FCFS 09.30.2013 10-Q
 
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q
[ X ]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2013
OR
[    ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ___________

Commission file number 0-19133
FIRST CASH FINANCIAL SERVICES, INC.
(Exact name of registrant as specified in its charter)
Delaware
75-2237318
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
690 East Lamar Blvd., Suite 400
76011
Arlington, Texas
(Zip Code)
(Address of principal executive offices)
 
(817) 460-3947
(Registrant’s telephone number, including area code)
NONE
(Former name, former address and former fiscal year, if changed since last report)
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.     xYes   o No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     xYes   o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
x  Large accelerated filer
o  Accelerated filer
o  Non-accelerated filer (Do not check if a smaller reporting company)
o  Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     oYes   x No
As of October 21, 2013, there were 28,904,475 shares of common stock outstanding.


 
 

FIRST CASH FINANCIAL SERVICES, INC.
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2013

INDEX

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


2

 
 

CAUTIONARY STATEMENT REGARDING RISKS AND UNCERTAINTIES THAT MAY AFFECT FUTURE RESULTS

Forward-Looking Information

This quarterly report 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 quarterly report 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, expected benefits and related expenses from tax restructuring activities, 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 quarterly report. Such factors are difficult to predict and many are beyond the control of the Company and may include, without limitation, the following:
changes in regional, national or international economic conditions, including inflation rates, unemployment rates, energy prices, etc.;
changes in consumer demand, including purchasing, borrowing and repayment behaviors;
changes in pawn forfeiture rates and credit loss provisions;
changes in the market value of pawn collateral and merchandise inventories, including gold prices and the value of consumer electronics;
changes or increases in competition;
the ability to locate, open and staff new stores and successfully integrate acquisitions;
the availability or access to sources of used merchandise inventory;
changes in credit markets, interest rates and the ability to establish, renew and/or extend the Company’s debt financing;
the ability to maintain banking relationships for treasury services;
the ability to hire and retain key management personnel;
new federal, state or local legislative initiatives or governmental regulations (or changes to existing laws and regulations) affecting pawn businesses, consumer loan businesses and credit services organizations (in both the United States and Mexico);
risks and uncertainties related to foreign operations in Mexico;
changes in import/export regulations and tariffs or duties;
changes in anti-money laundering and gun control regulations;
unforeseen litigation;
changes in tax rates or policies in the U.S. and Mexico;
changes in foreign currency exchange rates;
inclement weather, including natural disasters, and public health issues;
security breaches, cyber attacks or fraudulent activity;
a prolonged interruption in the Company’s operations of its facilities, systems, and business functions, including its information technology and other business systems;
the implementation of new, or changes in, the interpretation of existing accounting principles or financial reporting requirements;
future business decisions; and

3

 
 

other uncertainties.

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 quarterly report speak only as of the date of this quarterly report, 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.


4

 
 

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FIRST CASH FINANCIAL SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
 
 
 
 
 
 
 
September 30,
 
December 31,
 
 
2013
 
2012
 
2012
ASSETS
 
 
 
 
 
 
Cash and cash equivalents
 
$
30,539

 
$
25,744

 
$
50,285

Pawn loan fees and service charges receivable
 
17,835

 
15,888

 
15,367

Pawn loans
 
121,187

 
107,714

 
103,181

Consumer loans, net
 
1,375

 
2,027

 
1,879

Inventories
 
82,569

 
65,692

 
65,345

Prepaid expenses and other current assets
 
4,618

 
11,363

 
4,225

Deferred tax assets
 
3,348

 
1,078

 
1,148

Total current assets
 
261,471

 
229,506

 
241,430

 
 
 
 
 
 
 
Property and equipment, net
 
102,029

 
89,621

 
93,304

Goodwill, net
 
230,520

 
162,675

 
166,429

Other non-current assets
 
8,634

 
6,418

 
6,529

Total assets
 
$
602,654

 
$
488,220

 
$
507,692

 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
 
 
Current portion of notes payable
 
$
3,297

 
$
3,184

 
$
3,212

Accounts payable and accrued liabilities
 
35,446

 
35,707

 
27,938

Income taxes payable
 
9,718

 

 

Total current liabilities
 
48,461

 
38,891

 
31,150

 
 
 
 
 
 
 
Revolving unsecured credit facility
 
152,500

 
111,000

 
102,500

Notes payable, net of current portion
 
5,868

 
9,165

 
8,351

Deferred income tax liabilities
 
8,313

 
12,278

 
13,275

Total liabilities
 
215,142

 
171,334

 
155,276

 
 
 
 
 
 
 
Stockholders' equity:
 
 
 
 
 
 
Preferred stock
 

 

 

Common stock
 
393

 
383

 
388

Additional paid-in capital
 
176,018

 
149,606

 
159,081

Retained earnings
 
472,950

 
386,273

 
413,882

Accumulated other comprehensive income (loss) from
 
 
 
 
 
 
cumulative foreign currency translation adjustments
 
(9,162
)
 
(5,381
)
 
(6,940
)
Common stock held in treasury, at cost
 
(252,687
)
 
(213,995
)
 
(213,995
)
Total stockholders' equity
 
387,512

 
316,886

 
352,416

Total liabilities and stockholders' equity
 
$
602,654

 
$
488,220

 
$
507,692

 
 
 
 
 
 
 
The accompanying notes are an integral part
of these condensed consolidated financial statements.

