1
SECURITIES AND EXCHANGE
Washington, D. C.
-----------------
FORM 10-Q
(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 30, 1994
OR
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: 1-8641
------
COEUR D'ALENE MINES CORPORATION
(Exact name of registrant as specified on its charter)
IDAHO 82-0109423
- - ------------------------------ ---------------------------
(State or other jurisdiction of (I.R.S. Employer Ident.No.)
incorporation or organization)
P. O. Box I, Coeur d'Alene, Idaho 83816-0316
- - --------------------------------- ----------
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (208) 667-3511
- - -------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 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 CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of Issuer's classes of common stock, as of the latest
practicable date: Common stock, par value $1.00, of which 15,420,652 shares
were issued and outstanding as of August 5, 1994.
2
COEUR D'ALENE MINES CORPORATION
INDEX
Page No.
--------
PART I. Financial Information:
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets -- 3-4
June 30, 1994 and December 31, 1993
Consolidated Statements of Operations -- 5-6
Three Months Ended June 30, 1994 and 1993
Six Months Ended June 30, 1994 and 1993
Consolidated Statements of Cash Flows -- 7
Six Months Ended June 30, 1994 and 1993
Notes to Consolidated Financial Statements 8-10
Item 2. Management's Discussion and Analysis of 11-17
Financial Condition and Results of Operations
PART II. Other Information.
Item 4. Submission of Matters to a Vote of Security-Holders 17
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES
3
UNAUDITED
COEUR D'ALENE MINES CORPORATION
(An Idaho Corporation)
Coeur d'Alene, Idaho
CONSOLIDATED BALANCE SHEETS
ASSETS June 30, December 31,
1994 1993
------------- -------------
CURRENT ASSETS
Cash and cash equivalents $ 12,756,093 $ 14,678,097
Short-term investments 147,097,672 70,221,106
Receivables 9,018,808 7,757,910
Refundable income taxes 3,197,645 1,924,065
Inventories 35,144,972 34,670,469
------------- -------------
Total Current Assets 207,215,190 129,251,647
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment 84,753,563 81,007,505
Less accumulated depreciation 38,667,548 35,310,111
------------- -------------
46,086,015 45,697,394
MINING PROPERTIES
Operational mining properties 93,690,354 90,120,998
Less accumulated depletion 36,079,818 33,125,461
------------- -------------
57,610,536 56,995,537
Developmental properties 88,971,270 83,536,738
------------- -------------
146,581,806 140,532,275
OTHER ASSETS
Funds held in escrow 2,270,695 2,270,695
Notes receivable 158,559 355,069
Debt issuance costs, net of
accumulated amortization 8,610,458 4,708,372
Marketable equity securities 2,476,764 2,422,416
Other 1,667,916 470,469
------------- -------------
15,184,392 10,227,021
------------- -------------
$415,067,403 $325,708,337
============= =============
-3-
4
UNAUDITED
COEUR D'ALENE MINES CORPORATION
(An Idaho Corporation)
Coeur d'Alene, Idaho
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDER'S EQUITY June 30, December 31,
1994 1993
------------- -------------
CURRENT LIABILITIES
Accounts payable $ 1,401,109 $ 1,946,273
Accrued liabilities 4,321,670 5,265,232
Accrued interest payable 3,238,180 2,008,851
Accrued salaries and wages 3,409,271 2,898,486
Accrued litigation settlement 5,875,000 5,875,000
Accrued environmental settlement 1,230,000 1,230,000
Reserve for mine closure 274,629 494,800
Current portion of obligations
under capital leases 1,969,147 1,899,771
------------- -------------
Total Current Liabilities 21,719,006 21,618,413
OTHER LIABILITIES
6% Convertible Subordinated
Debentures 50,000,000 50,000,000
7% Convertible Subordinated
Debentures 75,000,000 75,000,000
6 3/8% Convertible Subordinated
Debentures 100,000,000
Obligations under capital leases 3,231,684 4,233,913
