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, 2001 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 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 10, 2001, there were 8,666,687 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,
2001 2000
------- -------
(unaudited)
(in thousands, except share data)
ASSETS
Cash and cash equivalents................... $ 9,667 $ 6,611
Service charges receivable.................. 2,723 2,707
Receivables................................. 21,988 22,043
Inventories................................. 12,151 17,221
Prepaid expenses and other current assets... 2,060 1,884
------- -------
Total current assets .................... 48,589 50,466
Property and equipment, net................. 9,956 10,378
Intangible assets, net...................... 52,744 53,508
Receivable from Cash & Go, Ltd.............. 6,832 4,580
Other....................................... 559 186
------- -------
$118,680 $119,118
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt and
notes payable............................. $ 1,534 $ 1,643
Accounts payable and accrued expenses....... 7,742 6,460
Income taxes payable........................ 34 528
------- -------
Total current liabilities ............... 9,310 8,631
Revolving credit facility................... 35,000 39,000
Long-term debt and notes payable, net of
current portion........................... 2,292 3,019
Deferred income taxes....................... 3,294 2,814
------- -------
49,896 53,464
------- -------
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; 9,320,868 and
9,320,868 shares issued, respectively;
8,666,687 and 8,796,027 shares
outstanding, respectively .............. 93 93
Additional paid-in capital ............... 50,953 50,953
Retained earnings ........................ 26,625 22,949
Common stock receivables from officers ... (5,872) (5,826)
Common stock held in treasury, at cost,
654,181 and 524,841 shares, respectively (3,015) (2,515)
------- -------
68,784 65,654
------- -------
$118,680 $119,118
======= =======
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,
2001 2000 2001 2000
------- ------- ------- -------
(unaudited, in thousands, except per share amounts)
Revenues:
Merchandise sales................... $ 13,177 $ 12,726 $ 27,994 $ 28,001
Service charges..................... 12,678 10,912 25,377 21,971
Check cashing fees.................. 555 543 1,180 1,151
Other............................... 548 575 1,110 1,198
------- ------- ------- -------
26,958 24,756 55,661 52,321
------- ------- ------- -------
Cost of goods sold and expenses:
Cost of goods sold.................. 9,100 8,112 18,661 18,411
Operating expenses.................. 12,289 11,967 23,818 23,307
Interest expense.................... 339 701 828 1,464
Depreciation........................ 592 542 1,176 1,054
Amortization........................ 382 379 764 758
Administrative expenses............. 1,834 1,830 4,670 3,575
------- ------- ------- -------
24,536 23,531 49,917 48,569
------- ------- ------- -------
Income before income taxes............... 2,422 1,225 5,744 3,752
Provision for income taxes............... 872 469 2,068 1,417
------- ------- ------- -------
Income before cumulative effect of change
in accounting principle, net of tax 1,550 756 3,676 2,335
Cumulative effect on prior years of
change in accounting principle......... - - - (2,287)
------- ------- ------- -------
Net income............................... $ 1,550 $ 756 $ 3,676 $ 48
======= ======= ======= =======
Net income per share:
Basic
Income before cumulative effect of
change in accounting principle..... $ 0.18 $ 0.09 $ 0.42 $ 0.27
Cumulative effect of change in
accounting principle, net of tax... - - - (0.26)
------- ------- ------- -------
Net income .......................... $ 0.18 $ 0.09 $ 0.42 $ 0.01
======= ======= ======= =======
Diluted
Income before cumulative effect of
change in accounting principle..... $ 0.17 $ 0.09 $ 0.40 $ 0.26
Cumulative effect of change in
accounting principle, net of tax... - - - (0.25)
------- ------- ------- -------
Net income .......................... $ 0.17 $ 0.09 $ 0.40 $ 0.01
======= ======= ======= =======
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,
--------------------
2001 2000
-------- --------
(unaudited, in thousands)
Cash flows from operating activities:
Net income ..................................... $ 3,676 $ 48