5

 
 

FIRST CASH FINANCIAL SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands, except per share amounts)
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30,
 
 
2013
 
2012
 
2013
 
2012
Revenue:
 
 
 
 
 
 
 
 
Retail merchandise sales
 
$
89,772

 
$
69,938

 
$
255,442

 
$
194,843

Pawn loan fees
 
47,455

 
39,768

 
133,658

 
108,612

Consumer loan and credit services fees
 
11,726

 
13,921

 
35,286

 
38,890

Wholesale scrap jewelry revenue
 
25,234

 
26,068

 
53,775

 
74,361

Total revenue
 
174,187

 
149,695

 
478,161

 
416,706

 
 
 
 
 
 
 
 
 
Cost of revenue:
 
 
 
 
 
 
 
 
Cost of retail merchandise sold
 
53,546

 
40,187

 
152,677

 
112,895

Consumer loan and credit services loss provision
 
3,694

 
4,429

 
8,601

 
9,667

Cost of wholesale scrap jewelry sold
 
22,394

 
19,141

 
45,498

 
55,317

Total cost of revenue
 
79,634

 
63,757

 
206,776

 
177,879

 
 
 
 
 
 
 
 
 
Net revenue
 
94,553

 
85,938

 
271,385

 
238,827

 
 
 
 
 
 
 
 
 
Expenses and other income:
 
 
 
 
 
 
 
 
Store operating expenses
 
47,302

 
39,889

 
134,778

 
111,003

Administrative expenses
 
12,738

 
12,330

 
38,513

 
36,248

Depreciation and amortization
 
3,988

 
3,328

 
11,346

 
9,467

Interest expense
 
1,122

 
444

 
2,474

 
697

Interest income
 
(69
)
 
(30
)
 
(267
)
 
(147
)
Total expenses and other income
 
65,081

 
55,961

 
186,844

 
157,268

 
 
 
 
 
 
 
 
 
Income from continuing operations before income taxes
 
29,472

 
29,977

 
84,541

 
81,559

 
 
 
 
 
 
 
 
 
Provision for income taxes
 
6,331

 
10,341

 
25,473

 
28,138

 
 
 
 
 
 
 
 
 
Income from continuing operations
 
23,141

 
19,636

 
59,068

 
53,421

 
 
 
 
 
 
 
 
 
Loss from discontinued operations, net of tax
 

 
(747
)
 

 
(671
)
Net income
 
$
23,141

 
$
18,889

 
$
59,068

 
$
52,750

 
 
 
 
 
 
 
 
 
Basic income per share:
 
 
 
 
 
 
 
 
Income from continuing operations
 
$
0.80

 
$
0.69

 
$
2.03

 
$
1.85

Loss from discontinued operations
 

 
(0.03
)
 

 
(0.03
)
Net income per basic share
 
$
0.80

 
$
0.66

 
$
2.03

 
$
1.82

 
 
 
 
 
 
 
 
 
Diluted income per share:
 
 
 
 
 
 
 
 
Income from continuing operations
 
$
0.79

 
$
0.67

 
$
1.99

 
$
1.80

Loss from discontinued operations
 

 
(0.03
)
 

 
(0.03
)
Net income per diluted share
 
$
0.79

 
$
0.64

 
$
1.99

 
$
1.77

 
 
 
 
 
 
 
 
 
The accompanying notes are an integral part
of these condensed consolidated financial statements.

6

 
 

FIRST CASH FINANCIAL SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited, in thousands)
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30,
 
 
2013
 
2012
 
2013
 
2012
Net income
 
$
23,141

 
$
18,889

 
$
59,068

 
$
52,750

Other comprehensive income (loss):
 
 
 
 
 
 
 
 
Currency translation adjustment, gross
 
(1,996
)
 
9,782

 
(2,632
)
 
12,339

Tax (expense) benefit
 
102

 
(3,375
)
 
410

 
(4,257
)
Comprehensive income
 
$
21,247

 
$
25,296

 
$
56,846

 
$
60,832

 
 
 
 
 
 
 
 
 
 The accompanying notes are an integral part
of these condensed consolidated financial statements.

FIRST CASH FINANCIAL SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(unaudited, in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Preferred
Stock
 
Common
Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accum-
ulated
Other
Compre-
hensive
Income
(Loss)
 
Common Stock
Held in Treasury
 
Total
Stock-
holders'
Equity
 
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
 
 
 
Shares
 
Amount
 
 
Balance at 12/31/2012
 

 
$

 
38,796

 
$
388

 
$
159,081

 
$
413,882

 
$
(6,940
)
 
9,700

 
$
(213,995
)
 
$
352,416

Shares issued under share-based com-pensation plan
 

 

 
4

 

 

 

 

 

 

 

Exercise of stock options
 

 

 
533

 
5

 
8,437

 

 

 

 

 
8,442

Income tax benefit from exercise of stock options
 

 

 

 

 
7,232

 

 

 

 

 
7,232

Share-based compensation expense
 

 

 

 

 
1,268

 

 

 

 

 
1,268

Net income
 

 

 

 

 

 
59,068

 

 

 

 
59,068

Currency translation adjustment, net of tax
 

 

 

 

 

 

 
(2,222
)
 

 

 
(2,222
)
Repurchases of treasury stock
 

 

 

 

 

 

 

 
729

 
(38,692
)
 
(38,692
)
Balance at 9/30/2013
 

 
$

 
39,333

 
$
393

 
$
176,018

 
$
472,950

 
$
(9,162
)
 
10,429

 
$
(252,687
)
 
$
387,512

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The accompanying notes are an integral part
of these condensed consolidated financial statements.




