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 DECEMBER 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 Identification No.)
incorporation or organization)
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.
5,342,164 shares of common stock, no par value, were outstanding as of
February 3, 2001
PART I. FINANCIAL INFORMATION.
Item 1. Financial Statements.
The accompanying condensed consolidated financial statements of
The Coeur d Alenes Company ( "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 30,
2000. The comparative consolidated balance sheet and related disclosures at
September 30, 2000 have been derived from the audited consolidated 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 three month period ended December 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 December 25, 2000 (unaudited)
and September 30, 2000 (audited)
Unaudited Consolidated Income Statements for the Three Months
Ended December 25, 2000 and December 25, 1999
Unaudited Consolidated Statements of Cash Flows for the Three
Months Ended December 25, 2000 and December 25, 1999
Condensed Notes to Unaudited Consolidated Financial Statements
THE COEUR D ALENES COMPANY
CONSOLIDATED BALANCE SHEET
December 25, 2000 and September 30, 2000
December 25, 2000 September 30, 2000
ASSETS (Unaudited) (Audited)
Current assets:
Cash and cash equivalents $ 3,684 $ 115,532
Accounts and notes receivable 1,203,439 1,226,837
Inventories 2,495,912 2,680,550
Other current assets 118,879 65,000
Total current assets 3,821,914 4,087,919
Property and equipment 5,666,312 5,630,525
Less accumulated depreciation 1,974,931 1,908,938
Net property and equipment 3,691,381 3,721,587
Other assets 41,903 82,223
Total assets $7,555,198 $7,891,729
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short term bank borrowings $ 743,382 $ 618,890
Accounts payable 522,570 865,536
Accrued expenses 275,452 328,119
Current maturities on long-term debt 228,134 210,733
Total current liabilities 1,769,538 2,023,278
Long-term debt:
Deferred tax liability 184,000 184,000
Long term-debt, less current
maturities 2,408,583 2,437,293
Total long term liabilities 2,592,583 2,621,293
Total liabilities 4,362,121 4,644,571
Stockholders' equity:
Common Stock 1,186,192 1,186,192
Retained earnings 2,017,695 2,071,776
3,203,887 3,257,968
Less treasury stock at cost 10,810 10,810
Total stockholders' equity 3,193,077 3,247,158
Total liabilities and
stockholder's equity $7,555,198 $7,891,729
THE COEUR D ALENES COMPANY
UNAUDITED CONSOLIDATED INCOME STATEMENT
Three Months Ended December 25, 2000 and December 25, 1999
2000 1999
Net sales $3,208,755 2,899,112
Costs of sales 2,443,090 2,145,119
Gross profit 765,665 753,993
Selling, general and
administrative expenses 794,570 775,786
Operating income (loss) (28,905) (21,793)
Other income (expense)
Interest income 9,651 8,360
Interest expense (66,798) (65,050)
Other income 208 625
Net other expense (56,939) (56,065)
Loss before income tax expense (85,844) (77,858)
Income tax benefit (31,762) (28,808)
Net loss $ (54,082) $ (49,050)
Loss per share (basic and diluted) ( 0.01) $ ( 0.01)
Weighted average shares
outstanding 5,342,164 5,344,628
THE COEUR D ALENES COMPANY
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months Ended December 25, 2000 and December 25, 1999
Increase (Decrease) in Cash and Cash Equivalents
2000 1999
Cash flows from operating activities:
Net loss $(54,082) $(49,050)
Adjustments to reconcile net income
to cash (used in) provided by
operating activities:
Depreciation 68,790 55,440
Changes in assets and
liabilities
Accounts and notes receivable 23,398 26,655
Inventories 184,638 197,596
Other current assets ( 53,879) ( 10,021)
Other assets 40,320 20,720
Accounts payable (342,966) 18,843
Accrued expenses ( 52,667) ( 60,407)
Net Cash (used in) provided by
operating activities (186,448) (199,776)
Cash flows from investing activities:
Additions to property and
equipment ( 38,584) ( 47,312)
Net cash flows used in investing
activities ( 38,584) ( 47,312)
Cash flows from financing activities:
Purchase of treasury stock ( 620)
Net borrowing (payments) under
line of credit 124,492 4,683
Borrowings of long-term debt 27,274
Principal repayment of long-term
debt (38,582) (167,815)
Cash provided (used) by financing
activities 113,184 (163,752)
Net decrease in cash and cash
equivalents (111,848) 11,288)
Cash and cash equivalents, beginning
of period 115,532 32,422
Cash and cash equivalents,
end of period $ 3,684 $21,134
THE COEUR D ALENES COMPANY
CONDENSED NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies.
Significant accounting policies followed for the three months ended
December 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 30, 2000 and September 25, 1999.
(2) Inventories.
Inventories are summarized as follows:
Unaudited Audited
December 25, September 30,
2000 2000
Fabrication inventories:
Raw materials $ 21,921 $ 26,574
Work-in-progress 555,788 579,622
Inventories at FIFO cost 577,709 606,196
LIFO reserve <29,155> <29,155>
Inventories at LIFO cost 548,554 577,041
Distribution inventories at FIFO 1,947,358 2,103,509
Total inventories $2,495,912 $2,680,550
(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 December 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 to shareholders with holdings of
one hundred or fewer shares beginning in January 1999 and which has been
extended through February 28, 2001. The offer resulted in 3,255 shares being
repurchased as treasury stock during the fiscal year ended September 30, 2000
with a total cost to the Company of $1,750. The purpose of the tender offer
is 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.
