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 nine months ended September 30, 2016.
Third Quarter 2016 Business and Financial Highlights
- Revenues for the 3rd quarter from
continuing operations were $10.6 million compared to $16.5 million,
a 36% decrease compared to the same period in 2015. Same store
sales increases were offset by the planned closing our Chicago
store and the Reeder Rd store in Dallas.
- Gross profit from continuing operations
decreased by $519,000, or 22%. Gross profit as a percent of revenue
increased to 18% of revenues in the current quarter, compared to
14% in the same period last year.
- Selling, general and administrative
(“SG&A”) expenses decreased 19% to $2.2 million compared
to $2.7 million in the third quarter of last year.
- Net loss for the quarter of 2016 was
$1.5 million or $0.12 per share, including a $1.0 million loss on
the sale of the Reeder Rd store. Excluding the loss on the sale,
the loss from continuing operations, net of taxes was $484,000. Net
loss for the third quarter of 2015 was $483,000, or $0.04 per
share.
- On June 20, 2016, the Company entered
into a stock purchase agreement with Elemetal and NTR in which DGSE
has agreed to issue common stock in exchange for the cancellation
and forgiveness of approximately $5.9 million of debt and trade
payable, subject to certain conditions including stockholder
approval. The matter is scheduled to be submitted to a vote of
stockholders at the Company’s 2016 Annual Meeting to be held
December 7, 2016.
- On July 27, 2016, the Company sold its
Reeder Rd store in Dallas for $2,250,000. Proceeds were used to
retire debt of $1.5 million, plus closing costs. Cash proceeds of
approximately $600,000 were applied toward the new Midtown flagship
location, allowing us to consolidate three Dallas stores.
Approximately $770,000 was spent in the third quarter for the
buildout of the Midtown location, with an additional $150,000
budgeted for completion costs the fourth quarter. The new Midtown
store is scheduled to open this week.
Third Quarter 2016 Results
For the quarter ended September 30, 2016, revenues from
continuing operations were $10.6 million, a 36% decrease
compared to $16.5 million in the quarter ended September 30,
2015. Bullion sales were down $4.8 million or 44% compared to the
prior year quarter. Jewelry and scrap sales were down approximately
18% and 2%, respectively, compared to the prior year quarter.
Gross profit from continuing operations for the third quarter of
2016 decreased $519,000, or 22%, to $1.9 million compared to
$2.4 million in the prior year quarter. Gross margin as a
percentage of revenue increased to 18% for the three months ended
September 30, 2016, compared to 14% for the same period in the
prior year on higher margins in bullion, scrap and rare coins.
SG&A expenses decreased by $506,000, or 19%, to $2.2
million, as compared to $2.7 million during the same period in
2015. The decrease in SG&A was primarily due to a 2015 accrual
of $360,000 related to a preliminary Texas sales tax assessment for
fiscal year 2010 through June 2013. SG&A also was impacted
favorably by the decrease in advertising expense during the three
months ended September 30, 2016 versus September 30, 2015 due
principally to a reduction in storefronts. SG&A for the three
months ended September 30, 2016 was negatively impacted by
additional salary expense associated with staff reductions of
approximately $75,000.
Loss from continuing operations for the third quarter of 2016,
net of taxes, was $1.5 million or $0.12 per share, driven primarily
by the $1.0 million loss on the sale of our Reeder Rd retail
location in Dallas. Excluding the loss on the sale of the Reeder Rd
store, the loss from continuing operations, net of taxes was
$484,000, compared to a loss from continuing operations of
$483,000, or $0.04 per share, in the third quarter of 2015.
Depreciation and amortization decreased by $2,621, or 3% in the
third quarter of 2016, to $78,000 compared to $80,000 for the same
period in the prior year.
Net loss, inclusive of discontinued operations, was
approximately $1.5 million or $0.12 per share, driven primarily by
the loss on the sale of our Reeder Rd location in Dallas in the
amount of $1.0 million, compared to a net loss of approximately
$469,000, or $0.04 per share, in the year-ago period.
