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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

February 2, 2017
(Date of Report - Date of Earliest Event Reported)
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FirstCash, Inc.
(Exact name of registrant as specified in its charter)


Delaware
(State or other jurisdiction of incorporation)


001-10960
(Commission File Number)
75-2237318
(IRS Employer Identification No.)


1600 West 7th Street, Fort Worth, Texas 76102
(Address of principal executive offices, including zip code)


(817) 335-1100
(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:
o    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))

    


Item 2.02 Results of Operations and Financial Condition.

On February 2, 2017, FirstCash, Inc. (the “Company”) issued a press release announcing its financial results for the three and twelve month periods ended December 31, 2016 and the Board of Directors’ declaration of a first quarter cash dividend of $0.19 per common share (the “Earnings Release”). The Earnings Release is attached hereto as Exhibit 99.1 and is incorporated by reference in its entirety into this Item 2.02.

The information provided in this Item 2.02, including the Earnings Release, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by the specific reference in such filing.

Item 9.01 Financial Statements and Exhibits.
 
(d) Exhibits:
 
 
 
 
 
 
99.1
Press release, dated February 2, 2017, announcing the Company's financial results for the three and twelve month periods ended December 31, 2016.


2

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: February 2, 2017
FIRSTCASH, INC.
 
(Registrant)
 
 
 
/s/ R. DOUGLAS ORR
 
R. Douglas Orr
 
Executive Vice President and Chief Financial Officer
 
(Principal Financial and Accounting Officer)

EXHIBIT INDEX
Exhibit Number
Document
99.1
Press release, dated February 2, 2017, announcing the Company's financial results for the three and twelve month periods ended December 31, 2016.


3
Exhibit

EXHIBIT 99.1
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FirstCash Reports Fourth Quarter and Full Year Results;
Declares Quarterly Dividend and Issues 2017 Earnings Outlook
_________________________________________________________________________________________

Fort Worth, Texas (February 2, 2017) -- FirstCash, Inc. (the “Company”) (NYSE: FCFS), a leading international operator of more than 2,000 retail pawn stores in the U.S. and Latin America, today announced revenue, net income and earnings per share for the fourth quarter and full year ended December 31, 2016. The Board of Directors also declared a $0.19 quarterly dividend payable on February 28, 2017 to stockholders of record as of February 14, 2017.

Mr. Rick Wessel, chief executive officer, stated, “2016 was a transformational year in the 28 year history of FirstCash. Early in the first quarter, we completed the acquisition of the Maxi Prenda stores in Mexico, Guatemala and El Salvador. This was our largest Latin American acquisition and expanded our operations outside of Mexico. In the third quarter, we almost tripled the size of our U.S. operations by merging with Cash America, the largest U.S. pawnshop operator with more than 800 stores in 20 U.S. states. Today, FirstCash has a market cap and combined assets of over $2 billion and is the largest pawn operator in the Americas with more than 2,000 stores serving under banked and value conscious customers in four countries.

“The core operating results in the fourth quarter were encouraging. Despite further currency headwinds impacting dollar-translated results, our Latin American stores had double digit increases in local currency same-store pawn loans and core revenues. In the U.S., the legacy First Cash stores posted a fourth quarter increase in same-store pawn loans, marking the first positive comparative in this metric in several quarters. The merger integration with Cash America remains on track as we are beginning to realize the expected cost synergies and are rapidly integrating our store operating systems on the FirstPawn IT platform. While the integration efforts and further currency headwinds will provide certain challenges in 2017, we believe the earnings, synergies and cash flow opportunities from our expansion and growth will drive long-term shareholder value,” Mr. Wessel concluded.

Earnings Highlights
•
Consolidated operating results of the Company for the year ended December 31, 2016 include the revenues and operating results of Cash America for the last four months of the year and include merger related expenses and other adjustments of approximately $35.4 million pre-tax, or $0.72 per share, net of tax for 2016.
•
The Company reported the following consolidated results for the fourth quarter and full year of 2016. Adjusted measures exclude merger related expenses and other adjustments, which are further defined and reconciled in the detailed reconciliation of non-GAAP financial measures including EBITDA and adjusted EBITDA, provided elsewhere in this release (in thousands except per share amounts):
 
 
Three Months Ended December 31,
 
 
2016
 
2015
 
 
As Reported
 
Adjusted
 
As Reported
 
Adjusted
 
 
(GAAP)
 
(Non-GAAP)
 
(GAAP)
 
(Non-GAAP)
Revenue
 
$
462,042

 
$
462,042

 
$
191,424

 
$
191,424

Net income
 
$
36,692

 
$
37,448

 
$
19,410

 
$
20,600

Diluted EPS
 
$
0.76

 
$
0.77

 
$
0.69

 
$
0.73

EBITDA
 
$
77,163

 
$
78,404

 
$
35,897

 
$
37,597

Weighted avg diluted shares
 
48,532

 
48,532

 
28,097

 
28,097



 
 
Twelve Months Ended December 31,
 
 
2016
 
2015
 
 
As Reported
 
Adjusted
 
As Reported
 
Adjusted
 
 
(GAAP)
 
(Non-GAAP)
 
(GAAP)
 
(Non-GAAP)
Revenue
 
$
1,088,377

 
$
1,088,377

 
$
704,602

 
$
704,602

Net income
 
$
60,127

 
$
85,332

 
$
60,710

 
$
68,483

Diluted EPS
 
$
1.72

 
$
2.44

 
$
2.14

 
$
2.42

EBITDA
 
$
144,881

 
$
180,252

 
$
120,448

 
$
132,201

Weighted avg diluted shares
 
35,004

 
35,004

 
28,326

 
28,326


•
For the quarter ended December 31, 2016, which includes the results of the Cash America operations for the full quarter, GAAP net income increased 89% while adjusted net income increased 82% compared to the same prior-year period. The smaller increases in GAAP and adjusted earnings per share of 10% and 5%, respectively, were a result of an increase in the weighted average diluted shares outstanding from the merger. Additionally, both GAAP and adjusted net income per share for the fourth quarter of 2016 were negatively impacted by approximately $0.06 per share due to the 19% decline in the value of the Mexican peso compared to the fourth quarter last year.
•
GAAP net income for the full year declined approximately 1%. The added earnings contribution from Latin American growth and the post-merger earnings contribution from Cash America were offset by $35 million in merger related costs and other adjustments and the 18% decline in the average value of the Mexican peso. Full year GAAP and adjusted earnings per share were reduced by approximately $0.28 per share due to the currency fluctuation.
•
EBITDA for the fourth quarter and full year totaled $77 million and $145 million, respectively. Adjusted EBITDA, which excludes merger costs, totaled $78 million for the current quarter, an increase of 109% compared to the fourth quarter of 2015. For the full year, adjusted EBITDA increased 36% to $180 million, as compared to $132 million in 2015. EBITDA and adjusted EBITDA are non-GAAP measures and are calculated in the detailed reconciliation of non-GAAP financial measures provided elsewhere in this release.
•
The Company is providing segment level reporting beginning with this release. The two identified segments are the U.S. operations segment and the Latin America operations segment. The pre-tax operating income in the Latin America segment increased 13% and 19% for the fourth quarter and full year periods, respectively, primarily due to the acquisition of Maxi Prenda and the strong same-store sales results that were partially offset by the currency impact. On a constant currency basis, the Latin America segment pre-tax operating income increased 32% and 39%, respectively. The pre-tax operating income in the U.S. increased 262% and 83% for the fourth quarter and full year periods, respectively, primarily due to the merger with Cash America. The operating results for each segment are further detailed elsewhere in this release.


