Industry News
ACE Cash Express Reports Fiscal 2005 Results; Record Revenue, Net Income and Earnings Per Share
DALLAS, Aug. 25 /PRNewswire-FirstCall/ -- ACE Cash Express, Inc. (Nasdaq: AACE) announced record fiscal 2005 net income of $27.4 million and record earnings per share of $1.98, compared to fiscal 2004 net income of $17.1 million and $1.49 per share. As previously disclosed, fiscal 2005 results include a one-time after-tax charge of approximately $0.6 million, or $0.04 per diluted share, related to a cumulative change to the Company's lease accounting practices in the third quarter of the year. Additionally, fiscal 2004 results included a one-time after-tax charge of $2.9 million or $0.25 per diluted share, related to the early extinguishment of debt following the Company's secondary offering of common stock in April 2004. Excluding these one-time charges, ACE's fiscal 2005 net income and earnings per share increased 40 percent and 16 percent, respectively, over fiscal 2004. During fiscal 2005, ACE's total revenue increased 9 percent to a record $268.6 million from $246.7 million in the prior year period. "We are pleased with our fiscal 2005 performance. Growth in comparable store loan fees, gains in bill payment and debit card revenue and the addition of stores drove performance this year," said Jay B. Shipowitz, President and Chief Executive Officer. "We remain focused on enhancing our product offerings in our continuing effort to bring convenient and quality services to our customers." Among the Company's accomplishments during fiscal 2005 were: * The total ACE store network, including franchised stores, had a record 40.2 million customer visits and processed approximately $10.3 billion in transactions. * ACE company-owned stores cashed 13.3 million checks, with a face value of approximately $5.3 billion, resulting in check-cashing fees of $131.6 million, up 2 percent from $129.2 million in fiscal 2004. * ACE company-owned stores processed over 2.1 million loan transactions, disbursing over $640 million in loan proceeds and generating interest income and fees of $91.8 million. Comparable store loan fees in company-owned stores increased 12.7 percent over the prior year. * ACE company-owned stores processed over 8.7 million bill payment and debit card transactions, producing a bill-payment revenue increase of 19 percent, to $20.3 million, from $17.0 million in the prior year period. * ACE company-owned stores sold over 172,000 prepaid debit cards in fiscal 2005, an increase of 29 percent over the prior year. * Store gross margin improved to 35.5 percent of revenue in fiscal 2005, compared to 34.3 percent in the previous year period. * Net income exceeded 10 percent of revenue, the highest in ACE's history. During fiscal 2005, the Company opened 60 newly constructed ACE Cash Express stores, opened 20 ACE Cash Advance stores, acquired 74 stores, sold six stores to ACE franchisees and closed 32 company-owned stores. ACE franchisees also opened 48 stores. At the end of the fiscal year, ACE had a network of 1,371 stores, consisting of 1,142 company-owned stores and 229 franchised stores. Fiscal Fourth Quarter Results The fiscal fourth quarter 2005 net income was $6.6 million or $0.48 per diluted share, compared to fiscal fourth quarter 2004 net income of $2.2 million or $0.16 per diluted share. Fiscal fourth quarter 2005 results include the cumulative effect of a reduction in ACE's tax rate for fiscal year 2005 to 39 percent from 40 percent. Fiscal fourth quarter 2004 results included a one-time after-tax charge of $2.9 million or $0.22 per diluted share related to the early extinguishment of debt. Excluding the charge in the fiscal fourth quarter of 2004, ACE's fiscal fourth quarter 2005 net income and earnings per share increased 30 percent and 24 percent, respectively, over the prior year period. During the fiscal fourth quarter of 2005, ACE's total revenue improved 9 percent to $63.4 million versus $58.1 million in the prior year period, due primarily to a 17 percent increase in bill payment services and a 15 percent increase in loan fees and interest. Among ACE's accomplishments during the fiscal fourth quarter 2005 were: * The total ACE store network, including franchised stores, had a record 10.1 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 $28.9 million, up 3 percent from $28.1 million in the fourth quarter of fiscal 2004. * ACE company-owned stores processed over 535,000 loan transactions, disbursing over $165 million in loan proceeds and generating interest income and fees of $22.9 million. Comparable store loan fees in company-owned stores increased 7.9 percent over the prior year's fourth quarter. * ACE company-owned stores processed over 2.1 million bill payment and debit card transactions producing a bill-payment revenue increase of 17 percent, to $5.3 million from $4.5 million in the prior year period. * ACE company-owned stores sold approximately 35,000 prepaid debit cards in the fourth quarter of fiscal 2005, an increase of 17 percent over the prior year. * Store gross margin improved to 33.0 percent of revenue in the fourth quarter of fiscal 2005 compared to 31.2 percent in the previous year period. During the fiscal fourth quarter 2005, the Company opened 29 company-owned stores, including 11 ACE Cash Advance stores. ACE franchisees also opened an additional 16 stores during the quarter. "As we begin fiscal 2006, we remain committed to our mission of understanding our customers, exceeding their expectations and investing in the communities we serve," said Jay B. Shipowitz, President and CEO. "Over the past six months we have managed through a significant regulatory challenge with the implementation of the revised FDIC Guidelines for Payday Lending. Through hard work and diligent focus on finding alternative solutions for our customers, our team has already introduced two new loan products to our customers in Texas and one new loan product in both Pennsylvania and Arkansas. In fiscal 2006, we intend to devote additional resources to continue our growth through de novo openings, opportunistic acquisitions, new products and more efficient operations." Fiscal 2006 Business Guidance * The Company expects to open 50 to 60 ACE Cash Express stores and 50 to 60 ACE Cash Advance Stores. * The Company expects to close 20 to 30 stores. * 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 will begin expensing stock options in Fiscal 2006 and expects to record stock option expenses 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; * Beginning July 1, 2005, a short-term consumer loan in Texas offered under Texas law (ACE Texas Loans) with a 32-day term. ACE Texas Loans generate loan fees and interest for ACE of approximately 25 percent of the loan fees and interest generated by an RBT Loan. Beginning August 1, 2005, ACE Texas Loans are only offered to customers that cannot qualify for either an RBT Loan or an FBD loan; * Beginning August 1, 2005, installment loans in Texas, Arkansas and Pennsylvania offered 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 cannot qualify for an RBT Loan. * The Company does not presently offer a loan product in Texas pursuant to the Credit Services Organization (CSO) business model. ACE has been and continues to be in consultation with its attorneys, the Texas Attorney General and the Texas Commissioner of the Office of Consumer Credit regarding the legality of this loan product offering. ACE continues to evaluate whether or not it can legally offer this product. The statements preceded by bullet points above are the Company's outlook or forecast for the Company's business for the fiscal year ending June 30, 2006. These statements are made only as of August 25, 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. 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 June 30, 2005, ACE had a network of 1,371 stores in 37 states and the District of Columbia, consisting of 1,142 company-owned stores and 229 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, 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 on 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 Year Ended June 30, June 30, 2005 2004 2005 2004 Revenues $63,412 $58,098 $268,649 $246,659 Store expenses: Salaries and benefits 17,146 13,722 65,293 59,593 Occupancy 9,029 7,801 34,768 30,563 Provision for loan losses and doubtful accounts 6,335 5,562 27,090 24,235 Depreciation 1,482 2,348 7,684 7,563 Other 8,483 10,534 38,398 40,066 Total store expenses 42,475 39,967 173,233 162,020 Gross margin 20,937 18,131 95,416 84,639 Region expenses 5,836 4,995 