<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
COMMISSION FILE NO. 1-2714
(Mark One)
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 1995
-------------------
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ________________________
to ________________________
ATLAS CORPORATION
--------------------------------------
(Exact name of registrant as specified
in its charter)
DELAWARE 13-5503312
- ------------------------------- -------------------
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
370 Seventeenth Street, Suite 3150, Denver, CO 80202
-----------------------------------------------------
(Address of principal executive offices)
(Zip Code)
303-825-1200
-------------------------------
(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
--- ---
As of November 10, 1995, 20,034,743 shares of Common Stock, par value $1 per
share, were issued and outstanding.
Page 1 of 11
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
--------------------
ATLAS CORPORATION AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Unaudited)
<TABLE>
<CAPTION>
September 30, June 30,
1995 1995
------------- --------
ASSETS
- ------
<S> <C> <C>
Current assets:
Cash and short-term investments $ 2,581 $ 4,453
Receivables 169 131
Inventories 250 250
Prepaid expenses and other current assets 3,882 4,281
------- -------
Total current assets 6,882 9,115
Property, plant and equipment 47,813 47,686
Less, accumulated depreciation, depletion,
amortization and impairment (44,404) (44,661)
-------- -------
3,409 3,025
Investment in unconsolidated subsidiary(Note 5) 25,140 25,452
Restricted cash and securities 5,634 5,659
Other assets 231 246
-------- -------
$ 41,296 $ 43,497
======== ========
LIABILITIES
- -----------
Current liabilities:
Trade accounts payable $ 358 $ 601
Accrued liabilities 2,657 2,903
------- -------
Total current liabilities 3,015 3,504
Convertible debenture 3,500 3,500
Other long-term liabilities 11,848 11,660
Commitments and contingencies (Note 4)
STOCKHOLDERS' EQUITY
- ---------------------
Common stock 18,635 18,578
Capital in excess of par value 68,723 68,678
Retained deficit (64,959) (63,216)
Currency translation adjustment 92 (103)
Unrealized gain on marketable securities 442 896
-------- -------
Total stockholders' equity 22,933 24,833
-------- -------
$ 41,296 $ 43,497
======== ========
</TABLE>
See notes to consolidated financial statements.
Page 2 of 11
<PAGE>
ATLAS CORPORATION AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data, Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
------------------
1995 1994
------ -------
<S> <C> <C>
Mining revenue $ -- $ 2,328
Costs and expenses:
Production costs -- 3,031
Shutdown and standby costs 328 1,275
---- ------
Loss from operations (328) (1,978)
Other (Income) and expense:
Exploration costs 159 790
General and administrative 766 572
Interest expense 94 116
Interest income (111) (63)
Equity in loss of unconsolidated subsidiary (Note 5) 507 364
------- -------
Loss from continuing operations before income taxes (1,743) (3,757)
Provision for income taxes -- --
------- -------
Net loss $(1,743) $(3,757)
======= =======
Per share of common stock:
Net loss $ (.09) $ (.31)
======= =======
Average number of common
shares outstanding 18,622 12,169
======= =======
</TABLE>
See notes to consolidated financial statements.
Page 3 of 11
<PAGE>
ATLAS CORPORATION AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands, Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
------------------
1995 1994
-------- -------
<S> <C> <C>
Operating activities
Net loss $ (1,743) $ (3,757)
Add (deduct) non-cash items:
Depreciation, depletion, amortization 13 367
Equity in loss of unconsolidated subsidiary 507 364
Other 102 --
Shutdown and standby costs -- 1,091
Net change in non-cash items
related to operations (Note 3) (603) 1,808
-------- --------
Cash used in continuing operations (1,724) (127)
-------- --------
From discontinued operations:
Change in receivables -- 475
Change in estimated uranium reclamation costs 249 (2)
-------- --------
Cash provided by discontinued operations 249 473
-------- --------
Cash provided by (used in) operating activities (1,475) 346
-------- --------
Investing activities:
Additions to property, plant and equipment (397) (273)
Investment in unconsolidated subsidiary -- (37,407)
-------- --------
Cash used in investing activities (397) (37,680)
-------- --------
Financing activities:
Proceeds from short-term note - 3,235
Repayment of short-term note - (450)
Proceeds from the issuance of common stock - 35,732
Costs associated with the issuance
of debenture and stock -- (2,106)
-------- --------
Cash provided by financing activities -- 36,411
-------- --------
Decrease in cash and cash equivalents (1,872) (923)
Cash and cash equivalents:
Beginning of period 4,453 3,767
-------- --------
End of period $ 2,581 $ 2,844
======== ========
</TABLE>
See notes to consolidated financial statements.