Year-to-Date 2016 Results
For the nine months ended September 30, 2016, revenues from
continuing operations were $37.8 million, a 15% decrease compared
to $44.3 million in the nine months ended September 30, 2015, due
primarily to continued weakness in the Company’s scrap business,
which is consistent with industry-wide trends. Bullion sales were
down 16% compared to prior year, while consignment sales were up
17% for the same period in the prior year.
Gross profit from continuing operations for the first nine
months of 2016 decreased by $991,000, or 14%, to $6.3 million
compared to $7.3 million during the first nine months of 2015.
Gross margin as a percentage of revenue increased slightly to 17%
for the nine months ended September 30, 2016, compared to 16% for
the same period in the prior year.
SG&A expenses decreased by $0.7 million, or 9%, to $7.4
million, as compared to $8.1 million during the same period in
2015. The decrease in SG&A is due to our continued efforts to
reduce expenses at all levels, including store-level operating
expenses, corporate overhead and advertising expense. The decrease
is also a result of the recognition of approximately $145,000
related to the acceleration of rent expense associated with two
stores closed during the first quarter of 2015. SG&A for the
nine months ended September 30, 2016 was negatively impacted by
additional salary expense associated with staff reductions of
approximately $117,000, and costs associated with the proposed
transaction with Elemetal and NTR of approximately $175,000.
Loss from continuing operations for the nine months ended
September 30, 2016, net of taxes, was $2.7 million, or $0.22 per
share, compared to a loss from continuing operations of $1.4
million, or $0.11 per share, in the same period of 2015. Adjusted
for the $1.0 million loss on the sale of the Reeder Rd store in
July of this year, current year net loss would have been
approximately $1.7 million or $0.14 per share.
Depreciation and amortization decreased by $16,000, or 5%, to
$287,000 compared to $302,000 for the same period in the prior
year. This decrease was due to one-time write off of assets
formerly utilized in four stores closed during Fiscal 2015.
Net loss, inclusive of discontinued operations, was
approximately $2.7 million, or $0.22 per share, compared to a net
loss of approximately $1.4 million, or $0.11 per share in the
year-ago period. Adjusted for the $1.0 million loss on the sale of
the Reeder Rd store in July of this year, current year net loss
would have been approximately $1.7 million, or $0.14 per share.
Balance Sheet Summary
At September 30, 2016, we had cash and cash equivalents of $1.1
million compared to $1.8 million at December 31, 2015. Through
September 30, 2016, DGSE invested approximately $790,000 for the
buildout of its new Midtown flagship location, including
approximately $600,000 of cash proceeds derived from the sale of
the Reeder Rd store. Stockholders’ equity decreased by $2.7 million
to $1.2 million at September 30, 2016 compared to
$3.9 million at December 31, 2015. If approved at the Annual
Meeting to be held December 7, 2016, the transactions contemplated
by the stock purchase agreement with Elemetal would result in an
increase in stockholders’ equity of approximately $5.9 million.
Conference Call
DGSE Companies management will conduct a live teleconference to
discuss its financial results:
Date: November 14, 2016
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
midnight on November 21, 2016, which may be accessed by dialing
1-844-512-2921 within the United States and 1-412-317-6671 if
dialing internationally. Please use passcode 13649985 to access the
replay.
Webcast:
The call will be webcast and will be
available by visiting
http://public.viavid.com/index.php?id=121965.
About DGSE Companies,
Inc.
DGSE Companies, Inc. wholesales and retails jewelry, diamonds,
fine watches, precious metal bullion and rare coin products through
its 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 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.
