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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ________ to ________

Commission File Number: 001-36347

 

img203160612_0.jpg 

A-MARK PRECIOUS METALS, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

(State of Incorporation)

 

11-2464169

(IRS Employer I.D. No.)

 

2121 Rosecrans Ave. Suite 6300
El Segundo, CA 90245

(Address of principal executive offices)(Zip Code)

(310) 587-1477

(Registrant’s Telephone Number, Including Area Code)

 

Securities registered pursuant to Section 12(b) of the Exchange Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value

AMRK

NASDAQ Global Select Market

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes. ☑ No. ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes. ☑ No. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes. ☐ No.

As of January 31, 2022, the registrant had 11,409,629 shares of common stock outstanding, par value $0.01 per share.

 

 

 

 


 

A-MARK PRECIOUS METALS, INC. AND SUBSIDIARIES

QUARTERLY REPORT ON FORM 10-Q

For the Six Months Ended December 31, 2021

TABLE OF CONTENTS

 

 

 

 

 

Page

PART I

 

 

 

 

 

Item 1.

Financial Statements

 

3

 

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

 

47

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

84

 

Item 4.

Controls and Procedures

 

84

 

 

 

 

 

PART II

 

 

 

 

 

Item 1.

Legal Proceedings

 

85

 

Item 1A.

Risk Factors

 

86

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

99

 

Item 3.

Defaults upon Senior Securities

 

99

 

Item 4.

Mine Safety Disclosures

 

99

 

Item 5.

Other Information

 

99

 

Item 6.

Exhibits

 

100

Signatures

 

 

 

101

 

2


 

PART I — FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

Index to the Condensed Consolidated Financial Statements and Notes thereof

 

 

Page

Condensed Consolidated Balance Sheets as of December 31, 2021 and June 30, 2021

4

Condensed Consolidated Statements of Income for the Three and Six Months Ended December 31, 2021 and 2020

6

Condensed Consolidated Statements of Stockholders' Equity for the Three and Six Months Ended December 31, 2021 and 2020

7

Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2021 and 2020

8

Notes to Condensed Consolidated Financial Statements

9

Note 1. Description of Business

9

Note 2. Summary of Significant Accounting Policies

10

Note 3. Assets and Liabilities, at Fair Value

21

Note 4. Receivables

23

Note 5. Secured Loans Receivable

24

Note 6. Inventories

26

Note 7. Property, Plant, and Equipment

27

Note 8. Goodwill and Intangible Assets

27

Note 9. Long-Term Investments

29

Note 10. Accounts Payable and Other Current Liabilities

29

Note 11. Derivative Instruments and Hedging Transactions

29

Note 12. Income Taxes

32

Note 13. Related Party Transactions

34

Note 14. Financing Agreements

36

Note 15. Commitments and Contingencies

38

Note 16. Stockholders' Equity

38

Note 17. Customer and Supplier Concentrations

41

Note 18. Segments and Geographic Information

42

Note 19. Subsequent Events

46

 

3


 

A-MARK PRECIOUS METALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except for share data)

 

 

 

December 31,
2021

 

 

June 30,
2021

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash(1)

 

$

19,352

 

 

$

101,405

 

Receivables, net

 

 

84,994

 

 

 

89,000

 

Derivative assets

 

 

24,728

 

 

 

44,536

 

Secured loans receivable(1)

 

 

126,303

 

 

 

112,968

 

Precious metals held under financing arrangements(1)

 

 

88,620

 

 

 

154,742

 

Inventories:

 

 

 

 

 

 

Inventories(1)

 

 

402,565

 

 

 

256,991

 

Restricted inventories

 

 

155,779

 

 

 

201,028

 

 

 

 

558,344

 

 

 

458,019

 

Prepaid expenses and other assets(1)

 

 

7,353

 

 

 

3,557

 

Total current assets

 

 

909,694

 

 

 

964,227

 

Operating lease right of use assets

 

 

7,063

 

 

 

5,702

 

Property, plant, and equipment, net

 

 

9,439

 

 

 

8,609

 

Goodwill

 

 

100,943

 

