<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, 1998
--------------
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 3140, Denver, CO 80202
-----------------------------------------------------
(Address of principal executive offices)
(Zip Code)
303-629-2440
--------------------
(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, 1998, 27,360,253 shares of Common Stock, par value $1 per
share, were issued and outstanding.
Page 1 of 12
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
--------------------
ATLAS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in Thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
- --------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 91 $ 583
Accounts receivable - Trade 746 542
Title X receivable (Note 5) 1,100 1,100
Accounts receivable - Other 370 541
Inventories 923 965
Prepaid expenses and other current assets 97 37
----------- ------------
Total current assets 3,327 3,768
----------- ------------
Property, plant and equipment 60,570 60,427
Less, accumulated depreciation, depletion,
amortization and impairment (46,242) (46,027)
----------- ------------
14,328 14,400
Restricted cash and securities 6,181 6,208
Asset held for sale 3,191 3,000
Title X receivable (Note 5) 14,765 14,765
Other assets 131 175
----------- ------------
$ 41,923 $ 42,316
=========== ============
LIABILITIES
Current liabilities:
Trade accounts payable $ 2,242 $ 2,209
Accrued liabilities 2,330 2,189
Short-term debt (Note 5) 5,754 6,017
Deferred gain on joint venture agreement 750 750
Current portion of estimated uranium
reclamation costs 800 800
----------- ------------
Total current liabilities 11,876 11,965
Long-term debt 1,917 1,917
Other liabilities, long-term 27,889 27,903
Commitments and contingencies (Note 5)
STOCKHOLDERS' EQUITY
Common stock 27,360 27,282
Capital in excess of par value 66,672 66,735
Deficit (93,791) (93,486)
----------- ------------
Total stockholders' equity 241 531
----------- ------------
$ 41,923 $ 42,316
=========== ============
See notes to consolidated financial statements.
</TABLE>
Page 2 of 12
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ATLAS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data, Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1998 1997
======================================================================
<S> <C> <C>
Mining revenue $ 1,136 $ 654
Costs and expenses:
Production costs 973 614
Depreciation, depletion and amortization 200 250
Shutdown and standby costs 75 107
General and administrative expenses 324 542
Exploration and prospecting costs 22 557
---------- --------
Gross Operating Loss (458) (1,416)
---------- --------
Other (income) and expense:
Interest expense 159 310
Interest income (74) (114)
Loss on asset held for sale -- 57
Other (238) (103)
---------- --------
Loss from continuing operations
before income
Taxes (305) (1,566)
Provision for income taxes -- --
---------- --------
Net loss (305) (1,566)
---------- --------
Other comprehensive income, net of tax:
Unrealized holding loss on securities -- (4,197)
---------- --------
Comprehensive loss $ (305) $ (5,763)
========== ========
Basic and diluted earnings per share
of common stock:
Net loss $ (0.01) $ (0.06)
========== ========
Average number of common shares outstanding 27,344 24,193
========== ========
See notes to consolidated financial statements.
</TABLE>
Page 3 of 12
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ATLAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands, Unaudited)
Three Months Ended
March 31,
----------------------------
<TABLE> 1998 1997
<CAPTION>
================================================================================
<S> <C> <C>
Operating activities:
Net loss $ (305) $ (1,566)
Add (deduct) non-cash items:
Depreciation, depletion, amortization 216 261
Gain on joint venture agreement (188) --
Loss on asset held for sale -- 57
Other -- 30
Net change in non-cash items
related to operations (Note 3) 488 807
-------- ----------
Cash provided by (used in) continuing
operations 211 (411)
-------- ----------
From discontinued operations:
Change in estimated uranium reclamation costs (105) 366
-------- ----------
Cash provided by (used in)
discontinued operations (105) 366
-------- ----------
Cash provided by (used in)
operating activities 106 (45)
-------- ----------
Investing activities:
Additions to property, plant and equipment (194) (148)
Proceeds from sale of equipment 50 --
Investment in asset held for sale (191) (740)
-------- ----------
Cash provided by (used in)
investing activities (335) (888)
-------- ----------
Financing activities:
Net increase (repayment) of short-term debt (263) 99
-------- ----------
Cash provided by (used in)
financing activities (263) 99
-------- ----------
Decrease in cash and cash equivalents (492) (834)
Cash and cash equivalents:
Beginning of period 583 1,022
-------- ----------
End of period $ 91 $ 188
======== ==========
See notes to consolidated financial statements.
</TABLE>
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
significant accounting policies of Atlas Corporation (the "Company") 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 consolidated financial statements and notes thereto included in the
Company's Annual Report of Form 10-K for the fiscal year ended December 31,
1997.
Certain of the comparative figures have been reclassified to conform with the
current year's presentation.
