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, 2000. 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)
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.
5,343,219 shares of common stock, no par value, were
outstanding as of June 30, 2000.
PART I. FINANCIAL INFORMATION.
Item 1. Financial Statements.
The accompanying condensed consolidated financial
statements of The Coeur d'Alenes Company (sometimes
referred to herein as the "Company") should be read in
conjunction with the audited consolidated financial
statements and related notes included in the Corporation's
Annual Report on Form 10-KSB for the year ended September 25,
1999. The comparative consolidated balance sheet and
related disclosures at September 25, 1999 have been derived
from the audited balance sheet and financial statement
footnotes. The accompanying condensed consolidated
financial statements reflect all adjustments that in the
opinion of management are necessary for a fair presentation
of the financial position, results of operations and cash
flows for the interim periods presented. The results of
operations for the nine month period ended June 25, 2000
are not necessarily indicative of the operating results to
be expected for the full year.
The preparation of the Company's consolidated financial
statements in conformity with generally accepted accounting
principles necessarily requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities at the balance sheet dates and reported amounts of
revenue and cost during the reporting periods. Actual results
could differ from those estimates. On an ongoing basis,
management reviews its estimates based on information that is
currently available. Changes in facts and circumstances may
result in revised estimates.
Condensed Consolidated Financial Statements
Consolidated Balance Sheets at June 25, 2000 (unaudited)
and September 25, 1999 (audited)
Unaudited Consolidated Income Statements -
Nine Months Ended June 25, 2000 and June 25, 1999
Unaudited Consolidated Income Statements -
Three Months Ended June 25, 2000 and June 25, 1999
Unaudited Consolidated Statement of Cash Flows -
Nine Months Ended June 25, 2000 and June 25, 1999
Condensed Notes to Unaudited Consolidated Financial
Statements
THE COEUR D'ALENES COMPANY
CONSOLIDATED BALANCE SHEET
June 25, 2000 (unaudited) and September 25, 1999 (audited)
June 25, September 25
2000 1999
(Unaudited) (Audited)
ASSETS
Current assets:
Cash $ 48,066 $ 32,422
Accounts receivable 1,139,111 1,019,063
Inventory 2,675,511 2,464,247
Other current assets 87,826 86,305
Total current assets 3,950,514 3,602,037
Plant, property and equipment 5,275,503 5,059,408
Less accumulated depreciation 1,849,964 1,715,242
Net plant property and
equipment 3,425,539 3,344,166
Other assets 43,949 67,777
Total assets $7,420,002 $7,013,980
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short term bank borrowings $ 624,970 $ 367,553
Accounts payable 814,935 540,154
Accrued expenses 311,306 297,271
Debentures payable to
related parties 0 128,000
Current amount on long-term debt 182,818 164,241
Total current liabilities 1,934,029 1,497,219
Long-term liabilities:
Deferred tax liability 162,000 156,000
Long term debt less
current maturities 2,228,475 2,266,399
Total long term liabilities 2,390,475 2,422,399
Total liabilities 4,324,504 3,919,618
Stockholders' equity:
Capital stock 1,186,192 1,186,192
Retained earnings 1,918,986 1,917,230
3,105,178 3,103,422
Less treasury stock at cost 9,680 9,060
Total stockholders' equity 3,095,498 3,094,362
Total liabilities and
stockholders' equity $7,420,002 $7,013,980
THE COEUR DALENES COMPANY
UNAUDITED CONSOLIDATED INCOME STATEMENT
Nine months Ended June 25, 2000 and June 25, 1999
2000 1999
Net sales $9,093,214 $9,386,402
Cost of sales 6,726,788 7,080,475
Gross profit on sales 2,366,426 2,305,927
Selling, general and administrative
expenses 2,238,325 2,211,765
Operating income 128,101 94,162
Other income (expense)
Interest income 25,186 31,339
Interest expense ( 179,699) ( 199,036)
Other income 29,199 42,800
Total other expense ( 125,314) ( 124,897)
Income (loss) before
income tax expense (benefit) 2,787 ( 30,735)
