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, 1997.
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
25, 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 March 25, 1997 and March 25, 1996 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
Page
Consolidated Balance Sheets -
March 25, 1997 and September 28, 1996 3
Unaudited Consolidated Income Statements -
Six Months Ended March 25, 1997 and March 25, 1996 4
Unaudited Consolidated Income Statements -
Three Months Ended March 25, 1997 and March 25, 1996 5
Unaudited Consolidated Statement of Cash Flows -
Six Months Ended March 25, 1997 and March 25, 1996 6
Condensed Notes to Unaudited Consolidated Financial Statement 7
THE COEUR D ALENES COMPANY
CONSOLIDATED BALANCE SHEET
March 25, 1997 and September 28, 1996
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
March 25, 1997 September 28, 1996
ASSETS (Unaudited) (Audited)
Current Assets:
Cash $ 61,541 $ 68,645
Accounts receivable 1,154,431 1,181,599
Inventory 2,572,142 2,788,654
Other current assets 104,493 70,450
Total current assets 3,892,607 4,109,348
Plant, Property and Equipment 4,780,260 5,332,622
Less accumulated depreciation 1,588,408 2,235,079
Net plant property and equipment 3,191,852 3,097,543
Other assets 63,493 50,732
Total assets $7,147,951 $7,257,623
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short term bank borrowings $1,045,318 $ 863,477
Accounts payable 776,965 1,046,662
Accrued expenses 270,556 486,478
Current amount on long-term debt 83,576 75,821
Total current liabilities 2,176,415 2,472,438
Long-term debt:
Deferred tax liability 63,007 44,403
Long term debt less current maturities 2,265,658 2,031,406
Long term debt to related parties 128,000 128,000
Total long term liabilities 2,456,665 2,203,809
Total liabilities 4,633,080 4,676,247
Stockholders' Equity:
Capital Stock 1,186,192 1,186,192
Retained earnings 1,332,479 1,398,984
2,518,671 2,585,176
Less Treasury Stock at cost 3,800 3,800
Total stockholders' equity 2,514,871 2,581,376
Total liabilities and stockholders
equity $7,147,951 $7,257,623
THE COEUR DALENES COMPANY
UNAUDITED CONSOLIDATED INCOME STATEMENT
Six Months Ended March 25, 1997 and March 25, 1996
1997 1996
Net sale $6,053,954 $5,895,189
Costs of sales 4,473,000 4,301,539
Gross profit on sales 1,580,954 1,593,650
Selling, general and administrative expenses 1,590,634 1,492,339
Operating income (loss) ( 9,680) 101,311
Other income (expense)
Interest income 12,788 12,148
Interest expense (156,568) ( 91,762)
Other income 47,896 30,181
Total other expense (95,884) ( 49,433)
Income (loss) before income tax expense (105,564) 51,878
Income tax expense (39,059) 19,195
Net income (loss) $ (66,505) $ 32,683
Earnings (loss) per share $ (0.01) $ 0.01
Shares outstanding 5,353,561 5,353,561
THE COEUR D'ALENES COMPANY
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months Ended March 25, 1997 and March 25, 1996
1997 1996
Net sales $3,049,824 $3,200,649
Costs of sales 2,276,804 2,318,540
Gross profit on sales 773,020 882,109
Selling, general and administrative expenses 760,052 734,446
Operating income 12,968 147,663
Other income (expense)
Interest income 6,133 357
Interest expense ( 79,176) ( 40,900)
Other income 18,329 14,036
Total other expense ( 54,714) ( 26,507)
Income (loss) before income tax expense ( 41,746) 121,156
Income tax expense ( 15,446) 44,828
Net income (loss) $ ( 26,300) $ 76,328
Earnings (loss) per share $ (0.00) $ 0.01
Shares outstanding 5,353,561 5,353,561
THE COEUR D'ALENES COMPANY
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
Six Months Ended March 25, 1997 and March 25, 1996
1997 1996
Cash flows from operating activities:
Net income (loss) $ (66,505) $ 76,328
Adjustments to reconcile net income
to cash provided (used) by
operating activities:
Depreciation 110,134 37,425
Gain on disposal of assets ( 35,723) ( 1,000)
Changes in assets and liabilities
Accounts and notes received 27,168 ( 76,232)
Inventories 216,512 272,518
Prepaid expense and other
current assets ( 34,043) 7,500
Other Assets ( 12,761) 0
Accounts payable (269,697) (427,306)
Accrued expenses (197,317) ( 37,396)
Cash used by operating activities (262,232) (148,163)
Cash flows from investing activities:
Proceeds from sale of assets 98,860 3,000
Additions to property and equipment (267,580) (301,181)
Cash used by investing activities (168,720) (298,181)
Cash flows from financing activities:
Contribution of shares to treasury (0) (4)
Net borrowing (repayment)
under line of credit 181,841 274,290
