##### 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, 2005
 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
(State or other jurisdiction of incorporation or organization)
    
    75-2142963
(IRS Employer Identification No.)
 1231 Greenway Drive, Suite 600Irving, Texas
    
    75038(Address of principal executive offices)
    
    (Zip Code)
 (972) 550-5000
  Title of each class
    
    Name of each exchange
on which registered
 None
 Common Stock, $.01 par value
 þ o
 o
 þ o
 o o
   DOCUMENTS INCORPORATED BY REFERENCE




---



ACE CASH EXPRESS, INC.
FORM 10-K
For the Year Ended June 30, 2005
 Table of Contents
 PageNumberPART IItem 1.
    
    Business
    
    
    3Item 2.
    
    Properties
    
    
    21Item 3.
    
    Legal Proceedings
    
    
    21Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    21PART IIItem 5.
    
    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    21Item 6.
    
    Selected Financial Data
    
    
    23Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    26Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    51Item 8.
    
    Financial Statements and Supplementary Data
    
    
    51Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    51Item 9A.
    
    Controls and Procedures
    
    
    51Managements Report on Internal Control over Financial Reporting
    
    
    52Report of Independent Registered Public Accounting Firm
    
    
    53Item 9B.
    
    Other Information
    
    
    54PART IIIItem 10.
    
    Directors and Executive Officers of the Registrant
    
    
    54Item 11.
    
    Executive Compensation
    
    
    54Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    54Item 13.
    
    Certain Relationships and Related Transactions
    
    
    54Item 14.
    
    Principal Accountant Fees and Services
    
    
    54PART IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    54SIGNATURES
    
    
    59INDEX TO EXHIBITS
    
    
    93Third Amendment to the Marketing & Services AgreementInstallment Loan Marketing & 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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##### Table of Contents



PART I
 
 ITEM 1. BUSINESS
 Overview
    Website Access to Reports. www.acecashexpress.com www.sec.gov
 Industry Overview
 Check Cashing.
   Short-Term Consumer Loans.
 3




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##### Table of Contents



Other financial services.
 Competitive Strengths
  Focus on Customer Service.
 Efficient Operating Model.
  
    
    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 Mastercard®.
 4




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##### Table of Contents



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.
 Experienced Management Team.
 Growth Strategy
  Open Company-Owned Stores.
  5




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##### Table of Contents



.
   Continue Franchise Store Development.
 
   Pursue Opportunistic Acquisitions.
   6




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##### Table of Contents



Introduce New Services.
 Continue Comparable Store Revenue Growth.
 Improve Operating Efficiency.
 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.
 7




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##### Table of Contents



Our Services
  Fiscal Year Ended June 30,2005
    
    
    2004
    
    
    2003(in thousands)Check cashing
    
    $
    131,619
    
    
    $
    129,194
    
    
    $
    125,703Short-term consumer loans
    
    
    91,793
    
    
    
    77,029
    
    
    
    70,806Bill payments
    
    
    20,266
    
    
    
    16,961
    
    
    
    13,507Money transfers
    
    
    11,868
    
    
    
    11,136
    
    
    
    10,898Money orders
    
    
    6,875
    
    
    
    6,330
    
    
    
    6,960Franchising
    
    
    3,180
    
    
    
    2,774
    
    
    
    2,346Other fees
    
    
    3,048
    
    
    
    3,235
    
    
    
    4,069Total revenue
    
    $
    268,649
    
    
    $
    246,659
    
    
    $
    234,289
 Check cashing.
   Short-term consumer loans.
  8




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Bill payments.
   9




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##### Table of Contents



Money transfers.
 Money orders.
 Franchising.
   Other services.
   New Store Economics
  10




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##### Table of Contents



Number of
    
    
    Average Store RevenuesStores Open at
    
    
    Year Ended June 30,Year Opened:
    
    June 30, 2005
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001(in thousands)1996 and earlier
    
    
    273
    
    
    $
    282.2
    
    
    $
    284.2
    
    
    $
    270.4
    
    
    $
    272.5
    
    
    $
    241.01997
    
    
    33
    
    
    
    285.1
    
    
    
    270.7
    
    
    
    248.1
    
    
    
    242.2
    
    
    
    209.11998
    
    
    45
    
    
    
    255.0
    
    
    
    252.8
    
    
    
    243.5
    
    
    
    228.8
    
    
    
    191.81999
    
    
    60
    
    
    
    232.7
    
    
    
    216.3
    
    
    
    206.0
    
    
    
    199.2
    
    
    
    164.42000
    
    
    59
    
    
    
    217.0
    
    
    
    210.1
    
    
    
    191.9
    
    
    
    180.4
    
    
    
    127.12001
    
    
    41
    
    
    
    236.7
    
    
    
    215.1
    
    
    
    187.9
    
    
    
    143.0
    
    
    
    34.32002
    
    
    35
    
    
    
    210.6
    
    
    
    183.6
    
    
    
    128.9
    
    
    
    35.6
    
    
    
    2003
    
    
    12
    
    
    
    207.7
    
    
    
    160.3
    
    
    
    36.2
    
    
    
    
    
    
    
    2004
    
    
    42
    
    
    
    122.8
    
    
    
    28.7
    
    
    
    
    
    
    
    
    
    
    
    2005
    
    
    60
    
    
    
    39.9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    660ACE Cash Advance stores (1)
    
    
    31Acquired stores (1)
    
    
    4511,142
 Number of
    
    
    Average Store Gross MarginStores Open at
    
    
    Year Ended June 30,Year Opened:
    
    June 30, 2005
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001(in thousands)1996 and earlier
    
    
    273
    
    
    $
    119.3
    
    
    $
    117.8
    
    
    $
    110.7
    
    
    $
    116.0
    
    
    $
    80.41997
    
    
    33
    
    
    
    117.5
    
    
    
    98.0
    
    
    
    89.1
    
    
    
    88.8
    
    
    
    56.01998
    
    
    45
    
    
    
    89.8
    
    
    
    78.9
    
    
    
    84.0
    
    
    
    81.4
    
    
    
    44.91999
    
    
    60
    
    
    
    79.2
    
    
    
    61.1
    
    
    
    59.5
    
    
    
    55.0
    
    
    
    16.52000
    
    
    59
    
    
    
    66.6
    
    
    
    54.8
    
    
    
    48.3
    
    
    
    46.3
    
    
    
    (6.7
    )2001
    
    
    41
    
    
    
    71.2
    
    
    
    51.5
    
    
    
    39.4
    
    
    
    8.6
    
    
    
    (21.3
    )2002
    
    
    35
    
    
    
    63.7
    
    
    
    37.7
    
    
    
    (1.4
    )
    
    
    (26.4
    )
    
    
    2003
    
    
    12
    
    
    
    58.2
    
    
    
    16.3
    
    
    
    (18.3
    )
    
    
    
    
    
    
    2004
    
    
    42
    
    
    
    (14.3
    )
    
    
    (31.7
    )
    
    
    
    
    
    
    
    
    
    
    2005
    
    
    60
    
    
    
    (29.3
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    660ACE Cash Advance stores (1)
    
    
    31Acquired stores (1)
    
    
    4511,142
 
 (1)
    
    ACE Cash Advance and acquired store count are provided on this newly constructed ACE
Cash Express store economics table to delineate mix between ACE Cash Express newly
constructed , ACE Cash Advance and acquired stores in our company-owned store network.
A similar table for ACE Cash Advance 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   11




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Company-owned Store Locations and Operations
  
  Company-Owned StoresAs of June 30,Market Area
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Texas
    
    
    368
    
    
    
    340
    
    
    
    328
    
    
    
    329
    
    
    
    326California
    
    
    92
    
    
    
    87
    
    
    
    85
    
    
    
    88
    
    
    
    90Colorado
    
    
    78
    
    
    
    66
    
    
    
    53
    
    
    
    56
    
    
    
    53Arizona
    
    
    73
    
    
    
    72
    
    
    
    75
    
    
    
    72
    
    
    
    75Florida
    
    
    65
    
    
    
    63
    
    
    
    68
    
    
    
    91
    
    
    
    91Pennsylvania
    
    
    43
    
    
    
    16
    
    
    
    16
    
    
    
    16
    
    
    
    9Georgia
    
    
    39
    
    
    
    44
    
    
    
    46
    
    
    
    50
    
    
    
    50Ohio
    
    
    38
    
    
    
    27
    
    
    
    25
    
    
    
    24
    
    
    
    18Tennessee
    
    
    38
    
    
    
    39
    
    
    
    18
    
    
    
    18
    
    
    
    19Maryland
    
    
    36
    
    
    
    38
    
    
    
    39
    
    
    
    39
    
    
    
    40Virginia
    
    
    34
    
    
    
    32
    
    
    
    29
    
    
    
    29
    
    
    
    29Louisiana
    
    
    33
    
    
    
    35
    
    
    
    27
    
    
    
    27
    
    
    
    25Indiana
    
    
    30
    
    
    
    28
    
    
    
    26
    
    
    
    25
    
    
    
    25Washington
    
    
    23
    
    
    
    14
    
    
    
    13
    
    
    
    13
    
    
    
    13Oklahoma
    
    
    20
    
    
    
    20
    
    
    
    21
    
    
    
    23
    
    
    
    23Arkansas
    
    
    18
    
    
    
    8
    
    
    
    8
    
    
    
    8
    
    
    
    8North Carolina
    
    
    16
    
    
    
    18
    
    
    
    16
    
    
    
    16
    
    
    
    16South Carolina
    
    
    16
    
    
    
    10
    
    
    
    10
    
    
    
    13
    
    
    
    13Washington, D.C.
    
    
    15
    
    
    
    16
    
    
    
    16
    
    
    
    16
    
    
    
    16Nevada
    
    
    15
    
    
    
    15
    
    
    
    14
    
    
    
    14
    
    
    
    14New Mexico
    
    
    13
    
    
    
    13
    
    
    
    11
    
    
    
    10
    
    
    
    10Missouri
    
    
    11
    
    
    
    11
    
    
    
    11
    
    
    
    11
    
    
    
    11Oregon
    
    
    9
    
    
    
    7
    
    
    
    8
    
    
    
    8
    
    
    
    7Kansas
    
    
    6
    
    
    
    6
    
    
    
    4
    
    
    
    4
    
    
    
    4Kentucky
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Wisconsin
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Alabama
    
    
    3
    
    
    
    1
    
    
    
    1
    
    
    
    3
    
    
    
    3Total
    
    
    1,142
    
    
    
    1,026
    
    
    
    968
    
    
    
    1,003
    
    
    
    988
  12




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Franchised Store Locations
  
   Franchised StoresAs of June 30,Market Area
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Texas
    
    
    42
    
    
    
    51
    
    
    
    55
    
    
    
    56
    
    
    
    55Ohio
    
    
    21
    
    
    
    20
    
    
    
    18
    
    
    
    16
    
    
    
    14Arizona
    
    
    15
    
    
    
    9
    
    
    
    5
    
    
    
    3
    
    
    
    2South Carolina
    
    
    15
    
    
    
    14
    
    
    
    13
    
    
    
    8
    
    
    
    8Florida
    
    
    14
    
    
    
    13
    
    
    
    16
    
    
    
    14
    
    
    
    13North Carolina
    
    
    13
    
    
    
    8
    
    
    
    6
    
    
    
    7
    
    
    
    7Oklahoma
    
    
    13
    
    
    
    11
    
    
    
    11
    
    
    
    11
    
    
    
    9Tennessee
    
    
    11
    
    
    
    8
    
    
    
    7
    
    
    
    7
    
    
    
    7California
    
    
    10
    
    
    
    9
    
    
    
    10
    
    
    
    11
    
    
    
    12Colorado
    
    
    8
    
    
    
    7
    
    
    
    6
    
    
    
    4
    
    
    
    3Louisiana
    
    
    8
    
    
    
    6
    
    
    
    12
    
    
    
    12
    
    
    
    12Kansas
    
    
    7
    
    
    
    6
    
    
    
    5
    
    
    
    4
    
    
    
    1Missouri
    
    
    6
    
    
    
    6
    
    
    
    4
    
    
    
    3
    
    
    
    3Oregon
    
    
    6
    
    
    
    5
    
    
    
    4
    
    
    
    4
    
    
    
    4Georgia
    
    
    5
    
    
    
    4
    
    
    
    6
    
    
    
    6
    
    
    
    7Wisconsin
    
    
    4
    
    
    
    2
    
    
    
    1
    
    
    
    1
    
    
    
    Alabama
    
    
    3
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    1Indiana
    
    
    3
    
    
    
    2
    
    
    
    2
    
    
    
    2
    
    
    
    2Virginia
    
    
    3
    
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    Arkansas
    
    
    2
    
    
    
    2
    
    
    
    1
    
    
    
    1
    
    
    
    1Delaware
    
    
    2
    
    
    
    2
    
    
    
    2
    
    
    
    1
    
    
    
    1Idaho
    
    
    2
    
    
    
    2
    
    
    
    2
    
    
    
    2
    
    
    
    1Iowa
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 13




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Franchised StoresAs of June 30,Market Area
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Maine
    
    
    2
    
    
    
    2
    
    
    
    1
    
    
    
    1
    
    
    
    1Michigan
    
    
    2
    
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    1Minnesota
    
    
    2
    
    
    
    2
    
    
    
    2
    
    
    
    2
    
    
    
    2New Mexico
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Hawaii
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    Mississippi
    
    
    1
    
    
    
    1
    
    
    
    2
    
    
    
    1
    
    
    
    1New Jersey
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    1Pennsylvania
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    South Dakota
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    1Wyoming
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    1Kentucky
    
    
    
    
    
    
    3
    
    
    
    3
    
    
    
    2
    
    
    
    2Connecticut
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2Total
    
    
    229
    
    
    
    204
    
    
    
    200
    
    
    
    184
    
    
    
    175
  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
 14




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standardization and compliance with state and federal lending regulations.
  
