SEC Filing | FirstCash, Inc.

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: September 30, 1999 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 76011 (Address of principal executive 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 November 12, 1999, there were 8,849,909 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 ------------------------------------- September 30, December 31, 1999 1998 ---- ---- (unaudited, in thousands, except share data) ASSETS Cash and cash equivalents....................... $ 7,519 $ 4,458 Service charges receivable...................... 3,019 2,707 Receivables..................................... 22,970 20,392 Inventories..................................... 20,586 17,403 Income taxes receivable......................... - 1,471 Prepaid expenses and other current assets....... 6,258 2,908 -------- -------- Total current assets....................... 60,352 49,339 Property and equipment, net..................... 10,270 9,146 Intangible assets, net.......................... 54,419 54,494 Other........................................... 434 346 -------- -------- $125,475 $113,325 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current portion of long-term debt and notes payable.................................. $ 2,135 $ 2,177 Accounts payable and accrued expenses........... 7,105 6,752 Income taxes payable............................ 783 989 -------- -------- Total current liabilities.................. 10,023 9,918 Revolving credit facility....................... 41,800 33,450 Long-term debt and notes payable, net of current portion................................ 4,796 6,283 Deferred income taxes........................... 3,416 2,966 -------- -------- 60,035 52,617 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; 9,106,993 and 9,089,305 shares issued, respectively; 8,636,034 and 8,618,346 shares outstanding, respectively... 91 91 Additional paid-in capital.................... 49,095 49,026 Retained earnings............................. 18,519 13,856 Common stock held in treasury, at cost, 470,959 shares............................... (2,265) (2,265) -------- -------- 65,440 60,708 -------- -------- $125,475 $113,325 ======== ======== 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, -------------------- ------------------- 1999 1998 1999 1998 ---- ---- ---- ---- (unaudited, in thousands, except per share data) Revenues: Merchandise sales................. $ 11,879 $ 10,388 $ 37,807 $ 29,547 Service charges................... 10,532 6,962 28,789 17,249 Check cashing fees................ 530 399 1,639 522 Other............................. 408 249 1,440 451 -------- -------- -------- -------- 23,349 17,998 69,675 47,769 -------- -------- -------- -------- Cost of goods sold and expenses: Cost of goods sold................ 8,178 6,728 25,517 19,501 Operating expenses................ 9,844 6,893 28,154 16,954 Interest expense.................. 733 564 1,917 1,582 Depreciation...................... 405 264 1,121 759 Amortization...................... 375 325 1,119 721 Administrative expenses........... 1,512 1,229 4,270 3,344 -------- -------- -------- -------- 21,047 16,003 62,098 42,861 -------- -------- -------- -------- Income before income taxes........... 2,302 1,995 7,577 4,908 Provision for income taxes........... 933 739 2,914 1,803 -------- -------- -------- -------- Net income........................... $ 1,369 $ 1,256 $ 4,663 $ 3,105 ======== ======== ======== ======== Basic earnings per share............. $ 0.16 $ 0.16 $ 0.54 $ 0.51 Diluted earnings per share........... $ 0.15 $ 0.14 $ 0.50 $ 0.43 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-Month Period Ended September 30, ------------------- 1999 1998 ---- ---- (unaudited, in thousands) Cash flows from operating activities: Net income......................................... $ 4,663 $ 3,105 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and amortization................. 2,240 1,480 (Increase) decrease in: Service charges receivable.................... (270) (302) Inventories................................... (3,030) (2,096) Prepaid expenses and other assets............. (1,967) (1,901) Increase (decrease) in: Accounts payable and accrued expenses......... 345 (37) Income taxes payable.......................... 244 533 -------- -------- Net cash flows from operating activities.... 2,225 782 -------- -------- Cash flows from investing activities: Net increase in receivables........................ (2,303) (1,741) Purchases of property and equipment................ (2,220) (1,022) Acquisition of existing stores..................... (1,008) (11,683) -------- -------- Net cash flows from investing activities.... (5,531) (14,446) -------- -------- Cash flows from financing activities: Proceeds from debt................................. 15,800 16,830 Repayments of debt................................. (9,502) (8,138) Registration fees.................................. (12) - Proceeds from exercise of stock options............ 81 6,185 -------- -------- Net cash flows from financing activities.... 6,367 14,877 -------- -------- Increase in cash and cash equivalents................. 3,061 1,213 Cash and cash equivalents at beginning of the period.. 4,458 1,588 -------- -------- Cash and cash equivalents at end of the period........ $ 7,519 $ 2,801 ======== ======== Supplemental disclosure of cash flow information: Cash paid during the period for: Interest....................................... $ 1,934 $ 1,557 ======== ======== Income taxes................................... $ 1,585 $ 849 ======== ======== 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 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 July 31, 1998 Annual Report to Stockholders. All significant intercompany accounts and transactions have been eliminated in consolidation. The consolidated financial statements as of September 30, 1999 and December 31, 1998 and for the periods ended September 30, 1999 and 1998 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 September 30, 1999 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 $55,000,000 long-term line of credit with a group of commercial lenders (the "Credit Facility"). At September 30, 1999, $41,800,000 was outstanding under this Credit Facility and an additional $8,831,000 was available to the Company pursuant to the available borrowing base. The Credit Facility bears interest at the prevailing LIBOR rate (which was approximately 5.4% at September 30, 1999) 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 nine months ended September 30, 1999 and as of November 12, 1999. Note 3 - Business Acquisitions - ------------------------------ During the nine months ended September 30, 1999, the Company acquired two pawnshops in El Paso, Texas, and one pawnshop in Virginia. The Company also opened one start-up check cashing store each in Oregon and Washington, one start-up pawnshop in South Carolina, and three start-up pawnshops in Mexico, which is the Company's initial entry into international markets. These acquisitions and openings brought the Company's total number of stores owned to 142 as of September 30, 1999. All acquisitions during the nine months ended September 30, 1999 were financed primarily with proceeds from the Company's Credit Facility, and seller-financed debt. Note 4 - Earnings Per Share - --------------------------- The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data): Three Months Ended Nine Months Ended September 30, September 30, ------------------ ----------------- 1999 1998 1999 1998 ---- ---- ---- ---- Numerator: Net income for calculating basic earnings per share.......... $ 1,369 $ 1,256 $ 4,663 $ 3,105 Plus interest expense, net of taxes, relating to convertible debentures............ - - - 195 ------- ------- ------- ------- Net income for calculating diluted earnings per share........ $ 1,369 $ 1,256 $ 4,663 $ 3,300 ======= ======= ======= ======= Denominator: Weighted-average common shares for calculating basic earnings per share................ 8,630 7,863 8,624 6,072 Effect of dilutive securities: Stock options and warrants...... 560 830 530 881 Contingently issuable shares due to acquisitions..... 212 - 214 - Convertible debentures.......... - - - 771 ------- ------- ------- ------- Weighted-average common shares for calculating diluted earnings per share................ 9,402 8,693 9,368 7,724 ======= ======= ======= ======= Basic earnings per share.............. $ .16 $ .16 $ .54 $ .51 Diluted earnings per share............ $ .15 $ .14 $ .50 $ .43 Note 5 - New Lines of Business - ------------------------------ During the nine months ended September 30, 1999, the Company entered a joint venture partnership with SSF, Ltd. to offer various consumer financial services, including payday advances, in convenience stores throughout the United States. The joint venture's first transaction is to offer these services in kiosks located inside as many as 420 Circle K, Citgo, Chevron, Exxon and Texaco convenience stores in Texas and Oklahoma. As of November 12, 1999, the joint venture has opened nine such kiosks, all of which are located in South Texas. During the nine months ended September 30, 1999, the Company signed an agreement with Utah-based WebBank, a subsidiary of WebFinancial Corporation, which allows the Company to offer WebBank's short-term, unsecured consumer loans throughout the United States. This agreement facilitated the introduction of payday advances in the Company's pawn stores in October 1999, as well as in the joint venture kiosks inside convenience stores. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ------------------------------------------------ GENERAL - ------- The Company's pawnshop revenues are derived primarily from service charges on pawn loans, and the sale of unredeemed goods, or "merchandise sales". Pawn loans are made for a 30-day term with an automatic extension of 60 days in Texas, South Carolina and Missouri, 30 days in Oklahoma and 15 days in Maryland and Virginia. Pawn loans made in Washington, D.C. are made for a 30 day term with no automatic extension. All pawn loans are collateralized by tangible personal property placed in the custody of the Company. The annualized service charge rates on pawn loans are set by state laws and range between 12% and 240% in Texas and 36% and 240% in Oklahoma, depending on the size of the loan. Service charge rates are 144% to 240% on an annualized basis in Maryland, with a $6 monthly minimum charge. In Washington, D.C., loans up to $40 bear a flat $2 charge per month, while loans over $40 