data: Volume - new loans and refinances $181,520 $159,673 $640,356 $527,723 Average advance $300 $283 $290 $278 Average finance charge $44.24 $44.83 $45.87 $43.71 Number of loan transactions - new loans and refinances 563 554 2,139 1,909 Matured loan volume $172,927 $154,565 $613,380 $516,741 Loan fees and interest $25,209 $23,223 $91,793 $77,029 Loan loss provision $8,114 $7,424 $26,941 $24,280 Gross margin on loans 67.8% 68.0% 70.7% 68.5% Loan loss provision as a percent of matured loan volume 4.7% 4.8% 4.4% 4.7% Loans Processed for Republic Bank: (B) Volume - new loans $28,763 $48,454 $184,646 $159,692 Average advance $309 $314 $319 $296 Average finance charge $54.52 $55.37 $56.30 $52.11 Number of loan transactions - new loans 93 154 578 541 Matured loan volume $31,563 $47,299 $181,153 $157,018 Loan fees and interest $4,534 $7,263 $27,880 $24,036 Provision for loan losses payable to Republic Bank $1,557 $2,337 $8,686 $7,390 Loans Processed for First Bank of Delaware: (C) Volume - new loans (D) $7,270 --- --- --- Average advance $340 --- --- --- Average finance charge (E) $33.79 --- --- --- Number of loan transactions - new loans (F) 21 --- --- --- Matured loan volume (G) $11,742 --- --- --- Loan fees and interest $1,901 --- --- --- Provision for loan losses payable to First Bank of Delaware $609 --- --- --- ACE Loans Operating Data: Volume - new loans and refinances $145,487 $111,219 $455,710 $368,031 Average advance $296 $269 $277 $269 Average finance charge $42.27 $39.89 $41.17 $39.40 Number of loan transactions - new loans and refinances 449 400 1,561 1,368 Matured loan volume $129,622 $107,266 $432,227 $359,723 Loan fees and interest $18,774 $15,960 $63,913 $52,993 Loan loss provision $5,947 $5,087 $18,255 $16,890 ACE Loans Balance Sheet Data: Gross loans receivable $37,993 $30,819 $31,790 $27,663 Less: Allowance for losses 13,221 12,021 11,003 10,616 Loans receivable, net of allowance $24,772 $18,798 $20,787 $17,047 Allowance for losses on loans receivable: Beginning of period $11,003 $10,616 $10,616 $8,734 Provision for loan losses 5,947 5,087 18,255 16,890 Charge-offs (3,729) (3,833) (18,996) (15,295) Recoveries --- 151 1,128(H) 287 End of period $13,221 $12,021 $11,003 $10,616 Allowance as a percent of gross loans receivable 34.8% 39.0% 34.6% 38.3% (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) First Bank of Delaware loans are 20-week installment loans made by First Bank of Delaware at our company-owned stores in Arkansas, Pennsylvania, and Texas since August 2005. (D) Includes only the loan origination amount for each installment loan. (E) The loans processed for First Bank of Delaware are 20-week loans; the average finance charge is presented based upon the 14-day average duration of the ACE loans and the Republic Bank loans. (F) Includes the initial 20-week loan transaction only. (G) Includes maturing principal amount for each 2-week payment. (H) Includes the recovery of $1.2 million from the sale of previously charged-off ACE loans. ACE CASH EXPRESS, INC. AND SUBSIDIARIES REVENUE ANALYSIS (unaudited) Three Months Ended Year Ended September 30, June 30, 2005 2004 2005 2004 2003 Revenues (in thousands): Check cashing fees $ 29,612 $ 28,117 $ 131,619 $ 129,194 $ 125,703 Loan fees and interest 25,209 23,223 91,793 77,029 70,806 Bill payment services 5,296 4,709 20,266 16,960 13,507 Money transfer services 2,967 2,825 11,868 11,136 10,898 Money order fees 1,599 1,731 6,875 6,330 6,960 Franchise revenues 769 747 3,180 2,774 2,346 Other fees 741 674 3,048 3,236 4,069 Total revenue $ 66,193 $ 62,026 $ 268,649 $ 246,659 $ 234,289 Three Months Ended Year Ended September 30, June 30, 2005 2004 2005 2004 2003 Percentage of Revenues: Check cashing fees 44.7% 45.3% 49.0% 52.4% 53.7% Loan fees and interest 38.1 37.4 34.2 31.2 30.2 Bill payment services 8.0 7.6 7.5 6.9 5.8 Money transfer services 4.5 4.6 4.4 4.5 4.6 Money order fees 2.4 2.8 2.6 2.6 3.0 Franchise revenues 1.2 1.2 1.2 1.1 1.0 Other fees 1.1 1.1 1.1 1.3 1.7 Total revenue 100.0% 100.0% 100.0% 100.0% 100.0% CONFERENCE CALL October 27, 2005 5 p.m. EDT An investor conference call will be held today, October 27, 2005 at 5 p.m. EDT, regarding the release of ACE Cash Express, Inc.'s fiscal 2006, first 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 1485799. Jay B. Shipowitz, President and Chief Executive Officer and William S. McCalmont, Executive Vice President and Chief Financial Officer, will present the first quarter review. For your convenience, the conference call will be replayed in its entirety beginning at approximately 6 p.m. EDT on October 27th through 12 p.m. EDT on November 2nd. If you wish to listen to a replay of this conference call, dial (800) 642-1687, provide your name and use confirmation number 1485799. If you have questions regarding this conference call, please contact Joy Robinson at (972) 753-2305. 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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