10-Q 1 ed10q1a.txt CALIFORNIA-ENGELS MINING COMPANY 10Q, 3/31/2001 SECURITIES AND EXCHANGE COMMISSION Washington D. C. 20549 Form 10-Q Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended March 31, 2001 Commission File No. 1-3871 CALIFORNIA-ENGELS MINING COMPANY (Exact name of registrant as specified in its charter) State of California (State or other jurisdiction of incorporation or organization) 94-0357560 (I.R.S. Employer Identification Number) Address: 117 Crescent Street, P. O. Box 778, Greenville, California 95947-0778 (Address of principal executive office) (Zip Code) (530) 284-6191 (Registrant's telephone number including area code) 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 CLASS Capital Stock, par value: $0.25 per share. OUTSTANDING AT MARCH 31, 2001: 760,815.94 shares. Filing Contains 9 pages. CALIFORNIA-ENGELS MINING COMPANY BALANCE SHEETS (Unaudited) PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ASSETS

~~SECURITIES~~March 31 December 31 2001 2000 --------- --------- CURRENT ASSETS Cash $ 54,645 $ 39,462 Deeds of Trust - current portion $ 6,863 $ 11,842 Deferred income tax $ - $ - Reimbursements receivable $ - $ - Deposits $ - $ - Prepaid income tax $ 5,874 $ 5,874 Total Current Assets $ 67,382 $ 57,178 PROPERTY AND ~~EXCHANGE~~EQUIPMENT, ~~COMMISSION~~NET $ 391,075 $ 397,995 OTHER ASSETS Investments available-for-sale $ 12,021 $ 12,011 Investments held-to-maturity $ 2,353 $ 2,472 Deeds of trust - net of current portion $ 163,214 $ 162,464 Total Other Assets $ 177,588 $ 176,947 Total Assets $ 636,045 $ 632,120

LIABILITIES AND STOCKHOLDERS' EQUITY

~~Washington~~March D.31 C.December ~~20549~~31 2001 2000 --------- -------- CURRENT LIABILITIES Income taxes payable $ - $ - Deferred tax liabilities $ 19,843 $ 19,843 Accrued expenses $ 39,406 $ 40,976 Notes payable, current portion $ 6,078 $ 8,014 Total Current Liabilities $ 65,327 $ 68,833 LONG TERM LIABILITIES Notes payable, net of current portion $ 106,548 $ 106,549 Total Liabilities $ 171,875 $ 175,382

CALIFORNIA-ENGELS MINING COMPANY BALANCE SHEETS (Unaudited) STOCKHOLDER'S EQUITY

~~Form~~March 1031 December 31 2001 2000 -Q-------- --------- STOCKHOLDERS' EQUITY Capital stock, par value $.25: 4,000,000 shares authorized 760,815.94 shares issued and outstanding in 2001 and 2000 $ 190,206 $ 190,206 Accumulated other comprehensive income (loss) $ 308 $ 308 Reduction surplus $2,800,856 $2,800,856 Accumulated deficit (2,527,200) (2,534,632) Total Stockholders' Equity $ 464,170 $ 456,738 Total Liabilities and Stockholders' Equity $ 636,045 $ 632,120

CALIFORNIA-ENGELS MINING COMPANY STATEMENTS OF OPERATIONS (Unaudited)

~~Quarterly~~Three ~~Report~~Months ~~Under~~Ended ~~Section~~March 1331, or2001 152000 ----- ----- REVENUE Timber and rock revenue $ 83,630 $ 1,045 Dividend income 619 710 Interest income 3,767 700 Total revenue $ 88,016 $ 2,455 OPERATING AND GENERAL EXPENSES Depreciation $ 505 501 Director fees - - Rock expense - - Insurance 1,860 1,900 Memberships and dues - - Miscellaneous 64 192 Office and storage rents 3,628 3,128 Office expense 178 275 Professional fees 2,975 - Reclamation plan expense - - Repairs and maintenance 1,170 - Superior quarry expense - - Taxes and licenses 498 573 Travel and per diem - - Vehicle expense 857 441 Wages and related taxes 3,020 3,732 Total Operating and General Expenses $ 14,755 $ 10,742 Income (dLoss) from Operations $ 73,261 $ (8,287) OTHER INCOME and (EXPENSE) Depletion $ (6,415) $ - Interest $ (3,418) $ (3,992) Timber harvest expense $ (59,056) $ - Timber management expense $ (4,215) $ (660) Office and bookkeeping service $ 7,275 $ 9,370 Total Other Income and (Expense) $ (65,829) $ 4,718 Income (Loss) Before Taxes $ 7,432 $ (3,569) Provision for income taxes $ - $ - Net Income (Loss) $ 7,432 $ (3,569) Income (Loss) Per Share $ 0.010 $ (0.005)

