Cash America 2008 Annual Report Download - page 5

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To my fellow shareholders
2
I wonder if other CEOs around the
globe are sharing my writer’s block as we
all sit down to pen a shareholders message
at a snapshot in time when the world no
longer looks level. I have been sitting with
my laptop staring at a blank screen for an
uncomfortably long period, attempting
to launch a message with a credible sense
of confidence in this period of global
economic chaos. I would love to appear
wise and unusually insightful, but the truth
is I feel like I am working with a Salvador
Dali canvas – where bringing order to the
picture relies less on analytics and more on
artful interpretation.
We all now know that sometime in
2007 the world began a dangerous and
painful freefall into the abyss of a recession
that has stunned everyone by the depth
and breadth of its reach and the severity
of its costs. Trillions of dollars of value
have evaporated across all asset classes
and all industry segments. Fear has begot
fear, and no one wants to be the first crazy
investor to step up with a claim that we
have reached bottom. After all, that would
require someone to actually bail out of
U.S. Treasuries and invest personal capital
in some equity instrument trading near
historical lows. No one wants to be that
bold quite yet. We all reassure each other
that the world will be level again, but no
one knows when.
The past 18 months have been
devastating for the shareholders of all
public companies, and Cash America
shareholders have not been spared. Despite
a record financial performance in 2008, our
share value plummeted from an all-time
high of $48.86 in April 2008 to a 5-year low
of $11.60 in recent trading.
Interestingly, while we were undoubtedly
caught in the wave of widespread investor
panic, the major blow to our shareholder value
was not delivered solely by market turmoil
but by a series of regulatory/legislative
activities related to our short-term cash
advance product. Legislators and voters in
Ohio, together with regulators in Florida,
Pennsylvania and Minnesota, abruptly
changed the rules in manners that severely
diluted the profitability of our product
offering in those states.
Understandably, investors already
shell-shocked by a 35% drop in most major
indices began trimming their holdings
throughout our industry segment as
the fear of further regulatory disruption
dominated all analysis. Anxiety was
ratcheted significantly by noise out of
Washington that the new Administration
had drawn a bead on the costs and
consumer protections of all forms of
consumer credit. Sell-side analysts
began publishing reports suggesting that
all earnings from the short-term cash
advance product be discounted to zero
value. This seems extreme to me, but I
do understand that rational risk-taking is
not currently in vogue. I am just thankful
we remain the largest pawnbroker in
the country as the market does seem to
appreciate the fundamental strength and
resiliency of that business model.
Rational or not, this is the field on
which we are playing today. And I recognize
that you do not pay management to stare
at blank screens. You pay us to skillfully
navigate both calm and rough seas in
a manner that builds long-term value
transcending periods of serious disruption.
We are not paid to freeze with fear nor
overreach when economic conditions
demand measured restraint. We are paid to
be smart, tough and hopeful – and I believe
we have ample reasons for hope.
I will share with you the key
components of a message I recently sent
to my 5,500 co-workers at Cash America –
a message in which I argue that hope
and excitement is justified today despite
the fear and uncertainty incessantly
chronicled in daily newscasts. I first
acknowledge that we have experienced
a minor degree of organizational pain by
closing shops, streamlining management
and saying goodbye to a number of
tenured co-workers. But I also argue that
we may very well be standing on the
threshold of incredible opportunity.
I believe the U.S. and possibly the
entire world is in the midst of a sea of
change for the provision of consumer
credit at every rung of the socioeconomic
ladder. I suspect consumers will be
encouraged and/or forced to moderate
their appetite for both consumption
and credit, with a resultant change
Cash America International, Inc.