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 September 30, 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
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(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 21,890,568 shares
were issued and outstanding as of November 10, 1997.
<PAGE>
COEUR D'ALENE MINES CORPORATION
INDEX
PAGE NO.
PART I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets --
September 30, 1997 and December 31, 1996 3-4
Consolidated Statements of Operations --
Nine Months Ended September 30, 1997 and 1996 5
Consolidated Statements of Cash Flows --
Nine Months Ended September 30, 1997 and 1996 6
Notes to Consolidated Financial Statements 7-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-19
PART II. Other Information.
Item 1. Legal Proceedings 19-20
Item 6. Exhibits and Reports on Form 8-K 20
SIGNATURES
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<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
<TABLE>
UNAUDITED
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 30, December 31,
1997 1996
-------------------------------------
(In Thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 44,189 $ 43,455
Short-term investments 78,343 124,172
Receivables 10,354 11,573
Inventories 32,827 31,992
--------- ---------
TOTAL CURRENT ASSETS 165,713 211,192
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment 119,343 118,993
Less accumulated depreciation 56,626 50,743
--------- ---------
62,717 68,250
MINING PROPERTIES
Operational mining properties 239,985 171,517
Less accumulated depletion 54,469 38,264
--------- ---------
185,516 133,253
Developmental properties 129,266 110,985
--------- ---------
314,782 244,238
OTHER ASSETS
Investment in unconsolidated affiliate 48,231
Notes receivable 8,490 4,000
Debt issuance costs, net of accumulated
amortization 3,474 4,081
Restricted funds 2,949
Marketable equity securities and other 1,988 338
--------- ---------
16,901 56,650
--------- ---------
$560,113 $580,330
========= =========
</TABLE>
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<PAGE>
<TABLE>
UNAUDITED
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 30, December 31,
1997 1996
-------------------------------------
(In Thousands)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 4,350 $ 4,327
Accrued liabilities 6,531 4,976
Accrued interest payable 3,027 4,968
Accrued salaries and wages 5,908 5,242
Bank loans 8,898 8,021
Current portion of remediation costs 8,500 3,500
Other current liabilities 317 532
--------- ---------
TOTAL CURRENT LIABILITIES 37,531 31,566
LONG-TERM LIABILITIES
6% subordinated convertible debentures 49,840 49,840
6 3/8% subordinated convertible debentures 95,000 100,000
Long-term borrowings 41,059 39,900
Deferred income taxes 3,138
Other long-term liabilities 4,438 12,826
--------- ---------
TOTAL LONG-TERM LIABILITIES 193,475 202,566
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Mandatory Adjustable Redeemable Convertible
Securities (MARCS), par value $1.00 per
share,(a class of preferred stock)
authorized 7,500,000 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 392,280 400,187
Accumulated deficit (78,724) (70,459)
Unrealized losses on available-for-sale
securities (1,287) (352)
Repurchased and nonvested shares (13,190) (13,206)
--------- ---------
329,107 346,198
--------- ---------
$560,113 $580,330
========= =========
See notes to consolidated financial statements.
