Collectors Universe, Inc.
Feb 9, 2010
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Collectors Universe Reports Results for Second Quarter Ended December 31, 2009

Operating income of $1.5 million and EPS of $0.22 for the quarter

NEWPORT BEACH, Calif., Feb 09, 2010 /PRNewswire via COMTEX/ -- 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 fiscal quarter and six months ended December 31, 2009.

Overview

Continuing Operations Second Quarter and First half of 2010

For the current second quarter, the Company reported net service revenues of $8.9 million, operating income of $1.5 million and after tax income from continuing operations of $1.7 million, or $0.22 per diluted share. This compares to net service revenues of $7.8 million, an operating loss of $(419,000) and an after tax loss from continuing operations of $(1.6) million, or $(0.17) per diluted share for the second quarter of fiscal 2009.

For the first half of fiscal 2010, the Company's net service revenues were $18.2 million, operating income was $3.3 million and after tax income from continuing operations was $3.4 million, or $0.45 per diluted share. This compares to net service revenues of $16.8 million, an operating loss of $(86,000) and an after tax loss from continuing operations of $(1.1) million, or $(0.12) per diluted share, for the six months ended December 31, 2009.

Net Income Second Quarter and First half of 2010

Net income for the second quarter and first half of fiscal 2010 was $1.2 million or $0.15 per diluted share and $2.8 million or $0.37 per diluted share, respectively and included losses from discontinued operations of $(508,000) for the quarter and $(561,000) for the six months, related to the Company's New York leases. The comparable net losses for the second quarter and first half of fiscal 2009 of $(10.9) million and $(12.2) million, respectively, included operating losses and impairment charges related to our discontinued operations of $(9.4) million for the second quarter and $(11.1) million for the first half of fiscal 2009.

Operational and Financial Highlights:

Michael McConnell, Chief Executive Officer, stated, "We are pleased with the growth achieved in both net service revenues and operating income in what is typically our slowest period of the year. PCGS continues to develop innovative service offerings for our growing client base. While PSA faces industry headwinds on the top-line, the team has done an excellent job of right-sizing operations to the current environment."

Results of Operations of our Continuing Businesses

The growth in revenues of $1.1 million in the current second quarter and $1.3 million in the first half of the year was driven by revenue increases of $1.5 million for the quarter and $2.0 million for the six months, in our coin grading and authentication business. Our other businesses continued to be impacted by current economic conditions with our trading cards and autographs business experiencing revenue declines of $0.2 million and $0.5 million for both the current second quarter and six months, respectively, and other reductions mainly in our stamp business. Our coin business represented 63% of our revenues for the first half of the year.

The gross profit margin of 59% in both the current year's second quarter and six month periods, compared with 48% and 52% for the second quarter and six month periods of the prior year, reflects the benefits of operating leverage in our coin grading and authentication business, as well as continued efforts to improve operational efficiency.

The reductions in operating expenses to $3.8 million and $7.5 million, respectively, in the current second quarter and six month periods reflect lower G&A expenses for personnel and outside professional services. Stock-based compensation costs increased in the current second quarter to $330,000, compared to $261,000 in the same quarter of last year, reflecting the recognition of performance based stock compensation determined to be probable in the second quarter.

The resulting operating income of $1.5 million and $3.3 million in the current second quarter and six months represented 16% and 18% of revenues. By comparison, the Company experienced operating losses of $(0.4) million and $(0.1) million for the three and six month periods of the prior year.

The income tax benefits of $0.2 million and $75,000 for the current year second quarter and six months reflect an annual effective tax rate of 5%, due to tax net operating loss carryforwards from prior years offset by a benefit that arose in the second quarter related to a change in the rules for alternative minimum taxes.

Income from continuing operations of $1.7 million or $0.22 per diluted share in the current second quarter, and $3.4 million and or $0.45 per diluted share for the current six months, reflects improved operating results and in the case of the per share amounts also reflects a reduction in the number of shares outstanding as a result of the repurchase of 1.75 million shares in the July 2009 Dutch Auction Tender Offer.

