Add
FCFS to Portfolio
Set Alert
Email to a
Friend
| |||
|
|
Quotes & Info
|
| FCFS > SEC Filings for FCFS > Form 10-Q on 6-Nov-2009 | All Recent SEC Filings |
6-Nov-2009
Quarterly Report
GENERAL
Pawn operations generated 82% of the Company's revenue from continuing operations during the first nine months of 2009. The Company's pawn revenue is derived primarily from service fees on pawn loans and merchandise sales of forfeited pawn collateral and used goods purchased directly from the general public. The Company accrues pawn service charge revenue on a constant-yield basis over the life of the pawn loan for all pawns that the Company deems collection to be probable based on historical pawn redemption statistics. If a pawn loan is not repaid prior to the expiration of the automatic extension period, if applicable, the property is forfeited to the Company and transferred to inventory at a value equal to the principal amount of the loan, exclusive of accrued interest.
The Company's short-term consumer loan revenue, which is approximately 17% of 2009 year-to-date consolidated revenue, is derived primarily from fees on short-term loans and credit services fees. The Company recognizes service fee income on short-term loans on a constant-yield basis over the life of the short-term loan, which is generally thirty-one days or less. The net defaults on short-term loans and changes in the short-term loan valuation reserve are charged to the short-term loan credit loss provision. The credit loss provision is based primarily upon historical credit loss experience, with consideration given to recent credit loss trends, delinquency rates, economic conditions and management's expectations of future credit losses. See additional discussion of the credit loss provision, and related allowances/accruals, in the section titled Results of Continuing Operations.
The Company offers a fee-based credit services organization program ("CSO program") to assist customers, primarily in Texas markets, in obtaining credit. Under the CSO program, the Company assists customers in applying for a short-term loan from an independent, non-bank, consumer lending company (the "Independent Lender") and issues the Independent Lender a letter of credit to guarantee the repayment of the loan. The Company recognizes credit services fees ratably over the life of the loan made by the Independent Lender. The loans made by the Independent Lender to credit services customers of the Company have terms of 7 to 180 days. The Company records a liability for the estimated fair value of the liability under the letters of credit. The credit loss provision is based primarily upon historical credit loss experience, with consideration given to recent credit loss trends, delinquency rates, economic conditions and management's expectations of future credit losses. See additional discussion of the credit loss provision, and related allowances/accruals, in the section titled Results of Continuing Operations.
OPERATIONS AND LOCATIONS
As of September 30, 2009, the Company had 553 locations in eleven U.S. states
and 19 states in Mexico, which represents a net store-count increase of 17% over
the past twelve months. A total of 15 new store locations were added during the
third quarter of 2009. The following table details store counts for the three
and nine months ended September 30, 2009:
Mexico
U.S. Locations Locations
------------------ ----------
Pawn/
Short-Term Short-Term
Pawn Loan Loan Total
Stores Stores Stores (1) Locations
------ ---------- ---------- ---------
Three Months Ended September 30, 2009
Total locations, beginning of period 97 143 299 539
New locations opened - - 15 15
Locations acquired - - - -
Discontinued short-term loan operations - (1) - (1)
------ ---------- ---------- ---------
Total locations, end of period 97 142 314 553
Nine Months Ended September 30, 2009
Total locations, beginning of period 94 162 269 525
New locations opened 1 3 45 49
Locations acquired 2 - - 2
Locations closed or consolidated - (1) - (1)
Discontinued short-term loan operations - (22) - (22)
------ ---------- ---------- ---------
Total locations, end of period 97 142 314 553
|
(1) At September 30, 2009, 271 stores in Mexico were large format pawnshops and 43 were CashYa! locations, which are small format pawnshop/short-term loan locations. The 45 store openings year-to-date in Mexico were the large format pawnshops.
For the three and nine months ended September 30, 2009, the Company's 50% owned joint venture, Cash & Go, Ltd., operated a total of 39 kiosks located inside convenience stores in the state of Texas, which are not included in the above table.
