SECURITIES AND EXCHANGE
Washington, D. C.
-----------------
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 1-8641
-------
COEUR D'ALENE MINES CORPORATION
------------------------------------------------------
(Exact name of registrant as specified on its charter)
IDAHO 82-0109423
--------------------------------- ---------------------------
(State or other jurisdiction of (I.R.S. Employer Ident.No.)
incorporation or organization)
P. O. Box I, Coeur d'Alene, Idaho 83816-0316
--------------------------------- ---------------------------
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (208) 667-3511
----------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since
last report
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 X NO
--- ---
-------------------------
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of Issuer's classes of common stock, as of the latest
practicable date: Common stock, par value $1.00, of which 15,600,730 shares
were issued and outstanding as of November 1, 1995.
<PAGE>
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
INDEX
Page No.
PART I. Financial Information:
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets -- 3-4
September 30, 1995 and December 31, 1994
Consolidated Statements of Operations -- 5-6
Three Months Ended September 30, 1995 and 1994
Nine Months Ended September 30, 1995 and 1994
Consolidated Statements of Cash Flows -- 7-8
Nine Months Ended September 30, 1995 and 1994
Notes to Consolidated Financial Statements 9-11
Item 2. Management's Discussion and Analysis of 12-18
Financial Condition and Results of Operations
PART II. Other Information.
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 19
SIGNATURES
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
UNAUDITED
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
ASSETS September 30, December 31,
1995 1994
------------- -------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 16,884,184 $ 14,707,278
Short-term investments 67,871,455 128,112,407
Receivables 13,059,169 7,677,269
Refundable income taxes 2,154,188 3,435,649
Inventories 32,182,467 34,215,127
------------- -------------
Total Current Assets 132,151,463 188,147,730
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment 118,429,571 83,872,789
Less accumulated depreciation 41,297,578 37,394,296
------------- -------------
77,131,993 46,478,493
MINING PROPERTIES
Operational mining properties 112,244,563 102,571,977
Less accumulated depletion 36,926,951 38,162,432
------------- -------------
75,317,612 64,409,545
Developmental properties 147,628,771 95,896,774
------------- -------------
222,946,383 160,306,319
NET ASSETS OF DISCONTINUED OPERATIONS 159,501 6,000,741
OTHER ASSETS
Funds held in escrow 2,270,695 2,270,695
Notes receivable 4,800,000
Debt issuance costs, net of
accumulated amortization 7,531,318 8,240,209
Other 660,827 917,206
------------- -------------
15,262,840 11,428,110
------------- -------------
$447,652,180 $412,361,393
============= =============
</TABLE>
3
<PAGE>
<TABLE>
UNAUDITED
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY September 30, December 31,
1995 1994
------------- -------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 4,127,075 $ 2,289,808
Accrued liabilities 5,383,444 4,426,925
Accrued interest payable 3,700,524 4,634,961
Accrued salaries and wages 3,959,666 3,867,801
Accrued litigation settlement 800,000
Current portion of obligations
under capital leases 2,344,918 2,041,057
------------- -------------
Total Current Liabilities 19,515,627 18,060,552
OTHER LIABILITIES
6% Convertible Subordinated
Debentures 50,000,000 50,000,000
7% Convertible Subordinated
Debentures 74,987,000 75,000,000
6 3/8% Convertible Subordinated
Debentures 100,000,000 100,000,000
Obligations under capital leases 563,053 2,192,856
Other long-term liabilities 9,063,324 5,234,899
Limited recourse project financing 23,585,552
Deferred income taxes 1,613,214 1,580,804
------------- -------------
Total Long-Term Liabilities 259,812,143 234,008,559
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred Stock, $1.00 par value per
share--authorized 10,000,000
shares, none outstanding
Common Stock, $1.00 par value per
share--authorized 60,000,000
shares, issued 16,657,995 at
September 30, 1995 and 16,633,163
at December 31, 1994 (including
1,059,211 shares held as
treasury stock) 16,657,995 16,633,163
Capital surplus 180,937,624 182,881,071
Accumulated deficit (14,772,272) (17,043,506)
Repurchased and nonvested shares (13,284,542) (13,358,309)
Unrealized losses on short-term
investment securities (1,214,395) (8,820,137)
------------- -------------
168,324,410 160,292,282