</TABLE>
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<PAGE>
<TABLE>
UNAUDITED
CONSOLIDATED STATEMENTS OF OPERATIONS
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
Three Months Ended September 30, 1997 and 1996
Nine Months Ended September 30, 1997 and 1996
<CAPTION>
3 MONTHS ENDED 9 MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
----------------------------- -----------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
(In thousands except for per share data)
<S> <C> <C> <C> <C>
INCOME
Sales of concentrates and dore' $ 38,628 $ 21,559 $ 96,757 $ 62,920
Less cost of mine operations 40,684 18,480 103,258 56,622
---------- ---------- ---------- ----------
Gross Profit (Loss) (2,056) 3,079 (6,501) 6,298
OTHER INCOME
Interest and other 2,843 5,004 20,427 9,158
---------- ---------- ---------- ----------
Total Income 787 8,083 13,926 15,456
EXPENSES
Administration 1,016 952 3,295 3,007
Accounting and legal 449 487 1,334 1,130
General corporate 1,223 1,873 4,837 5,273
Interest 1,982 1,016 6,330 2,476
Mining exploration 2,385 2,488 6,397 5,183
Write down of mining properties 33 54,415
---------- ---------- ---------- ----------
Total Expenses 7,055 6,849 22,193 71,484
---------- ---------- ---------- ----------
NET LOSS BEFORE TAXES (6,268) 1,234 (8,267) (56,028)
Income tax benefit 644 2 1,158
---------- ---------- ---------- ----------
NET INCOME (LOSS) $ (6,268) $ 1,878 $ (8,265) $ (54,870)
========== ========== ========== ==========
NET LOSS ATTRIBUTABLE
TO COMMON SHAREHOLDERS $ (8,903) $ (754) $ (16,164) $ (60,634)
========== ========== ========== ==========
EARNINGS PER SHARE DATA Earnings
per share data:
Weighted average number of
shares of Common Stock and
equivalents used in
calculation 21,891 21,893 21,891 21,327
========== ========== ========== ==========
Net Income (Loss) Per Share $ (.29) $ .09 $ (.38) $ (2.57)
========== ========== ========== ==========
Net Loss per share attributable
to Common Shareholders $ (.41) $ (.03) $ (.74) $ (2.84)
========== ========== ========== ==========
Fully Diluted Earnings Per Share:
Weighted average number of
shares of common stock
outstanding 34,800
==========
Net Income Per Share $ .06
==========
Cash dividends per share $ .15
==========
</TABLE>
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<PAGE>
<TABLE>
UNAUDITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
Nine months ended September 30, 1997 and 1996
<CAPTION>
1997 1996
----------- -----------
(In Thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (8,265) $ (54,870)
Add (less) noncash items:
Depreciation, depletion and amortization 24,614 9,234
(Gain) Loss on disposition of assets (170) 53,142
Other changes (439) (1,402)
----------- -----------
CASH PROVIDED BY OPERATING ACTIVITIES BEFORE WORKING CAPITAL CHANGES 15,740 6,104
Change in working capital:
Receivables 3,071 (360)
Inventories (485) 130
Accounts payable and accrued liabilities (6,781) (5,452)
Interest payable (1,941) (1,989)
----------- -----------
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 9,604 (1,567)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of El Bronce (net of cash received) (14,208)
Investment in mining company (14,643) (20,057)
Purchase of property, plant, and equipment (1,678) (2,503)
Proceeds from sales of marketable securities 123,263 51,136
Purchase of short-term investments (78,582) (118,697)
Expenditures on developmental properties (9,849) (9,085)
Expenditures on operational mining properties (12,529) (25,026)
Proceeds from sale of discontinued operations 863 2,566
Other assets (2,095) 603
----------- -----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 4,750 (135,271)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of preferred stock 144,626
Proceeds from bank loans 19,227
Retirement of long-term debt (4,807) (1,688)
Payment of cash dividends (7,899) (8,395)
Other (914) (206)
----------- -----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (13,620) 153,564
----------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS 734 16,726
Cash and cash equivalents at beginning of year 43,455 16,485
----------- -----------
CASH AND CASH EQUIVALENTS AT SEPTEMBER 30, 1997 AND 1996 $ 44,189 $ 33,211
=========== ===========
See notes to consolidated financial statements.
</TABLE>
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<PAGE>
Coeur d'Alene Mines Corporation and Subsidiaries
Notes to Consolidated Financial Statements
NOTE A: Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation have been included. Operating results for the three
and nine-month periods ended September 30, 1997 are not necessarily indicative
of the results that may be expected for the year ended December 31, 1997. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Coeur d'Alene Mines Corporation annual
report on Form 10-K for the year ended December 31, 1996.
NOTE B: Inventories
Inventories are comprised of the following:
<TABLE>
SEPTEMBER 30, DECEMBER 31,
1997 1996
-------- --------
(In Thousands)
<S> <C> <C>
In process and on leach pads $ 18,008 $ 19,948
Concentrate inventory 6,498 4,996
Dore' inventory 3,486 739
Supplies 4,835 6,309
--------- ---------
$ 32,827 $ 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
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<PAGE>
in, first out and weighted average cost methods. Dore' inventory includes
product at the mine site and product held by refineries.
