<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 March 31, 1996
--------------
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from
------------------
to
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ATLAS CORPORATION
-----------------------------------------
(Exact name of registrant as specified
in its charter)
DELAWARE 13-5503312
- ------------------------------- ------------------
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
370 Seventeenth Street, Suite 3050, Denver, CO 80202
----------------------------------------------------
(Address of principal executive offices)
(Zip Code)
303-629-2440
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(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 May 8, 1996, 20,092,270 shares of Common Stock, par value $1 per share,
were issued and outstanding.
Page 1 of 12
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
--------------------
Atlas Corporation
Consolidated Balance Sheets
(In Thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
- -------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and short-term investments $ 9,348 $ 1,607
Cash held in escrow -- 10,000
Receivables 301 365
Inventories 250 250
Investments in marketable equity securities -- 3,629
Prepaid expenses and other current assets 209 199
------------ --------------
Total current assets 10,118 16,050
Property, plant and equipment 51,190 50,765
Less, accumulated depreciation, depletion,
amortization and impairment (44,418) (44,406)
------------ --------------
6,772 6,359
Investment in unconsolidated subsidiary (Note 5) 23,027 23,756
Restricted cash securities 5,376 5,367
Other assets 1,762 1,508
------------ --------------
$ 47,055 $ 53,040
============ ==============
LIABILITIES
Current liabilities:
Trade accounts payable $ 173 $ 1,597
Accrued liabilities 2,646 2,798
Short-term notes payable -- 2,000
------------ --------------
Total current liabilities 2,819 6,395
Long-term debt 13,500 13,500
Other long-term liabilities 9,365 10,184
Minority Interest 729 818
Commitments and contingencies (Note 4)
STOCKHOLDERS' EQUITY
Common Stock 20,092 20,035
Capital in excess of par value 69,277 69,248
Retained deficit (68,594) (67,482)
Currency translation adjustment (133) (100)
Unrealized gain on marketable securities -- 442
------------ --------------
Total stockholders' equity 20,642 22,143
------------ --------------
$ 47,055 $ 53,040
============ ==============
</TABLE>
See notes to consolidated financial statements.
Page 2 of 12
<PAGE>
Atlas Corporation
Consolidated Statements of Operations
(In Thousands, Except Per Share Data, Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------
1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C>
Mining revenue $ -- $ --
Costs and expenses:
Production costs -- --
Shutdown and standby costs 282 --
General and administrative expenses 1,211 566
Exploration and prospecting costs 89 324
------- -------
Gross Operating Loss (1,582) (890)
Other (income) and expense:
Interest expense 423 94
Interest income (161) (155)
Equity in loss of unconsolidated subsidiary (Note 5) 696 648
Gain on sale of marketable securities (1,333) --
Other (6) --
------- -------
Total other (income) and expense (301) 507
------- -------
Loss from continuing operations before income taxes
and minority interest (1,201) (1,477)
Provision for income taxes -- --
------- -------
Loss from continuing operations before minority interest (1,201) (1,477)
Minority interest in net loss of subsidiary 89 --
------- -------
Net loss $(1,112) $(1,477)
======= =======
Per share of common stock:
Net loss $ (0.06) $ (0.08)
======= =======
Average number of common shares outstanding 20,050 18,574
======= =======
</TABLE>
See notes to consolidated financial statements.
Page 3 of 12
<PAGE>
Atlas Corporation
Consolidated Statement of Cash Flows
(In Thousands, Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
1996 1995
- -----------------------------------------------------------------------------------
<S> <C> <C>
Operating activities
Net loss $ (1,112) $ (1,477)
Add (deduct) non-cash items:
Depreciation, depletion, amortization 8 7
Equity in loss of unconsolidated subsidiary 696 648
Forfeiture of deposit -- 525
Gain on sale of marketable securities (1,333) --
Other (3) 22
Shutdown and standby costs -- (76)
Net change in non-cash items related to operations (Note 3) (1,535) (1,796)
-------- --------
Cash used in continuing operations (3,279) (2,147)
-------- --------
From discontinued operations:
Change in receivables -- 400
Change in estimated uranium reclamation costs (785) (364)
-------- --------
Cash provided by (used in) discontinued operations (785) 36
-------- --------
Cash used in operating activities (4,064) (2,111)
-------- --------
Investing activities:
Additions to property, plant and equipment (422) (168)
Proceeds from issuance of debt released from escrow 10,000 --
Investment in marketable securities -- (3,000)
Proceeds from sale of marketable securities 4,520 --
Other -- (25)
-------- --------
Cash provided by (used in) investing activities 14,098 (3,193)
-------- --------
Financing activities:
Repayment of short-term note (2,000) --
Costs associated with issuance of debt (283) --
-------- --------
Cash used in financing activities (2,283) --
-------- --------
Increase (decrease) in cash and cash equivalents 7,751 (5,304)
Cash and cash equivalents:
Beginning of period 1,607 11,789
-------- --------
End of period $ 9,358 $ 6,485
======== ========
</TABLE>
See notes to consolidated financial statements.