------------- -------------
$447,652,180 $412,361,393
============= =============
</TABLE>
See notes to consolidated financial statements
4
<PAGE>
<TABLE>
UNAUDITED
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
3 MONTHS ENDED 9 MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
-------------------------------- --------------------------------
1995 1994 1995 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCOME
From mine operations:
Sales of concentrates
and dore' $ 24,802,562 $ 20,666,805 $ 66,314,276 $ 60,340,300
Less cost of mine
operations 19,151,171 16,409,187 53,123,291 50,234,680
------------- ------------- ------------- -------------
Gross profits 5,651,391 4,257,618 13,190,985 10,105,620
Interest and other
income 4,218,048 5,167,819 8,665,464 9,206,348
------------- ------------- ------------- -------------
Total income 9,869,439 9,425,437 21,856,449 19,311,968
EXPENSES
Administrative 843,928 1,008,236 2,809,606 3,549,307
Accounting and legal 348,019 360,835 1,204,689 1,216,760
General corporate 1,496,117 1,330,023 4,697,307 4,076,936
Mining exploration 1,528,659 913,384 3,521,343 2,864,894
Idle facilities 356,944 385,541 1,481,244 1,213,285
Interest 2,177,444 3,057,175 7,794,214 8,497,293
Litigation settlement 976,028 976,028
------------- ------------- ------------- -------------
Total expenses 6,751,111 8,031,222 21,508,403 22,394,503
------------- ------------- ------------- -------------
Net Income (loss) from
continuing operations
before taxes 3,118,328 1,394,215 348,046 (3,082,535)
Provision (Benefit) for
income taxes 1,079,330 (30,072) 437,009 (226,932)
------------- ------------- ------------- -------------
Net Income (loss) from
continuing operations 2,038,998 1,424,287 (88,963) (2,855,603)
Income from discontinued
operations (net of
taxes) 218,607 2,360,196 566,399
------------- ------------- ------------- -------------
NET INCOME (LOSS) $ 2,038,998 $ 1,642,894 $ 2,271,233 $ (2,289,204)
============= ============= ============= =============
</TABLE>
5
<PAGE>
<TABLE>
UNAUDITED
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
3 MONTHS ENDED 9 MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
-------------------------------- --------------------------------
1995 1994 1995 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
EARNINGS PER SHARE DATA
Primary Earnings per share:
Weighted average number
of shares of Common
Stock outstanding 15,612,879 15,403,346 15,602,007 15,365,817
============= ============= ============= =============
Income (loss) per share
from continuing
operations $ .13 $ .10 $ .00 $ (.19)
Income per share from
discontinued operations .01 .15 .04
------------- ------------- ------------- -------------
NET INCOME (LOSS) PER SHARE $ .13 $ .11 $ .15 $ (.15)
============= ============= ============= =============
Fully Diluted Earnings Per Share:
Weighted average number
of shares of Common
Stock outstanding 26,314,903
Income per share ==========
from continuing
operations $ .12
Income per share from
discontinued operations .00
-----------
NET INCOME PER SHARE $ .12
===========
Cash dividends per share $ 0.15 $ 0.15
============ =============
</TABLE>
See notes to consolidated financial statements.
6
<PAGE>
<TABLE>
UNAUDITED
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 1995 and 1994
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES 1995 1994
------------- -------------
<S> <C> <C>
Net loss from continuing operations $ (88,963) $ (2,855,603)
Add (less) noncash items:
Depreciation, depletion and
amortization 12,767,290 13,411,701
Deferred income taxes (1,541,054) (630,107)
Loss on disposition
of fixed assets 272,610 (303,095)
Gain on foreign currency transactions (35,859) (1,357,379)
(Gain) loss on disposition of securities 877,574 (1,924,177)
Provision for litigation settlement 976,028
Changes in operating assets and liabilities:
Accounts receivable (3,201,111) (3,274,433)
Inventories 2,032,660 (300,618)
Accounts payable and
accrued liabilities 279,568 (2,334,922)
Interest payable (934,437) 1,602,344
------------- -------------
10,428,278 3,009,739
Income from discontinued operations 2,360,196 566,399
Add (less) noncash items:
Depreciation, depletion and amortization 85,381 212,338
Gain on disposition of
discontinued operations (3,877,636)
Deferred income taxes 1,573,464 377,599
Change in operating assets and liabilities:
Accounts receivable 601,242 (84,770)
Inventories (30,661) (256,388)
Accounts payable and accrued liabilities (109,218) 67,230
------------- -------------
602,768 882,408
------------- -------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 11,031,046 3,892,147
</TABLE>
7
<PAGE>
<TABLE>
UNAUDITED
