SPGZ Spectrum Group International Inc (CE)

Spectrum Group International, Inc. (OTCQB:SPGZ) today announced financial results for the third quarter of fiscal year 2013, which ended March 31, 2013.

Highlights for the Three and Nine Months ended March 31, 2013:

• Total revenue of $1.87 billion and $5.27 billion for the three and nine months ended March 31, 2013, respectively
  • Trading segment revenue of $1.83 billion and $5.13 billion for the three and nine months ended March 31, 2013, respectively
  • Collectibles segment revenue of $44.1 million and $143.1 million for the three and nine months ended March 31, 2013, respectively
• Gross profit of $13.6 million and $35.2 million for the three and nine months ended March 31, 2013, respectively
• Pre-tax income from continuing operations of $1.57 million and $1.43 million for the three and nine months ended March 31, 2013, respectively

Revenues for the three months ended March 31, 2013 increased $8.3 million, or 0.4%, to $1.87 billion from $1.86 billion in 2012. Revenues for the nine months ended March 31, 2013 decreased $977.4 million, or 15.6%, to $5.27 billion from $6.25 billion in 2012. Our trading segment revenues increased $9.2 million, or 0.5%, for the three months ended March 31, 2013 and decreased $969.7 million, or 15.9% for the nine months ended March 31, 2013. Our Collectibles segment revenues decreased $0.9 million, or 2.0%, for the three months ended March 31, 2013 and decreased $7.7 million, or 5.1%, for the nine months ended March 31, 2013. Our Trading business experienced a slight decrease in commodity prices and ounces sold for silver offset by an increase of ounces sold for gold during the three and the nine months ended March 31, 2013. Our Collectible segment revenues decreased primarily due to the Company shifting its March live wine auction to May. Numismatic sales increased $0.02 million, or 0.1% to $43.8 million for the three months ended March 31, 2013 from $43.7 million in 2012. For the nine months ended March 31, 2013, our Collectible segment revenues decreased by $7.7 million, or 5.1%, to $143.1 million from $150.8 million in 2012. Our numismatic business experienced weaker sales in the first quarter of fiscal 2013 compared to the first quarter of fiscal 2012, despite improvement in the second quarter. This was due in part to lower international hammer prices at auction impacting our commissions. Additionally, our wine revenues decreased by $0.9 million and $2.2 million for the three and nine month periods, respectively.

Gross profit for the three months ended March 31, 2013 increased $2.5 million, or 22.5%, to $13.6 million from $11.1 million in 2012. We experienced an increase in gross profit of $2.2 million, or 39.1%, to $7.7 million in our Trading segment. The increase is due to greater volatility in the commodity market impacting the spreads of silver and gold products during the period. Our Collectibles segment gross profit increased by $0.3 million, or 5.8%, to $5.8 million for the three months ended March 31, 2013 compared to the same period during 2012. The increase is due primarily to sales of a higher percentage of higher margin numismatic materials in the third quarter of fiscal 2013 as compared to the third quarter of fiscal 2012.

Pre-tax income from continuing operations for the three months ended March 31, 2013 was $1.6 million, as compared with pre-tax loss of $0.9 million for the comparable quarter in the prior fiscal year. Pre-tax income for the nine months ended March 31, 2013 was $1.4 million, compared to $4.8 million for the nine months ended March 31, 2012. The increase to pre-tax income in the three-month period is primarily due the increase in gross profit of $2.5 million described above. For the nine-month period, the decrease in pre-tax income is due to a $3.7 million decrease in interest income primarily from our Trading segment's financial service business.

More information regarding the Company’s financial results for the quarter ended March 31, 2013 is set forth in the Company’s Report on Form 10-Q, as filed with the Securities and Exchange Commission on May 14, 2013.

