UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
COMMISSION FILE NO. 1-2714
(Mark One)
(X) Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of
1934
For the quarterly period ended September 30, 1999 or
------------------
( ) Transition Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from _________ to ________
ATLAS CORPORATION
-----------------------------
(Exact name of small business issuer as specified
in its charter)
DELAWARE 13-5503312
------------------------------- ----------------
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
370 Seventeenth Street, Suite 3010, Denver, CO 80202
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(Address of principal executive offices)
(Zip Code)
303-629-2440
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(Issuer's telephone number)
Check whether the issuer (1) has 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
----- -----
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 X No
----- -----
As of November 10, 1999, 27,884,707 shares of Common Stock, par value $0.01 per
share, were issued and outstanding.
Transitional Small Business Disclosure Format (Check one):
Yes No X
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Page 1 of 13
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
--------------------
Atlas Corporation
Consolidated Balance Sheets
(in Thousands)
September 30, December 31,
1999 1998
- ------------------------------------------------------------------------------------------------------
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 464 $ 4
Accounts receivable - trade 1,286 892
Title X receivable (Note 4) -- 675
Accounts receivable - other 151 352
Asset held for sale -- 2,643
Inventories 758 914
Prepaid expenses and other current assets 109 13
------------------ ------------------
Total current assets 2,768 5,493
------------------ ------------------
Property, plant and equipment 59,262 59,205
Less: accumulated depreciation, amortization and impairment (47,499) (47,032)
------------------ ------------------
11,763 12,173
Restricted cash and securities (Note 4) 6,241 6,181
Title X receivable (Note 4) 14,232 14,109
Other assets 166 82
------------------ ------------------
$ 35,170 $ 38,038
================== ==================
LIABILITIES
Liabilities not subject to compromise:
Current liabilities:
Trade accounts payable $ 546 $ 980
Accrued liabilities 1,167 1,161
Short-term debt 3,485 3,233
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Total current liabilities 5,198 5,374
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Long-term debt -- 1,216
Other liabilities, long-term 452 3,512
------------------ ------------------
Total long-term liabilities 452 4,728
Liabilities subject to compromise (Notes 4 and 5) 33,717 30,089
------------------ ------------------
Total liabilities 39,367 40,191
------------------ ------------------
Commitments and contingencies (Note 4)
STOCKHOLDERS' DEFICIT
Common stock 279 275
Capital in excess of par value 93,797 93,788
Deficit (98,273) (96,216)
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Total stockholders' deficit (4,197) (2,153)
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$ 35,170 $ 38,038
================== ==================
See notes to consolidated financial statements.
Page 2 of 13
Atlas Corporation
Consolidated Statements of Operations
(In Thousands, Except Per Share Data, Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------------ ------------------------------------
1999 1998 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
Mining revenue $ 1,297 $ 1,394 $ 2,999 $ 3,493
Costs and expenses:
Production costs 1,178 1,257 2,883 3,061
Depreciation, depletion and amortization 272 275 834 702
Impairment of mineral property -- -- -- 34
Shutdown and standby costs 92 108 270 271
General and administrative expenses 169 291 610 943
Geological and land holding costs 36 18 86 60
--------------- --------------- --------------- ---------------
Gross operating loss (450) (555) (1,684) (1,582)
Other (income) and expense:
Interest expense 88 144 252 440
Interest income (10) (84) (113) (238)
Gain from joint venture agreement -- (188) -- (563)
Loss on asset held for sale -- 563 -- 1,037
Other (27) (15) (64) (119)
--------------- --------------- --------------- ---------------
Loss from continuing operations before
reorganization items and income taxes (501) (975) (1,759) (2,139)
Reorganization items:
Legal fees (88) (43) (283) (43)
Other (6) -- (15) --
--------------- --------------- --------------- ---------------
Loss before income taxes (595) (1,018) (2,057) (2,182)
Provision for income taxes -- -- -- --
--------------- --------------- --------------- ---------------
Net loss $ (595) $(1,018) $(2,057) $(2,182)
=============== =============== =============== ===============
Basic and diluted earnings per share of common stock:
Net loss $ (0.02) $ (0.04) $ (0.07) $ (0.08)
=============== =============== =============== ===============
Average number of common
shares outstanding 27,659 27,512 27,589 27,406
=============== =============== =============== ===============
See notes to consolidated financial statements
Page 3 of 13
Atlas Corporation
Consolidated Statements of Cash Flows
(In Thousands, Unaudited)
Nine Months Ended
September 30,
------------------------------------------
1999 1998
- -----------------------------------------------------------------------------------------------------------
Operating activities:
Net loss $(2,057) $(2,182)
Add (deduct) non-cash items:
Depreciation, depletion, amortization 834 741
Gain on joint venture agreement -- (563)
Loss on asset held for sale -- 1,037
Other -- 34
Net change in non-cash items
related to operations (Note 3) 16 (542)
----------------- ------------------
Cash used in continuing operations (1,207) (1,497)
----------------- ------------------
From discontinued operations:
Change in estimated uranium reclamation costs 162 563
----------------- ------------------
Cash used in operating activities before reorganization (1,045) (934)
items
----------------- ------------------
Investing activities:
Additions to property, plant and equipment (494) (379)
Proceeds from sale of equipment 70 1,674
Additions to restricted cash (250) --
Investment in asset held for sale -- (512)
Proceeds from sale of asset held for sale 2,643 --
----------------- ------------------
Cash provided by investing activities 1,969 783
----------------- ------------------
Financing activities:
Net repayment of short-term debt (1,005) (295)
Borrowings on short-term debt 541 250
----------------- ------------------
Cash used in financing activities (464) (45)
----------------- ------------------
Increase (decrease) in cash and cash equivalents 460 (196)
Cash and cash equivalents:
Beginning of period 4 583
----------------- ------------------
End of period $ 464 $ 387
================= ==================
See notes to consolidated financial statements.
