-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, M5unL72xdN5E7PtKMCgI7q6Vwz1DwoMSarFA7oGCaD7hpx/1bXvUfWVxH2bIjtsM qsJVK7LKJCHsu3LaY6BJUw== 0000927356-98-000892.txt : 19980521 0000927356-98-000892.hdr.sgml : 19980521 ACCESSION NUMBER: 0000927356-98-000892 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980520 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ATLAS CORP CENTRAL INDEX KEY: 0000008302 STANDARD INDUSTRIAL CLASSIFICATION: GOLD & SILVER ORES [1040] IRS NUMBER: 135503312 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-02714 FILM NUMBER: 98628890 BUSINESS ADDRESS: STREET 1: 370 SEVENTEENTH ST STREET 2: STE 3050 CITY: DENVER STATE: CO ZIP: 80202 BUSINESS PHONE: 3036292440 MAIL ADDRESS: STREET 1: 370 SEVENTEENTH STREET STREET 2: STE 3150 CITY: DENVER STATE: CO ZIP: 80202 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q COMMISSION FILE NO. 1-2714 (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 31, 1998 -------------- or (_) Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ________________________ to ________________________ ATLAS CORPORATION ----------------------- (Exact name of registrant as specified in its charter) DELAWARE 13-5503312 - ------------------ ------------ (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification No.) 370 Seventeenth Street, Suite 3140, Denver, CO 80202 ----------------------------------------------------- (Address of principal executive offices) (Zip Code) 303-629-2440 -------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 _____ ----- As of May 8, 1998, 27,360,253 shares of Common Stock, par value $1 per share, were issued and outstanding. Page 1 of 12 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. -------------------- ATLAS CORPORATION CONSOLIDATED BALANCE SHEETS (in Thousands)
March 31, December 31, 1998 1997 - -------------------------------------------------------------------------------- (Unaudited) ASSETS Current Assets: Cash and cash equivalents $ 91 $ 583 Accounts receivable - Trade 746 542 Title X receivable (Note 5) 1,100 1,100 Accounts receivable - Other 370 541 Inventories 923 965 Prepaid expenses and other current assets 97 37 ----------- ------------ Total current assets 3,327 3,768 ----------- ------------ Property, plant and equipment 60,570 60,427 Less, accumulated depreciation, depletion, amortization and impairment (46,242) (46,027) ----------- ------------ 14,328 14,400 Restricted cash and securities 6,181 6,208 Asset held for sale 3,191 3,000 Title X receivable (Note 5) 14,765 14,765 Other assets 131 175 ----------- ------------ $ 41,923 $ 42,316 =========== ============ LIABILITIES Current liabilities: Trade accounts payable $ 2,242 $ 2,209 Accrued liabilities 2,330 2,189 Short-term debt (Note 5) 5,754 6,017 Deferred gain on joint venture agreement 750 750 Current portion of estimated uranium reclamation costs 800 800 ----------- ------------ Total current liabilities 11,876 11,965 Long-term debt 1,917 1,917 Other liabilities, long-term 27,889 27,903 Commitments and contingencies (Note 5) STOCKHOLDERS' EQUITY Common stock 27,360 27,282 Capital in excess of par value 66,672 66,735 Deficit (93,791) (93,486) ----------- ------------ Total stockholders' equity 241 531 ----------- ------------ $ 41,923 $ 42,316 =========== ============ See notes to consolidated financial statements.
Page 2 of 12 ATLAS CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands, Except Per Share Data, Unaudited)
Three Months Ended March 31, -------------------------- 1998 1997 ====================================================================== Mining revenue $ 1,136 $ 654 Costs and expenses: Production costs 973 614 Depreciation, depletion and amortization 200 250 Shutdown and standby costs 75 107 General and administrative expenses 324 542 Exploration and prospecting costs 22 557 ---------- -------- Gross Operating Loss (458) (1,416) ---------- -------- Other (income) and expense: Interest expense 159 310 Interest income (74) (114) Loss on asset held for sale -- 57 Other (238) (103) ---------- -------- Loss from continuing operations before income Taxes (305) (1,566) Provision for income taxes -- -- ---------- -------- Net loss (305) (1,566) ---------- -------- Other comprehensive income, net of tax: Unrealized holding loss on securities -- (4,197) ---------- -------- Comprehensive loss $ (305) $ (5,763) ========== ======== Basic and diluted earnings per share of common stock: Net loss $ (0.01) $ (0.06) ========== ======== Average number of common shares outstanding 27,344 24,193 ========== ======== See notes to consolidated financial statements.