bear a 48% to 60% annualized rate. Missouri pawn loans bear service and storage charges totaling 240% per year, Virginia rates range from 120% to 180% annually, and South Carolina rates range from 60% to 300%. In its Texas stores, the Company recognizes service charges at the inception of the pawn loan at the lesser of the amount allowed by the state law for the initial 30-day term or $15, in accordance with state law. In Oklahoma, Maryland, Virginia, South Carolina, Missouri and Washington, D.C., the Company recognizes service charges at the inception of the loan at the amount allowed by law for the first 30 days. Pawn service charge income applicable to the remaining term and/or extension period is not recognized until the loan is repaid or renewed. If a loan is not repaid prior to the expiration of the automatic extension period, if applicable, the property is forfeited to the Company and held for resale. As a result of the Company's policy of accruing pawn service charges only for the initial 30-day term, unredeemed merchandise is transferred to inventory at a value equal to the loan principal plus one-month's accrued interest. The Company's accounting policy defers recognition of an amount of income equal to the amount of pawn service charges relating to the extension period until the loan is repaid or renewed, or until the merchandise is resold. This policy, in the Company's opinion, lessens the risk that the inventory's cost will exceed its realizable value when sold. Revenues at the Company's check cashing stores are derived primarily from check cashing fees, fees on payday advances, and fees from the sale of money orders and wire transfers. Payday advances have a term of thirty-one days or less, and carry a 15% service charge in California, Oregon and Washington, and a 10% service charge in Illinois. The Company recognizes service charge income on payday advances at the inception of the advance. Bad debts on payday advances are charged to operating expense in the month that the items are returned by the bank, and are credited to operating expense in the period the items are subsequently collected. 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. The Company has also made significant investments in projects that are critical to its future earnings growth. Such investments have included a year 2000 remediation program for the Company's store operating hardware and software, as well as a migration of the store operating system to a more sophisticated and powerful hardware infrastructure to facilitate future growth. Further, the Company has made additional investments in its internet retail website, including programming, inventory re-categorization, and digital photography of the Company's inventory. Finally, the Company has made significant investments related to its payday advance strategy, primarily in the areas of computer programming, training of store personnel, and costs related to its agreement with WebBank. 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. RESULTS OF OPERATIONS - --------------------- Nine months ended September 30, 1999 compared to nine months ended September 30, 1998 - -------------------------------------------------------------------------------- Total revenues increased 46% to $69,675,000 for the nine months ended September 30, 1999 (the "Nine-Month 1999 Period") as compared to $47,769,000 for the nine months ended September 30, 1998 (the "Nine-Month 1998 Period"). Of the $21,906,000 increase in total revenues, $1,300,000 relates to 3% same store increase at the 66 stores which were in operation throughout both the Nine-Month 1998 Period and the Nine-Month 1999 Period. The remaining increase of $20,606,000 resulted from revenues generated by 76 stores which were acquired or opened subsequent to January 1, 1998. In addition, 38% of the increase in total revenues, or $8,260,000, was attributable to increased merchandise sales, 53%, or $11,540,000, was attributable to increased service charges, 5%, or $1,117,000 was attributable to increased check cashing fees, and the remaining increase of $989,000, or 4%, was attributable to the increase in other income. As a percentage of total revenues, merchandise sales decreased from 62% to 54% during the Nine-Month 1999 Period compared to the Nine-Month 1998 Period, while service charges increased from 36% to 41%. Check cashing fees and other income increased from a combined 2% of total revenues in the Nine-Month 1998 Period to a combined 5% in the Nine-Month 1999 Period. The gross profit as a percentage of merchandise sales declined from 34% during the Nine-Month 1998 Period to 33% during the Nine-Month 1999 Period. The aggregate receivables balance increased 28% from $17,970,000 at September 30, 1998 to $22,970,000 at September 30, 1999. Of the $5,000,000 increase, $3,625,000 was attributable to the addition of 40 stores since October 1, 1998. The remaining increase of $1,375,000 was due to the 8% increase in same-store loan balances at the 102 stores in operation at both September 30, 1998 and September 30, 1999. The annualized yield on the average aggregate receivables balance increased from 146% during the Nine-Month 1998 Period to 177% during the Nine-Month 1999 Period. Operating expenses increased 66% to $28,154,000 during the Nine-Month 1999 