UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
ENDED JUNE 25, 2001.
[ ] TRANSITION REPORT UNDER 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)
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.
5,340,804 shares of common stock, no par value, were outstanding as of
July 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 nine month period ended June 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 June 25, 2001 (unaudited) and
September 30, 2000 (audited)
Unaudited Consolidated Income Statements for the
Nine Months Ended June 25, 2001 and June 25, 2000
Unaudited Consolidated Income Statements for the
Three Months Ended June 25, 2001 and June 25, 2000
Unaudited Consolidated Statements of Cash Flows for the
Nine Months Ended June 25, 2001 and June 25, 2000
Condensed Notes to Unaudited Consolidated Financial Statements
THE COEUR D'ALENES COMPANY
CONSOLIDATED BALANCE SHEETS
June 25, 2001 and September 25, 2000
June 25, September 30
2001 2000
(Unaudited) (Audited)
ASSETS
Current assets:
Cash and cash equivalents $ 267,328 $ 115,532
Accounts and notes receivable 922,066 1,226,837
Inventories 2,136,686 2,680,550
Other current assets 98,378 65,000
Total current assets 3,424,458 4,087,919
Property and equipment 5,702,403 5,630,525
Less accumulated depreciation 2,127,308 1,908,938
Property and equipment, net 3,575,095 3,721,587
Other assets 41,904 82,223
Total assets $7,041,457 $7,891,729
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short term bank borrowings $ 0 $ 618,890
Accounts payable 914,535 865,536
Accrued expenses 255,327 328,119
Current maturities on long-term debt 255,947 210,733
Total current liabilities 1,425,809 2,023,278
Long-term debt:
Deferred tax liability 184,000 184,000
Long-term debt less current maturities 2,283,210 2,437,293
Total long-term liabilities 2,467,210 2,621,293
Total liabilities 3,893,019 4,644,571
Stockholders' equity:
Capital stock 1,186,192 1,186,192
Retained earnings 1,973,776 2,071,776
3,159,968 3,257,968
Less treasury stock at cost 11,530 10,810
Total stockholders' equity 3,148,438 3,247,158
Total liabilities and stockholders' equity $7,041,457 $7,891,729
THE COEUR DALENES COMPANY
UNAUDITED CONSOLIDATED INCOME STATEMENTS
Nine months Ended June 25, 2001 and June 25, 2000
2001 2000
Net sales $9,483,782 $9,093,214
Cost of sales 7,155,763 6,726,788
Gross profit on sales 2,328,019 2,366,426
Selling, general and administrative expenses 2,349,700 2,238,325
Operating income (loss) (21,681) 128,101
Other income (expense)
Interest income 23,713 25,186
Interest expense ( 197,129) ( 179,699)
Other income 44,576 29,199
Total other expense, net ( 128,840) ( 125,314)
Income (loss) before income tax expense
(benefit) ( 150,521) 2,787
Income tax expense (benefit) ( 52,521) 1,031
Net income loss $ ( 98,000) $ 1,756
Earnings (loss) per share (basic and diluted) $ ( 0.02) $ 0.00
Weighted average shares outstanding 5,341,927 5,344,497
THE COEUR D'ALENES COMPANY
UNAUDITED CONSOLIDATED INCOME STATEMENTS
Three Months Ended June 25, 2001 and June 25, 2000
2001 2000
Net sales $3,161,234 $3,202,189
Cost of sales 2,448,539 2,395,880
Gross profit on sales 712,695 806,309
Selling, general and administrative expenses 716,929 734,359
Operating income (loss) (4,234) 71,950
Other income (expense)
Interest income 7,499 9,313
Interest expense ( 58,828) ( 62,571)
Other income 44,238 27,812
Total other expense, net ( 7,091) ( 25,446)
Income (loss) before income tax expense
(benefit) ( 11,325) 46,504
Income tax expense (benefit) ( 1,018) 17,207
Net income (loss) $ ( 10,307) $ 29,297
Earnings (loss) per share (basic and diluted) $ ( 0.00) $ 0.00
Weighted average shares outstanding 5,341,321 5,344,233
THE COEUR D'ALENES COMPANY
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended June 25, 2001and June 25, 2000
2001 2000
Cash flows from operating activities:
Net loss $( 98,000) $ 1,756
Adjustments to reconcile net loss
to net cash provided by operating activities:
Depreciation 218,370 179,735
Gain on disposal of assets - (271)
Changes in assets and liabilities:
Accounts and notes receivable 304,771 (120,048)
Inventories 543,864 (211,264)
Prepaid expense and other
current assets ( 33,378) ( 1,521)
Other assets 40,319 23,828
Accounts payable 48,999 274,781
Accrued expenses ( 72,792) 20,035
