<PAGE> 1
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 March 31, 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
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(Address of principal executive offices)
Registrant's telephone number including area code (208) 345-0660
-----------------------
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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 April 25, 1997
- ----------------------------------- ------------------------------
Common Stock, $.01 par value 255,137,277
Page 1 of 10
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SUNSHINE MINING AND REFINING COMPANY
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
(UNAUDITED)
MARCH 31 DECEMBER 31
1997 1996
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash investments $ 10,709 $ 16,317
Silver bullion 7,995 7,989
Accounts receivable 2,347 2,624
Inventories (Note 2) 2,426 2,523
Marketable securities 7 7
Other current assets 985 1,101
--------- ---------
Total current assets 24,469 30,561
Property, plant and equipment, at cost 141,613 141,409
Less accumulated depreciation,
depletion and amortization (73,278) (72,124)
--------- ---------
68,335 69,285
Investments and other assets 5,397 5,640
--------- ---------
Total assets $ 98,201 $ 105,486
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,108 $ 987
Accrued expenses 2,555 4,015
--------- ---------
Total current liabilities 3,663 5,002
Long-term debt 31,515 31,515
Accrued pension and other postretirement benefits 5,931 6,074
Other long-term liabilities and deferred credits 4,812 5,032
Stockholders' equity:
Common stock--$.01 par value;
400,000 shares authorized; shares issued:
March 31, 1997 - 259,803
December 31, 1996 - 259,652 2,598 2,597
Paid-in capital 704,342 704,343
Deficit (653,421) (647,832)
--------- ---------
53,519 59,108
Less treasury stock, at cost:
March 31, 1997 - 4,666 shares
December 31, 1996 - 4,671 shares 1,239 1,245
--------- ---------
52,280 57,863
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Total liabilities and stockholders' equity $ 98,201 $ 105,486
========= =========
</TABLE>
See accompanying notes.
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CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED
March 31, 1997 and 1996
(In Thousands, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Operating revenues $ 6,554 $ 3,327
Mark to market gain 186 470
--------- ---------
6,740 3,797
--------- ---------
Costs and expenses:
Cost of revenues 6,509 3,625
Depreciation, depletion
and amortization 1,308 960
Exploration 2,362 2,524
Selling, general and
administrative expense 1,379 1,252
--------- ---------
11,558 8,361
--------- ---------
Operating loss (4,818) (4,564)
Other income (expense):
Interest income 210 182
Interest and debt expense (1,016) (296)
Other, net 35 57
--------- ---------
(771) (57)
--------- ---------
Net loss (5,589) (4,621)
Preferred stock dividend requirements 0 (2,471)
--------- ---------
0
Loss applicable to common shares $ (5,589) $ (7,092)
========= =========
Loss per common share ($ 0.02) ($ 0.04)
========= =========
Weighted average common
shares outstanding 255,059 191,989
========= =========
</TABLE>
See accompanying notes.
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<PAGE> 4
SUNSHINE MINING AND REFINING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
MARCH 31, 1997 AND 1996
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Cash used by operating activities:
Net loss $ (5,589) $ (4,621)
Adjustments to reconcile net loss
to net cash used by operations:
Depreciation, depletion and amortization 1,308 960
Exploration costs charged to operations 2,362 2,524
Amortization of debt issuance costs 121 --
Realized and unrealized gains on
marketable equity securities -- (60)
Net (increase) decrease in:
Silver bullion (6) (420)
Accounts receivable 277 (108)
Inventories 97 (472)
Other assets and deferred charges 25 69
Net increase (decrease) in:
Accounts payable and accrued expenses (1,279) 570
Accrued pension and other postretirement benefits (143) 143
Other liabilities and deferred credits (214) (328)
-------- --------
Net cash used by operations (3,041) (1,743)
-------- --------
Cash provided (used) by investing activities:
Additions to property, plant and equipment and
exploration expenditures (2,720) (3,098)
Proceeds from investments 213 630
-------- --------
Net cash used by investing activities (2,507) (2,468)
-------- --------
Cash provided (used) by financing activities:
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 (60) (2,047)
-------- --------
Net cash provided (used) by financing activities (60) 27,954
-------- --------
Increase (decrease) in cash and cash investments (5,608) $ 23,743
Cash and cash investments, January 1 16,317 12,837
-------- --------
Cash and cash investments, March, 31, $ 10,709 $ 36,580
======== ========
Supplemental cash flow information -
Interest paid in cash $ 1,308 166
======== ========
</TABLE>
See accompanying notes.
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SUNSHINE MINING AND REFINING COMPANY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 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 three month period ended
March 31, 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 ended December 31, 1996.
2. INVENTORIES
The components of inventory consist of the following:
<TABLE>
<CAPTION>
March 31 December 31
1997 1996
------ ------
<S> <C> <C>
Precious Metals Inventories:
Work in process $1,103 $1,144
Finished goods 298 405
Materials and supplies inventories 1,025 974
------ ------
$2,426 $2,523
====== ======
</TABLE>
5
<PAGE> 6
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.
