FCFS Research Note

First Cash Financial Services, Inc. (FCFS)
By: Richard W. West, CFA

FIRST CASH REPORTS STRONG SECOND QUARTER & SIX MONHTHS RESULTS
EARNINGS PER SHARE UP 35% FOR QUARTER AND 33% FOR SIX MONTHS

STOCK WEAKNESS IN GENERAL MARKET ENVIRONMENT PRESENTS MAJOR BUYING OPPORTUNITY

REITERATE STRONG BUY

First Cash Financial Services, Inc. reported results for the second quarter ended June 30, 2002. Revenues for the quarter were up 1.8% to approximately $26.9 million as compared to $26.4 million for the second quarter last year. Excluding scrap jewelry sales that decreased to $624,000 from last years $1,619,000, revenues increased 5.9% for this years' second quarter as compared to last years' comparable quarter. Net income for Q2 increased 46% to $2,259,000 or $0.23 per diluted share as compared to $1.550.000 or $0.17 per diluted share in last year's second quarter.

For the six months ended June 30, 2002, revenues increased 1.4% to approximately $55.3 million as compared to $54.5 million for the six month period of last year. Excluding scrap jewelry sales that decreased to $1,301,000 from $3,099,000 in the prior year's first half, revenues increased 5.0% for this years' six months period as compared to last years' six month period. Net income for the six months increased 37% to $5,053,000 or $0.53 per diluted share as compared to $3,676,000 or $0.40 per diluted share in last year's first half. Retail margins increased to 41% during the first six months of 2002 from 33% last year. Inventories decreased $1.4 million or 11% and consequently, inventory turnover ratio increased to 2.7 times from 2.3 times for the twelve months ended June 30, 2002 as compared to last years trailing twelve month figure at June 30, 2002.

First Cash continues to retire interest-bearing debt in the second quarter of 2002. After retiring $8.2 million of debt during the fist six months of 2002, the Company's outstanding balance on its line-of-credit was $24.5 million at June 30, 2002. The interest rate on the line-of-credit was LIBOR plus 1%, which currently works out to 2.8%.

First Cash added six new stores in the second quarter of 2002, bringing the total of new stores added to fourteen. Future expansion plans for the remainder of 2002 should result in over 190 retail stores in eleven states and Mexico by year end. The expansion in Mexico should, we believe, add significantly to revenues and earnings for the balance of 2002 and into 2003. All the Company's growth in new stores is funded out of current cash flow from existing operations while also decreasing overall debt.

First Cash's results for the second quarter and six months periods exceed our estimates for these periods on all counts. When the 10Q for 6/30/02 is filed, we will be publish an updated Research Report. Given the continuation and success of the expansion plans, the pay-down of debt, the increases in margins, and the strong growth in net income and EPS, we will be reviewing our estimated EPS of $1.05 for the year ended 12/31/02 and $1.30 for the year ended 12/31/03. We expect that our estimates for ensuing periods may be increased at that time. Since our initial STRONG BUY recommendation on April 17, 2002, the stock has weakened because of the general market droop to its present level of $8.10 per share. At this level the stock is selling at a 7.7 P/E ratio on our estimated EPS for 2002 and a 6.2 P/E ratio on our estimated EPS for 2003. We believe that this level is a most attractive entry point for long term purchases.

We reiterate our rating of STRONG BUY of First Cash common stock at this time.

J.M.Dutton & Associates, LLC. John M. Dutton, President and Supervisory Analyst, 1129 Manning Drive, Suite 310, El Dorado Hills, CA 95762 Phone (916) 941-4985, Fax (978) 418-6422 Email: [email protected] Web site: www.JMDutton.com

Information, opinions or recommendations contained in this research note are submitted solely for advisory and information purposes. The information used and statements of fact made have been obtained from sources considered reliable but we neither guarantee nor represent the completeness or accuracy. Such information and the opinions expressed are subject to change without notice. This research note is not intended as an offering or a solicitation of an offer to buy or sell the securities mentioned or discussed. Neither the Firm, its principals, nor the assigned analysts own or trade shares of any company covered. The Firm does not accept any equity compensation. Anyone may enroll a company for research coverage, which costs US $25,000 prepaid for one-year. Reports are performed on behalf of the public, and are not a service to any company. The analysts are responsible only to the public, and are paid in advance to eliminate pecuniary interests and insure independence. Please read full disclosure and other reports and notes on the Company at www.JMDutton.com.