Principal repayment of long-term debt ( 19,993) ( 42,020)
New long term note 262,000 68,700
Construction loan 0 1,019,686
Pay off real estate loan (H. Stack) 0 (845,914)
Cash provided by financing activities 423,848 474,738
Net increase (decrease) in cash ( 7,104) 28,394
Cash, beginning of period 68,645 561
Cash, end of period $ 61,541 $ 28,955
</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 six months ended March 25,
1997 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:
<TABLE>
<CAPTION>
March 25, September 28,
1997 1996
<S> <C> <C> <C> <C>
Raw materials on LIFO $ 194,912 $ 147,528
Work-in-process 282,580 550,462
Inventories at FIFO cost 477,492 697,990
LIFO reserve (56,711) (56,711)
Inventories at LIFO cost 420,781 641,279
Other FIFO inventories 2,151,361 2,147,375
Total inventories 2,572,142 2,788,654
</TABLE>
(3) Short-term bank borrowings.
The Company has $1,850,000 in bank credit lines which mature on April 1,
1998. Interest is charged at the lenders prime rate plus .325%, 8.57% at March
25, 1997. 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, 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 March 25, 1997 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 six months of the current fiscal year, the Companys
working capital increased from approximately $1,637,000 at the end of the prior
fiscal year to approximately $1,716,000 as of March 25, 1997. The 5%
improvement is due primarily to the proceeds from the sale of surplus equipment
being applied to current liabilities.
During the month of November 1996, the Company converted a construction
loan to a permanent loan with a 20 year amortization and a ten year balloon
payment. The interest rate is adjustable semi-annually at LIBOR Index plus
2.75%. At March 25, 1997 the rate was 8.375%. The first adjustment will be May
11, 1997.
The Company has placed an order for a new 1/2 percent Cincinnati Shear
which should arrive before the end of the fiscal year. The cost will be
approximately $185,000. It is also likely that the Company will purchase a
document imaging system to replace the current manual filing system. The cost
is estimated to be approximately $30,000. A bank has committed funds up to
$250,000 to help finance these acquisitions with the interest rate at 1/2%
over prime.
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 April 1, 1998. The
Company expects to be able to renew the operating line of credit for the
following year on substantially the same terms and conditions as this year.
Results of Operations.
Six Months Ended March 25, 1997
Sales of approximately $6,054,000 for the six month period ended March 25,
1997 are 3% higher than approximately $5,895,000 for the same six month period
of the prior fiscal year. Gross margins, however, declined by 1% from
approximately $1,594,000 for the first half of last year to approximately
$1,581,000 during the same six month period of the current fiscal year. The
steel service center business accounts for approximately 80% of the total
Company sales and for the six month period ended March 25, 1997, posted a 13%
sales growth over the six month period ended March 25, 1996. Gross margins for
the steel service center at 22.4% for the first half of the current fiscal year
compare to 22.9% for the same period of time in the prior fiscal year. The
fabrication and processing business accounts for the remaining 20% of the total
net sales and experienced a 20% decline in sales volume for the six month period
ended March 25, 1997 over the same six month period of the prior fiscal year.
The gross margins at 36% of sales improved by a full percentage point over the
35% representative of the same period of the prior year. The sales volume
decrease attributable to a major budget reduction in the operations of a major
customer was too great to be offset by an improvement in the gross margin
percent. A comparison of net sales for the first six months of the prior fiscal
year shows the steel service center business contributing 74% of total sales and
the fabrication and processing business accounting for the remaining 26%
Operating expenses at approximately $1,591,000 for the six month period
ended March 25, 1997 were 7% higher than approximately $1,492,000 for the six
month period ended March 25, 1996. Severe weather conditions, equipment repairs
necessary as a result of moving seasoned equipment, higher wage rates and a
settlement bonus paid to shop employees all contributed to the increased expense
load.
