US 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
DECEMBER 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)
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.
5,335,530 shares of common stock, no par value, were outstanding
as of February 3, 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 29, 2001. The comparative
consolidated balance sheet and related disclosures at September 29, 2001
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, 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 revised estimates.
Condensed Consolidated Financial Statements
Consolidated Balance Sheets at December 25, 2001 (unaudited)
and September 29, 2001 (audited)
Unaudited Consolidated Statements of Operations for the Three
Months Ended December 25, 2001 and December 25, 2000
Unaudited Consolidated Statements of Cash Flows for the Three
Months Ended December 25, 2001 and December 25, 2000
Condensed Notes to Unaudited Consolidated Financial Statements
THE COEUR D ALENES COMPANY
CONSOLIDATED BALANCE SHEET
December 25, 2001 and September 29, 2001
December 25, 2001 September 29, 2001
ASSETS (Unaudited) (Audited)
Current assets:
Cash and cash equivalents $ 217,060 $ 168,928
Accounts and notes receivable 966,859 1,262,384
Inventories 1,599,043 1,739,273
Other current assets 112,695 104,629
Total current assets 2,895,657 3,275,214
Property and equipment 5,647,070 5,626,188
Less accumulated depreciation 2,223,241 2,164,441
Net property and equipment 3,423,829 3,461,747
Other assets 42,062 80,298
Total assets $6,361,548 $6,817,259
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable 569,951 691,040
Accrued expenses 260,541 323,542
Current maturities on long-term debt 248,729 268,916
Total current liabilities 1,079,221 1,283,498
Long-term debt:
Deferred tax liability 220,000 220,000
Long term-debt less current maturities 2,135,452 2,199,494
Total long term liabilities 2,355,452 2,419,494
Total liabilities 3,434,673 3,702,992
Stockholders' equity:
Common Stock 1,186,192 1,186,192
Retained earnings 1,754,473 1,939,605
2,940,665 3,125,797
Less treasury stock at cost 13,790 11,530
Total stockholders' equity 2,926,875 3,114,267
Total liabilities and
stockholder's equity $6,361,548 $6,817,259
THE COEUR D ALENES COMPANY
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended December 25, 2001 and December 25, 2000
2001 2000
Net sales $2,367,095 3,208,755
Costs of sales 1,814,408 2,443,090
Gross profit on sales 552,687 765,665
Selling, general and
administrative expenses 729,524 794,570
Operating income (loss) (176,837) (28,905)
Other income (expense)
Interest income 7,795 9,651
Interest expense (47,887) (66,798)
Other income 702 208
Net other expense (39,390) (56,939)
Loss before income tax expense (216,227) (85,844)
Income tax benefit (31,095) (31,762)
Net loss $(185,132) $ (54,082)
Loss per share (basic and diluted) ( 0.03) $ ( 0.01)
Weighted average shares outstanding 5,337,288 5,342,164
THE COEUR D'ALENES COMPANY
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months Ended December 25, 2001 and December 25, 2000
Increase (Decrease) in Cash and Cash Equivalents
2001 2000
Cash flows from operating activities:
Net loss $(185,132) $(54,082)
Adjustments to reconcile net income
to cash (used in) provided by operating activities:
Depreciation 58,800 68,790
Changes in assets and liabilities
Accounts and notes receivable 295,525 23,398
Inventories 140,230 184,638
Other current assets ( 8,066) ( 53,879)
Other assets 44,474 40,320
Accounts payable (121,089) (342,966)
Accrued expenses ( 63,000) ( 52,667)
Net Cash provided by (used in)
operating activities 161,742 (186,448)
Cash flows from investing activities:
Additions to property and equipment ( 27,121) ( 38,584)
Net cash used in investing activities ( 27,121) ( 38,584)
Cash flows from financing activities:
Treasury shares repurchased (2,260) 0
Net borrowing (under line of credit 0 124,492
Borrowings of long-term debt 0 27,274
Principal repayment of long-term debt (84,229) ( 38,582)
Net cash (used) provided in financing activities (86,489) 113,184
Net increase (decrease) in cash and
cash equivalents 48,132 (111,848)
Cash and cash equivalents, beginning of period 168,928 115,532
Cash and cash equivalents, end of period $ 217,060 $3,684
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, 2001 are the same as those contained in the Summary of
Significant Accounting Policies from the Company's audited financial
statements as of September 29, 2001 and September 30, 2000.