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation and amortization................ 1,940 1,812
Cumulative effect of change
in accounting principle.................... - 2,287
Changes in operating assets and liabilities:
(Increase) decrease in service
charges receivable........................... (16) 218
Decrease in inventories ....................... 5,071 602
Increase in prepaid expenses and other assets.. (548) (924)
Increase in accounts payable and
accrued expenses........................... 1,282 202
Increase (decrease) in income taxes payable.... (14) 408
-------- --------
Net cash flows from operating activities..... 11,391 4,653
-------- --------
Cash flows from investing activities:
Net decrease in receivables .................... 55 2,019
Purchases of property and equipment ............ (754) (1,316)
Increase in receivable from Cash & Go, Ltd...... (2,252) (2,075)
-------- --------
Net cash flows from investing activities........ (2,951) (1,372)
-------- --------
Cash flows from financing activities:
Proceeds from debt ............................. 8,700 3,777
Repayments of debt ............................. (13,536) (8,619)
Common stock receivables from officers ......... (48) (1,978)
Purchase of treasury stock ..................... (500) (248)
-------- --------
Net cash flows from financing activities..... (5,384) (7,068)
-------- --------
Increase (decrease) in cash and cash equivalents.. 3,056 (3,787)
Cash and cash equivalents at beginning
of the period................................... 6,611 10,717
-------- --------
Cash and cash equivalents at end of the period.... $ 9,667 $ 6,930
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest ...................................... $ 1,422 $ 1,450
======== ========
Income taxes .................................. $ 2,081 $ 1,008
======== ========
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, 2000 Annual Report on Form 10-K. All
significant intercompany accounts and transactions have been eliminated in
consolidation. The consolidated financial statements as of June 30, 2001
and for the periods ended June 30, 2001 and 2000 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, 2001 are not necessarily
indicative of the results that may be expected for the full fiscal year.
Note 2 - Revolving Credit Facility
The Company currently maintains a $50,000,000 long-term line of credit
with a group of commercial lenders (the "Credit Facility"). At June 30,
2001, $35,000,000 was outstanding under this Credit Facility and an
additional $13,907,000 was available to the Company pursuant to the
available borrowing base. The Credit Facility bears interest at the
prevailing LIBOR rate (which was approximately 4.8% at June 30, 2001) plus
one percent, and matures on September 1, 2002. Amounts available under the
Credit Facility are limited to 325% of the Company's earnings before income
taxes, interest, depreciation and amortization for the trailing twelve
months. 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 these requirements and
covenants during the six months ended June 30, 2001 and as of August 10,
2001.
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 Six Months Ended
--------------- ---------------
June 30, June 30, June 30, June 30,
2001 2000 2001 2000
------ ------ ------ ------
Numerator:
Income before cumulative effect
of change in accounting principle
for calculating basic and diluted
earnings per share $ 1,550 $ 756 $ 3,676 $ 2,335
Cumulative effect on prior years
of change in accounting principle
for calculating basic and diluted
earnings per share - - - (2,287)
------ ------ ------ ------
Net income for calculating basic
and diluted earnings per share $ 1,550 $ 756 $ 3,676 $ 48
Denominator:
Weighted-average common
shares for calculating basic
earnings per share 8,667 8,811 8,701 8,830
Effect of dilutive securities:
Stock options and warrants 617 - 426 106
------ ------ ------ ------
Weighted-average common
shares for calculating diluted
earnings per share 9,284 8,811 9,127 8,936
====== ====== ====== ======
Note 4 - Change in Accounting Principle
Effective January 1, 2000, the Company changed its method of income
recognition on pawn loans. The Company accrues pawn service charge revenue
on a constant yield basis for all pawn loans that the Company deems
collection to be probable based on historical loan redemption statistics.
