-----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, RqFdV+pvdbQT/4uXHvwRHHjv7IUd9fUTD3oRfwil6yM0UnBxc+8FUA9SoDlWxNqF F2jNGwfsFeAKefFjVE5Izw== 0000861502-99-000015.txt : 19990802 0000861502-99-000015.hdr.sgml : 19990802 ACCESSION NUMBER: 0000861502-99-000015 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990625 FILED AS OF DATE: 19990730 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COEUR D ALENES CO /IA/ CENTRAL INDEX KEY: 0000861502 STANDARD INDUSTRIAL CLASSIFICATION: FABRICATED STRUCTURAL METAL PRODUCTS [3440] IRS NUMBER: 820109390 STATE OF INCORPORATION: ID FISCAL YEAR END: 0925 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 001-10676 FILM NUMBER: 99673909 BUSINESS ADDRESS: STREET 1: PO BOX 2610 CITY: SPOKANE STATE: WA ZIP: 99220-2610 BUSINESS PHONE: 5099246363 MAIL ADDRESS: STREET 2: PO BOX 2610 CITY: SPOKANE STATE: WA ZIP: 992202610 FORMER COMPANY: FORMER CONFORMED NAME: CONJECTURE INC /IA/ DATE OF NAME CHANGE: 19931209 FORMER COMPANY: FORMER CONFORMED NAME: COEUR D ALENES CO /WA/ DATE OF NAME CHANGE: 19931209 10QSB 1 US SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 25, 1999. TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________________ TO ________________. Commission File Number 0-18353 THE COEUR D'ALENES COMPANY (Exact name of registrant as specified in its charter) Idaho 82-0109390 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) PO Box 2610, Spokane, Washington 99220-2610 (Address of principal executive offices) (Zip code) (509) 924-6363 (Registrant's telephone number, including area code) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 ___ Applicable only to issuers involved in bankruptcy proceedings during the preceding five years. Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes___No___ Applicable only to corporate issuers. State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. 5,345,419 shares of common stock, no par value, were outstanding as of June 30, 1999. PART I. FINANCIAL INFORMATION. Item 1. Financial Statements. The condensed financial statements of The Coeur d'Alenes Company (sometimes referred to herein as the "Company") included herein have been prepared by the Company without audit or review by the Company's accountants pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, all adjustments necessary to a fair statement of the results of operations for the interim periods ended June 25, 1999 and June 25, 1998 have been made. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full fiscal year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These condensed financial statements should be read in conjunction with the financial statements and the notes thereto included in The Coeur d'Alenes Company's latest audited financial statements for the fiscal year ended September 26, 1998. Index of Financial Statements Page Consolidated Balance Sheets - June 25, 1999 and September 26, 1998 3 Unaudited Consolidated Income Statements - Six Months Ended June 25, 1999 and June 25, 1998 4 Unaudited Consolidated Income Statements - Three Months Ended June 25, 1999 and June 25, 1998 5 Unaudited Consolidated Statement of Cash Flows - Six Months Ended June 25, 1999 and June 25, 1998 6 Condensed Notes to Unaudited Consolidated Financial Statement 7 THE COEUR D'ALENES COMPANY CONSOLIDATED BALANCE SHEET June 25, 1999 and September 26, 1998 June 25, September 26 1999 1998 (Unaudited) (Audited) ASSETS Current Assets: Cash $ 9,319 $ 39,486 Accounts receivable 1,007,036 1,417,269 Inventory 2,210,137 2,553,384 Other current assets 68,882 56,000 Total current assets 3,295,374 4,066,139 Plant, Property and Equipment 5,042,383 4,896,087 Less accumulated depreciation 1,710,183 1,539,044 Net plant property and equipment 3,332,200 3,357,043 Other assets 51,268 72,010 Total assets $6,678,842 $7,495,192 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Short term bank borrowings $ 127,231 $ 842,826 Accounts payable 633,730 585,811 Accrued expenses 270,100 400,509 Debentures payable to related parties 128,000 0 Current amount on long-term debt 147,247 134,714 Total current liabilities 1,306,308 1,963,860 Long-term debt: Deferred tax liability 120,000 120,000 Long term debt less current maturities 2,317,734 2,328,170 Long term debt to related parties 0 128,000 Total long term liabilities 2,437,734 2,576,170 Total liabilities 3,744,042 4,540,030 Stockholders' Equity: Capital Stock 1,186,192 1,186,192 Retained earnings 1,755,958 1,775,320 2,942,150 2,961,512 Less Treasury Stock at cost 7,350 6,350 Total stockholders' equity 2,934,800 2,955,162 Total liabilities and stockholders' equity $6,678,842 $7,495,192 THE COEUR DALENES COMPANY UNAUDITED CONSOLIDATED INCOME STATEMENT Nine Months Ended June 25, 1999 and June 25, 1998 1999 1998 Net sales $ 9,386,402 $10,488,212 Cost of sales 7,080,475 7,927,801 Gross profit on sales 2,305,927 2,560,411 Selling, general and administrative Expenses 2,211,765 2,246,617 Operating income 94,162 313,794 Other income (expense) Interest