Income tax expense(benefit) 1,031 ( 11,372)
Net income (loss) $ 1,756 $( 19,363)
Earnings (loss) per share $ 0.00 $ 0.00
Weighted average shares
outstanding 5,344,497 5,348,996
THE COEUR D'ALENES COMPANY
UNAUDITED CONSOLIDATED INCOME STATEMENT
Three Months Ended June 25, 2000 and June 25, 1999
2000 1999
Net sales $3,202,190 $3,037,938
Cost of sales 2,395,881 2,259,821
Gross profit on sales 806,309 778,117
Selling, general and
administrative expenses 734,359 719,519
Operating income 71,950 58,598
Other income (expense):
Interest income 9,313 9,475
Interest expense ( 62,571) ( 56,155)
Other income 27,812 21,687
Total other expense ( 25,446) ( 24,993)
Income before income tax expense 46,504 33,605
Income tax expense 17,207 12,434
Net income $ 29,297 $ 21,171
Earnings per share (basic
and diluted) $ 0.00 $ 0.00
Weighted average
shares outstanding 5,344,233 5,348,735
THE COEUR D'ALENES COMPANY
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
Nine Months Ended June 25, 2000 and June 25, 1999
2000 1999
Cash flows from
operating activities:
Net income (loss) $ 1,756 $( 19,363)
Adjustments to reconcile net
income to cash provided by
operating activities:
Depreciation 179,735 194,076
Gain on disposal of assets ( 271) ( 250)
Changes in assets and
liabilities
Accounts and notes
receivable ( 120,048) 410,233
Inventories ( 211,264) 343,247
Prepaid expense and
other current assets ( 1,521) ( 12,882)
Other assets 23,828 20,742
Accounts payable 274,781 47,919
Accrued expenses 20,035 (130,409)
Net cash provided
by operating activities 167,031 853,313
Cash flows from investing activities:
Proceeds from sale of assets 3,200 250
Additions to property
and equipment ( 264,037) ( 169,233)
Net cash used in investing
activities ( 260,837) ( 168,983)
Cash flows from financing activities:
Net borrowing (repayment)
under line of credit 257,417 ( 715,595)
New long-term borrowings 102,257 78,000
Principal repayment of
long-term debt ( 121,604) ( 75,902)
Principal repayment of
debentures ( 128,000) 0
Treasury shares repurchased ( 620) ( 1,000)
Net cash provided (used) in
financing activities 109,450 ( 714,497)
Net increase (decrease) in cash 15,644 ( 30,167)
Cash, beginning of period 32,422 39,486
Cash, end of period $ 48,066 $ 9.319
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, 2000 are the same as those contained in the
Summary of Significant Accounting Policies from the Company's
audited financial statements as of September 25, 1999 and
September 26, 1998.
(2) Inventories.
Inventories are summarized as follows:
June 25, September 25,
2000 1999
(Unaudited) (Audited)
Fabrication inventories:
Raw materials $ 14,419 $ 27,372
Work-in-progress 691,078 401,899
Inventories, at FIFO cost 705,497 429,271
LIFO reserve ( 35,100) ( 15,018)
Inventories, at LIFO cost 670,397 414,253
Distribution inventories, at FIFO 2,005,114 2,049,994
Total inventories 2,675,511 2,464,247
(3) Short-term bank borrowings.
The Company has $1,900,000 in bank credit lines which will
mature on February 16, 2001. Interest is charged at the lenders'
prime rate 9-1/2% as of June 25, 2000. 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 $2,200,000. The Company was
in compliance with all of these covenants as of their most recent
respective measurement date.
(4) Capital Stock.
The Company conducted a tender offer that has been extended
through September 30, 2000. The offer resulted in 1,186 shares
being repurchased as treasury stock through June 25, 2000 with a
total cost to the Company of $620. The purpose of the tender
offer 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 by the shareholder.
Federal Income Tax Expense
As of June 25, 2000 and September 25, 1999, the Company
has a deferred long term tax liability of $162,000 and
$156,000 respectively resulting primarily from the use of
accelerated methods of depreciation of fixed assets and a
deferred tax asset of $71,000 and $65,000 respectively
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
THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS OF THE COMPANY SHOULD BE READ IN
CONJUNCTION WITH THE COMPANY'S FINANCIAL STATEMENTS AND
NOTES THERETO INCLUDED ELSEWHERE IN THIS REPORT.
