SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.
-----------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to ___________________
Commission File Number: 1-8641
COEUR D'ALENE MINES CORPORATION
(Exact name of registrant as specified on its charter)
IDAHO 82-0109423
-------------------------------- ----------------------------
(State or other jurisdiction of (I.R.S. Employer Ident. No.)
incorporation or organization)
P. O. Box I, Coeur d'Alene, Idaho 83816
--------------------------------- ----------
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (208) 667-3511
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Former name, former address and former fiscal year, if changed since last
report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES [X] NO [ ]
-------------------------
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of Issuer's classes of common stock, as of the latest
practicable date: Common stock, par value $1.00, of which 21,890,971 shares
were issued and outstanding as of May 9, 1997.
<PAGE>
COEUR D'ALENE MINES CORPORATION
INDEX
Page No.
--------
PART I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets -- 3-4
March 31, 1997 and December 31, 1996
Consolidated Statements of Operations -- 5
Three Months Ended March 31, 1997 and 1996
Consolidated Statements of Cash Flows -- 6
Three Months Ended March 31, 1997 and 1996
Notes to Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis of 8-12
Financial Condition and Results of Operations
PART II. Other Information. 13
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES
-2-
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
<TABLE>
UNAUDITED
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
ASSETS
March 31, December 31,
1997 1996
-------------------------------------
(In Thousands)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 57,633 $ 43,455
Short-term investments 97,607 124,172
Receivables 8,482 11,573
Inventories 35,882 31,992
--------- ---------
TOTAL CURRENT ASSETS 199,604 211,192
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment 114,362 118,993
Less accumulated depreciation 52,249 50,743_
--------- ---------
62,113 68,250
MINING PROPERTIES
Operational mining properties 180,816 171,517
Less accumulated depletion 42,237 38,264
--------- ---------
138,579 133,253
Developmental properties 114,572 110,985
--------- ---------
253,151 244,238
OTHER ASSETS
Investment in unconsolidated affiliate 48,521 48,231
Notes receivable 4,000 4,000
Debt issuance costs, net of accumulated
amortization 3,924 4,081
Marketable equity securities and other 1,522 338
--------- ---------
57,967 56,650
$572,835 $580,330
========= =========
</TABLE>
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<PAGE>
UNAUDITED
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<CAPTION>
March 31, December 31,
1997 1996
-------------------------------------
(In Thousands)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 4,936 $ 4,327
Accrued liabilities 4,454 4,976
Accrued interest payable 4,098 4,968
Accrued salaries and wages 6,456 5,242
Bank loans 8,010 8,021
Current portion of remediation costs 3,500 3,500
Other current liabilities 453 532
--------- ---------
TOTAL CURRENT LIABILITIES 31,907 31,566
LONG-TERM LIABILITIES
6% subordinated convertible debentures 49,840 49,840
6 3/8% subordinated convertible debentures 100,000 100,000
Long-term borrowings 39,900 39,900
Other long-term liabilities 9,357 12,826
--------- ---------
TOTAL LONG-TERM LIABILITIES 199,097 202,566
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Mandatory Adjustable Redeemable Convertible
Securities (MARCS), par value $1.00 per
share,(a class of preferred stock) -
authorized 10,000,000 shares, 7,077,833
issued and outstanding 7,078 7,078
Common Stock, par value $1.00 per share-
authorized 60,000,000 shares, issued
22,950,182 shares (including 1,059,211
shares held in treasury) 22,950 22,950
Capital surplus 397,554 400,187
Accumulated deficit (72,179) (70,459)
Unrealized losses on short-term investments (377) (352)
Repurchased and nonvested shares (13,195) (13,206)
--------- ---------
341,831 346,198
--------- ---------
$572,835 $580,330
========= =========
See notes to consolidated financial statements.
