ARLINGTON, Texas, July 17, 2014 (GLOBE NEWSWIRE) -- First Cash Financial Services, Inc. (Nasdaq:FCFS), a leading international operator of retail pawn stores in the U.S. & Mexico, today announced revenue, net income and earnings per share for the three-month period ended June 30, 2014. The growth in revenue and earnings continued to be driven by the Company's pawn operations in both the U.S. and Mexico. The Company also reaffirmed its earnings per share guidance for fiscal 2014, which implies second half EBITDA growth of 17% to 20%.
Earnings Highlights
Revenue Highlights
All revenue growth rates presented below are calculated on a constant currency basis by applying the currency exchange rate from the comparable prior-year period to the current year's Mexican peso-denominated revenue. The average exchange rate for the second quarter of 2014 was 13.0 Mexican pesos / U.S. dollar versus 12.5 Mexican pesos / U.S. dollar in the comparable prior-year period.
Pawn Metrics
New Store Openings
Financial Metrics
Liquidity
Fiscal 2014 Outlook
Commentary and Analysis
Mr. Rick Wessel, chief executive officer, commented on the second quarter results, "We are pleased to report second quarter earnings. Year-over-year EBITDA increased 12% for the quarter, which was significantly greater than recent sequential quarters. Driven by solid growth in pawn receivables in the second quarter, we believe that we are well positioned for continued growth in our core pawn revenues over the balance of 2014."
"In Mexico, we saw pawn loan demand continue to rebound during the second quarter after the significant seasonal slowdown during the fourth quarter of 2013. At quarter end, pawn loan balances increased 14% over the prior year, a strong sequential improvement over 6% growth in the first quarter and 3% growth in the fourth quarter of last year. This momentum reinforces our belief in the long-term consistency in product demand and growth opportunities ahead from both new store openings and by gaining market share from small format 'gold-only' focused operators."
"In the U.S., we continue to believe there are significant expansion opportunities primarily through strategic local and regional acquisitions. Over the past 18 months, we acquired or opened 48 U.S. locations, including accretive regional acquisitions in new markets in both Texas and South Carolina. The integration of these acquisitions has gone well and we are rapidly optimizing inventory levels, margins and product mix at these recently acquired stores. The pawn industry remains fragmented in the U.S. with approximately 80% of the stores still independently owned and operated and we believe we can continue to expand our store base in the U.S. through strategic consolidation."
"As we begin the second half of the year, we anniversary the rapid decline in gold we experienced in the second quarter of last year. This significant decline not only impacted our scrap gold margins, although scrap gold has only accounted for 2% of our gross profit over the past 12 months, but also the amount we loan against gold jewelry. Assuming a stable gold market, we anticipate these variables associated with gold will 'normalize' in the second half of the year and subsequently anticipate EBITDA growth in the range of 17% to 20% for the remainder of the year."
"Over the past 25 years, we have experienced consistent long-term demand across economic cycles and believe we are well positioned to take advantage of the favorable population growth and demographic trends in our key markets. We believe our focus on retail merchandise sales of consumer electronics, tools, household appliances, and jewelry provides a compelling value proposition for mainstream consumers in both the U.S. and Mexico. Our pawn lending services are appealing to customers as compared to competitive alternatives because our stores can provide a source of credit in less than 10 minutes and require no underwriting, credit check, or bank account."
"In summary, we have demonstrated a history of significant and consistent earnings growth. Over the past five years, our EBITDA from continuing operations has grown from $71 million to over $140 million today, a compounded growth rate of 17%. We believe our recent financing activity further strengthens the long-term growth potential of First Cash and provides additional resources to continue to increase our pawn-focused store growth, revenue growth and earnings growth. We believe our focused business model, coupled with our strong balance sheet, positions us to drive sustainable long-term growth in shareholder value."
Forward-Looking Information
This release contains forward-looking statements about the business, financial condition and prospects of First Cash Financial Services, Inc. and its wholly owned subsidiaries (together, the "Company" or "First Cash"). 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 the expectations reflected in forward-looking statements are reasonable, there can be no assurances such expectations will prove to be accurate. Security holders are cautioned such forward-looking statements involve risks and uncertainties. Certain factors may cause results to differ materially from those anticipated by the forward-looking 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 2013 annual report on Form 10-K filed with the Securities and Exchange Commission on February 28, 2014, including the risks described in Item 1A "Risk Factors." Many of 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, except as required by law.