  Three Months Ended       Increase/     Increase/ March 31, March 31, (Decrease) (Decrease) in thousands, except per share data (unaudited) 2013 2012 (1) $ %   Revenues $ 1,869,594 $ 1,861,272 8,322 0.4 % Gross profit 13,579 11,084 2,495 22.5 % Operating expenses 13,089 13,083 6 0.0 % Operating income (loss) 490 (1,999 ) 2,489 124.5 % Pre-tax income (loss) from continuing operations 1,574 (942 ) 2,516 267.1 % Income (loss) from continuing operations 1,049 (231 ) 1,280 554.1 % Income (loss) from discontinued operations, net of tax, attributable to Spectrum Group International, Inc. 50 (252 ) 302 119.8 % Net income (loss) 1,099 (483 ) 1,582 327.5 % Less: net (income) loss attributable to non-controlling interests (347 ) (138 ) (209 ) -151.4 % Net income (loss) attributable to Spectrum Group International, Inc. $ 752 $ (621 ) 1,373 221.1 % Income (loss) per share attributable to Spectrum Group International, Inc. Basic - continuing operations $ 0.02 $ (0.01 ) 0.03 300.0 % Basic - discontinued operations $ — $ (0.01 ) 0.01 100.0 % Diluted - continuing operations $ 0.02 $ (0.01 ) 0.03 300.0 % Diluted - discontinued operations $ — $ (0.01 ) 0.01 100.0 % Basic - net income (loss) $ 0.02 $ (0.02 ) 0.04 200.0 % Diluted - net income (loss) $ 0.02 $ (0.02 ) 0.04 200.0 %

_________________(1) Adjusted to reflect discontinued operations.

  Nine Months Ended       Increase/     Increase/ March 31, March 31, (Decrease) (Decrease) in thousands, except per share data (unaudited) 2013 2012 (1) $ %   Revenues $ 5,270,750 $ 6,248,134 (977,384 ) -15.6 % Gross profit 35,218 39,054 (3,836 ) -9.8 % Operating expenses 35,851 43,318 (7,467 ) -17.2 % Operating loss (633 ) (4,264 ) 3,631 85.2 % Pre-tax income from continuing operations 1,430 4,787 (3,357 ) -70.1 % Income (loss) from continuing operations (265 ) 2,655 (2,920 ) -110.0 % Income (loss) from discontinued operations, net of tax, attributable to Spectrum Group International, Inc. (613 ) 60 (673 ) -1121.7 % Net income (loss) (878 ) 2,715 (3,593 ) -132.3 % Less: net (income) loss attributable to non-controlling interests 268 (1,158 ) 1,426 123.1 % Net income (loss) attributable to Spectrum Group International, Inc. $ (610 ) $ 1,557 (2,167 ) -139.2 % Income (loss) per share attributable to Spectrum Group International, Inc. Basic - continuing operations $ — $ 0.05 (0.05 ) -100.0 % Basic - discontinued operations $ (0.02 ) $ — (0.02 ) -100.0 % Diluted - continuing operations $ — $ 0.05 (0.05 ) -100.0 % Diluted - discontinued operations $ (0.02 ) $ — (0.02 ) -100.0 % Basic - net income (loss) $ (0.02 ) $ 0.05 (0.07 ) -140.0 % Diluted - net income (loss) $ (0.02 ) $ 0.05 (0.07 ) -140.0 %

_____________(1) Adjusted to reflect discontinued operations.

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 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.

