clct20180207_8k.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K 

 

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of

The Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): February 7, 2018

 

COLLECTORS UNIVERSE, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

1-34240

33-0846191

(State or other jurisdiction
of incorporation)

(Commission
File Number)

(IRS Employer
Identification No.)

 

  

  

  

1610 East Saint Andrew Place, Santa Ana, California

92705

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number, including area code: (949) 567-1234

 

N/A

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the Registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.



 

 

 

 

Item 2.02

Results of Operations and Financial Condition

     

On February 7, 2018, Collectors Universe, Inc. (the “Company”) issued a press release announcing its consolidated financial results for its second quarter of fiscal year 2018, which ended on December 31, 2017. A copy of that press release is attached as Exhibit 99.1 to, and by this reference is incorporated into, this Current Report on Form 8-K.

 

In accordance with General Instruction B.2 of Form 8-K, information in Item 2.02 and Item 7.01 of this Report, and Exhibit 99.1 hereto, are being furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, nor shall such information or such Exhibits be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”).

 

Item 9.01

Financial Statements and Exhibits.

 

(d)     Exhibits.

 

Exhibit No.

Description

99.1

Press release issued February 7, 2018 by Collectors Universe, Inc. announcing its consolidated financial results for its second quarter of fiscal year 2018, ended December 31, 2017 and a reduction in its quarterly dividend to $0.175 per quarter.

 

2

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Current Report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  

  

 COLLECTORS UNIVERSE, INC.

 

 

 

   

  

  

 

 

Dated: February 8, 2018

By:

  /s/ JOSEPH J. WALLACE

 
       
 

  

Joseph J. Wallace, Chief Financial Officer

 

 

S-1

 

 

EXHIBIT INDEX

 

 

Exhibit No.

Description

99.1

Press release issued on February 7, 2018 by Collectors Universe announcing its consolidated financial results for the second quarter of fiscal 2018, ended December 31, 2017 and a reduction in its quarterly dividend to $0.175 per quarter.

 

E-1

ex_104611.htm

Exhibit 99.1

 

 

 

Collectors Universe Reports Operating Results for Second Quarter of Fiscal 2018

Board Approves Dividend change to $0.175 per Share for the Third Quarter of Fiscal 2018

 

NEWPORT BEACH, CA – February 7, 2018 — Collectors Universe, Inc. (NASDAQ: CLCT), a leading provider of value-added authentication and grading services to dealers and collectors of high-value collectibles, today announced financial results for its second quarter and first half of fiscal year 2018 and provided an update on its dividend policy.

 

Operational and Financial Highlights:

 

 

Revenue in this year’s second quarter was $14.1 million, as compared to $17.9 million in last year’s second quarter. For the six months ended December 31, 2017, revenue was substantially unchanged at $33.8 million as compared to $33.6 million in same six months last year.

 

 

Our cards and autograph service revenues increased by $0.6 million, and $1.2 million in this year’s second quarter and six months periods, respectively, representing increases of 14% and record second quarter and first half revenues for that business.

 

 

Our coin service revenues declined by $4.4 million, or 34%, and $0.9 million, or 4%, in the second quarter and first six months, respectively, of the current fiscal year, as compared to the same respective periods of last year. China coin revenues decreased by $2.2 million, or 59%, in this year’s second quarter, which we believe was primarily due to seasonality and period-to-period volatility we have seen in that business. For the six months, China revenues increased by $1.0 million or 21%, due to the increase in those revenues during this year's first quarter. In addition, revenues generated by our US coins business declined by $2.3 million, or 27%, and by $2.2 million, or 13%, in the second quarter and six months ended December 31, 2017, respectively, reflecting a general slowness in the coin market in this year’s second quarter.

 

 

Coin service revenues generated by our overseas operations were 16% and 21% of total revenues in this year’s second quarter and six months periods, respectively, as compared to 24% and 17%, respectively, of total revenues in the same respective periods last year.

 

 

The gross profit margin was 54% and 59%, respectively, in the second quarter and for the first six months of this year, as compared to 64% and 62% in the same respective periods of the prior year. Those declines in profit margins were primarily attributable to the decrease in coin revenues in this year's second quarter, as a significant proportion of our direct costs are relatively fixed in the short-term.

 

 

Operating income was a $0.2 million and $4.8 million in the second quarter and first six months of the current year, respectively, as compared to $4.5 million and $7.3 million, respectively, in the corresponding periods of the prior year. In this year’s second quarter, we incurred $0.6 million in moving and lease exit costs in connection with the relocation of our operations and headquarters offices to a new facility, which occurred at the end of November 2017.