2. In 1997, the Financial Accounting Standards Board issued Statement No. 128,
"Earnings per Share." The new statement replaced the calculation of primary
and fully diluted earnings per share with basic and diluted earnings per
share. Unlike primary earnings per share, basic earnings per share excludes
any dilutive effects of options, warrants and convertible securities. Diluted
earnings per share is similar to the previously reported fully diluted
earnings per share. Adoption of the new standard, which involves restatement
of earnings (loss) per share amounts for prior periods, had no material
effect on the Company's earnings (loss) per share amounts for all 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:
Three Months Ended
March 31,
------------------
1998 1997
==============================================================================
Add (deduct) items other than cash:
Accounts receivable $ (33) $ (125)
Inventories 42 (70)
Prepaid expenses and other current assets (60) 73
Other assets 71 60
Trade accounts payable 33 480
Accrued liabilities 449 255
Other liabilities, long-term (14) 134
-------- ------
$ 488 $ 807
======== ======
4. Short term debt consisted of the following:
March 31, December
1998 31, 1997
-------- --------
Redeemable Convertible Debenture, due
September 20, 1998, bearing interest at 9% $ 3,500 $3,500
Advances on sale of concentrates 975 968
Other 1,279 1,549
-------- ------
$ 5,754 $6,017
======== ======
5. 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 mill and mines in 1987, and estimated
shutdown expenses and reclamation costs were
Page 5 of 12
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accrued. Title X of "The Comprehensive National Energy Policy Act" ("Title
X"), enacted in October 1992, provides for the reimbursement of past and
future reclamation expenses related to uranium sites operated under Atomic
Energy Commission contracts. The Company's uranium reclamation costs are
subsidized by this Government cost sharing program since 56% of its tailings
were generated under government contracts. The total estimated reclamation
liability ($21,830,000) and current and future Title X receivables
($15,865,000) are shown separately in the accompanying consolidated balance
sheets leaving a net liability to the Company of $5,965,000 as of March 31,
1998.
The Company has submitted five 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, 1998. As of May 1, 1998, the status of the five
claims is as follows:
<TABLE>
<CAPTION>
Actual
Gross Anticipated Reim-
Gross Claim Amount Reimbursement 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 $2,313,000 $ 217,000
June 16, 1995 3,638,000 2,591,000 1,453,000 1,267,000 186,000
May 1, 1996 3,998,000 2,884,000 1,618,000 1,112,000 506,000
May 1, 1997 2,054,000 1,579,000 886,000 529,000 357,000
May 1, 1998 1,602,000 --/1/ 899,000 -- 899,000
- -----------------------------------------------------------------------------------------------
Totals $7,386,000 $5,221,000 $2,165,000
===============================================================================================
</TABLE>
/1/ Pending.
In addition to the above amounts, the Company includes in the Title X
receivable in the consolidated balance sheet an amount equal to 56% of its
future estimated reclamation costs. Timing of the actual payments for approved
reimbursements is a function of Congressional appropriation of Title X
funding.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
"SAFE HARBOR" STATEMENT UNDER THE UNITED STATES PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995.
Statements which are not historical facts contained in this Form 10-Q are
forward looking statements that involve risks and uncertainties that could
cause actual results to differ from projected results. Factors that could
cause actual results to differ materially include, among others: general
economic conditions, metal and mineral prices, political events in foreign
countries, the risks associated with foreign operations generally, the timing
of receipt of necessary governmental permits, climatic conditions, labor
relations, availability and cost of material and equipment, the actual
configuration of ore bodies, delays in anticipated start-up dates,
environmental risks, the results of financing efforts and other risk factors
detailed in the Company's Form 10-K and 8-K filed with the Securities and
Exchange Commission.
Page 6 of 12
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RECENT EVENTS
On April 27, 1998, The Company executed a letter agreement (the "Agreement")
with North & South International Bancorp Limited, a Canadian Corporation with
offices in Toronto, Ontario (the "Buyer"), for the sale of all of its
controlling interest in Cornerstone Industrial Minerals Corporation
("Cornerstone") for total consideration of approximately $3.2 million. The
Agreement, anticipated to be completed in June, is subject to completion of
definitive agreements, a due diligence investigation by the Buyer, and
approval of the Boards of Directors of the Buyer and Cornerstone.