Page 4 of 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item
310(b) of Regulation S-B. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. There has not been any change
in the significant accounting policies of Atlas Corporation and its
subsidiaries (the "Company") for the periods presented.
In the opinion of Management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
The results for these interim periods are not necessarily indicative of
results for the entire year. These statements should be read in conjunction
with the consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1998.
2. On September 22, 1998, Atlas Corporation ("Atlas") filed a petition for
relief under Chapter 11 of the federal bankruptcy laws in the United States
Bankruptcy Court for the District of Colorado. Under Chapter 11, certain
claims against Atlas in existence prior to the filing of the petition for
relief under the federal bankruptcy laws are stayed while Atlas continues
business operations as debtor-in-possession. These claims are reflected in
the September 30, 1999 and December 31, 1998 balance sheets as "Liabilities
subject to compromise." Additional claims (Liabilities subject to compromise)
may arise subsequent to the filing date resulting from rejection of executory
contracts, including leases, and from the determination by the Court (or
agreed to by parties in interest) of allowed claims for contingencies and
other disputed amounts. Claims secured against Atlas' assets also are stayed,
although the holders of such claims have the right to move the Court for
relief from stay. Secured claims are secured primarily by restricted cash of
the Company and by performance bonds issued by insurance companies.
Two of the Company's subsidiaries, Atlas Precious Metals Inc. ("APMI") and
Atlas Gold Mining Inc. ("AGMI"), also filed for relief under Chapter 11 on
January 26, 1999. Accordingly, liabilities associated with these subsidiaries
have also been classified as Liabilities subject to compromise in the
September 30, 1999 balance sheet.
The Company's other subsidiaries, Arisur Inc. ("Arisur") and Suramco Metals,
Inc. ("Suramco") have not filed for protection under Chapter 11 and there is
no intention to do so. Accordingly, liabilities associated with these
subsidiaries are included in "Liabilities not subject to compromise" along
with secured and post-petition liabilities of the Company.
Page 5 of 13
3. The components of the net change in items other than cash related to
operating activities as reflected in the Consolidated Statements of Cash
Flows are as follows:
Nine Months Ended
September 30,
-------------------------------------------
1999 1998
- --------------------------------------------------------------------------------------------------------
Add (deduct) items other than cash:
Accounts receivable $(193) $ 195
Inventories 156 10
Prepaid expenses and other current assets (96) (43)
Restricted cash 190 --
Other assets (84) 77
Trade accounts payable (194) (37)
Accrued liabilities 233 (130)
Other liabilities, long-term 4 (614)
------------------ -----------------
$ 16 $(542)
================== =================
4. The Company was obligated to decommission and reclaim its uranium millsite
(the "Millsite") located near Moab, Utah, which was permanently shut down in
1987 and estimated shutdown expenses and reclamation costs were accrued.
Title X of The Comprehensive National Energy Policy Act ("Title X"), enacted
in October 1992, provides for the reimbursement of past and future
reclamation expenses related to uranium sites operated under Atomic Energy
Commission contracts. The Company's uranium reclamation costs are subsidized
by this government cost sharing program since 56% of its tailings were
generated under government contracts. The total estimated reclamation
liability ($20,720,000) and current and future Title X receivables
($14,232,000) are shown separately in the accompanying consolidated balance
sheets leaving a net liability to the Company of $6,488,000 as of September
30, 1999.
