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, 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.
5,353,450 shares of common stock, no par value, were outstanding as of
January 31, 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
December 25, 1997 and December 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 27, 1997.
Index of Financial Statements
Page
Consolidated Balance Sheets -
December 25, 1997 and September 27, 1997 3
Unaudited Consolidated Income Statements -
Three Months Ended December 25, 1997 and December 25, 1996 4
Unaudited Consolidated Statement of Cash Flows -
Three Months Ended December 25, 1997 and December 25, 1996 6
Condensed Notes to Unaudited Consolidated Financial Statement 7
THE COEUR D ALENES COMPANY
CONSOLIDATED BALANCE SHEET
December 25, 1997 and September 28, 1997
December 25, 1997 September 28, 1997
ASSETS (Unaudited) (Audited)
Current Assets:
Cash $ 7,760 $ 89,495
Accounts receivable 1,160,108 1,240,996
Inventory 2,542,632 2,342,671
Other current assets 100,448 70,004
Total current assets 3,810,948 3,743,166
Property and Equipment 4,761,711 4,735,715
Less accumulated depreciation 1,464,866 1,400,291
Net property and equipment 3,296,845 3,335,424
Other assets 54,389 73,365
Total assets $7,162,182 $7,151,955
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short term bank borrowings $ 383,652 $ 833,656
Accounts payable 1,163,308 613,608
Accrued expenses 272,539 307,520
Current amount on long-term debt 103,663 103,663
Total current liabilities 1,923,162 1,858,447
Long-term debt:
Deferred tax liability 65,000 65,000
Long term debt less current
maturities 2,370,973 2,393,822
Long term debt to related parties 128,000 128,000
Total long term liabilities 2,563,973 2,586,822
Total liabilities 4,487,135 4,445,269
Stockholders' Equity:
Capital Stock 1,186,192 1,186,192
Retained earnings 1,492,985 1,524,294
2,679,177 2,710,486
Less Treasury Stock at cost 4,130 3,800
Total stockholders' equity 2,675,047 2,706,686
Total liabilities and stockholder's
equity $7,162,182 $7,151,955
THE COEUR D ALENES COMPANY
UNAUDITED CONSOLIDATED INCOME STATEMENT
Three Months Ended December 25, 1997and December 25, 1996
1997 1996
Net sales $3,228,540 $3,004,130
Costs of sales 2,480,470 2,196,196
Gross profit on sales 748,070 807,934
Selling, general and
administrative expenses 738,765 830,577
Operating income <loss> 9,305 < 22,643>
Other income (expense)
Interest income 7,788 6,655
Interest expense <74,319> < 77,392>
Other income 7,528 29,567
Total other expense <59,003> < 41,170>
Loss before income tax expense <49,698> < 63,813>
Income tax benefit <18,388> < 23,611>
Net loss $ <31,310> $< 40,202>
Loss per share $ 0.01 $ 0.01
Shares outstanding 5,353,450 5,353,561
THE COEUR D'ALENES COMPANY
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months Ended December 25, 1997 and December 25, 1996
1997 1996
Cash flows from operating activities:
Net loss $<31,310> $<40,202>
Adjustments to reconcile net income
to cash provided (used) by operating activities:
Depreciation 64,575 55,384
Gain on disposal of assets < 1,000> < 22,122>
Changes in assets and liabilities
Accounts and notes receivable 80,888 <159,242>
Inventories < 199,961> < 7,862>
Other current assets < 30,444> < 57,943>
Other assets 18,976 6,239
Accounts payable 549,701 38,131
Accrued expenses < 34.981> <185,162>
Cash provided (used) by operating activities 416,444 <372,779>
Cash flows from investing activities:
Proceeds from sale of assets 1,000 47,350
Additions to property and equipment < 25,996> <250,505>
Cash flows used by investing activities < 24,996> <203,155>
Cash flows from financing activities:
Purchase of treasury stock < 330>
Net borrowing (payments)
borrowings under line of credit <450,004> 342,732
Principal repayment of long-term debt < 22,849> < 14,280>
New long term note 271,273
Cash provided <used> by financing activities <473,183> 599,725
Net increase (decrease) in cash < 81,735> 23,791
Cash, beginning of period 89,495 68,645
Cash, end of period $ 7,760 $ 92,436
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, 1997 are the same as those contained in the Summary of
Significant Accounting Policies from the Company's audited financial
statements as of September 27, 1997 and September 28, 1996.
(2) Inventories.
Inventories are summarized as follows:
December 25, September 27,
1997 1997
Fabrication inventories:
Raw materials $ 61,968 $ 74,501
Work-in-progress 92,909 293,181
Inventories at FIFO cost 154,877 367,682
LIFO reserve <50,538> <50,538>
Inventories at LIFO cost 104,339 317,144
Distribution inventories at FIFO 2,438,293 2,025,527
Total inventories $2,542,632 $2,342,671
(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 lender's prime rate plus .325%, 8.82% at
December 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.
The Company made a tender offer to shareholders with holdings of four shares or
less which ended on October 15, 1997. The purchase price for the shares was
$10 for each shareholder. The total shares tendered were 111 for a total
purchase price of $330.
