ACE Cash Express, Inc., the nation’s largest check-cashing chain and a significant provider of related retail financial services, announced revenues of $60.2 million for its third fiscal quarter ended March 31, 2001, resulting in a diluted loss per share of $0.41. These results are in line with the Company’s anticipated operating results that were announced on April 5, 2001.
During the third quarter of fiscal 2001, total revenue increased 46 percent, to $60.2 million from $41.3 million in the third quarter of fiscal 2000. The Company reported a net loss of $4.2 million for the third quarter of fiscal 2001 as compared to a net profit of $5.2 million, for the third quarter of fiscal 2000. Earnings before interest, taxes, depreciation and amortization decreased 31 percent, to $8.9 million for the fiscal 2001 third quarter from $12.8 million for the fiscal 2000 third quarter. As previously announced, the quarterly net loss resulted from an increase in the Company’s loan loss provision on participations in Goleta National Bank (GNB) loans and the accelerated closing of approximately 84 underperforming stores. The Company increased its loan loss provision in the quarter by approximately $8.5 million and recorded $8.6 million of store closing expense that included costs associated with lease terminations, reduction of employees, write-offs for goodwill and disposal of certain fixed assets and inventory.
ACE’s core revenue categories showed continued growth in the fiscal 2001 third quarter compared to the fiscal 2000 third quarter. Check-cashing fees increased 24 percent, from $19.0 million to $23.6 million, and loan fees increased 280 percent, from $3.7 million to $14.0 million. Fees for cashing tax refund checks also increased 29 percent, from $10.1 million to $12.9 million during the third quarter of fiscal 2001. ACE opened 15 newly constructed company-owned stores and acquired 2 stores; also, 7 franchised locations were opened, and 4 stores were closed. The Company expects to close the 84 underperforming stores before fiscal year-end.
Jay B. Shipowitz, President and Chief Operating Officer, remarked, “As previously announced, the increase in our participation loan-loss provision reflects a higher rate of borrower default and a lower collection rate than we had anticipated. We believe improvements that have been made by ACE and Goleta will allow the product to achieve higher levels of profitability in the future. We also believe that the closing of the underperforming stores will allow our field personnel to focus on our more profitable stores and improve ACE’s profitability in future years.”
Three-Month Financial Highlights
(in thousands, except per share data)
Incr/(Decr) in
Three Months Ended Fiscal 2001
March 31, from Fiscal 2000
2001 2000 $ %
(unaudited)
Revenues $60,193 $41,337 $18,856 46%
Net income/(loss) $(4,155) $5,177 $(9,332) (180)%
Earnings before interest,
taxes, depreciation and
amortization $8,896 $12,829 $(3,933) (31)%
Diluted earnings/(loss)
per share $(0.41) $0.50 $(0.91) (182)%
Nine Month Results
For the first nine months of fiscal 2001, total revenue increased 40 percent, to $145.5 million from $104.2 million for the first nine months of fiscal 2000. Because of the net loss in the third fiscal quarter, the Company reported a net loss of $772,000 for the first nine months of fiscal 2001 resulting in a diluted loss per share of $0.08, compared to net income of $7.6 million, (before the cumulative effect of the change in accounting) resulting in diluted earnings per share of $0.73, for the first nine months of fiscal 2000. Earnings before interest, taxes, depreciation and amortization grew 3 percent in the first nine months of fiscal 2001, to $25.1 million from $24.4 million for the first nine months of fiscal 2000. For the first nine months of fiscal 2001, same store sales increased by 22.8 percent, to $117.2 million from $95.5 million in the first nine months of fiscal 2000.
ACE opened 36 newly constructed company-owned stores, acquired 131 stores and opened 22 new franchised locations during the first nine months of fiscal 2001. ACE closed 14 stores during the first nine months of fiscal 2001; ACE expects to close the 84 underperforming stores before fiscal year-end.