Page 3 of 12 ATLAS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands, Unaudited) Three Months Ended March 31, ---------------------------- 1998 1997
================================================================================ Operating activities: Net loss $ (305) $ (1,566) Add (deduct) non-cash items: Depreciation, depletion, amortization 216 261 Gain on joint venture agreement (188) -- Loss on asset held for sale -- 57 Other -- 30 Net change in non-cash items related to operations (Note 3) 488 807 -------- ---------- Cash provided by (used in) continuing operations 211 (411) -------- ---------- From discontinued operations: Change in estimated uranium reclamation costs (105) 366 -------- ---------- Cash provided by (used in) discontinued operations (105) 366 -------- ---------- Cash provided by (used in) operating activities 106 (45) -------- ---------- Investing activities: Additions to property, plant and equipment (194) (148) Proceeds from sale of equipment 50 -- Investment in asset held for sale (191) (740) -------- ---------- Cash provided by (used in) investing activities (335) (888) -------- ---------- Financing activities: Net increase (repayment) of short-term debt (263) 99 -------- ---------- Cash provided by (used in) financing activities (263) 99 -------- ---------- Decrease in cash and cash equivalents (492) (834) Cash and cash equivalents: Beginning of period 583 1,022 -------- ---------- End of period $ 91 $ 188 ======== ========== See notes to consolidated financial statements.
Page 4 of 12 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. There has not been any change in the significant accounting policies of Atlas Corporation (the "Company") for the periods presented. In the opinion of Management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The results for these interim periods are not necessarily indicative of results for the entire year. These statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report of Form 10-K for the fiscal year ended December 31, 1997. Certain of the comparative figures have been reclassified to conform with the current year's presentation. 2. In 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings per Share." The new statement replaced the calculation of primary and fully diluted earnings per share with basic and diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options, warrants and convertible securities. Diluted earnings per share is similar to the previously reported fully diluted earnings per share. Adoption of the new standard, which involves restatement of earnings (loss) per share amounts for prior periods, had no material effect on the Company's earnings (loss) per share amounts for all periods presented. 3. The components of the net change in items other than cash related to operating activities as reflected in the Consolidated Statements of Cash Flows are as follows: Three Months Ended March 31, ------------------ 1998 1997 ============================================================================== Add (deduct) items other than cash: Accounts receivable $ (33) $ (125) Inventories 42 (70) Prepaid expenses and other current assets (60) 73 Other assets 71 60 Trade accounts payable 33 480 Accrued liabilities 449 255 Other liabilities, long-term (14) 134 -------- ------ $ 488 $ 807 ======== ====== 4. Short term debt consisted of the following: March 31, December 1998 31, 1997 -------- -------- Redeemable Convertible Debenture, due September 20, 1998, bearing interest at 9% $ 3,500 $3,500 Advances on sale of concentrates 975 968 Other 1,279 1,549 -------- ------ $ 5,754 $6,017 ======== ====== 5. The Company is obligated to decommission and reclaim its uranium mill site located near Moab, Utah. The Company discontinued its uranium operations and permanently shut down its uranium mill and mines in 1987, and estimated shutdown expenses and reclamation costs were Page 5 of 12 accrued. Title X of "The Comprehensive National Energy Policy Act" ("Title X"), enacted in October 1992, provides for the reimbursement of past and future reclamation expenses related to uranium sites operated under Atomic Energy Commission contracts. The Company's uranium reclamation costs are subsidized by this Government cost sharing program since 56% of its tailings were generated under government contracts. The total estimated reclamation liability ($21,830,000) and current and future Title X receivables ($15,865,000) are shown separately in the accompanying consolidated balance sheets leaving a net liability to the Company of $5,965,000 as of March 31, 1998. The Company has submitted five claims to the Department of Energy ("DOE") under Title X for reclamation costs incurred from the fiscal year ended June 30, 1980 through March 31, 1998. As of May 1, 1998, the status of the five claims is as follows:
Actual Gross Anticipated Reim- Gross Claim Amount Reimbursement bursement Anticipated Claim Date Amount Approved Receivable Payments Balance Due - ----------------------------------------------------------------------------------------------- July 7, 1994 $4,999,000 $4,510,000 $2,530,000 $2,313,000 $ 217,000 June 16, 1995 3,638,000 2,591,000 1,453,000 1,267,000 186,000 May 1, 1996 3,998,000 2,884,000 1,618,000 1,112,000 506,000 May 1, 1997 2,054,000 1,579,000 886,000 529,000 357,000 May 1, 1998 1,602,000 --/1/ 899,000 -- 899,000 - ----------------------------------------------------------------------------------------------- Totals $7,386,000 $5,221,000 $2,165,000 ===============================================================================================
/1/ Pending. In addition to the above amounts, the Company includes in the Title X receivable in the consolidated balance sheet an amount equal to 56% of its future estimated reclamation costs. Timing of the actual payments for approved reimbursements is a function of Congressional appropriation of Title X funding. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND --------------------------------------------------------------- RESULTS OF OPERATIONS --------------------- "SAFE HARBOR" STATEMENT UNDER THE UNITED STATES PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. Statements which are not historical facts contained in this Form 10-Q are forward looking statements that involve risks and uncertainties that could cause actual results to differ from projected results. Factors that could cause actual results to differ materially include, among others: general economic conditions, metal and mineral prices, political events in foreign countries, the risks associated with foreign operations generally, the timing of receipt of necessary governmental permits, climatic conditions, labor relations, availability and cost of material and equipment, the actual configuration of ore bodies, delays in anticipated start-up dates, environmental risks, the results of financing efforts and other risk factors detailed in the Company's Form 10-K and 8-K filed with the Securities and Exchange Commission. Page 6 of 12 RECENT EVENTS On April 27, 1998, The Company executed a letter agreement (the "Agreement") with North & South International Bancorp Limited, a Canadian Corporation with offices in Toronto, Ontario (the "Buyer"), for the sale of all of its controlling interest in Cornerstone Industrial Minerals Corporation ("Cornerstone") for total consideration of approximately $3.2 million. The Agreement, anticipated to be completed in June, is subject to completion of definitive agreements, a due diligence investigation by the Buyer, and approval of the Boards of Directors of the Buyer and Cornerstone. During 1997, the Company completed transactions on three of its non-operating properties. In June 1997, the Company sold 90% of its Gold Bar property to Barrick Gold Exploration Inc. ("Barrick") for $1 million in cash and the purchase by Barrick of one million shares of the Company's stock at $1 per share. Under the agreement, Barrick is also required to spend $3 million in exploration expenditures by June of 1999. To date Barrick has spent in excess of $1 million on exploration and is presently conducting exploratory drilling at Gold Bar. At Barrick's election, on or before June 3, 1999, the balance of the Gold Bar property will be conveyed to Barrick and Atlas may elect either to receive an additional $15,000,000 in cash and retain a 2% net smelter royalty, or to participate with Barrick in the further exploration and development of Gold Bar as a 25% carried joint venture participant. If Atlas elects to participate as a joint venture partner, Barrick will spend a minimum of $15,000,000 on the project. If Barrick chooses not to acquire the balance of the properties within the two-year period, all of Barrick's interest in the Gold Bar properties will be reconveyed to Atlas. In September, the Company executed an option agreement for the sale of its Doby George property for a total purchase price of $1.6 million, to be paid in installments through September 1998. The Company also completed an option agreement for the sale of its Grassy Mountain property for $4 million to be paid in installments over four years. In February 1997, Arisur signed a financing agreement with the Corporacion Andina de Fomento ("CAF") for $3 million. CAF is a multilateral financial institution that supports sustainable development and integration efforts within the