 

 

100,943

 

Intangibles, net

 

 

77,889

 

 

 

93,633

 

Long-term investments

 

 

30,904

 

 

 

18,467

 

Total assets

 

$

1,135,932

 

 

$

1,191,581

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Lines of credit

 

$

160,000

 

 

$

185,000

 

Liabilities on borrowed metals

 

 

67,434

 

 

 

91,866

 

Product financing arrangements

 

 

155,779

 

 

 

201,028

 

Accounts payable and other payables

 

 

7,447

 

 

 

5,935

 

Deferred revenue and other advances

 

 

158,365

 

 

 

194,416

 

Derivative liabilities

 

 

47,751

 

 

 

7,539

 

Accrued liabilities(1)

 

 

16,419

 

 

 

18,785

 

Income tax payable

 

 

1,343

 

 

 

5,016

 

Total current liabilities

 

 

614,538

 

 

 

709,585

 

Notes payable(1)

 

 

93,650

 

 

 

93,249

 

Deferred tax liabilities

 

 

16,331

 

 

 

19,514

 

Other liabilities

 

 

6,625

 

 

 

5,291

 

Total liabilities

 

 

731,144

 

 

 

827,639

 

Commitments and contingencies

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.01 par value, authorized 10,000,000 shares; issued
   and outstanding:
none as of December 31, 2021 and June 30, 2021

 

 

 

 

 

 

Common stock, par value $0.01; 40,000,000 shares authorized; 11,409,629
   and
11,229,657 shares issued and outstanding as of December 31, 2021
   and June 30, 2021, respectively

 

 

115

 

 

 

113

 

Additional paid-in capital

 

 

155,840

 

 

 

150,420

 

Retained earnings

 

 

247,269

 

 

 

212,090

 

Total A-Mark Precious Metals, Inc. stockholders’ equity

 

 

403,224

 

 

 

362,623

 

Noncontrolling interests

 

 

1,564

 

 

 

1,319

 

Total stockholders’ equity

 

 

404,788

 

 

 

363,942

 

Total liabilities, noncontrolling interests and stockholders’ equity

 

$

1,135,932

 

 

$

1,191,581

 

 

(1)
Includes amounts of the consolidated variable interest entity, which is presented separately in the table below.

 

See accompanying Notes to Condensed Consolidated Financial Statements

4


 

A-MARK PRECIOUS METALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands)

In September 2018, AM Capital Funding, LLC (“AMCF”), a wholly owned subsidiary of Collateral Finance Corporation (CFC”), completed an issuance of Secured Senior Term Notes, Series 2018-1, Class A in the aggregate principal amount of $72.0 million and Secured Subordinated Term Notes, Series 2018-1, Class B in the aggregate principal amount of $28.0 million (collectively, the "Notes"). The Class A Notes bear interest at a rate of 4.98% and the Class B Notes bear interest at a rate of 5.98%. The Notes have a maturity date of December 15, 2023.

The Company consolidates a variable interest entity ("VIE") if the Company is considered to be the primary beneficiary. AMCF is a VIE because its equity may be insufficient to maintain its on-going collateral requirements without additional financial support from the Company. The securitization is primarily secured by cash, bullion loans, and precious metals, and the Company is required to continuously hedge the value of certain collateral and make future contributions as necessary. The Company is the primary beneficiary of this VIE because the Company has the right to determine the type of collateral (i.e., cash, secured loans, or precious metals) placed into the entity, has the right to receive (and has received) the proceeds from the securitization transaction, earns on-going interest income from the secured loans (subject to collateral requirements), and has the obligation to absorb losses should AMCF's interest expense and other costs exceed its interest income.

The following table presents the assets and liabilities of this VIE, which are included in the condensed consolidated balance sheets above. The holders of the Notes have a first priority security interest in the assets as shown in the table below, which are in excess of the Notes' aggregate principal amount. Additionally, the liabilities of the VIE include intercompany balances, which are eliminated in consolidation. (See Note 14.)

