##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended June 30, 2006
 OR
 o
    
    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.
  Texas
    
    75-2142963(State or other jurisdiction of incorporation or organization)
    
    (IRS Employer Identification No.)1231 Greenway Drive, Suite 600
Irving, Texas
(Address of principal executive offices)
    
    75038
(Zip Code)
 (972) 550-5000
  Name of each exchangeTitle of each class
    
    on which registered
 None
 Common Stock, $.01 par value
 þ o
 o þ
 þ o
 o
  o þ o
 o þ
  DOCUMENTS INCORPORATED BY REFERENCE




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##### 



ACE CASH EXPRESS, INC.
FORM 10-K
For the Year Ended June 30, 2006
 Table of Contents
 Page NumberPART IItem 1.
    
    Business
    
    
    4Item 1A.
    
    Risk Factors
    
    
    24Item 1B.
    
    Unresolved Staff Comments
    
    
    33Item 2.
    
    Properties
    
    
    34Item 3.
    
    Legal Proceedings
    
    
    34Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    35PART IIItem 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    35Item 6.
    
    Selected Financial and Performance Data
    
    
    36Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    40Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    58Item 8.
    
    Financial Statements and Supplementary Data
    
    
    58Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    58Item 9A.
    
    Controls and Procedures
    
    
    58Managements Report on Internal Control over Financial Reporting
    
    
    59Report of Independent Registered Public Accounting Firm
    
    
    60Item 9B.
    
    Other Information
    
    
    61PART IIIItem 10.
    
    Directors and Executive Officers of the Registrant
    
    
    61Item 11.
    
    Executive Compensation
    
    
    61Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    61Item 13.
    
    Certain Relationships and Related Transactions
    
    
    61Item 14.
    
    Principal Accountant Fees and Services
    
    
    61PART IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    61SIGNATURES
    
    
    68INDEX TO EXHIBITS
    
    
    108Amendment to Installment Loan Marketing and Servicing AgreementSubsidiariesConsent of Grant Thornton LLPCertification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906
  2




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Forward-looking Statements
    3




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PART I
 
 ITEM 1. BUSINESS
 Overview
       Website Access to Reports. www.acecashexpress.com www.sec.gov.
 Industry Overview
  4




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Check cashing.
  Short-term consumer loans.
  Other financial services.
 Competitive Strengths
  Focus on Customer Service.
 Efficient Operating Model.
 5




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
    
    provide quality customer service and take pride in our store appearance;
    
    reduce cash shortages in our stores;
    
    reduce forgeries;
    
    increase our in-store loan payoffs;
    
    reduce the number of times our stores open late or close early;
    
    properly staff our stores for peak schedules;
    
    increase the number of daily loan transactions;
    
    reduce overtime hours;
    
    increase the number of new customer transactions; and
    
    provide more customers with the ACE prepaid Visa and Mastercard debit cards.
  Proprietary Information Systems.
 
    
    moving customers in and out of the store more quickly due to faster connectivity to our
centralized risk management system;
    
    evaluating customer transaction patterns to improve our check cashing approval process;
    
    utilizing automated decision-making technology to reduce check cashing risk;
    
    monitoring daily revenue by service on a regional, store and employee basis;
    
    detecting and preventing fraud and other losses, including cash differences, forgery and employee theft;
    
    planning and managing optimal store cash levels and store personnel scheduling; and
    
    facilitating compliance with regulatory requirements.
  Proven Acquisition Strategy.
 6




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Experienced Management Team.
 Growth Strategy
  Open Company-Owned Stores.
     Continue Franchise Store Development.
   7




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Pursue Opportunistic Acquisitions.
    Introduce New Services.
 Continue Comparable Store Revenue Growth.
 Improve Operating Efficiency.
 8




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Our Customers
   
    
    approximately 50% Caucasian; 25% Hispanic; 20% African American; 5% Other;
    
    a majority ranging in age from 25 to 45;
    
    an average household annual income of approximately $30,000, with approximately 40% above $40,000;
    
    approximately half are male and half are female, with our check cashing customers skewed
towards younger males and our short-term consumer loan customers skewed towards older
females;
    
    generally rent their housing and move more frequently than the national average; and
    
    pay bills with walk-in payments or money orders.
  Our Services
  Fiscal Year Ended June 30,2006
    
    
    2005
    
    
    2004(in thousands)Check cashing
    
    $
    148,065
    
    
    $
    131,619
    
    
    $
    129,194Short-term consumer loans
    
    
    108,667
    
    
    
    91,793
    
    
    
    77,029Bill payments
    
    
    25,151
    
    
    
    20,266
    
    
    
    16,961Money transfers
    
    
    13,985
    
    
    
    11,868
    
    
    
    11,136Money orders
    
    
    6,830
    
    
    
    6,875
    
    
    
    6,330Franchising
    
    
    3,242
    
    
    
    3,180
    
    
    
    2,774Other fees
    
    
    3,969
    
    
    
    3,048
    
    
    
    3,235Total revenues
    
    $
    309,909
    
    
    $
    268,649
    
    
    $
    246,659
 Check cashing.
   9




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Short-term consumer loans.
   Number of LoanLoans Made By or Processed For:
    
    Transactions
    
    Average Advance
    
    Average Customer Fee(in thousands)ACE (1)
    
    
    1,681
    
    
    $
    308
    
    
    $
    45.30Republic Bank (2)
    
    
    221
    
    
    
    312
    
    
    $
    55.00First Bank of Delaware
    
    
    62
    
    
    
    353
    
    
    $
    34.98True Financial (CSO loans) (1)
    
    
    154
    
    
    
    414
    
    
    $
    84.42
 
 (1)
    
    Includes new loans and refinances.(2)
    
    As of June 30, 2006, we no longer offer Republic Bank loans in any of our stores.   10




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Bill payments.
   Money transfers. ®
 Money orders.
 Franchising.
  11




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Other services.
 New Store Economics
    Number of
    
    Average Store RevenuesStores Open at
    
    Year Ended June 30,Year Opened:
    
    June 30, 2006
    
    2006
    
    2005
    
    2004
    
    2003
    
    2002(in thousands)1997 and earlier
    
    
    299
    
    
    $
    287.0
    
    
    $
    284.3
    
    
    $
    285.0
    
    
    $
    269.7
    
    
    $
    270.01998
    
    
    44
    
    
    
    258.2
    
    
    
    256.2
    
    
    
    254.8
    
    
    
    245.6
    
    
    
    230.91999
    
    
    58
    
    
    
    241.2
    
    
    
    234.1
    
    
    
    217.0
    
    
    
    206.4
    
    
    
    199.92000
    
    
    57
    
    
    
    229.8
    
    
    
    218.6
    
    
    
    210.7
    
    
    
    192.5
    
    
    
    182.82001
    
    
    41
    
    
    
    254.9
    
    
    
    236.7
    
    
    
    215.1
    
    
    
    187.9
    
    
    
    143.02002
    
    
    35
    
    
    
    224.7
    
    
    
    210.6
    
    
    
    183.6
    
    
    
    128.9
    
    
    
    35.62003
    
    
    11
    
    
    
    254.5
    
    
    
    214.2
    
    
    
    165.9
    
    
    
    38.0
    
    
    
    2004
    
    
    41
    
    
    
    178.6
    
    
    
    122.6
    
    
    
    26.2
    
    
    
    
    
    
    
    2005
    
    
    60
    
    
    
    138.1
    
    
    
    39.9
    
    
    
    
    
    
    
    
    
    
    
    2006
    
    
    51
    
    
    
    56.4697ACE Cash Advance stores
(1)
    
    
    81Acquired stores (1)
    
    
    5751,353
 Number of
    
    Average Store Gross MarginStores Open at
    
    Year Ended June 30,Year Opened:
    
    June 30, 2006
    
    2006
    
    2005
    
    2004
    
    2003
    
    2002(in thousands)1997 and earlier
    
    
    299
    
    
    
    125.5
    
    
    
    121.0
    
    
    
    118.1
    
    
    
    110.0
    
    
    
    113.91998
    
    
    44
    
    
    
    97.4
    
    
    
    90.5
    
    
    
    80.4
    
    
    
    85.3
    
    
    
    83.01999
    
    
    58
    
    
    
    87.1
    
    
    
    80.9
    
    
    
    63.2
    
    
    
    60.6
    
    
    
    56.12000
    
    
    57
    
    
    
    75.7
    
    
    
    67.8
    
    
    
    56.2
    
    
    
    49.0
    
    
    
    48.42001
    
    
    41
    
    
    
    83.8
    
    
    
    71.2
    
    
    
    51.5
    
    
    
    39.4
    
    
    
    8.62002
    
    
    35
    
    
    
    77.7
    
    
    
    63.7
    
    
    
    37.7
    
    
    
    (1.4
    )
    
    
    (26.4
    )2003
    
    
    11
    
    
    
    96.0
    
    
    
    66.0
    
    
    
    22.8
    
    
    
    (15.8
    )
    
    
    2004
    
    
    41
    
    
    
    31.0
    
    
    
    (13.3
    )
    
    
    (26.1
    )
    
    
    
    
    
    
    2005
    
    
    60
    
    
    
    (8.9
    )
    
    
    (29.3
    )2006
    
    
    51
    
    
    
    (27.0
    )697ACE Cash Advance stores
(1)
    
    
    81Acquired stores (1)
    
    
    5751,353
 12




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(1)
    
    ACE Cash Advance store count and acquired store count are provided on this ACE Cash
Express store economics table to delineate the mix between ACE Cash Express newly
constructed stores, ACE Cash Advance stores and acquired stores in our company-owned
store network. A similar table for ACE Cash Advance stores and acquired stores would
not provide a useful performance trend because we have just recently begun opening ACE
Cash Advance stores, and acquired store performance varies significantly depending on
the number of years that the store has been open prior to acquisition   Company-owned Store Locations and Operations
  
  13




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Company-Owned StoresAs of June 30,Market Area
    
    2006
    
    2005
    
    2004
    
    2003
    
    2002Texas
    
    
    385
    
    
    
    368
    
    
    
    340
    
    
    
    328
    
    
    
    329California
    
    
    164
    
    
    
    92
    
    
    
    87
    
    
    
    85
    
    
    
    88Arizona
    
    
    94
    
    
    
    73
    
    
    
    72
    
    
    
    75
    
    
    
    72Florida
    
    
    89
    
    
    
    65
    
    
    
    63
    
    
    
    68
    
    
    
    91Colorado
    
    
    88
    
    
    
    78
    
    
    
    66
    
    
    
    53
    
    
    
    56Tennessee
    
    
    48
    
    
    
    38
    
    
    
    39
    
    
    
    18
    
    
    
    18Pennsylvania
    
    
    45
    
    
    
    43
    
    
    
    16
    
    
    
    16
    
    
    
    16Ohio
    
    
    41
    
    
    
    38
    
    
    
    27
    
    
    
    25
    
    
    
    24Washington
    
    
    40
    
    
    
    23
    
    
    
    14
    
    
    
    13
    
    
    
    13Indiana
    
    
    38
    
    
    
    30
    
    
    
    28
    
    
    
    26
    
    
    
    25Georgia
    
    
    37
    
    
    
    39
    
    
    
    44
    
    
    
    46
    
    
    
    50Virginia
    
    
    36
    
    
    
    34
    
    
    
    32
    
    
    
    29
    
    
    
    29Maryland
    
    
    34
    
    
    
    36
    
    
    
    38
    
    
    
    39
    
    
    
    39Louisiana
    
    
    31
    
    
    
    33
    
    
    
    35
    
    
    
    27
    
    
    
    27North Carolina
    
    
    22
    
    
    
    16
    
    
    
    18
    
    
    
    16
    
    
    
    16Oklahoma
    
    
    20
    
    
    
    20
    
    
    
    20
    
    
    
    21
    
    
    
    23Arkansas
    
    
    18
    
    
    
    18
    
    
    
    8
    
    
    
    8
    
    
    
    8South Carolina
    
    
    17
    
    
    
    16
    
    
    
    10
    
    
    
    10
    
    
    
    13Nevada
    
    
    15
    
    
    
    15
    
    
    
    15
    
    
    
    14
    
    
    
    14Washington, D.C
    
    
    15
    
    
    
    15
    
    
    
    16
    
    
    
    16
    
    
    
    16New Mexico
    
    
    13
    
    
    
    13
    
    
    
    13
    
    
    
    11
    
    
    
    10Oregon
    
    
    12
    
    
    
    9
    
    
    
    7
    
    
    
    8
    
    
    
    8Missouri
    
    
    11
    
    
    
    11
    
    
    
    11
    
    
    
    11
    
    
    
    11Illinois
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Kansas
    
    
    8
    
    
    
    6
    
    
    
    6
    
    
    
    4
    
    
    
    4Nebraska
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Kentucky
    
    
    5
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    Wisconsin
    
    
    5
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    Alabama
    
    
    3
    
    
    
    3
    
    
    
    1
    
    
    
    1
    
    
    
    3Iowa
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    1,353
    
    
    
    1,142
    
    
    
    1,026
    
    
    
    968
    
    
    
    1,003
   Franchised Store Locations
  14




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##### Table of Contents



Franchised StoresAs of June 30,Market Area
    
    2006
    
    2005
    
    2004
    
    2003
    
    2002Texas
    
    
    42
    
    
    
    42
    
    
    
    51
    
    
    
    55
    
    
    
    56Ohio
    
    
    22
    
    
    
    21
    
    
    
    20
    
    
    
    18
    
    
    
    16Arizona
    
    
    17
    
    
    
    15
    
    
    
    9
    
    
    
    5
    
    
    
    3Oklahoma
    
    
    16
    
    
    
    13
    
    
    
    11
    
    
    
    11
    
    
    
    11South Carolina
    
    
    16
    
    
    
    15
    
    
    
    14
    
    
    
    13
    
    
    
    8North Carolina
    
    
    13
    
    
    
    13
    
    
    
    8
    
    
    
    6
    
    
    
    7Florida
    
    
    10
    
    
    
    14
    
    
    
    13
    
    
    
    16
    
    
    
    14Kansas
    
    
    9
    
    
    
    7
    
    
    
    6
    
    
    
    5
    
    
    
    4Louisiana
    
    
    9
    
    
    
    8
    
    
    
    6
    
    
    
    12
    
    
    
    12Colorado
    
    
    6
    
    
    
    8
    
    
    
    7
    
    
    
    6
    
    
    
    4Tennessee
    
    
    6
    
    
    
    11
    
    
    
    8
    
    
    
    7
    
    
    
    7Alabama
    
    
    5
    
    
    
    3
    
    
    
    2
    
    
    
    
    
    
    
    California
    
    
    5
    
    
    
    10
    
    
    
    9
    
    
    
    10
    
    
    
    11Wisconsin
    
    
    5
    
    
    
    4
    
    
    
    2
    
    
    
    1
    
    
    
    1Missouri
    
    
    4
    
    
    
    6
    
    
    
    6
    
    
    
    4
    
    
    
    3Georgia
    
    
    3
    
    
    
    5
    
    
    
    4
    
    
    
    6
    
    
    
    6Indiana
    
    
    3
    
    
    
    3
    
    
    
    2
    
    
    
    2
    
    
    
    2Oregon
    
    
    3
    
    
    
    6
    
    
    
    5
    
    
    
    4
    
    
    
    4Virginia
    
    
    3
    
    
    
    3
    
    
    
    1
    
    
    
    1
    
    
    
    1Delaware
    
    
    2
    
    
    
    2
    
    
    
    2
    
    
    
    2
    
    
    
    1Idaho
    
    
    2
    
    
    
    2
    
    
    
    2
    
    
    
    2
    
    
    
    2Iowa
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    Maine
    
    
    2
    
    
    
    2
    
    
    
    2
    
    
    
    1
    
    
    
    1Michigan
    
    
    2
    
    
    
    2
    
    
    
    1
    
    
    
    1
    
    
    
    1Minnesota
    
    
    2
    
    
    
    2
    
    
    
    2
    
    
    
    2
    
    
    
    2Mississippi
    
    
    2
    
    
    
    1
    
    
    
    1
    
    
    
    2
    
    
    
    1New Mexico
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    Arkansas
    
    
    1
    
    
    
    2
    
    
    
    2
    
    
    
    1
    
    
    
    1Kentucky
    
    
    1
    
    
    
    
    
    
    
    3
    
    
    
    3
    
    
    
    2Maryland
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Massachusetts
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Pennsylvania
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    South Dakota
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    1Wyoming
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    1Hawaii
    
    
    0
    
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    New Jersey
    
    
    0
    
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    1Total
    
    
    220
    
    
    
    229
    
    
    
    204
    
    
    
    200
    
    
    
    184
 15




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##### Table of Contents



Advertising and Marketing
     Information Systems
   
    
    records and monitors the details of every transaction, including the service type,
amount, fees, employee, time, actions taken and duration;
    
    integrates a proprietary and extensive customer/maker risk management database with an
automated decision methodology to guide our employees through the transaction and to better
manage risk in check cashing transactions;
    
    provides services in a standardized and efficient manner, which we believe allows us to
operate our stores with fewer personnel than many of our competitors (many of our stores are
operated by only one person);
    
    reduces the risk of transaction errors by automatically recalling customer data and
calculating fees; and
    
    provides fully automated, immediate and statistically validated loan application
decisions that help ensure standardization and compliance with state and federal lending
regulations.
  16




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##### Table of Contents




    
    monitor daily revenue by service on a company, regional, store and employee basis;
    
    monitor and manage daily store exception reports, which record, for example, any cash
shortages and late store opening times;
    
    identify cash differences between bank statements and our records, such as differences
resulting from missing checks and deposits;
    
    determine, on a daily basis, the amount of cash needed at each store location, allowing
centralized cash management personnel to maintain the optimal amount of cash inventory in
each store;
    
    electronically transmit information and documents to third-party providers of services offered at our stores;
    
    develop a standardized labor scheduling methodology by store, by day;
    
    facilitate compliance with regulatory requirements; and
    
    post revenue and some expenses to our general ledger system.
  ®
   Security
 ACE Cash Express Stores
 ®
  17




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##### Table of Contents



ACE Cash Advance Stores
  Human Resources
    Training.
 
    
    an annual management training program with all regional vice presidents, district
managers and human resource managers which covers employee hiring, progressive discipline,
retention, sexual harassment, compensation, equal employment opportunity compliance and
leadership;
    
    an annual three-day district manager conference at our corporate headquarters which
covers topics such as customer service, loss reduction, safety and security, better delivery
of services and compliance with legal and regulatory requirements;
    
    quarterly regional vice president meetings that focus on operational goal achievement and
human resource issues; and
    
    store employee training which consists of classroom and on-the-job training with
experienced store employees for a minimum of three weeks.
  Hiring and Retention.
  18




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Employees
   Competition
  Relationship with Third-Party Lenders
     19




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20




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Relationships with the Money Order and MoneyGram Suppliers
 Money Order Agreement.
  MoneyGram Agreement.
  Regulation
 General.
 State Regulations.
  21




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Federal Regulations.
     Short-term Consumer Loans.
 22




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23




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ITEM 1A. RISK FACTORS
  Our significant indebtedness and the restrictive covenants under our debt agreements may limit our
ability to expand or pursue our business strategy. In addition, if we are forced to repay some or
all of this debt following an event of default, our financial condition and results of operations
would be severely and adversely affected.
   
    
    incur additional indebtedness;
    
    pay dividends and make distributions in respect of our capital stock;
    
    create or permit restrictions on the ability of our restricted subsidiaries to pay dividends or make other
distributions to us;
    
    repurchase our capital stock;
    
    make investments, loans or other restricted payments;
    
    engage in transactions with shareholders and affiliates;
    
    create or permit certain liens;
    
    use the proceeds from sales of assets and subsidiary stock;
    
    sell or otherwise dispose of assets;
    
    make payments on our debt, other than in the ordinary course; and
    
    engage in mergers and acquisitions.
   24




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Our existing and future debt obligations could adversely affect our business, results of operations
and financial condition.
  
    
    make it more difficult for us to satisfy our obligations to the holders of our
outstanding debt;
    
    make us vulnerable to interest rate increases, because a significant portion of our
borrowings is, and will continue to be, at variable rates of interest;
    
    require us to dedicate a substantial portion of our cash flow from operations to payments
on our debt obligations, which will reduce our funds available for working capital, capital
expenditures and other general corporate expenses;
    
    limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
    
    place us at a disadvantage compared to our competitors that have proportionately less debt;
    
    restrict our operational flexibility, because of restrictive covenants that will limit
our ability to make acquisitions, explore certain business opportunities, dispose of assets
and take other actions; and
    
    limit our ability to borrow additional funds in the future, if we need them, due to
applicable financial and restrictive covenants in our debt agreements.
  
    
    refinance all or a portion of our debt;
    
    obtain additional financing;
    
    sell some of our assets or operations;
    
    reduce or delay capital expenditures and/or acquisitions; or
    
    revise or delay our strategic plans.
  If we do not generate a sufficient amount of cash, which depends on many factors beyond our
control, our liquidity and our ability to service our indebtedness and fund our operations would be
harmed.
  25




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The industry in which we operate is strictly regulated at both the federal and state level. Changes
in current laws and regulations, or the application of future laws and regulations, may have a
significant negative impact on our business, results of operations and financial condition.
  
