UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
OR
For the transition period from ________ to ________
Commission File Number:
(Exact name of registrant as specified in its charter)
(State of Incorporation) |
|
(IRS Employer I.D. No.) |
(Address of principal executive offices) (Zip Code)
(
(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 |
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.
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).
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 |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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 May 2, 2023, the registrant had
1
A-MARK PRECIOUS METALS, INC. AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
For the Quarterly Period Ended March 31, 2023
TABLE OF CONTENTS
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PART I |
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3 |
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Item 1. |
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3 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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46 |
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Item 3. |
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83 |
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Item 4. |
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84 |
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PART II |
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Item 1. |
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84 |
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Item 1A. |
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84 |
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Item 2. |
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98 |
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Item 3. |
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98 |
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Item 4. |
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98 |
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Item 5. |
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98 |
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Item 6. |
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99 |
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2
PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Index to the Condensed Consolidated Financial Statements and Notes thereof
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Condensed Consolidated Balance Sheets as of March 31, 2023 and June 30, 2022 |
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6 |
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7 |
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Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2023 and 2022 |
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30 |
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46 |
3
A-MARK PRECIOUS METALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except for share data)
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March 31, 2023 |
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June 30, 2022 |
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(unaudited) |
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ASSETS |
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Current assets |
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Cash(1) |
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$ |
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$ |
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Receivables, net |
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Derivative assets |
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Secured loans receivable(1) |
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Precious metals held under financing arrangements(1) |
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Inventories: |
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Inventories(1) |
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Restricted inventories |
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Income tax receivable |
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Prepaid expenses and other assets(1) |
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Total current assets |
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Operating lease right of use assets |
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Property, plant, and equipment, net |
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Goodwill |
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Intangibles, net |
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Long-term investments |
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Other long-term assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities |
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Lines of credit |
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$ |
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$ |
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Liabilities on borrowed metals |
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Product financing arrangements |
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Accounts payable and other payables |
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Deferred revenue and other advances |
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Derivative liabilities |
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Accrued liabilities(1) |
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Income tax payable |
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Notes payable(1) |
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Total current liabilities |
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Notes payable (2) |
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Deferred tax liabilities |
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Other liabilities |
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Total liabilities |
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Stockholders’ equity |
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Preferred stock, $ |
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Common stock, par value $ |
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Treasury stock, |
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— |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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( |
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— |
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Retained earnings |
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Total A-Mark Precious Metals, Inc. stockholders’ equity |
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Noncontrolling interest |
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Total stockholders’ equity |
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Total liabilities, noncontrolling interest and stockholders’ equity |
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$ |
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$ |
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See accompanying Notes to the Condensed Consolidated Financial Statements
4
A-MARK PRECIOUS METALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands; unaudited)
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 $
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 AMCF Notes have a first priority security interest in the assets as shown in the table below, which are in excess of the AMCF Notes' aggregate principal amount. Additionally, the liabilities of the VIE include intercompany balances, which are eliminated in consolidation. (See Note 15.)
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March 31, 2023 |
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June 30, 2022 |
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ASSETS OF THE CONSOLIDATED VIE |
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Cash |
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$ |
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$ |
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Secured loans receivable |
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Precious metals held under financing arrangements |
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Inventories |
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Prepaid expenses and other assets |
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Total assets of the consolidated variable interest entity |
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$ |
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$ |
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LIABILITIES OF THE CONSOLIDATED VIE |
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Deferred payment obligations(1) |
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$ |
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$ |
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Accrued liabilities |
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Notes payable(2) |
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Total liabilities of the consolidated variable interest entity |
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$ |
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$ |
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See accompanying Notes to the 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; unaudited)
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Three Months Ended March 31, |
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Nine Months Ended March 31, |
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2023 |
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2022 |
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2023 |
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2022 |
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Revenues |
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$ |
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$ |
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$ |
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$ |
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Cost of sales |
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Gross profit |
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Selling, general, and administrative expenses |
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( |
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( |
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( |
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( |
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Depreciation and amortization expense |
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( |
) |
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( |
) |
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( |
) |
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( |
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Interest income |
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Interest expense |
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( |
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( |
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( |
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( |
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Earnings (losses) from equity method investments |
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( |
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Other income, net |
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Unrealized gains (losses) on foreign exchange |
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( |
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Net income before provision for income taxes |
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Income tax expense |
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( |
) |
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( |
) |
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( |
) |
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( |
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Net income |
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Net income attributable to noncontrolling interest |
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Net income attributable to the Company |
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$ |
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$ |
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$ |
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$ |
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Basic and diluted net income per share attributable |
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Basic |
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$ |
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$ |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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$ |
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$ |
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Weighted average shares outstanding: |
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Basic |
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Diluted |
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See accompanying Notes to the Condensed Consolidated Financial Statements
6
A-MARK PRECIOUS METALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands, except for share data; unaudited)
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Common Stock |
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Additional Paid-in |
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Retained |
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Accumulated other comprehensive |
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Treasury Stock |
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Total A-Mark Precious Metals, Inc. Stockholders' |
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Non-controlling |
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Total Stockholders’ |
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Shares |
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Amount |
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Capital |
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Earnings |
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income (loss) |
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Shares |
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Amount |
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Equity |
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Interest |
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Equity |
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Balance, June 30, 2021 |
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$ |
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$ |
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$ |
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$ |
— |
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— |
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$ |
— |
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$ |
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$ |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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— |
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— |
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Share-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Exercise of share-based awards |
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— |
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— |
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— |
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— |
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— |
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— |
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Net settlement of share-based awards |
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— |
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( |
) |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Common stock issued for increase in long-term investments |
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— |
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— |
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— |
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— |
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— |
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Dividends declared ($ |
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— |
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— |
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— |
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( |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
Balance, September 30, 2021 |
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— |
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— |
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— |
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Net income |
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— |
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— |
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— |
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— |
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— |
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— |
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Share-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Exercise of share-based awards |
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— |
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— |
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— |
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— |
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— |
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— |
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Net settlement of share-based awards |
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( |
) |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
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Balance, December 31, 2021 |
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— |
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— |
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— |
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Net income |
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— |
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— |
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— |
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— |
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— |
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— |
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Share-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Exercise of share-based awards |
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— |
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— |
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— |
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— |
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— |
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Net settlement of share-based awards |
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— |
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( |
) |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
|
Balance, March 31, 2022 |
|
|
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$ |
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$ |
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$ |
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$ |
— |
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— |
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$ |
— |
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$ |
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$ |
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$ |
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|||||||
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||||||||||
Balance, June 30, 2022 |
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$ |
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$ |
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$ |
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$ |
— |
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— |
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$ |
— |
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$ |
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$ |
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$ |
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|||||||
Net income |
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— |
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— |
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— |
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— |
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— |
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— |
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||||
Share-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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|||
Earnings distribution paid to noncontrolling interest |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( | ) |
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( | ) |
Cumulative translation adjustment, net of tax |
|
— |
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— |
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— |
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— |
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— |
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— |
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— |
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|
|
|||
Common stock issued as employee compensation |
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Exercise of share-based awards |
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Net settlement of share-based awards |
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
||
Dividends declared ($ |
|
— |
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
Dividends declared ($ |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Balance, September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||||||
Net income |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Share-based compensation |
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Cumulative translation adjustment, net of tax |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Exercise of share-based awards |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||||
Net settlement of share-based awards |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Balance, December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||||||
Net income |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Share-based compensation |
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Cumulative translation adjustment, net of tax |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Exercise of share-based awards |
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Repurchases of common stock |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Dividends declared ($ |
|
— |
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
Balance, March 31, 2023 |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
|
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
See accompanying Notes to the Condensed Consolidated Financial Statements
7
A-MARK PRECIOUS METALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands; unaudited)
|
|
Nine Months Ended March 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
||
Net income |
|
$ |
|
|
$ |
|
||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
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|
||
Amortization of loan cost |
|
|
|
|
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|
||
Deferred income taxes |
|
|
( |
) |
|
|
( |
) |
Interest added to principal of secured loans |
|
|
( |
) |
|
|
( |
) |
Share-based compensation |
|
|
|
|
|
|
||
Write-down of digital assets |
|
|
|
|
|
|
||
Earnings from equity method investments |
|
|
( |
) |
|
|
( |
) |
Dividends received from equity method investees |
|
|
|
|
|
|
||
Changes in assets and liabilities: |
|
|
|
|
|
|
||
Receivables |
|
|
|
|
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|
||
Secured loans receivable |
|
|
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|
||
Secured loans made to affiliates |
|
|
|
|
|
( |
) |
|
Derivative assets |
|
|
|
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|
|
||
Income tax receivable |
|
|
( |
) |
|
|
|
|
Precious metals held under financing arrangements |
|
|
|
|
|
|
||
Inventories |
|
|
( |
) |
|
|
( |
) |
Prepaid expenses and other assets |
|
|
( |
) |
|
|
( |
) |
Accounts payable and other payables |
|
|
|
|
|
|
||
Deferred revenue and other advances |
|
|
|
|
|
( |
) |
|
Derivative liabilities |
|
|
|
|
|
|
||
Liabilities on borrowed metals |
|
|
( |
) |
|
|
( |
) |
Accrued liabilities |
|
|
( |
) |
|
|
|
|
Income tax payable |
|
|
( |
) |
|
|
( |
) |
Net cash provided by (used in) operating activities |
|
|
|
|
|
( |
) |
|
Cash flows from investing activities: |
|
|
|
|
|
|
||
Capital expenditures for property, plant, and equipment |
|
|
( |
) |
|
|
( |
) |
Purchase of long-term investments |
|
|
( |
) |
|
|
( |
) |
Purchase of intangible assets |
|
|
( |
) |
|
|
|
|
Secured loans receivable, net |
|
|
|
|
|
( |
) |
|
Purchase of digital assets |
|
|
|
|
|
( |
) |
|
Net cash provided by (used in) investing activities |
|
|
|
|
|
( |
) |
|
Cash flows from financing activities: |
|
|
|
|
|
|
||
Product financing arrangements, net |
|
|
|
|
|
( |
) |
|
Dividends paid |
|
|
( |
) |
|
|
( |
) |
Distributions paid to noncontrolling interest |
|
|
( |
) |
|
|
|
|
Net borrowings and repayments under lines of credit |
|
|
|
|
|
|
||
Repayments on notes payable to related party |
|
|
( |
) |
|
|
|
|
Repurchases of common stock |
|
|
( |
) |
|
|
|
|
Proceeds from issuance of related party note |
|
|
|
|
|
|
||
Debt funding issuance costs |
|
|
( |
) |
|
|
( |
) |
Proceeds from the exercise of share-based awards |
|
|
|
|
|
|
||
Payments for tax withholding related to net settlement of share-based awards |
|
|
( |
) |
|
|
( |
) |
Net cash (used in) provided by financing activities |
|
|
( |
) |
|
|
|
|
Net increase (decrease) in cash |
|
|
|
|
|
( |
) |
|
Cash, beginning of period |
|
|
|
|
|
|
||
Cash, end of period |
|
$ |
|
|
$ |
|
||
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
||
Cash paid during the period for: |
|
|
|
|
|
|
||
Interest paid |
|
$ |
|
|
$ |
|
||
Income taxes paid |
|
$ |
|
|
$ |
|
||
Income taxes refunded |
|
$ |
( |
) |
|
$ |
|
|
Non-cash investing and financing activities: |
|
|
|
|
|
|
||
Declared distributions and unpaid dividends |
|
$ |
|
|
$ |
|
||
Fair value of shares exchanged for increase in long-term investment |
|
$ |
|
|
$ |
|
||
Addition of right of use assets under operating lease obligations |
|
$ |
|
|
$ |
|
See accompanying Notes to the Condensed Consolidated Financial Statements
8
A-MARK PRECIOUS METALS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. DESCRIPTION OF BUSINESS
Basis of Presentation
The condensed consolidated financial statements comprise those of A-Mark Precious Metals, Inc. ("A-Mark", also referred to as "we", "us", and the "Company"), its wholly-owned consolidated subsidiaries (including a wholly-owned variable interest entity), and its joint venture in which the Company has a controlling interest.
Business Segments
The Company conducts its operations in
Wholesale Sales & Ancillary Services
The Company operates its Wholesale Sales & Ancillary Services segment directly and through its wholly-owned subsidiaries, A-Mark Trading AG (“AMTAG”), Transcontinental Depository Services, LLC ("TDS" or “Storage”), A-M Global Logistics, LLC (“AMGL” or "Logistics"), and AM&ST Associates, LLC ("AMST" or the "Silver Towne Mint").
The Wholesale Sales & Ancillary Services segment operates as a full-service precious metals company. We offer gold, silver, platinum, and palladium in the form of bars, plates, powder, wafers, grain, ingots, and coins. Our Industrial unit services manufacturers and fabricators of products utilizing or incorporating precious metals. Our Coin and Bar unit deals in over
Through its wholly-owned subsidiary AMTAG, the Company promotes A-Mark's products and services to the international market. Through our wholly-owned subsidiary TDS, we offer a variety of managed storage options for precious metals products to financial institutions, dealers, investors, and collectors around the world.