About First Cash
Founded in 1988, First Cash is a leading international operator of retail pawn stores, which account for approximately 95% of the Company's revenues. First Cash focuses on serving cash and credit constrained consumers through its retail locations, which buy and sell a wide variety of jewelry, electronics, tools and other merchandise, and make small consumer pawn loans secured by pledged personal property. Today, First Cash owns and operates 929 stores in 12 U.S. states and 27 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 June 30, 2014: | |||||
Pawn Locations | Consumer | ||||
Large | Small | Loan | Total | ||
Format (1) | Format (2) | Locations (3) | Locations | ||
Domestic: | |||||
Total locations, beginning of period | 229 | 24 | 57 | 310 | |
New locations opened | 1 | — | — | 1 | |
Locations closed or consolidated | — | (1) | — | (1) | |
Total locations, end of period | 230 | 23 | 57 | 310 | |
International: | |||||
Total locations, beginning of period | 560 | 17 | 28 | 605 | |
New locations opened | 12 | — | — | 12 | |
Locations closed or consolidated | (1) | — | — | (1) | |
Total locations, end of period | 571 | 17 | 28 | 616 | |
Total: | |||||
Total locations, beginning of period | 789 | 41 | 85 | 915 | |
New locations opened | 13 | — | — | 13 | |
Locations closed or consolidated | (1) | (1) | — | (2) | |
Total locations, end of period | 801 | 40 | 85 | 926 |
(1) The large format locations include retail showrooms and accept a broad array of pawn collateral including consumer electronics, appliances, power tools, jewelry and other general merchandise items. At June 30, 2014, 122 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 residing in the state of Texas. |
The following table details store openings for the six months ended June 30, 2014:
Pawn Locations | Consumer | |||
Large | Small | Loan | Total | |
Format (1) | Format (2) | Locations (3) | Locations | |
Domestic: | ||||
Total locations, beginning of period | 227 | 25 | 57 | 309 |
New locations opened | 3 | 1 | — | 4 |
Locations acquired | 1 | — | — | 1 |
Store format conversions | 1 | (1) | — | — |
Locations closed or consolidated | (2) | (2) | — | (4) |
Total locations, end of period | 230 | 23 | 57 | 310 |
International: | ||||
Total locations, beginning of period | 552 | 17 | 28 | 597 |
New locations opened | 20 | — | — | 20 |
Locations closed or consolidated | (1) | — | — | (1) |
Total locations, end of period | 571 | 17 | 28 | 616 |
Total: | ||||
Total locations, beginning of period | 779 | 42 | 85 | 906 |
New locations opened | 23 | 1 | — | 24 |
Locations acquired | 1 | — | — | 1 |
Store format conversions | 1 | (1) | — | — |
Locations closed or consolidated | (3) | (2) | — | (5) |
Total locations, end of period | 801 | 40 | 85 | 926 |
(1) The large format locations include retail showrooms and accept a broad array of pawn collateral including consumer electronics, appliances, power tools, jewelry and other general merchandise items. At June 30, 2014, 122 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 residing in the state of Texas. |
FIRST CASH FINANCIAL SERVICES, INC. | ||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||
(UNAUDITED) | ||||
Three Months Ended | Six Months Ended | |||
June 30, | June 30, | |||
2014 | 2013 | 2014 | 2013 | |
(in thousands, except per share data) | ||||
Revenue: | ||||
Retail merchandise sales | $ 97,188 | $ 83,900 | $ 195,896 | $ 165,670 |
Pawn loan fees | 47,555 | 43,052 | 95,193 | 86,203 |
Consumer loan and credit services fees | 8,416 | 10,085 | 18,200 | 21,852 |
Wholesale scrap jewelry revenue | 12,167 | 5,317 | 25,814 | 28,541 |
Total revenue | 165,326 | 142,354 | 335,103 | 302,266 |
Cost of revenue: | ||||
Cost of retail merchandise sold | 59,093 | 51,092 | 119,583 | 99,131 |
Consumer loan and credit services loss provision | 2,236 | 2,515 | 3,979 | 4,624 |
Cost of wholesale scrap jewelry sold | 10,076 | 4,600 | 21,164 | 23,104 |