Net cash provided by operating activities 952,153 167,031
Cash flows from investing activities:
Proceeds from sale of assets - 3,200
Additions to property and equipment ( 71,878) (264,037)
Cash used in investing activities ( 71,878) (260,837)
Cash flows from financing activities:
Net borrowings (repayment) under line of credit ( 618,890) 257,417
Borrowings of long-term debt 36,043 102,257
Principal repayment of debentures - (28,000)
Principal repayment of long-term debt ( 144,912) (121,604)
Treasury shares repurchased ( 720) ( 620)
Net cash provided by (used in) financing activities (728,479) 109,450
Net increase in cash and cash equivalents 151,796 15,644
Cash and cash equivalents, beginning of period 115,532 32,422
Cash and cash equivalents, end of period $ 267,328 $ 48,066
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, 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:
June 25, September 30,
2001 2000
(Unaudited) (Audited)
Fabrication inventories:
Raw materials $ 5,574 $ 26,574
Work-in-progress 341,893 579,622
Inventories, at FIFO cost 347,467 606,196
LIFO reserve ( 29,155) ( 29,155)
Inventories, at LIFO cost 318,312 577,041
Distribution inventories, at FIFO 1,818,374 2,103,509
Total inventories 2,136,686 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 ( 7% as of June 25,
2001). Outstanding borrowings (zero at June 25, 2001) 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 which expired on
May 31, 2001. The offer resulted in 1,360 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 June 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 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, 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 continues to be 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 continue to have smaller inventory
requirements in the near future. Since business has slowed down in response
to the aluminum industry shutdown, the fabrication inventories are down 48%
since September 2000.
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. The
Company had an option to continue to participate in the project, but has
decided against making any additional investment.
During the first nine months of the current fiscal year, cash flows of
$952,000 were provided by operations, compared to cash flows of $167,000
provided by operations during the same nine 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 $98,000 adjusted by depreciation of
$218,000, a decrease in accounts receivable of $305,000, a decrease in
inventories of $544,000, a decrease in accrued expenses of $73,000 and an
increase in accounts payable of $49,000. Cash flows provided by operations
for the same period of the prior fiscal year primarily consisted of a net
income of $2,000, adjusted by depreciation 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 used in investing
activities for the first nine months of the current and prior fiscal years of
$72,000 and $261,000 respectively were used to finance the purchase of new
equipment. Cash flows used by financing activities for the current fiscal
year consisted of $619,000 for repayment under the operating line of credit,
$36,000 additional long-term borrowings and $145,000 principal repayments on
existing long-term debt. During the first nine months of the prior fiscal
year, cash flows of $109,000 provided by financing activities were primarily
generated by net borrowings of $257,000 on the operating line of credit,
new long term borrowings of $103,000, partially offset by required principal
payments on long term debt of $122,000 and principal payments made to the
holders of $128,000 in debentures.
During the first nine months of the current fiscal year, the Company's working
capital decreased by 3% from approximately $2,065,000 to approximately
$1,999,000 as of June 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.
Results of Operations
Nine Months Ended June 25, 2001 Compared to Nine Months Ended June
25, 2000
Sales of approximately $9,484,000 for the nine month period ended June 25,
2001 are 4% higher than approximately $9,093,000 for the same period of the
prior fiscal year. Gross profits decreased by 2% from approximately
$2,366,000 during the first nine months of the prior fiscal year compared to
approximately $2,328,000 for the first nine months of the current fiscal year.
