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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
January 24, 2006
(Date of Report - Date of Earliest Event Reported)
FIRST CASH FINANCIAL SERVICES, INC.
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
0-19133 75-2237318
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(Commission File Number) (IRS Employer Identification No.)
690 East Lamar Blvd., Suite 400, Arlington, Texas 76011
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(Address of principal executive offices, including zip code)
(817) 460-3947
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(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange
Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
First Cash Financial Services, Inc. has issued a press release announcing its
financial results for the quarter and year ended December 31, 2005. The
Company's press release dated January 24, 2006 announcing the results is
attached hereto as Exhibit 99.1 and is incorporated by reference in its entirety
into this Item 2.02.
The information provided in this Item 2.02 shall not be deemed "filed" for
purposes of the Securities Act of 1934, as amended, or otherwise subject to the
liabilities of that section, nor shall such information be deemed incorporated
by reference in any filing under the Securities Act of 1933, as amended, except
as shall be expressly set forth by the specific reference in such filing.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(d) Exhibits:
99.1 Press Release date January 24, 2006 announcing the Company's financial
results for the quarter and year ended December 31, 2005.
2
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: January 24, 2006 FIRST CASH FINANCIAL SERVICES, INC.
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(Registrant)
/s/ R. DOUGLAS ORR
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R. Douglas Orr
Chief Accounting Officer
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EXHIBIT INDEX
Exhibit Number Document
- -------------- -------------------------------------
99.1 Press release dated January 24, 2006.
4
Exhibit 99.1
FIRST CASH FINANCIAL SERVICES REPORTS 31% INCREASE IN FOURTH QUARTER EPS;
RECORDS 20TH CONSECUTIVE QUARTER OF DOUBLE-DIGIT EPS GROWTH;
EARNINGS GUIDANCE INITIATED FOR 2006
ARLINGTON, Texas, Jan. 24 /PRNewswire-FirstCall/ -- First Cash Financial
Services, Inc. (Nasdaq: FCFS) today announced record-setting revenues, net
income and earnings per share for the three months and year ended December 31,
2005. This marked the Company's 20th consecutive quarter to achieve double-
digit earnings per share growth. In addition, the Company announced initial
earnings guidance for Fiscal 2006.
Earnings
* Diluted earnings per share for the fourth quarter of 2005 were $0.47,
a 31% increase compared to $0.36 diluted earnings per share in the
fourth quarter of 2004.
* Diluted earnings per share for Fiscal 2005 were $1.53. This represents
25% growth over 2004 diluted earnings per share of $1.22.
* Net income for the fourth quarter of 2005 was $7.7 million, a 27% gain
over fourth quarter 2004 net income of $6.1 million. Net income for
Fiscal 2005 was $25.4 million, compared to $20.7 million for Fiscal
2004, an increase of 23%.
Revenues
* Consolidated revenues for the fourth quarter of 2005 increased 18%,
totaling $60 million, compared to $51 million in the comparative 2004
period. Total revenues for Fiscal 2005 were $208 million, compared to
$180 million for Fiscal 2004, representing an increase of 16%.
* Same-store revenues for the fourth quarter of 2005 increased 11% over
the comparable prior-year period. The same-store revenue increases
were realized across all major revenue lines, which include
merchandise sales, pawn service fees, and payday advance/ credit
services fees.
* Pawn service fees increased 22% in the fourth quarter of 2005 compared
to the prior year, while aggregate short-term advance and credit
services fees increased 19% over the same period. For the year,
revenues from pawn service fees and short-term advance/credit services
fees increased by 18% and 12%, respectively.
* Total merchandise sales for the fourth quarter of 2005 were up 17%
over the same quarter of 2004, and increased 18% for all of 2005
compared to the prior year. Retail sales, which are net of non-retail
sales of scrap jewelry, increased by 18% and 16% for the quarter and
full year, respectively, as compared to the same prior-year periods.
Scrap jewelry sales for the fourth quarter increased from $4.9 million
in 2004 to $5.4 million in 2005 and also increased for the full year
from $16.7 million in 2004 to $20.8 million in 2005.
Store Count & Asset Growth
* The Company opened 50 new stores during 2005, bringing the total store
count to 328 units at December 31, 2005. In addition, the Company
operates 40 financial services kiosks located inside convenience
stores.
