clct20190206_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 5, 2019

 

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 5, 2019, Collectors Universe, Inc. (the “Company”) issued a press release announcing its consolidated financial results for its second quarter of fiscal year 2019, which ended on December 31, 2018. 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 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 5, 2019 by Collectors Universe, Inc. announcing its consolidated financial results for its second quarter of fiscal year 2019, ended December 31, 2018.

 

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 5, 2019

By:

   /s/ JOSEPH J. WALLACE                                       

     
 

  

Joseph J. Wallace, Senior Vice President and

Chief Financial Officer

 

S-1

 

 

EXHIBIT INDEX

 

 

Exhibit No.

 

Description

 

99.1

 

 

Press release issued on February 5, 2019 by Collectors Universe announcing its consolidated financial results for the second quarter of fiscal 2019, ended December 31, 2018.

 

E-1

 

ex_134210.htm

Exhibit 99.1

 

 

 

Collectors Universe Reports Results for Q2, 2019

 

Revenues up 12% for the Quarter

 

Operating Income up to $2.2 million versus $0.2 million in last year’s Q2

 

 

NEWPORT BEACH, CA – February 5, 2019 — Collectors Universe, Inc. (NASDAQ: CLCT), a leading provider of value-added authentication and grading services to dealers and collectors of collectibles, today announced financial results for its second quarter of fiscal year 2019.

 

Operational and Financial Highlights:

 

 

In the second quarter, which is typically the seasonally slowest quarter of the year, revenues were $15.7 million and operating income was $2.2 million as compared to last year’s second quarter revenues of $14.1 million and operating income of $0.2 million. In addition to the 12% revenue increase, the improved operating income reflected a reduction of $0.8 million in operating expenses. Cash edged up to $12.4 million at December 31, 2018, from $12.2 million at September 30, 2018 and $8.7 million at December 31, 2017.

 

 

The 12% increase in revenues in the quarter, comprised a $1.3 million or 29% increase for cards and autographs and a $0.9 million or 14% increase in US coin revenues. The cards and autographs revenues in the quarter represented a second quarter record for that business. Total coin revenues increased by 3%, despite continued softness in China revenues in the quarter.

 

 

Non-banking channel revenues in China were up 6% in this year’s six months, as we continue to build brand awareness in that region for long-term success. However, total China revenues decreased by $0.8 million and $3.8 million in this year’s second quarter and six months, reflecting the absence of revenues from the banking channel in China.

 

 

Revenues in this year’s six months included a $2.4 million or 24% increase in cards and autograph revenues and a 5% increase in US coin revenues. The cards and autographs revenues represented record first half revenues for that business. Total revenues in the six months were down by $0.6 million or 2%, due to the revenue reduction in China. Despite that revenue reduction, operating income for this year’s six months increased to $5.0 million from $4.8 million in last year’s six months and included a $1.1 million reduction in operating expenses.

 

 

The gross profit margins were 56% and 57% in this year’s second quarter and six months as compared to 54% and 59% in last year’s second quarter and six months. There can be variability in our gross profit margin due to seasonality and the mix of revenues. During fiscal 2018, our quarterly gross profit margin varied between 54% and 62%.

 

 

Income from continuing operations in this year’s second quarter was $1.5 million, or $0.17 per diluted share, as compared to $70,000, or $0.01, per diluted share in last year’s second quarter. For the six months, income from continuing operations was $3.6 million, or $0.40 per diluted share, as compared to $3.7 million, or $0.42 per diluted share, in last year’s six months.

 

 

 

Collectors Universe, Inc.

Page 2 of 6

 

 

 

The Company’s cash position as of December 31, 2018 was $12.4 million, as compared to $10.6 million as of June 30, 2018. Net cash generated of $1.8 million in this year’s six months included cash generated from continuing operations of $6.4 million, partially offset by $3.4 million used to pay cash dividends to stockholders, $1.0 million used for capital expenditures and capitalized software costs and $0.2 million used to paydown the Company’s term loan.

 

 

On January 23, 2019, we announced our quarterly cash dividend of $0.175 per share, which will be paid on March 1, 2019 to stockholders of record on February 15, 2019.