CALIFORNIA-ENGELS MINING COMPANY STATEMENTS OF CASH FLOWS (Unaudited)

Three Months Ended March 31, 2001 2000 ------ ------ CASH FLOWS FROM OPERATING ACTIVITIES Net Income (Loss) $ 7,432 $ (3,569) Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities: Depreciation and depletion 6,920 501 Amortization of ~~the~~GNMA ~~Securities~~discount ~~Exchange~~- ~~Act~~- (Gain)loss on sale of ~~1934~~securities - - (Gain) on sale of land - - (Increase) decrease in assets Prepaid expenses - (3,598) Deposits - - Increase (decrease) in liabilities Taxes payable - (4,697) Accrued expenses (1,570) 2,609 Net Cash Provided (Used) by Operating Activities $ 12,782 $ (8,754) CASH FLOWS FROM INVESTING ACTIVITIES Payments received on notes receivable $ 4,229 $ 1,160 Notes issued - (49,500) Purchases of securities and investments (10) (13) Proceeds from sale of securities - - Proceeds from sale of land - - Return of principal GNMA 119 113 Capital expenditures - (762) Net cash Provided (Used) by Investing Activities 4,338 (49,002)

CALIFORNIA-ENGELS MINING COMPANY STATEMENTS OF CASH FLOWS (Unaudited)

~~For~~Three ~~Quarter~~Months Ended ~~September~~March 3031, 2001 2000 ~~Commission~~ ~~File~~CASH FLOWS FROM FINANCING ACTIVITIES Purchase of treasury shares $ - $ - Notes payable - - Payments on notes payable (1,937) (1,556) Net Cash Provided (Used) by Financing Activities $ (1,937) $ (1,556) Net Increase (Decrease) in Cash and Cash Equivalents $ 15,183 $ (59,312) CASH AND CASH EQUIVALENTS, Beginning of Period $ 39,462 $ 71,295 CASH AND CASH EQUIVALENTS, End of Period $ 54,645 $ 11,983 SUPPLEMENTAL DISCLOSURE of CASH FLOW INFORMATION Cash paid during the year: Income taxes $ - $ 7,000 Interest $ 3,418 $ 3,992 SUPPLEMENTAL DISCLOSURE of NONCASH INVESTING ACTIVITIES Unrealized holding gains (losses) arising during period $ - $ 2,363 Issuance of notes receivable for sales of property $ - $ -

FIXED ASSET SUMMARY

~~No.~~March ~~1-3871~~31, December 31 2001 2000 Furniture and equipment $ 34,538 $ 34,538 Land 239,702 239,702 Less: Accumulated depreciation (22,731) (22,226) Subtotal $ 251,509 $ 252,014 Timber management development $ 164,078 $ 164,078 Less: Accumulated depletion (24,512) (18,097) Subtotal $ 139,566 $ 145,981 Total Property and Equipment $ 391,075 $ 397,995

