UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended Commission File Number:
September 30, 2005 0-19133
FIRST CASH FINANCIAL SERVICES, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-2237318
(state or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
690 East Lamar Blvd., Suite 400
Arlington, Texas 76011
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (817) 460-3947
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 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 ___
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Securities Exchange Act). Yes X No ___
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Securities Exchange Act). Yes ___ No X
As of October 26, 2005 there were 15,617,811 shares of Common Stock
outstanding.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRST CASH FINANCIAL SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
-------------------- ------------
2005 2004 2004
------- ------- -------
(unaudited)
(in thousands, except share data)
ASSETS
Cash and cash equivalents................ $ 29,657 $ 12,288 $ 26,232
Service fees receivable.................. 4,227 4,527 4,512
Pawn receivables......................... 29,152 24,859 23,429
Short-term advance receivables, net of
allowance of $246, $499 and $552,
respectively........................... 6,598 14,014 15,465
Inventories.............................. 21,461 18,074 17,644
Prepaid expenses and other current assets 1,812 1,303 1,378
Income taxes receivable.................. 789 598 867
------- ------- -------
Total current assets .................. 93,696 75,663 89,527
Property and equipment, net.............. 22,396 16,767 17,376
Goodwill................................. 53,237 53,237 53,237
Other.................................... 938 772 799
------- ------- -------
$170,267 $146,439 $160,939
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable......................... $ 945 $ 604 $ 856
Accrued expenses......................... 9,242 6,776 8,686
------- ------- -------
Total current liabilities ............. 10,187 7,380 9,542
Revolving credit facility................ - 2,000 -
Deferred income taxes payable............ 7,165 6,855 7,351
------- ------- -------
17,352 16,235 16,893
------- ------- -------
Stockholders' equity:
Preferred stock; $.01 par value;
10,000,000 shares authorized ........ - - -
Common stock; $.01 par value;
90,000,000 shares authorized ........ 168 161 166
Additional paid-in capital ............ 81,165 70,811 78,556
Retained earnings ..................... 95,102 71,348 77,440
Common stock held in treasury ......... (23,520) (12,116) (12,116)
------- ------- -------
152,915 130,204 144,046
------- ------- -------
$170,267 $146,439 $160,939
======= ======= =======
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 Nine Months Ended
September 30, September 30,
--------------------- --------------------
2005 2004 2005 2004
------- ------- ------- -------
(unaudited, in thousands, except per share amounts)
Revenues:
Merchandise sales $ 25,441 $ 22,006 $ 72,222 $ 61,103
Pawn service fees ........... 10,732 8,998 29,255 25,176
Short-term advance and
credit services fees....... 17,200 14,545 43,131 39,187
Check cashing fees .......... 671 683 2,188 2,316
Other ....................... 263 312 838 930
------- ------- ------- -------
54,307 46,544 147,634 128,712
------- ------- ------- -------
Cost of revenues:
Cost of goods sold........... 15,635 13,603 43,605 36,330
Short-term advance and credit
services loss provision.... 4,257 4,007 8,856 8,413
Check cashing returned
items expense.............. 72 50 206 179
------- ------- ------- -------
19,964 17,660 52,667 44,922
------- ------- ------- -------
Gross profit................... 34,343 28,884 94,967 83,790
------- ------- ------- -------
Expenses:
Store operating expenses..... 17,574 15,353 49,499 44,723
Administrative expenses...... 5,251 4,208 13,676 12,870
Depreciation................. 1,533 1,073 4,195 2,982
Interest expense ............ - 17 - 60
Interest income.............. (46) (10) (217) (42)
------- ------- ------- -------
24,312 20,641 67,153 60,593
------- ------- ------- -------
Income before income taxes..... 10,031 8,243 27,814 23,197
Provision for income taxes..... 3,661 3,053 10,152 8,583
------- ------- ------- -------
Net income..................... $ 6,370 $ 5,190 $ 17,662 $ 14,614
======= ======= ======= =======
Net income per share:
Basic..................... $ 0.41 $ 0.33 $ 1.12 $ 0.93
======= ======= ======= =======
Diluted................... $ 0.39 $ 0.31 $ 1.06 $ 0.86
======= ======= ======= =======
The accompanying notes are an integral part
of these condensed consolidated financial statements.
FIRST CASH FINANCIAL SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
--------------------
2005 2004
-------- --------
(unaudited, in thousands)
Cash flows from operating activities:
Net income ................................... $ 17,662 $ 14,614
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation .............................. 4,195 2,982
Short-term advance loss provision .......... 6,462 8,413
Stock option and warrant income tax benefit 1,147 5,859
Changes in operating assets and liabilities:
Service fees receivable .................... 285 (609)
Inventories ................................ (1,412) (895)
Prepaid expenses and other assets .......... (573) (428)
Accounts payable and accrued expenses ...... 645 (3,506)
Current and deferred income taxes ......... (108) 1,915
-------- --------
Net cash flows from operating activities . 28,303 28,345
-------- --------
Cash flows from investing activities:
Pawn receivables, net ........................ (8,128) (6,413)
Short-term advance receivables, net .......... 2,405 (8,668)
Purchases of property and equipment .......... (9,215) (5,331)
-------- --------
Net cash flows from investing activities . (14,938) (20,412)
-------- --------
Cash flows from financing activities:
Proceeds from debt ........................... - 10,000
Repayments of debt ........................... - (14,000)
Purchases of treasury stock .................. (11,404) (13,463)
Proceeds from exercise of stock options
and warrants................................ 1,464 5,971
-------- --------
Net cash flows from financing activities . (9,940) (11,492)
-------- --------
Change in cash and cash equivalents............ 3,425 (3,559)
Cash and cash equivalents at beginning
of the period................................ 26,232 15,847
-------- --------
Cash and cash equivalents at end of the period. $ 29,657 $ 12,288
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest ................................... $ - $ 68
======== ========
Income taxes ............................... $ 9,513 $ 808
======== ========
Supplemental disclosure of non-cash investing activity:
Non-cash transactions in connection with pawn
receivables settled through forfeitures of
collateral transferred to inventories $ 29,876 $ 24,842
======== ========
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. In
addition, the accompanying consolidated financial statements include the
accounts of Cash & Go, Ltd., a Texas limited partnership that operates
financial services kiosks inside convenience stores, in which the Company
has a 50% ownership interest. All significant intercompany accounts and
transactions have been eliminated.