Discontinued Operations

The loss from discontinued operations of $(0.5) million and $(0.6) million for the three and six months ended December 31, 2009 relate to additional fair value accruals for the leased facilities in New York City, associated with our former jewelry businesses.

Financial Condition

At December 31, 2009, cash and cash equivalents totaled $18.7 million, compared with $23.9 million at June 30, 2009. Net cash used of $5.2 million in the first half of the year comprised of cash generated from continuing operations of $3.9 million, the collection of a note receivable of $2.3 million, the repurchase of shares in the Dutch Auction Tender Offer for cash of $8.9 million, the payment of dividends to stockholders of $1.9 million and cash of $0.6 million used in discontinued operations.

Outlook

McConnell continued, "Despite the continued uncertain economic conditions that prevailed in the first half of the year, our business has performed admirably. We will continue to monitor short-term revenue trends and activity and maintain a bottom line focus in 2010."

Conference Call and Webcast

Collectors Universe will host a conference call to discuss results on Tuesday, February 9, 2010 at 4:30 p.m. Eastern Time/1:30 p.m. Pacific Time. Interested parties may participate in the conference call by dialing 877-941-8610 or 480-629-9820, five to ten minutes prior to the initiation of the call. A replay of the conference call will be available through February 23, 2010, by dialing 800-406-7325 or 303-590-3030 and entering access code 4206099#. A live webcast of the conference call will also be available on the Collectors Universe website, www.collectors.com, under Investor Relations: Earnings Conference Calls. 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, memorabilia and stamps ("collectibles"). The Company also compiles and publishes authoritative information about United States and world coins, collectible trading cards and sports memorabilia, collectible stamps, 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 web site, http://www.collectors.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."

Due to a number of risks and uncertainties to which our business is subject, our future financial performance may differ, possibly significantly, from our expected financial performance as set forth in the forward looking statements contained in this news release. Information regarding those risks and uncertainties, and their possible impact on our future financial performance, include, but are not limited to, our continued and increased dependence on our coin business which generated 63% of our consolidated revenues and substantially all of our operating income in the first half of the year, the risk that economic conditions in the United States will not improve for some time and may even deteriorate further, which could result in reductions in the demand for our collectible grading services and, consequently, in our revenues; the risk that the current economic recession and credit crisis 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 risk that our strategy to offer new services in our continuing collectibles markets will not be successful in enabling us to improve our profitability or may even cause us to incur significant losses; and the risk that the commercial real estate market in New York City will deteriorate further, in which case we may not be able to sublease the offices and laboratory facilities in New York City formerly occupied by our jewelry businesses within the time periods and for the rents currently expected, which would cause our net rental payment obligations to be significantly higher than currently expected leading to reductions in cash flows and additional losses from discontinued operations in future periods.

Additional information regarding these risks and information regarding other risks and uncertainties to which our business is subject is contained in our Annual Report on Form 10-K for our fiscal year ended June 30, 2009 and our Quarterly Report on Form 10-Q for the second quarter ended December 31, 2009 filed with the Securities and Exchange Commission today. 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, which speak only as of their respective dates. We also disclaim any obligation to update or revise any of the forward-looking statements 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, Inc.
    949-567-1245
    Email: jwallace@collectors.com


tables to follow -

                   COLLECTORS UNIVERSE, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                     (In Thousands, except per share data)
                                   (unaudited)


                                 Three Months Ended       Six Months Ended
                                 ------------------       ----------------
                                     December 31,            December 31,
                                     ------------            ------------
                                    2009       2008        2009       2008
                                    ----       ----        ----       ----
    Net revenues                   $8,883     $7,802     $18,181    $16,845
    Cost of revenues                3,633      4,027       7,372      8,153
                                    -----      -----       -----      -----
       Gross profit                 5,250      3,775      10,809      8,692
    Selling and marketing
     expenses                       1,141        994       2,336      2,242
    General and administrative
     expenses                       2,644      3,200       5,212      6,536
                                    -----      -----       -----      -----
       Total operating expenses     3,785      4,194       7,548      8,778
                                    -----      -----       -----      -----
    Operating income (loss)         1,465       (419)      3,261        (86)
    Interest and other income,
     net                               12         77          52        213
                                      ---        ---         ---        ---
    Income before provision for
     income taxes                   1,477       (342)      3,313        127
    Provision (benefit) for
     income taxes                    (202)     1,210         (75)     1,210
                                     ----      -----         ---      -----
    Income (loss) from
     continuing operations          1,679     (1,552)      3,388     (1,083)
    Loss from discontinued
     operations, net of loss on
     sales of discontinued
     businesses, net of income
     taxes                           (508)    (9,373)       (561)   (11,139)
                                     ----     ------        ----    -------
    Net income (loss)              $1,171   $(10,925)     $2,827   $(12,222)
                                   ======   ========      ======   ========

