<PAGE> 1
FILED PURSUANT TO RULE 424(b)(1)
REGISTRATION NO. 333-01305
PROSPECTUS
6,588,235 SHARES
[COEUR d'ALENE MINES CORPORATION LOGO]
[COEUR LOGO]
THE PRECIOUS METALS COMPANY
MANDATORY ADJUSTABLE REDEEMABLE CONVERTIBLE SECURITIES (MARCS)*
---------------------------
The shares offered hereby are 6,588,235 shares of Mandatory Adjustable
Redeemable Convertible Securities, $1.00 par value per share (MARCS)*, of Coeur
d'Alene Mines Corporation (the "Company").
The annual dividend payable with respect to each share of MARCS is $1.488.
Dividends will be cumulative from the date of issuance and will be payable
quarterly in arrears, on each June 15, September 15, December 15 and March 15,
commencing June 15, 1996. The liquidation preference applicable to each share of
MARCS is equal to the sum of (i) the per share price to the public shown below,
and (ii) the amount of accrued and unpaid dividends thereon.
On March 15, 2000 (the "Mandatory Conversion Date"), unless either
previously converted at the option of the holder or redeemed by the Company,
each outstanding share of MARCS will mandatorily convert into (i) 1.111 shares
of Common Stock, $1.00 par value per share, of the Company (the "Common Stock"),
subject to adjustment in certain events, and (ii) the right to receive an amount
in cash equal to all accrued and unpaid dividends thereon.
Shares of MARCS are not redeemable prior to March 15, 1999. At any time and
from time to time on or after March 15, 1999 until immediately prior to the
Mandatory Conversion Date, the Company may redeem any or all of the outstanding
shares of MARCS. Upon any such redemption, each holder will receive, in exchange
for each share of MARCS, the greater of: (a) the number of shares of Common
Stock equal to the sum of (i) $21.622, declining after March 15, 1999 as set
forth herein to $21.25 until the Mandatory Conversion Date and (ii) all accrued
and unpaid dividends thereon (such sum being the "Call Price"), divided by the
Current Market Price (as defined herein) of a share of Common Stock on the
applicable date of determination, or (b) .826 of a share of Common Stock.
At any time prior to the Mandatory Conversion Date, unless previously
redeemed, each of the shares of MARCS is convertible at the option of the holder
thereof into .826 of a share of Common Stock (equivalent to a conversion price
of $25.713 per share of Common Stock (the "Conversion Price")), subject to
adjustment in certain events. The number of shares of Common Stock a holder will
receive upon redemption, and the value of the shares received upon conversion
will vary depending on the market price of the Common Stock from time to time,
all as set forth herein.
The shares of MARCS have been approved for listing on the New York Stock
Exchange ("NYSE"). On March 7, 1996, the last reported sale price of the Common
Stock on the NYSE Composite Tape was $21.25 per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF RISK
FACTORS RELEVANT TO AN INVESTMENT IN THE SHARES OF MARCS OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
UNDERWRITING DISCOUNT PROCEEDS TO
PRICE TO PUBLIC(1) AND COMMISSIONS(2) COMPANY(1)(3)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share of MARCS.......................... $21.25 $.6375 $20.6125
- -----------------------------------------------------------------------------------------------------------
Total(4).................................... $139,999,994 $4,200,000 $135,799,994
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued dividends, if any, from the date of issue.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at $450,000.
(4) The Company has granted to the Underwriters an option, exercisable within 30
days after the date of this Prospectus, to purchase up to an additional
911,765 shares of MARCS to cover over-allotments, if any. If such option is
exercised in full, the total price to public, underwriting discount and
commissions and proceeds to the Company will be $159,375,000, $4,781,250 and
$154,593,750, respectively. See "Underwriting."
---------------------------
The shares of MARCS are offered by the several Underwriters, subject to
prior sale, when, as and if issued to and accepted by them, and subject to
approval of certain legal matters by counsel for the Underwriters and certain
other conditions. The Underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part. It is expected that
delivery of the shares of MARCS offered hereby will be made in New York, New
York, on or about March 13, 1996.
* Service mark of UBS Securities LLC.
---------------------------
UBS SECURITIES LLC LAZARD FRERES & CO. LLC
March 8, 1996
<PAGE> 2
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE MARCS OR THE
COMMON STOCK AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed with the Commission can be inspected and copied at
the Commission's public reference facilities at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Commission's regional offices at Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511
and Seven World Trade Center, New York, New York 10048. Copies of such material
can be obtained by mail from the Commission's Public Reference Section at 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Such reports,
proxy statements and other information also can be inspected at the offices of
the New York Stock Exchange, Inc. ("NYSE"), 20 Broad Street, New York, New York
10005.
The Company has filed a registration statement on Form S-3 (herein,
together with all amendments and exhibits, referred to as the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the securities offered hereby. This Prospectus does not contain
all of the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. For further information, reference is made to the Registration
Statement and the exhibits filed as part thereof. Statements contained herein
concerning any document filed as an exhibit are not necessarily complete and, in
each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement. Each such statement is qualified in its
entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are hereby
incorporated by reference in this Prospectus:
1. Annual Report on Form 10-K for the fiscal year ended December 31, 1995.
2. Current Report on Form 8-K filed on January 31, 1996 and amended on
February 15, 1996.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the shares of MARCS hereby shall be deemed to be
incorporated herein by reference and to be a part hereof from the respective
dates of filing of such documents.
Any statement contained in a document incorporated or deemed incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus and the Registration Statement of which it is a part to the
extent that a statement contained herein or in any other subsequently filed
document which is also incorporated or deemed to be incorporated by reference
herein modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus or such Registration Statement.
The Company will provide without charge to each person, including a
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of any such person, a copy of any or all of the
documents which are incorporated herein by reference, other than exhibits to
such documents (unless such exhibits are specifically incorporated by reference
into such documents). Requests should be directed to William F. Boyd, Esq.,
Secretary, Coeur d'Alene Mines Corporation, 400 Coeur d'Alene Mines Building,
505 Front Avenue, Coeur d'Alene, Idaho 83814, telephone number (208) 667-3511.
2
<PAGE> 3
PROSPECTUS SUMMARY
The following summary should be read in conjunction with, and is qualified
in its entirety by, the detailed information and financial statements (including
the notes thereto) incorporated by reference in this Prospectus. Unless
otherwise indicated, all information in this Prospectus assumes that the
Underwriters' over-allotment option will not be exercised.
THE COMPANY
OVERVIEW. Coeur d'Alene Mines Corporation ("Coeur" or the "Company") is an
international gold and silver producer engaged in the exploration, development
and operation of gold and silver mining properties located in the western United
States, New Zealand and Chile. Since 1986, Coeur has grown from a small domestic
silver producer into an international gold and silver producer through a focused
strategy of acquiring and developing producing or near-producing gold and silver
properties. The Company also actively explores for gold and silver on its
existing properties and in selected locations elsewhere in the world. Reserves
outside the United States currently account for approximately 20% of the
Company's total reserve base and approximately 44% of total current production.
As a result of its acquisition and development strategy, the Company's gold
and silver production and reserves have increased significantly in recent years.
Total production has increased from approximately 57,000 ounces of gold and 6.3
million ounces of silver, or approximately 147,000 ounces of gold equivalent*,
in 1992 to approximately 168,000 ounces of gold and 7.2 million ounces of
silver, or approximately 271,000 ounces of gold equivalent, in 1995. Total ore
reserves have increased from approximately 2.5 million ounces of gold and 121.0
million ounces of silver, or approximately 3.9 million ounces of gold
equivalent, at the end of 1991 to approximately 3.5 million ounces of gold and
124.4 million ounces of silver, or approximately 5.3 million ounces of gold
equivalent, at the end of 1995.
The Company's executive offices are located at 400 Coeur d'Alene Mines
Building, 505 Front Avenue, Coeur d'Alene, Idaho 83814; telephone number (208)
667-3511.
PRINCIPAL PROPERTIES. The Company's most significant properties are: (i)
the Rochester mine, a silver and gold surface mining operation located in
northwestern Nevada (the "ROCHESTER MINE"), which is 100% owned and operated by
Coeur, is one of the largest and lowest cost of production primary silver mines
in the United States, and has significant gold production; (ii) the Golden Cross
mine, an underground and surface gold mining operation located near Waihi, New
Zealand (the "GOLDEN CROSS MINE"), which is 80% owned and operated by Coeur;
(iii) the Fachinal open pit and underground gold and silver mine, located in
southern Chile (the "FACHINAL MINE"), which the Company developed following its
acquisition of the property in 1990 and where production commenced in October
1995; (iv) the El Bronce Mine, an underground gold and silver mine located in
northern Chile (the "EL BRONCE MINE"), in which the Company acquired a 51%
operating interest in October 1994; (v) a 50% interest in Silver Valley
Resources Corporation ("SILVER VALLEY RESOURCES"), which owns and recently
announced the reopening of the Coeur and Galena underground silver mines in
northern Idaho (the "COEUR MINE" and the "GALENA MINE") which were historically
among the largest and lowest cost of production silver mines in North America;
and (vi) the Kensington property, located north of Juneau, Alaska (the
"KENSINGTON PROPERTY"), which is 100% owned by Coeur and is being developed as
an underground gold mine.
- ---------------
* Gold equivalent determinations equate 70 ounces of silver to one ounce of
gold.
3
<PAGE> 4
GROWTH STRATEGY. As a result of its acquisition and development strategy,
Coeur has a number of current projects which are expected to result in increased
future production. The Company estimates that in 1996, gold production will
increase approximately 33% to approximately 224,000 ounces and silver production
will increase approximately 24% to approximately 8.9 million ounces. Coeur
expects future growth to result from the following:
ROCHESTER MINE. The Company estimates that the Rochester Mine, which it
has operated since 1986, will increase its gold production by approximately
24% to 74,000 ounces in 1996, which should more than offset an anticipated
decline in silver production. The mine has a mine life of more than ten
years at present gold and silver production and reserve levels and is
expected to benefit from efficiency improvements, a lower strip ratio and
an increasing gold grade over the mine life.
FACHINAL MINE. The Company commenced production at the Fachinal Mine in
October 1995 on schedule and under budget. The mine is expected to reach
full capacity in 1996, producing approximately 44,000 ounces of gold and
2.8 million ounces of silver annually with an estimated life of
approximately eight years at current production and reserve levels.
EL BRONCE MINE. The El Bronce Mine is expected to produce approximately
57,000 ounces of gold and 167,000 ounces of silver in 1996, an increase of
approximately 33% and 18%, respectively, over 1995 production levels. A
feasibility study designed to increase annual production by approximately
10% is underway and continuing exploratory and developmental activities are
expected to increase significantly ore reserves.
SILVER VALLEY RESOURCES. On February 9, 1996, Silver Valley Resources
announced that its Board of Directors had determined to reopen the Coeur
and Galena Mines in response to higher silver prices and increased ore
reserves developed during 1995. Shipments of concentrates from the mines
are expected to commence in June 1996, with total output estimated at
approximately 3.0 million ounces of silver during the mines' first full
year of operations.
KENSINGTON PROPERTY. An updated feasibility study is currently being
conducted at the Kensington Property and a decision regarding construction
of a mine is scheduled to be considered in the third quarter of 1996. If
construction commences, Kensington, after a two-year construction phase,
would be expected to produce an average of approximately 200,000 ounces of
gold per year at currently estimated reserve levels of approximately 1.9
million ounces of gold.
CURRENT EXPLORATION ACTIVITIES. Several exploration projects could add to
the Company's future reserves and production, including (i) the Kensington
Property, where, to date, the Company has not actively explored all of the
identified veins; (ii) Jualin (100% owned by the Company), a property
adjacent to the Kensington Property; (iii) Silver Valley Resources, where
reserves were increased 32% in 1995 and an active drifting and drilling
program has identified several new exploration targets at the Caladay
property, adjacent to the Galena Mine; and (iv) the El Bronce Mine, where
continuing exploratory and development activities are expected to
significantly increase ore reserves. Exploration expenditures have
increased from approximately $2.3 million in 1992 to $4.9 million in 1995
and it presently is estimated that they will approximate $5.9 million in
1996.
RECENT INITIATIVES IN AUSTRALIA. For information relating to the Company's
recent and proposed acquisition of interests in certain Australian gold mining
properties, see "The Company--Recent Initiatives in Australia."
4
<PAGE> 5
THE OFFERING
Securities................ The shares of MARCS rank prior to the Common Stock as
to payment of dividends and distribution of assets
upon liquidation. The MARCS mandatorily convert into
shares of Common Stock on March 15, 2000 (the
"Mandatory Conversion Date"). The Company has the
option to redeem the shares of MARCS, in whole or in
part, at any time and from time to time on or after
March 15, 1999 and prior to the Mandatory Conversion
Date at the Call Price (as defined herein), payable
in shares of Common Stock. In addition, the shares of
MARCS are convertible into shares of Common Stock at
the option of the holder at any time prior to the
Mandatory Conversion Date as set forth below.
