Spectrum Group International, Inc. (SPGZ.PK) today announced
financial results for its first quarter of fiscal year 2013, which
ended September 30, 2012.
Highlights for the Three Months Ended
September 30, 2012:
- Total revenue $1.66 billion and gross
profit of $10.2 million
- Trading segment revenue of $1.61
billion and gross profit of $5.2 million
- Collectible’s revenue of $51.3 million
and gross profit of $5.0 million
- Pre-tax loss from continuing operations
of $667,000 and basic and diluted loss per share from continuing
operations of $0.02
- Sold Stamps division for $7.75 million,
resulting in a gain on sale of $17,000
- Reduced ownership by Afinsa and
Auctentia from 57% to 9.9% of our outstanding common stock and
eliminated Auctentia’s 20% ownership of our Trading operations
- Sold in aggregate 13,430,702 shares of
common stock for aggregate proceeds of $25.5 million.
Revenues for the three months ended September 30, 2012 decreased
$594.2 million, or 26.3%, to $1.66 billion from $2.26 billion
in the three months ended September 30, 2011. Our Trading segment
revenues decreased $577.0 million, or 26.3%, to $1.61 billion for
the three months ended September 30, 2012 versus $2.19 billion
in the prior year. This decrease was primarily due to a slight
decrease in average precious metals prices and a decrease in the
ounces of precious metals sold. Our Collectibles segment revenues
decreased $17.2 million, or 25.1%, to $51.3 million for the
three months ended September 30, 2012 from $68.5 million in
2011. This was due primarily to softening in the numismatics
market, which led to decreased sales of coins and lower hammer
prices at auction impacting our commissions.
Gross profit decreased $7.8 million, or 43.5%, to $10.2 million,
or a gross profit margin of 0.6%, from $18.0 million, or a gross
profit margin of 0.8% in 2011. There was a decrease in gross profit
of $3.3 million, or 39.1%, to $5.2 million, or a gross profit
margin of 0.3%, in the Trading segment. The decrease was due
primarily to less price volatility and a decrease in volumes.
Collectibles segment gross profit decreased by $4.5 million, or
47.4%, to $5.0 million, or a gross profit margin of 9.8%. The
decrease was due to sales of a higher percentage of certain lower
margin numismatic material, losses on hedging transactions, and
softening of the overall market.
Pre-tax loss from continuing operations for the three months
ended September 30, 2012 was $667,000 versus
$6.8 million income in 2011. The pre-tax loss in the current
quarter is primarily due to the factors affecting gross profit and
revenues described above as well as the impact of a $1.4 million
decrease in interest income primarily associated with contraction
of our finance and liquidity business services in our Trading
operations caused by a decline in commodity prices. Also
contributing to the $667,000 loss was the impact of $675,000 in
unrealized losses on foreign exchange.
On September 13, 2012, we completed the sale of our Stamps
division for $7.75 million and recognized a $17,000 gain on the
sale. Loss from discontinued operations, which comprises the Stamps
division and our discontinued militaria collectibles business,
increased $1.6 million to $787,000 loss for the three months ended
September 30, 2012 from $795,000 income in 2011, due primarily to
the lack of Stamp auctions in the first quarter prior to the sale
of the Stamps division.
On September 25, 2012, we purchased from Afinsa and
Auctentia a total of 15,609,796 shares of common stock, as a
result of which the combined holdings of Afinsa and Auctentia was
reduced from 57% to 9.9% of the Company's common stock outstanding.
In addition, the Company purchased from Auctentia 20% of the shares
of the Company's subsidiary Spectrum PMI, Inc., which is the
holding company for the Company's A-Mark Precious Metals, Inc.
trading subsidiary. As a result, Spectrum PMI is now wholly owned
by the Company. The aggregate purchase price, including interest
and other charges, was $51.17 million. The purchase price was
funded through the proceeds of a rights offering and private
placement of shares of common stock, which also closed on
September 25, 2012, as well as the Company's cash on hand,
resulting in a net impact to working capital of $25.6 million in
cash and cash equivalents. The Company sold 12,004,387 shares in
the rights offering at a price of $1.90 per share, for aggregate
proceeds of $22.8 million, and 1,426,315 shares in the private
placement at a price of $1.90 per share, for aggregate proceeds of
$2.71 million.
More information regarding the Company’s financial results for
the first quarter ended September 30, 2012 is set forth in the
Company’s Report on Form 10-Q, as filed with the Securities and
Exchange Commission on November 13, 2012.
