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Spectrum Group International, Inc. – ‘8-K/A’ for 7/15/05 – EX-99

On: Friday, 9/30/05, at 2:42pm ET · For: 7/15/05 · Accession #: 922423-5-1575 · File #: 1-11988

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 9/30/05  Spectrum Group Int’l, Inc.        8-K/A:9     7/15/05    4:47K                                    Kramer Levin Naf… LLP/FA

Amendment to Current Report — Form 8-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 8-K/A       Form 8K Amendment No. 1                                4     13K 
 2: EX-23       Exhibit 23.1 Consent                                   1      7K 
 3: EX-99       Exhibit 99.1 Financial Statements                     15     59K 
 4: EX-99       Exhibit 99.2 Unaudited Financial Information           5     28K

EX-99 — Exhibit 99.1 Financial Statements

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                                                                    Exhibit 99.1

 FINANCIAL STATEMENTS OF BUSINESS ACQUIRED

The Financial Statements of A-Mark Precious Metals, Inc., together with the     
report of the Independent Registered Public Accounting Firm thereon, are        
presented under this Exhibit.                                                   

 INDEX

Report of Independent Registered Public Accounting Firm                       7 
Consolidated Balance Sheet - June 30, 2005                                    8 
Consolidated  Statement of Income - Eleven Months Ended                         
June 30, 2005                                                                 9 
Consolidated Statement of Stockholder's Equity - Eleven Months                  
ended June 30, 2005                                                          10 
Consolidated Statement of Cash Flows - Eleven Months ended                      
June 30, 2005                                                                11 
Notes to Consolidated Financial Statements                                   12 

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 Report Of Independent Registered Public Accounting Firm

Board of Directors                                                              
A-Mark Precious Metals, Inc.                                                    

We have audited the accompanying consolidated balance sheet of A-Mark Precious  
Metals, Inc. and subsidiaries (the "Company") as of June 30, 2005 and the       
related consolidated statements of income, shareholder's equity and cash flows  
for the eleven months then ended. These financial statements are the            
responsibility of the Company's management. Our responsibility is to express an 
opinion on these financial statements based on our audit.                       

We conducted our audit in accordance with auditing standards of the Public      
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the  
financial statements are free of material misstatement. An audit includes       
examining, on a test basis, evidence supporting the amounts and disclosures in  
the financial statements. An audit also includes assessing the accounting       
principles used and significant estimates made by management, as well as        
evaluating the overall financial statement presentation. We believe that our    
audit provides a reasonable basis for our opinion.                              

In our opinion, the consolidated financial statements referred to above present 
fairly, in all material respects, the financial position of A-Mark Precious     
Metals, Inc. and subsidiaries as of June 30, 2005 and the results of their      
operations and their cash flows for the eleven months then ended in conformity  
with accounting principles generally accepted in the United States of America.  

/S/ Amper, Politziner & Mattia, P.C.                                            

September 16, 2005                                                              
Edison, New Jersey                                                              

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A-MARK PRECIOUS METALS, INC. AND SUBSIDIARIES                                   
CONSOLIDATED BALANCE SHEET                                                      
June 30, 2005                                                                 
--------------------------------------------------------------------------------
(in thousands, except share data)                                               

ASSETS                                                                          

CURRENT ASSETS:                                                                 
Cash                                                              $ 1,566   
Receivables--net (Notes 2, 3, 7 and 8)                             10,192   
Inventories (Notes 2, 4, 8, 9 and 10)                              48,577   
Prepaid expenses and other current assets (Note 12)                   329   
                                                               -------

      Total current assets                                      60,664

FIXED ASSETS--Net (Notes 2 and 5)                                        35     

                                                               -------
TOTAL                                                               $60,699     
                                                               =======

LIABILITIES AND SHAREHOLDER'S EQUITY                                            

CURRENT LIABILITIES:                                                            
Accounts payable (Note 7)                                         $ 6,362   
Accrued liabilities                                                   927   
Due to Parent--net (Notes 2, 6 and 7)                                 231   
Lines of credit (Notes 4 and 8)                                    29,200   
Liability on borrowed metals (Notes 4, 8 and 9)                    16,343   
                                                               -------

      Total current liabilities                                 53,063
                                                               -------

COMMITMENTS AND CONTINGENCIES                                                   

SHAREHOLDER'S EQUITY:                                                           
Common stock, no par value--authorized, 200 shares;                         
issued and outstanding, 100 shares                                   75 
Additional paid-in capital                                          5,246   
Retained earnings                                                   2,315   
                                                               -------

      Total shareholder's equity                                 7,636
                                                               -------

TOTAL                                                               $60,699     
                                                               =======

See accompanying notes to consolidated financial statements.                    

