Cash America 2011 Annual Report Download - page 84

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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 as of both December 31, 2011 and 2010 (dollars in
thousands):
2011 2010
Balance at December 31, Amount % Amount %
Jewelry – held for one year or less $94,649 62.3 $79,566 63.6
Other merchandise – held for one year or less 50,907 33.5 39,809 31.8
Total merchandise held for one year or less 145,556 95.8 119,375 95.4
Jewelry – held for more than one year 2,626 1.7 2,685 2.2
Other merchandise – held for more than one year 3,792 2.5 3,039 2.4
Total merchandise held for more than one year 6,418 4.2 5,724 4.6
Total merchandise held for disposition $151,974 100.0 $125,099 100.0
Consumer Loan Activities:
Consumer loan fees. Consumer loan fees increased $107.6 million, or 21.9%, to $598.6 million in 2011
compared to $491.0 million in 2010. The increase in consumer loan fees is primarily due to growth in the e-commerce
segment from lending in the foreign markets in which the Company operates and, to a lesser extent, the expansion of the
Company’s installment loan and line of credit products in the United States, offset by a decrease in revenue from
domestic markets in which consumer loans are no longer offered due to changes in laws and the absence of fees from the
Company’s MLOC services business. The Company stopped providing MLOC services on behalf of a third-party
lender in October 2010 when the lender discontinued offering MLOC advances.
Consumer loan loss provision. The consumer loan loss provision increased by $43.3 million, to $225.7 million
in 2011, from $182.4 million in 2010, primarily due to higher loan balances in 2011 compared to 2010. The loss
provision as a percentage of consumer loan fees increased to 37.7% in 2011, from 37.2% in 2010, primarily due to
growth in loans written in foreign e-commerce markets and the expansion of the Company’s line of credit and
installment loan products in the United States, all of which have a higher percentage of new customers. New customers
tend to have a higher risk of default than customers with a history of successfully repaying loans. In addition, the
Company experienced a change in mix of consumer loans written between the retail services segment and the e-
commerce segment, with a higher percentage of consumer loans written at the e-commerce segment. The Company
expects that new customers as a percentage of total customers will remain similar to current levels since the number of
existing and new customer loans written are expected to increase at a similar pace. However, if the Company
experiences a disproportionate increase in new customers, loss rates will be higher until it develops a repayment history
with these customers. In addition, the loss provision increased due to increased charge-offs in the Company’s retail
services segment as a result of growth in loans to new customers that have less established payments histories.