CONSOLIDATED BALANCE SHEETS (in thousands, except per share data) (unaudited)         March 31, 2013 June 30, 2012 (1)   ASSETS Current assets: Cash and cash equivalents $ 28,083 $ 25,305 Receivables and secured loans, net — trading operations 86,009 127,995 Accounts receivable and consignor advances, net — collectibles operations 14,287 20,428 Inventory, net 133,147 157,849 Prepaid expenses and other assets 3,134 2,770 Deferred tax assets — 13,192 Current assets of discontinued operations —   8,273   Total current assets 264,660 355,812 Property and equipment, net 13,260 11,710 Goodwill 5,986 6,765 Other purchased intangibles, net 6,522 7,157 Restricted cash 597 550 Income tax receivables 888 2,637 Deferred tax assets — non-current 2,486 1,207 Other assets 566 943 Non-current assets of discontinued operations —   1,115   Total assets $ 294,965   $ 387,896   LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable and consignor payables $ 62,589 $ 95,787 Liability on borrowed metals 36,514 27,076 Obligation under product financing arrangement 9,821 15,576 Accrued expenses and other current liabilities 9,043 9,921 Income taxes payable — 17,860 Lines of credit 78,561 92,669 Deferred tax liability 1,877 — Debt obligations, current portion 365 154 Current liabilities of discontinued operations —   8,224   Total current liabilities 198,770 267,267 Deferred and other long-term tax liabilities 9,122 8,010 Debt obligations, net of current portion 6,138 6,574 Other long-term liabilities 697   168   Total liabilities 214,727   282,019   Commitments and contingencies     Redeemable non-controlling interest 14   124   Stockholders’ equity: Preferred stock, $.01 par value, authorized 10,000 shares; issued and outstanding: none — — Common stock, $.01 par value, authorized 40,000 shares; issued and outstanding: 30,555 and 32,723 at March 31, 2013 and June 30, 2012, respectively 306 327 Additional paid-in capital 210,234 242,418 Accumulated other comprehensive income 6,634 6,389 Accumulated deficit (138,916 ) (156,777 ) Total Spectrum Group International, Inc. stockholders’ equity 78,258 92,357 Non-controlling interest 1,966   13,396   Total stockholders’ equity 80,224   105,753   Total liabilities, redeemable non-controlling interest and stockholders’ equity $ 294,965   $ 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 amounts) (unaudited)     Three Months Ended Nine Months Ended

March 31,2013

 

March 31,2012 (1)

March 31,2013

 

March 31,2012 (1)

Revenues: Sales of precious metals $ 1,825,450 $ 1,816,231 $ 5,127,690 $ 6,097,344 Collectibles revenues: Sales of inventory 37,819 40,120 128,993 133,933 Auction services 6,325   4,921   14,067   16,857   Total revenues 1,869,594   1,861,272   5,270,750   6,248,134   Cost of sales: Cost of precious metals sold 1,817,707 1,810,664 5,108,271 6,076,093 Cost of collectibles sold 37,246 38,678 122,492 128,561 Auction services expense 1,062   846   4,769   4,426   Total cost of sales 1,856,015   1,850,188   5,235,532   6,209,080   Gross profit 13,579   11,084   35,218   39,054   Operating expenses: General and administrative 4,995 5,546 15,228 18,249 M.F. Global, Inc. loss provision — — (711 ) 2,094 Salaries and wages 7,524 7,047 19,691 21,661 Depreciation and amortization 570   490   1,643   1,314   Total operating expenses 13,089   13,083   35,851   43,318   Operating income (loss) 490   (1,999 ) (633 ) (4,264 ) Interest and other income (expense): Interest income 1,785 3,205 6,437 10,115 Interest expense (672 ) (1,326 ) (3,085 ) (3,889 ) Other income, net 25 47 247 455 Unrealized gain (loss) on foreign exchange (54 ) (869 ) (1,536 ) 2,370   Total interest, other income (expense) and unrealized gain (loss) on foreign exchange 1,084   1,057   2,063   9,051   Income (loss) from continuing operations before provision for income taxes 1,574 (942 ) 1,430 4,787 Provision for income taxes (income tax benefit) 525   (711 ) 1,695   2,132   Income (loss) from continuing operations 1,049 (231 ) (265 ) 2,655 Income (loss) from discontinued operations, net of tax, attributable to Spectrum Group International, Inc. 50   (252 ) (613 ) 60   Net income (loss) 1,099 (483 ) (878 ) 2,715 Less: net (income) loss attributable to non-controlling interests (347 ) (138 ) 268   (1,158 ) Net income (loss) attributable to Spectrum Group International, Inc. $ 752   $ (621 ) $ (610 ) $ 1,557   Basic and diluted income (loss) per share attributable to Spectrum Group International, Inc.: Basic - continuing operations $ 0.02   $ (0.01 ) $ —   $ 0.05   Basic - discontinued operations $ —   $ (0.01 ) $ (0.02 ) $ —   Diluted - continuing operations $ 0.02   $ (0.01 ) $ —   $ 0.05   Diluted - discontinued operations $ —   $ (0.01 ) $ (0.02 ) $ —   Basic - net income (loss) $ 0.02   $ (0.02 ) $ (0.02 ) $ 0.05   Diluted - net income (loss) $ 0.02   $ (0.02 ) $ (0.02 ) $ 0.05   Weighted average shares outstanding Basic 30,640   32,723   31,356   32,659   Diluted 30,895   32,723   31,356   32,902    

