-----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, C+CvVBV8X35HDO5ahhWUu8Z9e1Idr8N9O+HboIM5jtzDAd+so9D8oc55kjB5CKnH YUN+ZRrxF0kgUr8b0UJL5g== 0000950134-98-006273.txt : 19980805 0000950134-98-006273.hdr.sgml : 19980805 ACCESSION NUMBER: 0000950134-98-006273 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980803 SROS: NYSE 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: 98676033 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 JUNE 30, 1998 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 June 30, 1998 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 July 31, 1998 - ----------------------------------- ---------------------------- Common Stock, $.01 par value 256,831,512 Page 1 of 8 2 SUNSHINE MINING AND REFINING COMPANY CONSOLIDATED BALANCE SHEETS (In Thousands)
(Unaudited) June 30 December 31 1998 1997 ----------- ----------- ASSETS Current assets: Cash and cash investments $ 7,149 $ 15,985 Silver bullion 7,306 7,739 Accounts receivable 4,675 2,801 Inventories(Note 2) 3,583 3,627 Other current assets 1,531 1,739 ----------- ----------- Total current assets 24,244 31,891 Property, plant and equipment, at cost 147,631 143,192 Less accumulated depreciation, depletion and amortization (80,646) (77,727) ----------- ----------- 66,985 65,465 Investments and other assets 4,774 4,245 ----------- ----------- Total assets $ 96,003 $ 101,601 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,540 $ 1,351 Accrued expenses 3,880 3,581 ----------- ----------- Total current liabilities 5,420 4,932 Long-term debt 41,745 42,265 Accrued pension and other postretirement benefits 5,600 5,672 Other long-term liabilities and deferred credits 3,886 4,236 Stockholders' equity: Common stock$.01 par value; 600,000 shares authorized; shares issued: June 30, 1998-261,394 shares December 31, 1997-259,818 shares 2,614 2,598 Paidin capital 712,544 711,192 Deficit (674,696) (668,155) ----------- ----------- 40,462 45,635 Less treasury stock, at cost: June 30, 1998 4,563 shares December 31, 1997 4,586 shares 1,110 1,139 ----------- ----------- 39,352 44,496 ----------- ----------- Total liabilities and stockholders' equity $ 96,003 $ 101,601 =========== ===========
See accompanying notes. -2- 3 SUNSHINE MINING AND REFINING COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands, Except Per Share Amounts) (Unaudited)
Quarter Ended Six Months Ended June 30, June 30, 1998 1997 1998 1997 --------- --------- --------- --------- Operating revenues $ 8,553 $ 4,320 $ 18,293 $ 10,052 Mark to market writedown (1,755) (372) (963) (186) --------- --------- --------- --------- 6,798 3,948 17,330 9,866 --------- --------- --------- --------- Costs and expenses: Cost of revenues 7,455 5,018 14,405 10,706 Depreciation, depletion and amortization 1,500 1,214 2,895 2,522 --------- --------- --------- --------- 8,955 6,232 17,300 13,228 --------- --------- --------- --------- Operating margin (loss) (2,157) (2,284) 30 (3,362) Other income (expense) Exploration (1,536) (2,048) (2,581) (4,410) Selling, general and administrative expense (1,385) (1,461) (2,591) (2,841) Interest income 167 200 386 410 Interest and debt expense (1,725) (1,384) (3,410) (2,744) Other, net 24 (4) 1,626 33 --------- --------- --------- --------- (4,455) (4,697) (6,570) (9,552) --------- --------- --------- --------- Net loss $ (6,612) $ (6,981) $ (6,540) $ (12,914) ========= ========= ========= ========= Basic and fully diluted loss per common share: $ (0.03) $ (0.03) $ (0.03) $ (0.05) Weighted average common shares outstanding 256,759 255,137 256,229 255,100 ========= ========= ========= =========
See accompanying notes. -3- 4 SUNSHINE MINING AND REFINING COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited)
Six Months Ended June 30 1998 1997 -------- -------- Cash used by operating activities: Net loss $ (6,540) $(12,914) Adjustments to reconcile net loss to net cash used by operations: Depreciation, depletion and amortization 2,895 2,522 Amortization of debt issuance costs and accretion of debt discount 1,022 1,037 Net (increase) decrease in: Silver bullion 433 224 Accounts receivable (1,874) 1,347 Inventories 44 (74) Other assets and deferred charges (2,293) (328) Net increase (decrease) in: Accounts payable and accrued expenses 495 479 Accrued pension and other postretirement benefits (72) (114) Other liabilities and deferred credits (322) (413) -------- -------- Net cash used by operations (6,212) (8,233) -------- -------- Cash provided (used) by investing activities: Additions to property, plant and equipment (4,440) (1,050) Proceeds from sale of investments 1,774 273 -------- -------- Net cash used by investing activities (2,666) (777) -------- -------- Cash provided (used) by financing activities: Proceeds from issuance of common stock upon exercise of stock options and warrants 48 0 Debt issuance costs (6) (150) -------- -------- Net cash provided (used) by financing activities 42 (150) -------- -------- Decrease in cash and cash investments (8,836) (9,160) Cash and cash investments, January 1 15,985 16,317 -------- -------- Cash and cash investments, June 30 $ 7,149 $ 7,157 ======== ======== Supplemental cash flow information Interest paid in cash $ 2,056 $ 1,411 ======== ========
