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:
June 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 ___
As of July 26, 2005 there were 15,556,561 shares of Common Stock
outstanding.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRST CASH FINANCIAL SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
-------------------- -------------
2005 2004 2004
------- ------- -------
(unaudited)
(in thousands, except share data)
ASSETS
Cash and cash equivalents................ $ 19,092 $ 20,083 $ 26,232
Service charges receivable............... 4,776 4,208 4,512
Pawn receivables......................... 26,924 23,063 23,429
Short-term advance receivables, net of
allowance of $505, $464 and $552,
respectively........................... 14,068 13,069 15,465
Inventories.............................. 18,451 16,471 17,644
Prepaid expenses and other current assets 1,731 1,114 1,378
Income taxes receivable.................. 829 3,044 867
------- ------- -------
Total current assets ................. 85,871 81,052 89,527
Property and equipment, net.............. 21,367 16,104 17,376
Goodwill................................. 53,237 53,237 53,237
Other.................................... 905 739 799
------- ------- -------
$161,380 $151,132 $160,939
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable......................... $ 1,346 $ 832 $ 856
Accrued expenses......................... 6,969 6,692 8,686
------- ------- -------
Total current liabilities ............ 8,315 7,524 9,542
Deferred income taxes payable............ 7,509 6,555 7,351
------- ------- -------
15,824 14,079 16,893
------- ------- -------
Stockholders' equity:
Preferred stock; $.01 par value;
10,000,000 shares authorized ........ - - -
Common stock; $.01 par value;
90,000,000 shares authorized ........ 167 161 166
Additional paid-in capital ............ 80,177 70,734 78,556
Retained earnings ..................... 88,732 66,158 77,440
Common stock held in treasury ......... (23,520) - (12,116)
------- ------- -------
145,556 137,053 144,046
------- ------- -------
$161,380 $151,132 $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 Six Months Ended
June 30, June 30,
------------------- ------------------
2005 2004 2005 2004
------- ------- ------- -------
(unaudited, in thousands, except per share amounts)
Revenues:
Merchandise sales.......... $ 22,544 $ 18,626 $ 46,781 $ 39,097
Pawn service charges....... 9,569 8,044 18,523 16,178
Short-term advance service
charges.................. 13,262 12,639 25,931 24,642
Check cashing fees......... 691 723 1,517 1,633
Other...................... 262 286 575 618
------- ------- ------- -------
46,328 40,318 93,327 82,168
------- ------- ------- -------
Cost of revenues:
Cost of goods sold......... 13,380 10,657 27,970 22,727
Short-term advance loss
provision................ 3,018 3,017 4,599 4,406
Check cashing returned
items expense............ 48 56 134 129
------- ------- ------- -------
16,446 13,730 32,703 27,262
------- ------- ------- -------
Gross profit................. 29,882 26,588 60,624 54,906
------- ------- ------- -------
Expenses:
Store operating expenses... 16,164 14,593 31,925 29,370
Administrative expenses.... 4,209 4,250 8,425 8,662
Depreciation............... 1,370 988 2,662 1,909
Interest expense .......... - - - 43
Interest income............ (87) (18) (171) (32)
------- ------- ------- -------
21,656 19,813 42,841 39,952
------- ------- ------- -------
Income before income taxes... 8,226 6,775 17,783 14,954
Provision for income taxes... 3,003 2,529 6,491 5,530
------- ------- ------- -------
Net income................... $ 5,223 $ 4,246 $ 11,292 $ 9,424
======= ======= ======= =======
Net income per share:
Basic................... $ 0.33 $ 0.26 $ 0.71 $ 0.60
======= ======= ======= =======
Diluted................. $ 0.32 $ 0.25 $ 0.68 $ 0.55
======= ======= ======= =======
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 Months Ended June 30,
-------------------------
2005 2004
-------- --------
(unaudited, in thousands)
Cash flows from operating activities:
Net income .................................... $ 11,292 $ 9,424
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation ............................... 2,662 1,909
Short-term advance loss provision ........... 4,599 4,406
Stock option and warrant income tax benefit.. 666 5,821