NOTE C: Investment of Mining Company
On June 6, 1997, the Company acquired, for approximately US$14.6 million
in cash, an additional 14% interest in Gasgoyne Gold Mines NL of Australia,
increasing its total ownership to 50%. The acquisition has been accounted for
as a purchase. Effective June 6, 1997, the investment in Gasgoyne will be
accounted for on a proportionate consolidation basis.
NOTE D: Income Taxes
The Company has not recorded an income tax benefit for the three and
nine-month periods ended September 30, 1997 as it is currently not assured of
the realizability of operating loss carryforwards. The related deferred tax
asset has been fully reserved.
NOTE E: Subsequent Events
In October 1997, the Company completed an offering of $143,750,000
principal amount of 7.25% Convertible Subordinated Debentures due 2005 which
are convertible into shares of common stock on or before October 31, 2005,
unless previously redeemed, at a conversion price of $17.45 per share, subject
to adjustment in certain events. The Company is required to make semi-annual
interest payments. The debentures are redeemable at the option of the Company
on or after October 31, 2000, have no other funding requirements until
maturity, mature October 31, 2005.
During the second and third quarters of 1997, the Company purchased
11,379,048 shares of an Australian company, Eagle Mining Corporation N.L.
("Eagle"), for a total of US$26.2 million. Eagle was subsequently purchased by
another Australian company pursuant to a tender offer on October 3, 1997 for
$228.7 million. As a result, the Company will receive proceeds of $24.7
million in the fourth quarter of 1997 and report a loss on the sale of $1.5
million.
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<PAGE>
NOTE F: New Accounting Standard
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings Per Share, which is required to be adopted in the
fourth quarter of 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 loss per share for the
three-month periods ended September 30, 1997 and 1996 and the nine-month
periods ended September 30, 1997 and 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 G: Reclassifications
Certain reclassifications of prior year balances have been made to
conform to current year classifications.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS GENERAL
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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 and which is planned to be closed during the last
quarter of 1997 or the first quarter of 1998; the El Bronce Mine, a
wholly-owned Chilean gold mine; and the Fachinal Mine, a Chilean gold mine
wholly-owned by the Company.
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
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<PAGE>
and operates the Coeur Mine (where operations resumed in June 1996 and are
expected to continue until early 1999) and the Galena Mine (where operations
resumed in June 1997) in the Coeur d'Alene Mining District of Idaho. In May
1996, the Company acquired 35% 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 June 1997, the Company increased its ownership
interest in Gasgoyne to 50%.
The market price of gold has declined to levels that are the lowest since
1985. The market price of silver to date in 1997 is lower than the annual
average market prices experienced since 1993. The third quarter average price
of gold was $339. The market prices of silver (Handy & Harman) and gold
(London final) on November 10, 1997 were $4.88 per ounce and $310.75 per ounce
respectively. If the current price range in the low $300's continues, the
Company will need to reduce production costs and/or expand minable ore
reserves at its Chilean gold mines, Fachinal and El Bronce, to operate the
mines profitably. Also, if such prices continue, the Company may elect to
place such mines on temporary standby and halt production there to conserve
ore reserves until gold prices increase. The Company is required by Financial
Accounting Standards Statement 121 to review the valuations of its mining
properties. Such a review was last completed October 8, 1997. Should currently
depressed price levels continue for an extended period of time and/or if the
Company is unable to reduce production costs or expand minable ore reserves at
the Company's mining properties, the Company may need to effect asset
writedowns, particularly in the case of the Fachinal and El Bronce Mines and
the Kensington Property.