7

 
 

FIRST CASH FINANCIAL SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
CONTINUED
(unaudited, in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Preferred
Stock
 
Common
Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accum-
ulated
Other
Compre-
hensive
Income
(Loss)
 
Common Stock
Held in Treasury
 
Total
Stock-
holders'
Equity
 
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
 
 
 
Shares
 
Amount
 
 
Balance at 12/31/2011
 

 
$

 
38,291

 
$
383

 
$
147,649

 
$
333,523

 
$
(13,463
)
 
8,200

 
$
(152,720
)
 
$
315,372

Shares issued under share-based com-pensation plan
 

 

 
3

 

 

 

 

 

 

 

Exercise of stock options
 

 

 
47

 

 
506

 

 

 

 

 
506

Income tax benefit from exercise of stock options
 

 

 

 

 
476

 

 

 

 

 
476

Share-based compensation expense
 

 

 

 

 
975

 

 

 

 

 
975

Net income
 

 

 

 

 

 
52,750

 

 

 

 
52,750

Currency translation adjustment, net of tax
 

 

 

 

 

 

 
8,082

 

 

 
8,082

Repurchases of treasury stock
 

 

 

 

 

 

 

 
1,500

 
(61,275
)
 
(61,275
)
Balance at 9/30/2012
 

 
$

 
38,341

 
$
383

 
$
149,606

 
$
386,273

 
$
(5,381
)
 
9,700

 
$
(213,995
)
 
$
316,886

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The accompanying notes are an integral part
of these condensed consolidated financial statements.

8

 
 

FIRST CASH FINANCIAL SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
 
 
Nine Months Ended
 
 
September 30,
 
 
2013
 
2012
Cash flow from operating activities:
 
 
 
 
Net income
 
$
59,068

 
$
52,750

Adjustments to reconcile net income to net cash flow provided by operating activities:
 
 
 
 
Non-cash portion of credit loss provision
 
808

 
536

Share-based compensation expense
 
1,268

 
975

Depreciation and amortization expense
 
11,346

 
9,486

Deferred income taxes
 
(6,947
)
 
1,702

Loss on disposition of consumer loan stores
 

 
633

Changes in operating assets and liabilities, net of business combinations:
 
 
 
 
Pawn fees and service charges receivable
 
(2,623
)
 
(3,642
)
Merchandise inventories
 
(4,047
)
 
(4,418
)
Prepaid expenses and other assets
 
35

 
(671
)
Accounts payable and accrued expenses
 
5,590

 
6,642

Income taxes payable, current
 
9,521

 
(9,517
)
Net cash flow provided by operating activities
 
74,019

 
54,476

Cash flow from investing activities:
 
 
 
 
Loan receivables, net of cash repayments
 
(16,640
)
 
(25,705
)
Purchases of property and equipment
 
(17,945
)
 
(16,240
)
Acquisitions of pawn stores, net of cash acquired
 
(84,353
)
 
(108,027
)
Net cash flow used in investing activities
 
(118,938
)
 
(149,972
)
Cash flow from financing activities:
 
 
 
 
Borrowings from revolving credit facility
 
121,900

 
183,100

Repayments of revolving credit facility
 
(71,900
)
 
(72,100
)
Repayments of notes payable
 
(2,398
)
 
(1,051
)
Purchases of treasury stock
 
(38,692
)
 
(61,275
)
Proceeds from exercise of share-based compensation awards
 
8,442

 
506

Income tax benefit from exercise of stock options and warrants
 
7,232

 
476

Net cash flow provided by financing activities
 
24,584

 
49,656

Effect of exchange rates on cash
 
589

 
1,288

Change in cash and cash equivalents
 
(19,746
)
 
(44,552
)
Cash and cash equivalents at beginning of the period
 
50,285

 
70,296

Cash and cash equivalents at end of the period
 
$
30,539

 
$
25,744

 
 
 
 
 
The accompanying notes are an integral part
of these condensed consolidated financial statements.

9

 
 

FIRST CASH FINANCIAL SERVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Note 1 - Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements, including the notes thereto, include the accounts of First Cash Financial Services, Inc. (the “Company”), and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.

These unaudited consolidated financial statements are condensed and do not include all disclosures and footnotes required by generally accepted accounting principles in the United States of America for complete financial statements. These interim period financial statements should be read in conjunction with the Company's consolidated financial statements, which are included in the Company's annual report for the year ended December 31, 2012, on Form 10-K filed with the Securities and Exchange Commission on February 22, 2013. The condensed consolidated financial statements as of September 30, 2013, and for the three and nine month periods ended September 30, 2013, and 2012 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 flow for such interim periods. Operating results for the periods ended September 30, 2013, are not necessarily indicative of the results that may be expected for the full fiscal year.

The Company manages its pawn and consumer loan operations under three operating segments: U.S. pawn operations, U.S. consumer loan operations and Mexico operations. The three operating segments have been aggregated into one reportable segment because they have similar economic characteristics and similar long-term financial performance metrics. Additionally, all three segments offer similar and overlapping products and services to a similar customer demographic, operate in similar regulatory environments, and are supported by a single, centralized administrative support platform.