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A-MARK PRECIOUS METALS, INC. AND SUBSIDIARIES                                   
CONSOLIDATED STATEMENT OF INCOME                                                
ELEVEN MONTHS ENDED JUNE 30, 2005                                               
--------------------------------------------------------------------------------
(In thousands)                                                                  

REVENUES (Notes 2 and 7)                                            $ 2,315,004 
                                                                   -----------

COST OF SALES:                                                                  
 Cost of product sold (Notes 2 and 7)                                2,311,825
  Net (gain) on commodity contracts (Notes 2, 9 and 10)                    (731)
                                                                   -----------

          Total cost of sales                                        2,311,094
                                                                   -----------

GROSS PROFIT                                                              3,910 
                                                                   -----------

SELLING, GENERAL AND ADMINISTRATIVE                                             
 EXPENSES (Notes 7, 10 and 11)                                           2,060

INTEREST INCOME (Notes 3 and 4)                                             774 

INTEREST EXPENSE (Notes 4, 7 and 8)                                         970 
                                                                   -----------

INCOME BEFORE PROVISION FOR INCOME TAXES                                  1,654 

PROVISION FOR INCOME TAXES (Notes 2 and 6)                                  678 
                                                                   -----------
NET INCOME                                                          $       976 
                                                                   ===========

See accompanying notes to consolidated financial statements.                    

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                                                        [Enlarge/Download Table]


A-MARK PRECIOUS METALS, INC. AND SUBSIDIARIES                                                 
CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY                                                
FOR THE ELEVEN MONTHS ENDED JUNE 30, 2005                                                     
----------------------------------------------------------------------------------------------
(In Thousands)                                                                                

                                                   Additional                                 
                                     Common          Paid-In         Retained                 
                                      Stock          Capital         Earnings         Total   
                                      -----          -------         --------         -----   

                                                                                              
BALANCE, AUGUST 1, 2004                  75           5,246            1,339           6,660  

  Net income                                                             976             976  
                                     ------          ------           ------          ------  

BALANCE, JUNE 30, 2005               $   75          $5,246           $2,315          $7,636  
                                     ======          ======           ======          ======  

See accompanying notes to consolidated financial statements.                    

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A-MARK PRECIOUS METALS, INC. AND SUBSIDIARIES                                   
CONSOLIDATED STATEMENT OF CASH FLOWS                                            
FOR THE ELEVEN MONTHS ENDED JUNE 30, 2005                                       
--------------------------------------------------------------------------------
(In thousands)                                                                  

CASH FLOWS FROM OPERATING ACTIVITIES:                                           
 Net income                                                           $    976
Adjustments to reconcile net income to net cash provided by                 
operating activities:                                                   
   Depreciation and amortization                                            33
Changes in operating assets and liabilities:                            
      Receivables                                                        (2,865)
      Inventories                                                       (19,761)
     Prepaid expenses and other current assets                             252
     Accounts payable                                                      941
      Accrued liabilities                                                   (90)
                                                                      --------

           Net cash used in operating activities                        (20,514)
                                                                      --------

CASH FLOWS FROM INVESTING ACTIVITIES--Acquisition of                            
  fixed assets                                                               (9)
                                                                      --------

CASH FLOWS FROM FINANCING ACTIVITIES:                                           

 Due to/from Parent                                                        360
 Net proceeds from lines of credit                                      14,736
 Liability on borrowed metals                                            3,187
                                                                      --------

          Net cash provided by financing activities                     18,283
                                                                      --------

NET INCREASE IN CASH                                                     (2,240)

CASH, BEGINNING OF YEAR                                                   3,806 
                                                                      --------

CASH, END OF YEAR                                                      $  1,566 
                                                                      ========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW                                            
INFORMATION--                                                               
Cash paid for interest                                                 $    937 
                                                                      ========
Cash paid for income taxes                                             $     -- 
                                                                      ========

See accompanying notes to consolidated financial statements.                    