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 1995 and 1994
<CAPTION>
1995 1994
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant, and equipment $ (2,912,531) $ (5,358,097)
Purchase of short-term investments (2,423,374) (106,498,374)
Proceeds from sale of short-term securities 68,366,519 28,579,288
Proceeds from sale of assets 639,906 298,754
Proceeds from sale of discontinued operations 3,133,133
Expenditures on operational
mining properties (14,888,961) (6,020,748)
Expenditures on developmental properties (80,302,054) (7,257,743)
Proceeds from other assets (636,599) 460,247
-------------- --------------
NET CASH USED IN INVESTING ACTIVITIES (29,023,961) (95,796,673)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from offering of 6 3/8%
Convertible Subordinated Debentures 95,513,842
Proceeds from project financing 23,585,552
Retirement of obligations under capital
leases (1,516,985) (1,411,977)
Payment of cash dividend (2,339,376) (2,303,194)
NET CASH PROVIDED BY
FINANCING ACTIVITIES 19,729,191 91,798,671
-------------- --------------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 1,736,276 (105,855)
Cash and cash equivalents at beginning
of year:
Relating to continuing operations 14,707,278 14,388,998
Relating to discontinued operations 440,630 289,099
-------------- --------------
$ 15,147,908 $ 14,678,097
-------------- --------------
Cash and cash equivalents at end of year:
Relating to continuing operations 16,884,184 13,994,197
Relating to discontinued operations 578,045
--------------
$ 16,884,184 $ 14,572,242
============== ==============
</TABLE>
See notes to consolidated financial statements.
8
<PAGE>
UNAUDITED
Coeur d'Alene Mines Corporation
and Subsidiaries
Notes to Consolidated Financial Statements
NOTE A:
Other than as stated in the following notes, in the opinion of
management, the foregoing unaudited financial statements include all
adjustments, consisting of normal recurring accruals, necessary for a fair
presentation of the results of operations for the periods shown. The Third
Quarter Form 10-Q Report should be read in conjunction with the Company's
Annual Report on Form 10-K for the year ended December 31, 1994.
NOTE B: Inventories are composed of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
1995 1994
------------ ------------
<S> <C> <C>
Mining:
Ore in process and on leach pads $ 26,679,526 $ 28,895,419
Dore' inventory 1,994,506 1,748,207
Supplies 3,508,435 3,571,501
------------ ------------
$ 32,182,467 $ 34,215,127
============ ============
</TABLE>
Inventories of ore on leach pads and in the milling process are valued
based on actual costs incurred to place such ore into production, less costs
allocated to minerals recovered through the leaching and milling process.
Dore' inventory includes product at the mine site and product held by
refineries. All other inventories are stated at the lower of cost or market,
cost being determined using the first in, first out and weighted average cost
methods.
NOTE C:
On May 2, 1995, in furtherance of its plan to divest non-mining assets,
the Company sold the assets of its flexible hose and tubing division, The
Flexaust Company, and shares of a related subsidiary which it acquired in its
acquisition of Callahan in December 1991, for approximately $10.0 million
payable in cash, of which approximately $4 million was paid at the time of
closing and the balance is payable over the next five years. The results of
operations and the gain on sale of Flexaust manufacturing segment are
presented as "Discontinued Operations." The Company recorded a pre-tax gain on
the sale of approximately $3.9 million ($2.2 million net of income taxes)
during the second quarter of 1995.
NOTE D:
On July 7, 1995, the Company became the 100% owner and operator of the
Kensington property near Juneau, Alaska, by acquiring the 50% interest held by
its former joint venture partner, Echo Bay Mines, Ltd., for $32.5 million plus
a scaled royalty on 1 million ounces of future gold production after Coeur
recoups its purchase price and expenditures
9
<PAGE>
remaining to place the property into production. The Company plans to
continue its development activities at the Kensington property.
NOTE E:
The provision for income taxes for the nine months ended September 30,
1995 includes provisions for alternative minimum taxes, foreign taxes and
certain amounts recorded subsequent to an Internal Revenue Service audit,
offset by the recognition of certain net operating loss carryforwards. The
benefit for income taxes on income from continuing operations in 1994 is
primarily related to the realization of net operating loss carryforwards.