At September 30, 2009, the Company's credit services operations also include an internet distribution channel for customers in the states of Maryland and Texas.
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, related revenue and expenses, and disclosure of gain and loss contingencies at the date of the financial statements. Such estimates and assumptions are subject to a number of risks and uncertainties, which may cause actual results to differ materially from the Company's estimates. Both the significant accounting policies that management believes are the most critical to aid in fully understanding and evaluating the reported financial results and the effects of recent accounting pronouncements have been reported in the Company's 2008 Annual Report on Form 10-K.
The functional currency for the Company's Mexican subsidiaries is the Mexican peso. The assets and liabilities of these subsidiaries are translated into U.S. dollars at the exchange rate in effect at each balance sheet date, and the resulting adjustments are accumulated in other comprehensive income (loss) as a separate component of stockholders' equity. Revenue and expenses are translated at the monthly average exchange rates occurring during each year.
The Company's management reviews and analyzes certain operating results, in Mexico, on a constant currency basis because the Company believes this better represents the Company's underlying business trends. See additional discussion of constant currency operating results provided in the section titled "Non-GAAP Financial Information."
Stores included in the same-store revenue calculations are those stores that were opened prior to the beginning of the prior year comparative period and are still open. Also included are stores that were relocated during the year within a specified distance serving the same market, where there is not a significant change in store size and where there is not a significant overlap or gap in timing between the opening of the new store and the closing of the existing store. Non-retail sales of scrap jewelry are included in same-store revenue calculations.
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, advertising, property taxes, licenses, supplies and security. Administrative expenses consist of items relating to the operation of the corporate office, including the compensation and benefit costs of corporate management, area supervisors and other operations management personnel, collections operations and personnel, accounting and administrative costs, information technology costs, liability and casualty insurance, outside legal and accounting fees and stockholder-related expenses.
Recent Accounting Pronouncements
See discussion in Note 1 of Notes to Condensed Consolidated Financial Statements.
RESULTS OF CONTINUING OPERATIONS
Three Months Ended September 30, 2009, Compared To The Three Months Ended September 30, 2008
The following table details the components of revenue for the three months ended September 30, 2009, as compared to the three months ended September 30, 2008 (unaudited, 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. The Company's management reviews and analyzes business results in a constant currency because the Company believes this better represents the Company's underlying business trends.
Three Months Ended
September 30, Increase/(Decrease)
------------------------ Constant Currency
2009 2008 Increase/(Decrease) Basis
--------- ------ ---------------------------- -------------------------
Domestic revenue:
Pawn retail merchandise $ 15,792 $ 14,930 $ 862 6 % 6 %
sales
Pawn scrap jewelry sales 8,984 7,500 1,484 20 % 20 %
Pawn service fees 10,080 8,667 1,413 16 % 16 %
Short-term loan and credit 14,977 15,710 (733) (5)% (5)%
services fees
Other 714 830 (116) (14)% (14)%
--------- ------ ----------
50,547 47,637 2,910 6 % 6 %
--------- ------ ----------
Foreign revenue:
Pawn retail merchandise 20,590 16,134 4,456 28 % 51 %
sales
Pawn scrap jewelry sales 10,731 9,250 1,481 16 % 16 %
Pawn service fees 11,717 9,898 1,819 18 % 39 %
Short-term loan and credit 1,030 872 158 18 % 38 %
services fees
Other 31 2 29 - -
--------- ------ ----------
44,099 36,156 7,943 22 % 39 %
--------- ------ ----------
Total revenue:
Pawn retail merchandise 36,382 31,064 5,318 17 % 29 %
sales
Pawn scrap jewelry sales 19,715 16,750 2,965 18 % 18 %
Pawn service fees 21,797 18,565 3,232 17 % 29 %
Short-term loan and credit 16,007 16,582 (575) (3)% (2)%
services fees
Other 745 832 (87) (10)% (9)%
--------- ------ ----------
$ 94,646 $ 83,793 $ 10,853 13 % 20 %
|
The following table details pawn receivables, short-term loan receivables, and active CSO loans outstanding from an independent third-party lender as of September 30, 2009, as compared to September 30, 2008 (unaudited, 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.
