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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q



[ X ]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2017~~2018



[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to ___________

Commission file number 001-10960

FIRSTCASH, INC.

(Exact name of registrant as specified in its charter)



Delaware	75-2237318
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1600 West 7th Street, Fort Worth, Texas	76102
(Address of principal executive offices)	(Zip Code)

(817) 335-1100

(Registrant’s telephone number, including area code)

NONE

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. xYes o No

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). xYes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



x Large accelerated filer	o Accelerated filer
o Non-accelerated filer ~~(Do not check if a smaller reporting company)~~	o Smaller reporting company
	o Emerging growth company



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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). oYes x No

As of October 25, ~~2017,~~2018, there were ~~47,186,687~~43,832,215 shares of common stock outstanding.



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FIRSTCASH, INC.

FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, ~~2017~~2018

INDEX



PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Income ~~(Loss)~~	2
	Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~	3
	Condensed Consolidated Statements of Changes in Stockholders' Equity	3
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	1718
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	44
Item 4.	Controls and Procedures	45

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	4546
Item 1A.	Risk Factors	4546
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4546
Item 3.	Defaults Upon Senior Securities	46
Item 4.	Mine Safety Disclosures	46
Item 5.	Other Information	4647
Item 6.	Exhibits	47

SIGNATURES		48



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CAUTIONARY STATEMENT REGARDING RISKS AND UNCERTAINTIES THAT MAY AFFECT FUTURE RESULTS

Forward-Looking Information

This quarterly report contains forward-looking statements about the business, financial condition and prospects of FirstCash, Inc. and its wholly owned subsidiaries (together, 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,” “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 quarterly report. Such factors may include, without limitation, the risks, uncertainties and regulatory developments discussed and described in (i) the Company’s ~~2016~~2017 annual report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on ~~March 1, 2017,~~February 20, 2018, including the risks described in Part 1, Item 1A, “Risk Factors” thereof, (ii) in this quarterly report on Form 10-Q, and (iii) ~~the~~ other reports filed with the SEC. 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 quarterly report speak only as of the date of this quarterly report, and the Company expressly disclaims any obligation or undertaking to report any updates or revisions to any such statement to reflect any change in the Company’s expectations or any change in events, conditions or circumstances on which any such statement is based, except as required by law.



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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

																					FIRSTCASH, INC.	CONDENSED CONSOLIDATED BALANCE SHEETS	(unaudited, in thousands)

		September 30,						December 31,				September 30,						December 31,
		2017			2016			2016				2018			2017			2017
ASSETS
Cash and cash equivalents		$	93,411		$	83,356		$	89,955			$	57,025		$	93,411		$	114,423
Fees and service charges receivable		45,134			45,708			41,013				49,141			45,134			42,736
Pawn loans		371,367			373,169			350,506				387,733			371,367			344,748
Consumer loans, net		24,515			27,792			29,204				17,804			24,515			23,522
Inventories		308,683			332,862			330,683				277,438			308,683			276,771
Income taxes receivable		27,867			36,449			25,510				1,065			27,867			19,761
Prepaid expenses and other current assets		23,818			31,935			25,264				18,396			23,818			20,236
Investment in common stock of Enova		—			54,786			—
Total current assets		894,795			986,057			892,135				808,602			894,795			842,197

Property and equipment, net		234,309			240,749			236,057				250,088			234,309			230,341
Goodwill		834,883			865,350			831,151				906,322			834,883			831,145
Intangible assets, net		95,991			106,502			104,474				88,900			95,991			93,819
Other assets		59,054			69,125			71,679				50,635			59,054			54,045
Deferred tax assets		12,694			9,912			9,707				11,933			12,694			11,237
Total assets		$	2,131,726		$	2,277,695		$	2,145,203			$	2,116,480		$	2,131,726		$	2,062,784

LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable and accrued liabilities		$	94,769		$	129,997		$	109,354			$	103,223		$	94,769		$	84,331
Customer deposits		37,626			37,591			33,536				35,874			37,626			32,019
Income taxes payable		3,763			910			738				279			3,763			4,221
Total current liabilities		136,158			168,498			143,628				139,376			136,158			120,571

Revolving unsecured credit facilities		140,000			360,000			260,000
Revolving unsecured credit facility												305,000			140,000			107,000
Senior unsecured notes		294,961			196,373			196,545				295,722			294,961			295,243
Deferred tax liabilities		73,203			42,125			61,275				52,149			73,203			47,037
Other liabilities		19,725			77,645			33,769				12,505			19,725			17,600
Total liabilities		664,047			844,641			695,217				804,752			664,047			587,451

Stockholders’ equity:
Preferred stock		—			—			—				—			—			—
Common stock		493			493			493				493			493			493
Additional paid-in capital		1,219,589			1,217,820			1,217,969				1,222,947			1,219,589			1,220,356
Retained earnings		436,159			359,926			387,401				569,691			436,159			494,457
Accumulated other comprehensive loss		(88,445		)	(109,114		)	(119,806		)		(97,970		)	(88,445		)	(111,877		)
Common stock held in treasury, at cost		(100,117		)	(36,071		)	(36,071		)		(383,433		)	(100,117		)	(128,096		)
Total stockholders’ equity		1,467,679			1,433,054			1,449,986				1,311,728			1,467,679			1,475,333
Total liabilities and stockholders’ equity		$	2,131,726		$	2,277,695		$	2,145,203			$	2,116,480		$	2,131,726		$	2,062,784

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



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																											FIRSTCASH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
CONDENSED CONSOLIDATED STATEMENTS OF INCOME														CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands, except per share amounts)

		Three Months Ended						Nine Months Ended							Three Months Ended						Nine Months Ended
		September 30,						September 30,							September 30,						September 30,
		2017			2016			2017			2016				2018			2017			2018			2017
Revenue:
Retail merchandise sales		$	246,334		$	152,215		$	750,150		$	386,534			$	256,417		$	246,334		$	782,000		$	750,150
Pawn loan fees		132,545			79,505			383,428			182,816				134,613			132,545			387,418			383,428
Wholesale scrap jewelry sales		37,528			18,956			107,285			35,906				24,650			37,528			86,850			107,285
Consumer loan and credit services fees		19,005			10,477			58,754			21,079				14,198			19,005			43,382			58,754
Total revenue		435,412			261,153			1,299,617			626,335				429,878			435,412			1,299,650			1,299,617

Cost of revenue:
Cost of retail merchandise sold		161,350			93,399			483,458			239,166				163,287			161,350			501,358			483,458
Cost of wholesale scrap jewelry sold		36,831			16,977			102,370			30,701				23,859			36,831			80,430			102,370
Consumer loan and credit services loss provision		6,185			3,413			15,419			5,780				5,474			6,185			13,095			15,419
Total cost of revenue		204,366			113,789			601,247			275,647				192,620			204,366			594,883			601,247

Net revenue		231,046			147,364			698,370			350,688				237,258			231,046			704,767			698,370

Expenses and other income:
Store operating expenses		138,966			80,574			412,780			190,563				141,755			138,966			417,899			412,780
Administrative expenses		29,999			24,500			93,542			58,277				29,977			29,999			87,699			93,542
Depreciation and amortization		13,872			7,281			42,804			17,165				10,850			13,872			33,085			42,804
Interest expense		6,129			5,073			17,827			13,859				7,866			6,129			20,593			17,827
Interest income		(418		)	(138		)	(1,138		)	(636		)		(495		)	(418		)	(2,216		)	(1,138		)
Merger and other acquisition expenses		911			29,398			3,164			33,877				3,222			911			5,574			3,164
Loss on extinguishment of debt		20			—			14,114			—				—			20			—			14,114
Net loss on sale of common stock of Enova		—			253			—			253
Total expenses and other income		189,479			146,941			583,093			313,358				193,175			189,479			562,634			583,093

Income before income taxes		41,567			423			115,277			37,330				44,083			41,567			142,133			115,277

Provision for income taxes		13,293			1,835			39,119			13,895				10,758			13,293			37,002			39,119

Net income (loss)		$	28,274		$	(1,412	)	$	76,158		$	23,435
Net income															$	33,325		$	28,274		$	105,131		$	76,158

Net income (loss) per share:
Earnings per share:
Basic		$	0.59		$	(0.04	)	$	1.58		$	0.77			$	0.76		$	0.59		$	2.33		$	1.58
Diluted		$	0.59		$	(0.04	)	$	1.58		$	0.77			$	0.76		$	0.59		$	2.33		$	1.58

Dividends declared per common share		$	0.190		$	0.125		$	0.570		$	0.375			$	0.22		$	0.19		$	0.66		$	0.57

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



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FIRSTCASH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited, in thousands)

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Net income (loss) $ 28,274
$ (1,412 ) $ 76,158
$ 23,435
Other comprehensive income (loss):
Currency translation adjustment (4,981 ) (12,248 ) 31,361
(28,951 )
Change in fair value of investment in common stock of Enova ⁽¹⁾
—
(1,753 ) —
(1,753 )
Comprehensive income (loss) $ 23,293
$ (15,413 ) $ 107,519
$ (7,269 )

(1) Net of tax benefit of $1,031 for the three and nine months ended September 30, 2016.

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



FIRSTCASH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited, in thousands)

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2018		2017			2018		2017
Net income	$	33,325	$	28,274		$	105,131	$	76,158
Other comprehensive income:
Currency translation adjustment	16,698		(4,981		)	13,907		31,361
Comprehensive income	$	50,023	$	23,293		$	119,038	$	107,519

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

																																																	FIRSTCASH, INC.	CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY	(unaudited, in thousands)

		Preferred Stock			Common Stock			Additional Paid-In Capital			Retained Earnings			Accum- ulated Other Compre- hensive Loss			Common Stock Held in Treasury					Total Stock- holders’ Equity				Preferred Stock			Common Stock			Additional Paid-In Capital			Retained Earnings			Accum- ulated Other Compre- hensive Loss			Common Stock Held in Treasury					Total Stock- holders’ Equity
		Shares	Amount		Shares	Amount											Shares		Amount							Shares	Amount		Shares	Amount											Shares		Amount
Balance at 12/31/2016		—	$	—	49,276	$	493	$	1,217,969		$	387,401		$	(119,806	)	769		$	(36,071	)	$	1,449,986
Balance at 12/31/2017																										—	$	—	49,276	$	493	$	1,220,356		$	494,457		$	(111,877	)	2,362		$	(128,096	)	$	1,475,333
Shares issued under share-based com-pensation plan		—	—		—	—		(440		)	—			—			(10	)	440			—				—	—		—	—		(1,240		)	—			—			(22	)	1,240			—
Exercise of stock options		—	—		—	—		(242		)	—			—			(13	)	549			307				—	—		—	—		(294		)	—			—			(10	)	694			400
Share-based compensa-tion expense		—	—		—	—		2,302			—			—			—		—			2,302				—	—		—	—		4,125			—			—			—		—			4,125
Net income		—	—		—	—		—			76,158			—			—		—			76,158				—	—		—	—		—			105,131			—			—		—			105,131
Dividends paid		—	—		—	—		—			(27,400		)	—			—		—			(27,400		)		—	—		—	—		—			(29,897		)	—			—		—			(29,897		)
Currency translation adjustment		—	—		—	—		—			—			31,361			—		—			31,361				—	—		—	—		—			—			13,907			—		—			13,907
Repurchases of treasury stock		—	—		—	—		—			—			—			1,182		(65,035		)	(65,035		)
Balance at 9/30/2017		—	$	—	49,276	$	493	$	1,219,589		$	436,159		$	(88,445	)	1,928		$	(100,117	)	$	1,467,679
Purchases of treasury stock																										—	—		—	—		—			—			—			3,114		(257,271		)	(257,271		)
Balance at 9/30/2018																										—	$	—	49,276	$	493	$	1,222,947		$	569,691		$	(97,970	)	5,444		$	(383,433	)	$	1,311,728

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



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																																																			FIRSTCASH, INC.	CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY	CONTINUED	(unaudited, in thousands)

		Preferred Stock			Common Stock					Additional Paid-In Capital			Retained Earnings			Accum- ulated Other Compre- hensive Loss			Common Stock Held in Treasury					Total Stock- holders’ Equity				Preferred Stock			Common Stock			Additional Paid-In Capital			Retained Earnings			Accum- ulated Other Compre- hensive Loss			Common Stock Held in Treasury					Total Stock- holders’ Equity
		Shares	Amount		Shares		Amount												Shares		Amount							Shares	Amount		Shares	Amount											Shares		Amount
Balance at 12/31/2015		—	$	—	40,288		$	403		$	202,393		$	643,604		$	(78,410	)	12,052		$	(336,608	)	$	431,382
Balance at 12/31/2016																												—	$	—	49,276	$	493	$	1,217,969		$	387,401		$	(119,806	)	769		$	(36,071	)	$	1,449,986
Shares issued under share-based com-pensation plan		—	—		7		—			(3,903		)	—			—			(83	)	3,903			—				—	—		—	—		(440		)	—			—			(10	)	440			—
Shares issued upon merger with Cash America		—	—		20,181		202			1,015,305			—			—			—		—			1,015,507
Exercise of stock options																												—	—		—	—		(242		)	—			—			(13	)	549			307
Share-based compensa-tion expense		—	—		—		—			4,025			—			—			—		—			4,025				—	—		—	—		2,302			—			—			—		—			2,302
Net income		—	—		—		—			—			23,435			—			—		—			23,435				—	—		—	—		—			76,158			—			—		—			76,158
Dividends paid		—	—		—		—			—			(10,591		)	—			—		—			(10,591		)		—	—		—	—		—			(27,400		)	—			—		—			(27,400		)
Change in fair value of investment in common stock of Enova, net of tax		—	—		—		—			—			—			(1,753		)	—		—			(1,753		)
Currency translation adjustment		—	—		—		—			—			—			(28,951		)	—		—			(28,951		)		—	—		—	—		—			—			31,361			—		—			31,361
Retirement of treasury stock		—	—		(11,200	)	(112		)	—			(296,522		)	—			(11,200	)	296,634			—
Balance at 9/30/2016		—	$	—	49,276		$	493		$	1,217,820		$	359,926		$	(109,114	)	769		$	(36,071	)	$	1,433,054
Purchases of treasury stock																												—	—		—	—		—			—			—			1,182		(65,035		)	(65,035		)
Balance at 9/30/2017																												—	$	—	49,276	$	493	$	1,219,589		$	436,159		$	(88,445	)	1,928		$	(100,117	)	$	1,467,679

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



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															FIRSTCASH, INC.	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	(unaudited, in thousands)
		Nine Months Ended							Nine Months Ended
		September 30,							September 30,
		2017			2016				2018			2017
Cash flow from operating activities:
Net income		$	76,158		$	23,435			$	105,131		$	76,158
Adjustments to reconcile net income to net cash flow provided by operating activities:
Non-cash portion of credit loss provision		10,012			2,368				7,101			10,012
Share-based compensation expense		2,302			4,025				4,125			2,302
Net loss on sale of common stock of Enova		—			253
Depreciation and amortization expense		42,804			17,165				33,085			42,804
Amortization of debt issuance costs		1,322			1,083				1,448			1,322
Amortization of favorable/(unfavorable) lease intangibles, net		(744		)	(58		)		(341		)	(744		)
Loss on extinguishment of debt		14,114			—				—			14,114
Deferred income taxes, net		11,137			8,665				4,953			11,137
Changes in operating assets and liabilities, net of business combinations:
Fees and service charges receivable		(3,017		)	(2,630		)		(3,988		)	(3,017		)
Inventories		5,206			(4,924		)		3,227			5,206
Prepaid expenses and other assets		7,819			1,774				(10		)	7,819
Accounts payable, accrued liabilities and other liabilities		(21,036		)	2,990				4,857			(21,036		)
Income taxes		2,769			(13,672		)		14,631			2,769
Net cash flow provided by operating activities		148,846			40,474				174,219			148,846
Cash flow from investing activities:
Loan receivables, net of cash repayments		5,261			(31,486		)		(13,055		)	5,261
Purchases of property and equipment		(26,595		)	(23,426		)		(40,754		)	(26,595		)
Portion of aggregate merger consideration paid in cash, net of cash acquired		—			(8,251		)
Acquisitions of pawn stores, net of cash acquired		(1,141		)	(28,756		)		(88,387		)	(1,141		)
Proceeds from sale of common stock of Enova		—			2,962
Net cash flow used in investing activities		(22,475		)	(88,957		)		(142,196		)	(22,475		)
Cash flow from financing activities:
Borrowings from revolving credit facilities		181,000			396,000
Repayments of revolving credit facilities		(301,000		)	(94,000		)
Repayments of debt assumed from acquisitions		—			(238,532		)
Borrowings from revolving unsecured credit facility									357,500			181,000
Repayments of revolving unsecured credit facility									(159,500		)	(301,000		)
Issuance of senior unsecured notes		300,000			—				—			300,000
Repurchase/redemption of senior unsecured notes		(200,000		)	—				—			(200,000		)
Repurchase/redemption premiums paid on senior unsecured notes		(10,895		)	—				—			(10,895		)
Debt issuance costs paid		(5,342		)	(2,340		)		—			(5,342		)
Purchases of treasury stock		(65,035		)	—				(258,545		)	(65,035		)
Proceeds from exercise of share-based compensation awards		307			—				400			307
Dividends paid		(27,400		)	(10,591		)		(29,897		)	(27,400		)
Net cash flow provided by (used in) financing activities		(128,365		)	50,537
Net cash flow used in financing activities									(90,042		)	(128,365		)
Effect of exchange rates on cash		5,450			(5,652		)		621			5,450
Change in cash and cash equivalents		3,456			(3,598		)		(57,398		)	3,456
Cash and cash equivalents at beginning of the period		89,955			86,954				114,423			89,955
Cash and cash equivalents at end of the period		$	93,411		$	83,356			$	57,025		$	93,411

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



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FIRSTCASH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

~~(In thousands except per share amounts, unless otherwise indicated)~~

Note 1 - Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated balance sheet at December 31, ~~2016~~2017, which is derived from audited financial statements, and the unaudited condensed consolidated financial statements, including the notes thereto, include the accounts of FirstCash, Inc. and its wholly-owned subsidiaries (together, the “Company”). The Company regularly makes acquisitions and the results of operations for the acquired stores have been consolidated since the acquisition dates. All significant intercompany accounts and transactions have been eliminated.

These unaudited consolidated financial statements are condensed and do not include all disclosures and footnotes required by generally accepted accounting principles (“GAAP”) in the United States of America for complete financial statements. These interim period financial statements should be read in conjunction with the Company’s consolidated financial statements, which are included in the Company’s annual report on Form 10-K for the year ended December 31, ~~2016,~~2017, filed with the Securities and Exchange Commission (the “SEC”) on ~~March 1, 2017.~~February 20, 2018. The condensed consolidated financial statements as of September 30, ~~2017~~2018 and ~~2016,~~2017, and for the three month and nine month periods ended September 30, ~~2017~~2018 and ~~2016,~~2017, are unaudited, but in management’s opinion include all adjustments (consisting of only normal recurring adjustments) considered necessary to present fairly the financial position, results of operations and cash flow for such interim periods. Operating results for the periods ended September 30, ~~2017~~2018 are not necessarily indicative of the results that may be expected for the full fiscal year.

On September 1, 2016, the Company completed its merger with Cash America International, Inc. (“Cash America”), whereby Cash America merged with and into a wholly owned subsidiary of the Company (the “Merger”). The accompanying unaudited condensed consolidated results of operations for the three month and nine month periods ended September 30, 2017 include the results of operations for Cash America, while the comparable prior-year periods include the results of operations for Cash America for the period September 2, 2016 to September 30, 2016, affecting comparability of 2017 and 2016 amounts. The Company has performed a valuation analysis of identifiable assets acquired and liabilities assumed and allocated the aggregate Merger consideration based on the fair values of those identifiable assets and liabilities.

The Company has significant operations in Latin America, where in Mexico, Guatemala and ~~Guatemala~~Colombia the functional currency is the Mexican peso, ~~and~~ Guatemalan quetzal and Colombian peso, respectively. Accordingly, the assets and liabilities of these subsidiaries are translated into U.S. dollars at the exchange rate in effect at each balance sheet date, and the resulting adjustments are accumulated in other comprehensive income (loss) as a separate component of stockholders’ equity. Revenues and expenses are translated at the average exchange rates occurring during the three month and nine month periods ended September 30, ~~2017~~2018 and ~~2016.~~2017. The Company also has operations in El Salvador where the reporting and functional currency is the U.S. dollar.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). ASU 2014-09 is a comprehensive revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. ASU 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In August 2015, the Financial Accounting Standards Board issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606),” which delayed the effective date of ASU 2014-09 by one year. In addition, between March 2016 and December 2016, the Financial Accounting Standards Board issued ASU No. 2016-08, “Revenue from Contracts with Customers - Principal versus Agent Considerations (Reporting revenue gross versus net)” (“ASU 2016-08”), ASU No. 2016-10, “Identifying Performance Obligations and Licensing” (“ASU 2016-10”), ASU No. 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients” (“ASU 2016-12”), and ASU No. 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers” (“ASU 2016-20”). ASU 2016-08, ASU 2016-10, ASU 2016-12 and ASU 2016-20 clarify certain aspects of ASU 2014-09 and provide additional implementation guidance. ASU 2014-09, ASU 2016-08, ASU 2016-10, ASU 2016-12 and ASU 2016-20 (collectively, “ASC 606”) ~~become~~became effective for annual reporting periods (including interim periods within those periods) beginning after December 15, 2017 for public companies. ~~Early adoption is permitted but not before annual reporting periods beginning after December 15, 2016.~~ Entities are permitted to adopt ASC 606 using one of two methods: (a) full retrospective



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adoption, meaning the standard is applied to all periods presented, or (b) modified retrospective adoption, meaning the cumulative effect of applying the new standard is recognized as an adjustment to the opening retained earnings balance.