The functional currency for the Company’s Mexican subsidiaries is the Mexican peso. Accordingly, 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 average exchange rates occurring during the three-month and year-to-date periods.

Certain amounts in prior year comparative presentations have been reclassified in order to conform to the 2013 presentation.

Recent Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board issued ASU No. 2013-02, “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income” (“ASU 2013-02”). The amendments in ASU 2013-02 require an entity to disclose the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required under GAAP to be reclassified in its entirety to net income. For other amounts that are not required under GAAP to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures required under GAAP that provide additional detail about those amounts. The amendments of ASU 2013-02 are effective prospectively for reporting periods beginning after December 15, 2012. The adoption of ASU 2013-02 did not have a material effect on the Company’s financial position, results of operations or financial statement disclosures.


10

 
 

Note 2 - Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share (unaudited, in thousands, except per share data):
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30,
 
 
2013
 
2012
 
2013
 
2012
Numerator:
 
 
 
 
 
 
 
 
Income from continuing operations for calculating basic and diluted earnings per share
 
$
23,141

 
$
19,636

 
$
59,068

 
$
53,421

Loss from discontinued operations
 

 
(747
)
 

 
(671
)
Net income for calculating basic and diluted earnings per share
 
$
23,141

 
$
18,889

 
$
59,068

 
$
52,750

 
 
 
 
 
 
 
 
 
Denominator:
 
 
 
 
 
 
 
 
Weighted-average common shares for calculating basic earnings per share
 
28,904

 
28,616

 
29,128

 
28,951

Effect of dilutive securities:
 
 
 
 
 
 
 
 
Stock options, warrants and nonvested awards
 
449

 
814

 
509

 
778

Weighted-average common shares for calculating diluted earnings per share
 
29,353

 
29,430

 
29,637

 
29,729

 
 
 
 
 
 
 
 
 
Basic earnings per share:
 
 
 
 
 
 
 
 
Income from continuing operations
 
$
0.80

 
$
0.69

 
$
2.03

 
$
1.85

Loss from discontinued operations
 

 
(0.03
)
 

 
(0.03
)
Net income per basic share
 
$
0.80

 
$
0.66

 
$
2.03

 
$
1.82

 
 
 
 
 
 
 
 
 
Diluted earnings per share:
 
 
 
 
 
 
 
 
Income from continuing operations
 
$
0.79

 
$
0.67

 
$
1.99

 
$
1.80

Loss from discontinued operations
 

 
(0.03
)
 

 
(0.03
)
Net income per diluted share
 
$
0.79

 
$
0.64

 
$
1.99

 
$
1.77


Note 3 - Acquisitions

Consistent with the Company’s strategy to continue its expansion of pawn stores in selected markets, in September 2013, the Company acquired from Baja Unlimited, LLC and its subsidiaries, the operating entity owning the pawn loans, inventory, layaways and other operating assets and liabilities of eight large format pawn stores located in the Cabo/La Paz markets in Baja California Sur, Mexico. The purchase price for the all-cash transaction was $12,350,000, net of cash acquired, plus a nominal residual payment to be determined based on certain post-closing adjustments. The acquisition has been accounted for using the purchase method of accounting for both financial reporting and tax purposes. Accordingly, the purchase price was allocated to assets and liabilities acquired based upon their estimated fair market values at the date of acquisition, which were comparable for financial and tax purposes. The excess purchase price over the estimated fair market value of the net assets acquired has been recorded as goodwill of approximately $9,955,000, which is not deductible for foreign income tax purposes. The goodwill arising from the acquisition consists largely of the synergies and economies of scale expected from combining the operations of Baja Unlimited, LLC. The estimated fair values of the assets acquired are preliminary, as the Company is gathering information to finalize the valuation of these assets by year end. The assets, liabilities and results of operations of the locations are included in the Company’s consolidated results as of the acquisition date, September 30, 2013.

Consistent with the Company’s strategy to continue its expansion of pawn stores in selected markets, in June 2013, the Company acquired from O'Pak Credit LP, Pro Pawn LP and Milar Credit LP (collectively "Valu + Pawn") the pawn loans, inventory, layaways and other operating assets and liabilities of 19 large format pawn stores located in Texas. The purchase price for the transaction was $69,967,000, net of cash acquired, and was composed of $68,967,000 in cash paid at closing and an additional $1,000,000 payable to the sellers in June 2014. The acquisition has been accounted for using the purchase method of accounting for both financial reporting and tax purposes. Accordingly, the purchase price was allocated to assets and liabilities acquired based upon

11

 
 

their estimated fair market values at the date of acquisition, which were comparable for financial and tax purposes. The excess purchase price over the estimated fair market value of the net assets acquired has been recorded as goodwill of approximately $52,334,000, which is deductible for U.S. income tax purposes. The goodwill arising from the acquisition consists largely of the synergies and economies of scale expected from combining the operations of Valu + Pawn. For tax purposes, the goodwill and intangible assets are being amortized over the statutory period of 15 years. The estimated fair values of the assets acquired are preliminary, as the Company is gathering information to finalize the valuation of these assets by year end. The assets, liabilities and results of operations of the locations are included in the Company’s consolidated results as of the acquisition date, June 25, 2013.

