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 JUNE 25, 1997. 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.
5,353,561 shares of common stock, no par value, were outstanding as of June 30,
1997.
PART I. FINANCIAL INFORMATION.
Item 1. Financial Statements.
The condensed financial statements of The Coeur d'Alenes Company (sometimes
referred to herein as the "Company") included herein have been prepared by the
Company without audit or review by the Company's accountants pursuant to the
rules and regulations of the Securities and Exchange Commission. In the opinion
of management, all adjustments necessary to a fair statement of the results of
operations for the interim periods ended June 25, 1997 and June 25, 1996 have
been made. The results of operations for the interim periods are not
necessarily indicative of the results to be expected for the full fiscal year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations, although
the Company believes that the disclosures are adequate to make the information
presented not misleading. These condensed financial statements should be read in
conjunction with the financial statements and the notes thereto included in The
Coeur d'Alenes Company's latest audited financial statements for the fiscal year
ended September 28, 1996.
Index of Financial Statements
Page
Consolidated Balance Sheets -
June 25, 1997 and September 28, 1996 3
Unaudited Consolidated Income Statements -
Nine Months Ended June 25, 1997 and June 25, 1996 4
Unaudited Consolidated Income Statements -
Three Months Ended June 25, 1997 and June 25, 1996 5
Unaudited Consolidated Statement of Cash Flows -
Nine Months Ended June 25, 1997 and June 25, 1996 6
Condensed Notes to Unaudited Consolidated Financial Statement 7
THE COEUR D ALENES COMPANY
CONSOLIDATED BALANCE SHEET
June 25, 1997 and September 28, 1996
June 25, 1997 September 28, 1996
ASSETS (Unaudited)
(Audited)
Current Assets:
Cash $ 11,981 $ 68,645
Accounts receivable 1,125,403 1,181,599
Inventory 2,570,594 2,788,654
Other current assets 100,591 70,450
Total current assets 3,808,569 4,109,348
Property and Equipment 4,795,054 5,332,622
Less accumulated depreciation 1,632,908 2,235,079
Net property and equipment 3,162,146 3,097,543
Other assets 59,493 50,732
Total assets $7,030,208 $7,257,623
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short term bank borrowings $ 868,725 $ 863,477
Accounts payable 831,875 1,046,662
Accrued expenses 249,961 486,478
Current amount on long-term debt 87,901 75,821
Total current liabilities 2,038,462 2,472,438
Long-term debt:
Deferred tax liability 63,007 44,403
Long term debt less current maturities 2,238,922 2,031,406
Long term debt to related parties 128,000 128,000
Total long term liabilities 2,429,929 2,203,809
Total liabilities 4,468,391 4,676,247
Stockholders' Equity:
Capital Stock 1,186,192 1,186,192
Retained earnings 1,379,425 1,398,984
2,565,617 2,585,176
Less Treasury Stock at cost 3,800 3,800
Total stockholders' equity 2,561,817 2,581,376
Total liabilities and stockholder's equity $7,030,208 $7,257,623
THE COEUR D ALENES COMPANY
UNAUDITED CONSOLIDATED INCOME STATEMENT
Nine Months Ended June 25, 1997 and June 25, 1996
1997 1996
Net sales $9,293,019 $9,344,985
Costs of sales 6,904,820 6,834,153
Gross profit on sales 2,388,199 2,510,832
Selling, general and administrative expenses 2,287,321 2,169,520
Operating income 100,878 341,312
Other income (expense)
Interest income 20,433 17,267
Interest expense (237,846) (150,935)
Other income 85,487 66,251
Total other expense (131,926) (67,417)
Income (loss) before income tax expense (31,048) 273,895
Income tax expense (benefit) (11,488) 101,341
Net income (loss) $ (19,560) $172,554
Earnings (loss) per share $(0.00) $0.03
Shares outstanding 5,353,561 5,353,561
THE COEUR D'ALENES COMPANY
UNAUDITED CONSOLIDATED INCOME STATEMENT
Three Months Ended June 25, 1997 and June 25, 1996
1997 1996
Net sales $3,239,065 $3,449,797
Costs of sales 2,431,820 2,532,614
Gross profit on sales 807,245 917,183
Selling, general and administrative expenses 698,687 677,182
Operating income 108,558 240,001
Other income (expense)
Interest income 7,625 5,119
Interest expense (79,278) (59,173)
Other income 37,611 36,070
Total other expense (34,042) (17,984)
Income before income tax expense 74,516 222,017
Income tax expense 27,571 82,146
Net income $ 46,945 $ 139,871
Earnings per share $ 0.01 $ 0.03
Shares outstanding 5,353,561 5,353,561
THE COEUR D'ALENES COMPANY
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
Nine Months Ended June 25, 1997 and June 25, 1996
1997 1996
