UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. 3)
Filed by the Registrant [X] Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-12
THE COEUR d'ALENES COMPANY
(Name of Registrant as Specified In Its Charter)
________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(I)(1) and 0-11.
1) Title of each class of securities to which Transaction applies:
_________________________________________________
2) Aggregate number of securities to which Transaction applies:
_________________________________________________
3) Per unit price or other underlying value of Transaction computed
pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated
And state how it was determined):
_______________________________________________________________
4) Proposed maximum aggregate value of Transaction:
__________________________________________________
5) Total fee paid:
__________________________________________________
[ ] Fee previously paid with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and
identify the filing for which the offsetting fee was paid previously.
Identify the previous filing
by registration statement number, or the Form or Schedule and the date
of its filing.
1) Amount Previously Paid ______________
2) Form, Schedule or Registration Statement No.: ______________________
3) Filing Party __________________________________________________
4) Date Filed: ______________________________
THE COEUR d'ALENES COMPANY
3900 E Broadway
Spokane, WA 99202
(509) 924-6363
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
DATE AND TIME: __________________.
PLACE: 3900 E. Broadway, Spokane, WA 99202
MAILING ADDRESS: P O Box 2610, Spokane, WA 99220-2610
Proxies, Solicitation and Voting
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of proxies in the accompanying form to be used at the
Annual Meeting of Shareholders on ______, 2002. It was mailed to shareholders
on or about ______, 2002. Properly executed and dated proxies received will
be voted in accordance with instructions thereon. If no instructions are
given with respect to the matters to be acted upon, the shares represented by
the proxy will be voted for the proposal to amend the Company's articles of
incorporation to effect a reverse stock split followed by a forward stock
split of the Company's common stock, for the election of the nominees for
Directors designated below, for the approval of the appointment of BDO Seidman
as the independent certified public accountants of The Coeur d'Alenes Company
("Cd'A" or the "Company") and, as to any other business that comes before the
meeting, in the manner deemed in the best interests of the Company by the
persons named in the proxy.
Shareholders may vote in person or by proxy. A shareholder giving a proxy may
revoke it at any time before it is exercised by filing with the Secretary of
the Company an instrument of revocation or a duly executed proxy bearing a
later date. A proxy may also be revoked by attending the Annual Meeting of
Shareholders and voting in person. Attendance at the Annual Meeting of
Shareholders will not in and of itself constitute the revocation of a proxy.
As of the record date, ________, 2002, the Company had outstanding and
entitled to vote 5,335,530 shares of Common Stock, each of which is entitled
to one vote on each matter to be voted on at the meeting. The Articles of
Incorporation of the Company state that shareholders are not entitled to
exercise cumulative voting rights for the election of Directors.
PROPOSAL NO. 1
AMENDMENT OF THE COMPANY'S
ARTICLES OF INCORPORATION
TO EFFECT A REVERSE STOCK SPLIT FOLLOWED BY A FORWARD
STOCK SPLIT OF THE COMPANY'S COMMON STOCK
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE MERITS OR FAIRNESS OF THE TRANSACTION OR THE ACCURACY OR
ADEQUACY OF THE DISCLOSURES IN THIS PROXY STATEMENT. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
SPECIAL FACTORS
As presented in Proposal No. 1, the Board of Directors has authorized and
unanimously recommends that the Shareholders approve a reverse 1 for 1,000
stock split followed immediately by a forward 1,000 to 1 stock split of the
Company's common stock. A summary of the terms of the Transaction is as
follows:
? The purpose of the Transaction is to cash out Shareholders holding
less than one thousand (1,000) shares of common stock in a record or
nominee account at 6:01 p.m. on ________, 2002 (the "Effective
Time"); the Transaction is being undertaken at this time in order to
provide small, unaffiliated shareholders with an economic means of
liquidating their shares, as well as reducing the Company's expense
of compliance with federal securities laws, (For additional
information, see discussion in the section entitled "Reasons for
Transaction", page 14);
? The ratio for the reverse split is one (1) share for every one
thousand (1,000) shares beneficially owned at the Effective Time;
(For additional information, see discussion in section entitled
"Structure of the Transaction on page 15);
? Shareholders who are cashed out will receive $0.25 for each share
beneficially owned the moment before the Effective Time; the
Directors considered the following factors in determining that the
purchase price is fair:
? it is higher than the current trading price;
? it is higher than liquidation value;
? it allows cashed out shareholders to sell their shares without
cost;
? it allows cashed out shareholders to sell their shares now without
the continuing risks associated with the soft economy;
? Stock is available for purchase on the open market at $0.24 according
to the most recent over the counter listing but the stock is not
trading. Company stock, in transactions for which management is
privy to the details, has traditionally traded at one half of book
value or less both before and since the Company has been listed on
the Bulletin Board. (For additional information, see discussion in
section entitled "Affect of the Transaction on Company
Shareholders" at page 18);
? The Transaction must be approved by a majority of the shares of
common stock including shares owned by Shareholders who are
affiliated with the Company as officers, Directors or employees;
? If the Transaction is approved and if the number of shareholders
drops below three hundred, then the Company intends to file a
certification of termination of registration of its common stock with
the Securities and Exchange Commission and the Company will cease to
be a reporting company; Officers, Directors and holders of 10% or
more of the outstanding shares of common stock also will not be
subject to other provisions of federal securities law. (For
additional information, see section entitled "Effect on
Shareholders" at page 13 and "Affect of the Transaction on
Company" page 20);
? The Transaction, if approved, will not have any material effect upon
Shareholders beneficially owning one thousand (1,000) or more shares
of the Company's common stock; the Directors determined on January
28, 2002 that $0.25 per share was a fair purchase price. (For
additional information, see section entitled "Effect on Shareholders
at page 18).
? If the Transaction is approved, small Shareholders (thereafter
referred to as Cashed-Out Shareholders) will have dissenter appraisal
rights under Idaho law; a Cashed-Out Shareholder, however, must have
sent a notice to the Company prior to the meeting and not voted for
the Transaction. (For additional information, see section entitled
"Dissenter's Appraisal Rights" on page 24).
The purpose of the Transaction is to eliminate the cost associated with
administering a large number of shareholder accounts with fewer than 1,000
shares. All shareholders have received very little benefit from the "public
market" for the stock, as there has been very limited activity since 1993.
As an alternative, the Company has offered several programs allowing
shareholders to tender their shares to the Company, but has had limited
success in reducing the total number of accounts with small holdings. The
Company will benefit as a result of a substantial cost savings (approximately
$43,500 each year) and the small shareholders will benefit from the ability to
cash out their holdings without incurring a sales expense. The current
"market" value is $0.09 per share and any associated sales fees would be
deducted before the funds would be remitted to the shareholder. There will be
no material effect on the remaining shareholders, whether affiliated or
unaffiliated. The cost associated with the Transaction, which is likely to be
approximately $36,000 including the cash-out of the shareholders holding fewer
than 1,000 shares is a detriment to the remaining shareholders. This cost
will not impair or restrict the Company's ongoing business, however, and the
Company, as well as the remaining shareholders, will benefit in future years
from the annual cost reduction. It also will be more difficult for the
remaining shareholders to sell their shares since the Company's stock may not
be listed on the Bulletin Board. It will be more difficult for the
remaining minority shareholders to get financial information on the Company,
as it will no longer be filing reports with the Securities and Exchange
Commission. These detrimental effects will impact the ability of minority
shareholders to make appropriate investment decisions.
The Cashed-Out Shareholders will not be harmed as the net cash to the
shareholder exceeds proceeds available from sale in the open market. The price
of $0.25 per share is approximately twice what is currently available on the
open market. Small shareholders who are cashed out will be subject to the
capital gains tax rules in effect at the time of the Transaction. Mr. Coulson
and the Company have chosen this time for this Transaction because it is
required by operating losses to find ways to cut the expense load while still
maintaining operations at a level that will allow the Company to participate
in a market recovery.
At a regular meeting of the Board of Directors held on November 29, 2001, Mr.
Coulson, and the Directors of the Company initially determined that this
Transaction is fair to all unaffiliated shareholders of the Company. An
excerpt from the minutes of that meeting is included on page 15 of this Proxy
Statement. The small shareholders currently have no way to liquidate their
investment in the Company without incurring costs that are disproportionate to
the overall value of the stock. This Transaction provides a method to cash
out these shareholders. As explained on page 11, the Directors declined to
accept the conclusion presented in a going concern valuation study and report
from an independent business valuation service company.
