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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For The Transition Period From ______________________ to _____________________
Commission File Number 1-10012
SUNSHINE MINING AND REFINING COMPANY
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 75-2618333
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
877 W. Main, Suite 600, Boise, Idaho 83702
- --------------------------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number including area code (208) 345-0660
--------------
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Number of Shares Outstanding
Title of Each Class of Common Stock at August 4, 1997
- ----------------------------------- ----------------------------
Common Stock, $.01 par value 255,137,312
Page 1 of 9
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SUNSHINE MINING AND REFINING COMPANY
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
(Unaudited)
June 30 December 31
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash investments $ 7,157 $ 16,317
Silver bullion 7,765 7,989
Accounts receivable 1,277 2,624
Inventories (Note 2) 2,598 2,523
Other current assets 1,400 1,108
------------ ------------
Total current assets 20,197 30,561
Property, plant and equipment, at cost 142,261 141,409
Less accumulated depreciation,
depletion and amortization (74,448) (72,124)
------------ ------------
67,813 69,285
Investments and other assets 5,078 5,640
------------ ------------
Total assets $ 93,088 $ 105,486
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,611 $ 987
Accrued expenses 3,720 4,015
------------ ------------
Total current liabilities 5,331 5,002
Long-term debt 31,515 31,515
Accrued pension and other postretirement benefits 5,959 6,074
Other long-term liabilities and deferred credits 4,613 5,032
Stockholders' equity:
Common stock--$.01 par value;
600,000 shares authorized; shares issued:
June 30, 1997 - 259,803
December 31, 1996 - 259,652 2,598 2,597
Paid-in capital 704,342 704,343
Deficit (660,031) (647,832)
------------ ------------
46,909 59,108
Less treasury stock, at cost:
June 30, 1997 - 4,666 shares
December 31, 1996 - 4,671 shares 1,239 1,245
------------ ------------
45,670 57,863
------------ ------------
Total liabilities and stockholders' equity $ 93,088 $ 105,486
============ ============
</TABLE>
See accompanying notes.
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SUNSHINE MINING AND REFINING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Operating revenues $ 4,758 $ 4,025 $ 11,312 $ 7,352
Mark to market loss (372) (1,074) (186) (604)
-------- -------- -------- --------
4,386 2,951 11,126 6,748
-------- -------- -------- --------
Costs and expenses:
Cost of revenues 5,456 4,580 11,964 8,205
Depreciation, depletion
and amortization 1,214 1,061 2,522 2,021
Exploration 2,048 1,950 4,410 4,474
Selling, general and
administrative expense 1,461 1,367 2,841 2,619
-------- -------- -------- --------
10,179 8,958 21,737 17,319
-------- -------- -------- --------
Operating loss (5,793) (6,007) (10,611) (10,571)
Other income (expense):
Interest income 200 429 410 611
Interest and debt expense (1,013) (990) (2,029) (1,286)
Other, net (4) 25 31 83
-------- -------- -------- --------
(817) (536) (1,588) (592)
-------- -------- -------- --------
Net loss (6,610) (6,543) (12,199) (11,163)
Gain on retirement and exchange
of preferred stock -- 40,124 -- 40,124
Preferred stock dividend requirements -- -- -- (2,622)
-------- -------- -------- --------
Income (loss) applicable to common shares $ (6,610) $ 33,581 $(12,199) $ 26,339
======== ======== ======== ========
Income (loss) per common share:
Primary $ (0.03) $ 0.16 $ (0.05) $ 0.13
======== ======== ======== ========
Fully diluted $ (0.03) $ 0.15 $ (0.05) $ 0.12
======== ======== ======== ========
Weighted average common shares outstanding 255,137 212,471 255,100 202,230
======== ======== ======== ========
</TABLE>
See accompanying notes.