    
    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
  15




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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.
  16




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##### Table of Contents



Employees
   Competition
  Relationship with Republic Bank
    17




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##### Table of Contents



Regulation
 General.
 State Regulations.
   Federal Regulations.
    18




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##### Table of Contents



Short-term Consumer Loans.
    19




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##### Table of Contents



Relationships with the Money Order and MoneyGram Suppliers
 Money Order Agreement.
  MoneyGram Agreement.
  Relationship with H&R Block/SSM Arrangements
   20




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##### Table of Contents



ITEM 2. PROPERTIES
  
 ITEM 3. LEGAL PROCEEDINGS
 Putative Class Actions
    Other Incidental Proceedings
  
 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
  21




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##### Table of Contents



High
    
    
    LowFiscal 2004Quarter ended September 30, 2003
    
    $
    14.99
    
    
    $
    10.70Quarter ended December 31, 2003
    
    
    23.50
    
    
    
    14.45Quarter ended March 31, 2004
    
    
    34.50
    
    
    
    21.45Quarter ended June 30, 2004
    
    
    32.60
    
    
    
    20.25Fiscal 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
    
    
    
    19.61
     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
    
    
    625
    
    
    $
    0.01
    
    
    
    
    
    
    $
    20,000,000June 1  June 30
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    20,000,000Total
    
    
    625
    
    
    $
    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 $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. 22




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##### Table of Contents



ITEM 6. SELECTED FINANCIAL DATA
 Year Ended June 30,2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001(in thousands, except per share and store data)Statement of Earnings Data:Revenue
    
    $
    268,649
    
    
    $
    246,659
    
    
    $
    234,289
    
    
    $
    229,266
    
    
    $
    196,775Store expenses:Salaries and benefits
    
    
    65,293
    
    
    
    59,593
    
    
    
    58,170
    
    
    
    57,864
    
    
    
    51,969Occupancy
    
    
    34,768
    
    
    
    30,563
    
    
    
    29,194
    
    
    
    28,207
    
    
    
    26,439Provision for loan losses and doubtful accounts
    
    
    27,090
    
    
    
    24,235
    
    
    
    22,892
    
    
    
    22,064
    
    
    
    24,825Depreciation
    
    
    7,684
    
    
    
    7,563
    
    
    
    6,966
    
    
    
    7,180
    
    
    
    6,697Other
    
    
    38,398
    
    
    
    40,066
    
    
    
    38,192
    
    
    
    36,512
    
    
    
    35,085Total store expenses
    
    
    173,233
    
    
    
    162,020
    
    
    
    155,414
    
    
    
    151,827
    
    
    
    145,015Gross margin
    
    
    95,416
    
    
    
    84,639
    
    
    
    78,875
    
    
    
    77,439
    
    
    
    51,760Region expenses
    
    
    22,971
    
    
    
    19,251
    
    
    
    17,056
    
    
    
    17,495
    
    
    
    14,127Headquarters expenses
    
    
    19,245
    
    
    
    18,681
    
    
    
    17,133
    
    
    
    16,594
    
    
    
    10,328Franchise expenses
    
    
    1,227
    
    
    
    1,196
    
    
    
    1,225
    
    
    
    993
    
    
    
    1,017Other depreciation and amortization
    
    
    3,094
    
    
    
    3,893
    
    
    
    5,423
    
    
    
    7,570
    
    
    
    5,087Interest expense
    
    
    4,880
    
    
    
    10,231
    
    
    
    16,004
    
    
    
    14,934
    
    
    
    12,016Other (income) expenses:Restructuring
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (163
    )
    
    
    7,710Legal settlements
    
    
    
    
    
    
    
    
    
    
    1,050
    
    
    
    1,984
    
    
    
    350Loss on early extinguishment of debt
    
    
    
    
    
    
    4,858
    
    
    
    270
    
    
    
    
    
    
    
    Other (income) expense, including store closing expense
    
    
    (864
    )
    
    
    (1,893
    )
    
    
    264
    
    
    
    1,006
    
    
    
    108Total other expenses
    
    
    (864
    )
    
    
    2,965
    
    
    
    1,584
    
    
    
    2,827
    
    
    
    8,168Income from continuing operations before income taxes
    
    
    44,863
    
    
    
    28,422
    
    
    
    20,450
    
    
    
    17,026
    
    
    
    1,017Provision for income taxes
    
    
    17,497
    
    
    
    11,370
    
    
    
    8,174
    
    
    
    6,913
    
    
    
    406Income from continuing operations
    
    
    27,366
    
    
    
    17,052
    
    
    
    12,276
    
    
    
    10,113
    
    
    
    611Gain on sale of discontinued operations, net of income tax (1)
    
    
    
    
    
    
    
    
    
    
    499
    
    
    
    
    
    
    
    Net income
    
    $
    27,366
    
    
    $
    17,052
    
    
    $
    12,775
    
    
    $
    10,113
    
    
    $
    611Diluted earnings per share
    
    $
    1.98
    
    
    $
    1.49
    
    
    $
    1.25
    
    
    $
    1.00
    
    
    $
    0.06Weighted average number of diluted shares
    
    
    13,821
    
    
    
    11,477
    
    
    
    10,206
    
    
    
    10,141
    
    
    
    10,158Balance Sheet Data:Cash and cash equivalents
    
    $
    109,430
    
    
    $
    123,041
    
    
    $
    108,110
    
    
    $
    116,264
    
    
    $
    129,186Loans receivable, net
    
    
    20,787
    
    
    
    17,047
    
    
    
    13,000
    
    
    
    17,356
    
    
    
    14,386Total assets
    
    
    292,621
    
    
    
    270,262
    
    
    
    255,383
    
    
    
    263,677
    
    
    
    272,812Revolving advances
    
    
    43,300
    
    
    
    60,000
    
    
    
    83,900
    
    
    
    97,500
    
    
    
    109,800Term advances (current portion)
    
    
    
    
    
    
    
    
    
    
    3,833
    
    
    
    48,350
    
    
    
    1,125Term advances (noncurrent portion)
    
    
    
    
    
    
    
    
    
    
    34,436
    
    
    
    
    
    
    
    51,875Shareholders equity
    
    
    196,685
    
    
    
    162,604
    
    
    
    75,156
    
    
    
    62,311
    
    
    
    50,898
 23




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##### Table of Contents



SELECTED FINANCIAL DATA (continued)
 Year Ended June 30,2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Operating Data:Company-owned stores in operation:Beginning of year
    
    
    1,026
    
    
    
    968
    
    
    
    1,003
    
    
    
    988
    
    
    
    915Acquired
    
    
    74
    
    
    
    34
    
    
    
    2
    
    
    
    8
    
    
    
    133Opened
    
    
    80
    
    
    
    53
    
    
    
    14
    
    
    
    39
    
    
    
    49Sold
    
    
    (6
    )
    
    
    (5
    )
    
    
    (23
    )
    
    
    
    
    
    
    (4
    )Closed (2)
    
    
    (32
    )
    
    
    (24
    )
    
    
    (28
    )
    
    
    (32
    )
    
    
    (105
    )End of year
    
    
    1,142
    
    
    
    1,026
    
    
    
    968
    
    
    
    1,003
    
    
    
    988Franchised stores in operations:Beginning of year
    
    
    204
    
    
    
    200
    
    
    
    184
    
    
    
    175
    
    
    
    157Opened
    
    
    48
    
    
    
    32
    
    
    
    26
    
    
    
    22
    
    
    
    30Acquired by ACE
    
    
    (22
    )
    
    
    (13
    )
    
    
    (2
    )
    
    
    (8
    )
    
    
    (4
    )Closed
    
    
    (1
    )
    
    
    (15
    )
    
    
    (8
    )
    
    
    (5
    )
    
    
    (8
    )End of year
    
    
    229
    
    
    
    204
    
    
    
    200
    
    
    
    184
    
    
    
    175Total store network
    
    
    1,371
    
    
    
    1,230
    
    
    
    1,168
    
    
    
    1,187
    
    
    
    1,163Percentage increase (decrease) in comparable
company-owned store revenues from prior year: (3)Total revenue
    
    
    3.1
    %
    
    
    5.0
    %
    
    
    1.9
    %
    
    
    17.2
    %
    
    
    25.5
    %Check fees including tax check fees
    
    
    (3.8
    %)
    
    
    4.1
    %
    
    
    5.4
    %
    
    
    9.7
    %
    
    
    2.4
    %Loan fees and interest
    
    
    12.7
    %
    
    
    7.8
    %
    
    
    (4.4
    %)
    
    
    36.1
    %
    
    
    176.9
    %Capital Expenditures:(in thousands)Purchases of property and equipment, net
    
    $
    18,951
    
    
    $
    7,439
    
    
    $
    4,721
    
    
    $
    6,992
    
    
    $
    11,188Store acquisition costs:Property and equipment
    
    
    958
    
    
    
    511
    
    
    
    50
    
    
    
    135
    
    
    
    1,467Intangible assets
    
    
    18,429
    
    
    
    6,403
    
    
    
    673
    
    
    
    1,177
    
    
    
    35,841Check Cashing Data:Face amount of checks cashed (in millions)
    
    $
    5,277
    
    
    $
    5,103
    
    
    $
    5,040
    
    
    $
    4,843
    
    
    $
    4,498Face amount of average check
    
    $
    396
    
    
    $
    388
    
    
    $
    383
    
    
    $
    378
    
    
    $
    358Average fee per check
    
    $
    9.98
    
    
    $
    9.91
    
    
    $
    9.65
    
    
    $
    9.36
    
    
    $
    8.38Fees as a percentage of average check
    
    
    2.52
    %
    
    
    2.55
    %
    
    
    2.52
    %
    
    
    2.48
    %
    
    
    2.34
    %Number of checks cashed (in thousands)
    
    
    13,325
    
    
    
    13,151
    
    
    
    13,148
    
    
    
    12,821
    
    
    
    12,580Collections Data:(in thousands, except percentages)Face amount of returned checks
    
    $
    26,914
    
    
    $
    21,705
    
    
    $
    24,087
    
    
    $
    23,637
    
    
    $
    26,536Collections
    
    
    20,951
    
    
    
    13,947
    
    
    
    16,935
    
    
    
    16,090
    
    
    
    17,717Net write-offs
    
    $
    5,963
    
    
    $
    7,758
    
    
    $
    7,152
    
    
    $
    7,547
    
    
    $
    8,819Collections as a percentage of returned checks
    
    
    77.8
    %
    
    
    64.3
    %
    
    
    70.3
    %
    
    
    68.1
    %
    
    
    66.8
    %Net write-offs as a percentage of revenues
    
    
    2.2
    %
    
    
    3.1
    %
    
    
    3.1
    %
    
    
    3.3
    %
    
    
    4.5
    %Net write-offs as a percentage of the face amount
of checks cashed
    
    
    0.11
    %
    
    
    0.15
    %
    
    
    0.14
    %
    
    
    0.16
    %
    
    
    0.20
    %
 24




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##### Table of Contents



SELECTED FINANCIAL DATA (continued)
 Year Ended June 30,2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001(in thousands, except averages and percentages)Combined Small Consumer Loans Operating Data:Volume  new loans and refinances
    
    $
    640,356
    
    
    $
    527,723
    
    
    $
    484,026
    
    
    $
    502,013
    
    
    $
    396,783Average advance
    
    $
    290
    
    
    $
    278
    
    
    $
    274
    
    
    $
    269
    
    
    $
    269Average finance charge
    
    $
    45.87
    
    
    $
    43.71
    
    
    $
    44.55
    
    
    $
    45.61
    
    
    $
    42.30Number of loan transactions  new loans and refinances
    
    
    2,139
    
    
    