2

Note: Certain growth rates in “Revenue Highlights” and “Pawn Operating Metrics” are calculated on a constant currency basis, a non-GAAP measure defined elsewhere in this release and reconciled to the most comparable GAAP measures in the financial statements in this release. The average Mexican peso to U.S. dollar exchange rate for fiscal 2016 was 18.7 pesos / dollar versus 15.8 pesos / dollar in the comparable prior-year period. The average exchange rate for the fourth quarter of 2016 was 19.8 pesos / dollar versus 16.7 pesos / dollar in the comparable prior year period.

Revenue Highlights
•
Consolidated revenue for fiscal 2016 was $1.1 billion, an increase of 54%. For the fourth quarter of 2016, revenues increased 141% and totaled $462 million. On a constant currency basis, total revenues increased 64% for the full year and 152% for the fourth quarter.
•
Fiscal 2016 U.S. segment revenues increased 99% due primarily to the partial year contribution from the Cash America operations and totaled $334 million. Core U.S. same-store pawn revenues, which are composed of pawn lending fees and retail merchandise sales, in the legacy First Cash locations decreased slightly at 1% for the quarter. Fourth quarter same-store core revenues in the legacy Cash America stores declined approximately 5%, which primarily reflected lower average pawn receivables for the quarter.
•
Revenues for fiscal 2016 in Latin America increased 13% on a dollar-translated basis and increased an impressive 32% on a constant currency basis, driven by strong same-store sales results and the contribution of $65 million from the 211 Maxi Prenda stores acquired in late 2015 and early 2016. While core Latin America same-store pawn revenues declined 6% and 7% on a U.S. dollar basis during the fourth quarter and full year of 2016, respectively, Latin America core same-store pawn revenues increased by 11% and 9% on a constant currency basis, respectively.
Pawn Operating Metrics
•
Consolidated retail merchandise sales margins were 37% for both the fourth quarter and the full 2016 fiscal year, down one percentage point compared to prior-year periods. Retail margins in the Latin America segment were 36% and 37% for the fourth quarter and full year, respectively, while U.S. retail margins were 37% and 38% for the fourth quarter and full year, respectively.
•
Pawn loans outstanding in Latin America at December 31, 2016 increased by 16% on a U.S. dollar basis and 37% on a constant currency basis. U.S. pawn loans outstanding at December 31, 2016 totaled $293 million, which included $224 million from the Cash America locations. Pawn loans in the legacy U.S. First Cash stores increased 1% year-over-year.
•
Significantly impacted by the 18% year-over-year decline in the value of the Mexican peso compared to the U.S. dollar, same-store pawn loans in Latin America at December 31, 2016 declined 8% on a dollar-denominated basis. On a constant currency basis, pawn loans increased 11%, matching the largest same-store increase in the Latin American stores over the past four years.
•
U.S. same-store pawn loan balances in the legacy First Cash locations increased 1%, which represented continued sequential improvement in this metric. Same-store pawn receivables at the Cash America stores remained down mid-single digits, reflecting the prior quarter trend and caused, in part, by actively reducing the number of delinquent pawn loans outstanding to conform with First Cash operating practices.
Store Count Activity
•
During fiscal 2016, a total of 1,038 stores were added, composed of 815 U.S. locations from the merger with Cash America, 220 new and acquired pawn stores in Latin America and three additional pawn stores acquired in the U.S. The Company closed 18 consumer loan stores during fiscal 2016 as part of its strategic plan to further reduce payday lending exposure. The year-over-year store count has increased 30% in Latin America and 94% overall.

3

•
As of December 31, 2016, the Company operated 2,085 stores, of which 96% or 2,012 were pawn stores. There are 955 total stores in Latin America and 1,130 total stores in the U.S. In addition, there were 70 check cashing locations, previously part of Cash America, that are operated by independent franchisees under franchising agreements with the Company.
Liquidity
•
As previously announced, the Company entered into a new $400 million unsecured revolving bank credit facility in conjunction with the merger. The credit facility has a five year term from the closing date of the merger, September 1, 2016, and bears interest at either the prevailing London Interbank Offered Rate (LIBOR) plus a fixed spread of 2.5% or the prevailing prime or base rate plus a fixed spread of 1.5%. The interest rate on the outstanding balance was 3.25% at year end.
•
At December 31, 2016, the Company had $260 million drawn on the facility and an additional $6 million of outstanding letters of credit. During the fourth quarter, the Company utilized proceeds from the sale of the Enova stock holdings and normal seasonal cash flows to reduce the outstanding balance on the facility by $100 million.
•
As of December 31, 2016, the Company had $90 million in cash on its balance sheet and $134 million of availability for future borrowings under its long-term U.S. revolving bank credit facility.
•
As a result of the merger with Cash America, the Company had owned approximately six million shares of Enova International, Inc. on September 1, 2016. As previously announced, all of the shares were sold in open market transactions with the final sales completed on December 6, 2016. The Company generated net proceeds of $62.1 million, which was used to pay down the balance on the unsecured revolving bank credit facility.
Cash Dividends and Share Repurchases
•
The Board of Directors declared a $0.19 per share first quarter cash dividend on common shares outstanding, which will be paid on February 28, 2017 to stockholders of record as of February 14, 2017. This represents a 52% increase over the dividend paid to First Cash Financial Services, Inc. stockholders in the first quarter of 2016.
•
The Company currently has approximately 1.1 million shares of its common stock available for repurchase under its current buyback authorization. While the Company did not repurchase shares in fiscal 2016 because of the merger, it expects to begin repurchases in fiscal 2017, subject to expected liquidity and other factors it normally considers when making share repurchases.
Fiscal 2017 Outlook
•
The outlook for 2017 is tempered by the continued volatility and decline in the value of the Mexican peso relative to the strong U.S. dollar. The Company’s currency forecast for 2017 assumes an exchange rate of approximately 22.0 Mexican pesos to 1.0 U.S. dollar. This represents a potential decline of almost 20% compared to the average exchange rate of 18.7 to 1.0 in 2016. The anticipated year-over-year earnings drag is approximately $0.17 to $0.21 per share. For reference, it is anticipated that for 2017 a one point change in the average peso to dollar exchange rate will impact annual earnings by approximately $0.06 to $0.08 per share.
•
The Company is initiating its fiscal full-year 2017 guidance for adjusted earnings per share, a non-GAAP measure that excludes merger and other acquisition expenses, to be in the range of $2.45 to $2.60 based on an expected full year weighted average share count of approximately 48.2 million shares. This compares to 2016 adjusted earnings per share of $2.44 which was based on only 35.0 million weighted average shares outstanding.
◦
Adjusted net income, a non-GAAP measure that excludes merger and other acquisition expenses, is projected to be in the range of approximately $118 million to $125 million, which at the midpoint, implies an increase of 43% over 2016 adjusted net income of $85 million.
◦
The earnings guidance range implies adjusted EBITDA to be in the range of approximately $257 to $268 million for fiscal 2017. This compares to adjusted EBITDA of $180 million in fiscal 2016 and $132 million in fiscal 2015.