    
    check cashing fees;
    
    licensing and posting of fees;
    
    lending practices, such as truth in lending;
    
    interest rates and usury;
    
    currency reporting;
    
    recording and reporting of certain financial transactions;
    
    franchising in the states in which we offer and sell franchises;
    
    privacy of personal consumer information; and
    
    prompt remittance of proceeds for the sale of money orders.
   Short-term consumer loan services have come under increased scrutiny and regulation. If the
restrictions created by such regulations increase, or if short-term consumer loans become
prohibited in the states where we offer these loans, our business would be materially adversely
affected.
  26




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Any order, rule or regulation of the State of Texas curtailing the amount or manner in which True
Financial Services offers CSO loans in our Texas stores could materially adversely affect our
revenues derived from offering credit services.
  27




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A significant portion of our revenue is generated by our stores in Texas and a limited number of
states.
  Potential litigation and regulatory proceedings regarding our consumer loans could materially
adversely affect our financial condition.
   Media reports and public perception of short-term consumer loans as being predatory or abusive
could materially adversely affect our business.
   28




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If our estimates of our loan losses are not adequate to absorb known or probable losses, our
financial condition may be materially adversely affected.
    A significant portion of our consumer lending business is derived from our relationships with
third-party lenders, and a loss of any of these relationships could adversely affect our business.
   29




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If the loan approval process for either First Bank of Delaware or True Financial is flawed and more
loans go uncollected, our results of operations could be materially adversely affected.
  We are subject to franchise law and regulations that govern our status as a franchisor and regulate
some aspects of our franchise relationships. Our ability to develop new franchised stores and to
enforce contractual rights against franchisees may be adversely affected by these laws and
regulations, which could cause our franchise revenues to decline and adversely affect our growth
strategy.
  Our current and future business growth strategy involves new store openings and acquisitions, and
our failure to manage our growth or integrate or manage new stores we open or acquire may adversely
affect our business, prospects, results of operations and financial condition.
  §
    
    identification of new locations and negotiation of acceptable lease terms;§
    
    assimilation of acquired operations or services, including the loss of key employees from acquired businesses;§
    
    diversion of managements attention from our core business;§
    
    dilutive issuances of our equity securities (if necessary to finance acquisitions or new stores);§
    
    incurrence of additional indebtedness (if necessary to finance acquisitions or new stores);§
    
    assumption of contingent liabilities;§
    
    the potential impairment of acquired assets; and§
    
    incurrence of significant immediate write-offs.
  30




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If we lose key management or are unable to attract and retain the talent required for our business,
our operating results and growth could suffer.
  We are dependent on hiring an adequate number of hourly employees to run our business and are
subject to government regulations concerning these and our other employees, including minimum wage
laws.
  Competition in the retail financial services industry is intense and could cause us to lose market
share and revenues.
  Our revenues and net income from check cashing services may be materially adversely affected if the
number of consumer check cashing transactions decreases as a result of technological development or
the amount of checks we cash that are uncollected significantly increases.
   Our money transfer and money order revenues are derived from a key third-party relationship and a
loss of that relationship could adversely affect our revenues, cash flow and net income.
  31




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Any disruption in the availability of our information systems could adversely affect operations at
our stores.
  Our business may suffer if our trademarks and service marks are infringed.
  Part of our business is seasonal, which causes our revenues to fluctuate and may adversely affect
our ability to service our debt.
  Because we maintain a significant supply of cash in our stores, we may be subject to cash shortages
due to employee error and theft.
  The price of our common stock may be volatile.
  §
    
    price and volume fluctuations in the overall stock market from time to time,§
    
    significant volatility in the market price and trading volume of financial services companies,§
    
    actual or anticipated changes in our earnings or fluctuations in our operating
results or in the expectations of securities analysts,§
    
    general economic conditions and trends,§
    
    major catastrophic events,
 32




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§
    
    loss of a significant client or clients,§
    
    sales of large blocks of our stock, or§
    
    departures of key personnel.
  Insiders have substantial control over us and could limit your ability to influence the outcome of
key transactions, including a change of control.
  Our operations could be subject to natural disasters and other business disruptions, which could
adversely impact our future revenue and financial condition and increase our costs and expenses.
  Our business may be adversely affected if the acquisition by Ace Holdings is not completed.
   §
    
    the consequences of our managements attention having been diverted from our
day-to-day business over an extended period of time; and§
    
    the significant costs and expenses that we will have incurred relating to the
acquisition.
 
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  33




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ITEM 2. PROPERTIES
  
 ITEM 3. LEGAL PROCEEDINGS
 Pending Putative Class Actions
      Other Incidental Proceedings
  34




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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 PART II
 
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
   High
    
    LowFiscal 2005Quarter ended September 30, 2004
    
    $
    28.74
    
    
    $
    22.24Quarter ended December 31, 2004
    
    
    30.50
    
    
    
    24.29Quarter ended March 31, 2005
    
    
    29.99
    
    
    
    22.17Quarter ended June 30, 2005
    
    
    25.87
    
    
    
    19.61Fiscal 2006Quarter ended September 30, 2005
    
    $
    27.39
    
    
    $
    18.40Quarter ended December 31, 2005
    
    
    25.38
    
    
    
    18.90Quarter ended March 31, 2006
    
    
    27.35
    
    
    
    22.38Quarter ended June 30, 2006
    
    
    30.13
    
    
    
    24.15
    Total Number
    
    
    Maximumof Shares
    
    
    ApproximatePurchased as
    
    
    Dollar Value ofTotal
    
    
    
    
    
    
    Part of Publicly
    
    
    Shares that MayNumber of
    
    
    Average
    
    
    Announced
    
    
    Yet Be PurchasedShares
    
    
    Price Paid
    
    
    Plans or
    
    
    Under the PlansPurchased
    
    
    Per Share
    
    
    Programs
    
    
    or ProgramsPeriod
    
    (1)
    
    
    (1)
    
    
    (2)
    
    
    (2)April 1  April 30
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2,291,966May 1  May 31
    
    
    738
    
    
    $
    0.01
    
    
    
    
    
    
    $
    20,000,000June 1  June 30
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    20,000,000Total
    
    
    738
    
    
    $
    0.01
    
    
    
    
    
    
    $
    20,000,000
 
 (1)
    
    All of these shares were issued as restricted stock under our 1997 Stock Incentive Plan,
and upon forfeiture, we privately repurchased them from the grantees of the restricted
stock for the per share amount (par value) paid by them. These repurchases were not made
as part of our publicly announced repurchase program.(2)
    
    Previously, our board of directors had authorized up to $5 million for the repurchase
of shares of our Common Stock on the open market or in negotiated transactions. During
Fiscal 2000 and 2001, we repurchased 211,400 shares at an average price of $12.81 per
share. In May 2005, our board of directors terminated the previous repurchase program and
established a new program authorizing up to $20 million for the repurchase of shares.
Since then, no shares have been repurchased. The repurchase program does not have an
expiration date, but will terminate when we have made all of the authorized repurchases or
earlier by our board of directors. 35




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ITEM 6. SELECTED FINANCIAL AND PERFORMANCE DATA
 Year Ended June 30,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(in thousands, except per share and store data)Statement of Earnings Data:Revenue
    
    $
    309,909
    
    
    $
    268,649
    
    
    $
    246,659
    
    
    $
    234,289
    
    
    $
    229,266Store expenses:Salaries and benefits
    
    
    77,044
    
    
    
    65,293
    
    
    
    59,593
    
    
    
    58,170
    
    
    
    57,864Occupancy
    
    
    42,629
    
    
    
    34,768
    
    
    
    30,563
    
    
    
    29,194
    
    
    
    28,207Provision for loan losses and doubtful accounts
    
    
    34,725
    
    
    
    27,090
    
    
    
    24,235
    
    
    
    22,892
    
    
    
    22,064Depreciation
    
    
    8,831
    
    
    
    7,684
    
    
    
    7,563
    
    
    
    6,966
    
    
    
    7,180Hurricane Katrina related expenses
    
    
    1,154
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    43,777
    
    
    
    38,398
    
    
    
    40,066
    
    
    
    38,192
    
    
    
    36,512Total store expenses
    
    
    208,160
    
    
    
    173,233
    
    
    
    162,020
    
    
    
    155,414
    
    
    
    151,827Gross margin
    
    
    101,749
    
    
    
    95,416
    
    
    
    84,639
    
    
    
    78,875
    
    
    
    77,439Region expenses
    
    
    25,807
    
    
    
    22,971
    
    
    
    19,251
    
    
    
    17,056
    
    
    
    17,495Headquarters expenses
    
    
    22,441
    
    
    
    19,245
    
    
    
    18,681
    
    
    
    17,133
    
    
    
    16,594Franchise expenses
    
    
    1,230
    
    
    
    1,227
    
    
    
    1,196
    
    
    
    1,225
    
    
    
    993Other depreciation and amortization
    
    
    3,663
    
    
    
    3,094
    
    
    
    3,893
    
    
    
    5,423
    
    
    
    7,570Interest expense
    
    
    6,872
    
    
    
    4,880
    
    
    
    10,231
    
    
    
    16,004
    
    
    
    14,934Other (income) expenses:Restructuring
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (163
    )Legal settlements
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,050
    
    
    
    1,984Loss on early extinguishment of debt
    
    
    668
    
    
    
    
    
    
    
    4,858
    
    
    
    270
    
    
    
    Other (income) expense, including store closing expense
    
    
    54
    
    
    
    (864
    )
    
    
    (1,893
    )
    
    
    264
    
    
    
    1,006Total other (income) expenses
    
    
    722
    
    
    
    (864
    )
    
    
    2,965
    
    
    
    1,584
    
    
    
    2,827Income from continuing operations before income taxes
    
    
    41,014
    
    
    
    44,863
    
    
    
    28,422
    
    
    
    20,450
    
    
    
    17,026Provision for income taxes
    
    
    15,997
    
    
    
    17,497
    
    
    
    11,370
    
    
    
    8,174
    
    
    
    6,913Income from continuing operations
    
    
    25,017
    
    
    
    27,366
    
    
    
    17,052
    
    
    
    12,276
    
    
    
    10,113Gain on sale of discontinued operations, net of income tax (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    499
    
    
    
    Net income
    
    $
    25,017
    
    
    $
    27,366
    
    
    $
    17,052
    
    
    $
    12,775
    
    
    $
    10,113Income (loss) from continuing operations per share
    
    $
    1.76
    
    
    $
    1.98
    
    
    $
    1.49
    
    
    $
    1.20
    
    
    $
    1.00Diluted earnings per share
    
    $
    1.76
    
    
    $
    1.98
    
    
    $
    1.49
    
    
    $
    1.25
    
    
    $
    1.00Weighted average number of diluted shares
    
    
    14,377
    
    
    
    13,821
    
    
    
    11,477
    
    
    
    10,206
    
    
    
    10,141Balance Sheet Data:Cash and cash equivalents
    
    $
    152,652
    
    
    $
    109,430
    
    
    $
    123,041
    
    
    $
    108,110
    
    
    $
    116,264Loans receivable, net
    
    
    26,663
    
    
    
    20,787
    
    
    
    17,047
    
    
    
    13,000
    
    
    
    17,356Total assets
    
    
    392,534
    
    
    
    292,621
    
    
    
    270,262
    
    
    
    255,383
    
    
    
    263,677Revolving advances
    
    
    77,300
    
    
    
    43,300
    
    
    
    60,000
    
    
    
    83,900
    
    
    
    97,500Term advances (current portion)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,833
    
    
    
    48,350Term advances (noncurrent portion)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34,436
    
    
    
    Shareholders equity
    
    
    225,797
    
    
    
    196,685
    
    
    
    162,604
    
    
    
    75,156
    
    
    
    62,311
 36




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SELECTED FINANCIAL AND PERFORMANCE DATA (continued)
 Year Ended June 30,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Operating Data:Company-owned stores in operation:Beginning of year
    
    
    1,142
    
    
    
    1,026
    
    
    
    968
    
    
    
    1,003
    
    
    
    988Acquired
    
    
    135
    
    
    
    74
    
    
    
    34
    
    
    
    2
    
    
    
    8Opened
    
    
    101
    
    
    
    80
    
    
    
    53
    
    
    
    14
    
    
    
    39Sold
    
    
    (2
    )
    
    
    (6
    )
    
    
    (5
    )
    
    
    (23
    )
    
    
    Closed
    
    
    (23
    )
    
    
    (32
    )
    
    
    (24
    )
    
    
    (28
    )
    
    
    (32
    )End of year
    
    
    1,353
    
    
    
    1,142
    
    
    
    1,026
    
    
    
    968
    
    
    
    1,003Franchised stores in operations:Beginning of year
    
    
    229
    
    
    
    204
    
    
    
    200
    
    
    
    184
    
    
    
    175Opened
    
    
    32
    
    
    
    48
    
    
    
    32
    
    
    
    26
    
    
    
    22Acquired by ACE
    
    
    (18
    )
    
    
    (22
    )
    
    
    (13
    )
    
    
    (2
    )
    
    
    (8
    )Closed
    
    
    (23
    )
    
    
    (1
    )
    
    
    (15
    )
    
    
    (8
    )
    
    
    (5
    )End of year
    
    
    220
    
    
    
    229
    
    
    
    204
    
    
    
    200
    
    
    
    184Total store network
    
    
    1,573
    
    
    
    1,371
    
    
    
    1,230
    
    
    
    1,168
    
    
    
    1,187Percentage increase (decrease) in comparable
company-owned store revenues from prior year: (2)Total revenue
    
    
    7.1
    %
    
    
    3.1
    %
    
    
    5.0
    %
    
    
    1.9
    %
    
    
    17.2
    %Check fees including tax check fees
    
    
    1.7
    %
    
    
    (3.8
    %)
    
    
    4.1
    %
    
    
    5.4
    %
    
    
    9.7
    %Loan fees and interest
    
    
    12.1
    %
    
    
    12.7
    %
    
    
    7.8
    %
    
    
    (4.4
    %)
    
    
    36.1
    %Capital Expenditures:(in thousands)Purchases of property and equipment, net
    
    $
    18,134
    
    
    $
    18,951
    
    
    $
    7,439
    
    
    $
    4,721
    
    
    $
    6,992Store acquisition costs:Property and equipment
    
    
    2,150
    
    
    
    958
    
    
    
    511
    
    
    
    50
    
    
    
    135Intangible assets
    
    
    38,025
    
    
    
    18,429
    
    
    
    6,403
    
    
    
    673
    
    
    
    1,177Check Cashing Data:Face amount of checks cashed (in millions)
    
    $
    5,928
    
    
    $
    5,277
    
    
    $
    5,103
    
    
    $
    5,040
    
    
    $
    4,843Face amount of average check
    
    $
    414
    
    
    $
    396
    
    
    $
    388
    
    
    $
    383
    
    
    $
    378Average fee per check
    
    $
    10.40
    
    
    $
    9.98
    
    
    $
    9.91
    
    
    $
    9.65
    
    
    $
    9.36Fees as a percentage of average check
    
    
    2.51
    %
    
    
    2.52
    %
    
    
    2.55
    %
    
    
    2.52
    %
    
    
    2.48
    %Number of checks cashed (in thousands)
    
    
    14,331
    
    
    
    13,325
    
    
    
    13,151
    
    
    
    13,148
    
    
    
    12,821Collections Data:(in thousands, except percentages)Face amount of returned checks
    
    $
    37,380
    
    
    $
    26,914
    
    
    $
    21,705
    
    
    $
    24,087
    
    
    $
    23,637Collections
    
    
    30,824
    
    
    
    20,951
    
    
    
    13,947
    
    
    
    16,935
    
    
    
    16,090Net write-offs
    
    $
    6,556
    
    
    $
    5,963
    
    
    $
    7,758
    
    
    $
    7,152
    
    
    $
    7,547Collections as a percentage of returned checks
    
    
    82.5
    %
    
    
    77.8
    %
    
    
    64.3
    %
    
    
    70.3
    %
    
    
    68.1
    %Net write-offs as a percentage of revenues
    
    
    2.1
    %
    
    
    2.2
    %
    
    
    3.1
    %
    
    
    3.1
    %
    
    
    3.3
    %Net write-offs as a percentage of the face amount
of checks cashed
    
    
    0.11
    %
    
    
    0.11
    %
    
    
    0.15
    %
    
    
    0.14
    %
    
    
    0.16
    %




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SELECTED FINANCIAL AND PERFORMANCE DATA (continued)
 Year Ended June 30,2006
    
    2005
    
    2004
    
    2003
    
    2002(in thousands, except averages and percentages)Combined Small Consumer Loans Operating Data:Volume  new loans and refinances
    
    $
    685,388
    
    
    $
    624,257
    
    
    $
    527,723
    
    
    $
    484,026
    
    
    $
    502,013Average advance
    
    $
    315
    
    
    $
    290
    
    
    $
    278
    
    
    $
    274
    
    
    $
    269Average customer fee
    
    $
    47.95
    
    
    $
    45.87
    
    
    $
    43.71
    
    
    $
    44.55
    
    
    $
    45.61Number of loan transactions  new loans and refinances
    
    
    2,118
    
    
    
    2,139
    
    
    
    1,909
    
    
    
    1,798
    
    
    
    1,866Matured loan volume
    
    $
    708,333
    
    
    $
    613,380
    
    
    $
    516,741
    
    
    $
    488,940
    
    
    $
    489,887Loan fees and interest
    
    $
    108,667
    
    
    $
    91,793
    
    
    $
    77,029
    
    
    $
    70,806
    
    
    $
    74,197Loan loss provision
    
    $
    34,545
    
    
    $
    26,941
    
    
    $
    24,280
    
    
    $
    22,293
    
    
    $
    21,924Gross margin on loans (3)
    
    
    68.2
    %
    
    
    70.7
    %
    
    
    68.5
    %
    
    
    68.5
    %
    
    
    70.5
    %Loan loss provision as a percent of matured loan volume
    
    
    4.9
    %
    
    
    4.4
    %
    
    
    4.7
    %
    
    
    4.6
    %
    
    
    4.5
    %Loans Processed for Republic Bank:(4)Volume  new loans
    
    $
    68,951
    
    
    $
    184,646
    
    
    $
    159,692
    
    
    $
    63,897
    
    
    
    Average advance
    
    $
    312
    
    
    $
    319
    
    
    $
    296
    
    
    $
    302
    
    
    
    Average customer fee
    
    $
    55.00
    
    
    $
    56.30
    
    
    $
    52.11
    
    
    $
    53.35
    
    
    
    Number of loan transactions
    
    
    221
    
    
    
    578
    
    
    
    541
    
    
    
    211
    
    
    
    Matured loan volume
    
    $
    74,968
    
    
    $
    181,153
    
    
    $
    157,018
    
    
    $
    56,040
    
    
    
    Loan fees and interest
    
    $
    10,861
    
    
    $
    27,880
    
    
    $
    24,036
    
    
    $
    9,037
    
    
    
    Provision for loan losses payable to Republic Bank
    
    $
    5,807
    
    
    $
    8,686
    
    
    $
    7,390
    
    
    $
    2,932
    
    
    
    Loans Processed for First Bank of Delaware:(5)Volume  new loans (6)
    
    $
    21,739
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Average advance
    
    $
    353
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Average customer fee (7)
    
    $
    34.98
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Number of loan transactions (8)
    
    
    62
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Matured loan volume (9)
    
    $
    71,553
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loan fees and interest
    
    $
    9,960
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Provision for loan losses payable to
First Bank of Delaware
    
    $
    2,822
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Credit Services Organization Loans (CSO):(10)Volume  new loans and refinances
    
    $
    66,932
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Average advance
    
    $
    414
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Average customer fee
    
    $
    84.42
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Number of loan transactions  new loans and refinances
    
    
    154
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Matured loan volume
    
    $
    51,128
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loan fees and interest
    
    $
    12,131
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Provision for loan losses payable to True Financial
    
    $
    2,665
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ACE Loans:(11)Volume  new loans and refinances
    
    $
    527,766
    
    
    $
    439,610
    
    
    $
    368,031
    
    
    $
    420,129
    
    
    $
    502,013Average advance
    
    $
    308
    
    
    $
    277
    
    
    $
    269
    
    
    $
    268
    
    
    $
    269Average customer fee
    
    $
    45.30
    
    
    $
    41.17
    
    
    $
    39.40
    
    
    $
    42.71
    
    
    $
    45.61Number of loan transactions  new loans and refinances
    
    
    1,681
    
    
    
    1,561
    
    
    
    1,368
    
    
    
    1,587
    
    
    
    1,866Matured loan volume
    
    $
    510,684
    
    
    $
    432,227
    
    
    $
    359,723
    
    
    $
    432,900
    
    
    $
    489,887Loan fees and interest
    
    $
    75,715
    
    
    $
    63,913
    
    
    $
    52,993
    
    
    $
    61,769
    
    
    $
    74,197Loan loss provision
    
    $
    23,251
    
    
    $
    18,255
    
    
    $
    16,890
    
    
    $
    19,361
    
    
    $
    21,924
 38




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##### Table of Contents



SELECTED FINANCIAL AND PERFORMANCE DATA (continued)
 Year Ended June 30,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(in thousands, except percentages)ACE Loans Balance Sheet Data:Gross loans receivable
    
