FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended Commission File Number:
June 30, 2002 0-19133
FIRST CASH FINANCIAL SERVICES, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-2237318
(State of Incorporation) (IRS Employers
Identification Number)
690 East Lamar, Suite 400
Arlington, Texas
(Address of principal executive 76011
offices) (Zip Code)
(817)460-3947
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13(a) or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes x No ___
As of August 12, 2002, there were 8,871,187 shares of Company common stock,
par value $.01 per share ("Common Stock"), issued and outstanding.
Part I. Financial Information
Item 1. Financial Statements
FIRST CASH FINANCIAL SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2002 2001
------- -------
(unaudited)
(in thousands, except share data)
ASSETS
Cash and cash equivalents................... $ 12,177 $ 11,252
Service charges receivable.................. 2,636 2,817
Receivables................................. 22,620 23,556
Inventories................................. 11,301 12,681
Prepaid expenses and other current assets... 1,600 1,226
Income taxes receivable..................... 780 434
------- -------
Total current assets .................... 51,114 51,966
Property and equipment, net................. 10,330 10,034
Intangible assets, net...................... 53,194 53,194
Receivable from Cash & Go, Ltd.............. 6,271 7,455
Other....................................... 173 157
------- -------
$121,082 $122,806
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt and
notes payable............................. $ 1,606 $ 1,385
Accounts payable and accrued expenses....... 10,190 10,041
Revolving credit facility................... - 32,000
------- -------
Total current liabilities ............... 11,796 43,426
Revolving credit facility................... 24,500 -
Long-term debt and notes payable, net of
current portion........................... 653 1,608
Deferred income taxes....................... 4,389 3,669
------- -------
41,338 48,703
------- -------
Stockholders' equity:
Preferred stock; $.01 par value;
10,000,000 shares authorized; no shares
issued or outstanding ................... - -
Common stock; $.01 par value; 20,000,000
shares authorized; 9,525,368 and
9,417,868 shares issued, respectively;
8,871,187 and 8,763,687 shares
outstanding, respectively ............... 96 95
Additional paid-in capital ............... 51,908 51,255
Retained earnings ........................ 35,872 30,819
Common stock receivables from officers ... (5,117) (5,051)
Common stock held in treasury, at cost,
654,181 and 654,181 shares, respectively (3,015) (3,015)
------- -------
79,744 74,103
------- -------
$121,082 $122,806
======= =======
The accompanying notes are an integral
part of these condensed consolidated financial statements.
FIRST CASH FINANCIAL SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Six Months Ended
------------------- ------------------
June 30, June 30, June 30, June 30,
2002 2001 2002 2001
------- ------- ------- -------
(unaudited, in thousands, except per share amounts)
Revenues:
Merchandise sales................... $ 12,578 $ 12,793 $ 27,333 $ 27,289
Service charges..................... 13,368 12,678 26,113 25,377
Check cashing fees.................. 653 555 1,384 1,180
Other............................... 268 373 488 697
------- ------- ------- -------
26,867 26,399 55,318 54,543
Cost of goods sold and expenses:
Cost of goods sold.................. 7,082 8,921 15,992 18,316
Operating expenses.................. 12,733 11,993 24,768 23,120
Interest expense.................... 88 339 194 828
Depreciation........................ 586 549 1,141 1,091
Amortization ....................... - 382 - 764
Administrative expenses............. 2,848 1,834 5,328 4,670
------- ------- ------- -------
23,337 24,018 47,423 48,789
------- ------- ------- -------
Income before income taxes............... 3,530 2,381 7,895 5,754
Provision for income taxes............... 1,271 857 2,842 2,071
------- ------- ------- -------
Income from continuing operations........ 2,259 1,524 5,053 3,683
Gain (loss) from discontinued operations,
net of taxes .......................... - 26 - (7)
------- ------- ------- -------
Net income............................... $ 2,259 $ 1,550 $ 5,053 $ 3,676
======= ======= ======= =======
Net income per share:
Basic
Income from continuing operations $ 0.26 $ 0.18 $ 0.57 $ 0.42
Gain (loss) from discontinued
operations......................... - - - -
------- ------- ------- -------
Net income .......................... $ 0.26 $ 0.18 $ 0.57 $ 0.42
======= ======= ======= =======
Diluted
Income from continuing operations $ 0.23 $ 0.17 $ 0.53 $ 0.40
Gain (loss) from discontinued
operations......................... - - - -
------- ------- ------- -------
Net income .......................... $ 0.23 $ 0.17 $ 0.53 $ 0.40
======= ======= ======= =======
The accompanying notes are an integral
part of these condensed consolidated financial statements.