 

 

Income from continuing operations was $70,000, or $0.01 per diluted share, and $3.7 million, or $0.42 per diluted share, in this year’s second quarter and first six months, respectively, as compared to $2.9 million, or $0.34 per diluted share, and $4.5 million, or $0.53 per diluted share, in the corresponding respective periods of the prior year. The provisions for taxes for the quarter and six months ended December 31, 2017 reflects federal income taxes at a blended rate of 28% and a provisional one-time tax expense of $131,000 associated with the Tax Cuts and Jobs Act that was enacted into law in December 2017.

 

 

 

 

Collectors Universe, Inc.

Page 2 of 6

 

 

The Company’s cash position as of December 31, 2017 was $8.7 million, as compared to $9.8 million at June 30, 2017 and $10.2 million at September 30, 2017. Net cash used of $1.1 million in the first six months included $5.4 million of cash generated from continuing operations and $3.0 million of borrowings under our term loan, offset by $6.0 million used to pay cash dividends to stockholders, $3.3 million used for capital expenditures and capitalized software costs and $0.2 million used for discontinued operations.

 

Operations Commentary

 

Joseph J. Orlando Chief Executive Officer, stated, “While the December quarter has traditionally been our slowest of the year due to the seasonality of the business, this year's second quarter was slower than we had expected. Despite another record performance from our PSA and PSA/DNA division, the decrease in coin submissions in China, weakness in the vintage coin market and a substantial decline in modern coin sales at the U.S. Mint combined to adversely impact our overall results.”

 

Update on Dividend Policy

 

The Board of Directors approved a dividend of $0.175 per share for the third quarter of fiscal 2018 for an expected annual dividend of $0.70 per share. This represented a reduction from the quarterly dividend of $0.35 per share that we have previously paid to our stockholders and would increase available cash to fund our operations and the growth of our businesses by approximately $6.0 million annually. The third quarter dividend will be paid on February 23, 2018 to stockholders of record on February 13, 2018.

 

Mr. Orlando continued “For over 10 years, Collectors Universe has been committed to a policy of returning excess cash to our stockholders. That commitment has not changed. Our cash position has simply entered a range that required a modification to the quarterly dividend rate. The Company has made significant strides in recent years, and a big part of that success has been due to the international expansion of our coin business. It is crucial that we have access to additional cash that we will need to further fuel our growth, fund other business and strategic opportunities and increase our financial flexibility.

 

Bruce A. Stevens, Chairman of the Board, stated, “The Board of Directors understands the importance of the dividend to our stockholders. As a result, we have carefully considered this matter and evaluated other alternatives before making the decision to reduce the dividend. In addition, we wanted to set the dividend at an amount that we believe will be sustainable for a longer term. The Board remains committed to increasing long-term stockholder value and returning excess cash to our fellow stockholders in a prudent manner.”

 

Conference Call and Webcast

 

Collectors Universe will host a conference call to discuss results on Wednesday, February 7, 2018 at 4:30 p.m. Eastern Time/1:30 p.m. Pacific Time. Interested parties may participate in the conference call by dialing 800-289-0467 or 323-794-2093, five to ten minutes prior to the initiation of the call. A replay of the conference call will be available through February 21, 2018 by dialing 888-203-1112 or 719-457-0820 and entering access code 2510510#. A live webcast of the conference call will also be available on the Collectors Universe website, www.collectorsuniverse.com under Investor Relations: Events and Presentations. The webcast will be archived for 12 months.

 

About Collectors Universe

 

Collectors Universe, Inc. is a leading provider of value-added services to the high-value collectibles markets. The Company authenticates and grades collectible coins, trading cards, event tickets, autographs and memorabilia (“collectibles”). The Company also compiles and publishes authoritative information about United States and world coins, collectible trading cards and sports memorabilia (“collectibles”), and operates its CCE dealer-to-dealer Internet bid-ask market for certified coins and its Expos trade show and conventions business. This information is accessible to collectors and dealers at the Company's website, http://www.collectorsuniverse.com and is also published in print.

 

Cautionary Statements Regarding Forward Looking Information

 

This news release contains statements regarding our expectations, beliefs or views about our future financial performance and trends in our business and in our markets, which constitute "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Forward looking statements can often be identified by the use of words such as "believe," "expect," "anticipate," "intend," "plan," "estimate," "project," or future or conditional verbs such as "will," "would," "should," "could," or "may."

 

 

 

 

Collectors Universe, Inc.