22,971 19,251 Headquarters expenses 4,204 3,727 19,245 18,681 Franchise expenses 318 297 1,227 1,196 Other depreciation and amortization 852 827 3,094 3,893 Interest expense, net 665 1,401 4,880 10,231 Loss on early extinguishment of debt --- 4,858 --- 4,858 Other (income) expense, net (1,186) (1,566) (864) (1,893) Income before income taxes 10,248 3,592 44,863 28,422 Provision for income taxes 3,651 1,439 17,497 11,370 Net income $6,597 $2,153 $27,366 $17,052 Earnings per share: Basic $0.49 $0.17 $2.06 $1.55 Diluted $0.48 $0.16 $1.98 $1.49 Weighted average number of common shares outstanding: Basic 13,421 12,660 13,275 11,009 Diluted 13,796 13,110 13,821 11,477 ACE CASH EXPRESS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts) June 30, June 30, 2005 2004(A) (unaudited) (restated) ASSETS Current Assets Cash and cash equivalents $109,430 $123,041 Accounts receivable, net 3,969 5,555 Loans receivable, net 20,787 17,047 Prepaid expenses, inventories and other current assets 13,685 10,658 Total Current Assets 147,871 156,301 Noncurrent Assets Property and equipment, net 37,657 27,336 Covenants not to compete, net 1,668 1,067 Goodwill, net 98,702 81,719 Other assets 6,723 3,839 Total Assets $292,621 $270,262 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Revolving advances $43,300 $60,000 Accounts payable, accrued liabilities and other current liabilities 36,117 32,711 Money orders payable 4,867 4,495 Total Current Liabilities 84,284 97,206 Noncurrent Liabilities Deferred income tax 4,302 3,134 Deferred revenue 3,271 3,907 Other liabilities 4,079 3,411 Total Liabilities 95,936 107,658 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, 13,912,045 and 13,518,737 shares issued and 13,700,645 and 13,307,337 shares outstanding, respectively 137 133 Additional paid-in capital 103,544 95,941 Retained earnings 98,836 71,470 Accumulated comprehensive loss (56) (170) Treasury stock, at cost, 211,400 shares (2,707) (2,707) Unearned compensation - restricted stock (3,069) (2,063) Total Shareholders' Equity 196,685 162,604 Total Liabilities and Shareholders' Equity $292,621 $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 Ended June 30, Year Ended June 30, 2005 2004 2005 2004 2003 Company Operating and Statistical Data: Company-owned stores in operation: Beginning of period 1,118 988 1,026 968 1,003 Acquired --- 26 74 34 2 Opened 29 21 80 53 14 Sold (3) --- (6) (5) (23) Closed (2) (9) (32) (24) (28) End of period 1,142 1,026 1,142 1,026 968 Franchised stores in operation: Beginning of period 213 219 204 200 184 Opened 16 2 48 32 26 Acquired by ACE --- (5) (22) (13) (2) Closed/Sold --- (12) (1) (15) (8) End of period 229 204 229 204 200 Total store network 1,371 1,230 1,371 1,230 1,168 Percentage increase (decrease) in comparable store revenues from prior period: (A) Total revenue 1.4% 7.3% 3.1% 5.0% 1.9% Check fees including tax check fees (4.5%) 1.4% (3.8%) 4.1% 5.4% Loan fees and interest 7.9% 22.3% 12.7% 7.8% (4.4%) Cash Flow Data: (in thousands) Purchases of property and equipment, net $7,191 $4,089 $18,951 $7,439 $4,721 Store acquisition costs: Property and equipment --- 391 958 511 50 Intangible assets 26 6,081 18,428 6,403 673 Check Cashing Data: Face amount of checks cashed (in millions) $1,208 $1,123 $5,277 $5,103 $5,040 Face amount of average check 363 355 396 388 383 Average fee per check 8.79 8.90 9.98 9.91 9.65 Fees as a percentage of average check 2.42% 2.51% 2.52% 2.55% 2.52% Number of checks cashed (in thousands) 3,326 3,160 13,325 13,151 13,148 Check Collections Data: Face amount of returned checks (in thousands) $7,075 $5,897 $26,914 $21,705 $24,087 Collections (in thousands) 6,192 3,708 20,951 13,947 16,935 Net write-offs (in thousands) $883 $2,189 $5,963 $7,758 $7,152 Collections as a percentage of returned checks 87.5% 62.9% 77.8% 64.3% 70.3% Net write-offs as a percentage of revenues 1.4% 3.8% 2.2% 3.1% 3.1% Net write-offs as a percentage of the face amount of checks cashed 0.07% 0.19% 0.11% 0.15% 0.14% ACE CASH EXPRESS, INC. AND SUBSIDIARIES SUPPLEMENTAL STATISTICAL DATA, continued (unaudited) (in thousands, except averages and percents) Three Months Ended June 30, Year Ended June 30, 2005 2004 2005 2004 2003 Combined Short-Term Consumer Loans Operating Data: Volume - new loans and refinances $165,474 $137,163 $640,356 $527,723 $484,026 Average advance $293 $278 $290 $278 $274 Average finance charge $46.25 $43.66 $45.87 $43.71 $44.55 Number of loan transactions - new loans and refinances 536 495 2,139 1,909 1,798 Matured loan volume $149,638 $129,334 $613,380 $516,741 $488,940 Loan fees and interest $22,855 $19,835 $91,793 $77,029 $70,806 Loan loss provision $6,290 $5,532 $26,941 $24,280 $22,293 Gross margin on loans 72.5% 72.1% 70.7% 68.5% 68.5% Loan loss provision as a percent of matured loan volume 4.2% 4.3% 4.4% 4.7% 4.6% Loans Processed for Republic Bank: (B) Volume - new loans and refinances $46,254 $39,977 $184,646 $159,692 $63,897 Average advance $319 $299 $319 $296 $302 Average finance charge $56.32 $52.61 $56.30 $52.11 $53.35 Number of loan transactions - new loans and refinances 145 134 578 541 211 Matured loan volume $43,796 $37,601 $181,153 $157,018 $56,040 Loan fees and interest $6,892 $5,954 $27,880 $24,036 $9,037 Provision for loan losses payable to Republic Bank $2,041 $1,493 $8,686 $7,390 $2,932 ACE Loans Operating Data: (C) Volume - new loans and refinances $119,220 $97,186 $455,710 $368,031 $420,129 Average advance $281 $268 $277 $269 $268 Average finance charge $41.73 $39.27 $41.17 $39.40 $42.71 Number of loan transactions - new loans and refinances 391 361 1,561 1,368 1,587 Matured loan volume $105,842 $91,733 $432,227 $359,723 $432,900 Loan fees and interest $15,963 $13,881 $63,913 $52,993 $61,769 Loan loss provision $4,249 $4,039 $18,255 $16,890 $19,361 Gross loans receivable $31,790 $27,663 $31,790 $27,663 $21,734 Less: Allowance for losses 11,003 10,616 11,003 10,616 8,734 Loans receivable, net of allowance $20,787 $17,047 $20,787 $17,047 $13,000 Allowance for losses on loans receivable: Beginning of period $12,073 $10,657 $10,616 $8,734 $12,213 Provision for loan losses 4,249 4,039 18,255 16,890 19,361 Charge-offs (5,319) (4,080) (17,868) (15,008) (22,840) End of period $11,003 $10,616 $11,003 $10,616 $8,734 Allowance as a percent of gross loans receivable 34.6% 38.3% 34.6% 38.3% 40.2% (A) Calculated based on changes in revenue for all company-owned stores open during the period 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 UNAUDITED REVENUE ANALYSIS Three Months Ended June 30, Year Ended June 30, 2005 2004 2005 2004 2003 (dollars in thousands) (dollars in thousands) Check cashing fees $27,747 $26,653 $111,284 $108,439 $104,175 Loan fees and interest 22,855 19,835 91,793 77,029 70,806 Tax check fees 1,171 1,476 20,335 20,755 21,528 Bill payment services 5,255 4,474 20,266 16,960 13,507 Money transfer services 3,158 2,826 11,868 11,136 10,898 Money order fees 1,666 1,558 6,875 6,330 6,960 Franchise revenues 815 594 3,180 2,773 2,346 Other fees 745 682 3,048 3,237 4,069 Total revenue $63,412 $58,098 $268,649 $246,659 $234,289 Three Months Ended June 30, Year Ended June 30, 2005 2004 2005 2004 2003 (percentage of revenues) (percentage of revenues) Check cashing fees 43.8% 45.9% 41.4% 44.0% 44.5% Loan fees and interest 36.0 34.1 34.2 31.2 30.2 Tax check fees 1.8 2.5 7.6 8.4 9.2 Bill payment services 8.3 7.7 7.5 6.9 5.8 Money transfer services 5.0 4.9 4.4 4.5 4.6 Money order fees 2.6 2.7 2.6 2.6 3.0 Franchise revenues 1.3 1.0 1.2 1.1 1.0 Other fees 1.2 1.2 1.1 1.3 1.7 Total revenue 100.0% 100.0% 100.0% 100.0% 100.0% CONFERENCE CALL August 25, 2005 5 p.m. EDT An investor conference call will be held today, August 25, 2005 at 5 p.m. EDT, regarding the release of ACE Cash Express, Inc.'s fiscal 2005, fourth quarter and year-end earnings. The Company invites you to participate in the conference call by dialing (800) 442-9701. The confirmation code to access the call is 8037455. Jay B. Shipowitz, President and Chief Executive Officer and William S. McCalmont, Executive Vice President and Chief Financial Officer, will present the fourth quarter and year-end review. For your convenience, the conference call will be replayed in its entirety beginning at approximately 6 p.m. EDT on August 25th through 7 p.m. EDT on September 12th. If you wish to listen to a replay of this conference call, dial (800) 642-1687, provide your name and use confirmation number 8037455. If you have questions regarding this conference call, please contact Darla Ashby at (972) 550-5037.SOURCE ACE Cash Express, Inc.
Web Site: http://www.acecashexpress.com