FIRST CASH FINANCIAL SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six-Month Period
Ended June 30,
--------------------
2002 2001
-------- --------
(unaudited, in thousands)
Cash flows from operating activities:
Net income from continuing operations .......... $ 5,053 $ 3,683
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation and amortization................ 1,141 1,855
Discontinued operations...................... - 286
Changes in operating assets and liabilities:
(Increase) decrease in service
charges receivable .......................... 181 (16)
Decrease in inventories ....................... 1,380 5,122
Increase in prepaid expenses and other assets.. (390) (521)
Increase in accounts payable and
accrued expenses .......................... 149 909
Increase (decrease) in income taxes payable 374 (14)
-------- --------
Net cash flows from operating activities..... 7,888 11,304
-------- --------
Cash flows from investing activities:
Net decrease in receivables .................... 936 55
Purchases of property and equipment ............ (1,437) (669)
(Increase) decrease in receivable from
Cash & Go, Ltd ............................... 1,184 (2,252)
-------- --------
Net cash flows from investing activities ....... 683 (2,866)
-------- --------
Cash flows from financing activities:
Proceeds from debt ............................. 2,500 8,700
Repayments of debt ............................. (10,734) (13,536)
Common stock receivables from officers ......... (66) (46)
Proceeds from options exercised ................ 654 -
Purchase of treasury stock ..................... - (500)
-------- --------
Net cash flows from financing activities..... (7,646) (5,382)
-------- --------
Increase in cash and cash equivalents............. 925 3,056
Cash and cash equivalents at beginning
of the period .................................. 11,252 6,611
-------- --------
Cash and cash equivalents at end of the period.... $ 12,177 $ 9,667
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest ...................................... $ 484 $ 1,422
======== ========
Income taxes .................................. $ 2,355 $ 2,081
======== ========
The accompanying notes are an integral
part of these condensed consolidated financial statements.
FIRST CASH FINANCIAL SERVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements,
including the notes thereto, include the accounts of First Cash Financial
Services, Inc. (the "Company") and its wholly owned subsidiaries. Such
unaudited consolidated financial statements are condensed and do not include
all disclosures and footnotes required by generally accepted accounting
principles in the United States of America for complete financial
statements. Such interim period financial statements should be read in
conjunction with the Company's consolidated financial statements which are
included in the Company's December 31, 2001 Annual Report on Form 10-K. All
significant inter-company accounts and transactions have been eliminated in
consolidation. The consolidated financial statements as of June 30, 2002
and for the periods ended June 30, 2002 and 2001 are unaudited, but in
management's opinion, include all adjustments (consisting of only normal
recurring adjustments) considered necessary to present fairly the financial
position, results of operations and cash flows for such interim periods.
Operating results for the period ended June 30, 2002 are not necessarily
indicative of the results that may be expected for the full fiscal year.
Note 2 - Revolving Credit Facility
The Company maintains a long-term line of credit with a group of
commercial lenders. Subsequent to June 30, 2002, the Company renewed and
extended this long-term line of credit (the "New Credit Facility"). The New
Credit Facility provides a $30,000,000 long-term line of credit that matures
on September 1, 2005 and bears interest at the prevailing LIBOR rate (which
was approximately 1.8% at June 30, 2002) plus an applicable margin based on
a defined leverage ratio for the Company. Based on the Company's existing
leverage ratio, the margin is currently 1.375%, the most favorable rate
provided under the terms of the agreement. Amounts available under the New
Credit Facility will be limited to 300% of the Company's earnings before
income taxes, interest, depreciation and amortization for the trailing
twelve months. Under the terms of the New Credit Facility, the Company will
be required to maintain certain financial ratios and comply with certain
technical covenants. The Company was in compliance with these requirements
and covenants of the previous credit facility as of June 30, 2002 and of the
New Credit Facility as of August 12, 2002.
