Southern Bullion Closure Complete; SEC and Texas Sales Tax Issues
Settled
Company Website:
http://www.dgsecompanies.com
DALLAS -- (Business Wire)
DGSE Companies, Inc. (NYSE MKT: DGSE), a leading wholesaler and retailer
of jewelry, diamonds, fine watches, and precious metal bullion and rare
coin products, today announced its financial results for the three and
six months ended June 30, 2014.
Second Quarter 2014 Business and Financial Highlights
-
The shutdown of the company’s Southern Bullion Coin and Jewelry
(“Southern Bullion”) division is now complete. A total of 23 Southern
Bullion locations have been closed since February 2014 which
represents the entirety of the Southern Bullion operations. We have
now reclassified all Southern Bullion operations into discontinued
operations.
-
DGSE reported a loss from discontinued operations of $3.9 million for
the quarter, including the $2.9 million write off of the intangible
asset related to the Southern Bullion trade name, and $0.3 million
related to fixed assets previously used in Southern Bullion operations.
-
Revenues from continuing operations were $17.5 million compared to
$23.8 million, a 26% decline compared to the same period in 2013.
Significant decreases in both bullion and scrap sales, a result of the
drop in gold prices, were partially offset by strong growth in jewelry
sales.
-
Despite the 26% decline in overall revenue, gross profit from
continuing operations improved to $3.0 million, or 17.2% of revenue,
compared to $2.9 million, or 12.1% of revenue in the same period last
year. The 5.1% improvement was the result of a favorable shift in our
sales mix, as high-margin jewelry sales increased, and low margin
bullion sales decreased.
-
Selling, general and administrative expenses (“SG&A”) from continuing
operations remained flat at $3.4 million during the second quarter of
2014, unchanged from the second quarter of 2013, despite the addition
of two new stores that were not open in the same period of 2013.
-
Net loss from continuing operations was approximately $539,000 or
$0.04 per share, compared to net loss from continuing operations of
approximately $525,000, or $0.04 per share, in the second quarter of
2013.
-
Net loss, inclusive of discontinued operations, was approximately
$4,452,000 or $0.36 per share, compared to a net loss, inclusive of
discontinued operations, of approximately $1,124,000, or $0.09 per
share, in the second quarter of 2013.
-
DGSE welcomed two new independent directors to our Board of Directors.
Bruce Quinnell and Dennis McGill are both highly experienced, senior
executives with decades of business experience and both have spent
significant time with prominent national retailers.
-
DGSE announced an agreed final judgment in the previously disclosed
SEC litigation stemming from the accounting irregularities that
resulted in the company’s 2012 restatement of its financials. In
connection with the agreed final judgment, DGSE agreed to undertake
certain corporate governance reforms, many of which are already in
place. The judgment required no payment of civil damages.
-
DGSE reached a settlement with the Comptroller of Public Accounts of
the State of Texas (the “Comptroller”), to pay approximately $1.1
million in taxes, penalties and interest related to the Comptroller’s
Sales and Use Tax Audit of the company for the period of March 1, 2006
to November 30, 2009. Pursuant to the agreement, DGSE will pay the
settlement amount over an 18-month period. The company has fully
accrued for this expense.
Dusty Clem, Chairman of the Board and Chief Executive Officer, stated,
“While our earnings are still below my expectations, DGSE is starting to
see the benefits of expanding our focus on high-margin jewelry, diamond
and watch sales. This is reflected in the fact that our gross profit
actually increased this quarter, despite the fact that our top line
revenue was down almost 26% compared to 2013, due to substantially lower
gold prices. Our success in focusing on these high-margin segments
should show even more benefits as we move into the holiday season.”
Second Quarter 2014 Results
For the quarter ended June 30, 2014, revenues from continuing operations
were $17.5 million, a 26% decrease compared to $23.8 million in the
quarter ended June 30, 2013, due primarily to significant decreases in
both bullion and scrap sales as a result of declining gold prices, which
were on average 9% lower (as measured by London PM Fix) than in the same
period last year. Declining bullion and scrap revenue in the quarter was
partially offset by strong jewelry sales, which continue to show healthy
year over year increases.
Gross profit from continuing operations in the quarter was $3.0 million,
or 17.2% of revenue, compared to $2.9 million, or 12.1% of revenue, in
the prior year quarter. The 5.1% improvement was driven by a favorable
shift in our sales mix, as high-margin jewelry sales increased, and low
margin bullion sales decreased.
