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, 1998. 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 incorporation or
organization) Identification No.)
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.
5,352,553 shares of common stock, no par value, were outstanding
as of April 25, 1998.
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, 1998 and March 25, 1997
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 27,
1997.
Index of Financial Statements
Page
Consolidated Balance Sheets -
March 25, 1998 and September 27, 1997 3
Unaudited Consolidated Income Statements -
Six Months Ended March 25, 1998 and March 25, 1997 4
Unaudited Consolidated Income Statements -
Three Months Ended March 25, 1998 and March 25, 1997 5
Unaudited Consolidated Statement of Cash Flows -
Six Months Ended March 25, 1998 and March 25, 1997 6
Condensed Notes to Unaudited Consolidated Financial Statement 7
THE COEUR D ALENES COMPANY
CONSOLIDATED BALANCE SHEET
March 25, 1998 and September 27, 1997
March 25, September 27
1998 1997
(Unaudited) (Audited)
ASSETS
Current Assets:
Cash $ 60,070 $ 89,495
Accounts receivable 1,263,056 1,240,996
Inventory 2,762,192 2,342,671
Other current assets 93,874 70,004
Total current assets 4,179,192 3,743,166
Plant, Property and Equipment 4,788,407 4,735,715
Less accumulated depreciation 1,529,441 1,400,291
Net plant property and
equipment 3,258,966 3,335,424
Other assets 54,389 73,365
Total assets $7,492,547 $7,151,955
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short term bank borrowings $ 771,649 $ 833,656
Accounts payable 1,011,901 613,608
Accrued expenses 331,730 307,520
Debentures payable to
related parties 128,00
Current amount on
long-term debt 103,663 103,663
Total current liabilities 2,346,943 1,858,447
Long-term debt:
Deferred tax liability 97,953 65,000
Long term debt less current
maturities 2,347,607 2,393,822
Long term debt to related
parties 0 128,000
Total long term
liabilities 2,445,560 2,586,822
Total liabilities 4,792,503 4,445,269
Stockholders' Equity:
Capital Stock 1,186,192 1,186,192
Retained earnings 1,518,792 1,524,294
2,704,984 2,710,486
Less Treasury Stock at cost 4,940 3,800
Total stockholders'
equity 2,700,044 2,706,686
Total liabilities and
stockholders equity $7,492,547 $7,151,955
THE COEUR DALENES COMPANY
UNAUDITED CONSOLIDATED INCOME STATEMENT
Six Months Ended March 25, 1998 and March 25, 1997
1998 1997
Net sales $6,569,918 $6,053,954
Cost of sales 4,982,770 4,473,000
Gross profit on sales 1,587,148 1,580,954
Selling, general and
administrative expenses 1,472,339 1,590,634
Operating income (loss) 114,809 ( 9,680)
Other income (expense)
Interest income 16,319 12,788
Interest expense ( 149,882) (156,568)
Other income 10,020 47,896
Total other expense ( 123,543) (95,884)
Income (loss) before income
tax expense ( 8,734) (105,564)
Income tax (benefit) ( 3,232) (39,059)
Net income (loss) $( 5,502) $( 66.505)
Earnings (loss) per share $( 0.00 ) $( 0.01 )
Shares outstanding 5,352,553 5,353,561
THE COEUR D'ALENES COMPANY
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months Ended March 25, 1998 and March 25, 1997
1998 1997
Net sales $3,341,378 $3,049,824
Cost of sales 2,502,300 2,276,804
Gross profit on sales 839,078 773,020
Selling, general and
administrative expenses 733,575 760,052
Operating income 105,503 12,968
Other income (expense)
Interest income 8,530 6,133
Interest expense (75,562) ( 79,176)
Other income 2,493 18,329
Total other expense (64,539) ( 54,714)
Income (loss) before income
tax expense 40,964 ( 41,746)
Income tax expense 15,157 ( 15,446)
Net income (loss) $ 25,807 $ ( 26,300)
Earnings (loss) per share $ 0.00 $ (0.00)
Shares outstanding 5,352,553 5,353,561
THE COEUR D'ALENES COMPANY
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
Six Months Ended March 25, 1998 and March 25, 1997
1998 1997
Cash flows from operating activities:
Net loss $( 5,502) $ (66,505)
Adjustments to reconcile net income
to cash provided (used) by
operating activities:
Depreciation 129,150 110,134
Gain on disposal of assets ( 1,000) ( 35,723)
Changes in assets and liabilities
Accounts and notes receivable ( 22,060) 27,168
Inventories (419,521) 216,512
Prepaid expense and other
current assets ( 23,870) ( 34,043)
Other assets 18,976 ( 12,761)
Accounts payable 398,293 (269,697)
Accrued expenses 24,210 (197,317)
Other liabilities 32,953 _____
Cash provided (used)
by operating activities 131,629 (262,232)
Cash flows from investing activities:
Proceeds from sale of assets 1,000 98,860
Additions to property and equipment ( 52,692) (267,580)
Cash used by investing activities ( 51,692) (168,720)
Cash flows from financing activities:
Net borrowing (repayment)
under line of credit ( 62,007) 181,841
Principal repayment of long-term debt ( 46,215) ( 19,993)
New long term note 0 262,000
Treasury shares repurchased ( 1,140) 0
Cash provided (used) by
financing activities ( 109,362) 423,848
Net decrease in cash ( 29,425) ( 7,104)
Cash, beginning of period 89,495 68,645
Cash, end of period $ 60,070 $ 61,541
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, 1998 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:
March 25, September 28,
1997 1996
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
(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 1/2x12 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 fabrication 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)
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<PERIOD-TYPE> 6-MOS 12-MOS
<FISCAL-YEAR-END> SEP-26-1998 SEP-27-1997
<PERIOD-END> MAR-25-1998 SEP-27-1997
<CASH> 60,070 89,495
<SECURITIES> 0 0
<RECEIVABLES> 1,313,594 1,294,302
<ALLOWANCES> 50,538 53,306
<INVENTORY> 2,762,192 2,342,671
<CURRENT-ASSETS> 4,179,192 3,743,166
<PP&E> 4,788,407 4,735,715
<DEPRECIATION> 1,529,441 1,400,291
<TOTAL-ASSETS> 7,492,547 7,151,955
<CURRENT-LIABILITIES> 2,346,943 1,858,447
<BONDS> 1,905,024 1,924,395
0 0
0 0
<COMMON> 1,186,192 1,186,192
<OTHER-SE> 1,518,792 1,524,294
<TOTAL-LIABILITY-AND-EQUITY> 7,492,547 7,151,955
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<TOTAL-REVENUES> 6,596,257 12,992,262
<CGS> 4,982,770 9,498,045
<TOTAL-COSTS> 645,509 12,565,646
<OTHER-EXPENSES> 146,650 356,195
<LOSS-PROVISION> 7,400 3,000
<INTEREST-EXPENSE> 149,882 301,306
<INCOME-PRETAX> ( 8,734) 180,199
<INCOME-TAX> ( 3,232) 54,889
<INCOME-CONTINUING> 114,809 180,199
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
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<NET-INCOME> ( 5,502) 125,310
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