Dividends................. Holders of shares of MARCS will be entitled to
receive cumulative dividends at a rate per annum of
7.0% of the price per share to the public of the
shares of MARCS shown on the cover page of this
Prospectus (equivalent to a rate of $1.488 per annum
for each share of MARCS) from the date of initial
issuance, payable quarterly in arrears on each June
15, September 15, December 15 and March 15, or, if
any such date is not a business day, on the next
succeeding business day, commencing June 15, 1996.
See "Description of Capital Stock--Preferred
Stock--MARCS-- Dividends."
Mandatory Conversion...... On the Mandatory Conversion Date, unless previously
redeemed or converted, each outstanding share of
MARCS will mandatorily convert into (i) 1.111 shares
of Common Stock, subject to adjustment in certain
events, and (ii) the right to receive cash in an
amount equal to all accrued and unpaid dividends
thereon. See "Description of Capital Stock--Preferred
Stock--MARCS--Mandatory Conversion of MARCS." The
value of the Common Stock that may be received by
holders of shares of MARCS upon their mandatory
conversion may be more or less than the amount paid
for the shares of MARCS offered hereby due to market
fluctuations in the price of the Common Stock.
Optional Redemption....... Shares of MARCS are not redeemable prior to March 15,
1999. At any time and from time to time on or after
March 15, 1999 until immediately prior to the
Mandatory Conversion Date, the Company may redeem any
or all of the outstanding shares of MARCS. Upon any
such redemption, each holder will receive, in
exchange for each share of MARCS, the greater of (a)
the number of shares of Common Stock equal to the sum
of (i) $21.622, declining after March 15, 1999 as set
forth herein to $21.25 until the Mandatory Conversion
Date, and (ii) all accrued and unpaid dividends
thereon (such sum being the "Call Price"), divided by
the Current Market Price (as defined herein) of the
Common Stock on the applicable date of determination,
or (b) .826 of a share of Common Stock on the
applicable date of determination. See "Description of
Capital Stock--Preferred Stock--MARCS--Optional
Redemption." The number of shares of Common Stock to
be delivered in payment of the applicable Call Price
will be determined on the basis of the Current Market
Price of the Common Stock prior to the announcement
of the redemption, and the market price of the Common
Stock may vary between the date of such determination
and the subsequent delivery of such shares.
5
<PAGE> 6
Conversion at the Option
of the Holder............ At any time prior to the Mandatory Conversion Date,
unless previously redeemed, each share of MARCS is
convertible at the option of the holder thereof into
.826 of a share of Common Stock, equivalent to an
initial conversion price of $25.713 per share of
Common Stock (the "Conversion Price"), subject to
adjustment as described herein. The value of the
shares received upon conversion will vary depending
on the market price of the Common Stock from time to
time, all as set forth herein. The right of holders
to convert shares of MARCS called for redemption will
terminate immediately prior to the close of business
on the redemption date. See "Description of Capital
Stock--Preferred Stock--MARCS--Conversion at the
Option of the Holder."
Higher Dividend Yield and
Less Equity Appreciation
Than Common Stock........ Dividends will accrue on the shares of MARCS at a
higher rate than the rate at which dividends and cash
distributions historically have been paid on the
Common Stock. The opportunity for equity appreciation
afforded by an investment in the shares of MARCS is
less than that afforded by an investment in the
Common Stock because the Conversion Price is higher
than the per share price to the public of the shares
of MARCS and the Company may, at its option, redeem
the shares of MARCS at any time on or after March 15,
1999, and prior to the Mandatory Conversion Date, and
may be expected to do so if, among other
circumstances, the Current Market Price of the Common
Stock exceeds the Call Price. In such event, a holder
of a share of MARCS will receive less than 1.111
shares of Common Stock, but in no event less than
.826 of a share of Common Stock. A holder may also
surrender for conversion any shares of MARCS called
for redemption up to the close of business on the
redemption date, and a holder that so elects to
convert will receive .826 of a share of Common Stock
per share of MARCS. The per share value of Common
Stock received by holders of shares of MARCS may be
more or less than the per share amount paid for the
MARCS offered hereby, due to market fluctuations in
the price of Common Stock. See "Description of
Capital Stock--Preferred Stock--MARCS--Higher
Dividend Yield and Less Equity Appreciation than
Common Stock."
Voting Rights............. The holders of shares of MARCS will have the right
with the holders of Common Stock to vote in the
election of directors and upon each other matter
coming before any meeting of the holders of Common
Stock on the basis of one vote for each share of
MARCS. On such matters, the holders of shares of
MARCS and the holders of Common Stock will vote
together as one class except as otherwise provided by
law or the Company's Articles of Incorporation. In
addition, (i) in the event that dividends on the
shares of MARCS or any other series of Preferred
Stock (as defined herein) with like voting rights are
in arrears and unpaid for six quarterly dividend
periods, and in certain other circumstances, the
holders of shares of MARCS (voting separately as a
class with holders of all other series of outstanding
Preferred Stock upon which like voting rights have
been conferred and are exercisable) will be entitled
to vote, on the basis of one vote for each share of
MARCS, for the election of two directors of the
Company, such directors to be in addition to the
number of directors constituting the Board of
Directors immediately prior to the accrual of such
right, and (ii) the holders of the shares of MARCS
will have voting rights with respect to
6
<PAGE> 7
certain alterations of the Company's Articles of
Incorporation and certain other matters, voting on
the same basis or separately as a series. See
"Description of Capital Stock--Preferred
Stock--MARCS--Voting Rights" and "Description of
Capital Stock--Common Stock."
Liquidation Preference and
Ranking.................. The shares of MARCS will rank prior to the Common
Stock as to payment of dividends and distribution of
assets upon liquidation. The liquidation preference
of each share of MARCS is an amount equal to the sum
of (i) the per share price to the public shown on the
cover page of this Prospectus and (ii) all accrued
and unpaid dividends thereon. See "Description of
Capital Stock--Preferred Stock--MARCS--Dividends" and
"--Liquidation Rights."
New York Stock Exchange
Symbol of Common Stock... "CDE"
Listing................... The shares of MARCS have been approved for listing on
the New York Stock Exchange under the symbol "CDEPR."
Use of Proceeds........... The net proceeds to the Company from the sale of the
shares of MARCS offered hereby will be used, together
with cash on hand and internally generated funds, (i)
to fund the Company's developmental expenditures on
existing or new gold and silver mining properties,
including a portion of the expenditures to be
incurred by the Company if it decides to place the
Kensington Property into commercial production, and
(ii) for general corporate purposes, including the
possible acquisition of, or investment in, additional
gold and silver mining properties or businesses.
7
<PAGE> 8
SUMMARY FINANCIAL, OPERATING AND RESERVE DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
INCOME STATEMENT DATA: 1991 1992 1993 1994 1995(5)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Income:
Sales of concentrates and dore...... $ 49,035 $ 41,414 $ 67,990 $ 79,606 $ 89,239
Less cost of mine operations........ 44,072 37,829 59,804 67,802 72,210
-------- -------- -------- -------- --------
Gross profits....................... 4,963 3,585 8,186 11,804 17,029
Other income........................ 7,714 4,812 5,388 12,587 9,504
-------- -------- -------- -------- --------
Total income........................ 12,677 8,397 13,574 24,391 26,533
Loss from continuing operations(1)
.................................. (15,303) (1,488) (14,042) (4,736) (1,258)
Income (loss) before cumulative
effect of change in accounting
method(2)......................... (14,399) (759) (13,290) (3,943) 1,154
Cumulative effect of change in
accounting method................. -- -- 5,181 -- --
-------- -------- -------- -------- --------
Net income (loss)................... $(14,399) $ (759) $ (8,109) $ (3,943) $ 1,154
======== ======== ======== ======== ========
Income (loss) per share before
cumulative effect of change in
accounting method................. $ (0.94) $ (0.05) $ (0.87) $ (0.26) $ 0.07
Net income (loss) per share(3)...... (0.94) (0.05) (0.53) (0.26) 0.07
Ratio of earnings to fixed
charges(4)........................ -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------------
BALANCE SHEET DATA: 1991 1992 1993 1994 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Total assets........................ $261,034 $324,878 $325,249 $412,361 $445,646
Working capital..................... 129,883 179,370 104,883 170,087 105,597
Long-term debt(6)................... 57,902 131,134 129,234 227,193 174,000
Shareholders' equity................ 183,938 180,991 170,849 160,292 239,832
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
CASH FLOW DATA: 1991 1992 1993 1994 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities.............. $ 3,780 $ (3,007) $ 4,202 $ 7,898 $ 20,916
Capital expenditures................ 16,680 21,547 16,015 34,745 108,432
</TABLE>
PRODUCTION DATA:(7)
(IN OUNCES)
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995
----------------- ----------------- ------------------ ------------------ ------------------
PROPERTY GOLD SILVER GOLD SILVER GOLD SILVER GOLD SILVER GOLD SILVER
- -------------------------- ------ --------- ------ --------- ------- --------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Rochester Mine............ 60,565 5,707,700 56,562 5,431,369 66,412 5,943,894 56,886 5,937,770 59,307 6,481,825
Golden Cross Mine......... -- -- -- -- 56,898 175,325 67,400 222,246 83,058 286,216
El Bronce Mine............ -- -- -- -- -- -- 4,953 20,199 22,034 72,537
Fachinal Mine............. -- -- -- -- -- -- -- -- 3,586 334,816
Coeur Mine................ 40 189,928 -- -- -- -- -- -- -- --
Galena Mine............... 166 1,639,325 76 822,904 -- -- -- -- -- --
------ --------- ------ --------- ------- --------- ------- --------- ------- ---------
Total................. 60,771 7,536,953 56,638 6,254,273 123,310 6,119,219 129,239 6,180,215 167,985 7,175,394
</TABLE>
8
<PAGE> 9
RESERVE DATA:
(OUNCES IN THOUSANDS)
<TABLE>
<CAPTION>
TOTAL OUNCES OF
ESTIMATED PROVEN AND
PROBABLE RESERVES(8)
---------------------
PROPERTY GOLD SILVER
- ---------------------------------------------------------------------- ----- -------
<S> <C> <C>
Rochester Mine........................................................ 774 91,308
Golden Cross Mine..................................................... 325 1,383
El Bronce Mine........................................................ 81 222
Fachinal Mine......................................................... 319 14,288
Kensington Property................................................... 1,946 --
Coeur Mine............................................................ -- 3,264
Galena Mine........................................................... -- 10,485
Faride Mine........................................................... 46 3,464
----- -------
Total............................................................ 3,491 124,414
</TABLE>
- ---------------
(1) In May 1995, the Company sold the assets of its flexible hose and tubing
division, The Flexaust Company, and shares of a related subsidiary for
approximately $10.0 million, of which approximately $4.0 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 the Flexaust manufacturing
segment are not reflected in the results from continuing operations. The
Company recorded income from discontinued operations of $2.4 million in
1995.
(2) See Note (2) of the Notes to the "Selected Consolidated Financial Data."
(3) Earnings per share are calculated based on the weighted average number of
common shares outstanding and those Common Stock equivalents that are deemed
to be dilutive. The 6% Convertible Subordinated Debentures Due 2002 are
considered to be Common Stock equivalents. Accordingly, such debentures are
assumed to be converted, and interest expense on such debentures, net of tax
expense, has been considered in the computation of earnings per share,
except in those instances where the effects of conversion would be
antidilutive.
(4) For purposes of calculating the ratio of earnings to fixed charges, earnings
consist of income from continuing operations before income taxes and fixed
charges. Fixed charges consist of interest and that portion of rent deemed
representative of interest. The ratios of earnings to fixed charges are not
presented for the above periods because earnings were inadequate to cover
fixed charges by approximately $18.7 million in 1991, $8.7 million in 1992,
$21.9 million in 1993, $9.2 million in 1994, and $8.3 million in 1995.
(5) Included in the results of operations for the year ended December 31, 1995
are (i) a gain of $4.4 million (included in other income) from the sale of
gold and silver purchased in the open market which was in turn delivered
pursuant to fixed price forward contracts during the year; and (ii) $2.4
million of income from discontinued operations (including a $2.2 million
after-tax gain from the related sale of certain non-mining assets in May
1995) during the year.
(6) Includes obligations under capital leases.
(7) Production figures are those attributable to the Company's ownership
interest. Production data include (i) production for the Golden Cross Mine
since April 1993 when the Company acquired an 80% interest in that mine in a
transaction accounted for as a purchase, (ii) 51% of production for the El
Bronce Mine since October 1994 when the Company acquired a 51% operating
interest in that mine and (iii) production for the Fachinal Mine since
October 1995 when production commenced. Operations at the Coeur and Galena
Mines were suspended in April 1991 and July 1992, respectively, due to then
prevailing silver prices and those mines were placed on a care and
maintenance basis to conserve ore reserves. Operations at the Coeur and
Galena Mines are scheduled to resume full production in June 1996.
(8) Estimated reserve figures are for proven and probable reserves which do not
reflect loss of metal in the metallurgical process. The Company's net share
of gold and silver ounces reflect its interest in each mine or property.
