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First Cash Financial Services Inc. (FCFS) filed Quarterly Report for the period ended 2011-09-30.
First Cash Financial Services Inc. has a market cap of $1.26 billion; its shares were traded at around $41.01 with a P/E ratio of 18.99 and P/S ratio of 2.93. First Cash Financial Services Inc. had an annual average earning growth of 19.5% over the past 10 years. GuruFocus rated First Cash Financial Services Inc. the business predictability rank of 5-star.
This is the annual revenues and earnings per share of FCFS over the last 10 years. For detailed 10-year financial data and charts, go to 10-Year Financials of FCFS.
Highlight of Business Operations:
The gross profit margin on total merchandise sales was 39% during the third quarter of 2011, compared to 41% in the third quarter of 2010. The retail merchandise margin, which excludes scrap jewelry sales, was 41% during the third quarter of 2011, while the margin on wholesale scrap jewelry was 37%, compared to prior-year margins of 44% and 35%, respectively. The change in retail margins related primarily to the increased mix of hard good inventories, compared to jewelry, in Mexico, which typically carry lower margins than retail jewelry. The increase in scrap margins was reflective of higher selling prices relative to the changes in acquisition costs. Pawn inventories increased over the prior year by 25%, which was reflective of the growth in pawn loan balances, store maturation in Mexico and a decrease in the mix of faster-turning scrap jewelry inventories in Mexico. At September 30, 2011, the Company’s pawn inventories, at cost, were comprised as follows: 40% jewelry (primarily gold), 41% electronics and appliances, 6% tools and 13% other. On a cost basis, 98% of total inventories at September 30, 2011 had been held for one year or less, while 2% had been held for more than one year.The Company’s consumer loan and credit services loss provision was 30% of consumer loan and credit services fee revenue during the third quarter of 2011, compared to 32% in the third quarter of 2010, which reflected the continued maturation of the store base. The estimated fair value of liabilities under the CSO letters of credit, net of anticipated recoveries from customers, was $877,000, or 6.4% of the gross loan balance at September 30, 2011, compared to $917,000, or 6.9% of the gross loan balance at September 30, 2010, which is included as a component of the Company’s accrued liabilities. The Company’s loss reserve on consumer loans decreased to $49,000, or 5.0% of the gross loan balance at September 30, 2011, compared to $56,000, or 5.0% of the gross loan balance at September 30, 2010.
Total merchandise sales increased by 31% for the first nine months of 2011, with 36% growth in Mexico and 23% growth in the U.S. Store-based retail sales increased by 32%, primarily the result of a 42% increase in retail sales in Mexico, which reflected continued store maturation and an increased mix of consumer hard good (primarily consumer electronics and power tools) inventories. The 28% increase in scrap jewelry sales reflected a 26% increase in the weighted-average selling price of scrap gold, offset by a 4% decline in the quantity of scrap gold sold. The total volume of gold scrap jewelry sold in the first nine months of 2011 was approximately 45,000 ounces at an average cost of $1,102 per ounce and an average selling price of $1,466 per ounce. The overall decline in scrap jewelry volume was related primarily to pawn operations in Mexico, where the percentage of jewelry pawns and gold buying from customers has decreased as a percentage of the overall product mix compared to the prior year. As a result, scrap volume decreased 10% in Mexico. The shift in inventory mix is the result of the Company’s increased focus on hard good transactions (electronics and appliances) where there is less competition in Mexico, as compared to jewelry lending and gold buying, where there is greater competition. In the U.S., scrap volume increased approximately 1%, and scrap sales grew by 36%, which was primarily due to the increased selling price of gold.
The gross profit margin on total merchandise sales was 38% during the first nine months of 2011, compared to 40% during the first nine months of 2010. The retail merchandise margin, which excludes scrap jewelry sales, was 40% during the first nine months of 2011, while the margin on wholesale scrap jewelry was 34%, compared to prior-year margins of 42% and 34%, respectively. The change in retail margins related primarily to the increased mix of hard good inventories, compared to jewelry, in Mexico, which typically carry lower margins than retail jewelry. Pawn inventories increased over the prior year by 25%, which was reflective of the growth in pawn loan balances, store maturation in Mexico and a decrease in the mix of faster-turning scrap inventories in Mexico. At September 30, 2011, the Company’s pawn inventories, at cost, were comprised as follows: 40% jewelry (primarily gold), 41% electronics and appliances, 6% tools and 13% other. On a cost basis, 98% of total inventories at September 30, 2011, had been held for one year or less, while 2% had been held for more than one year.
The Company’s consumer loan and credit services loss provision was 23% of consumer loan and credit services fee revenue during the first nine months of 2011, compared to 27% in the first nine months of 2010 which reflected the continued maturation of the consumer loan store base and sales. During the second quarter of 2011, the Company sold bad debt portfolios generated from consumer loan and credit services guarantees for proceeds of $576,000. The portfolios, which were fully written-off, reduced the loss provision by this same amount. Excluding the benefit of all such sales, the year-to-date loss provision would have been 25%. The Company did not sell bad debt portfolios in the comparable prior-year period. The estimated fair value of liabilities under the CSO letters of credit, net of anticipated recoveries from customers, was $877,000, or 6.4% of the gross loan balance at September 30, 2011, compared to $917,000, or 6.9% of the gross loan balance at September 30, 2010, which is included as a component of the Company’s accrued liabilities. The Company’s loss reserve on consumer loans decreased to $49,000, or 5.0% of the gross loan balance at September 30, 2011, compared to $56,000, or 5.0% of the gross loan balance at September 30, 2010.
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