See accompanying notes. -4- 5 SUNSHINE MINING AND REFINING COMPANY NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS June 30, 1998 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 June 30, 1998 presentation. Operating results for the six-month period ended June 30, 1998 are not necessarily indicative of the results that may be expected for the year ended December 31, 1998. 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, 1997. 2. INVENTORIES The components of inventory consist of the following:
June 30 December 31 1998 1997 -------- -------- Precious Metals Inventories: Work in process $ 2,199 $ 2,171 Finished goods 165 264 Materials and supplies inventories 1,219 1,192 -------- -------- $ 3,583 $ 3,627 ======== ========
SUNSHINE MINING AND REFINING COMPANY Management's Discussion and Analysis of Financial Condition and Results of Operations for the Six Months Ended June 30, 1998 and 1997 LIQUIDITY AND CAPITAL RESOURCES Working capital at June 30, 1998 totaled $18.8 million including $7.1 million in cash and cash investments and $7.3 million in silver bullion. The Company anticipates capital expenditures in 1998 at the Sunshine Mine to be approximately $2.4 million, including $1.2 million expended in the first half. For 1998, the Company intends to spend approximately $4.4 million in discretionary exploration activities, primarily at the La Joya del Sol Mine in Argentina and the Sunshine Mine. Exploration expenditures for the first six months of 1998 totaled approximately $2.6 million. Additionally, $7.0 million is anticipated to be spent during 1998 preparing a bankable feasibility study and for development work at the Pirquitas Mine in Argentina, of which $2.9 million was spent in the first half. Cash and working capital are considered adequate to fund ongoing operations for the foreseeable future. However, development of the Pirquitas Mine is expected to require approximately $100 million, which the Company intends to raise from outside sources. The Company is currently reviewing financing options, including debt and/or equity 5 6 offerings, to determine the most appropriate financing for the development of the property. The Company has engaged outside independent consultants to prepare a comprehensive evaluation of all aspects of the project's operations and economics, known as a bankable feasibility study. The bankable feasibility study, scheduled for completion in the fourth quarter of 1998, will be used to support the financing effort. Although the Company believes it will be successful in obtaining adequate financing for the development of Pirquitas, no assurance can be given as to the availability of adequate financing. Operating, Investing, and Financing Activities Cash used in operating activities in the first half of 1998 was $6.2 million compared to $8.2 million in the first half of 1997. The $2.0 million decrease was primarily due to a reduction in cash operating loss to $2.6 million in the first half of 1998 compared to $9.4 million in the first half of 1997, partially offset by changes in working capital components. The improvement in cash operating loss resulted primarily from increased silver production and an increase in average per ounce silver price received for silver sold. Accounts receivable increased primarily due to increased sales volumes. Investments increased primarily due to the reduction in the valuation reserve previously booked against certain investments. Investing activities in the first half of 1998 used approximately $2.7 million of cash including $2.9 million for the development of Pirquitas, $1.2 million of capital expenditures at the Sunshine Mine and $341 thousand of other capital expenditures, partially offset by $1.8 million of proceeds from sale of investments. RESULTS OF OPERATIONS THE THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 1997 Consolidated operating revenues increased approximately $4.2 million (98%) for the second quarter of 1998 compared to the second quarter of 1997. The increase in operating revenues primarily resulted from an increase in silver sales volumes and average price received per ounce of silver sold (1,367,000 ounces of silver at an average of $5.48 per ounce in the 1998 quarter compared to 758,000 ounces at an average of $4.62 per ounce in the 1997 quarter). The silver sales volume increase primarily resulted from a 616,000 ounce (76.7%) increase in production in the 1998 quarter. Mark to market writedowns of work-in-process silver inventories and silver held for investment amounted to $1.8 million and $0.4 million in 1998 and 1997, respectively. Such writedowns, which were due to declines in the per ounce silver price during the periods, are charged against revenues. Cost of revenues increased $2.4 million (48.6%) (from $5.0 million in the second quarter of 1997 to $7.45 million in the second quarter of 1998) primarily due to the 76.7% increase in production in 1998, partially offset by lower net unit operating costs. Net unit operating costs decreased $.91 per ounce (16.2%) to $4.69 per ounce of silver primarily due to the increase in silver production and a 2.33 ounce per ton (10.6%) increase in average grades from 1997 to 1998 (1.4 million ounces produced from 60,184 tons at 24.31 ounces per ton in 1998 versus 0.8 million ounces from 37,867 tons at 21.98 ounces per ton in 1997) partially offset by a decrease in by-product credits of $0.30 per ounce of silver. The decrease in by-products credit per ounce of silver resulted primarily from a decrease in copper, antimony and lead prices in the 1998 quarter compared to the 1997 quarter. Depreciation, depletion and amortization increased by approximately $286 thousand as a result of increased production in