<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended Commission File Number:
April 30, 1996 0-19133
FIRST CASH, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-2237318
(State of Incorporation) (IRS Employers Identification
Number)
690 East Lamar, Suite 400
Arlington, Texas 76011
(Address of principal executive offices) (Zip Code)
(817)460-3947
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes x No
----- -----
As of June 5, 1996, there were 3,697,500 shares of Company common
stock, par value $.01 per share ("Common Stock"), issued and
outstanding.
1
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
FIRST CASH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
April 30, July 31,
1996 1995
---- ----
(unaudited)
(amounts in thousands)
ASSETS
<S> <C> <C>
Cash and cash equivalents................... $ 636 $ 266
Service charges receivable.................. 1,378 1,360
Loans....................................... 9,330 9,158
Inventories ................................ 7,457 7,639
Prepaid expenses and other current assets... 717 448
-------- --------
Total current assets................... 19,518 18,871
Property and equipment, net................. 5,076 4,648
Intangible assets, net...................... 19,103 19,343
Other....................................... 970 893
-------- --------
$ 44,667 $ 43,755
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt and
notes payable............................. $ 381 $ 373
Accounts payable and accrued expenses....... 1,294 1,198
Income taxes payable........................ 656 273
-------- --------
Total current liabilities.............. 2,331 1,844
Revolving credit facility................... 8,700 9,700
Long-term debt and notes payable, net of
current portion........................... 2,302 2,041
Debentures Due 1999......................... 7,500 7,500
Debentures Due 2004......................... 2,500 2,500
Deferred income taxes....................... 1,223 1,223
-------- --------
24,556 24,808
-------- --------
Stockholders' equity:
Preferred stock; $.01 par value; 10,000,000
shares authorized; no shares issued or
outstanding............................... - -
Common stock; $.01 par value; 20,000,000
shares authorized; 4,145,084 and 4,130,084
shares issued, respectively; 3,674,125 and
3,659,125 shares outstanding, respectively 42 42
Additional paid-in capital.................. 17,475 17,415
Retained earnings........................... 4,859 3,755
Common stock held in treasury, at cost,
470,959 shares............................ (2,265) (2,265)
-------- --------
20,111 18,947
-------- --------
$ 44,667 $ 43,755
======== ========
</TABLE>
The accompanying notes are an integral
part of these condensed consolidated financial statements.
2
<PAGE>
FIRST CASH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
April 30, April 30, April 30, April 30,
1996 1995 1996 1995
---- ---- ---- ----
(amounts in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Revenues:
Merchandise sales........... $ 6,474 $ 5,480 $ 18,884 $ 14,987
Pawn service charges........ 3,242 2,826 9,533 8,330
Other....................... 12 42 43 150
-------- -------- -------- --------
9,728 8,348 28,460 23,467
-------- -------- -------- --------
Cost of goods sold and expenses:
Cost of goods sold.......... 4,374 3,748 12,736 9,609
Operating expenses.......... 3,204 2,712 9,239 7,887
Interest expense............ 497 556 1,569 1,585
Depreciation................ 136 131 401 375
Amortization................ 138 143 414 408
Administrative expenses..... 841 736 2,300 2,252
-------- -------- -------- --------
9,190 8,026 26,659 22,116
-------- -------- -------- --------
Income before income taxes....... 538 322 1,801 1,351
Provision for income taxes....... 208 118 697 499
-------- -------- -------- --------
Net income....................... $ 330 $ 204 $ 1,104 $ 852
======== ======== ======== ========
Net income per common share...... $ .08 $ .06 $ .29 $ .23
Weighted average common shares
and common stock equivalents
outstanding.................... 3,945 3,695 3,754 3,732
</TABLE>
The accompanying notes are an integral
part of these condensed consolidated financial statements.