    $
    39,736
    
    
    $
    31,790
    
    
    $
    27,663
    
    
    $
    21,734
    
    
    $
    29,569Less: Allowance for losses on loans receivable
    
    
    13,073
    
    
    
    11,003
    
    
    
    10,616
    
    
    
    8,734
    
    
    
    12,213Loans receivable, net of allowance
    
    $
    26,663
    
    
    $
    20,787
    
    
    $
    17,047
    
    
    $
    13,000
    
    
    $
    17,356Allowance for losses on loans receivable:Beginning of period
    
    $
    11,003
    
    
    $
    10,616
    
    
    $
    8,734
    
    
    $
    12,213
    
    
    $
    13,382Provision for loan losses
    
    
    23,251
    
    
    
    18,255
    
    
    
    16,890
    
    
    
    19,361
    
    
    
    21,924Charge-offs
    
    
    (21,261
    )
    
    
    (18,996
    )
    
    
    (15,295
    )
    
    
    (23,729
    )
    
    
    (24,519
    )Recoveries
    
    
    80
    
    
    
    1,128
    
    
    
    287
    
    
    
    889
    
    
    
    1,426End of period
    
    $
    13,073
    
    
    $
    11,003
    
    
    $
    10,616
    
    
    $
    8,734
    
    
    $
    12,213Allowance as a percent of gross loans receivable
    
    
    32.9
    %
    
    
    34.6
    %
    
    
    38.3
    %
    
    
    40.2
    %
    
    
    41.3
    %
 
 (1)
    
    Discontinued operations related to our sale of 19 underperforming stores in Florida for a
pre-tax gain of $0.8 million and an after-tax gain of $0.5 million recorded in the three
months ended December 31, 2002.(2)
    
    Calculated based on changes in revenue for all company-owned stores open in both periods and
open for at least 13 months.(3)
    
    Gross margin on loans represents loan fees and interest less loan loss provision.(4)
    
    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. Effective
March 1, 2006, we discontinued offering Republic Bank loans in Texas and effective June 30,
2006, discontinued offering Republic Bank loans in Arkansas and Pennsylvania.(5)
    
    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. Effective
March 1, 2006, we discontinued offering First Bank of Delaware loans in Texas.(6)
    
    Includes only the loan origination amount for each installment loan.(7)
    
    The loans processed for First Bank of Delaware are 20-week loans; the Average customer fee is
presented based upon the 14-day average duration of the ACE loans and the Republic Bank loans.(8)
    
    Includes the initial 20-week loan transaction only.(9)
    
    Includes maturing principal amount for each 2-week payment.(10)
    
    True Financial began offering CSO loans at our company-owned stores in Texas on March 1,
2006.(11)
    
    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. 39




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##### Table of Contents



ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Business Overview
          40




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Regulatory Developments
    Critical Accounting Policies and Estimates
  41




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##### Table of Contents



Allowance for Loan Losses and Accrued Liability for Loan Losses Payable to Republic Bank,
First Bank of Delaware and True Financial.
  Goodwill.
 Income Taxes.
 Self-insurance liabilities.
 Summary of Annual Results
  42




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##### Table of Contents



Results of Operations
 Revenue Analysis
 Year Ended June 30,2006
    
    
    2005
    
    
    2004
    
    
    2006
    
    
    2005
    
    
    2004(in thousands)
    
    
    (percentage of revenue)Check cashing fees
    
    $
    148,065
    
    
    $
    131,619
    
    
    $
    129,194
    
    
    
    47.8
    %
    
    
    49.0
    %
    
    
    52.4
    %Loan fees and interest
    
    
    108,667
    
    
    
    91,793
    
    
    
    77,029
    
    
    
    35.1
    
    
    
    34.2
    
    
    
    31.2Bill-payment services
    
    
    25,151
    
    
    
    20,266
    
    
    
    16,960
    
    
    
    8.1
    
    
    
    7.5
    
    
    
    6.9Money transfer services
    
    
    13,985
    
    
    
    11,868
    
    
    
    11,136
    
    
    
    4.5
    
    
    
    4.4
    
    
    
    4.5Money order fees
    
    
    6,830
    
    
    
    6,875
    
    
    
    6,330
    
    
    
    2.2
    
    
    
    2.6
    
    
    
    2.6Franchise revenues
    
    
    3,242
    
    
    
    3,180
    
    
    
    2,774
    
    
    
    1.0
    
    
    
    1.2
    
    
    
    1.1Other fees
    
    
    3,969
    
    
    
    3,048
    
    
    
    3,236
    
    
    
    1.3
    
    
    
    1.1
    
    
    
    1.3Total revenues
    
    $
    309,909
    
    
    $
    268,649
    
    
    $
    246,659
    
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Average revenue per store
(excluding franchise revenues)
    
    $
    243.9
    
    
    $
    244.6
    
    
    $
    247.8
 Fiscal 2006 Compared to Fiscal 2005.
   43




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##### Table of Contents



Year Ended June 30,2006
    
    
    2005
    
    
    2004(in thousands)Money transfer services:Incentive and store opening bonuses
    
    $
    3,077
    
    
    $
    2,868
    
    
    $
    2,559Guarantees
    
    
    1,468
    
    
    
    1,319
    
    
    
    1,326Commissions
    
    
    9,440
    
    
    
    7,681
    
    
    
    7,251Total money transfer service revenue
    
    $
    13,985
    
    
    $
    11,868
    
    
    $
    11,136Money order fees:Incentive bonuses
    
    $
    808
    
    
    $
    808
    
    
    $
    854Commissions
    
    
    6,022
    
    
    
    6,067
    
    
    
    5,476Total money order revenue
    
    $
    6,830
    
    
    $
    6,875
    
    
    $
    6,330
  Fiscal 2005 Compared to Fiscal 2004.
     44




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Store Expense Analysis
 Year Ended June 30,2006
    
    
    2005
    
    
    2004
    
    
    2006
    
    
    2005
    
    
    2004(in thousands)
    
    
    (percentage of revenue)
    
    ]Salaries and benefits
    
    $
    77,044
    
    
    $
    65,293
    
    
    $
    59,593
    
    
    
    24.9
    %
    
    
    24.3
    %
    
    
    24.2
    %Occupancy
    
    
    42,629
    
    
    
    34,768
    
    
    
    30,563
    
    
    
    13.8
    
    
    
    13.0
    
    
    
    12.4Provision for loan losses and
doubtful accounts
    
    
    34,725
    
    
    
    27,090
    
    
    
    24,235
    
    
    
    11.2
    
    
    
    10.1
    
    
    
    9.8Depreciation
    
    
    8,831
    
    
    
    7,684
    
    
    
    7,563
    
    
    
    2.9
    
    
    
    2.9
    
    
    
    3.1Hurricane Katrina related expenses
    
    
    1,154
    
    
    
    
    
    
    
    
    
    
    
    0.4
    
    
    
    
    
    
    
    Other:Armored and security
    
    
    9,745
    
    
    
    8,750
    
    
    
    7,954
    
    
    
    3.1
    
    
    
    3.2
    
    
    
    3.2Returns and cash shorts
    
    
    7,876
    
    
    
    7,288
    
    
    
    9,350
    
    
    
    2.5
    
    
    
    2.7
    
    
    
    3.8Information services
    
    
    3,868
    
    
    
    3,884
    
    
    
    5,860
    
    
    
    1.2
    
    
    
    1.4
    
    
    
    2.4Bank charges
    
    
    6,218
    
    
    
    5,839
    
    
    
    5,093
    
    
    
    2.0
    
    
    
    2.2
    
    
    
    2.1Store supplies
    
    
    4,056
    
    
    
    4,423
    
    
    
    4,219
    
    
    
    1.3
    
    
    
    1.6
    
    
    
    1.7Telecommunications
    
    
    1,917
    
    
    
    1,977
    
    
    
    2,211
    
    
    
    0.6
    
    
    
    0.7
    
    
    
    0.9Advertising and marketing
    
    
    5,449
    
    
    
    2,863
    
    
    
    2,072
    
    
    
    1.8
    
    
    
    1.1
    
    
    
    0.8Miscellaneous
    
    
    4,648
    
    
    
    3,374
    
    
    
    3,307
    
    
    
    1.5
    
    
    
    1.3
    
    
    
    1.3Other
    
    
    43,777
    
    
    
    38,398
    
    
    
    40,066
    
    
    
    14.0
    
    
    
    14.2
    
    
    
    16.2Total store expenses
    
    $
    208,160
    
    
    $
    173,233
    
    
    $
    162,020
    
    
    
    67.2
    %
    
    
    64.5
    %
    
    
    65.7
    %Average per store expense
    
    $
    165.5
    
    
    $
    159.6
    
    
    $
    164.6Average per store gross margin
    
    $
    78.3
    
    
    $
    85.0
    
    
    $
    83.2Face amount of returned checks
    
    $
    37,380
    
    
    $
    26,914
    
    
    $
    21,705Collections
    
    
    (30,824
    )
    
    
    (20,951
    )
    
    
    (13,947
    )Net write-offs
    
    $
    6,556
    
    
    $
    5,963
    
    
    $
    7,758Net write-offs as a percentage of the
face amount of checks cashed
    
    
    0.11
    %
    
    
    0.11
    %
    
    
    0.15
    %
 Fiscal 2006 Compared to Fiscal 2005.
  45




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##### Table of Contents



Fiscal 2005 Compared to Fiscal 2004.
  Other Expenses Analysis
 Year Ended June 30,2006
    
    
    2005
    
    
    2004
    
    
    2006
    
    
    2005
    
    
    2004(in thousands)
    
    
    (percentage of revenue)Region expenses
    
    $
    25,807
    
    
    $
    22,971
    
    
    $
    19,251
    
    
    
    8.3
    %
    
    
    8.6
    %
    
    
    7.8
    %Headquarters expenses
    
    
    22,441
    
    
    
    19,245
    
    
    
    18,681
    
    
    
    7.2
    
    
    
    7.1
    
    
    
    7.6Franchise expenses
    
    
    1,230
    
    
    
    1,227
    
    
    
    1,196
    
    
    
    0.5
    
    
    
    0.5
    
    
    
    0.5Other depreciation and amortization
    
    
    3,663
    
    
    
    3,094
    
    
    
    3,893
    
    
    
    1.2
    
    
    
    1.1
    
    
    
    1.6Interest expense, net
    
    
    6,872
    
    
    
    4,880
    
    
    
    10,231
    
    
    
    2.2
    
    
    
    1.8
    
    
    
    4.1Loss on early extinguishment of debt
    
    
    668
    
    
    
    
    
    
    
    4,858
    
    
    
    0.2
    
    
    
    
    
    
    
    2.0Other (income) expenses, net
    
    
    54
    
    
    
    (864
    )
    
    
    (1,893
    )
    
    
    0.0
    
    
    
    (0.3
    )
    
    
    (0.8
    )Total other expenses
    
    $
    60,735
    
    
    $
    50,553
    
    
    $
    56,217
    
    
    
    19.6
    %
    
    
    18.8
    %
    
    
    22.8
    %
 Region Expenses
 Fiscal 2006 Compared to Fiscal 2005.
 Fiscal 2005 Compared to Fiscal 2004.
 Headquarters Expenses
 Fiscal 2006 Compared to Fiscal 2005.
 Fiscal 2005 Compared to Fiscal 2004.
 46




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##### Table of Contents



Franchise Expenses
 Fiscal 2006 Compared to Fiscal 2005.
 Fiscal 2005 Compared to Fiscal 2004.
 Other Depreciation and Amortization
 Fiscal 2006 Compared to Fiscal 2005.
 Fiscal 2005 Compared to Fiscal 2004.
 Interest Expense, Net
 Fiscal 2006 Compared to Fiscal 2005.
 Fiscal 2005 Compared to Fiscal 2004.
 Loss on Early Extinguishment of Debt
 Fiscal 2006 Compared to Fiscal 2005.
 Other (income) expense, net
 Fiscal 2006 Compared to Fiscal 2005.
 Fiscal 2005 Compared to Fiscal 2004.
 Income Taxes
 Fiscal 2006 Compared to Fiscal 2005.
 47




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Fiscal 2005 Compared to Fiscal 2004.
 Balance Sheet Variations
             48




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##### Table of Contents



ACE Loan Portfolio
      Year Ended June 30,2006
    
    
    2005
    
    
    2004(in thousands)ACE Loans:Gross loans receivable, beginning of period
    
    $
    31,790
    
    
    $
    27,663
    
    
    $
    21,734Originations
    
    
    527,765
    
    
    
    455,710
    
    
    
    368,031Repayments
    
    
    (498,638
    )
    
    
    (433,715
    )
    
    
    (347,094
    )Charge-offs
    
    
    (21,261
    )
    
    
    (18,996
    )
    
    
    (15,295
    )Recoveries
    
    
    80
    
    
    
    1,128
    
    
    
    287Gross loans receivable, end of period
    
    
    39,736
    
    
    $
    31,790
    
    
    $
    27,663Allowance for losses on loans receivable
    
    
    (13,073
    )
    
    
    (11,003
    )
    
    
    (10,616
    )Loans receivable, net of allowance
    
    $
    26,663
    
    
    $
    20,787
    
    
    $
    17,047Allowance for losses on loans receivable:Beginning of period
    
    $
    11,003
    
    
    $
    10,616
    
    
    $
    8,734Provision for loan losses
    
    
    23,992
    
    
    
    18,255
    
    
    
    (16,890
    )Katrina-related loan loss provision adjustment
    
    
    (741
    )
    
    
    
    
    
    
    Charge-offs
    
    
    (21,261
    )
    
    
    (18,996
    )
    
    
    (15,295
    )Recoveries
    
    
    80
    
    
    
    1,128
    
    
    
    287End of period
    
    $
    13,073
    
    
    $
    11,003
    
    
    $
    10,616Net loan
charge-offs as a percent of matured loan volume (1)
    
    
    4.1
    %
    
    
    3.9
    %
    
    
    4.1
    %Allowance as a percent of gross loans receivable
    
    
    32.9
    %
    
    
    34.6
    %
    
    
    38.3
    %
 
 (1)
    
    Matured loan volume represents all loans which became due and payable during
the reporting period.  49




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##### Table of Contents



Year Ended June 30,2006
    
    2005
    
    2004(dollars in thousands)ACE Loans:Gross loans receivable, end of period
    
    $
    39,736
    
    
    $
    31,790
    
    
    $
    27,663Loans past due < 90 days
    
    $
    9,321
    
    
    $
    7,065
    
    
    $
    6,261Percentage of gross loans receivable
    
    
    23.5
    %
    
    
    22.2
    %
    
    
    22.6
    %Loans past due > 90 days
    
    $
    4,823
    
    
    $
    3,927
    
    
    $
    3,653Percentage of gross loans receivable
    
    
    12.1
    %
    
    
    12.4
    %
    
    
    13.2
    %
 Off-Balance Sheet Arrangement with Third-party Lenders
     As of June 30,2006(in millions)Republic Bank
    
    $
    0.5First Bank of Delaware
    
    $
    1.1True Financial
    
    $
    12.0
  50




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##### Table of Contents



Year Ended June 30,2006
    
    
    2005
    
    
    2004(in thousands)Republic Bank Loans:Gross loans receivable on Republic Banks financial statements,
beginning of period
    
    $
    10,713
    
    
    $
    9,434
    
    
    $
    10,356Originations
    
    
    68,951
    
    
    
    184,646
    
    
    
    159,692Repayments
    
    
    (70,132
    )
    
    
    (174,997
    )
    
    
    (154,084
    )Charge-offs
    
    
    (9,051
    )
    
    
    (8,755
    )
    
    
    (6,545
    )Recoveries
    
    
    
    
    
    
    385
    
    
    
    15Gross loans receivable on Republic Banks financial statements,
end of period (1)
    
    
    481
    
    
    
    10,713
    
    
    
    9,434Loan losses paid to Republic Bank for loans less than
180 days delinquent
    
    
    1,525
    
    
    
    3,352
    
    
    
    2,976Gross bank loans receivable
    
    $
    2,006
    
    
    $
    14,065
    
    
    $
    12,410Liability for loan losses payable to Republic Bank, beginning of period
    
    $
    4,030
    
    
    $
    3,714
    
    
    $
    2,854Provision for loan losses payable to Republic Bank
    
    
    5,807
    
    
    
    8,686
    
    
    
    7,390Charge-offs
    
    
    (9,051
    )
    
    
    (8,755
    )
    
    
    (6,545
    )Recoveries
    
    
    
    
    
    
    385
    
    
    
    15Liability for loan losses payable to Republic Bank, end of period
    
    $
    786
    
    
    $
    4,030
    
    
    $
    3,714Net loan charge-offs as a percent of matured loan volume (2)
    
    
    12.1
    % (3)
    
    
    4.6
    %
    
    
    4.2
    %Liability as a percent of gross receivable
    
    
    39.2
    %
    
    
    28.7
    %
    
    
    29.9
    %
 
 (1)
    
    Republic Bank loans are not carried on our balance sheet.(2)
    
    Matured loan volume represents all loans which became due and payable during the reporting period.(3)
    
    Net loan charge-off percentage increased due to discontinuation of Republic Bank loan product offering in Texas in February 2006.  Year Ended June 30, 2006First Bank of
    
    
    TrueDelaware
    
    
    Financial(in thousands)First Bank of Delaware/True Financial (CSO) Loans:Gross loans receivable, beginning of period
    
    $
    
    
    
    $
    Originations
    
    
    21,739
    
    
    
    66,932Repayments
    
    
    (19,447
    )
    
    
    (54,913
    )Charge-offs
    
    
    (1,242
    )
    
    
    Recoveries
    
    
    
    
    
    
    Gross loans
receivable on third-party lenders financial statements, end of period (1)
    
    
    1,050
    
    
    
    12,019Loan losses paid to third-party lender for loans less than 180 days delinquent
    
    
    922
    
    
    
    3,146Gross loans receivable
    
    $
    1,972
    
    
    $
    15,165Liability for loan losses payable to third-party lenders, beginning of period
    
    $
    
    
    
    $
    Provision for loan losses payable
    
    
    2,823
    
    
    
    2,665Charge-offs
    
    
    (1,242
    )
    
    
    Recoveries
    
    
    
    
    
    
    Liability for loan losses payable to third-party lenders, end of period
    
    $
    1,581
    
    
    $
    2,665Net loan
charge-offs as a percent of matured loan volume (2)
    
    
    1.7
    %
    
    
    
    %Liability as a percent of gross receivable
    
    
    80.2
    %
    
    
    17.6
    %
 
 (1)
    
    First Bank of Delaware loans and True Financial loans are not carried on our balance sheet.(2)
    
    Matured loan volume represents all loans which became due and payable during the reporting period. 51




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##### Table of Contents



FirstBank of
    
    
    TrueRepublic Bank
    
    
    Delaware
    
    
    FinancialAs of June 30,2006
    
    
    2005
    
    
    2004
    
    
    2006
    
    
    2006(in thousands, except percentages)Gross third-party loans receivables,
end of period
    
    $
    2,006
    
    
    $
    14,065
    
    
    $
    12,410
    
    
    $
    1,972
    
    
    $
    15,165Loans past due < 90 days
    
    $
    289
    
    
    $
    2,365
    
    
    $
    2,776
    
    
    $
    377
    
    
    $
    4,966Percentage of gross loans receivable
    
    
    14.4
    %
    
    
    16.8
    %
    
    
    22.3
    %
    
    
    19.1
    %
    
    
    32.7
    %Loans past due > 90 days
    
    $
    1,333
    
    
    $
    2,522
    
    
    $
    1,509
    
    
    
    593
    
    
    
    164Percentage of gross loans receivable
    
    
    66.5
    %
    
    
    17.9
    %
    
    
    12.2
    %
    
    
    30.1
    %
    
    
    1.1
    %
 Loan Collection Trends
   
    
    Receive or collect 91.5% (or 93.0% in our third fiscal quarter) of the total volume, or
principal amount of loans maturing in any particular fiscal quarter by the end of the
current quarter.
    
    Receive or collect a cumulative 93.2% (or 94.8% in our third fiscal quarter) by 90 days
out.
    
