U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 for the fiscal year ended September 25, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED] for the transition period from
_____________ to _____________.
Commission file number 0-18353
THE COEUR D'ALENES Company
Idaho 82-0109390
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
PO Box 2610
Spokane, Washington 99220-2610
(Address of principal executive offices) (Zip Code)
(509) 924-6363
(Registrant's telephone number including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Name of each exchange
Title of each class on which registered
Common stock, no par value
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months, and has been subject to such filing requirements for at least the
past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]
Issuer's revenues for its most recent fiscal year: $12,247,613
The aggregate market value of the voting stock of the registrant held by non
affiliates cannot be readily determined because there is no established public
trading market for such stock.
Shares outstanding as of December 7, 1999: 5,344,233
No documents incorporated by reference herein.
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ITEM 1. DESCRIPTION OF BUSINESS.
(a) GENERAL DEVELOPMENT OF BUSINESS.
The Coeur d'Alenes Company was first established as J. R. Marks & Co.,
in Murray, Idaho during the gold rush of 1884 as a supply house for miners. By
1886, there were five stores in North Idaho. In 1889, they became part of
Holley, Mason, Marks & Company of Spokane, Washington. In 1892, the five North
Idaho stores were spun off by a group (including an original owner) and
incorporated under the name of The Coeur d'Alene Hardware Co. In 1913, the major
shareholders of Coeur d'Alene Ironworks put the assets of both companies
together, and the resulting Company was incorporated under the name of Coeur
d'Alene Hardware and Foundry Company. In 1959, Coeur d'Alene Hardware and
Foundry Company changed its name to The Coeur d'Alenes Company.
In February 1993, The Coeur d'Alenes Company merged with and into an
inactive mining company, Conjecture, Inc. ("Conjecture"), with Conjecture being
the surviving corporation but changing its name to The Coeur d'Alenes Company
("Cd'A" or the "Company") immediately following the merger. Conjecture was
incorporated in 1954 under the original name Conjecture Mines, Inc., but changed
its name to Conjecture, Inc. in 1989.
Cd'A, together with its wholly-owned subsidiary Union Iron Works, Inc.
of Spokane (dba Cd'A Stock Steel), is engaged in the business of the
distribution, processing and fabrication of steel, other metals and related
products. In early 1993 Conjecture's unpatented mining claims lapsed and, since
the merger, Cd'A has sold Conjecture's remaining patented mining claims. As a
result, Cd'A is no longer involved in the mining business on even an inactive
basis. As part of its strategic plan, Cd'A has implemented various changes over
the years in order to shift its business emphasis and focus away from higher
volume, lower margin business (involving a lesser value added component in the
form of fabrication, processing or other services) and more towards a lower
volume, higher margin business (involving a greater value added component in the
form of fabrication, processing, delivery or other services). As a result of
these changes, a significant amount of Cd'A's revenue is currently generated by
the value added and service aspects of this business.
In October 1993, Cd'A made a significant acquisition of assets when it
purchased property for distribution operations for approximately $1,150,000,
with the seller providing most of the financing. During September, 1995,
construction began on a new facility at the same location to house the
fabrication business. A construction loan from the Seafirst bank in the amount
of $1,678,728 was used to pay off the seller provided financing and provide 75
percent of the cost of construction. In September 1996, the facility was
complete and the business relocated. During August, 1996, construction began to
remodel and enlarge the office space located on the same property. The total
cost was approximately $262,000. The project was completed December 1996. See
Items 2 and 6.
(b) NARRATIVE DESCRIPTION OF BUSINESS.
Cd'A is based in Spokane, Washington and conducts its operations in two
separate facilities located at 3900 E. Broadway in Spokane, Washington. The
fabrication operations generally consist of the custom production of finished
metal structures or products (or components thereof) in accordance with a
customer's specifications. The fabrication operations include activities such as
cutting, bending, drilling, riveting, welding, assembling. The items produced by
the fabrication operations vary depending upon the nature of a customer's order,
but in the past have included such items as baghouses (which trap emissions from
factories or other manufacturing facilities), crucibles, potshells and liners
for aluminum, magnesium or other metal producers, slurry impellers for industry
and structural metal supports for highway signs. The distribution operations
generally consist of the resale of stock metal materials purchased from mills
with further processing or other services, such as cutting, bending, burning, or
sawing stock metal materials to a customer's specifications (component parts) or
delivery to a customer's location. Metal materials in various types, grades,
shapes and sizes are sold by the distribution operations, including such items
as beams, bars, plates, sheets, angles, tubes, pipes, gratings and decorative
iron. The distribution operations are referred to in the industry and sometimes
referred to herein as a steel service center.
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Cd'A is not dependent on a single supplier or a small number of
suppliers. Over time, it has purchased from domestic mills, foreign mills or a
combination thereof, depending upon mill prices, transportation costs and
foreign currency exchange rates.
Cd'A's customers are primarily industrial in nature. Although the mix
of Cd'A's customers varies over time, a substantial portion of Cd'A's sales in
the recent past has been to customers engaged in the agriculture, lumber,
construction, mining, metal producing, or other manufacturing industries.
Since there is turnover among Cd'A's customers (especially in the
fabrication business which is on a job to job basis and often involves
relatively large jobs), over any given period, the business of a few customers
may represent a significant portion of Cd'A's business. In fiscal 1999 one
customer amounted to 12% total sales. In fiscal 1998, no single customer
contributed business in excess of 10% of total net sales. The loss of this large
customer could have a significant adverse effect on the immediate business of
Cd'A especially in those situations where it resulted in the loss of large
fabrication jobs which had already been awarded to Cd'A. The turnover among
customers, however, means that any such adverse effect on the business of Cd'A
over the longer term will be more attenuated.
Nonetheless, it is still important for Cd'A to retain any such large
customers.
The primary market area served by Cd'A is the Pacific Northwest.
Although the market area also fluctuates somewhat over time, currently the
biggest market area in terms of sales is the Inland Northwest (Eastern
Washington, Northern Idaho, Northeastern Oregon and Western Montana). The
geographical market area of Cd'A is somewhat constrained by high relative
transportation costs associated with delivery to customers of products it sells.
The transportation cost component, however, is a more significant factor for the
steel service center operations than for the fabrication operations because of
the higher value added component and potential for higher margins in the
fabrication business. Cd'A markets its products throughout the Inland Northwest
through sales representatives who cover this territory.
In October, 1999, Stock Steel opened a small warehouse facility in
Wenatchee, WA. The primary business purpose is to sell ornamental iron and to
provide will call service to businesses in the area, many of which Stock Steel
is already supplying out of the Spokane facility.
Cd'A's steel service center business faces stiff competition, both from
other steel service centers (mainly those located in or near Cd'A's market area
due to transportation costs) and, for larger orders not requiring additional
processing or other services, from the mills themselves (not necessarily limited
to those located in or near Cd'A's market area since transportation costs from
the mill to Cd'A and from Cd'A to the customer may be approximately the same as
transportation costs from the mill directly to the customer). Cd'A's fabrication
business also faces stiff competition from other fabrication businesses,
primarily those located in the West and Midwest but also to a lesser extent,
those located in other areas of the United States. Again, transportation costs
somewhat constrain the size of the geographical market area for competing
fabrication operations, although as mentioned above this is a less significant
factor than for steel service center operations. Relatively high transportation
costs have not had and are not anticipated to have, a significant impact on
Cd'A's operations because, as mentioned above, the competition in the area
generally is faced with the same costs. In addition, to the extent that the
fabrication business market has been in Western Washington where much of the
competition is located, the cost of living and therefore labor rate
differentials generally were enough to offset the higher transportation cost of
Cd'A.
