UNITED STATES 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 MARCH 25, 2001.
[ ] 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
Identification No.) 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)
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.
5,341,580 shares of common stock, no par value, were outstanding as of
April 25, 2001.
Transitional Small Business Disclosure Format (Check One) Yes[ ] No[X]
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 30, 2000. The
comparative consolidated balance sheet and related disclosures at September
30, 2000 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 six month period ended March 25, 2001 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 revisions of those estimates.
Condensed Consolidated Financial Statements
Consolidated Balance Sheets at March 25, 2001 (unaudited) and
September 30, 2000 (audited)
Unaudited Consolidated Income Statements for the
Six Months Ended March 25, 2001 and March 25, 2000
Unaudited Consolidated Income Statements for the
Three Months Ended March 25, 2001 and March 25, 2000
Unaudited Consolidated Statements of Cash Flows for the
Six Months Ended March 25, 2001 and March 25, 2000
Condensed Notes to Unaudited Consolidated Financial Statements
THE COEUR D'ALENES COMPANY
CONSOLIDATED BALANCE SHEETS
March 25, 2001 and September 25, 2000
March 25, September 30
2001 2000
(Unaudited) (Audited)
ASSETS
Current assets:
Cash and cash equivalents $ 81,015 $ 115,532
Accounts and notes receivable 1,027,997 1,226,837
Inventories 2,467,392 2,680,550
Other current assets 107,879 65,000
Total current assets 3,684,283 4,087,919
Property and equipment 5,703,175 5,630,525
Less accumulated depreciation 2,052,518 1,908,938
Net property and equipment 3,650,657 3,721,587
Other assets 41,904 82,223
Total assets $7,376,844 $7,891,729
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short term bank borrowings $ 273,364 $ 618,890
Accounts payable 940,034 865,536
Accrued expenses 220,193 328,119
Current maturities on
long-term debt 234,697 210,733
Total current liabilities 1,668,288 2,023,278
Long-term debt:
Deferred tax liability 184,000 184,000
Long-term debt less current
maturities 2,365,411 2,437,293
Total long-term liabilities 2,549,411 2,621,293
Total liabilities 4,217,699 4,644,571
Stockholders' equity:
Capital stock 1,186,192 1,186,192
Retained earnings 1,984,083 2,071,776
3,170,275 3,257,968
Less treasury stock at cost 11,130 10,810
Total stockholders' equity 3,159,145 3,247,158
Total liabilities and stockholders'
equity $7,376,844 $7,891,729
THE COEUR DALENES COMPANY
UNAUDITED CONSOLIDATED INCOME STATEMENTS
Six months Ended March 25, 2001 and March 25, 2000
2001 2000
Net sales $6,322,548 $5,891,024
Cost of sales 4,707,224 4,330,908
Gross profit on sales 1,615,324 1,560,116
Selling, general and administrative
expenses 1,632,771 1,503,967
Operating income (loss) (17,447) 56,149
Other income (expense)
Interest income 16,214 15,873
Interest expense ( 138,301) ( 117,128)
Other income 338 1,387
Total other expense, net ( 121,749) ( 99,868)
Loss before income tax benefit ( 139,196) ( 43,719)
Income tax benefit ( 51,503) ( 16,176)
Net loss ( 87,693) $( 27,543)
Loss per share (basic and diluted) $( 0.02) $( 0.01)
Weighted average shares outstanding 5,342,067 5,344,628
THE COEUR D'ALENES COMPANY
UNAUDITED CONSOLIDATED INCOME STATEMENTS
Three Months Ended March 25, 2001 and March 25, 2000
2001 2000
Net sales $3,113,793 $2,991,911
Cost of sales 2,264,134 2,185,788
Gross profit on sales 849,659 806,123
Selling, general and administrative
expenses 838,199 728,176
Operating income 11,460 77,947
Other income (expense)
Interest income 6,563 7,513
Interest expense ( 71,503) ( 52,078)
Other income 131 763
Total other expense, net ( 64,809) ( 43,802)
Income (loss) before income tax
expense (benefit) (53,349) 34,145
Income tax expense (benefit) (19,739) 12,634
Net income (loss) $ ( 33,610) $ 21,511
Earnings (loss) per share
(basic and diluted) $ ( 0.01) $ 0.00
Weighted average shares outstanding 5,341,969 5,344,628
THE COEUR D'ALENES COMPANY
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended March 25, 2001and March 25, 2000
2001 2000
Cash flows from operating
activities:
Net loss $( 87,693) $( 27,543)
Adjustments to reconcile net
loss to net cash provided by
operating activities:
Depreciation 143,580 116,370
Provision for doubtful accounts 12,000 3,000
Changes in assets and liabilities:
Accounts and notes receivable 186,840 129,266
Inventories 213,158 154,422
Prepaid expense and other
current assets ( 42,879) ( 40,681)
Other assets 40,319 20,721
Accounts payable 74,498 259,376
Accrued expenses ( 107,926) 738
Net cash provided by operating
activities 431,897 615,669
Cash flows from investing activities:
Additions to property and equipment( 72,650) ( 154,406)
Cash used in investing activities ( 72,650) ( 154,406)
Cash flows from financing activities:
Net repayment under line of credit ( 345,526) ( 275,911)
Borrowings of long-term debt 36,043 -
Principal repayment of debentures - ( 128,000)
Principal repayment of long-term
debt ( 83,961) ( 81,726)
Treasury shares repurchased ( 320) ( 620)
Net cash used in financing
activities ( 393,764) ( 486,257)
Net decrease in cash and cash
equivalents ( 34,517) ( 24,994)
Cash and cash equivalents, beginning
of period 115,532 32,422
Cash and cash equivalents, end of
period $ 81,015 $ 7,428
THE COEUR D'ALENES COMPANY
CONDENSED NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies.