Balance at Increase/
September 30, (Decrease)
----------------- Constant Currency
2009 2008 Increase/(Decrease) Basis
------ ------ ---------------------------- -----------------------
Domestic customer receivables and CSO loans
outstanding:
Pawn receivables $ 31,237 $ 26,761 $ 4,476 17 % 17 %
Short-term loan receivables, net of 4,476 4,678 (202) (4)% (4)%
allowance
CSO short-term loans held by independent
third-party (1) 11,868 12,311 (443) (4)% (4)%
------ ------ ----------
47,581 43,750 3,831 9 % 9 %
------ ------ ----------
Foreign customer receivables:
Pawn receivables 28,348 23,421 4,927 21 % 38 %
Short-term loan receivables, net of 936 860 76 9 % 24 %
allowance
------ ------ ----------
29,284 24,281 5,003 21 % 38 %
------ ------ ----------
Total customer receivables and CSO loans
outstanding:
Pawn receivables 59,585 50,182 9,403 19 % 27 %
Short-term loan receivables, net of 5,412 5,538 (126) (2)% -
allowance
CSO short-term loans held by independent
third-party (1) 11,868 12,311 (443) (4)% (4)%
------ ------ ----------
$ 76,865 $ 68,031 $ 8,834 13 % 19 %
|
(1) CSO short-term loans outstanding are comprised of the principal portion of active CSO loans outstanding from 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 loans.
Pawn & Short-Term Loan Operations
The average value of the Mexican peso to the U.S. dollar decreased from 10.3 to 1 in the third quarter of 2008 to 13.3 to 1 in the third quarter of 2009. As a result, the translated revenue results of the Mexican operations into U.S. dollars were diminished by this currency rate fluctuation, especially in the Company's interior (off-border) stores where the majority of transactions, excluding sales of scrap jewelry, are conducted in pesos. However, while the weakening of the Mexican peso negatively affected the translated dollar-value of peso-denominated revenue from Mexico stores located in the interior of the country, the Company benefited from the translation of peso-denominated expenses across all stores in Mexico, in the form of lower reported expenses on a U.S. dollar basis. As a result of this and other natural currency hedges maintained by the Company, the impact of the currency rate fluctuation on third quarter net income and earnings per share was minimal.
The overall increase in year-over-year revenue from the pawn and short-term loan operations was due to a combination of significant same-store pawn revenue growth and the opening of new pawn stores, partially offset by declining U.S. short-term loan revenue. Same-store revenue in the pawn stores (stores that were in operation during all of the third quarter of both 2008 and 2009) increased by 9%, in both the U.S. and Mexico, on a constant currency basis for the third quarter of 2009. The revenue growth from Mexico is reflective of continued maturation of stores in Mexico, where the Company has concentrated the majority of its store openings over the past several years. Revenue growth in the U.S. was primarily the result of strong demand for pawn loans and increased revenue from scrap jewelry sales. The Company believes that it will continue to experience overall growth in pawn revenue in the fourth quarter of 2009 as a result of customer demand and the opening and maturation of stores. Same-store sales declined by 8% in the Company's U.S. short-term/payday loan stores, as a result of increased competition and slowing customer demand. Revenue generated by the new pawn and short-term loan stores opened since July 1, 2008 increased by $11,717,000 on a constant currency basis, compared to the same quarter last year.
Combined pawn retail and scrap jewelry sales increased by 17% for the quarter, with Mexico stores recording 38% growth on a constant currency basis, and U.S. stores 10% growth. The 18% increase in pawn scrap jewelry sales during the third quarter of 2009 was primarily due to a 10% increase in the quantity of scrap jewelry sold and a 5% increase in the weighted-average selling price of scrap gold. The total volume of gold scrap jewelry sold in the third quarter of 2009 was 19,400 ounces at an average cost of $684 per ounce and an average selling price of $972 per ounce.
