Spectrum Group International, Inc. Announces Third Quarter Fiscal 2011 Results
Spectrum Group International, Inc. (SPGZ.PK) today announced financial results for its fiscal quarter ended March 31, 2011.
Third Quarter Highlights:
-
Total revenue increased $238.59 million and $763.50 million to $1.61
billion and $4.82 billion for the three and nine months ended March
31, 2011.
- Trading segment revenue increased $207.67 million and $720.67 million to $1.54 billion and $4.65 billion for the three and nine months ended March 31, 2011 as a result of higher metal prices and higher metal ounces sold.
- Collectibles segment revenue increased $30.91 million and $42.84 million to $66.97 million and $166.70 million, respectively for the three and nine months ended March 31, 2011 as a result of record aggregate sales during the period.
- Gross profit increased $8.48 million and $8.47 million to $18.25 million and $42.74 million for the three and nine months ended March 31, 2011, as of result of increased revenues coupled with higher gross profit margins within the consolidated results.
- Pre-tax income increased $3.81 million and $4.26 million to $3.45 million and $5.97 million for the three and nine months ended March 31, 2011.
Revenues for the three months ended March 31, 2011 increased $238.59 million, or 17.4%, to $1.61 billion from $1.37 billion in the comparable period last year. The Company’s Trading segment was the main contributing factor as revenues increased $207.67 million, or 15.6% for the three months ended March 31, 2011 when compared to the same period in the prior year. Its Collectibles segment’s revenues increased $30.91 million, or 85.7% for the three month period ending March 31, 2011 compared to the three month period ending March 31, 2010. Revenues for the nine months ended March 31, 2011 increased $763.50 million, or 18.8% to $4.82 billion for the period ending March 31, 2011. The Trading segment was the main driver of the increase as revenues increased $720.67 million for the nine months ending March 31, 2011. The Collectibles segment revenue grew 34.6% to $166.70 million for the nine month period ending March 31, 2011.
The Company’s gross profit for the three months ended March 31, 2011 increased to $18.3 million from $9.8 million in the comparable period last year. An increase of $3.99 million in our Trading segment's gross profit contributed to the increase. In addition, the Collectibles segment's gross profit increased $4.5 million to $9.8 million from $5.4 million for the three months ended March 31, 2011 when compared to the three months ended March 31, 2010. Gross profit for the nine months ended March 31, 2011 increased $8.5 million to $42.7 million from $34.3 million in 2010. SGI’s Trading segment's gross profit increased $3.5 million to $18.4 million from $14.9 million for the nine month period ending March 31, 2011. Gross profit in the Collectibles segment increased $5.0 million to $24.4 million from $19.4 million for same period. The gross profit margins increased to 1.1% for the three months ended March 31, 2011 from 0.7% in 2010 and margins slightly increased to 0.9% for the nine months ended March 31, 2011 compared to 0.8% in 2010. The gross profit margins were flat in our Trading segment for the nine months ended March 31, 2011 and increased 0.21% for the three months ended March 31, 2011. Gross profit margins decreased 0.1% to 14.7% and decreased 1.0% to 14.6% in our Collectibles segment for the three and nine months ended March 31, 2011.
The Company’s pre-tax income for three months ended March 31, 2011 was $3.45 million, as compared to a pre-tax loss of $360 thousand when compared to the same period last year. Contributing to the increase was an increase in operating income of $7.05 million as a result of record aggregate sales during the quarter and a strong performance by the Collectible’s business where operating profits were up $4.24 million. The Trading segment had another strong quarter as operating income increased $2.59 million during the three months ending March 31, 2011. A weakening of the U.S. Dollar against the Euro resulted in a $1.8 million unrealized foreign currency loss at three months March 31, 2011 or $3.39 million decrease when compared to the same period last year. Pre-Tax income for the nine months ending March 31, 2011 increased $4.26 million to $5.97 million from $1.71 million for the comparable period last year. The Trading segment’s operating income increased $3.0 million or 57.8% for the nine months ending March 31, 2011 versus the same period last year. The Collectible’s segment operating income increased $5.00 million for the same nine months when compared the to the prior year’s result. Unrealized foreign currency exchange losses of $3.87 million have negatively impacted pre-tax profit for the nine months ending March 31, 2011 versus the same period last year. For both the three and nine month period these non-cash unrealized foreign currency losses directly relate to the translation of intercompany loans between SGI and its wholly owned international subsidiaries from Euros to USD in the consolidated financial statements.