The Company ~~plans to adopt~~adopted ASC 606 as of January 1, 2018 using the modified retrospective method. The ~~Company does not believe the~~ adoption of ASC 606 ~~will~~did not impact the Company’s revenue recognition for pawn loan fees, or consumer loan fees or credit services fees, as ~~it believes neither~~each of these revenue streams is ~~within~~outside the scope of ASC 606. Further, the Company has not identified any impacts to its consolidated financial statements that ~~it believes will be~~were material as a result of the adoption of ASC 606 for ~~other revenue streams (retail~~its retail merchandise sales ~~credit services fees and~~or wholesale scrap jewelry ~~sales), although it continues to evaluate the impact of adoption.~~

In July 2015, the Financial Accounting Standards Board issued ASU No. 2015-11, “Simplifying the Measurement of Inventory” (“ASU 2015-11”). ASU 2015-11 requires inventory be measured at the lower of cost or net realizable value. ASU 2015-11 defines net realizable value as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Inventory measured using last-in, first-out (“LIFO”) or the retail inventory method are excluded from the scope of this update. ASU 2015-11 requires prospective application and is effective for fiscal years beginning after December 15, 2016 and interim periods within those fiscal years, with early adoption permitted.sales revenue streams. The Company ~~adopted ASU 2015-11~~has not changed the presentation of its consolidated financial statements for assets, liabilities, or revenues from contracts with customers, nor has the Company recognized any cumulative effect adjustment as a result of ~~January 1, 2017, and~~ the ~~guidance was applied prospectively. There were no changes to the Company’s financial position, results~~adoption of ~~operations, financial statement disclosures or valuation of inventory.~~ASC 606.



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In February 2016, the Financial Accounting Standards Board issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). ASU 2016-02 requires a lessee to recognize, in the statement of financial position, a liability to make lease payments (the lease liability) and a right-to-use asset representing its right to use the underlying asset for the lease term. Leases will be classified as either financing or operating, with classification affecting the pattern of expense recognition in the income statement. Lessor accounting remains largely unchanged. In July 2018, the Financial Accounting Standards Board issued ASU No. 2018-10, “Codification Improvements to Topic 842, Leases” (“ASU 2018-10”) which updates narrow aspects of the guidance issued in ASU 2016-02. In July 2018, the Financial Accounting Standards Board issued ASU No. 2018-11, “Leases (Topic 842) Targeted Improvements” (“ASU 2018-11”) which provides an optional transition method that allows entities to initially apply the new standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption without restating prior periods. ASU 2016-02, isASU 2018-10 and ASU 2018-11 are effective for annual reporting periods beginning after December 15, 2018, and interim periods within those annual periods, with early adoption permitted. ~~An entity will be required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach.~~ The Company is currently assessing the potential impact of ASU 2016-02, ASU 2018-10 and ASU 2018-11 on its consolidated financial ~~statements.~~statements, though the adoption will result in a material increase in the assets and liabilities reflected on its consolidated balance sheets.

In June 2016, the Financial Accounting Standards Board issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). ASU 2016-13 amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables. ASU 2016-13 is effective for public entities for fiscal years beginning after December 15, 2019, with early adoption permitted. The Company is currently assessing the potential impact of ASU 2016-13 on its consolidated financial statements.

In August 2016, the Financial Accounting Standards Board issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”). ASU 2016-15 clarifies how companies present and classify certain cash receipts and cash payments in the statement of cash flows. ASU 2016-15 addresses eight specific cash flow issues with the objective of reducing existing diversity in practice. ASU 2016-15 isbecame effective for public entities for fiscal years beginning after December 15, ~~2017, with early~~2017. The adoption ~~permitted. The Company does not expect~~of ASU 2016-15 todid not have a material effect on the Company’s consolidated financial statements or ~~current~~ financial statement disclosures.

In January 2017, the Financial Accounting Standards Board issued ASU No. 2017-01, “Business Combinations (Topic 805) - Clarifying the Definition of a Business” (“ASU 2017-01”). ASU 2017-01 provides amendments to clarify the definition of a business and affects all companies and other reporting organizations that must determine whether they have acquired or sold a business. The amendments are intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The guidance isbecame effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years and should be applied prospectively as of the beginning of the period of adoption. ~~Early~~The adoption ~~is permitted under certain circumstances. The Company does not expect~~of ASU 2017-01 todid not have a material effect on the Company’s current financial position, results of operations or financial statement disclosures.

In January 2017, the Financial Accounting Standards Board issued ASU No. 2017-04, “Intangibles - Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”). These amendments eliminate step 2 from the goodwill impairment test. The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The guidance is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017 and should be adopted on a prospective basis. The Company does not expect ASU 2017-04 to have a material effect on the Company’s current financial position, results of operations or financial statement disclosures.

In March 2018, the Financial Accounting Standards Board issued ASU No 2018-05, “Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118” (“ASU 2018-05”), which became effective immediately. ASU 2018-05 adds various SEC paragraphs pursuant to the issuance of the December 2017 SEC Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”). See Note 6 for additional information regarding the adoption of ASU 2018-05.

In June 2018, the Financial Accounting Standards Board issued ASU No. 2018-07, “Compensation-Stock Compensation (Topic 718) - Improvements to Nonemployee Share-Based Payment Accounting” (“ASU 2018-07”). ASU 2018-07 simplifies the accounting for nonemployee share-based payment transactions. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. ASU 2018-07 is effective for public entities for fiscal years beginning after December 15, 2018,



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~~2017~~with early adoption permitted, but no earlier than a company’s adoption of ASC 606. The Company does not expect ASU 2018-07 to have a material effect on the Company’s current financial position, results of operations or financial statement disclosures.

In July 2018, the Financial Accounting Standards Board issued ASU No. 2018-09, “Codification Improvements” (“ASU 2018-09”). ASU 2018-09 does not prescribe any new accounting guidance, but instead makes minor improvements and ~~should~~clarifications of several different Financial Accounting Standards Board Accounting Standards Codification areas based on comments and suggestions made by various stakeholders. Certain updates are applicable immediately while others provide for a transition period to adopt in fiscal years beginning after December 15, 2018. The Company does not expect ASU 2018-09 to have a material effect on the Company’s current financial position, results of operations or financial statement disclosures.

In August 2018, the Financial Accounting Standards Board issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 modifies the disclosure requirements on fair value measurements. ASU 2018-13 is effective for public entities for fiscal years beginning after December 15, 2019, with early adoption permitted for any removed or modified disclosures. The removed and modified disclosures will be adopted on a retrospective basis and the new disclosures will be adopted on a prospective basis. The Company does not expect ASU ~~2017-04~~2018-13 to have a material effect on the Company’s current financial position, results of operations or financial statement disclosures.

Note 2 - Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per ~~share:~~share (in thousands, except per share amounts):


	Three Months Ended					Nine Months Ended				Three Months Ended				Nine Months Ended
	September 30,					September 30,				September 30,				September 30,
	2017		2016			2017		2016		2018		2017		2018		2017
Numerator:
Net income (loss)	$	28,274	$	(1,412	)	$	76,158	$	23,435
Net income										$	33,325	$	28,274	$	105,131	$	76,158

Denominator (in thousands):
Denominator:
Weighted-average common shares for calculating basic earnings per share	47,628		34,631			48,090		30,372		43,981		47,628		45,107		48,090
Effect of dilutive securities:
Stock options and nonvested stock awards	40		—			27		—
Stock options and nonvested common stock awards										135		40		97		27
Weighted-average common shares for calculating diluted earnings per share	47,668		34,631			48,117		30,372		44,116		47,668		45,204		48,117

Net income (loss) per share:
Earnings per share:
Basic	$	0.59	$	(0.04	)	$	1.58	$	0.77	$	0.76	$	0.59	$	2.33	$	1.58
Diluted	$	0.59	$	(0.04	)	$	1.58	$	0.77	$	0.76	$	0.59	$	2.33	$	1.58



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Note 3 - Acquisitions

Consistent with the Company’s strategy to continue its expansion of pawn stores in selected markets, during the nine months ended September 30, 2018, the Company acquired 342 pawn stores in Mexico in four separate transactions and 18 pawn stores located in the U.S. in seven separate transactions. The all-cash aggregate purchase price for these acquisitions was $105.0 million, net of cash acquired and subject to future post-closing adjustments. The purchases were composed of $88.4 million in cash paid during the nine months ended September 30, 2018 and remaining payables to the sellers of approximately $16.6 million. The purchase price of each acquisition was allocated to assets and liabilities acquired based upon their estimated fair market values at the date of acquisition. The excess purchase price over the estimated fair market value of the net assets acquired and liabilities assumed has been recorded as goodwill. The goodwill arising from these acquisitions consists largely of the synergies and economies of scale expected from combining the operations of the Company and the pawn stores acquired.

The estimated fair value of the assets acquired and liabilities assumed are preliminary, as the Company is gathering information to finalize the valuation of these assets and liabilities. The preliminary allocation of the aggregate purchase price of the Company’s individually immaterial acquisitions during the nine months ended September 30, 2018 is as follows (in thousands):



Pawn loans	$	18,714
Pawn loan fees receivable	1,866
Inventory	9,534
Other current assets	863
Property and equipment	3,717
Goodwill ⁽¹⁾	70,957
Intangible assets ⁽²⁾	871
Other non-current assets	168
Current liabilities	(1,657		)
Aggregate purchase price	$	105,033


⁽¹⁾	Goodwill associated with the U.S. operations segment and the Latin America operations segment was $5.2 million and $65.8 million, respectively. Substantially all of the goodwill is expected to be deductible for respective U.S. and Mexico income tax purposes.


⁽²⁾	Intangible assets primarily consist of customer relationships, which are generally amortized over 5 years.

The results of operations for the acquired stores have been consolidated since the respective acquisition dates. During the nine months ended September 30, 2018, revenue from the acquired stores was $21.0 million and the net loss from the combined acquisitions since the acquisition dates (including approximately $3.6 million of transaction and integration costs) was approximately $1.9 million.

Historical pre-acquisition financial statements of the four separate Mexico acquisitions were created in local country GAAP and the Company did not obtain pre-acquisition financial statements prepared in accordance with U.S. GAAP. As a result and due to the insignificance of these acquisitions, it is impractical for the Company to adequately present supplemental pro forma information.



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Note 34 - Long-Term Debt

The following table details the Company’s long-term debt at the respective principal amounts, net of unamortized debt issuance ~~costs:~~costs (in thousands):

September 30, December 31,
2017 2016 2016
Senior unsecured notes:
5.375% senior notes due 2024 ⁽¹⁾
$ 294,961
$ —
$ —
6.75% senior notes due 2021 ⁽²⁾
—
196,373
196,545
$ 294,961
$ 196,373
$ 196,545

Revolving unsecured credit facility, maturing 2022 $ 140,000
$ 360,000
$ 260,000



	September 30,				December 31,
	2018		2017		2017
5.375% senior unsecured notes due 2024 ⁽¹⁾	$	295,722	$	294,961	$	295,243
Revolving unsecured credit facility, maturing 2022	305,000		140,000		107,000
Total long-term debt	$	600,722	$	434,961	$	402,243


⁽¹⁾	As of September 30, 2018, September 30, 2017 and December 31, 2017, deferred debt issuance costs of ~~$5,039~~$4.3 million, $5.0 million and $4.8 million, respectively, are included as a direct deduction from the carrying amount of the senior unsecured notes due 2024 in the accompanying condensed consolidated balance sheets.


⁽²⁾	As of September 30, 2016 and December 31, 2016, deferred debt issuance costs of $3,627 and $3,455, respectively, are included as a direct deduction from the carrying amount of the senior unsecured notes due 2021 in the accompanying condensed consolidated balance sheets.



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Senior Unsecured Notes

On May 30, 2017, the Company ~~completed an offering of $300,000~~issued $300.0 million of 5.375% senior unsecured notes due on June 1, 2024 (the “Notes”)., all of which are currently outstanding. Interest on the Notes ~~will be~~is payable semi-annually in arrears on June 1 and December 1, commencing on December 1, 2017. The Notes were sold to the placement agents as initial purchasers for resale only to qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and outside the United States in accordance with Regulation S under the Securities Act. The Company used the proceeds from the offering to repurchase, or otherwise redeem, its outstanding $200,000, 6.75% senior notes due 2021 (the “2021 Notes”), to repay borrowings under the Company’s credit facility and to pay related fees and expenses associated with the Notes offering and the repurchase and redemption of the 2021 Notes. The Company capitalized approximately $5,200 in issuance costs, which consisted primarily of placement agent fees and legal and other professional expenses. The issuance costs are being amortized over the life of the Notes as a component of interest expense and are carried as a direct deduction from the carrying amount of the Notes in the accompanying condensed consolidated balance sheets.

1. The Notes are fully and unconditionally guaranteed on a senior unsecured basis jointly and severally by all of the Company's existing and future domestic subsidiaries that guarantee its ~~primary~~ revolving ~~bank~~unsecured credit facility. The Notes will permit the Company ~~to make share repurchases of up to $100,000 with the net proceeds of the Notes and other available funds and~~ to make restricted payments, such as purchasing shares of its stock and paying cash dividends, in an unlimited amount if, after giving pro forma effect to the incurrence of any indebtedness to make such payment, the Company's consolidated total debt ratio (“Net Debt Ratio”) is less than 2.25 to ~~1.00.~~1. The Net Debt Ratio is defined generally in the indenture governing the Notes ~~(the “Indenture”)~~ as the ratio of (1) the total consolidated debt of the Company minus cash and cash equivalents of the Company to (2) the Company’s consolidated trailing twelve months EBITDA, as adjusted to exclude certain non-recurring expenses and giving pro forma effect to operations acquired during the measurement period.

The Company ~~may redeem~~used the ~~Notes at any time on or after June 1, 2020, at~~proceeds from the ~~redemption prices set forth in the Indenture, plus accrued and unpaid interest, if any. In addition, prior to June 1, 2020, the Company may redeem some or all~~offering of the Notes atto repurchase, or otherwise redeem, its previously outstanding $200.0 million, 6.75% senior unsecured notes due 2021 (the “2021 Notes”). As a price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, plus a “make-whole” premium set forth in the Indenture. The Company may redeem up to 35% of the Notes prior to June 1, 2020, with the proceeds of certain equity offerings at a redemption price of 105.375% of the principal amount of the Notes redeemed, plus accrued and unpaid interest, if any. In addition, upon a change of control, noteholders have the right to require the Company to purchase the Notes at a price equal to 101% of the principal amount of the Notes, plus accrued and unpaid interest, if any.

~~For~~result, during the nine months ended September 30, 2017, the Company recognized a ~~$14,114~~$14.1 million loss on extinguishment of debt related to the repurchase or redemption of the 2021 Notes which includes the tender or redemption premiums paid over the outstanding $200,000 principal amount of the 2021 Notes and other reacquisition costs of $10,895 and the write off of unamortized debt issuance costs of $3,219.Notes.

Revolving Unsecured Credit ~~Facilities~~Facility

At September 30, ~~2017,~~2018, the Company maintained aan unsecured line of credit with a group of U.S. based commercial lenders (the ~~“2016 Credit~~“Credit Facility”) in the amount of ~~$400,000. In May 2017, the term of the 2016 Credit Facility was extended through~~$400.0 million, which matures on September 2, 2022. The calculation of the fixed charge coverage ratio was also amended to remove share repurchases from the calculation to provide greater flexibility for making future share repurchases and paying cash dividends.

At September 30, ~~2017,~~2018, the Company had ~~$140,000~~$305.0 million in outstanding borrowings and ~~a $4,456~~$3.2 million in outstanding ~~letter~~letters of credit under the ~~2016~~ Credit Facility, leaving ~~$255,544~~$91.8 million available for future borrowings. The ~~2016~~ Credit Facility bears interest, at the Company’s option, at either (i) the prevailing London Interbank Offered Rate (“LIBOR”) (with interest periods of 1 week or 1, 2, 3 or 6 months at the Company’s option) plus a fixed spread of 2.5% or (ii) the prevailing prime or base rate plus a fixed spread of 1.5%. The agreement has a LIBOR floor of 0%. Additionally, the Company is required to pay an annual commitment fee of 0.50% on the average daily unused portion of the ~~2016~~ Credit Facility commitment. The weighted-average interest rate on amounts outstanding under the ~~2016~~ Credit Facility at September 30, ~~2017~~2018 was ~~3.75%~~4.66% based on 1 week LIBOR. Under the terms of the ~~2016~~ Credit Facility, the Company is required to maintain certain financial ratios and comply with certain financial covenants. The ~~2016~~ Credit Facility also contains customary restrictions on the Company’s ability to incur additional debt, grant liens, make investments, consummate acquisitions and similar negative covenants with customary carve-outs and baskets. The Company was in compliance with the requirements and covenants of the ~~2016~~ Credit Facility as of September 30, ~~2017.~~2018. During the nine months ended September 30, ~~2017,~~2018, the Company ~~made~~received net ~~payments~~proceeds of ~~$120,000~~$198.0 million from borrowings pursuant to the ~~2016~~ Credit Facility.

On October 4, 2018, the Company amended and extended the Credit Facility. The total lender commitment under the amended facility increased from $400.0 million to $425.0 million and the term was extended to October 4, 2023. Certain financial covenants in the facility were amended, including an increase in the permitted consolidated leverage ratio from 2.75 to 3.0 times EBITDA adjusted for certain items as defined in the Credit Facility and an increase in the permitted domestic leverage ratio from 3.5 to 4.0 times domestic EBITDA adjusted for certain items as defined in the Credit Facility. The Credit Facility remains unsecured and continues to bear interest, at the Company’s option, at either (i) the prevailing LIBOR (with interest periods of 1 week or 1, 2, 3



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~~At September 30, 2017,~~or 6 months at the ~~Company maintained a U.S. dollar denominated line of credit with a bank in Mexico (the “Mexico Credit Facility”) in the amount of $10,000. The Mexico Credit Facility bears interest at 30-day LIBOR~~Company’s option) plus a fixed spread of ~~2.0% and matures in December 2017. Under~~2.5% or (ii) the ~~terms~~prevailing prime or base rate plus a fixed spread of the Mexico Credit Facility, the Company is required to maintain certain financial ratios and comply with certain financial covenants. The Company was in compliance with the requirements and covenants of the Mexico Credit Facility as of September 30, 2017. The Company is required to pay a one-time commitment fee of $25 due when the first amount is drawn/borrowed. At September 30, 2017, the Company had no amount outstanding under the Mexico Credit Facility and $10,000 was available for borrowings.1.5%.

Note 45 - Fair Value of Financial Instruments

The fair value of financial instruments is determined by reference to various market data and other valuation techniques, as appropriate. Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels. The three fair value levels are (from highest to lowest):

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

Recurring Fair Value Measurements

As of September 30, 2018, 2017 and December 31, 2017, the Company did not have any financial assets or liabilities ~~that are~~ measured at fair value on a recurring basis. ~~The Company’s financial assets that were measured at fair value on a recurring basis as of September 30, 2016 and December 31, 2016 were as follows:~~

September 30, Fair Value Measurements Using
Financial assets: 2016 Level 1 Level 2 Level 3
Cash America nonqualified savings plan-related assets $ 12,229
$ 12,229
$ —
$ —
Investment in common stock of Enova 54,786
54,786
—
—
$ 67,015
$ 67,015
$ —
$ —

December 31, Fair Value Measurements Using
2016 Level 1 Level 2 Level 3
Financial assets:
Cash America nonqualified savings plan-related assets $ 12,663
$ 12,663
$ —
$ —
$ 12,663
$ 12,663
$ —
$ —

Prior to the Merger, Cash America had a nonqualified savings plan that was available to certain members of its management. Upon completion of the Merger, the nonqualified savings plan was terminated and during the three months ended March 31, 2017, the Company dissolved the plan and distributed the remaining assets to the participants. As of September 30, 2016 and December 31, 2016, the assets of the nonqualified savings plan included marketable equity securities, which were classified as Level 1 and the fair values were based on quoted market prices. The nonqualified savings plan assets were included in prepaid expenses and other current assets in the accompanying condensed consolidated balance sheet with an offsetting liability of equal amount, which is included in accounts payable and accrued expenses in the accompanying condensed consolidated balance sheet.

The Company’s investment in common stock of Enova represented the Company’s available-for-sale shares of Enova International, Inc. (“Enova”) common stock. As of September 30, 2016, the equity securities representing Enova common stock were classified as Level 1 and based on the market determined stock price of Enova. During 2016, the Company sold all of the Enova shares in open market transactions.



~~Table of Contents~~

Fair Value Measurements on a Nonrecurring Basis

The Company measures non-financial assets and liabilities, such as property and equipment and intangible assets, at fair value on a nonrecurring basis or when events or circumstances indicate that the carrying amount of the assets may be impaired.

