Cash America 2013 Annual Report Download - page 4

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To my fellow shareholders
Experiencing extended periods of both triumph and setback
is one of the unassailable realities of being a CEO/President of a single
public company for a 25-year period, as I have. The periods of setback
serve to sharpen your strategic focus and execution skills, while the periods
of triumph provide conrmation that intelligent strategies and efcient
execution have their rewards. Most often, but not always, the market valuation
of your public stock will align appropriately along the continuum of those
experiences. Such has been the case for Cash America in recent years.
The period of 2009-2011 fell within the positive end of the continuum as the
company emerged from the recession of 2007-2008 with a solid foundation of
new earnings momentum, and our share price responded accordingly. However,
that momentum was disrupted over these last two years, and our share price
tracked the turmoil. The period of 2012-2013 is one of the very few two-year
periods in the lengthy public company history of Cash America where our share
price declined in consecutive years.
An abnormally high level of uncommon expense items exacerbated the
valuation volatility these past two years, and our share price has enjoyed periods
of strength associated with the exciting growth of our E-commerce business.
But the many positive sentiments of our business have been overshadowed by
two overarching concerns from investors – rst has been the lack of earnings
growth associated with our pawn business in the U.S., and second has been
the increased regulatory scrutiny by federal agencies in both the U.S. and UK
associated with our unsecured consumer loan businesses. The rst of these
two items reects the impact of near-term market-driven headwinds affecting
the entire pawn industry, while the second factor reects the inevitable anxiety
of investors in the face of regulatory uncertainty. Both have our attention and
will be explored further in my discussions for each reporting segment of our
enterprise. But rst, I will address our overall performance in 2013.
2013
On a consolidated basis in 2013, reported net income and earnings per share
were up dramatically over 2012, most notably due to a sizable income tax
benet recognized during the year in connection with the liquidation of a
wholly owned subsidiary in Mexico. Consequently, net income and earnings
per share are not good proxies for gauging our performance in 2013. I believe
other measures provide a more accurate picture of results. Namely, gross
revenue in 2013 was at with 2012; net revenue was up slightly; and adjusted
EBITDA1, a non-GAAP measure, ended down approximately 4%. Those
2
1
For a reconciliation of Adjusted EBITDA to Net Income attributable to Cash America International, Inc.,
see our Annual Report on Form 10-K under “Management’s Discussion and Analysis of Financial
Condition and Results of Operations – Overview – Non-GAAP Disclosure – Adjusted EBITDA.”