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Press release from GlobeNewswire (a Nasdaq OMX company)

First Cash Reports 42% Increase in Fourth Quarter Net Income

Wednesday, January 26, 2011

First Cash Reports 42% Increase in Fourth Quarter Net Income03:00 EST Wednesday, January 26, 2011 ARLINGTON, Texas, Jan. 26, 2011 (GLOBE NEWSWIRE) -- First Cash Financial Services, Inc. (Nasdaq:FCFS) today announced record-setting revenue, net income and earnings per share for both the three months and the year ended December 31, 2010. Earnings per share from continuing operations were $0.59 for the quarter and $1.75 for the year, as net income from continuing operations increased 42% and 32% for the respective fourth quarter and full-year periods. In addition, the Company has initiated guidance for fiscal 2011 earnings from continuing operations at a range of $2.02 to $2.10 per share.Earnings Highlights Diluted earnings per share from continuing operations for the fourth quarter of 2010 were $0.59, an increase of 37% compared to $0.43 in the fourth quarter of 2009. Net income from continuing operations increased by 42% to $18.6 million for the fourth quarter of 2010, compared to $13.1 million in the prior year. Fiscal 2010 diluted earnings per share from continuing operations were $1.75, a 29% increase compared to $1.36 in 2009. Net income from continuing operations for the year increased 32%, totaling $54.3 million, compared to $41.2 million in the prior year. Total diluted earnings per share, including income from discontinued operations, were $0.62 for the fourth quarter of 2010 and $1.86 for the full year. Earnings per share from discontinued operations were $0.03 for the quarter and $0.11 for the year.Revenue Highlights Consolidated 2010 revenue was $431 million, an increase of 19% over the prior year. Fourth quarter revenue increased by 17% over the comparable prior-year period. Revenue from international operations grew by 30%, accounting for 55% of total fourth quarter revenue and 52% of full year revenue. Fiscal 2010 revenue increased by 11% in the U.S. Consolidated same-store revenue increased by 10% during 2010. By country, same-store revenue increased 12% in Mexico and 8% in the United States during fiscal 2010. On a product-line basis in fiscal 2010, revenue from service fees on pawn loans increased 26% for the year, reflecting accelerating consumer demand for micro-lending products in both the United States and Mexico. Sales of pawn merchandise increased by 18% for the year, driven by especially strong retail sales in Mexico, which were up 39% in 2010. December holiday results were strong, with fourth quarter retail merchandise sales increasing 44% in Mexico and 8% in the U.S.  The retail sales gains reflected the Company's continued focus on hardgood (non-jewelry) lending and retailing in Mexico and more than offset a consolidated fourth quarter decrease in scrap jewelry sales of 14%. Total short-term loan and credit services revenue increased by 13% in fiscal 2010 due to increased same-store revenue. Fiscal 2010 revenue from the Company's remaining short-term loan and credit services operations in the United States represented less than 13% of total revenue.Key Profitability Metrics The Company's net operating margin (pre-tax income) was 20% in fiscal 2010, compared to 18% in 2009, which reflected same-store revenue growth and leveraging of operating expenses. The store-level operating profit margins were 29% for fiscal 2010, compared to 28% in the prior year. Gross margins on retail pawn merchandise sales were 42% for both the quarter and fiscal 2010, consistent with the comparable prior-year periods. Margins on wholesale scrap jewelry sales were 38% for the quarter and 35% for the year, reflecting increased gold prices in the fourth quarter, as compared to prior-year margins of 33% and 35%, respectively. Pawn receivables, which yield future service fees and inventories, increased by 31% year-over-year. Growth of pawn receivables in Mexico was particularly strong at 57% above the prior year, while U.S. pawns increased 13%. Over 95% of the Company's $74 million in customer receivables are pawn loans, which are fully collateralized. For the other credit products and services, which are comprised of short-term loans and credit services transactions, credit losses were