    1,909
    
    
    
    1,798
    
    
    
    1,866
    
    
    
    1,477Matured loan volume
    
    $
    613,380
    
    
    $
    516,741
    
    
    $
    488,940
    
    
    $
    489,887
    
    
    $
    370,559Loan fees and interest
    
    $
    91,793
    
    
    $
    77,029
    
    
    $
    70,806
    
    
    $
    74,197
    
    
    $
    54,771Loan loss provision
    
    $
    26,941
    
    
    $
    24,280
    
    
    $
    22,293
    
    
    $
    21,924
    
    
    $
    24,825Gross margin on loans
    
    
    70.7
    %
    
    
    68.5
    %
    
    
    68.5
    %
    
    
    70.5
    %
    
    
    54.7
    %Loan loss provision as a percent of matured loan volume
    
    
    4.4
    %
    
    
    4.7
    %
    
    
    4.6
    %
    
    
    4.5
    %
    
    
    6.7
    %Loans Processed for Republic Bank:(4)Volume  new loans and refinances
    
    $
    184,646
    
    
    $
    159,692
    
    
    $
    63,897
    
    
    
    
    
    
    
    Average advance
    
    $
    319
    
    
    $
    296
    
    
    $
    302
    
    
    
    
    
    
    
    Average finance charge
    
    $
    56.30
    
    
    $
    52.11
    
    
    $
    53.35
    
    
    
    
    
    
    
    Number of loan transactions  new loans and refinances
    
    
    578
    
    
    
    541
    
    
    
    211
    
    
    
    
    
    
    
    Matured loan volume
    
    $
    181,153
    
    
    $
    157,018
    
    
    $
    56,040
    
    
    
    
    
    
    
    Loan fees and interest
    
    $
    27,880
    
    
    $
    24,036
    
    
    $
    9,037
    
    
    
    
    
    
    
    Provision for loan losses payable to Republic Bank
    
    $
    8,686
    
    
    $
    7,390
    
    
    $
    2,932
    
    
    
    
    
    
    
    ACE Loans:(5)Volume  new loans and refinances
    
    $
    455,710
    
    
    $
    368,031
    
    
    $
    420,129
    
    
    $
    502,013
    
    
    $
    396,783Average advance
    
    $
    277
    
    
    $
    269
    
    
    $
    268
    
    
    $
    269
    
    
    $
    269Average finance charge
    
    $
    41.17
    
    
    $
    39.40
    
    
    $
    42.71
    
    
    $
    45.61
    
    
    $
    42.30Number of loan transactions  new loans and refinances
    
    
    1,561
    
    
    
    1,368
    
    
    
    1,587
    
    
    
    1,866
    
    
    
    1,477Matured loan volume
    
    $
    432,227
    
    
    $
    359,723
    
    
    $
    432,900
    
    
    $
    489,887
    
    
    $
    370,559Loan fees and interest
    
    $
    63,913
    
    
    $
    52,993
    
    
    $
    61,769
    
    
    $
    74,197
    
    
    $
    54,771Loan loss provision
    
    $
    18,255
    
    
    $
    16,890
    
    
    $
    19,361
    
    
    $
    21,924
    
    
    $
    24,825Balance Sheet Data:Gross loans receivable
    
    $
    31,790
    
    
    $
    27,663
    
    
    $
    21,734
    
    
    $
    29,569
    
    
    $
    27,768Less: Allowance for losses on loans receivable
    
    
    11,003
    
    
    
    10,616
    
    
    
    8,734
    
    
    
    12,213
    
    
    
    13,382Loans receivable, net of allowance
    
    $
    20,787
    
    
    $
    17,047
    
    
    $
    13,000
    
    
    $
    17,356
    
    
    $
    14,386Allowance for losses on loans receivable:Beginning of period
    
    $
    10,616
    
    
    $
    8,734
    
    
    $
    12,213
    
    
    $
    13,382
    
    
    $
    Provision for loan losses
    
    
    18,255
    
    
    
    16,890
    
    
    
    19,361
    
    
    
    21,924
    
    
    
    26,429Charge-offs
    
    
    (18,996
    )
    
    
    (15,295
    )
    
    
    (23,729
    )
    
    
    (24,519
    )
    
    
    (13,510
    )Recoveries
    
    
    1,128
    
    
    
    287
    
    
    
    889
    
    
    
    1,426
    
    
    
    463End of period
    
    $
    11,003
    
    
    $
    10,616
    
    
    $
    8,734
    
    
    $
    12,213
    
    
    $
    13,382Allowance as a percent of gross loans receivable
    
    
    34.6
    %
    
    
    38.3
    %
    
    
    40.2
    %
    
    
    41.3
    %
    
    
    48.2
    %
 
 (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)
    
    Fiscal 2001 Includes the 85 stores closed during the fourth quarter resulting from a plan
established and executed by management during the third quarter of fiscal 2001.(3)
    
    Calculated based on changes in revenue for all company-owned stores open in both periods and
open for at least 13 months.(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.(5)
    
    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. 25




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##### Table of Contents



ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Business Overview
     Regulatory Developments
   26




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##### Table of Contents



Critical Accounting Policies and Estimates
  Allowance for Loan Losses and Accrued Liability for Loan Losses Payable to Republic Bank.
  Goodwill.
 Income Taxes.
 Self-insurance liabilities.
 Summary of Annual Results
  27




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##### Table of Contents



Results of Operations
 Revenue Analysis
    
    Year Ended June 30,2005
    
    
    2004
    
    
    2003
    
    
    2005
    
    
    2004
    
    
    2003(in thousands)
    
    
    (percentage of revenue)Check cashing fees
    
    $
    131,619
    
    
    $
    129,194
    
    
    $
    125,703
    
    
    
    49.0
    %
    
    
    52.4
    %
    
    
    53.7
    %Loan fees and interest
    
    
    91,793
    
    
    
    77,029
    
    
    
    70,806
    
    
    
    34.2
    
    
    
    31.2
    
    
    
    30.2Bill-payment services
    
    
    20,266
    
    
    
    16,960
    
    
    
    13,507
    
    
    
    7.5
    
    
    
    6.9
    
    
    
    5.8Money transfer services
    
    
    11,868
    
    
    
    11,136
    
    
    
    10,898
    
    
    
    4.4
    
    
    
    4.5
    
    
    
    4.6Money order fees
    
    
    6,875
    
    
    
    6,330
    
    
    
    6,960
    
    
    
    2.6
    
    
    
    2.6
    
    
    
    3.0Franchise revenues
    
    
    3,180
    
    
    
    2,774
    
    
    
    2,346
    
    
    
    1.2
    
    
    
    1.1
    
    
    
    1.0Other fees
    
    
    3,048
    
    
    
    3,236
    
    
    
    4,069
    
    
    
    1.1
    
    
    
    1.3
    
    
    
    1.7Total revenue
    
    $
    268,649
    
    
    $
    246,659
    
    
    $
    234,289
    
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Average revenue per store
(excluding franchise revenues)
    
    $
    244.6
    
    
    $
    247.8
    
    
    $
    235.5
 Fiscal 2005 Compared to Fiscal 2004.
   28




---



##### Table of Contents



Year Ended June 30,2005
    
    
    2004
    
    
    2003(in thousands)Money transfer services:Incentive and store opening bonuses
    
    $
    2,868
    
    
    $
    2,559
    
    
    $
    2,528Guarantees
    
    
    1,319
    
    
    
    1,326
    
    
    
    1,4704,187
    
    
    
    3,885
    
    
    
    3,998Money order fees:Incentive bonuses
    
    
    808
    
    
    
    854
    
    
    
    950Total guarantee and bonus revenue
    
    $
    4,995
    
    
    $
    4,739
    
    
    $
    4,948
  Fiscal 2004 Compared to Fiscal 2003.
     Store Expense Analysis
    
    Year Ended June 30,2005
    
    
    2004
    
    
    2003
    
    
    2005
    
    
    2004
    
    
    2003(in thousands)
    
    
    (percentage of revenue)Salaries and benefits
    
    $
    65,293
    
    
    $
    59,593
    
    
    $
    58,170
    
    
    
    24.3
    %
    
    
    24.2
    %
    
    
    24.8
    %Occupancy
    
    
    34,768
    
    
    
    30,563
    
    
    
    29,194
    
    
    
    13.0
    
    
    
    12.4
    
    
    
    12.5Provision for loan losses and
doubtful accounts
    
    
    27,090
    
    
    
    24,235
    
    
    
    22,892
    
    
    
    10.1
    
    
    
    9.8
    
    
    
    9.8Depreciation
    
    
    7,684
    
    
    
    7,563
    
    
    
    6,966
    
    
    
    2.9
    
    
    
    3.1
    
    
    
    3.0Other:
 29




---



##### Table of Contents



Store Expense Analysis
    
    Year Ended June 30,2005
    
    
    2004
    
    
    2003
    
    
    2005
    
    
    2004
    
    
    2003(in thousands)
    
    
    (percentage of revenue)Armored and security
    
    
    8,750
    
    
    
    7,954
    
    
    
    7,782
    
    
    
    3.2
    
    
    
    3.2
    
    
    
    3.3Returns and cash shorts
    
    
    7,288
    
    
    
    9,350
    
    
    
    9,896
    
    
    
    2.7
    
    
    
    3.8
    
    
    
    4.2Information services
    
    
    3,884
    
    
    
    5,860
    
    
    
    3,831
    
    
    
    1.4
    
    
    
    2.4
    
    
    
    1.6Bank charges
    
    
    5,839
    
    
    
    5,093
    
    
    
    5,314
    
    
    
    2.2
    
    
    
    2.1
    
    
    
    2.3Store supplies
    
    
    4,423
    
    
    
    4,219
    
    
    
    4,063
    
    
    
    1.6
    
    
    
    1.7
    
    
    
    1.7Telecommunications
    
    
    1,977
    
    
    
    2,211
    
    
    
    3,027
    
    
    
    0.7
    
    
    
    0.9
    
    
    
    1.3Advertising and marketing
    
    
    2,863
    
    
    
    2,072
    
    
    
    564
    
    
    
    1.1
    
    
    
    0.8
    
    
    
    0.2Miscellaneous
    
    
    3,374
    
    
    
    3,307
    
    
    
    3,715
    
    
    
    1.3
    
    
    
    1.3
    
    
    
    1.6Other
    
    
    38,398
    
    
    
    40,066
    
    
    
    38,192
    
    
    
    14.2
    
    
    
    16.2
    
    
    
    16.2Total store expenses
    
    $
    173,233
    
    
    $
    162,020
    
    
    $
    155,414
    
    
    
    64.5
    %
    
    
    65.7
    %
    
    
    66.3
    %Average per store expense
    
    $
    159.6
    
    
    $
    164.6
    
    
    $
    157.8Average per store gross margin
    
    $
    85.0
    
    
    $
    83.2
    
    
    $
    77.7Face amount of returned checks
    
    $
    26,914
    
    
    $
    21,705
    
    
    $
    24,087Collections
    
    
    (20,951
    )
    
    
    (13,947
    )
    
    
    (16,935
    )Net write-offs
    
    $
    5,963
    
    
    $
    7,758
    
    
    $
    7,152Net write-offs as a percentage of the
face amount of checks cashed
    
    
    0.11
    %
    
    
    0.15
    %
    
    
    0.14
    %
 Fiscal 2005 Compared to Fiscal 2004.
  Fiscal 2004 Compared to Fiscal 2003.
  30




---



##### Table of Contents



Other Expenses Analysis
    
    Year Ended June 30,2005
    
    
    2004
    
    
    2003
    
    
    2005
    
    
    2004
    
    
    2003(in thousands)
    
    
    
    
    
    
    (percentage of revenue)Region expenses
    
    $
    22,971
    
    
    $
    19,251
    
    
    $
    17,056
    
    
    
    8.6
    %
    
    
    7.8
    %
    
    
    7.3
    %Headquarters expenses
    
    
    19,245
    
    
    
    18,681
    
    
    
    17,133
    
    
    
    7.1
    
    
    
    7.6
    
    
    
    7.3Franchise expenses
    
    
    1,227
    
    
    
    1,196
    
    
    
    1,225
    
    
    
    0.5
    
    
    
    0.5
    
    
    
    0.5Other depreciation and amortization
    
    
    3,094
    
    
    
    3,893
    
    
    
    5,423
    
    
    
    1.1
    
    
    
    1.6
    
    
    
    2.3Interest expense, net
    
    
    4,880
    
    
    
    10,231
    
    
    
    16,004
    
    
    
    1.8
    
    
    
    4.1
    
    
    
    6.8Loss on early extinguishment of debt
    
    
    
    
    
    
    4,858
    
    
    
    270
    
    
    
    
    
    
    
    2.0
    
    
    
