Cash America 2007 Annual Report Download - page 63

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refined gold, the profit margin on the disposition of merchandise (including jewelry sales) decreased to
41.2% in 2006 from 41.5% in 2005. The profit margin on the disposition of refined gold increased to 30.4%
in 2006 from 27.1% in 2005 primarily due to higher prevailing market prices of gold, which in turn caused
the hedge-adjusted selling price per ounce to increase 25.6% in 2006 compared to 2005. The Company also
experienced an 11.6% increase in the volume of refined gold sold during 2006, which was generally in line
with the increase in pawn loan balances for the period. Proceeds from disposition of merchandise,
excluding refined gold, increased $12.2 million, or 5.0%, in 2006 primarily due to the net addition of 19
pawnshop locations and to the higher levels of retail sales activity that was supported by higher levels of
merchandise available for disposition entering into 2006. The consolidated merchandise turnover rate was
2.7 times in both 2006 and 2005.
The table below summarizes the age of merchandise held for disposition before valuation allowance
of $1.9 million and $1.8 million, respectively, at December 31, 2006 and 2005 ($ in thousands).
2006 2005
Amount % Amount %
Merchandise held for 1 year or less –
Jewelry .................................................................. $ 52,087 58.6% $ 42,139 56.6%
Other merchandise................................................. 28,302 31.8 24,787 33.3
80,389 90.4 66,926 89.9
Merchandise held for more than 1 year –
Jewelry .................................................................. 5,280 5.9 4,684 6.3
Other merchandise................................................. 3,261 3.7 2,873 3.8
8,541 9.6 7,557 10.1
Total merchandise held for disposition.............. $ 88,930 100.0%$ 74,483 100.0%
Cash Advance Fees. Cash advance fees increased $53.0 million, or 37.3%, to $195.1 million in 2006 as
compared to $142.1 million in 2005. The increase resulted primarily from the growth and development of
new cash advance units and higher average cash advance balances outstanding during 2006, with some
additional contribution from CashNetUSA acquired in mid-September 2006. As of December 31, 2006,
cash advance products were available in 720 lending locations, including 425 pawnshops and 295 cash
advance locations. In 314 of these lending locations, the Company arranged for customers to obtain cash
advance products from independent third-party lenders for a fee. Cash advance fees from same stores
increased $14.8 million, or 10.5%, to $156.1 million in 2006 compared to $141.3 million in 2005. Cash
advance fees include revenue from the cash advance portfolio owned by the Company and fees paid to the
Company for credit services rendered to customers in connection with arranging for customers to obtain
cash advances from independent third-party lenders. See further discussion in Note 4 of Notes to
Consolidated Financial Statements. (Although cash advance transactions may take the form of loans or
deferred check deposit transactions, the transactions are referred to throughout this discussion as “cash
advances” for convenience.)
The following table sets forth cash advance fees by operating segment for the years ended
December 31, 2006 and 2005 ($ in thousands):
2006 2005 Inc./(Dec.)
Cash advance operations – storefront ............................. $ 120,946 $ 100,663 $ 20,283 20.1%
Cash advance operations – internet lending ................... 30,483 — 30,483 N/A
Total cash advance operations .................................... 151,429 100,663 50,766 50.4
Pawn lending operations................................................. 43,676 41,405 2,271 5.5
Consolidated cash advance fees ................................. $ 195,105 $ 142,068 $ 53,037 37.3%
The amount of cash advances written increased $247.4 million, or 26.6% to $1.2 billion in 2006
from $930.3 million in 2005. These amounts include $360.6 million in 2006 and $356.4 million in 2005