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<PAGE> 4
SUNSHINE MINING AND REFINING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1997 1996
-------- --------
<S> <C> <C>
Cash used by operating activities:
Net loss $(12,199) $(11,163)
Adjustments to reconcile net loss
to net cash used by operations:
Depreciation, depletion and amortization 2,522 2,021
Exploration costs charged to operations 4,410 4,474
Amortization of debt issuance costs 323 195
Other -- (60)
Net (increase) decrease in:
Silver bullion 224 601
Accounts receivable 1,347 (135)
Inventories (74) (586)
Other assets and deferred charges (328) (340)
Net increase (decrease) in:
Accounts payable and accrued expenses 479 1,862
Accrued pension and other postretirement benefits (114) 79
Other liabilities and deferred credits (413) (749)
-------- --------
Net cash used by operations (3,823) (3,801)
-------- --------
Cash provided (used) by investing activities:
Additions to property, plant and equipment and
exploration expenditures (5,460) (6,197)
Proceeds from investments 273 700
-------- --------
Net cash used by investing activities (5,187) (5,497)
-------- --------
Cash provided (used) by financing activities:
Costs associated with conversion of preferred stock
into common stock -- (1,028)
Proceeds from issuance of common stock upon exercise
of stock options and warrants -- 1
Proceeds from issuance of long term debt -- 30,000
Debt issuance costs (150) (2,320)
-------- --------
Net cash provided (used) by financing activities (150) 26,653
-------- --------
Increase (decrease) in cash and cash investments (9,160) $ 17,355
Cash and cash investments, January 1 16,317 12,837
-------- --------
Cash and cash investments, June 30 $ 7,157 $ 30,192
======== ========
Supplemental cash flow information -
Interest paid in cash $ 1,411 876
======== ========
</TABLE>
See accompanying notes.
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SUNSHINE MINING AND REFINING COMPANY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
June 30, 1997
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements of
Sunshine Mining and Refining Company ("Sunshine" or the "Company") have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the six month period ended June 30, 1997 are not necessarily
indicative of the results that may be expected for the year ended December
31, 1997. For further information, refer to the consolidated financial
statements and footnotes thereto included in Sunshine's report on Form
10-K for the year ending December 31, 1996.
2. INVENTORIES
The components of inventory consist of the following:
<TABLE>
<CAPTION>
June 30 December 31
1997 1996
------- -----------
<S> <C> <C>
Precious Metals Inventories:
Work in process $1,169 $1,144
Finished goods 309 405
Materials and supplies inventories 1,120 974
------ ------
$2,598 $2,523
====== ======
</TABLE>
3. RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings
Per Share" which becomes effective for the Company's 1997 consolidated
financial statements beginning in the fourth quarter of 1997. SFAS No. 128
will eliminate the disclosure of primary earnings per share which includes
the dilutive effect of stock options, warrants and other convertible
securities ("Common Stock Equivalents") and instead requires reporting of
"basic" earnings per share, which will exclude Common Stock Equivalents.
Additionally, SFAS No. 128 changes the methodology for fully diluted
earnings per share. In the opinion of the Company's management, it is not
anticipated that the adoption of this new accounting standard will have a
material effect on the reported earnings per share of the Company.
5
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SUNSHINE MINING AND REFINING COMPANY
Management's Discussion and Analysis of Financial Condition
and Results of Operations for the
Six Months Ended June 30, 1997 and 1996
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal product at this time is silver produced from its
Sunshine Mine in Kellogg, Idaho. Due to low silver prices, the Company's
operations have not generated positive cash flow, and the costs of exploration,
general and administrative expense, and interest charges have been funded from
available cash balances.
In 1992, in response to low silver prices the Company implemented an
exploration program to find lower-cost silver reserves in the Sunshine Mine and
in Latin America. The first such ore body found, the West Chance, is in the
previously undeveloped western section of the Sunshine Mine. The Company has
almost completed development of the West Chance and has begun full-scale mining
operations in the ore body. A significant reduction in the Company's cash
production cost per ounce is anticipated in the second half of 1997 as a result
of production increases. The anticipated improvements will not restore the
Company to profitability at current silver prices; however, the Company's
international exploration program has identified other properties which have
significant potential to further improve results.
The Company will soon complete pre-feasibility studies on its Pirquitas
Mine in Northwest Argentina, a property identified and acquired in late 1995.
These studies are expected to confirm that Pirquitas will be a large low-cost
silver/tin producer and add significantly to the Company's reserve base.
Development of the property as a 5,500 ton per day operation is currently being
studied and would likely require a capital investment of approximately $70-80
million. The Company has not yet begun to seek funding sources for this
project.
