<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
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
-----------------
-----------------
COMMISSION FILE NUMBER 0-12207
PEGASUS GOLD INC.
(Exact name of registrant as specified in its charter)
PROVINCE OF BRITISH COLUMBIA NONE
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
601 W. FIRST AVE., SUITE 1500, SPOKANE, WASHINGTON 99204
(Address of principal executive offices) (Zip Code)
(509) 624-4653
(Registrant's telephone number, including area code)
-----------------
-----------------
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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
41,186,569
--------------
Common Shares, without par value, outstanding at April 30, 1997
<PAGE>
PEGASUS GOLD INC.
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1997
INDEX
PART I. FINANCIAL INFORMATION
Page
Item #1
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND DECEMBER 31, 1996 . . . . . . . . . . . . . 3
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996 . . . . . . . . . . 4
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996 . . . . . . . . . . 5
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1997 AND
YEAR ENDED DECEMBER 31, 1996 . . . . . . . . . . . . . . . . . 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . 7
Item #2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS. . . . . . . . . 9
PART II. OTHER INFORMATION
Item #1
LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . 13
Item #6
EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . 13
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
In this Report, unless otherwise indicated, all dollar amounts are expressed in
U.S. Dollars.
2
<PAGE>
PEGASUS GOLD INC.
CONSOLIDATED BALANCE SHEET
March 31, 1997 and December 31, 1996
(In Thousands)
<TABLE>
<CAPTION>
ASSETS
1997 1996
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . $ 6,161 $ 8,566
Due from sales of products. . . . . . . . . . . . . . . 25,543 36,748
Inventories . . . . . . . . . . . . . . . . . . . . . . 59,832 51,997
Other current assets. . . . . . . . . . . . . . . . . . 10,373 10,164
--------- ---------
Total current assets. . . . . . . . . . . . . . . . . 101,909 107,475
Investments . . . . . . . . . . . . . . . . . . . . . . . 21,911 20,987
Property, plant, and equipment, net . . . . . . . . . . . 630,435 618,940
Other assets. . . . . . . . . . . . . . . . . . . . . . . 6,551 6,806
--------- ---------
$ 760,806 $ 754,208
--------- ---------
--------- ---------
LIABILITIES
Current liabilities:
Accounts payable and other current liabilities. . . . . $ 28,601 $ 23,641
Accrued salaries, wages, and benefits . . . . . . . . . 7,791 10,350
Mining taxes payable. . . . . . . . . . . . . . . . . . 4,394 4,610
Current portion of obligations under capital lease. . . 3,649 3,626
--------- ---------
Total current liabilities . . . . . . . . . . . . . . 44,435 42,227
Long-term debt. . . . . . . . . . . . . . . . . . . . . . 222,059 215,086
Capital lease obligations . . . . . . . . . . . . . . . . 22,210 22,466
Deferred income taxes . . . . . . . . . . . . . . . . . . 44,575 44,602
Deferred site closure and reclamation . . . . . . . . . . 50,881 50,878
Deferred revenue. . . . . . . . . . . . . . . . . . . . . 6,606 8,074
Other deferred liabilities. . . . . . . . . . . . . . . . 8,033 7,598
--------- ---------
Total liabilities . . . . . . . . . . . . . . . . . . 398,799 390,931
--------- ---------
Commitments and contingencies (Note 4)
SHAREHOLDERS' EQUITY
Class A preferred shares, Series 1, C$10 par value:
Authorized - 20,000,000 shares; none issued
Common shares no par value:
Authorized - 200,000,000 shares; issued
and outstanding, 1997 - 41,182,048 shares
and 1996 - 41,092,342 shares . . . . . . . . . . . . . 426,052 425,382
Accumulated deficit . . . . . . . . . . . . . . . . . . . (70,749) (70,734)
Foreign currency translation adjustment . . . . . . . . . 6,704 8,629
--------- ---------
Total shareholders' equity. . . . . . . . . . . . . . 362,007 363,277
--------- ---------
Total liabilities and shareholders' equity. . . . . . $ 760,806 $ 754,208
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements. 3
<PAGE>
PEGASUS GOLD INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 1997 and 1996
(In Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . $ 48,603 $ 48,790
--------- ---------
Cost of sales . . . . . . . . . . . . . . . . . . . . . . 34,356 35,695
Depreciation and amortization . . . . . . . . . . . . . . 9,260 9,217