Cash flows from operating activities:
Net income (loss) $ (19,560) $ 172,554
Adjustments to reconcile net income
to cash provided (used) by operating activities:
Depreciation 164,884 112,575
Gain on disposal of assets (35,723) ( 3,057)
Changes in assets and liabilities
Accounts and notes receivable 56,196 (81,769)
Inventories 218,060 (20,037)
Prepaid expense (30,141) 3,495
Other Assets ( 8,761) 31,557
Accounts payable (214,787) 714,401
Accrued expenses (217,912) (166,804)
Cash provided (used) by operating activities( 87,744) 762,915
Cash flows from investing activities:
Proceeds from sale of assets 98,860 8,000
Additions to property and equipment (292,624) (1,048,338)
Cash flows used by investing activities (193,764) (1,040,338)
Cash flows from financing activities:
Contribution of shares to treasury (0) (4)
Net borrowing (repayment)
under line of credit 5,248 ( 219,293)
Principal repayment of long-term debt (42,404) ( 64,159)
New long term note 262,000 146,900
Advance on construction loan 0 1,308,871
Pay off real estate loan (H. Stack) 0 ( 845,914)
Cash provided by financing activities 224,844 326,401
Net increase (decrease) in cash (56,664) 48,978
Cash, beginning of period 68,645 128,085
Cash, end of period $ 11,981 $ 177,063
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,
1997 are the same as those contained in the Summary of Significant Accounting
Policies from the Company's audited financial statements as of September 28,
1996 and September 30, 1995.
(2) Inventories.
Inventories are summarized as follows:
June 25, September 28,
1997 1996
Raw materials on LIFO $ 129,070 $ 147,528
Work-in-process 299,998 550,462
Inventories at FIFO cost 429,068 697,990
LIFO reserve (56,712) (56,711)
Inventories at LIFO cost 372,356 641,279
Other FIFO inventories 2,198,238 2,147,375
Total inventories 2,570,594 2,788,654
(3) Short-term bank borrowings.
The Company has $1,850,000 in bank credit lines which mature on April 1,
1998. Interest is charged at the lender's prime rate plus .325%, 8.57% at June
25, 1997. 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 $2,000,000.
(4) Capital Stock
On October 31, 1995, the holders of $122,000 worth of convertible
debentures converted into 976,000 shares of capital stock at a conversion price
of $.125 per share. The conversion increased capital stock outstanding from
4,377,577 shares to 5,353,561 shares.
(5) Federal Income Tax Expense
As of March 25, 1997 and September 28, 1996, the Company has a deferred
long term tax liability of $63,007 and $44,403 resulting primarily from the use
of accelerated methods of depreciation of fixed assets and a deferred tax asset
of $70,450 and $70,450 resulting from vacation accrual and bad debt allowance.
No valuation allowance is recorded since the Company believes it is more likely
than not that it will realize the deferred tax asset.
There were no extraordinary items to be reported for any of the above
accounting periods.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Liquidity and Capital Resources
During the first nine months of the current fiscal year, the Company's
working capital has declined from approximately $1,637,000 at the end of the
prior fiscal year to approximately $1,770,000 as of June 25, 1997. The 8%
improvement is due primarily to the proceeds from the sale of surplus equipment
being applied to current liabilities along with a $200,000 decrease in
inventories. The smaller inventory is the result of fewer fabrication jobs in
process.
During the month of November 1996, the Company converted a construction
loan to a permanent loan with a 20 year amortization and a ten year balloon
payment. The interest rate is adjustable semi-annually at LIBOR Index plus
2.75%. At June 25, 1997 the rate was 8.375%.
The Company has placed an order for a new 1/2"x12' Cincinnati Shear which
should arrive before the end of the fiscal year. The cost will be approximately
$185,000. It is also likely that the Company will purchase a document imaging
system to replace the current manual filing system. The cost is estimated to be
approximately $30,000. A bank has committed funds up to $250,000 to help
finance these acquisitions with the interest rate at 1/2% over prime.
The Company is dependent on an operating line of credit, secured by
accounts receivable and inventory to meet its daily financial obligations. A
$1.85 million operating line is currently in place through April 1, 1998. The
Company expects to be able to renew the operating line of credit for the next
year on substantially the same terms and conditions as this year.