In the second quarter of 1997, the Company acquired the rights to a
property in the Chubut province of Argentina, which it has named "La Joya del
Sol." Surface sampling and underground drilling has identified at least three
epithermal quartz veins on the property containing significant amounts of
high-grade gold mineralization. Based on the veins' width, strike length and
the consistency of the mineralization, the Company believes La Joya del Sol
will likely be an important gold mine. In addition, several other outcrops
similar in appearance to those already being tested have been identified on the
surface, but as yet no work has been commenced. The Company has not yet begun
to estimate capital and operating costs. Should development of the property be
warranted, the Company will have to obtain capital from outside sources, which
it has not as yet identified.
The Company considers the addition of new producing properties through its
exploration program vital to its return to profitability, and has budgeted
approximately $5.8 million for exploration in 1997, compared to expenditures of
$10.2 million in 1996. Future spending on exploration projects is contingent on
the Company's ability to raise new funding. The Company believes its success in
finding and developing new properties will assist it in raising the funds
required to continue its exploration program as well as in funding the
development of the properties it has already identified. However, no assurance
can be given that the necessary exploration and development funds can be
obtained.
At the end of the second quarter of 1997, the Company's working capital
was $14.9 million, which is considered adequate for the foreseeable future.
Operating, Investing, and Financing Activities
Cash used in operating activities was $3.8 million in the first half of
1997 and 1996. The cash operating loss increase of $0.4 million in the first
half of 1997 was offset by changes in working capital components. The cash
operating loss increased primarily due to the $0.7 million increase in interest
and debt expense related to the Eurobonds.
Approximately $5.2 and $5.5 million of cash was used by investing
activities in the 1997 and 1996 six-month periods, respectively.
Cash provided by financing activities was $26.7 million in the first half
of 1996 as a result of the Company's Notes Offering.
6
<PAGE> 7
RESULTS OF OPERATIONS
THE THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THE THREE MONTHS ENDED JUNE
30, 1996
Consolidated operating revenues increased approximately $0.7 million for
the second quarter of 1997 compared to the second quarter of 1996. The increase
in operating revenues resulted from an increase in silver sales volumes
(764,000 ounces of silver in the 1997 quarter compared to 655,000 ounces in the
1996 quarter) and the associated $0.6 million increase in by-product revenue
partially offset by a $0.52 (10.1%) decrease in average silver price received
per ounce. The silver sales volume increase primarily resulted from a 145,000
ounce (22%) increase in production in the 1997 quarter. Mark to market losses
on silver in work-in-process inventories and investment silver bullion
decreased $0.7 million. The mark to market losses were caused by declines in
the silver price during the periods, resulting in writedowns of the value of
the Company's work-in-process inventories and silver bullion held for
investment.
Cost of revenues increased $0.9 million (19%) (from $4.6 million in the
1996 quarter to $5.5 million in the 1997 quarter) primarily due to the 22%
increase in production in 1997, partially offset by lower unit production
costs. Unit production costs decreased $.58 (9.4%) to $5.60 per ounce of silver
primarily due to the increase in silver production from 1996 to 1997 (803
thousand ounces produced from 37,867 tons at 21.98 ounces per ton in 1997
versus 659 thousand ounces from 28,077 tons at 24.17 ounces per ton in 1996).
Depreciation, depletion and amortization increased by approximately $153
thousand as a result of increased production in the 1997 period.
Interest income decreased $229 thousand due to lower average invested cash
balances.
THE SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO THE SIX MONTHS ENDED JUNE 30,
1996
Consolidated operating revenues increased approximately $4.0 million
(53.9%) for the first six months of 1997 compared to the first six months of
1996 primarily due to an increase in sales volume (1.8 million ounces of silver
in the first six months of 1997 compared to 1.2 million ounces of silver in the
same period of 1996) and the associated $1.3 million increase in by-product
revenue. The increase in sales volumes primarily resulted from a 491,000 ounce
(40.5%) increase in production in 1997 compared to 1996, and a 53 thousand
ounce increase in sales volume of finished silver. Mark to market losses on
work-in-process silver inventories and silver bullion held for investment
amounted to $186 thousand and $604 thousand in 1997 and 1996, respectively. The
losses were due to declines in the per ounce silver price during the periods,
from $4.74 to $4.60 between December 31, 1996 and June 30, 1997; and from $5.28
to $4.98 between December 31, 1995 to June 30, 1996. The price per ounce has
declined further since June 30, 1997 and additional mark to market losses will
be incurred in the third quarter if the price does not recover.