The Company's wholly-owned subsidiary AMGL is based in Las Vegas, Nevada, and provides our customers an array of complementary services, including receiving, handling, inventorying, processing, packing, and shipping of precious metals and custom coins on a secure basis.
Through its wholly-owned subsidiary AMST, the Company designs and produces minted silver products. Our Silver Towne Mint operations allow us to provide greater product selection to our customers as well as to gain increased access to silver during volatile market environments, which have historically created higher demand for precious metals products.
Direct-to-Consumer
The Company operates its Direct-to-Consumer segment through its wholly-owned subsidiaries JM Bullion, Inc. (“JMB”) and Goldline, Inc. (“Goldline”). As of March 31, 2023, JMB has six wholly-owned subsidiaries: Buy Gold and Silver Corp. ("BGASC"), Gold Price Group, Inc. (“GPG”), Silver.com, Inc. (“Silver.com”), Goldline Metal Buying Corp. (“GMBC”), Provident Metals Corp. (“PMC”), and Cybermetals Corp. ("CyberMetals"). Goldline, Inc. owns 100% of AMIP, LLC ("AMIP"), and has a
JM Bullion, Inc.
JMB is a leading e-commerce retailer providing access to a broad array of gold, silver, copper, platinum, and palladium products through its websites. As of March 31, 2023, JMB operated seven separately branded, company-owned websites targeting specific niches within the precious metals retail market, including JMBullion.com, ProvidentMetals.com, Silver.com, BGASC.com, Cybermetals.com, GoldPrice.org, and SilverPrice.org. Typically, JMB offers approximately
9
In April 2022, JMB commercially launched the CyberMetals online platform, where customers can purchase and sell fractional shares of digital gold, silver, platinum, and palladium bars in a range of denominations. CyberMetals’ customers have the option to convert their digital holdings to fabricated precious metals products via an integrated redemption flow with JMB. These products may be designated for storage by the Company or shipped directly to the customer.
Goldline, Inc.
The Company acquired Goldline in August 2017 through an asset purchase transaction with Goldline, LLC, which had been in operation since 1960. Goldline is a direct retailer of precious metals to the investor community, and markets its precious metal products on television, radio, and the internet, as well as through customer service outreach. Goldline’s subsidiary AMIP manages its intellectual property. PMPP was formed in fiscal 2019 pursuant to terms of a joint venture agreement, for the purpose of purchasing precious metals from the partners' retail customers, and then reselling the acquired products back to affiliates of the partners. PMPP commenced its operations in fiscal 2020.
Secured Lending
The Company operates its Secured Lending segment through its wholly-owned subsidiary, Collateral Finance Corporation, LLC, including its two wholly-owned subsidiaries AM Capital Funding, LLC (“AMCF”) and CFC Alternative Investments (“CAI”), (collectively “CFC”).
CFC is a California licensed finance lender that originates and acquires commercial loans secured primarily by bullion and numismatic coins. CFC's customers include coin and precious metal dealers, investors, and collectors.
AMCF, a wholly-owned subsidiary of CFC, was formed for the purpose of securitizing eligible secured loans of CFC. AMCF issued and administers the AMCF Notes. (See Note 15.)
CAI is a holding company that has a
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The condensed consolidated financial statements reflect the financial condition, results of operations, statements of stockholders’ equity, and cash flows of the Company, and were prepared using accounting principles generally accepted in the United States (“U.S. GAAP”). The Company consolidates its subsidiaries that are wholly-owned, and majority owned, and entities that are variable interest entities where the Company is determined to be the primary beneficiary. The Company’s condensed consolidated financial statements include the accounts of: A-Mark, AMTAG, TDS, AMGL, AMST, JMB, Goldline, and CFC. Intercompany accounts and transactions are eliminated.
Comprehensive Income
Our other comprehensive income and losses are comprised of unrealized gains and losses associated with the translation of foreign-based equity method investments which are shown in our condensed consolidated statements of stockholders' equity.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting periods. These estimates include, among others, determination of fair value (primarily, with respect to precious metal inventory, derivatives, certain financial instruments, and certain investments), impairment assessments of property, plant and equipment and intangible assets, valuation allowance determination on deferred tax assets, determining the incremental borrowing rate for calculating right of use assets and lease liabilities, and revenue recognition judgments. Actual results could materially differ from these estimates.
Reclassification
In our condensed consolidated statements of stockholders' equity, we present (i) exercise of share-based awards and (ii) net settlement of share-based awards and in our condensed consolidated statements of cash flows, we present (i) proceeds from the exercise of share-based awards and (ii) payments for tax withholding related to net settlement of share-based awards as separate line-items. In prior fiscal years the aggregate amounts were presented in a single line-item, as net settlement on issuance of common shares on exercise of shared-based awards.
10
Prior periods have been reclassified to conform to the current period presentation. This reclassification has no impact on previously reported net income, financial position, or cash flows.
Unaudited Interim Financial Information
The accompanying interim condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting. These interim condensed consolidated financial statements are unaudited and, in the opinion of management, include all adjustments (consisting of normal recurring adjustments and accruals) necessary to present fairly the condensed consolidated balance sheets, condensed consolidated statements of income, condensed consolidated statements of stockholders’ equity, and condensed consolidated statements of cash flows for the periods presented in accordance with U.S. GAAP. Operating results for the three and nine months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2023 or for any other interim period during such fiscal year. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP have been omitted in accordance with the rules and regulations of the SEC. These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2022 (the “2022 Annual Report”), as filed with the SEC. Amounts related to disclosure of June 30, 2022 balances within these interim condensed consolidated financial statements were derived from the audited consolidated financial statements and notes thereto included in the 2022 Annual Report.
Stock Split in the Form of a Dividend
On April 28, 2022, the Company’s board of directors declared a two-for-one split of A-Mark’s common stock in the form of a stock dividend. Each stockholder of record at the close of business on May 23, 2022 received a dividend of one additional share of common stock for every share held on the record date, which was distributed on June 6, 2022. All share and per share amounts (except par value) have been retroactively adjusted to reflect the stock split in the form of a stock dividend for all periods presented.
Dividends are recorded if and when they are declared by the board of directors (see Note 17).
Fair Value Measurement
The Fair Value Measurements and Disclosures Topic 820 of the ASC ("ASC 820") creates a single definition of fair value for financial reporting. The rules associated with ASC 820 state that valuation techniques consistent with the market approach, income approach, and/or cost approach should be used to estimate fair value. Selection of a valuation technique, or multiple valuation techniques, depends on the nature of the asset or liability being valued, as well as the availability of data. (See Note 3.)
Concentration of Credit Risk
Cash is maintained at financial institutions, and, at times, balances may exceed federally insured limits. The Company has not experienced any losses related to these balances.
Assets that potentially subject the Company to concentrations of credit risk consist principally of receivables, loans of inventory to customers, and inventory hedging transactions. Based on an assessment of credit risk, the Company typically grants collateralized credit to its customers. Credit risk with respect to loans of inventory to customers is minimal. The Company enters into inventory hedging transactions, principally utilizing metals commodity futures contracts traded on national futures exchanges or forward contracts with credit worthy financial institutions. All of our commodity derivative contracts are under master netting arrangements and include both asset and liability positions. Substantially all of these transactions are secured by the underlying metals positions.
Foreign Currency
The functional currency of the Company is the United States dollar ("USD"). All transactions in foreign currencies are recorded in US dollars at the then-current exchange rate(s). Upon settlement of the underlying transaction, all amounts are remeasured to US dollars at the current exchange rate on date of settlement. All unsettled foreign currency transactions that remain in accounts receivable and trade account payables are remeasured to US dollars at the period end exchange rates. All remeasurement gains and losses are recorded in the current period net income.
The Company's wholly-owned foreign subsidiary, AMTAG, also generates remeasurement gains and losses. AMTAG functions as the Company’s international sales and marketing support and has a functional currency of USD, but maintains its books of record in the European Union Euro.
11
For the Company’s foreign-based equity method investments, the proportionate share of the investee’s income is translated into U.S. dollars at the average exchange rate for the period and the investment is translated using the exchange rate as of the end of the reporting period. The unrealized gains and losses associated with the translation of the investment are deferred in accumulated other comprehensive income on the Company’s condensed consolidated balance sheets.
To manage the effect of foreign currency exchange fluctuations, the Company utilizes foreign currency forward contracts. These derivatives generate gains and losses when settled and/or marked-to-market.
Business Combination
The Company accounts for business combinations by applying the acquisition method in accordance with Business Combinations Topic 805 of the ASC (“ASC 805”). The Company evaluates each purchase transaction to determine whether the acquired assets meet the definition of a business. Transaction costs related to the acquisition of a business are expensed as incurred and excluded from the fair value of consideration transferred. The identifiable assets acquired, liabilities assumed and noncontrolling interests, if any, in an acquired entity are recognized and measured at their estimated fair values. The excess of the fair value of consideration transferred over the fair values of identifiable assets acquired, liabilities assumed and noncontrolling interests, if any, in an acquired entity is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets and liabilities. Net cash paid to acquire a business is classified as investing activities on the accompanying condensed consolidated statements of cash flows.
Variable Interest Entity
A variable interest entity ("VIE") is a legal entity that has either (i) a total equity investment that is insufficient to finance its activities without additional subordinated financial support or (ii) whose equity investors as a group lack the ability to control the entity’s activities or lack the ability to receive expected benefits or absorb obligations in a manner that is consistent with their investment in the entity.
A VIE is consolidated for accounting purposes by its primary beneficiary, which is the party that has both the power to direct the activities that most significantly impact the VIE's economic performance, and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. The Company consolidates VIEs when it is deemed to be the primary beneficiary. Management regularly reviews and re-evaluates its previous determinations regarding whether it holds a variable interest in potential VIEs, the status of an entity as a VIE, and whether the Company is required to consolidate such VIEs in its condensed consolidated financial statements.
AMCF, a wholly owned subsidiary of CFC, is a special purpose entity ("SPE") formed as part of a securitization transaction in order to isolate certain assets and distribute the cash flows from those assets to investors. AMCF was structured to insulate investors from claims on AMCF’s assets by creditors of other entities. The Company has various forms of on-going involvement with AMCF, which may include (i) holding senior or subordinated interests in AMCF; (ii) acting as loan servicer for a portfolio of loans held by AMCF; and (iii) providing administrative services to AMCF. AMCF is required to maintain separate books and records. The assets and liabilities of this VIE, as of March 31, 2023 and June 30, 2022, are indicated on the table that follows the condensed consolidated balance sheets.
AMCF is considered a VIE because its initial equity investment may be insufficient to maintain its on-going collateral requirements without additional financial support from the Company. The securitization is primarily secured by 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), 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. (See Note 15.)
12
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less, when purchased, to be cash equivalents. The Company did not have any cash equivalents as of March 31, 2023 and June 30, 2022.
Allowance for Credit Losses
On
The Company sets credit and position risk limits based on management's judgements of the customer's creditworthiness and regularly monitors its credit arrangements. These limits include gross position limits for counterparties engaged in sales and purchase transactions with the Company. They also include collateral limits for different types of sale and purchase transactions that counterparties may engage in from time to time.
ASC 326 provides a practical expedient for assets secured by collateral when repayment is expected to be provided substantially through the sale of the collateral in the event of the borrower's financial difficulty. In these arrangements, a reporting entity may estimate the expected credit losses by comparing the fair value of the collateral as of the balance sheet date to the asset’s amortized cost basis. In situations when the fair value of the collateral is equal to or greater than the amortized cost, a reporting entity may determine that there are no expected credit losses. The Company applies the practical expedient based on collateral maintenance provisions in estimating an allowance for credit losses for its secured loan receivables activity. The Company has not historically experienced credit losses related to its lending activity, and since it does not expect any future losses, no allowance has been recorded for this asset class.
The Company has not historically experienced credit losses related to its other receivables activity; including (i) customer trade receivables, (ii) wholesale trade advances, and (iii) due from brokers, and, accordingly, no allowance has been recorded for these asset classes.
Precious Metals held under Financing Arrangements
The Company enters into arrangements with certain customers under which A-Mark purchases precious metals from the customers which are subject to repurchase by the customer at the spot value of the product on the repurchase date. The precious metals purchased under these arrangements consist of rare and unique items, and therefore the Company accounts for these transactions as precious metals held under financing arrangements, which generate financing income rather than revenue earned from precious metals inventory sales. In these repurchase arrangements, the Company holds legal title to the metals and earns financing income for the duration of the agreement.
These arrangements are typically terminable by either party upon
The Company’s precious metals held under financing arrangements are marked-to-market.