This report contains forward-looking statements
regarding, among other items, anticipated trends in the
Company's business. These forward-looking statements are
based largely on the Company's expectations and are subject
to a number of risks and uncertainties, certain of which
are beyond the Company's control. Actual results could
differ materially from these forward-looking statements as
a result of the factors described elsewhere herein. In
light of these risks and uncertainties, there can be no
assurance that the forward-looking information contained in
this report will in fact transpire or prove to be accurate.
LIQUIDITY AND CAPITAL RESOURCES
The Company anticipates that it will continue operating
the steel distribution business much as it has for the past
year during the twelve month period beginning June 26,
2000. In October 1999, the Company signed a two year lease
on a small warehouse facility in Wenatchee, WA. The
Company conducts a business similar to the retail steel
business in Spokane on a much smaller scale. The operation
has been open since November 1999. Required inventories
are expected to continue to be less than $50,000 as sales
are supported out of the Spokane location. The Company has
the option to cancel the lease after the first year with a
$2,000 penalty.
The replacement cost of inventories has been slowing
increasing following approximately eighteen months of
declining steel prices. More capital is required to
finance the larger dollar volumes of inventory. The
operating line of credit is adequate to support the
anticipated need. The economic climate will likely prevent
sales growth in the distribution business. The demand for
fabricated metal products in our particular niche of the
market appears to remain fairly strong and should allow for
continued sales growth in the fabrication business.
During the next twelve months the Company plans to
continue to replace outdated equipment and add capacity.
In order to facilitate this plan, a bank loan has been
approved in the amount of $300,000. These funds can be
used to finance up to 75% of the purchase price and should
be adequate to cover the immediate needs. As of June 25,
approximately $122,000 has been advanced on the loan.
During the first nine months of the current fiscal
year, cash flows provided by operations were approximately
$167,000 compared to approximately $853,000 for the same
period of the prior year. Cash flows from operations for
the nine months ended June 25, 2000 were primarily impacted
by a net income of $2,000, adjusted by depreciation expense
of $180,000, an increase in accounts receivable and
inventories of $120,000 and $211,000 respectively and an
increase in accounts payable of $275,000. Cash flows
provided by operations for the first nine months of the
prior fiscal year primarily consisted of a net loss of
$19,000, adjusted by depreciation of $194,000. Cash flows
used by investing activities of $261,000 during the current
fiscal year and $169,000 during the first nine months of
the prior fiscal year were attributable to the purchase of
new equipment. Cash flows provided by financing for the
current year include borrowing under the operating line of
credit in the amount of $257,000, a new equipment loan for
$102,000, principal repayment of long-term debt in the
amount of $122,000 and principal repayment of debentures in
the amount of $128,000 for a net provision of approximately
$109,000. During the first nine months of the prior year,
cash flows used by financing activities were primarily the
result of repayment of long-term debt, as the long-term
borrowings were approximately offset by the required
principal payments on previous long-term debt.
Working capital decreased during the first nine months
of the current year from approximately $2,105,000 at the
end of last year to approximately $2,016,000 as of June 25,
2000.
The Company is dependent on an operating line of
credit to meet its daily financial obligations. The
operating line of $1,900,000, which is currently in place
through February 16, 2001, is considered by management to
be adequate.
Results of Operations
Nine Months Ended June 25, 2000 Compared to Nine Months
Ended June 25, 1999
Sales of approximately $9,093,000 for the nine-month
period ended June 25, 2000 are 3% lower than approximately
$9,386,000 for the same period of the prior fiscal year.
At the same time, gross profits increased 3% to
approximately $2,366,000 from approximately $2,306,000 for
the first nine months of the prior fiscal year. The
increase in gross profits was principally due to a 25%
increase in the fabrication business' gross profits. The
steel service center sales of approximately $7,774,000
represent 85% of the total Company's sales for the first
nine months of the current fiscal year. Likewise, steel
service center sales of approximately $8,288,000 for the
same period of time during the prior fiscal year represent
88% of the total Company's sales. This is a 6% decline in
steel service center sales for the first nine months of the
current fiscal year compared to the same period of time
during the prior fiscal year. Lower than expected demand
is the primary reason for the decline. The fabrication
business, contributing 15% and 12% of the total sales for
the first nine months of fiscal 2000 and fiscal 1999
respectively, experienced a 20% increase in sales volume
from approximately $1,098,000 for the prior fiscal year to
approximately $1,319,000 for the current year. Demand for
fabricated metal products in our niche market have improved
during the last year and should remain strong for the next
six months.