    Receive or collect a cumulative 94.8% (or 95.7% in our third fiscal quarter) by 180 days
out.
  Collection Progression for Quarterly Loan Portfolios
 Collection PercentageActualDays Following Quarter
    
    Target
    
    Fiscal 2006
    
    Fiscal 2005
    
    Fiscal 2004First QuarterCurrent
    
    
    91.5
    %
    
    
    92.1
    %
    
    
    92.6
    %
    
    
    92.7
    %90
    
    
    93.2
    %
    
    
    93.9
    %
    
    
    94.3
    %
    
    
    94.9
    %180
    
    
    94.8
    %
    
    
    94.5
    %
    
    
    94.6
    %
    
    
    95.1
    %Second QuarterCurrent
    
    
    91.5
    %
    
    
    92.8
    %
    
    
    93.1
    %
    
    
    93.8
    %90
    
    
    93.2
    %
    
    
    94.7
    %
    
    
    95.4
    %
    
    
    95.7
    %180
    
    
    94.8
    %
    
    
    95.2
    %
    
    
    95.8
    %
    
    
    95.8
    %Third QuarterCurrent
    
    
    93.0
    %
    
    
    95.1
    %
    
    
    94.7
    %
    
    
    94.7
    %90
    
    
    94.8
    %
    
    
    95.9
    %
    
    
    96.1
    %
    
    
    96.0
    %180
    
    
    95.7
    %
    
    
    
    
    
    
    96.5
    %
    
    
    96.1
    %Fourth QuarterCurrent
    
    
    91.5
    %
    
    
    92.1
    %
    
    
    92.7
    %
    
    
    93.2
    %90
    
    
    93.2
    %
    
    
    
    
    
    
    94.4
    %
    
    
    94.6
    %180
    
    
    94.8
    %
    
    
    
    
    
    
    94.9
    %
    
    
    94.9
    %
 52




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##### Table of Contents



Liquidity and Capital Resources
 Cash Flows from Operating Activities
   Cash Flows from Investing Activities
  Cash Flows from Financing Activities
  Contractual Commitments
  Payments Due by June 30,2011 andTotal
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    thereafter(in thousands)Operating leases
    
    $
    98,570
    
    
    $
    30,315
    
    
    $
    23,444
    
    
    $
    16,841
    
    
    $
    11,620
    
    
    $
    16,350Convertible note payable
    
    
    19,400
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,400Acquisition notes payable
    
    
    623
    
    
    
    338
    
    
    
    272
    
    
    
    13
    
    
    
    
    
    
    
    Total
    
    $
    118,593
    
    
    $
    30,653
    
    
    $
    23,716
    
    
    $
    16,854
    
    
    $
    11,620
    
    
    $
    35,750
  53




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##### Table of Contents



.
 Existing Credit Facilities
   
    
    a $200 million primary revolving credit facility that is available
throughout the term of the credit agreement, which permits us to request an increase in
this facility of up to $25 million during the term of the credit agreement; and
    
    a $75 million seasonal revolving credit facility that is available during
each calendar-year-end holiday and tax season (i.e., January 1 through March 15) during
the term of the credit agreement.
    
    
    The sum of (a) the greatest of (i) the prime rate publicly announced by Wells Fargo Bank,
(ii) one percent plus the rate of interest on the secondary market for three-month
certificates of deposit reported by the Board of Governors of the Federal Reserve System
(the Board of Governors), multiplied by a fraction, the numerator of which is one and the
denominator of which is one minus the maximum reserve percentages required by the Board of
Governors to which Wells Fargo Bank is subject for new negotiable nonpersonal time deposits
in dollars of over $100,000 with maturities of approximately three months plus the annual
assessment rate that is payable by a member of the Bank Insurance Fund classified as well
capitalized, and (iii) the federal funds rate plus 0.5%; plus (b) a margin that varies from
0.75% to 1.75% per annum based on our debt-to-EBITDA ratio. (For this ratio, EBITDA is
our earnings before interest, taxes, depreciation, and amortization.) This interest rate
adjusts on a daily basis.
    
    The sum of (a) the London Interbank Offered Rate (LIBOR) for (at our discretion) one-,
two-, three- or six-month maturities, multiplied by a fraction, the numerator of which is
one and the denominator of which is one minus the maximum reserve percentages required by
the Board of Governors to which Wells Fargo Bank is subject for Eurocurrency funding, plus
(b) a margin that varies from 1.75% to 2.75% per annum based on our debt-to-EBITDA ratio.
This interest rate adjusts, at our discretion, at one-, two-, three-, or six-month
intervals, in accordance with the corresponding LIBOR.
 54




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##### Table of Contents




    
    The sum of (a) LIBOR for one-month maturities, plus (b) a margin that varies from 1.75%
to 2.75% per annum based on our debt-to-EBITDA ratio. This interest rate adjusts on a daily
basis.
     
    
    to limit any single acquisition of assets or capital stock of an entity in the retail
financial services business to a purchase price of no more than $10 million and to assets or
entities that have a positive cash flow for the 12 months preceding such acquisition, unless
otherwise agreed upon by the lenders;
    
    to reduce our risk of increases in interest rates by entering into one or more
interest-rate swap agreements to convert to fixed-rate obligations our floating- or
variable-rate interest obligations with respect to the lesser of (a) $30 million and (b) 50%
of the average amount of the unpaid loans outstanding during the prior month; and
    
    to maintain the following financial coverage ratios:
 -
    
    our consolidated net worth at any time cannot be less than $175.5 million plus
75% of all net income earned in a calendar quarter, without deduction for any quarterly
losses, plus 100% of the proceeds of any equity offering;-
    
    At the end of any fiscal quarter, our debt-to-EBITDA ratio cannot be more than
2.75-to-1.00 through December 31, 2005 and 2.50-to-1.00 thereafter; and-
    
    at the end of each fiscal quarter, our cash flow coverage ratio cannot be less
than 1.25-to-1.00.
  55




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##### Table of Contents



Previous Credit Facilities
  
    
    a $140 million primary revolving credit facility that is available
throughout the four-year term; and
    
    a $60 million seasonal revolving credit facility that is available during
each calendar-year-end holiday and tax season (i.e., December 15 through March 15)
during the four-year term.
   
    
    The sum of (a) the greatest of (i) the prime rate publicly announced by Wells Fargo Bank,
(ii) one percent plus the rate of interest on the secondary market for three-month
certificates of deposit reported by the Board of Governors of the Federal Reserve System
(the Board of Governors), multiplied by a fraction, the numerator of which is one and the
denominator of which is one minus the maximum reserve percentages required by the Board of
Governors to which Wells Fargo Bank is subject for new negotiable nonpersonal time deposits
in dollars of over $100,000 with maturities of approximately three months plus the annual
assessment rate that is payable by a member of the Bank Insurance Fund classified as well
capitalized, and (iii) the federal funds rate plus 0.5%; plus (b) a margin that varies from
1.25% to 2.25% per annum based on our debt-to-EBITDA ratio. (For this ratio, EBITDA is
our earnings before interest, taxes, depreciation, and amortization.) This interest rate
adjusts on a daily basis.
    
    The sum of (a) the London Interbank Offered Rate (LIBOR) for (at our discretion) one-,
two-, three- or six-month maturities, multiplied by a fraction, the numerator of which is
one and the denominator of which is one minus the maximum reserve percentages required by
the Board of Governors to which Wells Fargo Bank is subject for Eurocurrency funding, plus
(b) a margin that varies from 2.25% to 3.25% per annum based on our debt-to-EBITDA ratio.
This interest rate adjusts, at our discretion, at one-, two-, three-, or six-month
intervals, in accordance with the corresponding LIBOR.
    
    The sum of (a) LIBOR for one-month maturities, plus (b) a margin that varies from 2.25%
to 3.25% per annum based on our debt-to-EBITDA ratio. This interest rate adjusts on a daily
basis.
  Swap Agreements
     56




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##### Table of Contents



Self-Service Machine Funding Arrangements
  st
  Effects of Financing Arrangements
  Stock Repurchase Program
   Litigation Expenses
  Seasonality
  Impact of Inflation
  57




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##### Table of Contents



Liquidity Outlook
  
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   
 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
  58




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##### Table of Contents



MANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
  Internal Control  Integrated Framework
   59




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
     Internal
ControlIntegrated Framework Internal
Control Integrated Framework Internal Control Integrated Framework
 
 60




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##### Table of Contents



ITEM 9B. OTHER INFORMATION
  
 PART III
 
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
  
 ITEM 11. EXECUTIVE COMPENSATION
  
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
  
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
  
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  
 PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
  (1) Financial Statements.Report of independent registered public accounting firm
    
    
    69Consolidated balance sheets as of June 30, 2006 and 2005
    
    
    70Consolidated statements of earnings for the years ended June 30, 2006, 2005 and 2004
    
    
    71Consolidated statement of shareholders equity for the years ended June 30, 2006, 2005 and 2004
    
    
    72Consolidated statements of cash flows for the years ended June 30, 2006, 2005 and 2004
    
    
    73Notes to consolidated financial statements
    
    
    74(2) Financial Statement Schedules.Report of independent registered public accounting firm on schedule
    
    
    106Schedule II
 Valuation and Qualifying Accounts
    
    
    107
 61




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##### Table of Contents



Exhibits.
 Exhibit Number
    
    Exhibits3.1
    
    Restated Articles of Incorporation of the Company, as amended through January 31, 1998. (Included as Exhibit 3.6 to the
Companys Form 10-Q for the quarter ended December 31, 1997 (Commission File Number 0-20774) and incorporated herein by
reference.)3.2
    
    Amended and Restated Bylaws of the Company, as amended through January 31, 1998. (Included as Exhibit 3.7 to the Companys
Form 10-Q for the quarter ended December 31, 1997 (Commission File Number 0-20774) and incorporated herein by reference.)3.3
    
    Certificate of Amendment to the Companys Bylaws dated January 3, 2000. (Included as Exhibit 3.3 to the Companys Form 10-Q
for the quarter ended December 31, 1999 (Commission File Number 0-20774) and incorporated herein by reference.)4.1
    
    Form of Certificate representing shares of Registrants Common Stock. (Included as Exhibit 4.1 to the Companys Registration
Statement on Form S-1 (No. 33-53286) and incorporated herein by reference.)10.1
    
    Lease Agreement dated October 1, 1987, between the Company and Greenway Tower Joint Venture, as amended by First Amendment
to Lease Agreement dated April 29, 1988, Second Amendment to Lease Agreement dated August 24, 1988, Third Amendment to Lease
Agreement dated December 29, 1988 and Fourth Amendment to Lease Agreement dated January 29, 1991. (Included as Exhibit 10.8
to the Companys Registration Statement on Form S-1 (No 33-53286) and incorporated herein by reference.)10.2
    
    Fifth Amendment to Lease Agreement dated June 13, 1994, between the Company and Greenway Tower Joint Venture. (Included as
Exhibit 10.10 to the Companys Form 10-K for the fiscal year ended June 30, 1994 (Commission File Number 0-20774) and
incorporated herein by reference.)10.3
    
    Ace Cash Express, Inc. 401(k) Profit Sharing Plan, adopted July 1, 1994. (Included as Exhibit 10.13 to the Companys Form
10-K for the fiscal year ended June 30, 1994 (Commission File Number 0-20774) and incorporated herein by reference.) #10.4
    
    Ace Cash Express, Inc. Deferred Compensation Plan, adopted July 1, 1994. (Included as Exhibit 10.14 to the Companys Form
10-K for the fiscal year ended June 30, 1994 (Commission File Number 0-20774) and incorporated herein by reference.) #10.5
    
    Ace Cash Express, Inc. Non-Employee Directors Stock Option Plan dated March 27, 1995. (Included as Exhibit 10.19 to the
Companys Form 10-K for the fiscal year ended June 30, 1995 (Commission File Number 0-20774) and incorporated herein by
reference.) #10.6
    
    Sixth Amendment to Lease Agreement dated February 1, 1996, between the Company and Greenway Tower Joint Venture. (Included
as Exhibit 10.25 to the Companys Form 10-Q for the quarter ended March 31, 1996 (Commission File Number 0-20774) and
incorporated herein by reference.)10.7
    
    Amendment No.1 to the Ace Cash Express 401K Profit Sharing Plan effective January 1, 1998. (Included as Exhibit 10.33 to the
Companys Form 10-Q for the quarter ended March 31, 1998 (Commission File Number 0-20774) and incorporated herein by
reference.) #10.8
    
    Amendment No. 1 to Ace Cash Express, Inc. Non-Employee Directors Stock Option Plan. (Included as Exhibit 10.34
to the Companys Form 10-K for the fiscal year ended June 30, 1998 (Commission File No. 0-20774) and incorporated herein by
reference.) #10.9
    
    Amendment No. 2 to Ace Cash Express, Inc. Non-Employee Directors Stock Option Plan. (Included as Exhibit 10.35
to the Companys Form 10-K for the fiscal year ended June 30, 1998 (Commission File No. 0-20774) and incorporated herein by
reference.) #10.10
    
    Ace Cash Express, Inc. 1997 Stock Option Plan. (Included as Exhibit A to the Companys Proxy Statement for the 1997 Annual
Meeting of Shareholders, filed on Form DEF 14A on October 20, 1997 (Commission File No. 0-20774), and incorporated herein
by reference.) #
 62




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##### Table of Contents



Exhibit Number
    
    Exhibits10.11
    
    Amendment No. 1 to Ace Cash Express, Inc. 1997 Stock Option Plan. (Included as Exhibit 10.37 to the Companys Form 10-K for
the fiscal year ended June 30, 1998 (Commission File No. 0-20774) and incorporated herein by reference.) #10.12
    
    Money Order Agreement dated as of April 16, 1998, but effective as of December 16, 1998, between the Company and Travelers
Express Company, Inc. (Included as Exhibit 10.39 to the Companys Form 10-K for the fiscal year ended June 30, 1998
(Commission File No. 0-20774) and incorporated herein by reference.) 10.13
    
    Amendment No. 3 to Ace Cash Express, Inc. Non-Employee Directors Stock Option Plan. (Included as Exhibit 10.44 to the
Companys Form 10-Q for the quarter ended December 31, 1998 (Commission File No. 0-20774) and incorporated herein by
reference.) #10.14
    
    Amendment No. 2 to Ace Cash Express, Inc. 1997 Stock Option Plan. (Included as Exhibit 10.45 to the Companys
Form 10-Q for the quarter ended December 31, 1999 (Commission File Number 0-20774) and incorporated herein by reference.) #10.15
    
    Money Transfer Agreement dated as of June 30, 2000, among the Company, Travelers Express Company, Inc., and
MoneyGram Payment Systems, Inc. (Included as Exhibit 10.48 to the Companys Form 10-K for the fiscal year ended June 30,
2000 (Commission File No. 0-20774) and incorporated herein by reference.) 10.16
    
    Amendment No. 3 to Ace Cash Express, Inc. 1997 Stock Option Plan. (Included as Exhibit 10.50 to the Companys Form 10-Q for
the quarter ended December 31, 2000 (Commission File No. 0-20774) and incorporated herein by reference.) #10.17
    
    Change-in-Control Executive Severance Agreement dated as of May 15, 2001, between the Company and Barry M.
Barron. (Included as Exhibit 10.56 to the Companys Form 10-K for the fiscal year ended June 30, 2001 (Commission File No.
0-20774) and incorporated herein by reference.) #10.18
    
    Separation Agreement dated as of February 28, 2002, between the Company and R. Edward McCarty. (Included as
Exhibit 10.1 to the Companys Form 10-Q for the quarter ended March 31, 2002 (Commission File No. 0-20774) and incorporated
herein by reference.) #10.19
    
    Consulting Agreement dated as of February 28, 2002, between the Company and R. Edward McCarty. (Included as
Exhibit 10.2 to the Companys Form 10-Q for the quarter ended March 31, 2002 (Commission File No. 0-20774) and incorporated
herein by reference.) #10.20
    
    Seventh Amendment to Lease Agreement dated December 20, 2000, between the Company and Greenway Tower
Joint Venture. (Included as Exhibit 10.66 to the Companys Form 10-K for the fiscal year ended June 30, 2002 (Commission
File No. 0-20774) and incorporated herein by reference.)10.21
    
    Eighth Amendment to Lease Agreement dated May 10, 2001, between the Company and Greenway Tower Joint
Venture. (Included as Exhibit 10.67 to the Companys Form 10-K for the fiscal year ended June 30, 2002 (Commission File No.
0-20774) and incorporated herein by reference.)10.22
    
    Ace Cash Express, Inc. Executive Non-Qualified Excess Plan Adoption Agreement with the First Amendment to the
Ace Cash Express, Inc. Executive Non-Qualified Excess Plan, dated as of October 1, 2001. (Included as Exhibit 10.68 to the
Companys Form 10-K for the fiscal year ended June 30, 2002 (Commission File No. 0-20774) and incorporated herein by
reference.) #10.23
    
    Stipulation and Consent to the Issuance of a Consent Order between Ace Cash Express, Inc. and the Office of the
Comptroller of the Currency dated October 25, 2002. (Included as Exhibit 10.1 to the Companys Form 8-K filed on November 5,
2002 (Commission File No. 0-20774) and incorporated herein by reference.)10.24
    
    Consent Order issued by the Office of the Comptroller of the Currency In the Matter of Ace Cash Express, Inc.,
Irving, Texas, as Agent and Bank Service Provider for Goleta National Bank, Goleta, California, dated October 25, 2002.
(Included as Exhibit 10.2 to the Companys Form 8-K filed on November 5, 2002 (Commission File No. 0-20774) and incorporated
herein by reference.)10.25
    
    Amendment No. 4 to Ace Cash Express, Inc. 1997 Stock Option Plan. (Included as Exhibit 10.1 to the Companys
Form 10-Q for the quarter ended December 31, 2002 (Commission File No. 0-20774) and incorporated herein by reference.) #
 63




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##### Table of Contents



Exhibit Number
    
    Exhibits10.26
    
    License Agreement dated November 22, 2000, with Addendum No. 1 thereto dated as of May 31, 2001, by and
between H&R Block Tax Services, Inc. and the Company. (Included as Exhibit 10.1 to the Companys Form 8-K filed on January
21, 2003 (Commission File No. 0-20774) and incorporated herein by reference.) 10.27
    
    Loan and Servicing Agreement dated as of December 18, 2002, among Ace Funding LLC, the Company, Autobahn
Funding Company LLC, DZ Bank AG Deutsche Zentral-Genossenschaftsbank Frankfurt am Main, and U.S. Bank National Association,
together with the material Schedules, Exhibits and Annexes thereto (Included as Exhibit 10.3 to the Companys Form 8-K filed
on January 21, 2003 (Commission File No. 0-20774) and incorporated herein by reference.) 10.28
    
    Marketing and Servicing Agreement dated as of October 21, 2002, with First Amendment to Marketing and
Servicing Agreement dated as of January 28, 2003, between Republic Bank & Trust Company and the Company. (Included as
Exhibit 10.1 to the Companys Form 10-Q for the quarter ended March 31, 2003 (Commission File No. 0-20774) and incorporated
herein by reference.) 10.29
    
    Restricted Stock Agreement dated January 28, 2003 between the Company and Barry M. Barron. (Included as
Exhibit 10.2 to the Companys Form 10-Q for the quarter ended March 31, 2003 (Commission File No. 0-20774) and incorporated
herein by reference.) #10.30
    
    Restricted Stock Agreement dated July 2, 2003 between the Company and Jay B. Shipowitz. (Included as Exhibit
10.3 to the Companys Form 10-Q for the quarter ended September 30, 2003 (Commission File No. 0-20774) and incorporated
herein by reference.) #10.31
    
    Restricted Stock Agreement dated July 2, 2003 between the Company and Barry M. Barron. (Included as Exhibit
10.4 to the Companys Form 10-Q for the quarter ended September 30, 2003 (Commission File No. 0-20774) and incorporated
herein by reference.) #10.32
    
    Restricted Stock Agreement dated October 30, 2003, between the Company and William S. McCalmont. (Included
as Exhibit 10.1 to the Companys Form 10-Q for the quarter ended December 31, 2003 (Commission File No. 0-20774) and
incorporated herein by reference.) #10.33
    
    Change-in-Control Executive Severance Agreement executed December 5, 2003, but effective as of August 5, 2003,
between the Company and William S. McCalmont. (Included as Exhibit 10.1 to the Companys Form 10-Q for the quarter ended
December 31, 2003 (Commission File No. 0-20774) and incorporated herein by reference.) #10.34
    
    Amendment Number One to Money Order Agreement dated as of February 18, 1999, between the Company and
Travelers Express Company, Inc. (Included as Exhibit 10.1 to the Companys Form 8-K filed on November 4, 2003
(Commission File No. 0-20774) and incorporated herein by reference.)10.35
    
    Amendment No. 2 to Money Order Agreement dated as of October 29, 2003, between the Company and Travelers Express Company,
Inc. (Included as Exhibit 10.2 to the Companys Form 8-K filed on November 4, 2003 (Commission File No. 0-20774) and
incorporated herein by reference.) 10.36
    
    Cash Services Agreement dated as of December 30, 2003, by and between the Company and Texas Capital Bank, National
Association, together with the material Exhibits and Annexes thereto. (Included as Exhibit 10.1 to the Companys Form 8-K
filed on January 14, 2004 (Commission File No. 0-20774) and incorporated herein by reference.) 10.37
    
    First Amendment dated as of December 22, 2003, among Ace Funding LLC, the Company, Autobahn Funding Company LLC, DZ Bank AG
Deutsche Zentral-Genossenschaftsbank Frankfurt am Main, and U.S. Bank National Association, together with the Schedules
thereto. (Included as Exhibit 10.2 to the Companys Form 8-K filed on January 14, 2004 (Commission File No. 0-20774) and
incorporated herein by reference.)10.38
    
    First Amended and Restated Credit Agreement dated July 30, 2004, by and among the Company, Wells Fargo Bank, National
Association, as administrative agent for the lenders, JPMorgan Chase Bank, J.P. Morgan Securities, Inc., U.S. Bank, National
Association, Bank of America, N.A., Union Bank of California, N.A., Keybank National Association, and the lenders named in
Schedule 2.01, together with the Exhibits and Schedules thereto. (Application for confidential treatment for a portion of
the Schedules to this document has been submitted to the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.) (Included as Exhibit
 64