Andean region of South America. The proceeds of the first tranche of the loan of $2.3 million, received in May 1997, paid for certain equipment and expansion programs of the Bolivian operations and reimbursed Atlas $560,000 of funds previously advanced for said purposes. The remaining $700,000 has not yet been funded pending final approvals from CAF. CAPITAL RESOURCE REQUIREMENTS Bolivian operations The Company is in the process of evaluating a program for its Andacaba mine to increase its current reserves and to justify increased development. Based upon the results of the evaluation, the Company anticipates the implementation of a new operating plan at Andacaba. Implementation of the operating plan would require additional capital expenditures for underground drilling and/or development of either an internal mine shaft or a decline to provide for increased productivity through more efficient access to the ore body. The Company also continues to evaluate the feasibility of the start-up of its Comali mill, which would require approximately $200,000 in improvements. Limited development is underway at Don Francisco and Koyamayu. It is anticipated that funding for the initial drill program will be financed with funds from the sale of Cornerstone (see above). Other capital expenditures would be financed from remaining funds available from the CAF loan noted above and/or through other long-term project financing and cash flows from operations as available. Page 7 of 12 The Company anticipates that the acquisition of additional Bolivian operations, if any, would be funded with cash flow from operations, project financing, placement of additional equity or debt and/or the proceeds from the sale of assets discussed above. Gold Properties Exploration and development expenditures on the Gold Bar claim block are being funded by Barrick as described above. With the completion of the agreement with Barrick, the Company's holding costs on the property will decrease in 1998 to an estimated $300,000. These costs will be funded from the proceeds from the sale of Cornerstone and/or other properties (see above). While the Company has made the expansion of the Bolivian lead, zinc and silver operations its immediate focus, its long term strategy is to grow its Bolivian operations, and to develop and expand the Company's interests in gold properties. Reclamation Activities The Company is obligated to decommission and reclaim its uranium mill site near Moab, Utah. Final reclamation will commence following the issuance of a final Environmental Impact Statement on Atlas's reclamation plan. See below, "Results of Operations -- Reclamation Activities." The total estimated cost of Atlas's proposed reclamation plan is approximately $22 million. As the Department of Energy will reimburse 56% of all reclamation costs under Title X, Atlas will be reimbursed for approximately $12.3 million in reclamation costs, leaving Atlas approximately $9.7 million to fund. The Company has filed claims of $7.4 million for reimbursement of Title X reclamation costs incurred through March 1998 and has received payments of $5.2 million, leaving $2.2 million in Title X reimbursements currently due Atlas. Atlas also has $4.2 million in restricted cash securing a Nuclear Regulatory Commission ("NRC") reclamation performance bond. In order to meet its reclamation obligations, the Company anticipates using the Title X receivable and restricted cash noted above and, as necessary, cash flow from operations and/or the sale of assets. LIQUIDITY As of March 31, 1998, the working capital deficit was $8,549,000, which compares to a deficit of $8,197,000 as of December 31, 1997. The Company's current ratio at March 31, 1998 was .28 to 1, compared to .31 to 1 at December 31, 1997. The decrease during the quarter is a result of capital expenditures of $194,000 and the operating loss during the period. In order to fund near term capital requirements, the Company has entered into the agreement for the sale of Cornerstone, the CAF loan and other asset sales all discussed above. Longer term capital requirements will be satisfied from project financing, future operating cash flows, placement of additional equity or debt and/or from the sale of other assets. Page 8 of 12 RESULTS OF OPERATIONS During the quarter ended March 31, 1998, the Company had mining revenue of $1,136,000 compared to $654,000 in the same period of 1997. During 1997, the Company completed a mill expansion which more than doubled the capacity of the Andacaba Mill. Also, production of 13,274 tonnes during the quarter ended March 31, 1997 was less than expected due to flooding which reduced production from Andacaba. As a result