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      
FOR THE ELEVEN MONTHS ENDED JUNE 30, 2005                                       
(In thousands unless otherwise indicated)                                       
--------------------------------------------------------------------------------

1.  DESCRIPTION OF THE BUSINESS                                                 

A-Mark Precious Metals, Inc. ("PMI"), its wholly owned subsidiary, A-M    
  Handling Company ("AMH"), whose operations are not significant, and Yorktown
Coin & Bullion Corporation ("Yorktown"), a wholly owned subsidiary whose  
   operations were discontinued in fiscal 1999 (collectively, the "Company") and
which was merged into PMI on July 31, 2004, are distributors and service  
   providers to consumers, wholesalers, retailers and dealers of precious metals
  throughout the world from facilities located in Los Angeles, California. The
Company is a wholly owned subsidiary of A-Mark Holding, Inc.              

 A-Mark Holding, Inc. is wholly owned by another company (the "Parent"). The
Parent is a holding company for a group of four affiliated companies      
operating as a precious metals retail company, a precious metals and      
collectibles auction house, a finance company, and a precious metals      
wholesale and retail company. The Parent is a wholly owned subsidiary of  
another company (the "Ultimate Parent").                                  

  On July 15, 2005, Spectrum PMI, Inc. a newly formed acquisition entity owned
  80% by Spectrum Numismatics International Inc., a wholly-owned subsidiary of
Greg Manning Auctions, Inc. and 20% by Auctentia, S.L., a wholly owned    
subsidiary of Afinsa Bienes Tangibles, S.A. acquired all of the issued and
   outstanding capital stock of A-Mark Precious Metals, Inc. pursuant to a Stock
Purchase Agreement dated as of July 15, 2005.                             

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                  

  Consolidation--The consolidated financial statements include the accounts of
PMI and its wholly owned subsidiaries, AMH and Yorktown. All significant  
   intercompany balances and transactions have been eliminated in consolidation.

  Concentration of Credit Risk--Assets that potentially subject the Company to
   concentrations of credit risk consist principally of cash, receivables, loans
  of inventory to customers, and inventory hedging transactions. The Company's
cash is placed with high quality major banks. Concentration of credit risk
 with respect to receivables is limited due to the large number of customers
 composing the Company's customer base, their geographic dispersion, and the
collateralization of substantially all receivable balances. 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, as substantially all amounts are secured by letters of credit 
issued by creditworthy financial institutions. The Company enters into    
inventory hedging transactions, principally utilizing metals commodity    
  futures contracts traded on national futures exchanges or forward contracts,
with only major financial institutions. Substantially all of these        
transactions are secured by the underlying metals positions.              

Concentration of Suppliers--The Company buys a majority of its precious   
  metals from a limited number of suppliers. Management believes that numerous
other suppliers are available and would provide similar products on       
comparable terms.                                                         

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      
FOR THE ELEVEN MONTHS ENDED JUNE 30, 2005                                       
(In thousands unless otherwise indicated)                                       
--------------------------------------------------------------------------------

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                       

  Use of Estimates--The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America  
requires management to make estimates and assumptions that affect the     
reported amounts of assets and liabilities and disclosure of contingent   
assets and liabilities at the date of the financial statements and the    
   reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.                                

Inventories--Inventories principally include bullion and bullion coins and
   are stated at published market values. The unrealized gain resulting from the
  difference between market value and cost of physical inventories at June 30,
 2005 totaled $956, and is included as reduction of the cost of product sold
in the accompanying consolidated statement of income. Such gains are      
generally offset by the results of hedging transactions, which have been  
reflected as net loss (gain) on commodity contracts in the consolidated   
statement- of income for the eleven months ended June 30, 2005.           

Fixed Assets and Depreciation--Fixed assets are stated at cost less       
accumulated depreciation. Depreciation is calculated using an accelerated 
method based on the estimated useful lives of the related assets, ranging 
from three to five years.                                                 

Impairment of Long-Lived Assets--The Company reviews long-lived assets for
impairment whenever events or changes in circumstances indicate that the  
   carrying value of such assets may not be recoverable. An impairment exists if
  the undiscounted cash flows generated by the Company's long-lived assets are
  less than the net book value of the related assets. If long-lived assets are
impaired, an impairment loss is recognized and measured as the amount by  
which the carrying value exceeds the estimated fair value of those assets.