The Directors decided that $0.25 per share was a fair price. Over the last
two years, the range of high and low bids has been $0.13 to $0.05. Market
price is not a relevant measure of fairness, as there is not an active trading
market. Because of significant losses incurred in fiscal 2001 and continuing
in fiscal 2002, Mr. Coulson and management do not believe the price of a
single stock trade that occurred two years ago ($0.31 per share) represents
fair value nor is it relevant in determining the fairness of the price to the
unaffiliated shareholders. After tax earnings per share have averaged $0.02
and $0.01 over the last three years. At $0.25 per share, the purchase price
represents twelve and one half times average after tax net income per share
based on the last five years and twenty five times average after tax net
income per share based on the last three years. Book value as of December 25,
2002 was approximately $2,927,000, or $0.55 per share. The purchase price
represents roughly 50% of current book value. Liquidation value would likely
be half of a going concern value (determined by Cronkite and Kissell to be
$0.08 per share for minority shareholders) as there would be considerable
expense associated with winding down operations for closure. The net income
generated by the Company over the last three years has only resulted in an
average return on investment of 2%. A new investor in the Company would
undoubtedly require significantly more than twice that amount to justify the
purchase. Therefore, even at half of book value, the return on investment of
4% likely would not attract a lot of buyers. Over the last two years, the
Company has purchased a small number of shares through tender offers at
purchase prices ranging from $0.43 to $0.58. The Company was willing to pay
this higher price because of the few shares involved and the
disproportionately high cost of maintaining the accounts. Tender offers were
to shareholders with 200 or fewer shares. There have been no firm offers by
any unaffiliated party regarding mergers or acquisition of stock or assets
during the past two years. Mr. Coulson, Management and the Directors did not
attempt to assign any weight to the various factors in concluding that the
Transaction is fair to unaffiliated shareholders.
The following analysis was used in determining the fairness of the offer price
of $0.25 per share:
Bid price as published in the Spokane over the Counter Market for the
last two years;
April 4 - April 12, 2000 $0.25
April 13 - April 24, 2000 $0.20
April 25 - May 16, 2000 $0.20
May 17 - May 22, 2000 $0.18
May 23 - June 6, 2000 $0.18
June 7 - June 13, 2000 $0.13
June 14,2000 - January 3, 2001 $0.12
January 4 - August 27, 2001 $0.10
August 28 - October 11, 2001 $0.05
October 12 - October 15, 2001 $0.12
October 16 - November 28, 2001 $0.05
Noveber 29 - November 29, 2001 $0.12
November 30, 2001 - May 2, 2002 $0.05
May 3, 2002 - July 15, 2002 $0.07
July 16, 2002 - August 5, 2002 $0.08
August 6 - Present $0.09
The offer price is the highest "market" price during the two year
period and significant operating losses have been incurred since the
"market" price of $0.25 over two years ago.
The Price/Earnings ratio was calculated as follows;
Average Shares
Year After tax net income Outstanding Earnings Per Share
1997 $125,310 5,353,561 $0.0234
1998 $251,026 5,350,338 $0.0469
1999 $141,910 5,348,213 $0.0265
2000 $154,546 5,344,193 $0.0289
2001 $(132,171) 5,341,564 $(0.0247)
Total $0.101
Divided by 5 $0.02
Offering Price of $0.25/$0.02 = 12.5 x earnings
1999 $141,910 5,348,213 $0.0265
2000 $154,546 5,344,193 $0.0289
2001 $(132,171) 5,341,564 $(0.0247)
Total $0.03
Divided by 3 $0.01
Offering Price of $0.25/$0.01 = 25 x earnings
These calculations are based on undiluted shares as the only diluting factor
during the five year period was outstanding debentures that were never
converted to common stock and have been retired.
At a regular meeting of the Board held on January 28, 2002, the Board of
Directors determined that the transaction was fair to the unaffiliated and
Cashed-Out Shareholders. The Directors reviewed the earlier decision that the
purchase price would be $0.25 per share and determined that market conditions
had not changed. In fact, the Company was continuing to lose money. If
anything, the price could be adjusted down. In order to make the Transaction
attractive to the shareholders being cashed-out and at the same time not
damage the remaining unaffiliated shareholders, the Directors determined that
a purchase price of $0.25 was still a fair price. The Directors also agreed
that all aspects of the Transaction were fair to the Cashed-Out Shareholders.
This Transaction will not have a material effect on shareholders holding 1,000
or
more shares of the Company's stock. The Company will no longer have a class
of securities that is registered nor be a reporting Company; without an active
trading market over the last ten years, however, the registration of the
common stock has not provided a material benefit to the Company or its
shareholders.
If this Transaction had occurred as of December 25, 2001, the shareholders
with 1,000 or more shares would have benefited from an increase in book value
of approximately $0.02 per share. At the end of the second fiscal quarter,
the Company's book value is $.54. If the cost of this Transaction, including
the payment to cashed out shareholders, is approximately $36,000, the book
value per share after the Transaction will also be $.54 per share. Affiliated
shareholders, who currently control 64.95% of the outstanding common stock,
will control 65.73% of the outstanding common stock after the Transaction. If
this Transaction had taken place at the beginning of fiscal 2000, the loss per
share in fiscal 2001 would have been $0.025 instead of $0.024. The earnings
per share would have been $0.029 compared to actual earnings per share of
$0.028. The affiliated shareholders share of the net loss for 2001 would have
increased from $85,845 to $86,876. Likewise, the affiliated shareholders
share of the net income from fiscal 2000 would have increased from $100,377 to
$101,583. The change is less than one percent. Mr. Coulson's share of the
net book value and interest in net income of the Company would increase from
50.56% to 51.15%. His share of the operating loss for fiscal 2001 would have
increased by 1% or $779 and his share of the operating profit for fiscal 2000
would have increased by 1% equaling $912. His total share of the net book
value will decrease by approximately $1,500.
No Director dissented or abstained from voting on the Transaction. The
Transaction has not been structured in a manner that would require the
approval of a majority of the unaffiliated shareholders voting as a separate
class; neither Idaho state law nor the Articles of Incorporation of the
Company require nor provide for a procedure for the Cashed-Out Shareholders to
vote in a separate class.
A majority of the Directors who are not employees of the Company has not
retained an unaffiliated representative to act solely on behalf of
unaffiliated shareholders for purposes of negotiating the terms of this
Transaction; neither the Company nor Mr. Coulson intend to grant access to
Company files to unaffiliated Shareholders (except to the extent such access
exists for all shareholders under Idaho law), to provide counsel to
unaffiliated Shareholders at Company expense, to obtain appraisal services or
to prepare a report concerning the fairness of the Transaction. Although
these procedural safeguards are not present, Mr. Coulson and the Company
believe that the Transaction is procedurally fair to unaffiliated small
shareholders. The Directors understand their fiduciary responsibilities, have
authorized several tender offers to small shareholders previously, and have
tried to establish active trading markets. Dissenter appraisal rights also
are available.
This Transaction was approved by all the Directors who are not employees of
the Company.
There have been no firm offers made by an unaffiliated person during the last
two years to acquire the Company or a significant part of the Company's
assets.
In accordance with an engagement letter dated May 10,2001, the Company
received an independent valuation of the shares of common stock owned
beneficially by the minority shareholders as of August 31, 2001. This report
was prepared by Cronkite and Kissell Business Valuation and Financial Advisory
Services, 1888 Century Park East, Suite 1900, Los Angeles, CA 90067, who have
significant valuation experience including an emphasis on accounting, finance
and legal. The Company selected this firm because of their experience with
the steel fabrication industry. The report was prepared by David Kissell, ASA
and Helena Nam Reich, ASA. No relationship existed between this firm and the
Company or any of its affiliates before the preparation of the report; no
relationship is contemplated for the future. The valuation methodology
combined a market approach with an income approach, giving equal weight to
both approaches. The report was based upon financial information of the
Company for the previous five fiscal years. The market approach compared
ratios and earnings analysis with comparable financial information of eight
public companies. The income approach was based upon a capitalization of
debt-free cash flow. The market approach resulted in a total equity value of
$740,000, with a weight factor of 50% (a $370,000 weighted value). The income
approach resulted in a total equity value of $740,000, with a weight factor of
50% (a $395,000 weighted value). The total weighted value, therefore, was
$765,000 and, prior to discounts, the value per share would be $0.14 for the
5,340,804 shares issued and outstanding.
Cronkite and Kissel then applied a minority interest discount of 17% ($0.02
per share) and a lack of marketability discount of 30% ($.04 per share). The
Report then concluded that the fair market value of the minority interest was
$.08 per share. Since the Report did not compare the financial information of
the Company to similar information of other companies of similar size, the
Board of Directors felt that the discount for lack of marketability used in
the Report was questionable; consequently, the Directors did not accept the
conclusions set forth in the Report. The Report was filed on May 13, 2002 as
Exhibit 1 to Schedule 13E3/A of the Company and is incorporated herein by
reference.