</TABLE>
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<PAGE>
UNAUDITED
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
Three Months Ended March 31, 1997 and 1996
<CAPTION>
1997 1996
-------------------------------------
(In thousands except per share amounts)
<S> <C> <C>
INCOME
Sale of concentrates and dore' $ 24,470 $ 22,609
Less cost of mine operations 26,962 19,596
--------- ---------
Gross Profits (Losses) (2,492) 3,013
Other income - interest, dividends
and other 7,805 1,931
--------- ---------
Total Income 5,313 4,944
EXPENSES
Administration 1,067 1,088
Accounting and legal 422 274
General corporate 1,783 1,650
Mining exploration 1,500 1,039
Interest 2,262 684
--------- ---------
Total expenses 7,034 4,735
--------- ---------
NET INCOME (LOSS) BEFORE INCOME TAXES (1,721) 209
Provision for income taxes (76)
--------- ---------
NET INCOME (LOSS) $ (1,721) $ 133
========= =========
NET LOSS ATTRIBUTABLE TO
COMMON SHAREHOLDERS $ (4,353) $ (330)
========= =========
EARNINGS PER SHARE DATA
Weighted average number of shares
of Common Stock and equivalents used
in calculation (in thousands) 21,891 20,502
========= =========
Net income (loss) per share $ (.08) $ .01
========= =========
Net loss per share attributable to
common shareholders $ (.20) $ (.02)
========= =========
Dividends per share to common shareholders $ .15
=========
</TABLE>
See notes to consolidated financial statements.
-5-
<PAGE>
UNAUDITED
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
Three months ended March 31, 1997 and 1996
<CAPTION>
1997 1996
-------------------------------------
(In Thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (1,721) $133
Add (less) noncash items:
Depreciation, depletion and amortization 7,031 3,526
Other changes (189) (202)
--------- ---------
CASH PROVIDED BY OPERATING ACTIVITIES BEFORE
WORKING CAPITAL CHANGES 5,121 3,457
Change in working capital:
Receivables 3,066 (666)
Inventories (4,817) 1,549
Accounts payable and accrued liabilities (2,884) (2,170)
Interest payable (870) (902)
--------- ---------
CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (384) 1,268
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in unconsolidated affiliate (20) (1,418)
Purchase of property, plant, and equipment (336) (580)
Purchase of short-term investments and
marketable equity securities (8,403) (81,007)
Proceeds from sales of short-term investments
and marketable securities 34,856 30,936
Expenditures on developmental properties (3,586) (2,668)
Expenditures on operational mining properties (4,851) (14,453)
Other assets (228) 189
--------- ---------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 17,432 (69,001)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from MARCS issuance 135,700
Payment of cash dividends (2,633)
Other (237) (534)
--------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (2,870) 135,166
--------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS 14,178 67,433
Cash and cash equivalents at beginning of year 43,455 16,485
--------- ---------
CASH AND CASH EQUIVALENTS AT
MARCH 31, 1997 AND 1996 $ 57,633 $ 83,918
========= =========
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
Coeur d'Alene Mines Corporation
and Subsidiaries
Notes to Consolidated Financial Statements
NOTE A: Inventories are comprised of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
-------------------------------------
(In Thousands)
<S> <C> <C>
In process and on leach pads $ 20,179 $ 19,948
Concentrate inventory 7,977 4,996
Dore' inventory 2,208 739
Supplies 5,518 6,309
--------- ---------
$ 35,882 $ 31,992
========= =========
</TABLE>
Inventories of ore on leach pads and in the milling process are valued
based on actual costs incurred to place such ore into production, less costs
allocated to minerals recovered through the leaching and milling processes.
Inherent in this valuation is an estimate of the percentage of the minerals on
leach pads and in process that will ultimately be recovered. Management
evaluates this estimate on an ongoing basis. Adjustments to the recovery are
accounted for prospectively. All other inventories are stated at the lower of
cost or market with cost being determined using first in, first out and
weighted average cost methods. Dore' inventory includes product at the mine
site and product held by refineries.
NOTE B:
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings Per Share, which is required to be adopted on
December 31, 1997. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per
share, the dilutive effect of stock options will be excluded. Adoption of the
standard would have had no effect on the net income (loss) per share for the
first quarter ended March 31, 1997 and March 31, 1996. The Company has not yet
determined what the impact of Statement 128 will be on the calculation of
fully diluted earnings per share.
NOTE C:
Certain reclassifications of prior year balances have been made to
conform to current year classifications.
