SPGZ Spectrum Group International Inc (CE)

Spectrum Group International, Inc. (OTCQB:SPGZ) today announced financial results for its first quarter of fiscal year 2014, which ended September 30, 2013.

Highlights for the Three Months Ended September 30, 2013:

• Total revenue decreased $130.1 million to $1.53 billion when compared to the same period ended 2012.
  • Trading segment revenue decreased $121.5 million to $1.49 billion.
  • Collectible segment revenue decreased $8.6 million to $42.7 million.
• The Company achieved gross profit of $13.3 million, pre-tax income from continuing operations of $1.6 million and basic and diluted income per share from continuing operations of $0.03.

Revenues for the three months ended September 30, 2013 decreased $130.1 million, or 7.8%, to $1.53 billion from $1.66 billion in the three months ended September 30, 2012. Trading revenues decreased $121.5 million, or 7.5%, to $1.49 billion, from $1.61 billion resulting from declining precious metal prices in the three months ended September 30, 2013 compared to the three months ended September 30, 2012. Collectible segment revenues decreased $8.6 million, or 16.7%, to $42.7 million from $51.3 million. The decrease was due in part to lower hammer prices at auction impacting our commissions.

Gross profit for the three months ended September 30, 2013 increased $3.1 million, or 30.9%, to $13.3 million, or a gross profit margin of 0.9%, from $10.2 million, or a gross profit margin of 0.6% in the three months ended September 30, 2012. Both our Trading segment and our Collectibles segment experienced an increase in gross profit. Our Trading segment gross profit increased by $2.0 million, or 38.9%, to $7.2 million, or a gross profit margin of 0.5% from $5.2 million, or a gross profit margin of 0.3% in 2012. The gross profit and profit margin percentage improved in our Trading segment as a result of a more favorable impact in spreads during the current year quarter in the precious metals commodity markets as compared to the prior year quarter. The Collectibles segment gross profit increased by $1.1 million, or 22.7%, to $6.2 million, or a gross profit margin of 14.4% from $5.0 million, or a gross profit margin of 9.8% in the three months ended September 30, 2012. The increase was due to a larger percentage of sales of higher margin numismatic materials in the current year quarter compared to the prior year quarter.

General and administrative expenses increased $0.3 million, or 5.2%, to $5.4 million in 2013 from $5.1 million in the three months ended September 30, 2012, due primarily to increases in professional and consulting fees related to our anticipated spin-off of the Trading segment. Salaries and wages increased $0.5 million, or 8.4%, to $6.3 million in 2013 from $5.8 million in the three months ended September 30, 2012. The increase in salaries and wages was primarily the result of higher levels of discretionary based compensation expense and new hiring in both segments compared to the prior year quarter.

Pre-tax income from continuing operations for the three months ended September 30, 2013 was $1.6 million compared to a pre-tax loss of $667,000 in the three months ended September 30, 2012, a favorable increase of $2.3 million. The increase was primarily due to the increase in gross profit discussed above which was partially offset by increases in general and administrative expenses and salaries and wages expense in the three months ended September 30, 2013 compared to the three months ended September 30, 2012.

Excluding the impact of non-cash unrealized foreign exchange (losses) gain, pre-tax income (loss) for the three months ended September 30, 2013 and 2012 would have been $1.6 million and $(0.008) million, respectively.

        Three months ended

 

 

   

 

Increase/ Increase/

in thousands, except per share data

September 30,

September 30,

(Decrease) (Decrease)

(unaudited)

2013

2012

  $ % Revenues $ 1,534,800 $ 1,664,867 $ (130,067 ) (7.8 ) Gross profit 13,329 10,180 3,149 30.9 Operating expenses 12,223 11,417 806 7.1 Operating income (loss) 1,106 (1,237 ) 2,343 189.4 Pre-tax income (loss) from continuing operations 1,615 (667 ) 2,282 NM Income (loss) from continuing operations 915 (651 ) 1,566 NM Income (loss) from discontinued operations, net of tax, attributable to Spectrum Group International, Inc. — (787 ) 787 NM Net income (loss) 915 (1,438 ) 2,353 NM Less: net loss (income) attributable to non-controlling interest 41 (84 ) 125 NM Net income (loss) attributable to Spectrum Group International, Inc. $ 956 $ (1,522 ) $ 2,478 NM Income (loss) per share attributable to Spectrum Group International, Inc. Basic – continuing operations $ (0.03 ) $ (0.02 ) $ 0.05 250.0 Basic – discontinued operations $ — $ (0.03 ) $ 0.03 100.0