Additionally, during the nine months ended September 30, 2013, three pawn stores located in three U.S. states were acquired in three separate acquisitions for an aggregate purchase price of $2,750,000, net of cash acquired, and was composed of $2,677,000 in cash and payables to the sellers of $73,000. These acquisitions resulted in additional goodwill of approximately $1,685,000.

The preliminary allocations of the purchase prices for the Company's acquisitions during the nine months ended September 30, 2013 (the "2013 acquisitions") are as follows (in thousands):
 
Valu + Pawn
 
Baja Unlimited, LLC
 
Other
 
Total
Pawn loans
$
9,361

 
$
824

 
$
353

 
$
10,538

Inventory
5,024

 
583

 
532

 
6,139

Other current assets
1,071

 
34

 
43

 
1,148

Property and equipment
1,002

 
939

 
55

 
1,996

Goodwill
52,334

 
9,955

 
1,685

 
63,974

Intangible assets
2,190

 
300

 
130

 
2,620

Other non-current assets
73

 
6

 
4

 
83

Current liabilities
(1,088
)
 
(291
)
 
(52
)
 
(1,431
)
Purchase price
$
69,967

 
$
12,350

 
$
2,750

 
$
85,067


During the nine months ended September 30, 2013, revenue from the 2013 acquisitions since the acquisition dates was $12,966,000. The combined transaction and non-recurring integration costs of the 2013 acquisitions recorded during the nine months ended September 30, 2013, were approximately $1,615,000. During the nine months ended September 30, 2013, the net earnings from the 2013 acquisitions since the acquisition dates (including acquisition and integration costs) were $774,000.

The following unaudited pro forma financial information reflects the consolidated results of operations of the Company as if all the 2013 acquisitions had occurred on January 1, 2012. The unaudited pro forma financial information has been prepared for informational purposes only and does not purport to be indicative of what would have resulted had the acquisitions occurred on the date indicated or what may result in the future (in thousands, except per share data):
 
 
Nine Months Ended
 
Nine Months Ended
 
 
September 30, 2013
 
September 30, 2012
 
 
As Reported
 
Pro Forma
 
As Reported
 
Pro Forma
Total revenue from continuing operations
 
$
478,161

 
$
506,920

 
$
416,706

 
$
456,909

Income from continuing operations
 
59,068

 
62,506

 
53,421

 
58,227

Net income
 
59,068

 
62,506

 
52,750

 
57,556

Income from continuing operations per share:
 
 
 
 
 
 
 
 
Basic
 
$
2.03

 
$
2.15

 
$
1.85

 
$
2.01

Diluted
 
1.99

 
2.11

 
1.80

 
1.96

Net income per share:
 
 
 
 
 
 
 
 
Basic
 
$
2.03

 
$
2.15

 
$
1.82

 
$
1.99

Diluted
 
1.99

 
2.11

 
1.77

 
1.94



12

 
 

Note 4 - Guarantees

The Company offers a fee-based credit services organization program (“CSO Program”) to assist consumers in Texas markets in obtaining extensions of credit. The Company’s CSO Program in Texas is licensed as a Credit Access Business (“CAB”) under Texas Finance Code Chapter 393 and regulated by the Texas Office of the Consumer Credit Commissioner. Under the CSO Program, the Company assists customers in applying for a short-term extension of credit 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 extension of credit. The extensions of credit made by the Independent Lender to credit services customers of the Company range in amount from $50 to $1,500, have terms of 7 to 180 days and bear interest at a rate of 10% on an annualized basis. The Independent Lender is considered a variable interest entity of the Company. The Company does not have any ownership interest in the Independent Lender, does not exercise control over it and is not the primary beneficiary and, therefore, does not consolidate the Independent Lender’s results with its results.

The letters of credit under the CSO Program constitute a guarantee for which the Company is required to recognize, at the inception of the guarantee, a liability for the fair value of the obligation undertaken by issuing the letters of credit. The Independent Lender may present the letter of credit to the Company for payment if the customer fails to repay the full amount of the extension of credit and accrued interest after the due date of the extension of credit. Each letter of credit expires approximately 30 days after the due date of the extension of credit. The Company’s maximum loss exposure under all of the outstanding letters of credit issued on behalf of its customers to the Independent Lender as of September 30, 2013, was $14,821,000 compared to $16,191,000 at September 30, 2012. According to the letter of credit, if the borrower defaults on the extension of credit, the Company will pay the Independent Lender the principal, accrued interest, insufficient funds fee, and late fees, all of which the Company records as a component of its credit loss provision. The Company is entitled to seek recovery, directly from its customers, of the amounts it pays the Independent Lender in performing under the letters of credit. The Company records the estimated fair value of the liability under the letters of credit, which was $619,000 at September 30, 2013, in accrued liabilities. The loss provision associated with the CSO Program is based primarily upon historical loss experience, with consideration given to recent loss trends, delinquency rates, economic conditions and management’s expectations of future credit losses. See additional discussion of the loss provision and related allowances and accruals in the section titled “Results of Continuing Operations.”