Other long-term liabilities 4,735,357 2,325,764
Deferred income taxes 1,429,034 1,681,542
------------- -------------
Total Long-Term Liabilities 234,396,075 133,241,219
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred Stock, $1.00 par value
per share-authorized 10,000,000
shares, none outstanding
Common Stock, $1.00 par value per
share--authorized 60,000,000
shares, issued and outstanding
16,413,080 and 16,394,302 shares
(including 1,058,453 held as
treasury stock) 16,413,080 16,394,302
Capital surplus 179,101,154 181,038,631
Accumulated deficit (17,033,040) (13,100,942)
Repurchased and nonvested shares (13,415,134) (13,483,286)
Unrealized losses on short-
term investment securities (6,113,738)
------------- -------------
158,952,322 170,848,705
------------- -------------
$415,067,403 $325,708,337
============= =============
-4-
5
UNAUDITED
COEUR D'ALENE MINES CORPORATION
(An Idaho Corporation)
Coeur d'Alene, Idaho
CONSOLIDATED STATEMENTS OF OPERATIONS
3 MONTHS ENDED 6 MONTHS ENDED
JUNE 30 JUNE 30
--------------------------------- ----------------------------------
1994 1993 1994 1993
------------- ------------ ------------ ------------
INCOME
From mine operations:
Sales of concentrates
and dore' $ 19,463,913 $16,135,488 $ 39,673,495 $25,796,006
Less cost of mine
operations 16,788,680 14,554,849 34,318,840 23,709,315
------------- ------------ ------------- -------------
Gross profits 2,675,233 1,580,639 5,354,655 2,086,691
From manufacturing
operations:
Sale of industrial
products 2,827,223 2,528,391 5,513,139 4,848,735
Less cost of
manufacturing 2,510,887 2,245,117 5,020,450 4,340,528
------------- ------------ ------------- -------------
Gross profits 316,336 283,274 492,689 508,207
Interest and other income 3,032,618 1,436,636 4,618,840 2,718,229
------------- ------------ ------------- -------------
Total income 6,024,187 3,300,549 10,466,184 5,313,127
EXPENSES
Administration 950,362 822,108 2,541,071 1,798,169
Accounting and legal 434,985 778,648 855,925 1,362,262
General corporate 1,379,807 1,327,451 2,746,913 2,268,393
Mining exploration 1,215,186 387,519 1,951,510 888,791
Idle facilities 415,400 706,721 827,744 1,349,060
Interest 2,935,536 1,271,185 5,440,118 2,757,132
------------- ------------ ------------- -------------
Total expenses 7,331,276 5,293,632 14,363,281 10,423,807
------------- ------------ ------------- -------------
LOSS BEFORE TAXES AND
CUMULATIVE EFFECT OF
A CHANGE IN ACCOUNTING (1,307,089) (1,993,083) (3,897,097) (5,110,680)
Provision (Benefit) for
income taxes 27,710 (985,946) 35,001 (2,122,860)
------------- ------------ ------------- -------------
LOSS BEFORE CUMULATIVE
EFFECT OF CHANGE IN
ACCOUNTING (1,334,799) (1,007,137) (3,932,098) (2,987,820)
Cumulative effect of
change in accounting
method 5,181,188
------------- ------------ ------------- ------------
NET INCOME (LOSS) $ (1,334,799) $(1,007,137) $ (3,932,098) $ 2,193,368
============= ============ ============= ============
-5-
6
UNAUDITED
COEUR D'ALENE MINES CORPORATION
(An Idaho Corporation)
Coeur d'Alene, Idaho
CONSOLIDATED STATEMENTS OF OPERATIONS
3 MONTHS ENDED 6 MONTHS ENDED
JUNE 30 JUNE 30
----------------------------------- ----------------------------------
1994 1993 1994 1993
------------ ------------ ------------ ------------
EARNINGS PER SHARE DATA
Weighted average number
of shares of Common
Stock outstanding 15,354,627 15,335,478 15,346,742 15,322,963
============ ============ ============ ============
Loss per share
before cumulative
effect of change in
accounting method $ (0.09) $ (0.07) $ (0.26) $ (0.20)
Cumulative effect of
change in accounting $ .34
------------ ------------ ----------- ------------
INCOME(LOSS) PER SHARE $ (0.09) $ (0.07) $ (0.26) $ 0.14
============ ============ ============ ============
Cash dividends per share $ 0.15 $ 0.15
============ ============
See notes to consolidated financial statements.