Financial Assets and Liabilities Not Measured at Fair Value

The Company’s financial assets and liabilities as of September 30, 2018, 2017 ~~2016~~ and December 31, ~~2016~~2017 that are not measured at fair value in the condensed consolidated balance sheets are as ~~follows:~~follows (in thousands):

Carrying Value Estimated Fair Value
September 30, September 30, Fair Value Measurements Using
2017 2017 Level 1 Level 2 Level 3
Financial assets:
Cash and cash equivalents $ 93,411
$ 93,411
$ 93,411
$ —
$ —
Pawn loans 371,367
371,367
—
—
371,367
Consumer loans, net 24,515
24,515
—
—
24,515
Fees and service charges receivable 45,134
45,134
—
—
45,134
$ 534,427
$ 534,427
$ 93,411
$ —
$ 441,016

Financial liabilities:
Revolving unsecured credit facilities $ 140,000
$ 140,000
$ —
$ 140,000
$ —
Senior unsecured notes, outstanding principal 300,000
314,000
—
314,000
—
$ 440,000
$ 454,000
$ —
$ 454,000
$ —


	Carrying Value		Estimated Fair Value								Carrying Value		Estimated Fair Value
	September 30,		September 30,		Fair Value Measurements Using						September 30,		September 30,		Fair Value Measurements Using
	2016		2016		Level 1		Level 2		Level 3		2018		2018		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	83,356	$	83,356	$	83,356	$	—	$	—	$	57,025	$	57,025	$	57,025	$	—	$	—
Fees and service charges receivable											49,141		49,141		—		—		49,141
Pawn loans	373,169		373,169		—		—		373,169		387,733		387,733		—		—		387,733
Consumer loans, net	27,792		27,792		—		—		27,792		17,804		17,804		—		—		17,804
Fees and service charges receivable	45,708		45,708		—		—		45,708
	$	530,025	$	530,025	$	83,356	$	—	$	446,669	$	511,703	$	511,703	$	57,025	$	—	$	454,678

Financial liabilities:
Revolving unsecured credit facilities	$	360,000	$	360,000	$	—	$	360,000	$	—
Senior unsecured notes, outstanding principal	200,000		210,000		—		210,000		—
Revolving unsecured credit facility											$	305,000	$	305,000	$	—	$	305,000	$	—
Senior unsecured notes (outstanding principal)											300,000		300,000		—		300,000		—
	$	560,000	$	570,000	$	—	$	570,000	$	—	$	605,000	$	605,000	$	—	$	605,000	$	—



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	Carrying Value		Estimated Fair Value								Carrying Value		Estimated Fair Value
	December 31,		December 31,		Fair Value Measurements Using						September 30,		September 30,		Fair Value Measurements Using
	2016		2016		Level 1		Level 2		Level 3		2017		2017		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	89,955	$	89,955	$	89,955	$	—	$	—	$	93,411	$	93,411	$	93,411	$	—	$	—
Fees and service charges receivable											45,134		45,134		—		—		45,134
Pawn loans	350,506		350,506		—		—		350,506		371,367		371,367		—		—		371,367
Consumer loans, net	29,204		29,204		—		—		29,204		24,515		24,515		—		—		24,515
Fees and service charges receivable	41,013		41,013		—		—		41,013
	$	510,678	$	510,678	$	89,955	$	—	$	420,723	$	534,427	$	534,427	$	93,411	$	—	$	441,016

Financial liabilities:
Revolving unsecured credit facilities	$	260,000	$	260,000	$	—	$	260,000	$	—
Senior unsecured notes, outstanding principal	200,000		208,000		—		208,000		—
Revolving unsecured credit facility											$	140,000	$	140,000	$	—	$	140,000	$	—
Senior unsecured notes (outstanding principal)											300,000		314,000		—		314,000		—
	$	460,000	$	468,000	$	—	$	468,000	$	—	$	440,000	$	454,000	$	—	$	454,000	$	—



	Carrying Value		Estimated Fair Value
	December 31,		December 31,		Fair Value Measurements Using
	2017		2017		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	114,423	$	114,423	$	114,423	$	—	$	—
Fees and service charges receivable	42,736		42,736		—		—		42,736
Pawn loans	344,748		344,748		—		—		344,748
Consumer loans, net	23,522		23,522		—		—		23,522
	$	525,429	$	525,429	$	114,423	$	—	$	411,006

Financial liabilities:
Revolving unsecured credit facility	$	107,000	$	107,000	$	—	$	107,000	$	—
Senior unsecured notes (outstanding principal)	300,000		314,000		—		314,000		—
	$	407,000	$	421,000	$	—	$	421,000	$	—

As cash and cash equivalents have maturities of less than three months, the carrying value of cash and cash equivalents approximates fair value. Due to their short-term maturities, the carrying value of pawn loans and fees and service charges receivable approximate fair value. ~~Short-term~~Consumer loans, ~~and installment loans, collectively, represent consumer loans,~~ net ~~on the accompanying condensed consolidated balance sheets and~~ are carried net of the allowance for estimated loan losses, which is calculated by applying historical loss rates combined with recent default trends to the gross consumer loan balance. The unobservable inputs used to calculate the fair value of these loans include historical loss rates, recent default trends and estimated remaining loan ~~terms; therefore,~~terms. Therefore, the carrying value approximates the fair value.

The carrying value of the ~~Company’s prior~~revolving unsecured credit ~~facilities~~facility approximates fair value as of September 30, ~~2016. The carrying value of the Company’s current credit facilities (the 2016 Credit Facility and the Mexico Credit Facility) approximates fair value as of September 30,~~2018, 2017 and December 31, ~~2016.~~2017. The fair value of the revolving unsecured credit facility is estimated based on market values for debt issuances with similar characteristics or rates currently available for debt with similar terms. In addition, the revolving unsecured credit facility has a variable interest rate based on a fixed spread over LIBOR and reprices with any changes in LIBOR. The fair value of the senior unsecured notes ~~have been~~is estimated based on ~~a discounted cash flow analysis using a discount rate representing the Company’s estimate of the rate~~quoted prices in markets that ~~would be used by market participants. Changes in assumptions or estimation methodologies may have a material effect on these estimated fair values.~~are not active.



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Note 6 - Income Taxes

On December 22, 2017, the Tax Cuts and Jobs Act (“Tax Act”) was enacted into law. The Tax Act significantly changed U.S. corporate income tax law by, among other things, reducing the U.S. corporate income tax rate from 35% to 21% starting in 2018 and creating a territorial tax system with a one-time mandatory tax on previously deferred foreign earnings of U.S. corporations.

The Company’s consolidated effective tax rate for the nine months ended September 30, 2018 was 26.0% compared to 33.9% for the nine months ended September 30, 2017. The decrease in the effective tax rate for the nine months ended September 30, 2018 reflects the reduced U.S. corporate income tax rate as a result of the passage of the Tax Act, blended with the statutory tax rates of the Company’s foreign subsidiaries which are 30%, 25%, 30% and 37% in Mexico, Guatemala, El Salvador and Colombia, respectively.

In December 2017, the SEC issued SAB 118 to address concerns about reporting entities’ ability to timely comply with the accounting requirements to recognize all of the effects of the Tax Act in the period of enactment. SAB 118 allows disclosure that timely determination of some or all of the income tax effects from the Tax Act are incomplete by the due date of the financial statements and if possible to provide a reasonable estimate. As a result of the Tax Act, the Company recorded a provisional net income tax benefit of $27.3 million in the fourth quarter of 2017. As of September 30, 2018, no material adjustments to the estimates used to determine the provisional net tax benefit have been made. Any adjustments will be included in the provision for income taxes in the reporting period in which any such adjustments are determined, which will be no later than the fourth quarter of 2018. See Note 11 in the accompanying notes to the consolidated financial statements included in the Company’s annual report on Form 10-K for the year ended December 31, 2017 for further information on the provisional income tax benefit.



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Note 57 - Segment Information

The Company organizes its operations into two reportable segments as follows:

U.S. operations - Includes all pawn and consumer loan operations in the U.S.

Latin America operations - Includes all pawn and consumer loan operations in Latin America, which currently includes operations in Mexico, Guatemala, ~~and~~ El Salvador and Colombia. Effective June 30, 2018, the Company no longer offers an unsecured consumer loan product in Latin America.

The following tables present reportable segment information for the three and nine month periods ended September 30, 2018 and 2017 ~~and 2016:~~(in thousands):



	Three Months Ended September 30, 2018
	U.S. Operations		Latin America Operations		Corporate			Consolidated
Revenue:
Retail merchandise sales	$	162,001	$	94,416	$	—		$	256,417
Pawn loan fees	93,344		41,269		—			134,613
Wholesale scrap jewelry sales	18,804		5,846		—			24,650
Consumer loan and credit services fees	14,082		116		—			14,198
Total revenue	288,231		141,647		—			429,878

Cost of revenue:
Cost of retail merchandise sold	102,370		60,917		—			163,287
Cost of wholesale scrap jewelry sold	17,595		6,264		—			23,859
Consumer loan and credit services loss provision	5,420		54		—			5,474
Total cost of revenue	125,385		67,235		—			192,620

Net revenue	162,846		74,412		—			237,258

Expenses and other income:
Store operating expenses	102,955		38,800		—			141,755
Administrative expenses	—		—		29,977			29,977
Depreciation and amortization	5,285		2,915		2,650			10,850
Interest expense	—		—		7,866			7,866
Interest income	—		—		(495		)	(495		)
Merger and other acquisition expenses	—		—		3,222			3,222
Total expenses and other income	108,240		41,715		43,220			193,175

Income (loss) before income taxes	$	54,606	$	32,697	$	(43,220	)	$	44,083



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	Three Months Ended September 30, 2017
	U.S. Operations		Latin America Operations		Corporate			Consolidated
Revenue:
Retail merchandise sales	$	160,598	$	85,736	$	—		$	246,334
Pawn loan fees	95,266		37,279		—			132,545
Wholesale scrap jewelry sales	32,397		5,131		—			37,528
Consumer loan and credit services fees	18,525		480		—			19,005
Total revenue	306,786		128,626		—			435,412

Cost of revenue:
Cost of retail merchandise sold	107,561		53,789		—			161,350
Cost of wholesale scrap jewelry sold	31,518		5,313		—			36,831
Consumer loan and credit services loss provision	6,068		117		—			6,185
Total cost of revenue	145,147		59,219		—			204,366

Net revenue	161,639		69,407		—			231,046

Expenses and other income:
Store operating expenses	104,555		34,411		—			138,966
Administrative expenses	—		—		29,999			29,999
Depreciation and amortization	5,919		2,704		5,249			13,872
Interest expense	—		—		6,129			6,129
Interest income	—		—		(418		)	(418		)
Merger and other acquisition expenses	—		—		911			911
Loss on extinguishment of debt	—		—		20			20
Total expenses and other income	110,474		37,115		41,890			189,479

Income (loss) before income taxes	$	51,165	$	32,292	$	(41,890	)	$	41,567



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	Three Months Ended September 30, 2016										Nine Months Ended September 30, 2018
	U.S. Operations		Latin America Operations		Corporate			Consolidated			U.S. Operations		Latin America Operations		Corporate			Consolidated
Revenue:
Retail merchandise sales	$	84,547	$	67,668	$	—		$	152,215		$	514,494	$	267,506	$	—		$	782,000
Pawn loan fees	48,840		30,665		—			79,505			277,411		110,007		—			387,418
Wholesale scrap jewelry sales	15,046		3,910		—			18,956			70,394		16,456		—			86,850
Consumer loan and credit services fees	9,991		486		—			10,477			42,522		860		—			43,382
Total revenue	158,424		102,729		—			261,153			904,821		394,829		—			1,299,650

Cost of revenue:
Cost of retail merchandise sold	51,922		41,477		—			93,399			328,258		173,100		—			501,358
Cost of wholesale scrap jewelry sold	13,955		3,022		—			16,977			64,203		16,227		—			80,430
Consumer loan and credit services loss provision	3,275		138		—			3,413			12,874		221		—			13,095
Total cost of revenue	69,152		44,637		—			113,789			405,335		189,548		—			594,883

Net revenue	89,272		58,092		—			147,364			499,486		205,281		—			704,767

Expenses and other income:
Store operating expenses	52,480		28,094		—			80,574			310,963		106,936		—			417,899
Administrative expenses	—		—		24,500			24,500			—		—		87,699			87,699
Depreciation and amortization	2,906		2,602		1,773			7,281			15,877		8,364		8,844			33,085
Interest expense	—		—		5,073			5,073			—		—		20,593			20,593
Interest income	—		—		(138		)	(138		)	—		—		(2,216		)	(2,216		)
Merger and other acquisition expenses	—		—		29,398			29,398			—		—		5,574			5,574
Net loss on sale of common stock of Enova	—		—		253			253
Total expenses and other income	55,386		30,696		60,859			146,941			326,840		115,300		120,494			562,634

Income (loss) before income taxes	$	33,886	$	27,396	$	(60,859	)	$	423		$	172,646	$	89,981	$	(120,494	)	$	142,133



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	Nine Months Ended September 30, 2017
	U.S. Operations		Latin America Operations		Corporate			Consolidated
Revenue:
Retail merchandise sales	$	519,116	$	231,034	$	—		$	750,150
Pawn loan fees	287,338		96,090		—			383,428
Wholesale scrap jewelry sales	91,430		15,855		—			107,285
Consumer loan and credit services fees	57,425		1,329		—			58,754
Total revenue	955,309		344,308		—			1,299,617

Cost of revenue:
Cost of retail merchandise sold	337,789		145,669		—			483,458
Cost of wholesale scrap jewelry sold	87,600		14,770		—			102,370
Consumer loan and credit services loss provision	15,115		304		—			15,419
Total cost of revenue	440,504		160,743		—			601,247

Net revenue	514,805		183,565		—			698,370

Expenses and other income:
Store operating expenses	318,044		94,736		—			412,780
Administrative expenses	—		—		93,542			93,542
Depreciation and amortization	18,759		7,723		16,322			42,804
Interest expense	—		—		17,827			17,827
Interest income	—		—		(1,138		)	(1,138		)
Merger and other acquisition expenses	—		—		3,164			3,164
Loss on extinguishment of debt	—		—		14,114			14,114
Total expenses and other income	336,803		102,459		143,831			583,093

Income (loss) before income taxes	$	178,002	$	81,106	$	(143,831	)	$	115,277



~~Table of Contents~~

Nine Months Ended September 30, 2016

U.S.
Operations

Latin America
Operations
Corporate Consolidated
Revenue:
Retail merchandise sales $ 186,673
$ 199,861
$ —
$ 386,534
Pawn loan fees 94,929
87,887
—
182,816
Wholesale scrap jewelry sales 25,910
9,996
—
35,906
Consumer loan and credit services fees 19,619
1,460
—
21,079
Total revenue 327,131
299,204
—
626,335

Cost of revenue:
Cost of retail merchandise sold 114,632
124,534
—
239,166
Cost of wholesale scrap jewelry sold 22,914
7,787
—
30,701
Consumer loan and credit services loss provision 5,380
400
—
5,780
Total cost of revenue 142,926
132,721
—
275,647

Net revenue 184,205
166,483
—
350,688

Expenses and other income:
Store operating expenses 107,196
83,367
—
190,563
Administrative expenses —
—
58,277
58,277
Depreciation and amortization 5,827
7,919
3,419
17,165
Interest expense —
—
13,859
13,859
Interest income —
—
(636 ) (636 )
Merger and other acquisition expenses —
—
33,877
33,877
Net loss on sale of common stock of Enova —
—
253
253
Total expenses and other income 113,023
91,286
109,049
313,358

Income (loss) before income taxes $ 71,182
$ 75,197
$ (109,049 ) $ 37,330



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

The following discussion of financial condition, results of operations, liquidity and capital resources of FirstCash, Inc. and its wholly-owned subsidiaries ~~(the~~(together, the “Company”) should be read in conjunction with the Company’s condensed consolidated financial statements and accompanying notes included under Part I, Item 1 of this quarterly report on Form 10-Q, as well as with the audited consolidated financial statements and accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s annual report on Form 10-K for the year ended December 31, ~~2016~~.2017. References in this quarterly report on Form 10-Q to “year-to-date” refer to the nine-month period from January 1, ~~2017~~2018 to September 30, ~~2017.~~

~~In thousands except share and per share amounts, unless otherwise indicated.~~2018.

GENERAL

The Company is a leading operator of retail-based pawn stores with ~~over 2,100~~more than 2,400 store locations in the U.S. and Latin America. The Company’s pawn stores generate significant retail sales primarily from the merchandise acquired through collateral forfeitures and over-the-counter purchases from customers. The stores also offer pawn loans to help customers meet small short-term cash needs. Personal property, such as consumer electronics, jewelry, power tools, household appliances, sporting goods and musical instruments, is pledged as collateral for the pawn loans and held by the Company over the ~~life~~term of the ~~loan.~~loan plus a stated grace period. In addition, some of the Company’s pawn stores offer consumer loans or credit services products. The Company’s strategy is to focus on growing its retail-based pawn operations in the U.S. and Latin America through new store openings and strategic ~~acquisition~~acquisitions as opportunities ~~as they~~ arise. Pawn operations, which include retail merchandise sales, pawn loan fees and wholesale scrap jewelry sales, accounted for ~~95%~~approximately 97% and ~~97%~~95% of the Company’s consolidated revenue during the nine month periods ended September 30, ~~2017~~2018 and ~~2016,~~2017, respectively.

The Company organizes its operations into two reportable segments. The U.S. operations segment consists of all pawn and consumer loan operations in the U.S. and the Latin America operations segment consists of all pawn and consumer loan operations in Latin America, which currently includes operations in Mexico, Guatemala, El Salvador and ~~El Salvador.~~Colombia.

The Company recognizes pawn loan fee revenue on a constant-yield basis over the life of the pawn loan for all pawn loans of which the Company deems collection to be probable based on historical redemption statistics. If a pawn loan is not repaid prior to the expiration of the loan term, including any extension or grace period, if applicable, the property is forfeited to the Company and transferred to inventory at a value equal to the principal amount of the loan, exclusive of accrued pawn fee revenue. The Company records merchandise sales revenue at the time of the sale and presents merchandise sales net of any sales or value-added taxes collected. The Company does not provide direct financing to customers for the purchase of its merchandise, but does permit its customers to purchase merchandise on an interest-free layaway plan. Should the customer fail to make a required payment pursuant to a layaway plan, the previous payments are typically forfeited to the Company. Interim payments from customers on layaway sales are recorded as deferred revenue and subsequently recorded as income during the period in which final payment is received or when previous payments are forfeited to the Company. Some jewelry is ~~melted~~processed at a third-party ~~facility~~facilities and the precious metal and diamond content is sold at either prevailing market commodity prices or a previously agreed upon price with a commodity buyer. The Company records revenue from these wholesale scrap jewelry transactions when a price has been agreed upon and the Company ships the commodity to the buyer.

The Company operates a small number of stand-alone consumer finance stores in the U.S. ~~and Mexico.~~ These stores provide consumer financial services products including credit services and consumer ~~loans and check cashing.~~loans. In addition, ~~366~~302 of the Company’s pawn stores also offer credit services and/or consumer loans as an ancillary ~~product.~~product, which products have been deemphasized by the Company in recent years due to regulatory constraints and increased internet based competition for such products. Beginning in fiscal 2018, the Company no longer offers fee-based check cashing services in its company-owned, non-franchised stores. In addition, effective June 30, 2018, the Company no longer offers an unsecured consumer loan product in Mexico. Consumer loan and credit services revenue accounted for 5%approximately 3% and 3%5% of consolidated revenue during the nine month periods ended September 30, 2018 and 2017, ~~and 2016,~~ respectively. The increase in consumer loan and credit services revenue as a percentage of consolidated revenue was solely the result of the Merger as the Company continues to de-emphasize its consumer lending operations in light of increasing regulatory constraints on these operations.



~~Table of Contents~~

The Company recognizes service fee income on consumer loan transactions on a constant-yield basis over the life of the loan and recognizes credit services fees ratably over the life of the extension of credit made by independent third-party lenders. Changes in the valuation reserve on consumer loans and credit services transactions are charged or credited to the consumer loan credit loss provision. The credit loss provision associated with the Company’s credit services organization program and consumer loans is based primarily upon historical credit loss experience, with consideration given to recent credit loss trends, delinquency rates, economic conditions and management’s expectations of future credit losses.

Stores included in the same-store calculations presented in this report are those stores that were opened or acquired prior to the beginning of the prior-year comparative period and remained open through the end of the reporting period. Also included are stores that were relocated during the applicable period within a specified distance serving the same market where there is not a significant change in store size and where there is not a significant overlap or gap in timing between the opening of the new store and the closing of the existing store. Unless otherwise noted, same-store calculations exclude the results of the merged Cash America stores. Legacy Cash America same-store calculations refer to Cash America stores that were opened prior to the beginning of the prior-year comparative period (although not then owned by the Company) and remained open through the end of the reporting period.



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Operating expenses consist of all items directly related to the operation of the Company’s stores, including salaries and related payroll costs, rent, utilities, facilities maintenance, advertising, property taxes, licenses, supplies and security. Administrative expenses consist of items relating to the operation of the corporate offices, including the compensation and benefit costs of corporate management, area supervisors and other operations management personnel, collection operations and personnel, accounting and administrative costs, information technology costs, liability and casualty insurance, outside legal and accounting fees and stockholder-related expenses. Merger and other acquisition expenses ~~primarily~~ include incremental costs directly associated with ~~the Merger~~merger and ~~integration of Cash America,~~acquisition activities, including professional fees, legal expenses, severance, retention and other employee-related costs, ~~accelerated vesting of certain equity compensation awards,~~ contract breakage costs and costs related to consolidation of technology systems and corporate ~~facilities.~~facilities, among others.

The Company’s business is subject to seasonal variations, and operating results for the current quarter and year-to-date periods are not necessarily indicative of the results of operations for the full year. Typically, the Company experiences seasonal growth of service fees in the third and fourth quarter of each year due to loan balance growth. Service fees generally decline in the first and second quarter of each year after the heavy repayment period of pawn and consumer loans associated with statutory bonuses received by customers in the fourth quarter in Mexico and with tax refund proceeds received by customers in the first quarter in the U.S. Retail sales are seasonally higher in the fourth quarter associated with holiday shopping and, to a lesser extent, in the first quarter associated with tax refunds.



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OPERATIONS AND LOCATIONS

As of September 30, ~~2017,~~2018, the Company had ~~2,106~~2,446 store locations composed of 1,100 stores in 2625 U.S. states (including the District of Columbia), 1,292 stores in 32 states in Mexico, 37 stores in Guatemala, ~~and~~13 stores in El Salvador and four stores in Colombia, which represents a net store-count increase of 1%16% over the number of stores at September 30, ~~2016.~~2017.

