SPECTRUM GROUP INTERNATIONAL, INC. Files SEC form 10-Q, Quarterly Report
12-Feb-2010
Quarterly Report
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS
The discussion in this Item 2 and in Item 3 of this Quarterly Report ("Report") on Form 10-Q includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "1933 Act") and
Section 21E of the Securities Exchange Act of 1934, as amended (the "1934 Act"). Those Sections of the 1933 Act and 1934 Act provide a "safe harbor" for forward-looking statements to encourage companies to provide prospective information about their financial performance so long as they provide meaningful, cautionary statements identifying important factors that could cause actual results to differ from projected or anticipated results. Other than statements of historical fact, all statements in this Report and, in particular, any projections of or statements as to our expectations or beliefs concerning our future financial performance or financial condition or as to trends in our business or in our markets, are forward-looking statements. Forward-looking statements often include the words "believe," "expect," "anticipate," "intend," "plan," "estimate," "project," or words of similar meaning, or future or conditional verbs such as "will," "would," "should," "could," or "may." Our actual financial performance in future periods may differ significantly from the currently expected financial performance set forth in the forward-looking statements contained in this Report. The sections below entitled "Factors That Can Affect our Financial Position and Operating Results" and "Risks and Uncertainties That Could Affect our Future Financial Performance" describe some, but not all, of the factors and the risks and uncertainties that could cause these differences, and readers of this Report are urged to read those sections of this Report in their entirety and to review certain additional risk factors that are described in Item 1A of our Annual Report on Form 10-K (the "2009 Annual Report"), as filed by us with the Securities and Exchange Commission (the "SEC"), for the fiscal year ended June 30, 2009.
Due to these and other possible uncertainties and risks, readers are cautioned not to place undue reliance on the forward-looking statements contained in this Report, which speak only as of the date of this Report, or to make predictions about future performance based solely on historical financial performance. We also disclaim any obligation to update forward-looking statements contained in this Report or in our Annual Report on Form 10-K or any other prior filings with the SEC.
INTRODUCTION
Management's discussion and analysis of financial condition and results of operations is provided as a supplement to the accompanying consolidated statements and footnotes to help provide an understanding of our financial condition, the changes in our financial condition and the results of operations. Our discussion is organized as follows:
? Overview. This section provides a general description of our business, as well as recent significant transactions and events that we believe are important in understanding the results of operations, as well as to anticipate future trends in those operations.
? Results of operations. This section provides an analysis of our results of operations presented in the accompanying consolidated statements of operations by comparing the results for the three months and six months ended December 31, 2009 and 2008.
? Financial condition and liquidity and capital resources. This section provides an analysis of our cash flows, as well as a discussion of our outstanding debt that existed as of December 31, 2009. Included in the discussion of outstanding debt is a discussion of the amount of financial capacity available to fund our future commitments, as well as a discussion of other financing arrangements.
? Critical accounting estimates. This section discusses those accounting policies that both are considered important to our financial condition and results, and require significant judgment and estimates on the part of management in their application. In addition, all of our significant accounting policies, including critical accounting policies, are summarized in Note 1 to the accompanying consolidated financial statements.
? Recent accounting pronouncements. This section discusses new accounting pronouncements, dates of implementation and impact on our accompanying consolidated financial statements, if any.
Table of Contents
Overview
Business
We conduct our operations in two reporting segments: Trading and Collectibles. (Our reporting segments are defined in Note 14 of the Notes to Condensed Consolidated Financial Statements.) For the quarter ended December 31, 2009, our Trading and Collectibles segments reported revenues of $1.7 billion, or 97.5%, and $43.2 million, or 2.5%, compared to $973.3 million, or 96.4%, and $35.9 million, or 3.6%, respectively, for the quarter ended December 31, 2008. These segments achieved operating profits of $2.1 million and $1.5 million contributing to a consolidated operating income of $1.0 million during the current quarter compared to operating profits/(losses) of $8.5 million and $(0.6) million contributing to a consolidated operating income of $5.3 million during the same period of the prior year.
For the six months ended December 31, 2009, our Trading and Collectibles segments reported revenues of $2.6 billion, or 96.6%, and $90.8 million, or 3.4%, compared to $2.0 billion, or $96.4%, and $73.6 million, or 3.6%, respectively, for the six months ended December 31, 2008. These segments achieved operating profits of $4.0 million and $0.7 million contributing to a consolidated operating loss of $(0.4) million during the current year compared to operating profits/(losses) of $12.8 million and $(3.5) million contributing to a consolidated operating income of $5.5 million during the same period of the prior year.
Trading
Our Trading segment operates in the United States through A-Mark Precious Metals, Inc. ("A-Mark"). A-Mark is a distributor and service provider to consumers, wholesalers, retailers and dealers of precious metals throughout the world from facilities located in Santa Monica, California. A-Mark is a wholly owned subsidiary of Spectrum PMI, Inc., which in turn is 80% owned by the Company.