Page 4 of 11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The financial information contained in this report reflects all adjustments
which are of a normal recurring nature that the Company considers necessary
for a fair presentation of the results of operations for the periods
indicated.
2. There have been no dilution of earnings per share as a result of the
exercise of Option Warrants to Purchase Common Stock or stock options during
the periods presented.
3. The components of the net change in items other than cash related to
operating activities as reflected in the Consolidated Statements of Cash
Flows are as follows:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
--------------------
1995 1994
-------- -------
<S> <C> <C>
Add (deduct) items other than cash:
Receivables $ (38) $ (72)
Inventories 0 295
Prepaid expenses and other current assets (54) (216)
Restricted cash/investments and other assets 39 3,001
Trade accounts payable (242) (719)
Accrued liabilities (246) (300)
Other long-term liabilities (62) (181)
------ ------
$ (603) $1,808
====== ======
</TABLE>
4. During fiscal year 1988, the United States Environmental Protection Agency
notified the Company that it was one of several potentially responsible
parties for cleanup costs associated with the Company's former asbestos mine
and mill site ("site") near Coalinga, California, and in the City of
Coalinga. Following a prolonged period of inquiry and administrative
process, the Company, and other responsible parties, received approval of
the remedial action plan for the site in 1994. Remediation construction
work, which commenced in October 1994, will be completed by the end of 1995.
The Company is obligated to decommission and reclaim its uranium mill site
located near Moab, Utah. The Company discontinued its uranium operations and
permanently shut down its uranium operations in 1987 and accrued estimated
shut-down and reclamation costs of $17,406,000. The balance of this accrual
at September 30, 1995 was $5,592,000. Title X of "The Comprehensive National
Energy Policy Act" ("Title X"), enacted in October 1992, provides for the
reimbursement of decommissioning and reclamation expenses related to uranium
sites with tailings generated by Atomic Energy Commission (AEC) contracts.
The Company's uranium reclamation costs will be reduced by this government
cost sharing program since 56% of its tailings were generated under AEC
contracts. The Company believes the accrual, when combined with anticipated
reimbursements under the Title X program is sufficient to cover future
reclamation costs.
Since July 1994, the Company has submitted $8 million of prior costs claims
to the Department of Energy ("DOE") under Title X. If the $8 million in
claims was approved in
Page 5 of 11
<PAGE>
full, the Company would receive total reimbursements under Title X of $4.5
million. As of November 10, 1995, the DOE had approved $7 million of the
Company's claims with corresponding reimbursements of $3.9 million. To date,
only a portion, $1.9 million, of the reimbursements has been received by the
Company. The Company currently expects that the $1 million currently
disallowed will be reviewed and approved by the DOE in the summer of 1996.
5. On August 15, 1994, Atlas completed the purchase from M.I.M. (Canada) Inc.
of 12,694,200 common shares of Granges Inc. ("Granges"), a Canadian mining
company, which constituted a 37.2% interest. On May 1, 1995, Granges
amalgamated with its 50.5% subsidiary, Hycroft Resources and Development
Corporation, with the resultant amalgamated company being named Granges Inc.
The effect of the amalgamation was to reduce the Company's ownership
interest in Granges to 27.7%.