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##### Table of Contents



Exhibit Number
    
    Exhibits10.1 to the Companys Form 8-K filed on August 13, 2004 (Commission
File No. 0-20774) and incorporated herein by reference.) 10.39
    
    Executive Employment Agreement dated to be effective as of July 1, 2004, between the Company and Jay B. Shipowitz.
(Included as Exhibit 10.1 to the Companys Form 8-K filed on August 27, 2004 (Commission File No. 0-20774) and incorporated
herein by reference.) #10.40
    
    Restricted Stock Agreement dated to be effective as of July 1, 2004, between the Company and Jay B. Shipowitz. (Included as
Exhibit 10.2 to the Companys Form 8-K filed on August 27, 2004 (Commission File No. 0-20774) and incorporated herein by
reference.) #10.41
    
    Change-in-Control Executive Severance Agreement dated to be effective as of July 1, 2004, between the Company and Jay B.
Shipowitz. (Included as Exhibit 10.3 to the Companys Form 8-K filed on August 27, 2004 (Commission File No. 0-20774) and
incorporated herein by reference.) #10.42
    
    Employment Agreement dated to be effective as of July 1, 2004, between the Company and Donald H. Neustadt. (Included as
Exhibit 10.4 to the Companys Form 8-K filed on August 27, 2004 (Commission File No. 0-20774) and incorporated herein by
reference.) #10.43
    
    General Release and Covenant Not to Sue dated to be effective as of June 30, 2004 between the Company and Donald H.
Neustadt. (Included as Exhibit 10.5 to the Companys Form 8-K filed on August 27, 2004 (Commission File No. 0-20774) and
incorporated herein by reference.) #10.44
    
    Change-in-Control Executive Severance Agreement executed and effective on November 15, 2004 between the
Company and Barry M. Barron and William S. McCalmont. (Included as Exhibits 10.1 and 10.2 to the Companys Form 8-K filed
on November 19, 2004 (Commission File No. 0-20774) and incorporated herein by reference.) #10.45
    
    Second Amendment to the Marketing and Servicing Agreement dated as of September 30, 2003 between Republic
Bank & Trust Company and Ace Cash Express, Inc. (Included as Exhibit 10.1 to the Companys Form 10-Q for the quarter ended
December 31, 2004 (Commission File No. 0-20774) and incorporated herein by reference.)10.46
    
    Second Amendment dated as of December 15, 2004, among Ace Funding LLC, ACE Cash Express, Inc., the
Company, Autobahn Funding Company LLC, DZ Bank AG Deutsche Zentral-Genossenschaftsbank Frankfurt am Main, and U.S. Bank
National Association, together with the Schedules thereto. (Included as Exhibit 10.2 to the Companys Form 10-Q for the
quarter ended December 31, 2004 (Commission File No. 0-20774) and incorporated herein by reference.) 10.47
    
    Ninth Amendment to Lease Agreement dated October 21, 2003, between the Company and Greenway Tower Joint
Venture. (Included as Exhibit 10.1 to the Companys Form 10-Q for the quarter ended March 31, 2005 (Commission File No.
0-20774) and incorporated herein by reference.)10.48
    
    Tenth Amendment to Lease Agreement dated July 26, 2004, between the Company and Greenway Tower Joint
Venture. (Included as Exhibit 10.2 to the Companys Form 10-Q for the quarter ended March 31, 2005 (Commission File No.
0-20774) and incorporated herein by reference.)10.49
    
    Addendum No. 1 to Money Transfer Agreement dated as of October 31, 2003, between the Company and Travelers
Express Company, Inc. (Included as Exhibit 10.3 to the Companys Form 10-Q for the quarter ended March 31, 2005 (Commission
File No. 0-20774) and incorporated herein by reference.)10.50
    
    Third Amendment to the Marketing and Services Agreement dated as of July 26, 2005, between Republic Bank &
Trust Company and the Company. (Included as Exhibit 10.50 to the Companys Form 10-K for the fiscal year ended June 30,
2005 (Commission File No. 0-20774) and incorporated herein by reference.)10.51
    
    Installment Loan Marketing and Servicing Agreement dated as of July 21, 2005, between First Bank of Delaware
and the Company. (Application for confidential treatment for a portion of this document has been submitted to the Securities
and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.) (Included as Exhibit 10.51 to
the Companys Form 10-K for the fiscal year ended June 30, 2005 (Commission File No. 0-20774) and incorporated herein by
reference.)
 65




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##### Table of Contents



Exhibit Number
    
    Exhibits10.52
    
    Employment Separation Agreement dated as of June 30, 2005, between the Company and Donald H. Neustadt. (Included as Exhibit
10.1 to the Companys Form 8-K filed July 6, 2005 (Commission File No. 020774) and incorporated herein by reference.)10.53
    
    Consulting Agreement dated to be effective as of July 1, 2005, between the Company and Donald H. Neustadt.
(Included as Exhibit 10.2 to the Companys Form 8-K filed July 6, 2005 (Commission File No. 020774) and incorporated herein
by reference.)10.54
    
    Change-in-Control Executive Severance Agreement dated and effective July 26, 2005, between the Company and Allen J. Klose.
(Included as Exhibit 10.1 to the Companys Form 8-K filed July 27, 2005 (Commission File No. 020774) and incorporated herein
by reference.)10.55
    
    Change-in-Control Executive Severance Agreement dated and effective July 26, 2005, between the Company and Joe B. Edwards.
(Included as Exhibit 10.2 to the Companys Form 8-K filed July 27, 2005 (Commission File No. 020774) and incorporated herein
by reference.)10.56
    
    Change-in-Control Executive Severance Agreement dated and effective July 26, 2005, between the Company and Walter E. Evans.
(Included as Exhibit 10.3 to the Companys Form 8-K filed July 27, 2005 (Commission File No. 020774) and incorporated herein
by reference.)10.57
    
    Form of Restricted Stock Agreement. (Included as Exhibit 10.2 to the Companys Form 8-K filed October 3, 2005 (Commission
File No. 020774) and incorporated herein by reference.)#10.58
    
    Ace Cash Express, Inc. Non-Employee Directors Stock Incentive Plan, dated August 23, 2005. (Included as Exhibit 10.1 to the
Companys Form 8-K filed November 16, 2005 (Commission File No. 020774) and incorporated herein by reference.)#10.59
    
    Asset Purchase Agreement dated September 21, 2005, by and between the Company, Popular Cash Express, Inc., Popular Cash
Express  California, Inc. and Popular North America, Inc. (Included as Exhibit 10.1 to the Companys Form 10-Q for the
quarter ended September 30, 2005 (Commission File No. 0-20774) and incorporated herein by reference.)10.60
    
    Form of Convertible Promissory Note issuable to Popular Cash Express, Inc. (Included as Exhibit 10.2 to the Companys Form
10-Q for the quarter ended September 30, 2005 (Commission File No. 0-20774) and incorporated herein by reference.)10.61
    
    Second Amendment to Asset Purchase Agreement dated November 22, 2005, by and between the Company, Popular Cash Express,
Inc., Popular Cash Express  California, Inc. and Popular North America, Inc. (Included as Exhibit 10.1 to the Companys
Form 10-Q for the quarter ended December 31, 2005 (Commission File No. 0-20774) and incorporated herein by reference.)10.62
    
    Third Amendment dated as of December 27, 2005, among the Company, Ace Funding LLC, Autobahn Funding Company, LLC, DZ Bank AG
Deutsche Zentral-Genossenschaftsbank Frankfurt am Main and U.S. Bank National Association. (Included as Exhibit 10.2 to the
Companys Form 10-Q for the quarter ended December 31, 2005 (Commission File No. 0-20774) and incorporated herein by
reference.)10.63
    
    Form of Stock Option Agreement. (Included as Exhibit 10.1 to the Companys Form 8-K filed December 5, 2005 (Commission File
No. 020774) and incorporated herein by reference.)#10.64
    
    Form of Restricted Stock Agreement. (Included as Exhibit 10.2 to the Companys Form 8-K filed December 5, 2005 (Commission
File No. 020774) and incorporated herein by reference.)#10.65
    
    First Amendment to Credit Agreement dated as of January 19, 2006, among the Company, Wells Fargo Bank, National Association,
as administrative agent for the lenders, JPMorgan Chase Bank, J.P. Morgan Securities, Inc., U.S. Bank, National Association,
Bank of America, N.A., Union Bank of California, N.A., Keybank National Association, and the lenders named in
Schedule 2.01(B). (Included as Exhibit 10.1 to the Companys Form 8-K filed January 24, 2006 (Commission File No. 020774) and
incorporated herein by reference.)10.66
    
    Amended and Restated Executive Employment Agreement dated as of January 23, 2006, between the Company and Jay B. Shipowitz.
(Included as Exhibit 10.1 to the Companys Form 8-K filed January 26, 2006 (Commission File No. 020774) and incorporated
herein by reference.)
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##### Table of Contents



Exhibit Number
    
    Exhibits10.67
    
    Change-in-Control Executive Severance Agreement dated and effective January 23, 2006 between the Company and Jay B.
Shipowitz. (Included as Exhibit 10.2 to the Companys Form 8-K filed January 26, 2006 (Commission File No. 020774) and
incorporated herein by reference.)10.68
    
    Restricted Stock Agreement dated to be effective as of January 23, 2006 between the Company and Jay B. Shipowitz. (Included
as Exhibit 10.3 to the Companys Form 8-K filed January 26, 2006 (Commission File No. 020774) and incorporated herein by
reference.)10.69
    
    Letter Agreement to Installment Loan Marketing and Servicing Agreement dated February 21, 2006 between the Company and First
Bank of Delaware. (Included as Exhibit 10.1 to the Companys Form 8-K filed February 27, 2006 (Commission File No. 020774)
and incorporated herein by reference.)10.70
    
    Letter Agreement to Marketing and Servicing Agreement dated February 24, 2006, between the Company and Republic Bank & Trust
Company. (Included as Exhibit 10.2 to the Companys Form 8-K filed February 27, 2006 (Commission File No. 020774) and
incorporated herein by reference.)10.71
    
    Second Amendment to Credit Agreement dated as of February 28, 2006, among the Company, Wells Fargo Bank, National
Association, as administrative agent for the lenders, JPMorgan Chase Bank, J.P. Morgan Securities, Inc., U.S. Bank, National
Association, Bank of America, N.A., Union Bank of California, N.A., Keybank National Association, and the lenders named in
Schedule 2.01. (Included as Exhibit 10.1 to the Companys Form 8-K filed March 2, 2006 (Commission File No. 020774) and
incorporated herein by reference.)10.72
    
    Amendment No. 3 to Money Order Agreement dated February 28, 2006, between the Company and MoneyGram Payment Systems, Inc.,
as successor in interest to Travelers Express Company, Inc. (Included as Exhibit 10.2 to the Companys Form 8-K filed March
2, 2006 (Commission File No. 020774) and incorporated herein by reference.)10.73
    
    Consulting Agreement dated as of May 10, 2006, between the Company and Raymond C. Hemmig. (Included as Exhibit 10.1 to the
Companys Form 8-K filed May 11, 2006 (Commission File No. 020774) and incorporated herein by reference.)10.74
    
    Agreement and Plan of Merger dated as of June 6, 2006, between the Company, Ace Holdings I, LLC and Ranger Merger Sub, Inc.
(Included as Exhibit 10.1 to the Companys Form 8-K filed June 7, 2006 (Commission File No. 020774) and incorporated herein
by reference.)10.75
    
    Lease Agreement dated June 1, 2006, between the Company and Greenway Tower Joint Venture. (Included as Exhibit 10.1 to the
Companys Form 8-K filed June 9, 2006 (Commission File No. 020774) and incorporated herein by reference.)10.76
    
    Lease Termination Agreement dated June 1, 2006, between the Company and Greenway Tower Joint Venture. (Included as Exhibit
10.2 to the Companys Form 8-K filed June 9, 2006 (Commission File No. 020774) and incorporated herein by reference.)10.77
    
    Credit Services Agreement dated February 25, 2006, between the ACE Credit Services, LLC and True Financial Services, LP.
(Included as Exhibit 10.1 to the Companys Form 10-Q for the quarter ended March 31, 2006 (Commission File No. 0-20774) and
incorporated herein by reference.)10.78
    
    Parent Guaranty dated March 1, 2006, in favor of True Financial Services, LP by the Company. (Included as Exhibit 10.2 to
the Companys Form 10-Q for the quarter ended March 31, 2006 (Commission File No. 0-20774) and incorporated herein by
reference.)10.79
    
    Amendment to Installment Loan Marketing and Servicing Agreement dated as of July 28, 2006 between First Bank
of Delaware and Ace Cash Express, Inc.*21
    
    Subsidiaries of the Company.*23
    
    Consent of Grant Thornton LLP.*31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*31.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
 67




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Exhibit Number
    
    Exhibits32.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.*32.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.*
 
 *
    
    Filed herewith#
    
    Management contract or compensatory plan or arrangement
    
    Confidential treatment for a portion of this exhibit has been granted by the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. 
 SIGNATURES
  ACE CASH EXPRESS, INC.By:
    
    /s/ WILLIAM S. MCCALMONTWilliam S. McCalmontExecutive Vice President andChief Financial OfficerDate:
    
    August 29, 2006
  Signature
    
    Title
    
    Date/s/ RAYMOND C. HEMMIG

Raymond C. Hemmig
    
    Chairman of the Board, Director
    
    August 29, 2006/s/ JAY B. SHIPOWITZ

Jay B. Shipowitz
    
    President and Chief Executive Officer
Director (Principal Executive Officer)
    
    August 29, 2006/s/ WILLIAM S. MCCALMONT

William S. McCalmont
    
    Executive Vice President and Chief Financial Officer
Treasurer (Principal Financial and Accounting Officer)
    
    August 29, 2006/s/ ROBERT P. ALLYN
    
    Director
    
    August 29, 2006Robert P. Allyn/s/ MATRICE ELLIS-KIRK
    
    Director
    
    August 29, 2006Matrice Ellis-Kirk/s/ JOSEPH M. HAGGAR, III
    
    Director
    
    August 29, 2006Joseph M. Haggar, III/s/ MARSHALL B. PAYNE
    
    Director
    
    August 29, 2006Marshall B. Payne/s/ MICHAEL S. RAWLINGS
    
    Director
    
    August 29, 2006Michael S. Rawlings/s/ EDWARD W. ROSE III
    
    Director
    
    August 29, 2006Edward W. Rose III/s/ CHARLES DANIEL YOST
    
    Director
    
    August 29, 2006Charles Daniel Yost
 68




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
     Internal
ControlIntegrated Framework
 
 69




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##### Table of Contents



ACE
CASH EXPRESS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 June 30,
    
    
    June 30,2006
    
    
    2005ASSETSCurrent AssetsCash and cash equivalents
    
    $
    152,652
    
    
    $
    109,430Accounts receivable, net
    
    
    7,717
    
    
    
    3,969Loans receivable, net
    
    
    26,663
    
    
    
    20,787Prepaid expenses, inventories and other current assets
    
    
    14,047
    
    
    
    13,685Total Current Assets
    
    
    201,079
    
    
    
    147,871Noncurrent AssetsProperty and equipment, net
    
    
    46,657
    
    
    
    37,657Covenants not to compete, net
    
    
    2,088
    
    
    
    1,668Goodwill
    
    
    134,377
    
    
    
    98,702Other assets
    
    
    8,333
    
    
    
    6,723Total Assets
    
    $
    392,534
    
    
    $
    292,621LIABILITIES AND SHAREHOLDERS EQUITYCurrent LiabilitiesRevolving advances
    
    $
    77,300
    
    
    $
    43,300Accounts payable, accrued liabilities and other current liabilities
    
    
    45,881
    
    
    
    36,117Money orders payable
    
    
    10,594
    
    
    
    4,867Total Current Liabilities
    
    
    133,775
    
    
    
    84,284Noncurrent LiabilitiesDeferred income tax
    
    
    5,388
    
    
    
    4,302Deferred revenue
    
    
    3,202
    
    
    
    3,271Convertible notes payable
    
    
    19,400
    
    
    
    Other liabilities
    
    
    4,972
    
    
    
    4,079Total Liabilities
    
    
    166,737
    
    
    
    95,936Commitments and ContingenciesShareholders EquityPreferred stock, $1 par value, 1,000,000 shares authorized, none
issued and outstanding
    
    
    
    
    
    
    Common stock, $.01 par value, 50,000,000 shares authorized,
14,244,419 and 13,912,045 shares issued and 14,033,019 and
13,700,645 shares outstanding, respectively
    
    
    140
    
    
    
    137Additional paid-in capital
    
    
    104,260
    
    
    
    103,544Retained earnings
    
    
    123,853
    
    
    
    98,836Accumulated comprehensive income (loss)
    
    
    251
    
    
    
    (56
    )Treasury stock, at cost, 211,400 shares
    
    
    (2,707
    )
    
    
    (2,707
    )Unearned compensation  restricted stock
    
    
    
    
    
    
    (3,069
    )Total Shareholders Equity
    
    
    225,797
    
    
    
    196,685Total Liabilities and Shareholders Equity
    
    $
    392,534
    
    
    $
    292,621
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ACE CASH EXPRESS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF EARNINGS
 Year Ended June 30,2006
    
    
    2005
    
    
    2004Revenues
    
    $
    309,909
    
    
    $
    268,649
    
    
    $
    246,659Store expenses:Salaries and benefits
    
    
    77,044
    
    
    
    65,293
    
    
    
    59,593Occupancy
    
    
    42,629
    
    
    
    34,768
    
    
    
    30,563Provision for loan losses and doubtful accounts
    
    
    34,725
    
    
    
    27,090
    
    
    
    24,235Depreciation
    
    
    8,831
    
    
    
    7,684
    
    
    
    7,563Hurricane Katrina related expenses
    
    
    1,154
    
    
    
    
    
    
    
    Other
    
    
    43,777
    
    
    
    38,398
    
    
    
    40,066Total store expenses
    
    
    208,160
    
    
    
    173,233
    
    
    
    162,020Gross margin
    
    
    101,749
    
    
    
    95,416
    
    
    
    84,639Region expenses
    
    
    25,807
    
    
    
    22,971
    
    
    
    19,251Headquarters expenses
    
    
    22,441
    
    
    
    19,245
    
    
    
    18,681Franchise expenses
    
    
    1,230
    
    
    
    1,227
    
    
    
    1,196Other depreciation and amortization
    
    
    3,663
    
    
    
    3,094
    
    
    
    3,893Interest expense, net
    
    
    6,872
    
    
    
    4,880
    
    
    
    10,231Loss on early extinguishment of debt
    
    
    668
    
    
    
    
    
    
    
    4,858Other (income) expenses, net
    
    
    54
    
    
    
    (864
    )
    
    
    (1,893
    )Income before income taxes
    
    
    41,014
    
    
    
    44,863
    
    
    
    28,422Provision for income taxes
    
    
    15,997
    
    
    
    17,497
    
    
    
    11,370Net income
    
    $
    25,017
    
    
    $
    27,366
    
    
    $
    17,052Earnings per share:Basic
    
    $
    1.85
    
    
    $
    2.06
    
    
    $
    1.55Diluted
    
    $
    1.76
    
    
    $
    1.98
    
    
    $
    1.49Weighted average number of common shares
outstanding:Basic
    
    
    13,521
    
    
    
    13,275
    
    
    
    11,009Diluted
    
    
    14,377
    
    
    
    13,821
    
    
    
    11,477
  71




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ACE CASH EXPRESS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
 UnearnedAdditional
    
    
    
    
    
    
    Accumulated
    
    
    
    
    
    
    
    
    
    
    Compensation
    
    
    TotalCommon Stock
    
    
    Paid-In
    
    
    Retained
    
    
    Comprehensive
    
    
    Treasury Stock
    
    
    - Restricted
    
    
    ShareholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    Shares
    
    
    Amount
    
    
    Stock
    
    
    EquityBalance as of June 30, 2003
    
    
    10,183,713
    
    
    
    102
    
    
    
    24,385
    
    
    
    54,418
    
    
    
    (1,017
    )
    
    
    211,400
    
    
    
    (2,707
    )
    
    
    (23
    )
    
    
    75,158Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,052
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,052Change in fair value of interest-rate swaps,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    847
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    847Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,899Stock options exercised
    
    
    504,827
    
    
    
    5
    
    
    
    5,856
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,861Income tax benefit of stock options exercised
    
    
    
    
    
    
    
    
    
    
    1,828
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,828Restricted stock
    
    
    207,175
    
    
    
    2
    
    
    
    2,602
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,040
    )
    
    
    564Stock offering
    
    
    2,411,622
    
    
    
    24
    
    
    
    61,270
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61,294Balance as of June 30, 2004
    
    
    13,307,337
    
    
    
    133
    
    
    
    95,941
    
    
    
    71,470
    
    
    
    (170
    )
    
    
    211,400
    
    
    
    (2,707
    )
    
    
    (2,063
    )
    
    
    162,604Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,366
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,366Change in fair value of interest-rate swaps,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    114
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    114Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,480Stock options exercised
    
    
    310,885
    
    
    
    3
    
    
    
    3,577
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,580Income tax benefit of stock options exercised
    