Changes in operating assets and liabilities:
Service charges receivable .................. (264) (290)
Inventories ................................. (315) (285)
Prepaid expenses and other assets ........... (459) (206)
Accounts payable and accrued expenses ....... (1,227) (3,362)
Current and deferred income taxes .......... 196 (831)
-------- --------
Net cash flows from operating activities .. 17,150 16,586
-------- --------
Cash flows from investing activities:
Pawn receivables, net ......................... (3,987) (3,624)
Short-term advance receivables, net ........... (3,202) (3,716)
Purchases of property and equipment ........... (6,653) (3,595)
-------- --------
Net cash flows from investing activities .. (13,842) (10,935)
-------- --------
Cash flows from financing activities:
Proceeds from debt ............................ - 3,000
Repayments of debt ............................ - (9,000)
Purchase of treasury stock .................... (11,404) (1,347)
Proceeds from exercise of stock options
and warrants ................................ 956 5,932
-------- --------
Net cash flows from financing activities .. (10,448) (1,415)
-------- --------
Change in cash and cash equivalents............. (7,140) 4,236
Cash and cash equivalents at beginning
of the period................................. 26,232 15,847
-------- --------
Cash and cash equivalents at end of the period.. $ 19,092 $ 20,083
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest .................................... $ - $ 43
======== ========
Income taxes ................................ $ 6,086 $ 541
======== ========
Supplemental disclosure of non-cash investing activity:
Non-cash transactions in connection with pawn
receivables settled through forfeitures of
collateral transferred to inventories ....... $ 17,554 $ 15,110
======== ========
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 owns 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 June 30, 2005, and for the
three and six-month periods ended June 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 June 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 3.4% at June 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 June
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 June 30, 2005,
and July 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 Six Months Ended
June 30, June 30,
------------------ ----------------
2005 2004 2005 2004
------ ------ ------ ------
Numerator:
Net income for calculating basic
and diluted earnings per share $ 5,223 $ 4,246 $11,292 $ 9,424
====== ====== ====== ======
Denominator:
Weighted-average common shares
for calculating basic earnings
per share 15,679 16,033 15,871 15,732
Effect of dilutive securities:
Stock options and warrants 738 1,261 844 1,454
------ ------ ------ ------
Weighted-average common
shares for calculating diluted
earnings per share 16,417 17,294 16,715 17,186
====== ====== ====== ======
Basic earnings per share $ 0.33 $ 0.26 $ 0.71 $ 0.60
====== ====== ====== ======
Diluted earnings per share $ 0.32 $ 0.25 $ 0.68 $ 0.55
====== ====== ====== ======
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 Six Months Ended
June 30, June 30,
------------------ ----------------
2005 2004 2005 2004
------ ------ ------ ------
Net income, as reported $ 5,223 $ 4,246 $11,292 $ 9,424
Less: Stock-based employee
compensation determined under the
fair value requirements of SFAS
123, net of income tax benefits 46 55 7,438 2,411
------ ------ ------ ------
Adjusted net income $ 5,177 $ 4,191 $ 3,854 $ 7,013
====== ====== ====== ======
Earnings per share:
Basic, as reported $ 0.33 $ 0.26 $ 0.71 $ 0.60
Basic, adjusted $ 0.33 $ 0.26 $ 0.24 $ 0.45
Diluted, as reported $ 0.32 $ 0.25 $ 0.68 $ 0.55
Diluted, adjusted $ 0.32 $ 0.24 $ 0.23 $ 0.41
The fair values were determined using a Black-Scholes option-pricing
model using the following assumptions:
Three Months Ended Six Months Ended
June 30, June 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 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.
During the period from January 1, 2005, through June 30, 2005, the
Company issued 125,000 shares of common stock relating to the exercise of
outstanding stock options and warrants for an aggregate exercise price of
$1,623,000, including income tax benefit.