reduced to 25% of related revenue in fiscal 2010, compared to 26% in the prior year. Inventory turns remained strong in fiscal 2010 at 4.1 turns per year, compared to 4.3 turns in the prior year. The Company's return on equity for fiscal 2010 was 21%, while its return on assets was 18%. On a year-over-year basis, total shareholder equity increased by 40% and total assets increased by 34%.New Store Openings A total of 19 pawn stores were added during the fourth quarter, resulting in a total of 70 pawn stores added in fiscal 2010. Pawn store openings in fiscal 2010 included 58 de novo pawn store openings in Mexico, primarily in central Mexico, which includes Mexico City and the surrounding State of Mexico. The Company increased its number of large format U.S. pawn locations by 14 stores in 2010, or 14%, through a combination of acquisitions (6 stores), de novo openings (6 stores) and the expansion of small format stores (2 stores). As of December 31, 2010, the Company had 612 total store locations, of which 488 were pawn stores. On a year-over-year basis, the number of large format pawn stores increased by 16% and the total store count increased by 12%.Financial Position & Liquidity Earnings before interest, taxes, depreciation and amortization ("EBITDA") from continuing operations totaled $95 million for fiscal 2010, an increase of 25% over the comparable prior-year period. EBITDA margins were 22% for fiscal 2010 compared to 21% in the prior year. A detailed reconciliation of EBITDA and free cash flow, both non-GAAP financial measures, is provided elsewhere in this release. During fiscal 2010, the Company utilized current year cash flows to invest $18.4 million in new store additions, grow net customer receivables by $16.7 million, increase inventories by $13.0 million, reduce debt by $9.8 million and pay $5.7 million for acquisitions.  Even with the significant investments in new stores and receivable growth, free cash flow in fiscal 2010 was $32 million. Cash balances increased to $67 million at December 31, 2010, compared to $27 million last year. The Company had no amounts outstanding on its $25 million unsecured revolving credit facility and only $2 million of other interest-bearing debt is currently outstanding.  As of December 31, 2010, the ratio of total liabilities to stockholders' equity was 0.1 to 1, compared to 0.2 to 1 in the prior year.     Net working capital increased over the past year by 68% and totaled $170.4 million at year end. The current ratio was 5.9 to 1 at December 31, 2010.     2011 Outlook The Company is initiating its fiscal 2011 guidance for earnings per share from continuing operations at a range of $2.02 to $2.10 per share, a 15% to 20% earnings growth over 2010. The majority of 2011 revenue will again be derived from pawn operations, with only 10% to 12% of revenue expected to be from U.S. short-term loan and credit services operations. The Company expects to add 70 to 80 new stores in 2011, the majority of which will be in Mexico. All of the anticipated 2011 store additions will be pawn stores.Commentary & Analysis   Mr. Rick Wessel, First Cash's Chief Executive Officer, commented on the 2010 results, "We are extremely pleased to announce another year of record-setting operating results. We grew top line revenue by 19% and expanded both gross and operating profit margins, all of which propelled the net income growth of 32%. Importantly, our fourth quarter results were especially strong, which provides significant momentum as we enter 2011." In addition to record revenue and earnings, the Company achieved other key milestones in 2010. For the first time in Company history, over 50% of total revenues were generated in Mexico. In addition, the full year operating margin reached 20%, which was another first, while the Company also added its 600th store during the fourth quarter of 2010. According to Mr. Wessel, "We are proud of these accomplishments. They are a credit to our diverse and talented team of managers and store associates and reflect their energy and commitment to excellence." In looking at fourth quarter results, growth in net income was driven by a combination of strong loan demand, impressive retail sales and increased operating margins.  