 

 

 

December 31,
2021

 

 

 

June 30,
2021

 

ASSETS OF THE CONSOLIDATED VIE

 

 

 

 

 

 

 

Cash

 

$

2,556

 

 

 

$

2,877

 

Secured loans receivable

 

 

92,726

 

 

 

 

84,817

 

Precious metals held under financing arrangements

 

 

12,865

 

 

 

 

23,976

 

Inventories

 

 

 

 

 

 

2,532

 

Prepaid expenses and other assets

 

 

49

 

 

 

 

23

 

Total assets of the consolidated variable interest entity

 

$

108,196

 

 

 

$

114,225

 

LIABILITIES OF THE CONSOLIDATED VIE

 

 

 

 

 

 

 

Deferred payment obligations(1)

 

$

15,065

 

 

 

$

20,539

 

Accrued liabilities

 

 

963

 

 

 

 

847

 

Notes payable(2)

 

 

98,650

 

 

 

 

98,249

 

Total liabilities of the consolidated variable interest entity

 

$

114,678

 

 

 

$

119,635

 

 

 

 

 

 

 

 

 

 

(1)
This is an intercompany balance, which is eliminated in consolidation and hence is not shown on the consolidated balance sheets.
(2)
$5.0 million of the Notes are held by the Company, which is eliminated in consolidation and hence is not shown on the consolidated balance sheets.

 

See accompanying Notes to Condensed Consolidated Financial Statements

5


 

A-MARK PRECIOUS METALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except for share and per share data)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

December 31,
2021

 

 

December 31,
2020

 

 

December 31,
2021

 

 

 

December 31,
2020

 

Revenues

 

$

1,946,364

 

 

$

1,518,744

 

 

$

3,960,335

 

 

 

$

3,384,860

 

Cost of sales

 

 

1,880,441

 

 

 

1,499,993

 

 

 

3,838,403

 

 

 

 

3,329,964

 

Gross profit

 

 

65,923

 

 

 

18,751

 

 

 

121,932

 

 

 

 

54,896

 

Selling, general, and administrative expenses

 

 

(18,713

)

 

 

(8,528

)

 

 

(35,390

)

 

 

 

(18,033

)

Depreciation and amortization expense

 

 

(8,258

)

 

 

(505

)

 

 

(16,529

)

 

 

 

(1,006

)

Interest income

 

 

5,251

 

 

 

4,533

 

 

 

10,782

 

 

 

 

8,516

 

Interest expense

 

 

(5,395

)

 

 

(5,037

)

 

 

(10,868

)

 

 

 

(9,330

)

Earnings from equity method investments

 

 

1,220

 

 

 

2,362

 

 

 

2,709

 

 

 

 

6,488

 

Other income, net

 

 

433

 

 

 

205

 

 

 

842

 

 

 

 

564

 

Unrealized gains (losses) on foreign exchange

 

 

231

 

 

 

19

 

 

 

7

 

 

 

 

(78

)

Net income before provision for income taxes

 

 

40,692

 

 

 

11,800

 

 

 

73,485

 

 

 

 

42,017

 

Income tax expense

 

 

(8,753

)

 

 

(2,586

)

 

 

(15,422

)

 

 

 

(9,097

)

Net income

 

 

31,939

 

 

 

9,214

 

 

 

58,063

 

 

 

 

32,920

 

Net income attributable to noncontrolling interests

 

 

145

 

 

 

289

 

 

 

245

 

 

 

 

912

 

Net income attributable to the Company

 

$

31,794

 

 

$

8,925

 

 

$

57,818

 

 

 

$

32,008

 

Basic and diluted net income per share attributable
   to A-Mark Precious Metals, Inc.:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

2.79

 

 

$

1.26

 

 

$

5.11

 

 

 

$

4.53

 

Diluted

 

$

2.61

 

 

$

1.16

 

 

$

4.78

 

 

 

$

4.21

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

11,378,400

 

 

 

7,063,000

 

 

 

11,320,500

 

 

 

 

7,064,800

 

Diluted

 

 

12,192,100

 

 

 

7,713,300

 

 

 

12,100,700

 

 

 

 

7,610,400

 

 

 

