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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[ X] 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: November 18, 2002, 1:30 P.M. Pacific Standard 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 November 18, 2002. It was mailed to shareholders
on or about October 18, 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, September 24, 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 November 28, 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:
1 it is higher than the current trading price;
2 it is higher than liquidation value;
3 it allows cashed out shareholders to sell their shares
without cost;
4 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.
The going concern value of the Company, as measured by the
average return on investment, is less than the going concern
value for companies with sales comparable to the Company.
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
$10,000,000 to $25,000,000 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 a 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 $10,000,000 to $25,000,000 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% before tax return 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 - May 2, 2002 $0.05
May 3, 2002 - July 15, 2002 $0.07
July 16, 2002 - August 5, 2002 $0.08
August 6 - August 8, 2002 $0.09
August 9 - August 20, 2002 $0.10
August 30 - 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 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 conducted tender offers to holders of 200
and fewer shares continuously during 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 September 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 November 28, 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
November 28, 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 November 28, 2002 (the "Effective Time"). All
Shareholders on November 28, 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
November 28, 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 November 28, 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
November 28, 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 November
28, 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 November 28, 2002.
Hypothetical Scenario
C holds 1,001 shares of
Company stock in a record
account as of November 28,
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 November 28, 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 September 23, 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 November 28, 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
November 28, 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 November
28, 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 November 28, 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 November 28, 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 September 23, 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 June 30,
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 69 Director, Jan. 1976
5920 S Phalon Lane President, Jan. 1982
Spokane WA 99223 CEO Jan. 1982
Marilyn A. Schroeder 51 Director, Dec. 1991
N. 15406 Lloyd Lane Treasurer, Jan. 1982
Mead WA 99021 CFO Jan. 1982
Vice-President May 1998
Wendell J. Satre 84 Director Mar. 1989
2822 E Snowberry Lane
Spokane WA 99223
Robert P. Shanewise, MD 81 Director Mar. 1989
921 West Comstock Ct.
Spokane WA 99203
Lawrence A. Stanley 74 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
9/28/02
Jimmie T.G. Coulson 69 Director since January 1976
President and CEO since January 1982
Marilyn A. Schroeder 51 Director since December 1991
Treasurer and CFO since Jan. 1982.
Vice President since May 1998
Lawrence A. Coulson 44 General Manager of Stock Steel
since Oct. 1986
Vice President of Stock Steel
since January 1990
Joel E. Simpson 45 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