CALIFORNIA-ENGELS MINING COMPANY NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying financial statements are unaudited but, in the opinion of the management, include all adjustments, consisting solely of normal items, necessary for a fair presentation. Interim results are not necessarily indicative of results for a full year. These financial statements should be read in conjunction with the financial statements and notes which are included in the Company's Annual Report on Form 10-K for the year ended December 31, 2000. The accounting policies set forth in those annual financial statements are the same as the accounting policies utilized in the preparation of these financial statements, except as modified for appropriate interim financial statement presentation. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS Liquidity and Capital Resources During the 30 years its mining properties were leased, the Company endeavored to increase working capital, total assets and shareholder's equity in the event that its lessee, Placer Dome U.S. Inc., terminated its Mining Lease and Option to Purchase agreement and return the mining properties to the Company. This event occurred effective April 20, 1993. Thus, funds were available to begin preparation of a Non-Industrial Timber Management Plan which was approved by the California Department of Forestry and became effective July 2, 1999. The objective of the Company is to earn income from the sale of its timber so funds are available for the maintenance of its mining properties and the implementation of its timber management plan. The Company filed a Notice of Timber Operations pursuant to its Non-Industrial Timber Management Plan on September 7 and December 15, 2000 for a mechanical thinning/biomass project on its Engels and Smith parcels. Thinning began on the Lower Engels portion on December 11, 2000 and was completed there and on the Smith parcel by January 18, 2001. Following the winter, the project continues on the much larger Upper Engels portion after preparation of the road to Upper Camp for log and chip truck hauling. The Henry Timber Harvest Plan was approved December 18, 2000. Harvesting and hauling began on January 10 and was completed January 19, 2001. Results of Operations The Company had net gain, for the three months ending March 31, of $7,432 in 2001, compared to net loss of $3,569 in the 2000 period. The change in net income for the first three months of 2001 compared with the corresponding period in 2000 was due to revenue from timber thinning and harvest projects. The Company's principal sources of income are office management and bookkeeping fees, sale of timber, interest, dividends, capital gains on the sale of real estate and sale of rock and sand. There is no assurance that any of the sources of income will continue at current rates into the future. CALIFORNIA-ENGELS MINING COMPANY NOTES TO FINANCIAL STATEMENTS Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995 The matters discussed in this report on Form 10-Q, when not historical matters, are forward-looking statements that involve a number of risks and uncertainties that could cause actual results to differ materially from projected results. Such risks, trends and uncertainties include the highly cyclical nature of the forest products industry, general economic conditions, competition, price conditions or trends for the Company's products, elimination of import tariffs, the possibility that timber supply could increase if governmental, environmental or endangered species policies change, and the limitations on the Company's ability to harvest its timber due to adverse natural conditions or increased governmental restrictions. These and other risks are described from time to time in the Company's filings with the Securities and Exchange Commission. Many of these factors are beyond the Company's ability to control or predict. The Company disclaims any intent or obligation to update its forward-looking statements, whether as a result of receiving new information, the occurrence of future events, or otherwise. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Commodity Prices The Company's earnings and cash flow may be significantly impacted by changes in the market price of timber. Timber prices fluctuate and may be affected by numerous factors, such as seasonal demand, production levels, economic policies of central banks, interest rates and producer hedging. 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. None SIGNATURE 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. CALIFORNIA-ENGELS MINING COMPANY Registrant May 8, 2001 By: /s/ Norman A. Lamb Norman A. Lamb, President and Chief Executive Officer May 8, 2001 By: /s/ James E. Brousseau James E. Brousseau, Secretary- Treasurer and Chief Financial Officer

CALIFORNIA-ENGELS MINING COMPANY

(Exact name of registrant as specified in its charter)

State of California 94-0357560

(State or other jurisdiction of (I.R.S. Employer

incorporation or organization) Identification No.)

117 Crescent Street

P.O. Box 778

Greenville, California 95947-0778

(Address of principal executive office) (Zip Code)

(530) 284-6191

(Registrant's telephone number including area code)

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 _____

CLASS OUTSTANDING AT SEPTEMBER 30, 2000

Capital Stock, par 760,954.34 Shares

Value, $0.25 per share

Filing Contains 8 pages

CALIFORNIA-ENGELS MINING COMPANY

BALANCE SHEETS

(Unaudited)

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

September 30 December 31

2000 1999

ASSETS

Current Assets

Cash $ 54,467 $ 71,295

Deeds of trust - current portion 2,837 5,317

Deferred income tax - -

Reimbursements receivable - -

Deposits - -

Prepaid income tax - -

Total Current Assets 57,304 76,612

Property and Equipment, net 398,243 450,804

Other Assets

Investments available-for-sale 1,575 1,549

Investments held-to-maturity 2,367 2,790

Deeds of trust - net of current portion 174,544 30,830

Total Other Assets 178,486 35,169

Total Assets $ 634,033 $ 562,585

LIABILITIES

Current Liabilities

Income taxes payable $ 23,284 $ 4,697

Deferred tax liabilities 50 50

Accrued expenses 41,594 48,614

Notes payable, current portion 1,894 6,444

Total Current Liabilities 66,822 59,805

Long-term Liabilities

Notes payable, net of current portion 114,563 124,866

Total Long-term Liabilities 114,563 124,866

Total Liabilities 181,385 184,671

STOCKHOLDER'S EQUITY

Stockholder's Equity

Capital stock, par value $0.25: 4,000,000

shares authorized 760,954.3 shares

issued and outstanding in 1999 and 2000 190,241 190,241

Accumulated other comprehensive

income (loss) 288 288

Reduction surplus 2,800,917 2,800,917

Accumulated deficit (2,538,798) (2,613,532)