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, 2004 Annual Report on Form 10-K. The
condensed consolidated financial statements as of September 30, 2005, and
for the three and nine-month periods ended September 30, 2005 and 2004, 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 periods ended September 30, 2005
are not necessarily indicative of the results that may be expected for the
full fiscal year.
Certain amounts in prior year comparative presentations have been
reclassified in order to conform to the 2005 presentation.
Note 2 - Revolving Credit Facility
The Company maintains a long-term line of credit with two commercial
lenders (the "Credit Facility"). The Credit Facility provides a $25,000,000
long-term line of credit that matures on April 15, 2007, and bears interest
at the prevailing LIBOR rate (which was approximately 3.9% at September 30,
2005) plus a fixed interest rate margin of 1.375%. Amounts available under
the Credit Facility are limited to 300% of the Company's earnings before
income taxes, interest, and depreciation for the trailing twelve months. At
September 30, 2005, the Company had no amounts outstanding under the
facility and $25,000,000 available for borrowings. Under the terms of the
Credit Facility, the Company is required to maintain certain financial
ratios and comply with certain technical covenants. The Company was in
compliance with the requirements and covenants of the Credit Facility as of
September 30, 2005, and October 26, 2005. The Company is required to pay an
annual commitment fee of 1/8 of 1% on the average daily unused portion of
the Credit Facility commitment. The Company's Credit Facility contains
provisions that 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 Credit Facility.
Note 3 - 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 Nine Months Ended
September 30, September 30,
------------------- -------------------
2005 2004 2005 2004
------ ------ ------ ------
Numerator:
Net income for calculating basic
and diluted earnings per share $ 6,370 $ 5,190 $17,662 $14,614
====== ====== ====== ======
Denominator:
Weighted-average common shares
for calculating basic earnings
per share 15,571 15,750 15,771 15,738
Effect of dilutive securities:
Stock options and warrants 862 1,080 850 1,330
------ ------ ------ ------
Weighted-average common
shares for calculating diluted
earnings per share 16,433 16,830 16,621 17,068
====== ====== ====== ======
Basic earnings per share $ 0.41 $ 0.33 $ 1.12 $ 0.93
====== ====== ====== ======
Diluted earnings per share $ 0.39 $ 0.31 $ 1.06 $ 0.86
====== ====== ====== ======
Note 4 - Employee Stock Incentive Plans
The Company accounts for its employee stock incentive plans under
Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock
Issued to Employees, and the related interpretations under Financial
Accounting Standards Board (FASB) Interpretation No. 44, Accounting for
Certain Transactions Involving Stock Compensation. Accordingly, no stock-
based employee compensation cost is reflected in net income as all options
and warrants granted had an exercise price greater than or equal to the
market value of the underlying common stock on the date of grant. In
accordance with SFAS No. 148, Accounting for Stock-Based Compensation -
Transition and Disclosure, the following table illustrates the effect on net
income and earnings per share as if the Company had applied the fair value
recognition provisions of SFAS No. 123, Accounting for Stock-Based
Compensation, to stock-based employee compensation:
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
2005 2004 2005 2004
------ ------ ------ ------
Net income, as reported $ 6,370 $ 5,190 $17,662 $14,614
Less: Stock-based employee
compensation determined under the
fair value requirements of SFAS 123,
net of income tax benefits 46 55 7,485 2,466
------ ------ ------ ------
Adjusted net income $ 6,324 $ 5,135 $10,177 $12,148
====== ====== ====== ======
Earnings per share:
Basic, as reported $ 0.41 $ 0.33 $ 1.12 $ 0.93
Basic, adjusted $ 0.41 $ 0.33 $ 0.65 $ 0.77
Diluted, as reported $ 0.39 $ 0.31 $ 1.06 $ 0.86
Diluted, adjusted $ 0.38 $ 0.31 $ 0.61 $ 0.71
The fair values were determined using a Black-Scholes option-pricing
model using the following assumptions:
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
2005 2004 2005 2004
------ ------ ------ ------
Dividend yield - - - -
Volatility 45.0% 52.7% 45.0% 52.7%
Risk-free interest rate 3.5% 3.5% 3.5% 3.5%
Expected life 5.0 years 5.5 years 5.0 years 5.5 years
In December 2004, the FASB issued Statement No. 123(R), Share Based
Payments ("FAS 123(R)"). This pronouncement, which will be effective
for the Company beginning in 2006, requires that companies recognize
compensation expense equal to the fair value of stock options or other
share-based payments. In January 2005, the Company issued options to
purchase 2,076,000 shares of common stock to certain employees and directors
under its existing stock option plans. These options were issued in seven
equal layers to each recipient with exercise prices for the layers set at
$25.00, $30.00, $35.00, $40.00, $45.00, $50.00 and $55.00. The options were
fully-vested as of the date of grant, and accordingly, the Company will not
record share-based compensation expense related to these options when FAS
123(R) is adopted.
During the period from January 1, 2005, through September 30, 2005, the
Company issued 203,000 shares of common stock relating to the exercise of
outstanding stock options and warrants for an aggregate exercise price of
$2,612,000, including income tax benefit.
