Cash America 2015 Annual Report Download - page 48

Merchandise Sales Activities
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, which is generally the principal amount loaned on an
item or the amount paid for purchased merchandise. Management separates proceeds from disposition of
merchandise and gross profit on disposition of merchandise into two groups, retail sales and commercial sales.
Retail sales include the sale of jewelry and general merchandise primarily to consumers through the Company’s
locations. Commercial sales represent a secondary source of disposition and include the sale of refined gold,
diamonds, platinum, and silver to brokers or manufacturers.
On a consolidated basis, proceeds from disposition decreased in 2015 compared to 2014 by $39.2 million,
or 5.9%, partly due to the sale in 2014 of the Company’s Mexico-based operations, which generated $12.3 million
in proceeds from disposition in 2014. Gross profit on disposition decreased $4.4 million, or 2.3%, in 2015
compared to 2014, partly due to the sale of the Company’s Mexico-based operations, which generated $2.6 million
in gross profit on disposition in 2014.
The following table summarizes the proceeds from the disposition of merchandise and the related profit for
domestic pawn operations, excluding the Company’s Mexico-based pawn operations, for the years ended
December 31, 2015 and 2014 (dollars in thousands):
Year Ended December 31,
2015 2014(a)
Domestic pawn operations Retail Commercial Total Retail Commercial Total
Proceeds from disposition $533,730 $87,027 $620,757 $517,139 $130,569 $647,708
Gross profit on disposition $173,021 $8,494 $181,515 $171,173 $12,114 $183,287
Gross profit margin 32.4%9.8%29.2%33.1%9.3%28.3%
Percentage of total gross profit 95.3%4.7%100.0%93.4% 6.6% 100.0%
(a) Excludes amounts related to the Company’s Mexico-based pawn operations, which were sold in August 2014. For the year ended
December 31, 2014, Mexico-based pawn operations had proceeds from disposition of $12,298, gross profit on disposition of $2,582, and
gross profit margin of 21.0%.
Proceeds from disposition for domestic pawn operations decreased in 2015 compared to 2014 by
$27.0 million, or 4.2%. Commercial proceeds from disposition decreased $43.5 million, or 33.3%, as a result of the
Company’s continued emphasis on retail jewelry sales in its storefront locations and efforts to place less reliance on
the commercial disposition of jewelry due to the prevailing lower market price of gold. Partially offsetting this
decrease, retail proceeds from disposition increased $16.6 million, or 3.2%, primarily due to the Company’s
emphasis on retail disposition activities in its storefront locations. The decreased emphasis on commercial
disposition also contributed to a decrease in the Company’s merchandise turnover ratio from 2.3 times in 2014 to
2.0 times in 2015, as routine and frequent commercial dispositions typically contribute to a higher turnover ratio.
Management expects merchandise turnover to be at or below 2015 levels in future periods, as the merchandise
turnover ratio will be more closely tied to traditional jewelry merchandise turnover levels.
Gross profit on disposition for domestic pawn operations decreased $1.8 million, or 1.0%, in 2015
compared to 2014 due to a $3.6 million, or 29.9%, decrease in gross profit on commercial dispositions, mainly as a
result of lower diamond yields. Partially offsetting the decrease in gross profit on commercial dispositions, gross
profit on retail dispositions increased $1.8 million, or 1.1%, due to the Company’s emphasis on retail disposition
activities in storefront locations. Although the domestic retail gross profit margin decreased to 32.4% in 2015
compared to 33.1% in 2014 mainly as a result of the Company’s emphasis on the retail disposition of general
merchandise items, including the discounting of electronics inventory, the total domestic gross profit margin
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