Page 4 of 12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying 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. There has not been any change in the
Company's significant accounting policies for the periods presented.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
The results for these interim periods are not necessarily indicative of
results for the entire year. These statements should be read in conjunction
with the financial statements and notes thereto included in the Company's
Annual Report of Form 10-K for the fiscal year ended December 31, 1995.
2. There has 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
March 31,
--------------------------
1996 1995
---------- ----------
<S> <C> <C>
Add (deduct) items other than cash:
Trade accounts and other receivables $ 64 $ (30)
Inventories -- 366
Prepaid expenses and other current assets (10) 14
Other assets 20 (26)
Trade accounts payable (1,423) (345)
Accrued liabilities 268 (1,760)
Other long-term liabilities (454) (15)
---------- ---------
$ (1,535) $ (1,796)
========== =========
</TABLE>
4. 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 March 31, 1996 was $3,728,000, $800,000 of which is included in current
liabilities. 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 as 56% of its tailings were generated under AEC contracts. The
Company believes
Page 5 of 12
<PAGE>
the accrual, when combined with anticipated reimbursements under the Title X
program, is sufficient to cover future reclamation costs.
The Company has submitted three claims to the Department of Energy ("DOE")
under Title X for reclamation costs incurred from the fiscal year ended June
30, 1980 through March 31, 1996. The status of the three claims is as
follows:
<TABLE>
<CAPTION>
Anticipated
Reimburse Actual Reim-
Gross Claim Gross Amount -ment bursement Anticipated
Claim Date Amount Approved Receivable Payments Balance Due
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
July 7, 1994 $4,999,000 $ 4,510,000 $2,530,000 $1,396,000 $1,134,000
June 16, 1995 3,638,000 2,627,000/1/ 1,474,000 482,000 992,000
May 1, 1996 3,998,000 --/2/ 2,243,000 -- 2,243,000
- -----------------------------------------------------------------------------------------------------------------------------------
Totals $6,247,000 $1,878,000 $4,369,000
====================================================================================================================================
</TABLE>
/1/ Preliminary approval.
/2/ Approval pending.
Timing of the remaining payments for approved reimbursements is a function of
Congressional appropriation of Title X funding.
5. The Company reports the financial results of Granges Inc., a Canadian mining
company in which Atlas holds a 27.5% ownership interest, under the equity
method. A summarized Statement of Operations (Unaudited, US dollars,
Canadian GAAP, in thousands) of Granges for the three month periods ending
March 31, 1996 and March 31, 1995 are set forth below:
<TABLE>
<CAPTION>
March 31, March 31,
1996 1995
---------- ---------
<S> <C> <C>
Revenue $ 6,669 $11,702
Cost of sales 5,616 8,812
Depreciation, depletion & amortization 1,114 893
------- -------
Gross margin $ (61) $ 1,997
Net income (loss) $(1,966) $ 1,050
======= =======
</TABLE>
Under the equity method, the Company reported losses of $696,000 and $648,000
for the three month periods ended March 31, 1996 and 1995, respectively. The
loss recorded for the three months ended March 31, 1995 was recorded on a
three month lag, and therefore was based on Granges' loss for the three months
ended December 31, 1994. 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.
Page 6 of 12
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations
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Capital Resources and Liquidity
The Company currently controls a 27.5% interest in Granges Inc., a Canadian
gold mining company; three gold mining properties -- Gold Bar located in
central Nevada, Musgrove Creek located in Idaho and Doby George located in
northeast Nevada; the Tucker Hill perlite property; and has an option to
purchase another gold mining property, Commonwealth, which is located in
Arizona. The Company is also responsible for the reclamation of a uranium
processing site located near Moab, Utah, and an asbestos site located near
Coalinga, California.