6
<PAGE> 7
SUNSHINE MINING AND REFINING COMPANY
Management's Discussion and Analysis of Financial Condition
and Results of Operations for the
Three Months Ended March 31, 1997 and 1996
LIQUIDITY AND CAPITAL RESOURCES
As the price of silver since 1985 has been only slightly in excess of,
or less than, the Company's cash cost to produce an ounce of silver, the
Company's operations have not been able to generate cash flow sufficient to
cover its costs of exploration, research, general and administrative expenses,
and interest, as well as non-cash charges such as depreciation, depletion, and
amortization. Until such time as the price of silver increases significantly
or higher production is achieved at a lower cost, the Company will continue to
generate a negative cash flow from operations.
The Company anticipates capital expenditures in 1997 at the Sunshine
Mine to be approximately $1.3 million, including $366 thousand expended in the
first quarter. For 1997, the Company has also budgeted approximately $5.5
million for exploration activities at the Pirquitas Mine in Argentina and the
Sunshine Mine. Exploration expenditures for the first three months of 1997
totaled approximately $2.4 million.
Operating, Investing, and Financing Activities
Cash used in operating activities in the first quarter of 1997 was
$3.0 million compared to $1.7 million in the first quarter of 1996. The $1.3
million increase was primarily due to the $1.2 million semi-annual interest
payment in March, 1997 on the $30 million of Eurobonds issued March 22, 1996,
and a cash operating loss increase in the first quarter of 1997 of $0.7
million, partially 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 $2.5 million of cash was used by investing activities in
both quarters.
Cash provided by financing activities was $28.0 million in the first
quarter of 1996 as a result of the Company's Notes Offering.
7
<PAGE> 8
RESULTS OF OPERATIONS
THE THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THE THREE MONTHS ENDED MARCH
31, 1996
Consolidated operating revenues increased approximately $3.2 million
for the first quarter of 1997 compared to the first quarter of 1996, while mark
to market gains on work in process inventories and investment bullion decreased
$284 thousand. The increase in operating revenues resulted from an increase in
silver sales volumes (1,033,000 ounces of silver in the 1997 quarter compared
to 500,000 ounces in the 1996 quarter) and a $738 thousand increase in
by-product revenue partially offset by a $0.54 (9.5%) decrease in average
silver price received per ounce. The silver sales volume increase primarily
resulted from a 347,000 ounce (63%) increase in production in the 1997 quarter,
a 53 thousand ounce increase in sales volume of finished silver and a build up
of work in process inventory in the 1996 quarter.
Cost of revenues increased $2.9 million (80%) (from $3.6 million in
the first quarter of 1996 to $6.5 million in the first quarter of 1997)
primarily due to the 63% increase in production in 1997, increased sales of
retail silver and the 1996 build up of work in process inventories, partially
offset by lower unit production costs. Unit production costs decreased $.88
(14.7%) to $5.11 per ounce of silver primarily due to the increase in silver
production and a 1.9 ounce (10%) increase in average grades from 1996 to 1997
(901 thousand ounces produced from 45,799 tons at 20.33 ounces per ton in 1997
versus 554 thousand ounces from 31,037 tons at 18.42 ounces per ton in 1996)
and increased by-product credits of $0.48 per ounce of silver.
Exploration expense was approximately the same for the 1997 and 1996
periods pursuant to the Company's plans for exploration spending primarily at
the Pirquitas Mine in Argentina and the Sunshine Mine.
Depreciation, depletion and amortization increased by approximately
$348 thousand as a result of increased production in the 1997 period.
Interest and debt expense increased $720 thousand due to the debt
issued in March, 1996.
8
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SUNSHINE MINING AND REFINING COMPANY
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The litigation commenced on March 29, 1995 against the Company in
Delaware Chancery Court, New Castle County, by Harbor Finance
Partners, a Colorado Partnership, was dismissed with prejudice on
March 11, 1997, pursuant to a stipulation between the parties. The
Company agreed to pay plaintiff's counsel fees and expenses of
$47,500 to resolve their claim for services rendered in the
litigation.
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
9
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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 hereto duly authorized.
SUNSHINE MINING AND REFINING COMPANY
Dated: April 28, 1997 By: s/WILLIAM W. DAVIS
------------------------------------
William W. Davis
Executive Vice President
and Chief Financial Officer
10
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
EX-27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT MARCH 31, 1997 (UNAUDITED) AND THE CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED)
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-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 10,709
<SECURITIES> 7
<RECEIVABLES> 2,347
<ALLOWANCES> 0
<INVENTORY> 2,426
<CURRENT-ASSETS> 24,469
<PP&E> 141,613
<DEPRECIATION> 73,278
<TOTAL-ASSETS> 98,201
<CURRENT-LIABILITIES> 3,663
<BONDS> 31,514
0
0
<COMMON> 2,598
<OTHER-SE> 49,682
<TOTAL-LIABILITY-AND-EQUITY> 98,201
<SALES> 6,554
<TOTAL-REVENUES> 6,740
<CGS> 6,509
<TOTAL-COSTS> 7,817
<OTHER-EXPENSES> 2,362
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,016
<INCOME-PRETAX> (5,589)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,589)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,589)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