Diluted – continuing operations

$ (0.03 ) $ (0.02 ) $ 0.05 250.0 Diluted – discontinued operations $ — $ (0.03 ) $ 0.03 100.0

Basic – net income (loss)

$ (0.03 ) $ (0.05 ) $ 0.08 160.0 Diluted – net income (loss) $ (0.03 ) $ (0.05 ) $ 0.08 160.0  

NM= Not Meaningful

             

Reconciliation of non-GAAP disclosure

            Fiscal quarter ended September 30,   in thousands 2013 2012   Income (loss) from continuing operations before provision for income taxes $ 1,615 $ (667 ) Subtract: unrealized(loss) gain on foreign exchange 25 (675 ) Non-GAAP adjusted pretax income from continuing     operations $ 1,590 $ (8 )    

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 currency 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 Numismatics LLC (dba Stack’s Bowers Galleries), a rare coin and currency auction house and Spectrum Wine Auctions, all based in Irvine, California.

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.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

(Unaudited)

    September 30, June 30, 2013 2013 ASSETS Current assets: Cash and cash equivalents $ 43,529 $ 23,643 Receivables and secured loans, net – trading operations 63,345 109,696 Accounts receivable and consignor advances, net – collectibles operations 16,468 12,347 Inventory, net 195,733 188,253 Prepaid expenses and other assets 2,496 2,306 Deferred tax assets 3,630   3,630   Total current assets 325,201 339,875 Property and equipment, net 14,391 13,908 Goodwill 4,884 4,884 Other purchased intangible assets, net 6,134 6,317 Restricted cash 606 602 Income taxes receivable 2,696 1,836 Deferred tax assets – non-current 3,387 3,387 Other assets 157   566   Total assets $ 357,456   $ 371,375     LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable and consignor payables $ 81,658 $ 95,839 Liability on borrowed metals 13,308 20,117 Obligation under product financing arrangement 45,456 38,554 Accrued expenses and other current liabilities 9,586 10,693 Income taxes payable 7,783 6,364 Lines of credit 99,833 100,857 Debt obligations, current portion 163   161   Total current liabilities 257,787 272,585   Long term tax liabilities 9,361 9,322 Debt obligations, net of current portion 8,741 8,788 Other long-term liabilities 1,829   1,888   Total liabilities 277,718   292,583         Commitments and contingencies Redeemable non-controlling interest, VIE 119   160   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: 30,848 and 30,909 at September 30, 2013 and June 30, 2013, respectively 308 309 Additional paid-in capital 206,687 206,655 Accumulated other comprehensive income 6,605 6,605 Accumulated deficit (133,981 ) (134,937 ) Total stockholders’ equity 79,619   78,632   Total liabilities, redeemable non-controlling interest and stockholders’ equity $ 357,456   $ 371,375                

SPECTRUM GROUP INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(Unaudited)