of the above, production increased during the three months ended March 31, 1998 to 26,296 tonnes and is the primary reason for the increase in revenue. Cash production costs were $973,000 in the first quarter of 1998 compared to $614,000 during the same period of 1997. The increase in production costs during the period is also primarily related to the increase in production as described above. Total costs decreased from $46 per tonne in 1997 to $37 per tonne in 1998 as the efficiencies associated with the higher production have begun to take hold. Shutdown and standby costs at Gold Bar of $75,000 were incurred in the three month period ended March 31, 1998 compared to $107,000 for the comparable period in 1997. The decrease is a result of cost cutting measures implemented by the Company and also as a result of the assumption of certain of these costs under the agreement with Barrick as described above. Exploration costs for the three-month period ending March 31, 1998 were $22,000 compared to $557,000 for the comparable period in 1997. The 1997 amount includes a $450,000 charge pursuant to the Company's joint venture termination agreement with Vista Gold Corp. These costs have also been reduced as part of the Company's cost reduction program and through the allocation of certain costs to joint venture partners. General and administrative expenses for the three months ended March 31, 1998 were $324,000 compared to $542,000 for the comparable period in 1997. The Company has continued its efforts to reduce such expenses. The Company's corporate staff has been reduced from 11 people in the first quarter of 1997 to 6 at March 31, 1998. Additionally, in December 1997, the Company negotiated a reduction in the amount of space under lease at its corporate headquarters in Denver, Colorado, resulting in a reduction of $11,000 per month in leasehold costs. Strong efforts have also been made to reduce outside consulting fees wherever possible. Interest expense incurred during the three month period ended March 31, 1998 was $159,000 compared to $310,000 for the three month period ended March 31, 1997. The decrease is primarily a result of the Company's repurchase of its Exchangeable Debenture in June 1997, reducing interest expense by $60,000 per month. This reduction has been offset in part by the increase in interest expense related to the CAF and other loans for the Bolivian operations. During the quarter ended March 31, 1998, the Company incurred $194,000 in capital expenditures, substantially all of which related to the mine and mill expansion in Bolivia. Page 9 of 12 Reclamation Activities On March 7, 1997, the US Nuclear Regulatory Commission ("NRC") issued its final Technical Evaluation Report ("TER") which concluded that the Atlas reclamation plan was in compliance with the technical requirements for capping the tailings facility on-site. With completion of the final TER, the remaining requirement before NRC can complete the Environmental Impact Statement ("EIS") and make its final decision on the reclamation plan is completion of the final biological opinion by the US Fish and Wildlife Service ("FWS"). In its revised draft biological opinion released April 15, 1998, the FWS removed its recommendation for off-site tailings disposal. Currently, Atlas is working with NRC, FWS, and the Council on Environmental Quality toward completion of the biological opinion. Management is confident that a mutually acceptable resolution for the remaining issues of concern will be achieved. The final EIS is anticipated before year-end 1998. Page 10 of 12 PART II. OTHER INFORMATION Item 1. Legal Proceedings ----------------- None Item 2. Changes in Securities --------------------- None 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 -------------------------------- a. Exhibits None b. Reports on Form 8-K None Page 11 of 12 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. ATLAS CORPORATION ----------------- (Registrant) By: /s/ James R. Jensen ------------------- James R. Jensen Treasurer Date: May 20, 1998 /s/ James R. Jensen ------------ ------------------- James R. Jensen Treasurer (Principal Financial Officer & Chief Accounting Officer) Page 12 of 12 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS 3-MOS DEC-31-1998 DEC-31-1997 JAN-01-1998 JAN-01-1997 MAR-31-1998 MAR-31-1997 91 583 0 0 2,216 2,183 0 0 923 965 3,327 3,768 60,570 60,427 46,242 46,027 41,923 42,316 11,876 11,965 0 0 0 0 0 0 27,360 27,282 (27,119) (26,751) 41,923 42,316 1,136 654 1,448 871 1,173 864 1,594 2,070 0 57 0 0 159 310 (305) (1,566) 0 0 (305) (1,566) 0 0 0 0 0 0 (305) (1,566) (.01) (.06) (.01) (.06)
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