US SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549
FORM 10-QSB
(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 25, 1996. 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 0-18353
THE COEUR D'ALENES COMPANY
(Exact name of registrant as specified in its charter)
Idaho 82-0109390
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
PO BOX 2610, Spokane, Washington 99220-2610
(Address of principal executive offices) (Zip Code)
(509) 924-6363
(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
Applicable only to issuers involved in bankruptcy proceedings during the
preceding five years.
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes___No___
Applicable only to corporate issuers
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
5,353,561 shares of common stock, no par value, were outstanding as of
April 18, 1996.
PART I. FINANCIAL INFORMATION.
Item 1. Financial Statements.
The condensed financial statements of The Coeur d'Alenes Company (sometimes
referred to herein as the "Company") included herein have been prepared by the
Company without audit or review by the Company's accountants pursuant to the
rules and regulations of the Securities and Exchange Commission. In the opinion
of management, all adjustments necessary to a fair statement of the results of
operations for the interim periods ended March 25, 1996 and March 25, 1995 have
been made. The results of operations for the interim periods are not
necessarily indicative of the results to be expected for the full fiscal year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations, although
the Company believes that the disclosures are adequate to make the information
presented not misleading. These condensed financial statements should be read in
conjunction with the financial statements and the notes thereto included in The
Coeur d'Alenes Company's latest audited financial statements for the fiscal year
ended September 30, 1995.
Index of Financial Statements
Page
Consolidated Balance Sheets -
March 25, 1996 and September 30, 1995 3
Unaudited Consolidated Income Statements -
Six Months Ended March 25, 1996 and March 25, 1995 4
Unaudited Consolidated Income Statements -
Three Months Ended March 25, 1996 and March 25, 1995 5
Unaudited Consolidated Statement of Cash Flows -
Six Months Ended March 25, 1996 and March 25, 1995 6
Condensed Notes to Unaudited Consolidated
Financial Statement 7
THE COEUR D ALENES COMPANY
CONSOLIDATED BALANCE SHEET
March 25, 1996 and September 30, 1995
<TABLE>
<CAPTION>
March 25, 1996 September 30, 1995
<S> <C> <C> <C> <C>
ASSETS (Unaudited) (Audited)
Current Assets: $ $
Cash 28,955 128,085
Accounts receivable 1,230,984 992,363
Inventory 2,594,420 2,376,105
Other current assets 39,141 70,450
--------- -------
Total current assets 3,893,500 3,567,003
Property and Equipment 4,523,388 4,067,865
Less accumulated depreciation 2,192,197 2,193,188
--------- ---------
Net property and equipment 2,331,191 1,874,677
--------- ---------
Other assets 49,346 49,346
--------- ---------
Total assets 6,274,037 5,491,026
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short term bank borrowings $ 852,327 772,064
Accounts payable 1,205,437 733,767
Accrued expenses 439,842 430,798
Current amount on long-term debt 90,365 58,346
--------- ---------
Total current liabilities 2,587,971 1,994,975
Long-term debt:
Deferred tax liability 46,768 46,768
Long term debt less current maturities 1,187,468 1,030,131
Long term debt to related parties 128,000 250,000
--------- ---------
Total long term liabilities 1,362,236 1,326,899
--------- ---------
Total liabilities 3,950,207 3,321,874
--------- ---------
Stockholders' Equity:
Capital Stock 1,186,192 1,064,193
Retained earnings 1,141,438 1,108,755
--------- ---------
2,327,630 2,172,948
Less Treasury Stock at cost 3,800 3,796
--------- ---------
Total stockholders' equity 2,323,830 2,169,152
--------- ---------
Total liabilities and stockholders'
equity 6,274,037 5,491,026
========= =========
</TABLE>
THE COEUR D ALENES COMPANY
UNAUDITED CONSOLIDATED INCOME STATEMENT
Six Months Ended March 25, 1996 and March 25, 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C> <C>
$ $
Net sale 5,895,189 5,882,455
Costs of sales 4,301,539 4,253,087
--------- ---------
Gross profit on sales 1,593,650 1,629,368
Selling, general and administrative expenses 1,492,339 1,392,567
--------- ---------
Operating income 101,311 236,801
Other income (expense)
Interest income 12,148 23,237
Interest expense (91,762) (108,700)
Other income 30,181 47,774
--------- ---------
Total other expense (49,433) (37,689)
--------- ---------
Income before income tax expense 51,878 199,112
Income tax expense 19,195 77,653
---------- ---------
Net income $ 32,683 $ 121,459
---------- ---------
Earnings per share $ .01 $ .01
Shares outstanding 5,353,561 4,377,577
</TABLE>
THE COEUR D'ALENES COMPANY
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months Ended March 25, 1996 and March 25, 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C> <C>
$ $
Net sales 3,200,649 3,236,698
Costs of sales 2,318,540 2,315,645
--------- ---------
Gross profit on sales 882,109 921,053
Selling, general and administrative expenses 734,446 705,657
--------- ---------
Operating income 147,663 215,396
Other income (expense)
Interest income 357 9,005
Interest expense (40,900) (53,420)
Other income 14,036 31,169
---------- ----------
Total other expense (26,507) (13,246)
---------- ----------
Income before income tax expense 121,156 202,150
Income tax expense 44,828 78,716
--------- ----------
Net income $ 76,328 $ 123,434
--------- ----------
Earnings per share $ .01 $ .03
Shares outstanding 5,353,561 4,377,577
</TABLE>
THE COEUR D'ALENES COMPANY
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS Three Months
Ended March 25, 1996 and March 25, 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities: $ $
Net income (loss) 76,328 121,459
Adjustments to reconcile net income
to cash provided (used) by
operating activities:
Depreciation 37,425 58,100
Gain on disposal of assets (1,000) (15,675)
Changes in assets and liabilities
Accounts and notes receivable ( 76,232) 71,581
Inventories 272,518 (171,670)
Prepaid expense and other
current assets 7,500 (30,707)
Other Assets 0 46,704
Accounts payable (427,306) 468,276
Accrued expenses ( 37,396) (208,429)
-------- ---------
Cash provided (used) by operating
activities (148,163) 339,639
-------- ---------
Cash flows from investing activities:
Proceeds from sale of assets 3,000 20,000
Additions to property and equipment (301,181) (114,531)
-------- ---------
Cash flows used by investing activities (298,181) ( 94,531)
-------- ---------
Cash flows from financing activities:
Contribution of shares to treasury 4 0
Net borrowing (repayment)
under line of credit 274,290 (271,711)
Principal repayment of long-term debt ( 42,020) ( 82,349)
New long term note 68,700 0
Construction loan 1,019,686 0
Pay off real estate loan (H. Stack) ( 845,914) 0
--------- ---------
Cash used by financing activities 474,738 (354,060)
--------- ---------
Net increase (decrease) in cash 28,394 (108,952)
Cash, beginning of period 561 110,638
--------- ---------
Cash, end of period $ 28,955 $ 1,686
========= =========
</TABLE>
THE COEUR D ALENES COMPANY
CONDENSED NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
Summary of Significant Accounting Policies.
Significant accounting policies followed for the six months ended
March 25, 1996 are the same as those contained in the Summary of Significant
Accounting Policies from the Company's audited financial statements as of
September
30, 1995 and September 24, 1994.
<TABLE>
Inventories.
Inventories are summarized as follows:
<S> <C> <C> <C>
March 25, September 30,
1996 1995
Raw materials on LIFO $ 174,426 $ 94,873
Work-in-process 417,146 312,619
--------- --------
Inventories at FIFO cost 591,572 407,492
LIFO reserve (66,028) (66,028)
--------- -------
Inventories at LIFO cost 525,544 341,464
Other FIFO inventories 2,068,876 2,034,641
--------- --------
Total inventories 2,594,420 2,376,105
</TABLE>
Short-term bank borrowings.
The Company has $1,850,000 in bank credit lines which mature on March 1,
1997. Interest is charged at the lender s prime rate plus .325%, 8.57% at March
25, 1996. Outstanding borrowings are collateralized by accounts receivable and
inventories.
The credit line agreement contains covenants under which the Company may
not pay dividends in excess of 10% of annual net (after tax) profit, purchase
property and equipment in excess of $1.4 million in fiscal year end 1996 or
enter into mergers, acquisitions or any major sales of assets or corporate
reorganizations without prior consent of the bank. The Company is also required
to maintain certain financial ratios concerning working capital and debt to
equity, as well as a minimum net worth of $2,000,000.
Capital Stock.
On October 31, 1995, the holders of $122,000 worth of convertible
debentures converted into 976,000 shares of capital stock at a conversion price
of $.125 per share. The conversion increased capital stock outstanding from
4,377,577 shares to 5,353,577 shares.
(5) Federal Income Tax Expense
Effective September 26, 1993, the Company adopted SFAS No. 109, "Accounting
for Income Taxes," which requires an asset and liability approach to financial
accounting and reporting for income taxes. The cumulative effect of adopting
SFAS No. 109 on years prior to September 26, 1993 was $48,227. There was no
significant effect on net income from applying SFAS No. 109 during the year
ended September 24, 1994.
There were no extraordinary items to be reported for any of the above
accounting periods.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Liquidity and Capital Resources
During the first three months of the current fiscal year, the Company's
working capital has declined from approximately $1,572,000 on September 30,1995
to approximately $1,306,000 as of March 25, 1996. The 17% decline is due
primarily to financing the down payment on a new building which will be occupied
by the fabrication and processing business when the lease at the Spokane
Industrial Park expires in May 1996.
The Company has a commitment from a bank to provide a construction and
subsequent real estate loan for up to $1,688,000. As of March 25, 1996,
advances outstanding on the construction loan amounted to approximately
$1,020,000. Of this amount outstanding, $878,000 was used to pay off an
existing loan secured by a lien on the property. The commitment should be
adequate to complete construction of the warehouse structure. Various
alternatives are currently being explored for additional office space. It is
likely that the existing office space for Stock Steel can be remodeled and
expanded to provide the necessary accommodation for approximately $320,000. If
the appraisal supports the construction price and financing can be arranged the
expansion would be a good choice.
The Company is dependent on an operating line of credit, secured by
accounts receivable and inventory to meet its daily financial obligations. A
$1.85 million operating line is currently in place through March 1, 1997. The
Company expects to be able to renew the operating line of credit for the next
year on substantially the same terms and conditions as this year.
Results of Operations
Six Months Ended March 25, 1996
Sales of approximately $5,895,000 for the six month period ended March 25,
1996 are only slightly higher than the $5,882,000 for the same period of time in
the prior fiscal year. Gross margins, however, were 2% lower than the first six
months of the prior year. The deterioration in margins was due primarily to a
decrease in inventory replacement costs for material purchased from the mills.
The steel service center business will temporarily experience lower margins as
the sales price declines immediately when the mills announce a decrease. It
will generally take about 90 days to work the higher cost material out of the
inventory. Even when the higher priced inventories have been flushed out, gross
margin dollars will still be deflated as a result of a new smaller sales price.
The steel service center sales represent approximately 74% of the total Company
sales, with the fabrication and processing business accounting for the remaining
26%. The industrial fabrication and processing market shows continuing
strength.
A 7% increase in operating expenses during the first six months of the
current fiscal year over the same period of the prior year was due primarily to
the inefficiencies of working around the construction project. Wages and
associated benefits and taxes account for most of the increase. The warehouse
structure should be completed in early May and it will be difficult to bring the
operating expenses back down prior to that time.
Interest expense, at approximately $92,000 is 16% below the same period of
time in the prior year. The decrease is primarily due to lower interest rates
and the conversion of $122,000 worth of debentures into capital stock. The
interest rate on the debentures was 9.25%.
A combination of lower gross margins and a higher expense load resulted in
a decline in net income from approximately $121,500 at March 25, 1995 to
approximately $32,700 at March 25, 1996.
Three Months Ended March 25, 1996
Sales of approximately $3,200,000 for the three month period ended March
25, 1996 were 1% below the $3,237,000 for the same period in the prior fiscal
year. The steel service center business experienced a 7% decline in sales,
primarily the result of poor weather conditions and phone service interruption
problems that intermittently interfered with the sales effort for the better
part of three weeks. The fabrication and processing business had a 19% increase
in sales. Both markets continue to reflect aggressive competitive pricing.
Gross margins at 27.5% of sales for the current year dropped from 28.5% for
the same quarter of the prior fiscal year. The decline is attributable to
increased competition in the steel service center business.
Operating expenses at approximately $734,500 for the three month period
ended March 25, 1996 were roughly 4% higher than the same three month period of
the prior year. The increase is primarily the result of the continuing
construction project.
Interest expense at approximately $41,000 compared to $53,000 for the
second quarter of the prior fiscal year is down 23%. The decline is the result
of lower interest rates and the conversion of $122,000 worth of debentures into
capital stock.
Due to lower sales volume and higher operating expense, the net income for
the quarter ending March 25, 1996 at approximately $76,000 was 38% lower than a
net income of approximately $123,000 for the same quarter of the prior fiscal
year.
PART II. OTHER INFORMATION.
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
The Company had sold $250,000 of convertible debentures, collateralized by
land and building, held by related parties, with annual interest at 9.25% and
due October 31, 1998. The instruments are convertible to no-par common stock
after October 31, 1994 at $0.125 per share with 20% per year incremental
conversion price increases over the life of the debentures. The Company, at its
option, may call any or all outstanding debentures for redemption after January
2, 1994.
During October 1995, $122,000 of the debentures were converted at $0.125
per share for which 976,000 shares were issued. $128,000 remains as
long-term debt. This conversion increased the number of outstanding shares from
4,377,577 to 5,353,577.
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 (249.308).
(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 thereunto duly authorized.
<PAGE>
THE COEUR D'ALENES COMPANY
(Registrant)
Dated: April 25, 1996
/s/ Marilyn A. Schroeder
------------------------
Marilyn A. Schroeder, Treasurer and
Chief Financial Officer
(Authorized Officer and Principal
Accounting and Financial Officer)
<PAGE>
