Cash America 2009 Annual Report Download - page 77

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The consolidated merchandise turnover rate remained flat at 2.9 in 2009 compared to 2008. Management
expects that the profit margin on the disposition of merchandise will likely remain under pressure primarily due to
the soft economic environment, which may require discounting of merchandise to encourage retail sales, as well as
an increase in the percentage mix of refined gold sales, which typically have lower profit margins.
The table below summarizes the age of merchandise held for disposition related to the Company’s domestic
pawn operations before valuation allowance of $0.7 million at both December 31, 2009 and 2008 (dollars in
thousands). The collateral underlying unredeemed loans at the Company’s foreign pawn lending locations is not
owned by the Company, and therefore, is excluded from the table below.
2009 2008
Amount % Amount %
Merchandise held for 1 year or less –
Jewelry $70,834 61.9 % $72,780 66.1 %
Other merchandise 35,328 30.8 28,979 26.3
Total merchandise held for 1 year or less 106,162 92.7 101,759 92.4
Merchandise held for more than 1 year –
Jewelry 4,938 4.3 5,306 4.8
Other merchandise 3,424 3.0 3,128 2.8
Total merchandise held for more than 1 year 8,362 7.3 8,434 7.6
Total merchandise held for disposition $114,524 100.0 % $110,193 100.0 %
Cash Advance Fees. Cash advance fees increased $7.3 million, or 2.0%, to $371.9 million in 2009, as compared to
$364.6 million in 2008. The increase in revenue from cash advance fees is predominantly due to a 13.6% increase
in cash advance fees from the internet channel and card services channel. Offsetting this increase was an 18.5%
decrease in cash advance fees from storefront locations which is due to several factors, including the closure of 56
cash advance storefront locations during 2008, regulatory changes in certain markets for the cash advance product
that resulted in lower cash advance fees per loan, and the Company’s adjustments in underwriting criteria for the
cash advance product in late 2008 to reduce risk of loan losses. These factors caused a decrease in revenue on the
cash advance product. In particular, the short-term unsecured cash advance product offered at storefront locations
in Ohio under the Ohio Second Mortgage Loan statute has a lower annualized yield than the short-term unsecured
cash advance product offered prior to December 2008, which resulted in lower cash advance fees at the Ohio
storefront locations, despite an increase in cash advances written at these locations. In addition, the adjustments in
underwriting criteria for the cash advance product in late 2008 have resulted in a decrease in cash advances written
but have lowered the levels of losses in 2009. Management also believes that a generally soft economic
environment and higher unemployment levels may have led to fewer qualifying cash advance customers. These
factors contributed to the decrease in the number of short-term unsecured cash advance loans, which resulted in
reduced cash advance fees at the Company’s cash advance storefront locations, and, to a lesser extent, reduced
growth at the Company’s internet channel.
As of December 31, 2009, cash advance products were available in 680 lending locations, including 434
pawn lending locations and 246 cash advance storefront locations. In 249 of these lending locations, the Company
arranges for customers to obtain cash advance products from independent third-party lenders through the CSO
program for a fee. Cash advance fees from same stores (stores that have been open for at least twelve months)
decreased $13.0 million, or 10.1%, to $116.2 million for 2009, compared to $129.2 million for 2008.