Spectrum Group International, Inc. Announces Fiscal Year 2012 Financial Results

IRVINE, Calif.--(BUSINESS WIRE)--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