Revenue Recognition--The Company records sales of precious metals upon    
shipment. The Company records revenues from its metal assaying and melting
services after the related services are completed.                        

Commodity Contracts--The net gain or loss on commodity contracts includes 
  amounts recorded on the Company's outstanding commodity forwards and futures
contracts and on open physical purchase and sale commitments. The Company 
  records changes in the market value of its forwards and futures contracts as
  income or loss, the effect of which is to offset changes in market values of
the underlying metals positions (see Note 9). The underlying commodity    
contract value is treated as an off-balance-sheet item and not recorded in
the financial statements.                                                 

 Open forward contracts and purchase and sale commitments of inventories are
marked to the current market value, with any difference between the market
value and underlying contract value recorded as a gain or loss in the     
 financial statements. In the statement of income the Company recorded a net
   unrealized loss on open commodity and forward contracts and purchase and sale
   commitments of ($1,407) and a net realized gain on closed commodity contracts
of $2,138 for the eleven months ended June 30, 2005.                      

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      
FOR THE ELEVEN MONTHS ENDED JUNE 30, 2005                                       
(In thousands unless otherwise indicated)                                       
--------------------------------------------------------------------------------

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                 

   Income Taxes-- Historically the Company's taxable income or loss was included
in the consolidated federal and state income tax returns of the Ultimate  
Parent. The provision for income taxes is calculated as if the Company had
filed a separate tax return as an independent company. The provision for  
income taxes is determined in accordance with Statement of Financial      
Accounting Standard ("SFAS") No. 109 "Accounting for Income Taxes". The   
 Company recognizes deferred tax assets and liabilities based on differences
   between the financial reporting and tax bases of assets and liabilities using
the enacted tax rates and laws that are expected to be in effect when the 
differences are expected to be recovered. Company provides a valuation    
  allowance for deferred tax assets for which it does not consider realization
of such assets to be more likely than not.                                

Fair Value of Financial Instruments--The recorded value of the Company's  
financial instruments approximates fair value based on their short-term   
nature and variable interest rates of its borrowing arrangements.         

New Accounting Pronouncements-- In May 2005, the FASB issued SFAS No 154  
  "Accounting Changes and Error Corrections - A Replacement of APB Opinion No.
20 and FASB Statement No. 3." This Statement requires retrospective       
 application to prior periods' financial statements of changes in accounting
   principle, unless it is impracticable to determine either the period-specific
effects or the cumulative effect of the change. This Statement does not   
change the guidance for reporting the correction of an error in previously
issued financial statements or a change in accounting estimate. The       
provisions of this Statement shall be effective for accounting changes and
   corrections of errors made in fiscal years beginning after December 15, 2005.
The Company is not able to assess at this time the future impact of this  
Statement on its consolidated financial position or results of operations.

   In December 2004, the FASB issued Statement No 153. "Exchanges of Nonmonetary
  Assets, an Amendment of APB Opinion No. 29" ("Statement No. 153"). Statement
No. 153 is effective for nonmonetary asset exchanges occurring in the     
   Company's fiscal year beginning July 1, 2005. Statement No. 153 requires that
exchanges of productive assets be accounted for at fair value unless fair 
value cannot be reasonably determined or the transaction lacks commercial 
   substance. Statement No. 153 is not expected to have a material impact on the
Company's financial statements.                                           

 In November 2004, the FASB issued SFAS No. 151, "Inventory Costs." SFAS 151
   amends ARB No. 43, "Inventory Pricing," to clarify the accounting for certain
costs as period expense. The Statement is effective for fiscal years      
 beginning after June 15, 2005, however, early adoption of this Statement is
permitted. The Company does not anticipate an impact from the adoption of 
this statement.                                                           

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      
FOR THE ELEVEN MONTHS ENDED JUNE 30, 2005                                       
(In thousands unless otherwise indicated)                                       
--------------------------------------------------------------------------------

3.    RECEIVABLES                                                               

Receivables consist of the following at June 30, 2005:                      

 Customer trade receivables                     $  5,644
 Wholesale trade advances                          3,134
 Due from brokers and other                        1,198
 Notes receivable                                    292
                                                --------
                                                  10,268
  Allowance for doubtful accounts                     (76)
                                                --------

