Cash America 2012 Annual Report Download - page 4

CASH A M E RICA INTER N A T I ONAL, INC .
To my fellow
shareholders
About this time last
year when composing my annual
message to you, I envisioned
2012 as a reasonably stable and
predictable year for our business.
Coming off a highly successful and
active year in 2011, I had hoped the
frenetic pace might slow from sprint
to jog, providing our teams the
chance to step back, regroup and
sharpen execution around a solid
business plan. You now know 2012
did not quite unfold that way.
I do realize that any outlook
for stability and predictability in
today’s business world is more hope
than expectation. All businesses
today operate in a dynamic and
increasingly complex world,
particularly those of us saddled
with creeping regulatory intrusion.
Today, we all have access to
signicantly more data than we ever
dreamed possible 20 years ago,
and that data feeds sophisticated
analytical models, lulling us with a
sense that we know exactly how
our business will develop in coming
quarters and years. But that same
technological advance responsible
for today’s rich harvest of data
and robust planning tools has also
accelerated the rate of change in
the way customers behave and
companies compete. There is no
more jogging in the business world
today. Success requires the speed,
maneuverability and improvisational
skills of an NBA point guard.
Cash America’s business is
more complex today than ever.
I know some fund managers
and analysts prefer to buy and
follow stocks of companies with
very simple, straightforward and
predictable business plans that are
easy to understand and model. I
get that. I appreciate the appeal of
that loosely paraphrased Warren
Buffett axiom of only investing in
businesses a third-grader could
understand. I will also acknowledge
that complexity is often penalized
via discounts in price-earnings
ratios. However, I believe simplicity
can bear a price as well by
potentially limiting innovation,
growth and competitiveness. I rmly
believe the growing complexity of
our enterprise has driven greater
benet than cost for both our
customers and our shareholders.
Perhaps dismantling our story
into the following component
sections will help simplify your
understanding of the issues I see
as most relevant today.
2012
This past year of 2012 proved
to be one of the most challenging
years in recent memory. I
could provide a list of positive
developments and certain goals
achieved for the year, but the
bottom line is that we failed
to deliver on our consolidated
nancial plan for our shareholders.
Consolidated operating income
was down on a year-over-year
basis for the rst time in over
a decade, primarily driven by a
few nonrecurring charges, but
also impacted by an unexpected
slowing of our Domestic pawnshop
business. Consequently, our share
price declined 15% in 2012 following
a 26% gain in 2011 – not the kind of
results you demand from us.
Your examination of our
nancial results for 2012 will
reveal a signicant dichotomy of
performance and trajectory for
our two reporting segments. The
E-Commerce segment posted
substantial gains in revenues and
earnings, exceeding expectation
for the year. However, these gains
were not sufcient enough to
offset the difculties of the Retail
Services Segment, including two
signicant nonrecurring charges
and decelerating asset growth in
the core U.S. storefront locations.
I will discuss each segment in
more detail momentarily.
The nonrecurring items
mentioned above include charges
associated with the announced
reorganization of our Mexico
pawnshop business, the voluntary
reimbursement of certain funds
collected from approximately
14,000 cash advance customers
in Ohio and the withdrawal of the
proposed IPO of our wholly owned
subsidiary, Enova International,
Inc. The individual amounts for
these charges are highlighted
in our Form 10-K for 2012. The
Mexico reorganization charge and
the Ohio reimbursement are the
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