First Cash Financial : First Cash Reports 30% Increase in Fourth Quarter EPS; Fiscal 2006 Earnings Up 28%
01/24/2007| 06:00am US/Eastern
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First Cash Financial Services, Inc. (Nasdaq:FCFS) today announced record
revenues, net income and earnings per share for both the three months
and the year ended December 31, 2006. This marked First Cash's
24th consecutive quarter, covering a six-year
period, of double-digit growth in earnings per share. In addition, the
Company reaffirmed earnings per share guidance for 2007 of $1.25 to
$1.30, a 29% to 34% increase over 2006 earnings.
Earnings
Diluted earnings per share for the fourth quarter of 2006 were $0.30,
a 30% increase compared to diluted earnings per share of $0.23 in the
fourth quarter of 2005.
Diluted earnings per share for fiscal 2006 were $0.97. This represents
28% growth over 2005 diluted earnings per share of $0.76.
Net income for the fourth quarter of 2006 was $9.7 million, a 26%
increase over fourth quarter 2005 net income of $7.7 million. Net
income for fiscal 2006 was $31.7 million, compared to $25.4 million
for fiscal 2005, an increase of 25%.
Revenues
Consolidated revenues for the fourth quarter of 2006 increased by 47%,
totaling $88 million compared to $60 million in 2005. Total revenues
for fiscal 2006 were $270 million, compared to $208 million for fiscal
2005, an increase of 30%.
Same-store revenues increased 9% for both the fourth quarter and full
year of 2006 over the comparable prior-year periods.
Combined pawn revenues, which include service charges and merchandise
sales, increased by 22% in fiscal 2006, while combined cash advance
fees and credit services revenues increased by 9% for the year.
The Company recorded fiscal 2006 revenues of $24 million from Auto
Master, a buy-here/pay-here automotive retailer acquired in August
2006. Auto Master's unaudited proforma
revenues totaled $60.9 million for all of 2006.
New Locations
A total of 9 new retail locations were opened during the fourth
quarter of 2006, which was comprised of 5 cash advance stores, 2 pawn
stores, and 2 Auto Master buy-here/pay-here dealerships.
For the full year, the Company opened or acquired 80 new locations, an
increase of 60% over the 50 units opened in 2005. This includes the 8
Auto Master buy-here/pay-here dealerships acquired by the Company in
August of 2006.
The overall store and dealership count totals 407 units as of December
31, 2006, a 24% increase over the 328 units at December 31, 2005.
Operating Metrics
Earnings before interest, taxes, depreciation and amortization
(EBITDA) for fiscal 2006 totaled $58 million, an increase of 28% over
the comparative prior-year period. The EBITDA margin for 2006 was over
21%. A detailed reconciliation of this non-GAAP financial measure to
net income is provided elsewhere in this release.
The Company's return on stockholders'
equity increased to 18.4% in fiscal 2006, compared to 16.6% for 2005.
Domestic pawn balances totaled $21.4 million at December 31, 2006, an
increase of 15% over the prior year, while end-of-year pawn balances
in Mexico totaled $11.1 million, an increase of 28% over the prior
year. Total cash advance and third-party credit services loans
outstanding totaled $20.2 million at year end. The combined loan
balances in the Company's free-standing cash
advance stores increased by 27% over the prior year.
The gross margin on retail pawn merchandise sales for both the fourth
quarter and full year of 2006 was 44%, which was consistent with
margins recorded in the prior year. The gross margin on wholesale
scrap jewelry for both the fourth quarter and full year of 2006 was
34%, compared to the prior year margins of 21% and 22%, respectively.
This difference was primarily a result of increased gold prices during
the applicable periods. The volume-weight of scrap jewelry sold in the
fourth quarter and full year of 2006 increased approximately 10% and
13%, respectively, compared to the prior year.
The cash advance credit loss provision for fiscal 2006 was unchanged
from the prior year at 23% of fees. The fourth quarter credit
provision was 29% of fees, compared to 28% in the prior-year fourth
quarter; the increase was due to the fact that the Company did not
sell any portion of its charged-off receivable portfolio during the
fourth quarter of 2006.
Gross margins on retail automotive sales of Auto Master were 58%
during the fourth quarter of 2006, while the margin net of the credit
loss provision was 29%. The fourth quarter credit loss provision, at
28% of retail sales, reflected seasonal factors and higher loss
provision accruals for the two new dealerships opened in November 2006.
Financial Position & Liquidity
During 2006, First Cash utilized operating cash flows to fund $25
million in stock repurchases and $15 million in capital expenditures,
related primarily to new store openings.
The Company reduced its outstanding interest-bearing debt by $24
million during the fourth quarter. At year end, interest-bearing debt
was $17 million, compared to $41 million immediately following the
acquisition of Auto Master at September 30, 2006.
The ratio of total assets to total liabilities at December 31, 2006
was 5 to 1; the current ratio was at 6 to 1.
