-----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, IKS0yYpHd4ntDaMkorCyJeBFID376++D1zr8+xD9ETDPMXmhOpmIcEchbNAxKJGI 2+gJySABSI/aNo3GMeEcVw== 0000950134-00-004418.txt : 20000515 0000950134-00-004418.hdr.sgml : 20000515 ACCESSION NUMBER: 0000950134-00-004418 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUNSHINE MINING & REFINING CO CENTRAL INDEX KEY: 0000833376 STANDARD INDUSTRIAL CLASSIFICATION: MINING, QUARRYING OF NONMETALLIC MINERALS (NO FUELS) [1400] IRS NUMBER: 752231378 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10012 FILM NUMBER: 629712 BUSINESS ADDRESS: STREET 1: 877 WEST MAIN STREET STREET 2: SUITE 600 CITY: BOISES STATE: ID ZIP: 83702 BUSINESS PHONE: 2083450660 MAIL ADDRESS: STREET 1: 877 W MAIN STREET SUITE 600 CITY: BOISE STATE: ID ZIP: 83702 FORMER COMPANY: FORMER CONFORMED NAME: SUNSHINE MINING CO /DE DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: SUNSHINE HOLDINGS INC DATE OF NAME CHANGE: 19880915 10-Q 1 FORM 10-Q FOR QUARTER ENDED MARCH 31, 2000 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 2000 OR [ ] 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 1-10012 SUNSHINE MINING AND REFINING COMPANY - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 75-2618333 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 877 W. Main, Suite 600, Boise, Idaho 83702 - -------------------------------------------------------------------------------- (Address of principal executive offices) Registrant's telephone number including area code (208) 345-0660 -------------- - -------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report 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 [ ] Number of Shares Outstanding Title of Each Class of Common Stock at May 10, 2000 - ----------------------------------- ---------------------------- Common Stock, $.01 par value 42,618,005 Page 1 of 15 2 SUNSHINE MINING AND REFINING COMPANY CONSOLIDATED BALANCE SHEETS (In Thousands) (Unaudited)
March 31 December 31 2000 1999 -------- ----------- ASSETS Current assets: Cash and cash investments $ 1,227 $ 628 Silver bullion 1,729 4,117 Accounts receivable 2,850 2,677 Inventories (Note 2) 2,811 2,826 Other current assets 622 787 --------- --------- Total current assets 9,239 11,035 Property, plant and equipment, at cost 61,370 60,720 Less accumulated depreciation, depletion and amortization (37,960) (37,623) --------- --------- 23,410 23,097 Investments and other assets 3,054 2,888 --------- --------- Total assets $ 35,703 $ 37,020 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable $ 1,695 $ 1,634 Accrued expenses 5,295 3,562 Current portion, long term debt 39,934 31,518 --------- --------- Total current liabilities 46,924 36,714 Long-term debt 1,515 11,720 Accrued pension and other postretirement benefits 4,394 4,445 Other long-term liabilities and deferred credits 2,839 2,861 Stockholders' equity (deficit): Common stock -- $.01 par value; 75,000 shares authorized; shares issued: March 31, 2000 -- 41,716 December 31, 1999 -- 39,255 417 393 Paid-in capital 728,639 725,840 Deficit (747,915) (743,843) --------- --------- (18,859) (17,610) Less treasury stock, at cost: March 31, 2000 -- 579 shares December 31, 1999 -- 579 shares (1,110) (1,110) --------- --------- (19,969) (18,720) --------- --------- Total liabilities and stockholders' equity (deficit) $ 35,703 $ 37,020 ========= =========
See accompanying notes. 2 3 SUNSHINE MINING AND REFINING COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999 (In Thousands, Except Per Share Amounts) (Unaudited)
2000 1999 -------- -------- Operating revenues $ 7,177 $ 9,651 Mark to market gain (loss) (166) 83 -------- -------- 7,011 9,734 -------- -------- Costs and expenses: Cost of revenues (6,369) (8,693) Depreciation, depletion and amortization (332) (348) Exploration (376) (551) Selling, general and administrative expense (1,098) (1,215) -------- -------- (8,175) (10,807) -------- -------- Other income (expense) Interest income 19 57 Interest and debt expense (2,935) (2,203) Other, net 8 353 -------- -------- (2,908) (1,793) -------- -------- Net loss $ (4,072) $ (2,866) ======== ======== Basic and diluted loss per common share: $ (0.10) $ (0.09) ======== ======== Weighted average common shares outstanding 39,515 32,514 ======== ========
See accompanying notes. 3 4 SUNSHINE MINING AND REFINING COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited)