Note 5 - Revolving Credit Facility

On September 30, 2013, the Company entered into an agreement to amend its existing revolving credit facility with five commercial lenders (as amended, the “Unsecured Credit Facility”). The amount of the Unsecured Credit Facility was increased from $175,000,000 to $205,000,000 and the amount of permitted acquisition investments over the previous twelve-month period was increased from 10% to 20% of the Company’s consolidated tangible net worth and included an additional allowance for permitted acquisition investments of up to $60,000,000 during the period beginning September 30, 2013, and ending December 31, 2013. The Unsecured Credit Facility continues to bear interest at the prevailing 30-day LIBOR rate plus a fixed spread of 2.0% and matures in February 2015. The interest rate on amounts outstanding under the Unsecured Credit Facility was 2.19% at September 30, 2013. At September 30, 2013, the Company had $152,500,000 outstanding under the Unsecured Credit Facility and $52,500,000 available for borrowings. During the nine months ended September 30, 2013, the Company received net proceeds of $50,000,000 from the Unsecured Credit Facility.

Note 6 - Income Taxes

In July 2013, the Company terminated an election to include foreign subsidiaries in its consolidated U.S. federal income tax return and it is the Company's intent to indefinitely reinvest the earnings of these subsidiaries outside the U.S. Under current U.S. income tax law, the undistributed earnings of the foreign subsidiaries will no longer be subject to U.S. federal income tax beginning in July 2013. The Company recognized an estimated non-recurring net income tax benefit of approximately $3,273,000 in the third quarter of 2013 related primarily to changes in deferred tax assets and liabilities, net of certain non-recurring U.S. tax liabilities associated with the terminated election.


13

 
 

The principal current and non-current deferred tax assets and liabilities consist of the following at September 30, 2013, and December 31, 2012 (in thousands):
 
September 30, 2013
 
December 31, 2012
Deferred tax assets:
 
 
 
 
 
 
 
Depreciation
 
$
3,953

 
 
 
$

 
Cumulative foreign translation adjustment
 
3,857

 
 
 
3,447

 
Deferred cost of goods sold deduction
 
1,233

 
 
 

 
Interest accrual on forfeited pawn loans
 
1,029

 
 
 
1,365

 
Other
 
2,980

 
 
 
495

 
Total deferred tax assets
 
13,052

 
 
 
5,307

 
 
 
 
 
 
 
 
 
Deferred tax liabilities:
 
 
 
 
 
 
 
Intangible asset amortization
 
16,593

 
 
 
15,823

 
Share-based compensation
 
932

 
 
 
1,101

 
Other
 
492

 
 
 
510

 
Total deferred tax liabilities
 
18,017

 
 
 
17,434

 
 
 
 
 
 
 
 
 
Net deferred tax liabilities
 
$
(4,965
)
 
 
 
$
(12,127
)
 
 
 
 
 
 
 
 
 
The net deferred tax liability is classified as follows:
 
 
 
 
 
 
 
Current deferred tax assets
 
$
3,348

 
 
 
$
1,148

 
Non-current deferred income tax liabilities
 
(8,313
)
 
 
 
(13,275
)
 
Net deferred tax liabilities
 
$
(4,965
)
 
 
 
$
(12,127
)
 

Note 7 - Discontinued Operations     

The Company’s strategy has been to grow its pawn operations while reducing regulatory exposure from other consumer lending products, which include certain consumer loan and credit services products offered in the United States. In September 2012, the Company closed seven of its consumer loan stores located in the Texas cities of Austin and Dallas due in part to city ordinances enacted during 2012 in these cities, which significantly restricted the Company's ability to provide credit services products. The Company recorded a loss on disposal of $633,000, net of tax, or $0.03 per share, from these stores during the nine months ended September 30, 2012. The after-tax operating results from operations for these Texas stores were immaterial during the nine months ended September 30, 2012.

All revenue, expenses and income reported in these financial statements have been adjusted to reflect reclassification of all discontinued operations. The carrying amounts of the assets and liabilities for discontinued operations at September 30, 2012, were immaterial.


14

 
 

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of financial condition, results of operations, liquidity and capital resources of First Cash Financial Services, Inc. and its wholly-owned subsidiaries (the “Company”) should be read in conjunction with the Company's condensed consolidated financial statements and accompanying notes included under Part I, Item 1 of this quarterly report on Form 10-Q, as well as with Management's Discussion and Analysis of Financial Condition and Results of Operations included in the Company's annual report on Form 10-K for the year ended December 31, 2012. References in this quarterly report on Form 10-Q to “year-to-date” refer to the nine-month period from January 1, 2013, to September 30, 2013.

GENERAL   

The Company is a leading operator of retail-based pawn and consumer finance stores in the United States and Mexico. The Company's primary business is the operation of pawn stores, which engage in retail sales, purchasing of secondhand goods and consumer finance activities. The Company's pawn stores generate significant retail sales from the merchandise acquired through collateral forfeitures and over-the-counter purchases from customers. The Company's pawn stores are also a convenient source for small consumer loans to help customers meet their short-term cash needs. Personal property such as jewelry, consumer electronics, tools, sporting goods and musical instruments are pledged as collateral for the loans. In addition, some of the Company's pawn stores offer consumer loans or credit services products. The Company's strategy is to focus on growing its retail-based pawn operations in the United States and Mexico through new store openings and acquisition opportunities as they arise.

Pawn operations accounted for approximately 93% of the Company’s revenue from continuing operations during the nine months ended September 30, 2013. The Company’s pawn revenue is derived primarily from merchandise sales of forfeited pawn collateral and used goods purchased directly from the general public. The Company accrues pawn loan fee 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 loan term, including any 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.

During the nine months ended September 30, 2013, the Company acquired 30 pawn stores, including 19 stores located in Texas in a single transaction. For more information on the Company's acquisitions during the nine months ended September 30, 2013, see Note 3 (Acquisitions) to the unaudited condensed consolidated financial statements included in this quarterly report.

