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, 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 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.
5,344,233 shares of common stock, no par value, were outstanding as of
February 3, 2000.
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, 1999 and December 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 25, 1999.
Index of Financial Statements
Page
Consolidated Balance Sheets -
December 25, 1999 and September 25, 1999 3
Unaudited Consolidated Income Statements -
Three Months Ended December 25, 1999 and December 25, 1998 4
Unaudited Consolidated Statement of Cash Flows -
Three Months Ended December 25, 1999 and December 25, 1998 6
Condensed Notes to Unaudited Consolidated Financial Statement 7
THE COEUR D ALENES COMPANY
CONSOLIDATED BALANCE SHEET
December 25, 1999 and September 25, 1999
December 25, 1999 September 25, 1999
ASSETS (Unaudited) (Audited)
Current Assets:
Cash $ 21,134 $ 32,422
Accounts receivable 992,408 1,019,063
Inventory 2,266,651 2,464,247
Other current assets 96,326 86,305
Total current assets 3,376,519 3,602,037
Property and Equipment 5,106,520 5,059,408
Less accumulated depreciation 1,770,482 1,715,242
Net property and equipment 3,336,038 3,344,166
Other assets 47,057 67,777
Total assets $6,759,614 $7,013,980
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short term bank borrowings $ 372,236 $ 367,553
Accounts payable 558,997 540,154
Accrued expenses 236,864 297,271
Current amount on long-term debt 165,959 164,241
Debentures payable to related
Parties 0 128,000
Total current liabilities 1,334,056 1,497,219
Long-term debt:
Deferred tax liability 156,000 156,000
Long term debt less current
maturities 2,224,866 2,266,399
Total long term
liabilities 2,380,866 2,422,399
Total liabilities 3,714,922 3,919,618
Stockholders' Equity:
Capital Stock 1,186,192 1,186,192
Retained earnings 1,868,180 1,917,230
3,054,372 3,103,422
Less Treasury Stock at cost 9,680 9,060
Total stockholders' equity 3,044,692 3,094,362
Total liabilities and
stockholder's equity $6,759,614 $7,013,980
THE COEUR D ALENES COMPANY
UNAUDITED CONSOLIDATED INCOME STATEMENT
Three Months Ended December 25, 1999 and December 25, 1998
1999 1998
Net sales $2,899,112 3,507,646
Costs of sales 2,145,119 2,686,694
Gross profit on sales 753,993 820,953
Selling, general and
administrative expenses 775,786 790,600
Operating income (loss) <21,793> 30,353
Other income (expense)
Interest income 8,360 12,532
Interest expense <65,050> <76,651>
Other income 625 4,910
Total other expense <56,065> <59,209>
Loss before income tax expense <77,858> <28,856>
Income tax benefit <28,808> <10,677>
Net loss $ <49,050> $ <18,179>
Loss per share $ < 0.01> $ < 0.00>
Shares outstanding 5,344,233 5,348,735
THE COEUR D'ALENES COMPANY
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months Ended December 25, 1999 and December 25, 1998
1999 1998
Cash flows from operating activities:
Net loss $<49,050> $< 18,179>
Adjustments to reconcile net income
to cash provided (used) by
operating activities:
Depreciation 55,440 65,283
Changes in assets and liabilities
Accounts and notes
receivable 26,655 <163,720>
Inventories 197,596 346,225
Other current assets < 10,021> < 25,382>
Other assets 20,720 20,741
Accounts payable 18,843 516,327
Accrued expenses < 60,407> <142,128>
Cash provided by operating
activities 199,776 599,167
Cash flows from investing activities:
Additions to property and
equipment < 47,312> < 64,010>
Cash flows used by investing
activities < 47,312> < 64,010>
Cash flows from financing activities:
Purchase of treasury stock < 620> < 1,000>
Net borrowing (payments)
borrowings under
line of credit 4,683 <538,588>
Principal repayment of
long-term debt < 167,815> < 32,130>
Cash used by financing activities <163,752> <571,718>
Net decrease in cash < 11,288> < 36,561>
Cash, beginning of period 32,422 39,486
Cash, end of period $ 21,134 $ 2,925
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, 1999 are the same as those contained in the Summary of
Significant Accounting Policies from the Company's audited financial
statements as of September 25, 1999 and September 26, 1998.
(2) Inventories.
Inventories are summarized as follows:
December 25, September 25,
1999 1999
Fabrication inventories:
Raw materials $ 11,225 $ 27,372
Work-in-progress 384,019 401,899
Inventories at FIFO cost 395,244 429,271
LIFO reserve <15,018> <15,018>
Inventories at LIFO cost 380,226 414,253
Distribution inventories
at FIFO 1,886,425 2,049,994
Total inventories $2,266,651 $2,464,247
(3) Short-term bank borrowings.
