SPGZ Spectrum Group International Inc (CE)

Spectrum Group International, Inc. (SPGZ.PK) today announced financial results for its fiscal year ended June 30, 2012.

Highlights for the Fiscal Year Ended June 30, 2012:

• Total revenue increased $772.7 million to $7.97 billion.
  • Trading segment revenue increased $807.7 million to $7.77 billion.
• The Company achieved gross profit of $57.2 million, pre-tax income from continuing operations of $9.4 million and basic and diluted income per share from continuing operations of $0.12.

Revenues for the fiscal year ended June 30, 2012 increased $772.7 million, or 10.7%, to $7.97 billion from $7.20 billion in 2011. Trading revenues increased $807.7 million, or 11.6%, to $7.77 billion, from $6.96 billion resulting from higher precious metal prices. Collectible segment revenues decreased $35.1 million, or 14.6%, to $205.0 million, down from $240.1 million. The decrease is due primarily to softening in the overall numismatic market and a decrease in sales of silver bullion coins.

Gross profit decreased $3.5 million, or 5.8%, to $57.2 million, or a gross profit margin of 0.7%, from $60.8 million, or a gross profit margin of 0.8% in 2011. There was a decrease in gross profit of $2.6 million, or 9.0%, to $26.8 million, or a gross profit margin of 0.35%, in the Trading segment. The decrease was due primarily to less price volatility and a decrease in volumes. Collectibles segment gross profit decreased by $907,000, or 2.9%, to $30.3 million, or a gross profit margin of 14.8%. The decrease was due to sales of a higher percentage of certain lower margin numismatic material and the softening of the overall market.

Pre-tax income from continuing operations for the fiscal year ended June 30, 2012 was $9.4 million versus $8.6 million in 2011. While the Company had operating loss in the current fiscal year of $3.5 million, contributing to this loss was a $1.0 million reserve in connection with the claim against M.F. Global, Inc. Higher interest income along with the strengthening of the US dollar contributed to the increase in pre-tax income.

More information regarding the Company’s financial results for the year ended June 30, 2012 is set forth in the Company’s Report on Form 10-K, as filed with the Securities and Exchange Commission on September 27, 2012.

      Year ended                       June 30, June 30, Increase/ Increase/ in thousands, except per share data 2012 2011 (Decrease) (Decrease)     $ % Revenues

 

$

7,974,830 $ 7,202,171 $ 772,659 10.7 % Gross profit 57,208 60,756 (3,548 ) (5.8 )% Operating expenses 60,746 51,957 8,789 16.9 % Operating income (loss) (3,538 ) 8,799 (12,337 ) (140.2 )% Pre-tax income 9,447 8,595 852 9.9 % Net income from continuing operations 4,947 4,834 113 2.3 % Net income (loss) from discontinued operations, net of tax, attributable to Spectrum Group International, Inc. 94 31 63 203.2 % Net income 5,041 4,865 176 3.6 % Less: net income attributable to non-controlling interest (979 ) (1,091 ) (112 ) (10.3 )% Net income attributable to Spectrum Group International, Inc.

 

$

4,062 $ 3,774 $ 288 7.6 % Earnings (loss) per share attributable to Spectrum Group International, Inc. Basic – continuing operations

 

$

0.12 $ 0.12 $ — — % Basic – discontinued operations

 

$

— $ — $ — N/A Diluted – continuing operations

 

$

0.12 $ 0.11 $ 0.01 9.1 % Diluted – discontinued operations

 

$

— $ — $ — N/A Basic – net income

 

$

0.12 $ 0.12 $ — — % Diluted – net income

 

$

0.12 $ 0.11 $ 0.01 9.1 %

N/A = not applicable

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)

        June 30, 2012       June 30, 2011 ASSETS Current assets: Cash and cash equivalents $ 25,305 $ 24,181 Short-term investments — 1,151 Receivables and secured loans, net – trading operations 127,995 93,895 Accounts receivable and consignor advances, net – collectibles operations 27,698 29,647 Inventory, net 158,438 186,111 Prepaid expenses and other assets 3,184 4,091 Deferred tax assets 13,192 2,246 Current assets of discontinued operations —   228   Total current assets 355,812 341,550 Property and equipment, net 12,223 10,937 Goodwill 7,003 7,026 Other purchased intangible assets, net 7,382 8,240 Restricted cash 550 1,121 Income taxes receivable 2,637 2,637 Deferred tax assets – non-current 1,207 — Other assets 1,082 306 Non-current assets of discontinued operations —   10   Total assets $ 387,896   $ 371,827     LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable and consignor payables $ 101,791 $ 83,867 Liability on borrowed metals 27,076 11,384 Obligation under product financing arrangement 15,576 — Accrued expenses and other current liabilities 11,997 16,204 Accrued litigation settlement — 755 Income taxes payable 18,034 2,460 Lines of credit 92,669 134,891 Debt obligations, current portion 154 146 Current liabilities of discontinued operations —   23   Total current liabilities 267,267 249,730   Deferred and other long term tax liabilities 8,010 11,785 Debt obligations, net of current portion 6,574 6,689 Other long-term liabilities 168   —   Total liabilities 282,019   268,204     Commitments, contingencies and subsequent events Redeemable non-controlling interest 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: 32,723 and 32,537 at June 30, 2012 and June 30, 2011, respectively 327 325 Additional paid-in capital 242,418 241,917 Accumulated other comprehensive income 6,389 9,867 Accumulated deficit (156,777 ) (160,838 ) Total Spectrum Group International, Inc. stockholders’ equity 92,357 91,271 Non-controlling interest 13,396   12,352   Total stockholders’ equity 105,753   103,623   Total liabilities, redeemable non-controlling interest and stockholders’ equity $ 387,896   $ 371,827      