Cost of revenues increased $3.8 million (46%) (from $8.2 million in the
first six months of 1996 to $12.0 million in the first six months of 1997)
primarily due to the 40.5% increase in production in 1997, partially offset by
lower unit production costs. Unit production costs decreased $.75 (12.3%) to
$5.34 primarily due to the 40.5% increase in silver production (1.7 million
ounces produced from 83,667 tons at 21.08 ounces per ton in 1997 versus 1.2
million ounces from 58,317 tons at 21.46 ounces per ton in 1996).
Depreciation, depletion and amortization increased by approximately $501
thousand as a result of increased production figures in the 1997 period.
Interest income decreased by $201 thousand due to lower average invested
cash balances.
Interest expense increased $743 thousand due to the Company's Notes
Offering completed in March, 1996.
7
<PAGE> 8
SUNSHINE MINING AND REFINING COMPANY
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
On June 10, 1997, at Sunshine's Annual Meeting of Stockholders, for which
proxies were solicited pursuant to Regulation 14A, holders of common stock
voted on the following matters:
1. The following nominees for director were elected by the vote indicated:
<TABLE>
<CAPTION>
Broker
Name For Withheld Non-votes
-------------------- ----------- --------- ---------
<S> <C> <C> <C>
G. Chris Andersen 178,430,296 8,454,423 0
V. Dale Babbitt 178,367,352 8,517,367 0
George M. Elvin 178,427,824 8,456,895 0
Daniel D. Jackson 178,417,085 8,467,634 0
Oren G. Shaffer 178,398,242 8,486,477 0
John S. Simko 178,300,512 8,584,207 0
Robert B. Smith, Jr. 178,427,239 8,457,480 0
</TABLE>
2. The proposal to amend the Certificate of Incorporation of Sunshine to
increase the authorized Common Stock to 600 million shares was approved by the
following vote:
<TABLE>
<S> <C>
For: 155,231,706
Against: 27,169,879
Abstain: 4,483,134
Broker Non-Votes 0
</TABLE>
3. The alternative proposals to amend the Certificate of Incorporation of
Sunshine to effect a one-for-three, one-for-five or one-for-eight reverse stock
split of the issued and outstanding shares of Sunshine's Common Stock at the
discretion of the Board of Directors of Sunshine were approved by the following
vote:
<TABLE>
<S> <C>
For: 159,255,785
Against: 23,446,969
Abstain: 4,181,965
Broker Non-Votes 0
</TABLE>
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
*Exhibit No. 3.1 Certificate of Incorporation of Sunshine
Mining and Refining Company, as amended by the
Certificate of Amendment effective June 26,
1997, increasing Sunshine's authorized common
stock, par value $.01, to 600,000,000 (600
million) shares.
*Exhibit No. 27 Financial Data Schedule.
*Filed herewith
8
<PAGE> 9
(b) Reports on Form 8-K
None
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 hereto duly authorized.
SUNSHINE MINING AND REFINING COMPANY
Dated: August 8, 1997 By: /s/ WILLIAM W. DAVIS
------------------------------
William W. Davis
Executive Vice President
and Chief Financial Officer
9
<PAGE> 10
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<S> <C>
3.1 Certificate of Incorporation of Sunshine
Mining and Refining Company, as amended by the
Certificate of Amendment effective June 26,
1997, increasing Sunshine's authorized common
stock, par value $.01, to 600,000,000 (600
million) shares.
27 Financial Data Schedule.
</TABLE>
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
SUNSHINE MINING AND REFINING COMPANY
FIRST: The name of the Corporation is Sunshine Mining and Refining
Company.
SECOND: The registered office of the Corporation in the state of Delaware
is located at 1013 Centre Road in the City of Wilmington, County of New Castle.