A copy of the valuation report will be made available for
inspection and copying at the principal executive office of the
Company at 3900 E Broadway, Spokane, WA during regular business
hours by any interested shareholder of the Company or any
representative who has been so designated in writing by a
shareholder. The Company will mail a copy of the report to any
interested shareholder or designated agent upon written request
and without charge.
There have been no sales or acquisitions of the Company's common stock by any
of the executive officers or directors of the Company where the aggregate
value of the transactions exceeded $60,000 during the past two years.
The Company has been conducting tender offers to holders of 200 and fewer
shares continuously over the past two years. Total shares purchased and the
price paid for the Common Stock is detailed in the following table:
Avg Cost
Date # of shares Total Cost Per Share
October 2001 5,274 $2,260 $0.43
May 2001 776 $ 400 $0.52
February 2001 584 $ 320 $0.55
September 2000 1,055 $ 540 $0.51
June 2000 1,014 $ 590 $0.58
On December 21, 2001, the Company received an unsolicited offer to sell to
Company employees the shares of common stock held by Eliot Investments Limited
Partners. This Partnership offered to sell the shares quoted at the market
price, which at that time was $0.05. The total shares involved were 4,205.
Of those 4,205, Jimmie Coulson acquired 189 shares, Marilyn Schroeder acquired
2,516 shares and other employees who are not executive officers or directors
acquired the remaining 1,500 shares.
There were no negotiations, transactions or material contacts between the
Company and any of its executive officers, directors or affiliates that would
qualify as significant corporate events, as that term is defined by Item
1005(b) and (c) of Regulation M-A..
There are no agreements between the Company, its executive officers, directors
or any affiliates and any other party with respect to the Company's common
stock which would be subject to Item 1005(e) of Regulation M-A.
Ratio of earnings to fixed charges are as follows:
Nine Month Period Ended June 25, 2002: -1.22:1
Fiscal Year Ended September 29, 2001: -.54:1
Fiscal Year Ended September 30, 2000: .61:1
Fiscal Year Ended September 25, 1999: .57:1
Fiscal Year Ended September 26, 1998: .83:1
Fiscal Year Ended September 27, 1997: .42:1
Subject Company Information
(a) This Transaction is being conducted by the issuer:
THE COEUR D'ALENES COMPANY
3900 E Broadway
Spokane, WA 99220-2610
(509) 924-6363
b) Total shares of Common Stock outstanding as of April 23, 2002: 5,335,530
(c) There is currently no established public trading market for the Company's
common stock. The range of high bid and low bid quotations for the Company's
common stock, by quarters, as reported on the over-the-counter market for the
period beginning October 1, 1999 through September 29, 2001, is set forth in
dollars per share below:
2001 2000
High - Low High - Low
July 1 - September 30 $.12 - $.05 $.12 - $.12
April 1 - June 30 $.10 - $.10 $.25 - $.12
January 1 - March 31 $.12 - $.10 $.31 - $.12
October 1 - December 31 $.12 - $.12 $.12 - $.12
The source of the above quotations is the Spokane over-the-counter listing,
and the above quotations reflect inter-dealer prices, without retail mark-up,
markdown or commission and may not necessarily represent actual Transactions.
In addition, the lack of an established public trading market for the
Company's common stock should be kept in mind in reviewing the above
quotations. The prices shown are reflective of Transactions for a limited
number of shares.
(d) The Company has not declared or paid any dividend on the shares of common
stock in the last two (2) fiscal years. There also have not been any changes
in or disagreements with the Company's independent public accountants
concerning accounting or financial disclosures.
(e) n/a
(f) The Company has been conducting tender offers to holders of 200 and fewer
shares continuously over the past two years. Total shares purchased and the
price paid for the Common Stock is detailed in the following table:
Avg Cost
Date # of shares Total Cost Per Share
October 2001 5,274 $2,260 $0.43
May 2001 776 $ 400 $0.52
February 2001 584 $ 320 $0.55
September 2000 1,055 $ 540 $0.51
June 2000 1,014 $ 590 $0.58
The source of funds for the transaction will be the Company's working capital.
The total number of fractional shares that will be purchased and the total
cash to be paid by the Company are unknown. However, if the Transaction had
been completed as of January 1, 2002, the cash payment that would have been
issued to cashed out shareholders would have been at least $15,822 based on
63,287 shares held by 599 registered shareholders. The actual amounts will
depend on the number of cashed out shareholders at the Effective Time of the
transaction, which may vary from the number identified on January 1, 2002.
The Company is not able to determine at this time the number of shareholder
accounts with fewer than 1,000 shares are held in depositories.
The cost of the transaction is expected to be around $20,000 not including the
payment to cashed out shareholders. Legal fees, solicitation materials and
mailing are the only significant costs the Company anticipates at this time.
Three of the Company's Directors, listed below, will be cashed out unless they
acquire additional shares or if Dr. Robert Shanewise combines his accounts, to
bring their total holdings of record to more than 1,000.
Robert P. Shanewise
Wendell J. Satre
Lawrence A. Stanley
As all of the Directors believe this transaction is in the best interest of
the Company and all of the unaffiliated shareholders, all five intend to vote
their shares in favor of this transaction.
No Director or executive officer has made a recommendation separate from the
unanimous resolutions adopted by the directors either in support of or opposed
to this transaction to any other party.
No person or class of persons are directly or indirectly employed, retained,
or are to be compensated to make solicitations or recommendations in
connection with this transaction.
No Officer, employee or corporate assets of the Company has or will be
employed or used by the Company in connection with this transaction.
Identify and Background of Filing Person
The filing person is the subject company; because he is an
affiliated shareholder
Jimmie T. G. Coulson also is deemed to be a filing person;
Directors:
Jimmie T G Coulson, Director, President/Chief Executive Officer
("CEO")
P O Box 2610
Spokane, WA 99220-2610
(509) 924-6363
Wendell J Satre, Director
2822 E Snowberry Lane
Spokane, WA 99223
(509) 536-5627
Marilyn Schroeder, Director, Vice President/Chief Financial Officer
("CFO")
P O Box 2610
Spokane, WA 99220-2610
(509) 924-6363
Robert P Shanewise, Director
921 W Comstock Court
Spokane, WA 99203
(509) 443-1944
Lawrence A Stanley, Director
Empire Bolt and Screw
1501 E Trent
Spokane, WA 99202
(509) 534-0636
Officers:
Jimmie T G Coulson, Director, President/CEO
P O Box 2610
Spokane, WA 99220-2610
(509) 924-6363
Lawrence A Coulson, Vice President/GM Stock Steel
P O Box 2610
Spokane, WA 99220-2610
Marilyn Schroeder, Director, Vice President/CFO
P O Box 2610
Spokane, WA 99220-2610
(509) 924-6363
Information concerning the principal occupation and employment during the last
five years is set forth in Proposal No. 2 of this proxy statement at page 25.
None of these individuals has been convicted in a criminal proceeding nor
been a party to a judicial or administrative proceeding in the last five
years. All of these individuals are United States Citizens.
The Board of Directors has authorized and unanimously recommends that the
Shareholders approve a reverse 1 for 1000 stock split followed immediately by
a forward 1000 for 1 stock split of the Company's common stock (together, the
"Transaction"). As permitted under Idaho law, Shareholders of the Company
whose shares are converted into less than one share in the reverse split
portion of the Transaction will receive cash payments equal to the value of
their fractional interests determined in the manner described below. The
Transaction will include shares of common stock held in a nominee account, as
well as shares registered in the name of a Shareholder.
If approved, the Transaction will take place on . For the
Transaction to be approved, a majority of the Shareholders entitled to vote at
the Meeting, including Shareholders who are affiliated with the Company, must
approve the amendments to the Company's Articles of Incorporation attached
hereto as Exhibit A; the Company anticipates that the Shareholders listed in
the Security Ownership of Management section on page 31.will vote in favor of
the Transaction.
EFFECT ON SHAREHOLDERS:
If approved at the meeting, the Transaction will effect unaffiliated
Shareholders holding less than 1,000 shares of common stock in a record
account or in a nominee account at the close of business on _______, 2002.
Unaffiliated Shareholders holding common stock in street name through a
nominee (such as a bank or broker) will be effected in the same manner as
Shareholders whose shares are registered in their name. Such shares will be
cashed out by the Company at a price of $0.25 for each share beneficially
owned by an unaffiliated Shareholder prior to the effective time of the
reverse split; the Directors have determined that $0.25 represents a fair
value for the cashed-out shares. (See, Structure of the Transaction below.)
No commission or other fee will be charged to the Shareholders on this cash-
out. The purchase price will be paid when the certificates for such shares are
delivered to the Company. Such shares will have no continuing interest in the
Company after the Transaction whether or not such shares are delivered to the
Company.