For loans not repaid, the cost of forfeited collateral (inventory) is stated
at the lower of cost (cash amount loaned) or market. Prior to 2000, the
Company recognized service charge income on a constant yield basis over the
initial loan period for all pawn loans written. Service charges applicable
to the extension periods or additional loan periods were not recognized as
income until the loan was repaid or renewed. If the loan was not repaid,
the carrying value of the forfeited collateral (inventory) was stated at the
lower of cost (the principal amount loaned plus accrued service charges) or
market. The Company believes the accounting change provides a more timely
matching of revenues and expenses with which to measure results of
operations. The cumulative effect of the accounting method change on all
periods since inception of the Company through December 31, 1999 is
$2,287,000 (after an income tax benefit of $1,373,000) and is included as a
one-time reduction to net income for the six months ended June 30, 2000.
Note 5 - Operating Segment Information
The Company has three reportable operating segments: pawn lending
stores, check cashing/payroll advance stores, and a software and hardware
provider. The Company's pawn stores offer non-recourse loans on the
collateral of pledged tangible personal property as well as short-term
secured consumer loans commonly referred to as payroll advances. The
Company's check cashing and payroll advance stores provide check cashing
services, short-term secured consumer loans, bill payment services, money
transfer services and money order sales. The Company's computer software
subsidiary, Answers, etc., provides turnkey point of sale operating systems
to other check cashing and payroll advance operators unaffiliated with the
Company.
Management of the Company evaluates performance based on the operating
income of each segment. There are no intersegmental sales. Each of the
segments is supervised separately. Information concerning the segments is
set forth below (in thousands):
Check Cashing/
Pawn Payroll Advance
Stores Stores Software Consolidated
------ ------ -------- ------------
Three Months Ended June 30, 2001
--------------------------------
Total revenues $22,095 $ 4,304 $ 559 $ 26,958
Depreciation and amortization 721 200 53 974
Income before interest and
income taxes 1,961 873 (73) 2,761
Total assets at June 30, 2001 88,011 28,547 2,122 118,680
Capital expenditures 342 77 - 419
Three Months Ended June 30, 2000
--------------------------------
Total revenues 20,247 4,039 470 24,756
Depreciation and amortization 681 195 45 921
Income before interest and
income taxes 1,425 942 (441) 1,926
Total assets at June 30, 2000 86,631 32,011 2,423 121,065
Capital expenditures 401 86 46 533
Six Months Ended June 30, 2001
--------------------------------
Total revenues 46,120 8,423 1,118 55,661
Depreciation and amortization 1,431 403 106 1,940
Income before interest and
income taxes 4,885 1,922 (235) 6,572
Total assets at June 30, 2001 88,011 28,547 2,122 118,680
Capital expenditures 620 119 15 754
Six Months Ended June 30, 2000
--------------------------------
Total revenues 43,216 7,965 1,140 52,321
Depreciation and amortization 1,344 384 84 1,812
Income before interest and
income taxes 3,524 2,293 (601) 5,216
Total assets at June 30, 2000 86,631 32,011 2,423 121,065
Capital expenditures 906 253 155 1,314
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
First Cash Financial Services, Inc. is the nation's third largest
publicly traded pawnshop operator and currently owns and operates 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 loans, lending 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 ("payroll
advances").
The Company also currently owns check cashing and payroll advance
stores in 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
payroll advances. The Company also owns Answers, etc., a company which
provides computer hardware and software to third party check cashing and
payroll advance operators throughout the country, as well as ongoing
technical support. In addition, the Company is a 50% partner in Cash & Go,
Ltd., a joint venture which owns financial service kiosks located inside
convenience stores.
Although the Company has had significant increases in revenues due
primarily to acquisitions and secondarily to new store openings, 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, advertising, property taxes, licenses,
supplies, security and net returned checks. 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.
Effective January 1, 2000, the Company changed its method of income
recognition on pawn loans. The Company accrues pawn service charge revenue
on a constant yield basis for all pawn loans that the Company deems
collection to be probable based on historical loan redemption statistics.
