Spectrum Group International, Inc. Announces Fiscal First Quarter 2013 Financial Results

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Spectrum Group International, Inc. Announces Fiscal First Quarter 2013 Financial Results

IRVINE, Calif.--(BUSINESS WIRE)-- 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 profit10,18018,025(7,845)(43.5)%
Operating expenses11,41714,681(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 operations146,341127,995
Accounts receivable and consignor advances, net - collectibles operations15,58320,428
Inventory, net184,016157,849
Prepaid expenses and other assets3,1452,770
Deferred tax assets13,23113,192
Current assets of discontinued operations   8,273 
 Total current assets377,975355,812
Property and equipment, net12,67211,710
Goodwill5,9866,765
Other purchased intangible assets, net6,9437,157
Restricted cash572550
Income tax receivables2,6372,637
Deferred tax assets - non-current1,9071,207
Other assets940943
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 metals27,51227,076
Obligation under product financing arrangement15,576
Accrued expenses and other current liabilities6,8829,921
Income taxes payable15,00017,860
Lines of credit120,56592,669
Debt obligations, current portion491154
Current liabilities of discontinued operations   8,224 
Total current liabilities316,037267,267
 
Deferred and other long-term tax liabilities8,1558,010
Debt obligations, net of current portion6,2106,574
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, respectively306327
Additional paid-in capital209,576242,418
Accumulated other comprehensive income6,1946,389
Accumulated deficit (139,828) (156,777)
Total Spectrum Group International, Inc. stockholders' equity76,24892,357
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.
 
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SPECTRUM GROUP INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
         

Three months
ended
September 30,
2012

Three months
ended
September 30,
2011 (1)

Revenues:
Sales of precious metals$1,613,615$2,190,586
Collectibles revenues:
Sales of inventory46,27459,900
Auction services 4,978  8,568 
Total revenues 1,664,867  2,259,054 
Cost of sales:
Cost of precious metals sold1,608,4512,182,104
Cost of collectibles sold43,41756,386
Auction services expense 2,819  2,539 
Total cost of sales 1,654,687  2,241,029 
Gross profit 10,180  18,025