The Company reports the financial results of Granges under the equity
method. A summarized Statement of Operations (Unaudited, US dollars, in
thousands) of Granges for the three month periods ending September 30, 1995
and September 30, 1994 are set forth below:
September 30, September 30,
1995 1994
------------- --------------
Revenue $10,166 $11,229
Cost of sales 7,962 8,686
Depreciation, depletion & amortization 1,271 1,384
------- -------
Gross margin $ 933 $ 1,159
Net income (loss) $ 4,264 $ (840)
======= =======
Under the equity method, the Company reported losses of $507,000 and
$364,000 for the three month periods ended September 30, 1995 and 1994,
respectively. Cost in excess of Atlas' share of Granges' net assets were
allocated based upon their relative market value. Excess costs related to
producing properties is being amortized on a unit of production (gold
ounces) basis and is included in the reported loss. During the three months
ended September 30, 1995, Granges reported a gain on the sale of mineral
properties of US $4,923,000. Atlas' proportional share of this gain was
eliminated by the allocation of excess basis.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OF OPERATIONS
-------------
CAPITAL RESOURCES AND LIQUIDITY
The Company currently controls a 27.7% interest in Granges Inc., a Canadian
gold mining company, two gold mining properties, Gold Bar and Doby George (the
latter acquired on October 25, 1995), the Tucker Hill perlite property, as
well as having two gold properties under option, Commonwealth and Dixie
Comstock. The Company is also responsible for two properties currently
undergoing reclamation, a uranium processing site located near Moab, Utah, and
an asbestos site located near Coalinga, California.
Page 6 of 11
<PAGE>
GRANGES INC.
For the three months ended September 30, 1995, Granges reported production of
25,444 ounces of gold compared to 28,195 ounces for the same period the previous
fiscal year. Total tons mined, as reported by Granges, increased during the
quarter to 9,270,000 from 6,019,000 the same quarter the previous year due to a
increased mining fleet and the processing of run-of-mine ore. Mining cost per
ton, as reported by Granges, decreased to $.54 per ton from $.69 per ton in the
same period previous year. During the quarter, Granges reported a Cdn. $7.2
million gain on the sale of mineral properties.
On October 4, 1995, Atlas and Granges entered into an agreement in principle
setting forth the principle terms for completion of an exploration and
development mining venture agreement on approximately 34 square miles of the
Gold Bar property. A definitive agreement is expected to be completed by
November 30, 1995. It will require Granges, in order to earn a 50% undivided
interest in not more than 15 square miles, to expend not less than $2.5 million
prior to September 29, 1998 on exploration and development. In addition, Granges
must produce a report identifying and recommending development of an economic
gold mineral deposit of not less than 300,000 ounces of gold ("Report"). Granges
would be the manager of the venture during the initial stages. After Granges
completes its initial expenditures and the Report, Atlas would become the
manager of the venture. Additionally, at the time of earn in, Atlas would grant
throughput rights of not less than 50% of the capacity of Atlas' existing Gold
Bar mill facility to the venture. Atlas would be the operator and charge the
venture certain fees for processing as well as depreciation of the milling
complex.
On October 25, 1995, the Company entered into an agreement to privately place up
to $11 million of debentures which are convertible, at the option of the
purchaser, into a portion of Atlas' holdings of Granges common stock at a rate
of $2.35 per Granges share. The five year debentures will pay a 7 percent annual
rate of interest and are not callable by Atlas during the first three years. The
Company has also agreed to pledge 8,474,576 of the 12,714,200 shares of Granges
held by the Company as security for the debentures. The agreement provides for a
ninety day period from the date of closing for registration and qualification in
Canada and the United States of the debentures and the Granges shares issuable
upon exchange of the debentures, and provides for penalties if such
registrations and qualifications are not timely completed. The debentures are
to be registered on the Vancouver Stock Exchange and, (on a best efforts basis)
on an American stock exchange.
