ACE CASH EXPRESS INC/TX - 10-Q Quarterly Report

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 March 31, 2003


[ ]		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 incorporation or organization)		(I.R.S.Employer Identification No.)

1231 Greenway Drive, Suite 600
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 May 12, 2003

Common Stock		10,180,588 shares

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION
	ITEM 1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS
		CONSOLIDATED BALANCE SHEETS
		INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS
		INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
		NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 4. CONTROLS AND PROCEDURES
PART II. OTHER INFORMATION
	ITEM 1. LEGAL PROCEEDINGS
	ITEM 2. CHANGES IN SECURITIES
	ITEM 3. DEFAULTS UPON SENIOR SECURITIES
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	ITEM 5. OTHER INFORMATION
	ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
CERTIFICATION
INDEX TO EXHIBITS
EX-10.1 Marketing and Servicing Agreement
EX-10.2 Restricted Stock Agreement
EX-99.1 Certifications of CEO & CFO

ACE CASH EXPRESS, INC.


		Page No.

PART I.	FINANCIAL INFORMATION
Item 1.	Interim Consolidated Financial Statements:
	Consolidated Balance Sheets as of March 31, 2003 (unaudited) and June 30, 2002	3
	Interim Unaudited Consolidated Statements of Earnings for the Three and Nine Months Ended March 31, 2003 and 2002	4
	Interim Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2003 and 2002	5
	Notes to Interim Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	35
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	35
Item 2.	Changes in Securities	38
Item 3.	Defaults Upon Senior Securities	38
Item 4.	Submission of Matters to a Vote of Security Holders	38
Item 5.	Other Information	38
Item 6.	Exhibits and Reports on Form 8-K	38
SIGNATURES		39
CERTIFICATIONS		40
INDEX TO EXHIBITS		42

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 amounts)


			March 31,			June 30,
			2003			2002

			(unaudited)
ASSETS
Current Assets
		Cash and cash equivalents	$	123,686		$	116,264
		Accounts receivable, net		4,761			8,792
		Loans receivable, net		8,707			17,356
		Prepaid expenses and other current assets		6,410			7,979
		Inventories		571			946

Total Current Assets				144,135			151,337

Noncurrent Assets
		Property and equipment, net		33,040			37,161
		Covenants not to compete, net		1,243			1,546
		Goodwill, net		74,964			75,015
		Other assets		10,045			2,003

Total Assets			$	263,427		$	267,062

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
		Revolving advances	$	93,703		$	97,500
		Accounts payable, accrued liabilities, and other current liabilities		42,957			28,512
		Money orders payable		7,877			13,417
		Senior secured notes payable		—			4,000
		Term advances		3,833			48,350
		Notes payable		905			1,145

Total Current Liabilities				149,275			192,924

Noncurrent Liabilities
		Senior secured notes payable		—			4,000
		Term advances		36,167			—
		Notes payable		108			319
		Other liabilities		3,222			3,680

Total Liabilities				188,772			200,923

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, 10,391,988 shares issued and 10,180,588 shares outstanding				102			102
	Additional paid-in capital			24,384			24,353
	Retained earnings			52,900			45,469
	Accumulated other comprehensive loss			—			(1,078	)
	Treasury stock, at cost, 211,400 shares			(2,707	)		(2,707	)
	Unearned compensation restricted stock			(24	)		—

Total Shareholders’ Equity				74,655			66,139

Total Liabilities and Shareholders’ Equity			$	263,427		$	267,062

The accompanying notes are an integral part of these consolidated financial statements.