3
<PAGE>
FIRST CASH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Nine-Month Period
Ended April 30,
-----------------
1996 1995
---- ----
(amounts in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income.................................... $ 1,104 $ 852
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation and amortization............. 815 783
(Increase) decrease in:
Service charges receivable.................. (9) 7
Inventories................................. 216 (1,467)
Prepaid expenses and other assets........... (346) 318
Increase (decrease) in:
Accounts payable and accrued expenses....... 96 (157)
Income taxes payable........................ 383 441
-------- --------
Net cash flows from operating activities.. 2,259 777
-------- --------
Cash flows from investing activities:
Net (increase) decrease in loans.............. (124) 69
Purchases of property and equipment........... (829) (183)
Acquisition of existing stores................ (265) (2,331)
-------- --------
Net cash flows from investing activities.. (1,218) (2,445)
-------- --------
Cash flows from financing activities:
Proceeds from debt............................ 10,046 7,050
Repayments of debt............................ (10,777) (4,430)
Repurchase of treasury stock.................. - (777)
Proceeds from exercise of stock options....... 60 -
-------- --------
Net cash flows from financing activities.. (671) 1,843
-------- --------
Increase in cash and cash equivalents........... 370 175
Cash and cash equivalents at beginning of
the period.................................... 266 367
-------- --------
Cash and cash equivalents at end of the period.. $ 636 $ 542
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest.................................. $ 1,565 $ 1,564
======== ========
Income taxes.............................. $ 260 $ 58
======== ========
</TABLE>
The accompanying notes are an integral
part of these condensed consolidated financial statements.
4
<PAGE>
FIRST CASH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements,
including the notes thereto, include the accounts of First Cash, Inc.
and its wholly-owned subsidiaries, American Loan & Jewelry, Inc. and
Famous Pawn, Inc. Such unaudited consolidated financial statements are
condensed and do not include all disclosures and footnotes required by
generally accepted accounting principles for complete financial
statements. Such interim period financial statements should be read in
conjunction with the Company's consolidated financial statements which
were included in the Company's 1995 Annual Report to Stockholders. All
significant intercompany accounts and transactions have been eliminated
in consolidation. The consolidated financial statements as of April
30, 1996 and for the periods ended April 30, 1996 and 1995 are
unaudited, but in management's opinion, include all adjustments
(consisting of only normal recurring adjustments) considered necessary
to present fairly the financial position, results of operations and cash
flows for such interim periods. Operating results for the period ended
April 30, 1996 are not necessarily indicative of the results that may
be expected for the full fiscal year.
NOTE 2 - FEDERAL INCOME TAXES
The provision for federal income taxes in the accompanying
condensed consolidated financial statements has been calculated based
upon the Company's estimate of its anticipated effective tax rate for
the full fiscal year.
NOTE 3 - EARNINGS PER SHARE
Earnings per common share is computed by dividing net income
by the weighted average number of shares of common stock and common
stock equivalents outstanding during the period.
NOTE 4 - SUBSEQUENT EVENT
The Company acquired three pawnshops in Baltimore, Maryland in an
asset purchase including pawn loans, fixed assets, layaway deposits and
intangible assets from an unaffiliated corporation on May 13, 1996. The
three pawnshops were acquired for a cash purchase price of $2,400,000.
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company's revenues are derived primarily from service charges
on pawn loans and the sale of unredeemed goods, or "merchandise sales".
Loans are made for a 30-day term with an automatic extension of 60 days
in Texas, 30 days in Oklahoma and 15 days in Maryland. Loans made in
Washington, DC are made for 120 days with no automatic extension. All
loans are collateralized by tangible personal property placed in the
custody of the Company. The annualized service charge rates on the
loans are set by state laws and range between 12% and 240% in Texas and
36% and 240% in Oklahoma, depending on the amount of the loan. Service
charge rates are 144% on an annualized basis in Maryland, regardless of
loan amount. In Washington, DC, loans up to $40 bear a flat $2 charge
per month, while loans over $40 bear a 60% annualized rate. In its
Texas stores, the Company recognizes service charges at the inception of
the loan at the lesser of the statutory amount for the initial 30-day
term or $15, in accordance with state law. In Oklahoma, Maryland and
Washington, DC the Company recognizes service charges at the inception
of the loan at the amount allowed by law for the first 30 days. Pawn
service charge income applicable to the remaining term and/or
extension period is not recognized until the loan is repaid or renewed.
If a loan is not repaid prior to the expiration of the automatic
extension period, the property is forfeited to the Company and held for
resale.
As a result of the Company's policy of accruing pawn service
charges only for the initial 30-day term, unredeemed merchandise is
transferred to inventory at a value equal to the loan principal plus
one-month's accrued interest. The Company's accounting policy defers
recognition of an amount of income equal to the amount of pawn service
charges relating to the remaining term and/or extension period until the
loan is repaid, renewed, or until the merchandise is resold. As a
result of this policy, the Company's annualized loan yield is lower than
certain of its publicly traded competitors. Conversely, this revenue
recognition policy results in inventory being recorded at a lower value,
which results in realization of a larger gross profit margin on
merchandise sales than would be realized by certain of its publicly
traded competitors, which lessens the risk that the inventory's cost
will exceed its realizable value when sold. However, if the pawn loan
is repaid or renewed, or if the forfeited merchandise is resold, the
amount of income which would be recognized by the Company or certain of
its publicly traded competitors would be the same over time.
