-----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, BpZm7qrRnbp/ZkFABiP2djh79cG/ZUH7moB8piFFxlRqIYH3d15LUku4PFS5op8x ZK+OxajGOYplCuJA66wRGA== 0000950134-96-001788.txt : 19960510 0000950134-96-001788.hdr.sgml : 19960510 ACCESSION NUMBER: 0000950134-96-001788 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960509 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUNSHINE MINING & REFINING CO CENTRAL INDEX KEY: 0000833376 STANDARD INDUSTRIAL CLASSIFICATION: PRIMARY SMELTING & REFINING OF NONFERROUS METALS [3330] IRS NUMBER: 752231378 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10012 FILM NUMBER: 96558537 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, 1996 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For The Quarterly Period Ended March 31, 1996 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 75-2231378 - -------------------------------------------------------------------------------- (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 April 30, 1996 - ------------------------------------ ---------------------------- Common Stock, $.01 par value 192,125,892 Page 1 of 15 2 SUNSHINE MINING AND REFINING COMPANY CONSOLIDATED BALANCE SHEETS MARCH 31, 1996 AND DECEMBER 31, 1995 (In Thousands) ASSETS
March 31 December 31 1996 1995 ------------------- ------------------- Current assets: Cash and cash equivalents $ 36,580 $ 12,837 Silver bullion 9,396 8,976 Accounts receivable 1,691 1,583 Inventories (Note 2) 1,949 1,477 Marketable securities 7 13 Other current assets 1,522 1,592 ------------------- ------------------- Total current assets 51,145 26,478 Property, plant and equipment, at cost 139,745 140,886 Less accumulated depreciation, depletion and amortization (68,904) (69,967) ------------------- ------------------- 70,841 70,919 Other noncurrent assets and deferred charges 6,006 3,737 ------------------- ------------------- Total assets $ 127,992 $ 101,134 =================== ===================
See accompanying notes. -2- 3 SUNSHINE MINING AND REFINING COMPANY CONSOLIDATED BALANCE SHEETS MARCH 31, 1996 AND DECEMBER 31, 1995 (IN THOUSANDS) LIABILITIES AND STOCKHOLDERS' EQUITY
March 31 December 31 1996 1995 ----------------- ----------------- Current liabilities: Accounts payable $ 1,218 $ 687 Accrued expenses 3,103 2,241 ----------------- ----------------- Total current liabilities 4,321 2,928 Long-term debt (Note 3) 31,519 1,519 Accrued pension and other postretirement benefits 6,530 6,387 Other long-term liabilities and deferred credits 6,516 5,218 Stockholders' equity: Cumulative redeemable preferred stock-- aggregate redemption value: March 31, 1996 - $130,335 December 31, 1995 - $128,203 82,607 82,268 Common stock--$.01 par value; 400,000 shares authorized; shares issued: March 31, 1996 - 196,801 December 31, 1995 - 196,760 1,968 1,968 Paid-in capital 623,338 623,337 Deficit (627,414) (622,454) ----------------- ----------------- 80,499 85,119 Less treasury stock, at cost: March 31, 1996 - 4,749 shares December 31, 1995 - 3,664 shares 1,393 37 ----------------- ----------------- 79,106 85,082 ----------------- ----------------- Total liabilities and stockholders' equity $ 127,992 $ 101,134 ================= =================
See accompanying notes. -3- 4 SUNSHINE MINING AND REFINING COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (In Thousands, Except Per Share Amounts) (Unaudited)
QUARTER ------- 1996 1995 ------------ ------------ Operating revenues $ 3,797 $ 4,564 Costs and expenses: Cost of sales 3,625 5,035 Depreciation, depletion and amortization 960 859 Exploration 2,524 1,116 Selling, general and administrative expense 1,252 1,452 ------------ ------------ 8,361 8,462 ------------ ------------ Operating loss (4,564) (3,898) Other income (expense): Interest income 182 344 Interest expense (296) (135) Other, net 57 64 ------------ ------------ (57) 273 ------------ ------------ Net loss (4,621) (3,626) Preferred dividend requirements (2,471) (2,559) ------------ ------------ Loss applicable to common shares $ (7,092) $ (6,184) ============ ============ Loss per common share $ (0.04) $ (0.03) Weighted average common ============ ============ shares outstanding 191,989 192,995 ============ ============
See accompanying notes. -4- 5 SUNSHINE MINING AND REFINING COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (In Thousands) (Unaudited)