NOTE F:
On January 1, 1995, the Company entered into an agreement with Asarco
Incorporated and formed a new company named Silver Valley Resources
Corporation ("Silver Valley"). Both Coeur and Asarco contributed to Silver
Valley their respective interests in the Galena and Coeur Mines as well as
other assets and waived certain cash flow entitlements at the Galena Mine in
return for shares of capital stock of Silver Valley. Coeur's 50% investment is
included on the balance sheet as operational mining properties. The
transaction resulted in no gain or loss to the Company. The Board of Directors
of Silver Valley consists of six directors, three of whom, including the
Chairman of the Board, are appointed by Asarco and three of whom, including
the President, are appointed by the Company. Pursuant to a Shareholders'
Agreement between the parties, certain specified significant corporate actions
may not be taken without the approval of at least 80% of the members of Silver
Valley's Board of Directors. Asarco and the Company furnish certain management
and other services to Silver Valley.
NOTE G:
On April 19, 1995, the Company completed a limited recourse project
financing agreement with a bank syndicate lead by N.M. Rothschild & Sons, Ltd.
The agreement provides for the borrowing of up to $24 million for use in the
construction of the Fachinal project, contains various covenants and is
dependent upon attainment of certain completion tests. Furthermore, the
agreement restricts the recourse of the bank in the event of default to the
assets of the Company's Chilean subsidiary, Compania Minera CDE Fachinal
Limitada. The Company is required to guarantee repayment of the borrowing
until the project reaches defined completion, after which the project alone is
liable for repayment. The interest rate prior to completion is equal to LIBOR
plus 1.5% and increases to LIBOR plus 2.75% after completion. The borrowing is
repayable in eight equal remaining semiannual installments after project
completion. The Company utilized the loan proceeds for construction of the
Fachinal project, which construction is now complete, and at which startup and
initial production commenced in October 1995.
10
<PAGE>
NOTE H:
During the third quarter of 1995, the Company recorded a gain of $3.2
million arising from the sale of silver and gold purchased on the open market
which was delivered pursuant to fixed price forward contracts. A total of
2,541,669 ounces of silver and 67,001 ounces of gold, respectively, were sold
in this transaction at an average price of $6.04 and $403.51, respectively.
The gain is included in other income.
NOTE I:
During the third quarter of 1994, the Company received updated reserve
information indicating an increase in reserves at the Golden Cross Mine.
Accordingly, the Company adjusted its depletion rate effective July 1, 1994 to
reflect the increased reserves. The impact of the change was an increase in
net income of $623,258, or $.04 per share, for the three months ended
September 30, 1994.
NOTE J:
In March 1995, the Financial Accounting Standards Board (FASB) issued
Statement No. 121, Accounting for the Impairment of Long -Lived Assets and for
Long-Lived Assets to Be Disposed of. The Statement is effective in 1996. The
Company expects no material impact as a result of adoption of the statement.
NOTE K:
Certain reclassifications of prior year balances have been made to
conform to current year classifications.
11
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General
The results of the Company's operations are significantly affected by the
market prices of gold and silver which may fluctuate widely and are affected
by many factors beyond the Company's control, including interest rates,
expectations regarding inflation, currency values, governmental decisions
regarding the disposal of precious metal stockpiles, global and regional
political and economic conditions, and other factors. The Company's currently
operating mines are the Rochester Mine in Nevada, which it wholly owns and
operates; the Golden Cross Mine in New Zealand, in which the Company has an
80% operating interest; and the El Bronce Mine, a Chilean gold mine of which
the Company acquired a 51% net profits ownership interest and operating
control in October 1994. The Company completed construction of its new Chilean
Fachinal mine in October 1995 and initial gold and silver production has
begun.
The Company has an option until July 1997 to convert its 51% net profits
ownership interest in the El Bronce Mine to a 51% equity interest if it
invests $20.4 million and also invests a minimum of $5 million over a two-year
period for exploration and mine development designed to expand ore reserves
and increase annual gold production above the current level of 40,000 ounces
per year.
In July 1994, the Company's Board of Director's approved construction of
the Fachinal Project. Construction of the mine was completed in October 1995
and is expected to produce, in its first full year of operation, 44,000 ounces
of gold and 2.7 million ounces of silver. No assurance can be given that such
levels of production will be achieved. The total cost of project construction
is estimated to approximate $41.8 million. The process facilities are now
processing ore at the rate of 1,000 tons per day.