The following table details store count activity for the three months ended September 30, ~~2017:~~2018:


			Consumer					Consumer
	Pawn		Loan	Total		Pawn		Loan		Total
	Locations ⁽¹⁾		Locations ⁽²⁾	Locations		Locations ^{(1), (2)}		Locations ⁽³⁾		Locations
U.S.:
U.S. operations segment:
Total locations, beginning of period	1,073		44	1,117		1,074		33		1,107
New locations opened	1		—	1
Locations closed or consolidated	(1	)	—	(1	)	(4	)	(3	)	(7	)
Total locations, end of period	1,073		44	1,117		1,070		30		1,100

Latin America:
Latin America operations segment:
Total locations, beginning of period	952		28	980		1,182		—		1,182
New locations opened	9		—	9		16		—		16
Locations acquired						154		—		154
Locations closed or consolidated						(6	)	—		(6	)
Total locations, end of period	961		28	989		1,346		—		1,346

Total:
Total locations, beginning of period	2,025		72	2,097		2,256		33		2,289
New locations opened	10		—	10		16		—		16
Locations acquired						154		—		154
Locations closed or consolidated	(1	)	—	(1	)	(10	)	(3	)	(13	)
Total locations, end of period	2,034		72	2,106		2,416		30		2,446


⁽¹⁾	At September 30, ~~2017~~2018, ~~317~~302 of the U.S. pawn stores, ~~which are~~ primarily located in Texas and Ohio, also offered consumer loans and/or credit services ~~products, while 49 Mexico pawn stores offered~~as an ancillary product. Effective June 30, 2018, the Company no longer offers an unsecured consumer loan ~~products.~~product in Latin America.


⁽²⁾	The Company closed 10 pawn stores, four in the U.S. and six in Latin America, during the third quarter of 2018, which were primarily smaller format stores emphasizing payday lending or underperforming locations which were consolidated into existing stores, an opportunity driven by merger and acquisition activity.


⁽³⁾	The Company’s U.S. free-standing consumer loan locations offer consumer loans and/or a credit services ~~product~~products and are located in Ohio ~~Texas, California~~ and ~~limited markets in Mexico. The table does not include 63 check cashing locations operated by independent franchisees under franchising agreements with the Company.~~Texas.



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The following table details store count activity for the nine months ended September 30, ~~2017:~~2018:


			Consumer						Consumer
	Pawn		Loan		Total		Pawn		Loan		Total
	Locations ⁽¹⁾		Locations ⁽²⁾		Locations		Locations ^{(1), (2)}		Locations ⁽³⁾		Locations
U.S.:
U.S. operations segment:
Total locations, beginning of period	1,085		45		1,130		1,068		44		1,112
New locations opened	2		—		2
Locations acquired	1		—		1		18		—		18
Locations closed or consolidated	(15	)	(1	)	(16	)	(16	)	(14	)	(30	)
Total locations, end of period	1,073		44		1,117		1,070		30		1,100

Latin America:
Latin America operations segment:
Total locations, beginning of period	927		28		955		971		28		999
New locations opened	32		—		32		43		—		43
Locations acquired	5		—		5		342		—		342
Locations closed or consolidated	(3	)	—		(3	)	(10	)	(28	)	(38	)
Total locations, end of period	961		28		989		1,346		—		1,346

Total:
Total locations, beginning of period	2,012		73		2,085		2,039		72		2,111
New locations opened	34		—		34		43		—		43
Locations acquired	6		—		6		360		—		360
Locations closed or consolidated	(18	)	(1	)	(19	)	(26	)	(42	)	(68	)
Total locations, end of period	2,034		72		2,106		2,416		30		2,446


⁽¹⁾	At September 30, ~~2017, 317~~2018, 302 of the U.S. pawn stores, ~~which are~~ primarily located in Texas and Ohio, also offered consumer loans and/or credit services ~~products, while 49 Mexico pawn stores offer~~as an ancillary product. Effective June 30, 2018, the Company no longer offers an unsecured consumer loan ~~products.~~product in Latin America.


⁽²⁾	The Company closed 26 pawn stores, 16 in the U.S. and 10 in Latin America, during the nine months ended September 30, 2018, which were primarily smaller format stores emphasizing payday lending or underperforming locations which were consolidated into existing stores, an opportunity driven by merger and acquisition activity.


⁽³⁾	The Company’s U.S. free-standing consumer loan locations offer consumer loans and/or a credit services ~~product~~products and are located in Ohio ~~Texas, California~~ and ~~limited markets in Mexico. The table does not include 63 check cashing locations operated by independent franchisees under franchising agreements with the Company.~~Texas.



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CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities, related revenue and expenses, and disclosure of gain and loss contingencies at the date of the financial statements. Such estimates, assumptions and judgments are subject to a number of risks and uncertainties, which may cause actual results to differ materially from the Company’s estimates. The significant accounting policies that the Company believes are the most critical to aid in fully understanding and evaluating its reported financial results have been reported in the Company’s ~~2016~~2017 annual report on Form 10-K. There have been no changes to the Company’s significant accounting policies for the nine months ended September 30, ~~2017.~~2018.

Recent Accounting Pronouncements

See Note 1 - Significant Accounting Policies of the condensed consolidated financial statements contained in Part I, Item 1 of this report for a discussion of recent accounting pronouncements that the Company has adopted or will adopt in future periods.



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RESULTS OF ~~CONTINUING~~ OPERATIONS (unaudited)

Constant Currency Results

The Company’s management reviews and analyzes certain operating results in Latin America on a constant currency basis because the Company believes this better represents the Company’s underlying business trends. Constant currency results are non-GAAP financial measures, which exclude the effects of foreign currency translation and are calculated by translating ~~current year~~current-year results at ~~prior year~~prior-year average exchange rates. The scrap jewelry generated in Latin America is sold and settled in U.S. dollars and therefore, wholesale scrap jewelry sales revenue is ~~therefore~~ not affected by foreign currency translation. A small percentage of the operating and administrative expenses in Latin America are also billed and paid in U.S. dollars, which are not affected by foreign currency translation.

Business operations in Mexico, Guatemala and ~~Guatemala~~Colombia are transacted in Mexican pesos, ~~and~~ Guatemalan quetzales and Colombian pesos, respectively. The Company also has operations in El Salvador where the reporting and functional currency is the U.S. dollar. The following table provides exchange rates for the Mexican peso, ~~and~~ Guatemalan quetzal and Colombian peso for the current and ~~prior year~~prior-year periods:


	September 30,		Favorable /			September 30,		Favorable /
	2017	2016	(Unfavorable)			2018	2017	(Unfavorable)
Mexican peso / U.S. dollar exchange rate:
End-of-period	18.2	19.5		7	%	18.8	18.2		(3	)%
Three months ended	17.8	18.7		5	%	19.0	17.8		(7	)%
Nine months ended	18.9	18.3		(3	)%	19.0	18.9		(1	)%

Guatemalan quetzal / U.S. dollar exchange rate:
End-of-period	7.3	7.5		3	%	7.7	7.3		(5	)%
Three months ended	7.3	7.6		4	%	7.5	7.3		(3	)%
Nine months ended	7.4	7.6		3	%	7.5	7.4		(1	)%

Colombian peso / U.S. dollar exchange rate:
End-of-period						2,972	2,937		(1	)%
Three months ended						2,959	2,976		1	%
Nine months ended						2,886	2,939		2	%

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



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Operating Results for the Three Months Ended September 30, ~~2017~~2018 Compared to the Three Months Ended September 30, ~~2016~~2017

U.S. Operations Segment

The following table details earning assets, which consist of pawn loans, inventories and consumer loans, net ~~and inventories~~ as well as other earning asset metrics of the U.S. operations segment as of September 30, ~~2017~~2018 as compared to September 30, ~~2016:~~2017 (dollars in thousands, except as otherwise noted):


	Balance at September 30,						Increase /			Balance at September 30,						Increase /
	2017			2016			(Decrease)			2018			2017			(Decrease)
U.S. Operations Segment
Earning assets:
Pawn loans	$	281,217		$	300,646			(6	)%	$	278,809		$	281,217			(1	)%
Inventories											200,404			240,384			(17	)%
Consumer loans, net ⁽¹⁾		24,108			27,381			(12	)%		17,804			24,108			(26	)%
Inventories		240,384			280,429			(14	)%
	$	545,709		$	608,456			(10	)%	$	497,017		$	545,709			(9	)%

Average outstanding pawn loan amount (in ones)	$	152		$	145			5	%	$	163		$	152			7	%

Composition of pawn collateral:
General merchandise	36		%	39		%				36		%	36		%
Jewelry	64		%	61		%				64		%	64		%
	100		%	100		%				100		%	100		%

Composition of inventories:
General merchandise	43		%	48		%				42		%	43		%
Jewelry	57		%	52		%				58		%	57		%
	100		%	100		%				100		%	100		%

Percentage of inventory aged greater than one year	9		%	6		%				4		%	9		%

⁽¹⁾

Does not include the off-balance sheet principal portion of active ~~CSO~~ extensions of credit made by independent third-party ~~lenders.~~lenders, which are guaranteed by the Company through its credit services organization programs. These amounts, net of the Company’s estimated fair value of its liability for guaranteeing the extensions of credit, totaled ~~$9,251~~$7.4 million and ~~$11,641~~$9.3 million as of September 30, ~~2017~~2018 and ~~2016,~~2017, respectively.



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The following table presents segment pre-tax operating income of the U.S. operations segment for the three months ended September 30, ~~2017~~2018 as compared to the three months ended September 30, ~~2016.~~2017 (dollars in thousands). Store operating expenses include salary and benefit expense of store-level employees, occupancy costs, bank charges, security, insurance, utilities, supplies and other costs incurred by the stores.


	Three Months Ended							Three Months Ended
	September 30,							September 30,				Increase /
	2017		2016		Increase			2018		2017		(Decrease)
U.S. Operations Segment
Revenue:
Retail merchandise sales	$	160,598	$	84,547		90	%	$	162,001	$	160,598		1	%
Pawn loan fees	95,266		48,840			95	%	93,344		95,266			(2	)%
Wholesale scrap jewelry sales	32,397		15,046			115	%	18,804		32,397			(42	)%
Consumer loan and credit services fees	18,525		9,991			85	%	14,082		18,525			(24	)%
Total revenue	306,786		158,424			94	%	288,231		306,786			(6	)%

Cost of revenue:
Cost of retail merchandise sold	107,561		51,922			107	%	102,370		107,561			(5	)%
Cost of wholesale scrap jewelry sold	31,518		13,955			126	%	17,595		31,518			(44	)%
Consumer loan and credit services loss provision	6,068		3,275			85	%	5,420		6,068			(11	)%
Total cost of revenue	145,147		69,152			110	%	125,385		145,147			(14	)%

Net revenue	161,639		89,272			81	%	162,846		161,639			1	%

Segment expenses:
Store operating expenses	104,555		52,480			99	%	102,955		104,555			(2	)%
Depreciation and amortization	5,919		2,906			104	%	5,285		5,919			(11	)%
Total segment expenses	110,474		55,386			99	%	108,240		110,474			(2	)%

Segment pre-tax operating income	$	51,165	$	33,886		51	%	$	54,606	$	51,165		7	%

Retail Merchandise Sales Operations

U.S. retail merchandise sales increased ~~90%~~1% to ~~$160,598~~$162.0 million during the third quarter of ~~2017~~2018 compared to ~~$84,547~~$160.6 million for the third quarter of ~~2016. The increase was primarily due to~~2017. Same-store retail sales were consistent between the third quarter of 2016 only including the results of operations for Cash America for the period September 2, 2016 to September 30, 2016 (“Cash America 2016 Partial Quarter”) as the Merger was completed on September 1, 2016. Same-store retail sales decreased 1% in both legacy First Cash2018 and ~~Cash America stores in~~ the third quarter of ~~2017 compared to the third quarter of 2016.~~2017. During the third quarter of ~~2017,~~2018, the gross profit margin on retail merchandise sales in the U.S. was ~~33%~~37% compared to a margin of ~~39%~~33% during the third quarter of ~~2016, reflecting~~2017. The improvements were driven primarily by the ~~impact~~transition of ~~historically lower~~the Cash America locations to the FirstPawn IT platform and compensation plans focused on improving key profitability metrics such as retail margins and inventory turns.

U.S. inventories decreased 17% from $240.4 million at September 30, 2017 to $200.4 million at September 30, 2018. The decrease was primarily a result of strategic reductions in inventory levels including targeted liquidation of aged inventories in the Cash America stores ~~and a focus during~~over the ~~third quarter of 2017 on clearing aged inventory levels in the Cash America stores.~~

U.S. inventories decreased 14% from $280,429 at September 30, 2016 to $240,384 at September 30, 2017. The decrease was due to a 19% decline in legacy Cash America store inventories as the Company continues to optimize inventory levels and clear aged inventory in the Cash America stores, partially offset by a 6% increase in legacy First Cash store inventories.past several quarters. Inventories aged greater than one year ~~were 11% and 5%~~ in the ~~legacy Cash America stores~~U.S. at September 30, 2018 were 4% compared to 9% at September 30, 2017.

Pawn Lending Operations

U.S. pawn loan fees decreased 2% totaling $93.3 million during the third quarter of 2018 compared to $95.3 million for the third quarter of 2017. Same-store pawn fees decreased 3% in the third quarter of 2018 compared to the third quarter of 2017. Pawn loan receivables as of September 30, 2018 decreased 1% both in total and ~~legacy First Cash U.S. stores, respectively.~~

on a same-store basis compared to September 30, 2017. The decline in total and same-store pawn receivables and pawn loan fees relates primarily to the ongoing adoption of FirstCash’s lending practices and an increased focus on direct purchases of merchandise from customers less likely to redeem a pawn loan.



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~~Pawn Lending Operations~~

U.S. pawn loan fees increased 95% totaling $95,266 during the third quarter of 2017 compared to $48,840 for the third quarter of 2016. The increase was primarily due to the Cash America 2016 Partial Quarter. Legacy First Cash same-store pawn loan fees increased 3%, while legacy Cash America same-store pawn loan fees decreased 11% in the third quarter of 2017 compared to the third quarter of 2016. Pawn loan receivables in the U.S. as of September 30, 2017 decreased 6% compared to September 30, 2016. Legacy First Cash same-store pawn receivables increased 5%, while legacy Cash America same-store pawn receivables decreased 13% as of September 30, 2017 compared to September 30, 2016. The decline in legacy Cash America same-store pawn receivables and pawn loan fees was primarily due to the expected impact of reducing the holding period on delinquent pawn loans, continued optimization of loan-to-value ratios and to a lesser extent, the impact of the hurricane on pawn receivables in coastal Texas markets.

Wholesale Scrap Jewelry Operations

U.S. wholesale scrap jewelry revenue, consisting primarily of gold sales, ~~increased 115%~~decreased 42% to ~~$32,397~~$18.8 million during the third quarter of ~~2017~~2018 compared to ~~$15,046~~$32.4 million during the third quarter of ~~2016.~~2017. The ~~increase in wholesale~~ scrap jewelry ~~revenue was primarily due to the Cash America 2016 Partial Quarter. The scrap~~ gross profit margin in the U.S. was 3%6% compared to the prior-year margin of ~~7%, primarily as a result of the typically higher cost basis in scrap jewelry sold by the Cash America stores.~~3%. Scrap jewelry profits accounted for ~~less than~~ 1% of U.S. net revenue (gross profit) for both the third quarter of 2018 and 2017, ~~compared to 1% in~~and is considered a non-core revenue stream of the ~~third quarter of 2016.~~Company.

Consumer Lending Operations

Service fees from U.S. consumer loans and credit services transactions (collectively, consumer lending operations) ~~increased 85%~~decreased 24% to ~~$18,525~~$14.1 million during the third quarter of ~~2017~~2018 compared to ~~$9,991~~$18.5 million for the third quarter of ~~2016.~~2017. Net revenue (gross profit) from U.S. consumer lending operations decreased 30% to $8.7 million during the third quarter of 2018 compared to $12.5 million for the third quarter of 2017. The ~~increase in fees was due to the Cash America 2016 Partial Quarter. Excluding the increase due to the Cash America 2016 Partial Quarter, consumer loan and credit services fees decreased 32% as the~~ Company continues to de-emphasize consumer lending operations in light of increasing regulatory ~~constraints. Revenues~~constraints and internet-based competition and plans to further contract the number of U.S. consumer loan stores in the future. During the fourth quarter of 2018, the Company expects to close 13 stand-alone consumer lending locations and discontinue unsecured consumer loan products in 38 pawn locations, which offer consumer loans and/or credit services as an ancillary product. Revenue and gross profit from consumer lending operations ~~comprised 6%~~each accounted for 5% of total U.S. revenue and gross profit, respectively, during the third quarter of 2018 compared to 6% and 8%, respectively, during the third quarter of 2017 and ~~2016.~~is considered a non-core revenue stream of the Company.

The Company is currently evaluating regulatory changes in the state of Ohio. A state bill, recently signed into law by the governor, will significantly reduce, if not eliminate entirely, the consumer lending and credit services products and related revenues in Ohio when it becomes effective on or about April 26, 2019. The Company currently operates 119 stores in Ohio, all of which offer consumer loan and credit services products, which will be negatively impacted by the legislation when it becomes effective. See “—Regulatory Developments” for further information about the legislation and the potential impact on the Company’s results of operations.

Segment Expenses and Segment Pre-Tax Operating Income

U.S. store operating expenses ~~increased 99%~~decreased 2% to ~~$104,555~~$103.0 million during the third quarter of 2018 compared to $104.6 million during the third quarter of 2017, ~~compared~~primarily due to ~~$52,480 during~~continued efforts to integrate and optimize domestic store operations and a 1% decrease in the ~~third quarter of 2016, primarily as a result of the Merger.~~U.S. weighted-average store count. Same-store operating expenses ~~increased 2% and~~ decreased ~~3% in the legacy First Cash and Cash America stores, respectively,~~1% compared with the prior-year period.

U.S. store depreciation and amortization ~~increased 104%~~decreased 11% to ~~$5,919~~$5.3 million during the third quarter of 2018 compared to $5.9 million during the third quarter of 2017, primarily due to a reduction in capital spending in Cash America stores compared to ~~$2,906 during the third quarter of 2016, primarily as a result of the Merger.~~pre-merger levels.

The U.S. segment pre-tax operating income for the third quarter of ~~2017~~2018 was ~~$51,165,~~$54.6 million, which generated a pre-tax segment operating margin of ~~17%~~19% compared to ~~$33,886~~$51.2 million and ~~21%~~17% in the prior year, respectively. The ~~decline~~increase in the segment pre-tax operating margin was primarily due to ~~historically lower~~increased retail sales gross profits and reductions in store operating ~~margins~~expenses and store depreciation and amortization, partially offset by expected and continued reductions in ~~the Cash America stores and a focus during the third quarter of 2017 on clearing aged inventory levels in Cash America stores, resulting in lower~~non-core consumer lending gross ~~profit margins on retail merchandise sales.~~profits.



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Latin America Operations Segment

Latin American results of operations for the three months ended September 30, 2018 compared to the three months ended September 30, 2017 were impacted by a 7% unfavorable change in the average value of the Mexican peso compared to the U.S. dollar. The translated value of Latin American earning assets as of September 30, 2018 compared to September 30, 2017 also were impacted by a 3% unfavorable change in the end-of-period value of the Mexican peso compared to the U.S. dollar.

The following table details earning assets, which consist of pawn loans, inventories and consumer loans, net ~~and inventories~~ as well as other earning asset metrics of the Latin America operations segment as of September 30, ~~2017~~2018 as compared to September 30, ~~2016:~~2017 (dollars in thousands, except as otherwise noted):


										Constant Currency Basis															Constant Currency Basis
										Balance at															Balance at
										September 30,		Increase /													September 30,		Increase /
	Balance at September 30,						Increase /			2017		(Decrease)			Balance at September 30,							Increase /			2018		(Decrease)
	2017			2016			(Decrease)			(Non-GAAP)		(Non-GAAP)			2018			2017				(Decrease)			(Non-GAAP)		(Non-GAAP)
Latin America Operations Segment
Earning assets:
Pawn loans	$	90,150		$	72,523			24	%	$	84,378		16	%	$	108,924		$	90,150				21	%	$	112,594		25	%
Inventories																77,034			68,299				13	%	79,632			17	%
Consumer loans, net		407			411			(1	)%	380			(8	)%		—			407				(100	)%	—			(100	)%
Inventories		68,299			52,433			30	%	63,855			22	%
	$	158,856		$	125,367			27	%	$	148,613		19	%	$	185,958		$	158,856				17	%	$	192,226		21	%

Average outstanding pawn loan amount (in ones)	$	67		$	59			14	%	$	63		7	%	$	68		$	67				1	%	$	70		4	%

Composition of pawn collateral:
General merchandise	82		%	82		%									77		%	82		%
Jewelry	18		%	18		%									23		%	18		%
	100		%	100		%									100		%	100		%

Composition of inventories:
General merchandise	75		%	80		%									73		%	75		%	��
Jewelry	25		%	20		%									27		%	25		%
	100		%	100		%									100		%	100		%

Percentage of inventory aged greater than one year	1		%	1		%									0.4		%	1.0		%



Table of Contents

The following table presents segment pre-tax operating income of the Latin America operations segment for the three months ended September 30, ~~2017~~2018 as compared to the three months ended September 30, ~~2016.~~2017 (dollars in thousands). Store operating expenses include salary and benefit expense of store-level employees, occupancy costs, bank charges, security, insurance, utilities, supplies and other costs incurred by the stores.