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. As of July 26, 2005, the
Company had 309 locations in eleven U.S. states and six states in Mexico.
The Company's pawn stores engage in both consumer finance and retail sales
activities and are a convenient source for small consumer advances ("pawns")
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 collateral
forfeitures and over-the-counter purchases from customers. Many of the
Company's U.S. pawn stores also offer payday advances or related credit
services.
The Company also operates stand-alone payday advance stores in seven
U.S. states. These stores provide a broad range of consumer financial
services products, including short-term or payday advances, payday advance-
related credit services, check cashing, money orders, money transfers and
prepaid card products. In addition, the Company is a 50% partner in Cash &
Go, Ltd., a Texas limited partnership. Cash & Go, Ltd. owns and operates
kiosks located inside convenience stores and offers payday advance-related
credit services and check cashing.
Effective July 1, 2005, First Cash began marketing a fee-based credit
services package in its Texas locations, which includes access to a
short-term loan funded by an independent consumer finance lender operating
under existing Texas laws. The Company's credit services product is
authorized under existing provisions of the Texas Finance Code. Under these
provisions, First Cash Credit, Ltd. ("FCC"), a wholly owned subsidiary of
the Company, has registered as a "Credit Services Organization" in order to
provide, for a fee, credit services to help consumers in obtaining credit
and improving their credit rating. As part of these services, FCC assists
customers in applying for loans from an independent, Texas-based consumer
lending company. First Cash's Texas-based subsidiaries continue to offer
pawn loans and bank-funded payday advances, as well as the new credit
services product.
OPERATIONS AND LOCATIONS
The following table details store counts for the three and six-month
periods ended June 30, 2005:
Three Months Ended Six Months Ended
June 30, 2005 June 30, 2005
---------------------- ----------------------
Payday Payday
Pawn Advance Total Pawn Advance Total
Stores Stores Stores Stores Stores Stores
------ ------ ------ ------ ------ ------
Beginning of period count 205 92 297 197 87 284
New stores opened 9 1 10 19 6 25
Stores closed or consolidated - - - (2) - (2)
------ ------ ------ ------ ------ ------
End of period count 214 93 307 214 93 307
====== ====== ====== ====== ====== ======
At June 30, 2005, a total of 69 pawn stores also offered the payday
advance product in addition to pawn loans and retail sales. For the six-
month period ended June 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 chart. No
kiosks were opened or closed during the six months ended June 30, 2005.
Although 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 officers, area supervisors and other operations
management, 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. Revenues of the Cash & Go, Ltd.
joint venture kiosks are not included in same-store revenue calculations.
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.
RESULTS OF OPERATIONS
Three months ended June 30, 2005, compared to the three months ended June
30, 2004
The following chart (amounts shown in thousands) details the components
of revenues for the three months ended June 30, 2005 ("the Second Quarter of
2005"), as compared to the three months ended June 30, 2004 ("the Second
Quarter of 2004").
Three Months Ended June 30,
---------------------------
2005 2004 Increase/Decrease
------ ------ -----------------
Domestic revenues:
Merchandise sales $13,183 $12,522 $ 661 5%
Scrap jewelry sales 1,335 1,475 (140) (9%)
Pawn service charges 5,995 5,532 463 8%
Short-term advance service charges 13,262 12,639 623 5%
Check cashing fees 691 723 (32) (4%)
Other 262 286 (24) (8%)
------ ------ ----- ----
34,728 33,177 1,551 5%
------ ------ ----- ----
Foreign revenues:
Merchandise sales 5,394 3,121 2,273 73%
Scrap jewelry sales 2,632 1,508 1,124 75%
Pawn service charges 3,574 2,512 1,062 42%
------ ------ ----- ----
11,600 7,141 4,459 62%
------ ------ ----- ----
Total revenues:
Merchandise sales 18,577 15,643 2,934 19%
Scrap jewelry sales 3,967 2,983 984 33%
Pawn service charges 9,569 8,044 1,525 19%
Short-term advance service charges 13,262 12,639 623 5%
Check cashing fees 691 723 (32) (4%)
Other 262 286 (24) (8%)
------ ------ ----- ----
$46,328 $40,318 $6,010 15%
====== ====== ===== ====
Same-store revenues (stores that were in operation during all of the
Second Quarter of both 2004 and 2005, excluding revenues of the Cash & Go,
Ltd. joint venture kiosks) increased 9% or $3,378,000 for the Second Quarter
of 2005 as compared to the same quarter last year. Revenues generated by the
63 new pawn and payday advance stores that have opened since April 1, 2004
increased by $3,272,000, compared to the same quarter last year.