Three months ended
in thousands, except per share data
(unaudited)
September 30,2012
September 30,2011
Increase/(Decrease)$
Increase/(Decrease)%
Revenues $ 1,664,867 $ 2,259,054 $ (594,187 ) (26.3 )% Gross profit
10,180 18,025 (7,845 ) (43.5 )% Operating expenses 11,417 14,681
(3,264 ) (22.2 )% Operating income (loss) (1,237 ) 3,344 (4,581 )
(137.0 )% Pre-tax income (loss) from continuing operations (667 )
6,812 (7,479 ) (109.8 )% Income (loss) from continuing operations
(651 ) 3,842 (4,493 ) (116.9 )% Income (loss) from discontinued
operations, net of tax, attributable to Spectrum Group
International, Inc. (787 ) 795 (1,582 ) (199.0 )% Net income (loss)
(1,438 ) 4,637 (6,075 ) (131.0 )% Less: net income attributable to
non-controlling interest (84 ) (1,464 ) (1,380 ) (94.3 )% Net
income (loss) attributable to Spectrum Group International, Inc. $
(1,522 ) $ 3,173 $ (4,695 ) (148.0 )%
Income (loss) per share
attributable to Spectrum Group International, Inc. Basic –
continuing operations $ (0.02 ) $ 0.07 $ (0.09 ) (128.6 )% Basic –
discontinued operations $ (0.03 ) $ 0.03 $ (0.06 ) (200.0 )%
Diluted – continuing operations $ (0.02 ) $ 0.07 $ (0.09 ) (128.6
)% Diluted – discontinued operations $ (0.03 ) $ 0.03 $ (0.06 )
(200.0 )% Basic – net income (loss) $ (0.05 ) $ 0.10 $ (0.15 )
(150.0 )% Diluted – net income (loss) $ (0.05 ) $ 0.10 $ (0.15 )
(150.0 )%
About Spectrum Group International,
Inc.
Spectrum Group International, Inc. (together with its
subsidiaries, “we,” the “Company” or “SGI”) is a global trading and
collectibles network. We are a trader of precious metals and an
auctioneer of coins and wine, serving both collectors and dealers.
We are also a merchant/dealer of certain collectibles. Our
collectibles offerings span the price spectrum from modest to
ultra-high end. Furthermore, we offer loans to coin dealers,
collectors and investors backed by their precious metals, rare
coins, and other collectibles as collateral.
Our Trading business is conducted through A-Mark Precious
Metals, Inc. (“A-Mark”) and its subsidiaries. A-Mark is a
full-service precious metal trading company, and an official
distributor for many government mints throughout the world. A-Mark
products include gold, silver, platinum and palladium for storage
and delivery in the form of coins, bars, wafers and grain, and our
services include financing, leasing, consignment, hedging and
various customized financial programs. A-Mark’s subsidiary,
Collateral Finance Corporation, provides financing on a wide array
of bullion and numismatic products.
Our Collectibles business operates as an integrated network of
leading companies concentrating on numismatic (coins) and rare and
fine vintage wine. We have offices and auction houses in North
America, Europe and Asia. In addition to traditional live auctions,
we also conduct Internet and telephone auctions.
Spectrum Group’s Collectibles companies in the numismatics field
include Stack’s Bowers Galleries (rare coin and currency auction
house), Stack’s Bowers and Ponterio (world and ancient coins and
currency auction house), Teletrade (online coin auctions), and
Spectrum Numismatics International (wholesale rare coin dealer),
all based in Irvine, California. Spectrum Wine Auctions is engaged
in the sale by auction of rare and fine vintage wine.
SAFE HARBOR STATEMENT
Statements in this press release that relate to future plans,
objectives, expectations, performance, events and the like are
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 and the Securities
Exchange Act of 1934. Future events, risks and uncertainties,
individually or in the aggregate, could cause actual results to
differ materially from those expressed or implied in these
statements. Factors that could cause actual results to differ are
identified in our public filings with the Securities and Exchange
Commission (SEC), and include the fact that we have disclosed that
you should not rely upon our previously published financial
statements and the fact that we have not filed all of our reports
required by the Securities Exchange Act of 1934. More information
about factors that could affect our business and financial results
are included in our public filings with the SEC, which are
available on the SEC’s website located at www.sec.gov.