* Total pawn receivables increased 17%, from $23.4 million at December
31, 2004, to $27.3 million at December 31, 2005. Pawn receivables in
the Company's Mexico stores increased by 30% over the past twelve
months, while pawn receivables in its U.S. stores increased by 11%
over the same period.
* During the third quarter of 2005 the Company transitioned its short
term advance product in all Texas locations from a bank-funded payday
loan model to its new credit services product. As of December 31,
2005, the Company's credit services customers had current loans
outstanding with an independent lender in the amount of $10.7 million.
The combined payday advance and credit services-originated loan
balances at year end increased 11% compared to the prior year.
Operating Metrics
* The consolidated operating margin, calculated as income before taxes
as a percentage of revenues, improved to 19.7% for the current
quarter, compared to 18.9% for the same period of 2004. For the full
year of 2005, the operating margin increased to 19.1%, compared to
18.3% in 2004.
* The Company's return on stockholders' equity increased to 16.6% in
Fiscal 2005, compared to 15.4% in Fiscal 2004.
* Gross margins on total merchandise sales for the fourth quarter of
2005 were 40%, a gain over the 39% margin recorded in the prior-year
quarter. For the year, gross margins on merchandise sales were 40%,
which was consistent with the prior year. Retail merchandise sales
margins, which exclude bulk sales of scrap jewelry, were 44% for the
fourth quarter of 2005, an increase over the 43% margin in the prior
year. For the full year, retail margins were 44% in both 2005 and
2004.
* Inventory turns for Fiscal 2005 improved to 3.2 times, compared to 3.1
in Fiscal 2004.
* The payday advance and credit services loss provision increased from
21.4% of fees in Fiscal 2004 to 22.7% in Fiscal 2005. During the year,
the Company received approximately $1.6 million from the sale of
certain payday advance receivables written-off in 2004 and in prior
years, which was recorded as a credit to the overall loss provision,
as are all recoveries of receivables previously written-off. It is
anticipated that sales of selected charged-off receivables, along with
the implementation of other collection improvement initiatives, will
continue into future periods for the purpose of ongoing reduction of
the payday advance and credit services loss provision.
Financial Position & Liquidity
* Earnings before interest, taxes, depreciation and amortization
(EBITDA) for Fiscal 2005 totaled $45.2 million, an increase of 22%
compared to $37.0 million for Fiscal 2004. The Company provides a
detailed reconciliation of this non-GAAP financial measure to net
income elsewhere in this release.
* Cash balances as of December 31, 2005 totaled almost $43 million, of
which $24 million was invested in interest-bearing cash reserve
accounts.
* With total assets of $186 million and total liabilities of $23 million
as of December 31, 2005, the ratio of total assets to total
liabilities is 8 to 1, while the Company's current ratio stands at 7
to 1.
2006 Outlook
* The Company forecasts Fiscal 2006 diluted earnings per share to be in
a range of $1.81 to $1.85. The mid-point of this forecast represents a
20% increase over 2005 diluted earnings per share.
* Store openings in 2006 are expected to be in a range of 60 to 70 new
locations. The Company expects to continue opening both pawn stores in
Mexico and payday advance stores in the United States during 2006.
Commentary & Analysis
Mr. Alan Barron, Chief Executive Officer and Chief Operating Officer,
commented on the Company's operating results, "We are pleased to report First
Cash's operating results for Fiscal 2005, which was another record setting year
for revenues, net income and earnings per share. Our fourth quarter revenue and
earnings gains were particularly strong, which provides us tremendous momentum
as we enter Fiscal 2006."
First Cash achieved a number of significant milestones during 2005, such as
in April, when the Company opened its 300th full-service store location. Annual
revenues topped $200 million for the first time in Company history, and during
2005, the Company was recognized for the fourth consecutive year by Forbes
Magazine as one of the 200 Best Small Companies. First Cash attained another
milestone at year end 2005, when it recorded its 20th consecutive quarter, or
five years, of double-digit earnings growth.
The quality of the Company's revenue and earnings growth in 2005 was
evidenced through continued improvements in operating leverage and cash flows.
The Company's stock price performance in 2005 was also strong in a year that
most competitors in the specialty consumer finance sector had flat or negative
stock price performance. Management believes that this is a direct result of
First Cash's focus on consistent quality growth delivered across multiple
product lines and geographic markets.
