Collectors Universe Jewelry Revenue Down 25%

Collectors Universe, Inc. reported a 10 percent decline in net service revenues of $8.1 million and a loss from continuing operations of $10.8 million for the second quarter of 2009. This compares to net service revenues of $9 million and a loss from continuing operations of $1.4 million for the second fiscal quarter of 2008.

Results for the second quarter of fiscal 2009 reflect a non cash impairment charge of $7.7 million related to the goodwill and other long-lived assets of the company’s jewelry businesses. 

Jewelry grading revenues decreased by 25 percent, which was offset by capacity reductions and lower marketing costs, thereby reducing the operating loss, excluding the impairment charge, for the jewelry segment by approximately $300,000 for the same comparable period, the company said. As a result of the economic conditions and the uncertainty in forecasting of the jewelry retail market as it relates to our jewelry businesses, an impairment charge of $7.7 million was recognized in the second quarter.

The drop in net service revenues for the period also included a $781,000, or 10.4 percent, decline in grading and authentication fees and a $97,000, or 6.7 percent, decline in related services. The The decline in grading and authentication fees comprised decreases of 8 percent in both our coins and sportcards fees and a 25 percent decline in jewelry revenue. Consistent with the first quarter of fiscal 2009, the reductions in the coin grading fees was attributable to lower trade show and modern submissions partially offset by an increase in our vintage coin grading submissions.

“Our Jewelry Group operating results were adversely impacted by the slumping economy in the second fiscal quarter of 2009, resulting in a reduction of 25 percent in such revenues when compared to the second fiscal quarter of 2008, while the loss of such revenues was more than offset by the benefits of the reductions in expenses and improvements in efficiency in the Jewelry Group from the second fiscal quarter of 2008 to the second fiscal quarter of 2009,” said Michael Haynes, Collectors Universe chief executive officer.

The services gross profit margin was 44.5 percent in the 2009 second quarter compared to 44 percent in the same quarter of last year, when the prior second quarter is adjusted for $822,000 of significant warranty costs that were recognized in that quarter. While the company has implemented cost reductions in the first half of the year, the extent of the revenue declines have offset the benefit of such costs reductions.

Operating expenses before the impairment charge were $5.4 million for the period compared to $5.8 million for the same quarter of last year. The decrease of $$400,000 was attributable to lower sales and marketing expenses incurred by our jewelry businesses. Net general and administrative expenses were about the same quarter on quarter, as a result of costs reductions implemented so far this year being offset by increased rent expense for the colored gemstone business and professional fees.

The resulting operating loss for the second quarter of fiscal 2009, before the $7.7 million impairment charge, was $2 million as compared to an operating loss of $2.6 million for the same quarter of last year; while the operating losses, inclusive of the impairment, in the current second quarter totaled $9.7 million.

Collectors Universe said it continued its cost reduction programs, which are aimed at returning the company to consolidated operating profitability by the fourth quarter of fiscal 2009. As a result of these programs, the company achieved a $400,000 reduction in operating expenses, excluding the non-cash impairment charges, in the second fiscal quarter of 2009 as compared to the same fiscal quarter of 2008.

A 10 percent stock dividend per common share was distributed on Nov. 3, 2008. On Jan. 9, 2009, the Company adopted a limited duration stockholder rights plan for an initial term of one year but the plan may be extended for two additional years if approved by stockholders.