Cash America 2011 Annual Report Download - page 9

$1.20
$1.00
$0.80
$0.60
$0.40
$0.20
$0.0
Quarterly Earnings Per Share
Continuing Operations
Q4Q1
09 10 11
Q2 Q3
$150
$125
$100
$75
$50
$25
$0
After-Tax Income
from Continuing Operations
(in millions)
10 1107 08 09
3
CASH AMERICA INTERNATIONAL, INC.
Daniel R. Feehan
Chief Executive Ofcer and President
April 2012
acquired in October 2010. Those shops
have been a great addition to our store
base in Washington and Arizona, and
the performance of those shops in 2011
exceeded our pre-acquisition models.
We also added a total of 28 new
locations in 2011, including 20 de novo
openings and eight acquired shops.
Seventeen of these units are in the
U.S. and 11 are in Mexico. We expect
to add 35–40 new units in 2012 in
existing markets. We will also continue
our quest to nd attractive new pawn
markets in South and Central America.
I cannot credibly leave the topic
of our Retail Services segment without
accepting responsibility for the
disappointing nancial results of our
Mexico operations in 2011. I believe we
have made tremendous organizational
strides this past year to enhance our
recruiting and training programs,
introduce operational disciplines and
transition systems that will better
support the development of full-format
pawnshops. Reaping the benets of
these organizational initiatives with
improved nancial performance is
taking longer than I suggested it might
in early 2011. Even though this business
only represents a small portion of our
overall enterprise today – slightly less
than 2% of revenue – it is important for
us to succeed in Mexico, particularly
given our goal of further expansion into
Latin America.
The E-Commerce segment of Cash
America enjoyed another year of growth
in revenues – up 27% – and income from
operations – up 40%. This segment,
which provides consumer loans over
the Internet in the United States, United
Kingdom, Australia and Canada, has
grown its foreign business over the past
three years at a greater rate than its
business in the U.S. Total revenues of the
foreign component of the E-Commerce
segment were approximately 47%
of total segment revenues in 2011, up
from only 10% in 2008. In addition
to expanding geographically, the
E-Commerce segment has added new
installment loan products in both the
U.S. and the UK. At year-end, installment
loan balances represented approximately
23% of the total E-Commerce gross loan
portfolio. As I have mentioned repeatedly
in the past, our strategy of expanding
the geographical footprint and product
offering of our online platform is
designed to reach more customers with
greater alternatives, and geographic
expansion also diversies the regulatory
environments in which we operate.
Now, in closing, I would like to turn
from a discussion of our Retail Services
and E-Commerce segments to provide
my thoughts on the customers that
Cash America strives to serve, whether
through its secured or unsecured loan
products. I am sure many of you have
probably seen the media reports in
May of 2011 that splashed headlines
generally reading something like, “Half of
Americans don’t have $2,000 for a rainy
day.” These reports disclosed the results
of a March 2011 study by the National
Bureau of Economic Research entitled
Financially Fragile Households: Evidence
and Implications, which concluded that
50% of Americans would struggle to
come up with $2,000 in a pinch to pay
for unanticipated expenses. Interestingly,
the study suggests that the percentage
of those who would struggle in the UK
was slightly higher at 52%.
With current U.S. unemployment
at 8%–15%, depending on what measure
you want to use, I must assume the
remaining 35%–42% of Americans
referenced in this study represent the
hard-working American families we
serve today…people who are striving
to raise a family and contribute to
society…people who do understand
budgets, but are saddled with daily
demands that inhibit their ability to
create savings for that rainy day. Like
all of us, their lives are occasionally
interrupted by circumstances and
events beyond their control. Cars break
down, plumbing backs up, accidents
happen, and kids get sick. At those
times, they need someone to help
bridge that gap until they can adjust
and rebalance their budgets. Beyond
family and friends, most other traditional
options, such as bank advances, home
equity loans or credit card loans,
have withered under the pressures
of poor underwriting, increasingly
restrictive government regulation and
corporate mandates to move upstream
where customers provide larger fee
opportunities. Consequently, more and
more consumers are nding themselves
“downstream” with fewer options. As an
alternative nancial services provider, our
products and services are designed to
meet the needs of these customers.
The contraction of conventional
consumer credit and the expanding
universe of those needing short-term
nancial help is not a new phenomenon.
The retreat of conventional lenders
from the small, short-term loan market
has been under way for decades and is
what has provided Cash America the
opportunity to grow from one simple
pawnshop in 1984 to a company with
$1.5 billion of revenue today. As we enter
2012, I believe the continuing evolution
of the short-term consumer loan market
provides opportunities for alternative
service providers, particularly those like
Cash America, who are committed to
providing valuable loan products for the
expanding population of unbanked and
underbanked consumers.
Thanks for your belief in our
Company.