The following chart (amounts shown in thousands) details the pawn and
short-term advance receivable balances as of June 30, 2005, as compared to
June 30, 2004.
Balance at June 30,
-------------------
2005 2004 Increase/Decrease
------ ------ -----------------
Domestic receivables:
Pawn receivables $17,852 $16,420 $ 1,432 9%
Short-term advance receivables 14,068 13,069 999 8%
------ ------ ----- ----
31,920 29,489 2,431 8%
------ ------ ----- ----
Foreign receivables:
Pawn receivables 9,072 6,643 2,429 37%
------ ------ ----- ----
9,072 6,643 2,429 37%
------ ------ ----- ----
Total receivables:
Pawn receivables 26,924 23,063 3,861 17%
Short-term advance receivables 14,068 13,069 999 8%
------ ------ ----- ----
$40,992 $36,132 $4,860 13%
====== ====== ===== ====
Of the $3,861,000 total increase in pawn receivables, $1,804,000 was
attributable to the growth at the stores that were in operation as of June
30, 2005 and 2004, and $2,057,000 was attributable to the new stores opened
since June 30, 2004. Of the $999,000 increase in short-term advance
receivables, $658,000 was attributable to the growth in short-term advance
receivables balances at the stores that were in operation as of June 30,
2005 and 2004, and $577,000 was attributable to the new stores opened
since June 30, 2004, less a decrease in short-term advance receivables of
$236,000 at the Cash & Go, Ltd. joint venture kiosks. The Company's loss
provision reserve on short-term advance receivables increased from $464,000
at June 30, 2004, to $505,000 at June 30, 2005.
Gross profit margins on total merchandise sales were 41% during the
Second Quarter of 2005 compared to 43% during the Second Quarter of 2004.
Retail merchandise margins, which exclude scrap jewelry sales, were 45%
during the Second Quarter of 2005 compared to 46% during the Second Quarter
of 2004. The Company's loss provision relating to short-term advances
decreased from 23.9% of short-term advance service charge revenues to 22.8%
during the Second 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
$445,000 from such sales and this amount was recorded as a reduction to the
short-term advance loss provision.
Store operating expenses increased 11% to $16,164,000 during the Second
Quarter of 2005 compared to $14,593,000 during the Second Quarter of
2004, primarily as a result of the net addition of 60 pawn and
check cashing/short-term advance stores since April 1, 2004, which is a
24% increase in store count. Administrative expenses decreased 1% to
$4,209,000 during the Second Quarter of 2005 compared to $4,250,000 during
the Second Quarter of 2004, which is attributable to net reductions in total
administrative and supervisory compensation expense, net decreases in
certain Mexico administrative expenses and other seasonal and/or non-
recurring factors affecting comparability to the prior year. Full year
administrative expenses for 2005 are expected to increase in comparison to
2004. The Company had no interest expense during the Second Quarter of 2005
as a result of paying off all outstanding debt during Fiscal 2004. Interest
income increased from $18,000 in the Second Quarter of 2004 to $87,000 in
the Second Quarter of 2005, due primarily to interest income earned on
increased levels of invested cash and cash equivalents.
For the Second Quarter of 2004 and 2005, the Company's effective
federal income tax rate of 37% differed from the statutory tax rate of
approximately 35% primarily as a result of state and foreign income taxes.
