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, 1999. 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 inc 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.
5,348,735 shares of common stock, no par value, were outstanding
as of April 25, 1999.
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, 1999 and March 25, 1998 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 26, 1998.
Index of Financial Statements
Page
Consolidated Balance Sheets -
March 25, 1999 and September 26, 1998 3
Unaudited Consolidated Income Statements -
Six Months Ended March 25, 1999 and March 25, 1998 4
Unaudited Consolidated Income Statements -
Three Months Ended March 25, 1999 and March 25, 1998 5
Unaudited Consolidated Statement of Cash Flows -
Six Months Ended March 25, 1999 and March 25, 1998 6
Condensed Notes to Unaudited Consolidated Financial
Statement 7
THE COEUR D ALENES COMPANY
CONSOLIDATED BALANCE SHEET
March 25, 1999 and September 26, 1998
March 25, Sept 27
1999 1998
(Unaudited) (Audited)
ASSETS
Current Assets:
Cash $ 17,543 $ 39,486
Accounts receivable 1,002,188 1,417,269
Inventory 2,258,779 2,553,384
Other current assets 74,582 56,000
Total current assets 3,353,092 4,066,139
Plant, Property and Equipment 5,046,605 4,896,087
Less accumulated depreciation 1,666,370 1,539,044
Net plant property and
Equipment 3,380,235 3,357,043
Other assets 51,268 72,010
Total assets $6,784,595 $7,495,192
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities:
Short term bank borrowings $ 11,369 $ 842,826
Accounts payable 975,198 585,811
Accrued expenses 215,704 400,509
Debentures payable to related
parties 128,000 0
Current amount on long-term debt 142,940 134,714
Total current liabilities 1,473,211 1,963,860
Long-term debt:
Deferred tax liability 120,000 120,000
Long term debt less current
maturities 2,277,756 2,328,170
Long term debt to related parties 0 128,000
Total long term liabilities 2,397,756 2,576,170
Total liabilities 3,870,967 4,540,030
Stockholders Equity:
Capital Stock 1,186,192 1,186,192
Retained earnings 1,734,786 1,775,320
2,920,978 2,961,512
Less Treasury Stock at cost 7,350 6,350
Total stockholders equity 2,913,628 2,955,162
Total liabilities and stockholders
equity $6,784,595 $7,495,192
THE COEUR DALENES COMPANY
UNAUDITED CONSOLIDATED INCOME STATEMENT
Three Months Ended March 25, 1999 and March 25, 1998
1999 1998
Net sales $2,840,819 $3,341,738
Cost of sales 2,133,961 2,502,300
Gross profit on sales 706,858 839,078
Selling, general and
administrative expenses 701,644 733,575
Operating income (loss) 5,214 105,503
Other income (expense)
Interest income 9,332 8,530
Interest expense ( 66,229) ( 75,562)
Other income 16,202 2,493
Total other expense ( 40,695) ( 64,539)
Income (loss) before income tax expense ( 35,481) 40,964
Income tax expense (benefit) ( 13,128) 15,157
Net income (loss) $( 22,353) $ 25,807
Earnings (loss) per share $( 0.00 ) $ 0.00
Shares outstanding 5,348,735 5,352,553
THE COEUR D ALENES COMPANY
UNAUDITED CONSOLIDATED INCOME STATEMENT
Six Months Ended March 25, 1999 and March 25, 1998
1999 1998
Net sales $6,348,465 $6,569,918
Cost of sales 4,820,655 4,982,770
Gross profit on sales 1,527,810 1,587,148
Selling, general and
administrative expenses 1,492,247 1,472,339
Operating income (loss) 35,563 114,809
Other income (expense)
Interest income 21,864 16,319
Interest expense ( 142,880) ( 149,882)
Other income 21,112 10,020
Total other expense ( 99,904) ( 123,543)
Income (loss) before income
tax expense ( 64,341) ( 8,734)
Income tax (benefit) ( 23,806) ( 3,232)
Net income (loss) $( 40,535) $( 5,502)
Earnings (loss) per share $( 0.01 ) $( 0.00 )
Shares outstanding 5,348,735 5,352,553
THE COEUR D ALENES COMPANY
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
Six Months Ended March 25, 1999 and March 25, 1998
1999 1998
Cash flows from operating activities:
Net loss $( 40,535) $( 5,502)
Adjustments to reconcile net
Income to cash provided
(used) by operating
activities:
Depreciation 128,451 129,150
Gain on disposal of assets ( 250) ( 1,000)
Changes in assets and
liabilities
Accounts and notes receivable 415,081 ( 22,060)
Inventories 294,605 (419,521)
Prepaid expense and other
current assets ( 18,582) ( 23,870)
Other assets 20,742 18,976
Accounts payable 389,387 398,293
Accrued expenses ( 184,805) 24,210
Other liabilities 0 32,953
Cash provided by operating activities 1,004,094 131,629
Cash flows from investing activities:
Proceeds from sale of assets 250 1,000
Additions to property and equipment ( 151,642) ( 52,692)
Cash used by investing activities ( 151,392) ( 51,692)
Cash flows from financing activities:
Net borrowing (repayment)
under line of credit ( 831,457) ( 62,007)
Principal repayment of
long-term debt ( 42,188) ( 46,215)
New long term note 0 0
Treasury shares repurchased ( 1,000) ( 1,140)
Cash provided (used) by
financing activities ( 874,645) ( 109,362)
Net decrease in cash ( 21,943) ( 29,425)
Cash, beginning of period 39,486 89,495
Cash, end of period $ 17,543 $ 60,070
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, 1999 are the same as those contained
in the Summary of Significant Accounting Policies from the
Company s audited financial statements as of September 26,
1998 and September 27, 1997.
(2) Inventories.
Inventories are summarized as follows:
March 25, September 26,
1999 1998
Fabrication inventories:
Raw materials $ 31,368 $ 31,826
Work-in-progress 255,048 67,293
Inventories, at FIFO cost 286,416 99,119
LIFO reserve ( 19,861) ( 19,861)
Inventories, at LIFO cost 266,555 79,258
Distribution inventories, at FIFO 1,992,224 2,474,126
Total inventories 2,258,779 2,553,384
(3) Short-term bank borrowings.
The Company has $1,850,000 in bank credit lines which
mature on May 1, 2000. Interest is charged at the lenders
prime rate plus .25% or 8% as of March 25,1999. 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
$2,400,000.
(4) Capital Stock.
The Company conducted two tender offers which expired
during the current fiscal year. The offers resulted in 1,603
shares being repurchased as treasury stock with a total cost to
the Company of $1,000. 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, 1999 and September 26, 1998, the Company
has a deferred long term tax liability of $120,000 resulting
primarily from the use of accelerated methods of depreciation of
fixed assets and a deferred tax asset of $89,000 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
$2,102,000 at the end of the prior fiscal year to approximately
$1,880,000 as of March 25, 1999. The 11% decline is primarily
the result of equipment purchases financed with cash generated
by operations and debentures in the amount of $128,000 moving
from long term to current liabilities. These debentures
originally due October 1998, have been extended for a period of
one year and are due at the end of October 1999. The operating
line is adequate to retire this debt and currently has an
interest rate 3/4% 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, 2000.
Results of Operations.
Six Months Ended March 25, 1999
Sales of approximately $6,348,000 for the six month period
ended March 25, 1999 are 3% lower than approximately $6,570,000
for the same six month period of the prior fiscal year. The
sales decline was accompanied by a similar decline of 4% in
gross margins over the same periods of time from approximately
$1,587,000 for the six month period ended March 25, 1998 to
approximately $1,527,810 for the six month period ended March
25, 1999. The steel service center sales of approximately
$5,534,000 represent 87% of the total Company s sales for the
first six months of the current fiscal year. Likewise, service
center sales of approximately $5,747,000 for the same period of
the prior fiscal year also represents 87% of the total
Company s sales. This represents a decline of 4% in service
center sales for the first six months of the current year
compared to the same period of the prior fiscal year. The
decline is primarily due to low metal prices and somewhat
lower than expected demand. The fabrication business
contributing 13% of the total sales during the first six
months of both fiscal years, experienced a 1% decline in
sales volume from approximately $854,000 for the prior fiscal
year to approximately $843,000 for the current year. During
both years the first six months reflected extremely low demand
from the industrial users of fabricated products. The
prospects for the third quarter do not appear to be much
improved.
Operating expenses at approximately $1,492,000 for the
six month period ended March 25, 1999 are roughly $20,000
higher than approximately $1,472,000 for the same period of
the prior fiscal year. The slight increase is the result of
more indirect labor not captured in product production. A
small reduction in sales volume generally results in this
type of situation in the short run.