Estimates are as of December 31, 1995, except in the case of the Coeur Mine
estimate, which is as of January 1, 1991, and the Kensington Property
estimate, which is as of December 31, 1994. In the case of the Rochester
Mine, Golden Cross Mine, Fachinal Mine and the Kensington Property, the
reserve estimates were verified by independent geologists or mining
engineers. The El Bronce Mine and Faride Mine reserve figures are based on
the Company's estimates, the Galena Mine reserve figures are based on the
estimates of Silver Valley Resources, of which the Company owns 50%, and the
Coeur Mine figures are based on the reserve estimates of the former operator
of that mine. Based on experience and certain metallurgical testing,
estimated recovery rates are 55% of the silver and 85% of the gold contained
within the ore mined at the Rochester Mine, 89% of the gold and 55% of the
silver at the Golden Cross Mine, 89% of the gold and 92% of the silver at
the El Bronce Mine and 92% of the gold and 89% of the silver at the Fachinal
Mine; and based on metallurgical testing, estimated recovery rates at the
Company's development properties are 92% of the gold at the Kensington
Property; and based on historical operations, 97% of the silver at the
Galena and Coeur Mines. The prices used in preparing the above estimated ore
reserves range from $5.00 to $5.50 per ounce for silver and from $375 to
$409 per ounce for gold. Use of significantly lower silver and gold prices
in the ore reserve estimate calculations could materially reduce such
reserve estimates.
9
<PAGE> 10
RISK FACTORS
Investors should carefully review the factors set forth below as well as
the other information included or incorporated by reference in this Prospectus.
The forward-looking statements dealing with future mining production and
operations contained or incorporated by reference in this Prospectus, and
particularly those involving estimates of 1996 gold and silver production, are
expressly qualified by the following cautionary statements. The factors
summarized below could cause actual production and operating results to
materially differ from those presented in such forward-looking statements.
DEPENDENCE UPON GOLD AND SILVER PRICES
The results of the Company's operations and the market price of its Common
Stock are significantly affected by the market prices of gold and silver. Those
prices may fluctuate widely and are affected by many factors beyond the
Company's control, including interest rates, expectations regarding inflation,
currency values, global and regional political and economic conditions and other
factors. Examples of events reflecting the Company's dependence upon silver
prices include the suspension of mining operations at the Coeur and Galena Mines
in April 1991 and July 1992, respectively, during which months the average price
of silver was $3.97 and $3.95 per ounce, respectively. The Company's decision to
place its Kensington Property into commercial production is subject, among other
things, to there being a market price of gold of at least $400 per ounce. The
market prices of gold (based on the London final quotation) and silver (based on
the Handy and Harman base price quotation) on March 7, 1996 were $393.90 and
$5.38, respectively. No assurance can be given that the market prices of gold
and silver will not decline in the future.
PAST LOSSES
The Company reported net losses for each of the five years prior to 1995.
Significantly contributing to those net losses was the Company's deliberate
pursuit of a corporate policy of rapid growth through the acquisition of mining
companies and properties and the financing of such growth to a significant
extent by incurring indebtedness. Annual interest expense, which prior to 1993
was less than $2.0 million, rose to $5.4 million in 1993, $11.4 million in 1994
and $9.7 million in 1995. As a result of the Company's call for redemption in
December 1995 of its 7% Convertible Subordinated Debentures Due 2002, the
Company's interest expense in 1996 will be reduced by approximately $5.25
million per year. The Company's interest expense may be further reduced in the
event the $50 million principal amount of its 6% Convertible Subordinated
Debentures Due 2002 and the $100 million principal amount of its 6 3/8%
Convertible Subordinated Debentures Due 2004 are converted into Common Stock. In
addition to substantial interest expense, significant non-recurring write-offs
have been recorded in connection with acquisitions, mine closures, the
resolution of environmental disputes and the settlement of litigation. Included
in results of operations for 1995 are (i) a gain of $4.4 million (included in
other income) from the sale of gold and silver purchased in the open market
which was in turn delivered pursuant to fixed price forward contracts during the
year and (ii) $2.4 million of income from discontinued operations (including the
$2.2 million after-tax gain from the related sale of certain non-mining assets
in May 1995) during the year. The Company's accumulated deficit at December 31,
1995 amounted to approximately $15.9 million.
PAST ABSENCE OF EARNINGS TO SATISFY FIXED CHARGES
Primarily as a result of the expenses discussed above, the Company's
earnings have been inadequate to satisfy fixed charges (i.e., interest plus that
portion of rent deemed representative of interest) in each of the last five
years. The amounts by which earnings were inadequate to cover fixed charges were
approximately $18.7 million in 1991, $8.7 million in 1992, $21.9 million in
1993, $9.2 million in 1994 and $8.3 million in 1995. Dividends payable to
holders of shares of MARCS through their maturity on March 15, 2000 will
initially approximate $9.8 million per year, subject to reduction to the extent
that shares of MARCS are earlier converted or redeemed. The Company expects to
satisfy its fixed charges, dividends on shares of MARCS and other expense
obligations in the future from cash flow from operations and, in the event that
cash flow from operations is insufficient, from working capital, which amounted
to approximately $105.6 million at December 31, 1995. The Company's net cash
provided by operating activities for the years ended December 31, 1994 and 1995
was approximately $7.9 million and $20.9 million, respectively. The availability
of future cash flow from operations or working capital to fund the payment of
dividends on the shares of MARCS and other fixed charges will be dependent upon
numerous factors, including gold and silver prices, the amount of the Company's
expenditures for acquisitions and for development and exploratory activities,
10
<PAGE> 11
results of operations and the extent to which the shares of MARCS or the
Company's outstanding convertible subordinated debentures are converted or
redeemed.
RISKS ASSOCIATED WITH POSSIBLE ACQUISITIONS
The Company periodically considers the acquisition of gold and silver
mines, properties and businesses. In connection with future acquisitions, the
Company may incur indebtedness or issue equity securities, resulting in dilution
of the percentage ownership of existing shareholders. The Company intends to
seek shareholder approval for any such acquisitions only to the extent required
by applicable law, regulations or stock exchange rules. Except as described
herein under "The Company--Recent Initiatives in Australia," the Company
currently is not a party to any agreements relating to any material
acquisitions.
RISKS ASSOCIATED WITH THE COMPANY'S EXPLORATION AND DEVELOPMENT ACTIVITIES
Mineral exploration, particularly for gold and silver, involves many risks
and frequently is nonproductive. Once mineralization is discovered, it may take
a number of years until production is possible, during which time the economic
feasibility of any project may change. Substantial developmental expenditures
are required to establish ore reserves, extract the metals from the ore and, in
the case of new properties, to construct mining and processing facilities. The
Company expended approximately $23.0 million and $54.4 million (excluding
capitalized interest) in the years ended December 31, 1994 and 1995,
respectively, in connection with the exploration and development of its mining
properties. In the event the Company decides to place the Kensington Property
into commercial production, the Company estimates that approximately $195
million of capital expenditures will be required over a two-year period to
construct mining facilities. Furthermore, the Company plans to expend
approximately $17.6 million (excluding capitalized interest) in connection with
exploration and other developmental activities during 1996 (excluding the
possible construction of the mine at the Kensington Property).
RISKS ASSOCIATED WITH THE COMPANY'S MINING ACTIVITIES
Following the commencement of production, the mining business continues to
be subject to risks and hazards, including quantity of production, environmental
hazards, industrial accidents, encountering unusual or unexpected formations,
cave-ins, flooding and periodic interruptions due to inclement or hazardous
weather conditions. The Company has never been required to close any mine
because of such events. However, if such events were to occur, they could result
in damage to, or destruction of, mineral properties or producing facilities,
personal injury, environmental damage, reduced production and delays in mining,
monetary losses and possible legal liability. Insurance fully covering certain
environmental risks (including potential liability for pollution or other
hazards as a result of disposal of waste products occurring from exploration and
production) is not generally available to the Company or to other companies
within the industry. The Company has been recognized for its commitment to
environmental responsibility and knows of no material environmental liabilities
to which it currently is subject.
GOVERNMENT REGULATION
General. The Company's mining activities are subject to extensive federal,
state and local laws governing the protection of the environment, prospecting,
development, production, taxes, labor standards, occupational health, mine
safety, toxic substances and other matters. Although such regulations have never
required the Company to close any mine and the Company is not presently subject
to any material regulatory proceedings relating to such matters, the costs
associated with compliance with such regulatory requirements are substantial and
possible future legislation and regulations could cause additional expense,
capital expenditures, restrictions and delays in the development of the
Company's properties, the extent of which cannot be predicted. In the context of
environmental permitting, including the approval of reclamation plans, the
Company must comply with known standards and regulations which may entail
significant costs and delays. Although Coeur has been recognized for its
commitment to environmental responsibility and believes it is in substantial
compliance with applicable laws and regulations, amendments to current laws and
regulations, the more stringent implementation thereof through judicial review
or administrative action or the adoption of new laws could have a materially
adverse effect upon the Company. The Company expended approximately $3.0 million
and $2.9 million in connection with routine compliance activities at its
operating properties in 1994 and 1995, respectively, and expects to expend
approximately $3.0 million for that purpose in 1996. The Company has expended a
total of approximately $6.6 million on environmental and permitting activities
at the
11
<PAGE> 12
Kensington Property through December 31, 1995, and expects to expend
approximately $2.1 million for that purpose in 1996.
EPA Regulations. Mining wastes are currently exempt to a limited extent
from the extensive set of Environmental Protection Agency ("EPA") regulations
governing hazardous waste. While extraction and bonification wastes are
generally exempt from the Resource Conservation and Recovery Act ("RCRA"),
certain processing and other wastes are now regulated as hazardous wastes. The
EPA continues to evaluate the development of a program to regulate mining waste
pursuant to its solid waste management authority under RCRA. In this connection,
legislative re-authorization of RCRA is being discussed in Congress and the EPA
is studying regulations concerning how mine wastes should be managed and
regulated. If the Company's mine wastes were treated as hazardous waste or such
wastes resulted in operations being designated as a "Superfund" site under the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"
or "Superfund") for cleanup, material expenditures would likely be required for
the construction of additional waste disposal facilities or for other
remediation expenditures. Under CERCLA, the current owner or operator of the
land and the owner or operator at the time of its contamination may be held
liable and may be forced to undertake remedial cleanup action or to pay for the
government's cleanup efforts.
Additional regulations or requirements may also be imposed upon the
Company's tailings and waste disposal operations at the Rochester Mine under the
Nevada Water Pollution Control Law.
Natural Resources Laws. The Company is subject to federal and state laws
designed to protect natural resources. The Company and Callahan were advised by
the U.S. Department of Interior in July 1995 that they were identified as
potentially responsible parties for damages resulting from alleged injury to
federal natural resources with respect to the Bunker Hill Superfund Site. The
Company presently cannot state whether or estimate the extent to which, if any,
it will be liable for any such damages. However, the Company does not believe
its liability, if any, relating to the matter will be material in amount.
Proposed Mining Legislation. Legislation is presently being considered in
the U.S. Congress to change the Mining Law of 1872 (the "Mining Act") under
which the Company holds mining claims on public lands. It is possible that the
Mining Act will be amended or be replaced by more onerous legislation in the
future. The legislation under consideration contains new environmental standards
and conditions, additional reclamation requirements and extensive new procedural
steps which would likely result in delays in permitting. Among the bills under
consideration are bills calling for an 8% gross royalty, a 2.5% or 5% net
smelter return royalty or a 3.5% net proceeds royalty on the value of minerals
mined on public lands, payable to the U.S. Government. The Company believes that
if and when any royalty is imposed, it will not be a gross royalty. A
significant portion of the Company's U.S. mining properties are on public lands.
Whether or when changes will be enacted or the extent of any changes is not
presently known and the potential impact on the Company's U.S. activities is
difficult to predict.
FOREIGN ACTIVITIES
Reserves outside of the United States currently account for approximately
20% of the Company's total reserve base and approximately 44% of total current
production. Although the governments and economies of New Zealand and Chile, the
only foreign countries in which the Company currently owns or operates mining
properties, have been relatively stable in recent years, the ownership of
property in a foreign country generally is subject to the possible risk of
expropriation or nationalization with inadequate compensation. Any foreign
operation or investment may also be adversely affected by exchange controls,
currency fluctuations, taxation and laws or policies of particular countries as
well as laws and policies of the United States affecting foreign trade,
investment and taxation.
12
<PAGE> 13
THE COMPANY
OVERVIEW
The Company is an international gold and silver producer engaged in the
exploration, development and operation of gold and silver mining properties
located in the western United States, New Zealand and Chile. Since 1986, Coeur
has grown from a small domestic silver producer into an international gold and
silver producer through a focused strategy of acquiring and developing producing
or near-producing gold and silver properties. The Company also actively explores
for gold and silver on its existing properties and in selected locations
elsewhere in the world. Reserves outside of the United States currently account
for approximately 20% of the Company's total reserve base and approximately 44%
of total current production.
As a result of its acquisition and development strategy, the Company's gold
and silver production and reserves have increased significantly in recent years.
Total production has increased from approximately 57,000 ounces of gold and 6.3
million ounces of silver, or approximately 147,000 ounces of gold equivalent, in
1992 to approximately 168,000 ounces of gold and 7.2 million ounces of silver,
or approximately 271,000 ounces of gold equivalent, in 1995. Total ore reserves
have increased from approximately 2.5 million ounces of gold and 121.0 million
ounces of silver, or approximately 3.9 million ounces of gold equivalent, at the
end of 1991 to approximately 3.5 million ounces of gold and 124.4 million ounces
of silver, or approximately 5.3 million ounces of gold equivalent, at the end of
1995.