The rate of year-over-year pawn receivable growth, 57% in Mexico and 13% in the U.S., accelerated during the quarter as compared to growth rates at the end of the third quarter. In addition, the important fourth quarter retail sales were up 44% in Mexico and 8% in the U.S. Mr. Wessel noted, "The growth in pawn receivables drove a 30% increase in consolidated fourth quarter pawn service fee revenue, providing visibility for pawn revenue and earnings growth in the first half of 2011. In short, the current operating environment for our pawn stores is robust, given increasing consumer demand for micro-credit and deep-value retail products in both the United States and Mexico." The Company continues to execute on its growth strategy in Mexico through new store openings and maturation of the existing, but largely immature, store base. The total store count in Mexico now stands at 386 locations, which represents 63% of the Company's consolidated total store count. According to Mr. Wessel, "We believe that First Cash has a significant competitive advantage in Mexico where we are by far the largest operator of full-service pawn stores. The 333 large format stores we have in Mexico allow us to lend on a broader array of products, including many popular consumer electronic items, appliances and power tools. In addition, the size of the stores and their prominent locations attract heavy retail traffic. We opened a total of 58 stores in Mexico this year, and our pipeline of stores slated for opening in 2011 is well-positioned." In the U.S., First Cash added a total of 14 large format pawn stores in 2010, increasing the U.S. store count from 97 to 111 full service locations. Seven of the new locations were added in the fourth quarter, primarily de novo stores in the Company's Texas markets. Coupled with the mid-year acquisition of five stores on the East Coast, the Company believes that the added stores will drive additional U.S. revenue and profitability. The Company expects to add additional U.S. pawn stores in 2011 which are included in the consolidated store opening target.    The strength of the Company's cash flows and balance sheet liquidity continued to be impressive. All of the 2010 store openings, acquisitions and receivables growth were funded from operating cash flows. There are no amounts outstanding on the Company's $25 million unsecured credit facility, and net investable cash balances have increased approximately $45 million over the past twelve months. In summary, Mr. Wessel said, "We believe that First Cash remains well-positioned to deliver continued profitability and long-term earnings growth.   Our business model has proven to be recession resistant and the demand for our credit and retail products continues to grow in both the U.S. and Mexico. Our outstanding operating results in 2010 serve to provide strong validation of our operating model and ongoing strategy. We believe that strong cash flows will continue to support growth through our robust store expansion strategy. In addition, the strength of the balance sheet provides tremendous strategic flexibility and will allow us to generate additional returns for our shareholders. We are excited about our future and remain committed to increasing shareholder value."  Forward-Looking Information  This release may contain forward-looking statements about the business, financial condition and prospects of 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 release include, without limitation, the Company's expectations of earnings per share, earnings growth, expansion strategies, store openings, liquidity, cash flow, consumer demand for the Company's products and services, competition, strategic options, 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. The forward-looking statements contained in this release 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 release. 