    Quarter Ended Quarter Ended September 30, September 30, 2013 2012 Revenues: Sales of precious metals $ 1,492,113 $ 1,613,615 Collectibles revenues: Sales of inventories 35,131 46,274 Auction services 7,556   4,978   Total revenues 1,534,800   1,664,867   Cost of sales: Cost of precious metals sold 1,484,940 1,608,451 Cost of collectibles sold 33,729 43,417 Auction services expense 2,802   2,819   Total cost of sales 1,521,471   1,654,687   Gross profit 13,329   10,180   Operating expenses: General and administrative 5,397 5,128 Salaries and wages 6,269 5,784 Depreciation and amortization 557   505   Total operating expenses 12,223   11,417   Operating income (loss) 1,106   (1,237 ) Interest and other income (expense): Interest income 1,634 2,188 Interest expense (1,199 ) (1,082 ) Other income,net 49 139 Unrealized gain (loss) on foreign exchange 25   (675 ) Total interest and other income 509   570   Income (loss) from continuing operations before provision for income taxes 1,615 (667 ) Provision for income taxes (income tax benefit) 700   (16 ) Income (loss) from continuing operations 915 (651 ) Income (loss) from discontinued operations, net of tax attributable to Spectrum Group International, Inc. —   (787 ) Net income (loss) 915 (1,438 ) Less: net loss (income) attributable to non-controlling interests 41   (84 ) Net income (loss) attributable to Spectrum Group International, Inc. $ 956   $ (1,522 )   Basic and diluted income (loss) per share attributable to Spectrum Group International, Inc.: Basic – continuing operations $ 0.03   $ (0.02 ) Basic – discontinued operations $ —   $ (0.03 ) Diluted – continuing operations $ 0.03   $ (0.02 ) Diluted – discontinued operations $ —   $ (0.03 ) Basic – net income (loss) $ 0.03   $ (0.05 ) Diluted – net income (loss) $ 0.03   $ (0.05 )   Weighted average shares outstanding Basic 30,918   32,783   Diluted 31,501   32,783            

SPECTRUM GROUP INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

    Three Months Ended September 30, 2013     September 30, 2012 Cash flows from operating activities: Net income (loss) $ 915 $ (1,438 ) Loss from discontinued operations, net of tax, attributable to Spectrum Group International, Inc. —   787   Income (loss) from continuing operations 915 (651 ) Adjustments to reconcile income from continuing operations to net cash provided by operating activities — continuing operations: Net unrealized (gains) losses on foreign currency (25 ) 675 Depreciation and amortization 557 505 Provision for bad debts — 42 Share based compensation 144 72 Gain on sale of Stamps business — (17 ) Loss on abandonment of property and equipment — 179 Changes in assets and liabilities: Receivables and secured loans 46,375 (18,346 ) Accounts receivable and consignor advances (4,121 ) (179 ) Inventory (7,480 ) (26,741 ) Prepaid expenses and other assets 219 (1,303 ) Liabilities on borrowed metals (6,809 ) 436 Accounts payable, consignor payables, accrued expenses and other liabilities (15,288 ) 50,946 Income taxes receivable/payable 600 (2,593 ) Deferred taxes and other long-term tax liabilities —   (739 ) Net cash provided by operating activities — continuing operations 15,087 2,286 Net cash used in operating activities — discontinued operations —   (1,353 ) Net cash provided by operating activities 15,087   933   Cash flows from investing activities: Capital expenditures for property and equipment (857 ) (858 ) Change in restricted cash (4 ) (22 ) Cash transferred with sale of subsidiary — (3,935 ) Divestiture of business —   7,750   Net cash provided by investing activities — continuing operations (861 ) 2,935 Net cash used in investing activities — discontinued operations —   (22 ) Net cash provided by investing activities (861 ) 2,913   Cash flows from financing activities: Borrowings (repayments) under lines of credit, net (1,024 ) 27,896 Repayments on notes payable and capital lease obligations (105 ) (27 ) Obligation under product financing arrangement 6,902 (15,576 ) Issuance of common stock — 25,242 Retirement of repurchased Afinsa and Auctentia common stock and interest in Spectrum Precious Metals, Inc. — (51,178 ) Repurchase of common stock (146 ) — Proceeds from exercise of stock options 33 — Repurchase of restricted stock —   (1 ) Net cash provided by (used in) financing activities — continuing operations 5,660 (13,644 ) Net cash provided by (used in) financing activities — discontinued operations —   —   Net cash provided by (used in) financing activities 5,660   (13,644 ) Effects of exchange rate changes on cash —   152   Net increase (decrease) in cash and cash equivalents 19,886 (9,646 ) Cash and cash equivalents, beginning of period 23,643   25,305   Cash and cash equivalents, end of period $ 43,529   $ 15,659   Supplemental disclosures of cash flow information: Cash paid during the period for: Interest expense $ 999   $ 965   Income taxes $ 246   $ 3,099   Non-cash investing and financing activities: Purchase of equipment under capital lease $ —   $ (573 )  

Spectrum Group International, Inc.Paul SothChief Financial Officer949-748-4800psoth@spectrumgi.com