Spectrum Group International, Inc. (SPGZ.PK) today announced
financial results for the second quarter of fiscal year 2013, which
ended December 31, 2012.
Highlights for the Three and Six Months
ended December 31, 2012:
- Total revenue of $1.74 billion and
$3.40 billion for the three and six months ended December 31, 2012
- Trading segment revenue of $1.69
billion and $3.30 billion for the three and six months ended
December 31, 2012
- Collectibles segment revenue of $47.7
million and $98.9 million for the three and six months ended
December 31, 2012
- Gross profit of $11.5 million and $21.6
million for the three and six months ended December 31, 2012
- Pre-tax income (loss) from continuing
operations of $0.5 million and $(0.1) million for the three and six
months ended December 31, 2012
Revenues for the three months ended December 31, 2012 decreased
$391.5 million, or 18.4%, to $1.74 billion from $2.13 billion in
the year-ago quarter. Revenues for the six months ended December
31, 2012 decreased $985.7 million, or 22.5%, to $3.40 billion from
$4.39 billion in the year-ago quarter. Trading revenues decreased
$401.9 million, or 19.2%, for the three months ended December 31,
2012 and decreased $978.9 million, or 22.9%, for the six months
ended December 31, 2012 compared with the same periods last 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. Collectible segment revenues increased $10.4 million,
or 27.9%, for the three months ended December 31, 2012 and
decreased $6.8 million, or 6.5%, for the six months ended December
31, 2012. The increase for the three-month period is due primarily
to stronger second quarter sales in our numismatics business as a
result of improved market conditions. The decrease for the
six-month period is due to weaker sales in the first quarter of
fiscal 2013 compared to the first quarter of fiscal 2012, due in
part to lower hammer prices at auction impacting our
commissions.
Gross profit for the three months ended December 31, 2012
increased $1.5 million, or 15.2%, to $11.5 million, or a gross
profit margin of 0.7%, from $9.9 million, or a gross profit margin
of 0.5% in 2011. Trading segment gross profit decreased by $0.7
million, or 9.6%, to $6.5 million, or a gross profit margin of
0.39% for the three months ended December 31, 2012. The decrease
was due primarily to less price volatility and a decrease in
volumes. Collectibles segment gross profit increased by $2.2
million, or 80.3%, to $4.9 million from $2.7 million. The increase
was due primarily to sales of a higher percentage of higher margin
numismatic materials. Gross profit for the six months ended
December 31, 2012 decreased $6.3 million to $21.6 million, or a
gross profit margin of 0.6%, from $28.0 million, or a gross profit
margin of 0.6% in 2011. Trading and Collectibles segments
contributed to this decrease, with individual decreases of $4.0
million and $2.3 million, respectively, during this period.
Pre-tax income from continuing operations for the three months
ended December 31, 2012 was $0.5 million, as compared with pre-tax
loss of $1.1 million for the comparable quarter in the prior fiscal
year. Pre-tax loss for the six months ended December 31, 2012 was
$0.1 million, compared to pre-tax income of $5.7 million for the
six months ended December 31, 2011. Included in operating expenses
for the three and six months ended December 31, 2011 was a $2.1
million reserve in connection with the claim against M.F. Global,
Inc., of which settlement in the second quarter of fiscal 2013
resulted in a $0.7 million recovery of the reserve, or an increase
of $2.8 million in pre-tax income. The increase to pre-tax income
in the three-month period is primarily due to this increase as well
as the increase in gross profit of $1.5 million described above and
the impact of a $1.1 million decrease in general and administrative
expenses. The decrease in general and administrative expenses is
due to an effort to reduce spending in our Collectibles segment.
For the six-month period, the decrease in pre-tax income is due to
a $2.2 million decrease in interest income primarily from our
Trading segment’s lending business, and the impact of unrealized
gain (loss) on foreign currency, which declined by $4.7 million
gain to $1.5 million loss.
More information regarding the Company’s financial results for
the quarter ended December 31, 2012 is set forth in the Company’s
Report on Form 10-Q, as filed with the Securities and Exchange
Commission on February 13, 2013.