 

Commentary and Outlook

 

Joseph J. Orlando, President and Chief Executive Officer, stated, This year’s Q2 represented a marked improvement over the revenue and operating income generated in last year’s second quarter. Except for our Shanghai office in China, every major component of our authentication and grading services eclipsed the revenue figure from last year. While some of the increases were modest in nature, other parts of the business set Q2 revenue records. Those Q2 records included those produced by domestic businesses, like our PSA and PSA/DNA Authentication Services division, and our PCGS international offices in Hong Kong and Paris. As a result, even though Q2 is our seasonally-slowest quarter of the fiscal year, our cash position improved over this year’s Q1, as well.”

 

Orlando continued, “The PCGS US vintage, show and bulk services produced improved revenue figures versus last year’s Q2. In fact, the PCGS show service was up approximately 36%, an area of our coin business that generates our highest average service price. PCGS international produced mixed results. Our Hong Kong and Paris offices finished with record Q2 revenues, while our Shanghai office was down about $0.8 million from the previous year.”

 

“The PSA and PSA/DNA business set another quarterly revenue record for the division, beating last year’s record figure by roughly $1.4 million, a 29% increase year-over-year. Through the first two quarters of fiscal 2019, this part of our company is well on its way to its ninth consecutive year of top and bottom line growth. Despite continued improvements to our operational capacity, the backlog of submissions remains robust as we enter the second half of the fiscal year.”

 

“The management team is focused on improving our Company performance and market share in a number of ways, from customer service to product innovation, to improved efficiency, in addition to maximizing our short-term prospects in China.”

 

Conference Call and Webcast

 

Collectors Universe will host a conference call to discuss results on Tuesday, February 5, 2019 at 4:30 p.m. Eastern Time/1:30 p.m. Pacific Time. Interested parties may participate in the conference call by dialing 334-323-0522 or 877-260-1479, five to ten minutes prior to the initiation of the call. A replay of the conference call will be available through February 19, 2019 by dialing 888-203-1112 or 719-457-0820 and entering access code 7832530#. 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 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 , which make our operating results more vulnerable to conditions that could adversely affect or cause stagnation in the prices of precious metals and 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 the weakness or volatility of economic conditions 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, 2018 which we filed with the Securities and Exchange Commission on August 30, 2018 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, implied or inferred, 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 Orlando

President and Chief Executive Officer

949-567-1170

Email: jorlando@collectors.com 

 

Joseph Wallace

Senior Vice President and Chief Financial Officer

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,

 
   

2018

   

2017

   

2018

   

2017

 

Net revenues

  $ 15,704     $ 14,063     $ 33,199     $ 33,816  

Cost of revenues

    6,953       6,476       14,155       13,926  

Gross profit

    8,751       7,587       19,044       19,890  

Operating expenses:

                               

Selling and marketing expenses

    2,486       2,421       5,294       5,175  

General and administrative expenses

    4,051       4,926       8,709       9,954  

Total operating expenses

    6,537       7,347       14,003       15,129  

Operating income

    2,214       240       5,041       4,761  

Interest and other expense, net

    (145 )     (41 )     (142 )     (9 )

Income before provision for income taxes

    2,069       199       4,899       4,752  

Provision for income taxes

    588       129       1,287       1,049  

Income from continuing operations

    1,481       70       3,612       3,703  

Income from discontinued operations, net of income taxes

    -       89       -       89  

Net income

  $ 1,481     $ 159     $ 3,612     $ 3,792  
                                 

Net income per basic share:

                               

Income from continuing operations

  $ 0.17     $ 0.01     $ 0.40     $ 0.43  

Income from discontinued operations

    -       0.01       -       0.01  

Net income per basic share

  $ 0.17     $ 0.02     $ 0.40     $ 0.44  
                                 

Net income per diluted share:

                               

Income from continuing operations

  $ 0.17     $ 0.01     $ 0.40     $ 0.42  

Income from discontinued operations

    -       0.01       -       0.01  

Net income per diluted share

  $ 0.17     $ 0.02     $ 0.40     $ 0.43  
                                 

Weighted average shares outstanding:

                               

Basic

    8,936       8,699       8,934       8,637  

Diluted

    8,947       8,923       8,954       8,844  

Dividends declared per common share

  $ 0.175     $ 0.35     $ 0.35     $ 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,

2018

   

June 30,

2018

 
ASSETS                

Current assets:

               

Cash and cash equivalents

  $ 12,420     $ 10,581  

Accounts receivable, net of allowance of $74 and $80 at December 31, 2018 and June 30, 2018, respectively

    2,169       2,608  

Inventories, net

    2,423       2,579  

Prepaid expenses and other current assets

    1,793       1,965  

Total current assets

    18,805       17,733  
                 

Property and equipment, net

    7,923       8,378  

Goodwill

    2,083       2,083  

Intangible assets, net

    2,246       2,319  

Deferred income tax assets

    1,222       1,222  

Other assets

    474       479  

Total assets

  $ 32,753     $ 32,214  
                 

LIABILITIES AND STOCKHOLDERS’ EQUITY

               

Current liabilities:

               

Accounts payable

  $ 2,415     $ 2,487  

Accrued liabilities

    1,781       1,998  

Accrued compensation and benefits

    2,712       3,401  

Current portion of long-term debt

    750       562  

Income taxes payable

    397       312  

Deferred revenue

    3,538       3,213  

Total current liabilities

    11,593       11,973  
                 

Deferred rent

    3,879       3,535  

Long Term Debt

    2,063       2,438  
                 

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; 9,121 and 9,015 issued and outstanding at December 31, and June 30, 2018, respectively.

    9       9  

Additional paid-in capital

    86,837       86,369  

Accumulated deficit

    (71,628 )     (72,110 )

Total stockholders’ equity

    15,218       14,268  

Total liabilities and stockholders’ equity

  $ 32,753     $ 32,214  

 

 

 

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,

 
   

2018

   

2017

 

CASH FLOWS FROM OPERATING ACTIVITIES:

               

Net income

  $ 3,612     $ 3,792  

Discontinued operations

    -       (89 )

Income from continuing operations

    3,612       3,703  

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

               

Depreciation and amortization expense

    1,428       954  

Stock-based compensation expense

    468       451  

Provision for bad debts

    (1 )     62  

Provision for inventory write-down

    168       106  

Provision for warranty claims

    330       215  

Loss on sale of property and equipment

    -       119  

Deferred income taxes

    -       365  

Change in operating assets and liabilities:

               

Accounts receivable

    441       1,218  

Inventories

    (12 )     (460 )

Prepaid expenses and other

    243       202  

Other assets

    6       (85 )

Accounts payable and accrued liabilities

    (398 )     (133 )

Accrued compensation and benefits

    (689 )     (1,465 )

Income taxes payable

    85       (627 )

Deferred revenue

    326       929  

Deferred rent

    344       (138 )

Net cash provided by operating activities of continuing operations

    6,351       5,416  

Net cash used in operating activities of discontinued businesses

    -       (225 )

Net cash provided by operating activities

    6,351       5,191  
                 

CASH FLOWS FROM INVESTING ACTIVITIES:

               

Capital expenditures

    (505 )     (2,761 )

Capitalized software

    (468 )     (506 )

Proceeds from sale of business

    -       4  

Patents and other intangibles

    -       (6 )

Net cash used in investing activities

    (973 )     (3,269 )
                 

CASH FLOWS FROM FINANCING ACTIVITIES:

               

(Repayments) Borrowings under term loan

    (188 )     3,000  

Dividends paid to common stockholders

    (3,351 )     (6,021 )

Net cash used in financing activities

    (3,539 )     (3,021 )
                 

Net increase (decrease) in cash and cash equivalents

    1,839       (1,099 )

Cash and cash equivalents at beginning of period

    10,581       9,826  

Cash and cash equivalents at end of period

    12,420     $ 8,727  
                 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

               

Interest paid during the period

  $ 79     $ 33  

Income taxes paid during the period

  $ 1,319     $ 1,370  

Leasehold Improvements contributed by landlord

  $ -     $ 2,949