Page 3 of 6

 

Due to a number of risks and uncertainties to which our business and our markets are subject, our future financial performance may differ, possibly significantly, from expectations regarding our future financial performance that are expressed in, or that may be implied or inferred from the discussion of our operating results in this news release. Those risks and uncertainties, and their possible impact on our future financial performance, include, but are not limited to, the following: our continued dependence on our coin business which historically has generated more than 60% of our consolidated revenues and a substantial portion of our operating income, making our operating results more vulnerable to conditions that could adversely affect or cause stagnation in the prices of precious metals and reduce demand for and transactions in collectible coins; the risks that the economic recovery may stall, or that domestic or international economic conditions may deteriorate as a result of events outside of our control, that could lead to reductions in the demand for our collectibles authentication and grading services and, consequently, in our revenues and operating results; the risk that weakness or volatility in economic conditions or increases in interest rates in the United States and worldwide will lead to longer-term changes in the spending habits of consumers and in the availability and use of credit by smaller businesses, such as collectibles dealers, to fund purchases of collectibles, which could lead to longer-term declines in collectibles commerce and, therefore, in the demand for our services; the risks that claims under our coin and trading card authentication and grading warranties will increase substantially and that the warranty reserves we maintain for such claims will prove to be inadequate, which could cause our gross margin and operating results to decline or cause us to incur operating losses; the risk that our strategies of offering new services and expanding our collectibles authentication and grading business into new geographic areas, such as Europe and Asia will not be successful in enabling us to improve our profitability or may even cause us to incur significant losses; the risks and added complexity of conducting business overseas; the risk that it may become necessary for us to reduce the amount of, or suspend or discontinue the payment of cash dividends in the future, due to conditions or circumstances outside of our control, such as adverse economic or market conditions, as well as our future financial performance and the cash needs of our business in the future.

 

Additional information regarding these risks and other risks and uncertainties to which our business is subject is contained in Item 1A, entitled “Risk Factors”, in our Annual Report on Form 10-K for our fiscal year ended June 30, 2017 which we filed with the Securities and Exchange Commission on August 31, 2017 and readers of this news release are urged to review the discussion of those risks and uncertainties in that Report. Also, our actual financial results in the future may differ from those currently expected due to additional risks and uncertainties of which we are not currently aware or which we do not currently view as, but in the future may become, material to our business or operating results. Due to these risks and uncertainties, readers are cautioned not to place undue reliance on the forward-looking statements contained in this news release or in our Annual or Quarterly Reports filed with the Securities and Exchange Commission, which speak only as of their respective dates. We also disclaim any obligation to update or revise any of the forward-looking statements contained in this news release or in our Annual Report on Form 10-K, as a result of new information, future events or otherwise, except as may be required by law or NASDAQ rules.

 

Contact:

Joseph Wallace

Chief Financial Officer

Collectors Universe

949-567-1245

Email: jwallace@collectors.com

 

 

 

- tables to follow - 

 

 

 

 

Collectors Universe, Inc.

Page 4 of 6

 

COLLECTORS UNIVERSE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands, except per share data)

(Unaudited)

 

   

Three Months Ended

December 31,

   

Six Months Ended

December 31,

 
   

2017

   

2016

   

2017

   

2016

 

Net revenues

  $ 14,063     $ 17,862     $ 33,816     $ 33,610  

Cost of revenues

    6,476       6,475       13,926       12,614  

Gross profit

    7,587       11,387       19,890       20,996  

Operating expenses:

                               

Selling and marketing expenses

    2,421       2,327       5,175       4,748  

General and administrative expenses

    4,926       4,549       9,954       8,963  

Total operating expenses

    7,347       6,876       15,129       13,711  

Operating income

    240       4,511       4,761       7,285  

Interest and other expense, net

    (41 )     (96 )     (9 )     (72 )

Income before provision for income taxes

    199       4,415       4,752       7,213  

Provision for income taxes

    129       1,491       1,049       2,701  

Income from continuing operations

    70       2,924       3,703       4,512  

Income (loss) from discontinued operations, net of income taxes

    89       (2 )     89       (10 )

Net income

  $ 159     $ 2,922     $ 3,792     $ 4,502  
                                 

Net income per basic share:

                               

Income from continuing operations

  $ 0.01     $ 0.34     $ 0.43     $ 0.53  

Income from discontinued operations

    0.01       -       0.01       -  

Net income per basic share

  $ 0.02     $ 0.34     $ 0.44     $ 0.53  
                                 

Net income per diluted share:

                               

Income from continuing operations

  $ 0.01     $ 0.34     $ 0.42     $ 0.53  

Income from discontinued operations

    0.01       -       0.01       -  

Net income per diluted share

  $ 0.02     $ 0.34     $ 0.43     $ 0.53  
                                 

Weighted average shares outstanding:

                               

Basic

    8,699       8,478       8,637       8,476  

Diluted

    8,923       8,578       8,844       8,569  

Dividends declared per common share

  $ 0.35     $ 0.35     $ 0.70     $ 0.70  

 

 

 

 

Collectors Universe, Inc.