For loans not repaid, the cost of forfeited collateral (inventory) is stated
at the lower of cost (cash amount loaned) or market. Prior to 2000, the
Company recognized service charge income on a constant yield basis over the
initial loan period for all pawn loans written. Service charges applicable
to the extension periods or additional loan periods were not recognized as
income until the loan was repaid or renewed. If the loan was not repaid,
the carrying value of the forfeited collateral (inventory) was stated at the
lower of cost (the principal amount loaned plus accrued service charges) or
market. The Company believes the accounting change provides a more timely
matching of revenues and expenses with which to measure results of
operations. The cumulative effect of the accounting method change on all
periods since inception of the Company through December 31, 1999 is
$2,287,000 (after an income tax benefit of $1,373,000) and is included as a
one-time reduction to net income for the six months ended June 30, 2000.
RESULTS OF OPERATIONS
Three months ended June 30, 2001 compared to the three months ended June 30,
2000
Total revenues increased 9% to $26,958,000 for the three months ended
June 30, 2001 ("the Second Quarter of 2001") as compared to revenues of
$24,756,000 for the three months ended June 30, 2000 ("the Second Quarter of
2000"). Of the $2,202,000 increase in total revenues, 20%, or $451,000 was
attributable to increased merchandise sales, 80%, or $1,766,000 was
attributable to increased service charges, while other income and check
cashing fees decreased $15,000, or less than 1% of total revenues. As a
percentage of total revenues, merchandise sales decreased from 52% to 49%,
service charges increased from 44% to 47%, check cashing fees and other
income remained unchanged at 4% of total revenues during both the Second
Quarter of 2000 and the Second Quarter of 2001. Gross profit as a
percentage of merchandise sales decreased to 31% during the Second Quarter
of 2001 compared to 36% during the Second Quarter of 2000. This decrease in
the Company's gross profit margin was primarily the result of a higher
volume of scrap jewelry sales, which have lower margins, during the Second
Quarter of 2001.
The aggregate receivables balance (pawn loans plus payday advances)
increased 3% from $21,295,000 as of June 30, 2000 to $21,988,000 as of June
30, 2001. Of the $693,000 increase, $337,000 was attributable to the
addition of 6 stores acquired or opened subsequent to June 30, 2000. The
remaining increase of $356,000 was derived from the increase in aggregate
receivable balances at the 138 stores in operation at both June 30, 2000 and
June 30, 2001.
Operating expenses increased 3% to $12,289,000 during the Second
Quarter of 2001 compared to $11,967,000 during the Second Quarter of 2000.
Administrative expenses increased $4,000 to $1,834,000 during the Second
Quarter of 2001 compared to $1,830,000 during the Second Quarter of 2000.
Interest expense decreased 52% from $701,000 in the Second Quarter of 2000
to $339,000 in the Second Quarter of 2001, primarily due to lower interest
rates and an overall lower level of debt during the Second Quarter of 2001
compared to the Second Quarter of 2000.
For the Second Quarter of 2001 and the Second Quarter of 2000, the
Company's tax provisions of 36% and 38%, respectively, 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, 2001 compared to six months ended June 30, 2000
Total revenues increased 6% to $55,661,000 for the six months ended
June 30, 2001 (the "Six-Month 2001 Period") as compared to $52,321,000 for
the six months ended June 30, 2000 (the "Six-Month 2000 Period"). Of the
$3,340,000 increase in total revenues, $7,000, was attributable to a
decrease in merchandise sales, $3,406,000, was attributable to increased
service charges, while check cashing fees other income decreased $59,000.
As a percentage of total revenues, merchandise sales decreased from 54% to
50% during the Six-Month 2001 Period compared to the Six-Month 2000 Period,
while service charges increased from 42% to 46%, respectively. Check
cashing fees and other income remained at 4% of total revenues in the Six-
Month 2000 and 2001 Periods. Gross profit as a percentage of merchandise
sales decreased from 34% in the Six-Month 2000 Period to 33% in the Six-
Month 2001 Period. This decrease in the Company's gross profit margin was
primarily the result of a higher volume of scrap jewelry sales, which have
lower margins, during the Six-Month 2001 Period.