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<PAGE>
NOTE D:
Other than as stated in the notes above, in the opinion of management,
the foregoing unaudited financial statements include all adjustments,
consisting of normal recurring accruals, necessary for a fair presentation of
the results of operations for the periods shown.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
-------------------------------------------------
GENERAL
The results of the Company's operations are significantly affected by the
market prices of gold and silver which may fluctuate widely and are affected
by many factors beyond the Company's control, including interest rates,
expectations regarding inflation, currency values, governmental decisions
regarding the disposal of precious metals stockpiles, global and regional
political and economic conditions, and other factors. The Company's currently
operating mines are the Rochester Mine in Nevada, which it wholly owns and
operates; the Golden Cross Mine in New Zealand, in which the Company has an
80% operating interest; the El Bronce Mine, a wholly-owned Chilean gold mine;
and the Fachinal Mine, a Chilean gold mine wholly-owned by the Company which
commenced commercial production as of January 1, 1997.
The Company also has significant interests in other companies that
operate gold and silver mines. The Company owns 50% of Silver Valley Resources
Corporation ("Silver Valley"), which owns and operates the Coeur Mine (where
operations resumed in June 1996 and are expected to continue until late 1997
or early 1998) and the Galena Mine (where operations are expected to resume in
May 1997) in the Coeur d'Alene Mining District of Idaho. In May 1996, the
Company acquired 35% (increasing to 36% in February 1997) of Gasgoyne Gold
Mines NL, an Australian gold mining company ("Gasgoyne"), which owns a 50%
interest in the Yilgarn Star Gold Mine in Australia. In May 1997, the Company
increased its ownership interest in Gasgoyne to 50%.
A production decision at the Kensington Property, a wholly-owned
developmental gold property in Alaska, is subject to a market price of gold of
at least $400 per ounce and the receipt of certain required permits. The
market price of gold (London final) on May 8, 1997 was $343.75 per ounce. With
respect to the permits, the Company is unable to control the timing of their
issuance; however, it is expected that all permits will be received during the
second quarter of 1997.
The Company's business plan is to continue to acquire mining properties
and/or businesses that are operational or expected to become operational in
the near future so that they can reasonably be expected
-8-
<PAGE>
to contribute to the Company's near-term cash flow from operations and expand
the Company's gold and/or silver production.
This report contains certain forward-looking statements relating to the
Company's gold and silver mining business, including estimated production
data, expected operating schedules and other operating data. Actual
production, operating schedules and results of operations could differ
materially from those projected in the forward-looking statements. The factors
that could cause actual results to differ materially from those projected in
the forward-looking statements include (i) changes in the market prices of
gold and silver, (ii) the uncertainties inherent in the Company's production,
exploratory and developmental activities, including risks related to
permitting and regulatory delays, (iii) the uncertainties inherent in the
estimation of gold and silver ore reserves, (iv) changes that could result
from the Company's future acquisition of new mining properties or businesses,
(v) the risks and hazards inherent in the mining business (including
environmental hazards, industrial accidents, weather or geologically related
conditions), (vi) the effects of environmental and other governmental
regulations, and (vii) the risks inherent in the ownership or operation of or
investment in mining properties or businesses in foreign countries. Readers
are cautioned not to put undue reliance on forward-looking statements. The
Company disclaims any intent or obligation to update publicly these
forward-looking statements, whether as a result of new information, future
events or otherwise.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS
ENDED MARCH 31, 1996.
----------------------------------------------------------
SALES AND GROSS PROFITS
Sales of concentrates and dore' in the first quarter of 1997 increased by
$1.9 million, or 8%, over the first quarter of 1996. The increase in sales is
primarily attributable to increased metal sales from the El Bronce Mine due to
(i) the fact the Company increased its ownership in that facility from 50% to
100% during the third quarter of 1996 and (ii) the recommencement of
operations at Silver Valley's Coeur Mine during the second quarter of 1996.