Significant accounting policies followed for the six months ended March 25,
2001 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 as included in 10KSB filed on December 22, 2000.
(2) Inventories.
Inventories are summarized as follows:
March 25, September 30,
2001 2000
(Unaudited) (Audited)
Fabrication inventories:
Raw materials $ 11,702 $ 26,574
Work-in-progress 484,827 579,622
Inventories, at FIFO cost 496,529 606,196
LIFO reserve ( 29,155) ( 29,155)
Inventories, at LIFO cost 467,374 577,041
Distribution inventories, at FIFO 2,000,018 2,103,509
Total inventories 2,467,392 2,680,550
(3) Short-term bank borrowings.
The Company has $1,500,000 in bank credit lines which mature on February
16, 2002. Interest is charged at the lenders' prime rate ( 8% as of March
25, 2001). Outstanding borrowings totaling $273,364 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 each 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 May 31, 2001. The offer resulted in 584 shares being repurchased as
treasury stock during the current fiscal year. 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 by the
shareholder.
(5) Federal Income Tax Expense
As of March 25, 2001and September 30, 2000, the Company has a deferred long term
tax liability of $184,000 (unaudited) and $184,000 (audited) respectively
resulting primarily from the use of accelerated methods of depreciation of
fixed assets and a deferred tax asset of $65,000 (unaudited) and $65,000
(audited) 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.
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, 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 March 26, 2001.
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 distribution business in Spokane on a much 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 months.
The Company has the option to extend the lease for an additional five year
period with a 3% per year escalation in the required lease payment.
The replacement cost of metal inventories is still historically low. The
ongoing energy problems are having an adverse effect on demand within our
market area. Most of the higher priced metal in our inventory has been sold
and, with a few exceptions, our current values very closely parallel
replacement costs. The fabrication business likely will have smaller
inventory requirements in the near future, as business has slowed down in
response to the aluminum industry shutdown.
The Company currently has no plans for any major capital asset additions or
replacements for the remainder of the current fiscal year.
The Company maintains an investment in Road Renovator, LLC, a limited liability
corporation formed as a joint venture to manufacture and market a pot hole
patching machine. The prototype has been successfully completed. If
satisfactory manufacturing and sales agreements can be negotiated, The
Coeur d'Alenes Company has an option to make an investment of up to $150,000.
This investment will be made to fund a portion of the cost of the prototype
and provide working capital to operate the LLC until such time as the sales
and marketing efforts are successful. To protect its investment, The
Coeur d'Alenes Company may also have a contingent requirement to provide an
additional $165,000 over the next two years to allow the joint venture to
make payments on a finance lease taken out to fund the remainder of the cost
of the prototype. The sales and marketing plan anticipates sales of 4
units during the remainder of the year 2001. If these sales materialize, it
will not be necessary for The Coeur d'Alenes Company to invest any more
capital in the LLC during the current year.
During the first six months of the current fiscal year, cash flows of $432,000
were provided by operations, compared to cash flows of $616,000 provided by
operations during the same six month period of the prior fiscal year. Cash
flows from operations during the current fiscal year to date were impacted
primarily by a net loss of $87,000 adjusted by depreciation of $144,000, a
decrease in accounts receivable of $187,000, a decrease in inventories of
$213,000, a decrease in accrued expenses of $108,000 and an increase in
accounts payable of $74,000. Cash flows provided by operations for the same
period of the prior fiscal year primarily consisted of a net loss of $28,000,
adjusted by depreciation of $116,000, a decrease in accounts receivable and
inventories of $129,000 and $154,000 respectively and an increase in accounts
payable of $259,000. Cash flows used in investing activities for the first
six months of the current and prior fiscal years of $73,000 and $154,000
respectively were used to finance the purchase of new equipment. Cash flows
used by financing activities for the current fiscal year consisted of
$346,000 for repayment under the operating line of credit, $36,000 additional
long-term borrowings and $84,000 principal repayments on existing long-term
debt. During the first six months of the prior fiscal year, cash flows of
$486,000 used in financing activities were primarily used to pay down the
operating line of credit in the amount of $276,000, pay off the holders of
$128,000 of debentures and make required current payments of $82,000 of
long-term debt.
During the first six months of the current fiscal year, the Company's working
capital decreased by 2% from approximately $2,065,000 to approximately
$2,016,000 as of March 25, 2001.
The Company is dependent on an operating line of credit to meet its daily
financial obligations. The operating line of $1,500,000 which is currently
in place through February 16, 2002 is considered by management to be adequate
to cover all expected cash requirements, including the investment in Road
Renovator, LLC.