Total cost of revenue | 71,405 | 58,207 | 144,726 | 126,859 |
Net revenue | 93,921 | 84,147 | 190,377 | 175,407 |
Expenses and other income: | ||||
Store operating expenses | 48,934 | 43,308 | 97,426 | 86,113 |
Administrative expenses | 13,615 | 12,764 | 26,944 | 25,856 |
Depreciation and amortization | 4,325 | 3,733 | 8,597 | 7,358 |
Interest expense | 3,910 | 633 | 5,346 | 1,352 |
Interest income | (262) | (51) | (343) | (198) |
Total expenses and other income | 70,522 | 60,387 | 137,970 | 120,481 |
Income from continuing operations before income taxes | 23,399 | 23,760 | 52,407 | 54,926 |
Provision for income taxes | 7,384 | 8,106 | 13,438 | 19,092 |
Income from continuing operations | 16,015 | 15,654 | 38,969 | 35,834 |
Income (loss) from discontinued operations, net of tax | — | 9 | (272) | 93 |
Net income | $ 16,015 | $ 15,663 | $ 38,697 | $ 35,927 |
Basic income per share: | ||||
Income from continuing operations | $ 0.55 | $ 0.54 | $ 1.35 | $ 1.23 |
Income (loss) from discontinued operations | — | — | (0.01) | — |
Net income per basic share | $ 0.55 | $ 0.54 | $ 1.34 | $ 1.23 |
Diluted income per share: | ||||
Income from continuing operations | $ 0.55 | $ 0.53 | $ 1.33 | $ 1.21 |
Income (loss) from discontinued operations | — | — | (0.01) | — |
Net income per diluted share | $ 0.55 | $ 0.53 | $ 1.32 | $ 1.21 |
Weighted average shares outstanding: | ||||
Basic | 28,938 | 29,167 | 28,945 | 29,240 |
Diluted | 29,341 | 29,603 | 29,341 | 29,779 |
FIRST CASH FINANCIAL SERVICES, INC. | |||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||
(UNAUDITED) | |||
June 30, | December 31, | ||
2014 | 2013 | 2013 | |
(in thousands) | |||
ASSETS | |||
Cash and cash equivalents | $ 84,055 | $ 32,706 | $ 70,643 |
Pawn loan fees and service charges receivable | 17,808 | 16,354 | 16,689 |
Pawn loans | 123,901 | 112,212 | 115,234 |
Consumer loans, net | 1,339 | 1,504 | 1,450 |
Inventories | 77,587 | 82,005 | 77,793 |
Other current assets | 7,072 | 3,871 | 8,413 |
Total current assets | 311,762 | 248,652 | 290,222 |
Property and equipment, net | 112,488 | 97,734 | 108,137 |
Goodwill, net | 254,918 | 220,418 | 251,241 |
Other non-current assets | 15,559 | 8,639 | 9,373 |
Total assets | $ 694,727 | $ 575,443 | $ 658,973 |
LIABILITIES AND STOCKHOLDERS' EQUITY | |||
Current portion of notes payable | $ — | $ 3,268 | $ 3,326 |
Accounts payable and accrued liabilities | 42,400 | 31,759 | 38,023 |
Income taxes payable | — | 506 | 7,412 |
Total current liabilities | 42,400 | 35,533 | 48,761 |
Revolving unsecured credit facility | — | 153,000 | 182,000 |
Notes payable, net of current portion | — | 6,704 | 5,026 |
Senior unsecured notes | 200,000 | — | — |
Deferred income tax liabilities | 9,970 | 14,404 | 8,827 |
Total liabilities | 252,370 | 209,641 | 244,614 |
Stockholders' equity: | |||
Preferred stock | — | — | — |
Common stock | 394 | 393 | 394 |
Additional paid-in capital | 178,978 | 175,555 | 176,675 |
Retained earnings | 536,425 | 449,809 | 497,728 |
Accumulated other comprehensive income (loss) from cumulative foreign currency translation adjustments | (7,439) | (7,268) | (7,751) |
Common stock held in treasury, at cost | (266,001) | (252,687) | (252,687) |
Total stockholders' equity | 442,357 | 365,802 | 414,359 |
Total liabilities and stockholders' equity | $ 694,727 | $ 575,443 | $ 658,973 |
FIRST CASH FINANCIAL SERVICES, INC. | |||||
OPERATING INFORMATION | |||||
(UNAUDITED) | |||||
The following table details the components of revenue for the three months ended June 30, 2014, as compared to the three months ended June 30, 2013 (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) | ||||
June 30, | Constant Currency | ||||
2014 | 2013 | Increase/(Decrease) | Basis | ||
Domestic revenue: | |||||
Retail merchandise sales | $ 37,877 | $ 29,094 | $ 8,783 | 30% | 30% |
Pawn loan fees | 20,381 | 17,209 | 3,172 | 18% | 18% |
