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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 

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

For the quarterly period ended March 31, 2023

OR

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

 

For the transition period from ________ to ________

Commission File Number: 001-36347

 

img204978824_0.jpg 

 

A-MARK PRECIOUS METALS, INC.

 

(Exact name of registrant as specified in its charter)

 

 

Delaware

(State of Incorporation)

 

11-2464169

(IRS Employer I.D. No.)

 

2121 Rosecrans Ave. Suite 6300
El Segundo, CA 90245

(Address of principal executive offices) (Zip Code)

(310) 587-1477

(Registrant’s telephone number, including area code)

 

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

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value

AMRK

NASDAQ Global Select Market

 

 

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

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

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

 

 

 

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

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

As of May 2, 2023, the registrant had 23,260,606 shares of common stock, par value $0.01 per share outstanding.

 

 

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

 

 

 

 

 

Page

PART I

FINANCIAL INFORMATION

 

3

 

 

 

 

 

 

Item 1.

Financial Statements

 

3

 

Item 2.

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

 

46

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

83

 

Item 4.

Controls and Procedures

 

84

 

 

 

 

 

PART II

OTHER INFORMATION

 

84

 

 

 

 

 

 

Item 1.

Legal Proceedings

 

84

 

Item 1A.

Risk Factors

 

84

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

98

 

Item 3.

Defaults Upon Senior Securities

 

98

 

Item 4.

Mine Safety Disclosures

 

98

 

Item 5.

Other Information

 

98

 

Item 6.

Exhibits

 

99

 

 

 

 

 

Signatures

 

 

100

 

 

 

 

 

 

 

 

2


 

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Index to the Condensed Consolidated Financial Statements and Notes thereof

 

 

Page

Condensed Consolidated Balance Sheets as of March 31, 2023 and June 30, 2022

4

Condensed Consolidated Statements of Income for the Three and Nine Months Ended March 31, 2023 and 2022

6

Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended March 31, 2023 and 2022

7

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2023 and 2022

8

Notes to the Condensed Consolidated Financial Statements

9

Note 1. Description of Business

9

Note 2. Summary of Significant Accounting Policies

10

Note 3. Assets and Liabilities, at Fair Value

21

Note 4. Receivables

24

Note 5. Secured Loans Receivable

24

Note 6. Inventories

26

Note 7. Leases

27

Note 8. Property, Plant, and Equipment

28

Note 9. Goodwill and Intangible Assets

28

Note 10. Long-Term Investments

30

Note 11. Accounts Payable and Other Current Liabilities

30

Note 12. Derivative Instruments and Hedging Transactions

30

Note 13. Income Taxes

33

Note 14. Related Party Transactions

34

Note 15. Financing Agreements

36

Note 16. Commitments and Contingencies

38

Note 17. Stockholders' Equity

39

Note 18. Customer and Supplier Concentrations

41

Note 19. Segments and Geographic Information

43

Note 20. Subsequent Events

46

 

3


 

A-MARK PRECIOUS METALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except for share data)

 

 

 

March 31, 2023

 

 

June 30, 2022

 

 

 

(unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash(1)

 

$

78,101

 

 

$

37,783

 

Receivables, net

 

 

90,076

 

 

 

97,040

 

Derivative assets

 

 

58,456

 

 

 

91,743

 

Secured loans receivable(1)

 

 

96,856

 

 

 

126,217

 

Precious metals held under financing arrangements(1)

 

 

24,014

 

 

 

79,766

 

Inventories:

 

 

 

 

 

 

Inventories(1)

 

 

675,414

 

 

 

458,347

 

Restricted inventories

 

 

292,104

 

 

 

282,671

 

 

 

967,518

 

 

 

741,018

 

Income tax receivable

 

 

861

 

 

 

 

Prepaid expenses and other assets(1)

 

 

8,460

 

 

 

7,558

 

Total current assets

 

 

1,324,342

 

 

 

1,181,125

 

Operating lease right of use assets

 

 

5,410

 

 

 

6,482

 

Property, plant, and equipment, net

 

 

11,473

 

 

 

9,845

 

Goodwill

 

 

100,943

 

 

 

100,943

 

Intangibles, net

 