(1) Adjusted to reflect discontinued operations.

  SPECTRUM GROUP INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)   Nine Months Ended March 31, 2013     March 31, 2012 (1) Cash flows from operating activities: Net income (loss) $ (878 ) $ 2,715 (Income) loss from discontinued operations, net of tax, attributable to Spectrum Group International, Inc. 613   (60 ) Income (loss) from continuing operations (265 ) 2,655 Adjustments to reconcile income from continuing operations to net cash provided by operating activities — continuing operations: Net unrealized (gains) losses on foreign currency 1,536 (2,370 ) Depreciation and amortization 1,643 1,314 Provision for bad debts (610 ) 2,094 Provision for inventory reserve 19 485 Share based compensation 902 430 Gain on sale of Stamps business (17 ) — Loss on abandonment of property and equipment — 75 Changes in assets and liabilities: Receivables and secured loans 42,697 (11,478 ) Accounts receivable and consignor advances 1,052 1,220 Inventory 24,105 2,171 Prepaid expenses and other assets (929 ) 61 Liabilities on borrowed metals 9,438 14,753 Accounts payable, consignor payables, accrued expenses and other liabilities (33,733 ) (29,307 ) Income taxes receivable/payable (14,970 ) (8,332 ) Deferred taxes and other long-term tax liabilities 13,790 6,660 Accrued litigation settlement —   (755 ) Net cash provided by (used in) operating activities — continuing operations 44,658 (20,324 ) Net cash used in operating activities — discontinued operations (1,163 ) (4,316 ) Net cash provided by (used in) operating activities 43,495   (24,640 ) Cash flows from investing activities: Capital expenditures for property and equipment (1,916 ) (2,596 ) Change in restricted cash (47 ) 593 Purchases/sales of marketable securities — 68 Divestiture of business 7,750   —   Net cash provided by (used in) investing activities — continuing operations 5,787 (1,935 ) Net cash used in investing activities — discontinued operations (22 ) (38 ) Net cash provided by (used in) investing activities 5,765   (1,973 ) Cash flows from financing activities: Borrowings (repayments) under lines of credit, net (14,108 ) 15,508 Repayments on notes payable and capital lease obligations (320 ) (79 ) Obligation under product financing arrangement (5,755 ) 18,314 Issuance of common stock 25,213 5 Retirement of repurchased Afinsa and Auctentia common stock and interest in Spectrum Precious Metals, Inc. (51,178 ) — Repurchase of common stock (248 ) — Proceeds from exercise of stock options 105 — Contribution from non-controlling interest — 150 Repurchase of restricted stock (1 ) — Distributions paid to non-controlling interest —   (6 ) Net cash provided by (used in) financing activities — continuing operations (46,292 ) 33,892 Net cash provided by (used in) financing activities — discontinued operations —   —   Net cash provided by (used in) financing activities (46,292 ) 33,892   Effects of exchange rate changes on cash (190 ) 752   Net increase in cash and cash equivalents 2,778 8,031 Cash and cash equivalents, beginning of period 25,305   24,181   Cash and cash equivalents, end of period $ 28,083   $ 32,212   Supplemental disclosures of cash flow information: Cash paid during the period for: Interest expense $ 2,770   $ 2,766   Income taxes $ 2,961   $ 1,184   Non-cash investing and financing activities: Purchase of equipment under capital lease $ 665   $ —  

(1) Adjusted to reflect discontinued operations.