--------- ---------
43,616 44,912
--------- ---------
Gross profit 4,987 3,878
--------- ---------
Operating expenses:
General and administrative. . . . . . . . . . . . . . . 2,643 3,373
Exploration and evaluation. . . . . . . . . . . . . . . 1,197 1,456
Care and maintenance. . . . . . . . . . . . . . . . . . 1,894 34
Closure, reclamation, and related costs . . . . . . . . 500 500
--------- ---------
6,234 5,363
--------- ---------
Loss from operations (1,247) (1,485)
--------- ---------
Other income (expense):
Interest and other income . . . . . . . . . . . . . . . 259 1,157
Interest expense, net of amounts capitalized. . . . . . (435) (1,110)
Equity in net income of affiliates. . . . . . . . . . . 1,381 742
--------- ---------
1,205 789
--------- ---------
Loss before income taxes. . . . . . . . . . . . . . . . . (42) (696)
Income tax benefit. . . . . . . . . . . . . . . . . . . . (27) (709)
--------- ---------
Net income (loss) $ (15) $ 13
--------- ---------
--------- ---------
Net income (loss) per share $ (0.00) $ 0.00
--------- ---------
--------- ---------
Weighted average common shares outstanding 41,157 39,869
--------- ---------
--------- ---------
</TABLE>
4 The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
PEGASUS GOLD INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
For the Three Months Ended March 31, 1997 and 1996
(In Thousands)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Operating activities:
Net income (loss) . . . . . . . . . . . . . . . . . . . $ (15) $ 13
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . 9,450 9,365
Provision for closure, reclamation and related costs. . 500 500
Other, net. . . . . . . . . . . . . . . . . . . . . . . (3,052) (2,646)
Change in working capital accounts. . . . . . . . . . . . 5,295 (5,045)
--------- ---------
Net cash provided by operating activities . . . . . . . . 12,178 2,187
--------- ---------
Investing activities:
Additions to property, plant, and equipment, net. . . . (22,700) (34,287)
Purchase of short-term investments. . . . . . . . . . . -- (27,065)
--------- ---------
Net cash used in investing activities (22,700) (61,352)
--------- ---------
Financing activities:
Proceeds from issuance of long-term debt. . . . . . . . 7,820 --
Proceeds from issuance of common shares . . . . . . . . 670 90,193
Payments of long-term debt. . . . . . . . . . . . . . . -- (19,189)
Payments of obligations under capital lease . . . . . . (233) (204)
--------- ---------
Net cash provided by financing activities . . . . . . . . 8,257 70,800
--------- ---------
Effect of exchange rate changes on cash and cash
equivalents. . . . . . . . . . . . . . . . . . . . . . . (140) 377
--------- ---------
Net increase (decrease) in cash and cash equivalents. . . (2,405) 12,012
Cash and cash equivalents, beginning of period. . . . . . 8,566 32,907
--------- ---------
Cash and cash equivalents, end of period. . . . . . . . . $ 6,161 $ 44,919
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements. 5
<PAGE>
PEGASUS GOLD INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the Three Months Ended March 31, 1997 and the Year Ended December 31, 1996
(In Thousands)
<TABLE>
<CAPTION>
Common Shares Foreign
--------------------------- Currency
Number Accumulated Translation
of Shares Amount Deficit Adjustment
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance, December 31, 1995 34,825,203 $ 334,214 $ (49,131) $ 3,621
Net loss . . . . . . . . . . . . . . . . (21,603)
Common shares issued for:
Cash. . . . . . . . . . . . . . . . 6,000,000 88,175
Stock option plan . . . . . . . . . 234,217 2,612
Employee savings plan and other . . 32,922 381
Foreign currency translation adjustment 5,008
------------ ------------ ------------ ------------
Balance, December 31, 1996 41,092,342 $ 425,382 $ (70,734) $ 8,629
Net loss . . . . . . . . . . . . . . . . (15)
Common shares issued for:
Stock option plan 41,100 359
Employee savings plan and other . . 48,606 311
Foreign currency translation adjustment (1,925)
------------ ------------ ------------ ------------
Balance, March 31, 1997 41,182,048 $ 426,052 $ (70,749) $ 6,704
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
6 The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
PEGASUS GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. INTRODUCTION
The Company, which is incorporated in British Columbia, presents all
financial statements in United States dollars and under generally accepted
accounting principles as practiced in the United States.