(5) Federal Income Tax Expense
As of December 25, 1997 and September 27, 1997, the Company has a deferred
long term tax liability of $65,000 resulting primarily from the use of
accelerated methods of depreciation of fixed assets and a deferred tax asset
of $46,000 resulting from vacation accrual and bad debt allowance. A valuation
allowance on the Company's deferred tax assets has been established to the
extent the Company believes it is more likely than not that the deferred tax
assets will not be realized.
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
$1,884,700 on September 27,1997 to approximately $1,888,000 as of December
25, 1997.
The Company converted a construction loan in the amount of $1,950,000
to a permanent real estate 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 was being adjusted every six months to a rate
of 2.75% over LIBOR. As of January 26, 1998, the loan rate was fixed at
8-1/2%. An additional loan fee in the amount of $4,779 was paid to exercise the
conversion feature.
During the current fiscal year it is likely that the Company will want to
invest in crane improvements for the distribution business. The cost is
expected to be approximately $20,000. 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 April 1, 1998. 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 $3,229,000 for the three month period ended
December 31, 1997 are approximately 7% higher than approximately $3,004,000
for the same period of time in 1996. Gross margins, however, declined by
approximately 7% to $748,000 for the period ended December 31, 1997 from
$808,000 for the same period of the prior fiscal year. The steel service
center sales represent approximately 82% of the total sales for the first
three months of the current fiscal year compared to 76% for the first three
months of the prior fiscal year. This represents a 17% increase in the steel
service center's sales volume over the first three months of the prior year.
Of that 17%, approximately 1/3 is the result of the press brake work moving
from the fabrication business to the steel service center business where the
fit is better. The remaining 2/3, or 11% is real sales growth. The
fabrication business (contributing 18% and 24% of the total sales in the
first three months of fiscal 1998 and 1997 respectively) after factoring out
the shift of the press brake work experienced a real sales decline of 13%.
The fabrication business, with the greater value added component will
generally achieve gross margins 10%-20% higher as a percentage of sales than
the steel service center business. Consequently, the gross margin dollars
for the current year are approximately $60,000 less than the same period of
the prior fiscal year due to the different sales mix.
Operating expenses, at approximately $739,000 for the three months ended
December 25, 1997 were approximately 11% lower than approximately $831,000
for the same period of the prior fiscal year. The decrease was possible
because the prior fiscal year's expense was impacted by severe weather
conditions and a move to new facilities which was not duplicated in the
current year.
Interest expense at approximately $74,000 for the three month period
ended December 25, 1997 is 4% lower than approximately $77,000 for the three
month period ended December 25, 1996. The slight reduction is attributable
to a lower over all debt level for the first three months of the current
fiscal year. Increases in inventory levels going into the second quarter
will have the effect of increasing debt levels again and second quarter will
probably more closely resemble the second quarter of the prior fiscal year.
Other income at approximately $7,500 for the first three months of the
current fiscal year compares to approximately $30,000 for the same period of
time in the prior year. The decrease was expected, as last year's income
included the gain on the sale of surplus equipment (approximately $22,000) in
conjunction with the move of the fabrication business to a new facility.
The reduced operating expense for the first quarter of the current year
helped to reduce the loss to approximately $31,000 compared to a loss of
approximately $40,000 for the same period of time in 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 by 22%.
The Company conducted a tender offer on odd lot shares from August
1997 through October 15, 1997. As a result of the offer, the Company purchased
111 shares for a total cost of $330.
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 9, 1998
/s/ Marilyn A. Schroeder
Marilyn A. Schroeder, Treasurer and
Chief Financial Officer
(Authorized Officer and Principal
Accounting and Financial Officer
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<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 12-MOS
<FISCAL-YEAR-END> SEP-26-1998 SEP-27-1997
<PERIOD-END> DEC-25-1997 SEP-27-1997
<CASH> 7,760 89,495
<SECURITIES> 0 0
<RECEIVABLES> 1,216,609 1,294,302
<ALLOWANCES> 56,501 53,306
<INVENTORY> 2,542,632 2,342,671
<CURRENT-ASSETS> 3,810,948 3,743,166
<PP&E> 4,761,711 4,735,715
<DEPRECIATION> 1,464,866 1,400,291
<TOTAL-ASSETS> 7,162,182 7,151,955
<CURRENT-LIABILITIES> 1,923,162 1,858,447
<BONDS> 1,914,747 1,924,395
0 0
0 0
<COMMON> 1,186,192 1,186,192
<OTHER-SE> 1,492,985 1,524,294
<TOTAL-LIABILITY-AND-EQUITY> 7,162,182 7,151,955
<SALES> 3,228,540 12,858,765
<TOTAL-REVENUES> 3,243,856 12,992,262
<CGS> 2,480,470 9,498,045
<TOTAL-COSTS> 3,219,235 12,565,646
<OTHER-EXPENSES> 55,931 356,195
<LOSS-PROVISION> 2,400 3,000
<INTEREST-EXPENSE> 74,319 301,306
<INCOME-PRETAX> 49,698 180,199
<INCOME-TAX> 18,388 54,889
<INCOME-CONTINUING> 9,305 180,199
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 31,310 125,310
<EPS-PRIMARY> 0.01 0.02
<EPS-DILUTED> 0.01 0.02
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