More information regarding the Company’s financial results for the three and nine months ended March 31, 2011 is set forth in the Company’s Report on Form 10-Q, as filed with the Securities and Exchange Commission on May 12, 2011.
The Company also announced today that it is included on the 2011 Fortune 500 list of America’s largest companies for the second year in a row. Debuting on the list in 2010, SGI was ranked at No. 480, with $4.3 billion in annual revenue for 2009 and earnings per share of 23 cents on net income of $7.1 million. The Company climbed on the 2011 list to its current ranking at No. 381, with $6.0 billion in annual revenue for 2010. Of the 500 companies named on the 2011 list, there are 53 in California, and only six in Orange County, where SGI is headquartered. SGI is the only company in its industry currently on the Fortune 500.
| Three months ended | Nine months ended | |||||||||||||||||||||||||||
| in 000's (expect per share data) | March 31, 2011 | March 31, 2010 |
Increase/ |
Increase/ |
March 31, 2011 | March 31, 2010 |
Increase/ |
Increase/ |
||||||||||||||||||||
| Revenues | 1,609,626 | 1,371,038 | 238,588 | 17.4% | 4,815,517 | 4,052,014 | 763,503 | 18.8% | ||||||||||||||||||||
|
Gross Profit |
18,250 | 9,773 | 8,477 | 86.7% | 42,735 | 34,266 | 8,469 | 24.7% | ||||||||||||||||||||
| Operating expenses | 14,457 | 13,028 | 1,429 | 11.0% | 36,061 | 37,080 | (1,019) | -2.7% | ||||||||||||||||||||
| Operating income | 3,793 | (3,225) | 7,018 | NM | 6,674 | (2,814) | 9,488 | NM | ||||||||||||||||||||
| Income (loss) before provision for income taxes | 3,447 | (360) | 3,807 | NM | 5,968 | 1,710 |
4,258 |
249.0% | ||||||||||||||||||||
| Net (loss) income from continuing operation | 2,999 | (2,870) | 5,869 | NM | 5,197 | 1,131 | 4,066 | 359.5% | ||||||||||||||||||||
|
Loss from discountined operations, net of |
(152) | (309) | 157 | -50.8% | (966) | (1,133) | 167 | -14.7% | ||||||||||||||||||||
| Net (loss) income | 2,847 | (3,179) | 6,026 | NM | 4,231 | (2) | 4,233 | NM | ||||||||||||||||||||
|
Less: net income attributable to the non- |
(305) | (339) | 34 | -10.0% | (1,092) | (1,234) | 142 | -11.5% | ||||||||||||||||||||
| Net income (loss) attributable to SGI | 2,542 | (3,518) | 6,060 | NM | 3,139 | (1,236) | 4,375 | NM | ||||||||||||||||||||
|
Earnings per share |
||||||||||||||||||||||||||||
| Basic - continued operations | 0.08 | (0.10) | 0.18 | NM | 0.13 | - | 0.13 | NM | ||||||||||||||||||||
|
Basic - discontinued operations |
- | (0.01) | 0.01 | NM | (0.03) | (0.04) | 0.01 | NM | ||||||||||||||||||||
| Diluted - continued operations | 0.08 | (0.10) | 0.18 | NM | 0.12 | - | 0.12 | NM | ||||||||||||||||||||
|
Diluted - discontinued operations |
- | (0.01) | 0.01 | NM | (0.03) | (0.04) | 0.01 | NM | ||||||||||||||||||||
| Basic - attributable to SGI | 0.08 | (0.11) | 0.19 | NM | 0.10 | (0.04) | 0.14 | NM | ||||||||||||||||||||
| Diluted - attributable to SGI | 0.08 | (0.11) | 0.19 | NM | 0.09 | (0.04) | 0.13 | NM | ||||||||||||||||||||
|
Weighted average shares outstanding |
||||||||||||||||||||||||||||
| Basic | 32,468 | 31,985 | 32,422 | 31,895 | ||||||||||||||||||||||||
| Diluted | 33,169 | 31,985 | 33,089 | 31,895 | ||||||||||||||||||||||||
| 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, stamps and wine, serving both collectors and dealers. We are also a merchant/dealer of certain collectibles. Our collectibles offerings span the price spectrums from modest to ultra-high end. Furthermore, we offer loans to coin dealers, collectors and investors back by their precious metals, rare coin 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, which is the official Numismatic Lender of the American Numismatic Association, 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 philatelic (stamps) materials 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.
