Cash America 1999 Annual Report Download - page 5

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know the economy will turn and our core customers will return to previous borrowing habits. A big swing in the economy is not
necessary. Modest weakening can produce renewed loan demand, and we will be well positioned to capture our fair share.
Next, you should be encouraged about our commitment to adding new services in our shops to drive additional
revenues against the fixed cost of our facilities. Payday lending is a new service we will be adding in 2000. This loan product has
expanded rapidly in the U.S. during the past three years with dedicated storefronts and as an add-on service for many check
cashing outlets. Payday lending will introduce us to a broader mix of loan customers (only 30% of pawn loan customers fit the
profile of payday loan customers) and help strengthen our position as a broad-based financial services entity. We will also be
searching for cost effective ways to license the technology developed by innoVentry to bring its array of e-commerce solutions to
customers visiting our shops. This technology can provide Cash America with a sustaining point of differentiation from our
established competitors.
We believe these new initiatives and good old-fashioned operating discipline will drive stronger operating performance
beginning in the second half of 2000. I have gone on record consistently in the past nine months discussing the judgement errors
we made in 1998 and early 1999 as a result of overreaching to counter the impacts of softening loan demand. I have also held
consistently that the actions taken to address those dynamics would not be fully effective until the latter part of 2000. The
disciplines are now firmly in place and fundamentals are improving. We will achieve better returns on the assets deployed later
this year. Most importantly, you will not see us repeat such errors ever again. We will also be more selective in the new locations
added to our store base. A few of the units added in recent years have not produced returns above our weighted average cost of
capital, thereby diluting shareholder value. Even though these units comprise a very small segment of our store base, I believe
every single unit must be tasked with creating value to justify its call on our capital resources.
Finally, how do we survive and prosper in the new economy? Will our business be cannibalized by some new
technology not yet even conceived? Will the next generation of our core customers have affordable access to the technology
eluding their parents? Will they embrace revolutionary business solutions promising greater value and convenience? While I
obviously do not know the answers to these questions, the important point is that we are constantly asking ourselves such
questions and searching for answers at every turn.
Technology cannot quickly replace the core competency we have gained through our experiences with, and knowledge
of, our customers. We are confident that we know them better and appreciate them more than any other provider. We are
uniquely positioned to know whether new solutions will fit their needs and how those solutions should be packaged. We have
real time knowledge of how customers view value and what might motivate them to change the context of current shopping
habits.
Our answer for the new economy is to be open to change and critically skilled at evaluating the strategic and economic
justification for altering current business models. We will not jump into some new technology just to follow the crowd. But we
will be relentless in examining alternatives and searching for ways to cannibalize ourselves. The innovations we incubated for
innoVentry are proof of our willingness to take risks and redefine business models. I am not sure shareholders should expect
more from any established business entering the 21st century.
In closing, I want to personally acknowledge the significant contributions Jack Daugherty has made to Cash America
during his long run as Chief Executive Officer. His vision and courage propelled Cash America from a single shop in
1984 to a large international company enjoying a dominant position in our industry. Jack has been a
mentor and a friend to me throughout our fifteen years
together. I remain honored and humble in succeeding
him as Chief Executive Officer of the great company he
founded.
Thanks for your support throughout 1999, and I trust I
can count on your ongoing constructive feedback in the new year.