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,
2000.
[ ] 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)
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 April 25, 2000.
PART I. FINANCIAL INFORMATION.
Item 1. Financial Statements.
The accompanying condensed consolidated financial
statements of The Coeur d Alenes Company (sometimes referred to
herein as the Company) should be read in conjunction with the
audited consolidated financial statements and related notes
included in the Corporations Annual Report on Form 10-KSB for
the year ended September 25, 1999. The comparative consolidated
balance sheet and related disclosures at September 25, 1999 have
been derived from the audited balance sheet and financial
statement footnotes. The accompanying condensed consolidated
financial statements reflect all adjustments that in the opinion
of management are necessary for a fair presentation of the
financial position, results of operations and cash flows for the
interim periods presented.
The results of operations for the six month period ended March
25, 2000 are not necessarily indicative of the operating results
to be expected for the full year.
The preparation of the Companys consolidated financial
statements in conformity with generally accepted accounting
principles necessarily requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities at the balance sheet dates and reported amounts of
revenue and cost during the reporting periods. Actual results
could differ from those estimates. On an ongoing basis,
management reviews its estimates based on information that
is currently available. Changes in facts and circumstances may
result in revised estimates.
Condensed Consolidated Financial Statements
Consolidated Balance sheets at March 25, 2000 (unaudited)
and September 25, 1999
Unaudited consolidated Income Statements
Six Months Ended March 25, 2000 and March 25, 1999
Unaudited Consolidated Income Statements
Three Months Ended March 25, 2000 and March 25, 1999
Unaudited Consolidated Statement of Cash Flows
Six Months Ended March 25, 2000 and March 25, 1999
Condensed Notes to Unaudited Consolidated Financial
Statements
THE COEUR D ALENES COMPANY
CONSOLIDATED BALANCE SHEETS
March 25, 2000 and September 25, 1999
March 25, September 25
2000 1999
(Unaudited) (Audited)
ASSETS
Current Assets:
Cash $ 7,428 $ 32,422
Accounts receivable 894,883 1,019,063
Inventory 2,309,825 2,464,247
Other current assets 126,986 86,305
Total current assets 3,339,122 3,602,037
Plant, Property and
Equipment 5,174,627 5,059,408
Less accumulated
depreciation 1,792,425 1,715,242
Net plant property
and equipment 3,382,202 3,344,166
Other assets 44,970 67,777
Total assets $6,766,294 $7,013,980
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short term bank
borrowings $ 91,642 $ 367,553
Accounts payable 799,530 540,154
Accrued expenses 298,009 297,271
Debentures payable
to related parties 0 128,000
Current amount on
long-term debt 168,810 164,241
Total current
liabilities 1,357,991 1,497,219
Long-term debt:
Deferred tax
liability 162,000 156,000
Long term debt less
current maturities 2,180,104 2,266,399
Total long term
liabilities 2,342,104 2,422,399
Total liabilities 3,700,095 3,919,618
Stockholders' Equity:
Capital Stock 1,186,192 1,186,192
Retained earnings 1,889,687 1,917,230
3,075,879 3,103,422
Less treasury
stock at cost 9,680 9,060
Total stockholders'
equity 3,066,199 3,094,362
Total liabilities and
stockholders equity $6,766,294 $7,013,980
THE COEUR DALENES COMPANY
UNAUDITED CONSOLIDATED INCOME STATEMENTS
Six months Ended March 25, 2000 and March 25, 1999
2000 1999
Net sales $5,891,024 $6,348,465
Cost of sales 4,330,908 4,820,655
Gross profit on sales 1,560,116 1,527,810
Selling, general and
administrative expenses 1,503,967 1,492,247
Operating income 56,149 35,563
Other income (expense)
Interest income 15,873 21,864
Interest expense ( 117,128) ( 142,880)
Other income 1,387 21,112
Total other expense, net ( 99,868) ( 99,904)
Loss before income
tax benefit ( 43,719) ( 64,341)
Income tax benefit ( 16,176) ( 23,806)
Net loss ( 27,543 $( 40,535)
Earnings (loss) per share
(basic and diluted) $( 0.01) $( 0.01 )
Shares outstanding 5,344,628 5,349,250
THE COEUR D'ALENES COMPANY
UNAUDITED CONSOLIDATED INCOME STATEMENTS
Three Months Ended March 25, 2000 and March 25, 1999
2000 1999
Net sales $2,991,911 $2,840,819
Cost of sales 2,185,788 2,133,961
Gross profit on sales 806,123 706,858
Selling, general and
administrative expenses 728,176 701,644