On April 28, 1999, the Company, along with the U.S. Nuclear Regulatory
Commission ("NRC"), the State of Utah, ACSTAR (surety provider for Atlas)
and others, executed the Moab Utah Millsite Transfer Agreement ("MUMTA"),
which absolved the Company from all future liability with respect to the
Millsite. The agreement, approved by the Bankruptcy Court on June 22, 1999,
was reached to avoid lengthy and expensive litigation over the future of the
Millsite. As consideration for this release, Atlas has agreed to contribute
certain Millsite related assets to a Reclamation Trust to be controlled by
the government. The assets include the remaining Title X receivable as of
May 1, 1999, all future Title X receivables, Atlas' water rights and land at
the Millsite and $5,250,000 of restricted cash. Elimination of the liability
should coincide with confirmation of Atlas' plan of reorganization, but not
later than December 31, 1999.
Upon completion of MUMTA, management estimates that the Company will
recognize a gain from the transaction of approximately $1.2 million.
Page 6 of 13
5. Liabilities subject to compromise consisted of the following at September
30, 1999 and December 31, 1998:
(in thousands) September 30, 1999 December 31, 1998
-------------------- ---------------------
Accounts payable $ 1,724 $ 1,486
Accrued liabilities 1,717 1,671
Convertible debenture 3,500 3,500
Estimated uranium reclamation costs 20,720 /1/ 21,110 /1/
Mine reclamation accruals 3,264 /2/ -- /2/
Other liabilities 2,792 2,322
-------------------- ---------------------
$33,717 $30,089
==================== =====================
/1/ See Note 4 above.
/2/ Fully secured by reclamation bonds of $3.264 million, which is in turn
secured by approximately $1 million of restricted cash.
Page 7 of 13
Item 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
"SAFE HARBOR" STATEMENT UNDER THE UNITED STATES PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995.
Statements which are not historical facts contained in this Form 10-QSB are
forward looking statements that involve risks and uncertainties that could
cause actual results to differ from projected results. Factors that could
cause actual results to differ materially include, among others: general
economic conditions, metal and mineral prices, political events in foreign
countries, the risks associated with foreign operations generally, the timing
of receipt of necessary governmental permits, climatic conditions, labor
relations, availability and cost of material and equipment, the actual
configuration of ore bodies, delays in anticipated start-up dates,
environmental risks, the results of financing efforts and other risk factors
detailed in the Company's Form 10-K and 8-K filed with the Securities and
Exchange Commission.
RECENT EVENTS
On September 22, 1998, Atlas filed a petition for relief under Chapter 11 of
the federal bankruptcy laws in the United States Bankruptcy Court for the
District of Colorado. On January 26, 1999, APMI and AGMI also filed petitions
for relief under Chapter 11. Under Chapter 11, certain claims against Atlas
in existence prior to the filing of the petition are stayed while Atlas
continues business operations as debtor-in-possession. Additional claims may
arise subsequent to the filing date resulting from rejection of executory
contracts, including leases, and from the determination by the court (or
agreed to by parties in interest) of allowed claims for contingencies and
other disputed amounts. Claims secured against Atlas' assets also are stayed,
although the holders of such claims have the right to move the Court for
relief from stay. Secured claims are secured primarily by restricted cash of
the Company and by performance bonds issued by insurance companies.
Atlas does not intend to seek protection under any applicable bankruptcy laws
for Arisur Inc., its wholly owned subsidiary.
As discussed in footnote 4 to the Consolidated Financial Statements, the
Company has reached an agreement with the NRC, the State of Utah, ACSTAR and
others that absolves it from all future liability with respect to the
Millsite. As consideration for this release, Atlas has agreed to contribute
certain Millsite related assets to a Reclamation Trust to be controlled by the
government. Elimination of this liability should coincide with confirmation
of Atlas' plan of reorganization, but not later than December 31, 1999.
On May 9, 1999, Arisur defaulted on a loan payment of $478,000 due under its
loan agreement with Corporacion Andina de Fomento ("CAF"). Subsequently, by
letter dated July 28, 1999 and revised on October 26, 1999, CAF has agreed to
restructure the remaining balance of the debt under the condition that the
Company, by June 30, 2000, can demonstrate that it has a minimum of four years
of proven reserves at a production rate of 400 tonnes per day at the Andacaba
mine. In the event that the above condition is met, CAF would be willing to
restructure the existing debt over a 4 year period, which would include a
principal grace period of 18 months.