Inventories
The Company's inventory, which consists primarily of bullion and bullion coins, is acquired and initially recorded at cost and then marked to fair market value. The fair market value of the bullion and bullion coins comprises two components: (i) published market values attributable to the cost of the raw precious metal, and (ii) the premium paid at acquisition of the metal, which is attributable to the incremental value of the product in its finished goods form. The market value attributable solely to such premium is readily determinable by reference to multiple reputable published sources.
The Company’s inventory, except for certain lower of cost or net realizable value basis products (as discussed below), are subsequently recorded at their fair market values, that is, "marked-to-market." The daily changes in the fair market value of our inventory are offset by daily changes in the fair market value of hedging derivatives that are taken with respect to our inventory positions; both the change in the fair market value of the inventory and the change in the fair market value of these derivative instruments are recorded in cost of sales in the condensed consolidated statements of income.
13
While the premium component included in inventory is marked-to-market, our commemorative coin inventory, including its premium component, is held at the lower of cost or net realizable value, because the value of commemorative coins is influenced more by supply and demand determinants than on the underlying spot price of the precious metal content of the commemorative coins. Unlike our bullion coins, the value of commemorative coins is not subject to the same level of volatility as bullion coins because our commemorative coins typically carry a substantially higher premium over the spot metal price than bullion coins. Neither the commemorative coin inventory nor the premium component of our inventory is hedged. (See Note 6.)
Leased Right of Use Assets
We lease warehouse space, office facilities, and equipment. Our operating leases with terms longer than twelve months are recorded at the sum of the present value of the lease's fixed minimum payments as operating lease right of use assets ("ROU assets") in the Company’s condensed consolidated balance sheets. Lease terms include all periods covered by renewal and termination options where the Company is reasonably certain to exercise the renewal options or not to exercise the termination options. Our lease agreements do not contain any significant residual value guarantees or material restrictive covenants. Our finance leases are another type of ROU asset, but are classified in the Company’s condensed consolidated balance sheets as a component of property, plant, and equipment at the present value of the lease payments. The Company has insignificant finance lease activity at this time.
The ROU asset amounts include any initial direct costs incurred and lease payments made at or before the commencement date and are reduced by lease incentives. We use our incremental borrowing rate as the discount rate to determine the present value of the lease payments for leases, as our leases do not have readily determinable implicit discount rates. Our incremental borrowing rate is the rate of interest that we would incur to borrow on a collateralized basis over a similar term and amount in a similar economic environment.
Operating lease cost is recognized on a straight-line basis over the lease term. The depreciable life of ROU assets is limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. (See Note 7.)
For a lease modification, an evaluation is performed to determine if it should be treated as either a separate lease or a change in the accounting of an existing lease. Any amounts related to a modified lease are reflected as an operating lease ROU asset or related operating lease liability in our condensed consolidated balance sheet.
Property, Plant, and Equipment
Property, plant, and equipment is stated at cost less accumulated depreciation and amortization. Depreciation and amortization are calculated using a straight-line method based on the estimated useful lives of the related assets, ranging from
The Company reviews the carrying value of these assets for impairment whenever events and circumstances indicate that the carrying value of the asset may not be recoverable. In evaluating for impairment, the carrying value of each asset or group of assets is compared to the undiscounted estimated future cash flows expected to result from its use and eventual disposition. An impairment loss is recognized for the difference when the carrying value exceeds the discounted estimated future cash flows. The factors considered by the Company in performing this assessment include current and projected operating results, trends and prospects, the manner in which these assets are used, and the effects of obsolescence, demand and competition, as well as other economic factors.
Finite-lived Intangible Assets
Finite-lived intangible assets consist primarily of customer relationships, non-compete agreements, and employment contracts. Existing customer relationships intangible assets are amortized in a manner reflecting the pattern in which the economic benefits of the assets are consumed. All other intangible assets subject to amortization are amortized using the straight-line method over their useful lives, which are estimated to be
Goodwill and Indefinite-lived Intangible Assets
Goodwill is recorded when the purchase price paid for an acquisition exceeds the estimated fair value of the net identified tangible and intangible assets acquired. Goodwill and other indefinite-lived intangibles (such as trade names and trademarks) are not subject to amortization, but are evaluated for impairment at least annually. However, for tax purposes, goodwill acquired in connection with a taxable asset acquisition is generally deductible.
14
The Company evaluates its goodwill and other indefinite-lived intangibles for impairment in the fourth quarter of the fiscal year (or more frequently if indicators of potential impairment exist) in accordance with ASC 350. Goodwill is reviewed for impairment at a reporting unit level, which for the Company, corresponds to the Company’s reportable operating segments.
Evaluation of goodwill for impairment
The Company has the option to first qualitatively assess whether relevant events and circumstances make it more likely than not that the fair value of the reporting unit's goodwill is less than its carrying value. A qualitative assessment includes analyzing current economic indicators associated with a particular reporting unit such as changes in economic, market and industry conditions, business strategy, cost factors, and financial performance, among others, to determine if there would be a significant decline to the fair value of a particular reporting unit. If the qualitative assessment indicates it is not more likely than not that goodwill is impaired, no further testing is required.
If, based on this qualitative assessment, management concludes that goodwill is more likely than not to be impaired, or elects not to perform the qualitative assessment, then it is required to perform a quantitative analysis to determine the fair value of the business, and compare the calculated fair value of the reporting unit with its carrying amount, including goodwill. If through this quantitative analysis the Company determines the fair value of a reporting unit exceeds its carrying amount, the goodwill of the reporting unit is considered not to be impaired. If the Company concludes that the fair value of the reporting unit is less than its carrying value, a goodwill impairment loss will be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. (See Note 9.)
Evaluation of indefinite-lived intangible assets for impairment
The Company evaluates its indefinite-lived intangible assets (i.e., trade names and trademarks) for impairment. In assessing its indefinite-lived intangible assets for impairment, the Company has the option to first perform a qualitative assessment to determine whether events or circumstances exist that lead to a determination that it is unlikely that the fair value of the indefinite-lived intangible asset is less than its carrying amount. If the Company determines that it is unlikely that the fair value of an indefinite-lived intangible asset is less than its carrying amount, the Company is not required to perform any additional tests in assessing the asset for impairment. However, if the Company concludes otherwise or elects not to perform the qualitative assessment, then it is required to perform a quantitative analysis to determine if the fair value of an indefinite-lived intangible asset is less than its carrying value. If through this quantitative analysis the Company determines the fair value of an indefinite-lived intangible asset exceeds its carrying amount, the indefinite-lived intangible asset is considered not to be impaired. If the Company concludes that the fair value of an indefinite-lived intangible asset is less than its carrying value, an impairment loss will be recognized for the amount by which the carrying amount exceeds the indefinite-lived intangible asset’s fair value.
The methods used to estimate the fair value measurements of the Company’s reporting units and indefinite-lived intangible assets include those based on the income approach (including the discounted cash flow and relief-from-royalty methods) and those based on the market approach (primarily the guideline transaction and guideline public company methods). (See Note 9.)
Long-Term Investments
Investments in privately-held entities are accounted for using the equity method when the Company has significant influence, but not control over the investee. Significant influence is generally deemed to exist if the Company’s ownership interest in the voting stock of the investee ranges between
Investments in privately-held entities for which the Company has little or no influence over the investee are initially recorded at cost. Because the investments do not have a readily determinable fair value, the Company has elected to measure the investments at cost minus impairments, if any, with changes recognized in net income. If the Company identifies observable price changes in orderly transactions for an identical or a similar investment, the Company’s investment will be measured at fair value as of the date the observable transaction occurs.
We evaluate our long-term investments for impairment quarterly or whenever events or changes in circumstances indicate that a decline in the fair value of these assets is determined to be other-than-temporary. Additionally, the Company performs an on-going evaluation of the investments with which the Company has variable interests to determine if any of these entities are VIEs that are required to be consolidated. None of the Company’s long-term investments were VIEs as of March 31, 2023 and June 30, 2022.
15
Other Long-Term Assets
Digital Assets
The Company has purchased certain digital assets (crypto currencies) that are held for investment purposes. The Company accounts for digital assets in accordance with Intangibles - Goodwill and Other Topic 350 of the ASC ("ASC 350"). Digital assets are shown in the other long-term assets line-item on the condensed consolidated balance sheets. Digital assets are a type of intangible asset with indefinite useful lives, which are recorded at cost less impairment. Accordingly, if the fair market value at any point during the reporting period is lower than the carrying value, an impairment loss is recorded. If the fair market value at any point during the reporting period is higher than the carrying value, the basis of the digital assets will not be adjusted to account for this increase. Gains on digital assets, if any, are recognized upon sale or disposal of the digital assets. Write downs and gains are shown in the condensed consolidated statement of income, as component of the line-item other income, net.
As of March 31, 2023 and June 30, 2022, the carrying balance of our digital assets was $
Option to Acquire Additional Interest in a Long-Term Investment
On June 27, 2022, the Company acquired an additional
Accumulated other comprehensive income
For the Company’s foreign-based equity method investments, the proportionate share of the investee’s income is translated into U.S. dollars at the average exchange rate for the period and the investment is translated using the exchange rate as of the end of the reporting period. Foreign currency translation gains and losses associated with this activity are deferred and included as a component of accumulated other comprehensive income in the accompanying condensed consolidated balance sheets.
Treasury Stock
The Company periodically purchases its own common stock that is traded on public markets as part of announced stock repurchase programs. The repurchased common stock is classified as treasury stock on the consolidated balance sheets and held at cost. The direct costs incurred to acquire treasury stock are treated like stock issue costs and added to the cost of the treasury stock, which includes applicable fees and taxes. There have been no reissuances of treasury stock.
Noncontrolling interest
The Company’s condensed consolidated financial statements include entities in which the Company has a controlling financial interest. Noncontrolling interest is the portion of equity (net assets) in an entity in which the Company has a controlling financial interest that is not attributable, directly or indirectly, to the Company. Such noncontrolling interest is reported on the condensed consolidated balance sheets within equity, separately from the Company’s equity. On the condensed consolidated statements of income, revenues, expenses and net income or loss from the less-than-wholly owned subsidiary are reported at their consolidated amounts, including both the amounts attributable to the Company and the noncontrolling interest. Income or loss is allocated to the noncontrolling interest based on its weighted average ownership percentage for the applicable period. The condensed consolidated statements of equity include beginning balances, activity for the period and ending balances for each component of stockholders’ equity, noncontrolling interest and total equity.
Revenue Recognition
Settlement Date Accounting
Substantially all of the Company’s sales of precious metals are conducted using sales contracts that meet the definition of derivative instruments in accordance with Derivatives and Hedging Topic 815 of the ASC ("ASC 815"). The contract underlying A-Mark’s commitment to deliver precious metals is referred to as a “fixed-price forward commodity contract” because the price of the commodity is fixed at the time the order is placed. Revenue is recognized on the settlement date, which is defined as the date on which: (i) the quantity, price, and specific items being purchased have been established, (ii) metals have been delivered to the customer, and (iii) payment has been received or is covered by the customer’s established credit limit with the Company.
16
All derivative instruments are marked-to-market during the interval between the order date and the settlement date, with the changes in the fair value charged to cost of sales. The Company’s hedging strategy to mitigate the market risk associated with its sales commitments is described separately below under the caption “Hedging Activities.”
Types of Orders that are Physically Delivered
The Company’s contracts to sell precious metals to customers are usually settled with the physical delivery of metals to the customer, although net settlement (i.e., settlement at an amount equal to the difference between the contract value and the market price of the metal on the settlement date) is permitted. Below is a summary of the Company’s major order types and the key factors that determine when settlement occurs and when revenue is recognized for each type:
In general, unshipped orders for which a customer advance has been received by the Company are classified as advances from customers. Orders that have been paid for and shipped, but not yet delivered to the customer are classified as deferred revenue. Both customer advances and deferred revenue are shown, in the aggregate, as deferred revenue and other advances in the condensed consolidated financial statements. (See Note 11.)
Hedging Activities
The value of our inventory and our purchase and sale commitments are linked to the prevailing price of the underlying precious metal commodity. The Company seeks to minimize the effect of price changes of the underlying commodity and enters into inventory hedging transactions, principally utilizing metals commodity forward contracts with credit worthy financial institutions or futures contracts traded on national futures exchanges. The Company hedges by each commodity type (gold, silver, platinum, and palladium). All of our commodity derivative contracts are under master netting arrangements and include both asset and liability positions.
Commodity forward and futures contracts entered into for hedging purposes are recorded at fair value on the trade date and are marked-to-market each period. The difference between the original contract values and the market values of these contracts are reflected as derivative assets or derivative liabilities in the condensed consolidated balance sheets at fair value, with the corresponding unrealized gains or losses included as a component of cost of sales. When these contracts are net settled, the unrealized gains and losses are reversed and the realized gains and losses for forward contracts are recorded in revenue and cost of sales, and the net realized gains and losses for futures are recorded in cost of sales.