Although the Company has had significant increases in revenues due
to acquisitions and store openings, the Company has also incurred
increases in operating expenses attributable to the additional stores
and increases in administrative expenses attributable to establishing a
management team and supporting personnel associated with the Company's
growth. 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 depreciation, advertising,
property taxes, licenses, supplies and security. Administrative
expenses consist of items relating to the operation of the corporate
office, including the salaries of corporate officers, area supervisors
and other management, accounting and administrative costs, liability and
casualty insurance, outside legal and accounting fees and stockholder
related expenses.
6
<PAGE>
RESULTS OF OPERATIONS
NINE MONTHS ENDED APRIL 30, 1996 COMPARED TO NINE MONTHS ENDED
APRIL 30, 1995
Total revenues increased 21% to $28,460,000 for the nine months
ended April 30, 1996 (the "Nine-Month 1996 Period") as compared to
$23,467,000 for the nine months ended April 30, 1995 (the "Nine-Month
1995 Period"). Of the $4,993,000 increase in total revenues, $3,748,000
relates to the 36 stores which were in operation throughout both the
Nine-Month 1995 Period and the Nine-Month 1996 Period. The remaining
increase of $1,245,000 resulted from revenues generated by 8 stores (net
of one store consolidated) which were acquired or opened subsequent to
August 1, 1994. In addition, $3,897,000 of the increase in total
revenues was attributable to increased merchandise sales, $1,203,000
was attributable to increased pawn service charges, and the remaining
decrease of $107,000 was attributable to the decrease in other income.
As a percentage of total revenues, merchandise sales increased from
64% to 66%, and pawn service charges decreased from 35% to 33%,
during the Nine-Month 1996 Period as compared to the Nine-Month 1995
Period.
The aggregate loan balance increased 10% from $8,488,000 at April
30, 1995 to $9,330,000 at April 30, 1996. Of the $842,000 increase,
$163,000 was attributable to the addition of 3 stores since April 30,
1995 (net of one store consolidated). The remaining increase of
$679,000 was due to the 8% increase in same-store loan balances at the
41 stores in operation at both April 30, 1995 and April 30, 1996.
The annualized yield on the average aggregate loan balance was 138%
during the Nine-Month 1996 Period compared to 141% during the Nine-Month
1995 Period. The Company's average loan balance per store increased
from $202,000 as of April 30, 1995 to $212,000 as of April 30, 1996.
The gross profit as a percentage of merchandise sales decreased
from 36% during the Nine-Month 1995 Period to 33% during the Nine-Month
1996 Period. This decrease in the Company's gross profit margin on
merchandise sales was primarily the result of large jewelry scrap sales
in the first nine months of fiscal 1996 in an effort to lower the
Company's overall inventory levels. Such scrap sales have much smaller
profit margins than the Company's regular retail sales.
Operating expenses increased 17% to $9,239,000 during the Nine-
Month 1996 Period compared to $7,887,000 during the Nine-Month 1995
Period, primarily as a result of the addition of 3 stores (net)
subsequent to April 30, 1995, as well as overall higher revenues at the
Company's existing stores. Administrative expenses increased 2% to
$2,300,000 during the Nine-Month 1996 Period compared to $2,252,000
during the Nine-Month 1995 Period. Interest expense decreased to
$1,569,000 in the Nine-Month 1996 Period compared to $1,585,000 in the
Nine-Month 1995 Period as a result of reductions in the Company's
overall debt balance, and lower interest rates.
For the Nine-Month 1996 and 1995 Periods, the Company's tax
provisions of 39% and 37%, respectively, of income before income taxes
differed from the statutory rate of 34% primarily due to state income
taxes, net of the federal tax benefit.
