DGSE Companies, Inc. Reports First Quarter 2015 Results

DGSE Companies, Inc. Reports First Quarter 2015 Results

Dallas – May 13, 2015 - 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 months ended March 31, 2015.   

First Quarter 2015 Business and Financial Highlights

  • DGSE reported a net loss of $798,000 for the quarter, which included a $3,000 gain from discontinued operations, and a net loss of $801,000 from continuing operations. The loss from continuing operations included approximately $196,000 in non-recurring expenses and asset write offs, related to the closure of two Dallas-Ft. Worth (“DFW”) area stores.
  • Revenues from continuing operations were $12.9 million compared to $18.0 million, a 29% decline compared to the same period in 2014. DGSE continued to see declines in its bullion and scrap businesses, which combined with an unusually challenging quarter for its jewelry business to generate a significant year over year sales decline.
  • Gross profit from continuing operations decreased $877,000, or 27%, based on lower sales.  Gross profit as a percent of revenue increased to 18.1% in the current quarter, compared to 17.8% in the first quarter of 2014.
  • Selling, general and administrative expenses (“SG&A”) from continuing operations were down $461,000 in the quarter, to $2.9 million compared to $3.3 million during the first quarter of 2014. This reduction was achieved primarily through continued efforts to reduce expenses at all levels, including store-level operating expenses and corporate overhead, and was partially offset by $143,000 in non-recurring expenses related to the closure of two DFW area stores in the quarter.
  • Net loss from continuing operations was approximately $801,000 or $0.07 per share, compared to net loss from continuing operations of approximately $285,000, or $0.02 per share, in the first quarter of 2014.
  • Net loss, inclusive of discontinued operations, was approximately $798,000 or $0.07 per share, compared to a net loss, inclusive of discontinued operations, of approximately $523,000, or $0.04 per share, in the first quarter of 2014.

 

Dusty Clem, Chairman of the Board and Chief Executive Officer of DGSE stated, “The first quarter of 2015 was an extremely challenging quarter for DGSE. In 2014 we successfully focused our marketing, merchandising and operating efforts on growing our jewelry, watch and diamond businesses, and were rewarded with double digit growth in those areas. In the first quarter of 2015, for the first time in several quarters, we were not able to grow these lines, and in fact saw declines.”  Mr. Clem continued, “Unfortunately, we lost several days this quarter to harsh weather conditions in two of our most important markets, DFW and Charleston, which further exacerbated the effects of a difficult retail environment. While this quarter represents a setback in our efforts to create a consistently profitable DGSE, we continue to believe that growing our jewelry business and closely managing our expenses provides the best avenue for DGSE to offset the continued, industry-wide slowdown in the bullion and scrap businesses.”

 

First Quarter 2015 Results

For the quarter ended March 31, 2015, revenues from continuing operations were $12.9 million, a 29% decrease compared to $18.0 million in the quarter ended March 31, 2014. Bullion and scrap sales continued to trend downward, consistent with the industry, and DGSE’s jewelry, watch and diamond lines saw decreases for the first time in several quarters.

 

Gross profit from continuing operations in the quarter decreased by $877,000, or 27% to $2.3 million as compared to $3.2 million during the first quarter of 2014. Gross margin as a percentage of revenue increased to 18.1% for the three months ended March 31, 2015, compared to 17.8% for the same period in the prior year.

SG&A expenses decreased by $461,000, or 14%, to $2.9 million, as compared to $3.4 million during the same period in 2014.  The decrease was achieved despite recognizing $143,000 in expenses related to the closure of two DFW area stores. These expenses were primarily comprised of accelerated lease expense and fees related to early lease terminations. The overall decrease in SG&A was achieved primarily through continued efforts to reduce expenses at all levels, including store-level operating expenses, corporate overhead, and advertising expense.

Loss from continuing operations for the first quarter, net of taxes, was $801,000 or $0.07 per share compared to a net loss from continuing operations of $285,000, or $0.02 per share, in the first quarter of 2014.

Income from discontinued operations for the three months ended March 31, 2015 was $3,000, related to the Southern Bullion locations closed in 2014, compared to a net loss of $238,000 for these locations in the same quarter of 2014. The current quarter income relates to minor adjustments in accrued expenses related to the wind down of all Southern Bullion operations. The Company believes it has recognized all material expenses related to the closure of Southern Bullion operations.

Net loss for the first quarter was $798,000 or $0.07 per share, compared to a net loss of $523,000, or $0.04 per share, in the first quarter of 2014.

