DGSE Companies Inc. (DGSE) filed Quarterly Report for the period ended 2010-09-30.
Dgse Companies Inc. has a market cap of $44.74 million; its shares were traded at around $4.55 with and P/S ratio of 0.52. Dgse Companies Inc. had an annual average earning growth of 3.5% over the past 10 years.
Highlight of Business Operations:Sales decreased by $7,052,000 or 11.1%, during the nine months ended September 30, 2010 as compared to 2009. This decrease was primarily the result of a $357,000, or 1.9%, decrease in retail jewelry sales, a 1,939,000, or 6.2%, decrease in the sale of precious metal products, a $3,929,000 or 34.2% decrease in rare coin sales and a $827,000, or 30.9% decrease in our wholesale jewelry sales. The decreases in precious metals and rare coin sales were due to a decrease in demand resulting from a less volatile gold market. The decrease in jewelry sales was due to the sluggish retail environment. Cost of goods as a percentage of sales was 85.6% in 2010 vs. 84.9% in 2009.
During the nine months ended September 30, 2010 and 2009 cash flows from operating activities totaled ($217,433) and $643,865, respectively. During 2010 the ($217,433) cash flows from operating activities were primarily the result of the decrease in current liabilities ($1,808,546) which was partly offset by a 1,738,388 decrease in inventory. Cash flows from operating activities during 2009 were primarily the result of a decrease in inventory $448,917, a decrease in accounts payable and accrued expenses ($992,151), a decrease in customer deposits ($769,535) and a decrease in trade receivables 916,567. The decrease in inventory and customer deposits was due to a decrease in demand for precious metal products. The decrease in trade receivables was a result of a decrease in the sales of wholesale jewelry products.
During the nine months ended September 30 2010 and 2009 cash flows from investing activities totaled ($224,940) and $1,034,098, respectively. During 2010 the Company invested $287,340 in property and equipment. During 2009 the primary source of cash from investing activities was the result of cash received from the sale of the Company s pawn shops in June 2009.
During the nine months ended September 30, 2010 and 2009 cash flows from financing activities totaled ($383,578) and ($736,181), respectively. The use of cash during 2010 and 2009 was the result of repayment of loans.
On May 27, 2010, the Company announced that Texas Capital Bank has agreed to renew and increase the size of its current credit facility. The new facility is composed of a $3.5 million revolving note and a $1.0 million term loan provided immediate availability to finance current operations. The agreement was finalized and funded June 2, 2010. Borrowings under the revolving credit facility are collateralized by a general security interest in substantially all of our assets (other than the assets of Superior). As of September 30, 2010, approximately $3.9 million was outstanding under the term loan and revolving credit facility. If we were to default under the terms and conditions of the revolving credit facility, Texas Capital Bank would have the right to accelerate any indebtedness outstanding and foreclose on our assets in order to satisfy our indebtedness. Such a foreclosure could have a material adverse effect on our business, liquidity, results of operations and financial position. This credit facility matures in June 2011.
Upon the consummation of our acquisition of Superior, and after the exchange by Stanford of $8.4 million of Superior debt for shares of Superior common stock, Superior amended and restated its credit facility with Stanford. The amended and restated commercial loan and security agreement, which we refer to as the loan agreement, decreased the available credit line from $19.89 million to $11.5 million, reflecting the $8.4 million debt exchange. Interest on the outstanding principal balance accrued at the prime rate, as reported in the Wall Street Journal or, during an event of default, at a rate 5% greater than the prime rate as so reported.
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