Pawn receivables grew by 17% in the U.S., which has a mature store base, while in Mexico, pawn receivables grew by 38% on a constant currency basis. The 17% increase in pawn service charge revenue (29% on a constant currency basis) was consistent with the increase in pawn loan activity, which reflected increased consumer demand in all markets and continued expansion in Mexico. Service fees from short-term loans and credit services decreased 3% compared to the third quarter of 2008, which was reflective of a decline in outstanding U.S. short-term loans and CSO loans. The Company attributes the decline to weakened consumer demand for short-term/payday loan products and increased competition.
The gross profit margin on pawn merchandise sales was 39% during the third quarter of 2009, compared to 42% during the third quarter of 2008. The retail pawn merchandise margin, which excludes scrap jewelry sales, was 42% during the third quarter of 2009, compared to 45% in the third quarter of 2008. Gross margin on sales of scrap jewelry was 33% during the third quarter of 2009, compared to 36% in the third quarter of 2008. The decrease in retail margins was reflective of a general weakness in the consumer retailing environment, while the change in the scrap margin was reflective of relatively flat selling prices and increased costs. Pawn inventories increased over the prior year by 14%, which was reflective of growth in pawn receivable balances, especially in Mexico. At September 30, 2009, the Company's pawn inventories were comprised of 43% gold jewelry, 37% electronics, 8% tools and 12% other.
The Company's short-term loan and credit services loss provision was 30% of short-term loan and credit services fee revenue during the third quarter of 2009 and the third quarter of 2008. During the third quarter of 2009, the Company did not sell bad debt portfolios generated from short-term loan and credit services guarantees. The Company sold bad debt portfolios in the prior-year period for $225,000. The Company's loss reserve on short-term loan receivables increased to $286,000, or 5.0% of the gross receivable balance at September 30, 2009, compared to $283,000, or 4.9% of the gross receivable balance at September 30, 2008. The estimated fair value of liabilities under the CSO letters of credit, net of anticipated recoveries from customers, was $688,000, or 5.5% of the gross receivable balance at September 30, 2009, compared to $685,000, or 5.3% of the gross receivable balance at September 30, 2008.
Pawn and short-term loan store operating expenses of $26,776,000 during the third quarter of 2009 were flat compared to $26,794,000 during the third quarter of 2008, primarily as a result of closing short-term loan stores, and the decline in the value of the Mexican peso since July 1, 2008. Operating expenses increased approximately 14% on a constant currency basis.
The net store profit contribution from the pawn and short-term loan operations for the current-year quarter was $26,565,000, which equates to a store-level operating margin of 28%, compared to 26% in 2008.
Administrative Expenses, Interest, Taxes & Income
Administrative expenses increased 18% to $9,059,000 during the third quarter of 2009 compared to $7,647,000 during the third quarter of 2008, which reflected an 18% increase in the weighted-average store count and increased general management and supervisory compensation expense related to increased revenue and profitability.
Interest expense increased to $174,000 in the third quarter of 2009, compared to $82,000 for the third quarter of 2008.
For the third quarter of 2009 and 2008, the Company's effective federal income tax rates of 37.1% and 36.8%, respectively, differed from the federal statutory tax rate of approximately 35%, primarily as a result of state and foreign income taxes.
Income from continuing operations increased by 22% to $10,610,000 during the third quarter of 2009 compared to $8,729,000 during the third quarter of 2008. Including the results from the discontinued operations of Auto Master and the Washington, D.C., Michigan, and Texas short-term loan stores, net income was $11,974,000 during the third quarter of 2009, compared to a net loss of $46,407,000 during the third quarter of 2008.