    
    
    
    
    
    
    
    
    
    1,778
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,778Restricted stock
    
    
    82,423
    
    
    
    1
    
    
    
    2,248
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,006
    )
    
    
    1,243Balance as of June 30, 2005
    
    
    13,700,645
    
    
    
    137
    
    
    
    103,544
    
    
    
    98,836
    
    
    
    (56
    )
    
    
    211,400
    
    
    
    (2,707
    )
    
    
    (3,069
    )
    
    $
    196,685Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,017
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,017Change in fair value of interest-rate swaps,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    307
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    307Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,324Stock options exercised
    
    
    56,695
    
    
    
    1
    
    
    
    605
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    606Stock option expense
    
    
    
    
    
    
    
    
    
    
    915
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    915Income tax benefit of stock options exercised
    
    
    
    
    
    
    
    
    
    
    31
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31Restricted stock
    
    
    275,679
    
    
    
    2
    
    
    
    2,234
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,236Reclassify unearned compensation 
Restricted Stock
    
    
    
    
    
    
    
    
    
    
    (3,069
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,069
    
    
    
    Balance as of June 30, 2006
    
    
    14,033,019
    
    
    $
    140
    
    
    $
    104,260
    
    
    $
    123,853
    
    
    $
    251
    
    
    
    211,400
    
    
    
    ($2,707
    )
    
    $
    
    
    
    $
    225,797
  72




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##### Table of Contents



ACE
CASH EXPRESS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Year Ended June 30,2006
    
    
    2005
    
    
    2004Cash flows from operating activities:Net income
    
    $
    25,017
    
    
    $
    27,366
    
    
    $
    17,052Adjustments to reconcile net income to net cash provided
by operating activities:Depreciation and amortization
    
    
    12,494
    
    
    
    10,778
    
    
    
    11,456Provision for loan losses
    
    
    34,545
    
    
    
    26,941
    
    
    
    24,280Provision for doubtful accounts
    
    
    192
    
    
    
    161
    
    
    
    (21
    )Non-cash expenses related to Hurricane Katrina
    
    
    91
    
    
    
    
    
    
    
    Loss on disposal of property and equipment
    
    
    874
    
    
    
    1,451
    
    
    
    781Deferred revenue
    
    
    (3,084
    )
    
    
    (3,477
    )
    
    
    (2,009
    )Deferred income taxes
    
    
    1,237
    
    
    
    1,792
    
    
    
    (305
    )Stock option expense
    
    
    915
    
    
    
    
    
    
    
    Compensation on restricted stock grants
    
    
    2,234
    
    
    
    1,243
    
    
    
    564Changes in assets and liabilities, net of effects of acquisitions:Accounts receivable
    
    
    (3,940
    )
    
    
    1,425
    
    
    
    3,919Loans receivable
    
    
    (29,127
    )
    
    
    (22,001
    )
    
    
    (20,961
    )Prepaid expenses, inventories and other current assets
    
    
    (351
    )
    
    
    (4,174
    )
    
    
    1,104Other assets
    
    
    (1,685
    )
    
    
    (3,757
    )
    
    
    2,258Accounts payable, accrued liabilities, and other liabilities
    
    
    2,086
    
    
    
    (2,287
    )
    
    
    (12,481
    )Money orders payable
    
    
    5,727
    
    
    
    373
    
    
    
    (2,389
    )Net cash provided by operating activities
    
    
    47,225
    
    
    
    35,834
    
    
    
    23,248Cash flows from investing activities:Purchases of property and equipment, net
    
    
    (18,134
    )
    
    
    (18,951
    )
    
    
    (7,439
    )Store acquisition purchase price, net of cash received and
convertible and acquisition notes issued
    
    
    (20,249
    )
    
    
    (19,107
    )
    
    
    (6,914
    )Net cash used by investing activities
    
    
    (38,383
    )
    
    
    (38,058
    )
    
    
    (14,353
    )Cash flows from financing activities:Net increase (decrease) in revolving advances
    
    
    34,000
    
    
    
    (16,700
    )
    
    
    (23,900
    )Gross repayments of term advances
    
    
    
    
    
    
    
    
    
    
    (38,269
    )Repayments of acquisition notes payable
    
    
    (259
    )
    
    
    (42
    )
    
    
    (780
    )Tax benefit from stock options exercised
    
    
    31
    
    
    
    1,778
    
    
    
    1,828Proceeds from stock options exercised and restricted stock granted
    
    
    608
    
    
    
    3,577
    
    
    
    5,863Proceeds from stock offering
    
    
    
    
    
    
    
    
    
    
    61,294Net cash provided (used) by financing activities
    
    
    34,380
    
    
    
    (11,387
    )
    
    
    6,036Net increase (decrease) in cash and cash equivalents
    
    
    43,222
    
    
    
    (13,611
    )
    
    
    14,931Cash and cash equivalents, beginning of year
    
    
    109,430
    
    
    
    123,041
    
    
    
    108,110Cash and cash equivalents, end of year
    
    $
    152,652
    
    
    $
    109,430
    
    
    $
    123,041Supplemental disclosures of cash flows information:Interest paid
    
    $
    6,283
    
    
    $
    4,319
    
    
    $
    9,943Income taxes paid
    
    $
    14,494
    
    
    $
    14,518
    
    
    $
    7,403Non-cash investing activities:Issuance of convertible notes
    
    $
    19,400
    
    
    $
    
    
    
    $
    Issuance of acquisition notes payable
    
    
    554
    
    
    
    280
    
    
    
    
  73




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##### Table of Contents



ACE CASH EXPRESS, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Operations
  Principles of Consolidation
  Use of Estimates
     Revenue Recognition Policy
  74




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##### Table of Contents



Year Ended June 30,2006
    
    
    2005
    
    
    2004(in thousands)Check cashing
    
    $
    148,065
    
    
    $
    131,619
    
    
    $
    129,194Short-term consumer loans
    
    
    108,667
    
    
    
    91,793
    
    
    
    77,029Bill payments
    
    
    25,151
    
    
    
    20,266
    
    
    
    16,960Money transfers
    
    
    13,985
    
    
    
    11,868
    
    
    
    11,136Money orders
    
    
    6,830
    
    
    
    6,875
    
    
    
    6,330Franchising
    
    
    3,242
    
    
    
    3,180
    
    
    
    2,774Other services
    
    
    3,969
    
    
    
    3,048
    
    
    
    3,236Total revenues
    
    $
    309,909
    
    
    $
    268,649
    
    
    $
    246,659
 Cash and Cash Equivalents
  Accounts Receivable, Net
  Loans Receivable, Net
  75




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##### Table of Contents



As of June 30,2006
    
    2005(in millions)Republic Bank
    
    $
    0.8
    
    
    $
    4.0First Bank of Delaware
    
    
    1.6
    
    
    
    True Financial (CSO loans)
    
    
    2.7
    
    
    
    
  As of June 30,2006
    
    2005
    
    2004(in millions)Republic Bank
    
    $
    9.1
    
    
    $
    8.4
    
    
    $
    6.5First Bank of Delaware
    
    
    1.2
    
    
    
    
    
    
    
    True Financial (CSO loans)
    
    
    
    
    
    
    
    
    
    
    
 76




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##### Table of Contents



Inventories
  Property and Equipment
  New Store Accounting
  Store Acquisition Accounting
  Gain or Loss on Store Closure
  Software Development Costs
  Accounting for Impairment of Long-lived Assets
  Intangible Assets
  Deferred Borrowing Costs
 77




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##### Table of Contents



Incentive Program Accounting
  Store Expenses
  Returned Checks
  Advertising Costs
  Derivative Instruments and Hedging Activities
   78




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##### Table of Contents



June 30, 2006
    
    June 30, 2005Average
    
    Ending
    
    
    
    
    
    Average
    
    EndingEffective
    
    Effective
    
    
    
    
    
    Effective
    
    EffectiveAverage
    
    Swap
    
    Swap
    
    Average
    
    Swap
    
    SwapNotional
    
    Interest
    
    Interest
    
    Notional
    
    Interest
    
    InterestCorresponding Debt
    
    Amount
    
    Rate
    
    Rate
    
    Amount
    
    Rate
    
    Rate(in millions)
    
    
    
    
    
    
    
    
    
    (in millions)Revolving advance
    
    $
    35
    
    
    
    6.177
    %
    
    
    6.263
    %
    
    $
    36
    
    
    
    5.310
    %
    
    
    6.175
    %
   Change in Accumulated OtherAccumulated Other Comprehensive
    
    Comprehensive Income (Loss)Income (Loss), Net of Tax,
    
    for theas of June 30,
    
    Year Ended June 30,Corresponding Debt
    
    2006
    
    2005
    
    2004
    
    2006
    
    2005Revolving advance
    
    $
    251
    
    
    
    ($56
    )
    
    
    ($170
    )
    
    $
    307
    
    
    $
    114
   Year Ended June 30,2006
    
    
    2005
    
    
    2004(in thousands)Net income
    
    $
    25,017
    
    
    $
    27,366
    
    
    $
    17,052Other comprehensive income:Unrealized gain on hedging instruments
before tax expense
    
    
    503
    
    
    
    189
    
    
    
    1,412Tax expense
    
    
    (196
    )
    
    
    (75
    )
    
    
    (565
    )Unrealized gain on hedging instruments net
of the tax expense
    
    
    307
    
    
    
    114
    
    
    
    847Comprehensive income
    
    $
    25,324
    
    
    $
    27,480
    
    
    $
    17,899
 79




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##### Table of Contents



Franchise Accounting
    June 30,2006
    
    
    2005
    
    
    2004(in thousands)Initial fees and option to purchase fees
    
    $
    536
    
    
    $
    845
    
    
    $
    567Royalty fees
    
    
    2,708
    
    
    
    2,335
    
    
    
    2,205Other
    
    
    (2
    )
    
    
    
    
    
    
    2Total franchise revenues
    
    $
    3,242
    
    
    $
    3,180
    
    
    $
    2,774
  Income Taxes
  Earnings Per Share
  Year Ended June 30,2006
    
    
    2005
    
    
    2004(in thousands)Net income
    
    $
    25,017
    
    
    $
    27,366
    
    
    $
    17,052Interest expense on convertible notes payable, net of tax benefit
    
    
    260
    
    
    
    
    
    
    
    Net income  diluted
    
    $
    25,277
    
    
    $
    27,366
    
    
    $
    17,052Weighted average number of common shares outstanding:Basic
    
    
    13,521
    
    
    
    13,275
    
    
    
    11,009Effect of dilutive securities:Stock options and restricted stock
    
    
    423
    
    
    
    546
    
    
    
    468Convertible notes payable
    
    
    433
    
    
    
    
    
    
    
    Diluted
    
    
    14,377
    
    
    
    13,821
    
    
    
    11,477Earnings per share:Basic
    
    $
    1.85
    
    
    $
    2.06
    
    
    $
    1.55Diluted
    
    $
    1.76
    
    
    $
    1.98
    
    
    $
    1.49
 80




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##### Table of Contents



Fair Value of Financial Instruments
  Stock Incentive Plans
  Adoption of SFAS 123(R)
  Stock Option Expense Pro-forma Disclosures
  For the Years Ended June 30,2005
    
    
    2004(in thousands,except per share amounts)Net income, as reported
    
    $
    27,366
    
    
    $
    17,052Deduct: Total stock-based employee
compensation expense determined under
fair value based methods for all stock
option awards, net of related tax effects
    
    
    913
    
    
    
    855Deduct: Total stock-based non-employee
director compensation expense determined
under fair value based methods for all
stock option awards, net of related tax
effects
    
    
    68
    
    
    
    40Pro forma net income
    
    $
    26,385
    
    
    $
    16,157Earnings per share:Basic  as reported
    
    $
    2.06
    
    
    $
    1.55Basic  pro forma
    
    $
    1.99
    
    
    $
    1.47
 81




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##### Table of Contents



For the Years Ended June 30,2005
    
    
    2004(in thousands,except per share amounts)Diluted  as reported
    
    $
    1.98
    
    
    $
    1.49Diluted  pro forma
    
    $
    1.91
    
    
    $
    1.41
 Stock Option Grants
  Year EndedJune 30, 2006(dollars in thousands)Number of shares of stock options granted:Employee stock incentive plan
    
    
    43,1051995 non-employee director stock incentive plan
    
    
    2005 non-employee director stock incentive plan
    
    
    11,25054,355Total stock-based compensation expense determined under
fair value based methods for all stock option awards:Employee stock incentive plan
    
    $
    7931995 non-employee director stock incentive plan
    
    
    842005 non-employee director stock incentive plan
    
    
    38$
    915Tax benefit related to stock-based compensation expense
for stock option awards
    
    $
    357
   Year Ended June 30,2006
    
    
    2005
    
    
    2004(dollars in thousands)Number of shares of restricted stock granted:- Employee stock incentive plan
    
    
    268,650
    
    
    
    81,650
    
    
    
    199,075- 1995 non-employee director stock incentive plan
    
    
    
    
    
    
    12,250
    
    
    
    8,750- 2005 non-employee director stock incentive plan
    
    
    15,030
    
    
    
    
    
    
    
    283,680
    
    
    
    93,900
    
    
    
    207,825Number of shares of restricted stock forfeited:- Employee stock incentive plan
    
    
    (8,001
    )
    
    
    (11,477
    )
    
    
    (650
    )- 1995 non-employee director stock incentive plan
    
    
    
    
    
    
    
    
    
    
    - 2005 non-employee director stock incentive plan
    
    
    
    
    
    
    
    
    
    
    (8,001
    )
    
    
    (11,477
    )
    
    
    (650
    )Stock-based compensation expense for restricted stock grants:- Employee stock incentive plan
    
    $
    1,992
    
    
    $
    1,121
    
    
    $
    531- 1995 non-employee director stock incentive plan
    
    
    169
    
    
    
    122
    
    
    
    33- 2005 non-employee director stock incentive plan
    
    
    73
    
    
    
    
    
    
    
    $
    2,234
    
    
    $
    1,243
    
    
    $
    564
 82




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##### Table of Contents



2. OPERATING SEGMENTS
   Company-owned
    
    
    Franchised
    
    
    Other
    
    
    Total(in thousands, except for number of stores)Year ended June 30, 2006:Revenues
    
    $
    306,667
    
    
    $
    3,242
    
    
    $
    
    
    
    $
    309,909Gross margin
    
    
    98,507
    
    
    
    3,242
    
    
    
    
    
    
    
    101,749Region, headquarters, franchise expenses
    
    
    (48,248
    )
    
    
    (1,230
    )
    
    
    
    
    
    
    (49,478
    )Other depreciation and amortization
    
    
    (3,642
    )
    
    
    (21
    )
    
    
    
    
    
    
    (3,663
    )Loss on early extinguishment of debt
    
    
    (668
    )
    
    
    
    
    
    
    
    
    
    
    (668
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    (6,872
    )
    
    
    (6,872
    )Other expenses
    
    
    (54
    )
    
    
    
    
    
    
    
    
    
    
    (54
    )Income (loss) before taxes
    
    $
    45,895
    
    
    $
    1,991
    
    
    
    ($6,872
    )
    
    $
    41,014Total assets
    
    $
    391,156
    
    
    $
    1,378
    
    
    
    
    
    
    $
    392,534Number of stores at June 30, 2006
    
    
    1,353
    
    
    
    220
    
    
    
    
    
    
    
    1,573Year ended June 30, 2005:Revenues
    
    $
    265,469
    
    
    $
    3,180
    
    
    $
    
    
    
    $
    268,649Gross margin
    
    
    92,236
    
    
    
    3,180
    
    
    
    
    
    
    
    95,416Region, headquarters, franchise expenses
    
    
    (42,216
    )
    
    
    (1,227
    )
    
    
    
    
    
    
    (43,443
    )Other depreciation and amortization
    
    
    (3,075
    )
    
    
    (19
    )
    
    
    
    
    
    
    (3,094
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    (4,880
    )
    
    
    (4,880
    )Other expenses
    
    
    864
    
    
    
    
    
    
    
    
    
    
    
    864Income (loss) before taxes
    
    $
    47,809
    
    
    $
    1,934
    
    
    
    ($4,880
    )
    
    $
    44,863Total assets
    
    $
    291,296
    
    
    $
    1,325
    
    
    
    
    
    
    $
    292,621Number of stores at June 30, 2005
    
    
    1,142
    
    
    
    229
    
    
    
    
    
    
    
    1,371Year ended June 30, 2004:Revenues
    
    $
    243,885
    
    
    $
    2,774
    
    
    $
    
    
    
    $
    246,659Gross margin
    
    
    81,865
    
    
    
    2,774
    
    
    
    
    
    
    
    84,639Region, headquarters, franchise expenses
    
    
    (37,932
    )
    
    
    (1,196
    )
    
    
    
    
    
    
    (39,128
    )Other depreciation and amortization
    
    
    (3,881
    )
    
    
    (12
    )
    
    
    
    
    
    
    (3,893
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    (10,231
    )
    
    
    (10,231
    )Other expenses
    
    
    (2,965
    )
    
    
    
    
    
    
    
    
    
    
    (2,965
    )Income (loss) before taxes
    
    $
    37,087
    
    
    $
    1,566
    
    
    
    ($10,231
    )
    
    $
    28,422Total assets
    
    $
    269,182
    
    
    $
    1,080
    
    
    $
    
    
    
    $
    270,262Number of stores at June 30, 2004
    
    
    1,026
    
    
    
    204
    
    
    
    
    
    
    
    1,230
 3. FINANCING ARRANGEMENTS AND MONEYGRAM AGREEMENT
  Existing Credit Facilities
  83




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##### Table of Contents




    
    a $200 million primary revolving credit facility that is available
throughout the term of the credit agreement, with the ability to request an increase in
this facility of up to $25 million during the term of the credit agreement; and
    
    a $75 million seasonal revolving credit facility that is available during
each calendar-year-end holiday and tax season (i.e., January 1 through March 15) during
the term of the credit agreement.
    
    
    The sum of (a) the greatest of (i) the prime rate publicly announced by Wells Fargo Bank,
(ii) one percent plus the rate of interest on the secondary market for three-month
certificates of deposit reported by the Board of Governors of the Federal Reserve System
(the Board of Governors), multiplied by a fraction, the numerator of which is one and the
denominator of which is one minus the maximum reserve percentages required by the Board of
Governors to which Wells Fargo Bank is subject for new negotiable nonpersonal time deposits
in dollars of over $100,000 with maturities of approximately three months plus the annual
assessment rate that is payable by a member of the Bank Insurance Fund classified as well
capitalized, and (iii) the federal funds rate plus 0.5%; plus (b) a margin that varies from
0.75% to 1.75% per annum based on our debt-to-EBITDA ratio. (For this ratio, EBITDA is
our earnings before interest, taxes, depreciation, and amortization.) This interest rate
adjusts on a daily basis.
    
    The sum of (a) the London Interbank Offered Rate (LIBOR) for (at our discretion) one-,
two-, three- or six-month maturities, multiplied by a fraction, the numerator of which is
one and the denominator of which is one minus the maximum reserve percentages required by
the Board of Governors to which Wells Fargo Bank is subject for Eurocurrency funding, plus
(b) a margin that varies from 1.75% to 2.75% per annum based on our debt-to-EBITDA ratio.
This interest rate adjusts, at our discretion, at one-, two-, three-, or six-month
intervals, in accordance with the corresponding LIBOR.
    
    The sum of (a) LIBOR for one-month maturities, plus (b) a margin that varies from 1.75%
to 2.75% per annum based on our debt-to-EBITDA ratio. This interest rate adjusts on a daily
basis.
    84




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##### Table of Contents




    
    to limit any single acquisition of assets or capital stock of an entity in the retail
financial services business to a purchase price of no more than $10 million and to assets or
entities that have a positive cash flow for the 12 months preceding such acquisition, unless
otherwise agreed upon by the lenders;
    
    to reduce our risk of increases in interest rates by entering into one or more
interest-rate swap agreements to convert to fixed-rate obligations our floating- or
variable-rate interest obligations with respect to the lesser of (a) $30 million and (b) 50%
of the average amount of the unpaid loans outstanding during the prior month; and
    
    to maintain the following financial coverage ratios:
 
    
    our consolidated net worth at any time cannot be less than $175.5 million plus
75% of all net income earned in a calendar quarter, without deduction for any quarterly
losses, plus 100% of the proceeds of any equity offering;
    
    At the end of any fiscal quarter, our debt-to-EBITDA ratio cannot be more than
2.75-to-1.00 through December 31, 2005 and 2.50-to-1.00 thereafter;
    
    at the end of each fiscal quarter, our cash flow coverage ratio cannot be less
than 1.25-to-1.00.
  Previous Credit Facilities
  
    
    a $140 million primary revolving credit facility that is available
throughout the four-year term; and
    
    a $60 million seasonal revolving credit facility that is available during
each calendar-year-end holiday and tax season (i.e., December 15 through March 15)
during the four-year term.
   
    
    The sum of (a) the greatest of (i) the prime rate publicly announced by Wells Fargo Bank,
(ii) one percent plus the rate of interest on the secondary market for three-month
certificates of deposit reported by the Board of Governors of the Federal Reserve System
(the Board of Governors), multiplied by a fraction, the numerator of which is one and the
denominator of which is one minus the maximum reserve percentages required by the Board of
Governors to which Wells Fargo Bank is subject for new negotiable nonpersonal time deposits
in dollars of over $100,000 with maturities of approximately three months plus the annual
assessment rate that is payable by a member of the Bank Insurance Fund classified as well
capitalized, and (iii) the federal funds rate plus 0.5%; plus (b) a margin that varies from
1.25% to 2.25% per annum based on our debt-to-EBITDA ratio. (For this ratio, EBITDA is
our earnings before interest, taxes, depreciation, and amortization.) This interest rate
adjusts on a daily basis.
 85




---



##### Table of Contents




    
    The sum of (a) the London Interbank Offered Rate (LIBOR) for (at our discretion) one-,
two-, three- or six-month maturities, multiplied by a fraction, the numerator of which is
one and the denominator of which is one minus the maximum reserve percentages required by
the Board of Governors to which Wells Fargo Bank is subject for Eurocurrency funding, plus
(b) a margin that varies from 2.25% to 3.25% per annum based on our debt-to-EBITDA ratio.
This interest rate adjusts, at our discretion, at one-, two-, three-, or six-month
intervals, in accordance with the corresponding LIBOR.
    
    The sum of (a) LIBOR for one-month maturities, plus (b) a margin that varies from 2.25%
to 3.25% per annum based on our debt-to-EBITDA ratio. This interest rate adjusts on a daily
basis.
  Swap Agreements
      As of and for the YearsEnded June 30,2006
    
    
    2005(in thousands, except interest rates)Revolving advance ending balance
    
    $
    77,300
    
    
    $
    43,300Average revolving advance balance
    
    $
    63,306
    
    
    $
    54,806Interest expense
    
    $
    4,365
    
    
    $
    2,639Swap (income) expense
    
    
    (89
    )
    
    
    224Total interest expense
    
    $
    4,276
    
    
    $
    2,863Accrued interest expense on revolving advance
    
    $
    16
    
    
    $
    7Weighted average interest rate:Excluding swap expense
    
    
    7.50
    %
    
    
    5.87
    %Including swap (income) expense
    
    
    7.40
    %
    
    
    6.36
    %Commitment fees on unused revolving advance
    
    $
    421
    
    
    $
    418Accrued interest expense on unused revolving
advance
    
    $
    
    
    
    $
    14
 86




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##### Table of Contents



FixedInterest Rate Applies
    
    InterestNotional
    
    
    
    
    
    
    
    
    
    to:
    
    RateDebt
    
    Amount
    
    Swap Agreement Term
    
    Specific Term
    
    BeforeBank Name
    
    Type
    
    (in millions)
    
    Beginning
    
    Ending
    
    From
    
    To
    
    MarginJP Morgan Chase Bank
    
    Revolving Advances
    
    $
    60
    
    
    
    4/23/2003
    
    
    
    9/29/2006
    
    
    
    4/23/2003
    
    
    
    6/30/2003
    
    
    
    1.320
    %$
    60
    
    
    
    
    
    
    
    
    
    
    
    7/1/2003
    
    
    
    5/30/2004
    
    
    
    1.715
    %$
    30
    
    
    
    
    
    
    
    
    
    
    
    5/31/2004
    
    
    
    6/30/2004
    
    
    
    1.715
    %$
    30
    
    
    
    
    
    
    
    
    
    
    
    7/1/2004
    
    
    
    12/31/2004
    
    
    
    2.965
    %$
    45
    
    
    
    
    
    
    
    
    
    
    
    1/1/2005
    
    
    
    4/29/2005
    
    
    
    2.965
    %$
    35
    
    
    
    
    
    
    
    
    
    
    
    4/30/2005
    
    
    
    6/29/2005
    
    
    
    2.965
    %$
    35
    
    
    
    
    
    
    
    
    
    
    
    6/30/2005
    
    
    
    3/30/2006
    
    
    
    3.925
    %$
    35
    
    
    
    
    
    
    
    
    
    
    
    3/31/2006
    
    
    
    9/29/2006
    
    
    
    4.263
    %Wells Fargo Bank
    
    Revolving Advances
    
    $
    30
    
    
    
    9/29/2006
    
    
    
    9/28/2007
    
    
    
    9/29/2006
    
    
    
    9/28/2007
    
    
    
    4.46
    %
 Self-Service Machine Funding Arrangements
  st
  Notes Payable
  Debt Maturity Schedule
  87




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##### Table of Contents



Year Ending June 30:2007
    
    $
    3382008
    
    
    2722009
    
    
    13Remaining years
    
    
    19,400$
    20,023
 MoneyGram Agreement
     4. OTHER EXPENSES
  Year Ended June 30,2006
    
    
    2005
    
    
    2004(in thousands)Armored and security
    
    $
    9,745
    
    
    $
    8,750
    
    
    $
    7,954Returns and cash shorts
    
    
    7,876
    
    
    
    7,288
    
    
    
    9,350Information services
    
    
    3,868
    
    
    
    3,884
    
    
    
    5,860Bank charges
    
    
    6,218
    
    
    
    5,839
    
    
    
    5,093Store supplies
    
    
    4,056
    
    
    
    4,423
    
    
    
    4,219Telecommunications
    
    
    1,917
    
    
    
    1,977
    
    
    
    2,211Advertising and marketing
    
    
    5,449
    
    
    
    2,863
    
    
    
    2,072Miscellaneous
    
    
    4,648
    
    
    
    3,374
    
    
    
    3,307$
    43,777
    
    
    $
    38,398
    
    
    $
    40,066
 88




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##### Table of Contents



Year Ended June 30,2006
    
    
    2005
    
    
    2004(in thousands)Gain on sale of stores to franchisees
    
    ($
    515
    )
    
    ($
    1,802
    )
    
    ($
    649
    )Store closing expense
    
    
    394
    
    
    
    495
    
    
    
    410Gain on sale of warrants issued by NetSpend
    
    
    
    
    
    
    (132
    )
    
    
    (1,049
    )Settlements (1)
    
    
    
    
    
    
    
    
    
    
    (138
    )Store lease buyout (2)
    
    
    
    
    
    
    
    
    
    
    (450
    )Gain on sale of land in North Carolina
    
    
    
    
    
    
    
    
    
    
    (95
    )Other
    
    
    175
    
    
    
    575
    
    
    
    78$
    54
    
    
    ($
    864
    )
    
    ($
    1,893
    )
 
 (1)
    
    Fiscal 2004 consists of $106,000 for additional administrative costs related to the
settlement of substantially all claims in the Goleta loan-related lawsuits, $190,000 for a
state regulatory settlement and the recovery of $434,000 resulting from the settlement of
the Silverman lawsuit.(2)
    
    We received payment to terminate a store lease in Arizona to allow another retailer to
occupy the location. 5. PREPAID EXPENSES, INVENTORIES, AND OTHER CURRENT ASSETS
  June 30,2006
    
    
    2005(in thousands)Deferred tax asset
    
    $
    6,105
    
    
    $
    6,257Inventories
    
    
    1,728
    
    
    
    1,836Deposits
    
    
    1,597
    
    
    
    1,774Deferred finance costs
    
    
    724
    
    
    
    1,287Interest rate swap
    
    
    334
    
    
    
    Other prepaid invoices
    
    
    3,559
    
    
    
    2,531$
    14,047
    
    
    $
    13,685
 6. PROPERTY AND EQUIPMENT
  June 30,2006
    
    
    2005(in thousands)Property and equipment, at cost:Store equipment, furniture, and fixtures
    
    $
    61,341
    
    
    $
    54,493Land, buildings and leasehold improvements
    
    
    43,118
    
    
    
    34,215Signs
    
    
    11,484
    
    
    
    9,433Other property and equipment
    
    
    1,596
    
    
    
    1,484117,539
    
    
    
    99,625Less  accumulated depreciation
    
    
    70,882
    
    
    
    61,968$
    46,657
    
    
    $
    37,657
  7. ACQUISITIONS, GOODWILL AND OTHER INTANGIBLE ASSETS
  89




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##### Table of Contents



Acquisitions
 PCE PCEC
      Unaudited Pro Forma Results ofOperationsfor the Year Ended June 30,2006
    
    2005(in millions, except per share amounts)Revenues
    
    $
    319.0
    
    
    $
    294.9Net income
    
    $
    24.7
    
    
    $
    29.1Basic earnings per share
    
    $
    1.83
    
    
    $
    2.19Diluted earnings per share
    
    $
    1.75
    
    
    $
    2.00
 Acquisitions
  90




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##### Table of Contents



Year Ended June 30,2006
    
    
    2005
    
    2004(in thousands, except number of storesand number of transactions)Number of stores acquired
    
    
    135
    
    
    
    74
    
    
    
    34Number of transactions
    
    
    10
    
    
    
    11
    
    
    
    4Amounts allocated to:Goodwill
    
    $
    35,675
    
    
    $
    16,983
    
    
    $
    6,133Covenants not to compete
    
    
    981
    
    
    
    750
    
    
    
    270Acquired customer relationships
    
    
    1,369
    
    
    
    686
    
    
    
    0Total intangibles costs
    
    $
    38,025
    
    
    
    18,419
    
    
    
    6,403Property and equipment
    
    
    2,150
    
    
    
    958
    
    
    
    511Other assets
    
    
    28
    
    
    
    3
    
    
    
    1,023Total purchase price
    
    $
    40,203
    
    
    $
    19,380
    
    
    $
    7,937
  Amortizable Intangible Assets
   June 30,2006
    
    
    2005(in thousands)Covenants not to compete, at cost
    
    $
    3,289
    
    
    $
    2,678Less  accumulated amortization
    
    
    1,201
    
    
    
    1,010$
    2,088
    
    
    $
    1,668
   Amortization Expense for Covenants Not to CompeteFor the Year EndedJune 30,
    
    Actual
    
    Estimated(in thousands)2006
    
    $5612007
    
    
    
    $
    6062008
    
    
    
    
    5672009
    
    
    
    
    4882010
    
    
    
    
    3222011
    
    
    
    
    105
  June 30,2006
    
    
    2005(in thousands)Acquired customer relationships, at cost
    
    $
    2,064
    
    
    $
    695Less  accumulated amortization
    
    
    725
    
    
    
    196$
    1,339
    
    
    $
    499
  91




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##### Table of Contents



Amortization Expense forAcquired Customer RelationshipsFor the YearEnded June30,
    
    Actual
    
    Estimated(in thousands)2006
    
    $5292006
    
    
    
    $
    5712007
    
    
    
    
    4002008
    
    
    
    
    2482009
    
    
    
    
    1012010
    
    
    
    
    14
 Intangible Assets Not Subject to Amortization
  Year Ended June 30,2006
    
    
    2005(in thousands)Balance, beginning of the year
    
    $
    98,702
    
    
    $
    81,719Goodwill from acquisitions
    
    
    35,675
    
    
    
    16,983Balance, end of the year
    
    $
    134,377
    
    
    $
    98,702
  8. ACCOUNTS PAYABLE, ACCRUED LIABILITIES, AND OTHER LIABILITIES
  2006
    
    
    2005(in thousands)Accrued salaries and benefits
    
    $
    12,627
    
    
    $
    9,745Accounts payable
    
    
    11,738
    
    
    
    9,691Payable to NetSpend
    
    
    5,396
    
    
    
    2,471Money transfer payable
    
    
    5,170
    
    
    
    2,596Deferred revenue
    
    
    2,347
    
    
    
    2,207Accrued workers compensation
    
    
    879
    
    
    
    1,000Income taxes payable
    
    
    876
    
    
    
    766Payable to third-party lenders
    
    
    542
    
    
    
    2,348Accrued bank charges
    
    
    476
    
    
    
    464Notes payable  current
    
    
    337
    
    
    
    120Deferred gain on sale of stores
    
    
    103
    
    
    
    161Other accrued liabilities
    
    
    5,390
    
    
    
    4,548$
    45,881
    
    
    $
    36,117
 9. MONEY ORDER AGREEMENT
   92




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##### Table of Contents



10. NETSPEND AGREEMENT
   11. SHAREHOLDERS EQUITY
 Preferred Stock
  Stock Incentive Plans
    1997 Stock
    
    
    Non-employee Director StockIncentive
    
    
    Incentive Plans:Plan
    
    
    1995
    
    
    2005Total plan shares that may be issued upon
exercise of options or grant of restricted
stock:
    
    
    2,115,000
    
    
    
    229,500
    
    
    
    200,000Number of shares reserved for grants of
options or restricted stock as of June 30,
2006
    
    
    1,194,926
    
    
    
    78,590
    
    
    
    200,000Types of grants:
    
    Stock options
    
    Stock options
    
    Stock optionsand restricted stock
    
    and restricted stock
    
    and restricted stock
 93




---



##### Table of Contents



1997 Stock
    
    
    Non-employee Director StockIncentive
    
    
    Incentive Plans:Plan
    
    
    1995
    
    
    2005Available to:
    
    Employees
    
    Non-employee
    
    Non-employeedirectors
    
    directorsVesting period (generally):- Options exercisable at an exercise
price not less than the fair market
value at the grant date
    
    3  4 years annually
    
    3 years annually
    
    3 years annually- Restricted stock
    
    3  5 years annually
    
    3 years annually
    
    3 years annuallyExpiration (years after option grant date):
    
    
    10
    
    
    
    10
    
    
    
    5
 Determining Restricted Stock Fair Value
  Determining Stock Option Fair Value
 Valuation and Amortization Method
 Expected Term
 Expected Volatility
 Risk-Free Interest Rate
 Estimated Forfeitures
 Fair Value
  Non-employee Director StockEmployee Stock Incentive Plan
    
    Incentive PlansFor the Year Ended June 30,
    
    For the Year Ended June 30,2006
    
    2005
    
    2004
    
    2006
    
    2005
    
    2004Expected volatility
    
    
    42
    %
    
    
    44
    %
    
    
    46
    %
    
    
    42
    %
    
    
    44
    %
    
    
    46
    %Expected life (years)
    
    
    4.0
    
    
    
    4.0
    
    
    
    4.5
    
    
    
    4.7
    
    
    
    4.8
    
    
    
    4.7
    %Risk-free interest rate
    
    
    4.4
    %
    
    
    3.8
    %
    
    
    3.9
    %
    
    
    4.4
    %
    
    
    3.8
    %
    
    
    3.9
    %Expected forfeitures
    
    
    7.2
    %
    
    
    7.2
    %
    
    
    3.0
    %
    
    
    
    %
    
    
    
    %
    
    
    
    %Expected dividends
    
    None
    
    
    None
        
    None
        
    None
        
    None
        
    None
 94




---



##### Table of Contents



Employee Stock Incentive Plan.
  Outstanding
    
    ExercisableWeighted-
    
    Weighted-
    
    
    
    
    
    Weighted-average
    
    average
    
    Stock
    
    averageStock options
    
    exercise
    
    remaining
    
    options
    
    exerciseRange of exercise prices
    
    outstanding
    
    price
    
    contractual life
    
    exercisable
    
    priceUnder $10.00
    
    
    
    175,921
    
    
    $
    9.35
    
    
    
    5.6
    
    
    
    140,982
    
    
    $
    9.39$
    10.01  $15.00
    
    
    
    218,273
    
    
    
    13.04
    
    
    
    5.0
    
    
    
    164,085
    
    
    
    12.82$
    15.01  $20.00
    
    
    
    108,088
    
    
    
    17.08
    
    
    
    3.7
    
    
    
    104,338
    
    
    
    17.00$
    20.01  $25.00
    
    
    
    46,250
    
    
    
    22.92
    
    
    
    9.2
    
    
    
    3,437
    
    
    
    21.10$
    25.01  $30.00
    
    
    
    85,000
    
    
    
    26.70
    
    
    
    8.5
    
    
    
    21,248
    
    
    
    26.70633,532
    
    
    $
    15.26
    
    
    
    5.7
    
    
    
    434,090
    
    
    $
    13.45
  OutstandingStock
    
    Restricted
    
    Available forReserved
    
    Options
    
    Stock
    
    GrantShares at June 30, 2003
    
    
    1,675,715
    
    
    
    1,330,216
    
    
    
    2,500
    
    
    
    342,999Increase in shares reserved
    
    
    400,000
    
    
    
    
    
    
    
    
    
    
    
    400,000Granted
    
    
    
    
    
    
    138,750
    
    
    
    199,075
    
    
    
    (337,825
    )Exercised
    
    
    (469,828
    )
    
    
    (469,828
    )
    
    
    
    
    
    
    Restrictions lapsed
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Canceled
    
    
    
    
    
    
    (91,812
    )
    
    
    (650
    )
    
    
    92,462Shares at June 30, 2004
    
    
    1,605,887
    
    
    
    907,326
    
    
    
    200,925
    
    
    
    497,636Granted
    
    
    
    
    
    
    113,000
    
    
    
    81,650
    
    
    
    (194,650
    )Exercised
    
    
    (295,885
    )
    
    
    (295,885
    )
    
    
    
    
    
    
    Restrictions lapsed
    
    
    (24,018
    )
    
    
    
    
    
    
    (24,018
    )
    
    
    Canceled
    
    
    
    
    
    
    (96,871
    )
    
    
    (11,477
    )
    
    
    108,348Shares at June 30, 2005
    
    
    1,285,984
    
    
    
    627,570
    
    
    
    247,080
    
    
    
    411,334Granted
    
    
    
    
    
    
    43,105
    
    
    
    268,650
    
    
    
    (311,755
    )Exercised
    
    
    (35,445
    )
    
    
    (35,445
    )
    
    
    
    
    
    
    Restrictions lapsed
    
    
    (55,610
    )
    
    
    
    
    
    
    (55,610
    )
    
    
    Canceled
    
    
    
    
    
    
    (1,698
    )
    
    
    (8,001
    )
    
    
    9,699Shares at June 30, 2006
    
    
    1,194,929
    
    
    
    633,532
    
    
    
    452,119
    
    
    
    109,278
  Weighted AverageRemaining
    
    GrantOption
    
    Contractual
    
    Date
    
    AggregateExercise
    
    Term
    
    Fair
    
    IntrinsicStock Options
    
    Shares
    
    Price
    
    (Years)
    
    Value
    
    Value ($000)Outstanding at June 30, 2003
    
    
    1,330,216
    
    
    $
    11.55Granted
    
    
    138,750
    
    
    $
    15.27
    
    
    
    
    
    
    $
    6.56Exercised
    
    
    (469,828
    )
    
    $
    11.58
    
    
    
    
    
    
    
    
    
    
    $
    6,807
 95




---



##### Table of Contents



Weighted AverageRemaining
    
    GrantOption
    
    Contractual
    
    Date
    
    AggregateExercise
    
    Term
    
    Fair
    
    IntrinsicStock Options
    
    Shares
    
    Price
    
    (Years)
    
    Value
    
    Value ($000)Forfeited or expired
    
    
    (91,812
    )
    
    $
    11.23Outstanding at June 30, 2004
    
    
    907,326
    
    
    $
    12.14
    
    
    
    5.10
    
    
    
    
    
    
    $
    12,326Exercisable at June 30, 2004
    
    
    458,399
    
    
    $
    12.95
    
    
    
    4.16
    
    
    
    
    
    
    $
    5,823Outstanding at June 30, 2004
    
    
    907,326
    
    
    $
    12.14Granted
    
    
    113,000
    
    
    $
    25.78
    
    
    
    
    
    
    $
    10.08Exercised
    
    
    (295,885
    )
    
    $
    11.33
    
    
    
    
    
    
    
    
    
    
    $
    4,727Forfeited or expired
    
    
    (96,871
    )
    
    $
    14.68Outstanding at June 30, 2005
    
    
    627,570
    
    
    $
    14.52
    
    
    
    6.15
    
    
    
    
    
    
    $
    7,118Exercisable at June 30, 2005
    
    
    342,441
    
    
    $
    13.06
    
    
    
    4.56
    
    
    
    
    
    
    $
    4,365Outstanding at June 30, 2005
    
    
    627,570
    
    
    $
    14.52Granted
    
    
    43,105
    
    
    $
    23.38
    
    
    
    
    
    
    $
    9.02Exercised
    
    
    (35,445
    )
    
    $
    10.20
    
    
    
    
    
    
    
    
    
    
    $
    400Forfeited or expired
    
    
    (1,698
    )
    
    $
    9.47Outstanding at June 30, 2006
    
    
    633,532
    
    
    $
    15.26
    
    
    
    5.72
    
    
    
    
    
    
    $
    8,875Exercisable at June 30, 2006
    
    
    434,090
    
    
    
    13.45
    
    
    
    4.73
    
    
    
    
    
    
    $
    6,865
  Weighted AverageRemaining
    
    GrantContractual
    
    Date
    
    AggregateRestricted
    
    Term
    
    Fair
    
    IntrinsicRestricted Stock
    
    Shares
    
    Stock Price
    
    (Years)
    
    Value
    
    Value ($000)Outstanding at June 30, 2003
    
    
    2,500
    
    
    $
    0.01Granted
    
    
    199,075
    
    
    $
    0.01
    
    
    
    
    
    
    $
    12.31Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited or expired
    
    
    650
    
    
    $
    0.01Outstanding at June 30, 2004
    
    
    200,925
    
    
    $
    0.01
    
    
    
