Cash America 2010 Annual Report Download - page 71

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42
liquidation of forfeited loans.
Proceeds from 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 in the Company’s domestic
pawn operations. With respect to the Company’s foreign pawn operations, collateral underlying unredeemed pawn
loans is not owned by the Company; therefore, proceeds are recorded as pawn loan fees and service charges rather than
proceeds from disposition of merchandise when the collateral is sold. Retail sales include the sale of jewelry and
general merchandise direct to consumers through any of the Company’s domestic retail services locations or over the
internet. Commercial sales include the sale of refined gold, platinum and diamonds to brokers or manufacturers. The
following table summarizes the proceeds from the disposition of merchandise and the related profit in the Company’s
domestic pawn operations for the years ended December 31, 2010 and 2009 (dollars in thousands):
Year Ended December 31,
2010 2009
Retail Commercial Total Retail Commercial Total
Proceeds from disposition $ 306,300 $ 228,578 $ 534,878 $ 283,208 $ 219,528 $ 502,736
Gross profit on disposition $ 121,819 $ 74,303 $ 196,122 $ 112,417 $ 66,042 $ 178,459
Gross profit margin 39.8 % 32.5 % 36.7 % 39.7 % 30.1 % 35.5 %
Percentage of total gross profit 62.1 % 37.9 % 100.0 % 63.0 % 37.0 % 100.0 %
The total proceeds from disposition of merchandise increased $32.1 million, or 6.4%, during 2010 from 2009,
and the total profit from the disposition of merchandise increased $17.7 million, or 9.9%, during 2010 from 2009. The
increase in proceeds and profits was mainly due to an increase in merchandise available for sale generated from
forfeitures from the Company’s higher pawn loan balances and an increase in merchandise purchased from customers
and third-parties, combined with a slight improvement in the consolidated merchandise turnover rate, which increased
to 3.0 times in 2010, compared to 2.9 times in 2009.
Proceeds from retail sales, including jewelry, increased $23.1 million, or 8.2%, during 2010, compared to
2009. In addition, the profit margin on retail sales increased slightly to 39.8% in 2010, from 39.7% in 2009.
Proceeds from commercial dispositions increased $9.1 million, or 4.1%, in 2010 compared to 2009. The profit
margin on commercial sales increased to 32.5% in 2010, from 30.1% in 2009. Both the increases in proceeds and
profit margin on commercial sales are mainly due to a higher average market price of gold and diamonds sold, which
more than offset a lower volume of gold sold during 2010 compared to 2009.
Management expects that the profit margin on the disposition of merchandise will likely remain similar to
current levels, predominantly due to the prevailing market price for gold and continued consumer demand for value-
priced pre-owned general merchandise.