Note 5 - Credit Services Operations
Effective July 1, 2005, First Cash Credit, Ltd. ("FCC"), a wholly-owned
subsidiary of the Company, began offering a fee-based credit services
program ("CSO program") to assist consumers in its Texas markets in
obtaining credit. Under the CSO program, FCC assists customers in applying
for a short-term loan from an independent, non-bank, consumer lending
company (the "Independent Lender") and issues the Independent Lender a
letter of credit to guarantee the repayment of the loan. The loans made by
the Independent Lender to credit services customers of FCC range in amount
from $100 to $1,000, have terms of 7 to 31 days and bear interest at a rate
of less than 10% on an annualized basis. At September 30, 2005, the credit
services customers of FCC had total loans outstanding with the Independent
Lender of $10.0 million.
In accordance with the provisions of FASB Interpretation No. 45,
Guarantor's Accounting and Disclosure Requirements for Guarantees, lncluding
Indirect Guarantees of Indebtedness of Others, the letters of credit issued
by FCC to the Independent Lender as part of the CSO program constitute a
guarantee for which the Company is required to recognize, at the inception
of the guarantee, a liability for the fair value of the obligation
undertaken by issuing the letters of credit. Each letter of credit is
issued at the time that a FCC credit services customer enters into a loan
agreement with the Independent Lender. The Independent Lender may present
the letter of credit to FCC for payment if the customer fails to repay the
full amount of the loan and accrued interest after the due date of the loan.
Each letter of credit expires within 60 days from the inception of the
associated lending transaction. FCC's maximum loss exposure under all of
the outstanding letters of credit issued on behalf of its customers to the
Independent Lender as of September 30, 2005 was $11.1 million. FCC is
entitled to seek recovery directly from its customers for amounts it pays
the Independent Lender in performing under the letters of credit. The
estimated carrying amount of the liability under the letters of credit, net
of anticipated recoveries from customers, is $425,000, which is included as
a component of the Company's accrued expenses on its consolidated balance
sheets. This estimate is based upon the Company's historical credit losses
for the payday advance product, which the Company considers to be a similar
credit risk. In addition, the Company records a liability for collected,
but unearned, credit services fees received from its customers. Such
fees, which include a premium for providing the letter of credit to the
Independent Lender, are recognized over the life of the loan made by the
Independent Lender.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
First Cash Financial Services, Inc. (the "Company"), is a leading
provider of specialty consumer finance products. The Company's primary
business is the operation of pawn stores, which engage in both consumer
finance and retail sales activities. The pawn stores offer small consumer
loans ("pawns"), which are secured by pledged tangible personal property
such as jewelry, electronic equipment, tools, sporting goods and musical
equipment. The pawn stores also retail previously-owned merchandise
acquired through pawn collateral forfeitures and over-the-counter purchases
from customers.
The Company provides short-term advances, also known as payday
advances, in its stand-alone payday advance stores and in many of its pawn
stores. In addition, the Company began offering in July 2005 a fee-based
credit services program to assist consumers in its Texas markets in
obtaining credit, which includes access to a short-term loan funded by
an independent, non-bank, consumer finance lender. This product has
substantially replaced the Company's bank-funded payday advance product in
Texas, and effective October 1, 2005, the Company ceased writing new bank-
funded payday advances in Texas. The Company's payday advance stores also
provide other financial services products including check cashing, money
orders, money transfers and prepaid card products in selected markets. In
addition, the Company is a 50% partner in Cash & Go, Ltd., a Texas limited
partnership, which owns and operates kiosks located inside convenience
stores that offer the credit services program and check cashing.
OPERATIONS AND LOCATIONS
As of September 30, 2005, the Company had 313 locations in eleven U.S.
states and six states in Mexico. Included in this total, the Company has
219 pawn shops of which 96 are located in the U.S. and 123 are located in
Mexico. In addition, the Company has 94 payday advance stores, all of which
are located in the U.S. Approximately 69 of the U.S. pawn stores also offer
the payday advance product or the credit services product in addition to
pawn loans and retail sales. The following table details store counts for
the three and nine-month periods ended September 30, 2005:
Three Months Ended Nine Months Ended
September 30, 2005 September 30, 2005
---------------------- ----------------------
Payday Payday
Pawn Advance Total Pawn Advance Total
Stores Stores Stores Stores Stores Stores
------ ------ ------ ------ ------ ------
Beginning of period count 214 93 307 197 87 284
New stores opened 8 1 9 27 7 34
Stores closed or consolidated (3) - (3) (5) - (5)
------ ------ ------ ------ ------ ------
End of period count 219 94 313 219 94 313
====== ====== ====== ====== ====== ======
For the nine-month period ended September 30, 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 table. No kiosks were opened or closed during the Nine Months
ended September 30, 2005.
While the Company has had significant increases in revenues due to new
store openings in 2004 and 2005, the Company has also incurred increases
in operating expenses attributable to the additional stores. 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, advertising, property taxes, licenses, supplies
and security. Administrative expenses consist of items relating to the
operation of the corporate office, including the compensation and benefit
costs of corporate management, area supervisors and other operations
management personnel, accounting and administrative costs, information
technology costs, liability and casualty insurance, outside legal and
accounting fees and stockholder-related expenses.
Stores included in the same-store revenue calculations are those stores
that were opened prior to the beginning of the prior year comparative fiscal
period and are still open. Also included are stores that were relocated
during the year within a specified distance serving the same market, where
there is not a significant change in store size and where there is not a
significant overlap or gap in timing between the opening of the new store
and the closing of the existing store. During the periods reported, the
Company has not had store expansions that involved a significant change in
the size of retail showrooms, and accordingly, no expanded stores have
been excluded from the same-store calculations. Non-retail sales of scrap
jewelry are included in same-store revenue calculations.
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, related revenues and expenses, and
disclosure of gain and loss contingencies at the date of the financial
statements. Such estimates and assumptions are subject to a number of risks
and uncertainties, which may cause actual results to differ materially from
the Company's estimates. Both the significant accounting policies that
management believes are the most critical to aid in fully understanding and
evaluating the reported financial results and the effects of recent
accounting pronouncements have been reported in the Company's 2004 Annual
Report on Form 10-K.