The Directors believe that the Transaction will provide a significant benefit
to the unaffiliated Shareholders, as it provides a method for the unaffiliated
Shareholders owning less than 1,000 shares to receive cash for their shares
without incurring high brokerage costs. Because affiliated Shareholders own
or control 64.95% of the outstanding shares of the Company's common stock, it
is difficult for unaffiliated, small Shareholders to participate in or have an
effect upon management of the Company. See also, Background and Purpose of
the Transaction, page 12.
After the Transaction is completed, the unaffiliated Shareholders will not
have an equity interest in the Company. Management does not have any basis
upon which to speculate concerning the future fair market value of its shares
of common stock. The general downturn in the economy and the closure of the
aluminum smelters in the northwest in 2000 and 2001, among other things caused
the Company to incur a net loss for the fiscal year ended September 29, 2001
of $132,171. Management has been following an aggressive cost cutting program
since mid-2000; costs reduced and steps taken, include: merging the wholly
owned subsidiary back into the parent company to reduce overhead, cutting
staff by 30%, reducing inventories to lower carrying costs, postponing
equipment purchases and putting idled equipment up for sale . Eliminating the
projected cost of $43,500 related to small shareholders and SEC registration
is another cost reduction approach. The affiliated Shareholders and Directors
understand the risks facing the Company in the future. The Directors do not
believe that the small unaffiliated Shareholders should be subject to the
Company's future uncertainties. The Directors do not believe that there is
any detriment to the Shareholders in this Transaction.
If the Transaction is completed, affiliated Shareholders will own 65.73% of
the outstanding shares of common stock. See Affects of the Transaction on
Company Shareholders, page 13 for effect of the Transaction on the affiliated
Shareholders, increased interest in the net book value and net earnings/loss
of the Company.
The Transaction will have no net effect on Shareholders holding 1,000 or more
shares of the Company's common stock whether held of record or in a nominee
account with a bank or broker. Continuing Shareholders will no longer receive
whatever benefits result from the reporting system, including the continued
filing of the annual report on Form 10-KSB and quarterly filings on Form 10-
QSB. If the Transaction is approved, then the Company intends to withdraw its
registration of the common stock with the Securities and Exchange Commission
and cease to be a reporting company. If the Company's registration with the
SEC pursuant to Section 12(g) of the Securities Exchange Act of 1934 (the
"SEA") is withdrawn, then officers, Directors and shareholders owning more
than 5% of the outstanding shares of the Company's common stock will not be
required to file reports presently required by Sections 13 and 16 of the SEA.
The Company will also not be required to file proxy material with the SEA
pursuant to Section 14 of the SEA.
REASONS FOR THE TRANSACTION:
The Company, acting through its Directors, including all Directors who are not
employees of the Company, and Mr. Coulson recommend approval of the
Transaction for the following reasons, which are described in more detail
under "Background and Purpose of the Transaction" below:
? As a result of the Company's merger with Conjecture, Inc. in 1993,
the Company has a large number of Shareholders holding a small number
of shares. As of March 1, 2002, 599 of the 721 Shareholders of
record of the Company held less than 1,000 shares. These shares
constituted only 63,287 (1.18%) of the total 5,335,530 shares
outstanding at the time. Of these 599 shareholders, 382 own 40 or
fewer shares resulting in a value of $10.00 or less. Continuing to
maintain accounts for these Shareholders and mailing them notices and
financial information costs the Company a substantial amount each
year. The Transaction will reduce the number of Shareholders with
small accounts and result in significant cost savings for the
Company.
? In most cases, it is prohibitively expensive for Shareholders with
fewer than a round lot of 1,000 shares to sell their shares in the
limited public market that exists for the stock. The Transaction
provides such Shareholders with the opportunity to receive cash for
their shares without incurring brokerage fees. If these
Shareholders, however, do not want to cash out their shares, they can
purchase additional shares on the open market to increase their
record account to at least 1,000 shares or, if applicable,
consolidate or transfer record or nominee accounts held in different
names into a single record or nominee account with 1,000 or more
shares. Shareholders with less than 1,000 shares in a nominee
account can instruct their agent to purchase additional shares; for
some Shareholders, the nominee account could be closed with the
shares consolidated with shares held of record. Such Shareholders
need to complete any purchase or consolidation prior to the effective
time on ________, 2002.
? The Directors and officers of the Company are undertaking the
Transaction at this time because in the face of a depressed economy
and a significant decline in the demand for the Company's products,
the expense associated with administering these small shareholder
accounts is too great of a burden on cash flow. The Company
estimates that the annual savings from this Transaction will be
approximately $43,500.
STRUCTURE OF THE TRANSACTION
The Transaction includes both a reverse stock split and a forward stock split
of the Company's common stock. If this Transaction is approved and occurs, the
reverse split will occur at 6:00 P.M. Pacific time on ________, 2002 (the
"Effective Time"). All Shareholders on _________, 2002 will receive 1 share
of the Company's common stock for every 1,000 shares of the Company's common
stock held in their record or nominee accounts at that time. Any Shareholder
who has the beneficial interest in fewer than 1,000 shares of the Company's
common stock at the Effective Time (referred to hereafter as a "Cashed-Out
Shareholder"), will receive a cash payment instead of fractional shares. This
cash payment will be $0.25 per share as determined by the Board of Directors
at regularly scheduled meetings of the Board held on November 29, 2001 and
January 28, 2002. The Directors considered an independent valuation report
prepared by Cronkite and Kissell that established the value at $.08 per share
as of August 31, 2001. The Directors, however, did not accept the conclusions
and recommendations of that report. The Company did not ask Cronkite &
Kissell to issue a fairness opinion. As noted above, a copy will be provided
without charge upon written request. The Directors decided that $0.25 was a
more appropriate value. The minutes of the meeting for this discussion state
in part as follows:
The Board concluded that the Company should attempt to
eliminate the small shareholders in order to reduce
the number of shareholders to less than 300. The
Company thus would not be required to be a reporting
entity with the Securities and Exchange Commission.
Elimination of the filing requirements will reduce
expenses significantly. An independent valuation
report by Cronkite and Kissell on the Company's stock
was available for Board use. This report concluded
that the shares of common stock that represent a
minority interest have a fair market value of $0.08
per share. There was discussion on the lack of
relevance of this report. Since the report did not
compare the Company to other companies of similar
size, the Board felt that the discounts for lack of
marketability and lack of control used in the report
were questionable; consequently, the Directors did not
accept the conclusions set forth in the report. A
value of twenty-five cents a share, roughly half of
current book value, was considered and determined by
the Directors to be a fair price.
At the next regularly scheduled Directors meeting held January 28, 2002, the
Directors reviewed again their prior conclusion that $0.25 was the fair market
value for the shares. In addition to the facts examined at the November 29,
2001 meeting, the Directors noted that, based on the average earnings for the
last five years, the price earnings ratio at that value would be 12.5 to 1.
Given no change in business conditions or marketability of the stock, coupled
with the belief that 12.5 x earnings is a fair price, the Board once again
concluded that $0.25 was the fair market value per share. As required by
Idaho law, the Directors also considered the beneficial effect upon the
Company's customers, vendors, and suppliers of the cost reductions resulting
from the Transaction.
Immediately following the Effective Time for the reverse split, all
Shareholders who are not Cashed-Out Shareholders will receive 1,000 shares of
the Company's common stock for every 1 share of stock they received as a
result of the reverse stock split. If a Shareholder holds 1,000 or more shares
in a record or nominee account prior to the Transaction, any fractional share
in those accounts will not be cashed out after the reverse split and the total
number of shares held in those accounts will not change as a result of the
Transaction.
In general, the Transaction can be illustrated by the following examples:
Hypothetical Scenario
Result
A is a Shareholder who holds 999
shares of Company stock in one
account as of 6 P.M. on ________,
2002. Assume the trading value of
A's share is $0.25 per share.
Instead of receiving a fractional
share (.999 of a share) of Company
stock after the reverse split, A's
999 shares will be converted into the
right to receive cash. For these 999
shares, A will receive $249.75,
assuming the hypothetical trading
value of $0.25 per share.
Note: If A wants to continue an
investment in the Company, A can buy
at least 1 share of stock and hold it
in A's record account. A would have
to act far enough in advance of
________, 2002 so that the purchase
is complete by the close of business
on that date.
B has 1 record account and 1 nominee
account. As of _______, 2002, B holds
500 shares of Company stock in one
account and 700 shares of stock in
the nominee account. B has the
beneficial interest in the shares in
both accounts.
B will receive cash payments equal to
$0.25 per share for shares of Company
stock in each of the two accounts. B
would receive two checks totaling
$300.00 (500 shares x. .25 = $125.00
+ 700 shares x .25 = $175.00 $125.00
+ $175.00 = $300.00
Note: If B wants to continue an
investment in the Company, B can
consolidate/transfer the two accounts
prior to _______, 2002. In that
case, B's holdings will not be cashed
out in connection with the
Transaction because B will hold at
least 1,000 shares in one account. B
would have to act far enough in
advance so that the consolidation is
complete by the close of business on
_______, 2002.
C holds 1,001 shares of Company stock
in a record account as of ________,
2002.
