ARLINGTON, Texas, Jan. 28, 2014 (GLOBE NEWSWIRE) -- First Cash Financial Services, Inc. (Nasdaq:FCFS) today announced revenue, net income and earnings per share for the three-month and full-year periods ended December 31, 2013. The Company also announced the completion of its 12-store large format pawn acquisition in South Carolina, resulting in a total of 112 large format pawn store additions in 2013. Additionally, the Company announced the appointment of Mr. Gabriel Guerra Castellanos to its Board of Directors, and initiated guidance for 2014 store growth and earnings expectations.
Earnings Highlights
Revenue Highlights
Pawn Metrics
Acquisitions and New Store Openings
Financial Metrics and Liquidity
Appointment of New Board Member
Discontinued Payday Operations
Fiscal 2014 Outlook
Commentary and Analysis
Mr. Rick Wessel, chief executive officer, commented, "First Cash marked its 25th anniversary in 2013 with another year of record revenues, profits and cash flows driven by strong store growth. Although we experienced significant external headwinds in certain areas, revenue from core pawn retailing and lending operations in our pawn stores increased 25% during the year. Our ability to grow consolidated earnings in 2013, despite significant year-over-year revenue declines in non-core scrap jewelry and payday lending operations, was a significant achievement. Equally as important, we continued to invest in future growth as we added 112 large format pawn stores during the year, of which a record 69 came from de novo openings and 42 stores were strategically acquired. We believe our strategy for building and growing an exclusively pawn focused operation sets us apart in the industry."
"We are also pleased to announce the appointment of Mr. Gabriel Guerra Castellanos as an independent director of the Company. The Board is confident that he will provide extensive experience and knowledge in international and government affairs, public relations, and Mexico's political and economic conditions."
"During 2013, the largest percentage of our revenues continued to come from retail merchandise sales in our pawn stores. It was also the area where we saw the greatest growth, with sales up 28% overall. The fourth quarter retail sales and margin results saw slightly slower growth, in part a result of the condensed and highly promotional holiday shopping season coupled with severe snow and ice events in certain highly concentrated markets. We believe that our neighborhood locations offering deep-value retail products with exceptional customer service continue to differentiate us from traditional retailers."
"The most significant challenge of 2013 began in the second quarter as gold prices fell abruptly and initiated a decline of approximately 25% over the remainder of the year. The bulk of the impact in 2013 was on our non-core scrap jewelry operations, which caused an approximate $0.34 per share drag on tax adjusted earnings compared to fiscal 2012. We are optimistic that the earnings impact from scrap jewelry will soon dissipate as the exposure now represents less than 3% of total gross profit and the comparisons ease beginning with the second quarter. To a lesser extent, lower gold prices have also impacted our pawn loan balances in the U.S., where jewelry represents 60% of pawn collateral and in Mexico, where jewelry represents 13% of collateral. During the fourth quarter we, along with the industry, noted a larger than normal seasonal pay down of pawn loans in Mexico. Conversely, as we begin 2014, we are seeing a slightly stronger than expected seasonal rebound of pawn demand in Mexico."
"We continue to see a rapidly evolving competitive landscape in Mexico, primarily the result of volatile gold prices and the impact on "gold only" pawn operators. We have noted that many of the small format, gold-only operators are continuing to adjust their business models, including closing and consolidating locations. In the long-run, we believe that our 15 years of experience in Mexico, proprietary information systems, strong capital base, excellent customer service, larger locations and trained pawnbrokers who are merchants for a large variety of products provides us significant and sustainable competitive advantages. We continue to be pleased with the performance of our new stores and will continue to invest in and add stores in order to build on our significant first-mover advantage in the large format category."
"Our strategic focus on core pawn lending operations continues to be coupled with actions to further lessen exposure to consumer/payday lending products, which have suffered from regulatory and competitive pressures, especially in Texas. Last year, we closed 14 stand-alone consumer lending locations, including eight locations in Texas, and we expect to close several additional Texas locations in 2014. Additionally, the Company elected to terminate the Cash & Go joint venture, which offered credit services and check cashing in 37 kiosk locations inside convenience stores in Texas. As a result, total U.S. revenues from these products declined 10% and created approximately $0.09 per share of drag on our tax adjusted earnings. Due to these trends and our strategic actions, we expect revenues from consumer/payday lending products to be less than 5% of total revenue in 2014."