(2) Inventories.
Inventories are summarized as follows:
Unaudited Audited
December 25, September 29,
2001 2001
Fabrication inventories:
Raw materials $ 0 $ 5,095
Work-in-progress 20,676 62,302
Inventories at FIFO cost 20,676 67,397
LIFO reserve (1,531) (1,531)
Inventories at LIFO cost 19,145 65,866
Distribution inventories at FIFO 1,579,898 1,673,407
Total inventories $1,599,043 $1,739,273
(3) Short-term bank borrowings.
The Company has $1,500,000 in bank credit lines which will mature on
February 16, 2002. Interest is charged at the lenders' prime rate (4-3/4% as
of December 25, 2001). Outstanding borrowings are collateralized by accounts
receivable and inventories. There was no outstanding balance as of
December 25, 2001 or as of September 29, 2001.
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 tangible 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
two hundred or fewer shares beginning in June 2001 which expired on October 31,
2001. The offer resulted in 5,274 shares being repurchased as treasury stock
during the current fiscal year with a total cost to the Company of $2,260.
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.
(5) Federal Income Tax Expense
As of December 25, 2001 and September 29, 2001, the Company has a
deferred long term tax liability of $220,000 (unaudited) and $220,000
(audited) respectively resulting primarily from the use of accelerated methods
of depreciation of fixed assets and a deferred tax current asset of $44,000
(unaudited) and $44,000 (audited) respectively resulting from vacation accrual
and bad debt allowance. A valuation allowance on the Company's non current
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, 2001. In December, 2001, the Company signed
a one year lease on a 3,600 sq. ft. facility in Dalton Gardens, ID. At this
location, the Company intends to operate a metals convenience store similar
to the retail steel business in Spokane and Wenatchee. The operation opened
January 22, 2002. 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 beginning to show small
signs of improvement. In the wake of the energy crisis and the low price of
aluminum, demand for the Company's products has declined within its' market
area. As a result, inventories are currently smaller both in dollars and in
tons compared to prior years. As the cost of steel from the mill improves,
more dollars will be invested in inventories. Likewise, as business conditions
improve, inventories will increase. The demand for fabricated metal products
in our niche market has all but disappeared. In anticipation of an eventual
rebound in that segment of the market, the Company maintains a very small
investment in work in process. Effective January 28, 2002, the Company merged
Union Iron Works, Inc. of Spokane, dba Stock Steel back into The Coeur d'Alenes
Company and plans to operate in the future as only one business. The
fabrication process will be another service provided by the metals
distribution business. This restructuring will allow the Company as a whole
to be more efficient and reduce the number of internal transactions that
do not add value to the ultimate sale to the customer.
In an effort to offset the sales decline brought about by the erosion
of the customer base in the metals distribution business, the Company is
adding new products to the inventory mix. Aluminum is already in stock and
plans are in place to add stainless steel, copper and brass before the end of
the calendar year. These new product lines will increase the overall size of
our inventories by as much as $200,000.
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 $162,000 were provided by operations, compared to cash flows of $186,000
used 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 $185,000 adjusted by depreciation of $59,000,
a decrease in inventories of $140,000, a decrease in accounts receivable of
$296,000 and a decrease in accounts payable of $121,000. Cash flows used in
operations for the same period of the prior fiscal year primarily consisted
of a net loss of $54,000, adjusted by depreciation of $69,000, a decrease of
$185,000 in inventories and a decrease in accounts payable of $343,000.
Cash flows used in investing activities for the first three months of the
current and prior fiscal years of $27,000 and $39,000 respectively were used
to finance the purchase of new equipment. Cash flows used in financing
activities for the current fiscal year consisted primarily of principal
repayments of long term debt in the amount of $84,000. During the first
three months of the prior fiscal year, cash flows provided by financing
activities of $113,000 consisted of $124,000 borrowings under the operating
line of credit and $27,000 in new long-term borrowings, offset by $38,000
payments on existing long-term debt. The resulting increase in cash of
$48,000 during the first three months of the current fiscal year compares
to a $112,000 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 9% from approximately $1,992,000 at the end of the
prior fiscal year to approximately $1,816,000 as of December 25, 2001.