17
The Company enters into forward and futures contracts solely for the purpose of hedging our inventory holding risk and our liability on price protection programs, and not for speculative market purposes. The Company’s gains and losses on derivative instruments are substantially offset by the changes in the fair market value of the underlying precious metals inventory, which is also recorded in cost of sales in the condensed consolidated statements of income. (See Note 12.)
Other Sources of Revenue
The Company recognizes its storage, logistics, licensing, and other services revenues in accordance with the FASB's release ASU 2014-09 Revenue From Contracts With Customers Topic 606 of the ASC and subsequent related amendments ("ASC 606"), which follows five basic steps to determine whether revenue can be recognized: (i) identify the contract with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation.
The Company recognizes revenue when (or as) it satisfies its obligation by transferring control of the good or service to the customer. This is either satisfied over time or at a point in time. A performance obligation is satisfied over time if one of the following criteria are met: (i) the customer simultaneously receives and consumes the benefits as the Company performs, (ii) the Company's performance creates or enhances an asset that the customer controls as the asset is created or enhanced, or (iii) the Company's performance does not create an asset with an alternative use to the Company, and the Company has an enforceable right for payment of performance completed-to-date. When none of those is met, a performance obligation is satisfied at a point-in-time.
The Company recognizes storage revenue as the customer simultaneously receives and consumes the storage services (e.g., fixed storage fees based on the passage of time). The Company recognizes logistics (i.e., fulfillment) revenue when the customer receives the benefit of the services. The Company recognizes advertising and consulting revenues when the service is performed, and the benefit of the service is received by the customer. In aggregate, these types of service revenues account for less than 1% of the Company's consolidated revenues.
Interest Income
In accordance with Interest Topic 835 of the ASC ("ASC 835"), the following are interest income generating activities of the Company:
Interest Expense
The Company accounts for interest expense on the following arrangements in accordance with Interest Topic 835 of the ASC ("ASC 835"):
18
Leased metal transactions are a similar type of transaction, except the Company is not required to pledge other precious metal as collateral for the precious metal received. The fees charged by the third-party are based on the spot value of the pool metal received.
Both borrowed and leased metal transactions provide an additional source of liquidity, as the Company usually monetizes the metals received under such arrangements. Repayment is usually in the same form as the metals advanced, but may be settled in cash.
Amortization of Debt Issuance Costs
Debt issuance costs incurred in connection with the issuance of the AMCF Notes have been included as a component of the carrying amount of the debt, and Trading Credit Facility debt issuance costs are included in prepaid expenses and other assets in the Company's condensed consolidated balance sheets. Debt issuance costs are amortized to interest expense over the contractual term of the debt. Debt issuance costs of the Trading Credit Facility are amortized on a straight-line basis, while all other debt issuance costs are amortized using the effective interest method. Amortization of debt issuance costs included in interest expense was $
Earnings (Losses) from Equity Method Investments
The Company's proportional interest in the reported earnings and losses from equity method investments is shown on the condensed consolidated statements of income as earnings (losses) from equity method investments.
Other Income, Net
The Company's other income and expense is comprised of royalty and consulting income, which is recognized when earned.
Advertising
Advertising and marketing costs consist primarily of internet advertising, online marketing, direct mail, print media, and television commercials and are expensed when incurred. Advertising costs totaled $
Shipping and Handling Costs
Shipping and handling costs represent costs associated with shipping product to customers and receiving product from vendors and are included in cost of sales in the condensed consolidated statements of income. Shipping and handling costs incurred totaled $
19
Share-Based Compensation
The Company accounts for equity awards under the provisions of Compensation - Stock Compensation Topic 718 of the ASC ("ASC 718"), which establishes fair value-based accounting requirements for share-based compensation to employees. ASC 718 requires the Company to recognize the grant-date fair value of stock options and other equity-based compensation issued to employees as expense over the service period in the Company's condensed consolidated financial statements. The expense is adjusted for actual forfeitures of unvested awards as they occur. (See Note 17.)
Income Taxes
As part of the process of preparing its condensed consolidated financial statements, the Company is required to estimate its provision for income taxes in each of the tax jurisdictions in which it conducts business, in accordance with Income Taxes Topic 740 of the ASC ("ASC 740"). The Company computes its annual tax rate based on the statutory tax rates and tax planning opportunities available to it in the various jurisdictions in which it earns income. Significant judgment is required in determining the Company's annual tax rate and in evaluating uncertainty in its tax positions. The Company has adopted the provisions of ASC 740-10, which clarifies the accounting for uncertain tax positions. ASC 740-10 requires that the Company recognizes the impact of a tax position in the financial statements if the position is not more likely than not to be sustained upon examination based on the technical merits of the position. The Company recognizes interest and penalties related to certain uncertain tax positions as a component of income tax expense and the accrued interest and penalties are included in deferred and income taxes payable in the Company’s condensed consolidated balance sheets. See Note 13 for more information on the Company’s accounting for income taxes.
Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. A valuation allowance is provided when it is more likely than not that some portion or all of the net deferred tax assets will not be realized. The factors used to assess the likelihood of realization include the Company's forecast of the reversal of temporary differences, future taxable income, and available tax planning strategies that could be implemented to realize the net deferred tax assets. Failure to achieve forecasted taxable income in applicable tax jurisdictions could affect the ultimate realization of deferred tax assets and could result in an increase in the Company's effective tax rate on future earnings. Based on our assessment, it appears more likely than not that all of the net deferred tax assets will be realized through future taxable income.
Earnings per Share ("EPS")
The Company computes and reports both basic EPS and diluted EPS using the two-class method. Basic EPS is computed by dividing net income allocated to common shares by the weighted average number of common shares outstanding for the period, excluding any participating securities. Diluted EPS is computed by dividing net income allocated to common shares adjusted for reallocation of undistributed earnings of unvested restricted shares by the weighted average number of common shares determined for the basic EPS plus the dilutive effect of common stock equivalents using the treasury stock method based on the average market price for the period.
All outstanding nonvested shares that contain non-forfeitable rights to dividends or dividend equivalents that participate in undistributed earnings with common stock are considered participating securities and are included in computing earnings per share pursuant to the two-class method. The two-class method is an earnings allocation formula that determines earnings per share for each class of common stock and participating securities according to dividends or dividend equivalents and participation rights in undistributed earnings. The Company’s vested restricted stock units are considered participating securities. The Company’s unvested restricted stock units are considered nonparticipating securities since they are forfeitable.
A reconciliation of shares used in calculating basic and diluted earnings per common share for the three and nine months ended March 31, 2023 and 2022 is presented below.
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Three Months Ended March 31, |
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Nine Months Ended March 31, |
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2023 |
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2022 |
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2023 |
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2022 |
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Basic weighted-average shares of common stock outstanding |
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Effect of common stock equivalents |
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Diluted weighted-average shares outstanding |
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Actual common shares outstanding totaled
20
Recently Adopted Accounting Pronouncements and Auditing Standards
From time to time, the Financial Accounting Standards Board ("FASB") or other standards setting bodies issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification (“ASC”) are communicated through issuance of an Accounting Standards Update (“ASU”).
In June 2016, the FASB issued ASU No. 2016-13, (“
Recent Accounting Pronouncements Not Yet Adopted
Management does not believe that any other recently issued, but not yet effective, accounting pronouncement if currently adopted would have a material effect on the Company's condensed consolidated financial statements.
3. ASSETS AND LIABILITIES, AT FAIR VALUE
Fair Value of Financial Instruments
A financial instrument is defined as cash, evidence of an ownership interest in an entity, or a contract that creates a contractual obligation or right to deliver or receive cash or another financial instrument from a second entity. The fair value of financial instruments represents amounts that would be received upon the sale of those assets or that would be paid to transfer those liabilities in an orderly transaction between market participants at that date. Those fair value measurements maximize the use of observable inputs. However, in situations where there is little, if any, market activity for the asset or liability at the measurement date, the fair value measurement reflects the Company’s own judgments about the assumptions that market participants would use in pricing the asset or liability. Those judgments are developed by the Company based on the best information available in the circumstances, including expected cash flows and appropriately risk adjusted discount rates, and available observable and unobservable inputs.
For most of the Company's financial instruments, the carrying amount approximates fair value. The carrying amounts of cash, receivables, secured loans receivable, accounts payable and other current liabilities, accrued liabilities, and income taxes payable approximate fair value due to their short-term nature. The carrying amounts of derivative assets and derivative liabilities, liabilities on borrowed metals and product financing arrangements are marked-to-market on a daily basis to fair value. The carrying amounts of lines of credit approximate fair value based on the borrowing rates currently available to the Company for bank loans with similar terms and average maturities.
The Company’s AMCF Notes are reported at their aggregate principal amount less unamortized original issue discount and deferred financing costs on the accompanying condensed consolidated balance sheets. The fair value of the AMCF Notes is based on the present value of the expected coupon and principal payments using an estimated discount rate based on current market rates for debt with similar credit risk.
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March 31, 2023 |
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June 30, 2022 |
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Carrying Amount |
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Fair value |
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Carrying Amount |
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Fair value |
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AMCF Notes |
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$ |
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$ |
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$ |
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$ |
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21
Valuation Hierarchy
In determining the fair value of its financial instruments, the Company employs a fair value hierarchy that prioritizes the inputs for the valuation techniques used to measure fair value. ASC 820 established a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The significant assumptions used to determine the carrying value and the related fair value of the assets and liabilities measured at fair value on a recurring basis are described below:
Inventories. The Company's inventory, which consists primarily of bullion and bullion coins, is acquired and initially recorded at cost and then marked to fair market value. The fair market value of the bullion and bullion coins comprises two components: i) published market values attributable to the cost of the raw precious metal, and ii) the published market values attributable to the premium, which is attributable to the incremental value of the product in its finished goods form. The market value attributable solely to such premium is readily determinable by reference to multiple reputable published sources. Except for commemorative coin inventory, which are included in inventory at the lower of cost or net realizable value, the Company’s inventory is subsequently recorded at their fair market values on a daily basis. The fair value for commodities inventory (i.e., inventory excluding commemorative coins) is determined using pricing data derived from the markets on which the underlying commodities are traded. Precious metals commodities inventory is classified in Level 1 of the valuation hierarchy.
Precious Metals held under Financing Arrangements. The Company enters into arrangements with certain customers under which A-Mark purchases precious metals from the customers which are subject to repurchase by the customer at the spot value of the product on the repurchase date. The precious metals purchased under these arrangements consist of rare and unique items, and therefore the Company accounts for these transactions as precious metals held under financing arrangements, which generate financing income rather than revenue earned from precious metals inventory sales. In these repurchase arrangements, the Company holds legal title to the metals and earns financing income for the duration of the agreement. The fair value for precious metals held under financing arrangements, (a commodity, like inventory above) is determined using pricing data derived from the markets on which the underlying commodities are traded. Precious metals held under financing arrangements are classified in Level 1 of the valuation hierarchy.
Derivatives. Futures contracts, forward contracts, and open sale and purchase commitments are valued at their fair values, based on the difference between the quoted market price and the contractual price (i.e., intrinsic value,) and are included within Level 1 of the valuation hierarchy.
Margin and Borrowed Metals Liabilities. Margin and borrowed metals liabilities consist of the Company's commodity obligations to margin customers and suppliers, respectively. Margin liabilities and borrowed metals liabilities are carried at fair value, which is determined using quoted market pricing and data derived from the markets on which the underlying commodities are traded. Margin and borrowed metals liabilities are classified in Level 1 of the valuation hierarchy.
Product Financing Arrangements. Product financing arrangements consist of financing agreements for the transfer and subsequent re-acquisition of the sale of gold and silver at an agreed-upon price based on the spot price with a third-party. Such transactions allow the Company to repurchase this inventory on the termination (repurchase) date. The third-party charges monthly interest as a percentage of the market value of the outstanding obligation, which is carried at fair value. The obligation is stated at the amount required to repurchase the outstanding inventory. Fair value is determined using quoted market pricing and data derived from the markets on which the underlying commodities are traded. Product financing arrangements are classified in Level 1 of the valuation hierarchy.
Option to Purchase Interests in a Long-term Investment. The fair value of the option to purchase additional ownership interest in Silver Gold Bull, Inc, which is exercisable between December 2023 and September 2024, was determined by an independent third-party valuation firm and was recorded as a component of other long-term assets on the condensed consolidated balance sheets. This option is classified in Level 3 of the valuation hierarchy.
22
The value of the option was determined using a Monte Carlo Simulation model ("MCS model"). The MCS model includes inputs based on significant assumptions related to management’s forecasts of the investee’s earnings-before-interest-taxes-depreciation-amortization ("EBITDA") and corresponding future total equity simulations, where an early exercise multiple is calibrated to maximize the fair value of the option during the exercise period. For each simulation path, option payoffs are calculated based on the contractual terms, and then discounted at the term-matched risk-free rate, where the value of the option is calculated as the average present value over all simulated paths. Refer to the 2022 Annual Report for information about the certain assumptions in the MCS model that was used to determine that valuation of the option to purchase interest in a long-term investment.