Page 8 of 13
In August 1999, the Company reached an agreement with Vengold, Inc.
("Vengold") giving Vengold the option to acquire 100% of 603 unpatented lode
claims and 6 patented lode claims at the Gold Bar property. Vengold is
obligated under the agreement to incur $200,000 in exploration costs on the
property by December 31, 2001. The Company will retain a 2% net smelter
royalty interest in the property if the option is exercised. Of the remaining
mining claims at Gold Bar, the Company has retained 53 unpatented claims as
well as the remaining patented land at the Gold Bar site for its own use. The
remaining claims on the Gold Bar property, comprising approximately 80% of the
entire claim block, were dropped on August 31, 1999 in order to avoid paying
the annual holding fees on the claims of approximately $260,000.
The Company continues to focus on implementation of its plan of reorganization
of the Company. The primary focus of the plan is a release from any future
liability associated with the Millsite (see above) and to expand production at
its Andacaba Mine in order to increase operating cash flows (see above). The
Company is also pursuing claims for recovery of costs incurred at Moab from
the commercial general liability policies that it had during the years of
operation at the Millsite. Additionally, the Company is seeking to divest of
its Gold Bar and Grassy Mountain properties and other non-core assets to
generate additional cash for operations, and as partial satisfaction of its
pre-petition liabilities.
On September 27, 1999, the Company mailed to the creditors and shareholders
("Parties in Interest") of the Company a proposed plan of reorganization (the
"Plan") and disclosure statement which, amongst other things, incorporated the
elements described above. The Parties in Interest had until October 22, 1999
to submit their vote to either accept or reject the Plan as proposed.
Concurrent with this process, the Company was negotiating with the Pension
Benefit Guaranty Corporation ("PBGC") to terminate its defined benefit pension
plan and for the PBGC to assume control of the pension plan. Since the
aforementioned negotiations were not yet complete at October 22, 1999, the
PBGC voted to reject the plan. As a substantial creditor of the Company, the
PBGC's vote is sufficient to block acceptance of the Plan. Subsequently, the
Company has entered into an agreement with the PBGC to terminate the pension
plan and to change the PBGC's vote to accept the Plan. The agreement is
subject to court approval, which is anticipated to coincide with the hearing
on confirmation of the Plan scheduled for December 1, 1999. The Company
anticipates that with this acceptance, the Plan will be confirmed by the
Bankruptcy Court at the hearing on December 1, 1999 and the Company will be
out of bankruptcy by January 2000.
There is no guarantee that the Company will be successful in completing the
reorganization process. Management believes that successful completion of the
aforementioned goals is necessary for the Company to avoid a Chapter 7
liquidation of all of the assets of the Company.
CAPITAL RESOURCE REQUIREMENTS
Bolivian operations
The Company has developed an operating plan to expand its Andacaba mine to a
production level of 400 tonnes per day. This is expected to return the head
grades to
Page 9 of 13
historical levels. The Company also continues to evaluate the feasibility of
the start-up of its Comali mill, which would require from $200,000 to $300,000
in capital improvements.
The Company anticipates that funding for the expansion will be financed
through a combination of internally generated funds and deferral of current
loan payments.
Liquidity
As of September 30, 1999, the Company's working capital deficit was
$2,430,000, which compares to positive working capital of $119,000 as of
December 31, 1998. The Company's current ratio at September 30, 1999 was .53
to 1, compared to 1.02 to 1 at December 31, 1998. The decrease during the
period is a result of the operating loss during the period, the
reclassification of the CAF loan to short-term debt due to the default noted
above, and capital expenditures of $494,000 during the nine months ended
September 30, 1999.
The proceeds from the sale of Cornerstone have given the Company sufficient
cash to fund its immediate operating needs. Longer-term capital requirements
will be satisfied from future operating cash flows, from the sale of Company
assets such as the Gold Bar and Grassy Mountain properties, recoveries of
insurance claims for costs incurred at Moab, and placement of additional
equity or debt as necessary.