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 the inflation rate, changes in the unemployment rate, changes in consumer purchasing, borrowing and repayment behaviors, changes in credit markets, the ability to renew and/or extend the Company's existing bank line of credit, credit losses, changes or increases in competition, the ability to locate, open and staff new stores, the availability or access to sources of inventory, inclement weather, the ability to successfully integrate acquisitions, the ability to hire and retain key management personnel, the ability to operate with limited regulation as a credit services organization, new federal, state or local legislative initiatives or governmental regulations (or changes to existing laws and regulations) affecting short-term/payday loan businesses, credit services organizations and pawn businesses (in both the United States and Mexico), changes in import/export regulations and tariffs or duties, changes in anti-money laundering regulations, unforeseen litigation, changes in interest rates, monetary inflation, 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, public health issues and other uncertainties. These and other risks, uncertainties and regulatory developments are further and more completely described in the Company's 2009 Annual Report on Form 10-K and updated in subsequent releases on Form 10-Q.About First Cash First Cash Financial Services, Inc. is a leading international specialty retailer and provider of consumer financial services. Its 488 pawn stores make small loans secured by pledged personal property and retail a wide variety of jewelry, electronics, tools and other merchandise. The Company's short-term loan locations provide various combinations of financial services products, including short-term loans, check cashing, and credit services. In total, the Company owns and operates 612 stores in eight U.S. states and 21 states in Mexico.  First Cash is a component company in both the Standard & Poor's SmallCap 600 Index® and the Russell 2000 Index®. First Cash's common stock (ticker symbol "FCFS") is traded on the Nasdaq Global Select Market, which has the highest initial listing standards of any stock exchange in the world based on financial and liquidity requirements.  The First Cash Financial Services, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=3365STORE COUNT ACTIVITY The following table details store openings and closings for the three months ended December 31, 2010:    Pawn Locations Short-Term     Large Small Loan Total   Format (1) Format (2) Locations Locations United States:         Total locations, beginning of period  104  24  92  220 New locations opened or acquired  7  --   --   7 Locations closed or consolidated  --   --   (1)  (1) Total locations, end of period  111  24  91  226           Mexico:         Total locations, beginning of period  322  19  33  374 New locations opened or acquired  11  1  --   12 Total locations, end of period  333  20  33  386           Total:         Total locations, beginning of period  426  43  125  594 New locations opened or acquired  18  1  --   19 Locations closed or consolidated  --   --   (1)  (1) Total locations, end of period  444  44  124  612           The following table details store openings and closings for the twelve months ended December 31, 2010:    Pawn Locations Short-Term     Large Small Loan Total   Format (1) Format (2) Locations Locations United States:         Total locations, beginning of period  97  26  94  217 New locations opened or acquired  12  --   --   12 Stores converted to large format pawn  2  (2)  --   --  Locations closed or consolidated  --   --   (3)  (3) Total locations, end of period  111  24  91  226           Mexico:         Total locations, beginning of period  286  10  33  329 New locations opened or acquired  47  11  --   58 Locations closed or consolidated  --   (1)  --   (1) Total locations, end of period  333  20  33  386           Total:         Total locations, beginning of period  383  36  127  546 New locations opened or acquired  59  11  --   70 Stores converted to large format pawn  2  (2)  --   --  Locations closed or consolidated  --   (1)  (3)  (4) Total locations, end of period  444  44  124  612           (1)     The large format locations include retail showrooms and accept a broad array of pawn collateral including electronics, tools and jewelry. At December 31, 2010, 69 of the U.S. large format pawn stores also offered short-term loans or credit services products. (2)     The smaller format locations typically have limited retail operations and accept only jewelry and small electronic items as pawn collateral. At December 31, 2010, all of the U.S. and Mexico small format pawn stores also offered short-term loans or credit services products. First Cash is also an equal partner in Cash & Go, Ltd., a joint venture, which owns and operates 39 