A production decision at the Kensington Property, in which Coeur had
invested a total of $118.2 million (including $25.0 million of capitalized
interest) at September 30, 1997, is subject to a realized price of gold
through spot or forward sales of at least $400 per ounce and the receipt of
required key permits, satisfactory completion of a project optimization study
and approval by the Company's Board of Directors. The U.S. Forest Service
issued a decision approving the Supplemental Environmental Impact Statement
for the Kensington Project on August 15, 1997. On October 2, 1997, a coalition
of environmental organizations filed an appeal challenging the decision. On
November 13, 1997, the appeal was denied. In addition, on November 4, 1997,
the City and Borough of Juneau issued the Large Mine Permit for the Kensington
Mine. The
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<PAGE>
Company anticipates that it will receive the remaining key permits relating to
the Kensington Project by the end of 1997. Currently, Coeur is working on a
mine optimization study intended to reduce the project's capital and operating
costs, and a development program designed to increase the current 1.9 million
ounce gold reserve. Coeur does not intend to develop Kensington unless the
optimization study and developmental program demonstrate the results required
to make Kensington an economically viable project.
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 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.
The following table sets forth the amounts of gold and silver produced by
the Company's mining properties owned by the Company or in which it has an
interest, based on the amounts
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<PAGE>
attributable to the Company's ownership interests, and the cash and full costs
of such production during the three and nine month periods ended September 30,
1996 and 1997:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
----------------------------- -----------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
ROCHESTER MINE
Gold ozs. 27,359 20,145 65,398 51,659
Silver ozs. 1,811,415 1,542,188 5,023,757 4,483,700
Cash Costs per oz./silver $3.49 $3.32 $3.74 $3.56
Full Costs per oz./silver $4.04 $3.84 $4.34 $4.11
GOLDEN CROSS MINE
Gold ozs. 23,123 16,317 61,804 46,441
Silver ozs. 72,795 43,022 216,919 150,578
Cash Costs per oz./gold $206.70 $329.88 $247.09 $378.48
Full Costs per oz./gold $247.23 $339.70 $292.65 $424.77
FACHINAL MINE
Gold ozs. 6,763 5,039 23,417 16,871
Silver ozs. 487,256 496,266 1,581,125 1,564,261
Cash Costs per oz./gold $389.81 N/A $350.21 N/A
Full Costs per oz./gold $593.07 N/A $529.19 N/A
EL BRONCE MINE
Gold ozs. 12,816 9,305 36,398 22,496
Silver ozs. 26,494 20,333 73,803 48,175
Cash Costs per oz./gold $314.74 $294.31 $335.58 $296.84
Full Costs per oz./gold $376.41 $320.02 $397.57 $322.55
COEUR MINE
Silver ozs. 164,697 330,985 925,908 486,049
Cash Costs per oz./silver $3.89 $2.89 $2.79 $3.67
Full Costs per oz./silver $4.89 $3.54 $3.72 $4.34
GALENA MINE
Silver ozs. 370,420 N/A 370,420 N/A
Cash Costs per oz./silver $3.58 N/A $4.79 N/A
Full Costs per oz./silver $4.64 N/A $6.10 N/A
YILGARN STAR MINE
Gold ozs. 9,131 5,332 26,192 8,137
Cash Costs per oz./gold $300.32 $254.87 $259.78 $259.46
Full Costs per oz./gold $475.28 $342.62 $409.22 $351.43
CONSOLIDATED TOTALS
Gold ozs. 79,192 56,138 213,209 145,604
Silver ozs. 2,933,077 2,432,794 8,191,932 6,732,763
</TABLE>
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<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1996.
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SALES AND GROSS PROFITS
Sales of concentrates and dore' increased by $17,069,000, or 79%, for the
third quarter of 1997 over the same quarter of 1996. The increase is primarily
attributable to increased sales of metals produced at the Fachinal and El
Bronce Mines due to i) the classification of the Fachinal Mine as an operating
property for accounting purposes as of January 1, 1997, and ii) the Company's
increased ownership of the El Bronce Mine from 50% to 100% commencing in the
third quarter of 1996. In the third quarter of 1997, the Company produced a
total of 2,933,077 ounces of silver and 79,192 ounces of gold compared to
2,432,794 ounces of silver and 56,138 ounces of gold in the third quarter of
1996.