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,

			2003		2002		2003		2002

Revenues			$	67,167	$	68,091	$	180,524	$	174,663
Store expenses:
	Salaries and benefits			15,198		16,464		44,178		43,661
	Occupancy			7,431		7,101		21,852		20,854
	Provision for loan losses and doubtful accounts			4,813		3,760		18,791		17,266
	Depreciation			1,727		1,793		5,222		5,319
	Other			11,350		9,846		28,260		27,298

		Total store expenses		40,519		38,964		118,303		114,398

Store gross margin				26,648		29,127		62,221		60,265
Region expenses				4,350		4,476		12,719		13,031
Headquarters expenses				5,294		6,276		13,002		13,174
Franchise expenses				286		253		845		672
Other depreciation and amortization				1,150		3,736		4,407		6,068
Interest expense				5,885		5,261		13,595		11,364
Other expenses (income), net				5,333		2,105		6,110		2,229

	Income from continuing operations before taxes			4,350		7,020		11,543		13,727
	Provision for income taxes			1,734		2,850		4,611		5,573

		Income from continuing operations		2,616		4,170		6,932		8,154
Discontinued operations:
	Gain on sale of discontinued operations, net of tax			—		—		499		—

		Net income	$	2,616	$	4,170	$	7,431	$	8,154

Basic earnings per share:
	Continuing operations		$	0.26	$	0.41	$	0.68	$	0.81
	Discontinued operations			—		—		0.05		—

		Total	$	0.26	$	0.41	$	0.73	$	0.81

Diluted earnings per share:
	Continuing operations		$	0.26	$	0.41	$	0.68	$	0.81
	Discontinued operations			—		—		0.05		—

		Total	$	0.26	$	0.41	$	0.73	$	0.81

Weighted average number of common shares outstanding:
	Basic			10,181		10,154		10,181		10,103
	Diluted			10,203		10,166		10,189		10,125

The accompanying notes are an integral part of these consolidated financial statements.

ACE CASH EXPRESS, INC. AND SUBSIDIARIES
INTERIM UNAUDITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)


					Nine Months Ended
					March 31,

					2003			2002

Cash flows from operating activities:
			Net income		$	7,431		$	8,154
			Less: Gain on sale of discontinued operations, net of tax			499			—

				Income from continuing operations		6,932			8,154
		Adjustments to reconcile net income from continuing operations to net cash provided by operating activities:
		Depreciation and amortization				9,629			11,387
		Provision for loan losses				18,371			17,156
		Provision for doubtful accounts				420			110
		Loss on disposal of property and equipment				397			—
		Deferred revenue amortized				(1,625	)		(1,324	)
		Changes in assets and liabilities:
			Accounts receivable			3,941			(4,573	)
			Loans receivable			(9,060	)		(18,633	)
			Prepaid expenses and other current assets			832			(754	)
			Inventories			375			290
			Other assets			(11,215	)		(3,258	)
			Accounts payable, accrued liabilities and other liabilities			16,435			9,702

				Net cash provided by operating activities		35,432			18,257
Cash flows from investing activities:
		Purchases of property and equipment				(3,170	)		(5,175	)
		Cost of net assets acquired				(51	)		(1,155	)

				Net cash used in investing activities		(3,221	)		(6,330	)
Cash flows from financing activities:
		Net decrease in money order payable				(5,540	)		(4,172	)
		Net repayments of revolving advances				(3,797	)		(1,600	)
		Net repayments of term advances				(8,350	)		(1,500	)
		Net (repayments) borrowings of notes payable				(451	)		517
		Repayments of long-term notes payable				(8,000	)		(4,000	)
		Proceeds from stock options exercised				7			645

				Net cash used in financing activities		(26,131	)		(10,110	)

	Cash provided by continuing operations					6,080			1,817
	Cash provided by sale of discontinued operations					1,342			—

Net increase in cash and cash equivalents						7,422			1,817
Cash and cash equivalents, beginning of period						116,264			129,186

Cash and cash equivalents, end of period					$	123,686		$	131,003

Supplemental disclosures of cash flows information:
		Interest paid			$	12,000		$	7,810
		Income taxes paid			$	2,860		$	3,304

The accompanying notes are an integral part of these consolidated financial statements.

ACE CASH EXPRESS, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying condensed interim consolidated financial statements of Ace Cash Express, Inc. (the “Company” or “ACE”) and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financ

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