The name and address of its registered agent is Corporation Service Company,
1013 Centre Road, Wilmington, Delaware 19805.
THIRD: The nature of the business, objects and purposes to be transacted,
promoted or carried on by the Corporation are as follows:
To engage in and carry on the business of exploring for, developing
and utilizing natural resources of every kind and description; to explore
for, to develop and to mine, mill, concentrate, convert, smelt, treat,
refined, prepare for market, manufacture, buy, sell, exchange, and
otherwise to produce, process and deal in natural resources of every kind
and description, including without limitation, ores, metals, minerals,
oil, natural gas, timber, water, and all other natural products and the
products and by-products thereof of every kind and description and by
whatever means the same can be and may hereafter be bought, sold,
conveyed, transferred, produced, processed, handled or otherwise dealt in;
to buy, sell, exchange, lease, acquire and otherwise deal in real
property, mines, mineral rights and claims of any nature whatsoever,
timber rights, and interests of any nature whatsoever in oil and gas; to
own, lease, hire, rent, as lessee or lessor, operate and manage all types
of real property, buildings and fixtures, and the machinery, equipment and
other personal property and facilities necessary to the conduct, operation
and management of such business and all other activity in connection
therewith;
To manufacture, purchase or otherwise acquire, invest in, own,
mortgage, pledge, sell, assign and transfer or otherwise dispose of,
trade, deal in and with goods, wares and merchandise and personal property
of every class and description;
To acquire, and pay for in cash, stock, or bonds of this Corporation
or otherwise, the goodwill, rights, assets and property, and to undertake
or assume the whole or any part of the obligations or liabilities of any
person, partnership, trust, joint stock company, syndicate, firm,
association or corporation;
To acquire, hold, use, sell, assign, lease, grant licenses in respect
of, mortgage or otherwise dispose of letters patent of the United States
or any foreign country, patent rights, licenses and privileges,
inventions, improvements and processes, copyrights, trademarks and trade
names, relating to or useful in connection with any business of this
Corporation;
To acquire by purchase, subscription or otherwise, and to receive,
hold, own, sell, assign, exchange, transfer, mortgage, pledge or otherwise
dispose of or deal in and with any of the shares of the capital stock, or
any voting trust certificates in respect of the shares of capital stock,
scrip, warrants, rights, bonds, debentures, notes, trust receipts and
other securities, obligations, chooses in action and evidences of
indebtedness or interest issued or created by any corporations, joint
stock companies, syndicates, associations, firms, trusts or persons,
public or private, or by the government of the United States of America,
or by any foreign government, or by any state, territory, province
municipality or other political subdivision or by any governmental agency,
and as owner thereof to possess and exercise all rights, powers and
privileges of ownership, including the right to execute consents and vote
thereon, and to do any and all acts and things necessary or advisable for
the preservation, protection, improvement and enhancement in value
thereof;
To borrow or raise moneys for any of the purposes of the Corporation
and, from time to time without limit as to amount, to draw, make, accept,
endorse, execute and issue promissory notes, drafts, bills of exchange,
warrants, bonds, debentures and other negotiable or non-negotiable
instruments and evidences of indebtedness, and to secure the payment of
any thereof and of the interest thereon by mortgage upon or pledge,
conveyance or assignment in trust of the whole or any part of the property
of the Corporation, whether at the time owned or thereafter acquired, and
to sell, pledge or otherwise dispose of such bonds or other obligations of
the Corporation for its corporate purposes;
To purchase, receive, take by grant, gift, devise, bequest or
otherwise, lease, or otherwise acquire, own, hold, improve, employ, use
and otherwise deal in and with, real or personal property, or any interest
therein, wherever situated, and to sell, convey, lease, exchange, transfer
or otherwise dispose of, or mortgage or pledge, all or any of the
Corporation's property and assets, or any interest therein, wherever
situated; and
CERTIFICATE OF INCORPORATION - 1
<PAGE> 2
To engage in any lawful act or activities for which corporations may
be organized under the General Corporation Law of Delaware.
The business and purposes specified in the foregoing clauses shall, except
where otherwise expressed, be in nowise limited or restricted by reference to,
or inference from, the terms of any other clause in this Certificate of
Incorporation, but the business and purposes specified in each of the foregoing
clauses of this Article shall be regarded as independent business and purposes.
FOURTH: The total number of shares which the Corporation shall have
authority to issue is Six Hundred Twenty Million (620,000,000), of which stock
Six Hundred Million (600,000,000) shares of the par value of $0.01 each shall
be designated Common Stock and of which Twenty Million (20,000,000) shares of
the par value of $1.00 each shall be designated Preferred Stock.