“The tax season for the third quarter of this fiscal year resulted in a 28.5 percent increase in tax check fees over the third quarter of the last fiscal year,” said Donald H. Neustadt, chief executive officer of ACE. “As tax season ends, we plan to re-deploy 50 self-service machines from tax preparer locations to ACE stores. We believe that the self-service machines will improve customer service, making it faster and more convenient to cash checks.”
Nine-Month Financial Highlights
(in thousands, except per share data)
Incr/(Decr) in
Nine Months Ended Fiscal 2001
March 31, from Fiscal 2000
2001 2000 $ %
(unaudited)
Revenues $145,531 $104,209 $41,322 40%
Net income/(loss) $(772) $7,604 * $(8,376) (110)%
Earnings before interest,
taxes, depreciation and
amortization $25,075 $24,385 * $690 3%
Diluted earnings/(loss)
per share $(0.08) $0.73 * $(0.81) (111)%
* Before cumulative effect of change in accounting
Business Outlook for the Remainder of Fiscal 2001 and for Fiscal 2002
The statements made below (preceded by bullet points) are the Company’s outlook or forecast for the Company’s business for the remainder of the fiscal year ending June 30, 2001 and for the fiscal year ending June 30, 2002. These statements are made only as of April 20, 2001 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” which, as indicated in greater detail below under “Forward-looking Statements,” cannot be guaranteed and may turn out to be wrong.
The statements made below are based on various assumptions made after the nine months ended March 31, 2001, which include, but are not limited to the following: (1) the expected closing of 84 underperforming stores in the fourth quarter of fiscal 2001, the opening of an additional 50 newly- constructed stores in fiscal 2002, the closure of 10 stores during the normal course of business in fiscal 2002, but no other increase or decrease in the number of the Company’s owned stores (whether by acquisition or otherwise); (2) the face amount of the average check cashed being approximately $326; (3) the face amount of the average money order sold being approximately $132; (4) no material change in the effective interest rate on all money borrowed by the Company; (5) no material change in the nature or terms, or the procedure for the Company’s offering and selling at its locations, any third-party product or service offered at the Company’s locations.
— The number of checks cashed (excluding tax checks), which was 9.2 million in the first nine months of fiscal 2001, is expected to reach a total of between 12.3 and 12.4 million in all of fiscal 2001 and between 13.0 and 13.3 million in all of fiscal 2002. This assumed number for all of fiscal 2001 would be a 12 to 13 percent increase over the number of checks cashed in all of fiscal year 2000 and would result in check fees (excluding tax checks) of between $90 and $91 million for fiscal 2001. This assumed number for fiscal 2002 would be a 5 to 7 percent increase over the anticipated number of checks cashed in the fiscal year 2001 and would result in check fees (excluding tax checks) of between $97 and $99 million in fiscal 2002.
— The impact of the Company’s business of cashing tax refund checks and refund anticipation loan checks is continuing to be primarily in the third and fourth quarters of the Company’s fiscal year. The number of tax checks in the first nine months of fiscal 2001 was 320,000 and is estimated to be an additional 100,000 in the fourth quarter of fiscal 2001. The estimated total number of 420,000 tax checks cashed in all of fiscal 2001 would result in estimated tax fees of $15.0 to $15.1 million. The number of tax checks is expected to reach between 420,000 and 430,000 in all of fiscal 2002, which would result in tax fees of between $14.9 and $15.3 million.
— The number of Goleta National Bank (GNB) loan transactions in which participations are purchased is expected to reach between 1.5 and 1.6 million in all of fiscal 2002 compared to approximately 1.3 million such loan transactions in all of fiscal 2001. This number would result in between $59 and $61 million in loan interest from loan participations in fiscal 2002, compared to approximately $53 million in loan interest from loan participations in all of fiscal 2001.
— Revenue from bill-payment fees, which was $7.5 million in the first nine months of fiscal 2001, is expected to be between $10.8 and $11.2 million in all of fiscal 2002, compared to an estimated $10.2 million in all of fiscal 2001.
— Same store sales, which was 22.8 percent in the first nine months of fiscal 2001, is expected to increase between 7 and 8 percent in all of fiscal 2002.