    8.2
    
    
    
    
    
    
    $
    5,160Granted
    
    
    81,650
    
    
    $
    0.01
    
    
    
    
    
    
    $
    25.95Exercised
    
    
    (24,018
    )
    
    $
    0.01
    
    
    
    
    
    
    
    
    
    
    $
    597Forfeited or expired
    
    
    (11,477
    )Outstanding at June 30, 2005
    
    
    247,080
    
    
    $
    0.01
    
    
    
    8.07
    
    
    
    
    
    
    $
    6,313Granted
    
    
    268,650
    
    
    $
    0.01
    
    
    
    
    
    
    $
    23.45Exercised
    
    
    (55,610
    )
    
    $
    0.01
    
    
    
    
    
    
    
    
    
    
    $
    1,394Forfeited or expired
    
    
    (8,001
    )
    
    $
    0.01Outstanding at June 30, 2006
    
    
    452,119
    
    
    $
    0.01
    
    
    
    7.24
    
    
    
    
    
    
    $
    13,229
  Number of Shares
    
    
    Weighted Average Grant Date Fair ValueStock
    
    
    Restricted
    
    
    
    
    
    
    Stock
    
    
    RestrictedOptions
    
    
    Stock
    
    
    Total
    
    
    Options
    
    
    Stock
    
    
    TotalNonvested June 30, 2005
    
    
    285,129
    
    
    
    247,080
    
    
    
    532,009
    
    
    $
    6.74
    
    
    $
    15.93
    
    
    $
    10.98Granted
    
    
    43,105
    
    
    
    268,650
    
    
    
    311,755
    
    
    $
    9.02
    
    
    $
    23.63
    
    
    $
    21.61Vested
    
    
    (127,294
    )
    
    
    (55,610
    )
    
    
    (182,704
    )
    
    $
    6.22
    
    
    $
    18.52
    
    
    $
    9.90Forfeited
    
    
    (1,498
    )
    
    
    (8,001
    )
    
    
    (9,499
    )
    
    $
    4.60
    
    
    $
    23.57
    
    
    $
    20.58Nonvested June 30, 2006
    
    
    199,442
    
    
    
    452,119
    
    
    
    651,561
    
    
    $
    7.58
    
    
    $
    20.05
    
    
    $
    16.23
 96




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##### Table of Contents



1995 Non-employee Directors Stock Incentive Plan.
  Outstanding
    
    
    ExercisableWeighted-
    
    
    Weighted-
    
    
    
    
    
    
    Weighted-average
    
    
    average
    
    
    Stock
    
    
    averageRange of exercise
    
    Stock options
    
    
    exercise
    
    
    remaining
    
    
    options
    
    
    exerciseprices
    
    outstanding
    
    
    price
    
    
    contractual life
    
    
    exercisable
    
    
    priceUnder $10.00
    
    
    45,001
    
    
    $
    8.53
    
    
    
    0.9
    
    
    
    45,001
    
    
    $
    8.53$10.01  $15.00
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $15.01  $20.00
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $20.01  $25.00
    
    
    11,250
    
    
    
    24.45
    
    
    
    3.2
    
    
    
    3,750
    
    
    
    24.45$25.01  $30.00
    
    
    11,250
    
    
    
    28.24
    
    
    
    3.4
    
    
    
    3,750
    
    
    
    28.2467,501
    
    
    $
    14.47
    
    
    
    1.7
    
    
    
    52,501
    
    
    $
    11.08
  OutstandingStock
    
    Restricted
    
    Available forReserved
    
    Options
    
    Stock
    
    GrantShares at June 30, 2003
    
    
    190,250
    
    
    
    126,250
    
    
    
    
    
    
    
    64,000Granted
    
    
    
    
    
    
    
    
    
    
    8,750
    
    
    
    (8,750
    )Exercised
    
    
    (34,999
    )
    
    
    (34,999
    )
    
    
    
    
    
    
    Canceled
    
    
    
    
    
    
    (5,000
    )
    
    
    
    
    
    
    5,000Shares at June 30, 2004
    
    
    155,251
    
    
    
    86,251
    
    
    
    8,750
    
    
    
    60,250Granted
    
    
    
    
    
    
    22,500
    
    
    
    12,250
    
    
    
    (34,750
    )Exercised
    
    
    (15,000
    )
    
    
    (15,000
    )
    
    
    
    
    
    
    Restrictions lapsed
    
    
    (2,915
    )
    
    
    
    
    
    
    (2,915
    )
    
    
    Canceled
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expiration of plan
    
    
    (25,500
    )
    
    
    
    
    
    
    
    
    
    
    (25,500
    )Shares at June 30, 2005
    
    
    111,836
    
    
    
    93,751
    
    
    
    18,085
    
    
    
    Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    (21,250
    )
    
    
    (21,250
    )
    
    
    
    
    
    
    Restrictions lapsed
    
    
    (6,996
    )
    
    
    
    
    
    
    (6,996
    )
    
    
    Canceled
    
    
    
    
    
    
    (5,000
    )
    
    
    
    
    
    
    Expiration of plan
    
    
    (5,000
    )
    
    
    
    
    
    
    
    
    
    
    Shares at June 30, 2005
    
    
    78,590
    
    
    
    67,501
    
    
    
    11,089
    
    
    
    
  Weighted AverageRemaining
    
    GrantOption
    
    Contractual
    
    Date
    
    AggregateExercise
    
    Term
    
    Fair
    
    IntrinsicStock Options
    
    Shares
    
    Price
    
    (Years)
    
    Value
    
    Value ($000)Outstanding at June 30, 2003
    
    
    126,250
    
    
    $
    11.33Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    Exercised
    
    
    (34,999
    )
    
    $
    13.18
    
    
    
    
    
    
    
    
    
    
    $
    402Forfeited or expired
    
    
    (5,000
    )
    
    $
    13.25Outstanding at June 30, 2004
    
    
    86,251
    
    
    $
    11.32
    
    
    
    2.09
    
    
    
    
    
    
    $
    1,313Exercisable at June 30, 2004
    
    
    61,246
    
    
    $
    11.32
    
    
    
    1.69
    
    
    
    
    
    
    $
    880
 97




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##### Table of Contents



Weighted AverageRemaining
    
    GrantOption
    
    Contractual
    
    Date
    
    AggregateExercise
    
    Term
    
    Fair
    
    IntrinsicStock Options
    
    Shares
    
    Price
    
    (Years)
    
    Value
    
    Value ($000)Outstanding at June 30, 2004
    
    
    86,251
    
    
    $
    11.32Granted
    
    
    22,500
    
    
    $
    26.35
    
    
    
    
    
    
    $
    11.18Exercised
    
    
    (15,000
    )
    
    $
    14.58
    
    
    
    
    
    
    
    
    
    
    $
    166Forfeited or expired
    
    
    
    
    
    
    Outstanding at June 30, 2005
    
    
    93,751
    
    
    $
    13.62
    
    
    
    2.07
    
    
    
    
    
    
    $
    1,150Exercisable at June 30, 2005
    
    
    62,916
    
    
    $
    9.81
    
    
    
    1.24
    
    
    
    
    
    
    $
    991Outstanding at June 30, 2005
    
    
    93,751
    
    
    $
    13.62Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    9.02Exercised
    
    
    (21,250
    )
    
    $
    11.53
    
    
    
    
    
    
    
    
    
    
    $
    400Forfeited or expired
    
    
    (5,000
    )
    
    $
    11.00Outstanding at June 30, 2006
    
    
    67,501
    
    
    $
    14.47
    
    
    
    1.72
    
    
    
    
    
    
    $
    8,875Exercisable at June 30, 2006
    
    
    52,501
    
    
    $
    11.07
    
    
    
    1.27
    
    
    
    
    
    
    $
    6,865
  Weighted AverageRemaining
    
    GrantContractual
    
    Date
    
    AggregateRestricted
    
    Term
    
    Fair
    
    IntrinsicRestricted Stock
    
    Shares
    
    Stock Price
    
    (Years)
    
    Value
    
    Value ($000)Outstanding at June 30, 2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Granted
    
    
    8,750
    
    
    $
    0.01
    
    
    
    
    
    
    $
    27.94Exercised
    
    
    Forfeited or expired
    
    
    Outstanding at June 30, 2004
    
    
    8,750
    
    
    $
    0.01
    
    
    
    4.6
    
    
    
    
    
    
    $
    225Granted
    
    
    12,250
    
    
    $
    0.01
    
    
    
    
    
    
    $
    29.66Exercised
    
    
    (2,915
    )
    
    $
    0.01
    
    
    
    
    
    
    
    
    
    
    $
    81Forfeited or expired
    
    
    Outstanding at June 30, 2005
    
    
    18,085
    
    
    $
    0.01
    
    
    
    4.14
    
    
    
    
    
    
    $
    462Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    Exercised
    
    
    (6,996
    )
    
    $
    0.01
    
    
    
    
    
    
    
    
    
    
    $
    170Forfeited or expired
    
    
    
    
    
    
    Outstanding at June 30, 2006
    
    
    11,089
    
    
    $
    0.01
    
    
    
    3.20
    
    
    
    
    
    
    $
    324
  Number of Shares
    
    
    Weighted Average Grant Date Fair ValueStock
    
    
    Restricted
    
    
    
    
    
    
    Stock
    
    
    RestrictedOptions
    
    
    Stock
    
    
    Total
    
    
    Options
    
    
    Stock
    
    
    TotalNonvested June 30, 2005
    
    
    30,835
    
    
    
    18,085
    
    
    
    48,920
    
    
    $
    8.22
    
    
    $
    29.10
    
    
    $
    15.94Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Vested
    
    
    (15,835
    )
    
    
    (6,996
    )
    
    
    (22,831
    )
    
    
    6.71
    
    
    
    28.94
    
    
    
    13.53Forfeited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Nonvested June 30, 2006
    
    
    15,000
    
    
    
    11,089
    
    
    
    26,089
    
    
    $
    9.81
    
    
    $
    29.21
    
    
    $
    18.05
 98




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##### Table of Contents



2005 Non-employee Directors Stock Incentive Plan.
  Outstanding
    
    ExercisableWeighted-
    
    Weighted-
    
    
    
    
    
    Weighted-average
    
    average
    
    Stock
    
    averageRange of exercise
    
    Stock options
    
    exercise
    
    remaining
    
    options
    
    exerciseprices
    
    outstanding
    
    price
    
    contractual life
    
    exercisable
    
    price$20.01  $25.00
    
    
    11,250
    
    
    
    24.35
    
    
    
    9.42
    
    
    
    
    
    
    
    
  OutstandingStock
    
    Restricted
    
    AvailableReserved
    
    Options
    
    Stock
    
    for GrantShares reserved August 2005
    
    
    200,000
    
    
    
    
    
    
    
    
    
    
    
    200,000Granted
    
    
    
    
    
    
    11,250
    
    
    
    15,030
    
    
    
    (26,280
    )Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Restrictions lapsed
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Canceled
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Shares at June 30, 2006
    
    
    200,000
    
    
    
    11,250
    
    
    
    15,030
    
    
    
    173,720
  Weighted AverageRemaining
    
    GrantOption
    
    Contractual
    
    Date
    
    AggregateExercise
    
    Term
    
    Fair
    
    IntrinsicStock Options
    
    Shares
    
    Price
    
    (Years)
    
    Value
    
    Value ($000)Outstanding at June 30, 2005
    
    
    
    
    
    
    Granted
    
    
    11,250
    
    
    $
    24.35
    
    
    
    
    
    
    $
    10.21Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    Forfeited or expired
    
    
    
    
    
    
    Outstanding at June 30, 2006
    
    
    11,250
    
    
    $
    24.35
    
    
    
    1.72
    
    
    
    
    
    
    $
    55Exercisable at June 30, 2006
    
    
    
    
    
    $
    
    
    
    
    1.27
    
    
    
    
    
    
    $
    
  Weighted AverageRemaining
    
    GrantContractual
    
    Date
    
    AggregateRestricted
    
    Term
    
    Fair
    
    IntrinsicRestricted Stock
    
    Shares
    
    Stock Price
    
    (Years)
    
    Value
    
    Value ($000)Outstanding at June 30, 2005
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    
    
    
    $
    Granted
    
    
    15,030
    
    
    $
    0.01
    
    
    
    
    
    
    $
    24.88Exercised
    
    
    
    
    
    
    Forfeited or expired
    
    
    
    
    
    
    Outstanding at June 30, 2006
    
    
    15,030
    
    
    $
    0.01
    
    
    
    9.5
    
    
    
    
    
    
    $
    440
 99




---



##### Table of Contents



Number of Shares
    
    
    Weighted Average Grant Date Fair ValueStock
    
    
    Restricted
    
    
    
    
    
    
    Stock
    
    
    RestrictedOptions
    
    
    Stock
    
    
    Total
    
    
    Options
    
    
    Stock
    
    
    TotalNonvested June 30, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Granted
    
    
    11,250
    
    
    
    15,030
    
    
    
    26,280
    
    
    
    10.21
    
    
    
    24.88
    
    
    
    18.60Vested
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Nonvested June 30, 2006
    
    
    11,250
    
    
    
    15,030
    
    
    
    26,280
    
    
    $
    10.21
    
    
    $
    24.88
    
    
    $
    18.60
 Summary Information
   Grants of Restricted Stock to Certain Senior Executives
  
    
    10% may vest if the first performance goal is achieved by the end of our fiscal year
ending June 30, 2007;
    
    15% may vest if the second performance goal, which is higher than the first performance
goal, is achieved by the end of our fiscal year ending June 30, 2008;
    
    25% may vest if the third performance goal, which is higher than the second performance
goal, is achieved by the end of our fiscal year ending June 30, 2009; and
    
    50% may vest if the fourth performance goal, which is higher than the third performance
goal, is achieved by the end of our fiscal year ending June 30, 2010.
  100




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##### Table of Contents



Stock Repurchase Program
   12. INCOME TAXES
  Year Ended June 30,2006
    
    
    2005
    
    
    2004(in thousands)Current -Federal income tax
    
    $
    12,374
    
    
    $
    13,215
    
    
    $
    9,617State income tax
    
    
    2,385
    
    
    
    2,490
    
    
    
    2,05814,759
    
    
    
    15,705
    
    
    
    11,675Deferred -Federal income tax
    
    
    975
    
    
    
    1,420
    
    
    
    (234
    )State income tax
    
    
    263
    
    
    
    372
    
    
    
    (71
    )1,238
    
    
    
    1,792
    
    
    
    (305
    )$
    15,997
    
    
    $
    17,497
    
    
    $
    11,370
  June 30,2006
    
    
    2005(in thousands)Gross assets
    
    $
    6,105
    
    
    $
    12,981Gross liabilities
    
    
    (5,388
    )
    
    
    (11,026
    )Net deferred tax asset
    
    $
    717
    
    
    $
    1,955
  June 30,2006
    
    
    2005(in thousands)Loan loss provision
    
    $
    4,700
    
    
    $
    4,542Accrued liabilities and other
    
    
    4,318
    
    
    
    2,299Deferred revenue
    
    
    2,189
    
    
    
    2,229Depreciation and amortization
    
    
    (10,490
    )
    
    
    (7,115
    )$
    717
    
    
    $
    1,955
 101




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Year Ended June 30,2006
    
    
    2005
    
    
    2004(in thousands)Federal income tax provision on income at
statutory rate
    
    $
    14,354
    
    
    $
    15,702
    
    
    $
    9,948State taxes, net of federal benefit
    
    
    1,722
    
    
    
    1,795
    
    
    
    1,421Other
    
    
    (79
    )
    
    
    
    
    
    
    1Income tax provision
    
    $
    15,997
    
    
    $
    17,497
    
    
    $
    11,370
 13. COMMITMENTS AND CONTINGENCIES
 Lease Commitments
  Year Ending June 30:2007
    
    $
    30,3152008
    
    
    23,4442009
    
    
    16,8412010
    
    
    11,6202011
    
    
    6,418Remaining years
    
    
    9,932$
    98,570
  14. EMPLOYEE BENEFITS PLANS
   15. HURRICANE KATRINA
  16. MERGER AGREEMENT
  102




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17. PENDING LAWSUITS AND SETTLEMENTS
 Pending Putative Class Actions
      103




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Other Incidental Proceedings
  18. COMMON STOCK OFFERING
   19. LEASE ACCOUNTING RESTATEMENT
     104




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20. SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)
  UnauditedThree Months Ended
    
    Year EndedSept 30
    
    Dec 31
    
    Mar 31
    
    June 30
    
    June 30(in thousands, except per share amounts)2006:Revenues
    
    $
    66,193
    
    
    $
    72,264
    
    
    $
    91,161
    
    
    $
    80,291
    
    
    $
    309,909Gross margin
    
    
    17,287
    
    
    
    22,419
    
    
    
    35,596
    
    
    
    26,447
    
    
    
    101,749Net income
    
    
    2,865
    
    
    
    5,004
    
    
    
    9,851
    
    
    
    7,297
    
    
    
    25,017Basic earnings per share
    
    
    0.21
    
    
    
    0.37
    
    
    
    0.73
    
    
    
    0.54
    
    
    
    1.85Diluted earnings per share
    
    
    0.21
    
    
    
    0.36
    
    
    
    0.68
    
    
    
    0.50
    
    
    
    1.762005:Revenues
    
    $
    62,026
    
    
    $
    64,747
    
    
    $
    78,464
    
    
    $
    63,412
    
    
    $
    268,649Gross margin
    
    
    20,094
    
    
    
    22,272
    
    
    
    32,113
    
    
    
    20,937
    
    
    
    95,416Net income
    
    
    5,073
    
    
    
    5,828
    
    
    
    9,868
    
    
    
    6,597
    
    
    
    27,366Basic earnings per share
    
    
    0.38
    
    
    
    0.43
    
    
    
    0.72
    
    
    
    0.49
    
    
    
    2.06Diluted earnings per share
    
    
    0.37
    
    
    
    0.42
    
    
    
    0.71
    
    
    
    0.48
    
    
    
    1.982004:Revenues
    
    $
    55,701
    
    
    $
    59,186
    
    
    $
    73,674
    
    
    $
    58,098
    
    
    $
    246,659Gross margin
    
    
    17,332
    
    
    
    19,368
    
    
    
    29,808
    
    
    
    18,131
    
    
    
    84,639Net income
    
    
    3,007
    
    
    
    3,718
    
    
    
    8,174
    
    
    
    2,153
    
    
    
    17,052Basic earnings per share
    
    
    0.29
    
    
    
    0.36
    
    
    
    0.77
    
    
    
    0.17
    
    
    
    1.55Diluted earnings per share
    
    
    0.28
    
    
    
    0.34
    
    
    
    0.72
    
    
    
    0.16
    
    
    
    1.49
 105




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON SCHEDULE
   
 106




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##### Table of Contents



ACE CASH EXPRESS, INC. AND SUBSIDIARIES
 
 Schedule II  Valuation and Qualifying Accounts
 AdditionsCharged
    
    
    
    
    
    
    
    
    
    BalanceBalance at
    
    to costs
    
    Charged
    
    
    
    
    
    atbeginning
    
    and
    
    to other
    
    
    
    
    
    end ofDescription
    
    of period
    
    expenses
    
    accounts
    
    Deductions
    
    periodJune 30, 2006:Loan loss allowance
    
    $
    11.0
    
    
    $
    24.0
    
    
    $
    0.7
    
    
    $
    (21.2
    )
    
    $
    13.1Loan loss liability to Republic Bank
    
    $
    4.0
    
    
    $
    5.8
    
    
    $
    
    
    
    $
    (9.1
    )
    
    $
    0.8Loan loss liability to First Bank
of Delaware
    
    $
    
    
    
    
    2.8
    
    
    $
    
    
    
    $
    (1.2
    )
    
    $
    1.6Loan loss liability to True Financial
    
    $
    
    
    
    
    2.7
    
    
    $
    
    
    
    
    
    
    
    $
    2.7June 30, 2005:Loan loss allowance
    
    $
    10.6
    
    
    $
    18.3
    
    
    $
    
    
    
    $
    (17.9
    )
    
    $
    11.0Loan loss liability to Republic Bank
    
    $
    3.7
    
    
    $
    8.7
    
    
    $
    
    
    
    $
    (8.4
    )
    
    $
    4.0June 30, 2004:Loan loss allowance
    
    $
    8.7
    
    
    $
    16.9
    
    
    $
    
    
    
    $
    (15.0
    )
    
    $
    10.6Loan loss liability to Republic Bank
    
    $
    2.9
    
    
    $
    7.4
    
    
    $
    
    
    
    $
    (6.6
    )
    
    $
    3.7Restructure reserve
    
    $
    0.2
    
    
    $
    
    
    
    $
    
    
    
    $
    (0.2
    )
    
    $
    0.0
 
 (a)
    
    This schedule should be read in conjunction with the Companys audited consolidated financial
statements and related notes thereto. 107




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##### Table of Contents



INDEX TO EXHIBITS
 Exhibit Number
    
    Exhibit10.79
    
    Amendment to Installment Loan Marketing and Servicing Agreement dated as of July 28,
2006 between First Bank of Delaware and Ace Cash Express, Inc.21
    
    Subsidiaries of the Company.23
    
    Consent of Grant Thornton LLP.31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 200232.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 108