Total Stockholder's Equity 452,648 377,914

Total Liabilities and Stockholder's Equity $ 634,033 $ 562,585

CALIFORNIA-ENGELS MINING COMPANY

STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended September 30,

2000 1999

Revenue

Timber and rock revenue $ 480 $ 695

Dividend income 200 347

Interest income 2,717 1,030

Total Revenue 3,397 2,072

Operating and General Expenses

Depreciation 501 1,836

Director fees 2,000 -

Insurance - -

Miscellaneous 268 473

Memberships and dues - -

Office and storage rents 3,127 878

Office expenses 460 217

Professional fees 930 -

Reclamation plan expense 12,738 -

Repairs and maintenance - 30

Superior quarry expense - -

Taxes and licenses 222 976

Travel and per diem 230 -

Vehicle expense 249 355

Wages and related taxes 3,334 -

Total Operating and General

Expenses 24,059 4,765

Net Income (Loss) from Operations (20,662) (2,693)

Other Income and (Expense)

Depletion - -

Gain (loss) on sale of securities - -

Gain on sale of land 143,240 -

Interest (4,752) (1,110)

Timber management expense 5,319 (8,156)

Office and bookkeeping service 5,790 -

Total other income and (expense) 149,597 (9,266)

Income (Loss) Before Taxes 128,935 (11,959)

Provision for Income Taxes (29,824) -

Net Income (Loss) $ 99,111 $ (11,959)

Earnings (Loss) per Share $ 0.130 $ (0.016)

CALIFORNIA-ENGELS MINING COMPANY

STATEMENTS OF OPERATIONS

(Unaudited)

Nine Months Ended September 30,

2000 1999

Revenue

Timber and rock revenue $ 1,525 $ 2,798

Dividend income 967 1,209

Interest income 5,706 4,646

Total revenue 8,198 8,653

Operating and General Expenses

Depreciation 1,503 3,672

Director fees 2,000 -

Insurance 1,900 1,900

Miscellaneous 631 1,255

Memberships and dues - 350

Office and storage rents 9,383 2,883

Office expenses 3,140 768

Professional fees 3,970 1,838

Reclamation plan expense 12,738 -

Repairs and maintenance 1,050 3,770

Superior quarry expense - -

Taxes and licenses 3,111 3,114

Travel and per diem 714 411

Vehicle expense 945 973

Wages and related taxes 9,511 -

Total Operating and General

Expenses 50,596 20,934

Net Income (Loss) from Operations (42,398) (12,281)

Other Income and (Expense)

Depletion - -

Gain (loss) on sale of securities - -

Gain (loss) on sale of land 143,240 -

Interest (12,679) (1,110)

Timber management expense (6,160) (11,042)

Office and bookkeeping service 22,365 -

Total Other Income and (Expense) 146,766 (12,152)

Income (Loss) Before Taxes 104,368 (24,433)

Provision for Income Taxes (29,824) -

Net Income (Loss) $ 74,544 $ (24,433)

Earnings (Loss) per Share $ 0.098 $ (0.032)

CALIFORNIA-ENGELS MINING COMPANY

STATEMENTS OF CASH FLOWS

(Unaudited)

Nine Months Ended September 30,

2000 1999

Cash Flows from Operating Activities

Net Income (Loss) $ 74,544 $ (24,433)

Adjustments to reconcile net income

(loss) to net cash provided (used) by

operating activities:

Depreciation and depletion 1,503 3,672

Amortization of GNMA discount - -

(Gain) loss on sale of securities - (2,948)

(Gain) loss on sale of land (143,228) -

(Increase) decrease in assets

Prepaid expenses - -

Deposits - 563

Increase (decrease) in liabilities

Taxes payable 18,587 (1,650)

Accrued expenses (7,020) 49,114

Net cash provided (used) by

operating activities (55,614) 24,318

Cash Flows from Investing Activities

Payments received on notes receivable 4,683 35,232

Notes issued (49,117) -

Purchases of securities and investments (26) -

Proceeds from sale of securities - 20,824

Proceeds from sale of land 98,248 -

Return of principal GNMA 613 1,095

Capital expenditures (762) (233,003)