7
<PAGE>
THREE MONTHS ENDED APRIL 30, 1996 COMPARED TO THE THREE MONTHS ENDED
APRIL 30, 1995
Total revenues increased 17% to $9,728,000 for the three month
period ended April 30, 1996 ("the Third Quarter of Fiscal 1996") as
compared to $8,348,000 for the three month period ended April 30, 1995
("the Third Quarter of Fiscal 1995"). Of the $1,380,000 increase in
total revenues, $1,262,000 relates to the 41 stores which were in
operation throughout both the Third Quarter of Fiscal 1996 and the
Third Quarter of Fiscal 1995. The remaining increase of $118,000
resulted from revenues generated by 3 stores (net of one store
consolidated) which were open for only a portion of both the Third
Quarter of Fiscal 1996 and the Third Quarter of Fiscal 1995. In
addition, $994,000 of the increase in total revenues was attributable
to increased merchandise sales, $416,000 was attributable to
increased pawn service charges, and the remaining decrease of $30,000
was attributable to the decrease in other income. As a percentage of
total revenues, merchandise sales increased from 66% to 67%, and pawn
service charges decreased from 34% to 33%, during the Third Quarter
of Fiscal 1996 as compared to the Third Quarter of Fiscal 1995.
The aggregate loan balance increased 10% from $8,488,000 at April
30, 1995 to $9,330,000 at April 30, 1996. Of the $842,000 increase,
$163,000 was attributable to the addition of 3 stores since April 30,
1995 (net of one store consolidated). The remaining increase of
$679,000 was due to the 8% increase in same-store loan balances at the
41 stores in operation at both April 30, 1995 and April 30, 1996.
The Company's average loan balance per store increased from $202,000 as
of April 30, 1995 to $212,000 as of April 30, 1996.
The gross profit as a percentage of merchandise sales was 32%
during the Third Quarter of Fiscal 1995 and the Third Quarter of
Fiscal 1996. Operating expenses increased 18% to $3,204,000 during the
Third Quarter of Fiscal 1996 compared to $2,712,000 during the Third
Quarter of Fiscal 1995, primarily as a result of the 3 stores (net)
added subsequent to April 30, 1995, and higher overall revenues at the
Company's existing stores. Administrative expenses increased 14% to
$841,000 during the Third Quarter of Fiscal 1996 compared to $736,000
during the Third Quarter of Fiscal 1995. Interest expense decreased to
$497,000 in the Third Quarter of Fiscal 1996 compared to $556,000 in
the Third Quarter of Fiscal 1995 as a result of lower interest rates on
the Company's debt.
The Company's effective tax rate of 39% of income before income
taxes for the Third Quarter of Fiscal 1996 differed from the statutory
federal tax rate of 34% primarily as a result of state income taxes, net
of federal benefit. The effective tax rate of 37% of income before
income taxes for the Third Quarter of Fiscal 1995 differed from the
statutory federal tax rate of 34% primarily as a result of state income
taxes, net of the federal tax benefit.
8
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's operations and acquisitions have been financed with
funds generated from operations, bank borrowings, seller-financed
indebtedness, and the private placement of convertible debentures.
The Company maintains a $20,000,000 long-term line of credit with
Bank One, Texas, NA (the "Credit Facility"). The Credit Facility bears
interest at a variable rate which fluctuates between the bank's prime
lending rate and the prime lending rate minus one-half of one percent,
and matures in December 1997. The Credit Facility allows the Company to
borrow funds based upon 80% of loans and service charges receivable and
60% of inventory of the Company. As of April 30, 1996, $8,700,000
was drawn under this Credit Facility and an additional $4,341,000 was
available to the Company pursuant to the available borrowing base. The
Credit Facility requires that interest be paid monthly with the
principal due upon maturity. It is secured by substantially all of the
Company's assets. Under the terms of the Credit Facility, the Company
is required to maintain certain financial ratios and comply with certain
technical covenants. The Company believes it was in compliance with
these requirements and covenants during the nine month period ended
April 30, 1996 and as of June 5, 1996.
On May 13, 1996, the Company acquired three pawnshops and related
assets in Baltimore, Maryland for a cash purchase price of $2,400,000.
As of April 30, 1996, the Company's primary sources of liquidity
were $636,000 in cash and cash equivalents, $1,378,000 in service
charges receivable, $9,330,000 in loans, $7,457,000 in inventories and
$4,341,000 of available and unused funds under the Company's Credit
Facility. The Company had working capital as of April 30, 1996 of
$17,187,000 and a total liabilities to equity ratio of 1.2 to 1.
Net cash provided by operating activities for the Company during
the Nine Month 1996 Period was $2,259,000 as compared with net cash
provided by operating activities of $777,000 during the Nine Month 1995
Period. The change is primarily the result of decreasing inventories
during the first nine months of fiscal 1996 and increasing inventory
balances during the same period of fiscal 1995. Net cash used for
investing activities during the Nine Month 1996 Period was $1,218,000
as compared with $2,445,000 during the Nine Month 1995 Period. This
decrease reflects fewer store acquisitions during the Nine Month 1996
Period, when compared to the corresponding period of fiscal 1995. Net
cash used by financing activities of $671,000 during the Nine Month 1996
Period relates primarily to net decreases in the Company's debt
balances.