Consumer loan and credit services fees | 7,710 | 9,177 | (1,467) | (16)% | (16)% |
Wholesale scrap jewelry revenue | 6,865 | 1,556 | 5,309 | 341% | 341% |
72,833 | 57,036 | 15,797 | 28% | 28% | |
International revenue: | |||||
Retail merchandise sales | 59,311 | 54,806 | 4,505 | 8% | 13% |
Pawn loan fees | 27,174 | 25,843 | 1,331 | 5% | 10% |
Consumer loan and credit services fees | 706 | 908 | (202) | (22)% | (19)% |
Wholesale scrap jewelry revenue | 5,302 | 3,761 | 1,541 | 41% | 41% |
92,493 | 85,318 | 7,175 | 8% | 13% | |
Total revenue: | |||||
Retail merchandise sales | 97,188 | 83,900 | 13,288 | 16% | 19% |
Pawn loan fees | 47,555 | 43,052 | 4,503 | 10% | 13% |
Consumer loan and credit services fees | 8,416 | 10,085 | (1,669) | (17)% | (16)% |
Wholesale scrap jewelry revenue (1) | 12,167 | 5,317 | 6,850 | 129% | 129% |
$ 165,326 | $ 142,354 | $ 22,972 | 16% | 19% |
(1) Wholesale scrap jewelry revenue during the three months ended June 30, 2014, consisted primarily of gold sales, of which approximately 8,000 ounces were sold at an average price of $1,318 per ounce, compared to approximately 2,100 ounces of gold sold at $1,561 per ounce in the prior-year period. The limited amount of gold sold in the second quarter of 2013 was due to the Company's election to defer the sale of approximately 7,700 ounces of gold until the third quarter of 2013. |
FIRST CASH FINANCIAL SERVICES, INC. | ||||||
OPERATING INFORMATION (CONTINUED) | ||||||
(UNAUDITED) | ||||||
The following table details the components of revenue for the six months ended June 30, 2014, as compared to the six months ended June 30, 2013 (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. |
||||||
Six Months Ended | Increase/(Decrease) | |||||
June 30, | Constant Currency | |||||
2014 | 2013 | Increase/(Decrease) | Basis | |||
Domestic revenue: | ||||||
Retail merchandise sales | $ 83,452 | $ 62,806 | $ 20,646 | 33% | 33% | |
Pawn loan fees | 43,283 | 36,048 | 7,235 | 20% | 20% | |
Consumer loan and credit services fees | 16,822 | 20,065 | (3,243) | (16)% | (16)% | |
Wholesale scrap jewelry revenue | 15,408 | 15,506 | (98) | (1)% | (1)% | |
158,965 | 134,425 | 24,540 | 18% | 18% | ||
International revenue: | ||||||
Retail merchandise sales | 112,444 | 102,864 | 9,580 | 9% | 14% | |
Pawn loan fees | 51,910 | 50,155 | 1,755 | 3% | 8% | |
Consumer loan and credit services fees | 1,378 | 1,787 | (409) | (23)% | (19)% | |
Wholesale scrap jewelry revenue | 10,406 | 13,035 | (2,629) | (20)% | (20)% | |
176,138 | 167,841 | 8,297 | 5% | 9% | ||
Total revenue: | ||||||
Retail merchandise sales | 195,896 | 165,670 | 30,226 | 18% | 21% | |
Pawn loan fees | 95,193 | 86,203 | 8,990 | 10% | 13% | |
Consumer loan and credit services fees | 18,200 | 21,852 | (3,652) | (17)% | (16)% | |
Wholesale scrap jewelry revenue (1) | 25,814 | 28,541 | (2,727) | (10)% | (10)% | |
$ 335,103 | $ 302,266 | $ 32,837 | 11% | 13% |
(1) Wholesale scrap jewelry revenue during the six months ended June 30, 2014 consisted primarily of gold, of which approximately 16,900 ounces sold at an average selling price of $1,311 per ounce, compared to approximately 14,500 ounces of gold sold at $1,637 per ounce in the prior-year period. The limited amount of gold sold in the second quarter of 2013 was due to the Company's election to defer the sale of approximately 7,700 ounces of gold until the third quarter of 2013. |
FIRST CASH FINANCIAL SERVICES, INC. | |||||
OPERATING INFORMATION (CONTINUED) | |||||
(UNAUDITED) | |||||
The following table details customer loans and inventories held by the Company and active credit service organization ("CSO") credit extensions from an independent third-party lender as of June 30, 2014, as compared to June 30, 2013 (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 June 30, | Constant Currency | ||||
2014 | 2013 | Increase/(Decrease) | Basis | ||
Domestic: | |||||