The aggregate receivables balance (pawn loans plus payday advances)
increased 3% from $21,295,000 as of June 30, 2000 to $21,988,000 as of June
30, 2001. Of the $693,000 increase, $337,000 was attributable to the
addition of 6 stores acquired or opened subsequent to June 30, 2000. The
remaining increase of $356,000 was derived from the increase in aggregate
receivable balances at the 138 stores in operation at both June 30, 2000 and
June 30, 2001.
Operating expenses increased 2% to $23,818,000 during the Six-Month
2001 Period compared to $23,307,000 during the Six-Month 2000 Period.
Administrative expenses increased 31% to $4,670,000 during the Six-Month
2001 Period compared to $3,575,000 during the Six-Month 2000 Period.
Interest expense decreased to $828,000 in the Six-Month 2001 Period compared
to $1,464,000 in the Six-Month 2000 Period, primarily due to legal accrual
and the addition of supervisory staff and other overhead related to the
introduction of payday advances in the Company's pawn stores. Interest
expense decreased to $828,000 in the Six-Month 2001 Period compared to
$1,464,000 in the Six-Month 2000 Period.
For both the Six-Month 2001 and 20 00 Periods, the Company's tax
provisions of 36% and 38% 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 currently maintains a $50,000,000 long-term line of credit
with a group of commercial lenders (the "Credit Facility"). At June 30,
2001, $35,000,000 was outstanding under this Credit Facility and an
additional $13,907,000 was available to the Company pursuant to the
available borrowing base. The Credit Facility bears interest at the
prevailing LIBOR rate (which was approximately 4.8% at June 30, 2001) plus
one percent, and matures on September 1, 2002. Amounts available under the
Credit Facility are limited to 325% of the Company's earnings before income
taxes, interest, depreciation and amortization for the trailing twelve
months. 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 these requirements and
covenants during the six months ended June 30, 2001 and as of August 10,
2001. 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 is prohibited from paying dividends to its stockholders.
Substantially all of the unencumbered assets of the Company have been
pledged as collateral against indebtedness under the Credit Facility.
As of June 30, 2001, the Company's primary sources of liquidity were
$9,667,000 in cash and cash equivalents, $2,723,000 in service charges
receivable, $21,988,000 in receivables, $12,151,000 in inventories and
$13,907,000 of available and unused funds under the Company's Credit
Facility. The Company had working capital as of June 30, 2001 of
$39,279,000 and a total liabilities to equity ratio of 0.73 to 1.
Net cash provided by operating activities for the Company during the
Six-Month 2001 Period was $11,391,000 as compared with $4,653,000 provided
by operating activities during the Six-Month 2000 Period. Net cash used by
investing activities during the Six-Month 2001 Period was $2,951,000 as
compared with $1,372,000 used by investing activities during the Six-Month
2000 Period. Net cash used for financing activities of $5,384,000 during
the Six-Month 2001 Period compares to net cash provided by financing
activities of $7,068,000 during the Six-Month 2000 Period.
The profitability and liquidity of the Company are affected by the
amount of pawn loans outstanding, which is controlled in part by the
Company's pawn lending decisions. The Company is able to influence the
frequency of forfeiture of collateral by increasing or decreasing the amount
loaned in relation to the resale value of the pledged property. Tighter
credit decisions generally result in smaller loans in relation to the
estimated resale value of the pledged property and can thereby decrease the
Company's aggregate loan balance and, consequently, decrease pawn service
charges. Additionally, small loans in relation to the pledged property's
estimated sale value tend to increase loan redemptions and improve the
Company's liquidity. Conversely, providing larger loans in relation to the
estimated sale value of the pledged property can result in an increase in
the Company's pawn service charge income. Also larger average loan balances
can result in an increase in loan forfeitures, which increases the quantity
of goods on hand and, unless the Company increases inventory turnover,
reduces the Company's liquidity. In each of the Company's last three fiscal
years, at least 70% of the amounts loaned were either paid in full or
renewed. The Company's renewal policy allows customers to renew pawn loans
by repaying all accrued interest on such pawn loans. In addition to these
factors, the Company's liquidity is affected by merchandise sales and the
pace of store expansions.