Six months ended June 30, 2005, compared to the six months ended June 30,
2004
The following chart (amounts shown in thousands) details the components
of revenues for the six months ended June 30, 2005 ("the Six-Month 2005
Period"), as compared to the six months ended June 30, 2004 ("the Six-Month
2004 Period").
Six Months Ended June 30,
-------------------------
2005 2004 Increase/Decrease
------ ------ -----------------
Domestic revenues:
Merchandise sales $27,742 $26,949 $ 793 3%
Scrap jewelry sales 3,192 3,296 (104) (3%)
Pawn service charges 12,048 11,602 446 4%
Short-term advance service charges 25,931 24,642 1,289 5%
Check cashing fees 1,517 1,633 (116) (7%)
Other 575 618 (43) (7%)
------ ------ ----- ----
71,005 68,740 2,265 3%
------ ------ ----- ----
Foreign revenues:
Merchandise sales 9,803 5,726 4,077 71%
Scrap jewelry sales 6,044 3,126 2,918 93%
Pawn service charges 6,475 4,576 1,899 41%
------ ------ ----- ----
22,322 13,428 8,894 66%
------ ------ ----- ----
Total revenues:
Merchandise sales 37,545 32,675 4,870 15%
Scrap jewelry sales 9,236 6,422 2,814 44%
Pawn service charges 18,523 16,178 2,345 14%
Short-term advance service charges 25,931 24,642 1,289 5%
Check cashing fees 1,517 1,633 (116) (7%)
Other 575 618 (43) (7%)
------ ------ ------ ----
$93,327 $82,168 $11,159 14%
====== ====== ====== ====
Same-store revenues (stores that were in operation during all of the
first half of 2004 and 2005, excluding revenues of the Cash & Go, Ltd. joint
venture kiosks) increased 7% or $5,244,000 for the Six-Month 2005 Period
as compared to the same period last year. Revenues generated by the 77
new pawn and payday advance stores that have opened since January 1, 2004
increased by $7,100,000, compared to the same period last year.
Gross profit margins on total merchandise sales were 40% during the
Six-Month 2005 Period compared to 42% during the Six-Month 2004 Period.
Retail merchandise margins, which exclude scrap jewelry sales, were 44%
during the Six-Month 2005 Period compared to 45% during the Six-Month 2004
Period. The Company's loss provision relating to short-term advances
decreased from 17.9% of short-term advance service charge revenues during
the Six-Month 2004 Period to 17.7% during the Six-Month 2005 Period. During
the Six-Month 2005 Period, the Company initiated a program to sell selected
payday advance receivables which have been previously written off. The
Company realized approximately $445,000 from such sales and this amount was
recorded as a reduction to the short-term advance loss provision.
Store operating expenses increased 9% to $31,925,000 during the Six-
Month 2005 Period compared to $29,370,000 during the Six-Month 2004
Period, primarily as a result of the net addition of 72 pawn and
check cashing/short-term advance stores since January 1, 2004, which is a
31% increase in store count. Administrative expenses decreased 3% to
$8,425,000 during the Six-Month 2005 Period compared to $8,662,000 during
the Six-Month 2004 Period, which is attributable to net reductions in total
administrative and supervisory compensation expense, net decreases in
certain Mexico administrative expenses and other seasonal and/or non-
recurring factors affecting comparability to the prior year. Full year
administrative expenses for 2005 are expected to increase in comparison to
2004. The Company had no interest expense during the Six-Month 2005 Period
as a result of paying off all outstanding debt during Fiscal 2004. Interest
expense for the Six-Month 2004 Period was $43,000. Interest income
increased from $32,000 in the Six-Month 2004 Period to $171,000 in the Six-
Month 2005 Period, due primarily to interest income earned on increased
levels of invested cash and cash equivalents.
For the Second Quarter of 2004 and 2005, the Company's effective
federal income tax rate of 37% differed from the statutory tax rate of
approximately 35% primarily as a result of state and foreign income taxes.
LIQUIDITY AND CAPITAL RESOURCES
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 3.4% at June 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 June 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
June 30, 2005, and July 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.
