Collectors Universe Inc. (CLCT) F4Q12 Earnings Call August 29, 2012 04:30 pm ET Executives Michael McConnell - CEO Joe Wallace- CFO Analysts Adrian Day - Adrian Day Asset Management Presentation Operator
Throughout fiscal 2012, I have discussed our investments in targeted growth and strategic initiatives notably Asia against the background trends in our core authentication in grading activities. Overall, revenues grew solidly for the year driven largely by both unit and average selling price increases.A few data points. Units in our vintage coin line were essentially flat while ASP had a modest increase. Units in our World Coin Division grew by approximately 24% and ASP average selling price by approximately 28% for the year. Paris units doubled which is encouraging but ASP declined by approximately 15% for the year. Units in our bulk division declined by 3% while the ASP increased by 7%. However, in the fourth quarter, units in our bulk division declined by approximately 12% and ASP declined by almost 22%, a significant and rampant slowdown compared to the trend during the first three quarters of the year. At PSA, an 8% increase in ASP drove its revenue increase for the year. PSA/DNA was our standout performer for the year with units increasing by almost 40%, partially driven by our opening of an east coast office in the second half of the year. I wanted to highlight these data points and it is important to understand that within our key two key divisions, there are different lines of businesses that while they are related, can operate someone independently of one another. Moreover in descending order of magnitude, our largest line of business on a revenue basis within the company is our Bulk Modern Coin division followed by our vintage coin division and then PSA, our card division and collectively these three represent approximately 70% of total grading and authentication revenue. Thus when we experience a slowdown in an area such as bulk like we did in the fourth quarter, it challenges the overall corporate results.
Turning to the cost and profit metrics. During the year a variety of items contributed to the decline in operating profit despite an approximate 4 million increase in revenue. All other things equal, we estimate for illustrative purposes the revenue increase would be expected to contribute an incremental operating income of approximately 1 million. Instead operating income excluding the prior-year impairment charge related to expose declined by approximately $500,000.So, what drove the GAAP of approximately $1.5 million in operating income? First there were targeted investments in the P&L related to the global strategy, notably our expansion into Asia. This totaled approximately $450,000. Next we implemented a significant system upgrade for the first time in ten years. The P&L expenses associated with this upgrade was approximately $300,000 including depreciation related to the equipment purchases. In 2012, we were required to conduct a SOC’s audit at a cost of approximately $50,000. You may recall we purchased for a significant amount of money last year a coin under our warranty claim and that coin was sold for less than we forecast resulting in a P&L charge of $200,000. Despite that charge, our warranty reserves sits at a five-year high and we are comfortable with its current balance. Next and lastly, the previously mentioned impact on the P&L from the recording of the vouchers related to our collectors club memberships was approximately $300,000 for the year. This is virtually all profit that currently sits on the balance sheet as differed revenue and for which we have collected the cash. Collectively these 5 items totaling approximately $1.3 million were the primary drivers to the GAAP that I referred to. Looking ahead we don’t expect approximately 1 million of these cost to recur in fiscal 2012 and 2013. Read the rest of this transcript for free on seekingalpha.com