1996 1995 -------------- -------------- Cash used by operating activities: Net loss $ (4,621) $ (3,626) Adjustments to reconcile loss from operations to net cash used by operations: Depreciation, depletion and amortization 960 859 Exploration Expenditures 2,524 1,116 Realized and unrealized gains on marketable equity securities (60) - Net (increase) decrease in: Silver bullion (420) (720) Accounts receivable (108) (618) Inventories (472) 220 Other assets and deferred charges 70 384 Net increase (decrease) in: Accounts payable and accrued expenses 570 202 Accrued pension and other postretirement benefits 143 50 Other liabilities and deferred credits (328) 225 -------------- -------------- Net cash used by operations (1,742) (1,907) -------------- -------------- Cash provided (used) by investing activities: Additions to property, plant and equipment and exploration expenditures (3,098) (1,168) Proceeds from investments 630 12 -------------- -------------- Net cash used by investing activities (2,468) (1,156) -------------- -------------- Cash provided by financing activities: Proceeds from issuance of common stock upon exercise of stock options and warrants 1 - Proceeds from issuance of long term debt 30,000 - Debt issuance costs (2,047) - -------------- -------------- Net cash provided by financing activities 27,954 0 -------------- -------------- Increase (decrease) in cash and cash investments 23,743 (3,064) Cash and cash investments, January 1 12,837 26,581 -------------- -------------- Cash and cash investments, March 31 $ 36,580 $ 23,517 ============== ============== Supplemental cash flow information - Interest paid in cash $ 166 $ 63 ============== ==============
See accompanying notes. -5- 6 SUNSHINE MINING AND REFINING COMPANY NOTES TO CONDENSED FINANCIAL STATEMENTS March 31, 1996 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. Certain previously reported amounts have been reclassified to conform to the March 1996 presentation. Operating results for the three month period ended March 31, 1996 are not necessarily indicative of the results that may be expected for the year ended December 31, 1996. 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, 1995. 2. INVENTORIES The components of inventory consist of the following:
March 31 December 31 1996 1995 --------- ----------- Precious Metals Inventories: Work in process $ 990 $ 512 Finished goods 159 264 Materials and supplies inventories 800 701 --------- --------- $ 1,949 $ 1,477 ========= =========
-6- 7 3. LONG-TERM DEBT During the quarter, the Company, through its subsidiary SPMI, issued $30 million in 8% Senior Exchangeable Notes to non-U.S. persons pursuant to Regulation S promulgated under the Securities Act of 1933, as amended. See "Management's Discussion and Analysis of Financial Condition." 4. SIGNIFICANT ACCOUNTING POLICIES The Company adopted the Financial Accounting Standards Board ("FASB") Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of ("FAS 121")," in the first quarter of 1996. The adoption of FAS 121 had no impact on the Company's financial condition as the Company's methodology for evaluating its mining properties for impairment is consistent with FAS 121. FASB Statement No. 123, "Accounting for Stock Based Compensation ("FAS 123")" establishes an alternative method of accounting for stock based compensation to the method set forth in Accounting Principles Board Opinion No. 25 ("APB 25"). The Company will continue to account for stock option grants under the provisions of APB 25 and has adopted the disclosure provisions of FAS 123. Accordingly, the adoption of FAS 123 in 1996 had no effect on the Company's financial statements. - 7 - 8 SUNSHINE MINING AND REFINING COMPANY Management's Discussion and Analysis of Financial Condition and Results of Operations for the Three Months Ended March 31, 1996 and 1995 LIQUIDITY AND CAPITAL RESOURCES The Company, through Sunshine Precious Metals, Inc. ("SPMI"), its wholly-owned subsidiary, concluded an offering (the "Notes Offering") in March, 1996, conducted in Europe only to non-U.S. persons pursuant to Regulation S promulgated under the Securities Act of 1933, as amended. SPMI issued $30 million aggregate principal amount of Senior Exchangeable Notes due 2000 (the "Notes") pursuant to the Notes Offering. The net proceeds from the Notes Offering (approximately $27.25 million) will be used to fund development and exploration opportunities of the Company, and for working capital requirements of the Company. The Company's working capital totaled $46.8 million at March 31, 1996, which will be adequate to fund the Company's anticipated cash requirements for several years. Set forth below are certain terms and provisions of the Notes and the Notes Offering. The Notes bear interest at 8% per annum and will mature four years after their issuance (March 21, 2000). The Notes are exchangeable into a specified number of shares of Common Stock of the Company at an exchange price of $1.4375 per share, subject to reset and adjustment in certain events. The Notes may be exchanged at the option of the holder at any time after 40 days following the date of issuance and prior to maturity, unless previously redeemed. At any time after one year from the date of issuance and prior to maturity, SPMI may force the exchange of the Notes, in whole or in part, subject to certain restrictions. SPMI may redeem the Notes at any time at the principal amount if United States withholding taxes are imposed on payments in respect of the Notes. The Notes will be guaranteed by Sunshine (and any