    Net income (loss) per basic
     share:
      Income (loss) from
       continuing operations        $0.23     $(0.17)      $0.45     $(0.12)
      Loss from discontinued
       operations                   (0.07)     (1.03)      (0.07)     (1.22)
                                    -----      -----       -----      -----
      Net income (loss)             $0.16     $(1.20)      $0.38     $(1.34)
                                    =====     ======       =====     ======

    Net income (loss) per
     diluted share:
      Income (loss) from
       continuing operations        $0.22     $(0.17)      $0.45     $(0.12)
      Loss from discontinued
       operations                   (0.07)     (1.03)      (0.08)     (1.22)
                                    -----      -----       -----      -----
      Net income (loss)             $0.15     $(1.20)      $0.37     $(1.34)
                                    =====     ======       =====     ======

    Weighted average shares
     outstanding:
       Basic                        7,404      9,079       7,478      9,113
       Diluted                      7,555      9,079       7,592      9,113
    Dividends declared per
     common share                   $0.25         $-       $0.25      $0.23


                  COLLECTORS UNIVERSE, INC. AND SUBSIDIARIES
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                     (In Thousands, except per share data)
                                  (unaudited)


                                                         December 31, June 30,
    ASSETS                                                   2009       2009
                                                             ----       ----
    Current assets:
      Cash and cash equivalents                            $18,696    $23,870
      Accounts receivable, net of allowance of $85
       at December 31, 2009 and $63 at June 30, 2009         1,237      1,252
      Inventories, net                                         540        497
      Prepaid expenses and other current assets              1,155        868
      Customer notes receivable                                  -      2,340
      Notes receivable from sale of net assets of
       discontinued operations                                 142        212
      Current assets of discontinued operations                 37        102
                                                               ---        ---
          Total current assets                              21,807     29,141

      Property and equipment, net                            1,094      1,174
      Goodwill                                               2,826      2,626
      Intangible assets, net                                 2,413      2,776
      Notes receivable from sale of net of assets of
       discontinued operations                                 212        300
      Other assets                                             267         74
      Non-current assets of discontinued operations            182        182
                                                               ---        ---
                                                           $28,801    $36,273
                                                           =======    =======
    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
      Accounts payable                                        $998     $1,051
      Accrued liabilities                                    1,355      1,344
      Accrued compensation and benefits                      1,201      1,341
      Income taxes payable                                     172        252
      Net deferred income tax liability                         71         60
      Deferred revenue                                       2,196      1,883
      Current liabilities of discontinued operations         1,541      1,827
                                                             -----      -----
          Total current liabilities                          7,534      7,758

    Deferred rent                                              275        220
    Net deferred income tax liability                          197        208
    Non-current liabilities of discontinued
     operations                                              3,460      3,308
    Commitments and contingencies

    Stockholders' equity:
      Preferred stock, $.001 par value; 3,000 shares
       authorized, none issued or outstanding                    -          -
      Common stock, $.001 par value; 20,000 shares
       authorized; 7,683 and 9,158 issued and
       outstanding at December 31, 2009 June 30,
       2009, respectively                                        8          9
      Additional paid-in capital                            67,542     75,957
      Accumulated deficit                                  (50,215)   (51,187)
                                                           -------    -------
          Total stockholders' equity                        17,335     24,779
                                                            ------     ------
                                                           $28,801    $36,273
                                                           =======    =======

SOURCE Collectors Universe, Inc.