DGSE Companies Inc. (DGSE) filed Quarterly Report for the period ended 2011-03-31.
Dgse Cos Inc has a market cap of $57.1 million; its shares were traded at around $5.81 with and P/S ratio of 0.7.
Highlight of Business Operations:Sales increased by $7,410,690 or 43%, during the three months ended March 31, 2011 as compared to 2010. This increase was primarily the result of a $5,573,000, or 66.0%, increase in the sale of precious metal products and $1,683,000, or 30.0%, increase in our jewelry sales during the first quarter of 2011 as compared to 2010. The increases in precious metal sales was a result of strong consumer demand for these products and higher gold prices. The increase in jewelry sales was due to an improved retail environment. Cost of goods as a percentage of sales increased from 86.0% in 2010 to 86.7% in 2011. This increase was due to the increase in precious metals revenue as a percentage of total sales.
During the three months ended March 31, 2011 and 2010 cash flows from operating activities totaled $888,942 and ($350,411), respectively. Cash flows from operating activities during the three months ended March 31, 2011 were primarily the result of a increase in inventory ($786,879), a decrease in accounts payable and accrued expenses ($615,728), a increase in customer deposits $1,379,975 and a decrease in trade receivables $413,640. The increase in inventory and customer deposits was due to a first quarter increase in demand for precious metal products. The decrease in trade receivables was a result of a decrease in the sales of wholesale jewelry products. Cash flows from operating activities during the three months ended March 31, 2010 were primarily the result of a decrease in inventory $1,138,838, a decrease in accounts payable and accrued expenses ($934,785), and a decrease in customer deposits ($433,162). The decrease in inventory was due to the sluggish retail environment and bullion deliveries made during the three months ended March 31, 2010, which also contributed to the decrease in customer deposits.
During the three months ended March 31, 2011 and 2010 cash flows from investing activities totaled ($54,986) and ($87,762), respectively. During 2011 the primary use of cash from investing activities was the result of cash used to purchase property and equipment, ($54,986). During 2010 the Company invested ($87,762) in property and equipment.
During the three months ended March 31, 2011 and 2010 cash flows from financing activities totaled ($221,697) and ($55,674), respectively. The use of cash during both years was the result of repayment of loans to Texas Capital Bank and the mortgage on our facility.
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 December 31, 2010, approximately $4.5 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. As of March 31, 2011 the Company was not in full compliance of the loan covenants, however, management believes the non-compliance will be cured during the three months ending June 30, 2011.
On October 17, 2007, we closed on the purchase of our new headquarters location. As a result, we assumed a new loan with a remaining principal balance of $2,323,484 and an interest rate of 6.70%. The loan has required monthly payments of $20,192 with the final payment due on August 1, 2016.
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