Note 3 - Costs in Excess of Net Assets Acquired
The Company adopted Statement of Financial Accounting Standards
("SFAS") No. 142, Goodwill and Other Intangible Assets, effective January 1,
2002. Under SFAS No. 142, goodwill is no longer amortized, but reviewed for
impairment annually, or more frequently if certain indicators arise. The
Company has completed the initial step of a transitional fair value
impairment test and determined that no impairment of recorded goodwill
existed at January 1, 2002 or June 30, 2002.
Subsequent impairment losses, if any, will be reflected in operating
income or loss in the consolidated statement of income for the period in
which such loss is realized. Had the Company been accounting for its
goodwill under SFAS No. 142 for the three months and six months ended June
30, 2001, the Company's net income would have been as follows:
Three Months Ended Six Months Ended
--------------- ---------------
June 30, June 30, June 30, June 30,
2002 2001 2002 2001
------ ------ ------ ------
Reported net income $ 2,259 $ 1,550 $ 5,053 $ 3,676
Add: amortization of costs in excess
of net assets acquired, net of tax - 245 - 489
------ ------ ------ ------
Pro forma adjusted net income $ 2,259 $ 1,795 $ 5,053 $ 4,165
====== ====== ====== ======
Note 4 - Earnings Per Share
The following table sets forth the computation of basic and diluted
earnings per share (in thousands, except per share data):
Three Months Ended Six Months Ended
--------------- ---------------
June 30, June 30, June 30, June 30,
2002 2001 2002 2001
------ ------ ------ ------
Numerator:
Income from continuing operations
for calculating basic and diluted
earnings per share $ 2,259 $1,524 $ 5,053 $ 3,683
Gain (loss) from discontinued
operations for calculating basic
and diluted earnings per share - 26 - (7)
------ ------ ------ ------
Net income for calculating basic
and diluted earnings per share $ 2,259 $ 1,550 $ 5,053 $ 3,676
====== ====== ====== ======
Denominator:
Weighted-average common shares
for calculating basic earnings
per share 8,825 8,667 8,794 8,701
Effect of dilutive securities:
Stock options and warrants 917 617 805 426
------ ------ ------ ------
Weighted-average common
shares for calculating diluted
earnings per share 9,742 9,284 9,599 9,127
====== ====== ====== ======
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
First Cash Financial Services, Inc. (the "Company") is the nation's
third largest publicly traded pawnshop operator and currently owns pawn
stores in Texas, Oklahoma, Washington, D.C., Maryland, Missouri, South
Carolina, Virginia and Mexico. The Company's pawn stores engage in both
consumer finance and retail sales activities. The Company's pawn stores
provide a convenient source for consumer advances, advancing money against
pledged tangible personal property such as jewelry, electronic equipment,
tools, sporting goods and musical equipment. These pawn stores also
function as retailers of previously owned merchandise acquired in forfeited
pawn transactions and over-the-counter purchases from customers. The
Company's pawn stores also offer short-term, secured advances ("short-term
advances").
The Company also currently owns check cashing and short-term advance
stores in Texas, California, Washington, Oregon, Illinois, and Washington,
D.C. These stores provide a broad range of consumer financial services,
including check cashing, money order sales, wire transfers, bill payment
services and short-term advances. In addition, the Company is a 50% partner
in Cash & Go, Ltd., a Texas limited partnership, which currently owns and
operates 59 financial services kiosks located inside convenience stores.
For the quarter ended June 30, 2002 the Company's revenues were derived
47% from retail activities, 50% from lending activities, and 3% from other
sources, including check-cashing fees. The Company's primary business plan
is to significantly expand its short-term advance operations by opening new
stores in Texas and other states, by accelerating the growth of its pawn
operations in Mexico, and by expanding its short-term advance operations in
its existing pawn stores.
