CompuCredit achieved outstanding financial results in 2003. We earned $117 million, which was a record level of earnings, besting our previous record by a wide margin (42%). We ended the year with $111 million of cash on our balance sheet. All of our portfolios performed as well or better for the year than we had forecasted, and we have seen an improvement in the economy that should help our business over the next 24 months.
We use the term “fellow” shareholders because our management team and directors own more than half of the common stock of the Company. While we are a public company, we make our/your investment decisions as if it were actually our/your money. We look for that which will create the most long-term intrinsic value for the business, rather than that which might help us to reach a quarterly or yearly target, but not be in the best long-term interest of the Company. Our steady, conservative approach enabled us to continue to grow intrinsic value during a weak economy. This same approach will be used as we look to accelerate the growth in our business.
Given our current position and outlook, we are going to discuss three broad themes in this letter: Strength, Expertise and Opportunity. We will also provide a brief overview of our business activities and our outlook for each of those.
First, let’s talk about our Strength. CompuCredit is in a stronger financial position than at any time in its history. We are better positioned across all of our business activities – which include originations, portfolio purchases and charged-off receivables purchases – than we have ever been. Those business activities are also more diverse and complementary, and therefore provide a counterbalance to one another through different business cycles. As an example, when we are growing our origination business, we may have a slower rate of growth in our debt buying business, and vice-versa. We also have recently entered into a strategic long-term funding relationship with Merrill Lynch, thereby removing some of the risk of growing our origination business. In short, CompuCredit is strongly positioned to grow and take advantage of the opportunities available. We have reiterated in the past that we look first for profitability, then for liquidity and only then at growth. As of today, we have identified several profitable opportunities to pursue, we have secured the liquidity necessary to grow and we will now embark upon a growth plan that is both prudent and aggressive.
Our second broad theme in this letter is Expertise. Sometimes, the best way to truly learn is to weather a storm. For companies in the credit card industry, especially in the underserved market, the years 2000 through 2003 were very stormy. Those companies who were prudent during these times emerged from them smarter and wiser. Our intensive risk testing has continued over the last few years, even though we were not seeking to grow during that time. We understand our market today better than ever, and we are highly confident in our ability to generate long-term value from among our various markets. We have also added some bench strength in our managerial talent, which will assist us as we look for profitable growth.