-6-
7
UNAUDITED
COEUR D'ALENE MINES CORPORATION
(An Idaho Corporation)
Coeur d'Alene, Idaho
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 30, 1994 and 1993
CASH FLOWS FROM OPERATING ACTIVITIES 1994 1993
-------------- --------------
Net income (loss) $ (3,932,098) $ 2,193,368
Add (less) noncash items:
Depreciation, depletion and
amortization 8,943,583 4,597,141
Cumulative adjustment FAS 109 (5,181,188)
Deferred income taxes (252,508) (2,168,250)
Deferred stripping costs (591,712)
Loss on disposition
of fixed assets 128,153 167,954
(Gain) on foreign currency hedging (1,193,959)
Loss on sale of short-term
investments 575,245
Change in operating assets and
liabilities:
Accounts receivable (1,340,519) (1,710,036)
Inventories (599,711) (4,601,407)
Accounts payable and
accrued liabilities (652,617) 4,955,855
Interest payable 1,229,329 (1,571,867)
-------------- --------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 2,313,186 (3,318,430)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant, and equipment (3,257,526) (32,338,451)
Purchase of short-term investments (102,093,404) (51,026,366)
Proceeds from sale of short-term securities 17,560,691
Proceeds from sale of assets 253,784 454,173
Expenditures on operational
mining properties (3,772,100) (15,397,994)
Expenditures on developmental properties (5,434,533) (13,051,613)
Additions to funds held in escrow
Proceeds from other assets 96,404 85,549
-------------- --------------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (96,646,684) (111,274,702)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from offering of 6 3/8%
Convertible Subordinated Debentures 95,647,541
Retirement of obligations under capital
leases (932,853) (873,679)
Payment of cash dividends (2,303,194) (2,297,520)
-------------- --------------
NET CASH USED IN FINANCING ACTIVITIES 92,411,494 (3,171,199)
-------------- --------------
DECREASE IN CASH AND
CASH EQUIVALENTS (1,922,004) (117,764,331)
Cash and cash equivalents at beginning
of year 14,678,097 134,106,948
-------------- --------------
CASH AND CASH EQUIVALENTS AT
JUNE 30, 1994 AND 1993 $ 12,756,093 $ 16,342,617
============== ==============
See notes to consolidated financial statements.
-7-
8
UNAUDITED
Coeur d'Alene Mines Corporation
and Subsidiaries
Notes to Consolidated Financial Statements
NOTE A: Inventories are composed of the following:
JUNE 30, DECEMBER 31,
1994 1993
------------ ------------
Mining:
Ore in process and on leach pads $28,402,824 $27,958,186
Dore' inventory 1,744,670 1,947,294
Supplies 3,138,240 3,356,544
------------ ------------
33,285,734 33,262,024
Manufacturing:
Raw materials 1,170,715 755,206
Finished goods 688,523 653,239
------------ ------------
1,859,238 1,408,445
------------ ------------
$35,144,972 $34,670,469
============ ============
Inventories of ores on leach pads and in the milling process are
valued based on actual costs incurred to place such ore into production, less
costs allocated to minerals recovered through the leaching and milling
processes. Dore' inventory includes product at the mine site and product held
by refineries. All other inventories are stated at the lower of cost or
market, cost being determined using the first in, first out and weighted
average cost methods.
NOTE B:
Effective January 1, 1994, the Company changed its method of
accounting for debt and equity securities by adopting Statement of Financial
Accounting Standards (FAS) No. 115, "Accounting for Certain Investments in Debt
and Equity Securities". FAS No. 115 requires the use of fair value accounting.
The Company has classified its short term investments and marketable securities
as available for sale, according to the provisions of the new pronouncement.