GOLD PROPERTIES
A substantial portion of the proceeds from the convertible debentures are
expected to be used to fund the resumption of mining operations by the end of
1995 at Atlas' Gold Bar Project, located in Eureka, Nevada. The project has a
gold reserve of 3.1 million tons at an average grade of .063 ounces per ton, or
192,000 contained ounces. Milling operations were suspended in September 1994
after the depletion of stockpiled ores. The Company has signed an agreement in
principal with a contract mining company the provides the terms for contract
mining services as well as the terms under which the mining firm will guarantee
$5 million in project financing. The Company hopes to have definitive agreements
completed by the end of November. A six month period of overburden removal and
stockpiling will be required prior to the resumption of milling activities.
Annual production from Gold Bar is currently expected to average 53,000 ounces
of gold over a three year period.
Page 7 of 11
<PAGE>
On October 25, 1995, the Company acquired the Doby George property, located in
Elko County, Nevada, from Independence Mining Company for 1.4 million shares of
Common Stock and $400,000. The property has an indicated resource, as determined
by an independent engineering report, of 3.7 million tons at an average grade of
.06 containing approximately 220,000 ounces. The Company anticipates the
completion of a delineation and confirmation drilling program by the end of 1995
on a portion of this resource. In an effort to achieve production from the
property within two years the Company intends to submit a Plan of Operations to
the appropriate federal and state agencies for permitting within the next six to
nine months. Significant environmental baseline data for the property has
already been collected.
On September 7, 1995, the Company announced that it had entered into letter
agreements for one year purchase options on the Commonwealth and Dixie Comstock
properties. Both the Commonwealth project, located in central Arizona, and Dixie
Comstock project, located in western Nevada, are late stage exploration
properties. Over the next year the Company is required to spend $425,000 on
exploration and development at the Commonwealth property.
PERLITE
The Tucker Hill Perlite Project is currently in the permitting phase. An
Environmental Impact Statement has been prepared and a draft is currently open
for public comment. The Company anticipates that it will be able to resolve any
concerns brought forth during the public comment period and currently
anticipates receiving the final operating permits by the end of February 1996.
Construction at the milling site, which is located in Lakeview, Oregon, is fully
permitted and preliminary work began in October, 1995. The Company will monitor
the progress of the operating permits and adjust the mill construction schedule
accordingly. Contingent upon permitting, the Company anticipates the project to
be fully operational by July of 1996.
RECLAMATION ACTIVITIES
The Company continues to vigorously pursue the approval of its proposed
reclamation plan at its Moab, Utah, uranium millsite which calls for the mill
tailings to be reclaimed in place. While the U.S. Nuclear Regulatory Commission
("NRC") is reviewing the merits of the proposed reclamation plan, the Company
continues to perform decommissioning and interim cover placement. The Company
anticipates completing the placement of an interim cap on the tailings facility
within the next month and has almost completed the decommissioning and
dismantling of all milling and administrative facilities. The NRC has informed
the Company of its intention to issue in January 1996 a draft Technical
Evaluation Report ("TER"), the NRC's decision document, on the Company's
proposed reclamation plan in conjunction with a draft Environmental Impact
Statement ("EIS") for public comment. The Company currently expects that the
results of the TER will support reclamation of the tailings in place.
Remedial activities at the Company's asbestos mine and millsite located near
Coalinga, California, which began in October of 1994, are anticipated to be
completed by the end of calendar year 1995.
Page 8 of 11
<PAGE>
LIQUIDITY
During the last year the Company has funded its operating losses, working
capital requirements, and interim capital from the proceeds of the August 15,
1994, and December 15, 1994, private placements of equity securities. Future
capital requirements will be satisfied through the issuance of the convertible
debentures and Gold Bar financing guarantee as discussed above, as well as the
sale of noncore assets and/or existing working capital. Longer term capital
requirements will be funded from future operating cash flows and may be
generated from the issuance of additional debt or equity and/or the sale of
noncore assets.
