<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, 1998
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
(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
--- ---
<TABLE>
<CAPTION>
Number of Shares Outstanding
Title of Each Class of Common Stock at April 22, 1998
----------------------------------- ----------------------------
<S> <C>
Common Stock, $.01 par value 256,707,629
</TABLE>
<PAGE> 2
SUNSHINE MINING AND REFINING COMPANY
CONSOLIDATED BALANCE SHEETS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
March 31 December 31
1998 1997
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash investments $ 11,158 $ 15,985
Silver bullion 8,361 7,739
Accounts receivable 4,832 2,801
Inventories (Note 2) 3,738 3,627
Other current assets 1,825 1,739
---------- ----------
Total current assets 29,914 31,891
Property, plant and equipment, at cost 144,579 143,192
Less accumulated depreciation,
depletion and amortization (79,134) (77,727)
---------- ----------
65,445 65,465
Investments and other assets 5,724 4,245
---------- ----------
Total assets $ 101,083 $ 101,601
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,223 $ 1,351
Accrued expenses 3,145 3,581
---------- ----------
Total current liabilities 4,368 4,932
Long-term debt 41,510 42,265
Accrued pension and other postretirement benefits 5,629 5,672
Other long-term liabilities and deferred credits 3,818 4,236
Stockholders' equity:
Common stock -- $.01 per value;
600,000 shares authorized; shares issued:
March 31, 1998 -- 261,193
December 31, 1997 -- 259,818 2,612 2,598
Paid-in capital 712,369 711,192
Deficit (668,084) (668,155)
---------- ----------
46,897 45,635
Less treasury stock, at cost:
March 31, 1998 -- 4,586 shares
December 31, 1997 -- 4,586 shares 1,139 1,139
---------- ----------
45,758 44,496
---------- ----------
Total liabilities and stockholders' equity $ 101,083 $ 101,601
========== ==========
</TABLE>
See accompanying notes.
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SUNSHINE MINING AND REFINING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED
MARCH 31,1998 AND 1997
(In Thousands, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Operating revenues $ 9,740 $ 5,732
Mark to market gain 792 186
---------- ----------
10,532 5,918
---------- ----------
Costs and expenses:
Cost of revenues 6,950 5,688
Depreciation, depletion
and amortization 1,395 1,308
---------- ----------
8,345 6,996
---------- ----------
Operating margin (loss) 2,187 (1,078)
Other income (expense)
Exploration (1,045) (2,362)
Selling, general and
administrative expense (1,206) (1,380)
Interest income 219 210
Interest and debt expense (1,685) (1,360)
Other, net 1,601 37
---------- ----------
(2,116) (4,855)
---------- ----------
Net Income (loss) $ 71 $ (5,933)
========== ==========
Basic and fully diluted income (loss)
per common share: $ 0.00 $ (0.02)
Weighted average common shares outstanding 255,684 255,059
========== ==========
</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>
Three Months Ended March 31
1998 1997
---------- ----------
<S> <C> <C>
Cash used by operating activities:
Net Income $ 71 $ (5,933)
Adjustments to reconcile net loss
to net cash used by operations:
Depreciation, depletion and amortization 1,395 1,308
Amortization of debt issuance costs and accretion of debt discount 587 464
Net (increase) decrease in:
Silver bullion (622) (6)
Accounts receivable (2,031) 277
Inventories (111) 97
Other assets and deferred charges (1,762) 25
Net increase (decrease) in:
Accounts payable and accrued expenses (557) (1,279)
Accrued pension and other postretirement benefits (43) (143)
Other liabilities and deferred credits (419) (214)
---------- ----------
Net cash used by operations (3,492) (5,404)
---------- ----------
Cash provided (used) by investing activities:
Additions to property, plant and equipment (1,375) (358)
Proceeds from investments 0 213
---------- ----------
Net cash used by investing activities (1,375) (145)
---------- ----------
Cash provided (used) by financing activities:
Proceeds from issuance of common stock upon exercise of stock
options and warrants 46 0
Debt issuance costs (6) (60)
---------- ----------
Net cash provided (used) by financing activities 40 (60)
---------- ----------
Increase (decrease) in cash and cash investments (4,827) (5,609)
Cash and cash investments, January 1 15,985 16,317
---------- ----------
Cash and cash investments, Match 31 $ 11,158 $ 10,708
========== ==========
Supplemental cash flow information --
Interest paid in cash $ 1,274 $ 1,308
========== ==========
</TABLE>
See accompanying notes.
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<PAGE> 5
SUNSHINE MINING AND REFINING COMPANY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 1998
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. Certain previously reported amounts have been
reclassified to conform to the March 31, 1998 presentation. Operating
results for the three-month period ended March 31, 1998 are not
necessarily indicative of the results that may be expected for the year
ended December 31, 1998. 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, 1997.