"Despite the external challenges facing the industry over the past year, we continued to generate significant operating cash flow, as evidenced by EBITDA of almost $140 million in 2013. Coupled with our strong balance sheet, we were able to fund meaningful organic growth, repurchase stock and take advantage of strategic acquisition opportunities, including the recently completed 12-store acquisition in South Carolina."
"As we look to 2014, we continue to expect revenue and earnings growth, both in the U.S. and Mexico. Although our earnings expectations for the year are tempered by the difficult comparisons in the first quarter, the lower gold-pricing environment and further reductions in payday lending revenues, we remain confident and committed to our core strategy and operating model. Our large format stores remain very profitable and we will continue to invest in new stores for long-term growth."
"In summary, given our competitive strengths, growth platform and expanding customer base, we are excited about our ability to further grow our store count, revenues, and earnings. Our business model, coupled with our strong balance sheet, positions us to drive sustainable long-term growth in shareholder value. We continue to believe that we have the right formula for solid growth in the years to come."
Forward-Looking Information
This release contains forward-looking statements about the business, financial condition and prospects of First Cash Financial Services, Inc. (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," "targets," "intends," "could," or "anticipates," or the negative thereof, or other variations thereon, or comparable terminology, or by discussions of strategy or objectives. 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, regulatory exposures, store openings, liquidity (including the availability of capital under existing credit facilities), cash flow, consumer demand for the Company's products and services, income tax rates, currency exchange rates and the price of gold and the impacts thereof, earnings and related transaction expenses from acquisitions, the ability to successfully integrate acquisitions 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. 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, without limitation, the following:
These and other risks, uncertainties and regulatory developments are further and more completely described in the Company's 2012 annual report on Form 10-K. These risks and uncertainties are beyond the ability of the Company to control, nor can the Company predict, in many cases, all of the risks and uncertainties that could cause its actual results to differ materially from those indicated by the forward-looking statements. The forward-looking statements contained in this release speak only as of the date of this release, 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.
About First Cash
Founded in 1988, First Cash Financial Services, Inc. is the leading international operator of pawn stores. The Company focuses on serving cash and credit constrained consumers through deep value retailing and offering small loans and other financial products, through its retail pawn locations, which buy and sell a wide variety of jewelry, electronics, tools and other merchandise, and make small customer loans secured by pledged personal property. Today, the Company owns and operates 906 stores in 12 U.S. states and 26 states in Mexico.
First Cash is a component company in both the Standard & Poor's 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 COUNT ACTIVITY
The following table details store openings for the three months ended December 31, 2013:
Pawn Locations | Consumer | |||
Large | Small | Loan | Total | |
Format (1) | Format (2) | Locations (3) | Locations | |
Domestic: | ||||
Total locations, beginning of period | 210 | 27 | 63 | 300 |
New locations opened | 5 | — | — | 5 |
Locations acquired | 12 | — | — | 12 |
Store format conversions | 1 | (1) | — | — |
Locations closed or consolidated | (1) | (1) | (6) | (8) |
Total locations, end of period | 227 | 25 | 57 | 309 |
International: | ||||
Total locations, beginning of period | 542 | 17 | 29 | 588 |
New locations opened | 11 | — | — | 11 |
Locations closed or consolidated | (1) | — | (1) | (2) |
Total locations, end of period | 552 | 17 | 28 | 597 |
Total: | ||||