Management believes that the Credit Facility, current assets and cash
generated from operations will be sufficient to accommodate the Company's
current operations for at least the next twelve months. The Company has no
significant capital commitments as of August 10, 2001. The Company
currently has no written commitments for additional borrowings or future
acquisitions; however, the Company intends to continue to grow and will
likely seek additional capital to facilitate expansion. The Company will
evaluate acquisitions, if any, based upon opportunities, acceptable
financing, purchase price, strategic fit and qualified management personnel.
The Company intends to continue to engage in a plan of expansion
primarily through new store openings in both check cashing/payroll advance
locations for the Company, and kiosks for Cash & Go, Ltd., the Company's 50%
convenience store joint venture. Secondarily, the Company will selectively
expand through existing store acquisitions. 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. Between July 1,
2001 and August 10, 2001, the Company did not open or acquire any new
stores. All store openings and acquisitions during the six months ended
June 30, 2001 were financed with proceeds from the Company's Credit Facility
and with cash generated from operations.
NEW ACCOUNTING PRONUNCEMENTS
Statement of Financial Accounting Standards ("SFAS") No. 141, "Business
Combinations" is effective July 1, 2001 and prohibits pooling-of-interests
accounting for acquisitions. SFAS No. 142, "Goodwill and Other Intangible
Assets" is effective January 1, 2002 and specifies that goodwill and some
intangible assets will no longer be amortized but instead will be subject to
periodic impairment testing. The Company has not yet determined the effect
adopting SFAS No. 142 will have on its financial statements.
FORWARD LOOKING INFORMATION
This report contains certain statements that are "forward-looking
statements" within the meaning of Section 27A of the Securities Act and
Section 21E of the Exchange Act. Forward-looking statements can be
identified by the use of forward-looking terminology such as "believes,"
"expects," "may," "estimates," "will," "should," "plans," or "anticipates"
or the negative thereof, or other variations thereon, or comparable
terminology, or by discussions of strategy. Such statements include, but
are not limited to, the discussions of the Company's operations, liquidity,
and capital resources. Forward-looking statements are included in the
"Liquidity and Capital Resources" section of this annual report. 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. Generally, these statements relate to business
plans, strategies, anticipated strategies, levels of capital expenditures,
liquidity and anticipated capital funding needed to effect the business
plan. All phases of the Company's operations are subject to a number of
uncertainties, risks and other influences, many of which are outside the
control of the Company and cannot be predicted with any degree of accuracy.
Factors such as changes in regional or national economic conditions, changes
in governmental regulations, unforeseen litigation, changes in interest
rates or tax rates, significant changes in the prevailing market price of
gold, future business decisions and other uncertainties may cause results to
differ materially from those anticipated by some of the statements made in
this report. In light of the significant uncertainties inherent in the
forward-looking statements made in this report, the inclusion of such
statements should not be regarded as a representation by the Company or any
other person that the objectives and plans of the Company will be achieved.
Security holders are cautioned that such forward-looking statements involve
risks and uncertainties. The forward-looking statements contained 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.
PART II. OTHER INFORMATION
ITEM 2. Changes in securities
b. During the six months ended June 30, 2001, the Company repurchased
129,340 shares of common stock for an price of $3.87 per share.
ITEM 4. Submission of matters to a vote of security holders
On June 27, 2001, 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 June 27, 2001 annual stockholders' meeting are as
follows:
1. The stockholders elected Tara Schuchmann director of First Cash
Financial Services, Inc.
2. The stockholders ratified the selection of Deloitte & Touche
LLP as independent auditors of the Company for the year ended
December 31, 2001.
ITEM 6. Exhibits and reports on Form 8-K
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 10, 2001 FIRST CASH FINANCIAL SERVICES, INC.
----------------------------------
(Registrant)
/s/ Phillip E. Powell /s/ Rick L. Wessel
--------------------- ------------------------
Phillip E. Powell Rick L. Wessel
Chairman of the Board and Chief Accounting Officer
Chief Executive Officer
