Cash America 2008 Annual Report Download - page 28

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5
amount loaned. If the amounts received upon disposition of forfeited collateral are in excess of the principal
amount of the loan, all accrued fees and charges and disposition expenses, the excess is held by the
Company subject to being reclaimed by the borrower for a period of time, generally 6 months.
For domestic and foreign pawn operations, the recovery of the amount advanced and the realization
of a profit on the disposition of merchandise depends on the Company’s initial assessment of the property’s
estimated disposition value when the pawn loan is made. While the Company has historically realized
profits when disposing of merchandise, the improper assessment of the disposition value could result in the
disposition of the merchandise for an amount less than the loan amount. For 2008, 2007 and 2006, the
Company experienced profit margins on disposition of merchandise of 36.6%, 37.8% and 38.7%,
respectively. Changes in gold prices generally will also increase or decrease the disposition value of jewelry
items acquired in pawn transactions and could enhance or adversely affect the Company’s profit or recovery
of the carrying cost of the acquired collateral.
At December 31, 2008, the Company had approximately 1.4 million outstanding pawn loans
(including 1.2 million domestic and 0.2 million foreign) totaling $168.7 million, ($152.1 million domestic
and $16.7 million foreign) with an average of approximately $120 per loan outstanding ($125 domestic and
$90 foreign).
Presented below is information with respect to pawn loans made, acquired, and forfeited for the U.S
and foreign pawn lending operations for the years ended December 31, 2008, 2007 and 2006. The foreign
loan activity is for the 14 days in 2008 following the closing of the transaction and has an insignificant
effect on the amounts shown below as loans made, repaid, renewed or forfeited (dollars in thousands):
2008
2007 2006
Loans made, including loans renewed ..................
.
$ 594,815 $ 514,797 $ 474,046
Loans acquired......................................................
.
18,497 607 4,365
Loans repaid..........................................................
.
(247,332) (218,920) (210,177)
Loans renewed ......................................................
.
(99,178) (79,751) (78,942)
Loans forfeited for disposition..............................
.
(234,605) (206,798) (177,188)
Effect of exchange rate translation........................
.
(769) ʊ ʊ
Net increase in pawn loans outstanding ...........
.
$ 31,428 $ 9,935 $ 12,104
Merchandise Disposition Activities. The Company sells merchandise that pawn customers forfeit
when they do not repay or renew their pawn loans. The Company sells most of this merchandise at its
pawnshops, but also disposes of some items through wholesale sources, over the internet, or, in the case of
some gold jewelry, through a major gold bullion bank. Its pawnshops also sell used goods purchased from
the general public and some new merchandise, principally accessory merchandise that complements and
enhances the marketability of items such as tools, consumer electronics and jewelry. For the year ended
December 31, 2008, $306.7 million of merchandise was added to merchandise held for disposition, of which
$234.6 million was from loans not repaid, $72.1 million was purchased from customers and vendors, and
$44,000 was added through acquisitions of pawnshops. Proceeds from disposition of merchandise
contributed 45.2% of the Company’s total revenue in 2008, 42.7% in 2007 and 48.1% in 2007.
While the Company offers refunds and exchanges for certain merchandise items, it does not provide
its customers with express warranties on used merchandise; however, the Company offers customers a 30-
day satisfaction guarantee, whereby customers can return merchandise and receive a full refund, a
replacement item of comparable value or store credit. Customers may purchase merchandise on a layaway
plan under which the customer makes an initial cash deposit representing a small portion of the disposition
price and pays the balance in regularly scheduled, non-interest bearing payments. The Company segregates
the layaway item and holds it until the customer has paid the full disposition price. If the customer fails to
make a required payment, the item is placed with the other merchandise held for disposition. At December
31, 2008, the Company held approximately $8.8 million in customer layaway deposits.