Three Months Ended March 31 2000 1999 ------- ------- Cash used by operating activities: Net loss $(4,072) $(2,866) Adjustments to reconcile net loss to net cash used by operations: Depreciation, depletion and amortization 332 348 Amortization of debt issuance costs, accretion of debt discount and noncash interest 358 1,079 Common stock issued for interest on Senior Convertible Notes 573 -- Additional interest on 10% Notes payable 1,362 -- in common stock -- Gains on sales of investments and other -- (312) Net (increase) decrease in: Silver bullion 140 (31) Accounts receivable (173) (1,521) Inventories 15 1,205 Other assets and deferred charges 107 58 Net increase (decrease) in: Accounts payable and accrued expenses 432 (1,408) Accrued pension and other postretirement benefits (51) (178) Other liabilities and deferred credits (22) 39 ------- ------- Net cash used by operations (999) (3,587) ------- ------- Cash provided (used) by investing activities: Additions to property, plant and equipment (650) (689) Proceeds from investments 2,248 1,115 ------- ------- Net cash provided by investing activities 1,598 426 ------- ------- Cash provided (used) by financing activities: Proceeds from issuance of long term debt, net of issuance costs -- 5,875 Other -- 5 ------- ------- Net cash provided by financing activities -- 5,880 ------- ------- Increase in cash and cash investments 599 2,719 Cash and cash investments, January 1 628 1,412 ------- ------- Cash and cash investments, March 31 $ 1,227 $ 4,131 ======= ======= Supplemental cash flow information - Interest paid in cash $ 80 $ 658 ======= =======
See accompanying notes. 4 5 SUNSHINE MINING AND REFINING COMPANY NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS March 31, 2000 1. BASIS OF PRESENTATION The accompanying unaudited consolidated condensed financial statements of Sunshine Mining and Refining Company ("Sunshine" or the "Company") 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. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the quarter ended March 31, 2000 are not necessarily indicative of the results that may be expected for the year ended December 31, 2000. For further information, refer to the consolidated financial statements and footnotes thereto included in Sunshine's report on Form 10-K for the year ended December 31, 1999. 2. INVENTORIES The components of inventory consist of the following:
March 31 December 31 2000 1999 -------- ----------- Precious Metals Inventories: Work in process $ 1,334 $ 1,376 Finished goods 105 107 Materials and supplies inventories 1,372 1,343 -------- -------- $ 2,811 $ 2,826 ======== ========
3. LONG-TERM DEBT The maturity of the outstanding $26 million principal amount of 8% Senior Exchangeable Notes, originally due March 21, 2000 (the "Eurobonds"), has been extended to May 24, 2000. The Company was unsuccessful in its efforts to refinance the Eurobonds, and negotiations with the Company's significant 5 6 noteholders have been taking place regarding a potential restructuring of the Company's existing indebtedness. It is anticipated that a restructuring, if successfully accomplished, will result in a very substantial ownership of the Company's equity by the holders of the Eurobonds and the holders of the 10% Senior Convertible Notes due November 24, 2002 (the "10% Notes"). If the restructuring is not successfully accomplished, the Company may file for bankruptcy under the U. S. Bankruptcy Code. In February 2000, the Company retired $1 million of the Eurobonds, plus accrued interest, by the issuance of 756 thousand shares of common stock. In February 2000, the Company issued approximately 1 million shares of common stock for the first required quarterly prepayment of $1.25 million of the 10% Notes. In March 2000, approximately 698 thousand shares of common stock were issued as payment of approximately 73% of the interest payment due by April 1, 2000. Settlement of the remaining interest is being addressed in the negotiations of the potential restructuring of the Company's indebtedness. Because the Eurobonds were not retired or refinanced prior to March 21, 2000, approximately $1.4 million of additional interest became due pursuant to the terms of the 10% Notes. The additional interest is payable in either cash or shares of common stock to the holders of the 10% Notes. This additional interest has not been paid and is also being addressed in the restructuring negotiations. In April 2000, pursuant to the terms of the 10% Notes, the conversion price for the $13.6 million outstanding principal amount was reset to $0.675 per share. Subsequently, $1 million principal amount of the 10% Notes was converted into 1.5 million shares of common stock. 