Total locations, beginning of period | 752 | 44 | 92 | 888 |
New locations opened | 16 | — | — | 16 |
Locations acquired | 12 | — | — | 12 |
Store format conversions | 1 | (1) | — | — |
Locations closed or consolidated | (2) | (1) | (7) | (10) |
Total locations, end of period | 779 | 42 | 85 | 906 |
(1) The large format locations include retail showrooms and accept a broad array of pawn collateral including electronics, appliances, tools, jewelry and other consumer hard goods. At December 31, 2013, 120 of the U.S. large format pawn stores also offered consumer loans or credit services products. | ||||
(2) The small format locations typically have limited retail operations and primarily accept jewelry and small electronic items as pawn collateral and also offer consumer loans or credit services products. | ||||
(3) The Company's U.S. free-standing, small format consumer loan locations offer a credit services product and are all located in Texas. The Mexico locations offer small, short-term consumer loans. The Company's credit services operations also include an internet distribution channel for customers in the state of Texas. |
The following table details store openings for the twelve months ended December 31, 2013:
Pawn Locations | Consumer | |||
Large | Small | Loan | Total | |
Format (1) | Format (2) | Locations (3) | Locations | |
Domestic: | ||||
Total locations, beginning of period | 184 | 27 | 65 | 276 |
New locations opened | 9 | — | — | 9 |
Locations acquired | 34 | — | — | 34 |
Store format conversions | 1 | (1) | — | — |
Locations closed or consolidated | (1) | (1) | (8) | (10) |
Total locations, end of period | 227 | 25 | 57 | 309 |
International: | ||||
Total locations, beginning of period | 485 | 19 | 34 | 538 |
New locations opened | 60 | — | — | 60 |
Locations acquired | 8 | — | — | 8 |
Locations closed or consolidated | (1) | (2) | (6) | (9) |
Total locations, end of period | 552 | 17 | 28 | 597 |
Total: | ||||
Total locations, beginning of period | 669 | 46 | 99 | 814 |
New locations opened | 69 | — | — | 69 |
Locations acquired | 42 | — | — | 42 |
Store format conversions | 1 | (1) | — | — |
Locations closed or consolidated | (2) | (3) | (14) | (19) |
Total locations, end of period | 779 | 42 | 85 | 906 |
(1) The large format locations include retail showrooms and accept a broad array of pawn collateral including electronics, appliances, tools, jewelry and other consumer hard goods. At December 31, 2013, 120 of the U.S. large format pawn stores also offered consumer loans or credit services products. | ||||
(2) The small format locations typically have limited retail operations and primarily accept jewelry and small electronic items as pawn collateral and also offer consumer loans or credit services products. | ||||
(3) The Company's U.S. free-standing, small format consumer loan locations offer a credit services product and are all located in Texas. The Mexico locations offer small, short-term consumer loans. The Company's credit services operations also include an internet distribution channel for customers in the state of Texas. |
FIRST CASH FINANCIAL SERVICES, INC. | ||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||
(UNAUDITED) | ||||
Three Months Ended | Twelve Months Ended | |||
December 31, | December 31, | |||
2013 | 2012 | 2013 | 2012 | |
(in thousands, except per share amounts) | ||||
Revenue: | ||||
Retail merchandise sales | $ 111,745 | $ 92,613 | $ 367,187 | $ 287,456 |
Pawn loan fees | 47,897 | 43,625 | 181,555 | 152,237 |
Consumer loan and credit services fees | 11,011 | 12,674 | 43,781 | 48,692 |
Wholesale scrap jewelry revenue | 14,550 | 29,345 | 68,325 | 103,706 |
Total revenue | 185,203 | 178,257 | 660,848 | 592,091 |
Cost of revenue: | ||||
Cost of retail merchandise sold | 68,684 | 54,249 | 221,361 | 167,144 |
Consumer loan and credit services loss provision | 3,280 | 3,415 | 11,368 | 12,556 |
Cost of wholesale scrap jewelry sold | 13,047 | 21,536 | 58,545 | 76,853 |
Total cost of revenue | 85,011 | 79,200 | 291,274 | 256,553 |
Net revenue | 100,192 | 99,057 | 369,574 | 335,538 |
Expenses and other income: | ||||
Store operating expenses | 48,559 | 40,023 | 181,321 | 148,879 |
Administrative expenses | 10,840 | 13,889 | 49,530 | 50,211 |
Depreciation and amortization | 4,015 | 3,482 | 15,361 | 12,939 |
Interest expense | 1,018 | 791 | 3,492 | 1,488 |