Section 1. Power of Board to Issue Preferred Stock. Shares of Preferred
Stock may be issued from time to time in one or more series, each of such
series to have distinctive serial designations, which may be by distinguishing
number, letter or title, as shall hereafter be determined in the resolution or
resolutions providing for the issue of such Preferred Stock from time to time
adopted by the Board of Directors of the Company at a regularly called meeting
without dissenting vote, pursuant to authority so to do which is hereby
conferred upon and vested in the Board of Directors.
Section 2. Terms of Preferred Stock. Each series of Preferred Stock (i)
may have such number of shares; (ii) may have such voting powers, including,
without limitation, the right to vote as a class in connection with a Business
Combination (as defined in Article Fifth), full or limited, or may be without
voting powers; (iii) may be subject to redemption at such time or times and at
such price or prices; (iv) may be entitled to receive dividends, which may be
cumulative or noncumulative, at such rate or rates, on such conditions, from
such date or dates, and at such times, and payable in preference to, or in such
relation to, the dividends payable on any other class or classes or series of
stock; (v) may have such rights upon the dissolution of, or upon any
distribution of the assets of, the Corporation; (vi) may be convertible into,
or exchangeable for, shares of any other class or classes of stock of the
Corporation at such price or prices or at such rates of exchange, and with such
adjustments; (vii) may be entitled to the benefit of a sinking fund or purchase
fund to be applied to the purchase or redemption of shares of such series in
such amount or amounts; (viii) may be entitled to the benefit of conditions and
restrictions upon the creation of indebtedness of the Corporation or any
subsidiary, upon the issue of any additional stock (including, without
limitation, additional shares of such series or of any other series) and upon
the payment of dividends or the making of other distributions on and the
purchase redemption or other acquisition by the Corporation or any subsidiary
of any outstanding stock of the Corporation; and (ix) may have such other
relative, participating, optional or other special rights, and qualifications,
limitations or restrictions thereof; all as shall be stated in said resolution
or resolutions adopted by the Board of Directors providing for the issue of
such Preferred Stock. Except where otherwise set forth in the resolution or
resolutions adopted by the Board of Directors providing for the issue of any
series of Preferred Stock, the number of shares comprising such series may be
increased or decreased (but not below the number of share then outstanding)
from time to time by like action of the Board of Directors.
Section 3. Redemption or Purchase of Preferred Stock. Shares of any series
of Preferred Stock which have been redeemed (whether through the operation of a
sinking fund or otherwise) or purchased by the Corporation, or of which, if
convertible or exchangeable, have been converted into or exchanged for shares
of stock of any other class or classes, shall have the status of authorized and
unissued shares of Preferred Stock and may be reissued as a part of the series
of which they were originally a part or may be reclassified and reissued as
part of a new series of Preferred Stock to be created by resolution or
resolutions of the Board of Directors or as part of any other series of
Preferred Stock, all subject to the conditions or restrictions on issuance set
forth in the resolution or resolutions adopted by the Board of Directors
providing for the issue of any series of Preferred Stock and to any filing
required by law.
Section 4. Voting Rights. Except as otherwise provided by law or by the
resolution or resolutions adopted by the Board of Directors providing for the
issue of any series of Preferred Stock, the Common Stock shall have the
exclusive right to vote for the election of directors and for all other
purposes, each holder of the Common Stock being entitled to one vote for each
share held.
Section 5. Dividends. Subject to all the rights of the Preferred Stock or
any series thereof, the holders of the Common Stock shall be entitled to
receive, when, as and if declared by the Board of Directors, out of funds
legally available therefor, dividends payable in cash, stock or otherwise.
Section 6. Liquidation. Upon any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, and after the holders of the
Preferred Stock of each series shall have been paid in full the amounts to
which they respectively shall be entitled, or a sum sufficient for such
payments in full shall have been set aside, the remaining net assets of the
Corporation shall be distributed pro rata to the holders of the Common Stock in
accordance with their respective rights in interest, to the exclusion of the
holders of the Preferred Stock.