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Cd'A's steel service center business has larger working capital
requirements than the fabrication business. Cd'A is required to carry
significant amounts of inventory (generally three to four months worth) in the
steel service center business in order to provide just-in-time delivery for its
customers. Although Cd'A provides rights to return materials, materials returned
to Cd'A after sale for reasons other than quality of product or service are
subject to a restocking charge. Cd'A experiences a very limited amount of
returned goods. Customer payment terms are primarily net 30 days. Ten day
payment discounts are offered to some customers. The fabrication business
requires smaller working capital for work in process inventory.
Metal price fluctuations on the supply side have an effect on the
amount of working capital required to support inventories. When the price of
metal goes down, as it did during the year ended September 25, 1999, the
resources required to be invested in inventories declines also. Generally the
gross margins available in the market during these periods of declining prices
are lower than normal. When the cost goes back up again, margins will generally
recover assuming the strength of the market does not deteriorate.
Both the steel service center business and the fabrication business are
dependent on local, regional and, to a lesser extent, national economic
conditions. The cyclical nature of these businesses makes it necessary for Cd'A
to constantly watch the economic indicators in order to adjust capacity and
inventory appropriately. Failure to anticipate a downturn or upturn can have a
negative effect on earnings and cash flows because capacity and inventory may be
too high in a downturn resulting in a higher cost structure and increased cash
flow pressures and too low in an upturn resulting in lost sales.
Cd'A has generally not experienced a material seasonal effect on its
business. The company's two major areas of business, steel distribution and
steel fabrication are somewhat counter cyclical.
Cd'A has no material patents, trademarks, licenses, franchises,
concessions or royalty agreements. During September 1999, prior to fiscal year
end, Cd'A acquired a license agreement to manufacture and market a road patching
machine, the concept of which is covered by patents. Cd'A then assigned the
license agreement to a newly formed company, Road Renovator, LLC (the "LLC"). As
a result of the assignment, Cd'A received an ownership interest in the LLC. Once
the expected venture capital has been raised, Cd'A's interest will be 30%. The
LLC has an agreement with ARESCO, Inc. to manufacture the equipment.
Cd'A fabrication business had a labor contract with Ironworkers Local
#506 which expired August 1995. The Company continued to apply the terms and
conditions of the expired contract while attempting to negotiate a new, mutually
agreeable contract. In December 1996 the employees who were members of the
Ironworkers union elected to decertify and are no longer covered by a labor
contract. Cd'A also had a labor contract with Teamsters Local #582 which expired
in April 1995. Following the Ironworkers decertification, in June 1997 the
Teamsters Local #582 disclaimed recognition of a bargaining unit at Cd'A. There
are currently no employees covered by a labor contract.
Various environmental laws and regulations apply to Cd'A's operations.
Cd'A is not aware of any environmental law or regulation claim by any
governmental authority or regulatory body with which it has not complied. At
this time, it is not expected that federal, state or local environmental laws or
regulations will have a material adverse effect on the capital expenditures,
earnings or competitive position of Cd'A. Cd'A has not made any material capital
expenditures for environmental control facilities during the current or prior
two fiscal years, nor is it currently anticipated that Cd'A will make any
material capital expenditures for environmental control facilities during the
next fiscal year.
Cd'A is not aware of any existing or probable governmental regulations
which would have a material adverse effect on Cd'A's business.
Cd'A currently has 65 total employees (54 in the steel service center
business and 11 in the fabrication business). The Company believes that its
relations with its employees are good.
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ITEM 2. DESCRIPTION OF PROPERTY.
Cd'A conducts its operations out of two facilities located at 3900 E
Broadway in Spokane WA. Each of the two facilities is approximately 42,150
square feet for a total of approximately 84,300 sq. ft. The fabrication business
occupies approximately 20,000 square feet in the most recently constructed
building, with the steel service center business occupying the remaining 64,300
square feet. The property was purchased by Cd'A in October 1993 with
approximately 45,000 square feet of building including approximately 3,000
square feet of office space. An additional 42,150 square foot facility was added
during the fiscal year ended September 1996. During the first quarter of the
fiscal year ended September 1997, an additional 3,050 sq. ft. of office space
was added to the existing office space. On September 10, 1999, The Company
entered into a lease for a small warehouse in Wenatchee, WA. The term of the
lease is two years, beginning October 1, 1999. The monthly rent is $1,600 per
month for the first year and $1,648 per month for the second year. The lease can
be terminated at the end of the first year upon notice properly given and with a
termination penalty of $2,000. The Company also has an option to renew the lease
for an additional five years with a 3% escalation clause with respect to lease
payments. The lease also provides for a first right of refusal on some
additional warehouse space adjoining the space currently leased.The Company
believes its facilities are suitable and adequate to meet its current needs.
The facilities have a first lien in favor of a bank securing a
promissory note in the amount of approximately $1,840,000 as of September 25,
1999 and a second lien in favor of the holders of convertible debentures in the
amount of $128,000. See item 5 and 6.
ITEM 3. LEGAL PROCEEDINGS.
Cd'A is not a party to any material pending legal proceedings, nor is
any of its property subject to any material pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the
fourth quarter of the last fiscal year through solicitation of proxies or
otherwise.
PART II
ITEM 5. MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS.
(a) MARKET FOR COMMON STOCK. Although the common stock of Cd'A, having
no par value, is traded on the over-the-counter market based in Spokane,
Washington, there is currently no established public trading market for Cd'A
Common Stock. Since July 1, 1993, Cd'A Common Stock has been traded on this
over-the-counter market, with the primary basis consisting of limited quotations
by Sandberg Securities, Empire Securities and Pennaluna, Inc., securities
broker-dealers based in Spokane, Washington and Coeur d'Alene, Idaho. The range
of high bid and low bid quotations for Cd'A Common Stock, by quarters, for the
period beginning October 1, 1997 through September 30, 1999 are set forth in
dollars per share below:
1999 1998
High - Low High - Low
---------- ----------
July 1 - September 30 $.16 - $.12 $.28 - $.28
April 1 - June 30 $.24 - $.16 $.28 - $.20
January 1 - March 31 $.28 - $.23 $.20 - $.20
October 1 - December 31 $.28 - $.28 $.20 - $.20
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,
mark-down or commission and may not necessarily represent actual transactions.
In addition, the lack of an established public trading market for Cd'A Common
Stock should be kept in mind in reviewing the above quotations. The prices shown
are reflective of limited transactions.
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(b) HOLDERS. As of December 6, 1999, there were approximately 825 holders of
record of Cd'A Common Stock.
(c) DIVIDENDS. In the last two fiscal years, Cd'A has not declared or paid any
dividend on Cd'A Common Stock. Cd'A is restricted under the terms of its bank
loan agreement from paying dividends in an amount greater than 10% of net income
without the prior approval of the bank lender.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF
OPERATIONS.
THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS OF THE COMPANY SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S
FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE IN THIS REPORT.
This report contains forward-looking statements regarding, among other
items, anticipated trends in the Company's business. These forward-looking
statements are based largely on the Company's expectations and are subject to a
number of risks and uncertainties, certain of which are beyond the Company's
control. Actual results could differ materially from these forward-looking
statements as a result of the factors described elsewhere herein, including,
among others, regulatory or economic influences. In light of these risks and
uncertainties, there can be no assurance that the forward-looking information
contained in this Report will in fact transpire or prove to be accurate.