In December 2004, the FASB issued Statement No. 123(R), Share Based
Payments ("FAS 123(R)"). This statement, which will be effective for the
Company beginning in 2006, requires that companies recognize compensation
expense equal to the fair value of stock options or other share-based
payments. In January 2005, the Company issued options to purchase 2,076,000
shares of common stock to certain employees and directors under its existing
stock option plans. These options were issued in seven equal layers to each
recipient with exercise prices for the layers set at $25.00, $30.00, $35.00,
$40.00, $45.00, $50.00 and $55.00. The options were fully-vested as of the
date of grant, and accordingly, the Company will not record share-based
compensation expense related to these options when FAS 123(R) is adopted.
The Company designed the terms and conditions of this option grant in a
manner so as to provide meaningful long-term performance-based incentives
for the management team and to reduce future share based compensation
expense under FAS 123(R). In June 2005, 858,000 of the options issued in
January 2005 and still outstanding were canceled. These options had
exercise prices ranging from $45.00 to $55.00. The Company anticipates that
it will record share-based compensation expense, net of income taxes, in
2006 of approximately $300,000 related to the vesting of other previously
issued options.
Effective July 1, 2005, First Cash Credit, Ltd. ("FCC"), a wholly-owned
subsidiary of the Company, began offering a fee-based credit services
program ("CSO program") to assist consumers in its Texas markets in
obtaining credit. Under the CSO program, FCC assists customers in applying
for a short-term loan from an independent, non-bank, consumer lending
company (the "Independent Lender") and issues the Independent Lender a
letter of credit to guarantee the repayment of the loan. The loans made by
the Independent Lender to credit services customers of FCC range in amount
from $100 to $1,000, have terms of 7 to 31 days and bear interest at a rate
of less than 10% on an annualized basis.
In accordance with the provisions of FASB Interpretation No. 45,
Guarantor's Accounting and Disclosure Requirements for Guarantees, lncluding
Indirect Guarantees of Indebtedness of Others, the Company has determined
that the letters of credit issued by FCC to the Independent Lender as part
of the CSO program constitute a guarantee for which the Company is required
to recognize, at the inception of the guarantee, a liability for the fair
value of the obligation undertaken by issuing the letters of credit. Each
letter of credit is issued at the time that a FCC credit services customer
enters into a loan agreement with the Independent Lender. The Independent
Lender may present the letter of credit to FCC for payment if the customer
fails to repay the full amount of the loan and accrued interest after the
due date of the loan. Each letter of credit expires within 60 days from the
inception of the associated lending transaction. FCC is entitled to seek
recovery directly from its customers for amounts it pays the Independent
Lender in performing under the letters of credit. The carrying value of the
liability under the letters of credit, net of anticipated recoveries from
customers, is included as a component of the Company's accrued expenses.
RESULTS OF OPERATIONS
Three months ended September 30, 2005, compared to the three months ended
September 30, 2004
The following table (amounts shown in thousands) details the components
of revenues for the three months ended September 30, 2005 ("the Third
Quarter of 2005"), as compared to the three months ended September 30, 2004
("the Third Quarter of 2004"):
Three Months Ended September 30,
--------------------------------------
2005 2004 Increase/Decrease
-------- -------- -----------------
Domestic revenues:
Merchandise sales $ 13,371 $ 12,943 $ 428 3%
Scrap jewelry sales 2,128 2,529 (401) (16%)
Pawn service fees 6,551 6,121 430 7%
Short-term advance and
credit services fees 17,200 14,545 2,655 18%
Check cashing fees 671 683 (12) (2%)
Other 263 312 (49) (16%)
-------- -------- -------
40,184 37,133 3,051 8%
-------- -------- -------
Foreign revenues:
Merchandise sales 5,874 3,706 2,168 58%
Scrap jewelry sales 4,068 2,828 1,240 44%
Pawn service fees 4,181 2,877 1,304 45%
-------- -------- -------
14,123 9,411 4,712 50%
-------- -------- -------
Total revenues:
Merchandise sales 19,245 16,649 2,596 16%
Scrap jewelry sales 6,196 5,357 839 16%
Pawn service fees 10,732 8,998 1,734 19%
Short-term advance and
credit services fees 17,200 14,545 2,655 18%
Check cashing fees 671 683 (12) (2%)
Other 263 312 (49) (16%)
-------- -------- -------
$ 54,307 $ 46,544 $ 7,763 17%
======== ======== =======
The Company introduced its credit services program in its Texas
locations in July 2005. Credit services fees, which are included in
reported short-term advance and credit services fees, totaled $7,361,000 for
the Third Quarter of 2005. Same-store revenues (stores that were in
operation during all of the Third Quarter of both 2004 and 2005) increased
10% or $4,543,000 for the Third Quarter of 2005 as compared to the same
quarter last year. Revenues generated by the 59 new pawn and payday
advance stores that have opened since July 1, 2004 increased by $3,572,000,
compared to the same quarter last year.