    0.1Other (income) expenses, net
    
    
    (864
    )
    
    
    (1,893
    )
    
    
    1,314
    
    
    
    (0.3
    )
    
    
    (0.8
    )
    
    
    0.6Total other expenses
    
    $
    50,553
    
    
    $
    56,217
    
    
    $
    58,425
    
    
    
    18.8
    %
    
    
    22.8
    %
    
    
    24.9
    %
 Region Expenses
 Fiscal 2005 Compared to Fiscal 2004.
 Fiscal 2004 Compared to Fiscal 2003.
 Headquarters Expenses
 Fiscal 2005 Compared to Fiscal 2004.
 Fiscal 2004 Compared to Fiscal 2003.
 Franchise Expenses
 Fiscal 2005 Compared to Fiscal 2004.
 Fiscal 2004 Compared to Fiscal 2003.
 Other Depreciation and Amortization
 Fiscal 2005 Compared to Fiscal 2004.
 Fiscal 2004 Compared to Fiscal 2003.
 Interest Expense
 31




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##### Table of Contents



Fiscal 2005 Compared to Fiscal 2004.
 Fiscal 2004 Compared to Fiscal 2003.
 Loss on Early Extinguishment of Debt
 Fiscal 2004 Compared to Fiscal 2003.
 Other (Income) Expenses, Net
    
    Year Ended June 30,2005
    
    
    2004
    
    
    2003(in thousands)Gain on sale of stores to franchisees
    
    ($
    1,802
    )
    
    ($
    649
    )
    
    ($
    888
    )Gain on sale of warrants issued by Netspend Corporation
    
    
    (132
    )
    
    
    (1,049
    )
    
    
    Store closing expense
    
    
    495
    
    
    
    410
    
    
    
    534Settlements (1)
    
    
    
    
    
    
    (138
    )
    
    
    5,750Insurance recovery resulting from claims related to the
Goleta loan-related lawsuits
    
    
    
    
    
    
    
    
    
    
    (4,700
    )Loss on liquidation of ePacific investment
    
    
    
    
    
    
    
    
    
    
    703Store lease buyout (2)
    
    
    
    
    
    
    (450
    )
    
    
    Gain on sale of land in North Carolina
    
    
    
    
    
    
    (95
    )
    
    
    Other
    
    
    575
    
    
    
    78
    
    
    
    (85
    )Total other (income) expenses, net
    
    ($
    864
    )
    
    ($
    1,893
    )
    
    $
    1,314
 
 (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. Fiscal 2003 consists of a $5 million charge for
settlement and release of substantially all claims in the Goleta loan-related lawsuits
and payments of $500,000 and $250,000 to resolve state and federal regulatory matters,
respectively.(2)
    
    We received payment to terminate a store lease in Arizona to allow another
retailer to occupy the location.


Fiscal 2005 Compared to Fiscal 2004.


Fiscal 2004 Compared to Fiscal 2003.


Income Taxes


Fiscal 2005 Compared to Fiscal 2004. 32




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##### Table of Contents



Fiscal 2004 Compared to Fiscal 2003.
 Balance Sheet Variations
         For the Year Ended June 30,2005
    
    
    2004
    
    
    Change(in thousands)Accounts payable
    
    $
    12,162
    
    
    $
    8,911
    
    
    $
    3,251Accrued salaries and benefits
    
    
    9,745
    
    
    
    9,782
    
    
    
    (37
    )Money transfer payable
    
    
    2,596
    
    
    
    2,132
    
    
    
    464Payable to Republic Bank
    
    
    2,348
    
    
    
    1,584
    
    
    
    764
 33




---



##### Table of Contents



For the Year Ended June 30,2005
    
    
    2004
    
    
    Change(in thousands)Deferred revenue
    
    
    2,207
    
    
    
    1,900
    
    
    
    307Accrued workers compensation
    
    
    1,000
    
    
    
    821
    
    
    
    179Income taxes payable
    
    
    766
    
    
    
    1,621
    
    
    
    (855
    )Accrued bank charges
    
    
    464
    
    
    
    376
    
    
    
    88Deferred gain on sale of stores
    
    
    161
    
    
    
    159
    
    
    
    2Notes
payable  current
    
    
    120
    
    
    
    32
    
    
    
    88Accrued litigation
    
    
    86
    
    
    
    104
    
    
    
    (18
    )Interest-rate swap
    
    
    70
    
    
    
    
    
    
    
    70Interest payable
    
    
    21
    
    
    
    138
    
    
    
    (117
    )Restructuring accrual
    
    
    
    
    
    
    28
    
    
    
    (28
    )Accrued self-service machine write-off
    
    
    
    
    
    
    1,400
    
    
    
    (1,400
    )Other accrued liabilities
    
    
    4,371
    
    
    
    3,723
    
    
    
    648$
    36,117
    
    
    $
    32,711
    
    
    $
    3,406
 ACE Loan Portfolio
     Year Ended June 30,2005
    
    
    2004
    
    
    2003(in thousands)ACE Loans:Gross loans receivable, beginning of period
    
    $
    27,663
    
    
    $
    21,734
    
    
    $
    29,569Originations
    
    
    455,710
    
    
    
    368,031
    
    
    
    420,129Repayments
    
    
    (433,715
    )
    
    
    (347,094
    )
    
    
    (405,124
    )Charge-offs
    
    
    (18,996
    )
    
    
    (15,295
    )
    
    
    (23,729
    )Recoveries
    
    
    1,128
    
    
    
    287
    
    
    
    889Gross loans receivable, end of period
    
    $
    31,790
    
    
    $
    27,663
    
    
    
    21,734
 34




---



##### Table of Contents



Year Ended June 30,2005
    
    
    2004
    
    
    2003(in thousands)Allowance for losses on loans receivable
    
    
    (11,003
    )
    
    
    (10,616
    )
    
    
    (8,734
    )Loans receivable, net of allowance
    
    $
    20,787
    
    
    $
    17,047
    
    
    $
    13,000Allowance for losses on loans receivable:Beginning of period
    
    ($
    10,616
    )
    
    ($
    8,734
    )
    
    ($
    12,213
    )Provision for loan losses
    
    
    (18,255
    )
    
    
    (16,890
    )
    
    
    (19,361
    )Charge-offs
    
    
    18,996
    
    
    
    15,295
    
    
    
    23,729Recoveries
    
    
    (1,128
    )
    
    
    (287
    )
    
    
    (889
    )End of period
    
    ($
    11,003
    )
    
    ($
    10,616
    )
    
    ($
    8,734
    )Net loan charge-offs as a percent of matured loan volume (1)
    
    
    3.9
    %
    
    
    4.1
    %
    
    
    5.4
    %Allowance as a percent of gross loans receivable
    
    
    34.6
    %
    
    
    38.3
    %
    
    
    40.2
    %
 
 (1)
    
    Matured loan volume represents all loans which became due and payable during
the reporting period.   
    
    Receive or collect 91.5% (or 93% in our third fiscal quarter) of the total volume, or
principal amount of loans, by the end of the current quarter (i.e., by December 31 for the
short-term consumer loans maturing between October 1 and December 31).
    
    Receive or collect a cumulative 93.2% (or 94.8% in our third fiscal quarter) by 90 days
out (i.e., by March 31 for the same quarterly portfolio).
    
    Receive or collect a cumulative 94.8% (or 95.7% in our third fiscal quarter) by 180 days
out (i.e., by June 30 for the same quarterly portfolio). We charge-off our short-term
consumer loans when they become delinquent for 180 days.
  Collection Progression for Quarterly ACE Loan Portfolios
 Collection PercentageActualDays Following Quarter
    
    Target
    
    Fiscal 2005
    
    Fiscal 2004
    
    Fiscal 2003First Quarter30
    
    
    91.5
    %
    
    
    93.0
    %
    
    
    92.8
    %
    
    
    92.4
    %90
    
    
    93.2
    %
    
    
    94.6
    %
    
    
    94.9
    %
    
    
    94.7
    %180
    
    
    94.8
    %
    
    
    94.7
    %
    
    
    95.1
    %
    
    
    95.1
    %
 Second Quarter30
    
    
    91.5
    %
    
    
    93.5
    %
    
    
    93.9
    %
    
    
    93.1
    %90
    
    
    93.2
    %
    
    
    95.6
    %
    
    
    95.5
    %
    
    
    95.9
    %180
    
    
    94.8
    %
    
    
    96.0
    %
    
    
    95.8
    %
    
    
    96.1
    %
 Third Quarter30
    
    
    93.0
    %
    
    
    94.9
    %
    
    
    94.7
    %
    
    
    93.5
    %90
    
    
    94.8
    %
    
    
    96.3
    %
    
    
    96.0
    %
    
    
    95.9
    %180
    
    
    95.7
    %
    
    
    
    
    
    
    96.1
    %
    
    
    96.1
    %
 35




---



##### Table of Contents



Collection PercentageActualDays Following Quarter
    
    Target
    
    Fiscal 2005
    
    Fiscal 2004
    
    Fiscal 2003Fourth Quarter30
    
    
    91.5
    %
    
    
    93.3
    %
    
    
    93.2
    %
    
    
    93.4
    %90
    
    
    93.2
    %
    
    
    
    
    
    
    94.7
    %
    
    
    95.4
    %180
    
    
    94.8
    %
    
    
    
    
    
    
    95.1
    %
    
    
    95.6
    %
  Year Ended June 30,2005
    
    
    2004
    
    
    2003(dollars in thousands)ACE Loans:Gross loans receivable, end of period
    
    $
    31,790
    
    
    $
    27,663
    
    
    $
    21,734Loans past due (unpaid at due date)
    
    $
    10,992
    
    
    $
    9,914
    
    
    $
    7,841% of gross loans receivable
    
    
    34.6
    %
    
    
    35.8
    %
    
    
    36.1
    %Loans past due 90+ days
    
    $
    3,927
    
    
    $
    3,653
    
    
    $
    3,249% of gross loans receivable
    
    
    12.4
    %
    
    
    13.2
    %
    
    
    15.0
    %
 Off-Balance Sheet Arrangement with Republic Bank
     36




---



##### Table of Contents



Year Ended June 30,2005
    
    
    2004
    
    
    2003(in thousands)Republic Bank Loans:Gross loans receivable, beginning of period
    
    $
    9,434
    
    
    $
    10,356
    
    
    $
    Originations
    
    
    184,646
    
    
    
    159,692
    
    
    
    63,897Repayments
    
    
    (174,997
    )
    
    
    (154,084
    )
    
    
    (53,462
    )Charge-offs
    
    
    (8,755
    )
    
    
    (6,545
    )
    
    
    Recoveries
    
    
    385
    
    
    
    15
    
    
    
    (79
    )Gross loans receivable, end of period (1)
    
    $
    10,713
    
    
    $
    9,434
    
    
    
    10,356Liability for loan losses payable to Republic Bank, beginning of period
    
    
    (3,714
    )
    
    
    (2,854
    )
    
    
    Provision for loan losses payable to Republic Bank
    
    
    (8,686
    )
    
    
    (7,390
    )
    
    
    (2,933
    )Charge-offs
    
    
    8,755
    
    
    
    6,545
    
    
    
    Recoveries
    
    
    (385
    )
    
    
    (15
    )
    
    
    79Liability for loan losses payable to Republic Bank, end of period
    
    
    (4,030
    )
    
    
    (3,714
    )
    
    
    (2,854
    )Net loans receivable
    
    $
    6,683
    
    
    $
    5,720
    
    
    $
    7,502Net loan charge-offs as a percent of matured loan volume (2)
    
    
    4.6
    %
    
    
    4.2
    %
    
    
    Liability as a percent of gross receivable
    
    
    37.6
    %
    
    
    39.4
    %
    
    
    27.6
    %
 
 (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.   Collection Progression for Quarterly Republic Bank Loan Portfolios
 Collection PercentageActualDays Following Quarter
    
    Target
    
    Fiscal 2005
    
    Fiscal 2004
    
    Fiscal 2003First Quarter30
    
    
    91.5
    %
    
    
    91.6
    %
    
    
    92.4
    %
    
    
    90
    
    
    93.2
    %
    
    
    93.5
    %
    
    
    94.8
    %
    
    
    180
    
    
    94.8
    %
    
    
    94.3
    %
    
    
    94.9
    %
    
    
    
 Second Quarter30
    
    
    91.5
    %
    
    
    92.2
    %
    
    
    93.6
    %
    
    
    90
    
    
    93.2
    %
    
    
    94.9
    %
    
    
    95.9
    %
    
    
    180
    
    
    94.8
    %
    
    
    95.4
    %
    
    
    95.9
    %
    
    
    
 Third Quarter30
    
    
    93.0
    %
    
    
    94.3
    %
    
    
    94.7
    %
    
    
    94.3
    %90
    
    
    94.8
    %
    
    
    95.8
    %
    
    
    95.9
    %
    
    
    96.6
    %180
    
    
    95.7
    %
    
    
    