Pawn loans | $ 63,000 | $ 58,887 | $ 4,113 | 7% | 7% |
CSO credit extensions held by independent third-party (1) | 10,258 | 11,055 | (797) | (7)% | (7)% |
Other consumer loans | 772 | 769 | 3 | —% | —% |
74,030 | 70,711 | 3,319 | 5% | 5% | |
International: | |||||
Pawn loans | 60,901 | 53,325 | 7,576 | 14% | 14% |
Other consumer loans | 567 | 735 | (168) | (23)% | (23)% |
61,468 | 54,060 | 7,408 | 14% | 14% | |
Total: | |||||
Pawn loans | 123,901 | 112,212 | 11,689 | 10% | 10% |
CSO credit extensions held by independent third-party (1) | 10,258 | 11,055 | (797) | (7)% | (7)% |
Other consumer loans | 1,339 | 1,504 | (165) | (11)% | (11)% |
$ 135,498 | $ 124,771 | $ 10,727 | 9% | 9% | |
Pawn inventories: | |||||
Domestic pawn inventories | $ 36,370 | $ 38,534 | $ (2,164) | (6)% | (6)% |
International pawn inventories | 41,217 | 43,471 | (2,254) | (5)% | (5)% |
$ 77,587 | $ 82,005 | $ (4,418) | (5)% | (5)% | |
(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. | ||
OPERATING INFORMATION (CONTINUED) | ||
(UNAUDITED) | ||
The following table details the composition of pawn collateral and the average outstanding pawn loan receivable as of June 30, 2014, as compared to June 30, 2013. | ||
Balance at June 30, | ||
2014 | 2013 | |
Composition of pawn collateral: | ||
Domestic pawn loans: | ||
General merchandise | 45% | 39% |
Jewelry | 55% | 61% |
100% | 100% | |
International pawn loans: | ||
General merchandise | 88% | 87% |
Jewelry | 12% | 13% |
100% | 100% | |
Total pawn loans: | ||
General merchandise | 66% | 64% |
Jewelry | 34% | 36% |
100% | 100% | |
Average outstanding pawn loan amount: | ||
Domestic pawn loans | $ 162 | $ 169 |
International pawn loans | 71 | 70 |
Total pawn loans | 100 | 97 |
FIRST CASH FINANCIAL SERVICES, INC. |
NON-GAAP FINANCIAL INFORMATION |
(UNAUDITED) |
The Company uses certain financial calculations such as EBITDA from continuing operations, free cash flow and constant currency results (as defined or explained below) as factors in the measurement and evaluation of the Company's operating performance and period-over-period growth. The Company derives these financial calculations on the basis of methodologies other than GAAP, primarily by excluding from a comparable GAAP measure certain items that the Company does not consider to be representative of its actual operating performance. These financial calculations are "non-GAAP financial measures" as defined in Securities and Exchange Commission ("SEC") rules. The Company uses these financial calculations in operating its business because management believes they are less susceptible to variances in actual operating performance that can result from the excluded items and other infrequent charges. The Company presents these financial measures to investors because management believes they are useful to investors in evaluating the primary factors that drive the Company's operating performance and because management believes they provide greater transparency into the Company's results of operations. However, items that are excluded and other adjustments and assumptions that are made in calculating EBITDA from continuing operations, free cash flow and constant currency results are significant components in understanding and assessing the Company's financial performance. These non-GAAP financial measures should be evaluated in conjunction with, and are not a substitute for, the Company's GAAP financial measures. Further, because these non-GAAP financial measures are not determined in accordance with GAAP and are thus susceptible to varying calculations, EBITDA from continuing operations, free cash flow and constant currency results as presented may not be comparable to other similarly titled measures of other companies. |
FIRST CASH FINANCIAL SERVICES, INC. | ||||||
NON-GAAP FINANCIAL INFORMATION (CONTINUED) | ||||||
(UNAUDITED) | ||||||
Earnings from Continuing Operations Before Interest, Taxes, Depreciation and Amortization | ||||||