Period compared to $16,954,000 during the Nine-Month 1998 Period, primarily as a result of the addition of 76 stores subsequent to January 1, 1998, as well as overall higher revenues at the Company's existing stores. Administrative expenses increased 28% to $4,270,000 during the Nine-Month 1999 Period compared to $3,344,000 during the Nine-Month 1998 Period. Interest expense increased to $1,917,000 in the Nine-Month 1999 Period compared to $1,582,000 in the Nine Month 1998 Period. For the Nine-Month 1999 and 1998 Periods, the Company's tax provisions of 38% and 37%, respectively, of income before income taxes differed from the statutory rate of 34% primarily due to state income taxes, net of the federal tax benefit. Three months ended September 30, 1999 compared to three months ended September 30, 1998 - ------------------------------------------------------------------------------ Total revenues increased 30% to $23,349,000 for the three month period ended September 30, 1999 ("the Third Quarter of 1999") as compared to $17,998,000 for the three month period ended September 30, 1998 ("the Third Quarter of 1998"). Of the $5,351,000 increase in total revenues, $1,071,000 relates to the 6% same store revenue increase at the 95 stores which were in operation throughout both the Third Quarter of 1998 and the Third Quarter of 1999. The remaining increase of $4,280,000 resulted from revenues generated by 47 stores which were opened subsequent to July 1, 1998. In addition, 28% or $1,491,000 of the increase in total revenues was attributable to increased merchandise sales, 67% or $3,570,000 was attributable to increased service charges, 2% or $131,000 was attributable to increased check cashing fees, and the remaining increase of 3%, or $159,000 was attributable to the increase in other income. As a percentage of total revenues, merchandise sales decreased from 58% to 51%, and service charges increased from 39% to 45%, during the Third Quarter of 1999 as compared to the Third Quarter of 1998, while check cashing fees and other income increased from a combined 3% of total revenues to a combined 4% during the same periods. The gross profit as a percentage of merchandise sales decreased from 35% during the Third Quarter of 1998 to 31% during the Third Quarter of 1999. The aggregate receivables balance increased 28% from $17,970,000 at September 30, 1998 to $22,970,000 at September 30, 1999. Of the $5,000,000 increase, $3,625,000 was attributable to the addition of 40 stores since October 1, 1998. The remaining increase of $1,375,000 was due to the 8% increase in same-store loan balances at the 102 stores in operation at both September 30, 1998 and September 30, 1999. The annualized yield on the average aggregate receivables balance increased from 162% during the Third Quarter of 1998 to 190% during the Third Quarter of 1999. Operating expenses increased 43% to $9,844,000 during the Third Quarter of 1999 compared to $6,893,000 during the Third Quarter of 1998, primarily as a result of the 47 stores added subsequent to July 1, 1998, and higher overall revenues at the Company's existing stores. Administrative expenses increased 23% to $1,512,000 during the Third Quarter of 1999 compared to $1,229,000 during the Third Quarter of 1998. Interest expense increased to $733,000 in the Third Quarter of 1999 compared to $564,000 in the Third Quarter of 1998. For the Third Quarters of 1999 and 1998, the Company's tax provisions of 41% and 37%, respectively, 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 borrowings, and seller-financed indebtedness. The Company currently maintains a $55,000,000 long-term line of credit with a group of commercial lenders (the "Credit Facility"). At September 30, 1999, $41,800,000 was outstanding under this Credit Facility and an additional $8,831,000 was available to the Company pursuant to the available borrowing base. The Credit Facility bears interest at the prevailing LIBOR rate (which was approximately 5.4% at September 30, 1999) 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 nine months ended September 30, 1999 and as of November 12, 1999. During the nine months ended September 30, 1999, the Company acquired two pawnshops in El Paso, Texas, and one pawnshop in Virginia. The Company also opened one start-up check cashing store each in Oregon and Washington, one start-up pawnshop in South Carolina, and three start-up pawnshops in Mexico. These acquisitions and openings brought the Company's total number of stores owned to 142 as of September 30, 1999. All acquisitions during the nine months ended September 30, 1999 were financed primarily with proceeds from the Company's Credit Facility, and seller-financed debt. As of September 30, 1999, the Company's primary sources of liquidity were $7,519,000 in cash and cash equivalents, $3,019,000 in service charges receivable, $22,970,000 in receivables, $20,586,000 in inventories and $8,831,000 of available and unused funds under the Company's Credit Facility. The Company had working capital as of September 30, 1999 of $50,329,000 and a total liabilities to equity ratio of 0.92 to 1. During the nine months ended September 30, 1999, the Company received proceeds of $82,000 from the issuance of 17,688 shares of common stock relating to the exercise of outstanding common