The Company plans to continue its developmental activities at the
Kensington Property. A production decision relating to the Kensington Property
is subject to the approval by the Company, a market price of gold of at least
$400 per ounce, the receipt of certain required permits and satisfactory
conclusions in an updated feasibility study which is expected to be completed
in February 1996. The market price of gold (London final) on November 1, 1995
was $381.95 per ounce. With respect to the permits, the Company cannot with
certainty estimate the timing of their issuance. However, on September 1,
1995, a memorandum of agreement was entered into with the EPA, the State of
Alaska and Coeur which should facilitate issuance of draft permits in December
1995, in which event final permits are expected to be issued in the second
quarter of 1996.
The Company's business plan is to continue to acquire efficient mining
properties and/or businesses with a favorable operating cost structure that
are operational or expected to become operational in the near future
12
<PAGE>
so that they can reasonably be expected to contribute to the Company's
near-term cash flow and net income and expand the Company's gold and/or silver
production.
RESULTS OF OPERATIONS
Three Months Ended September 30, 1995 Compared to Three Months
Ended September 30, 1994
---------------------------------------------------------------
Sales and Gross Profits
Sales of concentrates and dore' in the third quarter of 1995 increased by
$4,135,757, or 20%, over the third quarter of 1994. The increase in sales is
primarily attributable to an increase in gold and silver production. In the
third quarter of 1995, the Company produced 1,873,605 ounces of silver and
43,791 ounces of gold compared to 1,582,579 ounces of silver and 31,125 ounces
of gold in the third quarter of 1994. Silver and gold prices averaged $5.33
and $384.31 per ounce, respectively, in the third quarter of 1995, compared
with $5.34 and $385.81 per ounce, respectively, in the third quarter of 1994.
The cost of mine operations in the third quarter of 1995 increased by
$2,741,984, or 17%, over the prior year's comparable quarter. The increase is
primarily due to an increase in gold and silver production. Gross profit from
mining operations in the third quarter of 1995 increased by $1,393,773, or
33%, to $5,651,391 compared to gross profit from mining operations of
$4,257,618 in the third quarter of 1994. Mine operations gross profit as a
percent of sales amounted to 23% in the third quarter of 1995, compared to 21%
in the third quarter of 1994. The improvement in the gross profit percentage
is primarily attributable to the increase realized in silver prices achieved
through the Company's forward sales program and decreased cost of mine
production at the Golden Cross Mine and the Rochester Mine. In the third
quarter of 1995, the Company's realized gold and silver prices of $5.59 and
$399.02, respectively, compared with average market prices of $5.33 and
$384.31, respectively.
The cash costs of production per ounce of gold at the Golden Cross Mine
decreased by $22.98 per ounce to $222.27 per ounce in the quarter ended
September 30, 1995, compared to $245.25 per ounce in the prior year's
comparable quarter. The reduction in cost is primarily attributable to
improved mill performance, the mining of higher grade ore, less waste from the
underground portion of the mine and increased production from the open pit
mine.
At the Rochester Mine, the cash costs of production per ounce of silver
on a silver equivalent basis amounted to $3.29 in the quarter ended September
30, 1995, compared to $3.43 per ounce in the quarter ended September 30, 1994.
In the third quarter of 1995, the Company expanded its efforts to
13
<PAGE>
prepare the El Bronce Mine for increased production by exposing additional
mining areas. As a result, the cash costs of production per ounce of gold at
the mine were $334.21 per ounce in the quarter, compared with cash costs of
production of $314.23 per ounce during the nine months ended September 30,
1995.
Other Income
Interest and other income in the third quarter of 1995 decreased by
$949,771, or 18%, compared with the third quarter of 1994. The decrease is due
to a decrease in the Company's cash equivalents and short-term investments
which was partially offset by a gain of $3.2 million arising from the sale of
silver and gold purchased on the open market which was delivered pursuant to
fixed price forward contracts in the third quarter of 1995. A total of
2,541,669 ounces of silver and 67,001 ounces of gold were sold in this
transaction at an average price of $6.04 and $403.51, respectively.
Expenses
Total expenses in the third quarter of 1995 decreased by $1,280,111
compared to the prior year's third quarter. Administrative expenses decreased
by $164,308, interest expense decreased by $879,731, and accounting and legal
expense decreased by $12,816. The decrease in total expenses is also due to
non-recurring write-offs of $976,028 effected in connection with the
settlement of litigation in the third quarter of 1994. The decrease is
partially offset by increases in general corporate expenses of $166,094, and
mining exploration expense of $615,275.
