Cash America 2009 Annual Report Download - page 85

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balances on pawn loans, which contributed $21.1 million of the increase and higher annualized yield on pawn
loans, which contributed $2.9 million of the increase. In addition, the Company’s decision to reduce the maximum
loan term from 90 days to 60 days in 198 pawn storefront locations in the last half of 2007 contributed to higher
reported pawn loan yields and contributed to better performance in the portfolio, as customer payments of finance
and service charges occurred earlier and the maximum amount of fees and service charges were lower as an overall
percentage of the loan amount.
Balances in domestic and foreign locations at December 31, 2008 were $168.7 million, which was $31.4
million, or 22.9%, higher than at December 31, 2007. The average balance of pawn loans outstanding for 2008
increased by $15.4 million, or 12.0%, compared to 2007, which management believes is attributable to higher gold
prices allowing for greater loan amounts for loans secured by gold collateral. A significant contribution to the
increase in the number of pawn loans and pawn loan balances was the inclusion of $16.7 million of pawn loans
from Prenda Fácil as of December 31, 2008.
Loan yield on pawn loans was 128.8% for 2008, compared to 125.5% in 2007. The higher annualized yield
is a function of the average rates for fees and service charges on pawn loans as well as the amount of finance and
service charges deemed to be collectible based on historical loan redemption statistics. The Company’s domestic
annualized loan yield increased to 129.0% in 2008 compared to 125.5% in 2007. The increase was primarily due to
improved performance and portfolio mix.
Proceeds from the Disposition of Merchandise. Profit from the disposition of merchandise represents the proceeds
received from the disposition of merchandise in excess of the cost of disposed merchandise. The following table
summarizes the proceeds from the disposition of merchandise and the related profit for 2008 as compared to 2007
(dollars in thousands):
Year Ended December 31,
2008 2007
Merchan- Refined Merchan- Refined
dise Gold Total dise Gold Total
Proceeds from disposition $ 286,952 $ 178,703 $ 465,655 $ 276,794 $ 120,027 $ 396,821
Profit on disposition $ 117,673 $ 52,622 $ 170,295 $ 112,090 $ 37,939 $ 150,029
Profit margin 41.0 % 29.4 % 36.6 % 40.5 % 31.6 % 37.8 %
Percentage of total profit 69.1 % 30.9 % 100.0 % 74.7 % 25.3 % 100.0 %
The total proceeds from disposition of merchandise and refined gold increased $68.8 million, or 17.4%, in
2008 compared to 2007, and the total profit from the disposition of merchandise and refined gold increased $20.3
million, or 13.5%, in 2008 compared to 2007. Overall profit margin decreased from 37.8% in 2007 to 36.6% in
2008, primarily due to a higher percentage mix of refined gold sold in 2008. The consolidated merchandise
turnover rate increased to 2.9 in 2008 compared to 2.7 in 2007.
Proceeds from disposition of merchandise increased $10.2 million, or 3.7%, in 2008 compared to 2007,
primarily due to the higher levels of retail sales activity that was supported by higher levels of merchandise
available for disposition entering into 2008. In addition, the profit margin on the disposition of merchandise
increased to 41.0% in 2008 from 40.5% in 2007, resulting in a $5.6 million, or 5.0%, increase in profit. The gross
profit margin in 2008 was positively impacted by a $1.2 million reduction in the inventory valuation allowance
during the fourth quarter of 2008, primarily due to a modification of the methodology used to assess the adequacy
of this allowance. Excluding the impact of this modification on the total cost of disposed merchandise the gross
profit margin would have been $169.1 million, or 36.3%, and, on merchandise excluding refined gold, the gross
profit margin would have been $117.1 million, or 40.8%.