Cash America 2007 Annual Report Download - page 36

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16
could put the company at a disadvantage to its competitors. Any such failures could have a material
adverse effect on the Company’s business.
xThe Company’s growth is subject to external factors and other circumstances over which the
Company has limited control or that are beyond the Company’s control. These factors and
circumstances could adversely affect the Company’s ability to grow through the opening and
acquisition of new operating units. The Company’s expansion strategy includes acquiring existing
stores and opening new ones. The success of this strategy is subject to numerous external factors, such
as the availability of attractive acquisition candidates, the availability of sites with acceptable
restrictions and suitable terms, the Company’s ability to attract, train and retain qualified unit
management personnel, the ability to access capital and the ability to obtain required government
permits and licenses. Some of these factors are beyond the Company’s control. The failure to execute
this expansion strategy would adversely affect the Company’s ability to expand its business and could
materially adversely affect its business, prospects, results of operations and financial condition.
xIncreased competition from banks, savings and loans, other short-term consumer lenders, and
other entities offering similar financial services, as well as retail businesses that offer products and
services offered by the Company, could adversely affect the Company’s results of operations. The
Company has many competitors to its core lending and merchandise disposition operations. Its
principal competitors are other pawnshops, cash advance companies, online lenders, consumer finance
companies and other financial institutions that serve the Company’s primary customer base. Many
other financial institutions or other businesses that do not now offer products or services directed toward
the Company’s traditional customer base, many of whom may be much larger than the Company, could
begin doing so. Significant increases in the number and size of competitors for the Company’s business
could result in a decrease in the number of cash advances or pawn loans that the Company writes,
resulting in lower levels of revenues and earnings in these categories. Furthermore, the Company has
many competitors to its retail operations, such as retailers of new merchandise, retailers of pre-owned
merchandise, other pawnshops, thrift shops, online retailers and online auction sites. Increased
competition or aggressive marketing and pricing practices by these competitors could result in
decreased revenues, margins and turnover rates in the Company’s retail operations.
xA sustained deterioration in the economy could reduce demand for the Company’s products and
services and result in reduced earnings. A sustained deterioration in the economy could cause
deterioration in the performance of the Company’s pawn loan or cash advance portfolios and in
consumer demand for pre-owned merchandise such as that sold in the Company’s pawnshops. An
economic slowdown could result in an increase in loan defaults in our cash advance products. During
such a slowdown, the Company could be required to tighten its underwriting standards, which would
reduce cash advance balances, and could face more difficulty in collecting defaulted cash advances,
which could lead to an increase in loan losses. While the credit risk for much of the Company’s pawn
lending is mitigated by the collateralized nature of pawn lending, a sustained deterioration in the
economy could reduce the demand and resale value of pre-owned merchandise and reduce the amount
that the Company could effectively lend on an item of collateral. Such reductions could adversely affect
pawn loan balances, pawn loan redemption rates, inventory balances, inventory mixes and gross profit
margins.
xThe Company’s earnings and financial position are subject to changes in the value of gold. A
significant or sudden decline in the price of gold could materially affect the Company’s earnings.
A significant portion of the Company’s pawn loans are secured by gold jewelry. The Company’s pawn
service charges, sales proceeds and ability to dispose of excess jewelry inventory at an acceptable
margin depend on the value of gold. A significant decline in gold prices could result in decreases in
merchandise sales margins, in inventory valuations, in the value of collateral securing outstanding pawn
loans, and in the balance of pawn loans secured by gold jewelry.