6 7 SUNSHINE MINING AND REFINING COMPANY Management's Discussion and Analysis of Financial Condition and Results of Operations for the Three Months Ended March 31, 2000 and 1999 Certain matters discussed in this report are "forward-looking statements" intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are all statements other than statements of historical fact, including without limitation those that are identified by the use of the words "anticipates," "believes," "estimates," "expects," "intends," "plans," "predicts" and similar expressions. Such statements address future plans, objectives, expectations and events or conditions concerning various matters such as mining exploration, capital expenditures, earnings, litigation, liquidity and capital resources and accounting matters. Actual results in each case could differ materially from those currently anticipated in such statements, by reason of factors including without limitation, actual results of exploration, silver prices, imprecision of reserve estimates, future economic conditions, regulations, competition and other circumstances affecting anticipated revenue and costs. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update any forward-looking statement. Readers are cautioned not to place undue reliance on these forward-looking statements. Readers should carefully review the risk factors described in other documents the Company files from time to time with the Securities and Exchange Commission. LIQUIDITY AND CAPITAL RESOURCES Working capital at March 31, 2000 was a deficit of $37.7 million. This deficit includes $26 million for the Eurobonds, which were scheduled to mature March 21, 2000, and $13.6 million for the 10% Notes required to be redeemed for either stock or cash in the next twelve months. Cash and silver bullion held for investment totaled $2.96 million at the end of the quarter. The Eurobonds maturity has been extended to May 24, 2000, while the Company works with the holders of the Eurobonds and the 10% Notes regarding a restructuring of the indebtedness. While final terms have not yet been agreed, it is anticipated that a restructuring will transfer a very substantial equity ownership interest in the Company to 7 8 the debt holders. If a restructuring is not successfully accomplished, the Company may file for bankruptcy under the U. S. Bankruptcy Code. Given current silver prices and cash production costs, the Company's operations generate a negative cash flow. Therefore, without an infusion of capital the Company's liquidity will continue to worsen. Current market conditions in the mining industry are not conducive to raising new capital. Therefore, the Company's prospects for continuing as a going concern are dependent upon a restructuring of its indebtedness into equity and an infusion of new capital from the current debt holders or other sources. A contributing factor to the Company's cash flow problem is the decline in production at the Sunshine Mine, as discussed under the heading Results of Operations. Absent a new discovery at the mine, production is expected to continue to decline in the coming months. The Company is working to gain access to an area which management believes has the potential to contain significant additional silver reserves. However, results from this work aren't expected to be available until the end of the third quarter of this year. The Company does not expect to be able to access the capital required to develop the Pirquitas Mine in Argentina until after completion of its debt restructuring as discussed above. Operating, Investing, and Financing Activities Cash used in operating activities in the first quarter of 2000 was $1.0 million compared to $3.3 million in the first quarter of 1999. The $2.3 million decrease was primarily due to changes in working capital components. Cash operating loss decreased $300 thousand to $1.4 million for the 2000 period. Investing activities in the first quarter of 2000 included $2.3 million proceeds from sale of investment silver bullion and $650 thousand of net additions to property, plant and equipment including $462 thousand for the development of Pirquitas. Investing activities in the first quarter of 1999 included approximately $1.1 million proceeds from investment recoveries and $689 thousand of net additions to property, plant and equipment primarily for the development of Pirquitas. Cash provided by financing activities in 1999 primarily consists of $5.9 million net proceeds from the issuance of convertible notes. 