The following tables present information about the Company's assets and liabilities measured at fair value on a recurring basis as of March 31, 2023 and June 30, 2022, aggregated by each fair value hierarchy level:
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March 31, 2023 |
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Quoted Price in Active Markets for Identical Instruments |
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Significant Other Observable Inputs |
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Significant Unobservable Inputs |
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Total |
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Assets: |
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Inventories(1) |
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$ |
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$ |
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$ |
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$ |
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Precious metals held under financing arrangements |
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|
|
|
|
|
|
|
||||
Derivative assets — open sale and purchase commitments, net |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivative assets — forward contracts |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Option to purchase interest in a long-term investment |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total assets, valued at fair value |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Liabilities on borrowed metals |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Product financing arrangements |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivative liabilities — open sale and purchase commitments, net |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivative liabilities — margin accounts |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivative liabilities — futures contracts |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivative liabilities — forward contracts |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total liabilities, valued at fair value |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
in thousands |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
June 30, 2022 |
|
|||||||||||||
|
|
Quoted Price in Active Markets for Identical Instruments |
|
|
Significant Other Observable Inputs |
|
|
Significant Unobservable Inputs |
|
|
Total |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Inventories(1) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Precious metals held under financing arrangements |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivative assets — open sale and purchase commitments, net |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivative assets — futures contracts |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivative assets — forward contracts |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Option to purchase interest in a long-term investment |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total assets, valued at fair value |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Liabilities on borrowed metals |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Product financing arrangements |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivative liabilities — open sale and purchase commitments, net |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivative liabilities — margin accounts |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivative liabilities — forward contracts |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total liabilities, valued at fair value |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
There were no transfers in or out of Level 2 or 3 from other levels within the fair value hierarchy during the reported periods.
23
Assets Measured at Fair Value on a Non-Recurring Basis
Certain assets are measured at fair value on a nonrecurring basis. These assets are not measured at fair value on an on-going basis, but are subject to fair value adjustments only under certain circumstances. These include (i) investments in private companies when there are identifiable events or changes in circumstances that may have a significant adverse impact on the fair value of these assets, (ii) equity method investments that are remeasured to the acquisition-date fair value upon the Company obtaining a controlling interest in the investee during a step acquisition, (iii) property, plant, and equipment and definite-lived intangibles, (iv) digital assets, (v) goodwill, or (vi) indefinite-lived intangibles, all of which are written down to fair value when they are held for sale or determined to be impaired.
With the exception of digital assets, our non-recurring valuations use significant unobservable inputs and significant judgments and therefore fall under Level 3 of the fair value hierarchy. The valuation inputs include assumptions on the appropriate discount rates, long-term growth rates, relevant comparable company earnings multiples, and the amount and timing of expected future cash flows. The cash flows employed in the analyses are based on the Company’s estimated outlook and various growth rates. Discount rate assumptions are based on an assessment of the risk inherent in the future cash flows of the respective equity method investment, asset group, or reporting unit. In assessing the reasonableness of its determined fair values, the Company evaluates its results against other value indicators, such as comparable transactions and comparable public company trading values. The Company used a third-party independent valuation specialist to assist us to determine the fair value of the net assets acquired in connection with Company’s step acquisition of JMB.
The fair value of the Company's digital assets is determined quarterly in accordance with ASC 820 and is based on quoted prices on the active exchange(s) that we have determined is the principal market for such assets (Level 1 inputs). When the quoted prices on active exchanges decrease and indicate that it is more likely than not that our digital assets are impaired, we consider the lowest market price of one unit of digital asset quoted on the active exchange since acquiring the digital asset. If the then current carrying value of a digital asset exceeds the fair value so determined, an impairment loss has occurred with respect to those digital assets in the amount equal to the difference between their carrying values and the price determined. As of March 31, 2023, the carrying amounts and estimated fair values of the Company’s digital assets totaled $
4. RECEIVABLES
Receivables consisted of the following as of March 31, 2023 and June 30, 2022:
in thousands |
|
|
|
|
|
|
||
|
|
March 31, 2023 |
|
|
June 30, 2022 |
|
||
Customer trade receivables |
|
$ |
|
|
$ |
|
||
Wholesale trade advances |
|
|
|
|
|
|
||
Due from brokers and other |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
Customer Trade Receivables. Customer trade receivables represent short-term, non-interest bearing amounts due from precious metal sales, advances related to financing products, and other secured interests in assets of the customer.
Wholesale Trade Advances. Wholesale trade advances represent advances of various bullion products and cash advances for purchase commitments of precious metal inventory. Typically, these advances are unsecured, short-term, and non-interest bearing, and are made to wholesale metals dealers and government mints.
Due from Brokers and Other. Due from brokers and other consists of the margin requirements held at brokers related to open futures contracts (see Note 12) and other receivables.
5. SECURED LOANS RECEIVABLE
Below is a summary of the carrying value of our secured loans as of March 31, 2023 and June 30, 2022:
in thousands |
|
|
|
|
|
|
||
|
|
March 31, 2023 |
|
|
June 30, 2022 |
|
||
Secured loans originated |
|
$ |
|
|
$ |
|
||
Secured loans acquired |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
Secured Loans - Originated: Secured loans include short-term loans, which include a combination of on-demand lines and short-term facilities. These loans are fully secured by the customers' assets, which predominantly include bullion and numismatic and semi-numismatic material, and which are typically held in safekeeping by the Company.
24
Secured Loans - Acquired: Secured loans also include short-term loans, which include a combination of on-demand lines and short-term facilities that are purchased from our customers. The Company acquires a portfolio of their loan receivables at a price that approximates the outstanding balance of each loan in the portfolio, as determined on the effective transaction date. Each loan in the portfolio is fully secured by the borrowers' assets, which include bullion and numismatic and semi-numismatic material, and which are typically held in safekeeping by the Company. The seller of the loan portfolio generally retains the responsibility for the servicing and administration of the loans.
As of March 31, 2023 and June 30, 2022, our secured loans carried weighted-average effective interest rates of
The secured loans that the Company generates with active customers of A-Mark are reflected as an operating activity on the condensed consolidated statements of cash flows. The secured loans that the Company generates with borrowers that are not active customers of A-Mark are reflected as an investing activity on the condensed consolidated statements of cash flows as secured loans receivables, net. For the secured loans that (i) are reflected as an investing activity and have terms that allow the borrowers to increase their loan balance (at the discretion of the Company) based on the excess value of their collateral compared to their aggregate principal balance of loan, and (ii) are repayable on demand or in the short-term, the borrowings and repayments are netted on the condensed consolidated statements of cash flows.
Credit Quality of Secured Loans Receivables and Allowance for Credit Losses
General
The Company's secured loan receivables portfolio comprises loans with similar credit risk profiles, which enables the Company to apply a standard methodology to determine the credit quality for each loan and the allowance for credit losses, if any.
The credit quality of each loan is generally determined by the collateral value assessment, loan-to-value (“LTV”) ratio (that is, the principal amount of the loan divided by the estimated value of the collateral) and the type (or class) of secured material. All loans are fully secured by precious metal bullion, numismatic and semi-numismatic collateral, or graded sports cards and sports memorabilia, which remains in the physical custody of the Company for the duration of the loan. The term of the loans is generally
When an account is in default or if a margin call has not been met on a timely basis, the Company has the right to liquidate the borrower's collateral in order to satisfy the unpaid balance of the outstanding loans, including accrued and unpaid interest.
Class and Credit Quality of Loans
The three classes of secured loan receivables are defined by collateral type: (i) bullion, (ii) numismatic and semi-numismatic and (iii) graded sports cards and sports memorabilia. The Company required LTV ratios vary with the class of loans. Typically, the Company requires an LTV ratio of approximately
The Company's secured loans by portfolio class, which align with internal management reporting, were as follows:
in thousands |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
March 31, 2023 |
|
|
June 30, 2022 |
|
||||||||||
Bullion |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||
Numismatic and semi-numismatic |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Graded sports cards and sports memorabilia |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
|
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
Due to the nature of market fluctuations of precious metal commodity prices, the Company monitors the bullion collateral value of each loan on a daily basis, based on spot price of precious metals. Numismatic and graded sports cards and sports memorabilia collateral values are updated by numismatic and graded sports cards and sports memorabilia specialists typically within every
Generally, we initiate the margin call process when the outstanding loan balance is in excess of
25
Loans with LTV ratios of less than 75% are generally considered to be higher quality loans.
in thousands |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
March 31, 2023 |
|
|
June 30, 2022 |
|
||||||||||
Loan-to-value of less than 75% |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||
Loan-to-value of 75% or more |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
|
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
The Company had
Non-Performing Loans/Impaired Loans
Historically, the Company has not established an allowance for any credit losses because the Company has liquidated the collateral to satisfy the amount due before any loan becomes non-performing or impaired.
Non-performing loans have the highest probability for credit loss. The allowance for secured loan credit losses attributable to non-performing loans is based on the most probable source of repayment, which is normally the liquidation of collateral. Due to the accelerated liquidation terms of the Company's loan portfolio, past due loans are generally liquidated within 90 days of default before a loan becomes non-performing. In the event a loan was to become non-performing, the Company would determine a reserve to reduce the carrying balance to its estimated net realizable value. As of March 31, 2023 and June 30, 2022, the Company had
A loan is considered impaired if it is probable, based on current information and events, that the Company will be unable to collect all amounts due according to the contractual terms of the loan. Customer loans are reviewed for impairment and include loans that are past due or non-performing, or if the customer is in bankruptcy. In the event of an impairment, recognition of interest income would be suspended, and the loan would be placed on non-accrual status at the time. Accrual would be resumed, and previously suspended interest income would be recognized, when the loan becomes contractually current and/or collection doubts are removed. Cash receipts on impaired loans are recorded first against the receivable and then to any unrecognized interest income. For the three and nine months ended March 31, 2023 and 2022, the Company incurred
6. INVENTORIES
Our inventory consists of the precious metals that the Company has physically received, and inventory held by third-parties, which, at the Company's option, it may or may not receive.
in thousands |
|
|
|
|
|
|
||
|
|
March 31, 2023 |
|
|
June 30, 2022 |
|
||
Inventory held for sale |
|
$ |
|
|
$ |
|
||
Repurchase arrangements with customers |
|
|
|
|
|
|
||
Consignment arrangements with customers |
|
|
|
|
|
|
||
Commemorative coins, held at lower of cost or net realizable value |
|
|
|
|
|
|
||
Borrowed precious metals |
|
|
|
|
|
|
||
Product financing arrangements |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
Inventory Held for Sale. Inventory held for sale represents precious metals, excluding commemorative coin inventory, that have been received by the Company and are not subject to repurchase by or consignment arrangements with third parties, borrowed precious metals, or product financing arrangements. As of March 31, 2023 and June 30, 2022, inventory held for sale totaled $
Repurchase Arrangements with Customers. The Company enters into arrangements with certain customers under which A-Mark purchases precious metals from the customers which are subject to repurchase by the customer at the fair value of the product on the repurchase date. Under these arrangements, the Company, which holds legal title to the metals, earns financing income until the time the arrangement is terminated, or the material is repurchased by the customer. In the event of a repurchase by the customer, the Company records a sale.