                                                  10,192
                                                ========

   Customer trade receivables represent short-term, non interest-bearing amounts
 due from metal sales and are generally secured by the related metals stored
with the Company, a security interest, or by a letter of credit issued on 
behalf of the customer. Advances on refined materials represent metals    
advanced to customers, secured by unrefined materials received from the   
  customer. These advances are limited to a portion of the unrefined materials
received. Wholesale trade advances are unsecured, short-term, non         
interest-bearing advances made to wholesale metals dealers and government 
mints. The Company periodically extends short-term credit through the     
issuance of notes receivable to preapproved customers at interest rates   
determined on a customer-by-customer basis. Due from brokers and other    
   principally consists of amounts due from brokers related to commodity hedging
transactions (see Note 9).                                                

4.  INVENTORIES                                                                 

Inventories include amounts borrowed from various suppliers under ongoing 
  agreements (see Note 8), totaling $16,343 at June 30, 2005. The Company also
  hedges substantially all of its physical inventories through commodity hedge
   transactions (see Note 9). The Company periodically loans metals to customers
  on a short-term consignment basis, charging interest fees based on the value
of the metal loaned. Inventories loaned under consignment arrangements to 
   customers at June 30, 2005 totaled $3,988. Substantially all inventory loaned
under consignment arrangements is secured by letters of credit issued by  
  major financial institutions for the benefit of the Company or insured under
an all-risk insurance policy with the Company as the loss-payee.          

5.  FIXED ASSETS                                                                

Fixed assets consist of the following at June 30, 2005:                     

  Office furniture and fixtures                      $  91
  Office equipment                                     335
  Computer equipment                                   148
  Computer software                                     44
                                                    ------
                                                       618
   Accumulated depreciation                            (583)
                                                    ------

                                                     $  35
                                                    ======

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      
FOR THE ELEVEN MONTHS ENDED JUNE 30, 2005                                       
(In thousands unless otherwise indicated)                                       
--------------------------------------------------------------------------------

6.  INCOME TAXES                                                                

The provision for income taxes consists of the following for the eleven   
months ended June 30, 2005:                                               

Current:                                              
Federal                                    $268   
State                                        75   
                                        ----

Total current provision                       343     
                                        ----

Deferred:                                             
Federal                                     286   
State                                        49   
                                        ----

Total deferred provision                      335     
                                        ----

                                        $678
                                        ====

 The effective tax rate (benefit) varied from the statutory rate as follows:

Statutory federal income tax rate                      35 %         
State income taxes, net of federal benefit              6 %         
Certain non-deductible expenses                         - %         
                                            ----
                                             41%
                                            ====

Deferred tax attributes resulting from differences between financial      
 accounting amounts and tax basis of assets and liabilities at June 30, 2005
are as follows:                                                           

Current assets and liabilities:                                     
Inventory mark to market adjustment                $  392           
Unrealized losses on commodity contracts              (57)          
                                        ------
Net current deferred tax liability                 $  335           
                                        ======

   Net deferred income taxes represented a net deferred tax liability of $335 at
June 30, 2005, and is included in due to/from Parent in the accompanying  
consolidated balance sheet.                                               

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      
FOR THE ELEVEN MONTHS ENDED JUNE 30, 2005                                       
(In thousands unless otherwise indicated)                                       
--------------------------------------------------------------------------------

7.  RELATED PARTY TRANSACTIONS                                                  

Due to/from Parent consists principally of working capital advances or    
withdrawals, inventory purchases, merchandise sales, and the allocation of
 certain general expenses, including income taxes incurred by the Company on
 behalf of the Parent and certain other allocations (see Note 2). The Parent
will also pay certain expenses on behalf of the Company. General expenses 
  incurred by the Parent are charged to the respective benefiting subsidiaries
based upon a comprehensive allocation method designed to approximate the  
 amount that would have been paid by the subsidiary on a separate basis. The
net amount of expenses incurred by the Company on behalf of the Parent    
totaled $2,589 during the eleven months ended June 30, 2005. Net working  
  capital advances made by the Parent to the Company totaled $2,950 during the
   eleven months ended June 30, 2005. Due to Parent amounts represent the net of
expenses incurred and working capital advances made and bear interest of  
4.04% at June 30, 2005. Related net interest income totaled $2 for the    
eleven months ended June 30, 2005.                                        

Sales to a Parent-affiliated company of $20,842 and from the affiliate of 
$13,553 for the eleven months ended June 30, 2005 are included in revenues
and cost of products sold. Amounts due to the affiliate totaled $1 at June
30, 2005 and are included in accounts payable and receivables in the      
accompanying consolidated balance sheets.                                 