    
    
    
    96.0
    %
    
    
    96.8
    %
 37




---



##### Table of Contents



Collection
Progression for Quarterly Republic Bank Loan Portfolios
 Collection PercentageActualDays Following Quarter
    
    Target
    
    Fiscal 2005
    
    Fiscal 2004
    
    Fiscal 2003Fourth Quarter30
    
    
    91.5
    %
    
    
    91.3
    %
    
    
    92.7
    %
    
    
    91.8
    %90
    
    
    93.2
    %
    
    
    
    
    
    
    94.3
    %
    
    
    94.7
    %180
    
    
    94.8
    %
    
    
    
    
    
    
    94.6
    %
    
    
    94.8
    %
  Year Ended June 30,2005
    
    
    2004(dollars in thousands)Republic Bank Loans:Gross loans receivable, end of period
    
    $
    10,713
    
    
    $
    9,434Loans past due (unpaid at due date)
    
    $
    5,516
    
    
    $
    4,272% of gross loans receivable
    
    
    51.5
    %
    
    
    45.3
    %Loans past due 90+ days
    
    $
    1,705
    
    
    $
    1,509% of gross loans receivable
    
    
    15.9
    %
    
    
    16.0
    %
 Liquidity and Capital Resources
 Cash Flows from Operating Activities
   Cash Flows from Investing Activities
  Cash Flows from Financing Activities
  38




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Certain Contractual Cash Commitments
  Payments Due by June 30,Total
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010 and thereafter(in thousands)Operating leases
    
    $
    60,717
    
    
    $
    23,710
    
    
    $
    18,003
    
    
    $
    11,253
    
    
    $
    5,270
    
    
    $
    2,481Acquisition notes payable
    
    
    328
    
    
    
    117
    
    
    
    118
    
    
    
    80
    
    
    
    13
    
    
    
    Total
    
    $
    61,045
    
    
    $
    23,827
    
    
    $
    18,121
    
    
    $
    11,333
    
    
    $
    5,283
    
    
    $
    2,481
    .
 Existing 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
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##### Table of Contents



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.
     
    
    to limit our capital expenditures during each fiscal year to $20 million;
    
    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 $133.7 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;
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
    
    at the end of each fiscal quarter, our cash flow coverage ratio cannot be less
than 1.25-to-1.00.
  Fiscal 2004 Credit Facilities
  
    
    a credit agreement with a syndicate of banks led by Wells Fargo Bank Texas, National
Association, as administrative agent for itself and other lenders, that provided for
revolving credit facilities of up to $175 million; and
    
    a note purchase agreement with American Capital Financial Services, Inc., as agent for
its affiliate American Capital Strategies, Ltd., in the amount of $40 million of our senior
subordinated secured promissory notes.
   Swap Agreements
    Self-Service Machine Funding Arrangements
  41




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Effects of Financing Arrangements
  Stock Repurchase Program
   Litigation Expenses
  Seasonality
  Impact of Inflation
  Liquidity Outlook
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Forward-looking Statements
    Risk Factors
  We have significant existing debt 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 pay 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;
    
    repurchase our capital stock;
    
    make capital expenditures;
    
    make investments or other restricted payments;
    
    engage in transactions with shareholders and affiliates;
    
    create liens;
    
    sell or otherwise dispose of assets;
    
    make payments on our debt, other than in the ordinary course; and
    
    engage in mergers and acquisitions.
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Our existing and future debt obligations could adversely affect our results of operations and
financial condition as we may be required to secure additional financing to meet our future capital
needs and cannot assure you that we will be able to do so on favorable terms, if at all.
  
    
    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.
  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.
  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;
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
    
    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.
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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.
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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
Republic Bank and First Bank of Delaware, and a loss of either relationship could adversely affect
our liquidity and profits.
 .
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If the loan approval process for either Republic Bank or First Bank of Delaware is flawed and more
loans go uncollected, our revenues 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 acquisitions and new store
openings, and our failure to manage our growth or integrate or manage new store acquisitions may
adversely affect our business, prospects, results of operations and financial condition.
  
    
    difficulties in assimilating acquired operations or services, including the loss of key
employees from acquired businesses;
    
    diversion of managements attention from our core business;
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##### Table of Contents




    
    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.
  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.
  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 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 liquidity and profits.
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Any disruption in the availability of our information systems could adversely affect operations at
our stores.
  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,
    
    loss of a significant client or clients,
    
    sales of large blocks of our stock, or
    
    departures of key personnel.
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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
harm our future revenue and financial condition and increase our costs and expenses.
  
 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
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MANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
  Internal Control  Integrated Framework
   52




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  Internal ControlIntegrated Framework
    Internal ControlIntegrated Framework Internal ControlIntegrated Framework
   
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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
 (a) The following documents are filed as part of this Report:(1) Financial Statements.Report of independent registered public accounting firm
    
    
    60Consolidated balance sheets as of June 30, 2005 and 2004
    
    
    61Consolidated statements of earnings for the years ended June 30, 2005, 2004 and 2003
    
    
    62Consolidated statement of shareholders equity for the years ended June 30, 2005, 2004 and 2003
    
    
    63Consolidated statements of cash flows for the years ended June 30, 2005, 2004 and 2003
    
    
    64Notes to consolidated financial statements
    
    
    65(2) Financial Statement Schedules.Report of independent registered public accounting firm on schedule
    
    
    91Schedule II  Valuation and Qualifying Accounts
    
    
    92
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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.) #
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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.) #
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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
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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. *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.) *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.*
 58




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##### Table of Contents



Exhibit Number
    
    Exhibits31.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*32.1
    
    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. 
   ACE CASH EXPRESS, INC.By:
    
    /s/ WILLIAM S. MCCALMONTWilliam S. McCalmontExecutive Vice President andChief Financial OfficerDate:
    
    September 12, 2005
  Signature
    
    Title
    
    Date/s/ RAYMOND C. HEMMIG
    
    Chairman of the Board, Director
    
    September 12, 2005Raymond C. Hemmig/s/ JAY B. SHIPOWITZ
    
    President and Chief Executive Officer
    
    September 12, 2005Jay B. Shipowitz
    
    Director (Principal Executive Officer)/s/ WILLIAM S. MCCALMONT
    
    Executive Vice President and Chief Financial Officer
    
    September 12, 2005William S. McCalmont
    
    Treasurer (Principal Financial and Accounting Officer)/s/ ROBERT P. ALLYN
    
    Director
    
    September 12, 2005Robert P. Allyn/s/ JOSEPH M. HAGGAR, III
    
    Director
    
    September 12, 2005Joseph M. Haggar, III/s/ DONALD H. NEUSTADT
    
    Director
    
    September 12, 2005Donald H. Neustadt/s/ MARSHALL B. PAYNE
    
    Director
    
    September 12, 2005Marshall B. Payne/s/ MICHAEL S. RAWLINGS
    
    Director
    
    September 12, 2005Michael S. Rawlings/s/ EDWARD W. ROSE III
    
    Director
    
    September 12, 2005Edward W. Rose III/s/ CHARLES DANIEL YOST
    
    Director
    
    September 12, 2005Charles Daniel Yost
 59




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##### Table of Contents



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




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##### Table of Contents



ACE CASH EXPRESS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 June 30,
    
    
    June 30,2005
    
    
    2004(1)(restated)ASSETSCurrent AssetsCash and cash equivalents
    
    $
    109,430
    
    
    $
    123,041Accounts receivable, net
    
    
    3,969
    
    
    
    5,555Loans receivable, net
    
    
    20,787
    
    
    
    17,047Prepaid expenses, inventories and other current assets
    
    
    13,685
    
    
    
    10,658Total Current Assets
    
    
    147,871
    
    
    
    156,301Noncurrent AssetsProperty and equipment, net
    
    
    37,657
    
    
    
    27,336Covenants not to compete, net
    
    
    1,668
    
    
    
    1,067Goodwill, net
    
    
    98,702
    
    
    
    81,719Other assets
    
    
    6,723
    
    
    
    3,839Total Assets
    
    $
    292,621
    
    
    $
    270,262LIABILITIES AND SHAREHOLDERS EQUITYCurrent LiabilitiesRevolving advances
    
    $
    43,300
    
    
    $
    60,000Accounts payable, accrued liabilities and other current liabilities
    
    
    36,117
    
    
    
    32,711Money orders payable
    
    
    4,867
    
    
    
    4,495Total Current Liabilities
    
    
    84,284
    
    
    
    97,206Noncurrent LiabilitiesDeferred income tax
    
    
    4,302
    
    
    
    3,134Deferred revenue
    
    
    3,271
    
    
    
    3,907Other liabilities
    
    
    4,079
    
    
    
    3,411Total Liabilities
    
    
    95,936
    
    
    
    107,658Commitments 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,
13,912,045 and 13,518,737 shares issued and 13,700,645 and
13,307,337 shares outstanding, respectively
    
    
    137
    
    
    
    133Additional paid-in capital
    
    
    103,544
    
    
    
    95,941Retained earnings
    
    
    98,836
    
    
    
    71,470Accumulated comprehensive income (loss)
    
    
    (56
    )
    
    
    (170
    )Treasury stock, at cost, 211,400 shares
    
    
    (2,707
    )
    
    
    (2,707
    )Unearned
compensation  restricted stock
    
    
    (3,069
    )
    
    
    (2,063
    )Total Shareholders Equity
    
    
    196,685
    
    
    
    162,604Total Liabilities and Shareholders Equity
    
    $
    292,621
    
    
    $
    270,262
 
 (1)
    
    The June 30, 2004 property and equipment, net, deferred income tax, other liabilities and
retained earnings balances have been adjusted to reflect the previously announced corrections to
ACEs lease accounting practices.  61




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##### Table of Contents



ACE CASH EXPRESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
 Year Ended June 30,2005
    
    
    2004
    
    
    2003Revenues
    
    $
    268,649
    
    
    $
    246,659
    
    
    $
    234,289Store expenses:Salaries and benefits
    
    
    65,293
    
    
    
    59,593
    
    
    
    58,170Occupancy
    
    
    34,768
    
    
    
    30,563
    
    
    
    29,194Provision for loan losses and doubtful accounts
    
    
    27,090
    
    
    
    24,235
    
    
    
    22,892Depreciation
    
    
    7,684
    
    
    
    7,563
    
    
    
    6,966Other
    
    
    38,398
    
    
    
    40,066
    
    
    
    38,192Total store expenses
    
    
    173,233
    
    
    
    162,020
    
    
    
    155,414Gross margin
    
    
    95,416
    
    
    
    84,639
    
    
    
    78,875Region expenses
    
    
    22,971
    
    
    
    19,251
    
    
    
    17,056Headquarters expenses
    
    
    19,245
    
    
    
    18,681
    
    
    
    17,133Franchise expenses
    
    
    1,227
    
    
    
    1,196
    
    
    
    1,225Other depreciation and amortization
    
    
    3,094
    
    
    
    3,893
    
    
    
    5,423Interest expense, net
    
    
    4,880
    
    
    
    10,231
    
    
    
    16,004Loss on early extinguishment of debt
    
    
    
    
    
    
    4,858
    
    
    
    270Other (income) expenses, net
    
    
    (864
    )
    
    
    (1,893
    )
    
    
    1,314Income from continuing operations before taxes
    
    
    44,863
    
    
    
    28,422
    
    
    
    20,450Provision for income taxes
    
    
    17,497
    
    
    
    11,370
    
    
    
    8,174Income from continuing operations
    
    
    27,366
    
    
    
    17,052
    
    
    
    12,276Discontinued operations:Gain on sale of discontinued operations, net of tax
    
    
    
    
    
    
    
    
    
    
    499Net income
    
    $
    27,366
    
    
    $
    17,052
    
    
    $
    12,775Basic earnings per share:Continuing operations
    
    $
    2.06
    
    
    $
    1.55
    
    
    $
    1.20Discontinued operations
    
    
    
    
    
    
    
    
    
    
    0.05Total
    
    $
    2.06
    
    
    $
    1.55
    
    
    $
    1.25Diluted earnings per share:Continuing operations
    
    $
    1.98
    
    
    $
    1.49
    
    
    $
    1.20Discontinued operations
    
    
    
    
    
    
    
    
    
    
    0.05Total
    
    $
    1.98
    
    
    $
    1.49
    
    
    $
    1.25Weighted average number of common shares outstanding:Basic
    
    
    13,275
    
    
    
    11,009
    
    
    
    10,181Diluted
    
    
    13,821
    
    
    
    11,477
    
    
    
    10,206
  62




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##### Table of Contents



ACE CASH EXPRESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
 UnearnedCommon Stock
    
    
    Additional
    
    
    
    
    