8 9 RESULTS OF OPERATIONS THE THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 1999 Consolidated operating revenues decreased approximately $2.5 million (25.6%) for the first quarter of 2000 compared to the first quarter of 1999. The decrease in operating revenues primarily resulted from a 393,000 ounce decrease in ounces of silver sold in the 2000 period, and a $0.15 decrease in average price received per ounce of silver sold (1,293,626 ounces of silver at an average of $5.06 per ounce in the 2000 quarter compared to 1,686,138 ounces at an average of $5.21 per ounce in the 1999 quarter) along with a $240 thousand decrease in by-product revenue. Sales in the 1999 quarter included a reduction of work in process inventories totaling 260 thousand ounces of silver. Mark to market loss on silver held for investment amounted to $166 thousand in the 2000 quarter compared to an $83 thousand mark to market gain in the 1999 period. Cost of revenues decreased $2.3 million (26.7%) (from $8.7 million in the first quarter of 1999 to $6.4 million in the 2000 quarter) primarily due to a decrease in ounces of silver produced. Net cash operating costs increased $.10 per ounce to $4.49 per ounce of silver primarily due to fixed costs being spread over fewer ounces and a $0.14 decrease in per ounce by-product credits. These were partially offset by reduced per ounce development and smelter costs. Development costs are lower because the West Chance area of the mine is almost fully developed. Smelter costs are lower due to improved contractual terms with the outside smelter, improved grades for both silver and lead concentrates produced and reduced tons of lead concentrate production in 2000. Silver production totaled 1,268,877 ounces produced from 52,042 tons at 24.49 ounces per ton in 2000 versus 1,425,936 ounces from 56,759 tons at 25.89 ounces per ton in 1999. The decrease in production was primarily due to fewer productive stopes being available as mining proceeds to the outskirts of the West Chance area. Exploration expense decreased $175 thousand in 2000 compared to 1999 primarily due to a reduction of expenditures for the Sunshine Mine and other projects in Argentina and the U.S. 9 10 General and administrative costs decreased $117 thousand due to various cost reduction measures. Interest income decreased $38 thousand due to lower average invested cash balances. Interest and debt expense increased $732 thousand primarily due to the $1.4 million penalty interest on the 10% Notes partially offset by the amortization of debt discount in 1999 for the 5% Convertible Notes issued in January 1999. In the 1999 period, other income included a $312 thousand gain from the sale of certain investments. 10 11 SUNSHINE MINING AND REFINING COMPANY PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS On February 24, 2000, the Company issued to the holders of the 10% Notes on a pro rata basis 1,009,962 shares of common stock as the first required quarterly prepayment of $1.25 million on the 10% Senior Convertible Notes due November 24, 2002 (the "10% Notes"). The 10% Notes were issued in November 1997 pursuant to the Company's reliance on the exemption from registration under the Securities Act of 1933, as amended (the "Securities Act"), found in Section 4(2), and the shares issued as the prepayment were issued pursuant to an exemption from registration under the Securities Act found in Section 3(a)(9) of the Securities Act or an exemption from registration under the Securities Act found in Section 4(2). On February 9, 2000, the Company issued to certain holders of the Eurobonds 756,000 shares of common stock in exchange for $1,000,000 of the 8% Senior Exchangeable Notes, originally due March 21, 2000 (the "Eurobonds"). The Eurobonds were issued in March 1996 pursuant to the Company's reliance on the exemption from registration under the Securities Act found in Regulation S (Sections 901-905 of the Securities Act), and the shares issued in exchange for the $1,000,000 of Eurobonds were issued pursuant to an exemption from registration under the Securities Act found in Section 3(a)(9) of the Securities Act. On March 29, 2000, the Company issued to the holders of the 10% Notes on a pro rata basis 698,179 shares of common stock as payment of interest due by April 1, 2000 on the 10% Notes. The 10% Notes were issued in November 1997 pursuant to the Company's reliance on the exemption from registration under the Securities Act found in Section 4(2), and the shares issued as interest were issued