DGSE Companies, Inc. (NYSE Amex: DGSE), which buys and sells jewelry, fine watches, diamonds, rare coins and precious metals products via traditional and internet channels reported that revenue for the three months ended September 30, 2011 was $47,528,000, a 162% increase from the revenue reported for the three months ended September 30, 2010 of approximately $18,108,000.
Net income for the three months ended September 30, 2011 was $139,210 or $.01 per common share on both a basic and diluted basis as compared to net income of $138,509 or $.01 per common share on both a basic and diluted basis for the three months ended September 30, 2010. Net income for the third quarter of 2011 was impacted by approximately $116,000 of one times costs related to the acquisition of Southern Bullion Trading, LLC. In addition, DGSE has taken a $1.7 million one time charge to earnings during the third quarter in order to establish a reserve that relates to a proposed settlement in a legal proceeding the Company has become involved with as the result of its acquisition of Superior Galleries in 2007. Though DGSE believes the suit is without merit, the Company has proposed a $1.7 million settlement in order to avoid a protracted legal proceeding.
Without these one time charges, net income for the three months ended September 30, 2011 was $1,244,513, or $.11 per common share on a basic basis and $.10 on a diluted basis.
“I am pleased to announce our third consecutive quarter of very strong operating performance,” stated William Oyster, President and CEO of DGSE. “This performance was driven by continuing growth from our core business channels, contributions from our first two Bullion Express stores and contribution from our Southern Bullion Trading, LLC acquisition that closed just 2 weeks prior to quarter end. With a rapidly expanding presence in targeted markets across the Country as the result of recent initiatives, and a continuing climate of strong consumer and investor interest in all areas of the precious metals markets, we are ideally positioned to continue our positive growth trends in the current quarter, traditionally our strongest quarter of the year, and into 2012.” Of special significance since our last financial release:
- DGSE announced in early October the grand opening of its third Bullion Express (“BE”) location in the highly trafficked Galleria Area of Dallas. Store traffic and revenues continue to exceed expectations at each respective location. The fourth BE location is scheduled to open in Arlington, Texas in early December. Leases have recently been signed for 2 additional BE locations in the upscale Highland Park area of Chicago and the Buckhead area of Atlanta. The Highland Park location is scheduled to open in mid-December, and the Buckhead location in January 2012. These two locations will represent DGSE’s initial presence in large new markets and will be larger than previous BE stores, allowing for expanded retail displays of unique one-of-a-kind jewelry pieces, diamonds, fine watches and rare coins in addition to providing immediate delivery of all precious metals products.
- DGSE completed its acquisition of 100 percent of Southern Bullion Trading, LLC (“SBT”), one of the largest precious-metals chains in the Southeast. In the coming quarters, DGSE plans to continue opening new SBT locations in targeted markets and enhancing SBT’s historical operations from a primary focus on purchasing used jewelry and scrap to offering two way markets in precious metals products and retail offerings of its product lines creating significant new revenue channels.
- On October 25, DGSE entered into a Debt Cancellation Agreement with NTR Metals, LLC, a Texas limited liability company, ("NTR"), whereby NTR agreed to forgive $2.5 million of intercompany bullion transaction related debt owed to NTR by DGSE in consideration for the grant of options to purchase 5,000,000 shares of DGSE common stock at an exercise price of $15.00 per share.
- Effective November 1, Dr. L.S. Smith voluntarily resigned from the positions of Chairman of the Board and Chief Executive Officer of DGSE for health reasons and entered into an Employment Agreement, pursuant to which Dr. Smith will provide consulting and advisory services to the Company. William H. Oyster, who has served as a member of DGSE’s Board of Directors and as President and Chief Operating Officer since January of 1990, was appointed to serve as Chairman of the Board and Chief Executive Officer immediately upon Dr. Smith's resignation. Since his election as a director and appointment as President and Chief Operating Officer in January 1990, Mr. Oyster has overseen the day-to-day operations of the Company.