LIQUIDITY AND CAPITAL RESOURCES
The Company anticipates that it will continue operating the steel
distribution business much as it has for the past two years during the
twelve-month period beginning September 26, 1999 and ending September 30, 2000.
In October 1999, the Company signed a two-year lease on a small warehouse
facility in Wenatchee, WA. The Company intends to conduct a business similar to
the steel distribution business in Spokane out of the Wenatchee location on a
much smaller scale. The inventory will be supported out of the Spokane facility
and it should not be necessary to increase the Company wide inventory by a
significant amount. The Company has an option to cancel the lease at the end of
the first year with a $2,000 penalty.
Gross margins as a percent of sales are likely to be somewhat lower
than the year just ended. After approximately eighteen months of declining steel
prices, the replacement inventory costs appear to be going back up. The economic
climate will likely prevent any sales growth in the distribution business other
than what may be attributable to the Wenatchee branch. The demand for fabricated
metal products in our niche of the market appears to be strong and should allow
for some sales growth in the fabrication business segment.
During October 1993, the Company purchased the real estate occupied by
the Steel Service Center business and sold convertible debentures in a private
placement in order to raise the down payment. The purchase price of the property
was $1,150,000. The convertible debenture offering was for $250,000 with
$200,000 used for the down payment. The debentures were due in October, 1998,
but the initial term was extended for one additional year to October 31, 1999.
The interest rate during the extended term was decreased from 9-1/4% to 8-3/4%.
The debentures allowed the holder to convert in whole or in part to Cd'A common
stock after October 31, 1994. The initial conversion price was $.125 per share
of Cd'A common stock. On November 1 in each of 1995, 1996 and 1997, the
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conversion price was increased by an amount equal to 20% of the initial
conversion price. On October 30, 1995, $122,000 of the debentures were converted
at the initial conversion price of $.125 per share resulting in 976,000
additional shares of common stock issued and outstanding. The conversion price
during the period of the extension was $.28 per share. The debentures were
secured by a second lien on the real estate. The remaining $128,000 of
debentures were redeemed subsequent to the end of the fiscal year on October 31,
1999.
The Company has a loan secured by a first lien on the real estate out
of which the businesses are operated. The loan is due in January 2007 and has a
twenty-year amortization period with a balloon payment of the balance remaining
at the end of ten years. The interest rate was fixed in February 1998 at 8-1/2%.
During the current fiscal year the Company plans to spend approximately
$130,000 to purchase some additional equipment, replacing existing aged
equipment and adding capacity. It is likely that a bank will provide funds for
75% of the anticipated expenditures with terms and conditions similar to those
negotiated on other equipment loans.
In fiscal 1999, the Company financed the business primarily with cash
flows from operating activities. During the year ended September 25, 1999 cash
decreased by approximately $7,000. The Company's cash flows provided by
operating activities were approximately $720,000 in fiscal 1999 and
approximately $220,000 in fiscal 1998. Cash flows provided by operating
activities in fiscal 1999 were primarily impacted by net income of $142,000,
adjusted by depreciation of $230,000, a decrease in accounts receivable and
inventories of $365,000 and $89,000 respectively and by increasing accrued
expenses of $103,000. Cash flows provided by operating activities in fiscal 1998
primarily consisted of net income of $251,000, adjusted by depreciation of
$219,000, an increase in accounts payable and accrued expenses of $65,000 and
reduced by increases in accounts receivable and inventories in the amounts of
$165,000 and $211,000 respectively. Cash flows used by investing activities of
$217,000 during fiscal 1999 and $242,000 in fiscal 1998 were attributable to
additions to property and equipment. Cash flows used by financing activities
during fiscal 1999 of $510,000 were primarily used to pay down the operating
line of credit and to repay $110,000 on long-term debt, offset slightly by
additional borrowing of $78,000 on a new equipment loan. Cash flows used by
financing activities for fiscal 1998 of $28,000 were primarily used to make
payments on term debt of $102,000 offset by a new term loan in the amount of
$67,000 and net borrowing of $10,000 on the operating line of credit.
Working capital at September 25, 1999 of approximately $2,105,000 is
virtually the same as at September 26, 1998 in the amount of $2,102,000. Cd'A is
very dependent on external sources of funding in the forms of operating lines of
credit and long term property and equipment loans. As of the end of the fiscal
year ended in September, 1999, Cd'A has an operating line of credit in the
amount of $1,850,000 with a bank. The interest rate is the bank's prime rate
plus 1/4%. The operating line expires on May 1, 2000. In the event that it is
not possible to renew the operating line, it would be necessary for Cd'A to
raise capital through stock issuances, bond sales or other available means.
Management, however, does not anticipate a significant problem in renewing the
operating line next April on substantially the same terms and conditions as the
current line.
NEW ACCOUNTING PRONOUNCEMENTS
In June, 1998, the Financial Accounting Standards Board ("FASB") issued
Statements of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which requires companies to
recognize all derivative contracts as either assets or liabilities in the
balance sheet and to measure them at fair value. If certain conditions are met,
a derivative may be specifically designated as a hedge, the objective of which
is to match the timing of gain or loss recognition on the hedging derivative
with the recognition of (i) the change in the fair value of the hedged asset or
liability that is attributable to the hedged risk or (ii) the earnings effect of
the hedged forecasted transaction. For a
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derivative not designated as a hedging instrument, the gain or loss is
recognized in income in the period of change. In July 1999, the FASB issued SFAS
No. 137, "Accounting for Derivative Instruments and Hedging Activities Deferral
of the effective date of SFAS No. 133 to now be for all fiscal quarters of
fiscal years beginning after June 15, 2000.
In October 1998, the FASB Issued SFAS No. 134, "Accounting for
Mortgage-Backed Securities Retained After the Securitization of Mortgage Loans
Held for Sale by a Mortgage Banking Enterprise", which effectively changes the
way mortgage banking firms account for certain securities and other interests
they retain after securitizing mortgage loans that were held for sale. SFAS No.
134 is effective for financial statement periods beginning after December 15,
1998.
In June 1998, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of Position
98-5, "Reporting on the Costs of Start-up Activities" ("SOP 98-5"). SOP 98-5
requires all start-up and organizational costs to be expensed as incurred. It
also requires all remaining historically capitalized amounts of these costs
existing at the date of adoption to be expensed and reported as the cumulative
effect of a change in accounting principle. SOP 98-5 is effective for all fiscal
years beginning after December 31, 1999.
In February 1999, the FASB issued SFAS No. 135, "Rescission of
Financial Accounting Standards Board No. 75 and Technical Corrections." SFAS No.
135 rescinds SFAS No. 75 and amends SFAS No. 35. SFAS No. 135 also amends other
existing authoritative literature to make various technical corrections, clarify
meanings, or describe applicability under changed conditions. SFAS No. 135 is
effective for financial statements issued for fiscal years ending after February
15, 1999.
None of the foregoing pronouncements is expected to have a material
effect on the Company's reported operating results or on its financial statement
presentation.
YEAR 2000 COMPLIANCE
The Company has reviewed its business and processing systems and
determined that all critical elements of the systems are year 2000 compliant.
The Company has made inquiries of customers and suppliers on which the
operations of the business are critically dependent to determine their year 2000
readiness. An analysis of the responses indicates substantial compliance with
year 2000 issues, so that any effect based on a third party's noncompliance is
not expected to be material.