During 1997, the Company completed transactions on three of its non-operating
properties. In June 1997, the Company sold 90% of its Gold Bar property to
Barrick Gold Exploration Inc. ("Barrick") for $1 million in cash and the
purchase by Barrick of one million shares of the Company's stock at $1 per
share. Under the agreement, Barrick is also required to spend $3 million in
exploration expenditures by June of 1999. To date Barrick has spent in excess
of $1 million on exploration and is presently conducting exploratory drilling
at Gold Bar. At Barrick's election, on or before June 3, 1999, the balance of
the Gold Bar property will be conveyed to Barrick and Atlas may elect either
to receive an additional $15,000,000 in cash and retain a 2% net smelter
royalty, or to participate with Barrick in the further exploration and
development of Gold Bar as a 25% carried joint venture participant. If Atlas
elects to participate as a joint venture partner, Barrick will spend a minimum
of $15,000,000 on the project. If Barrick chooses not to acquire the balance
of the properties within the two-year period, all of Barrick's interest in the
Gold Bar properties will be reconveyed to Atlas. In September, the Company
executed an option agreement for the sale of its Doby George property for a
total purchase price of $1.6 million, to be paid in installments through
September 1998. The Company also completed an option agreement for the sale of
its Grassy Mountain property for $4 million to be paid in installments over
four years.
In February 1997, Arisur signed a financing agreement with the Corporacion
Andina de Fomento ("CAF") for $3 million. CAF is a multilateral financial
institution that supports sustainable development and integration efforts
within the Andean region of South America. The proceeds of the first tranche
of the loan of $2.3 million, received in May 1997, paid for certain equipment
and expansion programs of the Bolivian operations and reimbursed Atlas
$560,000 of funds previously advanced for said purposes. The remaining
$700,000 has not yet been funded pending final approvals from CAF.
CAPITAL RESOURCE REQUIREMENTS
Bolivian operations
The Company is in the process of evaluating a program for its Andacaba mine to
increase its current reserves and to justify increased development. Based upon
the results of the evaluation, the Company anticipates the implementation of a
new operating plan at Andacaba. Implementation of the operating plan would
require additional capital expenditures for underground drilling and/or
development of either an internal mine shaft or a decline to provide for
increased productivity through more efficient access to the ore body. The
Company also continues to evaluate the feasibility of the start-up of its
Comali mill, which would require approximately $200,000 in improvements.
Limited development is underway at Don Francisco and Koyamayu.
It is anticipated that funding for the initial drill program will be financed
with funds from the sale of Cornerstone (see above). Other capital
expenditures would be financed from remaining funds available from the CAF
loan noted above and/or through other long-term project financing and cash
flows from operations as available.
Page 7 of 12
<PAGE>
The Company anticipates that the acquisition of additional Bolivian
operations, if any, would be funded with cash flow from operations, project
financing, placement of additional equity or debt and/or the proceeds from the
sale of assets discussed above.
Gold Properties
Exploration and development expenditures on the Gold Bar claim block are being
funded by Barrick as described above. With the completion of the agreement
with Barrick, the Company's holding costs on the property will decrease in
1998 to an estimated $300,000. These costs will be funded from the proceeds
from the sale of Cornerstone and/or other properties (see above).
While the Company has made the expansion of the Bolivian lead, zinc and silver
operations its immediate focus, its long term strategy is to grow its Bolivian
operations, and to develop and expand the Company's interests in gold
properties.
Reclamation Activities
The Company is obligated to decommission and reclaim its uranium mill site
near Moab, Utah. Final reclamation will commence following the issuance of a
final Environmental Impact Statement on Atlas's reclamation plan. See below,
"Results of Operations -- Reclamation Activities." The total estimated cost
of Atlas's proposed reclamation plan is approximately $22 million. As the
Department of Energy will reimburse 56% of all reclamation costs under Title
X, Atlas will be reimbursed for approximately $12.3 million in reclamation
costs, leaving Atlas approximately $9.7 million to fund. The Company has filed
claims of $7.4 million for reimbursement of Title X reclamation costs incurred
through March 1998 and has received payments of $5.2 million, leaving $2.2
million in Title X reimbursements currently due Atlas. Atlas also has $4.2
million in restricted cash securing a Nuclear Regulatory Commission ("NRC")
reclamation performance bond. In order to meet its reclamation obligations,
the Company anticipates using the Title X receivable and restricted cash noted
above and, as necessary, cash flow from operations and/or the sale of assets.
LIQUIDITY
As of March 31, 1998, the working capital deficit was $8,549,000, which
compares to a deficit of $8,197,000 as of December 31, 1997. The Company's
current ratio at March 31, 1998 was .28 to 1, compared to .31 to 1 at December
31, 1997. The decrease during the quarter is a result of capital expenditures
of $194,000 and the operating loss during the period.
In order to fund near term capital requirements, the Company has entered into
the agreement for the sale of Cornerstone, the CAF loan and other asset sales
all discussed above. Longer term capital requirements will be satisfied from
project financing, future operating cash flows, placement of additional equity
or debt and/or from the sale of other assets.