Our Collectibles companies in the philatelic field are auction houses Harmer Global Philatelic Network GmbH, Corinphila Auktionen of Zurich, Switzerland, Heinrich Köhler Auktionshaus of Wiesbaden, Germany, Corinphila Veilingen B.V., Amstelveen, Netherlands, and John Bull Stamp Auctions, Ltd of Hong Kong. Spectrum Group’s Collectibles companies in the numismatics field include Bowers-Stack’s Numismatics (rare coin and currency auction house), Ponterio & Associates (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 par value) |
|||||||||||
| March 31, | June 30, | ||||||||||
| 2011 | 2010 (1) | ||||||||||
| (Unaudited) | |||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 16,836 | $ | 22,320 | |||||||
| Short-term investments and marketable securities | 2,467 | 6,433 | |||||||||
| Receivables and secured loans, net — trading operations | 72,552 | 42,901 | |||||||||
| Accounts receivable and consignor advances, net — collectibles operations | 27,662 | 5,717 | |||||||||
| Inventories, net | 199,024 | 137,989 | |||||||||
| Prepaid expenses and other assets | 4,451 | 1,309 | |||||||||
| Current assets of discontinued operations | 447 | 522 | |||||||||
| Total current assets | 323,439 | 217,191 | |||||||||
| Property and equipment, net | 3,907 | 2,092 | |||||||||
| Goodwill | 6,901 | 5,942 | |||||||||
| Other purchased intangibles, net | 8,427 | 5,457 | |||||||||
| Other assets | 552 | 248 | |||||||||
| Income tax receivables | 5,221 | 4,974 | |||||||||
| Deferred tax assets | 59 | 144 | |||||||||
| Non-current assets of discontinued operations | 10 | 687 | |||||||||
| Total assets | $ | 348,516 | $ | 236,735 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable, customer deposits and consignor payables | $ | 105,409 | $ | 29,458 | |||||||
| Liabilities on borrowed metals | 12,585 | 40,841 | |||||||||
| Accrued expenses and other current liabilities | 14,868 | 13,248 | |||||||||
| Accrued litigation settlement | — | 2,697 | |||||||||
| Income taxes payable | 974 | 825 | |||||||||
| Lines-of credit | 100,800 | 47,200 | |||||||||
| Deferred tax liability | 934 | 934 | |||||||||
| Dividend payable to Auctentia | — | 2,500 | |||||||||
| Other current liabilities | 390 | — | |||||||||
| Current liabilities of discontinued operations | 122 | 1,102 | |||||||||
| Total current liabilities | 236,082 | 138,805 | |||||||||
| Deferred and other long term tax liabilities | 8,548 | 7,794 | |||||||||
| Other long term liabilities | 306 |
— |
|||||||||
| Total liabilities | 244,936 | 146,599 | |||||||||
| Commitments, contingencies and subsequent events | |||||||||||
| Stockholders’ equity: | |||||||||||
| Spectrum Group International, Inc. 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: 32,468 and 31,893 |
325 | 319 | |||||||||
| Additional paid-in capital | 241,549 | 241,615 | |||||||||
| Accumulated other comprehensive income | 8,811 | 3,529 | |||||||||
| Accumulated deficit | (159,211 | ) | (162,350 | ) | |||||||
| Total Spectrum Group International, Inc. stockholders’ equity | 91,474 | 83,113 | |||||||||
| Non-controlling interests | 12,106 | 7,023 | |||||||||
| Total stockholders’ equity | 103,580 | 90,136 | |||||||||
| Total liabilities and stockholders’ equity | $ | 348,516 | $ | 236,735 | |||||||
|
(1) The Condensed Consolidated Balance Sheet as of June 30, 2010 is from the audited Consolidated Financial Statements included in the Company’s 2010 Annual Report on Form 10-K |
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|
SPECTRUM GROUP INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) |
|||||||||||||||||||||
|
Three Months
|
Three Months
|
Nine Months
|
Nine Months
|