After the Transaction, C will
continue to hold all 1,001 shares of
Company stock.; the Transaction will
not effect his ownership.
D holds 999 shares of Company stock
in a nominee account as of ________,
2002.
Same result as A above.
BACKGROUND AND PURPOSE OF THE TRANSACTION
The Company has a large number of small shareholders resulting from the merger
with Conjecture, Inc. in 1993. Since that time, the Company has been able to
reduce its total number of Shareholders by offering several programs that have
allowed the Shareholders to tender their shares to the Company. The Company,
however, still has a large number of Shareholders with less than 1,000 shares.
As of May 1, 2002, 599 Shareholders owned fewer than 1,000 shares of stock.
At that time, these Shareholders represented approximately 83% of the total
number of Shareholders of record, but with ownership less than 2% of the total
number of outstanding shares of the Company's stock. Mr. Coulson and the
Company believe that the Transaction will provide the Cashed-Out Shareholders
with a cost-effective way to cash out their investments, as the Cashed-Out
Shareholders will not have any Transaction costs in connection with the
Transaction. In most other cases, small shareholders would likely incur
brokerage fees disproportionately high relative to the market value of the
shares if they wanted to sell their stock. In addition, some small
shareholders might even have difficulty finding a broker willing to handle
such a small Transaction. The Transaction, however, eliminates these problems
for most small shareholders. The Company and Mr. Coulson do not believe that
there is any alternative means available at this time to accomplish this
objective for small shareholders.
Mr. Coulson, as the single largest shareholder and President of the Company,
is very concerned about the Company's cost of doing business in a slow market.
Therefore, he supports the purpose of the Transaction. The cost of
administering each Shareholder's account is the same regardless of the number
of shares held in each account. Therefore, the Company's cost to maintain
hundreds of small accounts is disproportionately high when compared to the
total number of shares involved.
Because of these disproportionate costs, the Directors and Mr. Coulson believe
that it is in the best interests of the Company and its shareholders as a
whole to eliminate the administrative burden and costs associated with small
shareholders with fewer than 1,000 shares of Company stock.
The Company in the future may pursue alternative methods of reducing its
shareholder base whether or not the Transaction is approved, including odd-lot
tender offers and programs to facilitate sales by shareholders of odd-lot
holdings. There can be no assurance, however, that the Company will decide to
engage in any such Transactions.
AFFECT OF THE TRANSACTION ON COMPANY SHAREHOLDERS
Shareholders With Fewer Than 1,000 Shares:
If the Company completes the Transaction, Cashed-Out Shareholders:
? Will not receive a fractional share of the Company stock as a result
of the reverse split.
? Instead of receiving a fractional share of Company stock, will
receive cash equal to $0.25 for each share owned beneficially prior
to the Effective Time of the Transaction.
? After the reverse split, will have no further interest in the Company
with respect to cashed-out shares. These shares will no longer be
entitled to the right to vote as a shareholder or share in the
Company's assets, earnings and profits.
? Will not have to pay any service charges or brokerage fees in
connection with the Transaction.
? As soon as practicable after _________, 2002, will receive cash for
the common stock held immediately prior to the reverse split in
accordance with the procedure described below.
? All amounts owed to Shareholders will be subject to applicable
federal income tax and state abandoned property laws.
? No interest will be paid on cash payments owed as a result of the
Transaction.
If you hold certificated shares:
? A Cashed-Out Shareholder with a stock certificate representing
cashed-out shares will receive a transmittal letter from the Company
as soon as practicable after ______, 2002. The letter of transmittal
will contain instructions on how to surrender stock certificate(s) to
the Company for cash payment. Cash payments will not be made
until the outstanding certificate(s) are surrendered to the
Company together with a completed and executed copy of the
letter of transmittal. Please do not send certificates until
you receive a letter of transmittal.
If you hold shares in a nominee account:
? The Company intends for the Transaction to treat Shareholders
holding common stock in street name through a nominee (such as a
bank or broker) in the same manner as Shareholders whose shares
are registered in their names. Nominees will be instructed to
effect the Transaction for their beneficial holders. Nominees,
however, may have different procedures and Shareholders
holding common stock in street name should contact their
nominees.
NOTE:
Shareholders who would be cashed out as part of the Transaction but want to
continue to hold Company stock after the Transaction may do so by completing
any of the following actions by _________, 2002:
(1) Purchase a sufficient number of shares of Company stock on the open
market and have them registered or deposited so that they hold at least
1,000 shares in their account immediately prior to the Effective Time
for the reverse split; or
(2) If applicable, consolidate accounts so that they hold at least 1,000
shares of Company stock in one record account immediately prior to the
Effective Time.
Shareholders with 1,000 or More Shares:
Shareholders with 1,000 or more shares of common stock as of 6:00 P.M. on
_______, 2002 will first have their shares converted to one thousandth of the
number of shares held immediately prior to the reverse split. One minute after
the reverse split, at 6:01 P.M., such shares will be reconverted in the
forward stock split into 1,000 times the number of shares held after the
reverse split, which is the same number of shares held before the reverse
split. As a result, the Transaction will not effect the number of shares held
by the shareholder who holds 1,000 or more shares immediately prior to the
Effective Time.
If this Transaction had occurred as of December 25, 2001, the shareholders
with 1,000 or more shares would have benefited from an increase in book value
of approximately $0.02 per share. The Company's net book value as of the end
of the second fiscal quarter was $.54 per share. If the cost of this
Transaction, including the payment to cashed out shareholders, is
approximately $36,000, the book value per share after the Transaction will
also be $.54 per share. Affiliated shareholders, who currently control 64.95%
of the outstanding common stock, will control 65.73% of the outstanding common
stock after the Transaction. If this Transaction had taken place at the
beginning of fiscal 2000, the loss per share in fiscal 2001 would have been
$0.025 instead of $0.024. The earnings per share would have been $0.029
compared to actual earnings per share of $0.028. The affiliated shareholders
share of the net loss for 2001 would have increased from $85,845 to $86,876.
Likewise, the affiliated shareholders share of the net income from fiscal 2000
would have increased from $100,377 to $101,583. The change is less than one
percent. Mr. Coulson's interest in the net book value and net income would
increase from 50.56% to 51.15%. His share of the operating loss for fiscal
2001 would have increased by $779 and his share of the operating profit for
fiscal 2000 would have increased by $912. His total net book value would
decrease by approximately $1,500.
Beneficial Owners of Company Stock:
The Transaction will effect shareholders holding Company stock in street name
through a nominee (such as a bank or broker). Nominees may have different
procedures and shareholders holding Company stock in street name should
contact their nominees to determine how they are effected by this Transaction.
Determination of Cash-Out Price
As explained in the section above entitled Structure of the Transaction, the
cash-out price of the stock will be $0.25 per share. Under Idaho law, the
Company either may arrange for the sale of these fractional shares or pay cash
for their fair value. If the Transaction is completed, the Directors will
elect to pay cash for the fair value.
AFFECT OF THE TRANSACTION ON COMPANY
The Transaction will effect the registration of the Company's common stock
with the Securities and Exchange Commission (the "SEC") under the Securities
Exchange Act of 1934, as amended. Following the successful completion of the
Transaction, the Company will file a certification of termination of
registration pursuant to Rule 12g-4, as promulgated by the SEC under the
Securities Exchange Act of 1934. The Company will cease to be a reporting
company. The Company's listing of common stock on the NASDAQ Bulletin Board
will be discontinued. The Company will not be required to file annual or
quarterly reports with the SEC for any reporting period ending after the date
that the certification is filed. Information contained in annual or quarterly
reports will not be available on the internet.
The Company's Articles of Incorporation currently authorize the issuance of 10
million shares of common stock having no par value. The Amendment to the
Articles of Incorporation will reduce the authorized shares to 1,000 shares as
of the Effective Time, with the number of authorized shares returned to
10,000,000 shares moments thereafter. (See, Exhibit A) The total number of
outstanding shares of Company common stock will be reduced by the number of
shares held by Cashed-Out Shareholders immediately prior to the Effective
Time. Based on the Company's best estimates, if the Transaction had taken
place as of January 1, 2002, the number of outstanding shares of common stock
would have been reduced by approximately 63,287 assuming only shareholders of
record are effected by the Transaction and that no Shareholders took steps to
retain their shares. The number of holders of record of Company common stock
then would have been reduced from approximately 721 to 122 or by approximately
599 shareholders. Consequently, the Company expects to be able to withdraw
its registration with the SEC, even if shareholders with less than 1,000
shares in a nominee account are not included in the Transaction.