Collateral Finance Corporation ("CFC"), a licensed California Finance Lender and a wholly owned subsidiary of A-Mark, offers loans on precious metals, rare coins and other collectibles to coin dealers, collectors and investors. Collectibles
Our Collectibles segment is a global integrated network of companies with operations in North America, Europe and Asia as well as on the Internet. Our collectibles business is focused on philatelic (stamps) and numismatic
(coins) material, rare and fine vintage wine, and antique arms, armor and historical memorabilia. We primarily sell these materials, both owned and consigned, through our auction subsidiaries and through wholesale merchant/dealer relationships.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTSThe discussion in this Item 2 and in Item 3 of this Quarterly Report ("Report") on Form 10-Q includes "forward-looking statements" within the meaning ofSection 27A of the Securities Act of 1933, as amended (the "1933 Act") andSection 21E of the Securities Exchange Act of 1934, as amended (the "1934 Act"). Those Sections of the 1933 Act and 1934 Act provide a "safe harbor" for forward-looking statements to encourage companies to provide prospective information about their financial performance so long as they provide meaningful, cautionary statements identifying important factors that could cause actual results to differ from projected or anticipated results. Other than statements of historical fact, all statements in this Report and, in particular, any projections of or statements as to our expectations or beliefs concerning our future financial performance or financial condition or as to trends in our business or in our markets, are forward-looking statements. Forward-looking statements often include the words "believe," "expect," "anticipate," "intend," "plan," "estimate," "project," or words of similar meaning, or future or conditional verbs such as "will," "would," "should," "could," or "may." Our actual financial performance in future periods may differ significantly from the currently expected financial performance set forth in the forward-looking statements contained in this Report. The sections below entitled "Factors That Can Affect our Financial Position and Operating Results" and "Risks and Uncertainties That Could Affect our Future Financial Performance" describe some, but not all, of the factors and the risks and uncertainties that could cause these differences, and readers of this Report are urged to read those sections of this Report in their entirety and to review certain additional risk factors that are described in Item 1A of our Annual Report on Form 10-K (the "2009 Annual Report"), as filed by us with the Securities and Exchange Commission (the "SEC"), for the fiscal year ended June 30, 2009.Due to these and other possible uncertainties and risks, readers are cautioned not to place undue reliance on the forward-looking statements contained in this Report, which speak only as of the date of this Report, or to make predictions about future performance based solely on historical financial performance. We also disclaim any obligation to update forward-looking statements contained in this Report or in our Annual Report on Form 10-K or any other prior filings with the SEC.
INTRODUCTION
Management's discussion and analysis of financial condition and results of operations is provided as a supplement to the accompanying consolidated statements and footnotes to help provide an understanding of our financial condition, the changes in our financial condition and the results of operations. Our discussion is organized as follows:
Overview. This section provides a general description of our business, as well as recent significant transactions and events that we believe are important in understanding the results of operations, as well as to anticipate future trends in those operations.
Results of operations. This section provides an analysis of our results of operations presented in the accompanying consolidated statements of operations by comparing the results for the three months and six months ended December 31, 2009 and 2008.
Financial condition and liquidity and capital resources. This section provides an analysis of our cash flows, as well as a discussion of our outstanding debt that existed as of December 31, 2009. Included in the discussion of outstanding debt is a discussion of the amount of financial capacity available to fund our future commitments, as well as a discussion of other financing arrangements.
Critical accounting estimates. This section discusses those accounting policies that both are considered important to our financial condition and results, and require significant judgment and estimates on the part of management in their application. In addition, all of our significant accounting policies, including critical accounting policies, are summarized in Note 1 to the accompanying consolidated financial statements.
Recent accounting pronouncements. This section discusses new accounting pronouncements, dates of implementation and impact on our accompanying consolidated financial statements, if any.
Table of Contents
Overview
Business
We conduct our operations in two reporting segments: Trading and Collectibles. (Our reporting segments are defined in Note 14 of the Notes to Condensed Consolidated Financial Statements.) For the quarter ended December 31, 2009, our Trading and Collectibles segments reported revenues of $1.7 billion, or 97.5%, and $43.2 million, or 2.5%, compared to $973.3 million, or 96.4%, and $35.9 million, or 3.6%, respectively, for the quarter ended December 31, 2008. These segments achieved operating profits of $2.1 million and $1.5 million contributing to a consolidated operating income of $1.0 million during the current quarter compared to operating profits/(losses) of $8.5 million and $(0.6) million contributing to a consolidated operating income of $5.3 million during the same period of the prior year.
For the six months ended December 31, 2009, our Trading and Collectibles segments reported revenues of $2.6 billion, or 96.6%, and $90.8 million, or 3.4%, compared to $2.0 billion, or $96.4%, and $73.6 million, or 3.6%, respectively, for the six months ended December 31, 2008. These segments achieved operating profits of $4.0 million and $0.7 million contributing to a consolidated operating loss of $(0.4) million during the current year compared to operating profits/(losses) of $12.8 million and $(3.5) million contributing to a consolidated operating income of $5.5 million during the same period of the prior year.
Trading
Our Trading segment operates in the United States through A-Mark Precious Metals, Inc. ("A-Mark"). A-Mark is a distributor and service provider to consumers, wholesalers, retailers and dealers of precious metals throughout the world from facilities located in Santa Monica, California. A-Mark is a wholly owned subsidiary of Spectrum PMI, Inc., which in turn is 80% owned by the Company.
Collateral Finance Corporation ("CFC"), a licensed California Finance Lender and a wholly owned subsidiary of A-Mark, offers loans on precious metals, rare coins and other collectibles to coin dealers, collectors and investors. CollectiblesOur Collectibles segment is a global integrated network of companies with operations in North America, Europe and Asia as well as on the Internet. Our collectibles business is focused on philatelic (stamps) and numismatic(coins) material, rare and fine vintage wine, and antique arms, armor and historical memorabilia. We primarily sell these materials, both owned and consigned, through our auction subsidiaries and through wholesale merchant/dealer relationships.
