A-Mark Precious Metals, Inc. [AMRK] Filings

10-Q 1 amrk-20220331.htm 10-Q 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2022

☐ 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

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 April 28, 2022, the registrant had 11,514,010 shares of common stock outstanding, par value $0.01 per share.

A-MARK PRECIOUS METALS, INC. AND SUBSIDIARIES

QUARTERLY REPORT ON FORM 10-Q

For the Nine Months Ended March 31, 2022

TABLE OF CONTENTS


			Page
PART I
	Item 1.	Financial Statements	3
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	52
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	96
	Item 4.	Controls and Procedures	96

PART II
	Item 1.	Legal Proceedings	96
	Item 1A.	Risk Factors	97
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	110
	Item 3.	Defaults upon Senior Securities	110
	Item 4.	Mine Safety Disclosures	110
	Item 5.	Other Information	110
	Item 6.	Exhibits	111
Signatures			112

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, 2022 and June 30, 2021	4
Condensed Consolidated Statements of Income for the Three and Nine Months Ended March 31, 2022 and 2021	6
Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended March 31, 2022 and 2021	7
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2022 and 2021	8
Notes to Condensed Consolidated Financial Statements	9
Note 1. Description of Business	9
Note 2. Summary of Significant Accounting Policies	11
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	28
Note 8. Property, Plant, and Equipment	29
Note 9. Goodwill and Intangible Assets	30
Note 10. Long-Term Investments	32
Note 11. Accounts Payable and Other Current Liabilities	32
Note 12. Derivative Instruments and Hedging Transactions	33
Note 13. Income Taxes	37
Note 14. Related Party Transactions	39
Note 15. Financing Agreements	41
Note 16. Commitments and Contingencies	43
Note 17. Stockholders' Equity	44
Note 18. Customer and Supplier Concentrations	46
Note 19. Segments and Geographic Information	47
Note 20. Subsequent Events	51

A-MARK PRECIOUS METALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except for share data)


	March 31, 2022		June 30, 2021
ASSETS
Current assets:
Cash(1)	$	28,549	$	101,405
Receivables, net		65,636		89,000
Derivative assets		25,973		44,536
Secured loans receivable(1)		145,838		112,968
Precious metals held under financing arrangements(1)		87,450		154,742
Inventories:
Inventories(1)		564,816		256,991
Restricted inventories		199,447		201,028
		764,263		458,019
Prepaid expenses and other assets(1)		8,188		3,557
Total current assets		1,125,897		964,227
Operating lease right of use assets		6,774		5,702
Property, plant, and equipment, net		9,542		8,609
Goodwill		100,943		100,943
Intangibles, net		70,716		93,633
Long-term investments		32,511		18,467
Other long-term assets		200		—
Total assets	$	1,346,583	$	1,191,581
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Lines of credit	$	255,000	$	185,000
Liabilities on borrowed metals		67,824		91,866
Product financing arrangements		199,447		201,028
Accounts payable and other payables		26,175		5,935
Deferred revenue and other advances		193,081		194,416
Derivative liabilities		24,783		7,539
Accrued liabilities(1)		21,399		18,785
Income tax payable		268		5,016
Total current liabilities		787,977		709,585
Notes payable(1)		93,859		93,249
Deferred tax liabilities		14,951		19,514
Other liabilities		6,304		5,291
Total liabilities		903,091		827,639
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value, authorized 10,000,000 shares; issued and outstanding: none as of March 31, 2022 and June 30, 2021		—		—
Common stock, par value $0.01; 40,000,000 shares authorized; 11,514,010 and 11,229,657 shares issued and outstanding as of March 31, 2022 and June 30, 2021, respectively		116		113
Additional paid-in capital		156,997		150,420
Retained earnings		284,651		212,090
Total A-Mark Precious Metals, Inc. stockholders’ equity		441,764		362,623
Noncontrolling interests		1,728		1,319
Total stockholders’ equity		443,492		363,942
Total liabilities, noncontrolling interests and stockholders’ equity	$	1,346,583	$	1,191,581

(1)

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

See accompanying Notes to Condensed Consolidated Financial Statements

A-MARK PRECIOUS METALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands)

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

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

The following table presents the assets and liabilities of this VIE, which are included in the condensed consolidated balance sheets above. The holders of the Notes have a first priority security interest in the assets as shown in the table below, which are in excess of the Notes' aggregate principal amount. Additionally, the liabilities of the VIE include intercompany balances, which are eliminated in consolidation. (See Note 15.)


	March 31, 2022		June 30, 2021
ASSETS OF THE CONSOLIDATED VIE
Cash	$	2,829	$	2,877
Secured loans receivable		101,646		84,817
Precious metals held under financing arrangements		—		23,976
Inventories		—		2,532
Prepaid expenses and other assets		28		23
Total assets of the consolidated variable interest entity	$	104,503	$	114,225
LIABILITIES OF THE CONSOLIDATED VIE
Deferred payment obligations(1)	$	11,561	$	20,539
Accrued liabilities		995		847
Notes payable(2)		98,859		98,249
Total liabilities of the consolidated variable interest entity	$	111,415	$	119,635

(1)

This is an intercompany balance, which is eliminated in consolidation and hence is not shown on the consolidated balance sheets.