Operating income (loss) 77,947 5,214
Other income (expense)
Interest income 7,513 9,332
Interest expense ( 52,078) ( 66,229)
Other income 763 16,202
Total other expense, net ( 43,802) ( 40,695)
Income (loss) before
income tax expense 34,145 ( 35,481)
Income tax expense (benefit) 12,634 ( 13,128)
Net income (loss) $ 21,511 $ ( 22,353)
Earnings (loss) per share
basic and diluted) $ 0.00 $ ( 0.00 )
Shares outstanding 5,344,628 5,349,250
THE COEUR D'ALENES COMPANY
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended March 25, 2000 and March 25, 1999
2000 1999
Cash flows from operating activities:
Net loss $( 27,543) $( 40,535)
Adjustments to
reconcile net loss
to cash provided by
operating activities:
Depreciation 116,370 128,451
Gain on disposal
of assets 0 ( 250)
Provision for
doubtful accounts 3,000 9,500
Changes in assets and
liabilities:
Accounts and notes
receivable 129,266 405,581
Inventories 154,422 294,605
Prepaid expense and
other current assets ( 40,681) ( 18,582)
Other assets 20,721 20,742
Accounts payable 259,376 389,387
Accrued expenses 738 ( 184,805)
Cash provided by operating
activities 615,669 1,004,094
Cash flows from investing activities:
Proceeds from sale of
assets 0 250
Additions to property and
equipment ( 154,406) ( 151,642)
Cash used in investing
Activities ( 154,406) ( 151,392)
Cash flows from financing activities:
Net repayment under
line of credit ( 275,911) ( 831,457)
Principal repayment of
long-term debt ( 81,726) ( 42,188)
Principal repayment of
debentures ( 128,000) 0
Treasury shares
repurchased ( 620) ( 1,000)
Cash used by financing
activities ( 486,257) ( 874,645)
Net decrease in cash ( 24,994) ( 21,943)
Cash, beginning of period 32,422 39,486
Cash, end of period $ 7,428 $ 17,543
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, 2000 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:
March 25, September 25,
2000 1999
(Unaudited)
Fabrication inventories:
Raw materials $ 29,231 $ 27,372
Work-in-progress 429,187 401,899
Inventories, at FIFO cost 458,418 429,271
LIFO reserve ( 15,018) ( 15,018)
Inventories, at LIFO cost 443,400 414,253
Distribution inventories,
at FIFO 1,866,425 2,049,994
Total inventories 2,309,825 2,464,247
(3) Short-term bank borrowings.
The Company has $1,850,000 in bank credit lines which
matured on May 1, 2000. Interest is charged at the lenders
prime rate plus .25% ( 9-1/4% as of March 25, 2000). 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.
As of April 26, 2000 the Company has a $1,900,000 credit
line with a different bank which will mature on February 16,
2001. The old operating line will be paid off with funds
advanced from the new line of credit. Outstanding borrowings
will be collateralized by accounts receivable and inventories.
Interest will be charged at the lenders prime rate (9% as of
March 25, 2000). Covenants include a minimum net worth of
$2,200,000, a minimum of $1,500,000 in working capital, a current
ratio of at least 1.5 to 1 and a debt to equity ratio below 2.3
to 1. 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
reorganization without prior consent of bank.
(4) Capital Stock.
The Company conducted a tender offer that expired during
the current fiscal year. The offers resulted in 1,186 shares
being repurchased as treasury stock with a total cost to the
Company of $620. 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 by the
shareholder.
(5) Federal Income Tax Expense
As of March 25, 2000 and September 25, 1999, the Company has a
deferred long term tax liability of $162,000 (unaudited) and
$156,000 respectively resulting primarily from the use of
accelerated methods of depreciation of fixed assets and a
deferred tax asset of $71,000 (unaudited) and $65,000
respectively resulting from vacation accrual and bad debt
allowance. A valuation allowance on the Companys 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.
Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS OF THE COMPANY SHOULD BE READ IN
CONJUNCTION WITH THE COMPANYS FINANCIAL STATEMENTS AND
NOTES THERETO INCLUDED ELSEWHERE IN THIS REPORT.
This report contains forward-looking statements regarding, among
other items, anticipated trends in the Companys business. These
forward-looking statements are based largely on the Companys
expectations and are subject to a number of risks, uncertainties,
certain of which are beyond the Companys control. Actual
results could differ materially from these forward-looking
statements as a result of the factors described elsewhere herein.