The Company has no current plans to issue additional shares of common stock.
Unless legally required to do so, the Directors will not seek further
shareholder action before issuing stock. The Articles of Incorporation do not
provide shareholders with any preemptive right to acquire shares.
The total number of fractional shares that will be purchased and the total
cash to be paid by the Company are unknown. If the Transaction, however, had
been completed as of May 1, 2002, the cash payment that would have been issued
to those Cashed-Out Shareholders who are Shareholders of record would have
been $15,822 based on 63,287 shares held by 599 record shareholders. The
actual amounts will depend on the number of Cashed-Out Shareholders on
________, 2002, which may vary from the number identified on January 1, 2002.
The Company also cannot determine at this time the number of Shareholders
beneficially owning less than 1,000 shares whose shares are held in a nominee
account. Any such Shareholders subject to the cash-out would be added to the
totals in this paragraph. All funds required to complete the Transaction will
be provided by the general operations of the Company. The Company estimates
that the expenses of the Transaction, excluding estimated postage expense for
the proxy statement for this proposal and the printing cost of the Annual
Report, will not exceed $15,000.00. The Company will not borrow funds
specifically for the Transaction.
The Company's shares of common stock will continue to have no par value.
STOCK CERTIFICATES
The Transaction will not effect any certificates representing shares of common
stock held by owners of 1,000 or more shares immediately prior to the reverse
split. Old certificates held by any of these Shareholders will continue to
evidence ownership of the same number of shares as is set forth on the face of
the certificate.
As described above, any Cashed-Out Shareholder with share certificates will
receive a letter of transmittal after the Transaction is completed. These
Shareholders must complete and sign the letter of transmittal and return it
with their stock certificate(s) to the Company before they can receive cash
payment for their shares.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Certain federal income tax consequences to the Company and shareholders
resulting from the Transaction are summarized below. This summary is based on
existing US Federal income tax law, which may change, even retroactively.
This summary does not discuss all aspects of federal income taxation that may
be important to shareholders in light of their individual circumstances. Many
shareholders (such as financial institutions, insurance companies, broker-
dealers, tax exempt organizations and foreign persons) may be subject to
special tax rules. In addition, this summary does not discuss any state,
local, foreign or other tax considerations. This summary assumes that
shareholders have held and will hold their shares as capital assets for
investment p0urposes under the Internal Revenue Code of 1986, as amended.
Shareholders should consult their tax advisors as to the particular federal,
state, local, foreign, and other tax consequences, in light of their specific
circumstances.
The federal income tax consequences to shareholders also will depend upon
whether they are continuing or Cashed-Out Shareholders, as discussed below.
Federal Income Tax Consequences to Shareholders Who Are Not Cashed Out by the
Transaction:
Any shareholder who (1) continues to hold Company stock immediately after the
Transaction, and (2) receives no cash as a result of the Transaction, will not
recognize any gain or loss in the Transaction and will have the same adjusted
tax basis and holding period in his Company stock as he had in such stock
immediately prior to the Transaction.
Federal Income Tax Consequences to Cashed-Out Shareholders:
A Cashed-Out shareholder who receives cash in exchange for a fractional share
as a result of the Transaction, will recognize capital gain or loss. The
amount of capital gain or loss recognized will be the difference between the
cash received for cashed-out stock and the Shareholder's aggregate adjusted
tax basis in such stock.
Maximum Tax Rates Applicable to Capital Gain:
Net capital gain (defined generally as total capital gains in excess of
capital losses for the year) recognized upon the sale of capital assets that
have been held for more than 12 months generally will be subject to tax at a
rate not to exceed 20%. Net capital gain recognized from the sale of capital
assets that have been held for 12 months or less will continue to be subject
to tax at ordinary income tax rates. Capital gain recognized by a corporate
taxpayer will be subject to tax at the ordinary income tax rates applicable to
corporations.
ADDITIONAL INFORMATION
The Company's Annual Report for the fiscal year ended September 29, 2001, has
been included with the proxy statement. The Company currently has fifty-five
(55) employees on a full time equivalent basis. The section entitled
"Business of the Issuer", together with the consolidated financial
statements for the fiscal years ended September 29, 2001 and September 30,
2000, provide additional information concerning the Company's business,
including products currently distributed, the methods of distribution,
principal markets and effective environmental laws and regulations. The
information set forth in the Annual Report is important for every Shareholder
to review. The Annual Report also contains a description of real property
owned and leased by the Company together with a description of the plant and
facilities of the Company. The Sections of the Annual Report entitled
"Business of Issuer" and "Description of Property" on pages 2 and 5 of the
Annual Report are incorporated herein by reference. The consolidated
financial statements on pages F-1 through F-18 also are incorporated by
reference
As of April 1, 2002, the Company had 5,335,530 shares of common stock issued
and outstanding. There is currently no established public trading market for
the Company's common stock. The range of high bid and low bid quotations for
the Company's common stock, by quarters, as reported on the over-the-counter
market for the period beginning October 1, 1999 through March 31, 2002, is set
forth in dollars per share below:
High - Low
April 1 - June 30, 2002 $.05 - $.07
January 1 - March 31 2002 $.05 - $.05
October 1 - December 31 2001 $.05 - $.05
July 1 - September 30 2001 $.12 - $.05
April 1 - June 30 2001 $.10 - $.10
January 1 - March 31 2001 $.12 - $.10
October 1 - December 31 2000 $.12 - $.12
July 1 - September 30 2000 $.12 - $.12
April 1 - June 30 2000 $.25 - $.12
January 1 - March 31 2000 $.31 - $.12
October 1 - December 31 1999 $.12 - $.12
The source of the above quotations is the Spokane over-the-counter listing,
and the above quotations reflect inter-dealer prices, without retail mark-up,
markdown or commission and may not necessarily represent actual Transactions.
In addition, the lack of an established public trading market for the
Company's common stock should be kept in mind in reviewing the above
quotations. The prices shown are reflective of Transactions for a limited
number of shares.
The Company has not declared or paid any dividend on the shares of common
stock in the last two (2) fiscal years. There also have not been any changes
in or disagreements with the Company's independent public accountants
concerning accounting or financial disclosures.
The only purchase Transaction during the last two years involving the
Company's common stock and Jimmie Coulson was a single Transaction on December
21, 2001. The Transaction was an unsolicited offer to sell to Company
employees the shares of common stock held by Eliot Investments Limited
Partners. This Partnership offered to sell the shares quoted at the market
price, which at that time was $0.05. The total shares involved were 4,205.
Of those 4,205, Jimmie Coulson acquired 189 shares which he subsequently
gifted to his grandchildren.
DISSENTERS' APPRAISAL RIGHTS
In accordance with Section 30-1302 of the Idaho Code, Cashed-Out Shareholders
have the right to dissent from the Transaction and to receive payment in cash
for the "fair value" of those shares voted against the Transaction. Since
this brief summary is not a complete statement, a Shareholder intending to
dissent from the Transaction should refer to Section 30-1-1301 et seq. of the
Idaho Code attached to this Proxy Statement as Appendix A.
A Shareholder who wishes to assert dissenters' rights must (a) send a written
notice to the Company at P. O. Box 2610, Spokane, WA 99210-2610, Attention:
Jimmie T. G. Coulson, President, prior to the time the vote is taken, that
the Shareholder intends to demand payment for his shares if the Transaction is
completed; and (b) not vote his shares in favor of the proposed action. If
the Transaction is authorized by the Shareholders at the Annual Meeting, then
the Company will deliver a written Dissenters' Notice to all Shareholders who
submitted their notice of intent and did not vote in favor of the Transaction.
The Company's notice will be sent within ten (10) days of the Meeting date
and will contain the information set forth in Section 30-1-1322 (see, Appendix
A-4). The Shareholder then must submit a demand for payment in the form
required by Section 30-1-1323 (see, Appendix A-5) and the Company thereafter
will forward payment to the dissenter of the amount that the Company estimates
to be the fair value of the dissenter's shares, plus accrued interest. The
Company does not have any reason to believe that the fair value as determined
for dissenters' shares will be any different than the fair value set by the
Directors for the Transaction; consequently, the amount sent to dissenting
shareholders is anticipated to be an amount equal to $0.25 per share for each
share held by the dissenting shareholder prior to the Effective Time. If the
dissenter decides not to accept the payment received from the Company, then
the dissenter may notify the Company in writing of its own estimate of the
fair value of the shares and demand payment of the estimated amount. Such
demand from the dissenter must be made within thirty (30) days after the
Company has made or offered payment for his shares. If the dissenter does not
accept the Company's payment and the Company does not agree with the
dissenter's estimate of the fair value, then the Company will commence a
proceeding in the Idaho District Court for the County of Kootenai. The Court
may appoint appraisers and shall assess the costs of the proceeding, including
reasonable compensation and expenses of appraisers appointed by the Court,
against the Company unless the Court determines that the dissenters acted
arbitrarily, vexatiously, or not in good faith.
