UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
August 22, 2006
---------------
(Date of Report - Date of Earliest Event Reported)
First Cash Financial Services, Inc.
-----------------------------------
(Exact name of registrant as specified in its charter)
Delaware
--------
(State or other jurisdiction of incorporation)
0-19133 75-2237318
------- ----------
(Commission File Number) (IRS Employer Identification No.)
690 East Lamar Blvd., Suite 400, Arlington, Texas 76011
-------------------------------------------------------
(Address of principal executive offices, including zip code)
(817) 460-3947
--------------
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of
the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Forward-Looking Information
This report and the included exhibits may contain forward-looking statements
about the business, financial condition and prospects of First Cash
Financial Services, Inc. ("First Cash" or 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," "intends," "could," or "anticipates," or the negative
thereof, or other variations thereon, or comparable terminology, or by
discussions of strategy. 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 report include, without limitation, the Company's
expectations of earnings per share, earnings growth, revenues, profit
margins, expansion strategies, industry growth, acquisition synergies, store
openings, future liquidity, and cash flows. 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. The
forward-looking statements contained in this report speak only as of the
date of this statement, 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. Certain
factors may cause results to differ materially from those anticipated by
some of the statements made in this report. Such factors are difficult to
predict and many are beyond the control of the Company and may include
changes in regional, national or international economic conditions, changes
in consumer borrowing and repayment behaviors, credit losses, changes or
increases in competition, the ability to locate, open and staff new stores,
availability or access to sources of inventory, inclement weather, ability
to successfully integrate acquisitions, ability to retain key management
personnel, the ability to operate as a credit services organization in
Texas, new legislative initiatives or governmental regulations, or changes
to existing laws and regulations, affecting payday advance businesses,
credit services organizations, pawn businesses and Buy-Here/Pay-Here
automotive retailers in both the U.S. and Mexico, unforeseen litigation,
changes in interest rates, changes in tax rates or policies, changes in gold
prices, changes in energy prices, cost of funds, changes in foreign currency
exchange rates, future business decisions, and other uncertainties. These
and other risks and uncertainties are indicated in the Company's 2005 Annual
Report on Form 10-K (see "Item 1A. Risk Factors") and updated in subsequent
quarterly reports on Form 10-Q.
Item 1.01 Entry into a Material Definitive Agreement
On August 22, 2006, the Company entered into an agreement to amend its
existing long-term bank credit facility. The primary effect of the
amendment was to increase the amount available under the line of credit from
$25 million to $50 million and to extend the term of the facility until
April 2009. The line of credit will continue to bear interest at the
prevailing LIBOR rate plus a fixed margin of 1.375%. In addition, certain
existing financial covenants were eliminated, and the covenant restricting
the amount of share repurchases was modified to allow a maximum of $40
million annually, with a maximum of $75 million from August 2006 through
April 2009. The Third Amendment to the Credit Agreement, dated August 22,
2006, is filed as Exhibit 10.1 to this Current Report on Form 8-K and is
incorporated herein by reference.
On August 25, 2006 the Company signed a definitive stock purchase agreement
(the "Purchase Agreement") to acquire all of the common stock of Guaranteed
Auto Finance, Inc. and SHAC, Inc., which are two privately held corporations
d/b/a collectively as "Auto Master." The Purchase Agreement is filed as
Exhibit 2.1 to this Current Report on Form 8-K and is incorporated herein by
reference. The significant terms of the acquisition are reported in Item
2.01.
The press release announcing the Third Amendment to the Credit Agreement and
the execution of the Purchase Agreement is being furnished as Exhibit 99.1
to this Current Report on Form 8-K and is incorporated herein by reference.
Item 2.01 Completion of Acquisition or Disposition of Assets
On August 25, 2006, the Company completed the purchase of Guaranteed Auto
Finance, Inc. and SHAC, Inc., two privately held corporations d/b/a
collectively as "Auto Master." The purchase price for all the common stock
of the two companies was $33.7 million. The terms of the transaction and
the consideration paid were the result of arm's length negotiations between
the Company and the sellers. Prior to the completion of the transaction,
neither the Company nor any of its affiliates or officers, directors, or
their associates had any material relationship with the sellers. The
purchase price was funded through a combination of cash, First Cash's credit
facility and notes payable to the selling shareholders of Guaranteed Auto
Finance, Inc. and SHAC, Inc. The notes payable to the sellers total $10
million in aggregate and bear interest at 7%, with repayment to be completed
over the next four years. One of the notes payable, in the principal amount
of $1 million, is convertible after one year into 55,555 shares of the
Company's common stock, at a conversion price of $18.00 per share.