Accordingly, unrealized holding gains and losses on such securities are
excluded from earnings and reported as a separate component of shareholders'
equity until realized.
NOTE C:
On April 30, 1993, the Company acquired Cyprus Gold New Zealand
Limited, for approximately $54 million in cash. The acquisition has been
accounted for as a purchase. The following consolidated results of the
Company's operations assume that the acquisition took place at the beginning of
the period presented.
-8-
9
3 Months Ended 6 Months Ended
(In thousands except for June 30, 1993 June 30, 1993
per share amounts) -------------- --------------
Revenues $24,827 42,153
Net loss before cumulative
effect of change in
accounting $(1,534) (3,667)
Net income $ 1,534 1,514
Earnings per share data:
Loss per shareholder before
cumulative effect of
change in accounting $ (.10) (.24)
Net income per share $ .10 .10
NOTE D:
During the first quarter, the Company effected an offering of $100
million ($96,750,000 net to the Company after underwriter discount) of 6 3/8%
Convertible Subordinated Debentures Due 2004 which are convertible into shares
of Common Stock on or before January 31, 2004, unless previously redeemed, at a
conversion price of $26.20 per share. The Company is required to make semi-
annual interest payments. The debentures are redeemable at the option of the
Company on or after January 31, 1997. The debentures have no other funding
requirements until maturity. The debentures mature January 31, 2004.
NOTE E:
Effective January 1, 1993, the Company changed its method of accounting
for income taxes by adopting Statement of Financial Accounting Standards (FAS)
No. 109, "Accounting for Income Taxes." FAS No. 109 requires an asset and
liability approach to accounting for income taxes and establishes criteria for
recognizing deferred tax assets. Accordingly, the Company adjusted its
existing deferred income tax assets and liabilities to reflect current
statutory income tax rates and previously unrecognized tax benefits related to
federal and certain state net operating loss carryforwards. The Statement also
contains new requirements regarding balance sheet classification and prior
business combinations. Hence, the Company adjusted the carrying values of
Coeur Rochester, Inc. acquired in 1986 and CDE Chilean Mining Corp. acquired in
1989 to reflect the gross purchase value previously reported net-of-tax.
The cumulative effect of the accounting change on prior years at January
1, 1993 is a non-recurring gain of $5,181,188, or $.34 per share, and is
included in the accompanying Consolidated Statement of Operations for the six
months ended June 30, 1993. Other than the cumulative effect, the accounting
change had no material effect on the operating results for the three months and
six months ended June 30, 1993.
-9-
10
The Company's tax expense for the second quarter and first half of 1994
results primarily from state tax liabilities. There is no provision for
Federal income taxes in the second quarter or first half of 1994 due to net
operating losses incurred.
NOTE F:
Certain reclassifications of prior year balances have been made to
conform to current year classifications.
NOTE G:
Other than as stated in the notes above, in the opinion of management,
the foregoing unaudited financial statements include all adjustments,
consisting of normal recurring accruals, necessary to a fair presentation of
the results of operations of the periods shown.
-10-
11
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The results of the Company's operations are significantly affected by
the market prices of gold and silver which may fluctuate widely and are
affected by many factors beyond the Company's control, including interest
rates, expectations regarding inflation, currency values, governmental
decisions regarding the disposal of precious metal stockpiles, global and
regional political and economic conditions, and other factors. The Company's
currently operating mines are the Rochester Mine, which it wholly owns and
operates, and the Golden Cross Mine, in which the Company has an 80% operating
interest.
The depressed level of silver prices led to the suspension of mining
activity at the Galena Mine in July 1992 (during which month the average price
of silver was $3.95 per ounce) and at the Coeur Mine in April 1991 (during
which month the average price of silver was $3.97 per ounce). Any resumption
of mining at those mines will require the affirmative decision of Asarco,
Incorporated, the operator of those mines, to recommence operations there.
On July 19, 1994, the Company's Board of Director's approved
construction of the Fachinal Project. Construction of the new mine is expected
to take 18 months to complete and is expected to produce, in its first year,
41,000 ounces of gold and 2.6 million ounces of silver. Total project
construction is expected to cost $41.8 million.