The Company has expended approximately $25,000 on programming changes
and new equipment in order to assure that all of our systems are Year 2000
compliant. If for some reason any of the the programming should fail,
alternative manual systems could be easily implemented. None of our production
equipment have date sensitive programming.
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RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the percentage
of revenues represented by certain items reflected in the Company's statements
of income:
Year Ended
------------------------------
September 25, September 26,
1999 1998
------------- -------------
Net Sales 100.00% 100.00%
Cost of Sales 73.14% 74.62%
Gross Profit 26.86% 25.38%
Selling, General &
Administrative Expense 23.89% 21.20%
Operating Income 2.97% 4.18%
Interest Income .33% .26%
Interest Expense (2.03%) (2.10)%
Other Income .38% .18%
Income Before Income Taxes 1.65% 2.52%
Income Tax Expense .49% .77%
Net Income 1.16% 1.75%
Fiscal 1999 Compared to Fiscal 1998
Net sales decreased 15% to $12,248,000 in fiscal 1999 from $14,368,000
in fiscal 1998. Fabrication sales declined by 37% to $1,476,000 from $2,331,000
the prior year. The decline was due to a diminished demand in that segment of
the fabrication market that makes up our niche. Distribution sales also declined
by 10% to $10,772,000 from $12,037,000 the prior year. This decline was due to
increased price competition in certain segments of the market. The lower
distribution sales volume is expected to continue during the current fiscal
year. The distribution business accounted for 88% of the consolidated sales
during the fiscal year ended September, 1999 and 84% during the prior fiscal
year. The fabrication business contributed the remaining 12% in fiscal 1999 and
16% in fiscal 1998.
Cost of sales as a percentage of sales for fiscal 1999 at 73% compares
to 75% during the preceding fiscal year. The decrease is the result of declining
inventory replacement costs during the first three quarters of fiscal 1999. Cost
of sales for the distribution business was 74% for fiscal 1999 and 76% for
fiscal 1998, while the fabrication business increased to 69% for fiscal 1999
from 67% for the prior year.
Selling, general and administrative expenses decreased by $119,000
during fiscal 1999 compared to fiscal 1998. The decrease was possible not only
because the sales volume declined but also because fiscal 1998 was burdened with
the expense of a plant reorganization to accommodate the move of a major piece
of equipment. As a percentage of sales, the total selling, general and
administrative expense increased to 24% of sales in fiscal 1999 from 21% in
fiscal 1998.
Interest expense at $248,000 during the fiscal year ended September 25,
1999 was $54,000 lower than for the prior fiscal year at $302,000. The decrease
was primarily the result of the lower cost of inventories during most of fiscal
1999. The lower cost of material from the mills minimized the Company's
dependence on the operating line of credit during the most recently completed
fiscal year.
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Other income increased from $26,000 during fiscal 1998 to $46,000 for
fiscal 1999. The increase was due to higher returns from a retrospective rating
plan in which the Company participates for Industrial Insurance coverage and a
one time dividend paid by the State of Washington on Industrial Insurance
surplus funds.
Income tax expense of $60,000 for fiscal 1999 compares to $110,000 for
fiscal 1998. The effective tax rate was 30% for both years.
At September 25, 1999, the Company had a deferred long term tax
liability of $156,000 resulting primarily from the use of accelerated methods of
depreciation of fixed assets offset slightly by a long term tax asset due to a
net operating loss carryover. A valuation allowance has been established to the
extent the Company believes it is more likely than not that the net operating
loss tax advantage will not be realized. The Company also has a short term
deferred tax asset of $65,000 resulting from vacation accrual and allowance for
bad debts. The deferred tax liability and asset for the prior fiscal year were
$120,000 and $56,000 respectively.
The various factors discussed above resulted in a net income for the
fiscal year ended September 25, 1999 of $142,000 compared to $251,000 for the
year ended September 26, 1998.
ISSUES, OUTLOOKS AND UNCERTAINTIES
Cd'A continues to make changes to the structure of its business as
changing market conditions dictate. Most recently, the press brake business was
moved to the distribution line of business and new equipment was purchased to
supplement that segment of the business. During the current fiscal year, the
Company has expanded to open a branch in Wenatchee. Management believes that the
distribution business will experience somewhat of a flat sales volume for the
current year. The fabrication business should be stronger. It appears that the
cost of metal at the mills has started to increase after dramatic declines
during the year just ended. The fabrication business has been working to expand
its market niche with some success and will continue during the current year.
The near term outlook for the fabrication business is good, however, it is hard
to predict trends further than about six months into the future. The fabrication
business added a Demag crane dealership to its line of business during fiscal
1998. During fiscal 2000, the Company will build some of the cranes it sells.
The prospects for expansion in crane fabrication are good.
ITEM 7. CONSOLIDATED FINANCIAL STATEMENTS.
See the Consolidated Financial Statements beginning on page 19.
INDEX TO FINANCIAL STATEMENTS
Audited Consolidated Financial Statements
Report of Independent Certified Public Accountants F-2
Consolidated Balance Sheets F-3 to F-4
Consolidated Statements of Income F-5
Consolidated Statements of Stockholders' Equity F-6
Consolidated Statements of Cash Flows F-7
Summary of Accounting Policies F-8 to F-10
Notes to Consolidated Financial Statements F-11 to F-18
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
(The balance of this page has been intentionally left blank)
9
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
(a) DIRECTORS AND EXECUTIVE OFFICERS. THE FOLLOWING TABLE SETS FORTH THE
DIRECTORS AND EXECUTIVE OFFICERS OF CD'A.
Service
Name Age Position Commenced
- ---- --- -------- ---------
Jimmie T.G. Coulson 66 Director, Jan. 1976
6203 S. Corkery Ext. Rd. President, Jan. 1982
Spokane, WA 99223 Chief Exec. Off. Jan. 1982
Marilyn A. Schroeder 48 Director, Dec. 1991
N. 15406 Lloyd Lane Treasurer, Jan. 1982
Mead, WA 99021 Chief Fin. Off. Jan. 1982
Secretary May 1994
Wendell J. Satre 81 Director Mar. 1989
39 W. 33rd
Spokane, WA 99203
Robert Shanewise, M.D. 77 Director Mar. 1989
921 W. Comstock Ct.
Spokane, WA 99203
Lawrence A. Stanley 71 Director Feb. 1997
311 W. 32nd Ave.
Spokane WA 99203
Lawrence A. Coulson 41 Vice-President Jan. 1990
5611 S. Corkery Road
Spokane WA 99223
Joel E. Simpson 42 Vice-President Aug. 1995
1306 E. Sara Lane
Spokane WA 99223
Mr. Coulson has been a director of Cd'A since January 1976 and
president and chief executive officer of Cd'A since January 1982. He is also a
director and president of Union Iron Works, Inc., of Spokane (dba Cd'A Stock
Steel), which is a wholly-owned subsidiary of Cd'A. Mr. Coulson also is a
director of Inland Northwest Bank, a publicly-held bank based in Spokane,
Washington. He served the Steel Service Center Institute governmental affairs
committee as a past chairman.
Ms. Schroeder has been treasurer and chief financial officer of Cd'A
since January 1982, a director of Cd'A since December 1991 and secretary from
May 1994 through February 1998 and Vice-President since February 1998. She also
serves as a member of the board of directors of Associated Industries of the
Inland Northwest.
Mr. Satre has been a director of Cd'A since March 1989. He is a retired
chairman and CEO of Washington Water Power. He also is a director and chairman
of Output Technology Corporation and a director of ARESCO, Inc. and Key Tronic
Corporation where he served as acting president from August 1991 to March 1992.
