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
DECEMBER 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 January 31, 1997.
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
December 25, 1996 and December 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 28, 1996.
Index of Financial Statements
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Page
Consolidated Balance Sheets -
December 25, 1996 and September 28, 1996 3
Unaudited Consolidated Income Statements -
Three Months Ended December 25, 1996 and December 25, 1995 4
Unaudited Consolidated Statement of Cash Flows
Three Months Ended December 25, 1996 and December 25, 1995 6
Condensed Notes to Unaudited Consolidated
Financial Statement 7
</TABLE>
THE COEUR D ALENES COMPANY CONSOLIDATED BALANCE SHEET
December 25, 1996 and September 28, 1996
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ASSETS Dec 25, 1996 Sept 28, 1996
(Unaudited) (Audited)
Current Assets:
Cash $ 92,436 $ 68,645
Accounts receivable 1,340,841 1,181,599
Inventory 2,796,516 2,788,654
Other current assets 128,393 70,450
Total current assets 4,358,186 4,109,348
Property and Equipment 4,851,458 5,332,622
Less accumulated depreciation 1,584,022 2,235,079
Net property and equipment 3,267,436 3,097,543
Other asset 44,493 50,732
Total assets $7,670,114 $7,257,623
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short term bank borrowings $1,206,209 $ 863,477
Accounts payable 1,084,793 1,046,662
Accrued expenses 282,712 486,478
Current amount on long-term debt 83,576 75,821
Total current liabilities 2,657,290 2,472,438
Long-term debt:
Deferred tax liability 63,007 44,403
Long term debt less
current maturities 2,280,643 2,031,406
Long term debt to related parties 128,000 128,000
Total long term liabilities 2,471,650 2,203,809
Total liabilities 5,128,940 4,676,247
Stockholders' Equity:
Capital Stock 1,186,192 1,186,192
Retained earnings 1,358,782 1,398,984
--------------------------------------
2,544,974 2,585,176
Less Treasury Stock at cost 3,800 3,800
Total stockholders' equity 2,541,174 2,581,376
Total liabilities and
stockholder's equity $7,670,114 $7,257,623
</TABLE>
THE COEUR D ALENES COMPANY UNAUDITED CONSOLIDATED INCOME STATEMENT Three
Months Ended December 25, 1996 and December 25, 1995
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1996 1995
Net sales $3,004,130 $2,694,541
Costs of sales 2,196,196 1,983,000
Gross profit on sales 807,934 711,541
Selling, general and administrative
expenses 830,577 757,894
Operating loss (22,643) (46,353)
Other income (expense)
Interest income 6,655 12,506
Interest expense (77,392) (50,862)
Other income 29,567 15,430
Total other expense (41,170) (22,926)
Loss before income tax expense (63,813) (69,279)
Income tax benefit (23,611) (25,633)
Net loss $ (40,202) $ (43,646)
Loss per share $ 0.01 $ 0.01
Shares outstanding 5,353,561 5,353,577
</TABLE>
THE COEUR D'ALENES COMPANY
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months Ended December 25, 1996 and December 25, 1995
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1996 1995
Cash flows from operating activities:
Net loss $(40,202) $(43,646)
Adjustments to reconcile net income
to cash provided (used)
by operating activities:
Depreciation 55,384 37,425
Gain on disposal of assets (22,122)
Changes in assets and liabilities
Accounts and notes receivable (159,242) (162,399)
Inventories ( 7,862) (490,833)
Prepaid expense ( 57,943) ( 1,511)
Other Assets 6,239 31,557
Accounts payable 38,131 898,975
Accrued expenses (185,162) 46,453
Cash provided (used) by operating
activities (372,779) 316,021
Cash flows from investing activities:
Proceeds from sale of assets 47,350
Additions to property and equipment (250,505) (238,421)
Cash flows used by investing activities (203,155) (238,421)
Cash flows from financing activities:
Net borrowing (payments) borrowings
under line of credit 342,732 (194,027)
Principal repayment of long-term debt (14,280) ( 11,097)
New long term note 271,273 0
Cash provided (used) by financing
activities 599,725 (205,124)
Net increase (decrease) in cash 23,791 (127,524)
Cash, beginning of period 68,645 128,085
Cash, end of period $ 92,436 $ 561
</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 three months ended
December 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 28, 1996 and September 30, 1995.
(2) Inventories.