||||||||||||||||||
| (as restated) | (as restated) | ||||||||||||||||||||
| Revenues: | |||||||||||||||||||||
| Sales of precious metals | $ | 1,542,653 | $ | 1,334,979 | $ | 4,648,820 | $ | 3,928,155 | |||||||||||||
| Collectibles revenues: | |||||||||||||||||||||
| Sales of inventories | 59,089 | 31,706 | 147,775 | 109,373 | |||||||||||||||||
| Auction services | 7,884 | 4,353 | 18,922 | 14,486 | |||||||||||||||||
| Total revenue | 1,609,626 | 1,371,038 | 4,815,517 | 4,052,014 | |||||||||||||||||
| Cost of sales: | |||||||||||||||||||||
| Cost of precious metals sold | 1,534,249 | 1,330,560 | 4,630,469 | 3,913,274 | |||||||||||||||||
| Cost of collectibles sold | 55,596 | 29,792 | 138,872 | 101,277 | |||||||||||||||||
| Auction services expense | 1,531 | 913 | 3,441 | 3,197 | |||||||||||||||||
| Total cost of sales | 1,591,376 | 1,361,265 | 4,772,782 | 4,017,748 | |||||||||||||||||
| Gross profit | 18,250 | 9,773 | 42,735 | 34,266 | |||||||||||||||||
| Operating expenses: | |||||||||||||||||||||
| General and administrative | 6,407 | 6,831 | 16,643 | 16,772 | |||||||||||||||||
| Salaries and wages | 7,556 | 5,805 | 18,256 | 19,173 | |||||||||||||||||
| Depreciation and amortization | 494 | 392 | 1,162 | 1,135 | |||||||||||||||||
| Total operating expenses | 14,457 | 13,028 | 36,061 | 37,080 | |||||||||||||||||
| Operating profit (loss) | 3,793 | (3,255 | ) | 6,674 | (2,814 | ) | |||||||||||||||
| Interest and other income (expense): | |||||||||||||||||||||
| Interest income | 2,617 | 1,782 | 6,696 | 4,902 | |||||||||||||||||
|
Interest expense |
(1,156 | ) | (472 | ) | (3,068 | ) | (1,511 | ) | |||||||||||||
| Other income (expense), net | (14 | ) | (7 | ) | (465 | ) | 74 | ||||||||||||||
| Unrealized gains on foreign exchange | (1,793 | ) | 1,592 | (3,869 | ) | 1059 | |||||||||||||||
|
Total interest and other income (expense) income, foreign
|
(346 | ) | 2,895 |
(706 |
) |
4,524 |
|||||||||||||||
| Income before provision(benefit) for income taxes | 3,447 | (360 | ) |
5,968 |
1,710 |
||||||||||||||||
| Income tax provision (benefit) | 448 | 2,510 | 771 | 579 | |||||||||||||||||
| Net income (loss) from continuing operations | 2,999 | (2,870 | ) | 5,197 | 1,131 | ||||||||||||||||
| Loss from discontinued operations, net of tax | (152 | ) | (309 | ) | (966 | ) | (1,133 | ) | |||||||||||||
| Net income (loss) | 2,847 | (3,179 | ) | 4,231 | (2 | ) | |||||||||||||||
|
Less: Net income attributable to the non-controlling interests |
(305 | ) | (339 | ) |
(1,092 |
) |
(1,234 |
) |
|||||||||||||
|
Net income attributable to Spectrum Group International, Inc. |
$ | 2,542 | $ | (3,518 | ) |
$ |
3,139 |
$ |
(1,236 |
) |
|||||||||||
| Basic and diluted income (loss) per share: | |||||||||||||||||||||
| Basic – continuing operations | $ | 0.08 | $ | (0.10 | ) | $ | 0.13 | $ | — | ||||||||||||
| Basic – discontinued operations | $ | — | $ | (0.01 | ) | $ | (0.03 | ) | $ | (0.04 | ) | ||||||||||
|
Diluted – continuing operations |
$ | 0.08 | $ | (0.10 | ) | $ | 0.12 | $ | — | ||||||||||||
| Diluted – discontinued operations | $ | — | $ | (0.01 | ) | $ | (0.03 | ) | $ | (0.04 | ) | ||||||||||
|
Basic – attributable to Spectrum Group International |
$ | 0.08 | $ | (0.11 | ) | $ | 0.10 | $ | (0.04 | ) | |||||||||||
|
Diluted – attributable to Spectrum Group International |
$ | 0.08 | $ | (0.11 | ) | $ | 0.09 | $ | (0.04 | ) | |||||||||||
| Weighted average shares outstanding | |||||||||||||||||||||
| Basic - | 32,468 | 31,985 | 32,422 | 31,895 | |||||||||||||||||
| Diluted | 33,169 | 31,985 | 33,089 | 31,895 | |||||||||||||||||
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SPECTRUM GROUP INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited) |