10
<PAGE>
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
with The Coeur d'Alenes Company. Dr. Shanewise is owner of Moran Vista Assisted
Living Facility.
Lawrence A. Stanley is currently CEO of Empire Bolt and Screw, Inc.; a
Director of Washington Water Power Company; ARESCO, Inc., Output Technology
Corporation, a manufacturer of high speed printers for industry; and CXT, Inc. a
prestressed concrete manufacturer. He is past Chairman of the Association of
Washington Businesses and the Spokane Area Chamber of Commerce.
Lawrence Coulson has been the General Manager at Stock Steel since
September 1986 and a Vice-President since January 1990. Lawrence is a certified
credit executive (C.C.E.) and Director of the National Association of Credit
Management Inland Northwest. Lawrence is also a past President of the Spokane
Chapter of the Steel Service Center Institute. Lawrence has a Masters Degree in
Business Administration from Gonzaga University.
Joel E. Simpson has been employed at The Coeur d'Alenes Company since
1979. Joel became Merchandise Manager in 1985, Steel Service Center Manager in
1988, General Manager of the Industrial Fabrication Division in 1993 and
Vice-President of Cd'A in 1995. He served as President of the Steel Service
Center Institute, Spokane chapter from 1989 to 1992 and is currently on the
Spokane Economic Development Council's Workforce Development Committee. Joel has
an MBA degree from City University.
Each of the directors of Cd'A serve until his or her successor is duly
elected at the next annual shareholder meeting of Cd'A or until his or her
earlier resignation, removal or death.
(b) COMPLIANCE WITH SECTION 16(A) OF EXCHANGE ACT.
Based solely upon a review of Forms 3, 4 and 5 and amendments thereto
furnished to the Company with respect to the last fiscal year, Cd'A is not aware
of any failure to file any of such Forms during the last fiscal year or prior
years by any person who, at any time during the last fiscal year, was a
director, officer, or a beneficial owner of more than 10% of the shares of Cd'A
Common Stock.
ITEM 10. EXECUTIVE COMPENSATION.
Name & Principal Other Annual
Position Yr Salary* Compensation Bonus Total
- ---------------- -- ------- ------------ ------ -----
Jimmie Coulson 99 $112,262** 0 0 $112,262
President, CEO 98 $109,197** 0 $7,200 $116,397
97 $102,577** 0 0 $102,577
* Based upon salaries paid or accrued during fiscal years ended
September 25, 1999, September 26,1998 and September 27, 1997. 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 $3,420 in 1999, $1,785 in 1998 and $2,054 in 1997. 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
11
<PAGE>
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 participants 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.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS.
The following table sets forth the beneficial ownership of Cd'A Common
Stock as of December 2, 1999 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 5,344,233
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.
Amount and
Nature of
Title of Name and Address Beneficial Percent
Class Of Beneficial Owner Ownership of Class
-------- ------------------- ----------- --------
Common Stock Jimmie & Arlene Coulson
6302 S. Corkery Road
Spokane WA 99223 2,695,227 50.43
Common Stock Lawrence A. Coulson*
S 5711 Corkery Road
Spokane WA 99223 363,953 6.81
* Lawrence Coulson is the son of Jimmie Coulson
12
<PAGE>
(b) SECURITY OWNERSHIP OF MANAGEMENT.
The following table sets forth the beneficial ownership of Cd'A Common
Stock as of December 7, 1999 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.
Amount and
Nature of
Title of Name and Address Beneficial Percent
Class Of Beneficial Owner Ownership of Class
-------- ------------------- ----------- --------
Common Stock Jimmie & Arlene Coulson
6302 S. Corkery Road
Spokane WA 99223 2,695,227 50.43
Common Stock Lawrence A. Coulson
5711 S. Corkery Road
Spokane WA 99223 363,953 6.81
Common Stock Marilyn A. Schroeder
N. 15406 Lloyd Lane
Mead WA 99021 242,659 4.54
Common Stock Wendell J. Satre
39 West 33rd Ave
Spokane WA 99203 389 0*
Common Stock Joel E. Simpson
E. 1306 Sara Lane
Spokane WA 99223 26,003 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) * 3,425,429 64.10
* Indicates less than 1% of outstanding shares of class.
(c) CHANGES IN CONTROL. Cd'A is not aware of any arrangements which
may result in a change of control of Cd'A. See also item 6 relating to
convertible debentures issued in October 1993.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The purchasers of the $250,000 aggregate principal amount of the
Convertible Debentures sold and issued by Cd'A on October 29, 1993 and December
31, 1993, included the following persons and entities. Jimmie T.G. Coulson
(President, Chief Executive Officer and director) purchased $87,000 original
aggregate principal amount of the Convertible Debentures. A retirement account
for the benefit of Robert P. Shanewise, M.D. (director of Cd'A) purchased
$50,000 original aggregate principal amount of Convertible Debentures. Lawrence
A. Coulson (son of Jimmie T.G. Coulson) purchased $35,000. CINV (a partnership
whose partners are Jimmie T.G. Coulson, Lawrence A. Coulson and David A.
Coulson, sons of Jimmie T.G. Coulson, each of whom has a one-third partnership
interest) purchased $15,000. Ben Harney and Dorothy Harney (parents of Marilyn
A. Schroeder, Treasurer and a director of Cd'A) purchased $13,000, Harry Yost
and Ruth Yost (parents of Arlene Coulson) purchased $50,000. On October 31,
1995, the $87,000 purchased by Jimmie T. G. Coulson and the $35,000 purchased by
Lawrence Coulson were converted to common stock at a conversion price of $0.125
per share. All remaining debentures were repaid on October 31, 1999.
Cd'A has no parent Company.
(The balance of this page has been intentionally left blank).
13
<PAGE>
PART IV
ITEM 13. EXHIBITS, SCHEDULES, AND REPORTS ON FORM 8-K.
(a) EXHIBITS
Exhibit Index
Page Exhibit
No. No. Description of Exhibit
- ---- ------- ----------------------
43 3.1** Articles of Incorporation of Cd'A
77 3.2** Bylaws of Cd'A - Amendments to By-Laws dated 05/02/94
97 10.1** Seafirst Bank - Commercial Security Agreements (Cd'A &
Union Iron Works) dated 03/27/95 Seafirst Bank -
Business Loan Agreement dated 03/01/99 (Cd'A)
** Seafirst Bank - Promissory Note dated 3/27/95 (Cd'A and
Union Iron Works) Seafirst Bank - Loan Modification
Agreement dated 09/18/95 (Cd'A and Union Iron Works)
** Seafirst Bank - Promissory Notes dated 3/24/97 (Cd'A
Union Iron Works)
** Seafirst Bank - Deed of Trust, Security Agreement and
Fixture Filing With Assignment of Leases and Rents
dated 12/20/95 (Cd'A)
** Seafirst Bank - Construction Loan Agreement dated
12/20/95 (Cd'A)
** Seafirst Bank - Certificate and Indemnity Agreement
Regarding Building Laws and Hazardous Substances dated
12/20/95 (Cd'A)
** Seafirst Bank - Agreement of Subordination dated
12/20/95 (Cd'A and Union Iron Works)
** Seafirst Bank - Loan Modification and Additional
Advance Agreement dated 11/21/96 (Cd'A)
** Seafirst Bank - First Amended and Restated Promissory
Note dated 11/12/96 (Cd'A)
** Seafirst Bank - Subordination Agreement dated 2/5/96
(Cd'A)
** Seafirst Bank - Loan Modification Agreement dated July
29, 1999 (Cd'A and Union Iron Works)
120 10.2** Convertible Debentures due 1998 of Cd'A and related
Deed of Trust dated October 29,1993 executed by Cd'A in
favor of Stewart Title Company of Spokane as Trustee
for the benefit of the holders of such Convertible
Debenture see 4.1
14
<PAGE>
10.3*
235 10.6** Adoption Agreement #003 401K Employee Profit Sharing
Plan dated 04/30/93
10.7 Commercial Lease between Klaus Brodin (Lessor) and The
Coeur d'Alenes Company (Lessee) dated September 14,
1999
13.1** Annual report to security holders
18.1* Description of change in accounting principles
267 21** List of Subsidiaries
* See Note 4 to Consolidated Financial Statements
** Previously filed with the Securities and Exchange Commission on Form 10-KSB
for year ending September 1994
(b) REPORTS ON FORM 8-K.