SPECTRUM GROUP INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

        Year ended       Year ended June 30, 2012 June 30, 2011 Revenues: Sales of precious metals $ 7,769,792 $ 6,962,076 Collectibles revenues: Sales of inventories 174,674 214,738 Auction services 30,364   25,357   Total revenues 7,974,830   7,202,171   Cost of sales: Cost of precious metals sold 7,742,972 6,932,615 Cost of collectibles sold 167,824 203,941 Auction services expense 6,826   4,859   Total cost of sales 7,917,622   7,141,415   Gross profit 57,208   60,756   Operating expenses: General and administrative 27,947 22,279 M.F. Global, Inc. loss provision 1,016 — Salaries and wages 29,733 27,057 Depreciation and amortization 2,050 1,679 Goodwill and intangible asset impairment — 30 Litigation settlement —   912   Total operating expenses 60,746   51,957   Operating income (loss) (3,538 ) 8,799   Interest and other income (expense): Interest income 13,174 9,163 Interest expense (5,387 ) (3,653 ) Other income (expense), net 988 (1,047 ) Unrealized gain (loss) on foreign exchange 4,210   (4,667 ) Total interest and other income (expense) 12,985   (204 ) Income from continuing operations before provision for income taxes 9,447 8,595 Provision for income taxes 4,500   3,761   Income from continuing operations 4,947 4,834 Income from discontinued operations, net of tax attributable to Spectrum Group International, Inc. 94   31   Net income 5,041 4,865 Less: net income attributable to non-controlling interests (979 ) (1,091 ) Net income attributable to Spectrum Group International, Inc. $ 4,062   $ 3,774     Basic and diluted income per share attributable to Spectrum Group International, Inc.: Basic – continuing operations $ 0.12   $ 0.12   Basic – discontinued operations $ —   $ —   Diluted – continuing operations $ 0.12   $ 0.11   Diluted – discontinued operations $ —   $ —   Basic – net income $ 0.12   $ 0.12   Diluted – net income $ 0.12   $ 0.11     Weighted average shares outstanding Basic 32,678   32,469   Diluted 32,865   32,725      

SPECTRUM GROUP INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

        Year ended       Year ended June 30, 2012 June 30, 2011   Cash flows from operating activities: Net income $ 5,041 $ 4,865 Income from discontinued operations, net of tax, attributable to Spectrum Group International, Inc. (94 ) (31 ) Income from continuing operations 4,947 4,834 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 (4,210 ) 4,667 Depreciation and amortization 2,050 1,679 Impairment of intangible assets — 30 Provision for bad debts 2,133 22 Provision for inventory reserve 520 166 Share based compensation 542 862 Legal settlement — 912 Loss on abandonment of property and equipment 401 — Changes in assets and liabilities: Receivables and secured loans (35,116 ) (50,864 ) Accounts receivable and consignor advances (4 ) (23,327 ) Inventory 27,111 (48,162 ) Prepaid expenses and other assets 217 (2,372 ) Liabilities on borrowed metals 15,692 (29,457 ) Accounts payable, accrued expenses and other liabilities 14,556 57,953 Income taxes receivable/payable 16,395 3,170 Deferred taxes and other long-term tax liabilities (14,549 ) 294 Accrued litigation settlement (755 ) (2,854 ) Net cash provided by (used in) operating activities — continuing operations 29,930 (82,447 ) Net cash provided by (used in) operating activities — discontinued operations 109   (1,026 ) Net cash provided by (used in) operating activities 30,039   (83,473 ) Cash flows from investing activities: Capital expenditures for property and equipment (2,983 ) (797 ) Purchase of McGaw building — (725 ) Cash paid for acquisition, net of cash received — (3,250 ) Maturity of short-term investments 1,072 6,093 Change in restricted cash 571 (1,121 ) Disposition of Greg Martin Auctions, Inc. 109   125   Net cash provided by (used in) investing activities — continuing operations (1,231 ) 325 Net cash used in investing activities — discontinued operations (109 ) —   Net cash provided by (used in) investing activities (1,340 ) 325   Cash flows from financing activities: Borrowings (repayments) under lines of credit, net (42,222 ) 86,300 Repayments on notes payable (107 ) — Obligation under product financing arrangement 15,576 — Taxes paid on behalf of employees with respect to vesting of restricted shares — (180 ) Contribution from non-controlling interest 150 1,470 Distributions paid to non-controlling interest (6 ) — Dividends paid to non-controlling interest — (3,232 ) Proceeds from exercise of stock options 5   3   Net cash provided by (used in) financing activities — continuing operations (26,604 ) 84,361 Net cash provided by (used in) financing activities — discontinued operations —   —   Net cash provided by (used in) financing activities (26,604 ) 84,361   Effects of exchange rates on cash (971 ) 648   Net increase in cash and cash equivalents 1,124 1,861 Cash and cash equivalents, beginning of period 24,181   22,320   Cash and cash equivalents, end of period $ 25,305   $ 24,181   Supplemental disclosures of cash flow information: Cash paid during the period for: Interest expense $ 4,530   $ 3,064   Income taxes $ 2,898   $ 927   Non-cash investing and financing activities: Assumption of loan in the McGaw building purchase $ —   $ 6,525   Accrued purchase consideration $ —   $ 302   Sale of Greg Martin Auctions, Inc. $ —   $ 200   Acquisition of Stack’s Bowers Numismatics, LLC $ —   $ 3,498