See accompanying Notes to Condensed Consolidated Financial Statements

6


 

A-MARK PRECIOUS METALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in thousands, except for share data)

 

 

 

Common
Stock
(Shares)

 

 

Common
Stock

 

 

Additional
Paid-in
Capital

 

 

Retained
Earnings

 

 

Total
 A-Mark
Precious
Metals, Inc.
Stockholders'
Equity

 

 

Non-
Controlling
Interests

 

 

Total
Stockholders’
Equity

 

Balance, June 30, 2020

 

 

7,031,500

 

 

$

71

 

 

$

27,289

 

 

$

73,644

 

 

$

101,004

 

 

$

3,890

 

 

$

104,894

 

Net income

 

 

 

 

 

 

 

 

 

 

 

23,083

 

 

 

23,083

 

 

 

623

 

 

 

23,706

 

Share-based compensation

 

 

 

 

 

 

 

 

178

 

 

 

 

 

 

178

 

 

 

 

 

 

178

 

Net settlement on issuance of common shares on exercise of options

 

 

35,030

 

 

 

 

 

 

416

 

 

 

 

 

 

416

 

 

 

 

 

 

416

 

Dividends declared ($1.50 per common share)

 

 

 

 

 

 

 

 

 

 

 

(10,553

)

 

 

(10,553

)

 

 

-

 

 

 

(10,553

)

Balance, September 30, 2020

 

 

7,066,530

 

 

 

71

 

 

 

27,883

 

 

 

86,174

 

 

 

114,128

 

 

 

4,513

 

 

 

118,641

 

Net income

 

 

 

 

 

 

 

 

 

 

 

8,925

 

 

 

8,925

 

 

 

289

 

 

 

9,214

 

Share-based compensation

 

 

 

 

 

 

 

 

210

 

 

 

 

 

 

210

 

 

 

 

 

 

210

 

Net settlement on issuance of common shares on exercise of options

 

 

64,932

 

 

 

1

 

 

 

1,000

 

 

 

 

 

 

1,001

 

 

 

 

 

 

1,001

 

Dividends declared ($1.50 per common share)

 

 

 

 

 

 

 

 

 

 

 

(10,638

)

 

 

(10,638

)

 

 

 

 

 

(10,638

)

Balance, December 31, 2020

 

 

7,131,462

 

 

$

72

 

 

$

29,093

 

 

$

84,461

 

 

$

113,626

 

 

$

4,802

 

 

$

118,428

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2021

 

 

11,229,657

 

 

$

113

 

 

$

150,420

 

 

$

212,090

 

 

$

362,623

 

 

$

1,319

 

 

$

363,942

 

Net income

 

 

 

 

 

 

 

 

 

 

 

26,024

 

 

 

26,024

 

 

 

100

 

 

 

26,124

 

Share-based compensation

 

 

 

 

 

 

 

 

473

 

 

 

 

 

 

473

 

 

 

 

 

 

473

 

Net settlement on issuance of common shares on exercise of options

 

 

60,650

 

 

 

 

 

 

749

 

 

 

 

 

 

749

 

 

 

 

 

 

749

 

Common stock issued for increase in long term investment

 

 

61,590

 

 

 

1

 

 

 

2,977

 

 

 

 

 

 

2,978

 

 

 

 

 

 

2,978

 

Dividends declared ($2.00 per common share)

 

 

 

 

 

 

 

 

 

 

 

(22,639

)

 

 

(22,639

)

 

 

 

 

 

(22,639

)

Balance, September 30, 2021

 

 

11,351,897

 

 

 

114

 

 

 

154,619

 

 

 

215,475

 

 

 

370,208

 

 

 

1,419

 

 

 

371,627

 

Net income

 

 

 

 

 

 

 

 

 

 

 

31,794

 

 

 

31,794

 

 

 

145

 

 

 

31,939

 

Share-based compensation

 

 

 

 

 

 

 

 

582

 

 

 

 

 

 

582

 

 

 

 

 

 

582

 

Net settlement on issuance of common shares on exercise of options

 

 

57,732

 

 

 

1