The Company has a $1,850,000 bank credit line for revolving credit
requirements which is subject to renewal on May 1, 2000. Interest is
charged at the lender's prime rate plus .25%, 8.75% at December 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 $2,200,000. At
December 25, 1999 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 one
hundred or fewer shares beginning in January 1999 and which has been extended
through June 30, 2000. The purchase price for the shares was $10 for each
shareholder with 24 or fewer, $20 for each shareholder with more than 24
but less than 50 shares, $30 for each shareholder with more than 49 but less
than 75 shares and $40 for each shareholder with more than 74 but no more
than 100 shares. The total shares tendered so far is 4,502 shares for a
total purchase price of $2,330.
(5) Federal Income Tax Expense
As of December 25, 1999 and September 25, 1999, the Company has a
deferred long term tax liability of $156,000 resulting primarily from the
use of accelerated methods of depreciation of fixed assets and a deferred
tax asset of $65,000 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 $2,104,000 on September 25,1999 to
approximately $2,042,000 as of December 25, 1999. The $62,000 decline is
primarily the result of operating losses.
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. The loan matures in January 2007.
During the current fiscal year the Company has invested over $47,000 in
new equipment and it is likely that the Company will want to invest in
additional processing equipment for the distribution business. The additional
cost is expected to be approximately $100,000. 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 May 1, 2000. 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 $2,899,000 for the three month period ended
December 25, 1999 are approximately 17% lower than approximately $3,508,000
for the same period of time in the prior year. Gross margins decreased by
approximately 8% to $754,000 for the period ended December 25, 1999 from
approximately $821,000 for the same period of time in 1998. With a 16% decline
in net revenues, the steel service center sales at approximately $2,503,000
represent 86% of the total sales for the first three months of the current
fiscal year compared to 82%, or approximately $2,855,000 for the first quarter
of the prior fiscal year. The fabrication business contributed 14% of the
total first quarter sales for the current fiscal year and 18% for the same
period of the prior year. Overall gross margins as a percent of sales
improved from 23% during the first quarter of the prior fiscal year to 26%
for the first quarter of the current year.
Selling, general and administrative expenses at approximately $776,000 for
the quarter ended December 25, 1999 are 2% lower than approximately $791,000
for the three month period ended December 25, 1998. A shortage of skilled
labor created a need for more training than usual and therefore the expense
load did not decline as fast as the sales decline.
Interest expense at approximately $65,000 for the three month period
ended December 25, 1999 is 16% lower than approximately $77,000 for the three
month period ended December 25, 1998. The decrease is primarily due to the
lower cost of inventories resulting in less dependence on the operating line of
credit. Replacement costs are likely to be higher during the current fiscal
year.
Lower sales volume and high labor costs during the first quarter of the
current fiscal year resulted in a net loss of $49,050 compared to a net loss of
$18,179 for the first quarter of the prior fiscal year.
PART II. OTHER INFORMATION.
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
At September 25, 1999, the Company owed $128,000 to related parties
pursuant to the terms of a convertible debenture agreement. The debentures
required semi-annual interest payments and were 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.
The debentures were repaid at the end of October 1999.
The Company is conducting a tender offer on odd lot shares beginning
January 1999 with an extended expiration date of June 30, 2000. As a result of
the offer, the Company has purchased to date 4,502 shares for a total cost of
$2,330.
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, 1999
/s/ Marilyn A. Schroeder
Marilyn A. Schroeder, Treasurer and
Chief Financial Officer
(Authorized Officer and Principal
Accounting and Financial Officer)
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, 1999
________________________________
Marilyn A. Schroeder, Treasurer and
Chief Financial Officer
(Authorized Officer and Principal
Accounting and Financial Officer)
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<PERIOD-TYPE> 3-MOS 12-MOS
<FISCAL-YEAR-END> SEP-30-2000 SEP-25-1999
<PERIOD-END> DEC-25-1999 SEP-25-1999
<CASH> 21,134 32,422
<SECURITIES> 0 0
<RECEIVABLES> 1,080,570 1,086,229
<ALLOWANCES> 70,416 67,166
<INVENTORY> 2,266,651 2,464,247
<CURRENT-ASSETS> 3,376,519 3,602,037
<PP&E> 5,106,520 5,059,408
<DEPRECIATION> 1,770,482 1,715,242
<TOTAL-ASSETS> 6,759,614 7,013,980
<CURRENT-LIABILITIES> 1,334,056 1,407,219
<BONDS> 2,546,825 2,586,640
0 0
0 0
<COMMON> 1,186,192 1,186,192
<OTHER-SE> 1,858,500 1,908,170
<TOTAL-LIABILITY-AND-EQUITY> 6,759,614 7,013,980
<SALES> 2,899,112 12,247,713
<TOTAL-REVENUES> 2,908,097 12,334,238
<CGS> 2,145,119 8,957,654
<TOTAL-COSTS> 2,892,097 11,944,322
<OTHER-EXPENSES> 36,242 308,226
<LOSS-PROVISION> 3,000 12,000
<INTEREST-EXPENSE> 65,050 248,006
<INCOME-PRETAX> (77,858) 202,130
<INCOME-TAX> (28,808) 60,220
<INCOME-CONTINUING> (77,858) 202,130
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (49,050) 141,910
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