Net Income From Continuing Operations
The Company's income from continuing operations before income taxes
amounted to $3,118,328 in the third quarter of 1995 compared to income from
continuing operations before income taxes of $1,394,215 in the third quarter
of 1994. The Company provided $1,079,330 for income taxes in the third quarter
of 1995 compared to a benefit of $30,072 in the third quarter of 1994. As a
result, the Company reported net income from continuing operations of
$2,038,998, or $.13 per share, in the third quarter of 1995 compared to a net
income from continuing operations of $1,424,287, or $.10 per share, in the
third quarter of 1994. In the third quarter of 1994, the Company also reported
income of $218,607, or $.01 per share, arising from discontinued operations.
As a result, the Company's net income for the third quarter of 1995 is
$2,038,998, or $.13 per primary share ($.12 per fully diluted share) compared
with $1,642,894, or $.11 per primary share, in 1994's third quarter.
14
<PAGE>
Nine Months Ended September 30, 1995 Compared to Nine Months
Ended September 30, 1994
------------------------------------------------------------
Sales and Gross Profits
Sales of concentrates and dore' in the nine months ended September 30,
1995 increased by $5,973,976, or 10%, over the nine months ended September 30,
1994. The increase is primarily attributable to an increase in gold and silver
production. Silver and gold prices averaged $5.17 and $383.78 per ounce,
respectively, in the first nine months of 1995 compared to $5.33 and $383.85
per ounce, respectively, in the same period in 1994. During the first nine
months of 1995, the Company produced 5,082,236 ounces of silver and 122,184
ounces of gold compared to 4,512,157 ounces of silver and 94,225 ounces of
gold in the first nine months of 1994.
The cost of mine operations in the first nine months of 1995 increased by
$2,888,611, or 6%, over the first nine months of 1994. Gross profit from mine
operations increased by $3,085,365, or 31%, in the first nine months of 1995
over 1994's comparable period. Mine operations gross profit as a percent of
sales increased to 20% in the nine months ended September 30, 1995 compared to
17% in the nine months ended September 30, 1994. The increase was primarily
attributable to an increase realized in silver and gold prices achieved
through the Company's forward sales program and decreased cost of mine
production at the Golden Cross Mine. For the nine months ended September 30,
1995, the Company realized gold and silver prices of $5.31 and $389.63,
respectively, compared with average market prices of $5.17 and $383.78,
respectively.
The cash costs of production per ounce of gold at the Golden Cross Mine
amounted to $219.07 per ounce in the nine months ended September 30, 1995,
compared to $261.85 in the prior year's comparable nine-month period. The
reduction in cost is primarily attributable to improved mill performance, the
mining of higher grade ore, less waste from the underground portion of the
mine and increased production from the open pit mine.
At the Rochester Mine, cash costs of production per ounce of silver on a
silver equivalent basis amounted to $3.70 per ounce in the nine months ended
September 30, 1995, compared to $3.58 in the nine months ended September 30,
1994.
The cash costs of production per ounce of gold at the El Bronce Mine were
$314.23 per ounce during the nine months ended September 30, 1995.
Other Income
Interest and other income in the nine months ended September 30, 1995
decreased by $540,884, or 6%, from the prior years' comparable period. The
decrease is primarily due to a decrease in the level of the Company's cash and
securities portfolio in 1995 and a nonrecurring gain of $2.7 million arising
from the sale by the Company of common shares of International Curator in the
third quarter of 1994. The decrease was partially offset by the gain in the
third quarter of 1995 of $3.2 million related to the
15
<PAGE>
delivery of 67,001 ounces of gold and 2,541,669 ounces of silver purchased on
the open market to satisfy certain fixed price forward delivery contracts.
Expenses
Total expenses in the first nine months of 1995 decreased by $886,100, or
4%, from the prior year's comparable nine-month period. Contributing to the
decrease were decreases in administrative expenses of $739,701, accounting and
legal expense of $12,071 and interest expense of $703,079. The decrease in
total expenses was partially offset by an increase in general corporate
expense of $620,371, mining exploration expense of $656,449 and idle
facilities expense of $267,959 in the first nine months of 1995. The decrease
is also due to the non-recurring write-off of $976,028 effected in connection
with the settlement of litigation in the third quarter of 1994.
Income (Loss) From Continuing Operations
As a result of the above, the Company's income from continuing operations
before income taxes amounted to $348,046 in the first nine months of 1995
compared to a loss from continuing operations of $3,082,535 in the first nine
months of 1994. The provision for income taxes amounted to $437,009 in the
first nine months of 1995, compared to a benefit of $226,932 in the first nine
months of 1994. As a result, the Company reported a net loss from continuing
operations of $88,963, or $.00 per share, in the first nine months of 1995,
compared to a net loss of $2,855,603, or $.19 per share, in the first nine
months of 1994.