the 1998 quarter. Exploration expense decreased $512 thousand in 1998 compared to 1997 primarily due to the fact that work carried out at the Pirquitas Mine in Argentina is largely being capitalized as the property is now considered to be in the development stage. As a result, 6 7 approximately $2.0 million of expenditures at Pirquitas during the 1998 quarter were capitalized. This was partially offset by increased exploration expenditures at the La Joya del Sol gold property in Argentina, at the Sunshine Mine and other exploration projects. Selling, general and administrative expense decreased $76 thousand (5.2%) due to a variety of cost reductions. Interest and debt expense increased $341 thousand primarily due to the debt issued in November 1997. THE SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1997 Consolidated operating revenues increased approximately $8.2 million (82%) for the first six months of 1998 compared to the first six months of 1997 primarily due to an increase in sales volume and average price received per ounce of silver sold (2.7 million ounces of silver at an average of $5.94 per ounce in the first six months of 1998 compared to 1.7 million ounces of silver at an average of $4.92 in the same period of 1997) and the associated $638 thousand increase in by-product revenue. The increase in sales volumes primarily resulted from a 1.0 million ounce (59.6%) increase in production in 1998 compared to 1997. Mark to market writedowns of work-in-process silver inventories and silver bullion held for investment amounted to $963 thousand and $186 thousand in 1998 and 1997, respectively. Such writedowns are charged against revenues. The writedowns were due to declines in the per ounce silver price during the periods, from $5.945 to $5.57 between December 31, 1997 and June 30, 1998; and from $4.74 to $4.60 between December 31, 1996 and June 30, 1997. Cost of revenues increased $3.7 million (35%) (from $10.7 million in the first six months of 1997 to $14.4 million in the first six months of 1998) primarily due to the 59.6% increase in production in 1998, partially offset by lower net unit operating costs. Net unit operating costs decreased $.79 (14.7%) to $4.56 primarily due to the 59.6% increase in silver production (2.7 million ounces produced from 116,884 tons at 24.00 ounces per ton in 1998 versus 1.7 million ounces from 83,667 tons at 21.08 ounces per ton in 1997). Depreciation, depletion and amortization increased by approximately $373 thousand as a result of increased production in the 1998 period. Exploration expense decreased $1.8 million in 1998 compared to 1997 primarily due to the fact that work carried out at the Pirquitas Mine in Argentina is largely being capitalized as the property is now considered to be in the development stage. As a result, approximately $2.9 million of expenditures at Pirquitas during 1998 were capitalized. This was partially offset by increased exploration expenditures at the La Joya del Sol gold property in Argentina, at the Sunshine Mine and other exploration projects. Selling, general and administrative decreased $250 thousand (8.8%) due to a variety of cost reductions. Interest expense increased $666 thousand due to the debt issued in November 1997. Other, net increased $1.6 million due to the $1.6 million reduction of the valuation reserves previously recorded against certain investments as a result of restructuring and performance of certain investments. 7 8 SUNSHINE MINING AND REFINING COMPANY 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 On May 20, 1998, at Sunshine's Annual Meeting of Stockholders, for which proxies were solicited pursuant to Regulation 14A, the following nominees for director of Sunshine were elected by holders of common stock by the vote indicate.
Broker Name For Withheld Non-votes ----- --- -------- --------- G. Chris Andersen 186,388,620 3,879,630 0 V. Dale Babbitt 186,663,940 3,604,310 0 George M. Elvin 186,689,158 3,579,092 0 Daniel D. Jackson 186,658,748 3,609,502 0 Oren G. Shaffer 186,665,490 3,602,760 0 John S. Simko 186,680,118 3,588,132 0 Robert B. Smith, Jr. 186,679,837 3,588,413 0
ITEM 5. OTHER INFORMATION At the Company's 1999 annual meeting of shareholders, management proxies will have discretionary authority to vote on shareholder proposals that are not submitted for inclusion in the Company's proxy statement, unless the Company receives notice of those proposals on or before February 7, 1999. For matters disclosed to the Company on or before that date, management proxies may nonetheless, in certain circumstances, exercise discretionary voting pursuant to Rule 14a-4(c) under the Exchange Act of 1934. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (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 hereto duly authorized. SUNSHINE MINING AND REFINING COMPANY Dated: August 3, 1998 By: /s/ WILLIAM W. DAVIS ------------------------- William W. Davis Executive Vice President and Chief Financial Officer 8 9 INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION - ----------- ----------- 27 Financial Data Schedule
EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED CONSOLIDATED BALANCE SHEET AT JUNE 30, 1998 AND UNAUDITED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 7,149 0 4,675 0 3,583 24,244 147,631 4,744 96,003 5,420 41,745 0 0 2,614 36,738 96,003 18,293 17,330 14,405 17,300 2,581 0 3,410 (6,540) 0 (6,540) 0 0 0 (6,540) (0.03) (0.03)
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