As of June 30, 2005, the Company's primary sources of liquidity were
$19,092,000 in cash and cash equivalents, $45,768,000 in receivables,
$18,451,000 in inventories and $25,000,000 of available and unused funds
under the Company's Credit Facility. The Company had working capital of
$77,556,000 as of June 30, 2005, and total equity exceeded total liabilities
by a ratio of 9 to 1.
The Company utilized positive cash flows from operations in the Six-
Month 2005 Period to fund investing and financing activities primarily
related to the purchase of treasury stock and to opening new stores. Net
cash provided by operating activities of the Company during the six months
ended June 30, 2005, was $17,150,000, consisting primarily of net income of
$11,292,000 plus non-cash adjustments for depreciation, the short-term
advance loss provision, the tax benefit from the exercise of employee stock
options, and a change in tax balances of $2,662,000, $4,599,000, $666,000,
and $196,000, respectively, in addition to a decrease in accounts payable
and accrued expenses of $1,227,000, net of an increase in service charge
receivables, inventory, and prepaid assets of $264,000, $315,000, and
$459,000, respectively. Net cash used by investing activities during the
six months ended June 30, 2005, was $13,842,000, which was primarily
comprised of net cash outflows from pawn receivables activity of $3,987,000,
net cash outflows from short-term advance receivables activity of
$3,202,000, and cash paid for fixed asset additions of $6,653,000. The
opening of 25 new stores and the purchases of corporate fixed assets during
the Six-Month 2005 Period contributed significantly to the volume of fixed
asset additions. Net cash used by financing activities was $10,448,000
during the six months ended June 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 $956,000.
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 Six-
Month 2005 Period the total cash flows from operations were $17,150,000,
while net cash outflows related to pawn receivables activity and short-term
advance receivables activity were $3,987,000 and $3,202,000, respectively.
The combined net cash flows from operations and pawn and short-term
advance receivables totaled $9,961,000 for the Six-Month 2005 Period. For
the comparable Six-Month 2004 Period, cash flows from operations were
$16,586,000, and net cash outflows related to pawn receivables and short-
term advance receivables were $3,624,000 and $3,716,000, respectively. The
combined net cash flows from operations and pawn and short-term advance
receivables totaled $9,246,000 for the Six-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 charges. Additionally, small advances in relation to the
pledged property's estimated resale value tend to increase pawn redemptions
and improve the Company's liquidity. Conversely, providing larger pawns in
relation to the estimated resale value of the pledged property can result in
an increase in the Company's pawn service charge income. Also, larger
average pawn balances can result in an increase in pawn forfeitures, which
increases the quantity of goods on hand and, unless the Company increases
inventory turnover, reduces the Company's liquidity. The Company's renewal
policy allows customers to renew pawns by repaying all accrued interest on
such pawns, effectively creating a new pawn transaction.
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
charges receivable, based upon expected default rates, net of estimated
future recoveries of previously defaulted short-term advances and service
charges 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 charges 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 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.
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 earnings
per share forecast for 2005, its expectations for new store openings in
2005, and its expectations for transaction and revenue volumes from its
credit services and lending products in Texas. 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. Recently revised federal regulations and proposed state-level
legislation affecting the payday advance industry, which are described more
fully in the Company's Annual Report on Form 10-K for the year ended
December 31, 2004, could negatively affect the Company's financial results
and growth expectations in certain markets; however, the impact of the
revised regulations and legislation cannot be fully estimated at the current
time. Other such factors may include changes in regional, national or
international economic conditions, changes or increases in competition, the
ability to open and integrate new stores, the ability to maintain favorable
banking relationships as it relates to short-term lending products, the
ability to integrate and operate profitably the credit service product in
Texas, changes in legislative and governmental 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.
Payday Advance Regulatory Developments
The Company's short-term or payday advance operations are generally
regulated directly by the various states in which the product is offered.