Operating expenses at approximately $2,238,000 for the
nine month period ended June 25, 2000 are roughly $26,000
higher than approximately $2,212,000 for the same period of
the prior fiscal year. The slight increase is the result
of increasing labor and training costs.
Interest expense at approximately $180,000 for the
nine-month period ended June 25, 2000 is 10% lower than
approximately $199,000 for the same period of the prior
fiscal year. The decrease was the result of lower
inventories and accounts receivable supporting lower sales
volume during the first part of the year.
Other income of approximately $29,000 compares to
approximately $43,000 for the first nine months of the
prior fiscal year. During the prior fiscal year the State
of Washington based on higher than usual investment returns
on the state reserves paid an industrial insurance
dividend. Though such a payment is unusual in the
Department's history, it is likely that another dividend
will be paid in the near future.
Lower sales volume was offset by higher gross profits
resulting in a small net income compared to a net loss for
the same period of the prior year. After tax net income of
approximately $2,000 for the nine-month period ended June
25, 2000 compares to a net loss of approximately $19,000
for the nine-month period ended June 25, 1999.
Three months ended June 25, 2000 and June 25, 1999
Sales of approximately $3,202,000 for the third
quarter of the current fiscal year are 5% higher than
approximately $3,038,000 for the third quarter of the prior
fiscal year. The steel service center business, which
contributed 85% and 91% of the total sales for the three
month period ended June 25, 2000 and June 25, 1999
respectively, experienced a 1/2% increase in sales volume
over the third quarter of the prior fiscal year. The
increase from approximately $2,760,000 for the third
quarter of last year to approximately $2,773,000 for the
same period of time this year was largely the result of the
addition of a small warehouse facility in Wenatchee WA
during the current fiscal year. The fabrication business,
with a 54% increase in sales volume represents 15% of the
third quarter combined sales for the current fiscal year
and only 9% for the prior year. Sales of approximately
$429,000 for the quarter ended June 25, 2000 compares to
approximately $151,000 for the same quarter of the prior
fiscal year. The stronger demand should continue for at
least the next several months.
Gross profit for the three-month period ended June 25,
2000, at 25.2% of sales compares to 25.6% for the same
period of the prior fiscal year. The resulting gross
profit dollars for the third quarter of the current fiscal
year at approximately $806,000 exceed the same period of
the prior fiscal year by approximately $28,000. The
improvement in gross profit is the result of higher sales
volume particularly in the fabrication business, which
generally commands higher overall gross profit than the
steel service center business.
Operating expenses at approximately $734,000 for the
three-month period ended June 25, 2000 are 2% higher than
approximately $720,000 for the same period of the prior
fiscal year. The increase is primarily the result of
higher labor and training costs. In the tight labor market
of the Pacific Northwest, the costs are likely to continue
to increase during the remainder of the year.
Interest expense for the quarter ending June 25, 2000
at approximately $63,000 is 11% higher than the same
quarter of the prior fiscal year at approximately $56,000.
The increase is attributable to higher interest rates,
higher inventories and new long-term debt. Interest
expense is expected to continue to be higher than last year
as borrowing for new equipment will increase the overall
debt load. The additional interest expense should be more
than offset by lower maintenance on the new equipment,
greater efficiency and expanded capacity.
Improved sales volume and gross margins contributed to
an after tax net income of approximately $29,000 for the
third quarter of the current year compared to a net income
of approximately $21,000 for the same quarter of the prior
year.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
At September 25, 1999, the Company owed $128,000 to related
parties pursuant to the terms of a convertible debenture
agreement. The debentures were redeemed in accordance with the
agreement on October 31, 1999.
The Company is continuing to conduct a tender offer under an
extension, which will expire on September 30, 2000. During the
first nine months of the current fiscal year, the Company
repurchased 1,186 shares for treasury stock at a total cost of
$620. An additional 1,014 shares were tendered and repurchased
as of June 30, 2000 at an additional cost of $590. The purpose of
the tender offer is to buy out odd lot shareholders with holdings
of diminimus value.
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
(27) Financial Data Schedule
(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: August 7, 2000
/s/ Marilyn A. Schroeder
Marilyn A. Schroeder
Chief Financial Officer
(Authorized Officer and Principal
Accounting and Financial Officer)