Three Months Ended
December
December
Increase/ Increase/ in thousands, except per share
data
31, 2012
31, 2011
(Decrease) (Decrease) (unaudited)
(1)
$
%
(unaudited) Revenues
$
1,736,289 $ 2,127,808 $ (391,519 ) (18.4 )% Gross profit 11,459
9,945 1,514 15.2 % Operating expenses 11,345 15,554 (4,209 ) (27.1
)% Operating income (loss) 114 (5,609 ) 5,723 102.0 % Pre-tax
income (loss) from continuing operations 523 (1,083 ) 1,606 148.3 %
Provision for income taxes (income tax benefit) 1,062 (127 ) 1,189
936.2 % Loss from continuing operations (539 ) (956 ) 417 43.6 %
Net income (loss) from discontinued operations — (483 ) 483 100.0 %
Net income (loss) (539 ) (1,439 ) 900 62.5 % Less: net income
attributable to non-controlling interest 699 444 255 57.4 % Net
income (loss) attributable to Spectrum Group International, Inc.
$
160 $ (995 ) $ 1,155 116.1 %
Earnings (loss)
per share
Basic – continuing operations
$
0.01 $ (0.02 ) $ 0.03 (150.0 )% Basic – discontinued operations
$
— $ (0.01 ) $ 0.01 NM Diluted – continued operations
$
0.01 $ (0.02 ) $ 0.03 (150.0 )% Diluted – discontinued operations
$
— $ (0.01 ) $ 0.01 NM Basic – attributable to Spectrum Group
International, Inc.
$
0.01 $ (0.03 ) $ 0.04 (133.3 )% Diluted – attributable to Spectrum
Group International, Inc.
$
0.01 $ (0.03 ) $ 0.04 (133.3 )%
_________________
(1) Adjusted to reflect discontinued
operations.
NM = not meaningful
Six Months Ended
December
31, 2011
December
(1)
Increase/ Increase/ in thousands, except per share
data
31, 2012
(restated) (Decrease) (Decrease)
(unaudited) (unaudited) $
%
Revenues
$
3,401,156 $ 4,386,862 $ (985,706 ) (22.5 )% Gross profit
21,639
27,970 (6,331 ) (22.6 )% Operating expenses 22,762 30,235 (7,473 )
(24.7 )% Operating income (loss) (1,123 ) (2,265 ) 1,142 50.4 %
Pre-tax income (loss) from continuing operations (144 ) 5,729
(5,873 ) (102.5 )% Provision for income taxes 1,170 2,843 (1,673 )
(58.8 )% Net income (loss) from continuing operations (1,314 )
2,886 (4,200 ) (145.5 )% Net income (loss) from discontinued
operations (663 ) 312 (975 ) (312.5 )% Net income (loss) (1,977 )
3,198 (5,175 ) (161.8 )% Less: net (income) loss attributable to
non-controlling interest 615 (1,020 ) 1,635 (160.3 )% Net income
(loss) attributable to Spectrum Group International, Inc.
$
(1,362 ) $ 2,178 $ (3,540 ) (162.5 )%
Earnings (loss)
per share
Basic – continuing operations
$
(0.02 ) $ 0.06 $ (0.08 ) (133.3 )% Basic – discontinued operations
$
(0.02 ) $ 0.01 $ (0.03 ) NM Diluted – continuing operations
$
(0.02 ) $ 0.06 $ (0.08 ) (133.3 )% Diluted – discontinued
operations
$
(0.02 ) $ 0.01 $ (0.03 ) NM Basic – attributable to Spectrum Group
International, Inc.
$
(0.04 ) $ 0.07 $ (0.11 ) (157.1 )% Diluted – attributable to
Spectrum Group International, Inc.
$
(0.04 ) $ 0.07 $ (0.11 ) (157.1 )%
_____________
(1) Adjusted to reflect discontinued
operations.
