UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date
of Report (Date
of earliest event reported):
November 13, 2014 (November
13, 2014)
DGSE
COMPANIES, INC.
(Exact
name of registrant as specified in its charter)
Nevada
|
1-11048
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88-0097334
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(State or Other
Jurisdiction of
Incorporation)
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(Commission
File Number)
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(IRS Employer
Identification No.)
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15850 Dallas Parkway, Suite 140
Dallas, Texas 75248
(Address
of Principal Executive Offices) (Zip Code)
(972) 587-4049
(Registrant’s
telephone number, including area code)
(Former Name or Former Address, if Changed Since Last Report)
Check the
appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any
of the following provisions (see General Instruction A.2.
below):
⃞
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
⃞
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
⃞
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
⃞
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition
On November 13, 2014, DGSE Companies, Inc. (the “Registrant”)
issued a press release disclosing their financial results for the fiscal
quarter ended September 30, 2014 (the “Press Release”). The
Press Release is attached hereto as Exhibit 99.1.
Item 7.01 Regulation FD Disclosure
The Registrant will hold a telephone conference regarding the Press
Release on November 13, 2014 at 3:30 p.m. Central Time (4:30 p.m.
Eastern Time) to discuss the Registrant’s financial results for the
fiscal quarter ended September 30, 2014. To participate in the
teleconference, please dial +877-407-9039 for U.S. callers and
+201-689-8470 for international callers and reference the “DGSE
conference call” when prompted. A replay will be available after
completion of the call through November 20, 2014. To access the replay,
please dial +877-870-5176 (U.S. callers) or +858-384-5517 (international
callers) and reference passcode 13594851. The webcast and archived
replay can also be accessed on the Company’s website at
http://public.viavid.com/index.php?id=111814.
Item 9.01
Financial Statements and Exhibits
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) Exhibits.
The following exhibit is filed as part of this report:
|
Exhibit
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Number
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Description of Exhibit
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99.1
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Press Release, dated November 13, 2014.
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SIGNATURES
Pursuant to
the requirements of the Securities Exchange Act of 1934, as amended, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
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DGSE COMPANIES, INC.
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(Registrant)
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Date:
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November 13, 2014
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By:
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/s/ JAMES D. CLEM
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James D. Clem
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Chief Executive Officer
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(Principal Executive Officer)
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EXHIBIT INDEX
Exhibit
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Number
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Description of Exhibit
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99.1
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Press Release, dated November 13, 2014
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Exhibit 99.1
DGSE
Companies, Inc. Reports Third Quarter and Year to Date Results
DALLAS--(BUSINESS WIRE)--November 13, 2014--DGSE Companies, Inc. (NYSE
MKT: DGSE) (“DGSE” or the “Company”), 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, 2014.
Third Quarter 2014 Business and Financial Highlights
-
DGSE reported net income of $180,000 for the quarter, which included a
$167,000 gain from discontinued operations, and income of $13,000 from
continuing operations. The gain from discontinued operations was due
to successful lease termination negotiations, tax benefits related to
a reduction in the final tax calculation for states in which we no
longer conduct business, and the resolution of other miscellaneous
issues related to the wind down of Southern Bullion Coin and Jewelry
(“Southern Bullion”).
-
Revenues from continuing operations were $17.0 million compared to
$19.0 million, a 10% decline compared to the same period in 2013.
Strong growth in jewelry, watch and diamond sales partially offset
continued decreases in both bullion and scrap sales, a result of lower
gold prices.
-
Gross profit decreased $178,000, or 5%, based on lower sales. Gross
profit as a percent of revenue increased to 18.4% in the current
quarter, compared to 17.4% in the prior year quarter. The improvement
in gross profit as a percent of revenue 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 were down $873,000 in the quarter, to $2.9 million compared
to $3.8 million during the third quarter of 2013. This reduction was
primarily due to a $650,000 charge the Company took in the third
quarter of 2013 in anticipation of a sales tax settlement with the
Texas Comptroller. This charge did not recur in the third quarter of
2014. The remainder of the SG&A decrease, an additional $223,000
savings compared to the prior year, was achieved primarily through
continued efforts to reduce expenses at all levels, including
store-level operating expenses and corporate overhead.
-
Net income from continuing operations was approximately $13,000 or
$0.00 per share, compared to net loss from continuing operations of
approximately $863,000, or $0.07 per share, in the third quarter of
2013.