stock options. Net cash provided by operating activities for the Company during the Nine Month 1999 Period was $2,225,000 as compared with $782,000 provided by operating activities during the Nine-Month 1998 Period. Net cash used for investing activities during the Nine-Month 1999 Period was $5,531,000 as compared with $14,446,000 used for investing activities during the Nine-Month 1998 Period. Net cash provided by financing activities of $6,367,000 during the Nine-Month 1999 Period compares to net cash provided by financing activities of $14,877,000 during the Nine-Month 1998 Period. The profitability and liquidity of the Company are affected by the amount of loans outstanding, which is controlled in part by the Company's loan decisions. The Company is able to influence the frequency of forfeiture of pawn 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 pawn 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 November 12, 1999. 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 through existing store acquisitions and new store openings. 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 October 1, 1999 and November 12, 1999, the Company opened one check cashing store in Washington DC, one check cashing store in Oregon, and one pawn store in Mexico. All store openings and acquisitions during and after the nine months ended September 30, 1999 were financed with proceeds from the Company's Credit Facility and with seller-financed debt. YEAR 2000 ISSUE - --------------- The "Year 2000 Issue" is the result of computer programs that use two digits instead of four to record the applicable year. Computer programs that have date-sensitive software might recognize a date using "00" as the Year 1900 instead of the Year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including among other events, a temporary inability to process transactions or engage in similar normal business activities. The Year 2000 is a leap year, which may also lead to incorrect calculations, functions or system failure. The Company has established a committee to gather, test, and produce information about the Company's operations systems impacted by the Year 2000 transition. The Company has utilized both internal and external resources to identify, correct or reprogram, and test systems for Year 2000 compliance. Management currently believes that the Company has achieved Year 2000 compliance of the hardware and software components of its own internally developed point-of-sale operating system. The costs associated with this Year 2000 remediation project totalled approximately $50,000. The Company's contingency plan in the event of a widespread Year 2000 failure includes operating the Company's stores on a manual, non-computerized basis. Management currently believes, based on available information, that the Company will incur no additional material expenditures related to the Year 2000 Issue, and that the Year 2000 Issue will not have a material adverse impact on the Company's financial position or it's results of operations. In addition, the Company has contacted its significant vendors and suppliers to determine the extent to which the Company may be vulnerable to those parties' failure to remediate their own Year 2000 issues. While there can be no guarantee that the systems of other companies with which the Company's systems interface will be timely converted, or that a failure to convert by another company, or a conversion that is incompatible with the Company's systems would not require the Company to spend more time or money than anticipated, or even have a material adverse effect on the Company, management currently believes that all of its significant vendors and suppliers have achieved Year 2000 compliance. 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 nine months ending September 30, 1999, the Company issued 17,688 shares of common stock relating to the exercise of outstanding stock options for an aggregate exercise price of $82,000. Between October 1, 1999 and November 12, 1999, the Company issued 155,000 shares of common stock to retire acquisition-related liabilities of approximately $1,520,000, as well as an additional 58,875 shares of common stock related to the exercise of outstanding stock options for an aggregate exercise price of $272,000. ITEM 4. Submission of matters to a vote of security holders ITEM 6. Exhibits and reports on Form 8-K a. Exhibits 27.0 Financial Data Schedules (Edgar version only). 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: November 12, 1999 FIRST CASH FINANCIAL SERVICES, INC. ----------------------------------- (Registrant) Phillip E. Powell Rick L. Wessel - ------------------------- ------------------------- Phillip E. Powell Rick L. Wessel Chairman of the Board and Chief Accounting Officer Chief Executive Officer

5 This schedule contains summary financial information extracted from the condensed consolidated balance sheets and condensed consolidated statements of income found in the company's Form 10-Q for the year to date, and is qualified in its entirety by reference to such financial statements. 1,000 9-MOS DEC-31-1999 SEP-30-1999 7,519 0 25,989 0 20,586 60,352 10,270 0 125,475 10,023 0 0 0 91 65,349 125,475 37,807 69,675 25,517 25,517 34,664 0 1,917 7,577 2,914 4,663 0 0 0 4,663 0.54 0.50