								Constant Currency Basis												Constant Currency Basis
								Three Months												Three Months
								Ended												Ended
	Three Months Ended							September 30,		Increase /			Three Months Ended							September 30,		Increase /
	September 30,				Increase /			2017		(Decrease)			September 30,				Increase /			2018		(Decrease)
	2017		2016		(Decrease)			(Non-GAAP)		(Non-GAAP)			2018		2017		(Decrease)			(Non-GAAP)		(Non-GAAP)
Latin America Operations Segment
Revenue:
Retail merchandise sales	$	85,736	$	67,668		27	%	$	81,686		21	%	$	94,416	$	85,736		10	%	$	100,388		17	%
Pawn loan fees	37,279		30,665			22	%	35,534			16	%	41,269		37,279			11	%	43,868			18	%
Wholesale scrap jewelry sales	5,131		3,910			31	%	5,131			31	%	5,846		5,131			14	%	5,846			14	%
Consumer loan and credit services fees	480		486			(1	)%	457			(6	)%	116		480			(76	)%	123			(74	)%
Total revenue	128,626		102,729			25	%	122,808			20	%	141,647		128,626			10	%	150,225			17	%

Cost of revenue:
Cost of retail merchandise sold	53,789		41,477			30	%	51,252			24	%	60,917		53,789			13	%	64,762			20	%
Cost of wholesale scrap jewelry sold	5,313		3,022			76	%	5,068			68	%	6,264		5,313			18	%	6,657			25	%
Consumer loan and credit services loss provision	117		138			(15	)%	111			(20	)%	54		117			(54	)%	58			(50	)%
Total cost of revenue	59,219		44,637			33	%	56,431			26	%	67,235		59,219			14	%	71,477			21	%

Net revenue	69,407		58,092			19	%	66,377			14	%	74,412		69,407			7	%	78,748			13	%

Segment expenses:
Store operating expenses	34,411		28,094			22	%	32,920			17	%	38,800		34,411			13	%	40,989			19	%
Depreciation and amortization	2,704		2,602			4	%	2,587			(1	)%	2,915		2,704			8	%	3,080			14	%
Total segment expenses	37,115		30,696			21	%	35,507			16	%	41,715		37,115			12	%	44,069			19	%

Segment pre-tax operating income	$	32,292	$	27,396		18	%	$	30,870		13	%	$	32,697	$	32,292		1	%	$	34,679		7	%

Retail Merchandise Sales Operations

Latin America retail merchandise sales increased ~~27% (21%~~10% (17% on a constant currency basis) to ~~$85,736~~$94.4 million during the third quarter of ~~2017~~2018 compared to ~~$67,668~~$85.7 million for the third quarter of ~~2016.~~2017. The increase was primarily due to revenue contributions from recent acquisition activity, new store openings and a ~~24%~~1% increase ~~(19%~~(8% on a constant currency basis) in same-store retail sales, which included a same-store retail sales increase of 59% (52% on a constant currency basis) in the Maxi Prenda stores acquired in the fourth quarter of 2015 and first quarter of 2016. Excluding the Maxi Prenda stores, same-store retail sales increased 19% (14% on a constant currency basis), which was primarily due to strong retail demand trends and the maturation of existing stores.sales. The gross profit margin on retail merchandise sales was 35% during the third quarter of 2018 compared to 37% during the third quarter of ~~2017 compared~~2017. The decrease in retail margins was in large part the result of recent acquisitions of smaller format stores that have historically had lower retail margins. The Company expects retail margins to ~~39% during~~increase over time from current levels as these acquired smaller format stores utilize the ~~third quarter of 2016.~~FirstPawn IT platform and store associates are trained in Company best practices that focus on general merchandise lending and retail operations.

Inventories in Latin America increased ~~30% (22%~~13% (17% on a constant currency basis) from ~~$52,433~~$68.3 million at September 30, ~~2016~~2017 to ~~$68,299~~$77.0 million at September 30, ~~2017. Increased inventory levels~~2018. The increase was primarily due to the acquisition of 342 smaller format stores in Mexico over the ~~Maxi Prenda stores, which historically carried lower inventory balances than the typical First Cash store, accounted for 32% of the increase with growth from~~previous three quarters, new store openings and the maturation of existing ~~stores accounting for the remainder of the increase.~~

stores. Inventories aged greater than one year in Latin America were less than 1% at September 30, 2018 compared to 1% at September 30, 2017.



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Pawn Lending Operations

Pawn loan fees in Latin America increased ~~22% (16%~~11% (18% on a constant currency basis) totaling ~~$37,279~~$41.3 million during the third quarter of ~~2017~~2018 compared to ~~$30,665~~$37.3 million for the third quarter of ~~2016,~~2017, primarily as a result of the ~~24% (16%~~21% increase (25% on a constant currency basis) ~~increase~~ in pawn loan receivables as of September 30, ~~2017~~2018 compared to September 30, ~~2016.~~2017. The increase in pawn loan receivables ~~reflects~~was primarily driven by pawn loans acquired in the recent acquisitions and new store additions, partially offset by a same-store pawn receivable ~~increase~~decrease of ~~22% (14%~~3% (flat on a constant currency basis) ~~and new store additions. The increase in same-store pawn receivables was primarily due to strong demand for pawn loans and the maturation of existing stores.~~.

Wholesale Scrap Jewelry Operations

Latin America wholesale scrap jewelry revenue, consisting primarily of gold sales, increased ~~31%~~14% to ~~$5,131~~$5.8 million during the third quarter of ~~2017~~2018 compared to ~~$3,910~~$5.1 million during the third quarter of ~~2016.~~2017. The ~~increase in wholesale~~ scrap jewelry revenue was primarily due to reduced scrapping activities in the Maxi Prenda stores during the third quarter of 2016 as those stores were being converted to the Company’s proprietary point of sale and loan management system. The scrap gross ~~profit~~ margin in Latin America was a loss of ~~4% (1% profit~~7% (14% on a constant currency basis) compared to the prior-year gross margin loss of ~~23%~~4%. Scrap jewelry ~~profits or~~ losses accounted for ~~less than~~ 1% of ~~Latin America~~ net revenue (gross profit) for the third quarter of ~~2017~~2018 compared to 2%less than 1% in the third quarter of ~~2016.~~2017, and is considered a non-core revenue stream of the Company.

Consumer Lending Operations

The Company continues to strategically focus on its core pawn business and reduce its exposure to non-core unsecured lending products. Effective June 30, 2018, the Company ceased offering its unsecured consumer loan products in Mexico, and the 28 consumer loan stores were closed. As a result, the Company no longer offers an unsecured consumer loan product in Latin America. Consumer loan fees and the related loss provision recognized during the third quarter of 2018 relate to consumer loans made prior to June 30, 2018.

Segment Expenses and Segment Pre-Tax Operating Income

Store operating expenses increased ~~22% (17%~~13% (19% on a constant currency basis) to ~~$34,411~~$38.8 million during the third quarter of ~~2017~~2018 compared to ~~$28,094~~$34.4 million during the third quarter of ~~2016 and same-store~~2017. Total store operating expenses increased ~~14% (9%~~primarily due to the 29% increase in the Latin America weighted-average store count. Same-store operating expenses decreased 2% (increased 3% on a constant currency basis) compared to the prior-year period. ~~The increase in both total and same-store operating expenses was due in large part to increased compensation expense related to incentive pay and entry level wage competition.~~

The segment pre-tax operating income for the third quarter of ~~2017~~2018 was ~~$32,292,~~$32.7 million, which generated a pre-tax segment operating margin of ~~25%~~23% compared to ~~$27,396~~$32.3 million and ~~27%~~25% in the prior year, respectively. The decline in the pre-tax operating margin was in part the result of the recent smaller format store acquisitions that experienced lower retail margins during the integration.



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Consolidated Results of Operations

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 September 30, ~~2017~~2018 as compared to the three months ended September 30, ~~2016:~~2017 (dollars in thousands):


	Three Months Ended									Three Months Ended
	September 30,						Increase /			September 30,						Increase /
	2017			2016			(Decrease)			2018			2017			(Decrease)
Consolidated Results of Operations
Segment pre-tax operating income:
U.S. operations segment pre-tax operating income	$	51,165		$	33,886			51	%	$	54,606		$	51,165			7	%
Latin America operations segment pre-tax operating income	32,292			27,396				18	%	32,697			32,292				1	%
Consolidated segment pre-tax operating income	83,457			61,282				36	%	87,303			83,457				5	%

Corporate expenses and other income:
Administrative expenses	29,999			24,500				22	%	29,977			29,999				—	%
Depreciation and amortization	5,249			1,773				196	%	2,650			5,249				(50	)%
Interest expense	6,129			5,073				21	%	7,866			6,129				28	%
Interest income	(418		)	(138		)		203	%	(495		)	(418		)		18	%
Merger and other acquisition expenses	911			29,398				(97	)%	3,222			911				254	%
Loss on extinguishment of debt	20			—				—	%	—			20				(100	)%
Net loss on sale of common stock of Enova	—			253				(100	)%
Total corporate expenses and other income	41,890			60,859				(31	)%	43,220			41,890				3	%

Income before income taxes	41,567			423				9,727	%	44,083			41,567				6	%

Provision for income taxes	13,293			1,835				624	%	10,758			13,293				(19	)%

Net income (loss)	$	28,274		$	(1,412	)		2,102	%

Comprehensive income (loss)	$	23,293		$	(15,413	)		251	%
Net income										$	33,325		$	28,274			18	%

Corporate Expenses and Taxes

Administrative expenses were consistent, totaling $30.0 million during both the third quarter of 2018 and 2017, as administrative synergies realized from the Cash America merger and a 7% unfavorable change in the average value of the Mexican peso, which reduced comparative administrative expenses in Mexico, were offset by a 13% increase in the consolidated weighted-average store count resulting in additional management and supervisory compensation and other support expenses required for such growth. Administrative expenses were 7% of revenue during both the third quarter of 2018 and 2017.

Corporate depreciation and amortization decreased to $2.7 million during the third quarter of 2018 compared to $5.2 million during the third quarter of 2017, primarily due to the realization of depreciation and amortization merger synergies and a reduction in capital spending compared to pre-merger levels.

Interest expense increased to $7.9 million in the third quarter of 2018 compared to $6.1 million for the third quarter of 2017. See “—Liquidity and Capital Resources.”

Merger and other acquisition expenses increased to $3.2 million during the third quarter of 2018 compared to $0.9 million during the third quarter of 2017 associated with merger and acquisition activity. See “—Non-GAAP Financial Information” for additional details of merger and other acquisition expenses.



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~~Corporate Expenses and Taxes~~

Administrative expenses increased 22% to $29,999 during the third quarter of 2017 compared to $24,500 during the third quarter of 2016, primarily as a result of the Merger, a 37% increase in the weighted-average store count resulting in additional management and supervisory compensation and other support expenses required for such growth and by a 5% favorable change in the average value of the Mexican peso, which increased comparative administrative expenses in Mexico. As a percentage of revenue, administrative expenses decreased from 9% during the third quarter of 2016 to 7% during the third quarter of 2017, primarily due to synergies realized from the Merger and the Maxi Prenda acquisition.

Depreciation and amortization increased to $5,249 during the third quarter of 2017 compared to $1,773 during the third quarter of 2016 primarily due to the assumption of substantial corporate property and equipment from the Merger and $2,313 in amortization expense related to intangible assets acquired as a result of the Merger.

~~Interest expense increased to $6,129 in the third quarter of 2017 compared to $5,073 for the third quarter of 2016. See “—Liquidity and Capital Resources.”~~

Merger and other acquisition expenses decreased to $911 during the third quarter of 2017 compared to $29,398 during the third quarter of 2016, reflecting timing in transaction and integration costs primarily related to the Merger. See “—Non-GAAP Financial Information” for additional details of Merger related expenses.

For the third quarter of ~~2017~~2018 and ~~2016,~~2017, the Company’s consolidated effective ~~federal~~ income tax rates were ~~32.0%~~24.4% and ~~433.8%~~32.0%, respectively. The effective tax rate for the third quarter of ~~2016~~2018 was impacted ~~by certain significant Merger related expenses being non-deductible for~~primarily as a result of the passage of the Tax Cuts and Jobs Act (“Tax Act”) on December 22, 2017, which reduced the U.S. corporate income tax ~~purposes.~~rate from 35% in 2017 to 21% in 2018. The 24.4% effective income tax rate for the third quarter ~~included changes in~~of 2018 was also positively impacted by the refinement of certain 2018 foreign tax estimates ~~made~~ during the ~~third quarter of 2017~~quarter. The Company expects its full year 2018 blended effective income tax rate, including corporate income taxes on Latin American operations, to be approximately 26% as a result of ~~finalizing~~ the ~~2016 tax returns.~~Tax Act.

Net Income, Adjusted Net Income, ~~Net Income~~Diluted Earnings Per Share and Adjusted ~~Net Income~~Diluted Earnings Per Share

The following table sets forth revenue, net revenue, net income, ~~net income~~diluted earnings per share, adjusted net income and adjusted ~~net income~~diluted earnings per share for the third quarter of ~~2017~~2018 compared to the third quarter of ~~2016:~~2017 (in thousands, except per share amounts):

Three Months Ended September 30,
2017 2016
As Reported Adjusted As Reported Adjusted
(GAAP) (Non-GAAP) (GAAP) (Non-GAAP)
Revenue $ 435,412
$ 435,412
$ 261,153
$ 261,153
Net revenue $ 231,046
$ 231,046
$ 147,364
$ 147,364
Net income (loss) $ 28,274
$ 28,861
$ (1,412 ) $ 20,126
Diluted earnings (loss) per share $ 0.59
$ 0.61
$ (0.04 ) $ 0.58
Weighted avg diluted shares 47,668
47,668
34,631
34,631



	Three Months Ended September 30,
	2018				2017
	As Reported		Adjusted		As Reported		Adjusted
	(GAAP)		(Non-GAAP)		(GAAP)		(Non-GAAP)
Revenue	$	429,878	$	429,878	$	435,412	$	435,412
Net revenue	$	237,258	$	237,258	$	231,046	$	231,046
Net income	$	33,325	$	35,587	$	28,274	$	28,861
Diluted earnings per share	$	0.76	$	0.81	$	0.59	$	0.61
Weighted average diluted shares	44,116		44,116		47,668		47,668

GAAP and adjusted earnings per share for the three months ended September 30, 2017 compared to the three months ended September 30, 2016 were positively impacted by $0.02 per share due to the year-over-year 5% favorable change in the average value of the Mexican peso. Adjusted net income removes certain items from GAAP net income that the Company does not consider to be representative of its actual operating performance, such as ~~Merger~~merger and other acquisition expenses and ~~loss on~~debt extinguishment ~~of debt,~~costs, but does not adjust for the effects of foreign currency rate fluctuations. See “—Non-GAAP Financial Information—Adjusted Net Income and Adjusted ~~Net Income~~Diluted Earnings Per Share” below.



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Operating Results for the Nine Months Ended September 30, ~~2017~~2018 Compared to the Nine Months Ended September 30, ~~2016~~2017

U.S. Operations Segment

The following table presents segment pre-tax operating income of the U.S. operations segment for the nine months ended September 30, ~~2017~~2018 as compared to the nine months ended September 30, ~~2016.~~2017 (dollars in thousands). Store operating expenses include salary and benefit expense of store-level employees, occupancy costs, bank charges, security, insurance, utilities, supplies and other costs incurred by the stores.


	Nine Months Ended							Nine Months Ended
	September 30,							September 30,
	2017		2016		Increase			2018		2017		Decrease
U.S. Operations Segment
Revenue:
Retail merchandise sales	$	519,116	$	186,673		178	%	$	514,494	$	519,116		(1	)%
Pawn loan fees	287,338		94,929			203	%	277,411		287,338			(3	)%
Wholesale scrap jewelry sales	91,430		25,910			253	%	70,394		91,430			(23	)%
Consumer loan and credit services fees	57,425		19,619			193	%	42,522		57,425			(26	)%
Total revenue	955,309		327,131			192	%	904,821		955,309			(5	)%

Cost of revenue:
Cost of retail merchandise sold	337,789		114,632			195	%	328,258		337,789			(3	)%
Cost of wholesale scrap jewelry sold	87,600		22,914			282	%	64,203		87,600			(27	)%
Consumer loan and credit services loss provision	15,115		5,380			181	%	12,874		15,115			(15	)%
Total cost of revenue	440,504		142,926			208	%	405,335		440,504			(8	)%

Net revenue	514,805		184,205			179	%	499,486		514,805			(3	)%

Segment expenses:
Store operating expenses	318,044		107,196			197	%	310,963		318,044			(2	)%
Depreciation and amortization	18,759		5,827			222	%	15,877		18,759			(15	)%
Total segment expenses	336,803		113,023			198	%	326,840		336,803			(3	)%

Segment pre-tax operating income	$	178,002	$	71,182		150	%	$	172,646	$	178,002		(3	)%

Retail Merchandise Sales Operations

U.S. retail merchandise sales ~~increased 178%~~decreased 1% to ~~$519,116~~$514.5 million during the nine months ended September 30, ~~2017~~2018 compared to ~~$186,673~~$519.1 million for the nine months ended September 30, 2016. The increase was primarily due to the nine months ended September 30, 2016 only including the results of operations for Cash America for the period September 2, 2016 to September 30, 2016 (“Cash America 2016 Partial Period”) as the Merger was completed on September 1, 2016.2017. Same-store retail sales also decreased 1% ~~in legacy First Cash stores and decreased 4% in legacy Cash America stores~~ during the nine months ended September 30, ~~2017~~2018 compared to the nine months ended September 30, ~~2016. Gross~~2017. During the nine months ended September 30, 2018, the gross profit margin on retail merchandise sales in the U.S. was 36% compared to a margin of 35% during the nine months ended September 30, ~~2017 compared~~2017. The decline in retail sales was primarily due to ~~a margin of 39% during the nine months ended September 30, 2016, reflecting the impact of historically lower margins~~strategic reductions in ~~the Cash America stores and a focus during 2017 on clearing aged~~ inventory levels in the Cash America stores.



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Pawn Lending Operations

U.S. pawn loan fees ~~increased 203%~~decreased 3% totaling ~~$287,338~~$277.4 million during the nine months ended September 30, ~~2017~~2018 compared to ~~$94,929~~$287.3 million for the nine months ended September 30, ~~2016. The increase was primarily due to the Cash America 2016 Partial Period. Legacy First Cash same-store~~2017. Same-store pawn ~~loan fees increased 4%, while legacy Cash America same-store pawn loan~~ fees decreased 8%4% during the nine months ended September 30, ~~2017~~2018 compared to the nine months ended September 30, ~~2016.~~2017. Pawn loan receivables ~~in the U.S.~~ as of September 30, ~~2017~~2018 decreased 6%1% in total and on a same-store basis compared to September 30, ~~2016. Legacy First Cash same-store pawn receivables increased 5%, while legacy Cash America same-store pawn receivables decreased 13% as of September 30, 2017 compared to September 30, 2016.~~2017. The decline in ~~legacy Cash America~~ same-store pawn receivables and pawn loan fees ~~was~~relates primarily ~~due~~ to the ~~expected impact~~ongoing adoption of ~~reducing the holding period~~FirstCash’s lending practices and an increased focus on ~~delinquent~~direct purchases of merchandise from customers less likely to redeem a pawn ~~loans, continued optimization of loan-to-value ratios and to a lesser extent, the impact of the hurricane on pawn receivables in coastal Texas markets.~~loan.

Wholesale Scrap Jewelry Operations

U.S. wholesale scrap jewelry revenue, consisting primarily of gold sales, ~~increased 253%~~decreased 23% to ~~$91,430~~$70.4 million during the nine months ended September 30, ~~2017~~2018 compared to ~~$25,910~~$91.4 million during the nine months ended September 30, ~~2016.~~2017. The ~~increase in wholesale~~ scrap jewelry ~~revenue was primarily due to the Cash America 2016 Partial Period. The scrap~~ gross profit margin in the U.S. was 4%9% compared to the prior-year margin of ~~12%, primarily as a result of the typically higher cost basis in scrap jewelry sold by the Cash America stores.~~4%. Scrap jewelry profits accounted for 1% of U.S. net revenue (gross profit) for both the nine months ended September 30, 2018 and 2017, ~~compared to 2% in~~and is considered a non-core revenue stream of the ~~nine months ended September 30, 2016.~~Company.

Consumer Lending Operations

Service fees from U.S. consumer loans and credit services transactions (collectively, consumer lending operations) ~~increased 193%~~decreased 26% to ~~$57,425~~$42.5 million during the nine months ended September 30, ~~2017~~2018 compared to ~~$19,619~~$57.4 million for the nine months ended September 30, ~~2016. The increase in fees was due to the Cash America 2016 Partial Period. Excluding the increase due to the Cash America 2016 Partial Period,~~2017. Net revenue (gross profit) from U.S. consumer ~~loan and credit services fees~~lending operations decreased 30% asto $29.6 million during the nine months ended September 30, 2018 compared to $42.3 million for the nine months ended September 30, 2017. As previously discussed, the Company continues to de-emphasize consumer lending ~~operations in light of increasing regulatory constraints. Revenues~~operations. Revenue and gross profit from consumer lending operations ~~comprised~~accounted for 5% and 6% of total U.S. revenue and gross profit, respectively, during the nine months ended September 30, ~~2017~~2018 compared to 6% and ~~2016.~~8%, respectively, during the nine months ended September 30, 2017.

In April 2018, the Company sold the remaining assets of its eight California consumer lending stores. As a result, the Company no longer has operations in California. The Company recorded an immaterial loss resulting from the sale and store closures, which includes the cost of terminating the remaining lease liabilities.