2. SIGNIFICANT ACCOUNTING POLICIES
These unaudited consolidated financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-K. In the opinion of management, the
financial information set forth in the accompanying unaudited interim
consolidated financial statements reflects all adjustments necessary for a
fair statement of the periods reported, and all such adjustments were of a
normal and recurring nature.
EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share." This
statement specifies computation, presentation, and disclosure requirements
for earnings per share for entities with publicly held common stock or
potential common stock. The statement is effective for periods ending after
December 15, 1997. Adoption of this standard is not expected to have a
material effect on the Company's financial position or results of operations.
3. INVENTORIES
Inventories consist of the following:
March 31, Dec. 31,
(In Thousands) 1997 1996
---- ----
Deferred mining costs . . . . . . . . $39,557 $34,134
Materials and supplies. . . . . . . . 12,568 11,294
Stockpiled ore. . . . . . . . . . . . 7,479 6,317
Processed metal . . . . . . . . . . . 228 252
------------ --------------
$59,832 $51,997
------------ --------------
------------ --------------
4. COMMITMENTS AND CONTINGENCIES
HEDGED PRODUCTION
At March 31, 1997, the Company's production hedging program consists of the
following:
AVERAGE
PRICE DELIVERY
PER UNIT PERIOD
-------- ---------
GOLD
Forward sales . . . . . . . . . . . 720,000 ounces $441 1997-2003
Contingent forward sales. . . . . . 905,000 ounces $419 1999-2003
Call options sold . . . . . . . . . 409,000 ounces $478 1997-2003
Put options purchased . . . . . . . 300,000 ounces $423 1997-2001
SILVER
Forward sales . . . . . . . . . . . 2,053,000 ounces $5.10 1997-2001
ZINC
Forward sales . . . . . . . . . . . 12,236,000 pounds $0.50 1997-1998
Call options sold . . . . . . . . . 8,818,000 pounds $0.50 1997
Put options purchased . . . . . . . 7,937,000 pounds $0.48 1997
FOREIGN CURRENCY
The Company enters into foreign exchange contracts to hedge transactions
related to firm commitments and contractual obligations denominated in
foreign currencies, including debt. The Company regularly monitors its
foreign currency exposures and ensures that hedge contract amounts do not
exceed the amounts of underlying exposures.
At March 31, 1997, the Company held foreign currency forward contracts with
notional amounts totaling $80,833,000 which mature during 1997 and 1998. The
forward contracts convert $80,833,000 to Australian dollars at an average
rate of US$0.7644. The notional amount of forward exchange contracts is the
amount of foreign currency bought or sold at maturity.
7
<PAGE>
4. COMMITMENTS AND CONTINGENCIES, CONTINUED:
COMMON SHARES ISSUABLE
At March 31, 1997, a total of 11,191,144 shares of authorized common stock were
reserved for the following:
Convertible Notes . . . . . . . . . . . . . . . . . . 7,709,067
Stock Options . . . . . . . . . . . . . . . . . . . . 3,455,816
Employee Savings Plan . . . . . . . . . . . . . . . . 26,261
-----------
11,191,144
-----------
-----------
STOCK OPTION PLAN
In April 1997, shareholders approved the 1997 Stock Plan. Under the plan, a
maximum of 4,000,000 shares may be granted to directors and employees at not
less than 100 percent of the fair market value at the date of grant. Options
shall be fully vested after three years from the date of grant and expire
seven years from the date of grant.