The Company defines EBITDA from continuing operations as net income (loss) before income (loss) from discontinued operations net of tax, income taxes, depreciation and amortization, interest expense and interest income. EBITDA from continuing operations is commonly used by investors to assess a company's leverage capacity, liquidity and financial performance. However, EBITDA from continuing operations has limitations as an analytical tool and should not be considered in isolation or as a substitute for net income (loss) or other statement of income data prepared in accordance with GAAP. The following table provides a reconciliation of net income to EBITDA from continuing operations (in thousands): | ||||||
Trailing Twelve | ||||||
Three Months Ended | Six Months Ended | Months Ended | ||||
June 30, | June 30, | June 30, | ||||
2014 | 2013 | 2014 | 2013 | 2014 | 2013 | |
Net income | $ 16,015 | $ 15,663 | $ 38,697 | $ 35,927 | $ 86,616 | $ 82,425 |
(Income) loss from discontinued operations, net of tax | — | (9) | 272 | (93) | 998 | 599 |
Income from continuing operations | 16,015 | 15,654 | 38,969 | 35,834 | 87,614 | 83,024 |
Adjustments: | ||||||
Income taxes | 7,384 | 8,106 | 13,438 | 19,092 | 30,059 | 42,731 |
Depreciation and amortization | 4,325 | 3,733 | 8,597 | 7,358 | 16,600 | 14,168 |
Interest expense | 3,910 | 633 | 5,346 | 1,352 | 7,486 | 2,587 |
Interest income | (262) | (51) | (343) | (198) | (467) | (297) |
Earnings from continuing operations before interest, taxes, depreciation and amortization | $ 31,372 | $ 28,075 | $ 66,007 | $ 63,438 | $ 141,292 | $ 142,213 |
EBITDA from continuing operations margin calculated as follows: | ||||||
Total revenue from continuing operations | $ 165,326 | $ 142,354 | $ 335,103 | $ 302,266 | $ 693,685 | $ 629,223 |
Earnings from continuing operations before interest, taxes, depreciation and amortization | 31,372 | 28,075 | 66,007 | 63,438 | 141,292 | 142,213 |
EBITDA from continuing operations as a percentage of revenue | 19% | 20% | 20% | 21% | 20% | 23% |
Leverage ratio (indebtedness divided by EBITDA from continuing operations): | ||||||
Indebtedness | $ 200,000 | $ 162,972 | ||||
Earnings from continuing operations before interest, taxes, depreciation and amortization | 141,292 | 142,213 | ||||
Leverage ratio | 1.4:1 | 1.1:1 |
FIRST CASH FINANCIAL SERVICES, INC. | ||
NON-GAAP FINANCIAL INFORMATION (CONTINUED) | ||
(UNAUDITED) | ||
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. However, free cash flow has limitations as an analytical tool and should not be considered in isolation or as a substitute for cash flow from operating activities, including discontinued operations, or other income statement data prepared in accordance with GAAP. The following table reconciles "net cash flow from operating activities" to "free cash flow" (in thousands): | ||
Trailing Twelve Months Ended | ||
June 30, | ||
2014 | 2013 | |
Cash flow from operating activities, including discontinued operations | $ 110,611 | $ 94,102 |
Cash flow from investing activities: | ||
Loan receivables | (1,007) | (14,109) |
Purchases of property and equipment | (28,357) | (22,464) |
Free cash flow | $ 81,247 | $ 57,529 |
Constant Currency | ||
The Company's reporting currency is the U.S. dollar. However, 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. Pawn scrap jewelry in Mexico is sold in U.S. dollars and, accordingly, does not require a constant currency adjustment. 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 June 30, 2013 was used. The exchange rate at June 30, 2014 was also 13.0 to 1. 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 June 30, 2013 was 12.5 to 1, compared to the current-quarter rate of 13.0 to 1. The average exchange rate for the prior-year six-month period ended June 30, 2013 was 12.6 to 1, compared to the current year-to-date rate of 13.1 to 1. |