SG&A expenses decreased by approximately $26,000, or 0.8%, in the first
quarter, to $3.4 million compared to $3.4 million for the second quarter
of 2013. During the quarter, the company incurred $210,000 in
incremental operating expenses related to two new stores not yet opened
during the same quarter in 2013. During the three months ended June 30,
2014 and 2013, the Company incurred $137,000 and $227,000, respectively,
in professional fees and costs associated with the 2012 restatement of
our financial statements, the 2010 State of Texas sales tax audit, and
related legal matters.
Loss from continuing operations for the second quarter was $539,000 or
$0.04 per share compared to a net loss from continuing operations of
$525,000, or $0.04 per share, in the second quarter of 2013.
Loss from discontinued operations for the three months ended June 30,
2014 was $3.9 million, related to the Southern Bullion locations closed
in February and April of 2014, compared to a net loss of $599,000 for
these locations in the same quarter of 2013. Discontinued operations for
the current quarter includes the write-off of the $2.9 million
intangible asset attributed to the “Southern Bullion Coin & Jewelry”
trade name, as well as the write-off of approximately $296,000 in fixed
assets previously utilized in Southern Bullion operations.
Net loss for the second quarter was $4.5 million or $0.36 per share,
compared to a net loss of $1.1 million, or $0.09 per share, in the
second quarter of 2013.
Year-to-Date 2014 Results
In the six months ended June 30, 2014, revenues from continuing
operations decreased to $35.6 million, compared to $47.3 million in the
same period last year. This decrease was primarily due to lower bullion
and scrap sales, compared to the same period last year, mostly due to a
significant drop in gold prices, which were on average 15% lower (as
measured by London PM Fix) than in the first half of 2013.
Gross profit from continuing operations was $6.2 million or 17.5% of
revenue, compared to $6.5 million or 13.7% of revenue in the prior year
period. Robust sales of high-margin jewelry increased gross profit as a
percentage of revenue which largely offset the reduction in top line
revenue.
Selling, general and administrative expenses increased approximately
$158,000 or 2.4%, to $6.7 million in the six months ended June 30, 2014
compared to $6.5 million in the prior year. This slight increase was
largely the result of the opening of two additional retail locations in
2013, and largely offset by continued cost reduction efforts across all
areas. Depreciation and amortization were flat at approximately
$182,000, for the six months ended June 30, 2014 as well as the same
period in 2013.
The loss from continuing operations for the six months ended June 30,
2014 was $824,000 compared to $333,000 in the same period of 2013.
Loss from discontinued operations for the six months ended June 30, 2014
was $4.2 million related to operations of the Southern Bullion locations
closed down in February and April of 2014, compared to a net loss of
$489,000 for these locations in the same period of 2013. As noted above,
discontinued operations also includes the write-off of the $2.9 million
intangible asset attributed to the “Southern Bullion Coin & Jewelry”
trade name, as well as the write-off of approximately $296,000 in fixed
assets previously utilized in Southern Bullion operations.
Net loss for the six months was $5.0 million or $0.41 per share,
compared to a net loss of $0.8 million, or $0.07 per share, in the same
period of 2013.
Mr. Clem concluded, “We are happy to have efficiently completed the
Southern Bullion closure and to have wrapped up the SEC settlement and
Texas sales tax agreement. These legacy issues are now finally behind us
as we continue to critically evaluate our store and market
configuration, product mix and vendor relationships in order to move the
company to consistent profitability.”
Balance Sheet Summary
At June 30, 2014, DGSE Companies had cash and cash equivalents of $2.1
million compared to $2.6 million at December 31, 2013, related to
continuing operations. Stockholders’ equity decreased 46% to $5.5
million at June 30, 2014 compared to $10.4 million at December 31, 2013,
largely due to the write-off of $3.2 million in intangible and fixed
assets of Southern Bullion. As of June 30, 2014, the outstanding balance
on the company’s credit facility with NTR was $2.3 million compared to
$2.4 million at December 31, 2013.
Conference Call
DGSE Companies management will conduct a live teleconference to discuss
its financial results:
|
| |
Date: | |
August 13, 2014
|
| |
|
Time: | |
4:30 p.m. ET/3:30 p.m. CT
|
| |
|
Dial-in: | |
1-877-407-9039 if calling from the United States, or 1-201-689-8470
if dialing internationally.
|
| |
|
Replay: | |
A replay will be available until August 20, 2014, which may be
accessed by dialing 1-877-870-5176 within the United States and
1-858-384-5517 if dialing internationally. Please use passcode
13588341 to access the replay.
|
| |
|
Webcast: | |
The call will be webcast and will be available by visiting
http://public.viavid.com/index.php?id=110473.
|
About DGSE Companies
DGSE Companies, Inc. wholesales and retails jewelry, diamonds, fine
watches, and precious metal bullion and rare coin products through its
Bullion Express, Charleston Gold & Diamond Exchange, and Dallas Gold &
Silver Exchange operations. DGSE also owns Fairchild International,
Inc., one of the largest vintage watch wholesalers in the country. In
addition to its retail facilities in Illinois, South Carolina, and
Texas, the company operates internet websites which can be accessed at www.bullionexpress.com,
www.dgse.com,
and www.cgdeinc.com.