RECLAMATION, SITE CLOSURE AND REMEDIATION COSTS
All of the Company's operations are subject to reclamation and closure
requirements. The Company monitors these requirements and evaluates its
accruals for reclamation and closure regularly.
During the first quarter, the Company increased its estimate of the future
cost to close and reclaim the Basin Creek Mine and recorded a provision of
$500,000. However, it is reasonably possible that the Company's estimate of
its ultimate reclamation liability could increase as a result of prospective
changes in laws and regulations and changes in cost estimates.
ZORTMAN EXTENSION PROJECT
A plan of operation for the Zortman Extension Project was submitted to
regulatory agencies in May 1992. The Final Environmental Impact Statement
("FEIS") was issued in March 1996 and a favorable Record of Decision and
operating permits were granted on October 25, 1996. Mining operations at
Zortman ceased early in 1996 and will not commence again until a twelve month
construction period on the Zortman Extension Project is substantially
completed; major construction is not scheduled until 1998. Gold production
will continue from leaching ore previously mined and loaded on the pads, but
at a significantly reduced rate. Although the Company does not expect further
challenges to the project to be successful, issuance of the permit has been
appealed by third parties.
GENERAL
Various lawsuits, claims, and proceedings have been or may be instituted or
asserted against the Company. Management believes the disposition of other
matters that are pending or asserted will not have a material adverse effect
on the financial position of the Company or its results of operations.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
OVERVIEW
The Company recorded a net loss of $15,000 ($0.00 per share) in the first
quarter of 1997, compared to net income of $13,000 ($0.00 per share) during
the same period in 1996. Consolidated results were essentially unchanged
because an 11 percent decline in production and increased care and
maintenance costs were offset by a 7 percent increase in the realized price
per ounce of gold, lower general and administrative costs, and an increase in
the Company's share of earnings from affiliates.
GOLD PRODUCTION
The following chart details gold production, cash costs and total production
costs per ounce by location.
Three Months Ended
March 31,
-------------------
1997 1996
-------- ---------
FLORIDA CANYON MINE:
Ounces of gold . . . . . . . . . . . . . . . 40,131 24,484
Average cost per ounce:(1)
Cash operating cost. . . . . . . . . . . . . $ 277 $ 248
Total cash cost. . . . . . . . . . . . . . . $ 289 $ 265
Total production cost. . . . . . . . . . . . $ 395 $ 339
MONTANA TUNNELS MINE:(2)
Ounces of gold . . . . . . . . . . . . . . . 19,868 20,174
Average cost per ounce:(1)
Cash operating cost. . . . . . . . . . . . . $ 196 $ 153
Total cash cost. . . . . . . . . . . . . . . $ 241 $ 192
Total production cost. . . . . . . . . . . . $ 405 $ 341
MT. TODD MINE:
Ounces of gold . . . . . . . . . . . . . . . 6,100 15,623
Average cost per ounce:(1)
Cash operating cost. . . . . . . . . . . . . $ 429 $ 395
Total cash cost. . . . . . . . . . . . . . . $ 429 $ 395
Total production cost. . . . . . . . . . . . $ 531 $ 483
ZORTMAN MINE:
Ounces of gold . . . . . . . . . . . . . . . - 12,207
Average cost per ounce:(1)
Cash operating cost - $ 312
Total cash cost. . . . . . . . . . . . . . . - $ 333
Total production cost. . . . . . . . . . . . - $ 452
9
<PAGE>
Three Months Ended
March 31,
-------------------
1997 1996
-------- ---------
BEAL MOUNTAIN MINE:
Ounces of gold . . . . . . . . . . . . . . . 7,883 6,808
Average cost per ounce:(1)
Cash operating cost. . . . . . . . . . . . . $360 $274
Total cash cost. . . . . . . . . . . . . . . $388 $311
Total production cost. . . . . . . . . . . . $478 $410
BLACK PINE MINE:
Ounces of gold . . . . . . . . . . . . . . . 13,504 18,864
Average cost per ounce:(1)
Cash operating cost. . . . . . . . . . . . . $263 $280