The following table (amounts shown in thousands) details the pawn and
short-term advance receivable balances as of September 30, 2005, as compared
to September 30, 2004:
Balance at September 30,
----------------------------------
2005 2004 Increase/Decrease
------ ------ -----------------
Domestic receivables:
Pawn receivables $18,894 $17,050 $ 1,844 11%
Short-term advance receivables 6,598 14,014 (7,416) (53%)
------ ------ ------
25,492 31,064 (5,572) (18%)
------ ------ ------
Foreign receivables:
Pawn receivables 10,258 7,809 2,449 31%
------ ------ ------
Total receivables:
Pawn receivables 29,152 24,859 4,293 17%
Short-term advance receivables 6,598 14,014 (7,416) (53%)
------ ------ ------
$35,750 $38,873 $(3,123) (8%)
====== ====== ======
Of the $4,293,000 total increase in pawn receivables, $2,697,000 was
attributable to the growth at the stores that were in operation as of
September 30, 2005 and 2004, and $1,596,000 was attributable to the 46 new
stores opened since September 30, 2004. The decrease in short-term advance
receivables was due primarily to the introduction of the credit services
program in the Company's Texas locations, which resulted in a reduction of
short-term advance receivables during the Third Quarter of 2005. Short-term
advance receivables in the Company's Texas locations, including the Cash &
Go, Ltd, joint venture kiosks, decreased from $8,009,000 at September 30,
2004, to $319,000 at September 30, 2005. Short-term advance receivables in
the Company's non-Texas locations increased from $6,005,000 at September 30,
2004, to $6,279,000 at September 30, 2005. The Company's loss reserve on
short-term advance receivables decreased from $499,000 at September 30,
2004, to $246,000 at September 30, 2005 as a result of the decrease in
outstanding short-term advance receivables.
Gross profit margins on total merchandise sales were 39% during the
Third Quarter of 2005 compared to 38% during the Third Quarter of 2004.
Retail merchandise margins, which exclude scrap jewelry sales, were 45%
during the Third Quarter of 2005 and the Third Quarter of 2004. The
Company's payday advance and credit services loss provision decreased from
28% of short-term advance and credit services fee revenues during the Third
Quarter of 2004 to 25% during the Third Quarter of 2005. During the Second
Quarter of 2005, the Company initiated a program to sell selected payday
advance receivables which have been previously written off. The Company
realized approximately $941,000 from such sales during the Third Quarter of
2005. This amount was recorded as a reduction to the short-term advance
and credit services loss provision. It is anticipated that such sales of
selected written-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.
Store operating expenses increased 14% to $17,574,000 during the Third
Quarter of 2005 compared to $15,353,000 during the Third Quarter of 2004,
primarily as a result of the net addition of 53 pawn and check
cashing/short-term advance stores since July 1, 2004, which is a 20%
increase in the store count. Administrative expenses increased 25% to
$5,251,000 during the Third Quarter of 2005 compared to $4,208,000 during
the Third Quarter of 2004, which is primarily attributable to increased
costs related to variable management and supervisory compensation expense
and increased legal and accounting fees. The Company had no interest
expense during the Third Quarter of 2005 as it has had no interest-bearing
debt outstanding during the quarter. Interest income increased from $10,000
in the Third Quarter of 2004 to $46,000 in the Third Quarter of 2005, due
primarily to interest income earned on increased levels of invested cash and
cash equivalents.
For the Third Quarter of 2005 and 2004, the Company's effective federal
income tax rate of 36.5% and 37.0%, respectively, differed from the
statutory tax rate of approximately 35% and 34%, respectively, primarily as
a result of state income taxes.
Nine Months ended September 30, 2005, compared to the nine months ended
September 30, 2004
The following table (amounts shown in thousands) details the components
of revenues for the Nine Months ended September 30, 2005 ("the Nine-Month
2005 Period"), as compared to the Nine Months ended September 30, 2004 ("the
Nine-Month 2004 Period"):
Nine Months Ended September 30,
--------------------------------------
2005 2004 Increase/Decrease
-------- -------- -----------------
Domestic revenues:
Merchandise sales $ 41,113 $ 39,892 $ 1,221 3%
Scrap jewelry sales 5,320 5,825 (505) (9%)
Pawn service fees 18,599 17,723 876 5%
Short-term advance and
credit services fees 43,131 39,187 3,944 10%
Check cashing fees 2,188 2,316 (128) (6%)
Other 838 930 (92) (10%)
-------- -------- -------
111,189 105,873 5,316 5%
-------- -------- -------
Foreign revenues:
Merchandise sales 15,677 9,432 6,245 66%
Scrap jewelry sales 10,112 5,954 4,158 70%
Pawn service fees 10,656 7,453 3,203 43%
-------- -------- -------
36,445 22,839 13,606 60%
-------- -------- -------
Total revenues:
Merchandise sales 56,790 49,324 7,466 15%
Scrap jewelry sales 15,432 11,779 3,653 31%
Pawn service fees 29,255 25,176 4,079 16%
Short-term advance and
credit services fees 43,131 39,187 3,944 10%
Check cashing fees 2,188 2,316 (128) (6%)
Other 838 930 (92) (10%)
-------- -------- -------
$ 147,634 $ 128,712 $ 18,922 15%
======== ======== =======
The Company introduced its credit services program in its Texas
locations in July 2005. Credit services fees, which are included in
reported short-term advance and credit services fees, totaled $7,361,000 for
the Nine-Month 2005 Period. Same-store revenues (stores that were in
operation during all of the first nine months of 2004 and 2005) increased 6%
or $7,238,000 for the Nine-Month 2005 Period as compared to the same period
last year. Revenues generated by the 86 new pawn and payday advance stores
that have opened since January 1, 2004 increased by $12,390,000, compared to
the same period last year.
Gross profit margins on total merchandise sales were 40% during the
Nine-Month 2005 Period compared to 41% during the Nine-Month 2004 Period.
Retail merchandise margins, which exclude scrap jewelry sales, were 44%
during the Nine-Month 2005 Period compared to 45% during the Nine-Month 2004
Period. The Company's payday advance and credit services loss provision
remained the same at 21% of short-term advance and credit services fee
revenues during both the Nine-Month 2004 Period and the Nine-Month 2005
Period. During the Second Quarter of 2005, the Company initiated a program
to sell selected payday advance receivables which have been previously
written off. Year-to-date, the Company has realized approximately
$1,386,000 from such sales and this amount was recorded as a reduction
to the short-term advance and credit services loss provision. It is
anticipated that such sales of selected written-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.
