UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended: March 31, 1996
Commission File No.: 33-11309
THE IDAHO COMPANY
(Exact name of registrant as specified in its charter)
IDAHO 82-0410913
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
102 S. 17th Street, Suite 201, Boise, Idaho 83702
(Address of principal executive offices) (Zip Code)
(208) 344-6308
(Registrant's telephone number, including area code)
(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. [X] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
1,618 shares of no par value common stock
were outstanding at 03-31-96.
1
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
The financial information set forth herein is unaudited and reflects all
adjustments which are, in the opinion of management, necessary to the
presentation of a fair statement of the interim period presented.
2
THE IDAHO COMPANY
BALANCE SHEETS
March 31, 1996 Dec. 31, 1995
ASSETS
Cash $ 77,103 $ 128,742
Loans receivable 1,071,734 1,010,027
Less allowance for loan losses 64,308 63,636
---------- ----------
Net loans 1,007,426 946,391
Interest and other receivables 23,798 16,582
Prepaid expenses 6,509 9,415
---------- ----------
Total Assets $1,114,836 $1,101,130
---------- ----------
---------- ----------
LIABILITIES & STOCKHOLDERS' EQUITY
Accrued expenses $ 9,000 $ 2,950
Payroll tax payable 1,764 1,567
Fees collected, unearned 8,540
---------- ----------
19,304 4,517
Excess of net assets acquired over
cost, net of accumulated accretion
of $40,446 at March 31, 1996 and
$34,668 at December 31, 1995 75,113 80,891
---------- ----------
Total Liabilities 94,417 85,408
STOCKHOLDERS' EQUITY
Common stock, no par value,
Authorized 500,000 shares; 1,618
shares issued and outstanding 982,825 982,825
Retained earnings 37,594 32,897
---------- ----------
1,020,419 1,015,722
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $1,114,836 $1,101,130
---------- ---------
---------- ---------
3
THE IDAHO COMPANY
STATEMENTS OF OPERATIONS
Quarter Ended Quarter Ended
March 31, 1996 March 31, 1995
REVENUE
Consulting Income $ 150 $ 1,326
Loan Fees 6,701 15,570
Interest Income - Loans 34,809 27,019
Interest Income - Other 664 2,813
Negative Goodwill
& Other Income 6,303 6,278
-------- ---------
Total Revenue 48,627 53,006
EXPENSES
Operating Expenses 43,931 33,881
Total Expenses 43,931 33,881
-------- --------
NET INCOME/LOSS $ 4,696 $ 19,125
-------- --------
-------- --------
AVERAGE NUMBER
SHARES OUTSTANDING 1,618 1,618
(See Item 2.)
INCOME/LOSS PER SHARE
OF COMMON STOCK $2.90 $11.82
4
THE IDAHO COMPANY
STATEMENTS OF CASH FLOWS
March 31, 1996 March 31, 1995
INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 4,696 $ 19,125
Adjustments to reconcile net income
to net cash used in operating activities:
Accretion of excess of net assets
acquired over cost (5,778) (5,778)
Provision for loan losses 672 3,980
Changes in operating assets
and liabilities:
Accounts receivable 275
Interest receivable (7,217) (5,067)
Fees collected, unearned 8,541
Prepaid expenses 2,905 4,460
Accounts payable 62
Accrued expenses 6,050 (7,871)
Payroll tax payable 198 430
-------- --------
Total adjustments 5,371 (9,509)
NET CASH PROVIDED BY
OPERATING ACTIVITIES 10,067 9,616
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturities of interest bearing deposits 36,908
Loans receivable disbursed (149,534) (225,464)
Loans receivable collected 87,827 412,586
-------- --------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (61,707) 224,030
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable (5,705)
Reverse stock split - fractional
share payments (22,938)
Capital additions 22,938
-------- --------
NET CASH USED IN
FINANCING ACTIVITIES (5,705)
INCREASE (DECREASE) IN CASH (51,640) 227,941
CASH AT BEGINNING OF PERIOD 128,742 145,127
-------- --------
CASH AT END OF PERIOD $ 77,103 $373,068
-------- --------
-------- --------
5
THE IDAHO COMPANY
NOTES TO FINANCIAL STATEMENTS
Quarter Ended March 31, 1996
A. Basis of Presentation and Company Background
The Idaho Company (the Company), incorporated under the laws of the State of
Idaho on November 28, 1986, is a for-profit corporation. The Company was
formed to promote economic growth, and to stimulate, develop, and advance
the business prosperity of Idaho and its citizens. The Company achieves
this objective by lending to, investing in, arranging financing for, and
consulting with new, emerging, and expanding businesses.
The Company is not obligated to pay a dividend or dividend in kind unless
the payment has been approved by the Director of the Department of Finance
of the State of Idaho and is consistent with capital requirements and
profitability.
The Company is a licensed Business and Industrial Development Company
(BIDCO). As such, it is regulated by the State of Idaho Department of
Finance and subject to periodic asset quality examinations. On September 30,
1992, the Company was granted an exemption from registration as an
investment company under the Investment Company Act of 1940, conditioned
upon satisfying certain requirements, which have been met as of March 31, 1996.