These arrangements are typically terminable by either party upon 14 days' notice. Upon termination, the customer’s rights to repurchase any remaining inventory is forfeited. As of March 31, 2023 and June 30, 2022, included within inventories is $
26
Consignment Arrangements with Customers. The Company periodically loans metals to customers on a short-term consignment basis. Inventory loaned under consignment arrangements to customers as of March 31, 2023 and June 30, 2022 totaled $
Commemorative Coins. Our commemorative coin inventory, including its premium component, is held at the lower of cost or net realizable value, because the value of commemorative coins is influenced more by supply and demand determinants than on the underlying spot price of the precious metal content of the commemorative coins. The value of commemorative coins is not subject to the same level of volatility as bullion coins because our commemorative coins typically carry a substantially higher premium over the spot metal price than bullion coins. Our commemorative coins are not hedged and totaled $
Borrowed Precious Metals. Borrowed precious metals inventory include: (i) metals held by suppliers as collateral on advanced pool metals, (ii) metals due to suppliers for the use of their consigned inventory, (iii) unallocated metal positions held by customers in the Company’s inventory, and (iv) shortages in unallocated metal positions held by the Company in the supplier’s inventory. Unallocated or pool metal represents an unsegregated inventory position that is due on demand, in a specified physical form, based on the total ounces of metal held in the position. Amounts due under these arrangements require delivery either in the form of precious metals or cash. The Company's inventory included borrowed precious metals with market values totaling $
Product Financing Arrangements. This inventory represents amounts held as security by lenders for obligations under product financing arrangements. The Company enters into a product financing agreement for the transfer and subsequent re-acquisition of gold and silver at an agreed-upon price based on the spot price with a third-party finance company. This inventory is restricted and is held at a custodial storage facility in exchange for a financing fee, paid to the third-party finance company. During the term of the financing, the third-party finance company holds the inventory as collateral, and both parties intend for the inventory to be returned to the Company at an agreed-upon price based on the spot price on the finance arrangement termination date. These transactions do not qualify as sales and have been accounted for as financing arrangements in accordance with ASC 470-40 Product Financing Arrangements. The obligation is stated at the amount required to repurchase the outstanding inventory. Both the product financing arrangements and the underlying inventory are carried at fair value, with changes in fair value included in cost of sales in the condensed consolidated statements of income. Such obligations totaled $
The Company mitigates market risk of its physical inventory and open commitments through commodity hedge transactions. (See Note 12.) As of March 31, 2023 and June 30, 2022, the unrealized gains (losses) resulting from the difference between market value and cost of physical inventory were $
Premium Component of Inventory
The premium component, at market value, included in the inventory as of March 31, 2023 and June 30, 2022 totaled $
7. LEASES
As of March 31, 2023 and June 30, 2022, the balances of operating lease right of use assets were $
in thousands |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Three Months Ended March 31, |
|
|
Nine Months Ended March 31, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Operating lease costs |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Variable lease costs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Short term lease costs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Finance lease costs |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
27
For the nine months ended March 31, 2023, we made cash payments of $
The following represents our future undiscounted cash flows for each of the next five years and thereafter and reconciliation to the lease liabilities as of March 31, 2023 (in thousands):
Year ending June 30, |
|
Operating Leases |
|
|
|
2023 (remainder of year) |
|
$ |
|
|
|
2024 |
|
|
|
|
|
2025 |
|
|
|
|
|
2026 |
|
|
|
|
|
2027 |
|
|
|
|
|
Thereafter |
|
|
|
|
|
Total lease payments |
|
|
|
|
|
Imputed interest |
|
|
( |
) |
|
Total operating lease liability |
|
$ |
|
(1) |
|
- current |
|
$ |
|
(2) |
|
- long-term |
|
|
|
(3) |
|
|
|
$ |
|
(1) |
The Company has
We do not have leases that have not yet commenced, which would create significant rights and obligations for us, including any involvement with the construction or design of the underlying asset.
8. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment consisted of the following at March 31, 2023 and June 30, 2022:
in thousands |
|
|
|
|
|
|
||
|
|
March 31, 2023 |
|
|
June 30, 2022 |
|
||
Computer software |
|
$ |
|
|
$ |
|
||
Plant equipment |
|
|
|
|
|
|
||
Leasehold improvements |
|
|
|
|
|
|
||
Office furniture, and fixtures |
|
|
|
|
|
|
||
Computer equipment |
|
|
|
|
|
|
||
Building |
|
|
|
|
|
|
||
Total depreciable assets |
|
|
|
|
|
|
||
Less: Accumulated depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
Property and equipment not placed in service |
|
|
|
|
|
|
||
Land |
|
|
|
|
|
|
||
Property, plant, and equipment, net |
|
$ |
|
|
$ |
|
Property, plant and equipment depreciation and amortization expense for the three months ended March 31, 2023 and 2022 was $
9. GOODWILL AND INTANGIBLE ASSETS
Goodwill is an intangible asset that arises when a company acquires an existing business or assets (net of assumed liabilities) which comprise a business. In general, the amount of goodwill recorded in an acquisition is calculated as the purchase price of the business minus the fair market value of the tangible assets and the identifiable intangible assets, net of the assumed liabilities. Goodwill and intangibles can also be established by push-down accounting. Below is a summary of the significant transactions that generated goodwill and intangible assets of the Company:
28
Carrying Value
The carrying value of goodwill and other purchased intangibles as of March 31, 2023 and June 30, 2022 was as described below:
dollar amounts in thousands |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
March 31, 2023 |
|
|
June 30, 2022 |
|
||||||||||||||||||||||||||
|
|
Estimated |
|
Remaining |
|
Gross |
|
|
Accumulated |
|
|
Accumulated |
|
|
Net |
|
|
Gross |
|
|
Accumulated |
|
|
Accumulated |
|
|
Net |
|
||||||||
Identifiable intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Existing customer relationships |
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
|
||||||
Developed technology |
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
|
||||||
Non-compete and other |
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|||||
Employment agreement |
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
||||
Intangibles subject to amortization |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
|
||||||||
Tradenames and trademarks |
|
Indefinite |
|
Indefinite |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||||
Identifiable intangible assets |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||||||
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
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|
|
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|
||||||||
Goodwill |
|
Indefinite |
|
Indefinite |
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
The Company's intangible assets are subject to amortization except for trade names and trademarks, which have an indefinite life. Existing customer relationships intangible assets are amortized in a manner reflecting the pattern in which the economic benefits of the assets are consumed. All other intangible assets subject to amortization are amortized using the straight-line method over their useful lives, which are estimated to be to
Impairment
We recorded a non-recurring impairment charge of $
Estimated Amortization
Estimated annual amortization expense related to definite-lived intangible assets for the succeeding five years is as follows (in thousands):
Fiscal Year Ending June 30, |
|
Amount |
|
|
2023 (remainder of year) |
|
$ |
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
Thereafter |
|
|
|
|
|
|
$ |
|
29
10. LONG-TERM INVESTMENTS
As of March 31, 2023, the Company had
in thousands |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
March 31, 2023 |
|
|
June 30, 2022 |
|
||||||||||
Investee (1) |
|
Carrying |
|
|
Ownership |
|
|
Carrying |
|
|
Ownership |
|
||||
Silver Gold Bull, Inc. |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||
Pinehurst Coin Exchange, Inc. |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Sunshine Minting, Inc. |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Company A |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Company B |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Texas Precious Metals, LLC |
|
|
|
|
|
% |
|
|
— |
|
|
|
— |
% |
||
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
We consider all of our equity method investees to be related parties. See Note 14 for a summary of the Company's aggregate balances and activity with these related party entities. Our investment in Company A is a recognized as a cost method investment and is not considered a related party.
11. ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES
Accounts payable and other current liabilities consisted of the following:
in thousands |
|
|
|
|
|
|
||
|
|
March 31, 2023 |
|
|
June 30, 2022 |
|
||
Trade payables to customers |
|
$ |
|
|
$ |
|
||
Other accounts payable |
|
|
|
|
|
|
||
Accounts payable and other payables |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Deferred revenue |
|
$ |
|
|
$ |
|
||
Advances from customers |
|
|
|
|
|
|
||
Deferred revenue and other advances |
|
$ |
|
|
$ |
|
12. DERIVATIVE INSTRUMENTS AND HEDGING TRANSACTIONS
The Company is exposed to market risk, such as changes in commodity prices and foreign exchange rates. To manage the volatility related to these exposures, the Company enters into various derivative products, such as forwards and futures contracts. By policy, the Company historically has entered into derivative financial instruments for the purpose of hedging substantially all of Company's market exposure to precious metals prices, and not for speculative purposes. The Company’s gains (losses) on derivative instruments are substantially offset by the changes in the fair market value of the underlying precious metals inventory, both of which are recorded in cost of sales in the condensed consolidated statements of income.
Commodity Price Management
The Company manages the value of certain assets and liabilities of its trading business, including trading inventory, by employing a variety of hedging strategies. These strategies include the management of exposure to changes in the market values of the Company's trading inventory through the purchase and sale of a variety of derivative instruments, such as forwards and futures contracts.
The Company enters into derivative transactions solely for the purpose of hedging its inventory subject to price risk, and not for speculative market purposes. Due to the nature of the Company's global hedging strategy, the Company is not using hedge accounting as defined under ASC 815, whereby the gains or losses would be deferred and included as a component of other comprehensive income. Instead, gains or losses resulting from the Company's futures and forward contracts and open sale and purchase commitments are reported in the condensed consolidated statements of income as unrealized gains or losses on commodity contracts (a component of cost of sales) with the related unrealized amounts due from or to counterparties reflected as derivative assets or liabilities on the condensed consolidated balance sheets.
30
The Company's trading inventory and purchase and sale transactions consist primarily of precious metal products. The value of these assets and liabilities are marked-to-market daily to the prevailing closing price of the underlying precious metals. The Company's precious metals inventory is subject to fluctuations in market value, resulting from changes in the underlying commodity prices. Inventory purchased or borrowed by the Company is subject to price changes. Inventory borrowed is considered a natural hedge, since changes in value of the metal held are offset by the obligation to return the metal to the supplier.
Open sale and purchase commitments are subject to changes in value between the date the purchase or sale price is fixed (the trade date) and the date the metal is received or delivered (the settlement date). The Company seeks to minimize the effect of price changes of the underlying commodity through the use of forward and futures contracts. The Company’s open sale and purchase commitments typically settle within
The Company's policy is to substantially hedge its inventory position, net of open sale and purchase commitments that are subject to price risk, and regularly enters into precious metals commodity forward and futures contracts with financial institutions to hedge against this risk. The Company uses futures contracts, which typically settle within
The Company’s management sets credit and position risk limits. These limits include gross position limits for counterparties engaged in sales and purchase transactions with the Company. They also include collateral limits for different types of sale and purchase transactions that counterparties may engage in from time to time.
Derivative Assets and Liabilities
The Company's derivative assets and liabilities represent the net fair value of the difference (or intrinsic value) between market values and trade values at the trade date for open precious metals sale and purchase contracts, as adjusted on a daily basis for changes in market values of the underlying metals, until settled. The Company's derivative assets and liabilities also include the net fair value of open precious metals forwards and futures contracts. The precious metals forwards and futures contracts are settled at the contract settlement date.
All of our commodity derivative contracts are under master netting arrangements and include both asset and liability positions (i.e., offsetting derivative instruments). As such, for the Company's derivative contracts with the same counterparty, the receivables and payables have been netted on the condensed consolidated balance sheets. Such derivative contracts include open sale and purchase commitments, futures, forwards and margin accounts. T
in thousands |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
March 31, 2023 |
|
|
June 30, 2022 |
|
||||||||||||||||||||||||||
|
|
Gross |
|
|
Amounts |
|
|
Cash |
|
|
Net |
|
|
Gross |
|
|
Amounts |
|
|
Cash |
|
|
Net |
|
||||||||
Nettable derivative assets: |
|
|
|
|||||||||||||||||||||||||||||
Open sale and purchase commitments |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
||||||
Future contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Forward contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
||||||
Nettable derivative liabilities: |
|
|
|
|||||||||||||||||||||||||||||
Open sale and purchase commitments |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
||||||
Margin accounts |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||||
Future contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Forward contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
Gains or Losses on Derivative Instruments
The Company records the derivative at the trade date with a corresponding unrealized gains or losses, shown as a component of cost of sales in the condensed consolidated statements of income. The Company adjusts the derivatives to fair value on a daily basis until the transactions are settled. When these contracts are net settled, the unrealized gains and losses are reversed and the realized gains and losses for forward contracts are recorded in revenue and cost of sales, and the net realized gains and losses for futures are recorded in cost of sales.
31
Below is a summary of the net gains (losses) on derivative instruments for the three and nine months ended March 31, 2023 and 2022:
in thousands |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Three Months Ended March 31, |
|
|
Nine Months Ended March 31, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Gains (losses) on derivative instruments: |
|
|
|
|||||||||||||
Unrealized gains (losses) on open future commodity and forward contracts and open sale and purchase commitments, net |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
||
|
|
|
|
|
( |
) |
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
The Company’s net gains (losses) on derivative instruments, as shown in the table above, were substantially offset by the changes in the fair market value of the underlying precious metals inventory, which were also recorded in cost of sales in the condensed consolidated statements of income.
Summary of Hedging Positions
In a hedging relationship, the change in the value of the derivative financial instrument is offset to a great extent by the change in the value of the underlying hedged item.
in thousands |
|
|
|
|
|
|
||
|
|
March 31, 2023 |
|
|
June 30, 2022 |
|
||
Inventories |
|
$ |
|
|
$ |
|
||
Precious metals held under financing arrangements |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Less unhedgeable inventories: |
|
|
|
|
|
|
||
Commemorative coin inventory, held at lower of cost or net realizable value |
|
|
( |
) |
|
|
( |
) |
Premium on metals position |
|
|
( |
) |
|
|
( |
) |
Precious metal value not hedged |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
||
Commitments at market: |
|
|
|
|
|
|
||
Open inventory purchase commitments |
|
|
|
|
|
|
||
Open inventory sales commitments |
|
|
( |
) |
|
|
( |
) |
Margin sale commitments |
|
|
( |
) |
|
|
( |
) |
In-transit inventory no longer subject to market risk |
|
|
( |
) |
|
|
( |
) |
Unhedgeable premiums on open commitment positions |
|
|
|
|
|
|
||
Borrowed precious metals |
|
|
( |
) |
|
|
( |
) |
Product financing arrangements |
|
|
( |
) |
|
|
( |
) |
Advances on industrial metals |
|
|
|
|
|
|
||
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
||
Precious metal subject to price risk |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Precious metal subject to derivative financial instruments: |
|
|
|
|
|
|
||
Precious metals forward contracts at market values |
|
|
|
|
|
|
||
Precious metals futures contracts at market values |
|
|
|
|
|
|
||
Total market value of derivative financial instruments |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Net precious metals subject to commodity price risk |
|
$ |
|
|
$ |
|
Net precious metals subject to commodity price risk at March 31, 2023 includes the impact of projected sales activity between market close on March 31, 2023 and market opening on the next business day.
