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. 4)
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 300, 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 Kissel 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.
Assuming that the going concern value for minority shareholders would be
$0.08 per share (the discounted equity value reflected in Exhibit 1 of
the Cronkite and Kissel Report) liquidation value for minority shareholders
undoubtedly would be $0.04 per share or less because of the considerable
expense associated with winding down the Company's operations. The net
income generated by the Company over the last three years has resulted in an
average before tax return on investment of 3%. A new investor in the Company
undoubtedly would require a return on investment of at least twice that
amount in order to justify the purchase. The Risk Management Association,
which serves the financial services industry, publishes an Annual Statement
Study of major industries. According to that report, the median before tax
return on investment for all metals distribution businesses with $10 million
to $25 million in annual sales has averaged 18.4% over the last three years.
The median before tax return on investment for all companies has averaged
19% over the last three years. At purchase price equal to one half of the
Company's book value, an investor could achieve an average before tax return
on investment of approximately 6%; this return would still be less than the
return achieved by businesses in the industry with $10 million to $25 million
in annual sales. Therefore, the $0.25 per share price (approximately one
half of book value) is a fair price at which to buy out the minority
shareholders. A new investor in the Company, however, undoubtedly would
require significantly more than a 6% return on investment in order to justify
the purchase.
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 - Present $0.05
May 3, 2002 - July 15, 2002 $0.07
July 16, 2002 - August 5, 2002 $0.08
August 6, 2002 - 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
15, 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 June 12, 2002. 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
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.
Result
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.
Hypothetical Scenario
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.
Result
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.
Hypothetical Scenario
C holds 1,001 shares of Company
stock in a record account as of
________, 2002.
Result
After the Transaction, C will
continue to hold all 1,001 shares
of Company stock.; the Transaction
will not effect his ownership.
Hypothetical Scenario
D holds 999 shares of Company
stock in a nominee account as of
________, 2002.
Result
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
purposes 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, MD 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