In light of these risks and uncertainties, there can be no
assurance that the forward-looking information contained in this
report will in fact transpire or prove to be accurate.
LIQUIDITY AND CAPITAL RESOURCES
The Company anticipates that it will continue operating the steel
distribution business much as it has for the past year during the
twelve month period beginning March 26, 2000. In October 1999,
the Company signed a two year lease on a small warehouse facility
in Wenatchee, WA. The Company conducts a business similar to the
retail steel business in Spokane on a much smaller scale. The
operation has been open since November 1999. Required
inventories are expected to continue to be less than $50,000 as
sales are supported out of the Spokane location. The Company has
the option to cancel the lease after the first year with a $2,000
penalty.
The replacement cost of inventories has been slowing increasing
following approximately eighteen months of declining steel
prices. More capital will be required to finance the larger
dollar volumes of inventory. The economic climate will likely
prevent sales growth in the distribution business. The demand
for fabricated metal products in our particular niche of the
market appears to remain fairly strong and should allow for
continued sales growth in the fabrication business.
During the next twelve months the Company plans to continue to
replace outdated equipment and add capacity. In order to
facilitate this plan, a bank loan has been approved in the amount
of $300,000. These funds can be used to finance up to 75% of the
purchase price and should be adequate to cover the immediate
needs.
During the first six months of the current fiscal year cash flows
from operating activities were used to finance the business.
Cash decreased by approximately $25,000. The Companys cash
flows provided by operating activities were approximately
$616,000 compared to approximately $1,004,000 for the first six
months of the prior year. Cash flows from operations for the six
months ended March 25, 2000 were primarily impacted by a net loss
of $28,000, adjusted by depreciation of $116,000, a decrease in
accounts receivable and inventories of $129,000 and $154,000
respectively and an increase in accounts payable of $259,000.
Cash flows provided by operations for the first six months of the
prior fiscal year primarily consisted of a net loss of $41,000
adjusted by depreciation of $128,000, a decrease in accounts
receivable and inventories of $406,000 and $295,000 respectively,
an increase in accounts payable of $389,000 and a decrease in
accrued expenses of $185,000. Cash flows used by investing
activities of $154,000 during the current fiscal year and
$152,000 during the first six months of the prior fiscal year
were attributable to the purchase of new equipment. Cash flows
used by financing activities during the current year of $486,000
were primarily used to pay down the operating line of credit in
the amount of $276,000, pay off the holder of $128,000 of
debentures and make the required current payments of $82,000 on
installment debt. During the first six months of the prior
fiscal year the cash flows used by financing activities were
primarily to pay down the operating line of credit in the amount
of $831,000.
During the first six months of the current fiscal year, the
Companys working capital decreased by 6% from approximately
$2,105,000 at the end of the prior fiscal year to approximately
$1,981,000 as of March 25, 2000.
The Company is dependent on an operating line of credit to meet
its daily financial obligations. The operating line of
$1,900,000 which is currently in place through February 16, 2001
is considered by management to be adequate.
Results of Operations
Six Months Ended March 25, 2000 Compared to Six Months Ended
March 25, 1999
Sales of approximately $5,891,000 for the six-month period ended
March 25, 2000 are 7% lower than approximately $6,348,000 for the
same period of the prior fiscal year. Gross profits, however,
increased 2% from approximately $1,528,000 during the first six
months of the prior fiscal year to approximately $1,560,000 for
the first six months of the current fiscal year. The increase in
gross margins was principally due to a 14% increase in the
fabrication business gross profits. The steel service center
sales of approximately $5,000,000 represent 85% of the total
Companys sales for the first six months of the current fiscal
year. Likewise, steel service center sales of approximately
$5,522,000 for the same period of time during the prior fiscal
year represent 87% of the total Companys sales. This is a
decline of 10% in steel service center sales for the first six
months of the current fiscal year compared to the same period of
the prior fiscal year. The decline is primarily the result of
lower than expected demand. The fabrication business,
contributing 15% and 13% of the total sales for the first
six months of fiscal 2000 and fiscal 1999 respectively
experienced an 8% increase in sales volume from approximately
$821,000 for the prior fiscal year to approximately $891,000 for
the current year. Demand for fabricated metal products in our
niche market have improved during the past six to nine months
and should remain strong throughout the remainder of the fiscal
year.