Total cash cost. . . . . . . . . . . . . . . $288 $306
Total production cost. . . . . . . . . . . . $303 $352
CONSOLIDATED TOTALS
Ounces of gold . . . . . . . . . . . . . . . 87,486 98,160
Average cost per ounce:(1)
Cash operating cost. . . . . . . . . . . . . $274 $270
Total cash cost. . . . . . . . . . . . . . . $297 $294
Total production cost. . . . . . . . . . . . $403 $388
Average price per ounce sold . . . . . . . . $460 $428
- --------------
(1) Effective January 1, 1997, the Company adopted the gold production cost
standard developed by the Gold Institute in order to facilitate comparisons
among companies in the gold industry. Cash production costs reported in
prior periods have been restated as cash operating costs and total cash
costs in accordance with the new standard. Cash operating costs calculated
under the new standard include all operating costs (including overhead) at
the mine sites, but exclude royalties, production taxes and reclamation and
are reported net of by-product credits. Total cash costs include royalties
and production taxes, but exclude reclamation. Total production costs
remain unchanged and include reclamation in addition to depreciation,
depletion and amortization.
(2) Includes Diamond Hill.
REVENUES
GOLD: Revenue from the sale of gold decreased 4 percent to $40.2 million
during the first quarter of 1997 as a result of an 11 percent decline in
gold production. Lower production reflects the planned shutdown during the
quarter at Zortman, the cessation of mining heap leach ore at Mt. Todd, and
lower ore tonnage at Black Pine, offset by increased production at Florida
Canyon as a result of the plant expansion completed during 1996.
Average realized gold prices for the first three months of 1997 and 1996 were
$460 and $428 per ounce, respectively, compared to average first quarter
COMEX gold prices of $352 and $400, in 1997 and 1996, respectively. The
increased realized price per ounce of gold reflects the benefit of the
Company's hedging program.
OTHER METALS: Sales of other metals increased $1.6 million to $8.4 million
in the first quarter of 1997. Higher production of zinc and lead, due to
increased mill feed grades and tonnage at Montana Tunnels, and increased
prices for zinc and lead, were partially offset by lower production and
realized prices for silver. Realized prices were $4.42 per ounce, $0.54 per
pound, and $0.30 per pound for silver, zinc, and lead, respectively, compared
to $5.24, $0.51, and $0.16, respectively, in the first quarter of 1996.
10
<PAGE>
OPERATING COSTS
The average total cash cost of production increased to $297 per ounce of gold
in the first quarter of 1997 from $294 per ounce in the first quarter of
1996. Increased cash costs reflect lower production offset partially by
higher by-product credits per ounce. Total cash costs per ounce at Florida
Canyon were higher primarily as a result of lower ore grades. At Montana
Tunnels, increased cash costs resulted from lower production and additional
costs associated with maintaining stability of the pit highwall. Total cash
costs at Mt. Todd reflect the increased cost of residual production from the
heap combined with higher cyanide consumption due to unusually heavy
precipitation. At Beal Mountain, total cash costs have increased as a result
of the temporary cessation of crusher activities and pad loading during the
first quarter of 1997. Lower total cash costs at Black Pine are attributable
to higher ore grade and gold recovery.
Depreciation and amortization charges increased 13 percent to $106 per ounce
in 1997, compared to $94 per ounce in 1996. The increase reflects lower
production, increased property, plant, and equipment balances and increased
amortization for reclamation and closure costs which increased in 1996.
Exploration and evaluation expenses of $1.2 million in the first quarter of
1997 are 18 percent lower than during the same period in 1996 due to lower
program expenditures in Chile and Argentina and lower overall planned
expenditures for exploration.