check cashing and financial services kiosks located inside convenience stores in the United States. FIRST CASH FINANCIAL SERVICES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)  Three Months Ended Twelve Months Ended   December 31, December 31, 2010 20092010 2009  (in thousands, except per share amounts) Revenue:         Pawn merchandise sales$ 83,600 $ 73,372$ 269,909 $ 229,493 Pawn service fees 29,427  22,566 102,145  80,805 Short-term loan and credit services fees 16,340  14,126 57,943  51,488 Other 272  282 1,150  1,272   129,639  110,346 431,147  363,058 Cost of revenue:         Cost of goods sold 49,502  45,287 162,045  138,090 Short-term loan and credit services loss provision 4,453  3,868 14,740  13,369 Other 36  35 157  162   53,991  49,190 176,942  151,621 Net revenue 75,648  61,156 254,205  211,437           Expenses and other income:         Store operating expenses 32,691  27,574 118,254  100,647 Administrative expenses 11,298  9,539 40,522  34,281 Depreciation and amortization 2,877  2,677 10,506  10,067 Interest expense 44  163 391  765 Interest income (52)  (7) (97)  (67)   46,858  39,946 169,576  145,693           Income from continuing operations before income taxes 28,790  21,210 84,629  65,744           Provision for income taxes 10,215  8,135 30,374  24,588 Income from continuing operations 18,575  13,075 54,255  41,156           Income from discontinued operations, net of tax 981  1,922 3,403  8,608 Net income$ 19,556 $ 14,997$ 57,658 $ 49,764           Basic income per share:         Income from continuing operations$ 0.61 $ 0.44$ 1.79 $ 1.39 Income from discontinued operations 0.03  0.06 0.11  0.29 Net income per basic share$ 0.64 $ 0.50$ 1.90 $ 1.68           Diluted income per share:         Income from continuing operations$ 0.59 $ 0.43$ 1.75 $ 1.36 Income from discontinued operations  0.03  0.06 0.11  0.29 Net income per diluted share$ 0.62 $ 0.49$ 1.86 $ 1.65           Weighted average shares outstanding:         Basic 30,712  29,838 30,266  29,559 Diluted 31,666  30,421 31,058  30,191          FIRST CASH FINANCIAL SERVICES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)   December 31,  2010 2009   (in thousands) ASSETS           Cash and cash equivalents$ 67,240 $ 26,777 Service fees receivable 10,685  8,185 Pawn receivables 70,488  53,719 Short-term loan receivables 3,035  3,076 Inventories 47,406  34,437 Other 6,144  10,392 Total current assets 204,998  136,586       Property and equipment, net 58,425  47,980 Goodwill, net 76,355  69,731 Other 2,668  1,988 Total assets$ 342,446 $ 256,285       LIABILITIES AND STOCKHOLDERS' EQUITY           Current portion of notes payable$ 465 $ 4,111 Accounts payable and accrued liabilities 27,730  20,222 Income taxes payable and deferred tax liabilities 6,427  10,958 Total current liabilities 34,622  35,291       Notes payable, net of current portion 1,386  5,265 Deferred tax liabilities 8,434  3,290 Total liabilities 44,442  43,846       Stockholders' equity 298,004  212,439 Total liabilities and stockholders' equity$ 342,446 $ 256,285      FIRST CASH FINANCIAL SERVICES, INC. OPERATING INFORMATION (UNAUDITED) The following table details the components of revenue for the three months ended December 31, 2010, as compared to the three months ended December 31, 2009 (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, which is more fully described elsewhere in this release.    Three Months Ended     Increase/(Decrease)   December 31,     Constant Currency  2010 2009 Increase/(Decrease) Basis Domestic revenue:           Pawn retail merchandise sales$ 19,943 $ 18,537 $ 1,406 8 % 8 % Pawn scrap jewelry sales 10,120  12,165  (2,045) (17)% (17)% Pawn service fees 12,475  11,084  1,391 13 % 13 % Short-term loan and           credit services fees 15,080  13,003  2,077 16 % 16 % Other 272  270  2 1 % 1 %   57,890  55,059  2,831 5 % 5 %             Foreign revenue:           Pawn retail merchandise sales 40,745  28,300  12,445 44 % 37 % Pawn scrap jewelry sales 12,792  14,370  (1,578) (11)% (11)% Pawn service fees 16,952  11,482  5,470 48 % 40 % Short-term loan fees 1,260  1,123  137 12 % 6 % Other --   12  (12) (100)% (100)%   71,749  55,287  16,462 30 % 24 %             Total revenue:           Pawn retail merchandise sales 60,688  46,837  13,851 30 % 25 % Pawn scrap jewelry sales 22,912  26,535  (3,623) (14)% (14)% Pawn service fees 29,427  22,566  6,861 30 % 27 % Short-term loan and           credit services fees 16,340  14,126  2,214 16 % 15 % Other 272  282  (10) (4)% (4)%  $ 129,639 $ 110,346 $ 19,293 17 % 15 %            FIRST CASH FINANCIAL SERVICES, INC.OPERATING INFORMATION (CONTINUED)(UNAUDITED) The following table details the components of revenue for the twelve months ended December 31, 2010, as compared to the twelve months ended December 31, 2009 (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, which is more fully described elsewhere in this release.    