4

◦
The guidance for fiscal 2017 is presented on a non-GAAP basis, as it does not include the impact of expenses related to the Cash America merger or any future acquisitions. Given the difficulty in predicting the amount and timing of merger related expenses, the Company cannot reasonably provide a full reconciliation of adjusted earnings per share to GAAP earnings per share.
•
These estimates of expected adjusted earnings per share include the following assumptions:
◦
An estimated average exchange rate of approximately 22.0 Mexican pesos / U.S. dollar for fiscal 2017 compared to the foreign exchange rate of 18.7 Mexican pesos / U.S. dollar in fiscal 2016.
◦
The expected conversion of all the Cash America stores to the FirstPawn IT platform and the implementation of new operating protocols during 2017 that could have a short term negative impact on pawn receivables, inventories and margins.
◦
An expected earnings drag of approximately $0.03 per share due to expected reductions in consumer lending (payday) operations during 2017.
◦
An expected effective income tax rate for fiscal 2017 of approximately 36%, which compares to the 2016 effective rate of 33.8% (adjusted for merger costs). The increase in the tax rate is a result of the full year of incremental earnings from Cash America being taxed at approximately 37%.
◦
As previously announced, the Company currently plans to open or acquire approximately 85 stores in 2017, primarily focused on Latin America, including its first stores in Colombia.

Additional Commentary and Analysis

Mr. Wessel further commented on the Company’s fiscal 2016 results, “Our Latin America operations team had a phenomenal year in 2016, as evidenced by the strong local currency growth in same-store pawn loans and revenues during 2016. We are excited and encouraged that the rate of revenue growth continued to accelerate over the course of the year. The integration of the Maxi Prenda stores was successfully completed and their initial performance has exceeded our expectations. With over 900 stores in Latin America, we are well-positioned for continued growth in this important market that now includes our planned expansion into Colombia in 2017.

“As discussed in previous releases during 2016, the U.S. operating environment has been challenging; however, we are encouraged by the steady stabilization in certain parts of the business, as seen in the legacy First Cash U.S. stores which recorded their first increase in same-store pawn loans in several quarters. This is a positive leading indicator for these legacy stores where we have remained disciplined in maintaining proper loan to value ratios and managing other operating fundamentals.

“During the fourth quarter, we successfully transitioned 65 of the Cash America stores onto the FirstPawn IT platform and anticipate that these stores will begin to operate more efficiently with improved tools for assessing loan to value ratios, managing inventory and implementing incentive compensation plans focused on earnings quality. In the short term, the transition will likely cause pawn loans and inventories to contract in these locations which may soften pawn fees and negatively affect retail margins during 2017. Over the long term though, we expect the transition to drive improved efficiency and profitability metrics. This year we have already transitioned 96 stores onto the FirstPawn platform and completed 161 stores in total, which puts us on target to integrate all of the remaining Cash America stores during 2017.

“We remain confident in our ability to meet or exceed the full run rate of our targeted synergies by the first half of 2018. From a corporate perspective, the merger integration and realization of expected corporate synergies remains on track. The corporate staff will be fully combined in the downtown Fort Worth location owned by Cash America by the end of the first quarter, and we are already generating significant savings through the elimination of overlapping administrative functions and processes.


5

“Most importantly, the merger with Cash America significantly enhances our overall cash flows. We are guiding adjusted EBITDA for 2017 to be in a range of $257 to $268 million, which represents an increase of approximately 100% over adjusted EBITDA in 2015, the last full year before the merger. Additionally, our Latin American profits, which are generated in local currencies, are being reinvested in loan balances, new stores and further expansion activities in Latin American markets. At year end, we had $134 million of availability on our U.S. credit facility that could be used for future U.S. investments and stock repurchases. During 2017, in addition to continued quarterly dividend payments, the Company intends to resume stock repurchases under its existing share repurchase plan, targeting a total shareholder payout ratio of up to 50% of GAAP net income.

“Our adjusted EPS guidance for 2017 is tempered by macro factors primarily related to foreign currency translation, conservatism in our outlook for the transitioning and consolidating of our merged U.S. operations and a higher tax rate. Despite these headwinds, we still expect adjusted net income growth in 2017 to be in the range of 39% to 47% compared to 2016. We remain optimistic and committed to our pawn-focused long-term strategies in both the U.S. and Latin America and anticipate adding approximately 85 stores this year. Through continued additions of new stores and accretive acquisitions, we believe that we are building a diversified multi-country earnings platform. Coupled with our capacity to repurchase stock and pay cash dividends, we are confident in our prospects for delivering long-term shareholder value,” concluded Rick Wessel, FirstCash chief executive officer.

Forward-Looking Information

This release contains forward-looking statements about the business, financial condition and prospects of FirstCash, Inc. and its wholly owned subsidiaries. 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,” “would,” “anticipates,” “potential,” “confident,” “optimistic” or the negative thereof, or other variations thereon, or comparable terminology, or by discussions of strategy, objectives, estimates, guidance, expectations and future plans. Forward-looking statements can also be identified by the fact 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.
 
These forward-looking statements are made to provide the public with management’s current assessment of the Company’s business. Although the Company believes the expectations reflected in forward-looking statements are reasonable, there can be no assurances such expectations will prove to be accurate. Security holders are cautioned such forward-looking statements involve risks and uncertainties. Certain factors may cause results to differ materially from those anticipated by the forward-looking statements made in this release. Such factors may include, without limitation, the risks, uncertainties and regulatory developments discussed and described in (i) the Company’s 2015 annual report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 17, 2016, including the risks described in Part 1, Item 1A, “Risk Factors” thereof (ii) the Company’s quarterly report on Form 10-Q filed with the SEC on November 9, 2016, including the risks described in Part II, Item 1A, “Risk Factors” thereof, and (iii) the other reports filed with the SEC, including the Company’s forthcoming annual report on Form 10-K. Many of these risks and uncertainties are beyond the ability of the Company to control, nor can the Company predict, in many cases, all of the risks and uncertainties that could cause its actual results to differ materially from those indicated by the forward-looking statements. The forward-looking statements contained in this release speak only as of the date of this release, and the Company expressly disclaims any obligation or undertaking to report any updates or revisions to any such statement to reflect any change in the Company’s expectations or any change in events, conditions or circumstances on which any such statement is based, except as required by law.


6

About FirstCash

With over 2,000 retail pawn and consumer lending locations in the U.S., Mexico, Guatemala and El Salvador, FirstCash is the leading international operator of pawn stores. FirstCash focuses on serving cash and credit constrained consumers through its retail pawn locations, which buy and sell a wide variety of jewelry, consumer electronics, power tools, household appliances, sporting goods, musical instruments and other merchandise, and make small consumer pawn loans secured by pledged personal property. Approximately 96% of the Company's revenues are from pawn operations.