Interest income | (55) | (69) | (322) | (216) |
Total expenses and other income | 64,377 | 58,116 | 249,382 | 213,301 |
Income from continuing operations before income taxes | 35,815 | 40,941 | 120,192 | 122,237 |
Provision for income taxes | 10,297 | 13,329 | 35,713 | 41,375 |
Income from continuing operations | 25,518 | 27,612 | 84,479 | 80,862 |
Loss from discontinued operations, net of tax | (740) | (3) | (633) | (503) |
Net income | $ 24,778 | $ 27,609 | $ 83,846 | $ 80,359 |
Basic income per share: | ||||
Income from continuing operations | $ 0.88 | $ 0.96 | $ 2.91 | $ 2.80 |
Loss from discontinued operations | (0.03) | — | (0.02) | (0.02) |
Net income per basic share | $ 0.85 | $ 0.96 | $ 2.89 | $ 2.78 |
Diluted income per share: | ||||
Income from continuing operations | $ 0.87 | $ 0.93 | $ 2.86 | $ 2.72 |
Loss from discontinued operations | (0.03) | — | (0.02) | (0.02) |
Net income per diluted share | $ 0.84 | $ 0.93 | $ 2.84 | $ 2.70 |
Weighted average shares outstanding: | ||||
Basic | 28,933 | 28,795 | 29,079 | 28,912 |
Diluted | 29,393 | 29,666 | 29,574 | 29,713 |
FIRST CASH FINANCIAL SERVICES, INC. | ||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
(UNAUDITED) | ||
December 31, | ||
2013 | 2012 | |
(in thousands) | ||
ASSETS | ||
Cash and cash equivalents | $ 70,643 | $ 50,285 |
Pawn loan fees and service charges receivable | 16,689 | 15,158 |
Pawn loans | 115,234 | 103,181 |
Consumer loans, net | 1,450 | 1,879 |
Inventories | 77,793 | 65,345 |
Other current assets | 8,413 | 5,582 |
Total current assets | 290,222 | 241,430 |
Property and equipment, net | 108,137 | 93,304 |
Goodwill, net | 251,241 | 166,386 |
Other non-current assets | 9,373 | 6,572 |
Total assets | $ 658,973 | $ 507,692 |
LIABILITIES AND STOCKHOLDERS' EQUITY | ||
Current portion of notes payable | $ 3,326 | $ 3,212 |
Accounts payable and accrued liabilities | 38,023 | 27,938 |
Income taxes payable | 7,412 | — |
Total current liabilities | 48,761 | 31,150 |
Revolving unsecured credit facility | 182,000 | 102,500 |
Notes payable, net of current portion | 5,026 | 8,351 |
Deferred income tax liabilities | 8,827 | 13,275 |
Total liabilities | 244,614 | 155,276 |
Stockholders' equity: | ||
Preferred stock | — | — |
Common stock | 394 | 388 |
Additional paid-in capital | 176,675 | 159,081 |
Retained earnings | 497,728 | 413,882 |
Accumulated other comprehensive income (loss) from cumulative foreign currency translation adjustments | (7,751) | (6,940) |
Common stock held in treasury, at cost | (252,687) | (213,995) |
Total stockholders' equity | 414,359 | 352,416 |
Total liabilities and stockholders' equity | $ 658,973 | $ 507,692 |
FIRST CASH FINANCIAL SERVICES, INC.
OPERATING INFORMATION
(UNAUDITED)
The following table details the components of revenue for the three months ended December 31, 2013, as compared to the three months ended December 31, 2012 (in thousands). Constant currency results exclude the effects of foreign currency translation and are calculated by translating current-year results at prior-year average exchange rates, which is more fully described elsewhere in this release.
Three Months Ended | Increase/(Decrease) | ||||
December 31, | Constant Currency | ||||
2013 | 2012 | Increase/(Decrease) | Basis | ||
Domestic revenue: | |||||
Retail merchandise sales | $ 40,529 | $ 32,226 | $ 8,303 | 26% | 26% |
Pawn loan fees | 22,109 | 19,246 | 2,863 | 15% | 15% |
Consumer loan and credit services fees | 10,227 | 11,726 | (1,499) | (13)% | (13)% |
Wholesale scrap jewelry revenue | 7,767 | 16,963 | (9,196) | (54)% | (54)% |
80,632 | 80,161 | 471 | 1% | 1% | |
International revenue: | |||||
Retail merchandise sales | 71,216 | 60,387 | 10,829 | 18% | 19% |
Pawn loan fees | 25,788 | 24,379 | 1,409 | 6% | 6% |
Consumer loan and credit services fees | 784 | 948 | (164) | (17)% | (17)% |
Wholesale scrap jewelry revenue | 6,783 | 12,382 | (5,599) | (45)% | (45)% |
104,571 | 98,096 | 6,475 | 7% | 7% | |
Total revenue: | |||||
Retail merchandise sales | 111,745 | 92,613 | 19,132 | 21% | 21% |
Pawn loan fees | 47,897 | 43,625 | 4,272 | 10% | 10% |
Consumer loan and credit services fees | 11,011 | 12,674 | (1,663) | (13)% | (13)% |
Wholesale scrap jewelry revenue | 14,550 | 29,345 | (14,795) | (50)% | (50)% |
$ 185,203 | $ 178,257 | $ 6,946 | 4% | 4% |
FIRST CASH FINANCIAL SERVICES, INC.