-
Net income, inclusive of discontinued operations, was approximately
$180,000 or $0.01 per share, compared to a net loss, inclusive of
discontinued operations, of approximately $1,432,000, or $0.12 per
share, in the third quarter of 2013.
“Successfully growing our jewelry business and closely managing our
expenses has allowed us to show a small profit this quarter, despite
revenues being down by 10%”, stated Dusty Clem, Chairman of the Board
and Chief Executive Officer. “DGSE continues to see the benefits of
expanding our focus on high-margin jewelry, diamond and watch sales,
which has enabled us to partially offset the continued, industry-wide
slowdown in the bullion and scrap businesses. While we are gratified to
show a return to positive earnings for the first time in several
quarters, we are certainly not satisfied with essentially break-even
results in our continuing operations.”
Third Quarter 2014 Results
For the quarter ended September 30, 2014, revenues from continuing
operations were $17.0 million, a 10% decrease compared to $19.0 million
in the quarter ended September 30, 2013. This decrease was due primarily
to significant reductions in both bullion and scrap sales as a result of
declining gold prices. 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 $3.1 million,
or 18.4% of revenue, compared to $3.3 million, or 17.4% of revenue, in
the prior year quarter. The 1.0% improvement in gross profit as a
percentage of revenue 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 $873,000, or 23%, in the third
quarter, to $2.9 million compared to $3.8 million for the third quarter
of 2013. During the third quarter of 2013, the Company accrued $650,000
toward the final settlement of the Texas State Comptroller audit. The
Company did not incur a similar expense in the current quarter, leading
to a significant reduction in SG&A as compared to the prior year. The
remainder of the SG&A decrease, an additional $223,000 compared to the
prior year, was achieved primarily through continued efforts to reduce
expenses at all levels, including store-level operating expenses and
corporate overhead.
Income from continuing operations for the third quarter, net of taxes,
was $13,000 or $0.00 per share compared to a net loss from continuing
operations of $863,000, or $0.07 per share, in the third quarter of 2013.
Income from discontinued operations for the three months ended September
30, 2014 was $167,000, related to the Southern Bullion locations closed
in February and April of 2014, compared to a net loss of $569,000 for
these locations in the same quarter of 2013. The gain from discontinued
operations was due to successful lease termination negotiations, tax
benefits related to a reduction in the final tax calculation for states
in which we no longer conduct business, and the resolution of other
miscellaneous issues related to the wind down of Southern Bullion. The
Company believes it has now recognized all material expenses related to
the closure of Southern Bullion operations.
Net income for the third quarter was $180,000 or $0.01 per share,
compared to a net loss of $1.4 million, or $0.12 per share, in the third
quarter of 2013.
Year-to-Date 2014 Results
In the nine months ended September 30, 2014, revenues from continuing
operations were $52.6 million, a 21% decrease compared to $66.3 million
in the same period last year. This decrease was primarily due to lower
bullion and scrap sales, mostly a result of the significant drop in gold
prices, which were on average 11% lower (as measured by London PM Fix)
than in the same period last year. These decreases were significantly
offset by our jewelry, watch and diamond business, which has seen strong
growth year to date.
Gross profit from continuing operations was $9.4 million, or 17.8% of
revenue, compared to $9.8 million, or 14.7% of revenue in the prior year
period. Robust sales of high-margin jewelry combined with reduced sales
in the low margin bullion business, led to the increase in gross profit
as a percentage of revenue.
Selling, general and administrative expenses decreased approximately
$722,000 or 7.0%, to $9.6 million in the nine months ended September 30,
2014 compared to $10.4 million in the prior year. As noted above, in
2013 the Company accrued $650,000 toward the final settlement of the
Texas State Comptroller audit, and did not incur a similar expense in
the current year, leading to a reduction in SG&A as compared to the
prior year. In addition to this savings, the Company was able to
completely offset incremental operating expenses related to two stores
that had not yet opened during the first half of 2013, through its
continued efforts to reduce expenses at all levels, including
store-level operating expenses and corporate overhead.
The loss from continuing operations for the nine months ended September
30, 2014 was $809,000 compared to $1.2 million in the same period of
2013.