The Company also operates a small number of stand-alone consumer finance stores in Texas and Mexico. These stores provide consumer financial services products including credit services, consumer loans and check cashing. The product mix in these stores varies by market. The Company considers the consumer loan and credit services products generated through these locations to be non-core/non-growth revenue streams.

Consumer loan and credit services revenue, which was approximately 7% of consolidated year-to-date revenue from continuing operations, was derived primarily from credit services fees. The Company recognizes service fee income on consumer loans and credit services transactions on a constant-yield basis over the life of the loan or credit extension, which is generally 180 days or less. The net defaults on consumer loans and credit services transactions and changes in the valuation reserve are charged to the consumer loan credit loss provision. The credit loss provision associated with the Company's credit services organization ("CSO") program and consumer loans are 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. For an additional discussion of the credit loss provision and related allowances and accruals, see “Results of Continuing Operations.”

The Company's business is subject to seasonal variations, and operating results for the current quarter and year-to-date periods are not necessarily indicative of the results of operations for the full year. Typically, the Company experiences seasonal growth of service fees in the third and fourth quarter of each year due to loan balance growth that occurs after the heavy repayment period of pawn loans in late December in Mexico, which is associated with statutory Christmas bonuses received by customers, and in the first quarter in the United States, which is associated with tax refund proceeds received by customers. Retail sales are seasonally higher in the fourth quarter associated with holiday shopping.

15

 
 

OPERATIONS AND LOCATIONS

The Company has operations in the United States and Mexico. For the three months ended September 30, 2013, approximately 52% of total revenue was generated from Mexico and 48% from the United States. Year-to-date, 54% of revenue was generated from Mexico and 46% from the United States.

As of September 30, 2013, the Company had 888 store locations in 12 U.S. states and 26 states in Mexico, which represents a net store-count increase of 10% over the trailing twelve months. A total of 28 new store locations were added during the third quarter of 2013 and 83 have been added year-to-date.

The following table details store openings for the three months ended September 30, 2013:

 
 
Pawn Locations
 
Consumer
 
 
 
 
Large
 
Small
 
Loan
 
Total
 
 
Format (1)
 
Format (2)
 
Locations (3)
 
Locations
Domestic:
 
 
 
 
 
 
 
 
Total locations, beginning of period
 
208

 
27

 
64

 
299

New locations opened
 
2

 

 

 
2

Locations closed or consolidated
 

 

 
(1
)
 
(1
)
Total locations, end of period
 
210

 
27

 
63

 
300

 
 
 
 
 
 
 
 
 
International:
 
 
 
 
 
 
 
 
Total locations, beginning of period
 
516

 
18

 
34

 
568

New locations opened
 
18

 

 

 
18

Locations acquired
 
8

 

 

 
8

Locations closed or consolidated (4)
 

 
(1
)
 
(5
)
 
(6
)
Total locations, end of period
 
542

 
17

 
29

 
588

 
 
 
 
 
 
 
 
 
Total:
 
 
 
 
 
 
 
 
Total locations, beginning of period
 
724

 
45

 
98

 
867

New locations opened
 
20

 

 

 
20

Locations acquired
 
8

 

 

 
8

Locations closed or consolidated
 

 
(1
)
 
(6
)
 
(7
)
Total locations, end of period
 
752

 
44

 
92

 
888


(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 September 30, 2013, 115 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. At September 30, 2013, all but one of the small format pawn stores also offered 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. In addition to stores shown on this chart, the Company is also an equal partner in Cash & Go, Ltd., a joint venture, which owns and operates 37 check cashing and financial services kiosks located inside convenience stores in the state of Texas. The Company’s credit services operations also include an internet distribution channel for customers residing in the state of Texas.

(4)
The operations of the consumer loan locations were consolidated with adjacent or nearby large format pawn locations.



16

 
 

The following table details store openings for the nine months ended September 30, 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
 
4

 

 

 
4

Locations acquired
 
22

 

 

 
22

Locations closed or consolidated
 

 

 
(2
)
 
(2
)
Total locations, end of period
 
210

 
27

 
63

 
300

 
 
 
 
 
 
 
 
 
International:
 
 
 
 
 
 
 
 
Total locations, beginning of period
 
485

 
19

 
34

 
538

New locations opened
 
49

 

 

 
49

Locations acquired
 
8

 

 

 
8

Locations closed or consolidated (4)
 

 
(2
)
 
(5
)
 
(7
)
Total locations, end of period
 
542

 
17

 
29

 
588

 
 
 
 
 
 
 
 
 
Total:
 
 
 
 
 
 
 
 
Total locations, beginning of period
 
669

 
46

 
99

 
814

New locations opened
 
53

 

 

 
53

Locations acquired
 
30

 

 

 
30

Locations closed or consolidated
 

 
(2
)
 
(7
)
 
(9
)
Total locations, end of period
 
752

 
44

 
92

 
888


(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 September 30, 2013, 115 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. At September 30, 2013, all but one of the small format pawn stores also offered 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. In addition to stores shown on this chart, the Company is also an equal partner in Cash & Go, Ltd., a joint venture, which owns and operates 37 check cashing and financial services kiosks located inside convenience stores in the state of Texas. The Company’s credit services operations also include an internet distribution channel for customers in the state of Texas.