Store operating expenses increased 11% to $49,499,000 during the Nine-
Month 2005 Period compared to $44,723,000 during the Nine-Month 2004 Period,
primarily as a result of the net addition of 78 pawn and check
cashing/short-term advance stores since January 1, 2004, which is a 33%
increase in the store count. Administrative expenses increased 6% to
$13,676,000 during the Nine-Month 2005 Period compared to $12,870,000 during
the Nine-Month 2004 Period, which is attributable to increased costs related
to variable management and supervisory compensation expense and increased
legal and accounting fees. The Company had no interest expense during the
Nine-Month 2005 Period as it has had no interest-bearing debt outstanding
during the current year. Interest income increased from $42,000 in the
Nine-Month 2004 Period to $217,000 in the Nine-Month 2005 Period, due
primarily to interest income earned on increased levels of invested cash and
cash equivalents.
For the Nine-Month Period of 2005 and 2004, the Company's effective
federal income tax rate of 36.5% and 37.0%, respectively, differed from the
statutory tax rate of approximately 35% and 34%, respectively, primarily as
a result of state income taxes.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2005, the Company's primary sources of liquidity
were $29,657,000 in cash and cash equivalents, $39,977,000 in receivables,
$21,461,000 in inventories and $25,000,000 of available and unused funds
under the Company's Credit Facility. The Company had working capital of
$83,509,000 as of September 30, 2005, and total equity exceeded total
liabilities by a ratio of 9 to 1. The Company's operations and store
openings have been financed with funds generated primarily from operations.
The Company maintains a long-term line of credit with two commercial
lenders (the "Credit Facility"). The Credit Facility provides a $25,000,000
long-term line of credit that matures on April 15, 2007, and bears interest
at the prevailing LIBOR rate (which was approximately 3.9% at September 30,
2005) plus a fixed interest rate margin of 1.375%. Amounts available
under the Credit Facility are limited to 300% of the Company's earnings
before income taxes, interest, depreciation and amortization for the
trailing twelve months. At September 30, 2005, the Company had no amounts
outstanding under the facility and $25,000,000 available for borrowings.
Under the terms of the Credit Facility, the Company is required to maintain
certain financial ratios and comply with certain technical covenants. The
Company was in compliance with the requirements and covenants of the Credit
Facility as of September 30, 2005, and October 26, 2005. The Company is
required to pay an annual commitment fee of 1/8 of 1% on the average daily
unused portion of the Credit Facility commitment. The Company's Credit
Facility contains provisions that 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 Credit Facility.
Net cash provided by operating activities of the Company during the
Nine Months ended September 30, 2005, was $28,303,000, consisting primarily
of net income of $17,662,000 plus non-cash adjustments for depreciation, the
short-term advance and credit services loss provision, and the tax benefit
from the exercise of employee stock options of $4,195,000, $6,462,000, and
$1,147,000, respectively. Net changes in operating assets and liabilities
reduced cash provided by operating activities in the amount of $1,163,000.
Net cash used by investing activities during the Nine Months ended September
30, 2005, was $14,938,000, which was primarily comprised of net cash
outflows from pawn receivables activity of $8,128,000, net cash inflows from
short-term advance receivables activity of $2,405,000, and cash paid for
fixed asset additions of $9,215,000. Net inflows from short-term advance
activity were due to the reduction in outstanding short-term advances in the
Company's Texas locations resulting from the introduction of the credit
services program. The opening of 34 new stores and the purchases of
corporate fixed assets during the Nine-Month 2005 Period contributed
significantly to the volume of fixed asset additions. Net cash used by
financing activities was $9,940,000 during the Nine Months ended September
30, 2005, which consisted of purchases of treasury stock in the amount of
$11,404,000, net of proceeds from exercises of stock options and warrants of
$1,464,000.
For purposes of its internal liquidity assessments, the Company
considers net cash changes in pawn receivables and short-term advance
receivables to be closely related to operating cash flows. For the Nine-
Month 2005 Period, net cash flows from operations were $28,303,000, while
net cash outflows related to pawn receivables activity was $8,128,000 and
the net cash inflows related to short-term advance receivables activity was
$2,405,000. The combined net cash flows from operations and pawn and short-
term advance receivables totaled $22,580,000 for the Nine-Month 2005 Period.
For the comparable Nine-Month 2004 Period, net cash flows from operations
were $28,345,000, and net cash outflows related to pawn receivables and
short-term advance receivables were $6,413,000 and $8,668,000, respectively.
The combined net cash flows from operations and pawn and short-term advance
receivables totaled $13,264,000 for the Nine-Month 2004 Period.
The profitability and liquidity of the Company is affected by the
amount of pawn receivables outstanding, which is controlled in part by the
Company's pawn lending decisions. The Company is able to influence the
frequency of pawn redemptions by increasing or decreasing the amount
advanced in relation to the resale value of the pawned property. Tighter
credit decisions generally result in smaller pawn advances in relation to
the estimated resale value of the pledged property and can thereby decrease
the Company's aggregate pawn receivables balance and, consequently, decrease
pawn service fees. 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.
The amount of short-term advances outstanding and the related loss
provision also affect the profitability and liquidity of the Company. An
allowance for losses is provided on active short-term advances and service
fees receivable, based upon expected default rates, net of estimated future
recoveries of previously defaulted short-term advances and service fees
receivable. The Company considers short-term advances to be in default if
they are not repaid on the due date, and writes off the principal amount and
service fees receivable as of the default date, leaving only active
receivables in the reported balances. Net defaults and changes in the
short-term advance allowance are charged to the short-term advance and
credit services loss provision.
In addition to these factors, merchandise sales and the pace of store
expansions affect the Company's liquidity. Management believes that cash
generated from operations should be sufficient to accommodate the Company's
current operations for Fiscal 2005. The Company has no significant capital
commitments.