Although the Fachinal Mine reached commercial production effective January 1,
1997, no sales were recorded due to the fact that the first quarter production
was shipped early in the second quarter of 1997. The Company will receive $6.3
million from this sale in the second quarter. In the first quarter of 1997,
the Company produced a total of 2,542,273 ounces of silver and 59,963 ounces
of gold compared to 2,191,685 ounces of silver and 45,201 ounces of gold in
the first quarter of 1996. Silver and gold prices averaged $5.02 and $351.17
per ounce, respectively,
-9-
<PAGE>
in the first quarter of 1997, compared with $5.54 and $400.14 per ounce,
respectively, in the first quarter of 1996. In the first quarter of 1997, the
Company realized average gold and silver prices of $359.21 and $5.03,
respectively, compared with average market prices of $351.17 and $5.02,
respectively, realized in the prior year's first quarter.
The cost of mine operations in the first quarter of 1997 increased by
$7.4 million, or 38%, over the prior year's comparable quarter. The increase
is primarily due to the fact the Company increased its ownership in the El
Bronce Mine from 50% to 100% commencing in the third quarter of 1996, which
resulted in a proportionate increase in cost of mine operations in the first
quarter of 1997. In addition, Silver Valley Resources commenced operations at
its Coeur Mine during the second quarter of 1996. Finally, Fachinal commenced
commercial operations in the first quarter of 1997 and recorded costs of sales
of $2.2 million related to the adjustment of inventory values to reflect the
current market value of work-in-progress inventory were recognized in the
first quarter of 1997. Of the $7.4 million increase in the cost of mine
operations, approximately $3.5 million was attributable to the 99% increase in
depreciation, depletion and amortization expenses recorded in the first
quarter of 1997 over the prior year's first quarter. The increase in those
non-cash expenses primarily resulted from the Company's increased El Bronce
ownership interest and the fact that no such expenses were being recorded by
Silver Valley or Fachinal in the first quarter of 1996.
Gross losses from mining operations in the first quarter of 1997 amounted
to $2.5 million compared to gross profit from mining operations of $3.0
million in the first quarter of 1996. The $5.5 million decrease in gross
profit is due to the above mentioned changes in sales and cost of mine
operations coupled with lower gold and silver prices realized in the first
quarter of 1997.
OTHER INCOME
Interest and other income in the first quarter of 1997 increased by $5.9
million, or 304%, compared with the first quarter of 1996. The increase is due
primarily to a gain of $5.3 million arising from the sale of gold purchased on
the open market which was delivered pursuant to fixed-price forward contracts.
EXPENSES
Total expenses in the first quarter of 1997 increased by $2.3 million
over the prior year's first quarter. The increase is primarily due to an
increase in interest expense of $1.6 million. The increase is primarily
attributable to the reclassification of the Fachinal Mine from a
development-stage project to an operating property. Effective in 1997's first
quarter, interest expense on the Fachinal construction loan, which was
previously capitalized during the development stage,
-10-
<PAGE>
is now charged to operating expense. In addition, mining exploration expense
in the first quarter of 1997 increased by $.5 million, or 44%, over the prior
year's first quarter.
NET INCOME (LOSS)
The Company's loss before income taxes amounted to $1.7 million in the
first quarter of 1997 compared to a net income before income taxes of $.2
million in the first quarter of 1996. The Company received a benefit of $.1
million for income taxes in the first quarter of 1996. As a result, the
Company reports a net loss of $1.7 million, or $.08 per share, in the first
quarter of 1997 compared to a net income of $.1 million, or .01 per share, in
the first quarter of 1996. In the first quarter of 1997, the Company paid
dividends of $2.6 million on its Mandatory Adjustable Redeemable Convertible
Securities (MARCS). As a result, the loss attributable to Common Shareholders
was $4.4 million, or $.20 per share, compared to $.3 million, or $.02 per
share, in the first quarter of 1996.
LIQUIDITY AND CAPITAL RESOURCES
WORKING CAPITAL; CASH AND CASH EQUIVALENTS
The Company's working capital at March 31, 1997 was approximately $167.7
million compared to $179.6 million at December 31, 1996. The ratio of current
assets to current liabilities was 6.3 to one at March 31, 1997 compared to 6.7
to one at December 31, 1996.