pursuant to an exemption from registration under the Securities Act found in Section 3(a)(9) of the Securities Act or an exemption from registration under the Securities Act found in Section 4(2). On April 11 and 17, 2000, certain holders of the 10% Notes converted $1,000,000 of the 10% Notes for 1,481,480 shares of common stock pursuant to the terms of the 10% Notes. The 10% Notes were issued in November 1997 pursuant to the Company's reliance on the exemption from registration under the Securities Act found in Section 4(2), and the shares issued upon conversion of $1,000,000 of the 10% Notes were issued pursuant to an exemption from registration under the Securities Act found 11 12 in Section 3(a)(9) of the Securities Act or an exemption from registration under the Securities Act found in Section 4(2). ITEM 3. DEFAULTS UPON SENIOR SECURITIES On March 21, 2000, the Company did not make its scheduled principal and interest payments on the Eurobonds. There has not been a default declared on the Eurobonds, and holders of at least 66 2/3% of the Eurobonds have extended the maturity date of the principal and interest that was due on March 21, 2000. Arguments could be made that the Company is in default on the Eurobonds and that the 5% Notes and the 10% Notes are also in default due to cross-default provisions. Since the Eurobonds were not retired or refinanced prior to March 21, 2000, the Company was to issue to the holders of the 10% Notes $1,362,080 of additional interest to be paid in either cash or shares of common stock. The Company did not pay the additional interest; however, no default has been declared. Arguments could be made that the Company is in default on the 10% Notes, and such default could cause defaults under the Eurobonds and the 5% Notes due to cross-default provisions. By April 1, 2000, the Company did not issue shares to the holders of the 10% Notes satisfying the entire amount of the scheduled interest payment due on April 1, 2000. No default has been declared. Arguments could be made that the Company is in default on the 10% Notes, and such default could cause defaults under the Eurobonds and the 5% Notes due to cross-default provisions. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On March 27, 2000, a special meeting of the holders of the Eurobonds was held. At the meeting, holders of $17,570,000 of Eurobonds voted to extend the maturity of the principal of the Eurobonds to April 24, 2000 and adjourned the meeting until April 24, 2000. Holders of $345,000 of Eurobonds voted against the extension of the maturity. Holders of $8,060,000 of Eurobonds did not vote at all. On April 24, 2000, the special meeting of the holders of the Eurobonds was continued. At the meeting, holders of $17,570,000 of Eurobonds voted to extend the maturity of both the principal and interest of the Eurobonds to May 24, 2000. Holders of $345,000 of Eurobonds voted against the extension of the maturity. Holders of $8,060,000 of Eurobonds did not vote at all. 12 13 ITEM 5. OTHER INFORMATION By letter dated March 22, 2000, the New York Stock Exchange (the "Exchange") notified the Company that it was below the Exchange's continued listing standard of total market capitalization of not less than $50 million. The letter also noted that the Company's stock price had traded down recently and was in jeopardy of falling below the continued listing criteria of a minimum share price of $1 over a 30 day trading-day period. The Exchange has also stated that the Company had to present a business plan that demonstrates compliance with the continued listing standards within 18 months, which the Company has submitted. The business plan is subject to Exchange approval. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K None 13 14 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION - ----------- ----------- 27 Financial Data Schedule
15 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 hereto duly authorized. SUNSHINE MINING AND REFINING COMPANY Dated: May 12, 2000 By: /s/ WILLIAM W. DAVIS ------------------------- William W. Davis Executive Vice President and Chief Financial Officer EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AT MARCH 31, 2000 AND THE CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 2000, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 1,227 0 2,850 0 2,811 9,239 61,370 37,960 35,703 46,924 1,515 0 0 417 (20,386) 35,703 7,177 7,011 6,369 7,799 376 0 2,935 (4,072) 0 (4,072) 0 0 0 (4,072) (.10) (.10)
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