None.
15
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
THE COEUR D'ALENES COMPANY AND SUBSIDIARY
Report of Independent Certified Public Accountants..................F-2
Consolidated Balance Sheets.........................................F-3 to F-4
Consolidated Statements of Income ..................................F-5
Consolidated Statements of Changes in Stockholders' Equity..........F-6
Consolidated Statements of Cash Flows...............................F-7
Summary of Accounting Policies .....................................F-8 to F-10
Notes to Consolidated Financial Statements..........................F-11 to F-18
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
The Coeur d'Alenes Company and Subsidiary
We have audited the accompanying consolidated balance sheets of The Coeur
d'Alenes Company and Subsidiary as of September 25, 1999 and September 26, 1998,
and the related consolidated statements of income, changes in stockholders'
equity and cash flows for each of the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of The
Coeur d'Alenes Company and Subsidiary at September 25, 1999 and September 26,
1998, and the results of their operations and their cash flows for each of the
years then ended in conformity with generally accepted accounting principles.
/s/ BDO SEIDMAN, LLP
- ---------------------------------
November 17, 1999
F-2
<PAGE>
THE COEUR D'ALENES COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
September 25, September 26,
1999 1998
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents .............................. $ 32,422 $ 39,486
Accounts and notes receivable, less allowance of $67,166
and $56,848 for doubtful accounts (Notes 2 and 12) ... 1,019,063 1,417,269
Inventories (Notes 1 and 2) ............................ 2,464,247 2,553,384
Deferred tax asset (Note 6) ............................ 65,000 56,000
Income taxes receivable ................................ 21,305 --
------------ ------------
Total current assets ...................................... 3,602,037 4,066,139
------------ ------------
Property and equipment (Notes 3 and 4):
Land ................................................... 306,320 306,320
Building and leasehold improvements .................... 1,990,344 1,959,076
Machinery and equipment ................................ 2,357,027 2,233,818
Vehicles ............................................... 174,953 150,772
Office equipment ....................................... 230,764 246,101
------------ ------------
5,059,408 4,896,087
Less accumulated depreciation .......................... 1,715,242 1,539,044
------------ ------------
Net property and equipment ................................ 3,344,166 3,357,043
------------ ------------
Other assets (Note 8) ..................................... 67,777 72,010
------------ ------------
$ 7,013,980 $ 7,495,192
============ ============
</TABLE>
See accompanying summary of accounting policies and notes to
consolidated financial statements.
F-3
<PAGE>
THE COEUR D'ALENES COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 25, September 26,
1999 1998
------------ ------------
<S> <C> <C>
Current liabilities:
Short-term bank borrowings (Note 2) .................................. $ 367,553 $ 842,826
Accounts payable ..................................................... 540,154 585,811
Accrued expenses ..................................................... 297,271 400,509
Current maturities of long-term debt (Note 3) ........................ 164,241 134,714
Current maturities of related party debt (Notes 4 and 10) ............ 128,000 --
------------ ------------
Total current liabilities ............................................... 1,497,219 1,963,860
Deferred tax liability (Note 6) ......................................... 156,000 120,000
Long-term debt, less current maturities (Note 3) ........................ 2,266,399 2,328,170
Long-term debt to related parties (Notes 4 and 10) ...................... -- 128,000
------------ ------------
Total liabilities ....................................................... 3,919,618 4,540,030
------------ ------------
Commitments and contingencies (Notes 5, 7 and 9)
Stockholders' equity (Notes 4 and 10):
Common stock, no par, shares authorized 10,000,000; issued 5,357,373,
and outstanding 5,345,419 and 5,350,338 ............................ 1,186,192 1,186,192
Retained earnings ................................................... 1,917,230 1,775,320
------------ ------------
3,103,422 2,961,512
Less treasury stock, at cost; 11,954 and 7,035 shares ............... 9,060 6,350
------------ ------------
Total stockholders' equity .............................................. 3,094,362 2,955,162
------------ ------------
$ 7,013,980 $ 7,495,192
============ ============
</TABLE>
See accompanying summary of accounting policies and notes to
consolidated financial statements.
F-4
<PAGE>
THE COEUR D'ALENES COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Years Ended
September 25, September 26,
1999 1998
------------ ------------
Net sales .................................. $ 12,247,613 $ 14,368,061
Cost of sales .............................. 8,957,654 10,721,254
------------ ------------
Gross profit ............................... 3,289,959 3,646,807
Selling, general and administrative expenses 2,926,448 3,045,846
------------ ------------
Operating income ........................... 363,511 600,961
------------ ------------
Other income (expense):
Interest income ....................... 40,263 36,835
Interest expense ...................... (248,006) (301,817)
Other income .......................... 46,362 25,532
------------ ------------
Net other expense .......................... (161,381) (239,450)
------------ ------------
Income before income tax expense ........... 202,130 361,511
Income tax expense (Note 6) ................ 60,220 110,485
------------ ------------
Net income ................................. $ 141,910 $ 251,026
============ ============
Earnings per common share (Note 10):
Basic ................................. $ 0.03 $ 0.05
Diluted ............................... $ 0.02 $ 0.04
============ ============
See accompanying summary of accounting policies and notes to
consolidated financial statements.
F-5
<PAGE>
THE COEUR D'ALENES COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
------------------------ Treasury Stock
Shares Retained -----------------------
Outstanding Amount Earnings Shares Amount
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance, September 27, 1997.. 5,353,561 $1,186,192 $1,524,294 3,812 $ 3,800
Net income .................. -- -- 251,026 -- --
Treasury stock purchase ..... (3,223) -- -- 3,223 2,550
---------- ---------- ---------- ---------- ----------
Balance, September 26, 1998.. 5,350,338 1,186,192 1,775,320 7,035 6,350
Net income .................. -- -- 141,910 -- --
Treasury stock purchase ..... (4,919) -- -- 4,919 2,710
---------- ---------- ---------- ---------- ----------
Balance, September 25, 1999.. 5,345,419 $1,186,192 $1,917,230 11,954 $ 9,060
========== ========== ========== ========== ==========
</TABLE>
See accompanying summary of accounting
policies and notes to consolidated financial statements.