8.  BORROWING ARRANGEMENTS                                                      

The Company has a borrowing facility ("Credit Facility") with a group of  
 financial institutions under an intercreditor agreement, which provides for
  lines of credit of up to $50,000, including a facility for letters of credit
   up to a maximum of $50,000. The Company routinely uses the Credit Facility to
purchase metals from its suppliers and for operating cash flow purposes.  
Amounts under the Credit Facility bear interest based on London Interbank 
Offered Rate ("LIBOR") plus a margin. Borrowings are due on demand and    
   totaled $29,200 for lines of credit and $11,500 for letters of credit at June
30, 2005. Amounts borrowed under the Credit Facility are secured by the   
Company's receivables and inventories, and are guaranteed by the Parent.  

The Credit Facility contains certain restrictive financial covenants that 
require the Company and the Parent to maintain a minimum level of tangible
net worth, as defined, and a minimum ratio of tangible net worth to       
liabilities, among other items.                                           

The Company also borrows metals from several of its suppliers under       
short-term agreements bearing interest at a designated rate. Amounts under
   these agreements are due at maturity and require repayment either in the form
 of metals borrowed or cash. The Company had net borrowed metals included in
  inventories with market values totaling $16,343 at June 30, 2005. Certain of
these metals are secured by letters of credit issued under the Company's  
Credit Facility, which totaled $11,500 at June 30, 2005.                  

   Interest expense related to the Company's borrowing arrangements totaled $970
in the eleven months ended June 30, 2005.                                 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      
FOR THE ELEVEN MONTHS ENDED JUNE 30, 2005                                       
(In thousands unless otherwise indicated)                                       
--------------------------------------------------------------------------------

9.  HEDGING TRANSACTIONS                                                        

The Company manages the value of certain specific assets and liabilities, 
   including inventories, accounts receivable and accounts payable, by employing
a variety of strategies. These strategies include diversification of risk 
exposures and hedging through the purchase or sale of positions in related
financial instruments, including a variety of derivative products such as 
forwards and futures.                                                     

The Company's inventories and purchase and sale transactions consist      
 primarily of precious metal-bearing products. The value of these assets and
liabilities is linked to the prevailing price of the underlying precious  
metals and the interest component of the cost of carry. The Company's     
 precious metals inventories are subject to market value changes, created by
changes in the underlying commodity markets. Inventories purchased by the 
   Company outright are subject to price changes while inventories borrowed from
third-party suppliers are not. These transactions are considered natural  
   hedges, since changes in value of the metal held are offset by the obligation
to return the metal to the supplier.                                      

Open purchase and sale commitments are subject to changes in value between
the time the purchase or sale price is fixed and metal is received or     
 delivered. The Company seeks to minimize the effect of price changes of the
underlying commodity through the use of financial instruments. The Company
uses forward and futures contracts to manage the commodity price exposure 
arising from the existence of these assets and liabilities.               

 The Company's policy is to remain substantially hedged, as to its inventory
position and as to its purchase and sale commitments, at all times. The   
Company regularly enters into commodity forward and futures contracts with
  major financial institutions to hedge price changes that would cause changes
in the value of its physical metals positions and purchase commitments and
sale commitments. The Company has access to all of the precious metals    
markets, allowing it to place hedges. However, the Company also maintains 
   relationships with major market-makers in every major precious metals dealing
center.                                                                   

  Financial instruments designated as fair value hedges under SFAS No. 133 are
marked to market on a daily basis. The gain or loss from revaluing these  
instruments is reported as unrealized gain or loss on commodity contracts 
   with the related unrealized amounts due from or to counterparties included in
 receivables from or payable to brokers, dealers and clearing organizations.
Gains or losses resulting from the termination of hedge contracts are     
reported as realized gain or loss on commodity contracts.                 

