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RAPAPORT... DGSE Companies reported that revenue slipped 8 percent year on year to $128 million in 2012, citing a drop in demand for bullion during the year. Cost of sales decreased 13 percent to $104 million, but gross margin rose to 19 percent of revenue from 14.5 percent due to increases in jewelry and scrap metal sales and a shift away from lower-margin bullion business. Nonetheless, the company recorded a loss of $2.3 million, compared with a profit of $1 million in 2011. DGSE recorded a one-time expense of $3.2 million for restating prior year results and settling legal matters in addition to charges from discounted operations related to its Superior Galleries subsidiary. James Vierling, the CEO of DGSE, explained that the company executed on several key initiatives to regain integrity in its financial disclosures and refocus efforts on operational objectives and growth opportunities. ''During 2012, particular emphasis was placed on improving our financial controls, processes and procedures and I am extremely pleased with the work our new CFO, Brett Burford, and his team have done. We are now confident in our ability to accurately and credibly report our financial condition to current and prospective shareholders.'' DGSE expects to report a profit for 2013, while it funds expansion from internal cash flow. DGSE has signed leases and began construction on new store branches in Texas, South Carolina and Georgia. The company expects between eight and 12 organic store openings funded through internal cash in existing markets and to complete the reorganization of its accounting, back office and management functionality to support future growth that is capable of supporting 150 to 200 stores. Vierling said, “Since 2011, through self-funded organic store openings and through the acquisition of SBT, we have grown from four stores in three states, to 34 stores in eight states. Remarkably, we did this without increasing our debt. We believe that over the next several years, through additional self-funded growth, the acquisition of accretive businesses using our stock as currency and by leveraging our strategic relationships, we have the potential to expand to 150 to 200 locations nationwide with revenue exceeding $500 million. We understand that 2012 was a difficult year for our shareholders, and we would like to thank them for supporting this new management team, and ensure them that our focus in 2013 is on creating shareholder value through profitable expansion.''
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