Net cash provided (used) by

investing activities 53,639 (175,852)

Cash Flows from Financing Activities

Purchase of treasury shares - (90)

Notes payable - 177,600

Payments on notes payable (14,853) (28,890)

Net cash provided (used)

by financing activities (14,853) 148,620

Net Increase (Decrease) in Cash and

Cash Equivalents (16,828) (2,914)

Cash and Cash Equivalents,

Beginning of period 71,295 10,128

End of period $ 54,467 $ 7,214

CALIFORNIA-ENGELS MINING COMPANY

FIXED ASSET SUMMARY

(Unaudited)

September 30, December 31,

2000 1999

Furniture and Equipment $ 38,273 $ 33,775

Land 239,702 116,696

Less: Accumulated Depreciation (25,713) (18,700)

Subtotal 252,262 131,771

Timber Management Development 164,078 109,636

Less: Accumulated Depletion (18,097) (2,896)

Subtotal 145,981 106,740

Total Property and Equipment $ 398,243 $ 238,511

CALIFORNIA-ENGELS MINING COMPANY

NOTES TO FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying financial statements are unaudited but, in the opinion of the management, include all adjustments, consisting solely of normal items, necessary for a fair presentation. Interim results are not necessarily indicative of results for a full year.

These financial statements should be read in conjunction with the financial statements and notes, which are included in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. The accounting policies set forth in those annual financial statements are the same as the accounting policies utilized in the preparation of these financial statements, except as modified for appropriate interim financial statement presentation.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

Liquidity and Capital Resources

During the 30 years its mining properties were leased, the Company endeavored to increase working capital, total assets and shareholder's equity in the event that its lessee, Placer Dome U.S. Inc., terminated its Mining Lease and Option to Purchase agreement and return the mining properties to the Company. This event occurred effective April 20, 1993. Thus, funds were available to begin preparation of a Non-Industrial Timber Management Plan which was approved by the California Department of Forestry and became effective July 2, 1999. The objective of the Company is to earn income from the sale of its timber so funds are available for the maintenance of its properties and the implementation of its timber management plan. Because timber revenues are sporadic, in order to provide regular monthly income the President of the Company, on January 1, 2000, transferred management of the office building at 117 Crescent Street, Greenville, CA and its related bookkeeping business to the Company.

The Company filed a Notice of Timber Operations pursuant to its Non-Industrial Timber Management Plan with the California Department of Forestry on September 7, 2000 for a mechanical thinning and biomass project on its Engels Parcel and is completing a Timber Harvest Plan for its Henry Parcel.

Results of Operations

The Company had net gain, for the three months ending September 30, of $ 99,111 in 2000, compared to net loss of $ 11,959 in the 1999 period. The change in net income for the third quarter of 2000 over the third quarter of 1999 was due to the gain on the sale of land.

The Company's principal sources of income are office management and bookkeeping fees, sale of timber, interest, dividends, capital gains on sale of real estate and sale of rock and sand. There is no assurance that any of the sources of income will continue at current rates into the future.

Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995

The matters discussed in this report on Form 10-Q, when not historical matters, are forward-looking statements that involve a number of risks and uncertainties that could cause actual results to differ materially from projected results. Such risks, trends and uncertainties include the highly cyclical nature of the forest products industry, general economic conditions, competition, price conditions or trends for the Company's products, the possibility that timber supply could increase if governmental, environmental or endangered species policies change, and limitations on the Company's ability to harvest its timber due to adverse natural conditions or increased governmental restrictions. These and other risks are described from time to time in the Company's filings with the Securities and Exchange Commission. Many of these factors are beyond the Company's ability to control or predict. The Company disclaims any intent or obligation to update its forward-looking statements, whether a result of receiving new information, the occurrence of future events, or otherwise.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Commodity Prices

The Company's earnings and cash flow may be significantly impacted by changes in the market price of timber. Timber prices fluctuate and may be affected by numerous factors, such as seasonal demand, production levels, economic policies of central banks, interest rates and producer hedging.

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.

None

SIGNATURE

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.

CALIFORNIA-ENGELS MINING COMPANY

Registrant

DATE:

Norman A. Lamb, President

and Chief Executive Officer

DATE: November 10, 2000 By _/s/ James E. Brousseau__

James E. Brousseau, Secretary-

Treasurer and Chief Financial

Officer

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