NM = not meaningful
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) December 31,
June 30, 2012 2012 (1) ASSETS Current
assets Cash and cash equivalents $ 22,401 $ 25,305 Receivables and
secured loans, net – trading operations 113,081 127,995 Accounts
receivable and consignor advances, net – collectibles operations
11,091 20,428 Inventory, net 145,964 157,849 Prepaid expenses and
other assets 3,611 2,770 Deferred tax assets 13,192 13,192 Current
assets of discontinued operations — 8,273
Total
current assets 309,340 355,812 Property and equipment, net
12,999 11,710 Goodwill 5,986 6,765 Other purchased intangible
assets, net 6,731 7,157 Restricted cash 593 550 Income taxes
receivable 2,637 2,637 Deferred tax assets – non-current 1,615
1,207 Other assets 567 943 Non-current assets of discontinued
operations — 1,115
Total assets $ 340,468
$ 387,896
LIABILITIES, REDEEMABLE
NON-CONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY Current
liabilities Accounts payable and consignor payables $ 101,760 $
95,787 Liability on borrowed metals 35,139 27,076 Obligation under
product financing arrangement 4,778 15,576 Accrued expenses and
other current liabilities 7,460 9,921 Income taxes payable 16,138
17,860 Lines of credit 80,634 92,669 Debt obligation, current
portion 498 154 Current liabilities of discontinued operations —
8,224
Total current liabilities 246,407
267,267 Deferred and other long term tax liabilities 8,652
8,010 Debt obligations, net of current portion 6,175 6,574 Other
long-term liabilities 636 168
Total
liabilities 261,870 282,019 Commitments
and contingencies Redeemable non-controlling interest
59 124 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: 30,628 and 32,537 at December 31, 2012 and June
30, 2011, respectively 306 327 Additional paid-in capital 209,666
242,418 Accumulated other comprehensive income 6,660 6,389
Accumulated deficit (139,668 ) (156,777 )
Total Spectrum Group
International, Inc. stockholders’ equity 76,964 92,357
Non-controlling interest 1,575 13,396
Total
stockholders’ equity 78,539 105,753
Total
liabilities, redeemable non-controlling interest and stockholders’
equity $ 340,468 $ 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. CONSOLIDATED STATEMENTS OF
OPERATIONS (in thousands, except per share amounts)
(unaudited)
Three Months
Three Months
Six Months
Six Months Ended Ended
Ended
Ended
December 31,
December 31,
December 31,
December 31,
2012
2011
2012
2011
(1)
(1)
Revenues: Sales of precious metals $ 1,688,625 $ 2,090,527 $
3,302,240 $ 4,281,113 Collectibles revenues: Sales of inventory
44,900 33,913 91,174 93,813 Auction services 2,764 3,368
7,742 11,936 Total revenues 1,736,289
2,127,808 3,401,156 4,386,862 Cost of sales:
Cost of precious metals sold 1,682,113 2,083,325 3,290,564
4,265,429 Cost of collectibles sold 41,829 33,497 85,246 89,883
Auction services expense 888 1,041 3,707 3,580
Total cost of sales 1,724,830 2,117,863
3,379,517 4,358,892 Gross profit 11,459 9,945
21,639 27,970 Operating expenses: General and
administrative 5,105 6,162 10,233 12,703 M.F. Global, Inc. loss
provision (recovery) (711 ) 2,094 (711 ) 2,094 Salaries and wages
6,383 6,846 12,167 14,614 Depreciation and amortization 568
452 1,073 824 Total operating expenses 11,345
15,554 22,762 30,235 Operating income
(loss) 114 (5,609 ) (1,123 ) (2,265 ) Interest
and other income (expense): Interest income 2,464 3,286 4,652 6,910
Interest expense (1,331 ) (1,275 ) (2,413 ) (2,563 ) Other income,
net 83 1,036 222 408 Unrealized gain (loss) on foreign exchange
(807 ) 1,479 (1,482 ) 3,239 Total interest and other
income (expense) and unrealized gain (loss) on foreign exchange 409
4,526 979 7,994 Income (loss) from
continuing operations before provision for income taxes 523 (1,083
) (144 ) 5,729 Provision for income taxes (income tax benefit)
1,062 (127 ) 1,170 2,843 Income (loss)
from continuing operations (539 ) (956 ) (1,314 ) 2,886 Income
(loss) from discontinued operations, net of tax, attributable to
Spectrum Group International, Inc. — (483 ) (663 )
312 Net income (loss) (539 ) (1,439 ) (1,977 ) 3,198 Less:
net (income) loss attributable to non-controlling interests 699
444 615 (1,020 ) Net income (loss)
attributable to Spectrum Group International, Inc. $ 160 $
(995 ) $ (1,362 ) $ 2,178
Basic and diluted
income (loss) per share: Basic – continuing operations $ 0.01
$ (0.02 ) $ (0.02 ) $ 0.06 Basic –
discontinued operations $ — $ (0.01 ) $ (0.02 ) $
0.01 Diluted – continuing operations $ 0.01 $ (0.02 )
$ (0.02 ) $ 0.06 Diluted – discontinued operations $
— $ (0.01 ) $ (0.02 ) $ 0.01 Basic – net
income (loss) $ 0.01 $ (0.03 ) $ (0.04 ) $ 0.07
Diluted – net income (loss) $ 0.01 $ (0.03 ) $
(0.04 ) $ 0.07
Weighted average shares
outstanding Basic 30,628 32,652 31,706
32,645 Diluted 30,835 32,652 31,706
32,992 (1)
Adjusted to reflect discontinued operations.