Loss from discontinued operations for the nine months ended September
30, 2014 was $3.9 million related to the Southern Bullion locations
closed down in February and April of 2014, compared to a net loss of
$1.1 million for these locations in the same period of 2013.
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 at Southern Bullion locations.
Net loss for the nine months was $4.8 million or $0.39 per share,
compared to a net loss of $2.3 million, or $0.19 per share, in the same
period of 2013.
Mr. Clem concluded, “While we are not satisfied with our current
results, we are starting to see the impact of the strategic decisions
we’ve made over the last several months. As we move ahead we will be
critically evaluating our store count, market configuration, product mix
and vendor relationships in order to continue to move the Company toward
consistent profitability and value creation.”
Balance Sheet Summary
As of September 30, 2014, DGSE Companies had cash and cash equivalents
of $1.9 million compared to $2.6 million at December 31, 2013, related
to continuing operations. Stockholders’ equity decreased 45% to $5.7
million at September 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 September 30, 2014, the
outstanding balance on the Company’s credit facility with NTR Metals,
LLC 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:
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November 13, 2014
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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 November 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
13594851 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=111814.
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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
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.
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DGSE COMPANIES, INC. AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEETS
|
|
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September 30,
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|
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December 31,
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2014
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2013
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(Unaudited)
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ASSETS
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Current Assets:
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|
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Cash and cash equivalents
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$
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1,950,854
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|
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$
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2,637,726
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Trade receivables, net of allowances
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|
|
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224,946
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|
|
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162,670
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Inventories
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|
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11,196,056
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|
|
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9,992,156
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Prepaid expenses
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206,980
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138,600
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Assets related to discontinued operations
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22,057
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3,711,740
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Total current assets
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13,600,893
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|
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|
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16,642,892
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|
|
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Property and equipment, net
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4,442,826
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4,588,695
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Intangible assets, net
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31,014
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|
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41,353
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Other assets
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113,474
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|
|
|
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189,425
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Noncurrent assets related to discontinued operations
|
|
|
|
-
|
|
|
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3,441,766
|
|
|
|
|
|
|
|
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Total assets
|
|
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$
|
18,188,207
|
|
|
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$
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24,904,131
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|
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|
|
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LIABILITIES
|
|
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Current Liabilities:
|
|
|
|
|
|
|
Current maturities of line of credit, related party