Although the Company has had significant increases in revenues due
primarily to new store openings, and secondarily to acquisitions, the
Company has also incurred increases in operating expenses attributable to
the additional stores and increases in administrative expenses attributable
to building a management team and the support personnel required by the
Company's growth. Operating expenses consist of all items directly related
to the operation of the Company's stores, including salaries and related
payroll costs, rent, utilities, equipment depreciation, advertising,
property taxes, licenses, supplies, security and net returned checks (net
bad debts) for both check cashing and short term advances. Administrative
expenses consist of items relating to the operation of the corporate office,
including the salaries of corporate officers, area supervisors and other
management, accounting and administrative costs, liability and casualty
insurance, outside legal and accounting fees and stockholder-related
expenses.
RESULTS OF OPERATIONS
Three months ended June 30, 2002 compared to the three months ended June 30,
2001
Total revenues increased 1.8% to $26,867,000 for the three months ended
June 30, 2002 ("the Second Quarter of 2002") as compared to revenues of
$26,399,000 for the three months ended June 30, 2001 ("the Second Quarter of
2001"). Of the $468,000 increase in total revenues, $780,000 was
attributable to increased retail merchandise sales, $690,000 was
attributable to increased service charges, while other income and check
cashing fees decreased $7,000 and jewelry scrap sales decreased $995,000.
Excluding the impact of jewelry scrap sales, the Company's revenues
increased 5.9% in the Second Quarter of 2002 compared to the same period of
2001. As a percentage of total revenues, merchandise sales decreased from
49% to 47%, service charges increased from 48% to 50%, check cashing fees
and other income remained unchanged at 3% of total revenues during both the
Second Quarter of 2001 and the Second Quarter of 2002.
Gross profit as a percentage of merchandise sales increased to 44%
during the Second Quarter of 2002 compared to 30% during the Second Quarter
of 2001. Excluding jewelry scrap sales, the Company's margins increased
from 41% during the Second Quarter of 2001 to 43% in the Second Quarter
of 2002. This increase in retail margin is a result of the Company's
ongoing initiatives to control expenses, including the strategic decision
beginning in 2000 to lower loan-to-value ratios used to calculate pawn loan
amounts. The reduction in the loan-to-value ratios has served to reduce the
cost of inventory acquired through pawn forfeitures and has been implemented
without a significant impact on the volume of pawn loans written.
The aggregate receivables balance (pawn loans plus payday advances)
increased 3% from $21,988,000 as of June 30, 2001 to $22,620,000 as of June
30, 2002. Of the $632,000 increase, $862,000 was attributable to the net
addition of 28 stores acquired or opened subsequent to June 30, 2001. The
remaining decrease of $230,000 was derived from the decrease in aggregate
receivable balances at the 142 stores in operation at both June 30, 2001 and
June 30, 2002.
Operating expenses increased 6% to $12,733,000 during the Second
Quarter of 2002 compared to $11,993,000 during the Second Quarter of 2001
primarily due to the net addition of 26 stores since April 1, 2001, which is
an 18% increase in the total store count. Administrative expenses increased
$1,014,000 to $2,848,000 during the Second Quarter of 2002 compared to
$1,834,000 during the Second Quarter of 2001. This variance relates to
increased store management commissions and bonus accruals during the Second
Quarter 2002, which are reflective of the Company's increased profitability.
Interest expense decreased 74% from $339,000 in the Second Quarter of 2001
to $88,000 in the Second Quarter of 2002, due to lower interest rates and an
overall lower level of debt during the Second Quarter of 2002 compared to
the Second Quarter of 2001.
For the Second Quarter of 2002 and the Second Quarter of 2001, the
Company's tax provision of 36% of income before income taxes differed from
the statutory federal rate of 34% primarily due to state income taxes, net
of the federal tax benefit.