Silver and gold prices averaged $4.53 and $323.65 per ounce,
respectively, in the third quarter of 1997 compared with $5.05 and $384.65 per
ounce, respectively, in the third quarter of 1996. On November 10, 1997, the
market prices of silver (Handy & Harman) and gold (London Final) were $4.88
and $310.75, respectively. In the third quarter of 1997, the Company realized
average silver and gold prices of $4.57 and $333.41, respectively, compared
with average market prices of $5.05 and $390.23, respectively, realized in the
prior year's third quarter.
The cost of mine operations for the third quarter of 1997 increased by
$22,204,000, or 120%, above the prior year's comparable quarter. The increase
is primarily attributable to the following factors: i) the Company increased
its ownership in the El Bronce Mine from 50% to 100% commencing late in the
third quarter of 1996, which resulted in a proportionate increase in the cost
of mine operations in the third quarter of 1997; and ii) the Company
classified the Fachinal Mine as an operating property for accounting purposes
as of January 1, 1997, and began recording cost of mine operations at the
Fachinal Mine on that date. Of the approximately $22 million increase in the
cost of mine operations, $7.6 million, or 34%, were noncash expenses
attributable to the 430% increase in depreciation, depletion and amortization
expense recorded in the third quarter of 1997 over the prior year's third
quarter. The increase in these noncash expenses primarily resulted from the
Company's increased El
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<PAGE>
Bronce ownership interest and the fact that no such expenses were being
recorded by Fachinal since it was still under development in the third quarter
of 1996.
The gross loss from mining operations in the third quarter of 1997
amounted to $2.1 million compared to a gross profit from mining operations of
$3.1 million in the third quarter of 1996. The $5.1 million decrease in gross
profits is due to the above mentioned changes in sales and cost of mine
operations coupled with substantially lower gold and silver prices realized in
the third quarter of 1997 as compared to the third quarter of the prior year.
INTEREST AND OTHER INCOME
Interest and other income decreased by $2,161,000, or 43%, in the third
quarter of 1997 compared to the third quarter of 1996. The decrease is
primarily the result of lower average balances of cash and short-term
investments. In addition, during the third quarter of 1996, the Company
reported a gain of $1.3 million on the sale of certain marketable securities.
EXPENSES
For the third quarter of 1997, total expenses increased by $.2 million,
or 3%, above the prior year's comparable quarter. The increase is primarily
the result of a $1.0 million increase in interest expense which was partially
offset by a $.7 million decrease in general corporate expenses.
NET INCOME (LOSS)
As a result of the above, the Company reported a net loss of $6,268,000,
or $.29 per primary share, and a net loss of $8,903,000, or $.29 per share,
attributable to common shareholders for the third quarter of 1997 compared
with net income of $1,878,000, or $.09 per primary share, net income of $.06
per fully diluted share and a net loss of $754,000, or $.03 per share,
attributable to common shareholders for the third quarter of 1996.
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<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1997, COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1996
-------------------------------------------------------------------------
SALES AND GROSS PROFITS
Sales of concentrates and dore' increased by $33,837,000, or 54%, for the
first nine months of 1997 from the same period of 1996 and is primarily
attributable to increased sales of metals produced at the Fachinal and El
Bronce Mine due to i) the classification of the Fachinal Mine as an operating
property for accounting purposes as of January 1, 1997, and ii) the Company's
increased ownership of the El Bronce Mine from 50% to 100% commencing in the
third quarter of 1996. In the first nine months of 1997, the Company produced
a total of 8,191,932 ounces of silver and 213,209 ounces of gold compared to
6,732,763 ounces of silver and 145,604 ounces of gold in the nine-month period
of 1996.
Silver and gold prices averaged $4.77 and $339.28 per ounce,
respectively, in the first nine months of 1997 compared to $5.29 and $391.60
per ounce, respectively, in 1996's comparable period. On November 10, 1997,
the market price of silver (Handy & Harman) was $4.88 and the market price of
gold (London Final) was $310.75 per ounce. During the first nine months of
1997, the Company realized average silver and gold prices of $4.75 and
$343.87, respectively, compared with average market prices of $5.32 and
$395.68, respectively, realized in the prior year's comparable period.