The Company plans to continue its developmental activities at the
Kensington Property. A production decision relating to the Kensington Property
is subject to the approval by the Company and its joint venture partner, a
market price of gold of at least $400 per ounce and the receipt of certain
required permits. The market price of gold (London final) on August 5, 1994
was $378.60 per ounce. With respect to the permits, the Company is unable to
control the timing of their issuance. However, it is anticipated that an EPA
Technical Assistance Report will be furnished to the Army Corps of Engineers in
early September 1994, which will lead to the issuance by the Corps of its
section 404 permit in due course.
The Company plans, in connection with its evaluation of potential
acquisition candidates, to focus primarily upon mining properties and
businesses that are operational or expected to become operational in the near
future so that they can reasonably be expected to contribute to the Company's
near-term cash flow from operations.
-11-
12
The significant increase in the Company's mining exploration expenses in
the first half of 1994 over the prior year's comparable period reflects the
Company's efforts to expand its ore reserve base.
RESULTS OF OPERATIONS
Three Months Ended June 30, 1994, Compared to Three Months Ended
June 30, 1993
SALES AND GROSS PROFITS
Sales of concentrates and dore' increased by $3,328,425, or 21%, for the
second quarter of 1994 over the same quarter of 1993 and was primarily
attributable to increased production as a result of the Golden Cross Mine
operating for the entire quarter in 1994 compared to a partial quarter in 1993
and an increase in metals prices. The Golden Cross Mine was acquired on April
30, 1993. Silver and gold prices averaged $5.38 and $381.44 per ounce,
respectively, in the second quarter of 1994 compared with $4.26 and $360.41 per
ounce, respectively, in the second quarter of 1993. In the second quarter of
1994, the Company produced 1,419,181 ounces of silver and 31,523 ounces of gold
compared to 1,475,750 ounces of silver and 30,603 ounces of gold in the second
quarter of 1993.
The cost of mine operations for the second quarter of 1994 increased by
$2,233,831, or 15%, above the prior year's comparable quarter and is primarily
attributable to the acquisition of the Golden Cross Mine. Mine operations
gross profit as a percent of sales increased from 10% in the quarter ended June
30, 1993 to 14% in the quarter ended June 30, 1994. As a result, gross profits
from mine operations increased by $1,094,594, or 69%.
The cash costs of production per ounce of gold at the Golden Cross Mine
amounted to $269.04 per ounce in the quarter ended June 30, 1994, compared to
$229.92 per ounce in the prior year's comparable quarter. The increase was
primarily attributable to the presence of a harder grinding ore in the open pit
requiring more milling and chemicals in the processing. The cash costs of
production in the second quarter of 1994, however, decreased from $299.83 per
ounce cash costs incurred in the first quarter of 1994. The cash costs of
production per ounce of silver on a silver equivalent basis at the Rochester
Mine amounted to $3.65 in the quarter ended June 30, 1994, compared to $3.51
per ounce in the quarter ended June 30, 1993.
The sales of manufactured products, which consist of lightweight
flexible hose and duct and metal tubing, increased by $298,832, or 12%, in the
second quarter of 1994 above the second quarter of 1993. Cost of manufacturing
increased by $265,770, or 12%, compared with the second quarter of 1993. As a
result, gross profits from manufacturing increased by $33,062, or 12%, in the
second quarter of 1994 from the prior year's second quarter.
-12-
13
OTHER INCOME
Other income increased by $1,595,982, or 111%, the second quarter of
1994 compared to the second quarter of 1993. The difference is primarily the
result of an increase in the level of the Company's cash and securities
portfolio and unrealized foreign exchange gains on outstanding contracts at
June 30, 1994.
As a result of the above, the Company's total income increased by
$2,723,638, or 82%, in the second quarter of 1994 compared to the second
quarter of 1993.