successors thereof) and the - 8 - 9 guarantee will rank senior to all of its unsecured and subordinated obligations, including the currently outstanding Convertible Subordinated Reset Debentures due July 15, 2008. As the price of silver since 1985 has been only slightly in excess of, or less than, the Company's cash cost to produce an ounce of silver, the Company's operations have not been able to generate cash flow sufficient to cover its costs of exploration, research, general and administrative expenses, and interest, as well as non-cash charges such as depreciation, depletion, and amortization. Until such time as the price of silver increases significantly or higher production is achieved at a lower cost, the Company will continue to generate a negative cash flow from operations. The Company anticipates capital expenditures in 1996 at the Sunshine Mine to be approximately $3 million, including $574 thousand expended in the first quarter. For 1996, the Company has also budgeted approximately $7.5 million for exploration activities at the Sunshine Mine, Pirquitas property in Argentina, and other projects. Exploration expenditures for the first three months of 1996 totaled approximately $2.5 million. Preferred Stock The dividend on Sunshine's $11.94 (Stated Value) Cumulative Redeemable Preferred Stock (the "Preferred Stock") has neither been declared nor paid since December 31, 1990. Given current silver prices, the Company does not expect any resumption of dividends in the foreseeable future. Dividends are cumulative. The amount of aggregate redemption value disclosed on the balance sheet includes $45 million in dividends in arrears. The Certificate of Designation of Rights and Preferences (the "Certificate") governing the Preferred Stock prohibits partial redemptions while dividends are in arrears. Therefore, the Company has not made annual redemptions of approximately 808 thousand shares of the Preferred Stock since 1991. - 9 - 10 Pursuant to the Certificate, the Company may make dividend payments and redemptions of the Preferred Stock using cash or by issuing shares of its common stock valued in accordance with a specified formula. There are no penalties for the Company failing to make dividend payments or partial redemptions. On October 19, 1995, the Board of Directors of Sunshine approved the proposed merger (the "Merger") of Sunshine with and into its wholly-owned subsidiary, Sunshine Merger Company, pursuant to which Sunshine Merger Company would be the surviving entity. The purpose of the proposed Merger is to retire all of Sunshine's outstanding Preferred Stock. The proposed Merger requires approval by the holders of a majority of the outstanding Common Stock and Preferred Stock, voting separately as a class. A special meeting of Stockholders was held on March 29, 1996 to consider the Merger. The Merger was approved by the preferred stockholders at the meeting. The meeting has been adjourned until May 21, 1996 to allow common stockholders additional time to consider and vote on the Merger. As of April 30, 1996, approximately 47.1% of the outstanding Common Stock had been voted in favor of the Merger, 3.6% against the Merger, and 1.6% have voted to abstain. Operating, Investing, and Financing Activities Cash used in operating activities in the first quarter of 1996 was $1.7 million compared to $1.9 million in the first quarter of 1995. Cash operating losses decreased in the first quarter of 1995 by $0.5 million, partially offset by changes in working capital components. Approximately $2.5 million of cash was used by investing activities in the first quarter of 1996 compared to $1.2 million in the 1995 period. The $1.3 million increase was primarily due to increased exploration expenditures of $1.4 million and $0.6 million increase in additions to property, plant and equipment partially offset by the sale of certain marketable securities. - 10 - 11 Cash provided by financing activities was $28.0 million in the first quarter of 1996 as a result of the Company's Notes Offering. There was no cash provided by financing activities in the first quarter of 1995. RESULTS OF OPERATIONS THE THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 1995 Consolidated operating revenues decreased approximately $767 thousand for the first quarter of 1996 compared to the first quarter of 1995 due to smaller mark to market increases on work in process inventories and investment bullion during the quarter ($470 thousand increase in the first quarter of 1996 compared to $921 thousand increase in the same period in 1995); and a reduction in sales volumes (457,000 ounces of silver in the 1996 quarter compared to 619,000 ounces in the 1995 quarter). The reduction in sales volumes was due to a drawdown in work-in- process inventories in the first quarter of 1995 resulting from the suspension of operations of the Company's silver refinery during the 1995 quarter, which resulted in shorter processing time before