Page 8 of 12
<PAGE>
RESULTS OF OPERATIONS
During the quarter ended March 31, 1998, the Company had mining revenue of
$1,136,000 compared to $654,000 in the same period of 1997. During 1997, the
Company completed a mill expansion which more than doubled the capacity of the
Andacaba Mill. Also, production of 13,274 tonnes during the quarter ended
March 31, 1997 was less than expected due to flooding which reduced production
from Andacaba. As a result of the above, production increased during the three
months ended March 31, 1998 to 26,296 tonnes and is the primary reason for the
increase in revenue.
Cash production costs were $973,000 in the first quarter of 1998 compared to
$614,000 during the same period of 1997. The increase in production costs
during the period is also primarily related to the increase in production as
described above. Total costs decreased from $46 per tonne in 1997 to $37 per
tonne in 1998 as the efficiencies associated with the higher production have
begun to take hold.
Shutdown and standby costs at Gold Bar of $75,000 were incurred in the three
month period ended March 31, 1998 compared to $107,000 for the comparable
period in 1997. The decrease is a result of cost cutting measures implemented
by the Company and also as a result of the assumption of certain of these
costs under the agreement with Barrick as described above.
Exploration costs for the three-month period ending March 31, 1998 were
$22,000 compared to $557,000 for the comparable period in 1997. The 1997
amount includes a $450,000 charge pursuant to the Company's joint venture
termination agreement with Vista Gold Corp. These costs have also been reduced
as part of the Company's cost reduction program and through the allocation of
certain costs to joint venture partners.
General and administrative expenses for the three months ended March 31, 1998
were $324,000 compared to $542,000 for the comparable period in 1997. The
Company has continued its efforts to reduce such expenses. The Company's
corporate staff has been reduced from 11 people in the first quarter of 1997
to 6 at March 31, 1998. Additionally, in December 1997, the Company negotiated
a reduction in the amount of space under lease at its corporate headquarters
in Denver, Colorado, resulting in a reduction of $11,000 per month in
leasehold costs. Strong efforts have also been made to reduce outside
consulting fees wherever possible.
Interest expense incurred during the three month period ended March 31, 1998
was $159,000 compared to $310,000 for the three month period ended March 31,
1997. The decrease is primarily a result of the Company's repurchase of its
Exchangeable Debenture in June 1997, reducing interest expense by $60,000 per
month. This reduction has been offset in part by the increase in interest
expense related to the CAF and other loans for the Bolivian operations.
During the quarter ended March 31, 1998, the Company incurred $194,000 in
capital expenditures, substantially all of which related to the mine and
mill expansion in Bolivia.
Page 9 of 12
<PAGE>
Reclamation Activities
On March 7, 1997, the US Nuclear Regulatory Commission ("NRC") issued its
final Technical Evaluation Report ("TER") which concluded that the Atlas
reclamation plan was in compliance with the technical requirements for capping
the tailings facility on-site. With completion of the final TER, the remaining
requirement before NRC can complete the Environmental Impact Statement ("EIS")
and make its final decision on the reclamation plan is completion of the final
biological opinion by the US Fish and Wildlife Service ("FWS"). In its revised
draft biological opinion released April 15, 1998, the FWS removed its
recommendation for off-site tailings disposal. Currently, Atlas is working
with NRC, FWS, and the Council on Environmental Quality toward completion of
the biological opinion. Management is confident that a mutually acceptable
resolution for the remaining issues of concern will be achieved. The final EIS
is anticipated before year-end 1998.
Page 10 of 12
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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
None
Page 11 of 12
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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)
By: /s/ James R. Jensen
-------------------
James R. Jensen
Treasurer
Date: May 20, 1998 /s/ James R. Jensen
------------ -------------------
James R. Jensen
Treasurer (Principal Financial Officer &
Chief Accounting Officer)
Page 12 of 12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> MAR-31-1998 MAR-31-1997
<CASH> 91 583
<SECURITIES> 0 0
<RECEIVABLES> 2,216 2,183
<ALLOWANCES> 0 0
<INVENTORY> 923 965
<CURRENT-ASSETS> 3,327 3,768
<PP&E> 60,570 60,427
<DEPRECIATION> 46,242 46,027
<TOTAL-ASSETS> 41,923 42,316
<CURRENT-LIABILITIES> 11,876 11,965
<BONDS> 0 0
0 0
0 0
<COMMON> 27,360 27,282
<OTHER-SE> (27,119) (26,751)
<TOTAL-LIABILITY-AND-EQUITY> 41,923 42,316
<SALES> 1,136 654
<TOTAL-REVENUES> 1,448 871
<CGS> 1,173 864
<TOTAL-COSTS> 1,594 2,070
<OTHER-EXPENSES> 0 57
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 159 310
<INCOME-PRETAX> (305) (1,566)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (305) (1,566)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (305) (1,566)
<EPS-PRIMARY> (.01) (.06)
<EPS-DILUTED> (.01) (.06)
</TABLE>