The Company's cash flow from operations and total assets also have grown
significantly since 1991. Cash flow from operations has increased from a
negative $3.0 million in 1992 to a positive $20.9 million in 1995 and total
assets, which amounted to approximately $261 million at the end of 1991,
increased to approximately $446 million at the end of 1995.
The Company's executive offices are located at 400 Coeur d'Alene Mines
Building, 505 Front Avenue, Coeur d'Alene, Idaho 83814; telephone number (208)
667-3511.
PROPERTIES
The Company's most significant properties are: (i) the Rochester Mine, a
silver and gold surface mining operation located in northwestern Nevada, which
is 100% owned and operated by Coeur, is one of the largest and lowest cost of
production primary silver mines in the United States, and has significant gold
production; (ii) the Golden Cross Mine, an underground and surface gold mining
operation located near Waihi, New Zealand, which is 80% owned and operated by
Coeur; (iii) the Fachinal Mine, an open pit and underground gold and silver
mine, located in southern Chile, which Coeur developed following its acquisition
of the property in 1990 and where production commenced in October 1995; (iv) the
El Bronce Mine, an underground gold and silver mine located in northern Chile,
in which the Company acquired a 51% operating interest in October 1994; (v) a
50% interest in Silver Valley Resources, which owns and recently announced the
reopening of the Coeur and Galena Mines in northern Idaho which were
historically among the largest and lowest cost of production silver mines in
North America; and (vi) the Kensington Property, located north of Juneau,
Alaska, which is 100% owned by Coeur and is being developed as an underground
gold mine. In addition, Coeur has an option to acquire a 51% operating interest
through January 15, 1998 in the fully developed Faride Mine, a gold and silver
mine located in northern Chile which has not been operational since 1988 and
where the Company currently is conducting exploratory activities and feasibility
studies.
GROWTH STRATEGY
As a result of its acquisition and development strategy, Coeur has a number
of current projects which are expected to result in increased future production.
The Company estimates that in 1996, gold production will increase approximately
33% to approximately 224,000 ounces and silver production will increase
approximately 24% to approximately 8.9 million ounces. Coeur expects future
growth to result from the following:
Rochester Mine. The Company estimates that gold production in 1996 will
increase by approximately 24% over 1995 to 74,000 ounces, which should more than
offset an anticipated decline in silver production. The mine, which has been in
continuous operation since 1986 and has a mine life of more than ten years at
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<PAGE> 14
present gold and silver production and reserve levels, is expected to benefit
from efficiency improvements, a lower strip ratio and an increasing gold grade
over the mine life.
Fachinal Mine. The Fachinal Mine, with its mill that processes 540,000 tons
of ore per year, commenced production in October 1995 on schedule and under
budget. The open pit and underground mining operations are expected to reach
full capacity in 1996, producing approximately 44,000 ounces of gold and 2.8
million ounces of silver annually with an estimated life of approximately eight
years at current production and reserve levels.
El Bronce Mine. The El Bronce Mine is expected to produce approximately
57,000 ounces of gold and 167,000 ounces of silver in 1996, an increase of
approximately 33% and 18%, respectively, over 1995 production levels. A
feasibility study designed to increase annual production by approximately 10% is
underway and continuing exploratory and developmental activities are expected to
increase significantly ore reserves.
Silver Valley Resources. On February 9, 1996, Silver Valley Resources
announced that its Board of Directors had determined to reopen the Coeur and
Galena Mines in response to higher silver prices and increased ore reserves
developed during 1995. Shipments of concentrates from the Coeur and Galena Mines
are expected to commence in June 1996, with total output estimated at
approximately 3.0 million ounces of silver during the mines' first full year of
operations.
Kensington Property. An updated feasibility study is currently being
conducted at the Kensington Property and a decision regarding construction of a
mine is scheduled to be considered in the third quarter of 1996. If construction
commences, Kensington, after a two-year construction phase, would be expected to
produce an average of approximately 200,000 ounces of gold per year at currently
estimated reserve levels of approximately 1.9 million ounces of gold.
Current Exploration Activities. Several exploration projects could add to
the Company's future reserves and production, including (i) the Kensington
Property, where, to date, the Company has not actively explored all of the
identified veins; (ii) Jualin (100% owned by the Company), a property adjacent
to the Kensington Property; (iii) Silver Valley Resources, where reserves were
increased 32% in 1995 and an active drifting and drilling program has identified
several new exploration targets at the Caladay property, adjacent to the Galena
Mine; and (iv) the El Bronce Mine, where continuing exploratory and development
activities are expected to significantly increase ore reserves. Exploration
expenditures have increased from approximately $2.3 million in 1992 to
approximately $4.9 million in 1995 and it presently is estimated that they will
be approximately $5.9 million in 1996.
RECENT INITIATIVES IN AUSTRALIA
On December 21, 1995, the Company announced that it had acquired from the
principal shareholder of Gasgoyne Mines NL ("Gasgoyne"), an Australian gold
mining company which owns 50% of the Yilgarn Star Mine, an option (the "Option")
to acquire 19.9% of Gasgoyne's outstanding shares in exchange for a combination
of Coeur Common Stock and cash. In conjunction with this Option, the Company
announced its intention to make an offer (the "Offer") for the remainder of
Gasgoyne's outstanding shares that originally was scheduled to commence in
mid-February 1996. The Offer is conditioned upon Coeur's acquisition of at least
50.1% of Gasgoyne's outstanding shares. The terms of the Option and the Offer
call for Coeur to issue seven shares of Coeur Common Stock and A$60.00 (or
US$45.72, based on current exchange rates) in exchange for each 100 Gasgoyne
shares. Assuming Coeur's acquisition of 100% of Gasgoyne's outstanding shares,
Coeur would issue approximately 4.0 million shares and pay approximately $26.0
million in cash. Based on the market price of Coeur Common Stock on March 7,
1996 and current exchange rates, this equates to a total acquisition price of
approximately $120 million.
In January 1996, the Company announced that it acquired shares of, and an
option in, Orion Resources NL ("Orion"), an Australian gold mining company which
operates and owns 45% of the Yilgarn Star Mine, as well as other property
interests, from the holder thereof for $10.7 million. As a result of that
purchase, Coeur owns 13.1% of Orion's outstanding shares and, upon exercise of
the option, would own approximately
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<PAGE> 15
19.2% of Orion. If Coeur were to increase its equity ownership of Orion to above
20%, Gasgoyne would become the operator of the Yilgarn Star Mine. In the event
the Company is successful in its proposed acquisition of Gasgoyne, the Company
will consider increasing its equity ownership of Orion in order to acquire
operating control of the Yilgarn Star Mine.
Coeur's ownership in Orion and its proposed acquisition of Gasgoyne are
intended to increase the Company's holdings in the Australasian Region, where
the Company currently owns an 80% interest and operates the Golden Cross Mine in
New Zealand. Gasgoyne's major assets are a 50% interest in the Yilgarn Star Mine
in western Australia and a 45% interest in the Awak Mas gold project in
Indonesia. The Yilgarn Star Mine, which presently is transitioning from an open
pit to an underground mining operation, reports that it produced approximately
110,600 ounces of gold in Gasgoyne's fiscal year ended June 30, 1995, and
approximately 50,000 ounces of gold in the six months ended December 31, 1995.
On January 17, 1996, another Australian gold mining company, the Sons of
Gwalia Limited ("Sons of Gwalia") announced its intention to make a competing
bid for Gasgoyne's outstanding shares and on February 14, 1996, commenced a
lawsuit in Australia to enjoin Coeur's delivery of the Offer to Gasgoyne
shareholders. As a result of that suit, which was settled on March 4, 1996, the
commencement of Coeur's proposed Offer was delayed and it is anticipated that
Coeur's Offer, as well as the Sons of Gwalia offer, will be delivered to
Gasgoyne shareholders on or about March 18, 1996. The Company cannot now predict
whether or the extent to which its proposed Offer will be successful.
15
<PAGE> 16
USE OF PROCEEDS
The Company estimates that the proceeds from the net purchase price paid
for the shares of MARCS offered hereby will be approximately $135.8 million (or
approximately $154.6 million, assuming full exercise of the Underwriters'
over-allotment option) prior to the deduction of offering expenses. The Company
plans to use the net proceeds of the offering, together with cash on hand and
internally generated funds, (i) to fund the Company's developmental expenditures
on existing or new gold and silver mining properties, including a portion of the
expenditures planned to be incurred by the Company in the event the Company
decides to place the Kensington Property into commercial production (which is
estimated to cost $195 million during a two-year construction period); and (ii)
for general corporate purposes, including the possible acquisition of, or
investment in, additional gold and silver mining properties or businesses.
The Company's acquisition program is focused primarily upon operating gold
and silver mines and gold and silver properties or businesses that are expected
to become operational in the near future. Such mines, properties and businesses
may be located in the United States or in foreign countries. The Company
desires, through the sale of the shares of MARCS offered hereby, to be in a
position to take timely advantage of opportunities for the acquisition of or
investment in gold and silver mines, properties or businesses that may arise on
favorable terms. Consistent with its history, the Company is continually engaged
in the review and investigation of opportunities for expansion of its business
through acquisitions, investments or other transactions. Presently, however,
there are no agreements or understandings relating to any specific acquisitions
or investments other than as described in this Prospectus. See "The
Company--Recent Initiatives in Australia."
Pending the use of the net proceeds of the offering as discussed above, the
Company plans to invest the proceeds in investment grade interest-bearing
marketable securities or money market obligations of issuers that qualify for at
least an "A" rating from either Moody's Investors Services or Standard & Poor's.
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<PAGE> 17
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Company's Common Stock is listed on the NYSE Composite Tape and the
Pacific Stock Exchange. The following table sets forth, for the periods
indicated, the high and low closing sales prices of the Common Stock as reported
on the NYSE Composite Tape:
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C> <C>
1994: First Quarter.................................... $23.000 $18.375
Second Quarter................................... 21.750 16.625
Third Quarter.................................... 22.125 17.500
Fourth Quarter................................... 21.375 14.750
1995: First Quarter.................................... 18.500 14.750
Second Quarter................................... 21.500 17.500
Third Quarter.................................... 20.875 17.250
Fourth Quarter................................... 20.875 16.625
1996: First Quarter
(through March 7, 1996).......................... 25.125 18.375
</TABLE>
The Company paid per share cash distributions and dividends of $.15 on its
Common Stock on each of April 21, 1995, April 15, 1994, April 16, 1993 and April
15, 1992; $.12 on April 12, 1991; and $.11 on each of April 20, 1990 and April
21, 1989. Future distributions or dividends on the Common Stock, if any, will be
determined by the Company's Board of Directors and will depend primarily upon
the Company's results of operations, financial condition and capital
requirements.
On March 7, 1996, there were 8,187 record holders of the Company's
outstanding Common Stock.
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<PAGE> 18
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company at December 31, 1995 and as adjusted to reflect the issuance of the
shares of MARCS offered hereby and the Company's receipt of the net proceeds
therefrom:
<TABLE>
<CAPTION>
ACTUAL AS ADJUSTED
------------ ------------
<S> <C> <C>
Cash and cash equivalents, short-term investments and funds held
in escrow(a)................................................... $ 81,832,526 $217,182,520
=========== ===========
Long-term debt, including current portion:
6 3/8% Convertible Subordinated Debentures Due 2004(b)...... $100,000,000 $100,000,000
6% Convertible Subordinated Debentures Due 2002(c).......... 50,000,000 50,000,000
Limited recourse Fachinal project financing................. 23,999,997 23,999,997
Obligations under capital leases............................ 2,192,856 2,192,856
------------ ------------
Total long-term debt including current portion.............. 176,192,853 176,192,853
Shareholders' equity:(d)
Mandatory Adjustable Redeemable Convertible Securities,
$1.00 par value per share (MARCS); authorized 7,500,000
shares;
as adjusted--6,588,235 shares issued and outstanding...... -- 6,588,235
Common Stock, $1.00 par value per share; authorized
60,000,000 shares; issued--21,524,093 shares
(including 1,059,211 shares held as treasury stock)....... 21,524,093 21,524,093
Capital surplus............................................. 247,099,977 375,861,736
Accumulated deficit......................................... (15,889,154) (15,889,154)
Unrealized gains on short-term investments.................. 361,173 361,173
Repurchased and nonvested shares............................ (13,264,407) (13,264,407)
------------ ------------
Total shareholders' equity.................................. 239,831,682 375,181,676
------------ ------------
Total capitalization............................................. $416,024,535 $551,374,529
=========== ===========
</TABLE>
- ---------------
(a) The increase in cash and cash equivalents, short-term investments and funds
held in escrow resulting from the offering is attributable to estimated net
proceeds of $135,349,994.
(b) The 6 3/8% Convertible Subordinated Debentures Due 2004 are convertible into
Common Stock at $25.77 per share, subject to adjustment, and are redeemable
at specified redemption prices after January 31, 1997.