Inventories are summarized as follows:
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December 25, September 28,
1996 1996
Raw materials on LIFO $ 79,130 $ 147,528
Work-in-process 429,049 550,462
Inventories at FIFO cost 508,179 697,990
LIFO reserve (56,711) (56,711)
Inventories at LIFO cost 451,468 641,279
Other FIFO inventories 2,345,048 2,147,375
Total inventories 2,796,516 2,788,654
</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 December 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
As of December 25, 1996 and September 28, 1996, the Company has a deferred long
term tax liability of $63,007 and $44,403 resulting primarily from the use of
accelerated methods of depreciation of fixed assets and a deferred tax asset of
$70,450 and $70,450 resulting from vacation accrual and bad debt allowance. No
valuation allowance is recorded since the Company believes it is more likely
than not that it will realize the deferred tax asset. 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 remained relatively constant, moving from approximately
$1,637,000 on September 28,1996 to approximately $1,701,000 as of December 25,
1996. The 4% improvement was primarily the result of long-term financing on a
remodeled and expanded office building. The first progress payment was funded
from the operating line in September, 1996 waiting for an appraisal to support
permanent funding.
The Company converted a construction loan in the amount of $1,950,000 to a
permanent loan in December, 1996. The loan was used to pay off the former
owner, construct approximately 42,000 sq. ft. of plant facility and remodel and
expand the office space to approximately 6,000 sq. ft. The terms of the loan
include a 20 year amortization period with a ten year balloon payment.
Interest is adjusted every six months to a rate of 2.75% over LIBOR.
During the current fiscal year it is likely that the Company will want to
invest in a new shear for the distribution business. The cost is expected to
be approximately $250,000. A portion of the cost will likely be financed with
an equipment loan.
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 last
year.
Results of Operations
Sales of approximately $3,004,000 for the three month period ended
December 25, 1996 are approximately 11% higher than approximately $2,695,000
for the same period of time in 1995. Gross margins improved by approximately
14% for the first quarter of the current fiscal year compared to the first
quarter of the prior fiscal year. The steel service center sales represent
approximately 76% of the total Company sales and experienced a 12% growth for
the first three months of the current year compared to the first three months
of the prior year. The fabrication and processing business accounts for the
remaining 24% of the total sales and experienced a 7% increase in sales volume
for the three month period ended December 25, 1996 compared to the three month
period ended December 25, 1995.
Operating expenses at approximately $831,000 for the three month period
ended December 25, 1996 were 13.5% higher than approximately $712,000 for the
same period of the prior fiscal year. Severe weather conditions, including an
ice storm which left the plant without power for three days, had a negative
impact on the current year's first quarter expense load. The move to the new
facilities, which began in July, 1996, was not completed until December 1,
1996. Approximately $30,000 was spent on the move during the first quarter of
the current fiscal year. Another expense icurred in December, 1996 with no
comparable expense in 1995 was a settlement bonus paid to the shop employees of
the fabrication and processing business in the amount of $8,500.
Interest expense, at approximately $77,000 for the three month period ended
December 25, 1996 is 52% higher than approximately $51,000 for the three month
period ended December 25, 1995. The increase is the result of financing the
construction of a new fracility for the fabrication and processing business and
expansion of the office building. Long term debt increased by approximately
$1,278,000 to $2,471,650 as of December 25, 1996 compared to $1,193,802 as of
December 25, 1995.
With the additional expense load, the first quarter of the current year
ended with a net loss of $40,202, just slightly less than a net loss of $43,646
for the first quarter of the prior 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.
THE COEUR D'ALENES COMPANY
(Registrant)
Dated: February 7, 1997
/s/ Marilyn A. Schroeder
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> 3-MOS 12-MOS
<FISCAL-YEAR-END> SEP-27-1997 SEP-28-1996
<PERIOD-END> DEC-25-1996 SEP-28-1996
<CASH> 92,436 68,645
<SECURITIES> 0 0
<RECEIVABLES> 1,418,891 1,258,649
<ALLOWANCES> 78,050 77,050
<INVENTORY> 2,796,516 2,788,654
<CURRENT-ASSETS> 4,358,186 4,109,348
<PP&E> 4,851,458 5,332,622
<DEPRECIATION> 1,584,022 2,235,079
<TOTAL-ASSETS> 7,670,114 7,257,623
<CURRENT-LIABILITIES> 2,657,290 2,472,438
<BONDS> 1,950,000 1,678,728
0 0
0 0
<COMMON> 1,186,192 1,186,192
<OTHER-SE> 1,358,782 1,398,984
<TOTAL-LIABILITY-AND-EQUITY> 7,670,114 7,257,623
<SALES> 3,004,130 12,498,993
<TOTAL-REVENUES> 3,040,352 12,666,978
<CGS> 2,196,196 8,982,259
<TOTAL-COSTS> 3,026,774 11,902,279
<OTHER-EXPENSES> 53,781 341,797
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 77,392 209,124
<INCOME-PRETAX> (63,813) 422,902
<INCOME-TAX> (23,611) 132,673
<INCOME-CONTINUING> (22,643) 422,902
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (40,202) 290,229
<EPS-PRIMARY> (.01) .06
<EPS-DILUTED> (.01) .06
</TABLE>