The profitability and liquidity of the Company are affected by the
amount of loans outstanding, which is controlled in part by the
Company's loan decisions. The Company is able to influence the
frequency of forfeiture of collateral by increasing or decreasing the
amount loaned in relation to the resale value of the pledged property.
Tighter credit decisions generally result in smaller loans in relation
to the estimated resale value of the pledged property and can thereby
decrease the Company's aggregate loan balance and, consequently,
decrease pawn service charges. Additionally, small loans in relation to
the pledged property's estimated sale value tend to increase loan
9
<PAGE>
redemptions and improve the Company's liquidity. Conversely, providing
larger loans in relation to the estimated sale value of the pledged
property can result in an increase in the Company's pawn service charge
income. Also larger average loan balances can result in an increase in
loan forfeitures, which increases the quantity of goods on hand and,
unless the Company increases inventory turnover, reduces the Company's
liquidity. In each of the Company's last three fiscal years, at least
70% of the amounts loaned were either paid in full or renewed. The
Company's renewal policy allows customers to renew pawn loans by
repaying all accrued interest on such pawn loans. In addition to these
factors, the Company's liquidity is affected by merchandise sales and
the pace of store expansions.
Management believes that the Credit Facility, current assets and
cash generated from operations will be sufficient to accommodate the
Company's current operations for at least the next twelve months. The
Company has no significant capital commitments as of June 5, 1996.
The Company currently has no written commitments for additional
borrowings or future acquisitions; however, the Company intends to
continue to grow and will likely seek additional capital to facilitate
expansion. The Company will evaluate acquisitions, if any, based upon
opportunities, acceptable financing, purchase price, strategic fit and
qualified management personnel.
The Company intends to continue to engage in a plan of expansion
through existing store acquisitions and new store openings. While the
Company continually looks for, and is presented with, potential
acquisition candidates, the Company has no definitive plans or
commitments for further acquisitions. If the Company encounters an
attractive opportunity to acquire or open a new store in the near
future, the Company will seek additional financing, the terms of which
will be negotiated on a case-by-case basis.
10
<PAGE>
Part II. Other Information
Item 4. Submission of matters to a vote of security holders
On February 1, 1996, the Company held its annual meeting of
stockholders and its stockholders voted for (or ratified) the
following proxy proposals as a result of a majority of the
Company's outstanding capital stock voting in favor of the
proposals. The proposals ratified at the February 1, 1996
annual stockholders' meeting are as follows:
1. The stockholders ratified the selection of Price
Waterhouse LLP as independent auditors of the Company for
the fiscal year ending July 31, 1996.
2. The stockholders re-elected Phillip E. Powell as a director
of First Cash, Inc.
Item 6. Exhibits and reports on Form 8-K
27.0 Financial Data Schedules
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.
<TABLE>
<S> <C>
Dated: June 5, 1996 FIRST CASH, INC.
----------------
(Registrant)
Phillip E. Powell Rick L. Wessel
- - ----------------- --------------
Phillip E. Powell Rick L. Wessel
Chairman of the Board and Chief Accounting Officer
Chief Executive Officer
</TABLE>
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEETS AND CONDENSED CONSOLIDATED
STATEMENTS OF INCOME FOUND ON PAGES 2 AND 3 OF THE COMPANY'S FORM 10-Q
FOR THE YEAR TO DATE, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> APR-30-1996
<CASH> 636
<SECURITIES> 0
<RECEIVABLES> 10,708
<ALLOWANCES> 0
<INVENTORY> 7,457
<CURRENT-ASSETS> 19,518
<PP&E> 6,998
<DEPRECIATION> 1,922
<TOTAL-ASSETS> 44,667
<CURRENT-LIABILITIES> 2,331
<BONDS> 0
<COMMON> 42
0
0
<OTHER-SE> 20,069
<TOTAL-LIABILITY-AND-EQUITY> 44,667
<SALES> 18,884
<TOTAL-REVENUES> 28,460
<CGS> 12,736
<TOTAL-COSTS> 12,736
<OTHER-EXPENSES> 12,354
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,569
<INCOME-PRETAX> 1,801
<INCOME-TAX> 697
<INCOME-CONTINUING> 1,104
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,104
<EPS-PRIMARY> .29
<EPS-DILUTED> .29
</TABLE>