OPERATING INFORMATION (CONTINUED)
(UNAUDITED)
The following table details the components of revenue for the twelve months ended December 31, 2013, as compared to the twelve months ended December 31, 2012 (in thousands). Constant currency results exclude the effects of foreign currency translation and are calculated by translating current-year results at prior-year average exchange rates, which is more fully described elsewhere in this release.
Twelve Months Ended | Increase/(Decrease) | ||||
December 31, | Constant Currency | ||||
2013 | 2012 | Increase/(Decrease) | Basis | ||
Domestic revenue: | |||||
Retail merchandise sales | $ 139,469 | $ 104,289 | $ 35,180 | 34% | 34% |
Pawn loan fees | 79,398 | 63,640 | 15,758 | 25% | 25% |
Consumer loan and credit services fees | 40,378 | 44,862 | (4,484) | (10)% | (10)% |
Wholesale scrap jewelry revenue | 38,617 | 57,551 | (18,934) | (33)% | (33)% |
297,862 | 270,342 | 27,520 | 10% | 10% | |
International revenue: | |||||
Retail merchandise sales | 227,718 | 183,167 | 44,551 | 24% | 21% |
Pawn loan fees | 102,157 | 88,597 | 13,560 | 15% | 12% |
Consumer loan and credit services fees | 3,403 | 3,830 | (427) | (11)% | (14)% |
Wholesale scrap jewelry revenue | 29,708 | 46,155 | (16,447) | (36)% | (36)% |
362,986 | 321,749 | 41,237 | 13% | 10% | |
Total revenue: | |||||
Retail merchandise sales | 367,187 | 287,456 | 79,731 | 28% | 25% |
Pawn loan fees | 181,555 | 152,237 | 29,318 | 19% | 17% |
Consumer loan and credit services fees | 43,781 | 48,692 | (4,911) | (10)% | (10)% |
Wholesale scrap jewelry revenue | 68,325 | 103,706 | (35,381) | (34)% | (34)% |
$ 660,848 | $ 592,091 | $ 68,757 | 12% | 10% |
FIRST CASH FINANCIAL SERVICES, INC.
OPERATING INFORMATION (CONTINUED)
(UNAUDITED)
The following table details customer loans and inventories held by the Company and active CSO credit extensions from an independent third-party lender as of December 31, 2013, as compared to December 31, 2012 (in thousands). Constant currency results exclude the effects of foreign currency translation and are calculated by translating current-year balances at the prior-year end-of-period exchange rate, which is more fully described elsewhere in this release.
Increase/(Decrease) | |||||
Balance at December 31, | Constant Currency | ||||
2013 | 2012 | Increase/(Decrease) | Basis | ||
Domestic: | |||||
Pawn loans | $ 65,716 | $ 55,040 | $ 10,676 | 19% | 19% |
CSO credit extensions held by independent third-party (1) | 12,240 | 14,134 | (1,894) | (13)% | (13)% |
Other consumer loans | 832 | 1,149 | (317) | (28)% | (28)% |
78,788 | 70,323 | 8,465 | 12% | 12% | |
International: | |||||
Pawn loans | 49,518 | 48,141 | 1,377 | 3% | 3% |
Other consumer loans | 618 | 730 | (112) | (15)% | (15)% |
50,136 | 48,871 | 1,265 | 3% | 3% | |
Total: | |||||
Pawn loans | 115,234 | 103,181 | 12,053 | 12% | 12% |
CSO credit extensions held by independent third-party (1) | 12,240 | 14,134 | (1,894) | (13)% | (13)% |
Other consumer loans | 1,450 | 1,879 | (429) | (23)% | (23)% |
$ 128,924 | $ 119,194 | $ 9,730 | 8% | 8% | |
Pawn inventories: | |||||
Domestic pawn inventories | $ 40,910 | $ 32,664 | $ 8,246 | 25% | 25% |
International pawn inventories | 36,883 | 32,681 | 4,202 | 13% | 14% |
$ 77,793 | $ 65,345 | $ 12,448 | 19% | 19% | |
(1) CSO amounts outstanding are composed of the principal portion of active CSO extensions of credit by an independent third-party lender, which are not included on the Company's balance sheet, net of the Company's estimated fair value of its liability under the letters of credit guaranteeing the extensions of credit. |
FIRST CASH FINANCIAL SERVICES, INC.
