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Back to Basics for the 21st Century

Back to Basics for the 21st Century

In 2001 Dan Feehan, who had succeeded Jack Derica’s decisive return to its core lending activities, along with the company’s assured withdrawal from both its Rent-a-Tire and innoVentry business segments

In : selected independent pawnshops would be franchised under the Cash America brand name starting later in 1997. “By joining forces with hundreds of other quality and service-minded pawnbrokers, we will be able to reach markets beyond those served by our existing and planned company-owned stores,” COO Daniel Feehan explained. According to Mike Rapoport, an analyst with Dabnehy/Resnick, in addition to Cash America’s successful pawn business, the company was among the nation’s largest gold producers. It sold gold melted down from unredeemed, unsold jewelry on the metals exchange as bullion. “This thing makes money,” Rapoport told the Sun Sentinel.

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By 1998, however, with the explosive growth of Internetrelated businesses and the U.S. economic boom taking a bite out of demand for short-term loans, Cash America began to secondguess its longstanding reliance on its core business activities. Jumping on the high-tech bandwagon, the company launched innoVentry, a strategic joint venture with Wells Fargo Bank aimed at providing a broad range of e-based financial products and services to a larger, more diverse, group of customers. Expanding on the idea of Mr. Payroll’s automated checkcashing machine, innoVentry harnessed Internet and biometric technologies to create its own signature “Rapid Payment Machine” (RPM) cash management and information access machines, to be installed in retail outlets such as Albertson’s, Kmart, Kroger, Circle K, and Wal-Mart. The investment seemed promising. Also in 1998, having tested the rent-to-own concept at four stores in the Dallas-Fort Worth area and believing there was great potential in adding to the range of services it offered to its traditional pawn customer, Cash America increased its ownership of its Rent-a-Tire subsidiary from 40 percent to 99 percent and launched an aggressive course of expansion into erica saw little return on these investments during 1999, the company’s management resolved to stay the course, promising shareholders that these new initiatives would yield positive results by the end of 2000.

In payday loans Ohio the last years of the erica continued to grow its core business as well, keeping pace with four other publicly traded pawnshop companies, including First Cash, Inc., and EZCorp, Inc., which were vying for market share by grabbing up acquisitions. In 1998, Cash America acquired Doc Holliday’s Pawnbrokers and Jewelers, Inc., an Austin, Texasbased company with 40 locations in six states, among the largest privately owned pawnshop chains in the United States. Chairman and CEO Jack Daugherty hailed the acquisition as key to building Cash America’s presence in a variety of new and existing erica did not disclose the terms of the acquisition, the purchase price of Doc Holliday’s was estimated around $22 million. Roughly six times more than the total value of Doc Holliday’s loans, the steep price was evidence of increasing competition in the rapidly consolidating industry.

Having attempted to play the odds with broad-based diversification, by the end of 2000 Cash America’s management was forced to concede that its noncore investments were not going to pay off as expected. That year, the company reported a loss of $1.7 million, or 7 cents a share, a significant downturn, considering that it had reaped $3.9 million, or 15 cents a share, in 1999. While rededicating its resources to its pawnshop activities, the company would seek opportunities to bring in additional revenue through added fee-based financial services more compatible with its core competencies, such as money transfer, check cashing, bill payment, tax refund anticipation loans, and others. According to the new vision, Cash America would transform its image over time from a pawnshop operator to a neighborhood financial service center.

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