RESERVATION OF RIGHTS
The Board of Directors reserves the right to abandon the Transaction without
further action by the Shareholders at any time before the filing of the
amendments with the Secretary of State, even if the Transaction has been
authorized by the Shareholders at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR PROPOSAL NO. 1 TO AMEND
THE ARTICLES OF INCORPORATION TO EFFECT A REVERSE/FORWARD
STOCK SPLIT.
PROPOSAL NO. 2
ELECTION OF DIRECTORS
The Board of Directors of the Company will be comprised of five members. The
names, ages, business experience during the past five years and positions of
the nominees for Directors are set forth below. All Directors serve until the
next annual meeting of the Company's shareholders and until their successors
are elected and qualified or until their earlier resignation, removal or
death. Officers are appointed annually by the Board of Directors at the
organizational meeting of the Directors following the annual meeting of
shareholders. There are no arrangements or understandings between any nominee
and any other nominee pursuant to which the nominee is listed below.
NOMINEES FOR DIRECTORS
NAME AGE POSITION TERM SERVED
Jimmie T.G. Coulson 68 Director, Jan. 1976
5920 S Phalon Lane President, Jan. 1982
Spokane WA 99223 CEO Jan. 1982
Marilyn A. Schroeder 50 Director, Dec. 1991
N. 15406 Lloyd Lane Treasurer, Jan. 1982
Mead WA 99021 CFO Jan. 1982
Vice-President May 1998
Wendell J. Satre 83 Director Mar. 1989
2822 E Snowberry Lane
Spokane WA 99223
Robert P. Shanewise, M.D. 80 Director Mar. 1989
921 West Comstock Ct.
Spokane WA 99203
Lawrence A. Stanley 73 Director Feb. 1997
311 West 32nd Avenue
Spokane WA 99203
Mr. Coulson has been a Director of Cd'A since January 1976 and President and
Chief Executive Officer of Cd'A since January 1982. Mr. Coulson also is a
Director of Inland Northwest Bank, a Washington state-chartered commercial
bank. He is a member of the Metals Service Center Institute Planning and
Policy committee and a past Director of Spokane Area Economic Development
Council.
Mr. Satre has been a Director of Cd'A since March 1989. He is a retired
chairman and CEO of Washington Water Power (currently operating as Avista
Corp). He also is a Director and chairman of Output Technology Corporation, a
manufacturer of high speed printers, president and chairman of the Board of
Directors of Consolidated Electronics, Inc. and a Director of Key Tronic
Corporation where he served as acting president from August 1991 to March
1992.
Ms. Schroeder has been Treasurer and Chief Financial Officer of Cd'A since
January 1982 and has been a Director of Cd'A since December 1991 and a Vice
President of Cd'A since 1998. She also is a member of the Board of Directors
of Associated Industries of the Inland Northwest and a member of the Metals
Service Center Institute Management Information Committee.
Dr. Shanewise has been a Director of Cd'A since March 1989. Dr. Shanewise has
been an orthopedic surgeon for Orthopedic Associates, Inc., from 1955 to
present. He also was a Director of Conjecture from 1979 to February 1993 and
President of Conjecture from 1987 to the merger date of February 2, 1993. Dr.
Shanewise is the owner of Moran Vista Assisted Living Facility.
Lawrence A. Stanley is the founder of Empire Bolt and Screw and has been the
CEO since its incorporation in 1974. He also served as President from 1974
through 1995. He is the immediate past Chairman of the Board of Avista
Corporation, and a current Director of Output Technology Corporation, a
manufacturer of high speed printers for industry. He is past Chairman of the
Association of Washington Businesses and the Spokane Area Chamber of Commerce.
The Directors recommend a vote in favor of the nomination of these
Directors.
COMPENSATION OF EXECUTIVE OFFICERS
Executive Officers of the Company
The following information is provided about the Company's present executive
officers.
NAME AGE POSITION & TERM SERVED
3/28/02
Jimmie T.G. Coulson 68 Director since January 1976
President and CEO since January 1982
Marilyn A. Schroeder 50 Director since December 1991
Treasurer and CFO since Jan. 1982.
Vice-President since May 1998
Lawrence A. Coulson 43 General Manager of Stock Steel since
Oct. 1986
Vice President of Stock Steel since
January 1990
Joel E. Simpson 44 Vice President since August 1995 **
General Manager Cd'A Ind Fab
Nov. 1993 - September 2001
Vice President - Special Accounts Manager
Since October 2001
COMPENSATION
Name & Principal Other Annual
Position Yr Salary* Compensation Bonus Total
____________________________________________________________________
Jimmie Coulson 01 $122,950* 0 0 $120,735
President, CEO 00 $120,735* 0 0 $120,735
99 $112,262* 0 0 $112,262
Based upon salaries paid or accrued during fiscal years ended September 29,
2001, September 30,2000 and September 25, 1999. There are no employees
other than the CEO who receive compensation in excess of $100,000 annually.
Includes contribution to employee profit-sharing and 401(k) plan ("the
plan") of $3,398 in 2001, $3,364 in 2000 and $1,785 in 1999. The plan is
qualified under Section 401 and 501 of the Internal Revenue Code of 1986.
All employees are eligible to participate after one year of service if they
are 21 years of age or older and meet the minimum hours worked requirement.
The plan is funded by discretionary contributions determined by the Cd'A
Board of Directors and as of July 1, 1998, by a 50% match to employee
contributed funds to a maximum of 6% of salary. The profit-sharing
contributions are allocated to participants based on the participant's
salary as a percentage of total salaries of all participants. Vesting
occurs on an incremental basis between the third and seventh year of
service. No distributions were made to any executive officer during the
last three fiscal years except as required to refund any excess deferrals.
During the last three years the Company made no profit sharing
contributions.
** Because of a change in Mr. Simpson's duties and responsibilities, he is
not considered an executive officer after October 1, 2001.
OTHER TRANSACTIONS
Compensation of Directors
Directors who are not officers of the Company are paid $400 for each regular
meeting attended, $200 for each special meeting attended and $200 for all
committee meetings not held in conjunction with a full Board Meeting.
Committees of the Board of Directors
The following is a list of standing committees and members of each:
NO. MEETINGS FYE
COMMITTEE MEMBERS SEPTEMBER 2001
EXECUTIVE * Jimmie Coulson 0
Wendell J. Satre 0
Robert P. Shanewise 0
Lawrence A. Stanley 0
AUDIT * Lawrence A. Stanley 1
Robert P. Shanewise 1
Wendell J. Satre 1
COMPENSATION * Robert P. Shanewise 1
Lawrence A. Stanley 1
Wendell J. Satre 1
NOMINATING * Wendell J. Satre 1
Lawrence A. Stanley 1
Jimmie T. G. Coulson 1
Robert P. Shanewise 1
* Committee Chairperson
The duties of the Committee are as follows:
Executive Committee. The Executive Committee shall have the full authority of
the Board of Directors to take action upon such matters as may be referred to
the Committee by the Board of Directors.
Audit Committee. The Audit Committee meets with the independent public
accountants at least annually to review financial data and address issues
relevant to the operation of the Company.
Compensation Committee. The Compensation Committee receives and considers
recommendations from the chief executive officer for salaries and other forms
of compensation for the executive officers and makes recommendations to the
Board of Directors on these matters.
Nominating Committee. The responsibilities of the Nominating Committee
include recommending persons to act as Directors, preparing for and
recommending replacements for any vacancies in Director positions during the
year, and initial review of policy issues regarding the size and composition
of the Board of Directors.
There were four regularly scheduled Board meetings during the fiscal year
ended September 30, 2001. All Directors were in attendance at all regular
meetings, including Committee meetings. All committee meetings were attended
by the full committee.
Audit Committee Report
The Audit Committee of the Board of Directors is composed of three Directors
who are independent Directors as defined by the applicable rule of the NASD
listing standards. The Board of Directors has not adopted a written charter
for the Audit Committee.
The responsibilities of the Audit Committee include recommending to the Board
of Directors an accounting firm to be engaged as the Company's independent
accountants. Management is responsible for the Company's financial statements
and the financial reporting process, including the system of internal
controls. The independent accountants are responsible for expressing an
opinion on the conformity of those audited financial statements with
accounting principles generally accepted in the United States. The Audit
Committee's responsibility is to oversee these processes and the activities of
the Company's internal audit department.