(4)
The operations of the consumer loan locations were consolidated with adjacent or nearby large format pawn locations.


17

 
 

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. 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 2012 annual report on Form 10-K.

The Company has significant operations in Mexico, where 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 average exchange rates occurring during the three-month and year-to-date periods.

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. Amounts presented on a constant currency basis will be denoted as such. See "Non-GAAP Financial Information” for additional discussion of constant currency operating results.

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 remained open through the end of the measurement period. 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. Unless otherwise stated, 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 offices, 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

There were no recent accounting pronouncements that had a material effect on the Company’s financial position, results of operations or financial statement disclosures.


18

 
 

RESULTS OF CONTINUING OPERATIONS

Three Months Ended September 30, 2013, Compared To The Three Months Ended September 30, 2012

The following table details the components of the Company's revenue for the three months ended September 30, 2013, as compared to the three months ended September 30, 2012 (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 average value of the Mexican peso to the U.S. dollar increased 2%, from 13.2 to 1 in the third quarter of 2012 to 12.9 to 1 in the third quarter of 2013. The end-of-period value of the Mexican peso to the U.S. dollar decreased 2%, from 12.9 to 1 at September 30, 2012, to 13.1 to 1 at September 30, 2013. As a result of these currency exchange movements, revenue of Mexican operations translated into more U.S. dollars relative to the prior-year period, while net assets of Mexican operations translated into fewer U.S. dollars relative to the prior period. While the strengthening of the Mexican peso positively increased the translated dollar-value of revenue, the cost of sales and operating expenses increased as well. The scrap jewelry generated in Mexico is exported and sold in U.S. dollars, which does not contribute to the Company’s peso-denominated earnings stream.

 
 
Three Months Ended
 
 
 
 
 
Increase/(Decrease)
 
 
September 30,
 
 
 
 
 
Constant Currency
 
 
2013
 
2012
 
Increase/(Decrease)
 
Basis
Domestic revenue:
 
 
 
 
 
 
 
 
 
 
 
 
Retail merchandise sales
 
$
36,134

 
$
25,801

 
$
10,333

 
40
 %
 
 
40
 %
 
Pawn loan fees
 
21,241

 
16,747

 
4,494

 
27
 %
 
 
27
 %
 
Consumer loan and credit services fees
 
10,894

 
12,989

 
(2,095
)
 
(16
)%
 
 
(16
)%
 
Wholesale scrap jewelry revenue
 
15,344

 
13,822

 
1,522

 
11
 %
 
 
11
 %
 
 
 
83,613

 
69,359

 
14,254

 
21
 %
 
 
21
 %
 
International revenue:
 
 
 
 
 
 
 
 
 
 
 

 
Retail merchandise sales
 
53,638

 
44,137

 
9,501

 
22
 %
 
 
19
 %
 
Pawn loan fees
 
26,214

 
23,021

 
3,193

 
14
 %
 
 
12
 %
 
Consumer loan and credit services fees
 
832

 
932

 
(100
)
 
(11
)%
 
 
(13
)%
 
Wholesale scrap jewelry revenue
 
9,890

 
12,246

 
(2,356
)
 
(19
)%
 
 
(19
)%
 
 
 
90,574

 
80,336

 
10,238

 
13
 %
 
 
11
 %
 
Total revenue:
 
 
 
 
 
 
 
 

 
 
 
 
Retail merchandise sales
 
89,772

 
69,938

 
19,834

 
28
 %
 
 
27
 %
 
Pawn loan fees
 
47,455

 
39,768

 
7,687

 
19
 %
 
 
18
 %
 
Consumer loan and credit services fees
 
11,726

 
13,921

 
(2,195
)
 
(16
)%
 
 
(16
)%
 
Wholesale scrap jewelry revenue
 
25,234

 
26,068

 
(834
)
 
(3
)%
 
 
(3
)%
 
 
 
$
174,187

 
$
149,695

 
$
24,492

 
16
 %
 
 
15
 %
 

Domestic revenue accounted for approximately 48% of the total revenue for the current quarter, while international revenue (from Mexico) accounted for 52% of total revenue.

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 September 30, 2013, as compared to September 30, 2012 (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. For more information on the Company's CSO program, see Note 4 (Guarantees) to the Company's condensed consolidated financial statements included in this quarterly report on Form 10-Q.

19

 
 

 
 
 
 
 
 
 
 
 
 
Increase/(Decrease)
 
 
Balance at September 30,
 
 
 
 
 
Constant Currency
 
 
2013
 
2012
 
Increase/(Decrease)
 
Basis
Domestic:
 
 
 
 
 
 
 
 
 
 
 
 
Pawn loans
 
$
60,619

 
$
51,875

 
$
8,744

 
17
 %
 
 
17
 %
 
CSO credit extensions held by independent third-party (1)
 
12,926

 
14,048

 
(1,122
)
 
(8
)%
 
 
(8
)%
 
Other consumer loans
 
697

 
1,194

 
(497
)
 
(42
)%
 
 
(42
)%
 
 
 
74,242

 
67,117

 
7,125

 
11
 %
 
 
11
 %
 
International:
 
 
 
 
 
 
 
 
 
 
 
 
Pawn loans
 
60,568

 
55,839

 
4,729

 
8
 %
 
 
11
 %
 
Other consumer loans
 
678

 
833

 
(155
)
 
(19
)%