FirstCash is a component company in both the Standard & Poor’s SmallCap 600 Index® and the Russell 2000 Index®. FirstCash’s common stock (ticker symbol “FCFS”) is traded on the NYSE, home to many of the world’s most iconic brands, technology business leaders and emerging growth companies shaping today’s global economic landscape. For additional information regarding FirstCash and the services it provides, visit FirstCash’s websites located at http://www.firstcash.com and http://www.cashamerica.com.



7

FIRSTCASH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
 
 
Three Months Ended
 
Twelve Months Ended
 
 
December 31,
 
December 31,
 
 
2016
 
2015
 
2016
 
2015
 
 
(in thousands, except per share amounts)
Revenue:
 
 
 
 
 
 
 
 
Retail merchandise sales
 
$
282,597

 
$
128,280

 
$
669,131

 
$
449,296

Pawn loan fees
 
129,941

 
49,329

 
312,757

 
195,448

Consumer loan and credit services fees
 
22,772

 
6,503

 
43,851

 
27,803

Wholesale scrap jewelry sales
 
26,732

 
7,312

 
62,638

 
32,055

Total revenue
 
462,042

 
191,424

 
1,088,377

 
704,602

 
 
 
 
 
 
 
 
 
Cost of revenue:
 
 
 
 
 
 
 
 
Cost of retail merchandise sold
 
179,390

 
79,874

 
418,556

 
278,631

Consumer loan and credit services loss provision
 
6,213

 
2,085

 
11,993

 
7,159

Cost of wholesale scrap jewelry sold
 
22,324

 
6,540

 
53,025

 
27,628

Total cost of revenue
 
207,927

 
88,499

 
483,574

 
313,418

 
 
 
 
 
 
 
 
 
Net revenue
 
254,115

 
102,925

 
604,803

 
391,184

 
 
 
 
 
 
 
 
 
Expenses and other income:
 
 
 
 
 
 
 
 
Store operating expenses
 
137,451

 
52,510

 
328,014

 
207,572

Administrative expenses
 
38,260

 
12,818

 
96,537

 
51,883

Merger and other acquisition expenses
 
2,793

 
1,700

 
36,670

 
2,875

Depreciation and amortization
 
14,700

 
4,288

 
31,865

 
17,939

Goodwill impairment - U.S. consumer loan operations
 
—

 
—

 
—

 
7,913

Interest expense
 
6,461

 
4,405

 
20,320

 
16,887

Interest income
 
(115
)
 
(423
)
 
(751
)
 
(1,566
)
Net gain on sale of common stock of Enova
 
(1,552
)
 
—

 
(1,299
)
 
—

Total expenses and other income
 
197,998

 
75,298

 
511,356

 
303,503

 
 
 
 
 
 
 
 
 
Income before income taxes
 
56,117

 
27,627

 
93,447

 
87,681

 
 
 
 
 
 
 
 
 
Provision for income taxes
 
19,425

 
8,217

 
33,320

 
26,971

 
 
 
 
 
 
 
 
 
Net income
 
$
36,692

 
$
19,410

 
$
60,127

 
$
60,710

 
 
 
 
 
 
 
 
 
Net income per share:
 
 
 
 
 
 
 
 
Basic
 
$
0.76

 
$
0.69

 
$
1.72

 
$
2.16

Diluted
 
$
0.76

 
$
0.69

 
$
1.72

 
$
2.14

 
 
 
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
48,507

 
27,933

 
34,997

 
28,138

Diluted
 
48,532

 
28,097

 
35,004

 
28,326

 
 
 
 
 
 
 
 
 
Dividends declared per common share
 
$
0.190

 
$
—

 
$
0.565

 
$
—


8

FIRSTCASH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
 
 
December 31,
 
 
2016
 
2015
 
 
(in thousands)
ASSETS
 
 
 
 
Cash and cash equivalents
 
$
89,955

 
$
86,954

Pawn loan fees and service charges receivable
 
41,013

 
16,406

Pawn loans
 
350,506

 
117,601

Consumer loans, net
 
29,204

 
1,118

Inventories
 
330,683

 
93,458

Income taxes receivable
 
25,510

 
3,567

Prepaid expenses and other current assets
 
25,264

 
6,330

Total current assets
 
892,135

 
325,434

 
 
 
 
 
Property and equipment, net
 
236,057

 
112,447

Goodwill
 
831,151

 
295,609

Other assets
 
176,153

 
10,084

Deferred tax assets
 
9,707

 
9,321

Total assets
 
$
2,145,203

 
$
752,895

 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
Accounts payable and accrued liabilities
 
$
109,354

 
$
27,826

Customer deposits
 
33,536

 
14,426

Income taxes payable
 
738

 
3,923

Total current liabilities
 
143,628

 
46,175

 
 
 
 
 
Revolving unsecured credit facility
 
260,000

 
58,000

Senior unsecured notes
 
196,545

 
195,874

Deferred tax liabilities
 
61,275

 
21,464

Other liabilities
 
33,769

 
—

Total liabilities
 
695,217

 
321,513

 
 
 
 
 
Stockholders’ equity:
 
 
 
 
Preferred stock
 
—

 
—

Common stock
 
493

 
403

Additional paid-in capital
 
1,217,969

 
202,393

Retained earnings
 
387,401

 
643,604

Accumulated other comprehensive loss
 
(119,806
)
 
(78,410
)
Common stock held in treasury, at cost
 
(36,071
)
 
(336,608
)
Total stockholders’ equity
 
1,449,986

 
431,382

Total liabilities and stockholders’ equity
 
$
2,145,203

 
$
752,895


Note: The presentation of the Cash America assets and assumed liabilities in the Company’s financial statements is preliminary and will likely change, perhaps significantly, as fair value estimates are refined during the measurement period. The Company will complete its purchase price allocation no later than the third quarter of 2017.

Additionally, certain balances as of December 31, 2015 have been reclassified in order to conform to the current year presentation.

9

FIRSTCASH, INC.
OPERATING INFORMATION
(UNAUDITED)

The Company is providing segment level reporting beginning with this release. The Company’s new reportable segments are as follows:

•
U.S. operations - Includes all pawn and consumer loan operations in the United States
•
Latin America operations - Includes all pawn and consumer loan operations in Latin America, which currently includes operations in Mexico, Guatemala and El Salvador

The Company has provided a detail of pre-tax operating income by segment, which is a measure of pre-tax store-level operating performance. Store operating expenses include salary and benefit expense of store-level employees, occupancy costs, bank charges, security, insurance, utilities, supplies, cash shortages and other costs incurred by the stores.

Operating Results for the Three Months Ended December 31, 2016 Compared to the Three Months Ended December 31, 2015

The following table presents segment pre-tax operating income of the U.S. operations segment for the three months ended December 31, 2016 as compared to the three months ended December 31, 2015 (in thousands).