F-6
<PAGE>
THE COEUR D'ALENES COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
Years Ended
September 25, September 26,
1999 1998
------------ ------------
<S> <C> <C>
Operating activities:
Net income .................................... $ 141,910 $ 251,026
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation .............................. 230,001 219,040
Loss on disposal of property and equipment. 265 1,606
Provision for doubtful accounts ........... 12,000 12,400
Deferred income taxes ..................... 27,000 45,000
Changes in assets and liabilities:
Receivables .......................... 364,901 (164,669)
Inventories .......................... 89,137 (210,713)
Other assets ......................... 4,233 1,355
Accounts payable ..................... (45,657) (27,797)
Accrued expenses ..................... (103,238) 92,989
------------ ------------
Net cash provided by operating activities .......... 720,552 220,237
------------ ------------
Investing activities:
Additions to property and equipment ........... (217,639) (245,165)
Proceeds from sale of fixed assets ............ 250 2,900
------------ ------------
Net cash used in investing activities .............. (217,389) (242,265)
------------ ------------
Financing activities:
Borrowings under line of credit agreements .... 11,275,000 14,080,000
Repayments under line of credit agreements .... (11,750,273) (14,070,830)
Principal repayments of long-term debt ........ (110,244) (101,601)
Borrowings of long-term debt .................. 78,000 67,000
Purchase of treasury stock .................... (2,710) (2,550)
------------ ------------
Net cash used in financing activities .............. (510,227) (27,981)
------------ ------------
Net decrease in cash and cash equivalents .......... (7,064) (50,009)
Cash and cash equivalents, beginning of year ....... 39,486 89,495
------------ ------------
Cash and cash equivalents, end of year ............. $ 32,422 $ 39,486
============ ============
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for:
Interest .................................. $ 253,498 $ 301,171
Income taxes .............................. $ 74,267 $ 40,793
</TABLE>
See accompanying summary of accounting policies and notes to
consolidated financial statements.
F-7
<PAGE>
THE COEUR D'ALENES COMPANY AND SUBSIDIARY
SUMMARY OF ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of The
Coeur d'Alenes Company and its wholly-owned subsidiary, Union Iron Works, Inc.
(collectively referred to as "the Company"). Union Iron Works, Inc. ("the
Subsidiary") is doing business as Stock Steel. All significant intercompany
balances and transactions have been eliminated in consolidation.
NATURE OF BUSINESS
The Company is engaged in the distribution, processing and fabrication of steel
and related products to customer specifications. Most of the Company's business
activity is with customers located within the Pacific Northwest.
FISCAL YEAR
The Company's fiscal year is a 52 or 53 week period ending on the last Saturday
in September. Fiscal 1999 and 1998 were 52 week years.
CASH AND CASH EQUIVALENTS
For purposes of balance sheet classification and the statements of cash flows,
the Company considers all highly liquid short-term investments having an
original maturity of three months or less to be cash equivalents.
INVENTORIES
Inventories are valued at the lower of cost or market. Cost is determined by
using the last-in, first-out ("LIFO") method for fabrication steel inventories.
The first-in, first-out ("FIFO") method of pricing is used for all distribution
and other inventories, which are composed primarily of steel service center
stock.
PROPERTY, EQUIPMENT AND DEPRECIATION
Property and equipment are stated at cost. Depreciation is computed using
straight-line and accelerated methods over estimated useful lives of the assets
which range from 3 to 39 years.
REVENUE AND COST RECOGNITION
Sales are recorded and customers are billed when products are shipped or
projects are completed. Costs of orders and projects are recorded in the same
accounting period as related sales.
F-8
<PAGE>
THE COEUR D'ALENES COMPANY AND SUBSIDIARY
SUMMARY OF ACCOUNTING POLICIES
INCOME TAXES
The Company accounts for income taxes in accordance with the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes". SFAS No. 109 requires a company to recognize deferred tax assets
and liabilities for the expected future income tax consequences of events that
have been recognized in a company's financial statements. Under this method,
deferred tax liabilities and assets are determined based on the temporary
differences between the financial statement carrying amounts and tax bases of
assets and liabilities using enacted tax rates in effect in the years in which
the temporary differences are expected to reverse.
EARNINGS PER COMMON SHARE
The Company computes earnings per share ("EPS") in accordance with SFAS No. 128,
"Earnings per Share". SFAS No. 128 establishes standards for computing and
presenting EPS. SFAS No. 128 requires dual presentation of basic EPS and diluted
EPS on the face of all income statements issued after December 15, 1997 for all
entities with complex capital structures. Basic EPS is computed by dividing net
income by the weighted average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock. Diluted earnings per share was determined on the assumptions
that the convertible debentures were converted as of the first day of the year
and net earnings were adjusted for the interest expense on the debentures, net
of its tax effect.
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the consolidated balance sheets as of September
25, 1999 and September 26, 1998 for cash, accounts and notes receivables,
short-term bank borrowings, accounts payable and accrued expenses approximate
fair value because of the immediate or short-term maturity of these financial
instruments. The fair value of the $128,000 debt payable to related parties at
September 25, 1999 and September 26, 1998 is approximately $128,000 and
$179,000. The fair value of notes payable and long-term debt approximates its
carrying value as the stated rates of the debt reflect market conditions or
because the rates are variable in nature.
F-9
<PAGE>
THE COEUR D'ALENES COMPANY AND SUBSIDIARY
SUMMARY OF ACCOUNTING POLICIES
RESEARCH AND DEVELOPMENT COSTS
Expenditures associated with research and development are expensed as incurred.
These costs amounted to $26,573 and $20,377 during the years ended September 25,
1999 and September 26, 1998, respectively.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities," which
requires companies to recognize all derivative contracts as either assets or
liabilities in the balance sheet and to measure them at fair value. If certain
conditions are met, a derivative may be specifically designated as a hedge, the
objective of which is to match the timing of gain or loss recognition on the
hedging derivative with the recognition of (i) the change in the fair value of
the hedged asset or liability that is attributable to the hedged risk or (ii)
the earnings effect of the hedged forecasted transaction. For a derivative not
designated as a hedging instrument, the gain or loss is recognized in income in
the period of change. In July 1999, the FASB issued SFAS No. 137, "Accounting
for Derivative Instruments and Hedging Activities Deferral of the effective date
of SFAS No. 133." SFAS No. 137 amends the effective date of SFAS No. 133 to now
be for all fiscal quarters of fiscal years beginning after June 15, 2000.
In October 1998, the FASB issued SFAS No. 134, "Accounting for Mortgage-Backed
Securities Retained After the Securitization of Mortgage Loans Held for Sale by
a Mortgage Banking Enterprise", which effectively changes the way mortgage
banking firms account for certain securities and other interests they retain
after securitizing mortgage loans that were held for sale. SFAS No. 134 is
effective for financial statement periods beginning after December 15, 1998.
In June 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position 98-5,
"Reporting on the Costs of Start-up Activities" ("SOP 98-5"). SOP 98-5 requires
all start-up and organizational costs to be expensed as incurred. It also
requires all remaining historically capitalized amounts of these costs existing
at the date of adoption to be expensed and reported as the cumulative effect of
a change in accounting principle. SOP 98-5 is effective for all fiscal years
beginning after December 31, 1998.
In February 1999 the FASB issued SFAS No. 135, "Rescission of Financial
Accounting Standards Board No. 75 and Technical Corrections." SFAS No. 135
rescinds SFAS No. 75 and amends SFAS No. 35. SFAS No. 135 also amends other
existing authoritative literature to make various technical corrections, clarify
meanings, or describe applicability under changed conditions. SFAS No. 135 is
effective for financial statements issued for fiscal years ending after February
15, 1999.
None of the foregoing pronouncements is expected to have a material effect on
the Company's reported operating results or on its financial statement
presentation.