Granges Inc. and Exchangeable Debentures
For the three months ended March 31, 1996, Granges reported revenue of $6.7
million and gold production of 16,200 ounces compared to revenue of $11.7
million and gold production of 27,500 ounces for the same period the previous
fiscal year. The decrease in revenue was attributed to lower production from
its Hycroft mine which was a result of lower than normal recovery from a clay-
rich ore section combined with delayed recovery from a significant volume of
run-of-mine ore where solution application was held up until haulage roads
could be re-routed off of the fresh ore. Granges reported that direct
operating costs increased form $218 per ounce for the three months ended March
31, 1995 to $562 per ounces for the same quarter of 1996. This increase was
attributed to lower gold production and an increase in the carrying value of
product inventory. Granges reported a net loss of $1,966,000, or $(.04) per
share, for the three months ended March 31, 1996 compared to net income of
$1,050,000, or $.03 per share, for the three months ended March 31, 1995.
On November 10, 1995, the Company issued in escrow $10.0 million 7%
Exchangeable Debentures ("Debentures") due October 25, 2000. Upon
satisfaction by Atlas of certain registration and qualification requirements
on February 8, 1996, the transaction closed, which released the Debentures and
payment therefor. The holders of the Debentures have the right to exchange
their Debentures, at any time prior to the repayment of the Debentures by the
Company, for common shares of Granges currently held by the Company at a rate
of 42.5 shares of Granges for each $100 of principal amount of Debentures
surrendered for exchange. Atlas' current ownership in Granges of 27.5% would
decrease to 18.3% following a complete exchange of the debentures.
Gold Properties
The Company intends to utilize a substantial portion of the proceeds from the
exchangeable debentures to partially fund the resumption of mining operations
at Atlas' Gold Bar Project, located in Eureka, Nevada. The project has a gold
reserve of 2.7 million tons at an average grade of .070 ounces per ton, or
187,000 contained ounces. The Company signed an agreement in principal with a
contract mining company that provides the terms for contract mining services
as well as the terms under which the mining firm will guarantee $5 million in
Page 7 of 12
<PAGE>
project financing. Resumption of mining will depend on finalization of the
contract mining agreement, the obtaining of the requisite project financing
and the establishment of an acceptable hedging program. Pending satisfactory
resolution of these conditions, mining could resume in summer 1996. Should
mining recommence, a six month period of overburden removal and stockpiling
would be required prior to the resumption of milling activities. The current
mine plan estimates total gold production of 187,000 contained ounces over a
nominal three year period.
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 ounces per ton. The Company anticipates the completion
of a delineation and confirmation drilling program by the early summer 1996 on
a portion of this resource. As part of the program designed to accelerate
possible development of the property, the Company intends to submit a Plan of
Operations to the appropriate federal and state agencies for permitting within
the next six months. Significant environmental baseline data for the property
has already been collected.
In March 1996, Atlas was reassigned the Musgrove Creek property located in
Idaho which had been leased, along with the Grassy Mountain property located
in Oregon, during 1992 to another mining company. The Company is evaluating
all available project information and is considering several options for
advancing the property including exploration, joint ventures and sale.
Perlite
The Company is continuing to pursue development of the Tucker Hill Perlite
Project. A final EIS was issued in April 1996 which resulted in the approval
of the Company's plan of operations for the Tucker Hill perlite quarrying
operation. Upon completion of required archeological testing and final
approval of the associated mitigation plan, construction will be completed
with production targeted for late summer.
On January 16, 1996, Atlas announced that it had entered into a letter of
intent providing for the purchase by Phoenix Financial Holdings Inc., a
Canadian company in which Atlas has a 51% ownership interest, of the Tucker
Hill Project in return for $1 million cash, the equivalent of $1 million in
Phoenix common shares and a 2% royalty (as a result of which Atlas will hold a
67% interest in Phoenix). The purchase has been approved by a committee of
independent Phoenix board members but is awaiting regulatory approval and
approval by a majority of the minority shareholders of Phoenix at its annual
general meeting scheduled for June 1996.
Reclamation Activities
On January 30, 1996, the Nuclear Regulatory Commission ("NRC"), the federal
agency responsible for overseeing decommissioning and reclamation of Atlas'
uranium site located outside of Moab, Utah, released for public comment a
draft Environmental Impact Statement
Page 8 of 12
<PAGE>
("EIS") and draft Technical Evaluation Report ("TER") on reclamation of the
site. The documents assess Atlas' final reclamation plan for the tailings pile
generated by Atlas' uranium mill from 1956 to 1984. The NRC will use the EIS,
which was prepared by an independent third party contractor, to evaluate
environmental impacts of Atlas' proposal for reclamation of the tailings in
place. The final EIS and associated TER (Record of Decision) should be
available mid-to-late 1996, following the NRC's incorporation of its responses
to public comments. The NRC staff's preliminary conclusion is that the Atlas'
proposal for reclaiming the tailings at the existing location is an acceptable
alternative and meets all technical and economic criteria.