While the Company continually looks for, and is presented with
potential acquisition opportunities, the Company currently has no definitive
plans or commitments for acquisitions. The Company will evaluate potential
acquisitions, if any, based upon growth potential, purchase price, strategic
fit and quality of management personnel, among other factors. If the
Company encounters an attractive opportunity to acquire new stores in the
near future, the Company may seek additional financing, the terms of which
will be negotiated on a case-by-case basis.
Earnings before interest, taxes, depreciation and amortization
("EBITDA") for the trailing twelve month period ended September 30, 2005
totaled $42,641,000, an increase of 23% compared to $34,721,000 to the
trailing twelve month period ended September 30, 2004. The EBITDA margin,
which is EBITDA as a percentage of revenues, for the trailing twelve month
period ended September 30, 2005 was 21.5%, compared to 20.5% for the
comparable prior year period.
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 from continuing operations to EBITDA (amounts in thousands):
Trailing Twelve Months Ended
September 30,
----------------------
2005 2004
-------- --------
Net income from continuing operations $ 23,754 $ 19,431
Adjustments:
Interest income, net of interest expense (229) (50)
Depreciation 5,386 3,825
Income taxes 13,730 11,515
Amortization - -
-------- --------
Earnings before interest, income taxes,
depreciation and amortization $ 42,641 $ 34,721
======== ========
CAUTIONARY STATEMENT REGARDING RISKS AND UNCERTAINTIES THAT MAY AFFECT
FUTURE RESULTS
Forward-Looking Information
This quarterly report 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 quarterly report include, without limitation, the Company's
expectations of future liquidity, cash flows and its expectations for future
recoveries of written-off short-term advance receivables. 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 quarterly report 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 quarterly report. 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 the credit
services program in Texas, the ability to successfully refer credit services
customers to an independent lender who can provide credit to these
customers, new legislative and governmental regulations or changes to
existing regulations, 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.
Regulatory Developments
The pawn and payday advance industries in the United States are subject
to legislative initiatives and regulatory actions at the federal, state and
local levels. Recent regulatory initiatives have been primarily focused on
the payday advance industry at the state level and on certain bank-funded
payday advance activity at the federal level. The Company currently
provides payday advances under applicable state laws in seven state-level
jurisdictions, including California, District of Columbia, Illinois,
Oklahoma, Oregon, South Carolina and Washington. In the State of Texas, the
Company formerly had an agreement with County Bank of Rehoboth Beach,
Delaware ("County Bank"), a federally insured State of Delaware chartered
financial institution, to act as a loan servicer within the state for County
Bank. This agreement was terminated effective September 30, 2005. As of
October 1, 2005, the Company does not function as a loan servicer for any
out of state bank, and accordingly, it is not subject to federal regulations
over bank-funded payday advances. If regulatory actions that had negative
effects on the pawn and payday advance industries were taken at a U.S.
federal level or in U.S. states or municipalities where the Company has a
significant number of stores, those actions could have a materially adverse
effect on the Company's lending and retail activities and revenues. There
can be no assurance that additional federal, state or local legislation in
the U.S. will not be enacted, or that existing laws and regulations will not
be amended, which would have a materially adverse impact on the Company's
operations and financial condition.
The pawnshop industry in Mexico is currently subject to various general
business regulations in the areas of tax compliance, customs laws and
consumer protections, among others, by various federal, state and local
governmental agencies in Mexico. In addition, there are currently two
states in which the Company operates that have regulations specific to the
pawn industry. In general, these regulations provide for the registration
of pawnshops operating in the state and impose certain consumer protection
standards upon pawnshop operators. Legislation to specifically regulate the
pawn industry at a federal level and/or in other states has been, and
continues to be, proposed from time to time. The Company monitors the
status of any such proposed legislation on a regular basis. If regulatory
actions that had negative effects on the pawn industry were taken at a
federal level in Mexico, or in Mexican states or municipalities where the
Company has a significant number of stores, those actions could have a
materially adverse effect on the Company's lending and retail activities and
revenues. There can be no assurance that additional federal, state or local
statutes or regulations in Mexico will not be enacted, or that existing laws
and regulations will not be amended, which would have a materially adverse
impact on the Company's operations and financial condition.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risks relating to the Company's operations result primarily from
changes in interest rates, gold prices and foreign currency exchange rates
and are described in detail in the Company's 2004 Annual Report on Form 10-
K. The Company does not engage in speculative or leveraged transactions,
nor does it hold or issue financial instruments for trading purposes.
There have been no material changes to the Company's exposure to market
risks since December 31, 2004.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
The Company's Chief Executive Officer and Chief Financial Officer
have evaluated the effectiveness of the Company's disclosure
controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-
15(e) under the Exchange Act) as of the end of our third fiscal
quarter of 2005. Based on such evaluation, such officers have
concluded that the Company's disclosure controls and procedures are
effective.
(b) Changes in Internal Control Over Financial Reporting
There has been no significant change in the Company's internal
control over financial reporting that was identified in connection
with our evaluation that occurred during our last fiscal quarter
ended September 30, 2005, that has materially affected, or is
reasonably likely to materially affect, the Company's internal
control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no material developments in the litigation previously
reported in the Company's 2004 Annual Report on Form 10-K.
ITEM 2. CHANGES IN SECURITIES
During the period from January 1, 2005, through September 30, 2005, the
Company issued 52,000 shares of common stock relating to the exercise of
outstanding stock options for an aggregate exercise price of $781,000
(including income tax benefit). During the period from January 1, 2005,
through September 30, 2005, the Company issued 151,000 shares of common
stock relating to the exercise of outstanding stock warrants for an
aggregate exercise price of $1,830,000 (including income tax effect).
