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 quarter
and year ended December 31, 2014.
Fourth Quarter 2014 Summary
-
Revenue from continuing operations was $18.1 million compared to $20.8
million in the year-ago period. DGSE continues to see growth in its
jewelry business, although depressed prices in the precious metals
market continued to drive lower volumes in our bullion and scrap
categories.
-
Gross profit from continuing operations was $3.3 million, or 18.2% of
revenue, compared to $4.4 million, or 21.3% revenue in the same period
last year.
-
Selling, general and administrative (“SG&A”) expenses for continuing
operations decreased 25% to $3.0 million from $4.0 million in the
prior-year quarter. The resolution of all outstanding legal and sales
tax issues in 2014, helped drive significantly lower legal and
professional expenses in the quarter.
-
Income from continuing operations for the quarter was $175,000
compared to $476,000 in the fourth quarter of 2013.
-
Discontinued operations, related to the closure of all Southern
Bullion Coin & Jewelry stores (“Southern Bullion”) in early 2014,
generated income of $97,000 in the quarter, due to positive
adjustments in anticipated final state tax expenses, compare to a loss
of $881,000 in the fourth quarter of 2013.
-
Net income was approximately $272,000 or $0.02 per share, compared to
net loss of approximately $405,000, or $0.03 per share, in the
year-ago period.
Full Year 2014 Summary
-
Full-year revenue from continuing operations was $70.7 million, down
19% versus $87.1 million in 2013.
-
Gross profit was $12.7 million, or 17.9% of revenue, compared to $14.2
million or 16.3% of revenue in the prior year. Gross profit as a
percent of revenue increased as the revenue mix continued to shift
away from the low margin bullion business, which continued to see
significant declines in 2014.
-
SG&A expenses decreased $1.7 million or 12% to $12.7 million compared
to $14.4 million in the prior year due to a reduction in legal and
professional fees, and continued expense reduction initiatives.
-
Loss from continuing operations was $635,000 in 2014, compared to a
loss of $721,000 in 2013.
-
Loss from discontinued operations, related to the closure of Southern
Bullion, was approximately $3.9 million, compared to a net loss of
$1.9 million in the prior year. For 2014 discontinued operations
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 net book value of fixed assets
previously used in Southern Bullion operations.
-
Net loss was approximately $4.5 million, including discontinued
operations, compared to a net loss of $2.7 million in the prior year.
Dusty Clem, Chief Executive Officer and Chairman of the Board, stated,
“2014 was a year of substantial change for DGSE, as we exited the
Southern Bullion business, and finally put to rest the remaining legacy
legal and sales tax issues. Subsequent to these changes, we were pleased
to see modest profitability in the most recent two quarters, and believe
that our focus on growing our jewelry, diamond and watch businesses is
the right path forward for the company. The precious metals markets
continue to be challenging, and have had significant negative impact on
our bullion and scrap businesses. In 2015 we will continue to adapt our
operating model in order to best serve our clients and to meet the
challenges of the current markets. One of the ways in which we plan to
improve the business, is to move towards fewer, but larger stores in our
most important market, Dallas-Fort Worth. Our goal is to provide a
greater breadth of inventory, services and experience for our clients.
We are also re-launching our website to provide a substantially improved
online customer experience. This exciting change will allow us to shift
a greater share of our marketing focus to e-commerce, and to broaden our
potential reach beyond our physical locations.”
Fourth Quarter 2014 Results
For the quarter ended December 31, 2014, revenue from continuing
operations was $18.1 million, a 13% decrease compared to $20.8 million
in the quarter ended December 31, 2013, due primarily to continued
weakness in the Company’s bullion and scrap businesses, which are
consistent with industry-wide trends.
Gross profit from continuing operations for the quarter was $3.3
million, or 18.2% of revenue, compared to $4.4 million, or 21.3% of
revenue, in the prior year quarter. The overall gross profit decrease
was driven by lower sales of bullion and scrap compared to the prior
year quarter.