Segment Expenses and Segment Pre-Tax Operating Income

U.S. store operating expenses ~~increased 197%~~decreased 2% to ~~$318,044~~$311.0 million during the nine months ended September 30, 2018 compared to $318.0 million during the nine months ended September 30, 2017, ~~compared~~primarily due to ~~$107,196 during~~continued efforts to integrate and optimize domestic store operations and a 1% decrease in the ~~nine months ended September 30, 2016, primarily as a result of the Merger.~~U.S. weighted-average store count. Same-store operating expenses ~~increased~~decreased 1% ~~and decreased 3% in the legacy First Cash and Cash America stores, respectively,~~ compared with the prior-year period.

U.S. store depreciation and amortization ~~increased 222%~~decreased 15% to ~~$18,759~~$15.9 million during the nine months ended September 30, 2018 compared to $18.8 million during the nine months ended September 30, 2017, primarily due to a reduction in capital spending in Cash America stores compared to ~~$5,827 during the nine months ended September 30, 2016, primarily as a result of the Merger.~~pre-merger levels.

The U.S. segment pre-tax operating income for the nine months ended September 30, ~~2017~~2018 was ~~$178,002,~~$172.6 million compared to $178.0 million in the prior year, which generated a pre-tax segment operating margin of 19% ~~compared to $71,182 and 22% in the prior year, respectively.~~for both periods. The decline in the segment pre-tax operating ~~margin~~income was primarily due to ~~historically lower~~declines in pawn loan fees and non-core consumer lending gross profits, partially offset by increased retail sales gross profits and reductions in store operating ~~margins in the Cash America stores~~expenses and ~~a focus during 2017 on clearing aged inventory levels in Cash America stores, resulting in lower gross profit margins on retail merchandise sales.~~store depreciation and amortization.



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Latin America Operations Segment

Latin American results of operations for the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017 were impacted by a 1% unfavorable change in the average value of the Mexican peso compared to the U.S. dollar.

The following table presents segment pre-tax operating income of the Latin America operations segment for the nine months ended September 30, ~~2017~~2018 as compared to the nine months ended September 30, ~~2016.~~2017 (dollars in thousands). Store operating expenses include salary and benefit expense of store-level employees, occupancy costs, bank charges, security, insurance, utilities, supplies and other costs incurred by the stores.

Constant Currency Basis
Nine Months
Ended
Nine Months Ended September 30, Increase /
September 30, Increase / 2017 (Decrease)
2017 2016 (Decrease) (Non-GAAP) (Non-GAAP)
Latin America Operations Segment
Revenue:
Retail merchandise sales $ 231,034
$ 199,861
16 % $ 238,833
19 %
Pawn loan fees 96,090
87,887
9 % 99,272
13 %
Wholesale scrap jewelry sales 15,855
9,996
59 % 15,855
59 %
Consumer loan and credit services fees 1,329
1,460
(9 )% 1,377
(6 )%
Total revenue 344,308
299,204
15 % 355,337
19 %

Cost of revenue:
Cost of retail merchandise sold 145,669
124,534
17 % 150,536
21 %
Cost of wholesale scrap jewelry sold 14,770
7,787
90 % 15,238
96 %
Consumer loan and credit services loss provision 304
400
(24 )% 315
(21 )%
Total cost of revenue 160,743
132,721
21 % 166,089
25 %

Net revenue 183,565
166,483
10 % 189,248
14 %

Segment expenses:
Store operating expenses 94,736
83,367
14 % 97,565
17 %
Depreciation and amortization 7,723
7,919
(2 )% 7,956
— %
Total segment expenses 102,459
91,286
12 % 105,521
16 %

Segment pre-tax operating income $ 81,106
$ 75,197
8 % $ 83,727
11 %

~~Retail Merchandise Sales Operations~~

Latin America retail merchandise sales increased 16% (19% on a constant currency basis) to $231,034 during the nine months ended September 30, 2017 compared to $199,861 for the nine months ended September 30, 2016. The increase was primarily due to a 9% increase (13% on a constant currency basis) in same-store retail sales, which included a same-store retail sales increase of 25% (20% on a constant currency basis) in the Maxi Prenda stores acquired in the fourth quarter of 2015 and first quarter of 2016. Excluding the Maxi Prenda stores, same-store retail sales increased 9% (13% on a constant currency basis), which was primarily due to strong retail demand trends and the maturation of existing stores. During the nine months ended September 30, 2017, the gross profit margin on retail merchandise sales was 37% compared to 38% during the nine months ended September 30, 2016.



								Constant Currency Basis
								Nine Months
								Ended
	Nine Months Ended							September 30,		Increase /
	September 30,				Increase /			2018		(Decrease)
	2018		2017		(Decrease)			(Non-GAAP)		(Non-GAAP)
Latin America Operations Segment
Revenue:
Retail merchandise sales	$	267,506	$	231,034		16	%	$	268,988		16	%
Pawn loan fees	110,007		96,090			14	%	110,615			15	%
Wholesale scrap jewelry sales	16,456		15,855			4	%	16,456			4	%
Consumer loan and credit services fees	860		1,329			(35	)%	865			(35	)%
Total revenue	394,829		344,308			15	%	396,924			15	%

Cost of revenue:
Cost of retail merchandise sold	173,100		145,669			19	%	174,061			19	%
Cost of wholesale scrap jewelry sold	16,227		14,770			10	%	16,315			10	%
Consumer loan and credit services loss provision	221		304			(27	)%	222			(27	)%
Total cost of revenue	189,548		160,743			18	%	190,598			19	%

Net revenue	205,281		183,565			12	%	206,326			12	%

Segment expenses:
Store operating expenses	106,936		94,736			13	%	107,472			13	%
Depreciation and amortization	8,364		7,723			8	%	8,406			9	%
Total segment expenses	115,300		102,459			13	%	115,878			13	%

Segment pre-tax operating income	$	89,981	$	81,106		11	%	$	90,448		12	%



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Retail Merchandise Sales Operations

Latin America retail merchandise sales increased 16% in total and on a constant currency basis to $267.5 million during the nine months ended September 30, 2018 compared to $231.0 million for the nine months ended September 30, 2017. The increase was primarily due to revenue contributions from recent acquisition activity, new store openings and a 10% increase in both total and constant currency same-store retail sales. The gross profit margin on retail merchandise sales was 35% during the nine months ended September 30, 2018 compared to 37% during the nine months ended September 30, 2017. The decrease in retail margins was in large part the result of recent acquisitions of smaller format stores that have historically had lower retail margins. The Company expects retail margins to increase over time from current levels as these acquired smaller format stores utilize the FirstPawn IT platform and store associates are trained in Company best practices that focus on general merchandise lending and retail operations.

Pawn Lending Operations

Pawn loan fees in Latin America increased ~~9% (13%~~14% (15% on a constant currency basis) totaling ~~$96,090~~$110.0 million during the nine months ended September 30, ~~2017~~2018 compared to ~~$87,887~~$96.1 million for the nine months ended September 30, ~~2016~~2017, primarily as a result of the ~~24% (16%~~21% increase (25% on a constant currency basis) ~~increase~~ in pawn loan receivables as of September 30, ~~2017~~2018 compared to September 30, ~~2016.~~2017. The increase in pawn receivables ~~reflects~~was primarily driven by pawn loans acquired in the recent acquisitions and new store additions, partially offset by a same-store pawn receivable ~~increase~~decrease of ~~22% (14%~~3% (flat on a constant currency basis) ~~and new store additions. The increase in same-store pawn receivables was primarily due to strong demand for pawn loans and the maturation of existing stores.~~.

Wholesale Scrap Jewelry Operations

Latin America wholesale scrap jewelry revenue, consisting primarily of gold sales, increased ~~59%~~4% to ~~$15,855~~$16.5 million during the nine months ended September 30, ~~2017~~2018 compared to ~~$9,996~~$15.9 million during the nine months ended September 30, ~~2016.~~2017. The ~~increase in wholesale~~ scrap jewelry revenue was primarily due to reduced scrapping activities in the Maxi Prenda stores during the nine months ended September 30, 2016 as those stores were being converted to the Company’s proprietary point of sale and loan management system. The scrap gross profit margin in Latin America was ~~7% (4%~~1% in total and on a constant currency ~~basis)~~basis compared to the prior-year margin of ~~22%~~7%. Scrap jewelry profits accounted for less than 1% of Latin America net revenue (gross profit) for the nine months ended September 30, ~~2017, which equaled~~2018 compared to 1% for the nine months ended September 30, ~~2016.~~2017, and is considered a non-core revenue stream of the Company.

Consumer Lending Operations

Segment Expenses and Segment Pre-Tax Operating Income

Store operating expenses increased ~~14% (17%~~13% in total and on a constant currency ~~basis)~~basis to ~~$94,736~~$106.9 million during the nine months ended September 30, ~~2017~~2018 compared to ~~$83,367~~$94.7 million during the nine months ended September 30, ~~2016 and same-store~~2017. Total store operating expenses increased primarily due to the 20% increase in the Latin America weighted-average store count. Same-store operating expenses increased 4% ~~(7%~~in total and on a constant currency ~~basis)~~basis compared to the prior-year period. ~~The increase in both total and same-store operating expenses was due in large part to increased compensation expense related to incentive pay and entry level wage competition.~~

The segment pre-tax operating income for the nine months ended September 30, ~~2017~~2018 was ~~$81,106,~~$90.0 million, which generated a pre-tax segment operating margin of ~~24%~~23% compared to ~~$75,197~~$81.1 million and ~~25%~~24% in the prior year, respectively. The decline in the pre-tax operating margin was in part the result of the recent smaller format store acquisitions that experienced lower retail margins during the integration.



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Consolidated Results of Operations

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 nine months ended September 30, ~~2017~~2018 as compared to the nine months ended September 30, ~~2016:~~2017 (dollars in thousands):


	Nine Months Ended									Nine Months Ended
	September 30,						Increase /			September 30,						Increase /
	2017			2016			(Decrease)			2018			2017			(Decrease)
Consolidated Results of Operations
Segment pre-tax operating income:
U.S. operations segment pre-tax operating income	$	178,002		$	71,182			150	%	$	172,646		$	178,002			(3	)%
Latin America operations segment pre-tax operating income	81,106			75,197				8	%	89,981			81,106				11	%
Consolidated segment pre-tax operating income	259,108			146,379				77	%	262,627			259,108				1	%

Corporate expenses and other income:
Administrative expenses	93,542			58,277				61	%	87,699			93,542				(6	)%
Depreciation and amortization	16,322			3,419				377	%	8,844			16,322				(46	)%
Interest expense	17,827			13,859				29	%	20,593			17,827				16	%
Interest income	(1,138		)	(636		)		79	%	(2,216		)	(1,138		)		95	%
Merger and other acquisition expenses	3,164			33,877				(91	)%	5,574			3,164				76	%
Loss on extinguishment of debt	14,114			—				—	%	—			14,114				(100	)%
Net loss on sale of common stock of Enova	—			253				(100	)%
Total corporate expenses and other income	143,831			109,049				32	%	120,494			143,831				(16	)%

Income before income taxes	115,277			37,330				209	%	142,133			115,277				23	%

Provision for income taxes	39,119			13,895				182	%	37,002			39,119				(5	)%

Net income	$	76,158		$	23,435			225	%	$	105,131		$	76,158			38	%

Comprehensive income (loss)	$	107,519		$	(7,269	)		1,579	%

Corporate Expenses and Taxes

Administrative expenses ~~increased 61%~~decreased 6% to ~~$93,542~~$87.7 million during the nine months ended September 30, 2018 compared to $93.5 million during the nine months ended September 30, 2017, ~~compared to $58,277 during~~as administrative synergies realized from the ~~nine months ended September 30, 2016, primarily as~~Cash America merger and a ~~result~~1% unfavorable change in the average value of the ~~Merger and~~Mexican peso, which slightly reduced comparative administrative expenses in Mexico, were partially offset by a ~~54%~~9% increase in the consolidated weighted-average store count resulting in additional management and supervisory compensation and other support expenses required for such ~~growth, partially offset by a 3% unfavorable change in the average value of the Mexican peso, which reduced comparative administrative~~growth. Administrative expenses ~~in Mexico. As a percentage~~were 7% of revenue ~~administrative expenses~~during both the nine months ended September 30, 2018 and 2017.

Corporate depreciation and amortization decreased ~~from 9%~~to $8.8 million during the nine months ended September 30, ~~2016~~2018 compared to 7%$16.3 million during the nine months ended September 30, 2017, primarily due to the realization of depreciation and amortization merger synergies ~~realized from the Merger~~ and ~~the Maxi Prenda acquisition.~~a reduction in capital spending compared to pre-merger levels.

~~Depreciation and amortization~~Interest expense increased to ~~$16,322~~$20.6 million during the nine months ended September 30, ~~2017~~2018 compared to $3,419 during the nine months ended September 30, 2016 primarily due to the assumption of substantial corporate property and equipment from the Merger and $7,428 in amortization expense related to intangible assets acquired as a result of the Merger.

~~Interest expense increased to $17,827 during the nine months ended September 30, 2017 compared to $13,859~~$17.8 million for the nine months ended September 30, ~~2016.~~2017. See “—Liquidity and Capital Resources.”

Merger and other acquisition expenses ~~decreased~~increased to ~~$3,164~~$5.6 million during the nine months ended September 30, ~~2017~~2018 compared to ~~$33,877~~$3.2 million for the nine months ended September 30, ~~2016, reflecting timing in transaction~~2017 associated with merger and ~~integration costs primarily related to the Merger.~~acquisition activity. See “—Non-GAAP Financial Information” for additional details of ~~Merger related~~merger and other acquisition expenses.



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During the nine months ended September 30, 2017, the Company repurchased through a tender offer, or otherwise redeemed, its previously outstanding ~~$200,000,~~$200 million, 6.75% senior unsecured notes due 2021, incurring a loss on extinguishment of debt of ~~$14,114.~~$14.1 million.

For the nine months ended September 30, ~~2017~~2018 and ~~2016,~~2017, the Company’s consolidated effective ~~federal~~ income tax rates were ~~33.9%~~26.0% and ~~37.2%~~33.9%, respectively. The ~~decrease in the~~ effective tax rate ~~was primarily due to certain significant Merger related expenses being non-deductible~~ for ~~income tax purposes during~~ the nine months ended September 30, ~~2016, the tax impact of the loss on extinguishment of debt and changes in certain tax estimates made during 2017~~2018 was impacted primarily as a result of ~~finalizing~~ the ~~2016~~passage of the Tax Act on December 22, 2017, which reduced the U.S. corporate income tax ~~returns.~~rate from 35% in 2017 to 21% in 2018. The Company expects its full year 2018 blended effective income tax rate, including corporate income taxes on Latin American operations, to be approximately 26% as a result of the Tax Act.

Net Income, Adjusted Net Income, ~~Net Income~~Diluted Earnings Per Share and Adjusted ~~Net Income~~Diluted Earnings Per Share

The following table sets forth revenue, net revenue, net income, ~~net income~~diluted earnings per share, adjusted net income and adjusted ~~net income per share for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016:~~

Nine Months Ended September 30,
2017 2016
As Reported Adjusted As Reported Adjusted
(GAAP) (Non-GAAP) (GAAP) (Non-GAAP)
Revenue $ 1,299,617
$ 1,299,617
$ 626,335
$ 626,335
Net revenue $ 698,370
$ 698,370
$ 350,688
$ 350,688
Net income $ 76,158
$ 87,044
$ 23,435
$ 47,884
Diluted earnings per share $ 1.58
$ 1.81
$ 0.77
$ 1.58
Weighted avg diluted shares 48,117
48,117
30,372
30,372

~~GAAP and adjusted~~diluted earnings per share for the nine months ended September 30, ~~2017~~2018 compared to the nine months ended September 30, ~~2016 were negatively impacted by $0.03~~2017 (in thousands, except per share ~~due to the year-over-year 3% unfavorable change in the average value of the Mexican peso.~~ amounts):



	Nine Months Ended September 30,
	2018				2017
	As Reported		Adjusted		As Reported		Adjusted
	(GAAP)		(Non-GAAP)		(GAAP)		(Non-GAAP)
Revenue	$	1,299,650	$	1,299,650	$	1,299,617	$	1,299,617
Net revenue	$	704,767	$	704,767	$	698,370	$	698,370
Net income	$	105,131	$	109,089	$	76,158	$	87,044
Diluted earnings per share	$	2.33	$	2.41	$	1.58	$	1.81
Weighted average diluted shares	45,204		45,204		48,117		48,117

Adjusted net income removes certain items from GAAP net income that the Company does not consider to be representative of its actual operating performance, such as ~~Merger~~merger and other acquisition expenses and debt extinguishment costs, but does not adjust for the effects of foreign currency rate fluctuations. See “—Non-GAAP Financial Information—Adjusted Net Income and Adjusted ~~Net Income~~Diluted Earnings Per Share” below.

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, ~~2017,~~2018, the Company’s primary sources of liquidity were ~~$93,411~~$57.0 million in cash and cash equivalents, ~~$265,544~~$91.8 million of available and unused funds under the Company’s ~~long-term lines of~~revolving unsecured credit ~~with its commercial lenders, $441,016~~facility, $454.7 million in customer loans and fees and service charges receivable and ~~$308,683~~$277.4 million in inventories. As of September 30, ~~2017,~~2018, the amount of cash associated with indefinitely reinvested foreign earnings was ~~$42,329,~~$24.1 million, which is primarily held in Mexican pesos. The Company had working capital of ~~$758,637~~$669.2 million as of September 30, ~~2017~~2018 and total equity exceeded liabilities by a ratio of ~~2.2~~1.6 to 1.



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Ratio”) is less than 2.25 to ~~1.00.~~1. The Net Debt Ratio is defined generally in the indenture governing the Notes ~~(the “Indenture”)~~ as the ratio of (1) the total consolidated debt of the Company minus cash and cash equivalents of the Company to (2) the Company’s consolidated trailing twelve months EBITDA, as adjusted to exclude certain non-recurring expenses and giving pro forma effect to operations acquired during the measurement period. As of September 30, 2018, the Net Debt Ratio was 2.0 to 1. See “—Non-GAAP Financial Information” for additional information on the calculation of the Net Debt Ratio.



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At September 30, ~~2017,~~2018, the Company maintained aan unsecured line of credit with a group of U.S. based commercial lenders (the ~~“2016 Credit~~“Credit Facility”) in the amount of ~~$400,000. In May 2017, the term of the 2016 Credit Facility was extended through~~$400.0 million which matures on September 2, 2022. The calculation of the fixed charge coverage ratio was also amended to remove share repurchases from the calculation to provide greater flexibility for making future share repurchases and paying cash dividends.

At September 30, ~~2017,~~2018, the Company had ~~$140,000~~$305.0 million in outstanding borrowings and ~~a $4,456~~$3.2 million in outstanding ~~letter~~letters of credit under the ~~2016~~ Credit Facility, leaving ~~$255,544~~$91.8 million available for future borrowings. The ~~2016~~ Credit Facility bears interest, at the Company’s option, at either (i) the prevailing London Interbank Offered Rate (“LIBOR”) (with interest periods of 1 week or 1, 2, 3 or 6 months at the Company’s option) plus a fixed spread of 2.5% or (ii) the prevailing prime or base rate plus a fixed spread of 1.5%. The agreement has a LIBOR floor of 0%. Additionally, the Company is required to pay an annual commitment fee of 0.50% on the average daily unused portion of the ~~2016~~ Credit Facility commitment. The weighted-average interest rate on amounts outstanding under the ~~2016~~ Credit Facility at September 30, ~~2017~~2018 was ~~3.75%~~4.66% based on 1 week LIBOR. Under the terms of the ~~2016~~ Credit Facility, the Company is required to maintain certain financial ratios and comply with certain financial covenants. The ~~2016~~ Credit Facility also contains customary restrictions on the Company’s ability to incur additional debt, grant liens, make investments, consummate acquisitions and similar negative covenants with customary carve-outs and baskets. The Company was in compliance with the requirements and covenants of the ~~2016~~ Credit Facility as of September 30, ~~2017,~~2018, and believes it has the capacity to borrow a substantial portion of the amount available under the ~~2016~~ Credit Facility under the most restrictive covenant. During the nine months ended September 30, ~~2017,~~2018, the Company ~~made~~received net ~~payments~~proceeds of ~~$120,000~~$198.0 million from borrowings pursuant to the ~~2016~~ Credit Facility.

~~At September 30, 2017,~~On October 4, 2018, the Company ~~maintained a U.S. dollar denominated line of credit with a bank in Mexico (the “Mexico~~amended and extended the Credit ~~Facility”)~~Facility. The total lender commitment under the amended facility increased from $400.0 million to $425.0 million and the term was extended to October 4, 2023. Certain financial covenants in the ~~amount of $10,000. The Mexico~~facility were amended, including an increase in the permitted consolidated leverage ratio from 2.75 to 3.0 times EBITDA adjusted for certain items as defined in the Credit Facility ~~bears~~and an increase in the permitted domestic leverage ratio from 3.5 to 4.0 times domestic EBITDA adjusted for certain items as defined in the Credit Facility. The Credit Facility remains unsecured and continues to bear interest, at ~~30-day~~the Company’s option, at either (i) the prevailing LIBOR (with interest periods of 1 week or 1, 2, 3 or 6 months at the Company’s option) plus a fixed spread of ~~2.0% and matures in December 2017. Under~~2.5% or (ii) the ~~terms~~prevailing prime or base rate plus a fixed spread of the Mexico Credit Facility, the Company is required to maintain certain financial ratios and comply with certain financial covenants. The Company was in compliance with the requirements and covenants of the Mexico Credit Facility as of September 30, 2017, and believes it has the capacity to borrow the full amount available under the Mexico Credit Facility under the most restrictive covenant. The Company is required to pay a one-time commitment fee of $25 due when the first amount is drawn/borrowed. At September 30, 2017, the Company had no amount outstanding under the Mexico Credit Facility and $10,000 was available for borrowings.1.5%.