Six months ended June 30, 2002 compared to six months ended June 30, 2001
Total revenues increased 1.4% to $55,318,000 for the six months ended
June 30, 2002 (the "Six-Month 2002 Period") as compared to $54,543,000 for
the six months ended June 30, 2001 (the "Six-Month 2001 Period"). Of the
$775,000 increase in total revenues, $1,842,000 was attributable to an
increase in retail merchandise sales, $736,000 was attributable to increased
service charges, while check cashing fees and other income decreased $5,000
and jewelry scrap sales decreased $1,798,000. Excluding the impact of
jewelry scrap sales, the Company's revenues increased 5.0% in the first half
of 2002 compared to the same period of 2001. As a percentage of total
revenues, merchandise sales decreased from 50% to 49% during the Six-Month
2002 Period compared to the Six-Month 2001 Period, while service charges
remained flat at 47%. Check cashing fees and other income increased from 3%
to 4% of total revenues in the Six-Month 2002 Period compared to the Six-
Month 2001 Period.
Gross profit as a percentage of merchandise sales, the retail margin,
increased from 33% in the Six-Month 2001 Period to 41% in the Six-Month 2002
Period. Excluding jewelry scrap sales, the Company's margins increased from
41% in 2001 to 43% in 2002. This increase in retail margin is a result of
the Company's ongoing initiatives to control expenses, including the
strategic decision beginning in 2000 to lower loan-to-value ratios used to
calculate pawn loan amounts. The reduction in the loan-to-value ratios has
served to reduce the cost of inventory acquired through pawn forfeitures and
has been implemented without a significant impact on the volume of pawn
loans written.
The aggregate receivables balance (pawn loans plus payday advances)
increased 3% from $21,988,000 as of June 30, 2001 to $22,620,000 as of June
30, 2002. Of the $632,000 increase, $862,000 was attributable to the net
addition of 28 stores acquired or opened subsequent to June 30, 2001. The
remaining decrease of $230,000 was derived from the decrease in aggregate
receivable balances at the 142 stores in operation at both June 30, 2001 and
June 30, 2002.
Operating expenses increased 7% to $24,768,000 during the Six-Month
2002 Period compared to $23,120,000 during the Six-Month 2001 Period
primarily due to the net addition of 22 stores since January 1, 2001, which
is a 16% increase in the total store count. Administrative expenses
increased $658,000 to $5,328,000 during the Six-Month 2002 Period compared
to $4,670,000 during the Six-Month 2001 Period, primarily due to increased
store management commissions and bonus accruals, which are reflective of the
Company's increased profitability. Interest expense decreased to $194,000 in
the Six-Month 2002 Period compared to $828,000 in the Six-Month 2001 Period,
primarily due to significantly lower interest rates and lower overall level
of debt.
For both the Six-Month 2002 and 2001 Periods, the Company's tax
provision of 36% of income before income taxes differed from the statutory
rate of 34% primarily due to state income taxes, net of the federal tax
benefit.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operations and acquisitions have been financed with funds
generated from operations, bank and other borrowings, and the issuance of
the Company's securities.
The Company maintains a long-term line of credit with a group of
commercial lenders. Subsequent to June 30, 2002, the Company renewed and
extended this long-term line of credit (the "New Credit Facility"). The New
Credit Facility provides a $30,000,000 long-term line of credit that matures
on September 1, 2005 and bears interest at the prevailing LIBOR rate (which
was approximately 1.8% at June 30, 2002) plus an applicable margin based on
a defined leverage ratio for the Company. Based on the Company's existing
leverage ratio, the margin is currently 1.375%, the most favorable rate
provided under the terms of the agreement. Amounts available under the New
Credit Facility will be limited to 300% of the Company's earnings before
income taxes, interest, depreciation and amortization for the trailing
twelve months. Under the terms of the New Credit Facility, the Company will
be required to maintain certain financial ratios and comply with certain
technical covenants. The Company was in compliance with the requirements
and covenants of the previous credit facility as of June 30, 2002 and of the
New Credit Facility as of August 12, 2002. The Company is required to pay
an annual commitment fee of 1/5 of 1% on the average daily-unused portion of
the New Credit Facility commitment. The Company's New Credit Facility
contains provisions which will allow the Company to repurchase stock and/or
pay cash dividends, within certain parameters. Substantially all of the
unencumbered assets of the Company have been pledged as collateral against
indebtedness under the New Credit Facility.