 
 
Three Months Ended
 
 
 
 
 
December 31,
Increase /
U.S. Operations Segment
 
2016
 
2015
(Decrease)
Revenue:
 
 
 
 
 
 
 
Retail merchandise sales
 
$
199,353

 
$
54,056

 
269
%
 
Pawn loan fees
 
100,954

 
24,545

 
311
%
 
Consumer loan and credit services fees
 
22,303

 
5,965

 
274
%
 
Wholesale scrap jewelry sales
 
21,770

 
4,391

 
396
%
 
Total revenue
 
344,380

 
88,957

 
287
%
 
 
 
 
 
 
 
 
 
Cost of revenue:
 
 
 
 
 
 
 
Cost of retail merchandise sold
 
126,454

 
32,360

 
291
%
 
Consumer loan and credit services loss provision
 
6,114

 
1,956

 
213
%
 
Cost of wholesale scrap jewelry sold
 
18,443

 
4,040

 
357
%
 
Total cost of revenue
 
151,011

 
38,356

 
294
%
 
 
 
 
 
 
 
 
 
Net revenue
 
193,369

 
50,601

 
282
%
 
 
 
 
 
 
 
 
 
Segment expenses:
 
 
 
 
 
 
 
Store operating expenses
 
108,031

 
27,785

 
289
%
 
Depreciation and amortization
 
7,791

 
1,390

 
461
%
 
Total segment expenses
 
115,822

 
29,175

 
297
%
 
 
 
 
 
 
 
 
 
Segment pre-tax operating income
 
$
77,547

 
$
21,426

 
262
%
 




10

FIRSTCASH, INC.
OPERATING INFORMATION (CONTINUED)
(UNAUDITED)

The following table presents segment pre-tax operating income of the Latin America operations segment for the three months ended December 31, 2016 as compared to the three months ended December 31, 2015 (in thousands). Constant currency results are non-GAAP measures which exclude the effects of foreign currency translation and are calculated by translating current year results at prior year average exchange rates, which is more fully described elsewhere in this release.

 
 
 
 
 
 
 
 
 
Constant Currency Basis
 
 
 
 
 
 
 
 
 
Three Months
 
 
 
 
 
 
Three Months
 
 
 
 
Ended
 
 
 
 
 
 
Ended
 
 
 
 
December 31,
 
Increase /
 
 
December 31,
Increase /
 
2016
 
(Decrease)
 
 
2016
 
2015
(Decrease)
 
(Non-GAAP)
 
(Non-GAAP)
Latin America Operations Segment
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
Retail merchandise sales
 
$
83,244

 
$
74,224

 
12
 %
 
 
$
97,933

 
 
32
 %
 
Pawn loan fees
 
28,987

 
24,784

 
17
 %
 
 
33,989

 
 
37
 %
 
Consumer loan and credit services fees
 
469

 
538

 
(13
)%
 
 
555

 
 
3
 %
 
Wholesale scrap jewelry sales
 
4,962

 
2,921

 
70
 %
 
 
4,962

 
 
70
 %
 
Total revenue
 
117,662

 
102,467

 
15
 %
 
 
137,439

 
 
34
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of retail merchandise sold
 
52,936

 
47,514

 
11
 %
 
 
62,242

 
 
31
 %
 
Consumer loan and credit services loss provision
 
99

 
129

 
(23
)%
 
 
117

 
 
(9
)%
 
Cost of wholesale scrap jewelry sold
 
3,881

 
2,500

 
55
 %
 
 
4,594

 
 
84
 %
 
Total cost of revenue
 
56,916

 
50,143

 
14
 %
 
 
66,953

 
 
34
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net revenue
 
60,746

 
52,324

 
16
 %
 
 
70,486

 
 
35
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Segment expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Store operating expenses
 
29,420

 
24,725

 
19
 %
 
 
34,072

 
 
38
 %
 
Depreciation and amortization
 
2,510

 
2,128

 
18
 %
 
 
2,913

 
 
37
 %
 
Total segment expenses
 
31,930

 
26,853

 
19
 %
 
 
36,985

 
 
38
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Segment pre-tax operating income
 
$
28,816

 
$
25,471

 
13
 %
 
 
$
33,501

 
 
32
 %
 


11

FIRSTCASH, INC.
OPERATING INFORMATION (CONTINUED)
(UNAUDITED)

The following table reconciles pre-tax operating income of the Company’s U.S. operations segment and Latin America operations segment discussed above to consolidated net income for the three months ended December 31, 2016 as compared to the three months ended December 31, 2015 (in thousands).

 
 
Three Months Ended
 
 
 
 
 
December 31,
Increase /
 
 
2016
 
2015
(Decrease)
Other Items
 
 
 
 
 
 
 
U.S. operations segment pre-tax operating income
 
$
77,547

 
$
21,426

 
262
 %
 
Latin America operations segment pre-tax operating income
 
28,816

 
25,471

 
13
 %
 
Consolidated segment pre-tax operating income
 
106,363

 
46,897

 
127
 %
 
 
 
 
 
 
 
 
 
Corporate expenses and other income:
 
 
 
 
 
 
 
Administrative expenses
 
38,260

 
12,818

 
198
 %
 
Merger and other acquisition expenses
 
2,793

 
1,700

 
64
 %
 
Depreciation and amortization
 
4,399

 
770

 
471
 %
 
Interest expense
 
6,461

 
4,405

 
47
 %
 
Interest income
 
(115
)
 
(423
)
 
(73
)%
 
Net gain on sale of common stock of Enova
 
(1,552
)
 
—

 
—
 %
 
Total corporate expenses and other income
 
50,246

 
19,270

 
161
 %
 
 
 
 
 
 
 
 
 
Income before income taxes
 
56,117

 
27,627

 
103
 %
 
 
 
 
 
 
 
 
 
Provision for income taxes
 
19,425

 
8,217

 
136
 %
 
 
 
 
 
 
 
 
 
Net income
 
$
36,692

 
$
19,410

 
89
 %
 


12

FIRSTCASH, INC.
OPERATING INFORMATION (CONTINUED)
(UNAUDITED)

Operating Results for the Twelve Months Ended December 31, 2016 Compared to the Twelve Months Ended December 31, 2015

The following table presents segment pre-tax operating income of the U.S. operations segment for the twelve months ended December 31, 2016 as compared to the twelve months ended December 31, 2015 (in thousands):

 
 
Twelve Months Ended
 
 
 
 
 
December 31,
Increase /
U.S. Operations Segment
 
2016
 
2015
(Decrease)
Revenue:
 
 
 
 
 
 
 
Retail merchandise sales
 
$
386,026

 
$
197,011

 
96
%
 
Pawn loan fees
 
195,883

 
94,761

 
107
%
 
Consumer loan and credit services fees
 
41,922

 
25,696

 
63
%
 
Wholesale scrap jewelry sales
 
47,680

 
19,380

 
146
%
 
Total revenue
 
671,511

 
336,848

 
99
%
 
 
 
 
 
 
 
 
 
Cost of revenue:
 
 
 
 
 
 
 
Cost of retail merchandise sold
 
241,086

 
117,059

 
106
%
 
Consumer loan and credit services loss provision
 
11,494

 
6,770

 
70
%
 
Cost of wholesale scrap jewelry sold
 
41,357

 
17,530

 
136
%
 
Total cost of revenue
 
293,937

 
141,359

 
108
%
 
 
 
 
 
 
 
 
 
Net revenue
 
377,574

 
195,489

 
93
%
 
 
 
 
 
 
 
 
 
Segment expenses:
 
 
 
 
 
 
 
Store operating expenses
 
215,227

 
107,852

 
100
%
 
Depreciation and amortization
 
13,618

 
6,146

 
122
%
 
Total segment expenses
 
228,845

 
113,998

 
101
%
 
 
 


 


 


 
Segment pre-tax operating income
 
$
148,729

 
$
81,491

 
83
%
 




13

FIRSTCASH, INC.
OPERATING INFORMATION (CONTINUED)
(UNAUDITED)

The following table presents segment pre-tax operating income of the Latin America operations segment for the twelve months ended December 31, 2016 as compared to the twelve months ended December 31, 2015 (in thousands). Constant currency results are non-GAAP measures which exclude the effects of foreign currency translation and are calculated by translating current year results at prior year average exchange rates, which is more fully described elsewhere in this release.