(c) The 6% Convertible Subordinated Debentures Due 2002 are convertible into
Common Stock at $25.57 per share, subject to adjustment, and are redeemable
at 100% of the principal amount.
(d) Does not include Series A Junior Preferred Stock reserved for issuance upon
the exercise of Rights attached to the Common Stock, 3,880,481 shares of
Common Stock reserved for issuance upon the conversion of the 6 3/8%
Convertible Subordinated Debentures Due 2004, 1,955,416 shares of Common
Stock reserved for issuance upon the conversion of the 6% Convertible
Subordinated Debentures Due 2002, 427,443 shares of Common Stock reserved
for issuance under the Company's Executive Compensation Program, 200,000
shares of Common Stock reserved for issuance under the Company's
Non-Employee Directors Stock Option Plan, or a presently indeterminable
number of shares of Common Stock underlying the MARCS offered hereby.
18
<PAGE> 19
SELECTED CONSOLIDATED FINANCIAL DATA
The following table summarizes certain selected consolidated financial data
with respect to the Company and its subsidiaries and was derived from the
Company's Annual Report on Form 10-K for the year ended December 31, 1995, which
is incorporated by reference into this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1991 1992 1993 1994 1995(6)
-------- -------- -------- -------- --------
(THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Income:
Sales of concentrates and dore.... $ 49,035 $ 41,414 $ 67,990 $ 79,606 $ 89,239
Less cost of mine operations...... 44,072 37,829 59,804 67,802 72,210
-------- -------- -------- -------- --------
Gross profits..................... 4,963 3,585 8,186 11,804 17,029
Other income...................... 7,714 4,812 5,388 12,587 9,504
-------- -------- -------- -------- --------
Total income...................... 12,677 8,397 13,574 24,391 26,533
Expenses............................ 29,178 14,118 31,548 29,392 27,591
-------- -------- -------- -------- --------
Net loss from continuing operations
before income taxes............... (16,501) (5,721) (17,974) (5,001) (1,058)
Provision (benefit) for income
taxes............................. (1,198) (4,233) (3,932) (265) 200
-------- -------- -------- -------- --------
Loss from continuing operations..... (15,303) (1,488) (14,042) (4,736) (1,258)
Income from discontinued operations
(net of taxes)(1)................. 904 729 752 793 2,412
-------- -------- -------- -------- --------
Income (loss) before cumulative
effect of change in accounting
method............................ (14,399) (759) (13,290) (3,943) 1,154
Cumulative effect of change in
accounting method(2).............. -- -- 5,181 -- --
-------- -------- -------- -------- --------
Net income (loss)................... $(14,399) $ (759) $ (8,109) $ (3,943) $ 1,154
======== ======== ======== ======== ========
Earnings per share data:(3)
Loss from continuing operations... $ (1.00) $ (0.10) $ (0.92) $ (0.31) $ (0.08)
Income from discontinued
operations(net of taxes)....... 0.06 0.05 0.05 0.05 0.15
-------- -------- -------- -------- --------
Income (loss) before cumulative
change in accounting method.... (0.94) (0.05) (0.87) (0.26) 0.07
Cumulative effect of change in
accounting method.............. -- -- 0.34 -- --
-------- -------- -------- -------- --------
Net income (loss)................. $ (0.94) $ (0.05) $ (0.53) $ (0.26) $ 0.07
======== ======== ======== ======== ========
Cash dividends per share............ $ 0.12 $ 0.15 $ 0.15 $ 0.15 $ 0.15
======== ======== ======== ======== ========
Ratio of earnings to fixed
charges(4)........................ -- -- -- -- --
Weighted average number of shares of
Common Stock and equivalents used
in calculation.................... 15,308 15,317 15,328 15,388 15,888
======== ======== ======== ======== ========
BALANCE SHEET DATA:
Total assets........................ $261,034 $324,878 $325,249 $412,361 $445,646
Working capital..................... 129,883 179,370 104,883 170,087 105,597
Long-term debt(5)................... 57,902 131,134 129,234 227,193 174,000
Shareholders' equity................ 183,938 180,991 170,849 160,292 239,832
</TABLE>
19
<PAGE> 20
- ---------------
(1) In May 1995, the Company sold the assets of its flexible hose and tubing
division, The Flexaust Company, and shares of a related subsidiary for
approximately $10.0 million, of which approximately $4.0 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 the Flexaust
manufacturing segment are presented as "Discontinued Operations." The
Company recorded income from discontinued operations of $2.4 million in
1995.
(2) Effective January 1, 1993, the Company changed its method of accounting for
income taxes by adopting Statement of Financial Accounting Standards (FAS)
109, "Accounting for Income Taxes." FAS 109 requires an asset and liability
approach to accounting for income taxes and establishes criteria for
recognizing deferred tax assets. Accordingly, the Company adjusted its
existing deferred income tax assets and liabilities to reflect current
statutory income tax rates and previously unrecognized tax benefits related
to federal and certain state net operating loss carryforwards. FAS 109 also
contains new requirements regarding balance sheet classification and prior
business combinations. Hence, the Company adjusted the carrying values of
an incremental interest in the Rochester Mine acquired in 1988 and CDE
Chilean Mining Corp. acquired in 1990 to reflect the gross purchase value
previously reported net-of-tax. The cumulative effect of the accounting
change on prior years at January 1, 1993 is a nonrecurring gain of
$5,181,188, or $.34 per share, and is included in the Consolidated
Statement of Operations for the year ended December 31, 1993. Other than
the cumulative effect, the accounting change had no material effect on the
results of operations for the year ended December 31, 1993.
As of January 1, 1993, after giving effect to the implementation of FAS
109, the significant components of the Company's net deferred tax liability
were as follows:
<TABLE>
<CAPTION>
DEFERRED INCOME TAXES
-------------------------------
ASSETS LIABILITIES
----------- -----------
<S> <C> <C>
Property, plant and equipment................ $16,756,918
AMT credit carryforwards..................... $ 938,672
Business credit carryforwards................ 628,933
Net operating loss carryforwards............. 17,721,115
----------- -----------
Total................................... 19,288,720 16,756,918
Less--valuation allowance.................... (7,927,904)
----------- -----------
Net..................................... $11,360,816 $16,756,918
========== ==========
</TABLE>
As permitted by FAS 109, prior year financial statements have not been
restated to reflect the change in accounting method.
(3) Earnings per share are calculated based on the weighted average number of
common shares outstanding and those Common Stock equivalents that are
deemed to be dilutive. The 6% Convertible Subordinated Debentures Due 2002
are considered to be Common Stock equivalents. Accordingly, such debentures
are assumed to be converted, and interest expense on such debentures, net
of tax expense, has been considered in the computation of earnings per
share, except in those instances where the effects of conversion would be
antidilutive.
(4) For purposes of calculating the ratio of earnings to fixed charges, earnings
consist of income from continuing operations before income taxes and fixed
charges. Fixed charges consist of interest and that portion of rent deemed
representative of interest. The ratios of earnings to fixed charges are not
presented for the above periods because earnings were inadequate to cover
fixed charges by approximately $18.7 million in 1991, $8.7 million in 1992,
$21.9 million in 1993, $9.2 million in 1994, and $8.3 million in 1995.
(5) Includes obligations under capital leases.
(6) Included in the results of operations for the year ended December 31, 1995
are (i) a gain of $4.4 million (included in other income) from the sale of
gold and silver purchased in the open market which was in turn delivered
pursuant to fixed price forward contracts during the year; and (ii) $2.4
million of income from discontinued operations (including a $2.2 million
after-tax gain from the related sale of certain non-mining assets in May
1995) during the year.
20
<PAGE> 21
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
The Company is authorized to issue up to 60,000,000 shares of Common Stock,
par value $1.00 per share, of which, at February 28, 1996, 20,464,882 shares
were outstanding and 1,059,211 shares were held as treasury stock, up to
7,500,000 shares were reserved for issuance upon the conversion of the MARCS
offered hereby, 3,880,481 shares were reserved for possible issuance upon the
conversion of the Company's $100 million principal amount of outstanding 6 3/8%
Convertible Subordinated Debentures Due 2004, 1,955,416 shares were reserved for
issuance upon conversion of the Company's $50 million principal amount of
outstanding 6% Convertible Subordinated Debentures Due 2002, 427,443 shares were
reserved for issuance under the Company's Executive Compensation Program and
200,000 shares were reserved for issuance under the Company's Non-Employee
Directors Stock Option Plan.
The holders of Common Stock are entitled to one vote for each share held of
record on each matter submitted to a vote of shareholders, and upon giving
notice required by law, may cumulate their votes in elections of directors.
Subject to preferences that may be applicable to any shares of Preferred Stock
of the Company outstanding at the time, holders of Common Stock are entitled to
receive ratably such dividends as may be declared by the Board of Directors out
of funds legally available therefor and, in the event of the liquidation,
dissolution or winding up of the Company, are entitled to share ratably in all
assets remaining after payment of liabilities. Holders of Common Stock have no
preemptive rights and have no rights to convert their Common Stock into any
other security. The outstanding Common Stock is fully-paid and non-assessable.
The Company's Articles of Incorporation include a "fair price" provision
applicable to certain business combination transactions in which the Company may
be involved. The provision requires that an Interested Shareholder (the holder
of 10% or more of the Company's outstanding shares of Common Stock) not engage
in certain specified transactions (e.g., mergers, sales of assets, dissolution
and liquidation) unless one of three conditions is met: (i) a majority of the
directors who are unaffiliated with the Interested Shareholder and were
directors before the Interested Shareholder became an Interested Shareholder
approve the transaction; (ii) holders of 80% or more of the outstanding shares
of Common Stock approve the transaction; or (iii) the shareholders are all paid
a "fair price," i.e., generally the higher of the fair market value of the
shares or the same price as the price paid to shareholders in the transaction in
which the Interested Shareholder acquired its block. By discouraging certain
types of hostile takeover bids, the fair price provision may tend to insulate
current management against the possibility of removal. The Company is not aware
of any person or entity proposing or contemplating such a transaction.
The transfer agent and registrar for the Company's Common Stock is First
Interstate Bank of Oregon, N.A., Portland, Oregon.
PREFERRED STOCK
The Company is authorized to issue up to 10,000,000 shares of Preferred
Stock, par value $1.00 per share, none of which have been issued. The Board of
Directors has the authority to determine the dividend rights, dividend rates,
conversion rights, voting rights, rights and terms of redemption and liquidation
preferences, redemption prices, sinking fund terms on any series of Preferred
Stock, the number of shares constituting any such series and the designation
thereof. Holders of Preferred Stock have no preemptive rights and have no rights
to convert their Preferred Stock into any other securities. While series may be
designated and Preferred Stock may be issued from time to time in the future,
except upon exercise of the Rights (as described below), the Company has no
present plans to issue any such shares of Preferred Stock other than the MARCS.
SERIES A JUNIOR PREFERRED STOCK
On May 24, 1989, the Board of Directors of the Company declared a dividend
distribution of one Right for each outstanding share of the Company's Common
Stock to shareholders of record at the close of business on June 16, 1989. Each
Right entitles the registered holder to purchase from the Company one
one-hundredth
21
<PAGE> 22
of a share of Series A Preferred Stock at a purchase price of $100 in cash
("Purchase Price"), subject to adjustment. The description and terms of the
Rights are set forth in a Rights Agreement, dated as of May 24, 1989 (the
"Rights Agreement"), between the Company and First Interstate Bank of Oregon,
N.A., as Rights Agent. The Rights are not exercisable or detachable from the
Common Stock until ten days after any person or group acquires 20% or more (or
commences a tender offer for 30% or more) of the Company's Common Stock. If any
person or group acquires 30% or more of the Company's Common Stock or acquires
the Company in a merger or other business combination, each Right (other than
those held by the acquiring person) will entitle the holder to purchase
Preferred Stock of the Company or common stock of the acquiring company having a
market value of approximately two times the $100 exercise price. The Rights
expire on May 24, 1999, and can be redeemed by the Company at any time prior to
their becoming exercisable. Shares of Common Stock issued prior to the
expiration date of the Rights upon conversion of the shares of MARCS will be
accompanied by Rights.
MARCS
The summary contained herein of the terms of the shares of MARCS does not
purport to be complete and is subject to and qualified in its entirety by
reference to all of the provisions of the Company's Articles of Incorporation
and form of Certificate of Designations, Rights, Preferences and Limitations
relating to the shares of MARCS (the "Certificate of Designations"), a copy of
which has been filed as an exhibit to the Registration Statement of which this
Prospectus is a part.
The Company's Board of Directors has authorized the issuance of up to
7,500,000 shares of MARCS.
DIVIDENDS
Holders of shares of MARCS will be entitled to receive, when and as
declared by the Board of Directors out of funds legally available therefor, cash
dividends from the date of initial issuance of the shares of MARCS at the rate
per annum of 7.0 percent of the offering price per share to the public set forth
on the cover page of this Prospectus (equivalent to $1.488 per annum, or $.372
per quarter, for each share of MARCS), payable quarterly in arrears on each June
15, September 15, December 15, and March 15, or, if any such date is not a
business day, on the next succeeding business day; provided, however, that with
respect to any dividend period during which a redemption occurs, the Company
may, at its option, declare accrued dividends to, and pay such dividends on, the
date fixed for redemption, in which case such dividends would be payable in cash
to the holders of shares of MARCS as of the record date for such dividend
payment and would not be included in the calculation of the related MARCS Call
Price as set forth below. The first dividend period will be from the date of
initial issuance of the shares of MARCS to but excluding June 15, 1996, and the
first dividend will be payable on June 15, 1996. Dividends will cease to accrue
in respect of the shares of MARCS on the Mandatory Conversion Date or on the
date of their earlier conversion or redemption.