Care and maintenance costs increased to $1.9 million in the first quarter of
1997, compared to $34,000 during the same period in 1996. The increase
reflects the classification of costs at Zortman as care and maintenance in
the first quarter of 1997 during the temporary cessation of residual leaching
and plant production activities. Residual leaching at Zortman commenced in
early April 1997.
General and administrative expenses decreased 22 percent to $2.6 million in
the first quarter of 1997 primarily as a result of fewer employees, decreased
travel costs associated with the Company's foreign operations, and an overall
cost savings program undertaken at the corporate level.
OTHER INCOME (EXPENSE) AND TAXES
Interest and other income decreased $0.9 million to $0.3 million during the
first quarter of 1997 because of lower average cash and cash equivalent
balances. Cash and cash equivalents in the first quarter of 1996 included
proceeds from the Company's public offering of 6,000,000 common shares in
January.
Interest expense decreased $0.7 million to $0.4 million in the first quarter
of 1997. Increased interest cost associated with the Revolving Credit
Facility has been offset by the capitalization of $3.9 million of interest to
construction projects in the first quarter of 1997, compared to $1.6 million
capitalized during the same period in 1996.
Equity in net income of affiliates is comprised of the Company's
proportionate share of earnings from the Emerging Markets Gold Fund. The
decrease in the income tax benefit results from the 1996 recognition of
certain refund claims.
FINANCING, CAPITAL INVESTMENT, AND LIQUIDITY
At March 31, 1997, the Company had working capital of $57.5 million, compared
to $65.2 million at the end of 1996. Cash and cash equivalents totaled $6.2
million at March 31, 1997, compared to $8.6 million at the end of 1996.
OPERATING ACTIVITIES
Cash flow provided by operating activities was $12.2 million for the first
quarter of 1997, compared to $2.2 million during the same period in 1996.
Increased cash flow from operations primarily reflects changes in working
capital accounts. Cash flow from operations before working capital changes
for the first quarter of 1997 decreased $0.3 million compared to the same
period in 1996.
11
<PAGE>
INVESTING ACTIVITIES
During the quarter, the Company invested $22.7 million in property, plant and
equipment, including $10.6 million for expansion at Mt. Todd, $2.1 million at
Florida Canyon, and $3.9 million of capitalized interest. During the same
period in 1996, the Company invested $34.3 million in property, plant and
equipment and $27.1 million on short-term investments. The decrease in
capital spending reflects the completion of major expansion projects at Mt.
Todd and Florida Canyon.
FINANCING ACTIVITIES
Cash flow from financing activities for the first quarter of 1997 includes
borrowings under the Company's Revolving Credit Facility of $7.8 million and
$0.7 million raised from the issuance of common stock to the employee savings
plan and through stock option exercises. In the first quarter of 1996, the
Company raised $88.4 million, net of expenses, from the issuance of 6,000,000
common shares in Canada and the United States and made payments on
outstanding long-term debt amounting to $19.2 million.
CONCLUSION
The Company believes that the $6.2 million in cash and cash equivalents on
hand, along with cash flow from operations and funding available under the
Revolving Credit Facility, will be adequate to meet its cash requirements
during the period. However, cash flow from operations is subject to certain
risks that could materially impact available cash. In addition, if the
Company were to violate covenants under its Revolving Credit Facility, its
liquidity could be significantly affected.
SAFE HARBOR
The statements in this report which are not historical facts are forward
looking statements that involve a number of risks and uncertainties. In
addition to the factors discussed above, other factors that could cause
actual results to differ materially include the price of gold and other
commodities and currencies, production, permitting or regulatory delays,
reserve estimation, metallurgical recoveries, exploration success and reserve
growth, litigation, capital costs, and other risks detailed in the Company's
SEC filings.
12
<PAGE>
PART II. OTHER INFORMATION
PEGASUS GOLD INC.
Items 2, 3, 4, and 5 of Part II are omitted from this report as inapplicable.
Item 1. Legal Proceedings
See Part 1 - Item 1 - "Notes to Consolidated Financial Statements."