FIFTH: Vote Required to Approve Business Combinations. In addition to the
vote of stockholders otherwise required by law or by the terms of any other
Article of this Certificate of Incorporation, the affirmative vote or consent
of the holders of a majority of all shares of outstanding stock entitled to
vote thereon, and a majority of each series or class of Preferred Stock which
under this Certificate of Incorporation or by the resolution or resolutions of
the Board of Directors authorizing the issuance of such Preferred Stock is
entitled to vote thereon
CERTIFICATE OF INCORPORATION - 2
<PAGE> 3
as a class, shall be required to approve any Business Combination. As used in
this Article Fifth, the term "Business Combination" shall include any merger or
consolidation of the Corporation with or into any other corporation, firm or
entity which under the applicable provisions of Delaware law is required to be
submitted to a vote of stockholders, or the sale, lease, exchange or other
disposition (including, without limitation, any disposition in connection with
any dissolution, liquidation or winding up of the Corporation) of all or
substantially all of the property and assets of the Corporation (including its
good will and corporate franchises) to any other corporation, firm or entity.
SIXTH: The Corporation is to have perpetual existence.
SEVENTH: In furtherance and not in limitation of the powers conferred by
statute, the power to adopt, amend or repeal the bylaws of the Corporation is
hereby conferred upon and vested in the Board of Directors.
EIGHTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the state of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provision of section 279 of Title 8 of the Delaware Code order a meeting of
the creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
Corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this Corporation, as the case may be, and also on this
Corporation.
NINTH: Meetings of stockholders may be held within or without the State of
Delaware, as the bylaws may provide. The books of this Corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the bylaws of the Corporation. Elections of directors
need not be by written ballot unless the bylaws of the Corporation shall so
provide.
TENTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation; provided, however,
that no amendment to this Certificate of Incorporation shall, directly or
indirectly, amend, alter, change or repeal any of the provisions of Article
Fourth, Section 1 or any of the provisions of Article Fifth, unless the
amendment effecting such amendment, alteration, change or repeal shall receive
the affirmative vote or consent of the holders of (i) 66 2/3% of the
outstanding stock of the Corporation entitled to vote thereon, and (ii) 66 2/3%
of each class or series of Preferred Stock which under this Certification of
Incorporation or by the resolution or resolutions of the Board of Directors
authorizing the issuance of such class of Preferred Stock is entitled to vote
thereon as a separate class.
ELEVENTH: The name and mailing address of the incorporator is as follows:
Name Mailing Address
---- ---------------
Rebecca L. Saunders 877 W. Main St., Suite 600
Boise, ID 83702
TWELFTH: To the fullest extent permitted by the Delaware General
Corporation Law, as it now exists or may hereafter be amended, a director of
the Corporation shall not be liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, except to the
extent that such exemption from liability or limitation thereof is not
permitted under the Delaware General Corporation Law as the same exists or may
hereafter be amended. Any repeal or modification of this paragraph by the
stockholders of the Corporation shall be prospective only and shall not
adversely affect any limitation on the personal liability of a director of the
Corporation existing at the time of such repeal or modification.
THIRTEENTH: Any director may be removed, with or without cause, by a vote
of the holders of a majority of the shares then entitled to vote thereon.
THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, does make this Certificate, hereby declaring and certifying
that this is my act and deed and the facts herein stated are true, and
accordingly have hereunto set my hand this 25th day of October, 1995.
/s/ Rebecca L. Saunders
-----------------------------------
Rebecca L. Saunders, Incorporator
CERTIFICATE OF INCORPORATION - 3
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT JUNE 30, 1997 (UNAUDITED) AND THE CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED) AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 7,157
<SECURITIES> 0
<RECEIVABLES> 7,277
<ALLOWANCES> 0
<INVENTORY> 2,598
<CURRENT-ASSETS> 20,197
<PP&E> 142,261
<DEPRECIATION> 74,448
<TOTAL-ASSETS> 93,088
<CURRENT-LIABILITIES> 5,331
<BONDS> 31,515
0
0
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<OTHER-SE> 43,073
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<SALES> 11,312
<TOTAL-REVENUES> 11,126
<CGS> 11,964
<TOTAL-COSTS> 14,486
<OTHER-EXPENSES> 4,410
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<INTEREST-EXPENSE> 2,029
<INCOME-PRETAX> (12,199)
<INCOME-TAX> 0
<INCOME-CONTINUING> (12,199)
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<EXTRAORDINARY> 0
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