Dividends will be payable to holders of record as they appear on the stock
register of the Company on such record dates, not less than 15 nor more than 60
days preceding the payment date thereof, as shall be fixed by the Board of
Directors. Dividends for any period less than a full quarterly dividend period
will be computed on the basis of a 360-day year of twelve 30-day months and the
actual number of days elapsed in any period less than one month.
Dividends may be returns of capital for tax purposes and therefore not
eligible for the corporate dividends-received deduction. See "Federal Income Tax
Considerations--Absence of Significant Earnings and Profits."
Dividends will accrue whether or not there are funds legally available for
the payment of such dividends and whether or not such dividends are declared.
Accrued but unpaid dividends on shares of MARCS will cumulate as of the dividend
payment date on which they first become payable, but no interest will accrue on
accumulated but unpaid dividends on shares of MARCS.
22
<PAGE> 23
The shares of MARCS will rank on a parity, both as to payment of dividends
and distribution of assets upon liquidation, with any future preferred stock
issued by the Company that by its terms ranks pari passu with the shares of
MARCS.
As long as any shares of MARCS are outstanding, no dividends (other than
dividends payable in shares of, or warrants, rights or options exercisable for
or convertible into shares of, Common Stock or any other capital stock of the
Company ranking junior to the shares of MARCS as to the payment of dividends and
the distribution of assets upon liquidation ("Junior Stock") and cash in lieu of
fractional shares in connection with any such dividend) will be paid or declared
in cash or otherwise, nor will any other distribution be made (other than a
distribution payable in Junior Stock and cash in lieu of fractional shares in
connection with any such distribution), on any Junior Stock unless (i) full
dividends on Preferred Stock (including the shares of MARCS) that does not
constitute Junior Stock ("Parity Preferred Stock") have been paid, or declared
and set aside for payment, for all dividend periods terminating at or before the
date of such Junior Stock dividend or distribution payment to the extent such
dividends are cumulative; (ii) dividends in full for the current quarterly
dividend period have been paid, or declared and set aside for payment, on all
Parity Preferred Stock to the extent such dividends are cumulative; (iii) the
Company has paid or set aside all amounts, if any, then or theretofore required
to be paid or set aside for all purchase, retirement and sinking funds, if any,
for any Parity Preferred Stock; and (iv) the Company is not in default on any of
its obligations to redeem any Parity Preferred Stock.
In addition, as long as any shares of MARCS are outstanding, no shares of
any Junior Stock may be purchased, redeemed, or otherwise acquired by the
Company or any of its subsidiaries (except in connection with a reclassification
or exchange of any Junior Stock through the issuance of other Junior Stock (and
cash in lieu of fractional shares in connection therewith) or the purchase,
redemption or other acquisition of any Junior Stock with any Junior Stock (and
cash in lieu of fractional shares in connection therewith)), nor may any funds
be set aside or made available for any sinking fund for the purchase or
redemption of any Junior Stock unless: (i) full dividends on Parity Preferred
Stock have been paid, or declared and set aside for payment, for all dividend
periods terminating at or before the date of such purchase or redemption to the
extent such dividends are cumulative; (ii) dividends in full for the current
quarterly dividend period have been paid, or declared and set aside for payment,
on all Parity Preferred Stock to the extent such dividends are cumulative; (iii)
the Company has paid or set aside all amounts, if any, then or theretofore
required to be paid or set aside for all purchase, retirement, and sinking
funds, if any, for any Parity Preferred Stock; and (iv) the Company is not in
default on any of its obligations to redeem any Parity Preferred Stock.
Subject to the provisions described above, such dividends or other
distributions (payable in cash, property or Junior Stock) as may be determined
by the Board of Directors may be declared and paid on the shares of any Junior
Stock from time to time and Junior Stock may be purchased, redeemed or otherwise
acquired by the Company or any of its subsidiaries from time to time. In the
event of the declaration and payment of any such dividends or other
distributions, the holders of such Junior Stock will be entitled, to the
exclusion of holders of any Parity Preferred Stock, to share therein according
to their respective interests.
As long as any shares of MARCS are outstanding, dividends or other
distributions may not be declared or paid on any Parity Preferred Stock (other
than dividends or other distributions payable in Junior Stock and cash in lieu
of fractional shares in connection therewith), and the Company may not purchase,
redeem or otherwise acquire any Parity Preferred Stock (except with any Junior
Stock and cash in lieu of fractional shares in connection therewith), unless
either: (a)(i) full dividends on Parity Preferred Stock have been paid, or
declared and set aside for payment, for all dividend periods terminating at or
before the date of such Parity Preferred Stock dividend, distribution, purchase,
redemption or other acquisition payment to the extent such dividends are
cumulative; (ii) dividends in full for the current quarterly dividend period
have been paid, or declared and set aside for payment, on all Parity Preferred
Stock to the extent such dividends are cumulative; (iii) the Company has paid or
set aside all amounts, if any, then or theretofore required to be paid or set
aside for all purchase, retirement and sinking funds, if any, for any Parity
Preferred Stock; and (iv) the Company is not in default on any of its
obligations to redeem any Parity Preferred Stock; or (b) with respect to the
payment of dividends only, any such dividends will be declared and paid pro rata
so that the amounts of any dividends declared and paid per share of MARCS and
each other share of Parity Preferred Stock will in all
23
<PAGE> 24
cases bear to each other the same ratio that accrued dividends (including any
accumulation with respect to unpaid dividends for prior dividend periods, if
such dividends are cumulative) per share of MARCS and such other shares of
Parity Preferred Stock bear to each other.
MANDATORY CONVERSION OF MARCS
Unless previously either converted at the option of the holder into Common
Stock or redeemed by the Company, as hereinafter described, on the Mandatory
Conversion Date each outstanding share of MARCS will mandatorily convert into
(i) shares of Common Stock at the Common Equivalent Rate (as defined herein) in
effect on such date and (ii) the right to receive cash in an amount equal to all
accrued and unpaid dividends on such share of MARCS (other than previously
declared dividends payable to a holder of record as of a prior date) to the
Mandatory Conversion Date, whether or not declared, out of funds legally
available for the payment of dividends, subject to the right of the Company to
redeem the shares of MARCS on or after March 15, 1999, and before the Mandatory
Conversion Date, as described below, and subject to the conversion of the shares
of MARCS at the option of the holder at any time before the Mandatory Conversion
Date, as described below. The "Common Equivalent Rate" is initially 1.111 shares
of Common Stock for each share of MARCS and is subject to adjustment as
described below. Dividends will cease to accrue on the Mandatory Conversion Date
in respect of the shares of MARCS then outstanding.
Because the price of the Common Stock is subject to market fluctuations,
the value of the Common Stock that may be received by holders of shares of MARCS
upon their mandatory conversion may be more or less than the amount paid for the
shares of MARCS offered hereby.
OPTIONAL REDEMPTION
Shares of MARCS are not redeemable by the Company before March 15, 1999. At
any time and from time to time on or after that date until immediately before
the Mandatory Conversion Date, the Company will have the right to redeem, in
whole or in part, the outstanding shares of MARCS. Upon any such redemption, the
Company will deliver to the holder thereof in exchange for each share of MARCS
subject to redemption the greater of: (i) the number of shares of Common Stock
equal to the applicable Call Price (as described below) in effect on the
redemption date divided by the Current Market Price of the Common Stock,
determined as of the second trading day immediately preceding the Notice Date
(as defined below), or (ii) .826 of a share of Common Stock (subject to
adjustment in the same manner as the Optional Conversion Rate (as defined below)
is adjusted). Dividends will cease to accrue on the shares of MARCS on the date
fixed for their redemption.
The Call Price of each share of MARCS is the sum of (i) $21.622 on and
after March 15, 1999, to and including June 15, 1999; $21.529 on and after June
16, 1999, to and including September 15, 1999; $21.436 on and after September
16, 1999, to and including December 15, 1999; $21.343 on and after December 16,
1999, to and including February 15, 2000; and $21.25 (being the price to the
public of a share of MARCS appearing on the cover page of this Prospectus) on
and after February 16, 2000, to and including March 15, 2000; and (ii) all
accrued and unpaid dividends thereon to but not including the date fixed for
redemption (other than previously declared dividends payable to a holder of
record as of a prior date).
The "Current Market Price" per share of the Common Stock on any date of
determination means the lesser of (x) the average of the closing sale prices of
the Common Stock as reported on the NYSE Composite Tape for the 15 consecutive
trading days ending on and including such date of determination or (y) the
closing sale price of the Common Stock as reported on the NYSE Composite Tape
for such date of determination; provided, however, that, with respect to any
redemption of shares of MARCS, if any event resulting in an adjustment of the
Common Equivalent Rate occurs during the period beginning on the first day of
such 15-day period and ending on the applicable redemption date, the Current
Market Price as determined pursuant to the foregoing will be appropriately
adjusted to reflect the occurrence of such event. The "Notice Date" with respect
to any notice given by the Company in connection with a redemption of the shares
of MARCS means the date on which first occurs either the public announcement of
such redemption or the commencement of mailing of such notice to the holders of
shares of MARCS.
24
<PAGE> 25
If fewer than all the outstanding shares of MARCS are to be called for
redemption, shares of MARCS to be called will be selected by the Company, from
outstanding shares of MARCS not previously called, by lot or pro rata (as nearly
as may be) or by any other method determined by the Board of Directors in its
sole discretion to be equitable.
The Company will provide notice of any redemption of shares of MARCS to
holders of record of the shares of MARCS to be called for redemption not less
than 15 nor more than 60 days before the date fixed for redemption. Accordingly,
the earliest Notice Date for any call for redemption of shares of MARCS will be
January 14, 1999. Any such notice will be provided by mail, sent to the holders
of record of the shares of MARCS to be called at each such holder's address as
it appears on the stock register of the Company, first class postage prepaid;
provided, however, that failure to give such notice or any defect therein will
not affect the validity of the proceeding for redemption of any shares of MARCS
to be redeemed except as to the holder to whom the Company has failed to give
such notice or whose notice was defective. On and after the redemption date, all
rights of the holders of the shares of MARCS called for redemption will
terminate except the right to receive the redemption price (unless the Company
defaults on the payment of the redemption price). A public announcement of any
call for redemption will be made by the Company before, or at the time of, the
mailing of such notice of redemption.
Each holder of shares of MARCS called for redemption must surrender the
certificates evidencing such shares of MARCS to the Company at the place
designated in the notice of redemption and will thereupon be entitled to receive
certificates for shares of Common Stock and cash for any fractional share
amount.
CONVERSION AT THE OPTION OF THE HOLDER
Shares of MARCS are convertible, in whole or in part, at the option of the
holder thereof, at any time before the Mandatory Conversion Date, unless
previously redeemed, into shares of Common Stock at a rate of .826 of a share of
Common Stock for each share of MARCS (the "Optional Conversion Rate"),
equivalent to a conversion price of $25.713 per share of Common Stock (the
"Conversion Price"), subject to adjustment as described below. The right to
convert shares of MARCS called for redemption will terminate immediately before
the close of business on any redemption date with respect to such shares.
Conversion of shares of MARCS at the option of the holder may be effected
by delivering certificates evidencing such shares of MARCS, together with
written notice of conversion and a proper assignment of such certificates to the
Company or in blank (and, if applicable, cash payment of an amount equal to the
dividend attributable to the current quarterly dividend period payable on such
shares), to the office of the transfer agent for the shares of MARCS or to any
other office or agency maintained by the Company for that purpose and otherwise
in accordance with conversion procedures established by the Company. Each
optional conversion will be deemed to have been effected immediately before the
close of business on the date on which the foregoing requirements have been
satisfied. The conversion will be at the Optional Conversion Rate in effect at
such time and on such date.
Holders of shares of MARCS at the close of business on a record date for
any payment of declared dividends will be entitled to receive the dividend
payable on such shares of MARCS on the corresponding dividend payment date
notwithstanding the optional conversion of such shares of MARCS following such
record date and before such dividend payment date. However, shares of MARCS
surrendered for conversion after the close of business on a record date for any
payment of declared dividends and before the opening of business on the next
succeeding dividend payment date must be accompanied by payment in cash of an
amount equal to the dividend attributable to the current quarterly dividend
period payable on such date (unless such shares of MARCS are subject to
redemption on a redemption date between such record date and such dividend
payment date). A holder of shares of MARCS called for redemption on March 15,
1999 or any other dividend payment date will receive the dividend on such shares
of MARCS payable on that date and will be able to convert such shares of MARCS
after the record date for such dividend without paying an amount equal to such
dividend to the Company upon conversion. Upon any optional conversion of shares
of MARCS, the Company will make no payment of or allowance for previously
declared dividends or distributions on the shares of Common Stock issued upon
such conversion.