2007 Outlook
The Company expects continued strong earnings growth in 2007 from its
core pawn and cash advance businesses, primarily driven through its
well-established and on-going store expansion strategy. Combined with
the projected accretive earnings impact from Auto Master, the Company's
earnings per share estimate for 2007 is currently projected to be
$1.25 to $1.30 per share. This represents an increase of 29% to 34%
over 2006 diluted earnings per share.
For fiscal 2007, the Company expects to open a combination of 75 to 80
pawn and cash advance locations and 3 to 5 new Auto Master
dealerships. In total, the Company projects 78 to 85 combined unit
openings for 2007, an increase of 19% to 21% over the current unit
base.
Commentary & Analysis
Mr. Rick Wessel, Vice Chairman and Chief Executive Officer, commented on
the Company's operating results, ?Fiscal
2006 was a tremendous year for First Cash in all respects, as we again
posted record revenues, profits and unit growth. We completed the year
with an especially strong fourth quarter, which reflected significant
acceleration of our revenue and earnings growth. Other significant
accomplishments in 2006 included the completion of a strategic and very
accretive acquisition, the opening of our 400th
store location, and our second stock split in the last three years.
Additionally, we marked our 24th consecutive
quarter of double-digit growth in earnings per share. Our consistently
strong operating results over this six-year period are the result of our
diversified expansion strategy, operating discipline and focus on key
financial metrics.?
In addition to posting 28% earnings per share growth in 2006, the
Company grew revenues by 30% compared to the prior year, while fourth
quarter revenues increased at an even greater rate of 47%. Revenues from
Auto Master, the buy-here pay-here automobile retailer and finance
company acquired in August 2006, contributed to this growth, as did
significant revenue increases from the Company's
existing pawn and cash advance businesses. The Company's
core base of fully-mature, domestic pawn stores experienced revenue
gains in excess of 9% in 2006, while revenues in the Company's
Mexican pawn stores, where the Company has opened over 150 units over
the past five years, increased by 43%. Fiscal 2006 service charges in
the Company's free-standing cash advance
stores increased 11% for the full year, and 16% in the fourth quarter,
due in large part to new store openings in late 2005 and earlier in 2006.
The impact of the Company's continued focus
on both short and long-term, diversified growth in 2006 was evidenced by
both the record pace of new store-openings and the acquisition of Auto
Master, through which the Company has expanded into the significant
buy-here/pay-here automotive retail and finance segment. Including the
eight acquired Auto Master dealerships, First Cash added a record 80
locations during 2006, which represents a unit count increase of 24%.
The type of new locations opened in 2006 was diversified between pawn
stores, cash advance stores and buy-here/pay-here dealerships.
Geographically, the Company added new locations in 2006 in eleven
different states in the U.S. and Mexico.
In discussing the Company's expansion
strategy, Mr. Wessel commented, ?First Cash's
ability to serve its core customer base through a diversified set of
products and locations is key to our success and is innovative and
unique within our industry. With a now well-distributed mix of new
pawnshops, cash advance stores and buy-here/pay-here dealerships; we
have built three significant synergistically compatible platforms for
future growth that complement and support each other. In addition, we
have geographic diversity in multiple markets, both in the U.S. and
Mexico.?
The Company expects that its growth will continue to be funded primarily
through internally generated cash flows. These strong cash flows,
coupled with the Company's strong balance
sheet, provide significant capacity to fund future expansion and other
comparable growth opportunities and products as they arise. In 2006, the
Company utilized $25 million of available cash to repurchase stock and
will continue to view this as a potential use for future cash flows.
In summary, Mr. Wessel said, ?As we look
forward to 2007 and beyond, First Cash will remain focused on executing
its well-established growth strategies and expansions. We see
significant potential for both short and long-term growth in each of our
product lines and in each of our key expansion markets. Accordingly, we
are as confident and excited as ever about our ability to deliver
long-term value to our shareholders.?
Forward-Looking Information
This release may contain forward-looking statements about the business,
financial condition and prospects of First Cash Financial Services, Inc.
(?First Cash? or
the ?Company?).
Forward-looking statements, as that term is defined in the Private
Securities Litigation Reform Act of 1995, 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
can also be identified by the fact that these statements do not relate
strictly to historical or current matters. Rather, forward-looking
statements relate to anticipated or expected events, activities, trends
or results. Because forward-looking statements relate to matters that
have not yet occurred, these statements are inherently subject to risks
and uncertainties. Forward-looking statements in this release include,
without limitation, the Company's
expectations of earnings per share, earnings growth, expansion
strategies, earnings accretion from acquisitions, store and dealership
openings, future liquidity, cash flows, debt levels and other
performance results. These statements are made to provide the public
with management's current 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 release speak only as of
the date of this statement, and the Company expressly disclaims any
obligation or undertaking to report 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 release. Such factors are difficult to predict and many are
beyond the control of the Company and may include changes in regional,
national or international economic conditions, changes in consumer
borrowing and repayment behaviors, credit losses, changes or increases
in competition, the ability to locate, open and staff new stores and
dealerships, the availability or access to sources of inventory,
inclement weather, the ability to successfully integrate acquisitions,
the ability to retain key management personnel, the ability to operate
with limited regulation as a credit services organization in Texas, new
legislative initiatives or governmental regulations (or changes to
existing laws and regulations) affecting payday loan/cash advance
businesses, credit services organizations, pawn businesses and
buy-here/pay-here automotive businesses in both the U.S. and Mexico,
unforeseen litigation, changes in interest rates, changes in tax rates
or policies, changes in gold prices, changes in energy prices, changes
in used-vehicle prices, cost of funds, changes in foreign currency
exchange rates, future business decisions, and other uncertainties.