2. INVENTORIES
The components of inventory consist of the following:
<TABLE>
<CAPTION>
March 31 December 31
1998 1997
---------- ----------
<S> <C> <C>
Precious Metals Inventories:
Work in process $ 2,353 $ 2,171
Finished goods 190 264
Materials and supplies inventories 1,195 1,192
---------- ----------
$ 3,738 $ 3,627
========== ==========
</TABLE>
SUNSHINE MINING AND REFINING COMPANY
Management's Discussion and Analysis of Financial Condition
and Results Of Operations for the
Three Months Ended March 31, 1998 and 1997
LIQUIDITY AND CAPITAL RESOURCES
Working capital at March 31, 1998 totaled $25.5 million including $11.2
million in cash and cash investments and $8.4 million in silver bullion. The
Company anticipates capital expenditures in 1998 at the Sunshine Mine to be
approximately $2.7 million, including $419 thousand expended in the first
quarter. For 1998, the Company has also budgeted approximately $3.8 million for
exploration activities primarily at the La Joya del Sol Mine in Argentina and
the Sunshine Mine. Exploration expenditures for the first three months of 1998
totaled approximately $1.0 million. Additionally, $4.4 million is budgeted for
development of the Pirquitas Mine in Argentina, of which $900 thousand was spent
in the first quarter.
Cash and working capital are considered adequate to fund ongoing
operations for the foreseeable future. Development of the Pirquitas Mine will
require approximately $100 million. The Company is currently reviewing financing
options, including debt and/or equity offerings, to determine the most
appropriate financing for the development of the property. Although the Company
believes it will be successful in obtaining adequate financing for the
development of Pirquitas, no assurance can be given as to the availability of
adequate financing.
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<PAGE> 6
Operating, Investing, and Financing Activities
Cash used in operating activities in the first quarter of 1998 was $3.5
million compared to $5.4 million in the first quarter of 1997. The $1.9 million
decrease was primarily due to a $2.0 million cash operating income in the first
quarter of 1998 compared to a $4.2 million cash operating loss in the first
quarter of 1997, partially offset by changes in working capital components. The
cash operating income resulted primarily from increased silver production and
an increase in average per ounce silver price received for silver sold.
Accounts receivable increased primarily due to increased sales volumes.
Investments increased primarily due to the reduction in the valuation reserve
previously booked against certain investments.
Investing activities in the first quarter of 1998 used approximately
$1.4 million of cash including $900 thousand for the development of Pirquitas
and $419 thousand of capital expenditures at the Sunshine Mine.
RESULTS OF OPERATIONS
THE THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THE THREE MONTHS ENDED MARCH
31, 1997
Consolidated operating revenues increased approximately $4 million
(69.9%) for the first quarter of 1998 compared to the first quarter of 1997,
while mark to market gains on work in process inventories and investment
bullion increased $606 thousand. The increase in operating revenues primarily
resulted from an increase in silver sales volumes and average price received
per ounce of silver sold (1,311,000 ounces of silver at an average of $6.43 per
ounce in the 1998 quarter compared to 937,000 ounces at an average of $5.14 per
ounce in the 1997 quarter). The silver sales volume increase primarily resulted
from a 400,000 ounce (44%) increase in production in the 1998 quarter.
Cost of revenues increased $1.3 million (22.2%) (from $5.7 million in
the first quarter of 1997 to $6.95 million in the first quarter of 1998)
primarily due to the 44% increase in production in 1998, partially offset by
lower unit production costs. Unit production costs decreased $.69 per ounce
(13.5%) to $4.42 per ounce of silver primarily due to the increase in silver
production and a 3.34 ounce per ton (16.4%) increase in average grades from 1997
to 1998 (1.3 million ounces produced from 56,700 tons at 23.67 ounces per ton in
1998 versus 0.9 million ounces from 45,799 tons at 20.33 ounces per ton in 1997)
partially offset by a decrease in by-product credits of $0.25 per ounce of
silver. The decrease in by-products credit per ounce of silver resulted
primarily from a decrease in copper and lead prices in the 1998 quarter compared
to the 1997 quarter.
Operating margin in the 1998 period totaled $2.2 million in the 1998
quarter compared to an operating loss of $1.1 million in the 1997 quarter.
Exploration expense decreased $1.3 million in 1998 compared to 1997
primarily due to the fact that work carried out at the Pirquitas Mine in
Argentina is largely being capitalized as the property is now considered to be
in the development stage. As a result, approximately $900 thousand of
expenditures at Pirquitas during 1998 have been capitalized.
Selling, general and administrative expense decreased $173 thousand
(12.6%) due to a variety of cost reductions.
Interest and debt expense increased $326 thousand primarily due to the
debt issued in November 1997.
Other, net increased $1.6 million primarily due to the reduction of the
valuation reserves previously recorded against certain investments as a result
of restructuring and performance of certain investments.
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<PAGE> 7
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
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
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 23, 1998 By: /s/ WILLIAM W. DAVIS
-------------------------------------
William W. Davis
Executive Vice President
and Chief Financial Officer
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<PAGE> 8
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED BALANCE SHEET AT MARCH 31, 1998 AND UNAUDITED STATEMENT
OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1998, AND IS QUAILIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 11,158
<SECURITIES> 0
<RECEIVABLES> 4,832
<ALLOWANCES> 0
<INVENTORY> 3,738
<CURRENT-ASSETS> 29,914
<PP&E> 144,579
<DEPRECIATION> 79,134
<TOTAL-ASSETS> 101,083
<CURRENT-LIABILITIES> 4,368
<BONDS> 41,510
0
0
<COMMON> 2,612
<OTHER-SE> 43,146
<TOTAL-LIABILITY-AND-EQUITY> 101,083
<SALES> 9,740
<TOTAL-REVENUES> 10,532
<CGS> 6,950
<TOTAL-COSTS> 8,345
<OTHER-EXPENSES> 1,045
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,685
<INCOME-PRETAX> 71
<INCOME-TAX> 0
<INCOME-CONTINUING> 71
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 71
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