25
<PAGE> 26
HIGHER DIVIDEND YIELD AND LESS EQUITY APPRECIATION THAN COMMON STOCK
Dividends will accrue on the shares of MARCS at a higher rate than the rate
at which dividends and cash distributions are currently paid on the Common
Stock. The opportunity for equity appreciation afforded by an investment in
shares of MARCS is less than that afforded by an investment in the Common Stock
because the Conversion Price is higher than the per share price to the public of
the shares of MARCS and the Company may, at its option, redeem the shares of
MARCS at any time on or after March 15, 1999, and before the Mandatory
Conversion Date, and may be expected to do so, if, among other circumstances,
the Current Market Price of the Common Stock exceeds the Call Price for a share
of MARCS. In such event, a holder of a share of MARCS will receive less than
1.111 shares of Common Stock, but in no event less than .826 of a share of
Common Stock. A holder may also surrender for conversion any shares of MARCS
called for redemption up to the close of business on the redemption date, and a
holder that so elects to convert will receive .826 of a share of Common Stock
per share of MARCS. The per share value of Common Stock received by holders of
shares of MARCS may be more or less than the per share amount paid for the
shares of MARCS offered hereby, due to market fluctuations in the price of the
Common Stock.
As a result of these provisions, holders of shares of MARCS would be
expected to realize no equity appreciation if the Current Market Price of the
Common Stock is below the Conversion Price, and less than all of such
appreciation if the Current Market Price of the Common Stock is above the
Conversion Price. Holders of shares of MARCS will realize the entire decline in
equity value if the Current Market Price of the Common Stock is less than
$19.125, which is equivalent to 90% of the price paid for a share of MARCS.
CONVERSION ADJUSTMENTS
The Common Equivalent Rate and the Optional Conversion Rate are each
subject to adjustment as appropriate in certain circumstances, including if the
Company (a) pays a stock dividend or makes a distribution with respect to its
Common Stock in shares of Common Stock; (b) subdivides or splits its outstanding
Common Stock; (c) combines its outstanding Common Stock into a smaller number of
shares; (d) issues any shares of Common Stock by reclassification of its shares
of Common Stock; (e) issues certain rights or warrants to all holders of its
Common Stock; or (f) pays a dividend or distributes to all holders of its Common
Stock evidences of its indebtedness, cash or other assets (including capital
stock of the Company other than Common Stock but excluding any cash dividends or
distributions, other than "Extraordinary Cash Distributions", and dividends
referred to in clause (a) above). In addition, the Company will be entitled (but
will not be required) to make upward adjustments in the Common Equivalent Rate,
the Optional Conversion Rate and the Call Price as the Company, in its
discretion, determines to be advisable, in order that any stock dividend,
subdivision of shares, distribution of rights to purchase stock or securities,
or distribution of securities convertible into or exchangeable for stock (or any
transaction which could be treated as any of the foregoing transactions under
Section 305 of the Internal Revenue Code of 1986, as amended) hereafter made by
the Company to its shareholders will not be taxable. "Extraordinary Cash
Distribution" means, with respect to any consecutive 12-month period, all cash
dividends and cash distributions on the Common Stock during such period (other
than cash dividends and cash distributions for which a prior adjustment to the
Common Equivalent Rate and Optional Conversion Rate was previously made) to the
extent such dividends and distributions exceed, on a per share of Common Stock
basis, 10% of the average daily closing price of the Common Stock over such
period. All adjustments to the Common Equivalent Rate and the Optional
Conversion Rate will be calculated to the nearest 1/100th of a share of Common
Stock. No adjustment in the Common Equivalent Rate or the Optional Conversion
Rate will be required unless such adjustment would require an increase or
decrease of at least one percent therein; provided, however, that any
adjustments which, by reason of the foregoing, are not required to be made will
be carried forward and taken into account in any subsequent adjustment. All
adjustments will be made successively.
26
<PAGE> 27
Whenever the Common Equivalent Rate and the Optional Conversion Rate are
adjusted as provided in the preceding paragraph, the Company will file with the
transfer agent for the shares of MARCS a certificate with respect to such
adjustment, make a prompt public announcement thereof and mail a notice to
holders of the shares of MARCS providing specified information with respect to
such adjustment. At least 10 business days before taking any action that could
result in certain adjustments in the Common Equivalent Rate and the Optional
Conversion Rate, the Company will notify each holder of shares of MARCS
concerning such proposed action.
ADJUSTMENT FOR CERTAIN CONSOLIDATIONS OR MERGERS
In case of (i) any consolidation or merger to which the Company is a party
(other than a merger or consolidation in which the Company is the surviving or
continuing corporation and in which the shares of Common Stock outstanding
immediately before the merger or consolidation remain unchanged), (ii) any sale
or transfer to another corporation of the property of the Company as an entirety
or substantially as an entirety, or (iii) any statutory exchange of securities
with another corporation (other than in connection with a merger or
acquisition), each share of MARCS will, after consummation of such transaction,
be subject to (A) conversion at the option of the holder into the kind and
amount of securities, cash or other property receivable upon consummation of
such transaction by a holder of the number of shares of Common Stock into which
such share of MARCS might have been converted immediately before consummation of
such transaction, (B) conversion on the Mandatory Conversion Date into the kind
and amount of securities, cash or other property receivable upon consummation of
such transaction by a holder of the number of shares of Common Stock into which
such share of MARCS would have been converted if the conversion on the Mandatory
Conversion Date had occurred immediately before the date of consummation of such
transaction, plus the right to receive cash in an amount equal to all accrued
and unpaid dividends on such share of MARCS (other than previously declared
dividends payable to a holder of record as of a prior date), and (C) redemption
on any redemption date in exchange for the kind and amount of securities, cash,
or other property receivable upon consummation of such transaction by a holder
of the number of shares of Common Stock that would have been issuable at the
Call Price in effect on such redemption date upon a redemption of such shares of
MARCS immediately before consummation of such transaction, assuming that, if the
Notice Date for such redemption is not before such transaction, the Notice Date
had been the date of such transaction; and assuming in each case that such
holder of shares of Common Stock failed to exercise rights of election, if any,
as to the kind or amount of securities, cash or other property receivable upon
consummation of such transaction (provided that, if the kind or amount of
securities, cash or other property receivable upon consummation of such
transaction is not the same for each non-electing share, then the kind and
amount of securities, cash or other property receivable upon consummation of
such transaction for each non-electing share will be deemed to be the kind and
amount so receivable per share by a plurality of the non-electing shares). The
kind and amount of securities into or for which the shares of MARCS will be
convertible or redeemable after consummation of such transaction will be subject
to adjustment as described above under the caption "Conversion Adjustments"
following the date of consummation of such transaction. The Company may not
become a party to any such transaction unless the terms thereof are consistent
with the foregoing.
FRACTIONAL SHARES
No fractional shares of Common Stock will be issued upon redemption or
conversion of shares of MARCS. In lieu of any fractional share otherwise
issuable in respect of the aggregate number of shares of MARCS of any holder
that are redeemed or converted on any redemption date or upon mandatory
conversion or any optional conversion, such holder will be entitled to receive
an amount in cash equal to the same fraction of the (i) Current Market Price of
the Common Stock, determined as of the second trading day immediately preceding
the Notice Date, in the case of redemption, or (ii) Closing Price (as defined in
the Certificate of Designations) of the Common Stock determined (A) as of the
fifth trading day immediately preceding the Mandatory Conversion Date, in the
case of mandatory conversion, or (B) as of the second trading day immediately
preceding the effective date of conversion, in the case of an optional
conversion by a holder.
27
<PAGE> 28
RIGHTS AGREEMENT
Reference is made to the section "Description of Capital Stock--Preferred
Stock--Series A Junior Preferred Stock" for a description of the Company's
Rights Agreement. Shares of Common Stock issued upon conversion of the shares of
MARCS will be entitled to receive Rights in accordance with the terms and
conditions of the Rights Agreement. The method of calculation of the Current
Market Price of the Common Stock does not take into account any separate value
of the Rights, except to the extent any such value may be reflected in the
Current Market Price.
LIQUIDATION RIGHTS
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company, and subject to the rights of holders of any other
series of Preferred Stock, the holders of outstanding shares of MARCS are
entitled to receive an amount equal to the per share price to the public of the
shares of MARCS shown on the cover page of this Prospectus, plus accrued and
unpaid dividends thereon, out of the assets of the Company available for
distribution to shareholders, before any distribution of assets is made to
holders of Common Stock or any other capital stock ranking junior to shares of
MARCS upon liquidation, dissolution or winding up.
If upon any voluntary or involuntary liquidation, dissolution, or winding
up of the Company, the assets of the Company are insufficient to permit the
payment of the full preferential amounts payable with respect to the shares of
MARCS and all other series of Parity Preferred Stock, the holders of shares of
MARCS and of all other series of Parity Preferred Stock will share ratably in
any distribution of assets of the Company in proportion to the full respective
preferential amounts to which they are entitled. After payment of the full
amount of the liquidating distribution to which they are entitled, the holders
of shares of MARCS will not be entitled to any further participation in any
distribution of assets by the Company. A consolidation or merger of the Company
with or into one or more other corporations (whether or not the Company is the
corporation surviving such consolidation or merger), or a sale, lease or
exchange of all or substantially all of the assets of the Company will not be
deemed to be a voluntary or involuntary liquidation, dissolution or winding up
of the Company.
VOTING RIGHTS
The holders of shares of MARCS will have the right with the holders of
Common Stock to vote in the election of directors and upon each other matter
coming before any meeting of the holders of Common Stock on the basis of one
vote for each share of MARCS held. The holders of shares of MARCS and the
holders of Common Stock will vote together as one class on such matters except
as otherwise provided by law or by the Company's Articles of Incorporation.
In the event that dividends on the shares of MARCS or any other series of
Preferred Stock are in arrears and unpaid for six quarterly dividend periods, or
if any other series of Preferred Stock is entitled for any other reason to
exercise voting rights, separate from the Common Stock, to elect any directors
of the Company ("Preferred Stock Directors"), the holders of the shares of MARCS
(voting separately as a class with holders of all other series of Preferred
Stock upon which like voting rights have been conferred and are exercisable),
with each share of MARCS entitled to one vote on this and other matters in which
holders of Preferred Stock vote as a group, will be entitled to vote for the
election of two directors, such directors to be in addition to the number of
directors constituting the Board of Directors immediately before the accrual of
such right. Such right, when vested, will continue until all dividends in
arrears and payable on the shares of MARCS and such other series of Preferred
Stock have been paid in full and the right of any other series of Preferred
Stock to exercise voting rights, separate from the Common Stock, to elect
Preferred Stock Directors of the Company terminates or has terminated, and, when
so paid and any such termination occurs or has occurred, such right of the
holders of the shares of MARCS will cease. The term of office of any director
elected by the holders of the shares of MARCS and such other series of Preferred
Stock will terminate on the earlier of (i) the next annual meeting of
shareholders at which a successor has been elected and qualified or (ii) the
termination of
28
<PAGE> 29
the right of holders of the shares of MARCS and such other series of Preferred
Stock to elect Preferred Stock Directors.
The Company will not, without the approval of the holders of at least
66 2/3 percent of the shares of MARCS then outstanding: (i) amend, alter, or
repeal any of the provisions of the Articles of Incorporation or By-Laws of the
Company so as to affect adversely the powers, preferences or rights of the
holders of the shares of MARCS then outstanding or reduce the minimum time for
any required notice to which the holders of the shares of MARCS then outstanding
may be entitled (an amendment of the Articles of Incorporation to authorize or
create, or to increase the authorized amount of, Common Stock or other Junior
Stock or any stock of any class ranking on a parity with the shares of MARCS
being deemed not to affect adversely the powers, preferences or rights of the
holders of the shares of MARCS); (ii) authorize or create, or increase the
authorized amount of, any stock of any class, or any security convertible into
capital stock of any class, ranking prior to the shares of MARCS either as to
the payment of dividends or the distribution of assets upon liquidation,
dissolution or winding up of the Company; or (iii) merge or consolidate with or
into any other corporation, unless each holder of shares of MARCS immediately
preceding such merger or consolidation receives or continues to hold in the
resulting corporation the same number of shares, with substantially the same
rights and preferences, as correspond to the shares of MARCS so held.
The Company will not, without the approval of the holders of at least a
majority of the shares of MARCS then outstanding: (i) increase the authorized
number of shares of Preferred Stock; or (ii) create, or increase the authorized
number of shares of, any other class or classes of capital stock of the Company
ranking on a parity with the Preferred Stock, either as to payment of dividends
or the distribution of assets upon liquidation, dissolution or winding up of the
Company, or create any stock or other security convertible into or exchangeable
for or evidencing the right to purchase any stock of such other class ranking on
a parity with the Preferred Stock, or increase the authorized number of shares
of any such other class or amount of such other stock or security.
Notwithstanding the provisions summarized in the preceding two paragraphs,
no such approval described therein of the holders of the shares of MARCS will be
required if, at or before the time when such amendment, alteration or repeal is
to take effect or when the authorization, creation, increase or issuance of any
such prior or parity stock or convertible security is to be made, or when such
consolidation or merger, voluntary liquidation, dissolution, or winding up,
sale, lease, conveyance, purchase, or redemption is to take effect, as the case
may be, provision is made for the redemption of all shares of MARCS at the time
outstanding.