income 31,339 25,091 Interest expense ( 199,036) (230,404) Other income 42,800 36,810 Total other expense ( 124,897) (168,503) Income (loss) before income tax expense ( 30,735) 145,291 Income tax expense (benefit) ( 11,372) 53,757 Net income (loss) $ ( 19,363) $ 91,534 Earnings (loss) per share $ ( 0.00 ) $ 0.02 Shares outstanding 5,348,735 5,352,553 THE COEUR D'ALENES COMPANY UNAUDITED CONSOLIDATED INCOME STATEMENT Three Months Ended June 25, 1999 and June 25, 1998 1999 1998 Net sales $3,037,938 $3,918,292 Cost of sales 2,259,821 2,945,030 Gross profit on sales 778,117 973,262 Selling, general and administrative expenses 719,519 774,278 Operating income 58,598 198,984 Other income (expense) Interest income 9,475 8,772 Interest expense (56,155) ( 80,522) Other income 21,687 26,789 Total other expense (24,993) ( 44,961) Income (loss) before income tax expense 33,605 154,023 Income tax expense 12,434 56,989 Net income $ 21,171 $97,034 Earnings per share $ 0.00 $ 0.02 Shares outstanding 5,348,735 5,352,553 THE COEUR D'ALENES COMPANY UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS Nine Months Ended June 25, 1999 and June 25, 1998 1999 1998 Cash flows from operating activities: Net income (loss) ( 19,363) $ 91,534 Adjustments to reconcile net income to cash provided (used) by operating activities: Depreciation 194,076 194,909 Gain on disposal of assets ( 250) ( 1,000) Changes in assets and liabilities Accounts and notes receivable 410,233 (237,670) Inventories 343,247 (782,544) Prepaid expense and other current assets ( 12,882) 4,493 Other assets 20,742 18,976 Accounts payable 47,919 656,214 Accrued expenses (130,409) 28,973 Cash provided (used) by operating activities 853,313 ( 26,115) Cash flows from investing activities: Proceeds from sale of assets 250 1,000 Additions to property and equipment ( 169,233) (141,487) Cash used by investing activities ( 168,983) (140,487) Cash flows from financing activities: Purchase of Treasury shares ( 1,000) ( 1,140) Net borrowing (repayment) under line of credit ( 715,595) 114,316 Principal repayment of long-term debt ( 75,902) ( 70,412) New long term note 78,000 67,000 Cash provided (used) by financing activities (714,497) 109,764 Net increase (decrease) in cash ( 30,167) ( 56,838) Cash, beginning of period 39,486 89,495 Cash, end of period $ 9,319 $ 32,657 THE COEUR D'ALENES COMPANY CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (1) Summary of Significant Accounting Policies. Significant accounting policies followed for the nine months ended June 25, 1999 are the same as those contained in the Summary of Significant Accounting Policies from the Company's audited financial statements as of September 26, 1998 and September 27, 1997. (2) Inventories. Inventories are summarized as follows: June 25, September 26, 1999 1998 Fabrication inventories: Raw materials $ 47,345 $ 31,826 Work-in-progress 322,351 67,293 Inventories, at FIFO cost 369,696 99,119 LIFO reserve ( 19,861) ( 19,861) Inventories, at LIFO cost 349,835 79,258 Distribution inventories, at FIFO 1,860,302 2,474,126 Total inventories $2,210,137 $2,553,384 (3) Short-term bank borrowings. The Company has $1,850,000 in bank credit lines which mature on May 1, 2000. Interest is charged at the lenders prime rate plus .25%, 8% at June 25, 1999. Outstanding borrowings are collateralized by accounts receivable and inventories. The credit line agreement contains covenants under which the Company may not pay dividends in excess of 10% of annual net (after tax) profit, or enter into mergers, acquisitions or any major sales of assets or corporate reorganizations without prior consent of the bank. The Company is also required to maintain certain financial ratios concerning working capital and debt to equity, as well as a minimum net worth of $2,400,000. (4) Capital Stock. The Company conducted three tender offers which expired during the current fiscal year. The offers resulted in 3,416 shares being repurchased as treasury stock with a total cost to the Company of $2,240. The purpose of the tender offers was to buy out odd lot holders of stock with diminimus value which cost the Company more to service than the value of the stock held. An extension of the third tender offer is currently open for holders of 100 or fewer shares. The offer will expire on November 30, 1999 unless extended by the Company. The total cost to repurchase the stock is expected to be less than $4,000. (5) Federal Income Tax Expense As of June 25, 1999 and September 26, 1998, the Company has a deferred long term tax liability of $120,000 resulting primarily from the use of accelerated methods of depreciation of fixed assets and a deferred tax asset of $56,000 resulting from vacation accrual and bad debt allowance. A valuation allowance on the Company's deferred tax assets has been established to the extent the Company believes it is more likely than not that the deferred tax assets will not be realized. There were no extraordinary items to be reported for any of the above accounting periods. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Liquidity and Capital Resources During the first nine months of the current fiscal year, the Company's working capital decreased from approximately $2,102,000 at the end of the prior fiscal year to approximately $1,990,000 as of June 25, 1999. The 5% decline is the result of debentures in the amount of $128,000 moving from long term to current liabilities. These debentures are due on October 31, 1999. They are convertible to common stock at the rate of $.28 per share, however, any debentures that have not been converted by October 31 will be repaid. The operating line is adequate to retire this debt and currently has an interest rate _% lower than the 8-3/4% carried by the debentures. On January 26, 1998 the Company converted a real estate loan with a variable rate to an 8-1/2% fixed rate loan for the remaining term. The Company is dependent on an operating line of credit, secured by accounts receivable and inventory, to meet its daily financial obligations. The cost of metal from the mills has declined significantly over the last eighteen months. Because fewer dollars have been invested in the same tonnage required to be carried in inventory, the Company has relied to a much lesser extent on its operating line. When the prices go back up the Company will once again resume a heavier dependence on borrowed funds. A $1.85 million operating line is currently in place through May 1, 2000. Results of Operations: Nine Months Ended June 25, 1999 Sales of approximately $9,386,000 for the nine month period ended June 25, 1999 are approximately 11% lower than approximately $10,488,000 for the same nine month period of the prior fiscal year. The sales decline was accompanied by a similar decline of 10% in gross margins over the same period of time from approximately $2,560,000 for the nine month period ended June 25, 1998 to approximately $2,306,000 for the nine month period ended June 25, 1999. The steel service center sales of approximately $8,471,000 represent 90% of the total Company's sales for the first nine months of the current fiscal year. Likewise, service center sales of approximately $9,096,000 for the same period of the prior year represent 87% of the total Company's sales. This 7% decline in sales volume is due to low metal prices and lower than expected demand. This trend can likely be expected to continue during the last quarter of the fiscal year. The fabrication business, contributing 10% of the total sales for the first nine months of the current fiscal year and 13% for the same period of the prior year experienced a 30% decline in sales volume from approximately $1,590,000 to $1,107,000. The demand for fabricated metal products within the Company' s market area has been extremely low for the last two years. Indications are that the market is slowly improving. Backlogs are beginning to build up slowly. Operating expenses at approximately $2,212,000 for the nine month period ended June 25, 1999 are roughly 35,000 lower than the approximately $2,246,000 for the same period of the prior fiscal year. The 2% decrease is primarily related to the lower sales volume. Crane repairs are also down significantly from the prior year due to capital expenditures on crane upgrades. Interest expense, at approximately $199,000 for the nine month period ended June 25, 1999 is down 13% from approximately $230,000 for the same period of time during the prior fiscal year. The decrease was possible as a result of declining inventory replacement prices. With fewer dollars invested in inventories, borrowing on the operating line of credit is much lower than for the prior year. If the supply of low priced foreign metal products declines, the cost of metal may go back up, resulting in renewed dependence on the operating line of credit. Other income at approximately $43,000 for the first nine months of the current fiscal year compares to approximately $37,000 for the same period of time during the prior fiscal year. The increase is the result of an industrial insurance dividend paid by the State of Washington based on higher than usual investment returns on these reserves. The Company also participates in a purchasing cooperative for the steel service center industry. The first purchase rebate was paid during the current year. While the first rebate was small, the impact on future years may be greater. Lower sales volume without a similar decrease in operating expense resulted in a year to date net loss of approximately $19,000 compared to a net income of approximately $92,000 for the same period of time during the prior year. While the third quarter net income was not large, the price of metal in the marketplace shows signs of stabilizing and it that should be the case, fourth quarter will be much improved. Three Months Ended June 25, 1999 Sales volume for the third quarter of the current fiscal year lags behind that of the third quarter of the prior year by 