In general, revenue growth is dependent upon the Company’s ability to fund the addition of store locations (both de novo openings and acquisitions) and growth in customer loan balances and inventories. In addition to these factors, changes in loan balances, collection of pawn fees, merchandise sales, inventory levels, seasonality, operating expenses, administrative expenses, expenses related to ~~the Merger,~~merger and acquisition activities, tax rates, gold prices, foreign currency exchange rates and the pace of new store expansions and acquisitions, affect the Company’s liquidity. Management believes cash on hand, the borrowings available under its revolving unsecured credit ~~facilities,~~facility, anticipated cash generated from operations (including the normal seasonal increases in operating cash flows occurring in the first and fourth quarters) and other current working capital will be sufficient to meet the Company’s anticipated capital requirements for its business for at least the next twelve months. Where appropriate or desirable, in connection with the Company’s efficient management of its liquidity position, the Company could seek to raise additional funds from a variety of sources, including the sale of assets, reductions in capital spending, the issuance of debt or equity securities and/or changes to its management of current assets. The characteristics of the Company’s current assets, specifically the ability to rapidly liquidate gold jewelry inventory and adjust outflows of cash in its lending practices, gives the Company flexibility to quickly modify its business strategy to increase cash



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flow from its business, if necessary. Regulatory developments affecting the Company’s operations may also impact profitability and liquidity. See “—Regulatory Developments.”

The Company regularly evaluates opportunities to optimize its capital structure, including through consideration of the issuance of debt or equity, to refinance existing debt and to fund ongoing cash needs such as general corporate purposes, growth initiatives and its dividend and stock repurchase program.

The following tables set forth certain historical information with respect to the Company’s sources and uses of cash and other key indicators of ~~liquidity:~~liquidity (dollars in thousands):


	Nine Months Ended						Nine Months Ended
	September 30,						September 30,
	2017			2016			2018			2017
Cash flow provided by operating activities	$	148,846		$	40,474		$	174,219		$	148,846
Cash flow used in investing activities	$	(22,475	)	$	(88,957	)	$	(142,196	)	$	(22,475	)
Cash flow provided by (used in) financing activities	$	(128,365	)	$	50,537
Cash flow used in financing activities							$	(90,042	)	$	(128,365	)



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		Balance at September 30,						Balance at September 30,
		2017			2016			2018			2017
Working capital		$	758,637		$	817,559		$	669,226		$	758,637
Current ratio	6.57:1			5.85:1			5.8:1			6.6:1
Liabilities to equity ratio	0.45:1			0.59:1			0.6:1			0.5:1
Net Debt Ratio ⁽¹⁾	1.28:1			3.42:1			2.0:1			1.3:1

⁽¹⁾

Pursuant to the covenants of the Notes, the Company may make restricted payments, such as purchasing shares of its stock and paying cash dividends, in an unlimited amount if, after giving pro forma effect to the incurrence of any indebtedness to make such payment, the Company's Net Debt Ratio is less than 2.25 to 1.00. Adjusted EBITDA, a component of the Net Debt Ratio, is a non-GAAP financial measure. See “—Non-GAAP Financial Information” for a calculation of the Net Debt Ratio.

Net cash provided by operating activities increased ~~$108,372,~~$25.4 million, or ~~268%~~17%, from ~~$40,474 for the nine months ended September 30, 2016 to $148,846~~$148.8 million for the nine months ended September 30, 2017 to $174.2 million for the nine months ended September 30, 2018, due ~~primarily~~ to an increase in net income of ~~$52,723~~$29.0 million, net changes in certain non-cash adjustments to reconcile net income to operating cash flow and net changes in ~~certain adjustments and~~ operating assets and liabilities (as detailed in the condensed consolidated statements of cash flows).

Net cash used in investing activities ~~decreased $66,482,~~increased $119.7 million, or ~~75%~~533%, from ~~$88,957~~$22.5 million for the nine months ended September 30, ~~2016~~2017 to ~~$22,475~~$142.2 million for the nine months ended September 30, ~~2017.~~2018. Cash flows from investing activities are utilized primarily to fund pawn store acquisitions and purchases of property and equipment. In addition, net cash flows related to fundings/repayments of pawn and consumer loans are included in investing activities. The Company paid ~~$1,141~~$88.4 million in cash related to acquisitions and $40.8 million for property and equipment during the nine months ended September 30, ~~2017~~2018 compared to ~~$28,756~~$1.1 million and $26.6 million in the prior-year ~~period. In addition, the portion of the aggregate Merger consideration paid in cash upon closing of the Merger, net of cash acquired, was $8,251 during nine months ended September 30, 2016.~~period, respectively. The Company ~~received~~funded a net ~~repayments on loan receivables~~increase in pawn and consumer loans of ~~$5,261~~$13.1 million during the nine months ended September 30, ~~2017~~2018 compared to funds received from a net ~~fundings~~decrease in pawn and consumer loans of ~~$31,486~~$5.3 million during the nine months ended September 30, ~~2016 and received proceeds of $2,962 from the sale of 317,000 shares of common stock of Enova International, Inc. during the nine months ended September 30, 2016.~~2017.

Net cash used in financing activities ~~increased $178,902,~~decreased $38.3 million, or ~~354%~~30%, from ~~net cash provided by financing activities of $50,537~~$128.4 million for the nine months ended September 30, ~~2016~~2017 to ~~net cash used in financing activities of $128,365~~$90.0 million for the nine months ended September 30, ~~2017.~~2018. Net ~~payments~~borrowings on the Company’s credit ~~facilities~~facility were ~~$120,000~~$198.0 million during the nine months ended September 30, ~~2017~~2018 compared to net ~~proceeds~~payments of ~~$302,000~~$120.0 million during the nine months ended September 30, ~~2016.~~2017. During the nine months ended September 30, 2017, the Company received ~~$300,000~~$300.0 million in proceeds from the private offering of the Notes and paid ~~$5,342~~$5.3 million in debt issuance ~~costs.~~costs related to the Notes and the Credit Facility. Using part of the proceeds from the Notes, the Company repurchased, or otherwise redeemed, the ~~$200,000~~ 2021 Notes and paid tender or redemption premiums over the face value of the 2021 Notes and other reacquisition costs of ~~$10,895~~$10.9 million during the nine months ended September 30, 2017. ~~In addition, the~~The Company ~~repaid $6,532 in peso-denominated debt assumed from the Maxi Prenda acquisition~~funded $258.5 million worth of common stock share repurchases and ~~$232,000 in debt assumed in conjunction with the Merger~~paid dividends of $29.9 million during the nine months ended September 30, ~~2016. The Company repurchased $65,035~~2018, compared to funding $65.0 million worth of ~~shares~~share repurchases and dividends paid of ~~its common stock, realized proceeds from the exercise~~



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~~of stock options of $307 and paid dividends of $27,400~~$27.4 million during the nine months ended September 30, ~~2017, compared to dividends paid of $10,591 during the nine months ended September 30, 2016.~~2017.

During the nine months ended September 30, ~~2017,~~2018, the Company opened 3243 new pawn stores in Latin America, acquired ~~five~~342 pawn stores in Latin America ~~opened two~~and acquired 18 pawn stores in the U.S. ~~and acquired one pawn store in the U.S.~~ The cumulative all-cash purchase price of the ~~2017~~2018 acquisitions was ~~$1,154,~~$105.0 million, net of cash acquired and ~~certain~~subject to future post-closing adjustments. The purchases were composed of ~~$1,124~~$88.4 million in cash paid during the nine months ended September 30, ~~2017~~2018 and ~~$30~~$16.6 million of deferred purchase price payable in cash to the sellers in ~~2017. During the nine months ended September 30, 2017, the Company also paid $17 of deferred purchase price amounts payable related to prior-year acquisitions.~~2018 and 2019. The Company funded ~~$26,595~~$40.8 million in capital expenditures during the nine months ended September 30, ~~2017, related~~2018, primarily tofor maintenance capital expenditures, ~~and~~ new store ~~additions.~~additions and corporate assets, but also included $15.0 million related to the purchase of store real estate primarily at existing stores.

The Company intends to continue ~~expansion~~expansion primarily through acquisitions and new store openings. For fiscal ~~2017,~~2018, the Company expects to add ~~approximately 50~~at least 420 locations, which includes the 342 smaller format stores acquired in Mexico and the 61 large format stores acquired or opened during the first nine months of the year. Additionally, as opportunities arise at attractive prices, the Company intends to ~~60 stores, primarily in Latin America. The~~continue purchasing the real estate from its landlords at existing stores. Excluding these store real estate purchases, the Company expects ~~that~~ total capital expenditures for ~~2017,~~2018, including expenditures for new and remodeled stores and other corporate assets, will total approximately ~~$32,000~~$30.0 million to ~~$37,000.~~$35.0 million. Management believes ~~that~~ cash on hand, the amounts available to be drawn under the unsecured credit ~~facilities~~facility and cash generated from operations will be sufficient to accommodate the Company’s current operations and store expansion plans for the remainder of ~~2017.~~2018.

The Company continually looks for, and is presented with, potential acquisition opportunities. The Company currently has no other contractual commitments for materially significant future acquisitions, business combinations or capital commitments. The Company will evaluate potential acquisitions based upon growth potential, purchase price, available liquidity, debt covenant restrictions, strategic fit and quality of management personnel, among other factors. If the Company encounters an attractive



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opportunity to acquire new stores in the near future, the Company may seek additional financing, the terms of which will be negotiated on a case-by-case basis.

~~As of September 30,~~In May 2017, the Company has contractual commitments to deliver a total of 7,475 gold ounces over the months of October through December 31, 2017. The ounces required to be delivered over this time period are well within historical scrap gold volumes and the Company expects to have the required gold ounces to meet the commitments as they come due.

~~In January 2015,~~ the Company’s Board of Directors authorized a common stock repurchase program ~~for~~to repurchase up to ~~2,000,000 shares~~$100.0 million of the Company’s outstanding common stock. During ~~the first quarter of 2017,~~January 2018, the Company ~~repurchased 228,000~~completed the May 2017 stock repurchase program after repurchasing approximately 239,000 shares of its common stock at an aggregate cost of ~~$10,005~~$17.3 million. In October 2017, the Company’s Board of Directors authorized an additional $100.0 million share repurchase plan that became effective on January 31, 2018, following the completion of the May 2017 share repurchase plan. The Company completed the October 2017 share repurchase program in April 2018 after repurchasing 1,282,000 shares of its common stock at an aggregate cost of $100.0 million and an average cost per share of ~~$43.94.~~$78.01. In ~~May 2017,~~April 2018, the Company’s Board of Directors authorized a common stock repurchase program to repurchase up to $100.0 million of the Company’s outstanding common stock, which became effective on April 25, 2018. The Company completed the April 2018 share repurchase program in June 2018 after repurchasing 1,098,000 shares of its common stock at an aggregate cost of $100.0 million and an average cost per share of $91.06.

In July 2018, the Company’s Board of Directors authorized a new common stock repurchase program ~~for~~to repurchase up to ~~$100,000~~$100.0 million of the Company’s outstanding common ~~stock. The new share repurchase program replaced the Company’s prior share repurchase plan,~~stock, which ~~was terminated in May 2017.~~became effective on July 25, 2018. Under the ~~May 2017 stock~~July 2018 share repurchase program, the Company ~~has~~ repurchased ~~954,000~~495,000 shares of its common stock at an aggregate cost of ~~$55,030~~$40.0 million and an average cost per share of ~~$57.65~~$80.80 and ~~$44,970 remains~~$60.0 million remained available for repurchases as of September 30, ~~2017.~~2018. On October 24, 2018, the Board of Directors authorized an additional $100 million share repurchase program that will become effective upon the completion of the current plan, leaving a total of $160 million available for future repurchases. The Company intends to continue repurchases under ~~its~~the July 2018 repurchase program ~~in 2017~~ through open market transactions under trading plans in accordance with Rule 10b5-1 and Rule 10b-18 under the Exchange Act of 1934, as amended, subject to a variety of factors, including, but not limited to, the level of cash balances, credit availability, debt covenant restrictions, general business conditions, regulatory requirements, the market price of the Company’s stock, dividend policy and the availability of alternative investment opportunities.

Total cash dividends paid during the nine months ended September 30, 2018 and 2017 were $29.9 million and $27.4 million, respectively. In October 2017, the Company’s Board of Directors authorized an additional common stock repurchase program for up to $100,000 of the Company’s outstanding common stock to become effective upon completion of the May 2017 program.

~~In October 2017,~~January 2018, the Company’s Board of Directors approved a plan to increase the annual dividend 5%to $0.88 per share, or $0.22 per share quarterly, which began in the first quarter of 2018. In October 2018, the Company’s Board of Directors approved a plan to increase the annual dividend 14% from ~~$0.76~~$0.88 per share to ~~$0.80~~$1.00 per share, or ~~$0.20~~$0.25 per share quarterly, beginning in the fourth quarter of ~~2017.~~2018. The ~~$0.20~~declared $0.25 per share fourth quarter cash dividend on common shares outstanding, or an aggregate of ~~$9,470~~$11.0 million based on the September 30, ~~2017~~2018 share ~~counts, declared by the Board of Directors~~count, will be paid on November 30, ~~2017~~2018 to stockholders of record as of November ~~13, 2017.~~15, 2018. On an annualized basis, this represents aggregate dividends of $43.8 million based on the September 30, 2018 share count. The declaration and payment of cash dividends in the future (quarterly or otherwise) will be made by the Board of Directors, from time to time, subject to the Company’s financial condition, results of operations, business requirements, compliance with legal requirements and debt covenant restrictions.



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NON-GAAP FINANCIAL INFORMATION

The Company uses certain financial calculations such as adjusted net income, adjusted diluted earnings per share, adjusted pre-tax profit margin, adjusted net income ~~per share,~~margin, EBITDA, adjusted EBITDA, free cash flow, adjusted free cash flow and constant currency results ~~(as defined or explained below)~~(collectively, “Adjusted Financial Measures”) 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”),~~GAAP, primarily by excluding from a comparable GAAP measure certain items 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, EBITDA, adjusted EBITDA, free cash flow, adjusted free cash flow and constant currency results~~the Adjusted Financial Measures 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, EBITDA, adjusted EBITDA, free cash flow, adjusted free cash flow and constant currency results,~~the Adjusted Financial Measures, as presented, may not be comparable to other similarly titled measures of other companies.

The Company expects to incur additional expenses in 2017 and 2018 in connection with its Merger and integration of 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.



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The Company has adjusted the applicable financial measures to exclude, among other expenses and benefits, merger and other acquisition expenses because it generally would not incur such costs and expenses as part of its continuing operations. Merger and other acquisition expenses include incremental costs directly associated with merger and acquisition activities, including professional fees, legal expenses, severance, retention and other employee-related costs, contract breakage costs and costs related to the consolidation of technology systems and corporate facilities among others.

Adjusted Net Income and Adjusted ~~Net Income~~Diluted Earnings Per Share

Management believes the presentation of adjusted net income and adjusted ~~net income~~diluted earnings 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 by excluding items that management believes are non-operating in nature and not representative of the Company’s core operating performance. 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.

The following table provides 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:~~tax (in thousands, except per share amounts):

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
In Thousands Per Share In Thousands Per Share In Thousands Per Share In Thousands Per Share
Net income (loss), as reported $ 28,274
$ 0.59
$ (1,412 ) $ (0.04 ) $ 76,158
$ 1.58
$ 23,435
$ 0.77
Adjustments, net of tax:
Merger related expenses:
Transaction —
—
10,915
0.32
—
—
13,732
0.45
Severance and retention 56
—
8,737
0.25
857
0.02
8,737
0.29
Other 518
0.02
1,726
0.05
1,137
0.02
1,726
0.06
Total Merger related expenses 574
0.02
21,378
0.62
1,994
0.04
24,195
0.80
Other acquisition expenses —
—
—
—
—
—
94
—
Loss on extinguishment of debt 13
—
—
—
8,892
0.19
—
—
Net loss on sale of common stock of Enova —
—
160
—
—
—
160
0.01
Adjusted net income $ 28,861
$ 0.61
$ 20,126
$ 0.58
$ 87,044
$ 1.81
$ 47,884
$ 1.58



	Three Months Ended September 30,								Nine Months Ended September 30,
	2018				2017				2018				2017
	In Thousands		Per Share		In Thousands		Per Share		In Thousands		Per Share		In Thousands		Per Share
Net income and diluted earnings per share, as reported	$	33,325	$	0.76	$	28,274	$	0.59	$	105,131	$	2.33	$	76,158	$	1.58
Adjustments, net of tax:
Merger and other acquisition expenses:
Transaction	2,045		0.05		—		—		3,389		0.07		—		—
Severance and retention	—		—		56		—		43		—		857		0.02
Other	217		—		518		0.02		526		0.01		1,137		0.02
Total merger and other acquisition expenses	2,262		0.05		574		0.02		3,958		0.08		1,994		0.04
Loss on extinguishment of debt	—		—		13		—		—		—		8,892		0.19
Adjusted net income and diluted earnings per share	$	35,587	$	0.81	$	28,861	$	0.61	$	109,089	$	2.41	$	87,044	$	1.81



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The following tables provide 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:~~above (in thousands):


	Three Months Ended September 30,												Three Months Ended September 30,
	2017						2016						2018						2017
	Pre-tax		Tax		After-tax		Pre-tax		Tax		After-tax		Pre-tax		Tax		After-tax		Pre-tax		Tax		After-tax
Merger related expenses ⁽¹⁾	$	911	$	337	$	574	$	29,398	$	8,020	$	21,378
Merger and other acquisition expenses													$	3,222	$	960	$	2,262	$	911	$	337	$	574
Loss on extinguishment of debt	20		7		13		—		—		—		—		—		—		20		7		13
Net loss on sale of common stock of Enova	—		—		—		253		93		160
Total adjustments	$	931	$	344	$	587	$	29,651	$	8,113	$	21,538	$	3,222	$	960	$	2,262	$	931	$	344	$	587

Nine Months Ended September 30,
2017 2016
Pre-tax Tax After-tax Pre-tax Tax After-tax
Merger related expenses ⁽¹⁾
$ 3,164
$ 1,170
$ 1,994
$ 33,727
$ 9,532
$ 24,195
Other acquisition expenses —
—
—
150
56
94
Loss on extinguishment of debt 14,114
5,222
8,892
—
—
—
Net loss on sale of common stock of Enova —
—
—
253
93
160
Total adjustments $ 17,278
$ 6,392
$ 10,886
$ 34,130
$ 9,681
$ 24,449



	Nine Months Ended September 30,
	2018						2017
	Pre-tax		Tax		After-tax		Pre-tax		Tax		After-tax
Merger and other acquisition expenses	$	5,574	$	1,616	$	3,958	$	3,164	$	1,170	$	1,994
Loss on extinguishment of debt	—		—		—		14,114		5,222		8,892
Total adjustments	$	5,574	$	1,616	$	3,958	$	17,278	$	6,392	$	10,886

⁽¹⁾

The following table provides a calculation of the adjusted pre-tax profit margin and the adjusted net income margin (dollars in thousands):



	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2018			2017			2018			2017
Adjusted pre-tax profit margin calculated as follows:
Income before income taxes, as reported	$	44,083		$	41,567		$	142,133		$	115,277
Merger and other acquisition expenses		3,222			911			5,574			3,164
Loss on extinguishment of debt		—			20			—			14,114
Adjusted income before income taxes	$	47,305		$	42,498		$	147,707		$	132,555
Total revenue	$	429,878		$	435,412		$	1,299,650		$	1,299,617
Adjusted pre-tax profit margin	11.0		%	9.8		%	11.4		%	10.2		%

Adjusted net income margin calculated as follows:
Adjusted net income	$	35,587		$	28,861		$	109,089		$	87,044
Total revenue	$	429,878		$	435,412		$	1,299,650		$	1,299,617
Adjusted net income margin	8.3		%	6.6		%	8.4		%	6.7		%

~~Resulting tax benefit for the three and nine months ended September 30, 2016 is less than the statutory rate as a portion of the transaction costs were not deductible for tax purposes.~~



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Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) and Adjusted EBITDA

The Company defines EBITDA as net income before income taxes, depreciation and amortization, interest expense and interest income and adjusted EBITDA as EBITDA adjusted for 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 EBITDA and adjusted EBITDA are commonly used by investors to assess a company’s financial performance, and adjusted EBITDA is used in the calculation of the Net Debt Ratio as defined in the Company’s senior notes covenants. The following table provides a reconciliation of net income to EBITDA and adjusted ~~EBITDA:~~EBITDA (dollars in thousands):