    
    Accumulated
    
    
    Treasury Stock
    
    
    Compensation
    
    
    TotalPaid-In
    
    
    Retained
    
    
    Comprehensive
    
    
    
    
    
    
    
    
    
    
    - Restricted
    
    
    ShareholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    Shares
    
    
    Amount
    
    
    Stock
    
    
    EquityBalance as of June 30, 2002
    
    
    10,180,588
    
    
    $
    102
    
    
    $
    24,353
    
    
    $
    41,643
    
    
    ($
    1,078
    )
    
    
    211,400
    
    
    ($
    2,707
    )
    
    $
    
    
    
    $
    62,313Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,775
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,775Change in fair value of interest-rate swaps,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,836Stock options exercised
    
    
    625
    
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7Restricted stock
    
    
    2,500
    
    
    
    
    
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23
    )
    
    
    2Balance 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
    )
    
    $
    196,685
  63




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##### Table of Contents



ACE CASH EXPRESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 Year Ended June 30,2005
    
    
    2004
    
    
    2003Cash flows from operating activities:Net income
    
    $
    27,366
    
    
    $
    17,052
    
    
    $
    12,775Less: Gain on sale of discontinued operations, net of tax
    
    
    
    
    
    
    
    
    
    
    499Income from continuing operations
    
    
    27,366
    
    
    
    17,052
    
    
    
    12,276Adjustments to reconcile net income to net cash provided
by operating activities:Depreciation and amortization
    
    
    10,778
    
    
    
    11,456
    
    
    
    12,389Provision for loan losses
    
    
    26,941
    
    
    
    24,280
    
    
    
    22,772Provision for doubtful accounts
    
    
    161
    
    
    
    (21
    )
    
    
    120Loss on disposal of property and equipment
    
    
    1,451
    
    
    
    781
    
    
    
    634Loss on investment in ePacific
    
    
    
    
    
    
    
    
    
    
    703Deferred income taxes
    
    
    1,792
    
    
    
    (305
    )
    
    
    5,818Deferred revenue
    
    
    (3,477
    )
    
    
    (2,009
    )
    
    
    (2,217
    )Compensation on restricted stock grants
    
    
    1,243
    
    
    
    562
    
    
    
    2Changes in assets and liabilities, net of effects of acquisitions:Accounts receivable
    
    
    1,425
    
    
    
    3,919
    
    
    
    (757
    )Loans receivable
    
    
    (22,001
    )
    
    
    (20,961
    )
    
    
    (15,483
    )Prepaid expenses, inventories and other current assets
    
    
    (3,102
    )
    
    
    1,104
    
    
    
    (3,917
    )Other assets
    
    
    (3,757
    )
    
    
    2,258
    
    
    
    (10,888
    )Accounts payable, accrued liabilities, and other liabilities
    
    
    (2,287
    )
    
    
    (12,479
    )
    
    
    13,279Money orders payable
    
    
    373
    
    
    
    (2,389
    )
    
    
    (6,533
    )Net cash provided by operating activities
    
    
    36,906
    
    
    
    23,248
    
    
    
    28,198Cash flows from investing activities:Purchases of property and equipment, net
    
    
    (18,951
    )
    
    
    (7,439
    )
    
    
    (4,721
    )Total store acquisition purchase price, net of cash received
    
    
    (19,387
    )
    
    
    (6,914
    )
    
    
    (723
    )Net cash used by investing activities
    
    
    (38,338
    )
    
    
    (14,353
    )
    
    
    (5,444
    )Cash flows from financing activities:Net decrease in revolving advances
    
    
    (16,700
    )
    
    
    (23,900
    )
    
    
    (13,600
    )Gross borrowings of term advances
    
    
    
    
    
    
    
    
    
    
    40,000Gross repayments of term advances
    
    
    
    
    
    
    (38,269
    )
    
    
    (50,081
    )Net borrowings (repayments) of notes payable
    
    
    238
    
    
    
    (780
    )
    
    
    (576
    )Payments of senior secured notes payable
    
    
    
    
    
    
    
    
    
    
    (8,000
    )Proceeds from stock options exercised and restricted stock granted
    
    
    4,283
    
    
    
    7,691
    
    
    
    7Proceeds from stock offering
    
    
    
    
    
    
    61,294
    
    
    
    Net cash provided (used) by financing activities
    
    
    (12,179
    )
    
    
    6,036
    
    
    
    (32,250
    )Cash provided (used) by continuing operations
    
    
    (13,611
    )
    
    
    14,931
    
    
    
    (9,496
    )Cash provided by sale of discontinued operations
    
    
    
    
    
    
    
    
    
    
    1,342Net increase (decrease) in cash and cash equivalents
    
    
    (13,611
    )
    
    
    14,931
    
    
    
    (8,154
    )Cash and cash equivalents, beginning of year
    
    
    123,041
    
    
    
    108,110
    
    
    
    116,264Cash and cash equivalents, end of year
    
    $
    109,430
    
    
    $
    123,041
    
    
    $
    108,110Supplemental disclosures of cash flows information:Interest paid
    
    $
    4,319
    
    
    $
    9,943
    
    
    $
    15,391Income taxes paid
    
    $
    14,518
    
    
    $
    7,403
    
    
    $
    5,309
  64




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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
  65




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##### Table of Contents



Year Ended June 30,2005
    
    
    2004
    
    
    2003(in thousands)Check cashing
    
    $
    131,619
    
    
    $
    129,194
    
    
    $
    125,703Short-term consumer loans
    
    
    91,793
    
    
    
    77,029
    
    
    
    70,806Bill payments
    
    
    20,266
    
    
    
    16,960
    
    
    
    13,507Money transfers
    
    
    11,868
    
    
    
    11,136
    
    
    
    10,898Money orders
    
    
    6,875
    
    
    
    6,330
    
    
    
    6,960Franchising
    
    
    3,180
    
    
    
    2,774
    
    
    
    2,346Other services
    
    
    3,048
    
    
    
    3,236
    
    
    
    4,069Total revenue
    
    $
    268,649
    
    
    $
    246,659
    
    
    $
    234,289
 Cash and Cash Equivalents
  Accounts Receivable, Net
  Investments
   Loans Receivable, Net
  66




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##### Table of Contents



67




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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
  68




---



##### Table of Contents



Deferred Borrowing Costs
  Incentive Program Accounting
  Store Expenses
  Returned Checks
  Advertising Costs
  Derivative Instruments and Hedging Activities
   69




---



##### Table of Contents



June 30, 2005
    
    
    June 30, 2004Average
    
    
    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
    
    $
    36
    
    
    
    5.310
    %
    
    
    6.175
    %
    
    $
    58
    
    
    
    4.715
    %
    
    
    4.715
    %
   Change in Accumulated OtherAccumulated Other Comprehensive
    
    
    Comprehensive Income (Loss)Income (Loss), Net of Tax,
    
    
    for theCorresponding Debt
    
    as of June 30,
    
    
    Year Ended June 30,2005
    
    
    2004
    
    
    2003
    
    
    2005
    
    
    2004Revolving advance
    
    ($
    56
    )
    
    ($
    170
    )
    
    ($
    925
    )
    
    $
    114
    
    
    $
    755Term loan notes
    
    
    
    
    
    
    
    
    
    
    (92
    )
    
    
    
    
    
    
    92($
    56
    )
    
    ($
    170
    )
    
    ($
    1,017
    )
    
    $
    114
    
    
    $
    847
   Year Ended June 30,2005
    
    
    2004
    
    
    2003(in thousands)Net income
    
    $
    27,366
    
    
    $
    17,052
    
    
    $
    12,775Other comprehensive income:Unrealized gain on hedging instruments
before tax expense
    
    
    189
    
    
    
    1,412
    
    
    
    102Tax expense
    
    
    (75
    )
    
    
    (565
    )
    
    
    (41
    )Unrealized gain on hedging instruments net
of the tax expense
    
    
    114
    
    
    
    847
    
    
    
    61Comprehensive income
    
    $
    27,480
    
    
    $
    17,899
    
    
    $
    12,836
 70




---



##### Table of Contents



Franchise Accounting
    June 30,2005
    
    
    2004
    
    
    2003(in thousands)Initial fees and option to purchase fees
    
    $
    845
    
    
    $
    567
    
    
    $
    265Royalty fees
    
    
    2,335
    
    
    
    2,205
    
    
    
    2,074Other
    
    
    
    
    
    
    2
    
    
    
    7Total franchise revenue
    
    $
    3,180
    
    
    $
    2,774
    
    
    $
    2,346
  Income Taxes
  Earnings Per Share
   Year Ended June 30,2005
    
    
    2004
    
    
    2003(in thousands)Income from continuing operations
    
    $
    27,366
    
    
    $
    17,052
    
    
    $
    12,276Gain on sale of discontinued operations,
net of tax
    
    
    
    
    
    
    
    
    
    
    499Net income
    
    $
    27,366
    
    
    $
    17,052
    
    
    $
    12,775Reconciliation of denominator:Weighted average number of common shares
outstanding  basic
    
    
    13,275
    
    
    
    11,009
    
    
    
    10,181Effect of dilutive stock options and
restricted stock
    
    
    546
    
    
    
    468
    
    
    
    25Weighted average number of common and
dilutive shares outstanding  diluted
    
    
    13,821
    
    
    
    11,477
    
    
    
    10,206
 71




---



##### Table of Contents



Fair Value of Financial Instruments
  Reclassifications
  Stock Incentive Plans
 .
  Year Ended June 30,2005
    
    
    2004
    
    
    2003Number of shares of restricted stock granted:- Employee stock incentive plan
    
    
    81,650
    
    
    
    199,075
    
    
    
    2,500- Non-employee stock incentive plan
    
    
    12,250
    
    
    
    8,750
    
    
    
    93,900
    
    
    
    207,825
    
    
    
    2,500Number of shares of restricted stock forfeited:- Employee stock incentive plan
    
    
    (11,477
    )
    
    
    (650
    )
    
    
    - Non-employee stock incentive plan
    
    
    
    
    
    
    
    
    
    
    (11,477
    )
    
    
    (650
    )
    
    
    Stock-based compensation expense for
restricted stock grants:- Employee stock incentive plan
    
    $
    1,127,000
    
    
    $
    530,000
    
    
    $
    2,000- Non-employee director stock incentive plan
    
    
    122,000
    
    
    
    33,000
    
    
    
    $
    1,249,000
    
    
    $
    563,000
    
    
    $
    2,000
    72




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##### Table of Contents



Year Ended June 30,2005
    
    
    2004
    
    
    2003(in thousands, except per share amounts)Net income, as reported
    
    $
    27,366
    
    
    $
    17,052
    
    
    $
    12,775Deduct: Total stock-based employee compensation expense
determined under fair value based methods for all stock
option awards, net of related tax effects
    
    
    913
    
    
    
    855
    
    
    
    1,158Deduct: 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
    
    
    
    40
    
    
    
    65Pro forma net income
    
    $
    26,385
    
    
    $
    16,157
    
    
    $
    11,552Earnings per share:Basic  as reported
    
    $
    2.06
    
    
    $
    1.55
    
    
    $
    1.25Basic  pro forma
    
    $
    1.99
    
    
    $
    1.47
    
    
    $
    1.13Diluted  as reported
    
    $
    1.98
    
    
    $
    1.49
    
    
    $
    1.25Diluted  pro forma
    
    $
    1.91
    
    
    $
    1.41
    
    
    $
    1.13
   2. OPERATING SEGMENTS
   Company-owned
    
    
    Franchised
    
    
    Other
    
    
    Total(in thousands, except for number of stores)Year ended June 30, 2005:Revenue
    
    $
    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
    
    
    
    
    
    
    
    1,371
 73




---



##### Table of Contents



Company-owned
    
    
    Franchised
    
    
    Other
    
    
    Total(in thousands, except for number of stores)Year ended June 30, 2004:Revenue
    
    $
    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
    
    
    
    
    
    
    
    1,230Year ended June 30, 2003:Revenue
    
    $
    231,943
    
    
    $
    2,346
    
    
    $
    
    
    
    $
    234,289Gross margin
    
    
    76,529
    
    
    
    2,346
    
    
    
    
    
    
    
    78,875Region, headquarters, franchise expenses
    
    
    (34,189
    )
    
    
    (1,225
    )
    
    
    
    
    
    
    (35,414
    )Other depreciation and amortization
    
    
    (5,423
    )
    
    
    
    
    
    
    
    
    
    
    (5,423
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    (16,004
    )
    
    
    (16,004
    )Other expenses
    
    
    (1,584
    )
    
    
    
    
    
    
    
    
    
    
    (1,584
    )Income (loss) before taxes
    
    $
    35,333
    
    
    $
    1,121
    
    
    ($
    16,004
    )
    
    $
    20,450Total assets
    
    $
    258,203
    
    
    $
    565
    
    
    $
    
    
    
    $
    258,768Number of stores at June 30, 2003
    
    
    968
    
    
    
    200
    
    
    
    
    
    
    
    1,168
 3. FINANCING ARRANGEMENTS AND MONEYGRAM AGREEMENT
  Existing Fiscal 2005 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
 74




---



##### 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.
     
    
    to limit our capital expenditures during each fiscal year to $20 million;
    
    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 $133.7 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;
 75




---



##### Table of Contents



-
    
    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.
  Fiscal 2004 Credit Facilities
  
    
    a credit agreement with a syndicate of banks led by Wells Fargo Bank Texas, National
Association, as administrative agent for itself and other lenders, that provided for
revolving credit facilities of up to $175 million; and
    
    a note purchase agreement with American Capital Financial Services, Inc., as agent for
its affiliate American Capital Strategies, Ltd., in the amount of $40 million of our senior
subordinated secured promissory notes.
   
    
    a $120 million primary revolving credit facility available throughout the three-year
term; and
    
    a $55 million seasonal revolving credit facility available to us during each
calendar-year-end holiday and tax season (i.e., December 1 through March 15) during the
three-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,
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 varied from 1.5% to 2.75% 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 adjusted on a daily
basis.
    