Nine Months Ended September 30, 2009, Compared To The Nine Months Ended September 30, 2008
The following table details the components of revenue for the nine months ended September 30, 2009, as compared to the nine months ended September 30, 2008 (unaudited, 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. The Company's management reviews and analyzes business results in a constant currency because the Company believes this better represents the Company's underlying business trends.
Nine Months Ended
September 30, Increase/(Decrease)
--------------------- Constant Currency
2009 2008 Increase/(Decrease) Basis
-------- ------- --------------------------- -------------------------
Domestic revenue:
Pawn retail merchandise $ 47,920 $ 46,569 $ 1,351 3 % 3 %
sales
Pawn scrap jewelry sales 22,321 19,969 2,352 12 % 12 %
Pawn service fees 27,253 25,130 2,123 8 % 8 %
Short-term loan and credit 41,801 45,505 (3,704) (8)% (8)%
services fees
Other 2,364 2,737 (373) (14)% (14)%
-------- ------- -----------
141,659 139,910 1,749 1 % 1 %
-------- ------- -----------
Foreign revenue:
Pawn retail merchandise 56,230 43,229 13,001 30 % 53 %
sales
Pawn scrap jewelry sales 29,727 27,605 2,122 8 % 8 %
Pawn service fees 31,000 27,007 3,993 15 % 36 %
Short-term loan and credit 2,717 1,979 738 37 % 61 %
services fees
Other 85 2 83 - -
-------- ------- -----------
119,759 99,822 19,937 20 % 36 %
-------- ------- -----------
Total revenue:
Pawn retail merchandise 104,150 89,798 14,352 16 % 27 %
sales
Pawn scrap jewelry sales 52,048 47,574 4,474 9 % 9 %
Pawn service fees 58,253 52,137 6,116 12 % 23 %
Short-term loan and credit 44,518 47,484 (2,966) (6)% (5)%
services fees
Other 2,449 2,739 (290) (11)% (10)%
-------- ------- -----------
$ 261,418 $ 239,732 $ 21,686 9 % 16 %
|
Pawn & Short-Term Loan Operations
The average value of the Mexican peso to the U.S. dollar decreased from 10.5 to 1 for the nine months ended September 30, 2008 to 13.7 to 1 for the nine months ended September 30, 2009. As a result, the translated revenue results of the Mexican operations into U.S. dollars were diminished by this currency rate fluctuation, especially in the Company's interior (off-border) stores where the majority of transactions, excluding sales of scrap jewelry, are conducted in pesos. However, while the weakening of the Mexican peso negatively affected the translated dollar-value of peso-denominated revenue from Mexico stores located in the interior of the country, the Company benefited from the translation of peso-denominated expenses across all stores in Mexico, in the form of lower reported expenses on a U.S. dollar basis. As a result of this and other natural currency hedges maintained by the Company, the impact of the currency rate fluctuation on year-to-date net income and earnings per share was minimal.
The overall increase in year-over-year revenue from the pawn and short-term loan operations was due to a combination of same-store pawn revenue growth and the opening of new pawn stores, partially offset by declining U.S. short-term loan revenue. Same-store revenue in the pawn stores (stores that were in operation during all of the first nine months of both 2008 and 2009) increased by 6% on a constant currency basis for the nine months ended September 30, 2009. In Mexico, same-store sales increased by 8% on a constant currency basis, while same-store sales in the Company's U.S. pawn stores, which have a mature store base, increased by 4%. The revenue growth from Mexico is reflective of continued maturation of stores in Mexico, where the Company has concentrated the majority of its store openings over the past several years. Revenue growth in the U.S. was primarily the result of strong demand for pawn loans and increased revenue from scrap jewelry sales. The Company believes that it will continue to experience overall growth in pawn revenue in the fourth quarter of 2009 as a result of customer demand and the opening and maturation of stores. Same-store sales declined by 14% in the Company's U.S. short-term/payday loan stores, as a result of increased competition and slowing customer demand. Revenue generated by the new pawn and short-term loan stores opened since January 1, 2008 . . .
|
|