sales recognition of silver and copper concentrates to a third party smelter. These decreases were partially offset by increased sales volumes resulting from a 177,000 ounce (47%) increase in production in the 1996 quarter and an $0.83 (17.1%) increase in average silver price received per ounce. Cost of sales decreased $1.4 million (28%) (from $5.0 million in the first quarter of 1995 to $3.6 million in the first quarter of 1996) due to the drawdown in inventories in 1995, as discussed above, and lower unit production costs. Unit production costs decreased primarily due to a 47% increase in silver production and a 15.6% increase in average grades from 1995 to 1996 (554 thousand ounces produced from 31,037 tons at 18.42 ounces per ton in 1996 versus 377 thousand ounces from 24,534 tons at 15.93 ounces per ton in 1995). - 11 - 12 Exploration expense increased $1.4 million (28%) for the first quarter of 1996 compared to the same period in 1995 in keeping with the Company's plan to increase exploration spending at the Sunshine mine, the Pirquitas property in Argentina, and other sites in Argentina, Peru and Colorado. Depreciation, depletion and amortization increased by approximately $100 thousand as a result of increased production in the 1996 period. Interest income decreased by $162 thousand (47%) due to lower invested cash balances. Interest expense increased $161 thousand due to the Notes Offering completed in March, 1996. (See "Liquidity and Capital Resources.") - 12 - 13 SUNSHINE MINING AND REFINING COMPANY PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On March 22, 1996, a complaint was filed in the United States District Court for the District of Idaho on behalf of the United States Department of the Interior, United States Department of Agriculture and the Environmental Protection Agency against Sunshine, Sunshine Precious Metals, Inc. (SPMI) and other identified Potentially Responsible Parties (PRPs) for alleged natural resource damages in the Coeur d'Alene Basin. The complaint seeks to recover natural resource damages and response costs under the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (CERCLA) and the Clean Water Act, and does not identify the amount of damages sought to be recovered. The Company believes that the settlement by SPMI of all natural resource claims with the State of Idaho in May, 1986, bars these claims, and that the complaint is without merit. ITEM 2. CHANGES IN SECURITIES None ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On March 29, 1996, a special meeting of the stockholders of Sunshine was convened, at which holders of Sunshine's common stock and preferred stock, each voting separately as a class, were asked to vote on the proposed merger of Sunshine with and into Sunshine Merger Company, a wholly-owned subsidiary of Sunshine. On the effective date, the merger will result in the elimination of Sunshine's preferred stock in exchange for common stock and warrants to purchase common stock; all other securities of Sunshine will be converted into identical corresponding securities of Sunshine Merger Company without any action by the holders thereof. On the effective date of the merger, Sunshine Merger Company's name will be changed to Sunshine Mining and Refining Company. There were 7,166,186 shares of preferred stock outstanding and entitled to vote at the special meeting. The holders of preferred stock approved the merger proposal by the following vote: For: 4,381,202 Against: 387,867 Abstain: 39,029 The meeting was adjourned for lack of a quorum of common stock to April 17, 1996, with the polls remaining open during the interim with respect to the vote by holders of common stock. On April 17, 1996, the meeting was continued to April 30, 1996 for lack of a - 13 - 14 Quorum of Common stock. On April 30, 1996, the meeting was continued, with respect to the vote by holders of common stock, to May 21,1996 ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits None (b) Reports on Form 8-K Sunshine filed a report on Form 8-K dated March 22, 1996, regarding the closing of the offering of $30,000,000 8% Senior Exchangeable Notes due 2000 (the "Notes") by SPMI. The Notes will be guaranteed by and exchangeable into shares of common stock of Sunshine. - 14 - 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 9, 1996 By: /s/ William W. Davis ------------------------------------------ William W. Davis Executive Vice President, Chief Financial Officer and Chief Accounting Officer - 15 - 16 INDEX TO EXHIBITS Exhibit Number Description - ------- ----------- EX 27. Financial Data Schedule EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AT MARCH 31, 1996 (UNAUDITED) AND THE CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 36,580 7 1,691 0 1,949 51,145 139,745 68,904 127,992 4,321 31,519 1,968 82,607 0 (5,469) 127,992 3,797 3,797 3,625 7,109 0 0 296 (4,621) 0 (4,621) 0 0 0 (7,092) (0.04) (3.03)
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