The words "should," "believe," "estimate," "expect," "intend,"
"anticipate," "foresee," "plan" and similar expressions and
variations thereof identify certain of such forward-looking
statements, which speak only as of the dates on which they were
made. Additionally, any statements related to future improved
performance and estimates of revenues and earnings per share are
forward-looking statements. We undertake no obligation to publicly
update or revise any forward-looking statements. Readers are
cautioned not to place undue reliance on these forward-looking
statements.
SPECTRUM GROUP INTERNATIONAL, INC. CONDENSED CONSOLIDATED
BALANCE SHEETS (in thousands, except per share data)
(unaudited)
September 30,2012
June 30,2012 (1)
ASSETS Current assets: Cash and cash equivalents $
15,659 $ 25,305 Receivables and secured loans, net – trading
operations 146,341 127,995 Accounts receivable and consignor
advances, net – collectibles operations 15,583 20,428 Inventory,
net 184,016 157,849 Prepaid expenses and other assets 3,145 2,770
Deferred tax assets 13,231 13,192 Current assets of discontinued
operations — 8,273
Total
current assets 377,975 355,812 Property and equipment, net
12,672 11,710 Goodwill 5,986 6,765 Other purchased intangible
assets, net 6,943 7,157 Restricted cash 572 550 Income tax
receivables 2,637 2,637 Deferred tax assets – non-current 1,907
1,207 Other assets 940 943 Non-current assets of discontinued
operations — 1,115
Total assets
$ 409,632 $ 387,896
LIABILITIES, REDEEMABLE
NON-CONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY Current
liabilities: Accounts payable and consignor payables $ 145,587 $
95,787 Liability on borrowed metals 27,512 27,076 Obligation under
product financing arrangement — 15,576 Accrued expenses and other
current liabilities 6,882 9,921 Income taxes payable 15,000 17,860
Lines of credit 120,565 92,669 Debt obligations, current portion
491 154 Current liabilities of discontinued operations —
8,224
Total current liabilities 316,037
267,267 Deferred and other long-term tax liabilities 8,155
8,010 Debt obligations, net of current portion 6,210 6,574 Other
long-term liabilities 649 168
Total
liabilities 331,051 282,019
Commitments and contingencies
Redeemable non-controlling interest 56 124
Stockholders’ equity: Preferred stock, $0.01 par value,
authorized 10,000 shares; issued and outstanding: none — — Common
stock, $0.01 par value, authorized 40,000 shares; issued and
outstanding: 30,629 and 32,723 at September 30, 2012 and June 30,
2012, respectively 306 327 Additional paid-in capital 209,576
242,418 Accumulated other comprehensive income 6,194 6,389
Accumulated deficit (139,828 ) (156,777 )
Total
Spectrum Group International, Inc. stockholders’ equity 76,248
92,357 Non-controlling interest 2,277 13,396
Total stockholders’ equity 78,525
105,753
Total liabilities, redeemable
non-controlling interest and stockholders’ equity $ 409,632
$ 387,896
_________________________
(1) The condensed consolidated balance sheet as of June 30,
2012 has been derived from the audited consolidated financial
statements included in the Company's 2012 Annual Report on Form
10-K, adjusted to reflect discontinued operations.
SPECTRUM GROUP INTERNATIONAL, INC. CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (in thousands, except per share
data) (unaudited)
Three
monthsendedSeptember 30,2012
Three
monthsendedSeptember 30,2011 (1)
Revenues: Sales of precious metals $ 1,613,615 $ 2,190,586
Collectibles revenues: Sales of inventory 46,274 59,900 Auction
services 4,978 8,568 Total revenues
1,664,867 2,259,054 Cost of sales: Cost
of precious metals sold 1,608,451 2,182,104 Cost of collectibles
sold 43,417 56,386 Auction services expense 2,819
2,539 Total cost of sales 1,654,687
2,241,029 Gross profit 10,180
18,025 Operating expenses: General and administrative 5,128
6,541 Salaries and wages 5,784 7,768 Depreciation and amortization
505 372 Total operating expenses
11,417 14,681 Operating income (loss)
(1,237 ) 3,344 Interest and other income (expense):
Interest income 2,188 3,624 Interest expense (1,082 ) (1,288 )
Other income (expense), net 139 (628 ) Unrealized gain (loss) on
foreign exchange (675 ) 1,760 Total interest,
other income (expense) and unrealized gain (loss) on foreign
exchange 570 3,468 Income (loss) from
continuing operations before provision for income taxes (667 )
6,812 Provision for income taxes (income tax benefit) (16 )
2,970 Income (loss) from continuing operations (651 )
3,842 Income (loss) from discontinued operations, net of tax,
attributable to Spectrum Group International, Inc. (787 )
795 Net income (loss) (1,438 ) 4,637 Less: net income
attributable to non-controlling interests (84 )
(1,464 ) Net income (loss) attributable to Spectrum Group
International, Inc. $ (1,522 ) $ 3,173
Basic and
diluted income (loss) per share attributable to Spectrum Group
International, Inc.: Basic – continuing operations $ (0.02 ) $
0.07 Basic – discontinued operations $ (0.03 ) $ 0.03
Diluted – continuing operations $ (0.02 ) $ 0.07 Diluted –
discontinued operations $ (0.03 ) $ 0.03 Basic – net income
(loss) $ (0.05 ) $ 0.10 Diluted – net income (loss) $ (0.05
) $ 0.10
Weighted average shares outstanding
Basic 32,783 32,638 Diluted
32,783 32,935
_________________________
(1) Adjusted to reflect discontinued operations.
