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. (Amendment No. 1)
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM _________________ TO ________________.
Commission File Number 1-10676
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.
Amounts charged to customers as delivery income have been included in Sales.
Delivery costs have been included in cost of sales. Delivery costs included
in cost of sales for the first three months of the current year are $111,059
and $145,409 for the same period of the prior fiscal year.
(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