The steel service center sales of approximately $7,717,000 are 1% lower than
sales of approximately $7,774,000 for the first nine months of the prior
fiscal year and represent 81% of the current period's total sales. During
the first nine 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 per ton on 2% higher volume of tons sold over the first
nine months of the prior year. The fabrication business, contributing 19%
and 15% of the total sales for the first nine months of the current and prior
fiscal years respectively, experienced a 34% increase in sales volume from
approximately $1,319,000 to approximately $1,767,000 for the current year.
Demand for fabricated metal products was strong during the first six months
of the current year but slowed considerably during the third quarter as a
result of the idling of the aluminum smelters. 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 sales volume has been provided either
directly or indirectly from the aluminum industry. Energy policies that
prohibit the aluminum industry from acquiring adequate electricity at
reasonable rates has had, and will continue to have, a detrimental impact on
the steel fabrication and 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 $2,350,000 for the nine month period
ended June 25, 2001 are roughly $111,000 or 5% higher than approximately
$2,238,000 for the same period of the prior fiscal year. The increase is the
higher cost of fringe benefits and repairs on equipment.
Interest expense, at approximately $197,000 for the nine month period ended
June 25, 2001 is 10% higher than approximately $180,000 for the same period of
the prior fiscal year. The increase is the result of equipment additions
financed with borrowed funds. The impact of the higher debt load has been
partially offset by lower interest rates.
The higher sales volume was accompanied by a higher cost of material relative
to the inventory replacement costs dictating the ultimate market price during
most of the first three quarters of the current fiscal year. A net loss of
approximately $98,000 for the first nine months of the current year compares
to a net income of approximately $2,000 for the same period of the prior year.
Three Months Ended June 25, 2001 Compared to Three Months Ended June
25, 2000
Sales of approximately $3,161,000 for the third quarter of the current fiscal
year are 1% lower than approximately $3,202,000 for the third quarter of the
prior fiscal year. The steel service center business, which contributed 87%
and 85% 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 third
quarter of the prior fiscal year. The decline from approximately $2,773,000
for the second quarter of last year to approximately $2,748,000 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 4% decrease in sales volume
represents 13% of the third quarter combined sales for the current fiscal year
compared to 15% for the third quarter of the prior year. Sales volume of
approximately $413,000 for the quarter ended June 25, 2001 compares to
approximately $429,000 for the same quarter of the prior fiscal year.
The sales decrease reflects the weaker demand experienced during the third
quarter of the current year, following the idling of aluminum plants in our
market area. This is expected to continue during the final quarter of the
year.
Gross profit for the three month period ended June 25, 2001, at 23% of sales
compares to 25% of sales 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 $713,000 lag the same period of the prior fiscal year
by approximately $94,000. The erosion in gross profit dollars is attributed
to lower sales volume accompanied by lower gross margins in the fabrication
business.
Operating expenses at approximately $717,000 for the three month period ended
June 25, 2001 are 2% lower than approximately $734,000 for the same period of
the prior fiscal year. The decrease is primarily the result of a reduced
labor force in response to lower demand.
Interest expense for the quarter ended June 25, 2001 at approximately $59,000
is 6% lower than the same quarter of the prior fiscal year. The decrease is
attributable to lower interest rates.
Lower sales volume accompanied by lower gross margin percents resulted in a
net loss of approximately $10,000 for the third quarter of the current fiscal
year compared to a net income of approximately $29,000 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 currently conducting a new tender offer to holders of
200 and fewer shares which will expire on October 31, 2001. The purpose
of the new tender offer is to buy out odd lot shareholders of stock with
diminimus value. During the current fiscal year the Company has
repurchased 1,360 shares for treasury at a total cost of $720
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
Exhibits.
None.
(a) 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 3, 2001
/s/ Marilyn A. Schroeder
Marilyn A. Schroeder, Treasurer
and Chief Financial Officer
(Authorized Officer and Principal
Accounting and Financial Officer)
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