Real-time price quotations and real-time order execution in precious
metals are provided on another DGSE website at www.USBullionExchange.com.
Wholesale customers can access the full vintage watch inventory through
the restricted site at www.FairchildWatches.com.
The company is headquartered in Dallas, Texas and its common stock
trades on the NYSE MKT exchange under the symbol "DGSE."
This press release includes statements which may constitute
"forward-looking" statements, usually containing the words "believe,"
"estimate," "project," "expect" or similar expressions. These statements
are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Forward-looking statements
inherently involve risks and uncertainties that could cause actual
results to differ materially from the forward-looking statements.
Factors that would cause or contribute to such differences include, but
are not limited to, continued acceptance of the company's products and
services in the marketplace, competitive factors, dependence upon
third-party vendors, and other risks detailed in the company's periodic
report filings with the Securities and Exchange Commission. By making
these forward-looking statements, the company undertakes no obligation
to update these statements for revisions or changes after the date of
this release.
-- Tables follow --
|
| | | |
DGSE COMPANIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS |
| | | |
|
| | June 30, | | December 31, |
| |
| 2014 |
| |
| 2013 |
|
| | (Unaudited) | |
ASSETS | | | | |
Current Assets:
| | | | |
Cash and cash equivalents
| |
$
|
2,143,730
| | |
$
|
2,637,726
| |
Trade receivables, net of allowances
| | |
183,633
| | | |
162,670
| |
Inventories
| | |
11,517,687
| | | |
9,992,156
| |
Prepaid expenses
| | |
217,421
| | | |
138,600
| |
Assets related to discontinued operations
| |
|
139,104
|
| |
|
3,711,740
|
|
| | | |
|
Total current assets
| | |
14,201,575
| | | |
16,642,892
| |
| | | |
|
Property and equipment, net
| | |
4,505,609
| | | |
4,588,695
| |
Intangible assets, net
| | |
34,460
| | | |
41,353
| |
Other assets
| | |
115,710
| | | |
189,425
| |
Noncurrent assets related to discontinued operations
| | |
-
| | | |
3,441,766
| |
| |
| |
|
Total assets
| |
$
|
18,857,354
|
| |
$
|
24,904,131
|
|
| | | |
|
LIABILITIES | | | | |
Current Liabilities:
| | | | |
Accounts payable-trade
| |
$
|
5,259,356
| | |
$
|
5,535,624
| |
Accrued expenses
| | |
1,728,203
| | | |
1,729,528
| |
Customer deposits and other liabilities
| | |
1,741,703
| | | |
2,349,943
| |
Current maturities of long-term debt
| | |
126,699
| | | |
122,536
| |
Current maturities of capital leases
| | |
11,328
| | | |
11,091
| |
Liabilties related to discontinued operations
| |
|
449,903
|
| |
|
589,899
|
|
| | | |
|
Total current liabilities
| | |
9,317,192
| | | |
10,338,621
| |
| | | |
|
Line of credit, related party
| | |
2,303,359
| | | |
2,383,359
| |
Long-term debt, less current maturities
| |
|
1,687,696
|
| |
|
1,757,827
|
|
| | | |
|
Total liabilities
| | |
13,308,247
| | | |
14,479,807
| |
| | | |
|
Commitments and contingencies
| | | | |
| | | |
|
STOCKHOLDERS' EQUITY | | | | |
Common stock, $0.01 par value; 30,000,000 shares authorized;
12,223,584 and 12,175,584 shares issued and outstanding
| | |
122,235
| | | |
121,755
| |
Additional paid-in capital
| | |
34,145,174
