Cash America 2008 Annual Report Download - page 6

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$100
$80
$60
$40
$20
$0
After-Tax Income from
Continuing Operations
(in millions)
04
05
06
07 08
3
of behavior that I believe will be more
reluctant and much more gradual
than most expect. Unfortunately for
consumers, a change in behavior for
mainstream credit providers has been
neither reluctant nor gradual. A dramatic
and potentially permanent contraction
of consumer credit has already occurred
with no real concern for the disruption of
people’s lives.
Therein lies the opportunity. The
market has once again created a significant
gap between supply and demand. These
gaps don’t occur often, and when they do,
innovative and nimble specialty finance
companies have traditionally stepped
forward to fill the void. I believe Cash
America is uniquely positioned to be a
leader in this effort. My internal message to
co-workers highlights a number of specific
assets we bring to the opportunity.
First, we have a very strong foundation
of cash flow from our pawn business
that has proven immune to regulatory
disruption. This provides an anchor
of staying power that our non-pawn
competitors can not replicate. In addition,
our ability to fund these short-term loans
to our customers is not contingent on
accessing new liquidity from today’s stingy
capital markets.
Second, we have the only robust
dual delivery system within our current
competitive field. Speed, innovation,
flexibility and lower cost of delivery will
be key competitive factors in the financial
services evolution that is already under
way. The combination of storefront and
online delivery channels provides us a
real advantage. We are also committed to
adding an electronic card-based channel as
well. Multiple delivery channels are critical,
and we are way ahead of our competition
in this area.
Third, we are committed to the
development of new short- and mid-term
cash advance products that can potentially
displace our current short-term cash
advance products and address some of
the more serious concerns of legislators
and regulators. I believe we are currently
ahead of any competitor in this area and are
much better positioned organizationally to
capture this opportunity. We are determined
to evolve our product offering to be less
vulnerable to an abrupt change of rules.
Fourth, we have recently added a
new growth vehicle with our acquisition
of Prenda Fácil in Mexico. This exciting
opportunity will pave the way for expansion
throughout Latin America and provide new
momentum for our core pawn business as
we plan to establish between 50 and 60 new
lending locations in 2009 in Mexico.
Finally, I believe we have the best
minds and execution talent in our
field today. We have the culture and
the intellectual capital to leapfrog all
our competitors and become the most
dominant player in the field of alternative
financial services. While our competitors
struggle in this environment, we can gain
the upper hand.
Capitalizing on the opportunity in
these troubled times will not likely be a neat
and orderly effort. Testing new products
and evolving business models inevitably
involves risks and requires patience.
At the same time, we must be cautious
in protecting our precious capital as a
safeguard against further unforeseen
turmoil in the global economy.
However, you should find comfort in
the fact that your management team of
the past 20 years has never been reckless
with the assets you have entrusted to our
care. We did not follow our sophisticated
financial institution brethren in the
most recent folly of chasing loan volume
with pricing and terms bearing no
sensible relationship to the risks being
assumed. In fact, forfeiture rates on our
secured pawn loan products over the
past two years have been consistent with
historical patterns, and loss rates on
our unsecured short-term cash advance
products have actually declined.
This is not a matter of happenstance.
We have always managed this business
with a focus on the long-term goal
of building a sustainable foundation
capable of perpetuating growth in
shareholder value long after we are all
gone. This new opportunity I see in the
midst of the current consumer credit
chaos is yet another stepping stone in
that endeavor.
If you trust our vision, believe in our
talent and can find your way to regain
hope, now is a great time to be a Cash
America shareholder.
As always, we greatly appreciate your
ongoing support.
Daniel R. Feehan
Chief Executive Officer and President
February 2009
Cash America International, Inc.