Results of Operations
Nine Months Ended June 25, 1997
Sales of approximately $9,293,000 for the nine month period ended June 25,
1997 are 1/2% lower than approximately $9,345,000 for the same nine month period
of the prior fiscal year. Gross margins, however, declined by 5% from
approximately $2,511,000 for the first nine months of last year to approximately
$2,388,000 during the same nine month period of the current fiscal year. The
steel service center business accounts for approximately 82% of the total
Company sales and for the nine month period ended June 25, 1997 posted a 10%
sales growth over the nine month period ended June 25, 1996. Gross margins for
the steel service center at 22.8% for the first nine months of the current
fiscal year compare to 23.1% for the same period of time in the last fiscal
year. The fabrication and processing business accounts for the remaining 18% of
the total net sales and experienced a 31% decline in sales volume for the nine
month period ended June 25, 1997 over the same nine month period of the prior
fiscal year. The gross margins at 34.3% of sales are averaging the same as the
first nine months of the prior fiscal year. The sales volume decrease is
attributable to a significant capital budget reduction in the operations of a
major customer. A comparison of net sales for the first nine months of the
prior fiscal year shows the steel service center business contributing 74% of
total sales and the fabrication and processing business accounting for the
remaining 26%.
Operating expenses at approximately $2,287,000 for the nine month period
ended June 25, 1997 were 5% higher than approximately $2,170,000 for the nine
month period ended June 25,1996. Severe weather conditions, equipment repairs
necessary as a result of moving seasoned equipment, higher wage rates and a
sttlement bonus paid to shop employees all contributed to the increased expense
load.
Interest expense, at approximately $238,000 for the nine month period ended
June 25, 1997 is 58% higher than approximately $151,000 for the nine month
period ended June 25, 1996. The increase is the result of replacing a leased
facility formerly occupied by the fabrication and processing business with a
newly constructed facility paid for with a 25% down payment by the Company and
75% borrowed funds. Long term debt increased from approximately $2,204,000 as
of June 1996 to approximately $2,430,000 as of June 25, 1997. Most of the funds
used to build the new facility for operations were borrowed during the third
fiscal quarter of 1996.
With the burden of the increased expense load, the first nine months of the
current fiscal year resulted in an after tax net loss of $19,560 compared to a
net profit of $172,554 for the first nine months of the prior fiscal year.
Three Months Ended June 25, 1997
Sales of approximately $3,239,000 for the three month period ended June 25,
1997 were approximately 6% below the $3,450,000 for the same period of the prior
fiscal year. The steel service center business which contributed 87% of the
total sales for the three month perioded June 25, 1997, increased revenues by 9%
over the three month period ended June 25, 1996. The fabrication and processing
business, accounting for only 13% of third quarter sales in the current fiscal
year, experienced a sales decline of 49% during the third quarter of the current
year compared to the third quarter of the prior fiscal year. The decline is the
result of capital budget cuts by a major customer
Gross margins for the three month period ended June 25, 1997, at 24.9% of
sales dropped by over one and one half percentage points from 26.6% for the
same period of the prior fiscal year. The decrease is due to the sales blend
between service center and fabrication being more heavily weighted towards
service center sales which command a lower gross margin than fabrication sales.
The combination of lower sales volume and lower gross margin percent resulted in
gross margin dollars for the third quarter of the current fiscal year
approximately $110,000 lower than the same period of the prior fiscal year.
Operating expenses, at approximately $699,000 for the three month period
ended June 25, 1996 are 3% higher than the same three month period of the prior
fiscal year. The increase is due primarily to increased occupancy costs, more
repairs to equipment and higher labor costs.
Interest expense for the third quarter is approximately 34% higher than the
same period for the prior year. The increase is the result of the debt to
construct a new facility for the fabrication and processing business, along with
expansion of the office building at 3900 E. Broadway.
Lower sales volume, lower gross margins as a percent of sales and higher
expense resulted in a net income for the three months ended June 25, 1997 in the
amount of $46,945. The comparative net income for the same three month period
of the prior year was $139,871.
PART II. OTHER INFORMATION.
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
The Company had sold $250,000 of convertible debentures, collateralized
by land and building, held by related parties, with annual interest at 9.25%
and due October 31, 1998. The instruments are convertible to no-par common
stock after October 31, 1994 at $0.125 per share with 20% per year incremental
conversion price increases over the life of the debentures. The Company, at
its option, may call any or all outstanding debentures for redemption after
January 2, 1994.
During October 1996, $122,000 of the debentures were converted at $0.125
per share for which 976,000 shares were issued. $128,000 remains as long-term
debt. This conversion increased the number of outstanding shares from
4,377,577 to 5,353,577.
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: August 6, 1997
/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: August 6, 1997
_________________________________
Marilyn A. Schroeder, Treasurer and
Chief Financial Officer
(Authorized Officer and
Principal
Accounting and Financial
Officer)