EXPENSES
For the second quarter of 1994, total expenses increased by $2,037,644,
or 38%, over the prior year's comparable quarter. The increase is primarily
attributable to (i) an increase in interest expense of $1,664,351, or 131%,
primarily resulting from the issuance of $100 million principal amount of
6-3/8% Convertible Subordinated Debentures in January and February 1994, (ii)
an increase of $827,667, or 214%, in mining exploration expenses incurred in
connection with the Company's efforts to increase ore reserves, and (iii)
increases in administration and general corporate expenses.
INCOME (LOSS) BEFORE TAXES AND ACCOUNTING CHANGE
As a result of the above, the Company's loss before income taxes and the
cumulative effect of a change in accounting amounted to $1,307,089 for the
second quarter of 1994 compared to a loss before income taxes and the
cumulative effect of a change in accounting of $1,993,083 for the second
quarter of 1993. The Company reported income tax expense (benefit) for the
second quarter of 1994 of $27,710 compared to $(985,946) for the same period of
1993. As a result, the Company reports a loss before the cumulative effect of
a change in accounting of $1,334,799, or $.09 per share, for the second quarter
of 1994 compared with $1,007,137, or $.07 per share, for the 1993's comparable
quarter.
NET INCOME
As a result of the above, the Company reports a net loss of $1,334,799,
or $.09 per share, for the second quarter of 1994 compared with $1,007,137, or
$.07 per share, for the second quarter of 1993.
Six Months Ended June 30, 1994, Compared to Six Months Ended June 30,
1994
SALES AND GROSS PROFITS
Sales of concentrates and dore' increased by $13,877,489, or 54%, for
the six months ended June 30, 1994 over the same period of 1993 and was
primarily attributable to increased production as a result of the Golden
-13-
14
Cross Mine operating for the entire period in 1994 compared to the same period
in 1993. Silver and gold prices averaged $5.33 and $382.87 per ounce,
respectively, in the first six months of 1994 compared to $3.96 and $344.84 per
ounce, respectively, in the same period in 1993. During the first six months
of 1994, the Company produced 2,929,578 ounces of silver and 63,100 ounces of
gold compared to 2,812,119 ounces of silver and 47,750 ounces of gold in the
first six months of 1993. The increase in silver production is due to
increased production at the Company's Rochester Mine. The increase in gold
production is due to the Company's acquisition of an 80% interest in the Golden
Cross Mine effective April 30, 1993.
The cost of mine operations in the first six months of 1994 increased by
$10,609,525, or 45%, over the first six months of 1993. As a result, gross
profit from mine operations increased by $3,267,964, or 157%, in the first six
months of 1994 from 1993's comparable period. Mine operations gross profit as
a percent of sales increased from 8% in the six months ended June 30, 1993 to
13% in the six months ended June 30, 1994. The increase was primarily
attributable to the increases in silver and gold prices during the six months
ended June 30, 1994, from the prior year's comparable period.
The cash costs of production per ounce of gold at the Golden Cross Mine
amounted to $283.26 per ounce in the six months ended June 30, 1994, compared
to $229.92 in the prior year's comparable six month period. The increase was
primarily attributable to the presence of a harder grinding ore in the open pit
requiring more milling and chemicals in the processing. As stated above,
however, the cash costs incurred in the second quarter of 1994 were lower than
the cash costs incurred in the first quarter of 1994. The cash costs of
production per ounce of silver on a silver equivalent basis at the Rochester
Mine amounted to $3.64 per ounce in the six months ended June 30, 1994,
compared to $3.59 in the six months ended June 30, 1993.
Sales of industrial products in the first six months of 1994 increased
by $664,404, or 14%, compared to the first six months of 1993. Cost of
manufacturing increased by $679,922, or 16%, in the first half of 1994,
compared to the prior year's comparable period. As a result, gross profit from
manufacturing for the first six months of 1994 decreased by $15,518, or 3%,
compared to the first six months of 1993.
OTHER INCOME
Interest and other income in the first half of 1994 increased by
$1,900,611, or 70%, compared to the first half of 1993. The increase was
primarily due to an increase in the level of the Company's cash and securities
portfolio and unrealized foreign exchange gains on outstanding contracts at
June 30, 1994.