 
 
 
 
 
 
 
 
 
Constant Currency Basis
 
 
 
 
 
 
 
Twelve Months
 
 
 
 
Twelve Months
 
 
 
 
Ended
 
 
 
 
Ended
 
 
 
 
December 31,
 
Increase /
 
 
December 31,
Increase /
 
2016
 
(Decrease)
 
 
2016
 
2015
(Decrease)
 
(Non-GAAP)
 
(Non-GAAP)
Latin America Operations Segment
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
Retail merchandise sales
 
$
283,105

 
$
252,285

 
12
 %
 
 
$
331,325

 
 
31
%
 
Pawn loan fees
 
116,874

 
100,687

 
16
 %
 
 
136,259

 
 
35
%
 
Consumer loan and credit services fees
 
1,929

 
2,107

 
(8
)%
 
 
2,271

 
 
8
%
 
Wholesale scrap jewelry sales
 
14,958

 
12,675

 
18
 %
 
 
14,958

 
 
18
%
 
Total revenue
 
416,866

 
367,754

 
13
 %
 
 
484,813

 
 
32
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of retail merchandise sold
 
177,470

 
161,572

 
10
 %
 
 
207,615

 
 
28
%
 
Consumer loan and credit services loss provision
 
499

 
389

 
28
 %
 
 
587

 
 
51
%
 
Cost of wholesale scrap jewelry sold
 
11,668

 
10,098

 
16
 %
 
 
13,505

 
 
34
%
 
Total cost of revenue
 
189,637

 
172,059

 
10
 %
 
 
221,707

 
 
29
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net revenue
 
227,229

 
195,695

 
16
 %
 
 
263,106

 
 
34
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Segment expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Store operating expenses
 
112,787

 
99,720

 
13
 %
 
 
130,029

 
 
30
%
 
Depreciation and amortization
 
10,429

 
8,803

 
18
 %
 
 
12,064

 
 
37
%
 
Total segment expenses
 
123,216

 
108,523

 
14
 %
 
 
142,093

 
 
31
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Segment pre-tax operating income
 
$
104,013

 
$
87,172

 
19
 %
 
 
$
121,013

 
 
39
%
 







14

FIRSTCASH, INC.
OPERATING INFORMATION (CONTINUED)
(UNAUDITED)

The following table reconciles pre-tax operating income of the Company’s U.S. operations segment and Latin America operations segment discussed above to consolidated net income for the twelve months ended December 31, 2016 as compared to the twelve months ended December 31, 2015 (in thousands):

 
 
Twelve Months Ended
 
 
 
 
 
December 31,
Increase /
 
 
2016
 
2015
(Decrease)
Other Items
 
 
 
 
 
 
 
U.S. operations segment pre-tax operating income
 
$
148,729

 
$
81,491

 
83
 %
 
Latin America operations segment pre-tax operating income
 
104,013

 
87,172

 
19
 %
 
Consolidated segment pre-tax operating income
 
252,742

 
168,663

 
50
 %
 
 
 
 
 
 
 

 
Corporate expenses and other income:
 
 
 
 
 
 
 
Administrative expenses
 
96,537

 
51,883

 
86
 %
 
Merger and other acquisition expenses
 
36,670

 
2,875

 
1,175
 %
 
Depreciation and amortization
 
7,818

 
2,990

 
161
 %
 
Goodwill impairment - U.S. consumer loan operations
 
—

 
7,913

 
(100
)%
 
Interest expense
 
20,320

 
16,887

 
20
 %
 
Interest income
 
(751
)
 
(1,566
)
 
(52
)%
 
Net gain on sale of common stock of Enova
 
(1,299
)
 
—

 
—
 %
 
Total corporate expenses and other income
 
159,295

 
80,982

 
97
 %
 
 
 
 
 
 
 
 
 
Income before income taxes
 
93,447

 
87,681

 
7
 %
 
 
 

 

 

 
Provision for income taxes
 
33,320

 
26,971

 
24
 %
 
 
 
 
 
 
 
 
 
Net income
 
$
60,127

 
$
60,710

 
(1
)%
 







15

FIRSTCASH, INC.
OPERATING INFORMATION (CONTINUED)
(UNAUDITED)

Pawn and Consumer Lending Earning Assets at December 31, 2016 Compared to December 31, 2015

The following table details pawn loans, inventories and other consumer loans held by the Company and active credit service organization (“CSO”) credit extensions from independent third-party lenders for each reportable segment as of December 31, 2016 as compared to December 31, 2015 (in thousands). Constant currency results are non-GAAP measures which exclude the effects of foreign currency translation and are calculated by translating current-year balances at the prior-year end-of-period exchange rate, which is more fully described elsewhere in this release.

 
 
 
 
 
 
 
 
 
Constant Currency Basis
 
 
 
 
 
 
 
 
 
Balance at
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31,
 
Increase /
 
 
Balance at December 31,
Increase /
 
2016
 
(Decrease)
 
 
2016
 
2015
(Decrease)
 
(Non-GAAP)
 
(Non-GAAP)
U.S. operations segment:
 
 
 
 
 
 
 
 
 
 
 
 
 
Pawn loans
 
$
293,392

 
$
68,153

 
330
 %
 
 
$
293,392

 
 
330
 %
 
CSO credit extensions held by independent third-party (1)
 
12,098

 
7,005

 
73
 %
 
 
12,098

 
 
73
 %
 
Other consumer loans
 
28,847

 
688

 
4,093
 %
 
 
28,847

 
 
4,093
 %
 
Combined customer loans (2)
 
334,337

 
75,846

 
341
 %
 
 
334,337

 
 
341
 %
 
Latin America operations segment:
 
 
 
 
 

 
 
 
 
 
 
 
Pawn loans
 
57,114

 
49,448

 
16
 %
 
 
67,745

 
 
37
 %
 
Other consumer loans
 
357

 
430

 
(17
)%
 
 
429

 
 
—
 %
 
Combined customer loans
 
57,471

 
49,878

 
15
 %
 
 
68,174

 
 
37
 %
 
Total (2):
 
 
 
 
 

 
 
 
 
 
 
 
Pawn loans
 
350,506

 
117,601

 
198
 %
 
 
361,137

 
 