RESULTS OF OPERATIONS
Due to the suspension of milling operations at the Gold Bar Project, the
Company had no mining revenue or gold production for the three months ended
September 30, 1995. This compares to mining revenue of $2,328,000 and gold
production of 6,021 ounces generated from Gold Bar for the three month period
ended September 30, 1994.
Production costs of $3,031,000 and estimated shutdown and standby costs of
$1,275,000 were charged to operations for the three month period ended September
30, 1994. During that same period, production costs rose to 130% of revenue, or
$504 per ounce, due to the processing of low grade ore from depleting
stockpiles. The shutdown and standby costs were accrued through the end of the
fiscal year, June 30, 1995. For the three months ended September 30, 1995,
shutdown and standby costs of $328,000 were incurred. Due to the anticipated
resumption of operations at the Gold Bar facility, standby costs for future
periods have not been accrued.
Exploration costs decreased from $790,000 to $159,000, or by 80%, from the three
months ended September 30, 1994 to the three months ended September 30, 1995.
This was the result of the completion of underground exploration at Gold Bar in
September 1994 and as a result of joint venture agreements being signed on the
claim block in the summer and fall of 1994.
General and administrative expenses increased from $572,000 to $766,000, or by
34%, for the three months ended September 30, 1995 from the three months ended
September 30, 1994. This increase was a result of an intensified property
acquisition program and relocation expenses.
The Company had a net loss of $1,743,000 for the three month period ended
September 30, 1995, compared to a net loss of $3,757,000 for the comparable
quarter in the prior fiscal year. The prior year fiscal period loss reflects an
additional $1,650,000 loss from operations over the current year due to high
production costs and shutdown and standby costs accrued as discussed above.
Working capital was $3,867,000 at September 30, 1995 and $(4,122,000) at
September 30, 1994. The Company's current ratio at September 30, 1995 was 2.28
to 1, compared to .54 to 1 at September 30, 1994. Working capital reflects the
remaining proceeds from the December 15, 1994 private placement.
Page 9 of 11
<PAGE>
The Company's capital expenditures in the quarter ended September 30, 1995
were $397,000, all of which were for the Company's gold operations and the
further development of its Tucker Hill perlite deposit. Capital expenditures
for the quarter ended September 30, 1994 were $273,000 all of which were for
the Company's Gold Bar Project and the development of its Tucker Hill Perlite
Project. Funds required for the further development of Tucker Hill will, to
the extent possible, be obtained from project borrowings and/or private
placements.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
None
Item 2. Changes in Securities
---------------------
None
Item 3. Defaults upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a. Exhibits
None
b. Reports on Form 8-K
On October 4, 1995, a Form 8-K was filed reporting that the Company
had entered into an agreement to privately place up to $15 million
in five year convertible dentures, conversion of which, is into
Granges Inc. common shares currently held by the Company.
Page 10 of 11
<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.
ATLAS CORPORATION
-----------------
(Registrant)
/s/ Gerald E. Davis
-----------------------------
Gerald E. Davis
President
Date: November 13, 1995
-----------------
Page 11 of 11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ATLAS
CORPORATION SEPTEMBER 30, 1995 CONSOLIDATED FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 81
<SECURITIES> 2,500
<RECEIVABLES> 169
<ALLOWANCES> 0
<INVENTORY> 250
<CURRENT-ASSETS> 6,882
<PP&E> 47,813
<DEPRECIATION> 44,404
<TOTAL-ASSETS> 41,296
<CURRENT-LIABILITIES> 3,015
<BONDS> 3,500
<COMMON> 18,635
0
0
<OTHER-SE> 4,298
<TOTAL-LIABILITY-AND-EQUITY> 41,296
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 328
<TOTAL-COSTS> 328
<OTHER-EXPENSES> 1,321
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 94
<INCOME-PRETAX> (1,743)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,743)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,743)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