DGSE COMPANIES, INC. AND
SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
September 30, December 31, 2016 2015
(Unaudited) ASSETS Current Assets: Cash and cash
equivalents $ 1,141,818 $ 1,752,711 Trade receivables, net of
allowances 225,726 229,848 Inventories 9,148,168 9,565,506 Prepaid
expenses 95,303 106,547 Total current
assets 10,611,015 11,654,612 Property and equipment, net
1,741,155 4,281,388 Intangible assets, net 3,446 13,784 Other
assets 110,605 204,226 Total assets $
12,466,221 $ 16,154,010
LIABILITIES
Current Liabilities: Line of credit, related party $ 2,303,359 $ -
Current maturities of long-term debt - 1,589,522 Current maturities
of capital leases 12,457 12,069 Accounts payable-trade 7,091,127
5,689,056 Accrued expenses 814,659 1,174,458 Customer deposits and
other liabilities 851,204 1,309,648 Liabilities related to
discontinued operations 190,810 190,810
Total current liabilities 11,263,616 9,965,563 Line of
credit, related party - 2,303,359 Long-term debt, less current
maturities 4,271 13,664 Total
liabilities 11,267,887 12,282,586 Commitments and
contingencies
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value; 30,000,000
shares authorized; 12,389,976 and 12,296,446 shares issued and
12,388,976 and 12,295,446 shares outstanding
123,899 122,964 Additional paid-in capital 34,330,592 34,267,577
Accumulated deficit (33,256,157 ) (30,519,117 ) Total
stockholders' equity 1,198,334 3,871,424 Total
liabilities and stockholders' equity $ 12,466,221 $
16,154,010
DGSE
COMPANIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
OPERATIONS (Unaudited)
For the Three Months
EndedSeptember 30,
For the Nine Months
EndedSeptember 30,
2016 2015 2016
2015 Revenue: Sales $ 10,572,071 $ 16,523,826 $
37,844,993 $ 44,341,612 Cost of goods sold 8,704,491
14,137,085 31,546,514 37,052,512
Gross margin 1,867,580 2,386,741 6,298,479 7,289,100
Expenses: Selling, general and administrative expenses 2,184,041
2,689,569 7,401,556 8,108,750 Loss on the sale of assets 1,026,078
- 1,026,078 - Depreciation and amortization 77,878
80,499 287,278 302,831
3,287,997 2,770,068 8,714,912
8,411,581 Operating loss
(1,420,417 ) (383,327 ) (2,416,433 )
(1,122,481 ) Other expense (income): Other income, net
(3,110 ) (3,766 ) (3,371 ) (7,469 ) Interest expense 88,909
84,826 284,679 257,487
85,799 81,060 281,308
250,018 Loss from continuing operations
before income taxes (1,506,216 ) (464,387 ) (2,697,741 ) (1,372,499
) Income tax expense 4,334 18,159
39,960 43,082 Loss from
continuing operations (1,510,550 ) (482,546 ) (2,737,701 )
(1,415,581 ) Discontinued operations: Income from
discontinued operations, net of taxes 825
13,848 661 58,095 Net
loss $ (1,509,725 ) $ (468,698 ) $ (2,737,040 ) $ (1,357,486 )
Basic net loss per common share: Loss from continuing
operations $ (0.12 ) $ (0.04 ) $ (0.22 ) $ (0.11 ) Income from
discontinued operations - - -
- Net loss per share $ (0.12 ) $ (0.04 ) $
(0.22 ) $ (0.11 ) Diluted net loss per common share: Loss
from continuing operations $ (0.12 ) $ (0.04 ) $ (0.22 ) $ (0.11 )
Income from discontinued operations - -
- - Net loss income per share $ (0.12 )
$ (0.04 ) $ (0.22 ) $ (0.11 ) Weighted-average number of
common shares Basic 12,358,466 12,295,446 12,327,753 12,267,475
Diluted 12,358,466 12,295,446 12,327,753 12,267,475
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161114006283/en/
DGSE Companies, Inc.Matthew M. Peakes, CEO,
972-587-4021investorrelations@dgse.com
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