    The sum of (a) the London Interbank Offered Rate, or LIBOR, for one-, two-, three- or
six-month maturities (at our discretion), 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 varied from 3.0% to 4.25% per annum based on our debt-to-EBITDA ratio.
This interest rate adjusted, 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 varied from 3.0% to
4.25% per annum based on our debt-to-EBITDA ratio. This interest rate adjusts on a daily
basis.
  76




---



##### Table of Contents




    
    Series A Note: LIBOR plus 8%.
    
    Series B Note: LIBOR plus 10%.
    
    Series C Note: LIBOR plus 13%.
    
    Series D Note: LIBOR plus 13.25%.
   
    
    Series A Note: eleven quarterly installments of $833,333, payable at the end of each
calendar quarter, beginning June 30, 2003; and all remaining amounts at maturity on March
31, 2006.
    
    Series B Note: twelve quarterly installments of $125,000, payable at the end of each
calendar quarter, beginning June 30, 2003; seven quarterly installments of $1,062,500,
payable at the end of each calendar quarter, beginning June 30, 2006; and all remaining
amounts at maturity on March 31, 2008.
    
    Series C Note: at maturity on March 31, 2009.
    
    Series D Note: at maturity on March 31, 2010.
   Swap Agreements
    77




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##### Table of Contents



As of and for the Years Ended June 30,Revolving Advances
    
    
    Term Advances2005
    
    
    2004
    
    
    2005
    
    
    2004(dollars in thousands, except interest rates)Ending balance
    
    $
    43,300
    
    
    $
    60,000
    
    
    $
    
    
    
    $
    Average balance
    
    $
    54,806
    
    
    $
    81,028
    
    
    
    
    
    
    $
    31,489Interest expense
    
    $
    2,639
    
    
    $
    3,799
    
    
    
    
    
    
    $
    3,955Swap expense
    
    
    224
    
    
    
    365
    
    
    
    
    
    
    
    40Total interest expense
    
    $
    2,863
    
    
    $
    4,164
    
    
    
    
    
    
    $
    3,995Accrued interest expense
    
    $
    7
    
    
    $
    121
    
    
    $
    
    
    
    $
    Weighted average interest rate:Excluding swap expense
    
    
    5.87
    %
    
    
    4.81
    %
    
    
    
    
    
    
    12.92
    %Including swap expense
    
    
    6.36
    %
    
    
    5.30
    %
    
    
    
    
    
    
    12.79
    %Unused revolving advance:Commitment fees
    
    $
    418
    
    
    $
    241
    
    
    $
    
    
    
    $
    Accrued interest expense
    
    
    14
    
    
    
    17
  FixedInterest Rate Applies
    
    
    InterestNotional
    
    
    Swap Agreement Term
    
    
    to:
    
    
    RateBank
    
    
    
    
    Amount
    
    
    
    
    
    
    
    
    
    
    Specific Term
    
    
    BeforeName
    
    

Debt Type
    
    (in millions)
    
    
    Beginning
    
    
    Ending
    
    
    From
    
    
    To
    
    
    MarginJPMorgan
    
    Revolving Advances
    
    
    
    
    
    
    4/23/2003
    
    
    
    9/29/2006Chase
    
    
    
    $
    60
    
    
    
    
    
    
    
    
    
    
    
    4/23/2003
    
    
    
    6/30/2003
    
    
    
    1.320
    %Bank
    
    
    
    $
    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
    
    
    
    4.2625
    %National
    
    Term Advance
    
    
    
    
    
    
    6/2/2003
    
    
    
    3/31/2006City Bank
    
    
    
    $
    20
    
    
    
    
    
    
    (Swap
    
    
    6/2/2003
    
    
    
    6/30/2003
    
    
    
    1.34
    %$
    20
    
    
    
    
    
    
    terminated
    
    
    7/1/2003
    
    
    
    3/31/2004
    
    
    
    1.34
    %$
    20
    
    
    
    
    
    
    May 26, 2004)
    
    
    4/1/2004
    
    
    
    5/26/2004
    
    
    
    1.34
    %
 Self-Service Machine Funding Arrangements
  78




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##### Table of Contents



Notes Payable
  Debt Maturity Schedule
   Year Ending June 30:2006
    
    $
    1172007
    
    
    1182008
    
    
    80Remaining years
    
    
    13$
    328
 MoneyGram Agreement
    79




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##### Table of Contents



4. OTHER EXPENSES
  Year Ended June 30,2005
    
    
    2004
    
    
    2003(in thousands)Armored and security
    
    $
    8,750
    
    
    $
    7,954
    
    
    $
    7,782Returns and cash shorts
    
    
    7,288
    
    
    
    9,350
    
    
    
    9,896Information services
    
    
    3,884
    
    
    
    5,860
    
    
    
    3,831Bank charges
    
    
    5,839
    
    
    
    5,093
    
    
    
    5,314Store supplies
    
    
    4,423
    
    
    
    4,219
    
    
    
    4,063Telecommunications
    
    
    1,977
    
    
    
    2,211
    
    
    
    3,027Advertising and marketing
    
    
    2,863
    
    
    
    2,072
    
    
    
    564Miscellaneous
    
    
    3,374
    
    
    
    3,307
    
    
    
    3,715$
    38,398
    
    
    $
    40,066
    
    
    $
    38,192
  Year Ended June 30,2005
    
    
    2004
    
    
    2003(in thousands)Gain on sale of stores to franchisees
    
    ($
    1,802
    )
    
    ($
    649
    )
    
    
    (888
    )Gain on sale of warrants issued by Netspend
    
    
    (132
    )
    
    
    (1,049
    )
    
    $
    Store closing expense
    
    
    495
    
    
    
    410
    
    
    
    534Settlements (1)
    
    
    
    
    
    
    (138
    )
    
    
    5,750Insurance recovery resulting from claims related to the
Goleta loan-related lawsuits
    
    
    
    
    
    
    
    
    
    
    (4,700
    )Loss on liquidation of ePacific investment
    
    
    
    
    
    
    
    
    
    
    703Store lease buyout (2)
    
    
    
    
    
    
    (450
    )
    
    
    Gain on sale of land in North Carolina
    
    
    
    
    
    
    (95
    )
    
    
    Other
    
    
    575
    
    
    
    78
    
    
    
    (85
    )($
    864
    )
    
    ($
    1,893
    )
    
    $
    1,314
 
 (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. Fiscal 2003 consists of a $5 million charge for settlement and release of
substantially all claims in the Goleta loan-related lawsuits and payments of $500,000 and
$250,000 to resolve state and federal regulatory matters, respectively.(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 30,2005
    
    
    2004(in thousands)Deferred tax asset
    
    $
    6,257
    
    
    $
    6,903Deferred finance costs
    
    
    1,287
    
    
    
    1,920Inventories
    
    
    1,836
    
    
    
    778Deposits
    
    
    1,774
    
    
    
    Other prepaid invoices
    
    
    2,531
    
    
    
    1,057$
    13,685
    
    
    $
    10,658
 80




---



##### Table of Contents



6. PROPERTY AND EQUIPMENT
  June 30,2005
    
    
    2004(in thousands)Property and equipment, at cost:Store equipment, furniture, and fixtures
    
    $
    54,493
    
    
    $
    46,702Land, buildings and leasehold improvements
    
    
    34,215
    
    
    
    26,912Signs
    
    
    9,433
    
    
    
    7,931Other property and equipment
    
    
    1,484
    
    
    
    1,37599,625
    
    
    
    82,920Less  accumulated depreciation
    
    
    61,968
    
    
    
    55,584$
    37,657
    
    
    $
    27,336
  7. GOODWILL AND OTHER INTANGIBLE ASSETS
  Acquisitions
  Year Ended June 30,2005
    
    
    2004
    
    
    2003(in thousands, except number of storesand number of transactions)Number of stores acquired
    
    
    74
    
    
    
    34
    
    
    
    2Number of transactions
    
    
    11
    
    
    
    4
    
    
    
    2Total purchase priceAmounts allocated to:Goodwill
    
    $
    16,983
    
    
    $
    6,133
    
    
    $
    658Covenants not to compete
    
    
    750
    
    
    
    270
    
    
    
    10Other intangibles
    
    
    686
    
    
    
    0
    
    
    
    0Total intangibles costs
    
    
    18,419
    
    
    
    6403
    
    
    
    668Property and equipment
    
    
    958
    
    
    
    511
    
    
    
    50Other assets
    
    
    3
    
    
    
    1,023
    
    
    
    16Total purchase price
    
    $
    19,380
    
    
    $
    7,937
    
    
    $
    734
 Amortizable Intangible Assets
  81




---



##### Table of Contents



June 30,2005
    
    
    2004(in thousands)Covenants not to compete, at cost
    
    $
    2,678
    
    
    $
    2,304Less  accumulated amortization
    
    
    1,010
    
    
    
    1,237$
    1,668
    
    
    $
    1,067
   Amortization Expense for Covenants Not to CompeteFor the Year EndedJune 30,
    
    Actual
    
    
    Estimated(in thousands)2005
    
    $
    4612006
    
    
    
    
    
    $
    4622007
    
    
    
    
    
    
    3972008
    
    
    
    
    
    
    3592009
    
    
    
    
    
    
    2802010
    
    
    
    
    
    
    146
  June 30,2005
    
    
    2004(in thousands)Customer lists, at cost
    
    $
    695
    
    
    $
    Less  accumulated amortization
    
    
    196
    
    
    
    $
    499
    
    
    $
    
   Amortization Expense for Customer ListsFor the YearEnded June 30,
    
    Actual
    
    
    Estimated(in thousands)2005
    
    $
    1962006
    
    
    
    
    
    $
    2022007
    
    
    
    
    
    
    1432008
    
    
    
    
    
    
    952009
    
    
    
    
    
    
    442010
    
    
    
    
    
    
    10
 82




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##### Table of Contents



Intangible Assets Not Subject to Amortization
  Year Ended June 30,2005
    
    
    2004(in thousands)Balance, beginning of the year
    
    $
    81,719
    
    
    $
    75,586Goodwill from acquisitions
    
    
    16,983
    
    
    
    6,133Balance, end of the year
    
    $
    98,702
    
    
    $
    81,719
  8. ACCOUNTS PAYABLE, ACCRUED LIABILITIES, AND OTHER LIABILITIES
  2005
    
    
    2004(in thousands)Accounts payable
    
    $
    12,162
    
    
    $
    8,911Accrued salaries and benefits
    
    
    9,745
    
    
    
    9,782Money transfer payable
    
    
    2,596
    
    
    
    2,132Payable to Republic Bank
    
    
    2,348
    
    
    
    1,584Deferred revenue
    
    
    2,207
    
    
    
    1,900Accrued workers compensation
    
    
    1,000
    
    
    
    821Income taxes payable
    
    
    766
    
    
    
    1,621Accrued bank charges
    
    
    464
    
    
    
    376Deferred gain on sale of stores
    
    
    161
    
    
    
    159Notes payable  current
    
    
    120
    
    
    
    32Accrued litigation
    
    
    86
    
    
    
    104Interest-rate swap
    
    
    70
    
    
    
    Interest payable
    
    
    21
    
    
    
    138Restructuring accrual
    
    
    
    
    
    
    28Accrued self-service machine write-off
    
    
    
    
    
    
    1,400Other accrued liabilities
    
    
    4,371
    
    
    
    3,723$
    36,117
    
    
    $
    32,711
 9. MONEY ORDER AGREEMENT
    83




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##### Table of Contents



10. NETSPEND AGREEMENT
   11. SHAREHOLDERS EQUITY
 Preferred Stock
  Stock Incentive Plans
 Employee Stock Incentive Plan.
 Outstanding
    