|
|
|
$
|
2,303,359
|
|
|
|
$
|
-
|
|
Current maturities of long-term debt
|
|
|
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128,833
|
|
|
|
|
122,536
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Current maturities of capital leases
|
|
|
|
11,448
|
|
|
|
|
11,091
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Accounts payable-trade
|
|
|
|
5,043,843
|
|
|
|
|
5,535,624
|
|
Accrued expenses
|
|
|
|
1,489,267
|
|
|
|
|
1,729,528
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Customer deposits and other liabilities
|
|
|
|
1,485,218
|
|
|
|
|
2,349,943
|
|
Liabilities related to discontinued operations
|
|
|
|
345,777
|
|
|
|
|
589,899
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
|
10,807,745
|
|
|
|
|
10,338,621
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|
|
|
|
|
|
|
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Line of credit, related party
|
|
|
|
-
|
|
|
|
|
2,383,359
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Long-term debt, less current maturities
|
|
|
|
1,651,769
|
|
|
|
|
1,757,827
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
|
12,459,514
|
|
|
|
|
14,479,807
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|
|
|
|
|
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|
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Commitments and contingencies
|
|
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|
|
|
|
|
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STOCKHOLDERS' EQUITY
|
|
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Common stock, $0.01 par value; 30,000,000 shares authorized;
|
|
|
|
|
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12,223,584 and 12,175,584 shares issued and outstanding
|
|
|
|
122,235
|
|
|
|
|
121,755
|
|
Additional paid-in capital
|
|
|
|
34,145,173
|
|
|
|
|
34,045,654
|
|
Accumulated deficit
|
|
|
|
(28,538,715
|
)
|
|
|
|
(23,743,085
|
)
|
Total stockholders' equity
|
|
|
|
5,728,693
|
|
|
|
|
10,424,324
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity
|
|
|
$
|
18,188,207
|
|
|
|
$
|
24,904,131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DGSE COMPANIES, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF OPERATIONS
|
(UNAUDITED)
|
|
|
|
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|
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|
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Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2014
|
|
|
2013
|
|
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2014
|
|
|
2013
|
|
|
|
|
|
|
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Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
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Sales
|
|
|
$
|
17,040,249
|
|
|
|
$
|
18,999,701
|
|
|
|
$
|
52,622,968
|
|
|
|
$
|
66,304,892
|
|
Cost of goods sold
|
|
|
|
13,905,844
|
|
|
|
|
15,687,340
|
|
|
|
|
43,267,708
|
|
|
|
|
56,532,284
|
|
Gross margin
|
|
|
|
3,134,405
|
|
|
|
|
3,312,361
|
|
|
|
|
9,355,260
|
|
|
|
|
9,772,608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
|
2,936,556
|
|
|
|
|
3,809,548
|
|
|
|
|
9,632,784
|
|
|
|
|
10,354,913
|
|
Depreciation and amortization
|
|
|
|
99,893
|
|
|
|
|
87,326
|
|
|
|
|
288,600
|
|
|
|
|
269,113
|
|
|
|
|
|
3,036,449
|
|
|
|
|
3,896,874
|
|
|
|
|
9,921,384
|
|
|
|
|
10,624,026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
|
97,956
|
|
|
|
|
(584,513
|
)
|
|
|
|
(566,124
|
)
|
|
|
|
(851,418
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense (income):
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (income) expense, net
|
|
|
|
(5,717
|
)
|
|
|
|
(2,250
|
)
|
|
|
|
(44,679
|
)
|
|
|
|
213
|
|
Interest expense
|
|
|
|
89,239
|
|
|
|
|
66,604
|
|
|
|
|
258,383
|
|
|
|
|
170,566
|
|
|
|
|
|
83,522
|
|
|
|
|
64,354
|
|
|
|
|
213,704
|
|
|
|
|
170,779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes
|
|
|
|
14,434
|
|
|
|
|
(648,867
|
)
|
|
|
|
(779,828
|
)
|
|
|
|
(1,022,197
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
|
1,604
|
|
|
|
|
214,414
|
|
|
|
|
29,975
|
|
|
|
|
174,379
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
|
12,830
|
|
|
|
|
(863,281
|
)
|
|
|
|
(809,803
|
)
|
|
|
|
(1,196,576
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations, net of taxes
|
|
|
|
166,757
|
|
|
|
|
(568,673
|
)
|
|
|
|
(3,985,827
|
)
|
|
|
|
(1,057,523
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
$
|
179,587
|
|
|
|
$
|
(1,431,954
|
)
|
|
|
$
|
(4,795,630
|
)
|
|
|
$
|
(2,254,099
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income (loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
$
|
0.00
|
|
|
|
$
|
(0.07
|
)
|
|
|
$
|
(0.06
|
)
|
|
|
$
|
(0.10
|
)
|
Income (loss) from discontinued operations
|
|
|
|
0.01
|
|
|
|
|
(0.05
|
)
|
|
|
|
(0.33
|
)
|
|
|
|
(0.09
|
)
|
Net income (loss) per share
|
|
|
$
|
0.01
|
|
|
|
$
|
(0.12
|
)
|
|
|
$
|
(0.39
|
)
|
|
|
$
|
(0.19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income (loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
$
|
0.00
|
|
|
|
$
|
(0.07
|
)
|
|
|
$
|
(0.06
|
)
|
|
|
$
|
(0.10
|
)
|
Income (loss) from discontinued operations
|
|
|
|
0.01
|
|
|
|
|
(0.05
|
)
|
|
|
|
(0.33
|
)
|
|
|
|
(0.09
|
)
|
Net income (loss) per share
|
|
|
$
|
0.01
|
|
|
|
$
|
(0.12
|
)
|
|
|
$
|
(0.39
|
)
|
|
|
$
|
(0.19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of common shares
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
12,223,584
|
|
|
|
|
12,175,584
|
|
|
|
|
12,209,416
|
|
|
|
|
12,175,584
|
|
Diluted
|
|
|
|
12,271,362
|
|
|
|
|
12,175,584
|
|
|
|
|
12,209,416
|
|
|
|
|
12,175,584
|
|
CONTACT:
DGSE Companies, Inc.
Dusty Clem, 972-587-4021
Chairman
and CEO
investorrelations@dgse.com
DGSE Companies (AMEX:DGSE)
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