On June 15, 1994, William F. Rigby acquired 97.7 percent of the Company's
then outstanding common stock in a tender offer for cash consideration in
the amount of $957,780. In accordance with the tender offer terms and
conditions, a reverse stock split was subsequently concluded during the
first quarter of 1995. The remaining 2.3 percent of shares outstanding
became fractional shares as a result of the split and were paid out in the
form of cash. The reverse stock split occurred on February 28, 1995, and
resulted in a reduction of pre-split issued and outstanding shares of
163,453 to 1,618 post-split shares. Effective with the reverse stock split,
the Company amended its articles of incorporation to eliminate the par value
feature of its authorized common stock in favor of a no par value feature.
On February 28, 1995, the Company re-acquired all fractional common shares
created by the reverse stock split for approximately $23,000.
The Idaho Company continues to explore opportunities to form and/or manage
a Small Business Investment Corporation (SBIC). The Idaho Company may
ultimately consider forming a subsidiary or affiliate for the purpose of
becoming licensed as an SBIC. The Company may also pursue a partnership
arrangement.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Unaudited Interim Financial Statements. In the opinion of management,
the accompanying financial statements contain all adjustments necessary to
fairly represent the financial position of The Idaho Company and the results
of operations and cash flows.
6
This report on Form 10-Q for the quarter ended March 31, 1996, should be
read in conjunction with the Company's report on Form 10-K for the year
ended December 31, 1995, and report on Form 10-Q for the quarter ended
September 30, 1995.
Loans: The Company makes commercials loans to Idaho small businesses to
stimulate economic activity through job creation. Loans are reported at the
principal amount outstanding, net of an allowance for estimated loan losses.
Accrual of interest is discontinued when reasonable doubt exists as to
collectibility. All loans greater than 90 days delinquent are subject to
nonaccrual of interest. Interest accruals are resumed on such loans only
when, in the judgment of management, the loans are fully collectible.
Allowance for Loan Losses. The allowance for loan losses is established
through a provision charged to expense. Loans are charged against the
allowance when management believes that the collectibility of principal is
unlikely. The allowance is an amount which management believes would be
adequate to absorb possible losses on existing loans, based on 1) conditions
existing at the balance sheet date, 2) evaluations of the collectibility of
the loans and 2) prior loan loss experience. The evaluations take into
consideration such factors as changes in the nature and volume of the loan
portfolio, overall portfolio quality, review of specific problem loans, and
current economic conditions that may affect the borrower's ability to repay.
Income Taxes. Effective January 1, 1993, the Company adopted Statement
of Financial Accounting Standards No. 109, Accounting for Income Taxes
(Statement No. 109). Under the asset and liability method of Statement No.
109, deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss carryforwards. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in
years in which those temporary differences are expected to be recovered or
settled. Under Statement No. 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.
Excess of Net Assets Acquired over Cost. The excess of net assets
acquired over purchase price is amortized on a straight-line basis over a
five year life.
Income Per Share. Income per share is computed by dividing the net
income by the average number of shares outstanding during the period. See
"Basis of Presentation" for a description of the reverse stock split
occurring on February 28, 1995.
Interest Bearing Deposits. Interest bearing deposits are comprised of
certificates of deposit and other deposits.
Notes Payable. The Company was obligated under a note payable at
March 31, 1995 which was paid in full during the following quarter.
Cash. With the exception of a nominal operating account, all cash earns
interest at current market rates.
Reclassifications. Certain amounts presented in 1995 have been
reclassified to be consistent with this presentation.
7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS. The quarter ended March 31, 1996 resulted in net
income of $4,696, compared to net income of $19,125 for the quarter ended
March 31, 1995. The first quarter of 1995 included fees from the sale of an
SBA-guaranteed loan which substantially increased net income for the quarter.
There were no accounting fees during the quarter ended March 31, 1995;
accounting fees amounted to $12,200 at March 31, 1996. Year-to-date results
for 1996 are in line with management's projections.
Revenues for the first quarter of 1996 were primarily derived from interest
on loans receivable and loan fees. Non-cash revenues were also realized from
the amortization of negative goodwill (see "Basis of Presentation" under
Notes to Financial Statements). The primary sources of revenue for the
quarter ended March 31, 1995, were interest on loans receivable and loan fees.
Shareholders' equity on March 31, 1996, was $1,020,419 compared to
shareholders equity of $1,004,077 on March 31, 1995.
Inflation has had no significant impact upon the operating overhead, lending
or investing activities of the company. Management anticipates that interest
rates will remain relatively constant throughout 1996.
LIQUIDITY AND CAPITAL RESOURCES. As of March 31, 1996, the Company held
$77,103 in cash accounts (including interest bearing accounts) to fund loans
and operating expenses. The Company has an available a line of credit in the
amount of $250,000 at a rate of Prime plus 1.5 percent, undrawn against at
quarter end. At March 31, 1996, current portions of loans receivable
totalled $511,248. No extraordinary capital expenditures were anticipated
at quarter end. Management believes that existing cash, the line of credit,
and cash generated from operations will be sufficient to allow the company to
meet its obligations as they come due.
At March 31, 1996, the largest asset items consisted of cash and loans
receivable, net of reserve, totalling $1,084,529 out of $1,114,836 total
assets. At March 31, 1995, the largest asset items consisted of cash and
loans receivable, net, totalling $1,093,509 out of $1,117,856 total assets.
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.
8
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.
FOR THE IDAHO COMPANY
BY /s/Eugene D. Heil
- --------------------------------------
President and Chief Accounting Officer
Date April 25, 1996
9