UNAUDITED NON-GAAP FINANCIAL INFORMATION
The Company uses certain financial calculations, such as free cash flow, EBITDA from continuing operations and constant currency results, which are not considered measures of financial performance under U.S. generally accepted accounting principles ("GAAP"). Items excluded from the calculation of free cash flow, EBITDA from continuing operations and constant currency results are significant components in understanding and assessing the Company's financial performance. Since free cash flow, EBITDA from continuing operations and constant currency results are not measures determined in accordance with GAAP and are thus susceptible to varying calculations, free cash flow, EBITDA from continuing operations and constant currency results, as presented, may not be comparable to other similarly titled measures of other companies. Free cash flow, EBITDA from continuing operations and constant currency results should not be considered as alternatives to net income, cash flow provided by or used in operating, investing or financing activities or other financial statement data presented in the Company's consolidated financial statements as indicators of financial performance or liquidity. Non-GAAP financial measures should be evaluated in conjunction with, and are not a substitute for, GAAP financial measures.
Earnings from Continuing Operations Before Interest, Taxes, Depreciation and Amortization
EBITDA from continuing operations is commonly used by investors to assess a company's leverage capacity, liquidity and financial performance. The following table provides a reconciliation of net income to EBITDA from continuing operations (in thousands):
Twelve Months Ended | ||
December 31, | ||
2013 | 2012 | |
Net income | $ 83,846 | $ 80,359 |
Loss from discontinued operations, net of tax | 633 | 503 |
Income from continuing operations | 84,479 | 80,862 |
Adjustments: | ||
Income taxes | 35,713 | 41,375 |
Depreciation and amortization | 15,361 | 12,939 |
Interest expense | 3,492 | 1,488 |
Interest income | (322) | (216) |
Earnings from continuing operations before interest, taxes, depreciation and amortization | $ 138,723 | $ 136,448 |
EBITDA from continuing operations margin calculated as follows: | ||
Total revenue from continuing operations | $ 660,848 | $ 592,091 |
Earnings from continuing operations before interest, taxes, depreciation and amortization | 138,723 | 136,448 |
EBITDA from continuing operations as a percentage of revenue | 21% | 23% |
FIRST CASH FINANCIAL SERVICES, INC.
UNAUDITED NON-GAAP FINANCIAL INFORMATION (CONTINUED)
Free Cash Flow
For purposes of its internal liquidity assessments, the Company considers free cash flow, which is defined as cash flow from the operating activities of continuing and discontinued operations reduced by purchases of property and equipment and net cash outflow from loan receivables. Free cash flow is commonly used by investors as a measure of cash generated by business operations that will be used to repay scheduled debt maturities and can be used to invest in future growth through new business development activities or acquisitions, repurchase stock, or repay debt obligations prior to their maturities. These metrics can also be used to evaluate the Company's ability to generate cash flow from business operations and the impact that this cash flow has on the Company's liquidity. The following table reconciles "cash flow from operating activities" to "free cash flow" (in thousands):
Twelve Months Ended | ||
December 31, | ||
2013 | 2012 | |
Cash flow from operating activities, including discontinued operations | $ 106,718 | $ 88,792 |
Cash flow from investing activities: | ||
Loan receivables | (411) | (17,325) |
Purchases of property and equipment | (26,672) | (21,841) |
Free cash flow | $ 79,635 | $ 49,626 |
Constant Currency
Certain performance metrics discussed in this release are presented on a "constant currency" basis, which may be considered a non-GAAP measurement of financial performance under GAAP. The Company's management uses constant currency results to evaluate operating results of certain business operations in Mexico, which are transacted in Mexican pesos. Constant currency results reported herein are calculated by translating certain balance sheet and income statement items denominated in Mexican pesos using the exchange rate from the prior-year comparable period, as opposed to the current comparable period, in order to exclude the effects of foreign currency rate fluctuations for purposes of evaluating period-over-period comparisons. For balance sheet items, the end-of-period exchange rate of 13.0 to 1 at December 31, 2012, was used, compared to the exchange rate of 13.1 to 1 at December 31, 2013. For income statement items, the average closing daily exchange rate for the appropriate period was used. The average exchange rate for the prior-year quarter ended December 31, 2012 was 12.9 to 1, compared to the current-quarter rate of 13.0 to 1. The average exchange rate for the prior-year twelve-month period ended December 31, 2012 was 13.2 to 1, compared to the current year-to-date rate of 12.8 to 1.