In this context, the Audit Committee has met and held discussions with
management and the independent accountants. Management represented to the
Audit Committee that the Company's consolidated financial statements were
prepared in accordance with generally accepted accounting principles, and the
Audit Committee has reviewed and discussed the consolidated financial
statements with management and the independent accountants. The Audit
Committee discussed with the independent accountants matters required to be
discussed by Statement On Auditing Standards No. 61, "Communication with
Audit Committees".
The Company's independent accountants also provided to the Audit Committee the
written disclosures and the letter required by Independent Standards Board
Standard No. 1, "Independence Discussions with Audit Committees". The Audit
Committee also considered the compatibilities of non-audit services with the
accountants' independence.
In fulfilling its oversight responsibilities, the Audit Committee has reviewed
and discussed with management and the independent accountants the Company's
audited financial statements contained in the Company's Annual Report on Form
10-KSB for the year ended September 29, 2001. The Audit Committee
recommended that the Board of Directors include the audited consolidated
financial statements in the Company's Annual Report on Form 10-KSB for the
year ended September 29, 2001, as filed with the Securities and Exchange
Commission.
The Audit Committee discussed with the Company's independent accountants the
overall scope and plans for their audit. The Audit Committee meets with the
internal and independent accountants, with and without management present, to
discuss the results of their examinations, their evaluations of the Company's
internal controls and the overall quality of the Company's financial
reporting.
This report is submitted by the Audit Committee. Its members are:
Lawrence A. Stanley, Chairman
Wendell J. Satre
Robert P. Shanewise
Filing Requirements
With respect to the Company's most recent fiscal year, the records of the
Company indicate that the Directors and executive officers have filed all
required Forms 3, 4 and 5 on a timely basis.
SECURITY OWNERSHIP AND CERTAIN
BENEFICIAL OWNERSHIP OF MANAGEMENT
The following table sets forth the beneficial ownership of Cd'A Common
Stock as of May 1, 2002 by each person known by Cd'A to be a beneficial owner
of 5% or more of Cd'A Common Stock. As of such date, a total of 5,335,530
shares of Cd'A Common Stock were outstanding. This disclosure is made
pursuant to certain rules and regulations promulgated by the Securities and
Exchange Commission and in certain instances the number of shares shown as
being beneficially owned may not be deemed to be beneficially owned for other
purposes.
Title of Name and Address Amount and Percent of
Class Of Beneficial Owner Nature of Class
Beneficial
Ownership
Common Stock Jimmie & Arlene Coulson
5920 S Phalon Lane
Spokane WA 99223 2,697,141 50.56
Common Stock Lawrence A. Coulson*
South 5711 Corkery Road
Spokane WA 99223 393,427 7.37
* Lawrence Coulson is the son of Jimmie Coulson
(b) SECURITY OWNERSHIP OF MANAGEMENT.
The following table sets forth the beneficial ownership of Cd'A Common
Stock as of December 2, 2001 by each Director and executive officer of Cd'A,
named individually, and all Directors and executive officers of Cd'A as a
group, without naming them. This disclosure is made pursuant to certain rules
and regulations promulgated by the Securities and Exchange Commission and in
certain instances the number of shares shown as being beneficially owned may
not be deemed to be beneficially owned for other purposes.
Title of Name and Address of Amount and
Class Beneficial Owner Nature of Percent of
Beneficial Class
Ownership
Common Stock Jimmie & Arlene Coulson
5920 S Phalon Lane
Spokane WA 99223 2,697,141** 50.56
Common Stock Lawrence A. Coulson
5711 S. Corkery Road
Spokane WA 99223 393,427** 7.37
Common Stock Marilyn A. Schroeder
N. 15406 Lloyd Lane
Mead WA 99021 249,791 4.68
Common Stock Wendell J. Satre
2822 E Snowberry Lane
Spokane WA 99223 389 0*
Common Stock Joel E. Simpson
E. 1306 Sara Lane
Spokane WA 99223 27,244 0*
Common Stock Robert Shanewise, M.D.
921 W. Comstock Court
Spokane WA 99203 96,809 1.81
Common Stock Lawrence A. Stanley
311 West 32nd
Spokane WA 99203 389 0*
Common Stock All Directors & executive
officers as a group
------------ -----
(7 persons) 3,465,190 64.95
* Indicates less than 1% of outstanding shares of class.
** Includes 1/3 ownership (11,904 shares) of CINV , a family partnership with
35,714 shares
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
During October, 1993, the Company sold $250,000 convertible debentures in a
private placement. The debentures were due on October 31, 1998 but the
initial term was extended for one year through October 30, 1999. The interest
rate was 8-3/4% for the period of the extension. The debentures were secured
by a second lien on the real estate. Reference is made to the form 10-KSB
for the fiscal year ended September 29, 2001, Item 2, which is incorporated by
reference herein.
PROPOSAL NO. 3
SELECTION OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
BDO Seidman has examined the financial statements of the Company starting with
the fiscal year ended September 30, 1989 through fiscal year ended September
29, 2001. The Directors recommend that their appointment for fiscal
2002, (the period ending September 28, 2002) be approved by the
shareholders. If a majority of the shares present at the meeting fails to
approve the appointment of BDO Seidman as independent certified public
accounts, the Board of Directors will consider the selection of another
accounting firm. The principal accountant for the current year and the most
recently completed year will not be present at the annual meeting of
shareholders. A representative of BDO Seidman is not expected to be present
at the annual meeting of shareholders. Therefore BDO Seidman will not have
the opportunity to make a statement or respond to questions.
Audit Fees:
The aggregate fees billed by BDO Seidman, LLP for professional services for
the audit of the Company's annual consolidated financial statements for fiscal
2001 and the review of the consolidated financial statements included in the
Company's Annual Report on Form 10-KSB for fiscal 2001 were $26,229. Fees
billed by BDO Seidman, LLP for professional services related to reviews of the
financial statements included in the quarterly Form 10-QSB during the 2001
fiscal year were $7,398.
Financial Information Systems Design and Implementation Fees:
There were no fees billed by BDO Seidman, LLP to the Company for financial
information systems design and implementation for fiscal 2001.
All other fees:
The aggregate fees billed to the Company for all other services rendered by
BDO Seidman, LLP for fiscal 2001 were $1,525.
The Audit Committee feels that the services rendered by BDO Seidman are
compatible with maintaining the principal accountant's independence.
SHAREHOLDERS' PROPOSALS FOR
2003 ANNUAL MEETING
The Company has had to change the date of its annual meeting in 2002 by more
than thirty (30) days from the date of the annual meeting in 2001. Notice of
a Shareholder Proposal for the 2003 Annual Meeting must be received on or
before November 15, 2002, or it will be considered untimely. Proposals of
Shareholders intended to be presented at the 2003 annual meeting should be
submitted by certified mail, return receipt requested, and must be received by
the Company at its headquarters in Spokane, Washington on or before that date
to be eligible for inclusion in the Company's proxy statements and former
proxy card relating to that meeting. Shareholder proposals should be
submitted to the Secretary of The Coeur d'Alenes Company, P.O. Box 2610,
Spokane, WA 99220-2610. Any such proposal should comply with the Securities
and Exchange Commission rules governing shareholder proposals submitted for
inclusion in proxy materials.
FORM 10-KSB FOR THE YEAR ENDED
SEPTEMBER 29, 2001
A copy of the Annual Report on Form 10-KSB for the year ended September 29,
2001 which was filed with the Securities & Exchange Commission has been
included with this proxy statement. The financial statements for the fiscal
year ended September 29, 2001 and September 30, 2000, included in the Annual
Report, are incorporated herein by reference. Because of the expense
associated with producing and mailing, the Exhibits have been omitted.
Reference is made to the Form 10-KSB, Part IV, Item 13 (List of Exhibits)
which is incorporated herein by reference. A copy of the exhibits as filed
with the Securities and Exchange Commission, will be sent to shareholders upon
request and upon payment of a reasonable charge. Requests should be made to:
The Coeur d'Alenes Company
Attn: Arlene Coulson
PO Box 2610
Spokane WA 99220-2610
Reference is made to the Form 10-KSB for the fiscal year ended September 2001,
Item 2 (Description of Property) Item 10 and Item 13 (List of Exhibits) which
is incorporated herein by reference.
FORM 10-QSB FOR THE NINE MONTHS ENDED
JUNE 25, 2002
A copy of the Quarterly Report on Form 10-QSB for the nine month period ended
June 25, 2002 which was filed with the Securities and Exchange Commission on
August 1, 2002 has been included with this proxy statement and the financial
information included therein is incorporated be reference.
OTHER MATTERS TO COME BEFORE
THE MEETING
No other matters are intended to be brought before the meeting by the Company
nor does the Company know of any matters to be brought before the meeting by
others. If, however, any other matters properly come before the meeting, the
persons named in the proxy will vote the shares represented thereby in
accordance with their judgment on any such matters.
By order of the Board of Directors
Arlene Coulson, Secretary