| | | |
34,045,654
| |
Accumulated deficit
| |
|
(28,718,302
|
)
| |
|
(23,743,085
|
)
|
Total stockholders' equity
| | |
5,549,107
| | | |
10,424,324
| |
| |
| |
|
Total liabilities and stockholders' equity
| |
$
|
18,857,354
|
| |
$
|
24,904,131
|
|
|
| |
| |
DGSE COMPANIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) |
| | | |
|
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| |
| 2014 |
|
|
| 2013 |
| |
| 2014 |
|
|
| 2013 |
|
| | | | | | | |
|
Revenue:
| | | | | | | | |
Sales
| |
$
|
17,518,412
| | |
$
|
23,775,109
| | |
$
|
35,582,719
| | |
$
|
47,305,191
| |
Cost of goods sold
| |
|
14,508,227
|
| |
|
20,889,655
|
| |
|
29,361,864
|
| |
|
40,844,409
|
|
Gross margin
| | |
3,010,185
| | | |
2,885,454
| | | |
6,220,855
| | | |
6,460,782
| |
| | | | | | | |
|
Expenses:
| | | | | | | | |
Selling, general and administrative expenses
| | |
3,353,921
| | | |
3,379,671
| | | |
6,704,140
| | | |
6,545,902
| |
Depreciation and amortization
| |
|
94,677
|
| |
|
76,658
|
| |
|
181,815
|
| |
|
181,787
|
|
| |
|
3,448,598
|
| |
|
3,456,329
|
| |
|
6,885,955
|
| |
|
6,727,689
|
|
| | | | | | | |
|
Operating loss
| |
|
(438,413
|
)
| |
|
(570,875
|
)
| |
|
(665,100
|
)
| |
|
(266,907
|
)
|
| | | | | | | |
|
Other expense (income):
| | | | | |
Other (income) expense, net
| | |
(31,166
|
)
| | |
(726
|
)
| | |
(57,661
|
)
| | |
2,461
| |
Interest expense
| |
|
88,330
|
| |
|
52,258
|
| |
|
169,143
|
| |
|
103,962
|
|
| |
|
57,164
|
| |
|
51,532
|
| |
|
111,482
|
| |
|
106,423
|
|
| | | | | | | |
|
Loss from continuing operations before income taxes
| | |
(495,577
|
)
| | |
(622,407
|
)
| | |
(776,582
|
)
| | |
(373,330
|
)
|
| | | | | | | |
|
Income tax expense (benefit)
| |
|
43,491
|
| |
|
(97,635
|
)
| |
|
47,070
|
| |
|
(40,035
|
)
|
| | | | | | | |
|
Loss from continuing operations
| | |
(539,068
|
)
| | |
(524,772
|
)
| | |
(823,652
|
)
| | |
(333,295
|
)
|
| | | | | | | |
|
Discontinued operations:
| | | | | |
Loss from discontinued operations
| |
|
(3,913,172
|
)
| |
|
(599,003
|
)
| |
|
(4,151,565
|
)
| |
|
(488,850
|
)
|
| | | | | | | |
|
Net loss
| |
$
|
(4,452,240
|
)
| |
$
|
(1,123,775
|
)
| |
$
|
(4,975,217
|
)
| |
$
|
(822,145
|
)
|
| | | | | | | |
|
Basic net loss per common share:
| | |
Loss from continuing operations
| |
$
|
(0.04
|
)
| |
$
|
(0.04
|
)
| |
$
|
(0.07
|
)
| |
$
|
(0.03
|
)
|
Loss from discontinued operations
| |
|
(0.32
|
)
| |
|
(0.05
|
)
| |
|
(0.34
|
)
| |
|
(0.04
|
)
|
Net loss per share
| |
$
|
(0.36
|
)
| |
$
|
(0.09
|
)
| |
$
|
(0.41
|
)
| |
$
|
(0.07
|
)
|
| | | | | | | |
|
Diluted net loss per common share:
| | |
Loss from continuing operations
| |
$
|
(0.04
|
)
| |
$
|
(0.04
|
)
| |
$
|
(0.07
|
)
| |
$
|
(0.03
|
)
|
Loss from discontinued operations
| |
|
(0.32
|
)
| |
|
(0.05
|
)
| |
|
(0.34
|
)
| |
|
(0.04
|
)
|
Net loss per share
| |
$
|
(0.36
|
)
| |
$
|
(0.09
|
)
| |
$
|
(0.41
|
)
| |
$
|
(0.07
|
)
|
| | | | | | | |
|
Weighted-average number of common shares
| | |
Basic
| | |
12,210,397
| | | |
12,175,584
| | | |
12,202,214
| | | |
12,175,584
| |
Diluted
| | |
12,210,397
| | | |
12,175,584
| | | |
12,202,214
| | | |
12,175,584
| |
Contacts:
DGSE Companies, Inc.
Dusty Clem, Chairman and CEO, 972-587-4021
investorrelations@dgse.com
Source: DGSE Companies, Inc.
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