The Company continues to execute its successful long-term expansion
strategy, which is focused on new store openings in high-potential markets in
the U.S. and Mexico. Significantly, the new stores opened in 2005 are ramping up
to profitability at a faster rate than the comparable class of stores opened in
2004. During 2006, the Company anticipates that it will open new stores in
additional states and/or regions in both the U.S. and Mexico.
The strong financial position of the Company provides flexibility for
continued growth and investment. First Cash utilized operating cash flows in
2005 to fund store expansion activities and loan growth, while also repurchasing
approximately $11 million of its stock. Additionally, the Company had no
interest bearing debt during 2005 and significantly increased its invested cash
reserve positions throughout the year.
In summarizing the Company's expectations for 2006 and beyond, Mr. Barron
said, "First Cash is well-positioned for significant future growth in earnings,
revenues and new store locations. Our core business model for both the pawn and
payday advance products continues to deliver proven earnings growth and
generates exceptional cash flows. The improved revenue and profit streams,
affected in part due to the introduction of the credit services product during
the second half of 2005, will be in place for the full 2006 fiscal year. We are
excited as well about new expansion markets in both our U.S. and Mexico
operating regions where we have built the capability and capacity to efficiently
expand at a record rate in 2006. Our balance sheet is strong and we have the
flexibility and resources to make future strategic investments in our
infrastructure and to pursue new business and revenue opportunities as they
arise. In short, we have high expectations for substantial future growth and
confidence in our ability to continue delivering long-term value for our
shareholders."
Forward-Looking Information
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," "projects," "expects," "may," "estimates,"
"should," "plans," "intends," "could," 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 Company's expectations of earnings per share, store
openings, loss provisions, future liquidity and cash flows. 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 release speak only as of the date of this
statement, 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 circumstances
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
release. Such factors are difficult to predict and many are beyond the control
of the Company and may include changes in regional, national or international
economic conditions, changes in consumer borrowing and repayment behaviors,
changes or increases in competition, the ability to locate, open and integrate
new stores, the ability to integrate and operate as a credit services
organization in Texas, the ability to successfully refer credit services
customers to an independent lender who can provide credit to these customers,
new legislative initiatives or governmental regulations or changes to existing
regulations affecting payday advance businesses, credit services organizations
and pawn businesses in both the U.S. and Mexico, unforeseen litigation, changes
in interest rates, changes in tax rates or policies, changes in gold prices,
changes in foreign currency exchange rates, future business decisions, and other
uncertainties. These and other risks and uncertainties are indicated in the
Company's 2004 Annual Report on Form 10-K and updated in subsequent quarterly
reports on Form 10-Q.
About First Cash
First Cash Financial Services, Inc. and its subsidiaries are engaged in the
operation of pawn and consumer credit stores, which lend money on the collateral
of pledged personal property, retail previously-owned merchandise acquired
through loan forfeitures, provide payday advances, and offer other financial and
credit services products. The Company owns and operates stores in eleven U.S.
states and seven states in Mexico. First Cash is also an equal partner in Cash &
Go, Ltd., a joint venture, which owns and operates 40 check- cashing and
financial services kiosks located inside convenience stores.
First Cash has been recognized for four consecutive years by Forbes
magazine as one of its "200 Best Small Companies." This annual ranking is based
on a combination of profitability and growth performance measures over the most
current one and five-year periods. First Cash was also recently ranked for the
second consecutive year by Fortune Small Business magazine on the "FSB 100:
America's Fastest-Growing Small Public Companies." First Cash's common stock is
traded on the Nasdaq Stock Market under the ticker symbol "FCFS" and it is a
component Company in the Russell 2000 Index.