Net cash used in operating activities in the first quarter of 1997 was
$(.4) million compared to $1.3 million provided by operating activities in the
first quarter of 1996. Cash provided by operating activities before working
capital changes was $5.1 million in the first quarter of 1997 compared to $3.5
million in 1996's comparable quarter. In the first quarter of 1997, operating
cash flow was impacted by the buildup of work-in-progress inventories at
Fachinal. These inventories were sold early in the second quarter of 1997 and
it is expected that inventories will be reduced from first quarter levels
during the rest of the year. Net cash provided by investing activities in the
first quarter of 1997 was $17.4 million compared to $(69.0) million used in
investing activities in the
prior year's comparable period. Net cash used in financing activities in the
first quarter of 1997 was $2.9 million, compared to $135.2 million provided by
financing activities in the first quarter of 1996. As a result of the above,
cash and cash equivalents increased by $14.2 million in the first quarter of
1997 compared to a $67.4 million increase for the comparable period in 1996.
-11-
<PAGE>
INCREASE IN INTEREST IN GASGOYNE
In February 1997, Gasgoyne effected a selective reduction of capital by
repurchasing its publicly held shares from those shareholders other than Coeur
and Sons of Gwalia, as a result of which Coeur's ownership interest increased
from 35% to 36% of Gasgoyne's outstanding shares. It is the intent of the
Company and Sons of Gwalia to equalize their respective ownership interests in
Gasgoyne, thereby giving the Company a 50% interest in that company or its
underlying assets. The equalization will be completed in the second quarter of
1997 and that the total cost to Coeur will be approximately $18 million. This
acquisition will be funded out of the Company's existing cash resources.
FEDERAL NATURAL RESOURCES ACTION
On March 22, 1996, an action was filed in the United States District
Court for the District of Idaho (Civ. No. 96-0122-N-EJL) by the United States
against various defendants, including the Company, asserting claims under the
Comprehensive Environmental Resources Compensation and Liability Act and the
Clean Water Act for alleged damages to Federal natural resources in the Coeur
d'Alene River Basin of northern Idaho as a result of alleged releases of
hazardous substances from mining activities conducted in the area since the
late 1800s. No specific monetary damages are identified in the complaint.
However, in July 1996, the government indicated damages may approximate $982
million. The United States asserts that the defendants are jointly and
severally liable for costs and expenses incurred by the U.S. government in
investigation, removal and remedial action and the restoration or replacement
of affected natural resources. In 1986 and 1992 the Company had settled
similar issues with the State of Idaho and the Coeur d'Alene Indian Tribe,
respectively, and believes that those prior settlements exonerate it of
further involvement with alleged natural resource damage in the Coeur d'Alene
River Basin. Accordingly, the Company intends to vigorously defend this
matter. On March 27, 1997, the Company filed a motion for summary judgment
with the court seeking an order of dismissal. The motion is pending decision
by the court. At this initial stage of the proceeding it is not possible to
predict its ultimate outcome.
-12-
<PAGE>
PART II. Other Information.
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
No. 27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
None
-13-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COEUR D'ALENE MINES CORPORATION
-------------------------------
(Registrant)
Dated May 15, 1997 /s/ Dennis E. Wheeler
-----------------------
DENNIS E. WHEELER
Chairman, President and
Chief Executive Officer
Dated May 15, 1997 /s/ James A. Sabala
-----------------------
JAMES A. SABALA
Senior Vice President and
Chief Financial Officer
-14-
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000215466
<NAME> COEUR D ALENE MINES CORP
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 57,633
<SECURITIES> 97,607
<RECEIVABLES> 8,482
<ALLOWANCES> 0
<INVENTORY> 35,882
<CURRENT-ASSETS> 199,604
<PP&E> 409,750
<DEPRECIATION> 94,486
<TOTAL-ASSETS> 572,835
<CURRENT-LIABILITIES> 31,907
<BONDS> 149,840
7,078
0
<COMMON> 22,950
<OTHER-SE> 311,803
<TOTAL-LIABILITY-AND-EQUITY> 572,835
<SALES> 24,470
<TOTAL-REVENUES> 32,275
<CGS> 26,962
<TOTAL-COSTS> 33,996
<OTHER-EXPENSES> 7,034
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,262
<INCOME-PRETAX> 1,721
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,721
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,721
<EPS-PRIMARY> (.08)
<EPS-DILUTED> 0
</TABLE>