SPECTRUM GROUP INTERNATIONAL, INC. CONSOLIDATED
STATEMENTS OF CASH FLOWS (in thousands)
(unaudited) Six Months Ended Six Months
Ended December 31, 2012 December 31, 2011
(1)
Cash flows from operating activities: Net income
(loss) $ (1,977 ) $ 3,198 (Income) loss from discontinued
operations, net of tax, attributable to Spectrum Group
International, Inc. 663 (312 ) Income (loss) from
continuing operations (1,314 ) 2,886 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 1,482 (3,239 ) Depreciation and
amortization 1,073 824 Provision for (recovery of) bad debts (660 )
2,094 Provision for inventory reserve 10 49 Share based
compensation 191 311 Gain on sale of Stamps business (17 ) — Loss
on abandonment of property of equipment 204 76 Changes in assets
and liabilities: Receivables and secured loans 15,625 (94,161 )
Accounts receivable and consignor advances 4,298 5,011 Inventory
11,297 36,996 Prepaid expenses and other assets (1,407 ) (498 )
Liabilities on borrowed metals 8,063 10,539 Accounts payable,
accrued expenses and other liabilities 3,792 64,418 Income taxes
receivable/payable (1,051 ) 1,486 Deferred taxes and other
long-term liabilities (408 ) (1,554 ) Accrued litigation settlement
— (680 )
Net cash provided by operating activities
— continuing operations 41,178 24,558
Net cash provided by
(used in) operating activities — discontinued operations (1,238
) 280
Net cash provided by operating activities
39,940 24,838
Cash flows from investing
activities: Capital expenditures for property and equipment
(1,565 ) (2,313 ) Change in restricted cash (43 ) 593
Purchases/sales of marketable securities — (138 ) Divestiture of
business 7,750 —
Net cash provided by (used in)
investing activities — continuing operations 6,142 (1,858 )
Net cash used in investing activities — discontinued
operations (22 ) (27 )
Net cash provided by (used in)
investing activities 6,120 (1,885 )
Cash flows
from financing activities: Borrowings (repayments) under lines
of credit, net (12,035 ) (13,533 ) Borrowings (repayments) on notes
payable (55 ) (52 ) Obligation under product financing arrangement
(10,798 ) — Issuance of common stock 25,213 — 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 (48,854 ) (13,591 )
Net cash provided by (used
in) financing activities – discontinued operations — —
Net cash used in financing activities (48,854 )
(13,591 ) Effects of exchange rates on cash (110 ) 998
Net increase in cash and cash equivalents (2,904 )
10,360
Cash and cash equivalents, beginning of period 25,305
24,181
Cash and cash equivalents, end of
period $ 22,401 $ 34,541
Supplemental
disclosures of cash flow information: Cash paid during the
period for: Interest expense $ 1,982 $ 1,224
Income taxes $ 2,618 $ 751
Non-cash items
Purchase of equipment under capital lease $ (573 ) $ —
(1) Adjusted to reflect
discontinued operations.
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