No financial statements with respect to Auto Master will be filed pursuant
to this Form 8-K, as the acquisition doesn't represent a significant
subsidiary as defined in Rule 1-02(w) of Regulation S-X. Accordingly, none
of the financial data set forth in this Form 8-K relating to Auto Master has
been audited by the Company's independent auditor.
Auto Master, based in Northwest Arkansas, owns and operates eight Buy-
Here/Pay-Here automobile dealerships located in Arkansas, Missouri and
Oklahoma, which specialize in the sale of clean, moderately-priced used
vehicles. The customers of Auto Master, many of whom are under-banked or
otherwise credit-challenged, typically utilize the dealerships' in-house
financing programs, which feature affordable down payments and weekly or bi-
weekly payment plans.
Vehicle inventory purchases are typically processed through a central
reconditioning facility located in Northwest Arkansas, near Bentonville,
for necessary repairs and detailing before being delivered to the retail
locations. The consolidated purchasing and reconditioning functions, along
with centralized inventory and sales management, allow Auto Master to expect
retail margins of 50% or better on its vehicle sales. Most of the Company's
underwriting, legal collection and other administrative functions are based
at the same central facility. The Company expects to retain Auto Master's
current management team and the administrative operational support facility
located in Tontitown, Arkansas.
The revenues of Auto Master, which are comprised primarily of retail
automobile sales and finance charges on the financing of the retail sales,
totaled $44 million in its 2005 fiscal year and $34 million for the
seven months ended July 31, 2006. Auto Master sold approximately 4,600
automobiles from its retail dealerships in 2005 and approximately 3,400
automobiles for the seven months ended July 31, 2006. The average retail
price for Auto Master's vehicles is approximately $9,000. Auto Master
targets gross profit margins from the retail sale of vehicles, net of
allowances for uncollectible receivables, of approximately 30%.
Notes receivable from customers of Auto Master, net of allowances for
uncollectible accounts, totaled approximately $30 million at July 31, 2006,
while inventories totaled $3 million at that date. Auto Master expects that
the average effective interest income yield on net customer receivables will
typically range from 9% to 11%. At July 31, 2006, Auto Master had interest
bearing debt of approximately $15 million, which the Company retired on
the closing date, utilizing funds available under its own credit facility.
Goodwill and other identified intangible assets arising from the acquisition
are expected to total approximately $18 million.
Auto Master was founded in 1989 and its growth has been accomplished through
de novo Buy-Here/Pay-Here dealership openings. It expects new dealership
locations to become profitable within two to four months of their opening
date and the dealerships are expected to generate positive monthly cash flow
within approximately 24 months of opening.
This description of the Purchase Agreement is qualified in its entirety to
the full text of the Purchase Agreement, which is filed as Exhibit 2.1 to
this Current Report on Form 8-K and is incorporated herein by reference.
The press release announcing the transaction is filed as Exhibit 99.1 to
this Current Report on Form 8-K and is incorporated herein by reference.
Item 2.02 Results of Operations and Financial Condition
On August 28, 2006, the Company announced that it expects diluted earnings
per share for 2006 will be in a range of $0.96 to $0.97, which exceeds its
previously released guidance. The Company has initiated diluted earnings
per share guidance for 2007 in a projected range of $1.25 to $1.30 per
share. The Company also announced that it expects to open a total of 70 to
75 new pawn and short-term advance stores in 2007. In addition, with
the acquisition of Auto Master, the Company plans to open 3 to 5 new
Buy-Here/Pay-Here dealerships during the remainder of 2006 and 2007.
A copy of the Company's news release containing these announcements is
furnished as Exhibit 99.1 to this Current Report on Form 8-K and is
incorporated herein by reference.
Item 7.01 Regulation FD Disclosure
The press release announcing the execution of the Purchase Agreement, the
Third Amendment to the Credit Agreement and expected results of operations
is being furnished as Exhibit 99.1 to this Current Report on Form 8-K and is
incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits:
2.1 Stock Purchase Agreement dated August 25, 2006 between Auto Master
and First Cash Financial Services, Inc.
10.1 Third Amendment to the Credit Agreement dated August 22, 2006.
99.1 Press Release dated August 28, 2006 announcing the Company's
acquisition of a Buy-Here/Pay-Here automotive retailer, Auto Master.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: August 28, 2006 FIRST CASH FINANCIAL SERVICES, INC.
(Registrant)
/s/ R. DOUGLAS ORR
------------------------
R. Douglas Orr
Chief Accounting Officer
EXHIBIT INDEX
Exhibit
Number Document
-------- --------
2.1 Stock Purchase Agreement dated August 25, 2006.
10.1 Third Amendment to the Credit Agreement dated August 22, 2006.
99.1 Press Release dated August 28, 2006.