In the State of Texas, the Company has 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. The Company is licensed as a regulated servicing
agent by the State of Texas. The Federal Deposit Insurance Corporation
("FDIC") regulates the ability of state chartered banks to enter into
relationships with out-of-state payday loan servicers, and maintains
guidelines under which such arrangements are permitted. Texas is the only
state in which the Company functions as a loan servicer through a
relationship with a state chartered bank that is subject to the FDIC
guidelines for payday lending.
On March 2, 2005, the FDIC issued revised payday lending guidelines for
FDIC-supervised banks. The revised guidelines, which generally became
effective July 1, 2005, include a requirement that such banks cannot provide
a payday loan to a customer with payday loans outstanding from any bank for
more than three months in the previous twelve months. The Company expects
that implementation of the revised guidelines will have a negative effect on
some portion of its bank funded payday lending revenues in its Texas
locations. Customers who are rejected for a payday advance by County Bank
due to the new FDIC guidelines or any other reason will be allowed to apply
for the Company's new credit services product. The Company expects revenue
from its credit services product to offset or exceed the expected decrease
in Texas-based payday advance revenues as a result of the new FDIC
guidelines. The Company's payday advance revenues from Texas locations
totaled $30,554,000 in Fiscal 2004 and represented approximately 17% of the
Company's total revenues for 2004. For the six month period ended June 30,
2005, payday revenues from Texas locations totaled $14,295,000 and
represented approximately 15% of the Company's total revenues.
In addition to federal legislative and regulatory oversight, the
consumer finance industry is also subject to legislative initiatives and
regulatory actions at the state level. If state-level legislative or
regulatory actions that had negative effects on the consumer finance
industry were taken in states where the Company has a significant number of
stores, those actions could have a materially adverse effect on the
Company's lending activities and revenues. There can be no assurance that
additional local, state, or federal legislation 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.
Other
Certain factors may cause results to differ materially from those
anticipated by some of the statements made in this report. Such factors are
difficult to predict and many are beyond the control of the Company, but may
include changes in regional, national or international economic conditions,
changes in competition from various sources including both financial
services entities and retail businesses, the ability to integrate new
stores, changes in governmental regulations, unforeseen litigation, changes
in capital markets, changes in interest rates, changes in tax rates or
policies, the ability to maintain a loan servicing relationship with an
out-of-state bank necessary to generate service charges from short-term
advances in the Texas market, future business decisions, changes in gold
prices, changes in foreign currency exchange rates, and other risks and
uncertainties indicated in the Company's 2004 Annual Report to Stockholders.
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 second 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 June 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 and
arbitration previously reported in the Company's 2004 Annual Report to
Stockholders filed on Form 10-K.
ITEM 2. CHANGES IN SECURITIES
During the period from January 1, 2005, through June 30, 2005, the
Company issued 38,000 shares of common stock relating to the exercise of
outstanding stock options for an aggregate exercise price of $561,000
(including income tax effect). During the period from January 1, 2005,
through June 30, 2005, the Company issued 87,000 shares of common stock
relating to the exercise of outstanding stock warrants for an aggregate
exercise price of $1,062,000 (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 and still outstanding 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 July 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 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
On May 26, 2005, the Company held the annual meeting of its
stockholders. Of the 16,716,355 issued and outstanding common shares
entitled to vote at the meeting, 15,025,581 of the common shares voted in
person or by proxy. The shareholders voted affirmatively on the following
two proposals:
1. The stockholders ratified the election of Phillip Powell, director:
FOR % WITHHELD %
14,455,754 96.2 569,827 3.8
2. The stockholders ratified the selection of Hein & Associates LLP as
independent auditors of the Company for the year ended December 31, 2005:
FOR % AGAINST % ABSTAIN %
14,910,428 92.6 71,717 0.4 43,436 0.3
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: July 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: July 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: July 26, 2005
/s/ R. Douglas Orr
--------------------------------------
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 June 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: July 26, 2005
/s/ J. Alan Barron
--------------------------------------
J. Alan Barron
Chief Executive Officer
/s/ R. Douglas Orr
--------------------------------------
R. Douglas Orr
Chief Financial Officer