Cash America 2011 Annual Report Download - page 82

51
YEAR ENDED 2011 COMPARED TO YEAR ENDED 2010
Pawn Lending Activities:
Pawn lending activities consist of pawn loan fees and service charges from the retail services segment during the
period and the profit on disposition of collateral from unredeemed pawn loans, as well as the sale of merchandise
acquired from customers directly or from third parties. Routinely, the largest component of net revenue from pawn
lending activities is the pawn loan fees and service charges from pawn loans, which are impacted by the trend in pawn
loan balances and the yield on pawn loans during the period.
The following table sets forth selected data related to the Company’s pawn lending activities as of and for the
years ended December 31, 2011 and 2010 (dollars in thousands):
2011 2010
Year Ended December 31: Domestic Foreign Total Domestic Foreign Total
Pawn loan fees and service charges $ 261,829 $ 30,062 $ 291,891 $ 221,335 $ 31,979 $ 253,314
Average pawn loan balance outstanding $ 205,610 $ 20,629 $ 226,239 $ 166,163 $ 22,111 $ 188,274
Amount of pawn loans written and renewed $ 869,203 $ 118,126 $ 987,329 $ 689,476 $ 89,746 $ 779,222
Annualized yield on pawn loans 127.3% 105.2% (a) 124.6% 133.2% 116.4% (a) 130.8%
Gross profit margin on disposition of merchandise 36.4% - (a) 36.4% 36.7% - (a) 36.7%
Merchandise turnover 3.0 - (a) 3.0 3.0 - (a) 3.0
As of December 31:
Ending pawn loan balances $ 238,399 $ 15,120 $ 253,519 $ 197,301 $ 21,107 $ 218,408
Ending merchandise balance, net $ 151,274 $ - (a) $ 151,274 $ 124,399 $ - (a) $ 124,399
(
a
)
With respect to the Company’s foreign pawn operations, the annualized yield on pawn loans is calculated using the average pawn loan
balance outstanding in the table above, plus the average value of the collateral underlying unredeemed pawn loans, which is included in
“Other assets” on the Company’s consolidated balance sheets, of $7,947 and $5,355 for the years ended December 31, 2011 and 2010,
respectively. Collateral underlying unredeemed pawn loans will be sold to settle the obligations owed by the customer but is not owned by
the Company; therefore, profit on the disposition of this collateral is recorded as “Pawn loan fees and service charges” in the Company’s
consolidated statements of operations.
Pawn loan fees and service charges. Pawn loan balances in domestic and foreign locations at December 31,
2011 were $253.5 million, which was $35.1 million, or 16.1%, higher than at December 31, 2010. The average balance
of pawn loans outstanding for 2011 increased by $38.0 million, or 20.2%, compared to 2010, primarily due to organic
growth in domestic retail operations and the additional pawn loan balances resulting from the Maxit acquisition that
occurred in the fourth quarter of 2010. In addition, higher average gold prices contributed to the growth in pawn loan
balances as increased collateral values have supported customer demand, resulting in a higher average pawn loan
amount. Annualized pawn loan yield on pawn loans was 124.6% for 2011, compared to 130.8% in 2010. The decrease
in pawn loan yield is mostly due to a change in mix of pawn loans by market.
Domestic pawn loan fees and service charges increased $40.5 million, or 18.3%, to $261.8 million in 2011, from
$221.3 million in 2010. The increase is mainly due to higher average pawn loan balances during 2011 as a result of
organic growth in domestic retail operations and the Maxit acquisition. The lower annualized pawn loan yield in the
domestic portfolio is mainly due to a change in the mix of states in which the Company has pawn loans, with a higher
concentration of pawn loans in states with lower statutory loan yields, primarily related to the acquisition of the Maxit
stores and the growth in that portfolio since the Maxit acquisition in the fourth quarter of 2010. Management expects
year-over-year comparisons to normalize with respect to pawn loan yields in 2012.