The cost of mine operations in the first nine months of 1997 increased by
$46,636,000, or 82%, above the prior year's comparable nine-month period. The
increase is primarily attributable to the fact that i) the Company increased
its ownership in the El Bronce Mine from 50% to 100% commencing late in the
third quarter of 1996, which resulted in a proportionate increase in the cost
of mine operations during the nine-month period ended September 30, 1997; and
ii) the Company classified the Fachinal Mine as an operating property for
accounting purposes as of January 1, 1997, and began recording cost of mine
operations at the Fachinal Mine on that date. Of the approximately $46.6
million increase in the cost of mine operations, $14.4 million or 30.8% were
noncash expenses attributable to the 199.4% increase in depreciation,
depletion and amortization expense recorded in the nine months ended September
30, 1997 over the prior year's comparable period. The increase in these
noncash expenses primarily resulted from the
-15-
<PAGE>
Company's increased El Bronce ownership interest and the fact that no such
expenses were being recorded by Fachinal during 1996.
The gross loss from mining operations in the first nine months of 1997
amounted to $6.5 million compared to a gross profit from mining operations of
$6.3 million in the same period of 1996. The $12.8 million decrease in gross
profits is due to the above mentioned changes in sales and cost of mine
operations coupled with substantially lower gold and silver prices realized in
the nine months ended September 30, 1997.
INTEREST AND OTHER INCOME
Interest and other income increased by $11.3 million, or 123%, in the
first nine months of 1997 compared to the same period in 1996. The increase is
primarily the result of i) the receipt of $8 million of insurance proceeds for
business interruption and property damage at the Golden Cross Mine in the
second quarter of 1997, and ii) 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 in the first quarter of 1997.
EXPENSES
For the first nine months of 1997, total expenses decreased by $49.3
million. The decrease is primarily attributable to the $54.4 million writedown
of mining properties recorded in the second quarter of 1996. In the first nine
months of 1997, interest expense increased by $3,854,000, primarily
attributable to the reclassification of the Fachinal Mine from a development-
stage property to an operating property. Effective in 1997, interest expense
on the Fachinal construction loan, which was previously capitalized during the
development stage, is charged to operating expense. Mining exploration expense
for the first nine months of 1997 increased by $1,214,000, or 23%, over the
prior year's comparable nine-month period.
NET INCOME (LOSS)
As a result of the above, the Company's loss before income taxes amounted
to $8,267,000 in the first nine months of 1997 compared to a loss of
$56,028,000 in the first nine months of 1996. The Company reported an income
tax benefit of $2,000 for the first nine months of 1997, compared to
$1,158,000 in the
-16-
<PAGE>
first nine months of 1996. As a result, the Company reported a net loss of
$8,265,000, or $.38 per share, and a net loss attributable to common
shareholders of $16,164,000, or $.74 per share, in the first nine months of
1997, compared to a net loss of $54,870,000, or $2.57 per share, and a net
loss attributable to common shareholders of $60,634,000, or $2.84 per share,
in the first nine months of 1996.
LIQUIDITY AND CAPITAL RESOURCES
WORKING CAPITAL; CASH AND CASH EQUIVALENTS
The Company's working capital at September 30, 1997 was approximately
$128.2 million compared to $179.6 million at December 31, 1996. The ratio of
current assets to current liabilities was 4.4 to one at September 30, 1997
compared to 6.7 to one at December 31, 1996.
Net cash provided by operating activities for the first nine months of
1997 increased by $11.2 million to $9.6 million from $1.6 million used in
operating activities during the first nine months of 1996. A total of $4.7
million of cash was provided by investing activities in the first nine months
of 1997 compared to $135.3 million used in investing activities in the first
nine months of 1996. Of the $135.3 million used in investing activities during
the first nine months of 1996, $118.7 million relates to the purchase of
investment grade intermediate term investments. The Company's financing
activities used $13.6 million of cash during the first nine months of 1997
compared with $153.6 million provided by financing activities for the first
nine months of 1996. During the second and third quarters of 1997, the Company
purchased 11,379,048 shares of an Australian company, Eagle Mining Corporation
N.L. ("Eagle"), for a total of US$26.2 million. Eagle was subsequently
purchased by another Australian company pursuant to a tender offer on October
3, 1997 for $228.7 million. As a result, the Company sold its interest in
Eagle and will receive proceeds of $24.7 million in the fourth quarter of 1997
and report a loss on the sale of $1.5 million. As a result of the above, the
Company's net cash increase for the first nine months of 1997 was $.7 million
compared with a net cash increase of $16.7 million for the first nine months
of 1996.