22%. Over half of the approximately $880,000 decrease was in the fabrication business. The fabrication business posted sales volume of just over $750,000 during the third quarter of last year and just under $279,000 for the third quarter of the current year. The remaining $410,000 decrease was in the steel service center business. The comparative combined third quarter sales figures are approximately $3,038,000 for the current year and approximately $3,918,000 for the prior year. Continuing depressed metal prices and increased competition accounts for the decrease. The limited demand for fabricated metal products continued throughout the third quarter of the current year. Orders already placed for the fourth quarter indicated that the final quarter of the fiscal year will be more profitable than the third quarter for the fabrication business. Gross margins for the three month period ended June 25, 1999 at 26.6% of sales compare to 24.4% for third quarter of the prior year. Even with gross margins at 2 percentage points higher than last year, the total gross margin dollars for the third quarter of the current year are 20% lower than the same period of time during the prior year. At approximately $778,000 for the current year, third quarter margins lag the prior year by approximately $195,000. Operating expenses at approximately $720,000 for the three month period ended June 25, 1999 are 7% lower than approximately $774,000 for the same period of the prior fiscal year. The $54,000 decrease was possible because of the decline in sales volume (tonnage) and the lower repair expense resulting from capital improvements. Interest expense for the three month period ended June 25, 1999 at approximately $56,000 is 30% lower than approximately $81,000 for the same period of time during the preceding fiscal year. Lower inventory values allowed the Company to borrow less money. This is expected to be a short term benefit as the price from supply sources firms up. Any increase in interest expense due to higher cost inventories should be offset by better gross margins. Lower sales volume resulted in a net income for the third quarter of the current year significantly lower than that of the same quarter of the prior fiscal year. At 1.1% of sales, the third quarter net income for the current year of approximately $12,000 compares to .9% of sales or approximately $92,000 for the prior year. PART II. OTHER INFORMATION. Item 1. Legal Proceedings. None. Item 2. Changes in Securities. At December 25, 1998 and September 26, 1998, the Company owed $128,000 to related parties pursuant to the terms of a convertible debenture agreement. The debentures require semi-annual interest payments and are secured by the Company's land and building. In October 1998, the agreement was amended from an interest rate of 9.25% to 8.75% and from a due date of October 31, 1998 to October 31, 1999. Accordingly, the related party debt has been classified as a current liability at March 25, 1999 and a noncurrent liability at September 26, 1998. The debentures are convertible into shares of the Company's common stock at a per share rate of $.28 through maturity. The Company, at its option, may call any or all outstanding debentures for redemption. The Company conducted tender offers on odd lot shares from October 1998 through June 30, 1999. As a result of the offers, the Company purchased 7,123 shares for a total cost of $2,240. An extended tender offer is currently active for shareholders with 100 or fewer shares and expires on November 30, 1999. Item 3. Defaults Upon Senior Securities. None. Item 4. Submission of Matters to a Vote of Security Holders. None. Item 5. Other Information. None. Item 6. Exhibits and Reports on Form 8-K (249.308). (a) Exhibits. None. (b) Reports on Form 8-K. None. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE COEUR D'ALENES COMPANY (Registrant) Dated: July 29, 1999 /s/ Marilyn A. Schroeder Marilyn A. Schroeder, Vice-President, Treasurer and Chief Financial Officer (Authorized Officer and Principal Accounting and Financial Officer) SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE COEUR D'ALENES COMPANY (Registrant) Dated: July 29, 1999 __________________________________________ Marilyn A. Schroeder, Vice-President, Treasurer and Chief Financial Officer (Authorized Officer and Principal Accounting and Financial Officer) Page 13 of 13 EX-27 2
5 6-MOS 12-MOS SEP-25-1999 SEP-26-1998 JUN-25-1999 SEP-26-1998 9,319 39,486 0 0 1,085,490 1,474,117 78,454 56,848 2,210,137 2,553,384 3,295,374 4,066,139 5,042,383 4,896,087 1,710,183 1,539,044 6,678,842 7,495,192 1,306,308 1,963,860 1,850,923 1,884,068 0 0 0 0 1,186,192 1,186,192 1,748,608 1,768,970 6,678,842 7,495,192 9,386,403 14,368,061 9,460,942 14,430,428 7,080,475 10,721,254 9,280,868 13,877,585 187,664 412,302 19,000 12,400 199,036 301,817 (30,735) 361,511 (11,372) 110,485 (30,735) 361,511 0 0 0 0 0 0 (19,363) 251,026 0.00 0.05 0.00 0.04
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