 

64,281

 

 

 

67,965

 

Long-term investments

 

 

80,995

 

 

 

70,828

 

Other long-term assets

 

 

5,459

 

 

 

5,471

 

Total assets

 

$

1,592,903

 

 

$

1,442,659

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Lines of credit

 

$

230,000

 

 

$

215,000

 

Liabilities on borrowed metals

 

 

25,730

 

 

 

59,417

 

Product financing arrangements

 

 

292,104

 

 

 

282,671

 

Accounts payable and other payables

 

 

10,164

 

 

 

6,127

 

Deferred revenue and other advances

 

 

253,688

 

 

 

175,545

 

Derivative liabilities

 

 

83,330

 

 

 

75,780

 

Accrued liabilities(1)

 

 

19,763

 

 

 

21,813

 

Income tax payable

 

 

 

 

 

382

 

Notes payable(1)

 

 

94,644

 

 

 

 

Total current liabilities

 

 

1,009,423

 

 

 

836,735

 

Notes payable (2)

 

 

1,752

 

 

 

94,073

 

Deferred tax liabilities

 

 

14,788

 

 

 

15,408

 

Other liabilities

 

 

4,802

 

 

 

5,972

 

Total liabilities

 

 

1,030,765

 

 

 

952,188

 

Commitments and contingencies

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

Preferred stock, $0.01 par value, authorized 10,000,000 shares; issued and outstanding: none as of March 31, 2023 and June 30, 2022

 

 

 

 

 

 

Common stock, par value $0.01; 40,000,000 shares authorized; 23,596,341 and 23,379,888 shares issued and 23,260,606 and 23,379,888 shares outstanding as of March 31, 2023 and June 30, 2022, respectively

 

 

236

 

 

 

234

 

Treasury stock, 335,735 and 0 shares at cost as of March 31, 2023 and June 30, 2022, respectively

 

 

(9,762

)

 

 

 

Additional paid-in capital

 

 

168,253

 

 

 

166,526

 

Accumulated other comprehensive loss

 

 

(1,229

)

 

 

 

Retained earnings

 

 

403,473

 

 

 

321,849

 

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

 

 

560,971

 

 

 

488,609

 

Noncontrolling interest

 

 

1,167

 

 

 

1,862

 

Total stockholders’ equity

 

 

562,138

 

 

 

490,471

 

Total liabilities, noncontrolling interest and stockholders’ equity

 

$

1,592,903

 

 

$

1,442,659

 

 

(1)
Includes amounts of the consolidated variable interest entity, which are presented separately in the table below.
(2)
Notes payable as of June 30, 2022 includes amounts of the consolidated variable interest entity, which is presented separately in the table below.

 

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 $72.0 million and Secured Subordinated Term Notes, Series 2018-1, Class B in the aggregate principal amount of $28.0 million (collectively, the "AMCF Notes"). The Class A Notes bear interest at a rate of 4.98% and the Class B Notes bear interest at a rate of 5.98%. The AMCF Notes have a maturity date of December 15, 2023.

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

The following table presents the assets and liabilities of this VIE, which are included in the condensed consolidated balance sheets above. The holders of the 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.)

 

 

 

March 31, 2023

 

 

June 30, 2022

 

ASSETS OF THE CONSOLIDATED VIE

 

 

 

 

 

 

Cash

 

$

1,578

 

 

$

3,264

 

Secured loans receivable

 

 

48,632

 

 

 

92,246

 

Precious metals held under financing arrangements

 

 

17,865

 

 

 

13,524

 

Inventories

 

 

50,106

 

 

 

4,752

 

Prepaid expenses and other assets

 

 

28

 

 

 

23

 

Total assets of the consolidated variable interest entity

 

$

118,209

 

 

$

113,809

 

LIABILITIES OF THE CONSOLIDATED VIE

 

 

 

 

 

 

Deferred payment obligations(1)

 

$

27,572

 

 

$

21,081

 

Accrued liabilities

 

 

594

 

 

 

832

 

Notes payable(2)

 

 

99,644

 

 

 

99,073

 

Total liabilities of the consolidated variable interest entity

 

$

127,810

 

 

$

120,986

 

 

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

 

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)

