First Cash ends used-car venture

Wed. October 01, 2008; Posted: 01:43 AM

Oct 01, 2008 (Fort Worth Star-Telegram - McClatchy-Tribune Information Services via COMTEX) -- FCFS | Quote | Chart | News | PowerRating -- First Cash Financial Services of Arlington said Tuesday that it will end a two-year venture into the used-car sales and finance business, a move that will produce an after-tax write-down of $52.5 million in the third quarter just ended.

First Cash, whose principal business is its chain of more than 500 pawnshops and consumer lending stores, had previously reported that its Auto Master operation was unprofitable but improving.

The company said Tuesday that the business's unpredictability, volatile loan losses and the uncertain economic outlook led to the decision to discontinue its operations over the next 12 months.

Chief Financial Officer Doug Orr said Auto Master was financed using the company's own cash, rather than the business credit markets.

But the business is more cash-intensive than its pawnshops and "we can redeploy that cash in the pawn operations" and generate a better return, he said.

First Cash bought Arkansas-based Auto Master for $33.7 million. The dealership operated eight "buy here, pay here" car lots, also known as "tote the note." As of June 30, First Cash had doubled the number of lots to 16. It now plans to sell or liquidate inventories and its portfolio of customer loans.

Orr said the turmoil in credit markets forced the company to sharply mark down the value of those loans.

"There is no market for those notes," Orr said. "That's why we hope to do an orderly liquidation."

To see more of the Fort Worth Star-Telegram, or to subscribe to the newspaper, go to http://www.dfw.com. Copyright (c) 2008, Fort Worth Star-Telegram, Texas Distributed by McClatchy-Tribune Information Services. For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.

For full details on First Cash Financial Svc (FCFS) click here. First Cash Financial Svc (FCFS) has Short Term PowerRatings of 6. Details on First Cash Financial Svc (FCFS) Short Term PowerRatings is available at This Link.

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