Income From Discontinued Operations
On May 2, 1995, the Company sold the Flexaust division, a manufacturer of
flexible hose and tubing. In the nine months ended September 30, 1995, the
Company reported income from discontinued operations (net of taxes) of
$2,360,196, or $.15 per share compared with $566,399, or $.04 per share, for
the nine months ended September 30, 1994.
Net Income (Loss)
As a result of the above, the Company reported net income of $2,271,233,
or $.15 per share, in the first nine months of 1995, compared to a net loss of
$2,289,204, or $.15 per share, in the prior year's comparable nine-month
period.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital at September 30, 1995 was approximately
$112.6 million compared to $170.1 million at December 31, 1994. The ratio of
current assets to current liabilities was 6.8 to one at September 30, 1995
compared to 10.4 to one at December 31, 1994.
16
<PAGE>
Net cash provided by operating activities in the first nine months of
1995 was $11,031,046 compared to $3,892,147 in the first nine months of 1994.
Net cash used in investing activities in the first nine months of 1995 was
$29,023,961 compared to $95,796,673 in the prior year's comparable period. Net
cash provided by financing activities in the first nine months of 1995 was
$19,729,191, compared to $91,798,671 used in the first nine months of 1994. As
a result of the above, cash and cash equivalents increased by $1,736,276 in
the first nine months of 1995 compared to a $105,855 decrease for the
comparable period of 1994.
For the nine months ended September 30, 1995 and 1994, the Company
expended $2,122,461 and $1,945,905, respectively, in connection with routine
environmental compliance activities at its operating properties. At September
30, 1995, the Company had expended a total of approximately $5.2 million on
environmental and permitting activities at the Kensington property, which
expenditures have been capitalized as part of its development cost.
On July 19, 1994, the Company's Board of Directors approved the
construction of the Fachinal project. The total cost of project construction
is estimated to approximate $41.8 million. On April 19, 1995, the Company
completed a limited recourse project financing agreement with a bank syndicate
lead by N.M. Rothschild & Sons, Ltd. The agreement provides for the borrowing
of up to $24 million for use in the construction of the Fachinal project,
contains various covenants and is dependent upon attainment of certain
completion tests. Furthermore, the agreement restricts the recourse of the
banks in the event of default to the assets of the Company's Chilean
subsidiary, Compania Minera CDE Fachinal Limitada. The Company is required to
guarantee repayment of the borrowing until construction of the project reaches
defined completion, after which the project alone is liable for repayment.
Construction of the project was completed in October 1995; however, the
agreement requires the project to demonstrate compliance with certain ore
throughput and financial covenants in order for construction to be deemed
complete in which event the Company's loan guarantee is removed. The Company
expects this to occur during early 1996. The interest rate prior to completion
of construction of the project is equal to LIBOR plus 1.5% and increases to
LIBOR plus 2.75% after completion. The borrowing is repayable in eight equal
remaining semiannual installments after completion of project construction.
The Company and its wholly-owned subsidiary, Callahan Mining Corporation
("Callahan"), were advised by the Fish and Wildlife Service (the "Service") of
the U.S. Department of the Interior on July 18, 1995 that they were identified
as potentially responsible parties for damages resulting from injury to
federal natural resources with respect to the Bunker Hill Superfund Site. By
letter dated July 24, 1995, the Company and Callahan requested the Service to
identify the federal natural resources allegedly injured, set forth the basis
for the assertion that they are potentially responsible parties and quantify
the dollar amount of the alleged damages. The Company presently cannot state
whether or estimate the extent to which, if any, it will be liable for damages
in connection with the matter. However, the Company does not believe its
liability, if any, will be
17
<PAGE>
material in amount.
The Company estimates that approximately $201 million will be necessary
to place the Kensington mine into production. The Company is exploring various
alternative methods to finance the construction.
PART II. OTHER INFORMATION
Item 5. Other Information
On August 10, 1995, the Company conveyed 630,888 shares of Consolidated
Silver Corporation stock owned by it, and released a claim in the approximate
amount of $100,000, to Hecla Mining Company in exchange for release of Hecla's
right to receive approximately $1,100,000 from first net profits from the
Galena Mine and Hecla's interest in the Caladay Mine Operating Agreement.