The Company continues to be dependent on an operating line of credit
to meet its daily financial obligations. The operating line of credit of
$1,500,000 which is currently in place through February 16, 2002 is considered
by management to be adequate. Management expects to be able to renew the line
of credit for another year with only minor revisions to the terms and
conditions that are currently in place.
Results of Operations
Three Months Ended December 25, 2001 compared to Three Months
Ended December 25, 2000.
Sales of approximately $2,367,000 for the three month period ended
December 25, 2001 are 26% lower than approximately $3,209,000 for the same
period of the prior fiscal year. Gross profits decreased by 28% from
approximately $766,000 during the first quarter of the prior fiscal year to
approximately $553,000 for the first three months of the current fiscal year.
The decrease was primarily the result of no appreciable fabrication business.
With the disappearance of most of the customer base for our fabrication niche
market, the fabrication service is no longer accounted for as a separate
business. 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 prior fiscal year with the fabrication business providing the other 26%
or approximately $827,000. Fabrication was only a very minor portion
of the total sales during the first quarter of the current year.
Selling, general and administrative expenses at approximately
$730,000 for the quarter ended December 25, 2001 are roughly $65,000 lower
than approximately $795,000 for the same period of the prior fiscal year.
The change is primarily the result of elimination of overhead expense
associated with the fabrication business along with other reductions in
personnel. All expenses are being analyzed with the objective of eliminating
discretionary expense and deferring expense that is not currently essential.
Interest expense at approximately $48,000 for the three month period
ended December 25, 2001 is 28% lower than approximately $67,000 for the three
month period ended December 25, 2000. The decrease is the result of lower
interest rates coupled with less dependence on the operating line of credit
resulting from decreased inventories and receivables.
Income tax benefit is estimated at 14% for the first three months
of the current fiscal year and at 37% for the same period of time during the
prior fiscal year.
A 26% lower sales volume in combination with an operating cost
reduction of only 8% resulted in a net loss after tax for the first quarter
of the current year of $185,000 compared to a net loss after tax of $54,000
for the same period last year.
PART II. OTHER INFORMATION.
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
The Company conducted a tender offer on odd lot shares that expired
on October 31, 2001. As a result of the offer, the Company purchased 5,274
shares at a total cost of $2,260 during the first quarter of the current
fiscal year. The Company is currently in the process of filing a preliminary
proxy statement for review by the Securities and Exchange Commission that
contains a proposal for a 1,000:1 reverse split followed immediately by a
1,000:1 forward split. Under the plan, Shareholders holding fewer than 1,000
shares will be cashed out. The proposal will be voted on by the shareholders
at the next annual meeting. The Company would benefit from a substantial cost
savings as a result of the reverse split. If the proposal passes, the total
number of shares to be cashed out and the total cost to the Company are
unknown because the offer includes shares held in depositories. The Company's
best estimate is that the 63,287 shares held by holders of record with fewer
than 1,000 shares will be cashed out at a cost to the Company of approximately
$16,000. The cost of the transaction not including the cash out of
shareholders is estimated at approximately $10,000.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
The Company intends to propose for a vote by the shareholders a
1,000:1 reverse stock split followed immediately by a 1,000:1 forward stock
split at the annual shareholders' meeting on April 15, 2002. All shareholders
of record holding 1,000 or fewer shares will be cashed out at a purchase price
of $0.25 per share. The details of the transaction have been included as
Proposal No. 3 in a preliminary proxy statement filed with the Securities
and Exchange Commission on February 6, 2002 and also in a Schedule 13E3 filed
on February 6, 2002. Both the preliminary proxy statement and the Schedule
13E3 are incorporated herein by reference.
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 6, 2002
/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.
THE COEUR D'ALENES COMPANY
(Registrant)
Dated: February 6, 2001
________________________________
Marilyn A. Schroeder, Treasurer and
Chief Financial Officer
(Authorized Officer and Principal
Accounting and Financial Officer)