Mr. Clem concluded, “We clearly are not satisfied with our current results, and are continuing to make adjustments to the business, in order to regain profitability in a very difficult environment for our industry.  We continue to contemplate a wide range of options that we believe will increase the Company’s value.”

 

Balance Sheet Summary

As of March 31, 2015, DGSE had cash and cash equivalents of $1.2 million compared to $2.2 million at December 31, 2014. Stockholders’ equity decreased 13% to $5.3 million at March 31, 2015 compared to $6.1 million at December 31, 2014. As of March 31, 2015, the outstanding balance on the Company’s credit facility with NTR Metals, LLC was $2.3 million compared to $2.3 million at December 31, 2014.

 

 

Conference Call

DGSE’s management will conduct a live teleconference to discuss its financial results:

 

Date:

May 13, 2015

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 May 20, 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 13609625 to access the replay.

Webcast:

The call will be webcast and will be available by visiting http://public.viavid.com/index.php?id=114605.

 

 

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.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.

 

Contact:

DGSE Companies, Inc.

Dusty Clem, Chairman and CEO

972-587-4021
investorrelations@dgse.com

 

-- Tables follow --

DGSE COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

    March 31,   December 31,  
    2015   2014  
           
ASSETS        
Current Assets:        
  Cash and cash equivalents   $       1,179,427    $       2,184,435  
  Trade receivables, net of allowances               14,668               904,076  
  Inventories         11,442,658           11,144,157  
  Prepaid expenses             196,042               104,513  
  Assets related to discontinued operations               28,478                 49,729  
           
  Total current assets         12,861,273           14,386,910  
           
Property and equipment, net           4,237,393             4,365,767  
Intangible assets, net               24,122                 27,568  
Other assets             127,681               128,356  
           
  Total assets  $     17,250,469    $     18,908,601  
           
LIABILITIES        
Current Liabilities:        
  Current maturities of long-term debt  $          133,210    $          131,003  
  Current maturities of capital leases               11,692                 11,529  
  Accounts payable-trade           5,347,930             5,831,736  
  Accrued expenses           1,130,765             1,541,552  
  Customer deposits and other liabilities           1,154,027             1,082,778  
  Liabilities related to discontinued operations             279,749               303,564  
           
  Total current liabilities           8,057,373             8,902,162  
           
Line of credit, related party           2,303,359             2,303,359  
Long-term debt, less current maturities           1,578,143             1,616,237  
           
Total liabilities         11,938,875           12,821,758  
           
Commitments and contingencies        
           
STOCKHOLDERS' EQUITY        
Common stock, $0.01 par value; 30,000,000 shares authorized;
   12,253,846 and 12,175,584 shares issued and outstanding
            122,538               122,388  
Additional paid-in capital         34,254,371           34,231,271  
Accumulated deficit        (29,065,315)          (28,266,816)  
  Total stockholders' equity           5,311,594             6,086,843  
           
  Total liabilities and stockholders' equity  $     17,250,469    $     18,908,601  
           
           
 
 
   

 

DGSE COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

        For the Three Months Ended
March 31,
        2015   2014
             
Revenue:        
  Sales    $       12,875,149    $       18,064,307
  Cost of goods sold             10,541,966             14,853,636
    Gross margin               2,333,183               3,210,671
             
Expenses:        
  Selling, general and administrative expenses               2,886,043               3,346,774
  Depreciation and amortization                 140,624                   90,585
                    3,026,667               3,437,359
             
    Operating loss                (693,484)                (226,688)
             
Other expense (income):        
  Other income, net                   (3,033)                 (26,495)
  Interest expense                   83,768                   80,813
                        80,735                   54,318
             
    Loss from continuing operations before income taxes              (774,219)                (281,006)
             
Income tax expense                   26,844                     3,579
             
Loss from continuing operations                (801,063)                (284,585)
             
Discontinued operations:        
  Income (loss) from discontinued operations, net of taxes                   2,564                (238,393)
             
    Net loss    $          (798,499)    $          (522,978)
             
Basic net loss per common share:        
  Loss from continuing operations    $               (0.07)    $               (0.02)
  Loss from discontinued operations                         -                       (0.02)
  Net loss per share    $               (0.07)    $               (0.04)
             
Diluted net loss per common share:        
  Loss from continuing operations    $               (0.07)    $               (0.02)
  Loss from discontinued operations                         -                       (0.02)
  Net loss per share    $               (0.07)    $               (0.04)
             
Weighted-average number of common shares        
  Basic             12,245,679             12,193,940
  Diluted             12,245,679             12,193,940