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First Cash Reports 42% Increase In Fourth Quarter Net Income

ARLINGTON, Texas, Jan. 26, 2011 (GLOBE NEWSWIRE) -- First Cash Financial Services, Inc. (Nasdaq:FCFS) today announced record-setting revenue, net income and earnings per share for both the three months and the year ended December 31, 2010. Earnings per share from continuing operations were $0.59 for the quarter and $1.75 for the year, as net income from continuing operations increased 42% and 32% for the respective fourth quarter and full-year periods. In addition, the Company has initiated guidance for fiscal 2011 earnings from continuing operations at a range of $2.02 to $2.10 per share.

Earnings Highlights

  • Diluted earnings per share from continuing operations for the fourth quarter of 2010 were $0.59, an increase of 37% compared to $0.43 in the fourth quarter of 2009.
  • Net income from continuing operations increased by 42% to $18.6 million for the fourth quarter of 2010, compared to $13.1 million in the prior year.
  • Fiscal 2010 diluted earnings per share from continuing operations were $1.75, a 29% increase compared to $1.36 in 2009.
  • Net income from continuing operations for the year increased 32%, totaling $54.3 million, compared to $41.2 million in the prior year.
  • Total diluted earnings per share, including income from discontinued operations, were $0.62 for the fourth quarter of 2010 and $1.86 for the full year. Earnings per share from discontinued operations were $0.03 for the quarter and $0.11 for the year.

Revenue Highlights

  • Consolidated 2010 revenue was $431 million, an increase of 19% over the prior year. Fourth quarter revenue increased by 17% over the comparable prior-year period.
  • Revenue from international operations grew by 30%, accounting for 55% of total fourth quarter revenue and 52% of full year revenue. Fiscal 2010 revenue increased by 11% in the U.S.
  • Consolidated same-store revenue increased by 10% during 2010. By country, same-store revenue increased 12% in Mexico and 8% in the United States during fiscal 2010.
  • On a product-line basis in fiscal 2010, revenue from service fees on pawn loans increased 26% for the year, reflecting accelerating consumer demand for micro-lending products in both the United States and Mexico. Sales of pawn merchandise increased by 18% for the year, driven by especially strong retail sales in Mexico, which were up 39% in 2010.
  • December holiday results were strong, with fourth quarter retail merchandise sales increasing 44% in Mexico and 8% in the U.S.  The retail sales gains reflected the Company's continued focus on hardgood (non-jewelry) lending and retailing in Mexico and more than offset a consolidated fourth quarter decrease in scrap jewelry sales of 14%.
  • Total short-term loan and credit services revenue increased by 13% in fiscal 2010 due to increased same-store revenue. Fiscal 2010 revenue from the Company's remaining short-term loan and credit services operations in the United States represented less than 13% of total revenue.

Key Profitability Metrics

  • The Company's net operating margin (pre-tax income) was 20% in fiscal 2010, compared to 18% in 2009, which reflected same-store revenue growth and leveraging of operating expenses. The store-level operating profit margins were 29% for fiscal 2010, compared to 28% in the prior year.
  • Gross margins on retail pawn merchandise sales were 42% for both the quarter and fiscal 2010, consistent with the comparable prior-year periods. Margins on wholesale scrap jewelry sales were 38% for the quarter and 35% for the year, reflecting increased gold prices in the fourth quarter, as compared to prior-year margins of 33% and 35%, respectively.
  • Pawn receivables, which yield future service fees and inventories, increased by 31% year-over-year. Growth of pawn receivables in Mexico was particularly strong at 57% above the prior year, while U.S. pawns increased 13%.
  • Over 95% of the Company's $74 million in customer receivables are pawn loans, which are fully collateralized. For the other credit products and services, which are comprised of short-term loans and credit services transactions, credit losses were reduced to 25% of related revenue in fiscal 2010, compared to 26% in the prior year.
  • Inventory turns remained strong in fiscal 2010 at 4.1 turns per year, compared to 4.3 turns in the prior year.
  • The Company's return on equity for fiscal 2010 was 21%, while its return on assets was 18%. On a year-over-year basis, total shareholder equity increased by 40% and total assets increased by 34%.

New Store Openings

  • A total of 19 pawn stores were added during the fourth quarter, resulting in a total of 70 pawn stores added in fiscal 2010.
  • Pawn store openings in fiscal 2010 included 58 de novo pawn store openings in Mexico, primarily in central Mexico, which includes Mexico City and the surrounding State of Mexico.
  • The Company increased its number of large format U.S. pawn locations by 14 stores in 2010, or 14%, through a combination of acquisitions (6 stores), de novo openings (6 stores) and the expansion of small format stores (2 stores).
  • As of December 31, 2010, the Company had 612 total store locations, of which 488 were pawn stores. On a year-over-year basis, the number of large format pawn stores increased by 16% and the total store count increased by 12%.

Financial Position & Liquidity

  • Earnings before interest, taxes, depreciation and amortization ("EBITDA") from continuing operations totaled $95 million for fiscal 2010, an increase of 25% over the comparable prior-year period. EBITDA margins were 22% for fiscal 2010 compared to 21% in the prior year. A detailed reconciliation of EBITDA and free cash flow, both non-GAAP financial measures, is provided elsewhere in this release.
  • During fiscal 2010, the Company utilized current year cash flows to invest $18.4 million in new store additions, grow net customer receivables by $16.7 million, increase inventories by $13.0 million, reduce debt by $9.8 million and pay $5.7 million for acquisitions.  Even with the significant investments in new stores and receivable growth, free cash flow in fiscal 2010 was $32 million.
  • Cash balances increased to $67 million at December 31, 2010, compared to $27 million last year. The Company had no amounts outstanding on its $25 million unsecured revolving credit facility and only $2 million of other interest-bearing debt is currently outstanding. 
  • As of December 31, 2010, the ratio of total liabilities to stockholders' equity was 0.1 to 1, compared to 0.2 to 1 in the prior year.    
  • Net working capital increased over the past year by 68% and totaled $170.4 million at year end. The current ratio was 5.9 to 1 at December 31, 2010.     

2011 Outlook

  • The Company is initiating its fiscal 2011 guidance for earnings per share from continuing operations at a range of $2.02 to $2.10 per share, a 15% to 20% earnings growth over 2010.
  • The majority of 2011 revenue will again be derived from pawn operations, with only 10% to 12% of revenue expected to be from U.S. short-term loan and credit services operations.
  • The Company expects to add 70 to 80 new stores in 2011, the majority of which will be in Mexico. All of the anticipated 2011 store additions will be pawn stores.

Commentary & Analysis  

Mr. Rick Wessel, First Cash's Chief Executive Officer, commented on the 2010 results, "We are extremely pleased to announce another year of record-setting operating results. We grew top line revenue by 19% and expanded both gross and operating profit margins, all of which propelled the net income growth of 32%. Importantly, our fourth quarter results were especially strong, which provides significant momentum as we enter 2011."

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