    ExercisableWeighted-Weighted-
    
    
    average
    
    
    
    
    
    WeightedStock
    
    
    average
    
    
    remaining
    
    Stock
    
    
    - averageRange of exercise
    
    options
    
    
    exercise
    
    
    contractual
    
    options
    
    
    exerciseprices
    
    outstanding
    
    
    price
    
    
    life
    
    exercisable
    
    
    priceUnder $10.00
    
    
    199,377
    
    
    $
    9.34
    
    
    6.6
    
    
    98,998
    
    
    $
    9.39$10.01  $15.00
    
    
    226,355
    
    
    
    13.05
    
    
    6.0
    
    
    139,730
    
    
    
    12.75$15.01  $20.00
    
    
    105,588
    
    
    
    17.02
    
    
    4.6
    
    
    103,713
    
    
    
    16.98$20.01  $25.00
    
    
    11,250
    
    
    
    20.87
    
    
    9.8
    
    
    
    
    
    
    $25.01  $30.00
    
    
    85,000
    
    
    
    26.70
    
    
    9.5
    
    
    
    
    
    
    627,570
    
    
    $
    14.53
    
    
    6.5
    
    
    342,441
    
    
    $
    13.06
  84




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##### Table of Contents



WeightedOutstanding
    
    
    
    
    
    
    AverageStock
    
    
    Restricted
    
    
    Available
    
    
    StockReserved
    
    
    Options
    
    
    Stock
    
    
    for Grant
    
    
    Option PriceShares at June 30, 2002
    
    
    1,687,590
    
    
    
    1,286,863
    
    
    
    
    
    
    
    400,727
    
    
    $
    11.93Granted
    
    
    
    
    
    
    272,100
    
    
    
    2,500
    
    
    
    (274,600
    )
    
    
    9.53Exercised
    
    
    (625
    )
    
    
    (625
    )
    
    
    
    
    
    
    
    
    
    
    8.58Canceled
    
    
    (11,250
    )
    
    
    (228,122
    )
    
    
    
    
    
    
    216,872
    
    
    
    11.26Shares at June 30, 2003
    
    
    1,675,715
    
    
    
    1,330,216
    
    
    
    2,500
    
    
    
    342,999
    
    
    
    11.55Increase in shares reserved
    
    
    400,000
    
    
    
    
    
    
    
    
    
    
    
    400,000Granted
    
    
    
    
    
    
    138,750
    
    
    
    199,075
    
    
    
    (337,825
    )
    
    
    15.27Exercised
    
    
    (469,828
    )
    
    
    (469,828
    )
    
    
    
    
    
    
    
    
    
    
    11.58Canceled
    
    
    
    
    
    
    (91,812
    )
    
    
    (650
    )
    
    
    92,462
    
    
    
    11.23Shares at June 30, 2004
    
    
    1,605,887
    
    
    
    907,326
    
    
    
    200,925
    
    
    
    497,636
    
    
    
    12.14Granted
    
    
    
    
    
    
    113,000
    
    
    
    81,650
    
    
    
    (194,650
    )
    
    
    25.78Exercised
    
    
    (295,885
    )
    
    
    (295,885
    )
    
    
    
    
    
    
    
    
    
    
    11.33Restrictions lapsed
    
    
    (24,018
    )
    
    
    
    
    
    
    (24,018
    )
    
    
    
    
    
    
    Canceled
    
    
    
    
    
    
    (96,871
    )
    
    
    (11,477
    )
    
    
    108,348
    
    
    
    14.68Shares at June 30, 2005
    
    
    1,285,984
    
    
    
    627,570
    
    
    
    247,080
    
    
    
    411,334
    
    
    $
    14.52
 Non-employee Directors Stock Incentive Plan.
  Outstanding
    
    ExercisableWeighted-Weighted-
    
    
    average
    
    
    
    
    
    WeightedStock
    
    
    average
    
    
    remaining
    
    Stock
    
    
    - averageRange of exercise
    
    options
    
    
    exercise
    
    
    contractual
    
    options
    
    
    exerciseprices
    
    outstanding
    
    
    price
    
    
    life
    
    exercisable
    
    
    priceUnder $10.00
    
    
    45,001
    
    
    $
    8.53
    
    
    1.9
    
    
    36,666
    
    
    $
    8.65$10.01  $15.00
    
    
    26,250
    
    
    
    11.43
    
    
    0.4
    
    
    26,250
    
    
    
    11.43$15.01  $20.00
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $20.01  $25.00
    
    
    11,250
    
    
    
    24.45
    
    
    4.2
    
    
    
    
    
    
    $25.01  $30.00
    
    
    11,250
    
    
    
    28.24
    
    
    4.4
    
    
    
    
    
    
    93,751
    
    
    $
    13.62
    
    
    2.1
    
    
    62,916
    
    
    $
    9.81
  85




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##### Table of Contents



WeightedOutstanding
    
    
    
    
    
    
    AverageStock
    
    
    Restricted
    
    
    Available
    
    
    StockReserved
    
    
    Options
    
    
    Stock
    
    
    for Grant
    
    
    Option PriceShares at June 30,
2002
    
    
    190,250
    
    
    
    128,250
    
    
    
    
    
    
    
    62,000
    
    
    $
    12.20Granted
    
    
    
    
    
    
    25,000
    
    
    
    
    
    
    
    (25,000
    )
    
    
    8.01Canceled
    
    
    
    
    
    
    (27,000
    )
    
    
    
    
    
    
    27,000
    
    
    
    12.42Shares at June 30,
2003
    
    
    190,250
    
    
    
    126,250
    
    
    
    
    
    
    
    64,000
    
    
    
    11.33Granted
    
    
    
    
    
    
    
    
    
    
    8,750
    
    
    
    (8,750
    )Exercised
    
    
    (34,999
    )
    
    
    (34,999
    )
    
    
    
    
    
    
    
    
    
    
    13.18Canceled
    
    
    
    
    
    
    (5,000
    )
    
    
    
    
    
    
    5,000
    
    
    
    13.25Shares at June 30,
2004
    
    
    155,251
    
    
    
    86,251
    
    
    
    8,750
    
    
    
    60,250
    
    
    
    11.32Granted
    
    
    
    
    
    
    22,500
    
    
    
    12,250
    
    
    
    (34,750
    )
    
    
    26.35Exercised
    
    
    (15,000
    )
    
    
    (15,000
    )
    
    
    
    
    
    
    
    
    
    
    14.58Restrictions lapsed
    
    
    (2,915
    )
    
    
    
    
    
    
    (2,915
    )
    
    
    
    
    
    
    Canceled
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expiration of plan
    
    
    (25,500
    )
    
    
    
    
    
    
    
    
    
    
    (25,500
    )
    
    
    Shares at June 30,
2005
    
    
    111,836
    
    
    
    93,751
    
    
    
    18,085
    
    
    
    
    
    
    $
    13.62
 Stock Repurchase Program
   12. INCOME TAXES
  Year Ended June 30,2005
    
    
    2004
    
    
    2003(in thousands)Current -Federal income tax
    
    $
    13,215
    
    
    $
    9,617
    
    
    $
    2,332State income tax
    
    
    2,490
    
    
    
    2,058
    
    
    
    35715,705
    
    
    
    11,675
    
    
    
    2,689Deferred -Federal income tax
    
    
    1,420
    
    
    
    (234
    )
    
    
    5,091State income tax
    
    
    372
    
    
    
    (71
    )
    
    
    7271,792
    
    
    
    (305
    )
    
    
    5,818$
    17,497
    
    
    $
    11,370
    
    
    $
    8,507
 86




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##### Table of Contents



June 30,2005
    
    
    2004(in thousands)Gross assets
    
    $
    12,981
    
    
    $
    9,382Gross liabilities
    
    
    (11,026
    )
    
    
    (8,163
    )Net deferred tax asset
    
    $
    1,955
    
    
    $
    1,219
  June 30,2005
    
    
    2004(in thousands)Loan loss provision
    
    $
    4,542
    
    
    $
    4,246Accrued liabilities and other
    
    
    2,289
    
    
    
    1,191Deferred revenue
    
    
    2,229
    
    
    
    2,219Depreciation and amortization
    
    
    (7,115
    )
    
    
    (6,550
    )Interest-rate swap
    
    
    10
    
    
    
    113$
    1,955
    
    
    $
    1,219
  Year Ended June 30,2005
    
    
    2004
    
    
    2003(in thousands)Federal income tax provision on income at
statutory rate
    
    $
    15,702
    
    
    $
    9,948
    
    
    $
    7,449State taxes, net of federal benefit
    
    
    1,795
    
    
    
    1,421
    
    
    
    959Other
    
    
    
    
    
    
    1
    
    
    
    99Income tax provision
    
    $
    17,497
    
    
    $
    11,370
    
    
    $
    8,507
 13. COMMITMENTS AND CONTINGENCIES
 Lease Commitments
  Year Ending June 30:2006
    
    $
    23,7102007
    
    
    18,0032008
    
    
    11,2532009
    
    
    5,2702010
    
    
    2,179Remaining years
    
    
    303$
    60,718
  14. EMPLOYEE BENEFITS PLANS
  87




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##### Table of Contents



15. RELATED PARTY TRANSACTIONS
 Loans Receivable, Net
   16. DISCONTINUED OPERATIONS
  17. PENDING LAWSUITS AND SETTLEMENTS
 Purdie v. Ace Cash Express, Inc. et al. Purdie
     88




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##### Table of Contents



18. COMMON STOCK OFFERING
   19. LEASE ACCOUNTING RESTATEMENT
     89




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##### Table of Contents



Lease
    
    
    June 30, 2004June 30, 2004
    
    
    Adjustment
    
    
    Restated(in thousands)Assets:Property, plant and equipment
    
    $
    30,721
    
    
    $
    (3,385
    )
    
    $
    27,336Total adjustment
    
    
    
    
    
    $
    (3,385
    )Liabilities:Deferred income tax
    
    $
    5,684
    
    
    $
    (2,550
    )
    
    $
    3,134Other liabilities
    
    
    420
    
    
    
    2,991
    
    
    
    3,411Retained earnings
    
    
    75,296
    
    
    
    (3,826
    )
    
    
    71,470Total adjustment
    
    
    
    
    
    $
    (3,385
    )
  Year EndedJune 30, 2005(in thousands)Occupancy expense
    
    $
    217Depreciation expense
    
    
    886Headquarters expense
    
    
    (181
    )Other depreciation and amortization
    
    
    27Total adjustment before tax
    
    
    949Provision for income tax
    
    
    380Net after tax adjustment
    
    $
    569
 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)2005: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
    
    
    
    27,366Diluted 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
    
    
    
    17,052Diluted earnings per share
    
    
    .28
    
    
    
    .34
    
    
    
    .72
    
    
    
    .16
    
    
    
    1.492003:Revenues
    
    $
    56,061
    
    
    $
    57,295
    
    
    $
    67,167
    
    
    $
    53,765
    
    
    $
    234,289Gross margin
    
    
    17,678
    
    
    
    17,894
    
    
    
    26,648
    
    
    
    16,655
    
    
    
    78,875Income from continuing operations
    
    
    2,406
    
    
    
    1,910
    
    
    
    2,616
    
    
    
    5,344
    
    
    
    12,276Diluted earnings per share from
continuing operations
    
    
    .24
    
    
    
    .19
    
    
    
    .26
    
    
    
    .52
    
    
    
    1.20Net income
    
    
    2,406
    
    
    
    2,409
    
    
    
    2,616
    
    
    
    5,344
    
    
    
    12,775Diluted earnings per share
    
    
    .24
    
    
    
    .24
    
    
    
    .26
    
    
    
    .52
    
    
    
    1.25
 90




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON SCHEDULE
    
 91




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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, 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
    )
    
    $
    0.0June 30, 2003:Loan loss allowance
    
    $
    12.2
    
    
    $
    19.3
    
    
    $
    
    
    
    $
    (22.8
    )
    
    $
    8.7Loan loss liability to Republic Bank
    
    $
    
    
    
    $
    2.9
    
    
    $
    
    
    
    $
    
    
    
    $
    2.9Restructure reserve
    
    $
    0.4
    
    
    $
    
    
    
    $
    
    
    
    $
    (0.2
    )
    
    $
    0.2
 
 (a)
    
    This schedule should be read in conjunction with the Companys audited consolidated financial
statements and related notes thereto. 92




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##### Table of Contents



INDEX TO EXHIBITS
 Exhibit Number
    
    Exhibit10.50
    
    Third Amendment to the Marketing and Services Agreement dated as of July 26, 2005,
between Republic Bank & Trust Company and the Company.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.)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.
 93