Page 5 of 6

 

COLLECTORS UNIVERSE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands, except per share data)

(Unaudited)

 

 

 

December 31,

2017

   

June 30,

2017

 
ASSETS                

Current assets:

               

Cash and cash equivalents

  $ 8,727     $ 9,826  

Accounts receivable, net of allowance of $123 and $77 at December 31, 2017 and June 30, 2017, respectively

    2,334       3,615  

Inventories, net

    3,076       2,722  

Prepaid expenses and other current assets

    1,460       1,661  

Total current assets

    15,597       17,824  
                 

Property and equipment, net

    8,811       3,163  

Goodwill

    2,083       2,083  

Intangible assets, net

    2,326       2,183  

Deferred income tax assets

    2,499       2,864  

Other assets

    498       413  

Non-current assets of discontinued operations

    -       79  

Total assets

  $ 31,814     $ 28,609  

LIABILITIES AND STOCKHOLDERS EQUITY

               

Current liabilities:

               

Accounts payable

  $ 3,454     $ 2,660  

Accrued liabilities

    1,607       1,652  

Accrued compensation and benefits

    2,907       4,373  

Current portion of long-term debt

    188       -  

Income taxes payable

    37       664  

Deferred revenue

    3,607       2,676  

Current liabilities of discontinued operations

    -       391  

Total current liabilities

    11,800       12,416  
                 

Deferred rent

    3,065       276  

Long Term Debt

    2,812       -  
                 

Commitments and contingencies

               
                 

Stockholders’ equity:

               

Preferred stock, $.001 par value; 3,000 shares authorized; no shares issued or outstanding

    -       -  

Common stock, $.001 par value; 20,000 shares authorized; 9,016 and 8,921 issued and outstanding at December 31, 2017 and June 30, 2017, respectively.

    9       9  

Additional paid-in capital

    85,398       84,948  

Accumulated deficit

    (71,270 )     (69,040 )

Total stockholders’ equity

    14,137       15,917  

Total liabilities and stockholders’ equity

  $ 31,814     $ 28,609  

 

 

 

 

Collectors Universe, Inc.

Page 6 of 6

 

COLLECTORS UNIVERSE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)

 

   

Six Months Ended
December 31,

 
   

2017

   

2016

 

CASH FLOWS FROM OPERATING ACTIVITIES:

               

Net income

  $ 3,792     $ 4,502  

Discontinued operations

    (89 )     10  

Income from continuing operations

    3,703       4,512  

Adjustments to reconcile income from continuing operations to net cash provided by operating activities:

               

Depreciation and amortization expense

    954       830  

Stock-based compensation expense

    451       210  

Provision for bad debts

    62       26  

Provision for inventory write-down

    106       29  

Provision for warranty

    215       336  

Loss on sale of property and equipment

    119       5  

Deferred income taxes

    365       -  

Change in operating assets and liabilities:

               

Accounts receivable

    1,218       (650 )

Inventories

    (460 )     (541 )

Prepaid expenses and other

    202       85  

Other assets

    (85 )     (46 )

Accounts payable and accrued liabilities

    (133 )     (372 )

Accrued compensation and benefits

    (1,465 )     (95 )

Income taxes payable

    (627 )     832  

Deferred revenue

    929       305  

Deferred rent

    (138 )     (44 )

Net cash provided by operating activities of continuing operations

    5,416       5,422  

Net cash used in operating activities of discontinued businesses

    (225 )     (240 )

Net cash provided by operating activities

    5,191       5,182  
                 

CASH FLOWS FROM INVESTING ACTIVITIES:

               

Proceeds from sale of business

    4       9  

Capital expenditures

    (2,761 )     (726 )

Capitalized software

    (506 )     (371 )

Patents and other intangibles

    (6 )     (5 )

Net cash used in investing activities

    (3,269 )     (1,093 )
                 

CASH FLOWS FROM FINANCING ACTIVITIES:

               

Borrowings under term loan

    3,000       -  

Dividends paid to common stockholders

    (6,021 )     (5,959 )

Net cash used in financing activities

    (3,021 )     (5,959 )
                 

Net decrease in cash and cash equivalents

    (1,099 )     (1,870 )

Cash and cash equivalents at beginning of period

    9,826       11,967  

Cash and cash equivalents at end of period

  $ 8,727     $ 10,097  
                 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                
Interest paid during the period   $ 28     $ -  
Income taxes paid during the period   $ 1,370     $ 1,857  
                 
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES:                
Leasehold Improvements contributed by landlord   $ 2,949     $ -