Results of operations
The following is a summary of operating statistics at the Andacaba Mill for
the three months and nine months ended September 30, 1999 and 1998:
Three Months ended September Nine Months ended September
30, 30,
-------------------------------- -------------------------------
1999 1998 1999 1998
-------------- ------------- ------------- -------------
Tonnes milled 32,252 30,347 92,622 85,436
Tonnes of lead concentrate produced 488 658 1,387 1,722
Tonnes of lead concentrate sold 612 790 1,665 1,842
Grade of lead concentrate produced:
Lead 63.25% 64.46% 63.66% 64.84%
Silver (ounces per tonne) 107.59 136.32 120.99 137.64
Tonnes of zinc concentrate produced 3,153 3,258 9,245 8,766
Tonnes of zinc concentrate sold 3,895 3,627 8,422 8,540
Grade of zinc concentrate produced:
Zinc 46.52% 46.64% 45.69% 46.42%
Silver (ounces per tonne) 19.29 21.98 22.56 24.32
Average price received:
Lead (per tonne) $ 491 $ 570 $ 570 $ 556
Zinc (per tonne) $ 950 $ 1,044 $ 1,044 $ 1,070
Silver (per ounce) $ 5.01 $ 5.77 $ 5.77 $ 5.82
Page 10 of 13
During the nine months ended September 30, 1999, the Company had mining
revenue of $2,999,000 compared to $3,493,000 in the same period of 1998.
Average prices received were significantly lower in 1999 than 1998 (see
above). This fact, combined with the lower tonnes of zinc and lead concentrate
sold in 1999 resulted in the lower revenue for the period. During the quarter
ended September 30, 1999 mining revenues were $1,297,000 compared to
$1,394,000 for the same period in 1998. Higher tonnes of zinc concentrate sold
during the period was offset by lower sales of lead concentrate. The
significantly lower prices in 1999 were the primary reason for the decrease in
revenue for the period.
Cash production costs during the nine months ended September 30, 1999 were
$2,883,000, or $286 per tonne of concentrate sold. This compares to
$3,061,000, or $295 per tonne of concentrate sold for the same period in 1998.
For the quarter ended September 30, 1999, cash production costs were
$1,178,000, or $261 per tonne of concentrate sold compared to $1,257,000, or
$285 per tonne sold in the same period in 1998. The lower per tonne costs are
a result of operating cost reductions and efficiencies implemented at the end
of 1998 and early 1999.
Shutdown and standby costs at Gold Bar were $92,000 and $270,000 during the
three and nine month periods ended September 30, 1999 compared to $108,000 and
$271,000 for the comparable periods in 1998. The Company has continued to
reduce costs at the site resulting in the modest decrease for the three months
ended September 30, 1999 compared to the same period in 1998.
Geological costs for the three and nine-month periods ending September 30,
1999 were $36,000 and $86,000 compared to $18,000 and $60,000 for the
comparable periods in 1998. In 1998, certain costs were charged to Barrick,
resulting in higher costs for 1999.
General and administrative expenses for the three and nine months ended
September 30, 1999 were $169,000 and $610,000 compared to $291,000 and
$943,000 for the comparable periods in 1998. The Company has continued its
efforts to reduce such expenses. Legal fees were reduced from $240,000 for
the nine-month period in 1998 to $38,000 in 1999 as several legal actions have
been resolved or settled. As a result of staff reductions at the Company's
headquarters, salaries and benefits have been reduced over this same period
from $264,000 to $227,000. Accounting and auditing fees were also reduced in
this time frame from $53,000 in 1998 to $36,000 in 1999. Similar reductions
in legal fees, accounting fees and salaries account for the lower amounts in
the third quarter of these respective periods.
Interest expense incurred during the three and nine month periods ended
September 30, 1999 was $88,000 and $252,000 compared to $144,000 and $440,000
for the same periods ended September 30, 1998. Interest accruals on all
outstanding loans of Atlas and APMI have ceased as a result of filing for
Chapter 11, resulting in the decrease.
During the nine months ended September 30, 1999 and 1998, the Company incurred
$494,000 and $379,000 in capital expenditures, respectively, substantially all
of which related to the mining operation in Bolivia. These costs were
primarily for mine development expenditures at the mine.
Page 11 of 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
None
Item 2. Changes in Securities
---------------------
None
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
--------------------------------
a. Exhibits
10.1 Revised second amended joint disclosure statement of Atlas
Corporation, Atlas Gold Mining Inc. and Atlas Precious Metals
Inc.
10.2 Atlas Corporation's second amended plan of reorganization
10.3 Atlas Precious Metals Inc.'s second amended plan of
reorganization
10.4 Atlas Gold Mining Inc.'s second amended plan of
reorganization
b. Reports on Form 8-K
None
Page 12 of 13
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.
ATLAS CORPORATION
-----------------
(Registrant)
By: /s/ James R. Jensen
-----------------------------------
James R. Jensen
Chief Financial Officer
Date: November 12, 1999 /s/ James R. Jensen
-----------------------------------
James R. Jensen
Chief Financial Officer
(Principal Financial Officer
& Chief Accounting Officer)
Page 13 of 13