FIRST CASH FINANCIAL SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Quarter Ended Year Ended
December 31, December 31,
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2005 2004 2005 2004
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(unaudited) (unaudited)
(in thousands, except per share amounts)
Revenues:
Merchandise sales $ 29,917 $ 25,642 $ 102,139 $ 86,745
Pawn service fees 11,565 9,487 40,820 34,663
Short-term advance and
credit services fees 17,750 14,936 60,881 54,123
Check cashing fees 712 714 2,900 3,030
Other 197 322 1,035 1,252
60,141 51,101 207,775 179,813
Cost of revenues:
Cost of goods sold 18,054 15,726 61,659 52,056
Short-term advance and
credit services loss
provision 4,952 3,146 13,808 11,559
Check cashing returned
items expense 95 73 301 252
23,101 18,945 75,768 63,867
Gross profit 37,040 32,156 132,007 115,946
Expenses:
Store operating expenses 17,931 16,340 67,430 61,063
Administrative expenses 5,736 4,967 19,412 17,837
Depreciation 1,609 1,191 5,804 4,173
Interest expense --- 13 --- 73
Interest income (100) (25) (317) (67)
25,176 22,486 92,329 83,079
Income before income taxes 11,864 9,670 39,678 32,867
Provision for income taxes 4,143 3,578 14,295 12,161
Net income $ 7,721 $ 6,092 $ 25,383 $ 20,706
Net income per share:
Basic $ 0.49 $ 0.39 $ 1.61 $ 1.31
Diluted $ 0.47 $ 0.36 $ 1.53 $ 1.22
Weighted average common
shares outstanding:
Basic 15,700 15,801 15,753 15,754
Diluted 16,587 16,931 16,612 17,034
FIRST CASH FINANCIAL SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31,
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2005 2004
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(unaudited)
(in thousands)
ASSETS:
Cash and cash equivalents $ 42,741 $ 26,232
Service fees receivable 4,176 4,512
Pawn receivables 27,314 23,429
Short-term advance receivables 6,488 15,465
Inventories 21,987 17,644
Prepaid expenses and other current assets 5,430 3,649
Total current assets 108,136 90,931
Property and equipment, net 23,565 17,376
Goodwill 53,237 53,237
Other 1,016 799
$ 185,954 $ 162,343
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable $ 908 $ 856
Accrued liabilities 13,722 8,686
Total current liabilities 14,630 9,542
Deferred income taxes payable 8,616 8,755
Total liabilities 23,246 18,297
Stockholders' equity 162,708 144,046
$ 185,954 $ 162,343
STORE COUNT ACTIVITY
The following table details store openings and closings for the quarter and
year ended December 31, 2005:
Quarter Ended Dec. 31, 2005 Year Ended Dec. 31, 2005
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Payday Payday
Pawn Advance Total Pawn Advance Total
Stores Stores Stores Stores Stores Stores
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Beginning of
period count 219 94 313 197 87 284
New stores opened 8 8 16 35 15 50
Stores closed or
consolidated (1) --- (1) (6) --- (6)
End of period
count 226 102 328 226 102 328
For the quarter and year ended December 31, 2005, the Company's 50% owned
joint venture, Cash & Go, Ltd., operated a total of 40 kiosks located inside
convenience stores in the state of Texas, which are not included in the above
chart. No kiosks were opened or closed during Fiscal 2005.
FIRST CASH FINANCIAL SERVICES, INC.
UNAUDITED NON-GAAP FINANCIAL INFORMATION - EBITDA
EBITDA is commonly used by investors to assess a company's leverage
capacity, liquidity and financial performance. EBITDA is not considered a
measure of financial performance under U.S. generally accepted accounting
principles ("GAAP"), and the items excluded from EBITDA are significant
components in understanding and assessing the Company's financial performance.
Since EBITDA is not a measure determined in accordance with GAAP and is thus
susceptible to varying calculations, EBITDA, as presented, may not be comparable
to other similarly titled measures of other companies. EBITDA should not be
considered as an alternative to net income, cash flows provided by or used in
operating, investing or financing activities or other financial statement data
presented in the Company's consolidated financial statements as an indicator of
financial performance or liquidity. Non-GAAP measures should be evaluated in
conjunction with, and are not a substitute for, GAAP financial measures. The
following table provides a reconciliation of net income to EBITDA (amounts in
thousands):
Year Ended December 31,
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2005 2004
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Net income $ 25,383 $ 20,706
Adjustments:
Interest expense --- 73
Interest income (317) (67)
Depreciation 5,804 4,173
Income taxes 14,295 12,161
Earnings before interest, income taxes,
depreciation and amortization $ 45,165 $ 37,046
SOURCE First Cash Financial Services, Inc.
-0- 01/24/2006
/CONTACT: Rick Wessel, President, or Doug Orr, Executive Vice President &
Chief Financial Officer, both of First Cash Financial Services, Inc.,
+1-817-505-3199, or investorrelations@firstcash.com /
/Web site: http://www.firstcash.com /