													Trailing Twelve																		Trailing Twelve
	Three Months Ended						Nine Months Ended						Months Ended						Three Months Ended						Nine Months Ended						Months Ended
	September 30,						September 30,						September 30,						September 30,						September 30,						September 30,
	2017			2016			2017			2016			2017			2016			2018			2017			2018			2017			2018			2017
Net income (loss)	$	28,274		$	(1,412	)	$	76,158		$	23,435		$	112,850		$	42,845
Net income																			$	33,325		$	28,274		$	105,131		$	76,158		$	172,865		$	112,850
Income taxes		13,293			1,835			39,119			13,895			58,544			22,112			10,758			13,293			37,002			39,119			26,303			58,544
Depreciation and amortization		13,872			7,281			42,804			17,165			57,504			21,453			10,850			13,872			33,085			42,804			45,514			57,504
Interest expense		6,129			5,073			17,827			13,859			24,288			18,264			7,866			6,129			20,593			17,827			26,801			24,288
Interest income		(418	)		(138	)		(1,138	)		(636	)		(1,253	)		(1,059	)		(495	)		(418	)		(2,216	)		(1,138	)		(2,675	)		(1,253	)
EBITDA		61,150			12,639			174,770			67,718			251,933			103,615			62,304			61,150			193,595			174,770			268,808			251,933
Adjustments:
Merger related expenses		911			29,398			3,164			33,727			5,657			33,727
Other acquisition expenses		—			—			—			150			300			1,850
Merger and other acquisition expenses																				3,222			911			5,574			3,164			11,472			5,957
Loss on extinguishment of debt		20			—			14,114			—			14,114			—			—			20			—			14,114			—			14,114
Net (gain) / loss on sale of common stock of Enova		—			253			—			253			(1,552	)		253
Net gain on sale of common stock of Enova																				—			—			—			—			—			(1,552	)
Adjusted EBITDA	$	62,081		$	42,290		$	192,048		$	101,848		$	270,452		$	139,445		$	65,526		$	62,081		$	199,169		$	192,048		$	280,280		$	270,452

Net Debt Ratio calculated as follows:
Total debt (outstanding principal)													$	440,000		$	560,000														$	605,000		$	440,000
Less: cash and cash equivalents														(93,411	)		(83,356	)														(57,025	)		(93,411	)
Net debt													$	346,589		$	476,644														$	547,975		$	346,589
Adjusted EBITDA													$	270,452		$	139,445														$	280,280		$	270,452
Net Debt Ratio													1.28		:1	3.42		:1													2.0		:1	1.3		:1



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Free Cash Flow and Adjusted Free Cash Flow

For purposes of its internal liquidity assessments, the Company considers free cash flow and adjusted free cash flow. The Company defines free cash flow as cash flow from operating activities less purchases of property and equipment and net fundings/repayments of pawn and consumer loans, which are considered to be operating in nature by the Company but are included in cash flow from investing ~~activities,~~activities. Beginning this quarter, the Company modified its definition of adjusted free cash flow and retrospectively applied the definition to prior-period results. The Company now defines adjusted free cash flow as free cash flow adjusted for ~~Merger related~~merger and other acquisition expenses paid that management considers to be non-operating in ~~nature.~~nature and adjusted for purchases of store real estate, primarily at existing stores, which are included in purchases of property and equipment. Management considers the store real estate purchases to be discretionary in nature and not required to operate its pawn stores. Free cash flow and adjusted free cash flow are commonly used by investors as an additional measure of cash generated by business operations that may be used to repay scheduled debt maturities and debt service or, following payment of such debt obligations and other non-discretionary items, may be available to invest in future growth through new business development activities or acquisitions, repurchase stock, pay cash dividends 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. However, free cash flow and adjusted free cash flow have limitations as analytical tools and should not be considered in isolation or as a substitute for cash flow from operating activities or other income statement data prepared in accordance with GAAP. The following table reconciles ~~net~~ cash flow from operating activities to free cash flow and adjusted free cash ~~flow:~~flow (in thousands):


													Trailing Twelve																		Trailing Twelve
	Three Months Ended						Nine Months Ended						Months Ended						Three Months Ended						Nine Months Ended						Months Ended
	September 30,						September 30,						September 30,						September 30,						September 30,						September 30,
	2017			2016			2017			2016			2017			2016			2018			2017			2018			2017			2018			2017
Cash flow from operating activities	$	46,033		$	901		$	148,846		$	40,474		$	205,226		$	68,101		$	54,252		$	46,033		$	174,219		$	148,846		$	245,730		$	205,226
Cash flow from investment activities:
Cash flow from investing activities:
Loan receivables, net of cash repayments	(28,702		)	(22,020		)	5,261			(31,486		)	20,675			(12,903		)	(43,968		)	(28,702		)	(13,055		)	5,261			22,419			20,675
Purchases of property and equipment	(9,194		)	(6,353		)	(26,595		)	(23,426		)	(37,032		)	(28,971		)	(17,566		)	(9,194		)	(40,754		)	(26,595		)	(51,294		)	(37,032		)
Free cash flow	8,137			(27,472		)	127,512			(14,438		)	188,869			26,227			(7,282		)	8,137			120,410			127,512			216,855			188,869
Merger related expenses paid, net of tax benefit	898			18,158			4,443			19,715			5,667			19,715
Merger and other acquisition expenses paid, net of tax benefit																			2,502			898			5,601			4,443			7,817			5,667
Discretionary purchases of store real estate																			6,266			2,211			14,986			6,857			19,293			9,489
Adjusted free cash flow	$	9,035		$	(9,314	)	$	131,955		$	5,277		$	194,536		$	45,942		$	1,486		$	11,246		$	140,997		$	138,812		$	243,965		$	204,025

Constant Currency Results

The Company’s reporting currency is the U.S. dollar. However, certain performance metrics discussed in this report are presented on a “constant currency” basis, which is considered a non-GAAP ~~measurement of~~ financial ~~performance.~~measure. 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.

The Company believes constant currency results provide investors with valuable supplemental information regarding the underlying performance of its business operations in Latin America, consistent with how the Company’s management evaluates such performance and operating results. 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, Guatemala and ~~Guatemala~~Colombia are transacted in Mexican pesos, ~~and~~ Guatemalan quetzales and Colombian pesos, respectively. The Company also has operations in El Salvador where the reporting and functional currency is the U.S. dollar. See the Latin America operations segment tables in “—Results of Continuing Operations” above for additional reconciliation of certain constant currency amounts to as reported GAAP amounts.



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REGULATORY DEVELOPMENTS

The Company is subject to significant regulation of its pawn, consumer loan and general business operations in all of the jurisdictions in which it operates. These regulations are implemented through various laws, ordinances and regulatory pronouncements from federal, state and municipal governmental entities in the U.S. and Latin America. These regulatory bodies often have broad discretionary authority over the establishment, interpretation and enforcement of such regulations. These regulations are subject to change, sometimes significantly, as a result of political, economic or social trends, events and media perception.

The Company is subject to specific laws, regulations and ordinances primarily concerning its pawn and consumer lending operations. Many statutes and regulations prescribe, among other things, the general terms of the Company’s pawn and consumer loan agreements, including maximum service fees and/or interest rates that may be charged and collected and mandatory consumer disclosures. In many municipal, state and federal jurisdictions, in both the U.S. and countries in Latin America, the Company must obtain and maintain regulatory operating licenses and comply with regular or frequent regulatory reporting and registration requirements, including reporting and recording of pawn loans, pawned collateral, used merchandise purchased from the general public, retail sales activities, firearm transactions, export, import and transfer of merchandise, and currency transactions, among other things. Existing regulations and regulatory developments are further and more completely described under “Governmental Regulation” in Part I, Item 1 of the Company’s ~~2016~~2017 annual report on Form 10-K filed with the SEC on ~~March 1, 2017.~~February 20, 2018. There have been no material changes toin regulatory developments affecting the ~~Company’s regulatory developments~~Company since December 31, ~~2016,~~2017, except as explained below.

~~On July 11, 2017, the Consumer Financial Protection Bureau (“CFPB”) issued a final rule~~Beginning on consumer arbitration agreements banning waiver of class action in pre-dispute arbitration clauses (the “Arbitration Rule”) with an effective date of March 2019. The rule, as written, would have prohibited financial services companies, includingJanuary 1, 2018, the Company ~~from using arbitration clauses that ban consumers from participating~~ceased offering fee-based check cashing services in ~~class actions. On July 25, 2017,~~its non-franchise stores and no longer considers itself a money services business as defined under U.S. federal law. As a result, the ~~House of Representatives voted~~Company is no longer subject to ~~repeal the Arbitration Rule using the Congressional Review Act (the “CRA”) and on October 24, 2017, the Senate also voted~~anti-money laundering requirements under U.S. federal laws pertaining to repeal the Arbitration Rule under the CRA. The repeal measure will now go to the president’s desk, where it is expected to be signed. The congressional repeal prevents the measure from returning to legislative consideration for the next five years. The Arbitration Rule was also legally challenged by various industry trades and groups seeking declaratory and injunctive relief and challenging the constitutionality and legality of the Arbitration Rule and the CFPB, among other things (the “Arbitration Lawsuit”). The CRA repeal likely makes the Arbitration Lawsuit moot unless the plaintiffs pursue additional relief or declaration that the CFPB is unconstitutional.money services businesses.

On ~~October 5, 2017,~~July 30, 2018, the ~~CFPB released its small-dollar~~governor of Ohio signed into law the Ohio Fairness in Lending Act (the “Act”). The Act will significantly impact the consumer loan ~~rule (the “SDL Rule”), which is scheduled to take effect~~industry in ~~July 2019. If~~Ohio as it effectively caps a consumer loan amount at $1,000, substantially limits consumer loans with maturities of less than 90 days by capping monthly payments as a percentage of the ~~SDL Rule takes effect, lenders, like~~borrower’s gross income, creates a maximum loan term of one year, caps interest rates at 28% per annum and caps the ~~Company, will be required, among~~total cost of a consumer loan (including fees) at 60% of the original principal. There are also other ~~things, to determine whether consumers have~~provisions such as disclosure requirements, maximum borrowing levels and collections restrictions. In addition, the ~~ability to repay their loans before issuing certain short-term small dollar, payday and auto title loans. Importantly,~~Act essentially eliminates the ~~SDL Rule does not apply to non-recourse pawn loans. The SDL Rule applies to all storefront and online small-dollar short-term lenders regardless~~use of ~~state license or tribal affiliation. However, the CFPB provided for an exception for lenders offering accommodation~~credit service organizations (each a “CSO”) by prohibiting a CSO from brokering loans that ~~make~~meet any of the following conditions: (i) the loan amount is less than ~~2,500 short-term loans per~~$5,000, (ii) the term of the loan is less than one year, and ~~derive no more than 10 percent~~(iii) the APR exceeds 28%. The provisions of ~~their revenue from such loans. Additionally,~~ the CFPB exempted the National Credit Union Administration’s authorized “payday alternative loans” and certain wage advance loans offered to employees by employers. The SDL Rule will likely be subject to legislative challenges, trade association litigation and potentially a new CFPB Director. If the SDL Rule doesAct become effective ~~the small dollar lending industry will experience a significant regulatory change.~~on or about April 26, 2019.

The Company ~~believes~~currently operates 113 Cashland-branded stores in Ohio that primarily offer consumer loan and credit services products and six Cash America-branded pawn stores in Ohio that offer consumer loan and credit services as ancillary products, all of which will be negatively impacted by the Act. It is not expected that the ~~SDL Rule~~regulatory changes will ~~not directly impact~~materially affect the ~~vast majority~~Company’s Ohio-based consumer lending and credit services revenues in 2018, which the Company estimates to be approximately $40 million, representing less than 2.5% of consolidated revenue. The Company will continue to analyze the viability of its Cashland operations in Ohio in 2019, which is when the provisions of the law become effective. Most of the Cashland stores currently offer pawn ~~products, which comprise approximately 95%~~loans and pawn retailing as ancillary products. While many of ~~its total revenues.~~the Cashland stores will likely be closed, a significant number may continue operating as pawn stores.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risks relating to the Company’s operations result primarily from changes in interest rates, gold prices and foreign currency exchange rates, and are described in detail in the Company’s ~~2016~~2017 annual report on Form 10-K. The impact of current-year fluctuations in gold prices and foreign currency exchange rates, in particular, are further discussed in Part I, Item 2 herein. The Company does not engage in speculative or leveraged transactions, nor does it hold or issue financial instruments for trading purposes. There have been no material changes to the Company’s exposure to market risks since December 31, ~~2016.~~2017.



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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company’s management, under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) under the Securities Exchange Act of 1934) (the “Exchange Act”) as of September 30, ~~2017~~2018 (the “Evaluation Date”). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There ~~has~~have been no ~~change~~changes in the Company’s internal control over financial reporting during the quarter ended September 30, ~~2017~~2018 that ~~has~~have materially affected, or isare reasonably likely to materially affect, the Company’s internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

The Company’s management, including its Chief Executive Officer and Chief Financial Officer, does not expect that the Company’s disclosure controls and procedures or internal controls will prevent all possible error and fraud. The Company’s disclosure controls and procedures are, however, designed to provide reasonable assurance of achieving their objectives, and the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective at that reasonable assurance level.



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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There have been no material changes in the status of legal proceedings previously reported in the Company’s ~~2016~~2017 annual report on Form 10-K.

ITEM 1A. RISK FACTORS

Important risk factors that could ~~cause~~materially affect the Company’s business, financial condition or results ~~or events to differ from current expectations,~~of operations in future periods are described in Part I, Item 1A, “Risk Factors” of the Company’s ~~2016~~2017 annual report on Form 10-K. These factors are supplemented by those discussed under “Management’s Discussion And Analysis Of Financial Condition And Results Of Operations” and “Regulatory Developments” in Part I, Item 2 of this quarterly report and in “Governmental Regulation” in Part I, Item 1 of the Company’s ~~2016~~2017 annual report on Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(~~In thousands except share and per share amounts)~~

In ~~January 2015,~~April 2018, the Company’s Board of Directors authorized a common stock repurchase program ~~for~~to repurchase up to ~~2,000,000 shares~~$100.0 million of the Company’s outstanding common ~~stock. During~~stock, which became effective on April 25, 2018 and followed the ~~first quarter~~completion of the Company’s $100.0 million October 2017 share repurchase plan. The Company completed the ~~Company repurchased 228,000~~April 2018 share repurchase program in June 2018 after repurchasing 1,098,000 shares of its common stock at an aggregate cost of ~~$10,005~~$100.0 million and an average cost per share of ~~$43.94.~~$91.06. In ~~May 2017,~~July 2018, the Company’s Board of Directors authorized a new common stock repurchase program ~~for~~to repurchase up to ~~$100,000~~$100.0 million of the Company’s outstanding common ~~stock. The new share repurchase program replaced the Company’s prior share repurchase plan,~~stock, which ~~was terminated in May 2017.~~became effective on July 25, 2018. Under the ~~May 2017 stock~~July 2018 share repurchase program, the Company ~~has~~ repurchased ~~954,000~~495,000 shares of its common stock at an aggregate cost of ~~$55,030~~$40.0 million and an average cost per share of ~~$57.65~~$80.80 and ~~$44,970 remains~~$60.0 million remained available for repurchases as of September 30, 2017. The Company intends to continue repurchases under its repurchase program in 2017 through open market transactions under trading plans in accordance with Rule 10b5-1 and Rule 10b-18 under the Exchange Act of 1934, as amended, subject to a variety of factors, including, but not limited to, the level of cash balances, credit availability, debt covenant restrictions, general business conditions, regulatory requirements, the market price of the Company’s stock, dividend policy and the availability of alternative investment opportunities.



~~Table of Contents~~

2018.

The following table provides the information with respect to purchases made by the Company of shares of its common stock during each month the programs were in effect during the ~~nine~~three months ended September 30, ~~2017:~~2018 (dollars in thousands, except per share amounts):

Total
Number
Of Shares
Purchased

Average
Price
Paid
Per Share

Total Number Of
Shares Purchased
As Part Of Publicly
Announced Plans
Maximum Number Of Shares That May Yet Be Purchased Under The Plans Approximate Dollar Value Of Shares That May Yet Be Purchased Under The Plans
January 1 through January 31, 2017 —
$ —
—
1,148,000

⁽²⁾
February 1 through February 28, 2017 228,000
43.94
228,000
920,000

⁽²⁾
March 1 through March 31, 2017 —
—
—
920,000

⁽²⁾
April 1 through April 30, 2017 —
—
—
920,000

⁽²⁾
May 1 through May 31, 2017 —
—
—

⁽¹⁾
$ 100,000
June 1 through June 30, 2017 290,000
56.06
290,000

⁽¹⁾
83,731
July 1 through July 31, 2017 292,000
58.21
292,000

⁽¹⁾
66,733
August 1 through August 31, 2017 269,000
58.53
269,000

⁽¹⁾
50,989
September 1 through September 30, 2017 103,000
58.22
103,000

⁽¹⁾
44,970
Total 1,182,000
$ 55.01
1,182,000



	Total Number Of Shares Purchased	Average Price Paid Per Share		Total Number Of Shares Purchased As Part Of Publicly Announced Plans	Approximate Dollar Value Of Shares That May Yet Be Purchased Under The Plans
July 1 through July 31, 2018	—	$	—	—	$	100,000
August 1 through August 31, 2018	291,000	$	81.12	291,000	$	76,400
September 1 through September 30, 2018	204,000	$	80.35	204,000	$	60,016
Total	495,000	$	80.80	495,000


⁽¹⁾	~~The 2,000,000 share repurchase program was terminated in May 2017.~~


⁽²⁾	~~The $100,000 repurchase program was initiated in May 2017.~~

InOn October ~~2017,~~24, 2018, the ~~Company’s~~ Board of Directors authorized an additional ~~common stock~~$100.0 million share repurchase program ~~for up to $100,000 of the Company’s outstanding common stock to~~that will become effective upon the completion of the ~~May 2017 program.~~current plan, leaving a total of $160.0 million available for future repurchases.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not Applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.



Table of Contents

ITEM 5. OTHER INFORMATION

None.



~~Table of Contents~~

ITEM 6. EXHIBITS

Incorporated by Reference
Exhibit No. Exhibit Description Form File No. Exhibit Filing Date Filed Herewith
3.1
Amended and Restated Certificate of Incorporation
DEF 14A 0-19133 B 04/29/2004
3.2
Amendment to Amended and Restated Certificate of Incorporation
8-K 001-10960 3.1 09/02/2016
3.3
Amended and Restated Bylaws
8-K 001-10960 3.2 09/02/2016
31.1
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act provided by Rick L. Wessel, Chief Executive Officer
X
31.2
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act provided by R. Douglas Orr, Chief Financial Officer
X
32.1
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 provided by Rick L. Wessel, Chief Executive Officer
X
32.2
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 provided by R. Douglas Orr, Chief Financial Officer
X
101 ⁽¹⁾
The following financial information from the Company's Quarterly Report on Form 10-Q for the third quarter of fiscal 2017, filed with the SEC on November 1, 2017, is formatted in Extensible Business Reporting Language (XBRL): (i) Condensed Consolidated Balance Sheets at September 30, 2017, September 30, 2016 and December 31, 2016, (ii) Condensed Consolidated Statements of Income (Loss) for the three and nine months ended September 30, 2017 and September 30, 2016, (iii) Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2017 and September 30, 2016, (iv) Condensed Consolidated Statements of Changes in Stockholders’ Equity for the nine months ended September 30, 2017 and September 30, 2016, (v) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and September 30, 2016 and (vi) Notes to Condensed Consolidated Financial Statements. X

Incorporated by Reference

Exhibit No.

Exhibit Description

Form

File No.

Exhibit

Filing Date

Filed Herewith

3.1

Amended and Restated Certificate of Incorporation

DEF 14A

0-19133

04/29/2004

3.2

Amendment to Amended and Restated Certificate of Incorporation

8-K

001-10960

3.1

09/02/2016

3.3

Amended and Restated Bylaws

8-K

001-10960

3.2

09/02/2016

31.1

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act provided by Rick L. Wessel, Chief Executive Officer

31.2

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act provided by R. Douglas Orr, Chief Financial Officer

32.1

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 provided by Rick L. Wessel, Chief Executive Officer

32.2

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 provided by R. Douglas Orr, Chief Financial Officer

101 ⁽¹⁾

The following financial information from the Company's Quarterly Report on Form 10-Q for the third quarter of fiscal 2018, filed with the SEC on October 31, 2018, is formatted in Extensible Business Reporting Language (XBRL): (i) Condensed Consolidated Balance Sheets at September 30, 2018, September 30, 2017 and December 31, 2017, (ii) Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2018 and September 30, 2017, (iii) Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2018 and September 30, 2017, (iv) Condensed Consolidated Statements of Changes in Stockholders’ Equity for the nine months ended September 30, 2018 and September 30, 2017, (v) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and September 30, 2017 and (vi) Notes to Condensed Consolidated Financial Statements.

⁽¹⁾

The XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.



Table of Contents

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: ~~November 1, 2017~~October 31, 2018	FIRSTCASH, INC.
	(Registrant)

	/s/ RICK L. WESSEL
	Rick L. Wessel
	Chief Executive Officer
	(On behalf of the Registrant)

	/s/ R. DOUGLAS ORR
	R. Douglas Orr
	Executive Vice President and Chief Financial Officer
	(As Principal Financial and Accounting Officer)



	Nine Months Ended September 30, 2016
	U.S. Operations		Latin America Operations		Corporate			Consolidated
Revenue:
Retail merchandise sales	$	186,673	$	199,861	$	—		$	386,534
Pawn loan fees	94,929		87,887		—			182,816
Wholesale scrap jewelry sales	25,910		9,996		—			35,906
Consumer loan and credit services fees	19,619		1,460		—			21,079
Total revenue	327,131		299,204		—			626,335

Cost of revenue:
Cost of retail merchandise sold	114,632		124,534		—			239,166
Cost of wholesale scrap jewelry sold	22,914		7,787		—			30,701
Consumer loan and credit services loss provision	5,380		400		—			5,780
Total cost of revenue	142,926		132,721		—			275,647

Net revenue	184,205		166,483		—			350,688

Expenses and other income:
Store operating expenses	107,196		83,367		—			190,563
Administrative expenses	—		—		58,277			58,277
Depreciation and amortization	5,827		7,919		3,419			17,165
Interest expense	—		—		13,859			13,859
Interest income	—		—		(636		)	(636		)
Merger and other acquisition expenses	—		—		33,877			33,877
Net loss on sale of common stock of Enova	—		—		253			253
Total expenses and other income	113,023		91,286		109,049			313,358

Income (loss) before income taxes	$	71,182	$	75,197	$	(109,049	)	$	37,330