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First Cash Reports Record Second Quarter Earnings Per Share Of $0.36; Operating Income Increases 22%, Raising 2010 Guidance

ARLINGTON, Texas, July 21, 2010 (GLOBE NEWSWIRE) -- First Cash Financial Services, Inc. (Nasdaq:FCFS) today announced record-setting revenue, net income and earnings per share for the three months ended June 30, 2010. The Company reported second quarter earnings per share from continuing operations of $0.36, a 20% increase over the prior year. The Company is increasing fiscal 2010 earnings guidance to a range of $1.58 to $1.62 per share. In addition, the Company announced that it completed, in early July, the acquisitions of six pawn stores in existing U.S. markets.

Earnings Highlights

  • Diluted earnings per share from continuing operations for the second quarter of 2010 were $0.36, an increase of 20%, compared to $0.30 in the second quarter of 2009. Net income from continuing operations for the second quarter increased by 22% to $11.2 million, compared to $9.1 million in the prior-year quarter.
  • Year-to-date diluted earnings per share from continuing operations for the six months ended June 30, 2010 were $0.72, an increase of 18% over the prior year-to-date period. Net income from continuing operations through June 30, 2010 was $22.2 million, compared to $18.4 million in the prior year.    
  • Total diluted earnings per share, including income from discontinued operations, were $0.38 for the second quarter of 2010 and $0.78 year-to-date. Earnings per share from discontinued operations, primarily the former Auto Master operation, were $0.02 for the second quarter and $0.06 year-to-date.

Revenue Highlights

  • Consolidated second quarter revenue increased by 19% over last year, totaling $98 million. Year-to-date revenue was $195 million, a 20% increase over the prior year. 
  • Same-store revenue increased by 12% for both the second quarter and year-to-date periods. By region, same-store pawn revenue increased in the current quarter by 14% in Mexico and 10% in the United States.
  • On a geographic basis, the Company's revenue continue to be diversified between the United States and Mexico, with 52% of second quarter revenue being generated in Mexico and 48% derived from domestic operations. In Mexico, second quarter revenue increased by 26% over last year, reflecting contributions from both new and maturing stores. U.S. pawn revenue increased by 12% in the second quarter, the result of continuing strong same-store revenue growth. 
  • On a product-line basis, second quarter revenue from service fees on pawn loans increased 25%, which reflected ongoing consumer demand for micro-credit products in both the United States and Mexico.  Overall pawn merchandise sales increased by 18% for the quarter, driven by especially strong retail sales in Mexico (up 39%) and jewelry scrap sales in the United States (up 27%).
  • Total short-term loan and credit services revenue increased by 15% in the second quarter; even with this increase, revenue from the Company's remaining short-term loan and credit services operations in the United States represented only 13% of total revenue.

Key Profitability Metrics

  • Pawn receivables, from which the Company earns service fees and future inventories for sale, totaled $61 million at June 30, 2010, an increase of 16%, driven largely by 26% pawn growth in Mexico. The significant increase in Mexico reflected continued store expansion and product demand.
  • The gross margin on retail pawn merchandise sales was 42% for the quarter, a sequential improvement over the first quarter margin of 41% and approaching the prior-year margin of 43%.   Margins on wholesale scrap jewelry sales were 33% for the second quarter, comparable to prior-year margins of 36%.  Inventory turns improved in the second quarter to 4.4x, compared to 4.0x in the prior year.
  • Even with the addition of 56 new stores over the past twelve months, consolidated store-level operating profit margins were 28% for the second quarter of 2010, which equaled the prior-year margin. The net operating margin (pre-tax income) was 18% for the second quarter of 2010 and 2009. Return on equity for the trailing twelve months was 21%, while return on assets was 17%.
  • Over 80% of the Company's customer receivables are pawn loans, which are fully collateralized. For the remainder of the receivable portfolio, which is comprised of short-term loans and credit services products, credit losses were reduced in the second quarter to 26% of related revenue, compared to 28% in the prior-year quarter. Credit losses declined over the trailing twelve months to 25% of related revenue, compared to 27% in the comparable prior-year period. 

New Store Openings

  • A total of 12 new store locations were opened during the second quarter of 2010, all of which were new pawn stores located in Mexico.  The majority of the new locations were in expansion markets in central Mexico, including the State of Mexico.
  • The Company now has 354 total store locations in 20 states in Mexico, an 18% increase in the year-over-year store count. The Company's store base in Mexico is still maturing, as 44% of the stores are less than three years old.

U.S. Pawn Acquisitions

  • In early July, the Company completed the acquisitions of six pawnshops in existing U.S. markets. The combined purchase price for the six stores was $7.6 million and was comprised of $5.6 million in cash and notes payable to the selling shareholders of $2.0 million. The transactions and operating results will be included in the consolidated results beginning in the third quarter of 2010.
  • With these acquisitions, the Company now has a total of 103 U.S. pawn stores, compared to 97 at the beginning of the year.

Financial Position & Liquidity

  • Earnings before interest, taxes, depreciation and amortization ("EBITDA") from continuing operations totaled $84 million for the trailing twelve months ended June 30, 2010, an increase of 20% over the comparable prior-year period. The EBITDA margin was 21% for the current and prior-year periods. A detailed reconciliation of EBITDA and free cash flow, both non-GAAP financial measures, is provided elsewhere in this release.
  • Free cash flow for the trailing twelve months was $55 million, compared to $38 million in the prior year.  The Company's free cash flow has been used to reduce outstanding debt by $48 million over the past twelve months. At the same time,  cash balances have increased to $46 million at June 30, 2010, compared to $22 million at the same time last year.
  • As of June 30, 2010, the Company had no amounts drawn on its $25 million unsecured revolving credit facility and only $7 million of total interest bearing debt is currently outstanding.  
  • As of June 30, 2010, the ratio of total liabilities to stockholders' equity was 0.2 to 1, compared to 0.4 to 1 at June 30, 2009.

2010 Outlook

  • The Company is increasing its fiscal 2010 guidance for earnings per share from continuing operations to a range of $1.58 to $1.62 per share, which represents 14% to 17% growth over 2009 earnings.  The previous guidance was $1.53 to $1.59 per share.
  • The majority of 2010 revenue will be derived from pawn operations, with only 12% to 14% of revenue expected to be from U.S. short-term loan and credit services operations.
  • In 2010, the Company is on target to add 65 to 75 new stores, the majority of which will be in Mexico. All of the anticipated 2010 store additions will be pawn stores.

Commentary & Analysis  

Mr. Rick Wessel, First Cash's Chief Executive Officer, commented on the Company's second quarter 2010 results, "We are very pleased with the record second quarter results, as our core pawn operations continue to reflect significant strength and continued growth. Loan demand in both the United States and Mexico remains strong, and the growth of retail sales, especially in Mexico, exceeded our expectations. As a result of the strong first half results and our forecast for the remainder of 2010, we are increasing our full-year earnings guidance for 2010."   

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