Interest expense, at approximately $157,000 for the six month period ended
March 25, 1997 is 71% higher than approximately $65,000 for the six month period
ended March 25, 1996. The increase is the result of replacing a leased facility
formerly occupied by the fabrication and processing business with a newly
constructed facility paid for with a 25% down payment by the Company and 75%
borrowed funds. Long term debt increased from approximately $1,362,000 as of
March 1996 to approximately $2,457,000 as of March 1997.
With the burden of the increased expense load, the first six months of the
current fiscal year resulted in an after tax net loss of $66,505, compared to a
net profit of $32,683 for the first six months of the prior fiscal year.
Three Months Ended March 25, 1996
Sales of approximately $3,050,000 for the three month period ended March
25, 1996 were approximately 5% below the $3,201,000 for the same period of the
prior fiscal year. The steel service center business, which contributed 84% of
the total sales for the three month period ended March 25, 1997, increased
revenues by 9% over the three month period ended March 25, 1996. The
distribution and processing business, accounting for only 16% of second quarter
sales in the current fiscal year, experienced a sales decline of 42% during the
second quarter of the current year compared to the second quarter of the prior
fiscal year. The decline is the result of capital budget cuts by a major
customer.
Gross margins for the three month period ended March 25, 1997, at 25.3% of
sales dropped by over two percentage points from 27.6% for the same period of
the prior fiscal year. The decrease is due to the sales blend between service
center and fabrication being more heavily weighted towards service center sales
which command a lower gross margin than fabrication sales. The combination of
lower sales volume and lower gross margin percent resulted in gross margin
dollars for the second quarter of the current fiscal year approximately $109,000
lower than the same period of the prior fiscal year.
Operating expenses at approximately $760,000 for the three month period
ended March 25, 1997 are 5% higher than the same three month period of the prior
fiscal year. The increase is due primarily to increased occupancy costs, more
repairs to equipment and higher labor costs.
Interest expense for the second quarter roughly doubled over the same time
period for the prior year. The increase is the result of the debt incurred to
construct a new facility for the fabrication and processing business.
Lower sales volume, lower gross margins as a percent of sales and higher
expense resulted in a net loss for the three months ended March 25, 1997 in the
amount of $26,300. The comparative net income for the same three month period
of the prior year was $76,328.
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 1996, $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 29, 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> 6-MOS 12-MOS
<FISCAL-YEAR-END> SEP-27-1997 SEP-28-1996
<PERIOD-END> MAR-25-1996 SEP-28-1996
<CASH> 61,541 68,645
<SECURITIES> 0 0
<RECEIVABLES> 1,233,981 1,258,649
<ALLOWANCES> 79,550 77,050
<INVENTORY> 2,572,142 2,788,654
<CURRENT-ASSETS> 3,892,607 4,109,348
<PP&E> 4,780,260 5,332,622
<DEPRECIATION> 1,588,408 2,235,079
<TOTAL-ASSETS> 7,147,951 7,257,623
<CURRENT-LIABILITIES> 2,176,415 2,472,438
<BONDS> 1,943,660 1,678,728
0 0
0 0
<COMMON> 1,186,192 1,186,192
<OTHER-SE> 1,332,479 1,398,984
<TOTAL-LIABILITY-AND-EQUITY> 7,147,951 7,257,623
<SALES> 6,053,954 12,498,993
<TOTAL-REVENUES> 6,114,638 12,666,978
<CGS> 4,473,000 8,982,259
<TOTAL-COSTS> 6,063,634 11,902,279
<OTHER-EXPENSES> 117,509 341,797
<LOSS-PROVISION> 6,000 0
<INTEREST-EXPENSE> 156,568 209,124
<INCOME-PRETAX> (105,564) 422,902
<INCOME-TAX> (39,059) 132,673
<INCOME-CONTINUING> (105,564) 422,902
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (66,505) 290,229
<EPS-PRIMARY> ( 0.01) 0.06
<EPS-DILUTED> ( 0.01) 0.06
</TABLE>
