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, 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.
5,348,735 shares of common stock, no par value, were outstanding as
of January 31, 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 December 25,
1998 and December 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 26, 1998.
Index of Financial Statements
Page
Consolidated Balance Sheets -
December 25, 1998 and September 26, 1998 3
Unaudited Consolidated Income Statements -
Three Months Ended December 25, 1998 and December 25, 1997 4
Unaudited Consolidated Statement of Cash Flows -
Three Months Ended December 25, 1998 and December 25, 1997 6
Condensed Notes to Unaudited Consolidated Financial Statement 7
THE COEUR D ALENES COMPANY
CONSOLIDATED BALANCE SHEET
December 25, 1998 and September 26, 1998
December 25, 1998 September 26, 1998
ASSETS (Unaudited) (Audited)
Current Assets:
Cash $ 2,925 $ 39,486
Accounts receivable 1,580,990 1,417,269
Inventory 2,207,159 2,553,384
Other current assets 81,382 56,000
Total current assets 3,872,456 4,066,139
Property and Equipment 4,959,890 4,896,087
Less accumulated
Depreciation 1,604,120 1,539,044
Net property and equipment 3,355,770 3,357,043
Other assets 51,269 72,010
Total assets $ 7,279,495 $ 7,495,192
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short term bank borrowings $ 304,238 $ 842,826
Accounts payable 1,102,138 585,811
Accrued expenses 258,381 400,509
Current amount on
long-term debt 134,714 134,714
Debentures payable to related parties 128,000 0
Total current liabilities 1,927,471 1,963,860
Long-term debt:
Deferred tax liability 120,000 120,000
Long term debt less current
maturities 2,296,040 2,328,170
Long term debt to related parties 0 128,000
Total long term liabilities 2,416,040 2,576,170
Total liabilities 4,343,511 4,540,030
Stockholders' Equity:
Capital Stock 1,186,192 1,186,192
Retained earnings 1,757,142 1,775,320
2,943,334 2,961,512
Less Treasury Stock at cost 7,350 6,350
Total stockholders' equity 2,935,984 2,955,162
Total liabilities and
stockholders equity $ 7,279,495 $ 7,495,192
THE COEUR D ALENES COMPANY
UNAUDITED CONSOLIDATED INCOME STATEMENT
Three Months Ended December 25, 1998 and December 25, 1997
1998 1997
Net sales $ 3,507,646 $ 3,228,540
Costs of sales 2,686,694 2,480,470
Gross profit on sales 820,953 748,070
Selling, general and administrative
expenses 790,600 738,765
Operating income <loss> 30,353 9,305
Other income (expense)
Interest income 12,532 7,788
Interest expense <76,651> <74,319>
Other income 4,910 7,528
Total other expense <59,209> <59,003>
Loss before income tax expense <28,856> <49,698>
Income tax benefit <10,677> <18,388>
Net loss $ <18,179> $ <31,310>
Loss per share $ < 0.00> $ < 0.01>
Shares outstanding 5,348,735 5,353,450
THE COEUR D'ALENES COMPANY
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months Ended December 25, 1998 and December 25, 1997
1998 1997
Cash flows from operating activities:
Net loss $ <18,179> $ < 31,310>
Adjustments to reconcile net income
to cash provided (used) by
operating activities:
Depreciation 65,283 64,575
Gain on disposal of assets < 0 > < 1,000>
Changes in assets and liabilities
Accounts and notes receivable < 163,720> < 80,888>
Inventories < 346,225> < 199,961>
Other current assets < 25,382> < 30,444>
Other assets 20,741 18,976
Accounts payable 516,327 549,701
Accrued expenses < 142,128> < 34,981>
Cash provided by operating activities 599,167 416,444
Cash flows from investing activities:
Proceeds from sale of assets 1,000 1,000
Additions to property and equipment < 64,010> < 25,996>
Cash flows used by investing activities < 64,010> < 24,996>
Cash flows from financing activities:
Purchase of treasury stock < 1,000> < 330>
Net borrowing (payments)
borrowings under line of credit < 538,588> < 450,004>
Principal repayment of long-term debt < 32,130> < 22,849>
Cash used by financing activities < 571,718> < 473,183>
Net decrease in cash < 36,561> < 81,735>
Cash, beginning of period 39,486 89,495
Cash, end of period $ 2,925 $ 7,760
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, 1998 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:
December 25, September 26,
1998 1998
Fabrication inventories:
Raw materials $ 12,638 $ 31,826
Work-in-progress 37,745 67,293
Inventories at FIFO cost 50,383 99,119
LIFO reserve <19,861> <19,861>
Inventories at LIFO cost 30,522 79,258
Distribution inventories at FIFO 2,176,637 2,474,126
Total inventories $2,207,159 $2,553,384
(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%, 8.75% at December 25, 1998. 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. At December 25, 1998 the Company
was in compliance with all of its bank covenants.
(4) Capital Stock.