TRANSFER AGENT AND REGISTRAR
First Interstate Bank of Oregon, N.A., will act as transfer agent and
registrar for, and paying agent for the payment of dividends on, the shares of
MARCS.
MISCELLANEOUS
Upon issuance, the shares of MARCS will be fully paid and nonassessable.
Holders of shares of MARCS have no preemptive rights. The Company will at all
times reserve and keep available out of its authorized and unissued Common
Stock, solely for issuance upon the conversion or redemption of shares of MARCS,
such number of shares of Common Stock as will from time to time be issuable upon
the conversion or redemption of all the shares of MARCS then outstanding. Shares
of MARCS redeemed for, or converted into Common Stock of the Company or
otherwise reacquired by the Company will resume the status of authorized and
unissued shares of Preferred Stock, undesignated as to series, and will be
available for subsequent issuance.
29
<PAGE> 30
FEDERAL INCOME TAX CONSIDERATIONS
The Company has received an opinion from its counsel, Freedman, Levy, Kroll
& Simonds, which addresses certain of the federal income tax consequences under
existing law of the purchase, ownership and disposition of the shares of MARCS.
A copy of that opinion is filed as an exhibit to the Registration Statement of
which this Prospectus is a part, and the following summary of such tax
consequences is qualified in its entirety by reference thereto. The Company does
not intend to seek a ruling from the Internal Revenue Service (the "IRS") with
respect to any of these tax consequences. The summary is presented for
informational purposes only and is limited to a summary of the federal income
tax consequences to investors who are citizens or residents of the United States
or that are U.S. corporations. State, local and estate tax consequences are not
summarized, nor are tax consequences to special classes of investors, including
United States Aliens (defined below), tax-exempt organizations, insurance
companies, banks or dealers in securities. For example, a United States Alien
may be subject to United States federal income, withholding or estate tax in
certain circumstances, generally including, without limitation, (i) the payment
of certain dividends, or (ii) gain on the sale, exchange or redemption of shares
of MARCS or Common Stock if such gain is "effectively connected with a U.S.
trade or business" or the Company is or was a "United States real property
holding corporation," as those terms are defined under the Code (as defined
below) and the underlying regulations, or the holder was an individual present
in the United States for 183 days or more in the year of sale, exchange or
redemption. For purposes of this Prospectus, a "United States Alien" means any
person, who for United States federal income tax purposes, is a foreign
corporation, a nonresident alien individual, a nonresident alien fiduciary of a
foreign estate or trust, or a foreign partnership one or more of the members of
which is, for United States federal income tax purposes, a foreign corporation,
a nonresident alien individual, or a nonresident alien fiduciary of a foreign
estate or trust.
Tax consequences may vary depending upon the particular status of an
investor. The summary is limited to taxpayers who will hold shares of MARCS or
Common Stock received upon conversion or redemption of shares of MARCS as
"capital assets" within the meaning of Section 1221 of the Internal Revenue Code
of 1986, as amended (the "Code"). The summary is based upon current law,
applicable Treasury Regulations, judicial authority, and current administrative
rulings and practice, including certain amendments to the Code, which have not
yet been subject to definitive interpretation by the IRS or the courts. There
can be no assurance that future changes in applicable law or administrative and
judicial interpretations thereof will not adversely affect the tax consequences
summarized herein or that there will not be differences of opinion as to the
interpretation of applicable law.
The following summary does not constitute, and should not be considered as,
legal or tax advice to prospective investors. Each potential investor should
consult with its own tax adviser before determining whether to purchase shares
of MARCS.
DIVIDENDS
Dividends paid on shares of MARCS will be taxable as ordinary income to the
extent of the Company's current or accumulated earnings and profits. Dividends
received by corporations out of such earnings and profits will generally qualify
for the 70 percent dividends-received deduction, so long as the holder has held
its shares of MARCS for a sufficient time (generally more than 45 days) and
certain other conditions are met. Where the dividends-received deduction is
available, a portion of the amount deducted may have to be included by a
corporation in computing its possible liability for alternative minimum tax. In
addition, the tax portion of President Clinton's recently-proposed budget
legislation includes two provisions that, if enacted, would materially affect
corporations that rely on the dividends-received deduction. The proposed
legislation would (1) reduce the 70 percent dividends-received deduction to 50
percent, and (2) eliminate the dividends-received deduction for a particular
dividend if the corporate taxpayer's holding period for dividend-paying stock is
not satisfied over a period immediately before and immediately after the
taxpayer becomes entitled to receive the dividend. These changes would be
effective for dividends received or accrued after January 31, 1996. There can be
no assurance that these provisions will be enacted by the United States
Congress.
30
<PAGE> 31
Under certain circumstances, a corporation that receives an "extraordinary
dividend," as defined in Section 1059 of the Code, is required to reduce its
stock basis by the non-taxed portion of such dividend (generally, the portion
claimed as a dividends-received deduction). Quarterly dividends not in arrears
paid to an original holder of shares of MARCS generally will not constitute
extraordinary dividends under Section 1059(c) of the Code. Under a special rule
in Section 1059(f) of the Code, any dividend with respect to "disqualified
preferred stock" is treated as an extraordinary dividend; however, while the
issue is not free from doubt due to the lack of authority directly on point, the
shares of MARCS should not constitute "disqualified preferred stock."
ABSENCE OF SIGNIFICANT EARNINGS AND PROFITS
Because the Company presently has no significant accumulated earnings and
profits, and the amount of current earnings and profits cannot be predicted, all
or part of the dividends paid by the Company on the shares of MARCS (or the
Common Stock issued upon conversion or redemption thereof) may be treated as
returns of capital rather than dividends eligible for the dividends-received
deduction. A return of capital reduces the holder's tax basis in the shares of
MARCS (or such Common Stock), is taxable as capital gain to the extent it
exceeds basis, and results in additional taxable gain (or reduced taxable loss)
upon a sale or other taxable disposition of the shares of MARCS (or such Common
Stock).
CONVERSION OR REDEMPTION INTO COMMON STOCK
As a general rule, no gain or loss will be recognized by a holder on the
optional or mandatory conversion or optional redemption of shares of MARCS into
shares of Common Stock if no cash is received. Gain or dividend income may be
recognized, however, to the extent cash is received in payment of dividends in
arrears. In addition, gain or loss may be recognized upon the receipt by a
holder of cash in lieu of a fractional share of Common Stock.
The tax basis of the shares of Common Stock received upon conversion or
redemption will generally be equal to the tax basis of the shares of MARCS
converted or redeemed (adjusted to reflect any income or gain recognized on the
conversion or redemption). The holding period of the shares of such Common Stock
will generally include the holding period of the shares of MARCS converted or
redeemed.
CALL OR CONVERSION PREMIUM
Under certain circumstances, Section 305 of the Code requires that any
excess of the redemption price of preferred stock over its issue price is
includable in income, before receipt, as a constructive dividend. While the
issue is not free from doubt due to a lack of authority directly on point, a
holder of shares of MARCS should not be required to include any call or
conversion premium in income as a redemption premium under Section 305 of the
Code.
ADJUSTMENT OF CONVERSION RATE
Certain adjustments (or failures to make adjustments) to the conversion
rate, based on the Company's issuance of certain rights, warrants, evidences of
its indebtedness, securities or other assets to holders of its Common Stock,
which have the effect of increasing the proportionate interest of a holder of
shares of MARCS in the Company's assets or earnings and profits, may result in
constructive distributions taxable as dividends to such holders, which may
constitute (and cause other dividends to constitute) extraordinary dividends to
corporate holders.
BACKUP WITHHOLDING
Certain noncorporate holders may be subject to backup withholding at a rate
of 31 percent on dividends and certain consideration received upon the call or
conversion of the shares of MARCS. Generally, backup withholding applies only
when the taxpayer fails to furnish or certify a proper Taxpayer Identification
Number or when the taxpayer is notified by the IRS that the taxpayer has failed
to report payments of interest and dividends properly. Holders should consult
their tax advisers regarding their qualification for exemption from backup
withholding and the procedure for obtaining any applicable exemption.
31
<PAGE> 32
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement") between the Company and each of the underwriters
named below (the "Underwriters"), the Company has agreed to sell to the
Underwriters, and each of the Underwriters severally has agreed to purchase from
the Company, the number of shares of MARCS set forth opposite each Underwriter's
name.
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERWRITER OF MARCS
--------------------------------------------- ----------------
<S> <C>
UBS Securities LLC .......................... 4,392,157
Lazard Freres & Co. LLC...................... 2,196,078
----------------
Total................................... 6,588,235
</TABLE>
In the Underwriting Agreement, the Underwriters severally have agreed,
subject to the terms and conditions set forth therein, to purchase all of the
shares of MARCS being sold pursuant to the Underwriting Agreement if any of the
shares being sold pursuant to the Underwriting Agreement are purchased. Under
certain circumstances, the commitments of nondefaulting Underwriters may be
increased.
The Underwriters have advised the Company that they propose initially to
offer the shares of MARCS to the public at the public offering price set forth
on the cover page of the Prospectus and to certain dealers at such price less a
concession not in excess of $.38 per share. The Underwriters may allow, and such
dealers may reallow, a discount not in excess of $.10 per share on sales to
certain other dealers. After the initial public offering, the public offering
price, concession and discount may be changed.
The Company has granted to the Underwriters an option, exercisable for 30
days after the date of this Prospectus, to purchase up to an additional 911,765
shares of MARCS at the price to the public set forth on the cover page of the
Prospectus, less the underwriting discount. The Underwriters may exercise this
option only to cover over-allotments, if any, made on the sale of shares of
MARCS offered hereby. To the extent that the Underwriters exercise this option,
each of the Underwriters will have a firm commitment, subject to certain
conditions, to purchase the same percentage of such shares as the number of
shares of MARCS to be purchased by each Underwriter shown in the foregoing table
bears to the total number of shares initially offered hereby.
The Company has agreed, for a period of 90 days after the date of this
Prospectus, to not, without the prior written consent of the Underwriters,
directly or indirectly, sell, offer to sell, grant any option for the sale of,
or otherwise dispose of, any shares of its capital stock or securities
convertible into or exchangeable for capital stock of the Company other than to
the Underwriters pursuant to the Underwriting Agreement, subject to certain
exceptions set forth in the Underwriting Agreement.
Prior to this offering, there has been no public market for the shares of
MARCS. The initial public offering price for the shares of MARCS was determined
by negotiations among the Company and the Underwriters. Among the factors
considered in determining the price to the public were the market price of the
Company's Common Stock, an assessment of the Company's recent results of
operations, the future prospects of the Company and the gold and silver mining
industry in general, market prices of securities of other companies engaged in
activities similar to the Company and prevailing conditions in the securities
market. There can be no assurance that an active trading market will develop for
the shares of MARCS or that the shares of MARCS will trade in the public market
subsequent to the offering at or above the initial public offering price.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, and to contribute
to payments that the Underwriters may be required to make in respect thereof.
UBS Securities LLC has, and its affiliates have, performed various
investment banking and commercial banking services for the Company and its
affiliates, for which they have received customary compensation.
32
<PAGE> 33
LEGAL MATTERS
The legality of the shares of MARCS offered hereby will be passed upon for
the Company by Freedman, Levy, Kroll & Simonds, Washington, D.C. and for the
Underwriters by Cravath, Swaine & Moore, New York, New York.
INDEPENDENT AUDITORS
The consolidated financial statements of Coeur d'Alene Mines Corporation at
December 31, 1995 and 1994, and for each of the three years in the period ended
December 31, 1995 incorporated by reference in this Prospectus and Registration
Statement have been audited by Ernst & Young LLP, independent auditors as set
forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
33
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<PAGE> 35
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<PAGE> 36
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus, and, if given or
made, such information or representations must not be relied upon as having been
authorized. This Prospectus does not constitute an offer to sell or solicitation
of an offer to buy any securities other than the securities to which it relates
or an offer to sell or the solicitation of an offer to buy such securities in
any circumstances in which such offer or solicitation is unlawful. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the date hereof or that the information contained
herein is correct as of any time subsequent to its date.
---------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
Prospectus Summary.................... 3
Risk Factors.......................... 10
The Company........................... 13
Use of Proceeds....................... 16
Price Range of Common Stock
and Dividends....................... 17
Capitalization........................ 18
Selected Consolidated Financial
Data................................ 19
Description of Capital Stock.......... 21
Federal Income Tax Considerations..... 30
Underwriting.......................... 32
Legal Matters......................... 33
Independent Auditors.................. 33
</TABLE>
6,588,235 Shares
[COEUR LOGO]
THE PRECIOUS METALS COMPANY
[COEUR D'ALENE MINES LOGO]
MANDATORY ADJUSTABLE REDEEMABLE
CONVERTIBLE SECURITIES (MARCS)*
---------------------------
Prospectus
March 8, 1996
---------------------------
UBS SECURITIES LLC
LAZARD FRERES & CO. LLC
* Service mark of UBS Securities LLC