SG&A expenses for continuing operations decreased $1.0 million, or 25%,
in the quarter ended December 31, 2014, to $3.0 million compared to
approximately $4.0 million in the prior year quarter. The resolution of
all outstanding legal and sales tax issues in 2014 helped drive
significantly lower legal and professional expenses in the quarter,
combined with continued company-wide expense reductions.
Net income from continuing operations for the fourth quarter was
$175,000, or $0.01 per share, compared to net income from continuing
operations of $476,000, or $0.04 per share, in the year-ago quarter.
Discontinued operations, related to the closure of Southern Bullion in
early 2014, generated income of $97,000 in the quarter, due to positive
adjustments in anticipated final state tax expenses, compared to a loss
of $881,000 in the fourth quarter of 2013.
Net income was approximately $272,000 or $0.02 per share, compared to a
net loss of approximately $405,000, or $0.03 per share, in the year-ago
period, an improvement of $677,000.
“While we aren’t satisfied with the current level of profitability,”
continued Mr. Clem, “we are gratified to see that the strategic
decisions we made in early 2014 with the closure of Southern Bullion,
have allowed us to show positive income for the second quarter in a row.
We believe this is an indication that DGSE is on the right track, and we
will continue to strive to build a company that will produce consistent
returns for our shareholders.”
Full-Year 2014 Results
Revenue from continuing operations decreased by $16.4 million, or 19%,
in the year ended December 31, 2014, to $70.7 million, compared to $87.1
million in the prior year. This decrease was primarily the result of
continuing weakness in the bullion and scrap markets, as noted above.
Our scrap business has historically been one of our largest revenue and
profit drivers, and in 2014 that business continued to contract in line
with the industry. With the deterioration of the scrap and bullion
markets, we focused our advertising and merchandising efforts on our
jewelry, watch and diamond businesses, and despite the loss of store
traffic due to fewer scrap sellers, we continued to successfully grow
our retail jewelry business in 2014.
Gross profit for the year was $12.7 million, or 17.9% of revenue,
compared to gross profit of $14.2 million, or 16.3% of revenue in the
prior year. While gross profit decreased, gross profit as a percent of
revenue increased, as high-margin jewelry sales became a greater share
of our sales mix, and low-margin bullion sales became a lower share.
SG&A expenses decreased $1.7 million, or 12%, in the year ended December
31, 2014, to $12.7 million compared to $14.4 million in the prior year.
This decrease was driven by a reduction in legal and professional costs
and broad cost reduction efforts across all areas. With the resolution
of several outstanding legal matters, we experienced significantly lower
legal expenses, compared to the prior year. We also accrued $775,000 in
2013, towards the resolution of our 2010 Texas sales tax audit, which
created a positive variance in 2014. In addition, we were able to reduce
operating expenses in a wide variety of areas including freight,
insurance, benefits, investor relations, accounting and other
professional fees, travel and supplies. In 2014 we used some of these
savings to increase advertising spend in core markets, by roughly 10%,
or $205,000.
Depreciation and amortization increased by $30,000, or 8%, to $383,000
compared to $353,000 in the prior year. This increase was due primarily
to new assets put into place to support our jewelry repair business.
Loss from continuing operations in 2014 improved by $86,000, to a loss
of $635,000, or $0.05 per share, compared to a loss of $721,000, or
$0.06 per share, in 2013.
Discontinued operations in the year ended December 31, 2014 generated a
loss of $3.9 million related to the Southern Bullion locations closed
down in early 2014, compared to a net loss of $1.9 million for these
locations in 2013. For 2014, 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 related to the net book value of fixed assets
previously utilized in Southern Bullion operations.
Net loss for the year was $4.5 million, or $0.37 per share, inclusive of
discontinued operations, compared to net loss of $2.7 million, or $0.22
per share, in the prior year. The great majority of this loss, $3.9
million, related to the discontinued operations of Southern Bullion in
2014, including the $2.9 million non-cash write off of the Southern
Bullion intangible asset.
Balance Sheet Summary
At December 31, 2014, DGSE Companies had cash and cash equivalents of
$2.2 million compared to $2.6 million at December 31, 2013.