As a result of the above, the Company's total income increased by
$5,153,057, or 97%, in the six months ended June 30, 1994, over the prior
year's comparable quarter.
-14-
15
EXPENSES
Total expenses in the first half of 1994 increased by $3,939,474, or
38%, over the prior year's comparable six-month period. The increase is
primarily attributable to (i) an increase in interest expense of $2,682,986, or
97%, primarily resulting from the issuance of $100 million principal amount of
6-3/8% Convertible Subordinated Debentures in January and February 1994, (ii)
an increase of $1,062,719, or 120%, in mining exploration expenses incurred in
connection with the Company's efforts to increase ore reserves, and (iii)
increases in administration and general corporate expenses.
INCOME (LOSS) BEFORE TAXES AND ACCOUNTING CHANGE
As a result of the above, the Company's loss before income taxes and the
cumulative effect of a change in accounting amounted to $3,897,097 in the first
six months of 1994 compared to $5,110,680 in the first six months of 1993. The
Company reported income tax expense (benefit) of $35,001 for the first six
months of 1994, compared to ($2,122,860) in the first six months of 1993. As a
result, the Company reported a net loss before the cumulative effect of a
change in accounting of $3,932,098, or $.26 per share, in the first six months
of 1994, compared to a net loss of $2,987,820, or $.20 per share, in the first
six months of 1993.
CHANGE IN ACCOUNTING
Effective January 1, 1993, the Company changed its method of accounting
for income taxes by adopting the mandatory Statement of Financial Accounting
Standards (FAS) 109, "Accounting for Income Taxes." FAS 109 requires an asset
and liability approach to accounting for income taxes and establishes criteria
for recognizing deferred tax assets. Accordingly, the Company adjusted its
existing deferred income tax assets and liabilities to reflect current
statutory income tax rates and previously unrecognized tax benefits related to
federal and certain state net operating loss carry forwards. The cumulative
effect of the accounting change on prior years at January 1, 1993, resulted in
a non-recurring gain of $5,181,188, or $.34 per share, and is included in the
results of operations for the six months ended June 30, 1993.
NET INCOME (LOSS)
As a result of the above, the Company reported a net loss of $3,932,098,
or $.26 per share, in the first six months of 1994, compared to net income of
$2,193,368, or $.14 per share, in the prior year's comparable six-month period.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital at June 30, 1994 was approximately $185.5
million compared to approximately $107.6 million at December 31,
-15-
16
1993. The ratio of current assets to current liabilities was 9.5 to 1 at June
30, 1994, compared with 6.0 to 1 at December 31, 1993.
The increase in the Company's working capital at June 30, 1994 compared
to December 31, 1993 is primarily attributable to the Company's sale in January
and February 1994 of an aggregate of $100,000,000 principal amount of 6 3/8%
Convertible Subordinated Debentures Due 2004 (the "Debentures"). The
Debentures were issued by the Company in connection with an offering to
"qualified institutional buyers" as defined in Rule 144A under the Securities
Act and to certain non-U.S. persons in reliance upon Regulation S under the
Securities Act. The Company plans to use the approximately $95.7 net proceeds
from such offering for general corporate purposes, including the possible
acquisition of, or investment in, additional precious metals mines, properties
or businesses, and for possible developmental activities on new or existing
mining properties. The Company's acquisition efforts are primarily focused
upon operating precious metals mines and precious metals properties or
businesses that are expected to become operational in the near future. The
Company currently is engaged in the review and investigation of opportunities
for expansion of its business through acquisitions, investments or other
transactions. While preliminary agreements have been entered into with respect
to certain proposed acquisitions, the consummation of such acquisitions is
subject to significant contingencies. The Company invested the proceeds of the
above offering in interest-bearing marketable securities and money market
obligations, and plans to continue such investments pending the use of the
proceeds of that offering as discussed above.