Operating expenses at approximately $1,504,000 for the six month
period ended March 25, 2000 are roughly $12,000 higher than
approximately $1,492,000 for the same period of the prior fiscal
year. The slight increase is the result of increasing labor and
training costs.
Interest expense at approximately $117,000 for the six-month
period ended March 25, 2000 is 18% lower than approximately
$143,000 for the same period of the prior year. The decrease was
possible as a result of lower inventories and accounts receivable
supporting a lower sales volume.
Other income of approximately $1,000 compares to approximately
$21,000 for the first six months of the prior fiscal year.
During the prior fiscal year there was a one time industrial
insurance dividend paid by the State of Washington based on
higher than usual investment returns on the state reserves. This
will likely not be repeated during the current fiscal year.
Lower sales volume was offset by higher gross margins resulting
in a smaller net loss for the first six months of the current
fiscal year compared to the first six months of the prior fiscal
year. After tax net loss of approximately $28,000 for the six
month period ended March 25, 2000 is 32% lower than the after tax
net loss of approximately $41,000 for the same period of time
during the prior fiscal year.
Three months ended March 25, 2000 and March 25, 1999
Sales of approximately $2,992,000 for the second quarter of the
current fiscal year are 5% higher than approximately $2,841,000
for the second quarter of the prior fiscal year. The steel
service center business, which contributed 86% and 94% of the
total sales for the three month period ended March 25, 2000 and
1999 respectively, experienced a 3% decline in sales volume over
the second quarter of the prior fiscal year. The decline from
approximately $2,666,000 for the second quarter of last year to
approximately $2,576,000 for the same period of time this year
was largely the result of competitive price pressures. Tons of
metal sold during the second quarter of the current year were
approximately the same as last year. The fabrication business,
with a 147% increase in sales volume represents 14% of the second
quarter combined sales for the current fiscal year and only
6% for the prior year. Approximately $416,000 sales for the
quarter ended March 25, 2000 compare to approximately $169,000
for the same quarter of the prior fiscal year. The stronger
demand is expected to continue for the remainder of this year.
Gross margins for the three-month period ended March 25, 2000, at
26.9% of sales compares to 24.9% of sales for the same period of
the prior fiscal year. The resulting gross margin dollars for
the second quarter of the current fiscal year at approximately
$806,000 exceed the same period of the prior year by
approximately $100,000. The improvement in gross margins is
attributable to the higher volume of fabrication sales and
the slowly improving price of metal.
Operating expenses at approximately $728,000 for the three-month
period ended March 25, 2000 are 4% higher than approximately
$702,000 for the same period of the prior fiscal year. The
increase is primarily the result of higher labor and training
costs. In the tight labor market of the Pacific Northwest, the
costs are likely to continue to increase slightly during the
remainder of the year.
Interest expense for the quarter ending March 25, 2000 at
approximately $52,000 is 21% lower than the same quarter of the
prior fiscal year. The decrease is attributable to lower
inventories and accounts receivable resulting in a lesser
dependence on our operating line of credit. This decrease will
likely be temporary as the price of metal is recovering
making the replacement costs of inventory higher. If sales
improve during the second half of the year accounts receivable
will also be higher.
Improved sales volume and gross margins contributed to an after
tax net income of approximately $22,000 for the second quarter of
the current year compared to a net loss of approximately the same
amount for the quarter of the prior 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 were redeemed in accordance with the
agreement on October 31, 1999.
The Company is continuing to conduct a tender offer
under an extension which will expire on June 30, 2000. During
the current fiscal year the Company has repurchased 1,186 shares
for treasury at a total cost of $620. The purpose of the tender
offer is to buy out odd lot shareholders of stock with diminimus
value.
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: May 4, 2000
/s/ Marilyn A. Schroeder
Marilyn A. Schroeder,
Treasurer and Chief Financial
Officer
(Authorized Officer and
Principal Accounting and
Financial Officer)
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<FISCAL-YEAR-END> SEP-30-2000 SEP-25-1999
<PERIOD-END> MAR-25-2000 SEP-25-1999
<CASH> 7,428 32,422
<SECURITIES> 0 0
<RECEIVABLES> 965,949 1,086,229
<ALLOWANCES> 71,066 67,166
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<DEPRECIATION> 1,792,425 1,715,242
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<INTEREST-EXPENSE> 117,128 248,006
<INCOME-PRETAX> (43,719) 202,130
<INCOME-TAX> (16,176) 60,220
<INCOME-CONTINUING> (43,719) 202,130
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