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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

OR

Commission File Number 0-20774

ACE CASH EXPRESS, INC.

(Registrant’s telephone number, including area code) (972) 550-5000

Securities registered pursuant to Section 12(b) of the Act:

None
Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.01 par value

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 by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [  ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).
Yes  [  ]  No  [X]

As of September 19, 2003, 10,344,979 shares of Common Stock were outstanding. As of such date the aggregate market value of voting stock (based upon the last reported sales price in The Nasdaq Stock Market) held by nonaffiliates of the registrant was approximately $105,396,104.

DOCUMENTS INCORPORATED BY REFERENCE

The information required by Part III is incorporated by reference from the registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this report.

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PART I

ITEM 1. BUSINESS

General

Ace Cash Express, Inc. (“ACE” or the “Company”) is a significant provider of retail financial services in the United States. The Company is also the largest owner, operator, and franchiser of check-cashing stores in the United States. As of August 31, 2003, the Company had a total network of 1,168 stores in 36 states and the District of Columbia, consisting of 968 company-owned stores and 200 franchised stores. The Company seeks to provide a full range of retail financial services and transaction processing in its markets and to develop and maintain the largest network of stores in each of the markets where the Company operates. The Company’s growth strategy is to integrate acquisitions, new store openings, and franchising in new and existing markets and to develop new products for introduction into the existing store base.

ACE stores offer check-cashing services and other retail financial services at competitive rates in clean, convenient settings. The Company’s services also include offering short-term consumer loans; selling money orders; providing money transfer services using the MoneyGram network; offering bill-payment services and other retail financial transaction processing services.

Industry Overview

The primary industry in which ACE operates is check-cashing. Industry sources indicate that there are approximately 11,000 check-cashing stores nationally. Though there is limited public information available, the Company believes that there are four other check-cashing companies operating or franchising over 100 stores and five companies that operate or franchise between 50 and 100 locations, with the remaining companies operating fewer than 50 stores, in the United States.

The Company believes that it and other check-cashing companies focus on and offer services to a customer segment that banks do not service and operate at locations and during hours that are more convenient than those traditionally offered by banks. Unlike many banks, check-cashing stores are willing to assume the risk that checks they cash will “bounce.” For instance, it is not unusual for a bank to refuse to cash a check for a customer who does not maintain a deposit account with the bank and to require its depositors to maintain sufficient funds in an account to cover a check to be cashed or wait several days for the check to clear. As a result, the Company believes check-cashing stores provide an attractive alternative to customers without bank accounts or with relatively small account balances. Although these customers might save money by depositing their checks in a bank and waiting for them to clear, many prefer paying a fee to take advantage of the convenience and availability of immediate cash offered by check-cashing stores.

The core business of check-cashing stores is generally cashing checks for a fee. These fees are intended to provide the check casher with a profit after covering operating expenses, including any interest expense incurred by the check casher on the funds advanced to customers between the time checks are cashed and the time the checks clear through the banking system. The risk a check-cashing store assumes upon cashing a check is that the check will be uncollected because of insufficient funds, stop payment orders, or fraud. In order to minimize this risk and the losses associated with uncollected checks, many check-cashing stores cash only payroll or government entitlement checks, charge higher fees, or have stricter approval procedures for cashing personal checks. ACE does not promote the cashing of personal checks in its stores. For the fiscal year ended June 30, 2003, less than 1% of the checks cashed by the Company were one-party personal checks.

In addition to check-cashing services, most check-cashing stores offer customers a range of other services, including access to short-term consumer loans, bill-payment services, money orders, and wire transfer services. Some check-cashing stores also offer public transportation passes, copying and fax transmission services, and postage stamps.

The Company believes that the deregulation of the banking and savings and loan industry has increased the role played by check-cashing stores in providing basic retail financial services to low-income and middle-income customers. At the same time, the Company believes that competition, regulatory scrutiny and complexity are contributing to consolidation of the industry. The Company’s strategy is to position itself to benefit from industry consolidation and the competitive advantages available to large operators and franchisers of retail financial services.

Growth Strategy

ACE’s growth strategy consists principally of combining acquisitions and new store openings (both company-owned and franchised stores), with the objective of having the largest number of retail financial services locations in each of its markets and developing new products for introduction into the existing store base, and by increasing same store sales of existing products. ACE defines its target markets as cities of 100,000 or more. In fiscal 2003, the Company opened 14 newly constructed stores, acquired 2 stores, franchised 26 stores, and sold 23 and closed 28 company-owned stores. The Company

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currently anticipates that it will construct and open 40 company-owned stores, primarily in existing markets, during the fiscal year ending June 30, 2004. The Company’s growth strategy depends upon the availability of adequate financing, as well as suitable locations, acquisition opportunities, and experienced management employees, and is subject to the risk that any of these conditions may not be met. The Company’s growth in owned stores in fiscal 2003 was smaller than the Company’s historical growth primarily because of limitations on capital expenditures imposed by the Company’s bank credit agreement through March 31, 2003. The Company’s new and longer-term financing arrangements entered into as of March 31, 2003, however, should enable the Company to pursue its traditional growth strategy, as well as to expand the Company’s franchise network (which requires a minimal amount of capital).

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The following table illustrates the development of company-owned stores since June 30, 1997 by showing the number of stores open in each market area at the end of each of the indicated periods:

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Acquisitions. During fiscal 2003, the Company acquired two stores in two separate transactions. The Company believes its experience with acquisitions permits it to successfully integrate additional acquisitions. Of the 968 ACE company-owned stores in operation as of June 30, 2003, 382, or 39%, have been acquired stores. The Company does not have any current plan or expectation as to the number of stores that it may acquire during the fiscal year ending June 30, 2004. The Company intends to continue searching for strategic opportunities in both existing and new markets.

Self-service machines. The Company has developed self-service machines (“SSMs”) which are able to cash checks, sell prepaid long-distance telephone cards, sell money orders, and process third-party bill payments. The Company increased the number of self-service machines in H&R Block Tax Services, Inc. (“H&R Block”) retail locations, to over 200 during the 2003 tax season (i.e., January through March). Those machines only cashed tax-refund checks issued to customers at H&R Block locations. The Company currently has 21 machines in company-owned locations and more than 200 machines available for deployment at H&R Block locations during the 2004 tax season. The Company currently has 22 bill-payment only SSMs located at a third-party service provider’s locations. The Company plans to deploy 15 additional bill-payment-only SSMs at such service provider’s locations in fiscal 2004.

Franchise Operations

The Company is one of the largest franchisers of check-cashing stores in the United States. ACE franchises are marketed through an employee sales force, supplemented by advertising in newspapers, trade journals, and other media. The following table illustrates the development of franchised stores since June 30, 1998 by showing the number of stores open in each state at the end of each of the indicated periods: