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 JUNE 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.
5,353,577 shares of common stock, no par value, were outstanding as of June
30, 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 June
25, 1996 and June 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
<TABLE>
<S> <C>
Page
Consolidated Balance Sheets -
June 25, 1996 and September 30, 1995 3
Unaudited Consolidated Income Statements -
Nine Months Ended June 25, 1996 and June 25, 1995 4
Unaudited Consolidated Income Statements -
Three Months Ended June 25, 1996 and June 25, 1995 5
Unaudited Consolidated Statement of Cash Flows -
Nine Months Ended June 25, 1996 and June 25, 1995 6
Condensed Notes to Unaudited Consolidated Financial Statement 7
</TABLE>
THE COEUR D ALENES COMPANY CONSOLIDATED BALANCE SHEET
June 25, 1996 and September 30, 1995
<TABLE>
<S> <C> <C> <C> <C>
June 25, 1996 September 30, 1995
ASSETS
(Unaudited) (Audited)
Current Assets:
Cash $ 177,063 $ 128,085
Accounts receivable 1,074,132 992,363
Inventory 2,396,141 2,376,105
Other current assets 66,955 70,450
Total current assets 3,714,291 3,567,003
Property and Equipment 5,016,793 4,067,865
Less accumulated depreciation 2,211,299 2,193,188
Net property and equipment 2,805,494 1,874,677
Other assets 17,789 49,346
Total assets $6,537,574 $5,491,026
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short term bank borrowings $ 552,771 $ 772,064
Accounts payable 1,448,168 733,767
Accrued expenses 263,994 430,798
Current amount on long-term debt 74,989 58,346
Total current liabilities 2,339,922 1,994,975
Long-term debt:
Deferred tax liability 46,768 46,768
Long term debt less current
maturities 1,559,183 1,030,131
Long term debt to related parties 128,000 250,000
Total long term liabilities 1,733,951 1,326,899
Total liabilities 4,073,873 3,321,874
Stockholders' Equity:
Capital Stock 1,186,192 1,064,193
Retained earnings 1,281,309 1,108,755
2,467,501 2,172,948
Less Treasury Stock at cost 3,800 3,796
Total stockholders' equity 2,463,701 2,169,152
Total liabilities and
stockholder's equity $6,537,574 $5,491,026
</TABLE>
THE COEUR D ALENES COMPANY
UNAUDITED CONSOLIDATED INCOME STATEMENT
Nine Months Ended June 25, 1996 and June 25, 1995
<TABLE>
<S> <C> <C> <C>
1996 1995
Net sales $9,344,985 $8,778,081
Costs of sales 6,834,153 6,352,815
Gross profit on sales 2,510,832 2,425,266
Selling, general and
administrative expenses 2,169,520 2,046,569
Operating incpme 341,312 378,697
Other income (expense)
Interest income 17,267 40,525
Interest expense (150,935) (166,592)
Other income 66,251 86,616
Total other expense (67,417) (39,451)
Income before income tax expense 273,895 339,246
Income tax expense 101,341 132,306
Net income $ 172,554 $206,940
Earnings per share $0.03 $0.05
Shares outstanding 5,353,577 4,377,577
</TABLE>
THE COEUR D'ALENES COMPANY
UNAUDITED CONSOLIDATED INCOME STATEMENT
Three Months Ended June 25, 1996 and June 25, 1995
<TABLE>
<S> <C> <C> <C> <C>
1996 1995
Net sales $3,449,797 $2,895,626
Costs of sales 2,532,614 2,099,728
Gross profit on sales 917,183 795,898
Selling, general and administrative
expenses 677,182 654,002
Operating income 240,001 141,896
Other income (expense)
Interest income 5,119 17,288
Interest expense (59,173) (57,892)
Other income 36,070 38,841
Total other expense (17,984) (1,763)
Income before income tax expense 222,017 140,133
Income tax expense 82,146 54,652
Net income $139,871 $85,481
Earnings per share $ 0.03 $ 0.02
Shares outstanding 5,353,577 4,377,577
</TABLE>
THE COEUR D'ALENES COMPANY
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
Nine Months Ended June 25, 1996 and June 25, 1995
<TABLE>
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1996 1995
Cash flows from operating activities:
Net income $ 172,554 $206,940
Adjustments to reconcile net income to cash
provided (used) by operating activities:
Depreciation 112,575 90,800
Gain on disposal of assets (3,057) (15,675)
Changes in assets and liabilities
Accounts and notes receivable ( 81,769) 198,465
Inventories ( 20,037) (382,086)
Prepaid expense 3,495 ( 11,576)
Other Assets 31,557 2,073
Accounts payable 714,401 354,042
Accrued expenses (166,804) ( 82,632)
Cash provided by operating activities 762,915 360,351
Cash flows from investing activities:
Proceeds from sale of assets 8,000 20,000
Additions to property and equipment (1,048,338) (184,760)
Cash flows used by investing activities (1,040,338) (164,760)
Cash flows from financing activities:
Contribution of shares to treasury (4) 0
Net repayment under line of credit (219,293) (276,854)
Principal repayment of long-term debt ( 64,159) (226,372)
New long term note 146,900 200,000
Advance on construction loan 1,308,871 0
Pay off real estate loan (H. Stack) ( 845,914) 0
Cash provided (used) by financing activities 326,401 (303,226)
Net increase (decrease) in cash 48,978 (107,635)
Cash, beginning of period 128,085 110,638
Cash, end of period $ 177,063 $ 3,003
</TABLE>
THE COEUR D'ALENES COMPANY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies.
Significant accounting policies followed for the nine months ended June 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.
(2) Inventories.
Inventories are summarized as follows:
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June 25, September 30,
1996 1995
Raw materials on LIFO $ 50,789 $ 94,873
Work-in-process 335,512 312,619
Inventories at FIFO cost 386,301 407,492
LIFO reserve (66,028) (66,028)
Inventories at LIFO cost 320,273 341,464
Other FIFO inventories 2,075,869 2,034,641
Total inventories 2,396,142 2,376,105
</TABLE>
(3) 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 June
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.
(4) 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 nine months of the current fiscal
year, the Company's working capital has declined from approximately $1,572,000
on September 30,1995 to approximately $1,375,000 as of June 25, 1996. The 13%
decline is due primarily to financing the down payment on a new building which
will be occupied by the fabrication and processing business. The lease on the
premises at the Spokane Industrial Park expired in May 1996. The fabrication
business is continuing to occupy the premises on a month to month lease until
the new facility at 3900 E. Broadway is complete.
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 June
25, 1996, advances outstanding on the construction loan amounted to
approximately $1,309,000. 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 plant structure. Alternatives are
still 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 $215,000. As soon as the
engineering is complete the contractor will apply for a building permit. The
plan is to begin construction immediately thereafter. It will be necessary to
acquire more efficient office furniture in order to make the additional space
accommodate the required personnel. The estimated cost of the furniture is
$70,000.
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
Nine Months Ended June 25, 1996
Sales of approximately $9,345,000 for the nine month period ended June 25,
1996 are 6% higher than approximately $8,778,000 for the same period of time in
the prior fiscal year. The increase in sales volume is due primarily to strong
demand in both the steel service center and the fabrication and processing
markets. Gross margins for the first three quarters of the current year, at
approximately $2,510,000 exceeded gross margins for the same period of time in
the prior year by 3-1/2%. As a percentage of sales, gross margins for the
current year at 26.9% are down slightly from 27.6% the prior year to date. The
decline was primarily due to inventory costs below replacement costs early in
the year. Increased volume offset the temporary effect of declining mill
replacement pricing. The steel service center business represents approximately
74% of the current year to date sales and 67% of the current year to date gross
margins. The fabrication and processing business accounts for the remaining 26%
of sales and 33% of gross margins. The markets for both businesses continue to
exhibit signs of strong demand in the immediate future.
A 5% increase in operating expense during the first
nine months of the current fiscal year over the same period of the prior year is
accounted for primarily by increased wages and associated benefits and taxes.
The increases are attributable in part to the inefficiencies inherent in working
around a construction project. The structure is about 99% complete and the
major pieces of equipment have been moved. The move should be complete by the
middle to the end of August. While a lot of the spaciousness of the old
facility will be gone, the new facility has a much more efficient layout and the
space will be much better utilized.
Interest expense, at approximately $151,000 for the first three quarters of
the current fiscal year is 9% below the $166,600 for the same period for the
prior fiscal 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%.
Other income includes payments received on a sublease arrangement at the
Spokane Industrial Park location. The $6,000 monthly rental fee was reduced to
$3,000 monthly in April 1996 as the equipment in the building was removed for
use at the new facility. Rebates from prior years' participation in an
industrial insurance retrospective rating plan for the current year were
approximately 50% of the prior year. Both of these third quarter events brought
year to date non operating other income down by 24% for the first nine months of
the current year compared to the same period of time for the prior year.
An overall 17% decline in net income for the first nine months of the
current year compared to the same period of the prior year is the result of
inefficiencies created by the construction project. To some extent these costs
were anticipated, however there were unforeseen costs associated with delays
caused by design changes. Both the steel service center business and the
fabrication and processing business have been profitable during the first nine
months of the current fiscal year.
Three Months Ended June 25, 1996
Sales of approximately $3,450,000 for the three month period ended June 25,
1996 were 19% higher than approximately $2,896,000 gross sales for the same
period in the prior fiscal year. The fabrication and processing business
achieved a 48% increase in gross sales at the same time the steel service center
business increased revenues by 12%. The fabrication and processing business
accounted for 25% of the current year third quarter sales, while the steel
service center business accounted for the other 75%. Potential for fourth
quarter sales is good, however, the equipment relocation for the fabrication and
processing equipment will cause significant downtime for production. Sales will
necessarily decline during the period of the move, which will take approximately
8-10 weeks to accomplish.
Gross margins at 26.6% of sales for the most recent quarter compare to
27.5% for the quarter ending June 25, 1995. Sales growth resulted in an overall
increase of 15% in total gross margins.
Operating expenses, at approximately $677,000 for the three months ended
June 25, 1996 compare to approximately $654,000 for the same period of time in
the prior fiscal year. This 4% increase is primarily the result of the 19%
increase in sales volume.
Net income before taxes of approximately $222,000 represents a 59% increase
for the three month period ended June 25, 1996 compared to the three month
period ended June 25, 1995. Strong sales volume and continuing attention to
cost control helped to reduce the shortfall between last year's net income year
to date and the current year's net income.
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.
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)
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.
THE COEUR D'ALENES COMPANY
(Registrant)
Dated: April 25, 1996
_________________________________
Marilyn A. Schroeder, Treasurer and
Chief Financial Officer
(Authorized Officer and Principal
Accounting and Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 6-MOS
<FISCAL-YEAR-END> SEP-28-1996 SEP-30-1995
<PERIOD-END> JUN-25-1996 MAR-25-1996
<CASH> 177,063 128,085
<SECURITIES> 0 0
<RECEIVABLES> 1,164,354 1,108,132
<ALLOWANCES> 90,222 84,213
<INVENTORY> 2,396,142 2,376,105
<CURRENT-ASSETS> 3,714,291 3,567,003
<PP&E> 5,016,793 4,067,865
<DEPRECIATION> 2,211,299 2,193,188
<TOTAL-ASSETS> 6,537,574 5,491,026
<CURRENT-LIABILITIES> 2,339,922 1,994,975
<BONDS> 1,337,688 851,796
0 0
0 0
<COMMON> 1,186,192 1,064,193
<OTHER-SE> 1,277,509 1,104,959
<TOTAL-LIABILITY-AND-EQUITY> 6,537,574 5,491,026
<SALES> 9,344,985 12,115,865
<TOTAL-REVENUES> 9,428,503 12,240,378
<CGS> 6,834,153 8,734,461
<TOTAL-COSTS> 9,003,673 11,667,501
<OTHER-EXPENSES> 252,276 316,289
<LOSS-PROVISION> 6,000 2,000
<INTEREST-EXPENSE> 150,935 184,095
<INCOME-PRETAX> 273,895 388,782
<INCOME-TAX> 101,341 132,194
<INCOME-CONTINUING> 273,895 388,782
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 172,554 256,588
<EPS-PRIMARY> $.03 $.06
<EPS-DILUTED> $.03 $.04
</TABLE>