207
 %
 
CSO credit extensions held by independent third-parties (1)
 
12,098

 
7,005

 
73
 %
 
 
12,098

 
 
73
 %
 
Other consumer loans
 
29,204

 
1,118

 
2,512
 %
 
 
29,276

 
 
2,519
 %
 
Combined customer loans (2)
 
$
391,808

 
$
125,724

 
212
 %
 
 
$
402,511

 
 
220
 %
 
Pawn inventories:
 
 
 
 
 

 
 
 
 
 
 
 
U.S. operations segment
 
$
282,860

 
$
56,040

 
405
 %
 
 
$
282,860

 
 
405
 %
 
Latin America operations segment
 
47,823

 
37,418

 
28
 %
 
 
56,908

 
 
52
 %
 
Combined inventories
 
$
330,683

 
$
93,458

 
254
 %
 
 
$
339,768

 
 
264
 %
 

(1) 
CSO amounts outstanding are composed of the principal portion of active CSO extensions of credit by independent third-party lenders, which are not included on the Company’s balance sheet, net of the Company’s estimated fair value of its liability under the letters of credit guaranteeing the extensions of credit.

(2) 
Combined customer loans is a non-GAAP measure as it includes CSO credit extensions held by independent third-parties not included on the Company’s balance sheet. The Company believes this non-GAAP measure provides investors with important information needed to evaluate the magnitude of potential loan losses and the opportunity for revenue performance of the consumer loan portfolio on an aggregate basis. The Company also believes the comparison of the aggregate amounts from period to period is more meaningful than comparing only the amounts reflected on the Company’s balance sheet since both credit services fees revenue and the corresponding loss provision are impacted by the aggregate amount of loans owned by the Company and those guaranteed by the Company as reflected in its financial statements.


16

FIRSTCASH, INC.
STORE COUNT ACTIVITY

The following table details store count activity for the twelve months ended December 31, 2016:

 
 
 
 
Consumer Loan Locations (2)
 
 
 
 
Pawn
Locations (1)
 
 
Total
Locations
U.S. operations segment:
 
 
 
 
 
 
Total locations, beginning of period
 
296

 
42

 
338

Merged Cash America locations
 
794

 
21

 
815

Locations acquired
 
3

 
—

 
3

Locations closed or consolidated
 
(8
)
 
(18
)
 
(26
)
Total locations, end of period
 
1,085

 
45

 
1,130

 
 
 
 
 
 
 
Latin America operations segment:
 
 
 
 
 
 
Total locations, beginning of period
 
709

 
28

 
737

New locations opened
 
41

 
—

 
41

Locations acquired
 
179

 
—

 
179

Locations closed or consolidated
 
(2
)
 
—

 
(2
)
Total locations, end of period
 
927

 
28

 
955

 
 
 
 
 
 
 
Total:
 
 
 
 
 
 
Total locations, beginning of period
 
1,005

 
70

 
1,075

Merged Cash America locations
 
794

 
21

 
815

New locations opened
 
41

 
—

 
41

Locations acquired
 
182

 
—

 
182

Locations closed or consolidated
 
(10
)
 
(18
)
 
(28
)
Total locations, end of period
 
2,012

 
73

 
2,085


(1) 
At December 31, 2016, 326 of the U.S. pawn stores, which are primarily located in Texas and Ohio, also offered consumer loans or credit services products, while 49 Mexico pawn stores offer consumer loan products.

(2) 
The Company’s U.S. free-standing consumer loan locations offer consumer loans and/or credit services products and are located in Ohio, Texas, California and limited markets in Mexico. The table does not include 70 check cashing locations operated by independent franchisees under franchising agreements with the Company.

17

FIRSTCASH, INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
TO GAAP FINANCIAL MEASURES
(UNAUDITED)

The Company uses certain financial calculations such as adjusted net income, adjusted net income per share, adjusted EBITDA and constant currency results (as defined or explained below) as factors in the measurement and evaluation of the Company’s operating performance and period-over-period growth. The Company derives these financial calculations on the basis of methodologies other than generally accepted accounting principles (“GAAP”), primarily by excluding from a comparable GAAP measure certain items that the Company does not consider to be representative of its actual operating performance. These financial calculations are “non-GAAP financial measures” as defined in Securities and Exchange Commission (“SEC”) rules. The Company uses these non-GAAP financial measures in operating its business because management believes they are less susceptible to variances in actual operating performance that can result from the excluded items, other infrequent charges and currency fluctuations. The Company presents these financial measures to investors because management believes they are useful to investors in evaluating the primary factors that drive the Company’s operating performance and because management believes they provide greater transparency into the Company’s results of operations. However, items that are excluded and other adjustments and assumptions that are made in calculating adjusted net income, adjusted net income per share, adjusted EBITDA and constant currency results are significant components in understanding and assessing the Company’s financial performance. These non-GAAP financial measures should be evaluated in conjunction with, and are not a substitute for, the Company’s GAAP financial measures. Further, because these non-GAAP financial measures are not determined in accordance with GAAP and are thus susceptible to varying calculations, adjusted net income, adjusted net income per share, adjusted EBITDA and constant currency results as presented may not be comparable to other similarly titled measures of other companies.

The Company expects to incur significant expenses over the next two years in connection with its merger and integration with Cash America. The Company has adjusted the applicable financial measures to exclude these items because it generally would not incur such costs and expenses as part of its continuing operations. The merger related expenses are predominantly incremental costs directly associated with the merger and integration of Cash America, including professional fees, legal expenses, severance and retention payments, accelerated vesting of certain equity compensation awards, contract breakage costs and costs related to consolidation of technology systems and corporate facilities.

Adjusted Net Income and Adjusted Net Income Per Share
Management believes the presentation of adjusted net income and adjusted net income per share (“Adjusted Income Measures”) provides investors with greater transparency and provides a more complete understanding of the Company’s financial performance and prospects for the future. In addition, management believes the adjustments shown below are useful to investors in order to allow them to compare the Company’s financial results for the current periods presented with the prior periods presented.




18

FIRSTCASH, INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
TO GAAP FINANCIAL MEASURES (CONTINUED)
(UNAUDITED)

The following tables provide a reconciliation between the net income and diluted earnings per share calculated in accordance with GAAP to the Adjusted Income Measures, which are shown net of tax (in thousands, except per share data):
 
Three Months Ended December 31,
 
Twelve Months Ended December 31,
 
2016
 
2015
 
2016
 
2015
 
In Thousands
 
Per Share
 
In Thousands
 
Per Share
 
In Thousands
 
Per Share
 
In Thousands
 
Per Share
Net income, as reported
$
36,692

 
$
0.76

 
$
19,410

 
$
0.69

 
$
60,127

 
$
1.72

 
$
60,710

 
$
2.14

Adjustments, net of tax:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Merger related expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Transaction
667