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|
Three Months March 31, 2011 |
Nine Months March 31, 2010 |
||||||||||||
| (as restated) | |||||||||||||
| Cash flows from operating activities: | |||||||||||||
| Net income from continuing operations | $ | 5,197 | $ | 1,131 | |||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||
| Unrealized loss on foreign currency | 3,869 | (1,059) | |||||||||||
| Depreciation and amortization | 1,131 | 1,135 | |||||||||||
| Impairment of intangibles | 30 | — | |||||||||||
| Provision for bad debts | 74 | 59 | |||||||||||
| Provision for inventory reserve | 270 | 310 | |||||||||||
| Stock based compensation | 467 | 1,229 | |||||||||||
|
Gain on sales of marketable securities |
— | (135) | |||||||||||
| Loss on abandonment of property and equipment | — | 114 | |||||||||||
| Changes in assets and liabilities: | |||||||||||||
| Accounts receivable and consignor advances | (21,631) | (110) | |||||||||||
| Receivables and secured loans | (29,268) | 11,922 | |||||||||||
| Inventory | (61,179) | (13,178) | |||||||||||
| Prepaid expenses and other assets | (2,448) | (54) | |||||||||||
| Liabilities on borrowed metals | (28,256) | 18,452 | |||||||||||
| Accounts payable, accrued expenses and other liabilities | 76,917 | 17,734 | |||||||||||
| Income taxes | 379 | (443) | |||||||||||
| Deferred taxes | 105 | 184 | |||||||||||
| Accrued litigation settlement | (2,697) | — | |||||||||||
| Net cash (used in) provided by operating activities | (57,040) | 37,291 | |||||||||||
| Net cash (used in) provided by discontinued operating activities | (996) | 981 | |||||||||||
| Net cash (used in) provided by operating activities | (58,036) | (38,272) | |||||||||||
| Cash flows from investing activities: | |||||||||||||
| Capital expenditures for property and equipment | (819) | (714) | |||||||||||
| Cash paid for acquisition, net of cash acquired | (2,760) | (774) | |||||||||||
| Cash paid for other intangibles | — | (20) | |||||||||||
| Maturity of short term investments | 4,711 | 6,049 | |||||||||||
| Decrease in restricted cash | — | 650 | |||||||||||
| Sales of marketable securities | — | 1,049 | |||||||||||
| Net cash provided by (used in) investing activities | 1,132 | 6,240 | |||||||||||
| Net cash provided by (used in) discontinued investing activities | 125 | (12) | |||||||||||
| Net cash provided by investing activities | 1,257 | 6,228 | |||||||||||
| Cash flows from financing activities: | |||||||||||||
| Borrowings under lines-of-credit, net | 53,600 | (31,750) | |||||||||||
| Taxes paid on behalf of employees with respects to vesting restricted shares | (151) | (133) | |||||||||||
| Dividends paid to non-controlling interest | (2,500) | (1,000) | |||||||||||
| Net cash provided by (used in) financing activities | 50,949 | (32,883) | |||||||||||
| Effects of exchange rates on cash | 346 | (428) | |||||||||||
| Net increase in cash and cash equivalents | (5,484) | 11,189 | |||||||||||
| Cash and cash equivalents, beginning of period | 22,320 | 17,545 | |||||||||||
| Cash and cash equivalents, end of period | $ | 16,836 | $ | 28,734 | |||||||||
| Supplemental disclosures of cash flow information: | |||||||||||||
| Cash paid during the year for: | |||||||||||||
| Interest expense | $ | 707 | $ | 927 | |||||||||
| Income taxes | $ | 2,128 | $ | 1,440 | |||||||||
| Non-cash items | |||||||||||||
| Accrued purchase consideration | $ | 302 | $ | — | |||||||||
| Sale of Greg Martin Auction, LLC | $ | 200 | $ | — | |||||||||
| Acquisition of Stack’s Bowers Numismatics, LLC | $ | 3,498 | $ | — | |||||||||