Note 4, Paragraph 9 under "General" which information is incorporated
herein by reference.
Item 6. Exhibits and Report on Form 8-K
(a) Exhibits
11.0 Computation of Earnings Per Share
27.0 Financial Data Schedule
(b) Reports on Form 8-K:
None
13
<PAGE>
PEGASUS GOLD INC.
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.
PEGASUS GOLD INC.
(Registrant)
Date: May 13, 1997 By: /s/ Phillips S. Baker, Jr.
-- ------------------------------
Phillips S. Baker, Jr.
Vice President, Finance
Chief Financial Officer, and
Principal Accounting Officer
14
<PAGE>
EXHIBIT 11.0
PEGASUS GOLD INC.
COMPUTATION OF EARNINGS PER SHARE
(In Thousands, except for share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
---- ----
<S> <C> <C>
PRIMARY:
Earnings:
Net income (loss) applicable to primary earnings calculation. . . . . ($15) $13
------ ------
------ ------
Weighted average number of shares outstanding:
Common shares and equivalent. . . . . . . . . . . . . . . . . . . . . 41,140 39,441
------ ------
Additional shares outstanding assuming exercise of stock options
reduced by the number of shares which could have been purchased
with the proceeds from the exercise of such options . . . . . . . . . 17 428
------ ------
Weighted average number of shares outstanding, as adjusted. . . . . . . . 41,157 39,869
------ ------
------ ------
Net income (loss) per share - primary . . . . . . . . . . . . . . . . . . ($0.00) $0.00
------ ------
------ ------
FULLY DILUTED:
Earnings:
Net loss applicable to primary earnings per share calculation . . . . ($15) $13
Add:
Interest relating to 6.25% convertible subordinated notes, net of
amount capitalized. . . . . . . . . . . . . . . . . . . . . . . . . . - 239
Amortization of issuance costs relating to 6.25% convertible
subordinated note . . . . . . . . . . . . . . . . . . . . . . . . . . - 130
------ ------
Net income (loss) applicable to fully diluted
earnings per share calculation. . . . . . . . . . . . . . . . . . . . ($15) $382
------ ------
------ ------
Weighted average number of shares outstanding:
Common shares and equivalents . . . . . . . . . . . . . . . . . . . . 41,140 39,441
Additional shares outstanding assuming exercise
of stock options reduced by the number of shares
which could have been purchased with the proceeds
from the exercise of such options. . . . . . . . . . . . . . . . . . 32 429
Additional average shares outstanding
assuming conversion of 6.25% convertible
subordinated notes . . . . . . . . . . . . . . . . . . . . . . . . . 7,709 7,709
------ ------
Weighted average number of shares outstanding, as adjusted. . . . . . . . 48,881 47,579
------ ------
------ ------
Net income (loss) per share - fully diluted(a). . . . . . . . . . . . . . ($0.00) $0.01
------ ------
------ ------
</TABLE>
(a) This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although it is contrary to paragraph 40 of APB Opinion No. 15
because it produces an anti-dilutive result.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 6,161
<SECURITIES> 0
<RECEIVABLES> 25,543
<ALLOWANCES> 0
<INVENTORY> 59,832
<CURRENT-ASSETS> 101,909
<PP&E> 630,435
<DEPRECIATION> 0
<TOTAL-ASSETS> 760,806
<CURRENT-LIABILITIES> 44,435
<BONDS> 0
0
0
<COMMON> 426,052
<OTHER-SE> (64,045)
<TOTAL-LIABILITY-AND-EQUITY> 760,806
<SALES> 48,603
<TOTAL-REVENUES> 48,603
<CGS> 34,356
<TOTAL-COSTS> 43,616
<OTHER-EXPENSES> 3,591
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 435
<INCOME-PRETAX> (42)
<INCOME-TAX> (27)
<INCOME-CONTINUING> (15)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15)
<EPS-PRIMARY> (0.00)
<EPS-DILUTED> (0.00)
</TABLE>