Stockholders’ equity decreased by $4.3 million, or 42%, to $6.1 million
at December 31, 2014 compared to $10.4 million at December 31, 2013. As
of year-end, the outstanding balance on the Company’s credit facility
with NTR Metals, Inc. (“NTR”) was $2.3 million compared to $2.4 million
at December 31, 2013. This decrease is the result of loan principal
repayment during 2014. On February 4, 2015 the company and NTR entered
into a two-year extension of the credit facility, extending the
termination date to August 1, 2017. All other terms of the agreement
remain the same.
Conference Call
DGSE Companies management will conduct a live teleconference to discuss
its financial results:
Date:
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March 26, 2015
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Time:
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4:30 p.m. ET/3:30 p.m. CT
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Dial-in:
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1-877-407-9039 if calling from the United States, or 1-201-689-8470
if dialing internationally.
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Replay:
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A replay will be available until midnight on April 2, 2015, 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
13604535 to access the replay.
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Webcast:
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The call will be webcast and will be available by visiting
http://public.viavid.com/index.php?id=113643.
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About DGSE Companies
DGSE Companies, Inc. wholesales and retails jewelry, diamonds, fine
watches, and precious metal bullion and rare coin products through its
Charleston Gold & Diamond Exchange, Chicago Gold & Diamond Exchange
(formerly Bullion Express), 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 websites which can be accessed at www.cgdeinc.com,
and www.dgse.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 --
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DGSE COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
|
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December 31,
|
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2014
|
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|
|
2013
|
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ASSETS
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Current Assets:
|
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Cash and cash equivalents
|
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$
|
2,184,435
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|
|
$
|
2,637,726
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Trade receivables, net of allowances
|
|
|
904,076
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|
|
|
162,670
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Inventories
|
|
|
11,144,157
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|
|
|
9,992,156
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|
Prepaid expenses
|
|
|
104,513
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|
|
|
138,600
|
|
Assets related to discontinued operations
|
|
|
49,729
|
|
|
|
3,711,740
|
|
|
|
|
|
|
Total current assets
|
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14,386,910
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16,642,892
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Property and equipment, net
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4,365,767
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4,588,695
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Intangible assets, net
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27,568
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41,353
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Other assets
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128,356
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189,426
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Noncurrent assets related to discontinued operations
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-
|
|
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3,441,765
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|
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|
|
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Total assets
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$
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18,908,601
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$
|
24,904,131
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LIABILITIES
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Current Liabilities:
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|
|
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Current maturities of long-term debt
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$
|
131,003
|
|
|
$
|
122,536
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|
Current maturities of capital leases
|
|
|
11,529
|
|
|
|
11,091
|
|
Accounts payable-trade
|
|
|
5,831,736
|
|
|
|
5,535,624
|
|
Accrued expenses
|
|
|
1,541,552
|
|
|
|
1,729,528
|
|
Customer deposits and other liabilities
|
|
|
1,082,778
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|
|
|
2,349,943
|
|
Liabilities related to discontinued operations
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|
|
303,564
|
|
|
|
589,899
|
|
|
|
|
|
|
Total current liabilities
|
|
|
8,902,162
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|
|
|
10,338,621
|
|
|
|
|
|
|
Line of credit, related party
|
|
|
2,303,359
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|
|
|
2,383,359
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Long-term debt, less current maturities
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1,616,237
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|
|
|
1,757,827
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|
|
|
|