For the nine months ended September 30, 1997 and 1996, the Company
expended $3.7 million and $2 million, respectively, in connection with
environmental compliance activities at its
-17-
<PAGE>
operating properties. For the nine months ended September 30, 1997, the
Company expended a total of approximately $2.5 million on environmental and
permitting activities at the Kensington property, which expenditures have been
capitalized as part of its development cost.
SALE OF 7 1/4 CONVERTIBLE SUBORDINATED DEBENTURES DUE 2005
In October 1997, the Company sold $143,750,000 aggregate principal amount
of 7 1/4% Convertible Subordinated Debentures due 2005 (the "Debentures") to
Lazard Freres & Co. LLC (the "Purchaser") pursuant to exemptions from
registration under the Securities Act of 1933 (the "Act"). The Debentures are
convertible into shares of the Company's Common Stock on or before October 31,
2005, unless previously redeemed, at a conversion price of $17.45 per share,
subject to adjustment in certain events. The Debentures are redeemable, in
whole or in part, at any time on or after October 31, 2000. Pursuant to a
Registration Rights Agreement, dated as of October 15, 1997, between the
Company and Purchaser, the Company is obligated to file with the Securities
and Exchange Commission and use its best efforts to cause to become effective
a shelf registration statement to cover resales of the Debentures and shares
of Common Stock issuable upon conversion thereof and to maintain the
effectiveness of such registration statement until October 31, 1999, subject
to adjustment in certain circumstances. The Company received approximately
$139 million of net proceeds from the sale of the Debentures. Of that amount,
approximately $42.9 million has been used to repay bank debt (as discussed
below) and the balance will be used for other corporate purposes, including
the possible acquisition of or investment in additional silver and gold mining
properties or businesses.
REPAYMENT OF BANK INDEBTEDNESS
On October 31, 1997, the Company used approximately $42.9 million of the
net proceeds of the sale of Debentures to repay (i) approximately $24 million
borrowed under a project loan facility agreement with a bank syndicate lead by
N.M. Rothschild & Sons Ltd. relating to the Company's construction of the
Fachinal Mine and (ii) approximately $18.9 million borrowed under the
Company's $20.0 million line of credit agreement with Rothschild Australia
Ltd. in connection with the Company's investment in Gasgoyne.
-18-
<PAGE>
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 Response, Compensation, and Liability Act of 1980
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 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 United States 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
and, in March 1997 and September 1997 filed motions for summary judgment which
are pending decision by the court. At this initial stage of the action, it is
not possible to predict its ultimate outcome.
PART II. Other Information.
ITEM 1. LEGAL PROCEEDINGS
On July 2, 1997 a suit was filed by a purchaser of the Company's common
stock in Federal District Court for the District of Colorado naming the
Company and certain of its officers and its independent auditor as defendants.
Plaintiff alleges that the Company violated the Securities Exchange Act of
1934 during the period January 1, 1995 to July 11, 1996, and seeks
certification of the law suit as a class action. The class members are alleged
to be those persons who purchased publicly traded debt and equity securities
of the Company during the time period stated. On September 22, 1997 an amended
complaint was filed in the proceeding adding other security holders as
additional plaintiffs. The action seeks unspecified compensatory damages,
pre-judgment and post-judgment interest, attorney's fees and costs of
litigation. The complaint asserts that the defendants knew material adverse
non-public information
-19-
<PAGE>
about the Company's financial results which was not disclosed, and which
related to the Golden Cross and Fachinal Mines; and that the defendants
intentionally and fraudulently disseminated false statements which were
misleading and failed to disclose material facts. The Company believes the
allegations are without merit and intends to vigorously defend against them.