32
Notional Balances of Derivatives
The notional balances of the Company's derivative instruments, consisting of contractual metal quantities, are expressed at current spot prices of the underlying precious metal commodity.
in thousands |
|
|
|
|
|
|
||
|
|
March 31, 2023 |
|
|
June 30, 2022 |
|
||
Purchase commitments |
|
$ |
|
|
$ |
|
||
Sales commitments |
|
$ |
( |
) |
|
$ |
( |
) |
Margin sales commitments |
|
$ |
( |
) |
|
$ |
( |
) |
Open forward contracts |
|
$ |
|
|
$ |
|
||
Open futures contracts |
|
$ |
|
|
$ |
|
The contract amounts (i.e., notional balances) of the Company's forward and futures contracts and the open sales and purchase commitments are not reflected in the accompanying condensed consolidated balance sheet. The Company records the difference between the market price of the underlying metal or contract and the trade amount at fair value.
The Company is exposed to the risk of failure of the counterparties to its derivative contracts. Significant judgment is applied by the Company when evaluating the fair value implications. The Company regularly reviews the creditworthiness of its major counterparties and monitors its exposure to concentrations. On March 31, 2023, the Company believes its risk of counterparty default is mitigated as a result of such evaluation and the short-term duration of these arrangements.
Foreign Currency Exchange Rate Management
The Company utilizes foreign currency forward contracts to manage the effect of foreign currency exchange fluctuations on its sale and purchase transactions. These contracts generally have maturities of less than one week.
The market values (fair values) of the Company’s foreign exchange forward contracts and the net open sale and purchase commitment transactions, denominated in foreign currencies, outstanding were as follows:
in thousands |
|
|
|
|
|
|
||
|
|
March 31, 2023 |
|
|
June 30, 2022 |
|
||
Foreign exchange forward contracts |
|
$ |
|
|
$ |
|
||
Open sale and purchase commitment transactions, net |
|
$ |
|
|
$ |
|
13. INCOME TAXES
Net income from operations before provision for income taxes for the three and nine months ended March 31, 2023 and 2022 is shown below:
in thousands |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Three Months Ended March 31, |
|
|
Nine Months Ended March 31, |
|
||||||||||||
|
|
2023 |
|
|
|
2022 |
|
|
2023 |
|
|
|
2022 |
|
||||
U.S. |
|
$ |
|
|
|
$ |
|
|
$ |
|
|
|
$ |
|
||||
Foreign |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
|
$ |
|
|
$ |
|
|
|
$ |
|
The Company files a consolidated federal income tax return based on a June 30 tax year end. The provision for income tax expense by jurisdiction and the effective tax rate for the three and nine months ended March 31, 2023 and 2022 are shown below:
in thousands |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Three Months Ended March 31, |
|
|
Nine Months Ended March 31, |
|
||||||||||||
|
|
2023 |
|
|
|
2022 |
|
|
2023 |
|
|
|
2022 |
|
||||
Current: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Federal |
|
$ |
|
|
|
$ |
|
|
$ |
|
|
|
$ |
|
||||
State and local |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|||
Income tax expense |
|
$ |
|
|
|
$ |
|
|
$ |
|
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Effective income tax rate |
|
|
% |
|
|
|
% |
|
|
% |
|
|
|
% |
For the three and nine months ended March 31, 2023, our effective tax rate differs from the federal statutory rate primarily due to the foreign derived intangible income special deduction, the excess tax benefit from share-based compensation, partially offset by
33
Section 162(m) executive compensation disallowance and state taxes (net of federal tax benefit). For the three and nine months ended March 31, 2022, our effective tax rate differs from the federal statutory rate primarily due to foreign derived intangible income special deduction, the excess tax benefit from share-based compensation, partially offset by state taxes (net of federal tax benefit), and other normal course non-deductible expenditures.
Income Taxes Receivable and Payable
As of March 31, 2023 and June 30, 2022, income tax receivable totaled $
Deferred Tax Assets and Liabilities
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized by evaluating both positive and negative evidence. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. As of March 31, 2023 and June 30, 2022, management concluded that it was more likely than not that the Company would be able to realize the benefit of the U.S. federal and state deferred tax assets. We based this conclusion on historical and projected operating performance, as well as our expectation that our operations will generate sufficient taxable income in future periods to realize the tax benefits associated with the deferred tax assets. A tax valuation allowance was considered unnecessary, as management concluded that it was more likely than not that the Company would be able to realize the benefit of the U.S. federal and state deferred tax assets.
As of March 31, 2023, the condensed consolidated balance sheet reflects the deferred tax items for each tax-paying component (i.e., federal and state), resulting in a state deferred tax liability of $
Net Operating Loss Carryforwards
As of March 31, 2023 and June 30, 2022, the Company has approximately $
Unrecognized Tax Benefits
The Company has taken or expects to take certain tax benefits on its income tax return filings that it has not recognized as a tax benefit (i.e., an unrecognized tax benefit) on its condensed consolidated statements of income. The Company's measurement of its uncertain tax positions is based on management's assessment of all relevant information, including, but not limited to prior audit experience, audit settlement, or lapse of the applicable statute of limitations. As of March 31, 2023, there have been
Related parties include entities which the Company controls or has the ability to significantly influence, and entities which are under common control with the Company. Related parties also include persons who are affiliated with related entities or the Company who are in a position to influence corporate decisions (such as owners, executives, board members and their families). In the normal course of business, we enter into transactions with our related parties. Below is a list of related parties with whom we have had significant transactions during the presented periods:
34
Our related party transactions include (i) sales and purchases of precious metals, (ii) financing activities, (iii) repurchase arrangements, and (iv) hedging transactions. Below is a summary of our related party transactions. The amounts presented for each period were based on each entity’s related party status for that period.
Balances with Related Parties
Receivables and Payables, Net
As of March 31, 2023 and June 30, 2022, the Company had related party receivables and payables balances as set forth below:
in thousands |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
March 31, 2023 |
|
June 30, 2022 |
||||||||||||||||
|
|
Receivables |
|
Payables |
|
Receivables |
|
Payables |
||||||||||||
Stack's Bowers Galleries |
|
$ |
|
(1) |
|
$ |
— |
|
|
|
$ |
— |
|
|
|
$ |
|
(3) |
||
Equity method investees |
|
|
|
(1) |
|
|
|
(2) |
|
|
|
(1) |
|
|
|
(3) |
||||
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Long-term Investments
As of March 31, 2023 and June 30, 2022, the aggregate carrying balance of the equity method investments was $
Long-term Other Assets
As of March 31, 2023 and June 30, 2022, the fair value of the option to purchase an additional
Notes Payable
On April 1, 2021, CCP entered into a loan agreement ("CCP Note") with CFC, which provides CFC with up to $
Activity with Related Parties
Sales and Purchases
During the three and nine months ended March 31, 2023 and 2022, the Company made sales and purchases to various companies, which have been deemed to be related parties, as follows:
in thousands |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
Three Months Ended March 31, |
|
|
Nine Months Ended March 31, |
|
||||||||||||||||||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||||||||||||||||||
|
|
Sales |
|
|
Purchases |
|
|
Sales |
|
|
Purchases |
|
|
Sales |
|
|
Purchases |
|
|
Sales |
|
|
Purchases |
|
||||||||
Stack's Bowers Galleries |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Equity method investees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
35
Interest Income
During the three and nine months ended March 31, 2023 and 2022, the Company earned interest income related to loans made to Stack's Bower Galleries and from financing arrangements (including repurchase agreements) with affiliated companies, as set forth below:
in thousands |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Three Months Ended March 31, |
|
|
Nine Months Ended March 31, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Interest income from secured loans receivables |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Interest income from finance products and repurchase arrangements |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
Selling, General, and Administrative
During the three months ended March 31, 2023 and 2022, the Company incurred selling general, and administrative expense related to its subleasing agreement with Stack's Bower Galleries that totaled $
During the nine months ended March 31, 2023 and 2022, the Company incurred selling, general, and administrative expense related to its subleasing agreement with Stack's Bower Galleries that that totaled $
Interest Expense
During the three months ended March 31, 2023 and 2022, the Company incurred interest expense related to its note with CCP that totaled $
Equity Method Investments — Earnings and Dividends Received
During the three months ended March 31, 2023 and 2022, the Company's proportional share of our equity method investee's earnings were net losses of $
During the three months ended March 31, 2023 and 2022, the Company received
Other Income
During the three months ended March 31, 2023 and 2022, the Company earned royalty income related to one of CFC's secured lending agreements and information technology consulting services income from Stack's Bower Galleries that totaled $
15. FINANCING AGREEMENTS
Lines of credit - Trading Credit Facility
On December 21, 2021, the Company entered into a new
Also on December 21, 2021, in connection with entry into the Trading Credit Facility, all amounts outstanding under the Company’s uncommitted demand borrowing facility with a syndicate of banks (the "Prior Credit Facility”) were paid in full, and the Prior Trading Credit Facility was terminated. The amounts set forth in our condensed consolidated financial statements for all periods prior to December 21, 2021 refer to the Prior Credit Facility.
The Trading Credit Facility provides the Company with the liquidity to buy and sell billions of dollars of precious metals annually. A-Mark routinely uses funds drawn under the Trading Credit Facility to purchase metals from its suppliers and for operating cash flow purposes. Our CFC subsidiary also uses the funds drawn under the Trading Credit Facility to finance certain of its lending activities.
36
Borrowings totaled $
The Trading Credit Facility contains various covenants, all of which the Company was in compliance with as of March 31, 2023.
Although the Trading Credit Facility is a committed facility, lenders holding at least
Interest expense related to the Company’s Trading Credit Facility totaled $
Interest expense related to the Company’s Trading Credit Facility totaled $
Notes Payable - AMCF Notes
In September 2018, AM Capital Funding, LLC (“AMCF”), a wholly owned subsidiary of CFC, completed an issuance of Secured Senior Term Notes (collectively, the "AMCF Notes"): Series 2018-1, Class A (the “Class A Notes”) in the aggregate principal amount of $
AMCF applied the net proceeds from the sale to the Company’s purchase of loans and precious metals inventory, and to pay certain costs and expenses. CFC and A-Mark may from time to time also contribute cash or sell precious metals to AMCF in exchange for cash or subordinated, deferred payment obligations from AMCF. In addition, AMCF may from time to time sell precious metals to A-Mark for cash.
As of March 31, 2023, the condensed consolidated carrying balance of the AMCF Notes was $
For the three months ended March 31, 2023 and 2022, the interest expense related to the AMCF Notes (including loan amortization costs) totaled $
For the nine months ended March 31, 2023 and 2022, the interest expense related to the AMCF Notes (including loan amortization costs) totaled $
Notes Payable — Related Party
See Note 14.
37
Liabilities on Borrowed Metals
The Company recorded liabilities on borrowed metals with market values totaling $
For the three months ended March 31, 2023 and 2022, the interest expense related to liabilities on borrowed metals totaled $
Advanced Pool Metals
The Company borrows precious metals from its suppliers and customers under short-term agreements using other precious metals from its inventory as collateral. The Company has the ability to sell the metals advanced. These arrangements can be settled by repayment in similar metals or in cash. Once the obligation is settled, the metals held as collateral are released back to the Company.
Liabilities on Borrowed Metals — Other
Liabilities may also arise from: (i) unallocated metal positions held by customers in the Company’s inventory, (ii) amounts due to suppliers for the use of their consigned inventory, and (iii) shortages in unallocated metal positions held by the Company in the supplier’s inventory. Unallocated or pool metal represents an unsegregated inventory position that is due on demand, in a specified physical form, based on the total ounces of metal held in the position. Amounts due under these arrangements require delivery either in the form of precious metals, or in cash.