SPECTRUM GROUP INTERNATIONAL, INC. CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (in thousands)
(unaudited)
Three
monthsendedSeptember 30,2012
Three
monthsendedSeptember 30,2011 (1)
Cash flows from operating activities: Net income
(loss) $ (1,438 ) $ 4,637 (Income) loss from discontinued
operations, net of tax, attributable to Spectrum Group
International, Inc. 787 (795 ) Income (loss)
from continuing operations (651 ) 3,842 Adjustments to reconcile
income from continuing operations to net cash provided by (used in)
operating activities — continuing operations: Net unrealized
(gains) losses on foreign currency 675 (1,760 ) Depreciation and
amortization 505 372 Provision for bad debts 42 — Provision for
inventory reserve 19 26 Share based compensation 72 148 Gain on
sale of Stamps business (17 ) — Loss on abandonment of property and
equipment 179 — Changes in assets and liabilities: Receivables and
secured loans (18,346 ) (115,552 ) Accounts receivable and
consignor advances (179 ) (3,782 ) Inventory (26,760 ) 21,378
Prepaid expenses and other assets (1,303 ) (1,549 ) Liabilities on
borrowed metals 436 10,688 Accounts payable, accrued expenses and
other liabilities 47,011 142,288 Income taxes receivable/payable
(2,593 ) 2,119 Deferred taxes and other long-term tax liabilities
(739 ) (2 ) Accrued litigation settlement —
(755 )
Net cash provided by (used in) operating activities —
continuing operations (1,649 ) 57,461
Net cash provided by
(used in) operating activities — discontinued operations
(1,353 ) 1,078
Net cash provided by (used in)
operating activities (3,002 ) 58,539
Cash flows from investing activities: Capital expenditures
for property and equipment (858 ) (898 ) Change in restricted cash
(22 ) 543 Purchases/sales of marketable securities — (991 )
Divestiture of business 7,750 —
Net
cash provided by (used in) investing activities — continuing
operations 6,870 (1,346 )
Net cash used in investing
activities — discontinued operations (22 ) —
Net cash provided by (used in) investing activities
6,848 (1,346 )
Cash flows from financing
activities: Borrowings (repayments) under lines of credit, net
27,896 (18,697 ) Borrowings (repayments) on notes payable (27 ) (34
) Obligation under product financing arrangement (15,576 ) —
Issuance of common stock 25,242 — Retirement of repurchased common
stock (51,178 ) — Repurchase of restricted stock (1 ) —
Distributions paid to non-controlling interest —
(6 )
Net cash used in financing activities — continuing
operations (13,644 ) (18,737 )
Net cash provided by (used
in) financing activities — discontinued operations —
—
Net cash used in financing activities
(13,644 ) (18,737 ) Effects of exchange rates on cash
152 (195 )
Net increase (decrease) in cash
and cash equivalents (9,646 ) 38,261
Cash and cash
equivalents, beginning of period 25,305
24,181
Cash and cash equivalents, end of period $
15,659 62,442
Supplemental disclosures of
cash flow information: Cash paid during the period for:
Interest expense $ 965 1,224 Income taxes $
3,099 751
Non-cash investing and financing
activities: Purchase of equipment under capital lease $ (573 )
—
_________________________
(1) Adjusted to reflect discontinued operations.
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