Interest expense, at approximately $143,000 for the
six month period ended March 25, 1999 is 5% lower than
approximately $150,000 for the same period of the prior year.
The decrease was possible as a result of declining inventory
prices. With fewer dollars invested in inventories of
approximately the same tons as the prior fiscal year,
dependence on the operating line of credit was significantly
reduced, with the end result of lower interest expense.
Other income at approximately $21,000 for the first six
months of the current fiscal year compares to approximately
$10,000 for the first half of the prior fiscal year. The
increase is the result of an industrial insurance dividend
paid by the State of Washington based on higher than usual
investment returns on the state reserves. This will likely
be a one-time occurrence.
Lower sales volume and higher operating expense combined
produced a net loss for the first six months of the current
fiscal year of approximately $41,000 compared to a net loss
for the same period of time during the prior fiscal year of
approximately $6,000. If the price of metal in the
marketplace begins to stabilize, the trend may be reversible
in the last half of the year.
Three Months Ended March 25, 1999
Sales of approximately $2,841,000 for the second quarter
of the current fiscal year are 15% lower than approximately
$3,341,000 for the second quarter of the prior fiscal year.
The steel service center business, which contributed 94% of
the total combined sales for the three month period ended
March 25, 1999, experienced a 13% decline in sales volume
over the second quarter of the prior fiscal year. Increased
competition and continuing declining metal prices account for
the decrease. The fabrication business, with a 35% decline in
sales volume, represents approximately 6% of the combined sales
for the second quarter of the current fiscal year compared to
8% during the second quarter of the prior fiscal year. The
sharp decline is the result of a very limited demand from the
industrial users of fabricated metal products in the Inland
Northwest. This group of customers continues to predict
lackluster demand for the third quarter.
Gross margins for the three-month period ended March 25,
1999, at 24.9% of sales compare to 25.1% of sales for the same
period of the prior fiscal year. With the lower sales volume,
gross margin dollars for the second quarter of the current
fiscal year at approximately $707,000 lag those of the prior
year s second quarter at approximately $839,000 by 16%. The
lower gross margins are also the result of the continuing
decline in metal prices from the supply sources.
Operating expenses at approximately $701,000 for the
three-month period ended March 25, 1999 are 4% lower than
approximately $734,000 for the same period of the prior fiscal
year. The decline is due to the reduced sales volume in the
current fiscal year. Sales, however, declined at a more rapid
pace than operating expense.
Interest expense for the three-month period ended March
25, 1999 at approximately $66,000 is 13% lower than
approximately $76,000 for the same period of time during the
preceding fiscal year. The decline is attributable to the
lower inventory values, which results in a lesser dependence
on our operating line of credit. This will be a temporary
situation until the price of metal begins to recover to its
former value.
Lower sales volume and a lower gross margin percentage
contributed to the overall net loss for the second quarter
of the current fiscal year in the approximate amount of
$22,000. The net income of approximately $26,000 is the
comparative figure for the same period of the prior fiscal
year.
PART II. OTHER INFORMATION.
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
At December 25, 1998 and September 26, 1998, the Company
owed $128,000 to related parties pursuant to the terms of a
convertible debenture agreement. The debentures require semi-
annual interest payments and are secured by the Company s land
and building. In October 1998, the agreement was amended from
an interest rate of 9.25% to 8.75% and from a due date of
October 31, 1998 to October 31, 1999. Accordingly, the related
party debt has been classified as a current liability at March
25, 1999 and a noncurrent liability at September 26, 1998. The
debentures are convertible into shares of the Company s common
stock at a per share rate of $.28 through maturity. The
Company, at its option, may call any or all outstanding
debentures for redemption.
The Company conducted a tender offer on odd lot shares
from January 1998 through December 15, 1998. As a result of
the offer, the Company purchased 4,715 shares for a total cost
of $3,220. Another tender offer is currently active for
shareholders with 100 or fewer shares that expires on June
30, 1999.
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, 1999
/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-END> MAR-25-1999 SEP-26-1998
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<SECURITIES> 0 0
<RECEIVABLES> 1,061,258 1,474,117
<ALLOWANCES> 59,070 56,848
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<PP&E> 5,046,605 4,896,087
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<INCOME-PRETAX> (64,341) 361,511
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<INCOME-CONTINUING> (64,341) 361,511
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