The Company made a tender offer to shareholders with holdings
of forty-nine or fewer shares beginning in January 1998 and which
after two extensions, expired on December 15, 1998. The purchase
price for the shares was $10 for each shareholder with 24 or fewer
shares and $20 for each shareholder with more than 24 but less than
50 shares. The total shares tendered was 4,715 shares for a total
purchase price of $3,220.
(5) Federal Income Tax Expense
As of December 25, 1998 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 $56,000 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 declined from approximately $2,102,000 on
September 26,1998 to $1,945,000 as of December 25, 1998. The
decline is primarily the result of debentures payable to related
parties in the amount of $128,000 moving from long-term to short
term liabilities. The debentures are due on October 31, 1999. See
Part II Item 2.
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. 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 additional processing equipment for the
distribution business. The cost is expected to be approximately
$170,000. A portion of the cost will likely be financed with an
equipment loan. The bank has approved a loan in the amount of
$150,000 with interest only payments until May 1, 1999. The loan
agreement contains provisions for conversion to a five year
repayment term at that date. The interest rate is 1/2% over the
banks prime rate.
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. 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 $3,508,000 for the three month period
ended December 21, 1998 are approximately 9% higher than
approximately $3,229,000 for the same period of time in 1997. Gross
margins increased by 10% to approximately $821,000 for the period
ended December 25, 1998 from approximately $748,000 for the same
period of the prior fiscal year. With an 8% increase in net
revenues, the steel service center sales at approximately $2,855,000
represent 81% of the total sales for the first three months of the
current fiscal year. This compares to sales of approximately
$2,649,000 or 82% of total sales for the first three months of the
prior fiscal year. The fabrication business contributed 19% of the
total first quarter sales for the current fiscal year and 18% for
the same period of the prior year. Gross margins as a percent of
sales are approximately 23% for the period ending December 25, 1998
as well as the period ending December 25, 1997.
Operating expenses, at approximately $791,000 for the quarter
ended December 25, 1998 are 7% higher than approximately $739,000
for the same period of the prior fiscal year. The increase is
attributable to the higher sales volume. As a percent of sales,
operating expenses for the first quarter of both fiscal years are
23%.
Interest expense at approximately $77,000 for the three month
period ended December 25, 1998 is 4% higher than approximately
$74,000 for the three Month period ended December 25, 1997. The
slight increase is due to the purchase of crane upgrades and a new
crane during the latter part of the prior fiscal year. The crane
and upgrades were financed utilizing borrowed funds for 80% of the
purchase price. The total cost was approximately $100,000.
Declining inventory replacement costs will cause interest expense to
decline during the second quarter of the current fiscal year.
Other income at approximately $4,900 for first quarter of the
current fiscal year is slightly lower than approximately $7,500 for
the same period of the prior fiscal year. During the first quarter
of the prior year a piece of office equipment was sold at a gain of
approximately $1,000 which accounted for most of the difference.
Higher sales volume during the first quarter of the current
fiscal year helped reduce the net loss compared to the first quarter
of the prior year. At approximately $18,000 the net loss for the
period ended December 25, 1998 is 58% of the net loss 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 Companys 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 December 25, 1998 and a noncurrent
liability at September 26, 1998. The debentures are convertible
into shares of the Companys 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.
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
Dated: February 9, 1999
(Registrant)
/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> 3-MOS 12-MOS
<FISCAL-YEAR-END> SEP-25-1999 SEP-26-1998
<PERIOD-END> DEC-25-1998 SEP-26-1998
<CASH> 2,925 39,486
<SECURITIES> 0 0
<RECEIVABLES> 1,643,392 1,474,117
<ALLOWANCES> 62,402 56,848
<INVENTORY> 2,207,159 2,553,384
<CURRENT-ASSETS> 3,872,456 4,066,139
<PP&E> 4,959,890 4,896,087
<DEPRECIATION> 1,604,120 1,539,044
<TOTAL-ASSETS> 7,279,495 7,495,192
<CURRENT-LIABILITIES> 1,927,471 1,963,860
<BONDS> 1,873,252 1,884,068
0 0
0 0
<COMMON> 1,186,192 1,186,192
<OTHER-SE> 1,749,792 1,768,970
<TOTAL-LIABILITY-AND-EQUITY> 7,279,495 7,495,192
<SALES> 3,507,646 14,368,061
<TOTAL-REVENUES> 3,525,088 14,430,428
<CGS> 2,686,694 10,721,254
<TOTAL-COSTS> 3,477,294 13,877,585
<OTHER-EXPENSES> 65,974 412,302
<LOSS-PROVISION> 5,500 12,400
<INTEREST-EXPENSE> 76,651 301,817
<INCOME-PRETAX> (28,856) 361,511
<INCOME-TAX> (10,677) 110,485
<INCOME-CONTINUING> 30,353 361,511
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (18,179) 251,026
<EPS-PRIMARY> 0.00 0.05
<EPS-DILUTED> 0.00 0.04
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