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 128,000
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 27, 1997 and September 28, 1996.
(2) Inventories.
Inventories are summarized as follows:
March 25, September 27,
1998 1997
Fabrication inventories:
Raw materials $ 61,860 $ 74,501
Work-in-progress 318,580 293,181
Inventories, at FIFO cost 380,440 367,682
LIFO reserve ( 50,538) ( 50,538)
Inventories, at LIFO cost 329,902 317,144
Distribution inventories, at FIFO 2,432,290 2,025,527
Total inventories 2,762,192 2,342,671
(3) Short-term bank borrowings.
The Company has $1,850,000 in bank credit lines which mature on May 1,
1999. Interest is charged at the lenders prime rate plus .25%. At March
25, 1997, the operating line was still priced under the prior loan agreement
which carried interest at the rate of the lenders prime rate plus .325%, or
8.57%. 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 $2,200,000.
(4) Capital Stock.
The Company conducted two tender offers which expired during the current
fiscal year. The offers resulted in 1,008 shares being repurchased as
treasury stock with a total cost to the Company of $1,140. The purpose of
the tender offers was to buy out odd lot holders of stock with diminimus
value which cost the Company more to service than the value of the stock held.
(5) Federal Income Tax Expense
As of March 25, 1998 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 six months of the current fiscal year, the Company's
working capital decreased from approximately $1,885,000 at the end of the
prior fiscal year to approximately $1,832,000 as of March 25, 1998. The
3% decline is primarily the result of debentures in the amount of $128,000
moving from long term to current liabilities. These debentures are due
at the end of October 1998. The operating line is adequate to retire this
debt and currently has an interest rate 1-1/4% lower than the rate carried
by the debentures.
On January 26, 1998 the Company converted the real estate loan from a
variable rate loan to an 8-1/2% fixed rate loan for the 228 months remaining
on the term.
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 May 1, 1999.
Results of Operations.
Six Months Ended March 25, 1998
Sales of approximately $6,570,000 for the six month period ended
March 25, 1998 are 8-1/2% higher than approximately $6,054,000 for the
same six month period of the prior fiscal year. Gross margins, however,
increased by less than 1/2% from approximately $1,581,000 for the first
half of last year to approximately $1,587,000 during the same six month
period of the current fiscal year. The steel service center sales
represent approximately 87% of the total sales for the first six months
of the current year compared to 80% for the first six months of the prior
year. This reflects a 19% increase in the steel service center's sales
volume over the first half of the prior year. Of that 19%, approximately
1/4 is the result of press brake work moving from the fabrication business
to the steel service center business where there is a better fit. The
remaining 3/4, or 14% is real sales growth. The fabrication business
(contributing 13% and 20% of the total sales in the first six months of
1998 and 1997 respectively). After factoring out the shift of the press
brake work experienced a sales decline of 24%. Since the business will
experience gross margins from 10% to 20% higher as a percentage of sales then
the distribution business, the increase in gross margins did not keep pace
with the sales volume increase.
Operating expenses at approximately $1,472,000 for the six month period
ended March 25, 1998 were 7% lower than approximately $1,591,000 for the
same period of the prior fiscal year. The $118,000 decrease was possible
because the current fiscal year was not impacted by severe weather
conditions, relocation of operations or nonproductive labor resulting from
declining sales volume, as was the prior year.
Interest expense, at approximately $150,000 for the six month period
ended March 25, 1998 is 4% lower than approximately $157,000 for the same
period of the prior year. The decrease was possible because of a slightly
lower debt level during the first quarter and a lower interest rate on a
real estate loan of approximately $1,911,000 during the second quarter of
the current year.
Other income at approximately $10,000 for the first six months of the
current fiscal year compares to approximately $48,000 for the first half of
the prior fiscal year. The decrease was anticipated as the prior year
includes approximately $36,000 of gain on the disposal of surplus equipment.
The surplus equipment was sold at the time of and immediately following the
relocation of the fabrication business to its current location.
The reduced operating costs for the first half of the year helped to
reduce the size of the net loss to approximately $5,500 compared to a net
loss of approximately $66,500 for the same period of the prior year.
Three Months Ended March 25, 1998
Sales of approximately $3,341,000 for the second quarter of the current
fiscal year are 10% higher than approximately $3,050,000 for the second
quarter of the prior fiscal year. The steel service center business, which
contributed 92% of the total sales for the three month period ended March
25, 1998, increased revenues by approximately 21% over the same period of
the prior fiscal year when its sales represented 84% of the Company's sales.
In October 1997 the press brake business was shifted from the fabrication
business to the steel service center business. After eliminating the effect
of the press brake business, the real increase in second quarter sales for
the current year over the sales for same period of the prior year was 18%.
The fabrication business represents 8% of the total sales for the second
quarter of the current year and 16% for the same period of the prior year.
After the same process of eliminating the effects of the business shift,
the fabrication sales were down 40% in a comparison of sales for the three
month period ended March 25, 1998 with sales for the three month period
ended March 25, 1997. The decrease is the result of low demand in the
Company's market area.
Gross margins for the three month period ended March 25, 1998, at
25.1% of sales compared to 25.3% of sales for the same period of the prior
fiscal year. With the higher volume of sales, gross margin dollars for the
second quarter of the current fiscal year at approximately $839,000 exceed
those of the prior year's second quarter at approximately $773,000 by 8-1/2%
Operating expenses at approximately $734,000 for the three month period
ended March 25, 1998 are 3% lower than approximately $760,000 for the same
period of the prior fiscal year. The decrease is due primarily to the
absence in the current year of some of the relocation related expenses that
were present during the second quarter of last year. These expenses were
mostly repair and maintenance on equipment that was unsettled in the
relocation.
Interest expense for the three month period ended March 25, 1998 at
approximately $76,000 was only slightly lower than approximately $79,000 for
the same period of the prior year The 4% decline was the result of a lower
interest rate on a real estate loan.
Higher sales volume and a lower expense load resulted in a net income
of approximately $26,000 for the second quarter of the current year compared
to a net loss of approximately the same amount for the three month period
ended March 25, 1997.
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 two tender offers, one from August 1997 through
October 15, 1997 and another from January 15, 1998 through March 15, 1998.
These tender offers were made to holders of odd lot shares of 24 or fewer
shares. As a result of the offers the Company purchased 1008 shares at a
total cost of $1,140.
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, 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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<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
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0 0
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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
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