Net cash provided by (used in) operating activities for the first six
months of 1994 was $2,313,186 compared with $(3,318,430) for the first six
months of 1993. A total of $96,646,684 of cash was used in investing
activities in the six months of 1994, compared to $111,274,702 in the first six
months of 1993. Of the $96,646,684 used in investing activities during the
first six months of 1994, $102.1 million relates to the purchase of investment
grade intermediate term investments. The Company's financing activities
provided $92,411,494 of cash during the first six months of 1994 compared with
$3,171,199 used in financing activities for the first six months of 1993. As a
result of the above, the Company's net cash decrease for the first six months
of 1994 was $1,922,004 compared with a net cash decrease of $117,764,331 for
the first six months of 1993. The net cash decrease for the first half of 1993
was primarily due to the use of $111,274,702 in investing activities.
In view of the recent, significant increase in the Company's capital
resources described above, the Company terminated its $38 million revolving
line of credit agreement with a syndicate of banks in June 1994. On June 8,
1994, the Company entered into a credit agreement with Seattle First National
Bank providing for a maximum of $10 million letter of credit.
-16-
17
For the quarters ended June 30, 1994 and 1993, the Company expended
$1,236,766 and $806,367, respectively, in connection with environmental
compliance activities at its operating properties. At June 30, 1994, the
Company had expended a total of approximately $4.3 million on environmental and
permitting activities at the Kensington property, which expenditures have been
capitalized as part of its development cost.
On June 24, 1994, the U.S. District Court for the District of Idaho
approved the proposed settlement (the "Settlement") of Kassover v. Coeur
d'Alene Mines Corporation et al. (the "Lawsuit"), a class action instituted
against the Company and others in 1990. Pursuant to the Settlement, a total of
up to 220,083 shares of Common Stock will be issued by the Company in exchange
for the claims of the members of the plaintiff class (the "Claimants") and
their counsel. The number of such shares was determined by dividing $4 million
by the average daily closing price of the Common Stock for the five business
days preceding the "fairness hearing" relating to the Settlement held on June
16, 1994. The Company issued 66,025 shares to counsel for the claimants in
late July 1994, and plans to issue the balance of up to 154,058 shares
following the processing of the Claimants' claims, which is expected to be in
September or October 1994.
On July 19, 1994, the Company's Board of Directors approved the
construction of the Fachinal project following the completion by the
independent engineering firm of Fluor Daniel Wright of a detailed feasibility
study. Pursuant to that study, the cost to complete Fachinal is estimated to
be $41.8 million. The Company plans to seek funding for that construction on a
project financing basis.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders
The Company's Annual Meeting of Shareholders was held on May 10, 1994.
Messrs. Dennis E. Wheeler, Joseph C. Bennett, Duane B. Hagadone, James
J. Curran, James A. Sabala, James A. McClure and Jeffery T. Grade were
nominated and elected to serve as members of the Board for one year or until
their successors are elected and qualified, by a vote of approximately 13.4
million shares (ranging from 13,408,142 to 13,457,130) for, and no shares
voting against or abstaining.
Shareholders ratified the selection of Ernst & Young to serve as the
Company's public accountants for the current fiscal year by a vote of
13,283,442 shares for, 29,799 shares against, with 127,101 shares abstaining.
-17-
18
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The following exhibit is filed herewith:
10 Credit Agreement, dated June 8, 1994 between
Registrant/Seattle-First National Bank.
(b) Reports on Form 8-K
None
-18-
19
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.
COEUR D'ALENE MINES CORPORATION
-------------------------------
(Registrant)
Dated August 12, 1994 /s Dennis E. Wheeler
---------------------------
DENNIS E. WHEELER
Chairman, President and
Chief Executive Officer
Dated August 12, 1994 /s James A. Sabala
---------------------------
JAMES A. SABALA
Senior Vice President
(Principal Financial and
Accounting Officer)
20
COEUR D'ALENE MINES CORPORATION
INDEX TO EXHIBITS
FORM 10-Q FOR PERIOD ENDED JUNE 30, 1994
SEQUENTIAL
EXHIBIT NO. PAGE NO.
- - ----------- ----------
10 Credit Agreement between Coeur D'Alene Mines Corporation
and Seattle-First National Bank 21
-20-