Results of Operations
Six Months Ended March 25, 2001 Compared to Six Months Ended March 25, 2000
Sales of approximately $6,323,000 for the six month period ended March 25, 2001
are 7% higher than approximately $5,891,000 for the same period of the prior
fiscal year. Gross profits increased by 4% from approximately $1,560,000
during the first six months of the prior fiscal year compared to
approximately $1,615,000 for the first six months of the current fiscal year.
The steel service center sales of approximately $4,923,000 are 1% lower than
sales of approximately $4,983,000 for the first six months of the prior
fiscal year and represent 78% of the current period's total sales. During
the first six months of the previous year the steel service center sales
represented 85% of the total Company sales. The decline is the result of a
lower sales price while the actual tons sold were 3% higher than the first
six months of the prior year. The fabrication business, contributing 22% and
15% of the total sales for the first six months of fiscal 2001 and 2000
respectively experienced a 52% increase in sales volume from approximately
$890,000 to approximately $1,354,000 for the current year. Demand for
fabricated metal products was very strong during the first half of the
current year, however, the opposite is likely to be true during the final
half of the current year as the effect of the aluminum company shut downs
begin to impact the overall market. The aluminum industry consumes large
quantities of products fabricated from heavy steel plate in the process of
producing aluminum. Forty percent of all the aluminum produced in the United
States is produced in the Northwest, which is the market served by our
Company. Approximately 25% of our current sales volume is provided either
directly or indirectly from the aluminum industry. Any energy policy that
prohibits the aluminum industry from acquiring adequate electricity at
reasonable rates will have a detrimental effect on the steel distribution
market in the Northwest. Currently, most of the aluminum producers are shut
down, selling their power and paying their employees not to work.
Operating expenses at approximately $1,633,000 for the six-month period ended
March 25, 2001 are roughly $129,000 or 9% higher than approximately
$1,504,000 for the same period of the prior fiscal year. The increase is
primarily the higher cost of fringe benefits and higher depreciation expense
resulting from the recent purchase of new equipment.
Interest expense at approximately $138,000 for the six-month period ended March
25, 2001 is 18% higher than approximately $117,000 for the same period of the
prior fiscal year. The increase is the result of equipment additions financed
with higher levels of borrowing.
Higher sales volume was offset by a higher cost of material relative to the
inventory replacement costs dictating the ultimate market price. A net loss
of approximately $88,000 for the first six months of the current year
compares to a net loss of approximately $28,000 for the same period of the
prior year.
Three Months Ended March 25, 2001 Compared to Three Months Ended March 25, 2000
Sales of approximately $3,114,000 for the second quarter of the current fiscal
year are 4% higher than approximately $2,992,000 for the second quarter of the
prior fiscal year. The steel service center business, which contributed 82%
and 86% of the total sales for the three month period ended March 25, 2001
and 2000 respectively, experienced a 1% decline in sales volume over the
second quarter of the prior fiscal year. The decline from approximately
$2,576,000 for the second quarter of last year to approximately $2,552,000
for the same period of time this year was largely the result of a lower sales
price per ton of steel. The fabrication business, with a 27% increase in
sales volume represents 18% of the second quarter combined sales for the
current fiscal year and only 14% for the prior year. Approximately $527,000
sales for the quarter ended March 25, 2001 compares to approximately $416,000
for the same quarter of the prior fiscal year. The sales increase reflects
the stronger demand experienced during the first half of the current fiscal
year. This is not expected to continue for the second half of the year.
Gross profit for the three month period ended March 25, 2001, at 27.3% of
sales, compares to 26.9% of sales for the same period of the prior fiscal
year. The resulting gross profit dollars for the second quarter of the
current fiscal year at approximately $850,000 exceed the same period of the
prior fiscal year by approximately $44,000. The improvement in gross profit
dollars is attributed to higher sales volume where as the increase in the
gross profit percent is the result of lower cost inventories.
Operating expenses at approximately $838,000 for the three-month period ended
March 25, 2001 are 15% higher than approximately $728,000 for the same period
of the prior fiscal year. The increase is primarily the result of slightly
more repairs and maintenance costs, higher depreciation and higher labor and
benefit costs.
Interest expense for the quarter ended March 25, 2001 at approximately $72,000
is 4% higher than the same quarter of the prior fiscal year. The increase is
attributable to higher levels of long-term debt.
Higher sales volume was offset by higher sales, general and administrative
expense, resulting in a net loss of approximately $34,000 for the second
quarter of the current fiscal year compared to a net income of approximately
$22,000 for the same quarter of the prior fiscal year.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities
The Company is continuing to conduct a tender offer under an extension which
will expire on May 31, 2001. During the current fiscal year the Company has
repurchased 584 shares for treasury at a total cost of $320. The purpose of
the tender offer is to buy out odd lot shareholders of stock with 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.
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: May 4, 2001
/s/ Marilyn A. Schroeder
Marilyn A. Schroeder, Treasurer and
Chief Financial Officer
(Authorized Officer and Principal
Accounting and Financial Officer)
12
12