Twelve Months Ended     Increase/(Decrease)   December 31,     Constant Currency  2010 2009 Increase/(Decrease) Basis Domestic revenue:           Pawn retail merchandise sales$ 70,980 $ 66,376 $ 4,604 7 % 7 % Pawn scrap jewelry sales 39,416  34,454  4,962 14 % 14 % Pawn service fees 44,071  38,323  5,748 15 % 15 % Short-term loan and           credit services fees 53,318  47,648  5,670 12 % 12 % Other 1,138  1,211  (73) (6)% (6)%   208,923  188,012  20,911 11 % 11 %             Foreign revenue:           Pawn retail merchandise sales 117,556  84,566  32,990 39 % 30 % Pawn scrap jewelry sales 41,957  44,097  (2,140) (5)% (5)% Pawn service fees 58,074  42,482  15,592 37 % 28 % Short-term loan fees 4,625  3,840  785 20 % 13 % Other 12  61  (49) (80)% (82)%   222,224  175,046  47,178 27 % 20 %             Total revenue:           Pawn retail merchandise sales 188,536  150,942  37,594 25 % 20 % Pawn scrap jewelry sales 81,373  78,551  2,822 4 % 4 % Pawn service fees 102,145  80,805  21,340 26 % 22 % Short-term loan and           credit services fees 57,943  51,488  6,455 13 % 12 % Other 1,150  1,272  (122) (10)% (10)%  $ 431,147 $ 363,058 $ 68,089 19 % 16 %            FIRST CASH FINANCIAL SERVICES, INC. OPERATING INFORMATION (CONTINUED) (UNAUDITED) The following table details pawn receivables, short-term loan receivables, active CSO loans outstanding from an independent third-party lender and inventories as of December 31, 2010, as compared to December 31, 2009 (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, which is more fully described elsewhere in this release.    Balance at     Increase/(Decrease)   December 31,     Constant Currency  2010 2009 Increase/(Decrease) Basis Domestic customer receivables:           Pawn receivables$ 35,319 $ 31,277 $ 4,042 13 % 13 % Short-term loan receivables,            net of allowance 2,079  2,189  (110) (5)% (5)% CSO short-term loans held            by independent third-party (1) 14,587  11,837  2,750 23 % 23 %   51,985  45,303  6,682 15 % 15 %             Foreign customer receivables:           Pawn receivables 35,169  22,442  12,727 57 % 49 % Short-term loan receivables,            net of allowance 956  887  69 8 % 2 %   36,125  23,329  12,796 55 % 47 %             Total customer receivables:           Pawn receivables 70,488  53,719  16,769 31 % 28 % Short-term loan receivables,            net of allowance 3,035  3,076  (41) (1)% (3)% CSO short-term loans held            by independent third-party (1) 14,587  11,837  2,750 23 % 23 %  $ 88,110 $ 68,632 $ 19,478 28 % 26 %                         Pawn inventories:           Domestic pawn inventories$ 19,730 $ 17,285 $ 2,445 14 % 14 % Foreign pawn inventories 27,676  17,152  10,524 61 % 53 %  $ 47,406 $ 34,437 $ 12,969 38 % 33 %             (1)   CSO short-term loans outstanding are comprised of the principal portion of active CSO loans outstanding from an independent third-party lender, which are not included on the Company's balance sheet, net of the Company's estimated fair value of its liability under the letters of credit guaranteeing the loans.FIRST CASH FINANCIAL SERVICES, INC.UNAUDITED NON-GAAP FINANCIAL INFORMATION The Company uses certain financial calculations, such as free cash flow, EBITDA and constant currency results, which are not considered measures of financial performance under U.S. generally accepted accounting principles ("GAAP"). Items excluded from the calculation of free cash flow, EBITDA and constant currency results are significant components in understanding and assessing the Company's financial performance. Since free cash flow, EBITDA and constant currency results are not measures determined in accordance with GAAP and are thus susceptible to varying calculations, free cash flow, EBITDA and constant