Credit and position risk limits are set by the Company's management. These
 limits include gross position limits for counterparties engaged in purchase
  and sales transactions with the Company. They also include collateral limits
   for different types of purchase and sale transactions that counterparties may
engage in from time to time.                                              

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      
FOR THE ELEVEN MONTHS ENDED JUNE 30, 2005                                       
(In thousands unless otherwise indicated)                                       
--------------------------------------------------------------------------------

9.    HEDGING TRANSACTIONS (CONTINUED)                                          

   A summary of the market values of the Company's physical inventory positions,
purchase and sale commitments, and its outstanding forwards and futures   
contracts is as follows at June 30, 2005:                                 

Inventories at market value                                           $ 48,758  
Unhedged inventory and numismatic coin inventory                          (352) 
                                                                    --------

Bullion and bullion coin inventories at market value                    48,406  
Open inventory purchase commitments                                     26,148  
Unhedgeable premium on metals positions                                   (874) 
Open inventory sale commitments                                        (18,077) 
Margin sale commitments                                                 (2,345) 
Inventories under natural hedges:                                               
 Inventory borrowed from suppliers                                    (16,343)
Advances on industrial metals                                            554
                                                                    --------

Inventory subject to price risk                                         37,469  
                                                                    --------

Inventory fair value hedge transactions offsetting price risk:                  
Precious metals forward contract sales at market values                5,464
Precious metals futures contract sales at market values               32,004
                                                                    --------

Total market value on inventory hedge transactions                      37,468  
                                                                    --------

Net unhedged metals position at market                                $      1  
                                                                    ========

10. COMMITMENTS AND CONTINGENCIES                                               

The Company had outstanding purchase and sale commitments arising in the  
   normal course of business totaling $26,148 and $18,077, respectively, at June
  30, 2005. The Company also had purchase and sale commitments related to open
   forward and futures contracts used in hedging its inventories totaling $5,464
and $32,004, respectively, at June 30, 2005.                              

The contract amounts of these forward and futures contracts and the open  
 purchase and sale orders are not reflected in the accompanying consolidated
balance sheets. The difference between the market price of the underlying 
metal and contract or trade amount is recorded as part of the net loss on 
   commodity contracts (see Note 2) and amounted to an unrealized loss of $1,407
for the eleven months ended June 30, 2005.                                

The Ultimate Parent subleases office facilities to the Company under an   
operating lease expiring in 2007. The lease requires the payment of the   
   related property taxes, insurance, maintenance and other costs for the leased
 property. Under a sublease with the Ultimate Parent, rent expense allocated
to the Company for the eleven months ended June 30, 2005 was $98.         

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      
FOR THE ELEVEN MONTHS ENDED JUNE 30, 2005                                       
(In thousands unless otherwise indicated)                                       
--------------------------------------------------------------------------------

Pursuant to the terms of the sale described in Note 1, the company is     
   subleasing its premises from the former ultimate parent for approximately $10
per month. The Company can exit the premises at any time with 6 months'   
notice.                                                                   

11. EMPLOYEE BENEFIT PLAN                                                       

  The Ultimate Parent has a 401(k) savings plan (the "Plan"). Employees of the
  Company who have completed six months of service and have reached age 21 are
eligible to participate in the Plan through deferrals of salary.          
Contributions to the Plan by the Ultimate Parent are discretionary and    
determined annually. The Ultimate Parent contributed $2 on behalf of the  
employees of the Company for the eleven months ended June 30, 2005. Such  
contributions have been allocated to the Company and are reflected in     
   selling, general and administrative expenses in the accompanying consolidated
statements of income.

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘8-K/A’ Filing	Date	First	Last	Other Filings

	12/15/05	9
Filed on:	9/30/05			10-Q
	9/16/05	2		10-K/A
For Period End:	7/15/05	7		8-K
	7/1/05	9
	6/30/05	2	15	10-K, 10-K/A, 5
	6/15/05	9
	7/31/04	7
				List all Filings

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Filing Submission 0000922423-05-001575 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Spectrum Group International, Inc. – ‘8-K/A’ for 7/15/05 – EX-99

On: Friday, 9/30/05, at 2:42pm ET · For: 7/15/05 · Accession #: 922423-5-1575 · File #: 1-11988

Previous ‘8-K’: ‘8-K’ on 8/17/05 for 8/16/05 · Next: ‘8-K’ on 10/3/05 for 9/27/05 · Latest: ‘8-K’ on / for 5/12/14

Amendment to Current Report — Form 8-KFiling Table of Contents

EX-99 — Exhibit 99.1 Financial Statements

Dates Referenced Herein and Documents Incorporated by Reference

Amendment to Current Report — Form 8-K
Filing Table of Contents