As of June 30, 2002, the Company's primary sources of liquidity were
$12,177,000 in cash and cash equivalents, $2,636,000 in service charges
receivable, $22,620,000 in receivables, $11,301,000 in inventories and
$5,500,000 of available and unused funds under the Company's New Credit
Facility. The Company had working capital as of June 30, 2002 of
$39,318,000 and a total-liabilities-to-equity ratio of 0.52 to 1.
Net cash provided by operating activities for the Company during the
Six-Month 2002 Period was $7,888,000 as compared with $11,304,000 provided
by operating activities during the Six-Month 2001 Period, primarily due to
the decrease in inventory levels during the Six-Month 2001 period. Net cash
flows from investing activities during the Six-Month 2002 Period were
$683,000 as compared with $2,866,000 used by investing activities during the
Six-Month 2001 Period, primarily due to a decrease in the receivable from
Cash & Go, Ltd during the Six-Month 2002 period compared to an increase in
the comparable 2001 period. Net cash used for financing activities during
the Six-Month 2002 Period was $7,646,000 as compared to $5,382,000 during
the Six-Month 2001 Period.
The profitability and liquidity of the Company is affected by the
amount of pawns outstanding, which is controlled in part by the Company's
lending decisions. The Company is able to influence the frequency of pawn
redemption by increasing or decreasing the amount pawned in relation to the
resale value of the pledged property. Tighter credit decisions generally
result in smaller pawns in relation to the estimated resale value of the
pledged property and can thereby decrease the Company's aggregate pawn
balance and, consequently, decrease pawn service charges. Additionally,
small advances in relation to the pledged property's estimated resale value
tend to increase pawn redemptions and improve the Company's liquidity.
Conversely, providing larger pawns in relation to the estimated resale value
of the pledged property can result in an increase in the Company's pawn
service charge income. Also, larger average pawn balances can result in an
increase in pawn forfeitures, which increases the quantity of goods on hand
and, unless the Company increases inventory turnover, reduces the Company's
liquidity. The Company's renewal policy allows customers to renew pawns by
repaying all accrued interest on such pawns, effectively creating a new pawn
transaction. In addition to these factors, merchandise sales and the pace
of store expansions affect the Company's liquidity.
Management believes that the New Credit Facility and cash generated
from operations will be sufficient to accommodate the Company's current
operations for fiscal 2002. The Company has no significant capital
commitments. The Company currently has no written commitments for
additional borrowings, future acquisitions or additional capital. The
Company will evaluate acquisitions, if any, based upon opportunities,
acceptable financing, purchase price, strategic fit and qualified management
personnel.
The Company continues to add stores in accordance with its growth
strategy and targeted locations in the U.S. and Mexico. During the second
quarter, six new stores were opened, bringing the total of new stores added
during the first six months to 14. During the remainder of fiscal 2002, the
Company currently plans to open approximately 25 stores in markets
previously identified for strategic expansion. Secondarily, the Company
plans to increase its short-term advance operations in its existing pawn
stores. This expansion will be funded through the Company's New Credit
Facility. While the Company continually looks for, and is presented with
potential acquisition candidates, the Company has no definitive plans
or commitments for further acquisitions. If the Company encounters an
attractive opportunity to acquire or open a new store in the near future,
the Company will seek additional financing, the terms of which will be
negotiated on a case-by-case basis.
FORWARD LOOKING INFORMATION
Factors impacting 2002 will include the continued success of the Company's
short-term cash advance product and the continued growth in pawn loan
demand. Management will continue to pursue marketing and development
activities to enhance loan balances and promote short-term loans in 2002.
