Cash America 2011 Annual Report Download - page 83

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Foreign pawn loan fees and service charges decreased $1.9 million, or 6.0%, to $30.1 million in 2011 from
$32.0 million in 2010, primarily due to increased forfeiture rates and lower yield on the disposition of forfeited
merchandise.
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. Retail sales include the
sale of jewelry and general merchandise direct to consumers through the Company’s retail services locations or over the
Internet. Commercial sales include the sale of refined gold, platinum, silver and diamonds to brokers or manufacturers.
The following table summarizes the proceeds from the disposition of merchandise and the related profit for the years
ended December 31, 2011 and 2010 (dollars in thousands):
Year Ended December 31,
2011 2010
Retail Commercial Total Retail Commercial Total
Proceeds from disposition $ 346,469 $ 290,259 $ 636,728 $ 306,300 $ 228,578 $ 534,878
Gross profit on disposition $ 134,455 $ 97,118 $ 231,573 $ 121,819 $ 74,303 $ 196,122
Gross profit margin 38.8 % 33.5 % 36.4 % 39.8 % 32.5 % 36.7 %
Percentage of total gross profit 58.1 % 41.9 % 100.0 % 62.1 % 37.9 % 100.0 %
The total proceeds from disposition of merchandise increased $101.9 million, or 19.0%, during 2011 from 2010,
and the total profit from the disposition of merchandise increased $35.5 million, or 18.1%, during 2011 from 2010. The
increase in proceeds and profit 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. The consolidated merchandise turnover rate remained constant at 3.0 times for both 2011 and 2010.
Proceeds from retail dispositions of merchandise increased $40.2 million, or 13.1%, during 2011 compared to
2010, primarily due to organic growth in the Company’s domestic retail operations and the Maxit acquisition. However,
the profit margin on the retail disposition of merchandise decreased slightly to 38.8% in 2011, from 39.8% in 2010, due
primarily to discounting of merchandise prices to encourage retail sales activity.
Proceeds from commercial dispositions increased $61.7 million, or 27.0%, in 2011 compared to 2010. The
profit margin on commercial sales increased to 33.5% in 2011, from 32.5% in 2010. These increases were primarily due
to an increase in the average market prices for gold and diamonds, offset by fewer ounces of refined gold sold as a result
of lower forfeiture rates on the Company’s pawn loan portfolio secured by jewelry.
Management expects the profit margin on retail dispositions, excluding commercial activities, to be slightly
lower than current levels as merchandise available for disposition has increased over the prior year, which has resulted
in the discounting of merchandise.