— The Company which reported total revenue of $145.5 million in the first nine months of fiscal 2001, expects its total revenue for all of fiscal 2002 to range between $210 and $215 million, which would be an 8 to 11 percent increase from the Company’s estimated fiscal 2001 total revenue of approximately $195 million.
— The Company’s gross margin percentage, which was 26.6 percent in the first nine months of fiscal 2001, expects gross margin percentage for all of fiscal 2002 to be approximately 32 to 33 percent compared to approximately 27 percent for all of fiscal 2001.
— Region, headquarters, and franchise expenses, for the first nine months of fiscal 2001 were $18.8 million. In all of fiscal 2002, these same expenses are expected to range from 13.3 to 13.5 percent of revenue for fiscal 2002, compared to an estimated 13 percent of revenue for all of fiscal 2001.
— The Company’s interest expense for the first nine months of fiscal 2001 was $9.0 million. The Company expects its interest expense for all of fiscal 2002 to be approximately $12.5 million, which would be an increase of 3 percent over the estimated interest expense of $12.2 million for all of fiscal 2001; the increase would be due to estimated slightly higher effective interest rates offset in part by estimated lower average borrowings.
— Regarding participations purchased in GNB loans, small consumer loan losses, as a percentage of total revenue, which was 12.6 percent in the first nine months of fiscal 2001, are expected to range between 10.7 and 10.9 percent in all of fiscal 2002 compared to an expected 12.1 percent in all of fiscal 2001.
— Returned checks, net of collections and cash shortages, as a percentage of total revenue, which was 6.5 percent in the first nine months of fiscal 2001, is expected to range between 5.2 and 5.5 percent in all of fiscal 2002, compared to an estimated 6.2 percent in all of fiscal 2001.
— The effective tax rate for all of fiscal 2002 is expected to be approximately 40 percent, substantially the same as the effective rate for all of fiscal 2001.
— The Company, whose center-level depreciation was $5.0 million in the first nine months of fiscal 2001, expects center-level depreciation to be approximately $6.7 million for all of fiscal 2002, an increase of 2 percent over the estimated depreciation for fiscal 2001 of $6.6 million.
— The Company, whose amortization of goodwill and other acquisition- related intangibles was $3.7 million in the first nine months of fiscal 2001, expects amortization of goodwill and other acquisition- related intangibles and costs to be approximately $6.0 million for fiscal 2002, an increase of 18 percent over the amortization for fiscal 2001 due to acquisitions during the first nine months of fiscal 2001.
— Diluted loss per share for the first nine months of fiscal 2001 was $0.08. The Company expects diluted earnings per share for fiscal 2002 to range between $1.30 and $1.36, compared an anticipated diluted earnings per share range of $0.03 to $0.05 for all of fiscal 2001.
— The Company’s earnings before interest, taxes, depreciation, and amortization (EBITDA) for the first nine months of fiscal 2001 was $25.1 million. The Company expects EBITDA in all of fiscal 2002 to be between $45 and $47 million, a 34 to 40 percent increase over the estimated fiscal 2001 EBITDA of approximately $33.5 million.
About the Company
ACE Cash Express, Inc. is headquartered in Irving, Texas and is the largest owner, operator and franchiser of check-cashing stores in the United States. Founded in 1968, the company has a total network of 1,153 stores, consisting of 983 company-owned stores and 170 franchised stores in 34 states and the District of Columbia. ACE also maintains automatic check-cashing machines, which provide financial services without the need for a service associate, at 71 locations. ACE offers a broad range of financial and check- cashing services and is one of the largest providers of MoneyGram wire transfer transactions. In addition, ACE offers money orders, bill payment services, and prepaid local and long distance telecommunication services. Under ACE’s agreement with Goleta National Bank (GNB), GNB currently makes small consumer loans available to customers at various ACE company-owned stores. The company’s website is found at http://www.acecashexpress.com.
For complete details on ACE’s lastest earnings report visit CardData ([www.carddata.com][1]).
[1]: http://www.carddata.com