These and other risks and uncertainties are indicated in the Company's
2005 Annual Report on Form 10-K (see ?Item
1A. Risk Factors?) and updated in subsequent
quarterly reports on Form 10-Q.
About First Cash
First Cash Financial Services, Inc. is a leading provider of specialty
consumer financial services and related retail products. Its pawn stores
make small loans secured by pledged personal property, retail pawned
merchandise, and in many locations, provide cash advances and credit
services products. The Company's cash advance
locations provide various combinations of short-term cash advance
products, check-cashing, credit services and other financial services
products. First Cash also operates automobile dealerships focused on the ?buy-here/pay-here?
segment of the used-vehicle sales and financing market. In total, the
Company owns and operates over 410 stores and buy-here/pay-here
dealerships in thirteen U.S. states and eight states in Mexico. First
Cash is also an equal partner in Cash & Go, Ltd., a joint venture, which
owns and operates check-cashing and financial services kiosks located
inside convenience stores.
First Cash has been recognized for five consecutive years by Forbes
magazine as one of its ?200 Best Small
Companies.? This annual ranking is based
on a combination of profitability and growth performance measures over
the most current one and five-year periods. In addition, First Cash is a
component company in both the Standard & Poors SmallCap 600 Index®
and the Russell 2000 Index®.
First Cash's common stock (ticker symbol "FCFS")
is traded on the Nasdaq Global Select Market, which has the
highest initial listing standards of any stock exchange in the world
based on financial and liquidity requirements.
Store Openings
The following tables detail store openings and closings for the three
months and twelve months ended December 31, 2006:
Cash
Advance/
Buy-Here/
Check-
Pay-Here
Pawn
Cashing
Automotive
Total
Stores
Stores
Dealerships
Locations
Three Months Ended December 31, 2006
Total locations, beginning of period
250
140
8
398
New locations opened
2
5
2
9
Locations acquired
-
-
-
-
Locations closed or consolidated
-
-
-
-
Total locations, end of period
252
145
10
407
Twelve Months Ended December 31, 2006
Total locations, beginning of period
226
102
-
328
New locations opened
27
43
2
72
Locations acquired
-
-
8
8
Locations closed or consolidated
(1)
-
-
(1)
Total locations, end of period
252
145
10
407
For the three months and twelve months ended December 31, 2006, 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 charts. No
kiosks were opened or closed during fiscal 2006.
FIRST CASH FINANCIAL SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2006 (1)
2005
2006 (1)
2005
(unaudited)
(unaudited)
(in thousands, except per share amounts)
Revenues:
Merchandise sales
$
53,623
$
29,917
$
149,473
$
102,139
Finance and service charges
33,502
29,315
116,187
101,701
Other
1,050
909
4,062
3,935
88,175
60,141
269,722
207,775
Cost of revenues:
Cost of goods sold
28,915
18,054
84,229
61,659
Credit loss provision
10,135
4,952
21,463
13,808
Other
128
95
440
301
39,178
23,101
106,132
75,768
Net revenues
48,997
37,040
163,590
132,007
Expenses and other income:
Store operating expenses
23,236
17,931
81,089
67,430
Administrative expenses
7,870
5,736
24,671
19,412
Depreciation and amortization
2,351
1,609
8,041
5,804
Interest expense
697
-
916
-
Interest income
(36)
(100)
(727)
(317)
34,118
25,176
113,990
92,329
Income before income taxes
14,879
11,864
49,600
39,678
Provision for income taxes
5,187
4,143
17,856
14,295
Net income
$
9,692
$
7,721
$
31,744
$
25,383
Net income per share:
Basic
$
0.31
$
0.25
$
1.01
$
0.81
Diluted
$
0.30
$
0.23
$
0.97
$
0.76
Weighted average shares outstanding:
Basic
31,253
31,400
31,448
31,506
Diluted
32,785
33,174
32,859
33,225
(1) On August 25, 2006, the Company acquired Guaranteed Auto Finance,
Inc. and SHAC, Inc. (collectively doing business as "Auto Master").
Accordingly, the Condensed Consolidated Statements of Income include the
results of Auto Master for the period August 26, 2006 through December
31, 2006. All significant intercompany accounts have been eliminated.
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