The continued impact in 2002 of still higher loan balances, improved bad
debt collection efforts, improved margins on retail sales, lower interest
rates on outstanding debt, new store openings and the further maturation of
those already in place should lead to continued growth in the Company's
earnings per share. Fiscal 2002's net income has been positively impacted
by the new accounting pronouncement dealing with the Company's treatment of
the amortization of goodwill and intangibles. Other factors that will
determine the level of earnings in 2002 include the direction of loan
balances, bad debt collections, retail sales, margins on retail sales,
interest rates on the Company's outstanding debt and the number of new store
openings. These factors lead management to an estimated range for earnings
per share from continuing operations for fiscal 2002 of between $1.04 and
$1.11 per share.
This release may contain forward-looking statements about the business,
financial condition and prospects of First Cash Financial Services, Inc.
Forward-looking statements can be identified by the use of forward-looking
terminology such as "believes," "expects," "may," "estimates," "will,"
"should," "plans," "intends," or "anticipates" or the negative thereof, or
other variations thereon, or comparable terminology, or by discussions of
strategy. Forward-looking statements in this release include, without
limitation, the earnings per share discussion above, the expectation of
increased loan growth, the expectation for additional store openings, and
the expectation of growth in the Company's short-term advance products.
These statements are made to provide the public with management's assessment
of the Company's business. Although the Company believes that the
expectations reflected in forward-looking statements are reasonable, there
can be no assurances that such expectations will prove to be accurate.
Security holders are cautioned that such forward-looking statements involve
risks and uncertainties. The forward-looking statements contained in this
report speak only as of the date of this report, and the Company expressly
disclaims any obligation or undertaking to release any updates or revisions
to any such statement to reflect any change in the Company's expectations or
any change in events, conditions or circumstance on which any such statement
is based. Certain factors may cause results to differ materially from those
anticipated by some of the statements made in this report. Such factors are
difficult to predict and many are beyond the control of the Company, but may
include changes in regional or national economic conditions, the ability to
integrate new stores, changes in governmental regulations, unforeseen
litigation, changes in interest rates or tax rates, future business
decisions and other uncertainties.
PART II. OTHER INFORMATION
ITEM 2. Changes in securities
During the six months ended June 30, 2002, the Company granted
616,000 stock purchase options and warrants with an exercise price of
$8.00 per share to various employees and directors of the Company.
During the six months ended June 30, 2002, the Company issued 107,500
shares of common stock relating to the exercise of outstanding stock
warrants and options for an aggregate exercise price of $654,000
(including income tax benefit).
The above referenced issuances were exempt from registration pursuant
to Section 4(2) of the Securities Act of 1933 and no underwriters
were utilized, or sales commissions paid in these transactions.
ITEM 4. Submission of matters to a vote of security holders
On July 18, 2002, the Company held its annual meeting of stockholders
and its stockholders voted for (or ratified) the following proxy
proposals as a result of a majority of the Company's outstanding
capital stock voting in favor of the proposals. The proposals
ratified at the July 18, 2002 annual stockholders' meeting are as
follows:
1. The stockholders ratified the re-election of Phillip E. Powell
as director.
2. The stockholders ratified the selection of Deloitte & Touche LLP
as independent auditors of the Company for the year ended
December 31, 2002.
3. The stockholders approved an increase in the number of shares
available for issuance in the Company's 1999 Stock Option Plan
from 1,200,000 shares of common stock to 2,500,000 shares of
common stock.
ITEM 6. Exhibits and reports on Form 8-K
CERTIFICATION
Each of the undersigned hereby certifies in his capacity as an officer of
First Cash Financial Services, Inc. (the "Company") that the Quarterly
Report of the Company on Form 10-Q for the period ended June 30, 2002 fully
complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 and that the information contained in such a report
fairly presents, in all material respects, the financial condition of the
Company at the end of such period and the results of operations of the
Company for such period.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: August 12, 2002 FIRST CASH FINANCIAL SERVICES, INC.
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(Registrant)
/s/ Phillip E. Powell /s/ Rick L. Wessel
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Phillip E. Powell Rick L. Wessel
Chairman of the Board and Chief Accounting Officer
Chief Executive Officer