 

 

 

Three Months Ended March 31,

 

 

Nine Months Ended March 31,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenues

 

$

2,317,150

 

 

$

2,109,115

 

 

$

6,167,206

 

 

$

6,069,450

 

Cost of sales

 

 

2,241,652

 

 

 

2,037,032

 

 

 

5,951,147

 

 

 

5,875,435

 

Gross profit

 

 

75,498

 

 

 

72,083

 

 

 

216,059

 

 

 

194,015

 

Selling, general, and administrative expenses

 

 

(23,841

)

 

 

(20,494

)

 

 

(62,438

)

 

 

(55,884

)

Depreciation and amortization expense

 

 

(3,340

)

 

 

(7,548

)

 

 

(9,784

)

 

 

(24,077

)

Interest income

 

 

6,087

 

 

 

5,343

 

 

 

16,167

 

 

 

16,125

 

Interest expense

 

 

(9,237

)

 

 

(5,429

)

 

 

(22,603

)

 

 

(16,297

)

Earnings (losses) from equity method investments

 

 

(70

)

 

 

1,608

 

 

 

7,276

 

 

 

4,317

 

Other income, net

 

 

641

 

 

 

493

 

 

 

2,001

 

 

 

1,335

 

Unrealized gains (losses) on foreign exchange

 

 

35

 

 

 

(135

)

 

 

250

 

 

 

(128

)

Net income before provision for income taxes

 

 

45,773

 

 

 

45,921

 

 

 

146,928

 

 

 

119,406

 

Income tax expense

 

 

(9,775

)

 

 

(8,375

)

 

 

(32,096

)

 

 

(23,797

)

Net income

 

 

35,998

 

 

 

37,546

 

 

 

114,832

 

 

 

95,609

 

Net income attributable to noncontrolling interest

 

 

78

 

 

 

164

 

 

 

306

 

 

 

409

 

Net income attributable to the Company

 

$

35,920

 

 

$

37,382

 

 

$

114,526

 

 

$

95,200

 

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

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.53

 

 

$

1.64

 

 

$

4.89

 

 

$

4.19

 

Diluted

 

$

1.46

 

 

$

1.53

 

 

$

4.64

 

 

$

3.92

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

23,421,300

 

 

 

22,859,600

 

 

 

23,435,700

 

 

 

22,712,800

 

Diluted

 

 

24,655,400

 

 

 

24,425,800

 

 

 

24,690,900

 

 

 

24,275,200

 

 

 

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)

 

Common Stock

 

 

Additional Paid-in

 

 

Retained

 

 

Accumulated other comprehensive

 

 

Treasury Stock

 

 

Total A-Mark Precious Metals, Inc. Stockholders'

 

 

Non-controlling

 

 

Total Stockholders’

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

income (loss)

 

 

Shares

 

 

Amount

 

 

Equity

 

 

Interest

 

 

Equity

 

Balance, June 30, 2021

 

22,459,314

 

 

$

113

 

 

$

150,420

 

 

$

212,090

 

 

$

 

 

 

 

 

$

 

 

$

362,623

 

 

$

1,319

 

 

$

363,942

 

Net income

 

 

 

 

 

 

 

 

 

 

26,024

 

 

 

 

 

 

 

 

 

 

 

 

26,024

 

 

 

100

 

 

 

26,124

 

Share-based compensation

 

 

 

 

 

 

 

473

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

473

 

 

 

 

 

 

473

 

Exercise of share-based awards

 

120,630

 

 

 

 

 

 

762

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

762

 

 

 

 

 

 

762

 

Net settlement of share-based awards

 

670

 

 

 

 

 

 

(13

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13

)

 

 

 

 

 

(13

)

Common stock issued for increase in long-term investments

 

123,180

 

 

 

1

 

 

 

2,977

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,978

 

 

 

 

 

 

2,978

 

Dividends declared ($1.00 per common share)

 

 

 

 

 

 

 

 

 

 

(22,639

)

 

 

 

 

 

 

 

 

 

 

 

(22,639

)

 

 

 

 

 

(22,639

)

Balance, September 30, 2021

 

22,703,794

 

 

 

114

 

 

 

154,619

 

 

 

215,475