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Total liabilities
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|
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12,821,758
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|
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14,479,807
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Commitments and contingencies
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STOCKHOLDERS' EQUITY
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Common stock, $0.01 par value; 30,000,000 shares authorized;
12,238,846 and 12,175,584 shares issued and outstanding
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|
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122,388
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|
|
|
121,755
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|
Additional paid-in capital
|
|
|
34,231,271
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|
|
|
34,045,654
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|
Accumulated deficit
|
|
|
(28,266,816
|
)
|
|
|
(23,743,085
|
)
|
Total stockholders' equity
|
|
|
6,086,843
|
|
|
|
10,424,324
|
|
|
|
|
|
|
Total liabilities and stockholders' equity
|
|
$
|
18,908,601
|
|
|
$
|
24,904,131
|
|
|
|
|
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DGSE COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
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For the Year Ended
December 31,
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For the Three Months Ended
December 31,
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2014
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2013
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2014
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2013
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Revenue:
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Sales
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$
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70,742,755
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$
|
87,095,935
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|
|
|
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$
|
18,119,787
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$
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20,791,043
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Cost of goods sold
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58,091,288
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72,888,844
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14,823,580
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16,356,560
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Gross margin
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12,651,467
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14,207,091
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3,296,207
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4,434,483
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|
|
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Expenses:
|
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|
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Selling, general and administrative expenses
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12,670,968
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14,363,216
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|
|
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3,038,184
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|
|
|
4,008,303
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Depreciation and amortization
|
|
|
382,565
|
|
|
|
353,034
|
|
|
|
|
|
93,965
|
|
|
|
83,921
|
|
|
|
|
13,053,533
|
|
|
|
14,716,250
|
|
|
|
|
|
3,132,149
|
|
|
|
4,092,224
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
|
|
(402,066
|
)
|
|
|
(509,159
|
)
|
|
|
|
|
164,058
|
|
|
|
342,259
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense (income):
|
|
|
|
|
|
|
|
|
|
|
Other (income) expense, net
|
|
|
(174,189
|
)
|
|
|
(106,696
|
)
|
|
|
|
|
(129,510
|
)
|
|
|
(106,909
|
)
|
Interest expense
|
|
|
341,382
|
|
|
|
261,185
|
|
|
|
|
|
82,999
|
|
|
|
90,619
|
|
|
|
|
167,193
|
|
|
|
154,489
|
|
|
|
|
|
(46,511
|
)
|
|
|
(16,290
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes
|
|
|
(569,259
|
)
|
|
|
(663,648
|
)
|
|
|
|
|
210,569
|
|
|
|
358,549
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit)
|
|
|
65,416
|
|
|
|
57,168
|
|
|
|
|
|
35,441
|
|
|
|
(117,211
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
(634,675
|
)
|
|
|
(720,816
|
)
|
|
|
|
|
175,128
|
|
|
|
475,760
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations, net of taxes
|
|
|
(3,889,056
|
)
|
|
|
(1,938,373
|
)
|
|
|
|
|
96,771
|
|
|
|
(880,850
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(4,523,731
|
)
|
|
$
|
(2,659,189
|
)
|
|
|
|
$
|
271,899
|
|
|
$
|
(405,090
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income (loss) per common share:
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
(0.05
|
)
|
|
$
|
(0.06
|
)
|
|
|
|
$
|
0.01
|
|
|
$
|
0.04
|
|
Income (loss) from discontinued operations
|
|
|
(0.32
|
)
|
|
|
(0.16
|
)
|
|
|
|
|
0.01
|
|
|
|
(0.07
|
)
|
Net income (loss) per share
|
|
$
|
(0.37
|
)
|
|
$
|
(0.22
|
)
|
|
|
|
$
|
0.02
|
|
|
$
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income (loss) per common share:
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
(0.05
|
)
|
|
$
|
(0.06
|
)
|
|
|
|
$
|
0.01
|
|
|
$
|
0.04
|
|
Income (loss) from discontinued operations
|
|
|
(0.32
|
)
|
|
|
(0.16
|
)
|
|
|
|
|
0.01
|
|
|
|
(0.07
|
)
|
Net income (loss) per share
|
|
$
|
(0.37
|
)
|
|
$
|
(0.22
|
)
|
|
|
|
$
|
0.02
|
|
|
$
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of common shares
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
12,216,787
|
|
|
|
12,175,584
|
|
|
|
|
|
12,238,661
|
|
|
|
12,175,584
|
|
Diluted
|
|
|
12,216,787
|
|
|
|
12,175,584
|
|
|
|
|
|
12,238,661
|
|
|
|
12,175,584
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