 
0.01

 
—

 
—

 
14,399

 
0.41

 
—

 
—

Severance and retention
857

 
0.02

 
—

 
—

 
9,594

 
0.27

 
—

 
—

Other
—

 
—

 
—

 
—

 
1,726

 
0.05

 
—

 
—

Total merger related expenses
1,524

 
0.03

 
—

 
—

 
25,719

 
0.73

 
—

 
—

Other acquisition expenses
210

 
—

 
1,190

 
0.04

 
304

 
0.01

 
1,989

 
0.07

Restructuring expenses related to U.S. consumer loan operations
—

 
—

 
—

 
—

 
—

 
—

 
5,784

 
0.21

Net gain on sale of common stock of Enova
(978
)
 
(0.02
)
 
—

 
—

 
(818
)
 
(0.02
)
 
—

 
—

Adjusted net income
$
37,448

 
$
0.77

 
$
20,600

 
$
0.73

 
$
85,332

 
$
2.44

 
$
68,483

 
$
2.42



19

FIRSTCASH, INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
TO GAAP FINANCIAL MEASURES (CONTINUED)
(UNAUDITED)

The following table provides a reconciliation of the gross amounts, the impact of income taxes and the net amounts for each of the adjustments included in the table above (in thousands):

 
Three Months Ended December 31,
 
2016
 
2015
 
Pre-tax
 
Tax
 
After-tax
 
Pre-tax
 
Tax
 
After-tax
Merger related expenses (1)
$
2,493

 
$
969

 
$
1,524

 
$
—

 
$
—

 
$
—

Other acquisition expenses
300

 
90

 
210

 
1,700

 
510

 
1,190

Net gain on sale of common stock of Enova
(1,552
)
 
(574
)
 
(978
)
 
—

 
—

 
—

Total adjustments
$
1,241

 
$
485

 
$
756

 
$
1,700

 
$
510

 
$
1,190


(1) Resulting tax benefit is less than the statutory rate as a portion of the transaction costs are not deductible for tax purposes.
 
Twelve Months Ended December 31,
 
2016
 
2015
 
Pre-tax
 
Tax
 
After-tax
 
Pre-tax
 
Tax
 
After-tax
Merger related expenses (1)
$
36,220

 
$
10,501

 
$
25,719

 
$
—

 
$
—

 
$
—

Other acquisition expenses
450

 
146

 
304

 
2,875

 
886

 
1,989

Restructuring expenses related to U.S. consumer loan operations
—

 
—

 
—

 
8,878

 
3,094

 
5,784

Net gain on sale of common stock of Enova
(1,299
)
 
(481
)
 
(818
)
 
—

 
—

 
—

Total adjustments
$
35,371

 
$
10,166

 
$
25,205

 
$
11,753

 
$
3,980

 
$
7,773


(1) Resulting tax benefit is less than the statutory rate as a portion of the transaction costs are not deductible for tax purposes.



20

FIRSTCASH, INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
TO GAAP FINANCIAL MEASURES (CONTINUED)
(UNAUDITED)

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization
The Company defines adjusted EBITDA as net income before income taxes, depreciation and amortization, interest expense, interest income and certain items as listed below that management considers to be non-operating in nature and not representative of its actual operating performance. The Company believes adjusted EBITDA is commonly used by investors to assess a company’s financial performance. However, adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation or as a substitute for net income or other statement of income data prepared in accordance with GAAP. The following table provides a reconciliation of net income to adjusted EBITDA (in thousands):     
 
 
Three Months Ended
 
Twelve Months Ended
 
 
December 31,
 
December 31,
 
 
2016
 
2015
 
2016
 
2015
Net income
 
$
36,692

 
$
19,410

 
$
60,127

 
$
60,710

Income taxes
 
19,425

 
8,217

 
33,320

 
26,971

Depreciation and amortization (1)
 
14,700

 
4,288

 
31,865

 
17,446

Interest expense
 
6,461

 
4,405

 
20,320

 
16,887

Interest income
 
(115
)
 
(423
)
 
(751
)
 
(1,566
)
EBITDA
 
77,163

 
35,897

 
144,881

 
120,448

Adjustments:
 
 
 
 
 
 
 
 
Merger related expenses
 
2,493

 
—

 
36,220

 
—

Other acquisition expenses
 
300

 
1,700

 
450

 
2,875

Restructuring expenses related to U.S. consumer loan operations
 
—

 
—

 
—

 
8,878

Gain on sale of equity securities
 
(1,552
)
 
—

 
(1,299
)
 
—

Adjusted EBITDA
 
$
78,404

 
$
37,597

 
$
180,252

 
$
132,201

 
 
 
 
 
 
 
 
 
Adjusted EBITDA margin calculated as follows:
 
 
 
 
 
 
 
 
Total revenue
 
$
462,042

 
$
191,424

 
$
1,088,377

 
$
704,602

Adjusted EBITDA
 
$
78,404

 
$
37,597

 
$
180,252

 
$
132,201

Adjusted EBITDA as a percentage of revenue
 
17
%
 
20
%
 
17
%
 
19
%
 
(1) 
For the twelve months ended December 31, 2015, excludes $493 of depreciation and amortization, which is included in the restructuring expenses related to U.S. consumer loan operations.




21

FIRSTCASH, INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
TO GAAP FINANCIAL MEASURES (CONTINUED)
(UNAUDITED)

Constant Currency
The Company’s reporting currency is the U.S. dollar. However, certain performance metrics discussed in this release are presented on a “constant currency” basis, which may be considered a non-GAAP measurement of financial performance. The Company’s management uses constant currency results to evaluate operating results of business operations in Latin America, which are primarily transacted in local currencies. Constant currency results reported herein are calculated by translating certain balance sheet and income statement items denominated in local currencies using the exchange rate from the prior-year comparable period, as opposed to the current comparable period, in order to exclude the effects of foreign currency rate fluctuations for purposes of evaluating period-over-period comparisons. Business operations in Mexico and Guatemala are transacted in Mexican pesos and Guatemalan quetzales, respectively. The Company also has operations in El Salvador where the reporting and functional currency is the U.S. dollar. In addition, see the tables detailing the components of revenue elsewhere in this release for additional reconciliation of revenues to constant currency revenues.

The following table provides exchange rates for the Mexican peso and Guatemalan quetzal for the current and prior year periods:  

 
 
December 31,
 
Increase /
 
 
2016
 
2015
 
(Decrease)
Mexican peso / U.S. dollar exchange rate:
 
 
 
 
 
 
 
 
End-of-period
 
20.7
 
17.2
 
 
(20
)%
 
Three months ended
 
19.8
 
16.7
 
 
(19
)%
 
Twelve months ended
 
18.7
 
15.8
 
 
(18
)%
 
 
 
 
 
 
 
 
 
 
Guatemalan quetzal / U.S. dollar exchange rate:
 
 
 
 
 
 
 
 
End-of-period
 
7.5
 
7.6
 
 
1
 %
 
Three months ended
 
7.5
 
7.6
 
 
1
 %
 
Twelve months ended
 
7.6
 
7.7
 
 
1
 %
 

For further information, please contact:
Gar Jackson
Global IR Group
Phone:     (949) 873-2789
Email:     gar@globalirgroup.com

Doug Orr, Executive Vice President and Chief Financial Officer
Phone:    (817) 258-2650
Email:     investorrelations@firstcash.com
Website:    ir.firstcash.com


22