Product Financing Arrangements
The Company has agreements with third-party financial institutions which allow the Company to transfer its gold and silver inventory at an agreed-upon price, which is based on the spot price. Such agreements allow the Company to repurchase this inventory at an agreed-upon price based on the spot price on the repurchase date. The third-party charges a monthly fee as a percentage of the market value of the outstanding obligation; such monthly charges are classified in interest expense. These transactions do not qualify as sales, and therefore have been accounted for as financing arrangements and are reflected in the condensed consolidated balance sheet as product financing arrangements. The obligation is stated at the amount required to repurchase the outstanding inventory. Both the product financing obligation and the underlying inventory (which is entirely restricted) are carried at fair value, with changes in fair value recorded as a component of cost of sales in the condensed consolidated statements of income. Such obligations totaled $
For the three months ended March 31, 2023 and 2022, the interest expense related to product financing arrangements totaled $
16. COMMITMENTS AND CONTINGENCIES
Refer to Note 16 of the Notes to Consolidated Financial Statements in the 2022 Annual Report for information relating to employment contracts and other commitments. The Company is not aware of any material changes to commitments as summarized in the 2022 Annual Report.
Legal Matters
The Company is from time-to-time party to various lawsuits, claims and other proceedings, that arise in the ordinary course of its business.
Although the ultimate outcome of any legal matter cannot be predicted with certainty, based on current information, including our assessment of the merits of the particular claim, we do not expect that these legal proceedings or claims will have any material adverse impact on our future consolidated financial position, results of operations, or cash flows.
38
In accordance with U.S. GAAP, we review the need to accrue for any loss contingency and establish a liability when, in the opinion of management, it is probable that a matter would result in a liability and the amount of loss, if any, can be reasonably estimated. We do not believe that the resolution of any currently pending lawsuits, claims and proceedings, either individually or in the aggregate, will have a material adverse effect on financial position, results of operations or liquidity. However, the outcomes of any currently pending lawsuits, claims and proceedings cannot be predicted, and therefore, there can be no assurance that this will be the case.
Additionally, we record receivables for insurance recoveries relating to litigation-related losses and expenses if and when such amounts are covered by insurance and recovery of such losses or expenses are due.
17. STOCKHOLDERS’ EQUITY
Shelf Registration Statement
On September 25, 2020, the Company filed a universal shelf registration statement on Form S-3, which was declared effective by the Securities and Exchange Commission (the “SEC”) on March 4, 2021, on which the Company registered for sale up to $
Dividends
On
On August 18, 2022, the Company's board of directors also declared the initial quarterly regular cash dividend of $
On
Share Repurchase Program
In April 2018, the Company's board of directors approved a share repurchase program which authorizes the Company to purchase up to
2014 Stock Award and Incentive Plan
The Company's amended and restated 2014 Stock Award and Incentive Plan (the "2014 Plan") was approved most recently on October 27, 2022 by the Company's stockholders. As of March 31, 2023,
Under the 2014 Plan, the Company may grant options and other equity awards as a means of attracting and retaining officers, employees, non-employee directors and consultants, to provide incentives to such persons, and to align the interests of such persons with the interests of stockholders by providing compensation based on the value of the Company's stock. Awards under the 2014 Plan may be granted in the form of incentive or non-qualified stock options, stock appreciation rights ("SARs"), restricted stock, restricted stock units ("RSUs"), dividend equivalent rights, other stock-based awards (which may include outright grants of shares) and cash incentive awards. The 2014 Plan also authorizes grants of awards with performance-based conditions and market-based conditions. The 2014 Plan is administered by the Compensation Committee of the board of directors, which, in its discretion, may select officers and other employees, directors (including non-employee directors) and consultants to the Company and its subsidiaries to receive grants of awards. The board of directors itself may perform any of the functions of the Compensation Committee under the 2014 Plan.
39
Under the 2014 Plan, the exercise price of options and base price of SARs, as set by the Compensation Committee, generally may not be less than the fair market value of the shares on the date of grant, and the maximum term of stock options and SARs is
Stock Options
The Company uses the Black-Scholes option pricing model, which uses various inputs such as the common share price and estimates that include the risk-free interest rate, volatility, expected life and dividend yield. As of March 31, 2023 there were no stock options outstanding with performance conditions or other types of awards with market conditions.
During the three months ended March 31, 2023 and 2022, the Company incurred $
A required adjustment to outstanding stock options was triggered as a result of the non-recurring special dividend declared on August 18, 2022. In accordance with the terms of the Company’s equity award plans under which the options were issued, an adjustment was required to protect the holders of such stock options from decreases in the value of the stock options due to payment of the non-recurring special dividends. This event decreased the exercise price of outstanding stock options by $
The following table summarizes the stock option activity for the nine months ended March 31, 2023:
|
|
Options |
|
|
Weighted Average Exercise Price Per Share |
|
|
Aggregate |
|
|
Weighted Average Grant Date Fair Value Per Award |
|
||||
Outstanding at June 30, 2022 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Granted |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Exercised |
|
|
( |
) |
|
$ |
|
|
|
|
|
|
|
|||
Outstanding at March 31, 2023 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Exercisable at March 31, 2023 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
The following table summarizes the status of stock options outstanding as of March 31, 2023:
Exercise Price Ranges |
|
|
Options Outstanding |
|
|
Options Exercisable |
|
|||||||||||||||||||||||
From |
|
|
To |
|
|
Number of Shares Outstanding |
|
|
Weighted Average Remaining Contractual Life |
|
|
Weighted Average Exercise Price |
|
|
Number of Shares Exercisable |
|
|
Weighted Average Remaining Contractual Life |
|
|
Weighted Average Exercise Price |
|
||||||||
$ |
|
|
$ |
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
$ |
|
||||||||
$ |
|
|
$ |
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
$ |
|
||||||||
$ |
|
|
$ |
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
$ |
|
||||||||
$ |
|
|
$ |
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
$ |
|
||||||||
$ |
|
|
$ |
|
|
|
|
|
|
|
|
$ |
|
|
|
— |
|
|
|
— |
|
|
$ |
— |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
$ |
|
The following table summarizes the nonvested stock option activity for the nine months ended March 31, 2023.
|
|
Options |
|
|
|
Weighted Average Grant Date Fair Value Per Award |
|
||
Nonvested Outstanding at June 30, 2022 |
|
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
$ |
|
||
Vested |
|
|
( |
) |
|
|
$ |
|
|
Forfeitures |
|
|
— |
|
|
|
$ |
— |
|
Nonvested Outstanding at March 31, 2023 |
|
|
|
|
|
$ |
|
40
Restricted Stock Units
RSUs granted by the Company are not transferable and automatically convert to shares of common stock on a one-for-one basis as the awards vest or at a specified date after vesting.
A required adjustment to certain outstanding RSUs was triggered as a result of the non-recurring special dividend declared on
During the three months ended March 31, 2023 and 2022, the Company incurred $
The following table summarizes the RSU activity for the nine months ended March 31, 2023:
|
|
Awards |
|
|
|
Weighted Average Fair Value per Unit at Grant Date |
|
|
||
Nonvested Outstanding at June 30, 2022 |
|
|
|
|
|
$ |
|
|
||
Granted |
|
|
|
|
|
$ |
|
|
||
Vested & delivered |
|
|
( |
) |
|
|
$ |
|
|
|
Vested & deferred (1) |
|
|
( |
) |
|
|
$ |
|
|
|
Nonvested Outstanding at March 31, 2023 |
|
|
|
|
|
$ |
|
|
||
Vested but subject to deferred settlement at March 31, 2023 (1) |
|
|
|
|
|
$ |
|
|
||
Outstanding at March 31, 2023 |
|
|
|
|
|
$ |
|
|
(1) Certain RSU holders elected to defer settlement of the RSUs to a specified date. The DSU holder is contractually obligated to defer settlement of the DSUs to a specified date following the holder’s termination of service.
Common Stock
In fiscal 2023, a portion of the fiscal 2022 annual bonuses was paid in the form of common stock to the Chief Executive Officer and President. The Company issued
Certain Anti-Takeover Provisions
The Company’s certificate of incorporation and by-laws contain certain anti-takeover provisions that could have the effect of making it more difficult for a third-party to acquire, or of discouraging a third-party from attempting to acquire, control of the Company without negotiating with its board of directors. Such provisions could limit the price that certain investors might be willing to pay in the future for the Company’s securities. Certain of such provisions allow the Company to issue preferred stock with rights senior to those of the common stock or impose various procedural and other requirements which could make it more difficult for stockholders to effect certain corporate actions.
18. CUSTOMER AND SUPPLIER CONCENTRATIONS
Customer Concentration
The following customer provided 10 percent or more of the Company's revenues for the three months ended March 31, 2023 and 2022:
in thousands |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
Three Months Ended March 31, |
|
|
Nine Months Ended March 31, |
|
||||||||||||||||||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||||||||||||||||||
|
|
Amount |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
||||||||
Total revenue |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||||||
Customer concentrations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
HSBC Bank (1) |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
41
(1) Sales with this trading partner include sales on forward contracts that are entered into for hedging purposes rather than sales characterized with the physical delivery of precious metal product. This sales activity has been reported within the Wholesale Sales and Ancillary Services segment.
No single customer provided 10 percent or more of the Company's accounts receivable balances as of March 31, 2023.
The following customers accounted for 10 percent or more of the Company's secured loans receivable as of March 31, 2023:
in thousands |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
March 31, 2023 |
|
|
June 30, 2022 |
|
||||||||||
|
|
Amount |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
||||
Total secured loans |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||
Customer concentrations |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Customer A |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||
Customer B |
|
|
|
|
|
% |
|
|
|
|
|
% |
Supplier Concentration
The Company buys precious metals from a variety of sources, including through brokers and dealers, from sovereign and private mints, from refiners and directly from customers. The Company believes that no one supplier or small group of suppliers is critical to its business, since other sources of supply are available that provide similar products on comparable terms.
42
19. SEGMENTS AND GEOGRAPHIC INFORMATION
The Company evaluates segment reporting in accordance with Segment Reporting Topic 280 of the ASC (“ASC 280”), each reporting period, including evaluating the organizational structure and the reporting package that is reviewed by the chief operating decision makers. The Company's operations are organized under
Revenue
in thousands |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Three Months Ended March 31, |
|
|
|
Nine Months Ended March 31, |
|
|
||||||||||||
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
||||
Revenue by segment(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Wholesale Sales & Ancillary Services |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
Eliminations of inter-segment sales |
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
|
Wholesale Sales & Ancillary Services, net of eliminations (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Direct-to-Consumer |
|
|
|
(a) |
|
|
|
(b) |
|
|
|
(c) |
|
|
|
(d) |
||||
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
in thousands |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Three Months Ended March 31, |
|
|
|
Nine Months Ended March 31, |
|
||||||||||||
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
||||
Revenue by geographic region |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
United States |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
||||
Europe |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
North America, excluding United States |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asia Pacific |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Africa |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
Australia |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
Gross Profit and Gross Margin Percentage
in thousands |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Three Months Ended March 31, |
|
|
|
Nine Months Ended March 31, |
|
||||||||||||
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
||||
Gross profit by segment(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Wholesale Sales & Ancillary Services |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
||||
Eliminations and adjustments |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
( |
) |
||
Wholesale Sales & Ancillary Services, net of eliminations and adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Direct-to-Consumer, net of eliminations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
||||
Gross margin percentage by segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Wholesale Sales & Ancillary Services |
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
||||
Wholesale Sales & Ancillary Services, net of eliminations and adjustments |
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
||||
Direct-to-Consumer |
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
||||
Consolidated gross margin percentage |
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
43
Operating Income and (Expenses)
in thousands |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Three Months Ended March 31, |
|
|
|
Nine Months Ended March 31, |
|
||||||||||||
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
||||
Operating income (expense) by segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Wholesale Sales & Ancillary Services |
|
$ |
( |
) |
|
|
$ |
( |
) |
|
|
$ |
( |
) |
|
|
$ |
( |
) |
Eliminations |
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
Wholesale Sales & Ancillary Services, net of eliminations |
|
$ |
( |
) |
|
|
$ |
( |
) |
|
|
$ |
( |
) |
|
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Wholesale Sales & Ancillary Services, net of eliminations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling, general and administrative expenses |
|
$ |
( |
) |
|
|
$ |
( |
) |
|
|
$ |
( |
) |
|
|
$ |
( |
) |
Depreciation and amortization expense |
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense |
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
Earnings (losses) from equity method investments |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|||
Other income, net |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
||
Unrealized gains (losses) on foreign exchange |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
( |
) |
||
|
|
$ |
( |
) |
|
|
$ |
( |
) |
|
|
$ |
( |
) |
|
|
$ |
( |
) |
Direct-to-Consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling, general and administrative expenses |
|
$ |
( |
) |
|
|
$ |
( |
) |
|
|
$ |
( |
) |
|
|
$ |
( |
) |
Depreciation and amortization expense |
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
Interest expense |
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
Other expense, net |
|
|
— |
|
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
$ |
( |
) |
|
|
$ |
( |
) |
|
|
$ |
( |
) |
|
|
$ |
( |
) |
Secured Lending |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling, general and administrative expenses |
|
$ |
( |
) |