The transactions set forth in the above paragraphs were completed
pursuant to either Section 4(2) of the Securities Act or Rule 506 of
Regulation D of the Securities Act. With respect to issuances made pursuant
to Section 4(2) of the Securities Act, the transactions did not involve any
public offering and were sold to a limited group of persons. Each recipient
either received adequate information about the Company or had access,
through employment or other relationships, to such information, and the
Company determined that each recipient had such knowledge and experience in
financial and business matters that they were able to evaluate the merits
and risks of an investment in the Company. With respect to issuances made
pursuant to Rule 506 of Regulation D of the Securities Act, the Company
determined that each purchaser was an "accredited investor" as defined in
Rule 501(a) under the Securities Act. All sales of the Company's securities
were made by officers of the Company who received no commission or
other remuneration for the solicitation of any person in connection with
the respective sales of securities described above. The recipients of
securities represented their intention to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof and appropriate legends were affixed to the share
certificates and other instruments issued in such transactions.
In January 2005, the Company issued options to purchase 2,076,000
shares of common stock to certain employees and directors under its existing
stock option plans. These options were issued in seven equal layers to each
recipient with exercise prices for the layers set at $25.00, $30.00, $35.00,
$40.00, $45.00, $50.00 and $55.00. In June 2005, 858,000 of the options
issued in January 2005 were canceled. These options had exercise prices
ranging from $45.00 to $55.00.
On July 15, 2004, the Board of Directors authorized the repurchase of
up to 1,600,000 shares of common stock. During the period from January 1,
2005, through October 26, 2005, the Company repurchased 576,000 shares of
common stock at an average price of $19.74 per share under the stock
repurchase program approved by the Board of Directors.
The following table provides the information with respect to purchases
made by the Company of shares of its common stock during each month that the
program was in effect during 2005:
Total Average Total Number of Maximum Number
Number Price Shares Purchased as Of Shares that May
Of Shares Paid Per Part of Publicly Yet Be Purchased
Purchased Share Announced Plan Under the Plan
--------- ----- -------------- --------------
January 1 through
January 31, 2005 - $ - - 977,285
February 1 through
February 28, 2005 - - - 977,285
March 1 through
March 31, 2005 - - - 977,285
April 1 through
April 30, 2005 576,479 19.74 576,479 400,806
May 1 through
May 31, 2005 - - - 400,806
June 1 through
June 30, 2005 - - - 400,806
July 1 through
July 31, 2005 - - - 400,806
August 1 through
August 31, 2005 - - - 400,806
September 1 through
September 30, 2005 - - - 400,806
October 1 through
October 26, 2005 - - - 400,806
------- -------
Total 576,479 $19.74 576,479
======= =======
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS
Exhibits:
31.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley
Act provided by J. Alan Barron, Chief Executive Officer
31.2 Certification Pursuant to Section 302 of the Sarbanes-Oxley
Act provided by R. Douglas Orr, Chief Financial Officer
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
provided by J. Alan Barron, Chief Executive Officer and
R. Douglas Orr, Chief Financial Officer
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: October 26, 2005 FIRST CASH FINANCIAL SERVICES, INC.
----------------------------------
(Registrant)
/s/ J. ALAN BARRON
-----------------------
J. Alan Barron
Chief Executive Officer
/s/ R. DOUGLAS ORR
-----------------------
R. Douglas Orr
Chief Financial Officer
(Principal Accounting Officer)
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------ -----------
31.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act
provided by J. Alan Barron, Chief Executive Officer
31.2 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act
provided by R. Douglas Orr, Chief Financial Officer
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 provided
by J. Alan Barron, Chief Executive Officer and R. Douglas Orr,
Chief Financial Officer
EXHIBIT 31.1
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT
I, J. Alan Barron, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of First Cash
Financial Services, Inc. (the "Registrant");
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the Registrant as of, and for, the periods presented in this report;
4. The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13(a)-15(f) and 15(d)-15(f)) for the Registrant and have:
a. Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
Registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
b. Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the Registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report
based on such evaluation; and
d. Disclosed in this report any change in the Registrant's internal
control over financial reporting that occurred during the
Registrant's most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the
Registrant's internal control over financial reporting; and
5. The Registrant's other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the Registrant's auditors and the audit committee of the
Registrant's board of directors (or persons performing the equivalent
functions):
a. All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the Registrant's
ability to record, process, summarize and report financial
information; and
b. Any fraud, whether or not material, that involves management or
other employees who have a significant role in the Registrant's
internal control over financial reporting.
Date: October 26, 2005
/s/ J. Alan Barron
--------------------------------------
J. Alan Barron
Chief Executive Officer
EXHIBIT 31.2
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT
I, R. Douglas Orr, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of First Cash
Financial Services, Inc. (the "Registrant");
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the Registrant as of, and for, the periods presented in this
report;
4. The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15(d)-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13(a)-15(f) and 15d-15(f)) for the Registrant and have:
a. Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
Registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
b. Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the Registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report
based on such evaluation; and
d. Disclosed in this report any change in the Registrant's internal
control over financial reporting that occurred during the
Registrant's most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the
Registrant's internal control over financial reporting; and
5. The Registrant's other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the Registrant's auditors and the audit committee of
the Registrant's board of directors (or persons performing the
equivalent functions):
a. All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the Registrant's
ability to record, process, summarize and report financial
information; and
b. Any fraud, whether or not material, that involves management or
other employees who have a significant role in the Registrant's
internal control over financial reporting.
Date: October 26, 2005
/s/ R. Douglas Orr
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R. Douglas Orr
Chief Financial Officer
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of First Cash Financial Services,
Inc. (the "Company") on Form 10-Q for the quarterly period ended September
30, 2005, as filed with the Securities and Exchange Commission on the date
hereof (the "Report"), we, J. Alan Barron and R. Douglas Orr each certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, that to our knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
Date: October 26, 2005
/s/ J. Alan Barron
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J. Alan Barron
Chief Executive Officer
/s/ R. Douglas Orr
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R. Douglas Orr
Chief Financial Officer