currency results, as presented, may not be comparable to other similarly titled measures of other companies. Free cash flow, EBITDA and constant currency results should not be considered as alternatives to net income, cash flow provided by or used in operating, investing or financing activities or other financial statement data presented in the Company's condensed consolidated financial statements as indicators of financial performance or liquidity. Non-GAAP measures should be evaluated in conjunction with, and are not a substitute for, GAAP financial measures. Free Cash Flow For purposes of its internal liquidity assessments, the Company considers free cash flow, which is defined as cash flow from the operating activities of continuing and discontinued operations reduced by purchases of property and equipment and net cash outflow from pawn and short-term/payday loan customer receivables. Free cash flow is commonly used by investors as a measure of cash generated by business operations that will be used to repay scheduled debt maturities and can be used to invest in future growth through new business development activities or acquisitions, repurchase stock, or repay debt obligations prior to their maturities. These metrics can also be used to evaluate the Company's ability to generate cash flow from business operations and the impact that this cash flow has on the Company's liquidity. The following table reconciles "net cash flow from operating activities" to "free cash flow" (in thousands):   Twelve Months Ended   December 31,  2010 2009 Cash flow from operating activities (1)$ 73,645 $ 85,213 Cash flow from investing activities:     Pawn and short-term loan receivables (23,648)  (12,964) Purchases of property and equipment (18,385)  (15,376) Free cash flow$ 31,612 $ 56,873       (1) Cash flow from operating activities in 2009 included approximately $15 million of non-recurring cash receipts and tax refunds from the discontinued Auto Master operation.FIRST CASH FINANCIAL SERVICES, INC.UNAUDITED NON-GAAP FINANCIAL INFORMATION (CONTINUED)EBITDA EBITDA is commonly used by investors to assess a company's leverage capacity, liquidity and financial performance. The following table provides a reconciliation of income from continuing operations to EBITDA (in thousands):    Twelve Months Ended   December 31,  2010 2009       Income from continuing operations$ 54,255 $ 41,156 Adjustments:     Income taxes 30,374  24,588 Depreciation and amortization 10,506  10,067 Interest expense 391  765 Interest income (97)  (67) Earnings from continuing operations before interest, taxes,      depreciation and amortization$ 95,429 $ 76,509       EBITDA margin calculated as follows:     Total revenue from continuing operations$ 431,147 $ 363,058 Earnings from continuing operations before interest, taxes,      depreciation and amortization 95,429  76,509 EBITDA as a percent of revenue22% 21%      Constant Currency Results 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 under GAAP. The Company's management uses constant currency results to evaluate operating results of certain business operations in Mexico, which are transacted primarily in Mexican pesos. Pawn scrap jewelry in Mexico is sold in U.S. dollars and, accordingly, does not require a constant currency adjustment. Constant currency results reported herein are calculated by translating certain balance sheet and income statement items denominated in Mexican pesos 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. For balance sheet items, the closing exchange rate at the end of the applicable prior-year period (December 31, 2009) of 13.1 to 1 was used, compared to the current end of period (December 31, 2010) exchange rate of 12.4 to 1. For income statement items, the average closing daily exchange rate for the appropriate period was used. The average exchange rate for the prior-year quarter ended December 31, 2009 was 13.1 to 1, compared to the current quarter rate of 12.4 to 1. The average exchange rate for the prior-year twelve-month period ended December 31, 2009 was 13.5 to 1, compared to the current year-to-date rate of 12.6 to 1. CONTACT: Rick Wessel, Chairman and Chief Executive Officer Doug Orr, Executive Vice President and Chief Financial Officer Phone: (817) 505-3199 Email: investorrelations@firstcash.com Website: www.firstcash.com