In an effort to gain the support of several environmental groups in
Alaska, in August 1995 the Company proposed to change the location of the
effluent discharge point at the Kensington project from Lynn Canal to Sherman
Creek, at a point adjacent to the tailings impoundment. While these changes
are not required by law, they are proposed in response to comments raised by
the environmental organizations that they prefer a freshwater discharge
instead of a marine discharge. In addition, the Company proposes to switch to
diesel fuel rather than liquid petroleum gas for power generation. As a
result, a supplemental environmental impact statement is being prepared and
associated changes will be required to be made to the National Pollution
Discharge Elimination System, City and Borough of Juneau and State air quality
permits. The discharge point change addresses some of the issues raised by EPA
in its previously issued Technical Assistance Report. The Company anticipates
issuance by the various regulatory agencies of all key permits for the project
in the second quarter of 1996.
On August 7, 1995, the Company settled certain issues arising as a result
of an Internal Revenue Service audit which resulted in the release of income
tax refunds totaling $2,939,903 (including accrued interest). The Company is
still disputing one issue involving the deductibility of certain costs which,
if resolved in favor of the IRS, would involve the payment of approximately
$130,000. The Company believes the remaining matter has been treated in a
manner that is consistent with applicable law.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The following exhibit is filed herewith:
Exhibit No. Document
11 Statement regarding computation of per share
earnings
(b) Reports on Form 8-K
None
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COEUR D'ALENE MINES CORPORATION
(Registrant)
Dated November 2, 1995 /s/Dennis E. Wheeler
--------------------
DENNIS E. WHEELER
Chairman, President and
Chief Executive Officer
Dated November 2, 1995 /s/James A. Sabala
--------------------
JAMES A. SABALA
Senior Vice President
(Principal Financial and
Accounting Officer)
19
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<CASH> 16,884,184
<SECURITIES> 67,871,455
<RECEIVABLES> 15,213,357
<ALLOWANCES> 0
<INVENTORY> 32,182,467
<CURRENT-ASSETS> 132,151,463
<PP&E> 378,302,905
<DEPRECIATION> 78,224,529
<TOTAL-ASSETS> 447,652,180
<CURRENT-LIABILITIES> 19,515,627
<BONDS> 224,987,000
<COMMON> 16,657,995
0
0
<OTHER-SE> 151,666,415
<TOTAL-LIABILITY-AND-EQUITY> 447,652,180
<SALES> 66,314,276
<TOTAL-REVENUES> 74,979,740
<CGS> 53,123,291
<TOTAL-COSTS> 53,123,291
<OTHER-EXPENSES> 21,508,403
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,794,214
<INCOME-PRETAX> 348,046
<INCOME-TAX> 437,009
<INCOME-CONTINUING> (88,963)
<DISCONTINUED> 2,360,196
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,271,233
<EPS-PRIMARY> .15
<EPS-DILUTED> 0
</TABLE>
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
EXHIBIT 11
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30
--------------------------------
1995 1994
------------- -------------
<S> <C> <C>
Primary Earnings Per Share:
Average shares outstanding 15,598,784 15,354,627
Net effect of dilutive stock
options-based on the treasury
stock method using average
market price 14,095 48,719
------------- -------------
15,612,879 15,403,346
============= =============
Income from continuing operations $ 2,038,998 $ 1,424,287
Income from discontinued operations 218,607
------------- -------------
Net Income $ 2,038,998 $ 1,642,894
============= =============
Per share amounts:
Earnings from continuing operations $ .13 $ (.10)
Earnings from discontinued operations .01
------------- -------------
Earnings per share $ .13 $ (.09)
============= =============
Fully diluted Earnings Per Share:
Average shares outstanding 15,598,784
Net effect of dilutive stock
options-based on the treasury
stock method using average
market price 14,095
Assumed conversion of 6%
convertible bonds 1,955,417
Assumed conversion of 7%
convertible bonds 4,866,126
Assumed conversion of 6 3/8%
convertible bonds 3,880,481
-------------
26,314,903
=============
Net income $ 2,038,998
Add 6% convertible bond
interest net of federal
income tax effect 514,083
Add 7% convertible bond
interest net of federal
income tax effect 911,310
Add 6 3/8% convertible bond
interest net of federal
income tax effect 1,104,075
Less adjustment for capitalized
interest (1,395,407)
-------------
Income from continuing operations 3,173,059
Income from discontinued operations
-------------
Net income $ 3,173,059
=============
Per share amounts:
Earnings from continuing operations $ .12
Earnings from discontinued operations .00
-------------
Earnings per share $ .12
=============
</TABLE>