Remedial activities at the Company's asbestos mine and millsite located near
Coalinga, California, which began in October of 1994, were substantially
completed in the fall of 1995. The project is currently awaiting final
inspection and approval. The Company believes that its existing accrual is
adequate to cover future remediation costs.
Liquidity
Working capital was $7,299,000 at March 31, 1996 and $4,329,000 at March 31,
1995. The Company's current ratio at March 31, 1996 was 3.59 to 1, compared
to 2.54 to 1 at March 31, 1995. The increase in working capital reflects the
proceeds from the March 9, 1996 sale of 2.4 million Dakota Mining Corporation
common shares and the remaining proceeds from the exchangeable debenture.
During the last quarter the Company funded its operating losses, working
capital requirements, and other capital needs from the net proceeds of the
$10.0 million exchangeable debenture and from the sale of its investment in
Dakota Mining Corp. Future capital requirements will be satisfied through
existing cash reserves, project financing, as well as the sale of other assets
and/or existing working capital. Longer term capital requirements will be
funded from future operating cash flows and, as required, from the issuance of
additional debt or equity and/or the sale of other assets.
Results of Operations
Due to the suspension of Gold Bar milling operations in September 1994, the
Company had no mining revenue or gold production for the three months ended
March 31, 1996 or 1995.
Estimated shutdown and standby costs of $282,000 were charged to operations
for the three month period ended March 31, 1996. No charges were recorded in
the corresponding period of the prior year because estimated shutdown costs
for the period from September 1994 through the end of the fiscal year (June
30, 1995) were accrued when milling operations were suspended. 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 $324,000 to $89,000, or by 73%, from the
three months ended March 31, 1995 to the three months ended March 31, 1996.
This decrease reflects a four person reduction in the exploration staff and
the current focus of the exploration staff on projects with near term
development potential, the associated costs of which are being capitalized.
Page 9 of 12
<PAGE>
General and administrative expenses increased from $566,000 to $1,211,000, or
by 114%, for the three months ended March 31, 1996 from the three months ended
March 31, 1995. This increase was a result of employee bonuses, the additional
general and administrative costs resulting from the consolidation of Phoenix,
which was acquired in November 1995, an intensified property acquisition
program, and the costs associated with the relocation of the corporate office.
The Company's capital expenditures in the quarter ended March 31, 1996, of
$422,000, were for development of the Tucker Hill, Doby George, and
Commonwealth properties. Capital expenditures for the quarter ended March 31,
1995, of $168,000, were for the Company's Gold Bar Project and the development
of its Tucker Hill Perlite Project.
Business Combination with MSV Resources Inc.
The Company announced on March 6, 1996 that it had agreed to merge with MSV
Resources Inc. ("MSV"), a Canadian mining company, through a share exchange
tender offer. Atlas was notified by MSV on April 11, 1996 that there had been
a change in both the management and Board composition of the company and was
subsequently notified on April 12, 1996 that MSV was terminating all further
discussions regarding a possible business combination. Atlas considers certain
actions by MSV to constitute a breach of the publicly announced merger
agreement, and intends to explore available avenues of legal redress.
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
--------------------------------
Page 10 of 12
<PAGE>
a. Exhibits
None
b. Reports on Form 8-K
Report on Form 8-K dated January 22, 1996 containing the Company's
news release with respect to its sale to Phoenix Financial Holdings
of the Tucker Hill Project.
Report on Form 8-K dated January 31, 1996 containing the Company's
news release with respect to the release of the draft EIS and TER
for the Moab, Utah uranium processing site.
Report on Form 8-K dated March 8, 1996 containing the Company's
news release with respect to the signing of a merger agreement with
MSV Resources Inc.
Report on Form 8-K dated March 25, 1996 containing the Company's
news release with respect to the revision of the March 8, 1996
merger agreement with MSV Resources Inc.
Page 11 of 12
<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: May 15, 1995
------------
Page 12 of 12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ATLAS
CORPORATION MARCH 21, 1996 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> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 9,358
<SECURITIES> 0
<RECEIVABLES> 301
<ALLOWANCES> 0
<INVENTORY> 250
<CURRENT-ASSETS> 10,118
<PP&E> 51,190
<DEPRECIATION> 44,418
<TOTAL-ASSETS> 47,055
<CURRENT-LIABILITIES> 2,819
<BONDS> 13,500
0
0
<COMMON> 20,092
<OTHER-SE> 550
<TOTAL-LIABILITY-AND-EQUITY> 47,055
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 371
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 423
<INCOME-PRETAX> (1,112)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,112)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,112)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