(2)

$5.0 million of the Notes are held by the Company, which is eliminated in consolidation and hence is not shown on the consolidated balance sheets.

See accompanying Notes to Condensed Consolidated Financial Statements

A-MARK PRECIOUS METALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

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


	Three Months Ended						Nine Months Ended
	March 31, 2022			March 31, 2021			March 31, 2022			March 31, 2021
Revenues	$	2,109,115		$	2,049,489		$	6,069,450		$	5,434,349
Cost of sales		2,037,032			1,981,318			5,875,435			5,311,282
Gross profit		72,083			68,171			194,015			123,067
Selling, general, and administrative expenses		(20,494	)		(13,295	)		(55,884	)		(31,328	)
Depreciation and amortization expense		(7,548	)		(1,488	)		(24,077	)		(2,494	)
Interest income		5,343			4,724			16,125			13,240
Interest expense		(5,429	)		(5,335	)		(16,297	)		(14,665	)
Earnings from equity method investments		1,608			7,410			4,317			13,898
Other income, net		493			340			1,335			904
Remeasurement gain on pre-existing equity interest		—			26,306			—			26,306
Unrealized losses on foreign exchange		(135	)		(53	)		(128	)		(131	)
Net income before provision for income taxes		45,921			86,780			119,406			128,797
Income tax expense		(8,375	)		(9,847	)		(23,797	)		(18,944	)
Net income		37,546			76,933			95,609			109,853
Net income attributable to noncontrolling interests		164			308			409			1,221
Net income attributable to the Company	$	37,382		$	76,625		$	95,200		$	108,632
Basic and diluted net income per share attributable to A-Mark Precious Metals, Inc.:
Basic	$	3.27		$	9.54		$	8.38		$	14.67
Diluted	$	3.06		$	8.84		$	7.84		$	13.61

Weighted average shares outstanding:
Basic		11,429,800			8,028,900			11,356,400			7,403,900
Diluted		12,212,900			8,668,300			12,137,600			7,980,700

See accompanying Notes to Condensed Consolidated Financial Statements

A-MARK PRECIOUS METALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in thousands, except for share data)


	Common Stock (Shares)		Common Stock		Additional Paid-in Capital		Retained Earnings			Total A-Mark Precious Metals, Inc. Stockholders' Equity			Non- Controlling Interests		Total Stockholders’ Equity
Balance, June 30, 2020		7,031,500	$	71	$	27,289	$	73,644		$	101,004		$	3,890	$	104,894
Net income		—		—		—		23,083			23,083			623		23,706
Share-based compensation		—		—		178		—			178			—		178
Net settlement on issuance of common shares on exercise of options		35,030		—		416		—			416			—		416
Dividends declared ($1.50 per common share)		—		—		—		(10,553	)		(10,553	)		-		(10,553	)
Balance, September 30, 2020		7,066,530		71		27,883		86,174			114,128			4,513		118,641
Net income		—		—		—		8,925			8,925			289		9,214
Share-based compensation		—		—		210		—			210			—		210
Net settlement on issuance of common shares on exercise of options		64,932		1		1,000		—			1,001			—		1,001
Dividends declared ($1.50 per common share)		—		—		—		(10,638	)		(10,638	)		—		(10,638	)
Balance, December 31, 2020		7,131,462		72		29,093		84,461			113,626			4,802		118,428
Net income		—		—		—		76,625			76,625			308		76,933
Share-based compensation		—		—		271		—			271			—		271
Issuance of common stock sold in public offering, net of offering costs		2,875,000		29		75,315		—			75,344			—		75,344
Common stock issued for acquisition of JMB		1,047,007		10		41,598		—			41,608			—		41,608
Net settlement on issuance of common shares on exercise of options		82,764

A-Mark Precious Metals, Inc. [AMRK] Filings
10-Q	[2022-05-09]
10-Q	[2022-02-08]
10-Q	[2021-11-08]
10-K	[2021-09-13]
10-Q	[2021-05-14]
10-Q	[2021-02-10]
10-Q	[2020-11-12]
10-K	[2020-09-14]
10-Q	[2020-05-08]
10-Q	[2020-02-10]
10-Q	[2019-11-12]
10-K	[2019-09-16]
10-Q	[2019-05-10]
10-Q	[2019-02-12]
10-Q	[2018-11-13]
10-K	[2018-09-19]
10-Q	[2018-05-11]
10-Q	[2018-02-09]
10-Q	[2017-11-14]
10-K	[2017-09-15]
10-Q	[2017-05-10]
10-Q	[2017-02-08]
10-Q	[2016-11-09]
10-K	[2016-09-23]
10-Q	[2016-05-11]
10-Q	[2016-02-11]
10-Q	[2015-11-12]
10-K	[2015-09-24]
10-Q	[2015-05-07]
10-Q	[2015-02-10]
10-Q	[2014-11-07]
10-K	[2014-09-26]
10-Q	[2014-05-13]
10-Q	[2014-03-27]
S-1	[2013-11-12]