On October 27, 1997, the Company, its auditors and the individual defendants
filed with the Court motions to dismiss the amended complaint on the ground
that it fails to state a valid claim. No assurances can be given at this early
stage of the action as to its ultimate outcome.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
No. 27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
No Forms 8-K were filed during the quarter ended September 30, 1997.
A Form 8-K was filed on October 16, 1997.
-20-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COEUR D'ALENE MINES CORPORATION
-------------------------------
(Registrant)
Dated November 13, 1997 /s/DENNIS E. WHEELER
-----------------------
Dennis E. Wheeler
Chairman, President and
Chief Executive Officer
Dated November 13, 1997 /s/JAMES A. SABALA
-----------------------
James A. Sabala
Senior Vice President and
Chief Financial Officer
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
EXHIBIT 11
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
----------------------------- -----------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
(In thousands except per share amounts)
Weighted average shares
outstanding 21,891 21,891 21,891 21,327
Net effect of dilutive
stock options-based on the
treasury stock method using
average market price 2
---------- ---------- ---------- ----------
21,891 21,893 21,891 21,327
========== ========== ========== ==========
Net income (Loss) $ (6,268) $ 1,878 $ (8,265) $ (54,870)
========== ========== ========== ==========
Per share amounts:
Net income (loss)
per share $ (.29) $ .09 $ (.38) $ (2.57)
========== ========== ========== ==========
Net income (loss) $ (6,268) $ 1,878 $ (8,265) $ (54,870)
Less preferred dividends 2,635 2,632 7,899 5,764
---------- ---------- ---------- ----------
Net income (loss)
attributable to
common shareholders $ (8,903) $ (754) $ (16,164) $ (60,634)
========== ========== ========== ==========
Per share amounts
attributable to common
shareholders:
Net income (loss) per
share attributable to
common shareholders $ (.41) $ (.03) $ (.74) $ (2.84)
========== ========== ========== ==========
</TABLE>
<PAGE>
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
EXHIBIT 11
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
(continued)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
----------------------------- -----------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
(In thousands except per share amounts)
Fully diluted earnings
per share:
Average shares outstanding 21,891
Net effect of dilutive
stock options-based on the
treasury stock method using
average market price 2
Assumed conversion of 6%
convertible bonds 1,949
Assumed conversion of 6 3/8%
convertible bonds 3,880
Assumed conversion of MARCS 7,078
---------- ----------
34,800
========== ==========
Net income $ $ 1,878
Add 6% convertible bond
interest net of federal
income tax effect 513
Add 7% convertible bond
interest net of federal
income tax effect
Add 6 3/8% convertible bond
interest net of federal
income tax effect 1,104
Less adjustment for capitalized
interest (1,442)
---------- ----------
Income from continuing
operations $ $ 2,052
========== ==========
Per share amounts:
Earnings from continuing
operations $ $ .06
========== ==========
</TABLE>
-2-
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000215466
<NAME> COEUR D'ALENE MINES CORPORATION
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 44,189
<SECURITIES> 78,343
<RECEIVABLES> 10,354
<ALLOWANCES> 0
<INVENTORY> 32,827
<CURRENT-ASSETS> 165,713
<PP&E> 488,594
<DEPRECIATION> 111,095
<TOTAL-ASSETS> 560,113
<CURRENT-LIABILITIES> 37,531
<BONDS> 144,840
7,078
0
<COMMON> 22,950
<OTHER-SE> 299,079
<TOTAL-LIABILITY-AND-EQUITY> 560,113
<SALES> 96,757
<TOTAL-REVENUES> 117,184
<CGS> 103,258
<TOTAL-COSTS> 125,451
<OTHER-EXPENSES> 17,356
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,837
<INCOME-PRETAX> (8,267)
<INCOME-TAX> 2
<INCOME-CONTINUING> (8,265)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,265)
<EPS-PRIMARY> (0.38)
<EPS-DILUTED> 0
</TABLE>