(5) Federal Income Tax Expense
As of December 25, 2000 and September 30, 2000, the Company has a
deferred long term tax liability of $184,000 resulting primarily from the use
of accelerated methods of depreciation of fixed assets and a deferred tax
asset of $65,000 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.
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 December 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
smaller scale. The operation has been open since November 1999. Required
inventories are expected to be in the $50,000 to $75,000 range during the
next twelve month period.
The replacement cost of metal inventories is once again on the decline. In
the wake of the current energy crisis and higher interest rates, demand for
the Company's products has declined within its' market area. As a result,
inventories are likely to be smaller both in dollars and in tons over the
next few months. The demand for fabricated metal products has remained
strong over the last year and is expected to continue at approximately the
same level over the next two to three months. Over the longer term, if the
local economy remains sluggish, the fabrication business is also likely to
decline.
The Company currently has no plans for any major capital asset additions
or replacements for the remainder of the fiscal year. Therefore, it is
unlikely the Company will need to acquire any new long-term debt.
During the first three months of the current fiscal year, cash flows of
$186,000 were used by operations, compared to cash flows of $200,000 provided
by operations during the same three month period of the prior fiscal year.
Cash flows from operations during the current fiscal year were impacted
primarily by an operating loss of $54,000 adjusted by depreciation of
$69,000, a decrease in inventories of $185,000 and a decrease in accounts
payable of $343,000. Cash flows provided by operations for the same period
of the prior fiscal year primarily consisted of a net loss of $49,000,
adjusted by depreciation of $55,000, a decrease of $198,000 in inventories
and an increase of $60,000 in accrued expenses. Cash flows used in investing
activities for the first three months of the current and prior fiscal years
of $39,000 and $47,000 respectively were used to finance the purchase of new
equipment. Cash flows provided by financing activities for the current
fiscal year consisted of borrowings of $124,000 under the operating line of
credit and $27,000 in new long-term borrowings, offset by $39,000 payments
on existing long-term debt. During the first three months of the prior
fiscal year, cash flows used by financing activities of $164,000 were
primarily used to make principal payments on long-term debt. The resulting
decrease in cash of $112,000 during the first three months of the current
fiscal year compares to an $11,000 decrease in cash for the same period of
the prior fiscal year.
During the first three months of the current fiscal year, the Company's
working capital decreased by 1% from approximately $2,065,000 at the end of the
prior fiscal year to approximately $2,052,000 as of December 25, 2000.
The Company continues to be dependent on an operating line of credit to
meet its daily financial obligations. The operating line of credit of
$1,900,000 which is currently in place through February 16, 2001 is
considered by management to be adequate. Management expects to be able to
renew the line of credit for another year with substantially the same terms
and conditions that are currently in place.
Results of Operations
Three Months Ended December 25, 2000 compared to Three Months
Ended December 25, 1999.
Sales of approximately $3,209,000 for the three month period ended
December 25, 2000 are 10% higher than approximately $2,899,000 for the same
period of the prior fiscal year. Gross profits, however, increased by only 2%
from approximately $754,000 during the first quarter of the prior fiscal
year to approximately $766,000 for the first three months of the current
fiscal year. The steel service center sales of approximately $2,382,000
represented 74% of the total Company's sales for the first three months of
the current fiscal year, compared to sales of approximately $2,425,000 which
represented 87% of the consolidated Company's sales for the same three month
period of the prior fiscal year, a 2% decline. The steel service center's
gross profits for the first quarter of the current and prior fiscal years of
$523,000 and $590,000 respectively declined by 11%.
The declines are due to a sluggish local economy resulting in diminished
demand. The fabrication business, contributing 26% and 13% of the total
sales for the first quarter of fiscal 2001 and 2000 respectively, experienced
a 74% increase to a sales volume of approximately $827,000 from approximately
$474,000. The same comparison on gross profits shows an improvement of 46%
from approximately $152,000 to $222,000. Second quarter fabrication sales
are again expected to be strong. However, bidding activity has definitely
slowed down and is expected to have an affect on sales.
Selling, general and administrative expenses at approximately $795,000 for
the quarter ended December 25, 2000 are roughly $17,000 higher than
approximately $776,000 for the same period of the prior fiscal year. The
change is primarily the result of increased fixed costs associated with new
equipment purchases during the prior year.
Interest expense at approximately $67,000 for the three month period
ended December 25, 2000 is 3% higher than approximately $65,000 for the three
month period ended December 25, 1999. The slight increase is the result of
increased levels of borrowing to support equipment purchases.
Higher sales volume was offset by gross margin that were lower by 2
percentage points. This in combination with higher operating costs resulted
in a net loss after tax for the first quarter of the current year of $54,000
compared to a net loss after tax of $49,000 for the same period last year.
PART II. OTHER INFORMATION.
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
The Company is continuing to conduct a tender offer on odd lot shares
under an extention that will expire on February 28, 2001. As a result of the
offer, the Company purchased 3,255 shares at a total cost of $1,750 during
the fiscal year ended September 30, 2000.
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: February 2, 2001
/s/ Marilyn A. Schroeder
Marilyn A. Schroeder, 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.
Dated: February 2, 2001
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