F-10
<PAGE>
THE COEUR D'ALENES COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. INVENTORIES
Inventories are summarized as follows:
September 25, September 26,
1999 1998
------------ ------------
Fabrication inventories:
Raw materials .................... $ 27,372 $ 31,826
Work-in-progress ................. 401,899 67,293
------------ ------------
Inventories, at FIFO cost ........ 429,271 99,119
LIFO reserve ..................... (15,018) (19,861)
------------ ------------
Inventories, at LIFO cost ........ 414,253 79,258
Distribution inventories, at FIFO..... 2,049,994 2,474,126
------------ ------------
Total inventories .................... $ 2,464,247 $ 2,553,384
============ ============
During the year ended September 26, 1998, the liquidation of LIFO inventories
decreased cost of sales and, therefore, increased income before income tax
expense by approximately $61,500.
2. SHORT-TERM BANK BORROWINGS
The Company has a $1.85 million bank credit line available for revolving credit
requirements which is subject to renewal on May 1, 2000. Interest is charged at
the lender's prime rate plus 0.25% (8.50% at September 25, 1999). Outstanding
borrowings are collateralized by accounts receivable and inventories.
Short-term borrowing activity was as follows:
September 25, September 26,
1999 1998
------------ ------------
Balance outstanding at year-end ................ $ 367,553 $ 842,826
Weighted average interest rate at year-end ..... 8.50% 8.75%
Maximum amount outstanding at any month end .... $ 660,976 $ 1,340,566
Average amount outstanding ..................... $ 330,902 $ 848,317
Weighted average interest rate during the year.. 8.18% 8.78%
============ ============
F-11
<PAGE>
THE COEUR D'ALENES COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The weighted average interest rate and monthly balances are computed using the
end of month borrowings outstanding and the related end of month interest rate.
The month end balances and interest rates are averaged to determine the yearly
weighted average balance of borrowings and the weighted average interest rate
during the year.
The credit line agreement contains covenants under which the Company may not
declare or pay any dividends in excess of 10% of annual net (after tax) profit
or enter into mergers, acquisitions or any major sales of assets or corporate
reorganizations without prior consent by the bank. The Company is also required
to maintain certain financial ratios concerning working capital, debt to equity,
and a minimum tangible net worth of $2,200,000. At September 25, 1999 the
Company was in compliance with all of its bank covenants.
3. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
September 25, September 26,
1999 1998
---------------- ---------------
<S> <C> <C>
Note payable to a bank, monthly payments of
$16,925 including interest at 8.5%; due
January 2007, collateralized by property.......... 1,839,399 $ 1,884,068
Note payable to a bank, monthly payments of
$3,990 including interest at 8.625%; due
June 2005, collateralized by equipment............ 215,814 243,495
Note payable to a bank, monthly payments of
$4,018 including interest at 0.5% over the
bank's prime rate (8.75% at September 25, 1999);
due September 2003, collateralized
by equipment...................................... 161,143 194,085
Note payable to a bank, monthly payments of
$3,203 including interest at 8.75%; due
September 2002, collateralized by equipment....... 101,139 129,236
Note payable to a bank, monthly payments of
$1,853 at 0.5% over the bank's prime rate
(8.75% at September 25, 1999); due
August 2004, collateralized by equipment......... 90,000 12,000
</TABLE>
F-12
<PAGE>
THE COEUR D'ALENES COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 25, September 26,
1999 1998
------------ ------------
LID payable to City of Spokane, annual
principal payments of $2,572 plus interest
at 8.5%; due October 2008 ................ 23,145 --
------------ ------------
2,430,640 2,462,884
Less current maturities ..................... 164,241 134,714
------------ ------------
Long-term debt, less current maturities ..... $ 2,266,399 $ 2,328,170
============ ============
Scheduled long-term debt maturities as of September 25, 1999 are as follows:
YEAR ENDING Amount
-----------
September 30, 2000............................................ $ 164,241
September 29, 2001............................................ 177,487
September 28, 2002............................................ 193,232
September 27, 2003............................................ 168,869
September 25, 2004............................................ 133,544
Thereafter.................................................... 1,593,267
-----------
Total............................................ $ 2,430,640
===========
4. DEBT TO RELATED PARTIES
At September 25, 1999 and September 26, 1998, the Company owed $128,000 to
related parties pursuant to the terms of a convertible debenture agreement. The
debentures require semi-annual interest payments at 8.75%, are secured by the
Company's land and building and are due October 31, 1999. The debentures are
convertible into shares of the Company's common stock at a per share rate of
$.28 through maturity. The Company, at its option, may call any or all
outstanding debentures for redemption. Subsequent to year end, the Company
repaid the $128,000 owed to debenture holders.
5. LEASE COMMITMENTS
The Company leases office furniture and equipment and vehicles under operating
leases that expire at various dates through 2003. As of September 25, 1999,
future minimum rental payments required under operating leases that have
remaining noncancellable terms in excess of one year are as follows:
YEAR ENDING Amount
-------------
September 30, 2000........................................... $ 206,125
September 29, 2001........................................... 160,225
September 28, 2002........................................... 73,669
September 27, 2003........................................... 23,506
-----------
Total........................................................ $ 463,525
===========
F-13
<PAGE>
THE COEUR D'ALENES COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Rental expense for all operating leases was $228,983 and $298,268 for the years
ended September 25, 1999 and September 26, 1998.
6. INCOME TAXES
Income tax expense consists of the following:
Years Ended
-----------------------------------
September 25, September 26,
1999 1998
---------------- ---------------
Federal:
Current.............................. $ 32,626 $ 64,454
Deferred............................. 27,000 45,000
State - current.......................... 594 1,031
---------------- ---------------
Income tax expense....................... $ 60,220 $ 110,485
================ ===============
Major items causing the Company's effective tax rate to differ from the
statutory rates are as follows:
<TABLE>
<CAPTION>
September 25, 1999 September 26, 1998
------------------------ -----------------------
Amount Percent Amount Percent
------------ ---------- ------------ ---------
<S> <C> <C> <C> <C>
Income tax expense at statutory
rate........................... $ 68,724 34.0% $ 122,914 34.0%
Graduated tax rate differences.... (10,688) (5.3) (8,785) (2.4)
Other............................. 2,184 1.1 (3,644) (1.0)
----------- --------- ------------ --------
Income tax expense................ $ 60,220 29.8% $ 110,485 30.6%
=========== ========= ============ ========
</TABLE>
Significant components of the Company's deferred tax assets and liabilities
consist of the following:
September 25, September 26,
1999 1998
---------------- ---------------
Current deferred tax assets:
Vacation accrual.......................... $ 40,000 $ 36,100
Allowance for doubtful accounts........... 23,000 17,100
Other..................................... 2,000 2,800
---------------- ---------------
Current deferred tax asset................... $ 65,000 $ 56,000
================ ===============
F-14
<PAGE>
THE COEUR D'ALENES COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 25, September 26,
1999 1998
------------ ------------
Non-current deferred tax assets (liabilities):
Net operating loss carryforwards .......... $ 127,000 $ 131,000
Depreciation .............................. (184,000) (151,900)
Other ..................................... (1,000) (900)
------------ ------------
Total non-current deferred tax liability ..... (58,000) (21,800)
Valuation allowance .......................... (98,000) (98,200)
------------ ------------
Net non-current deferred tax liability ....... $ (156,000) $ (120,000)
============ ============
A valuation allowance on the Company's deferred tax assets has been established
to the extent the Company believes it is more likely than not that the deferred
tax assets will not be realized.
At September 25, 1999, the Company has available net operating loss
carryforwards of approximately $385,000 which expire through 2007. Utilization
of the operating loss carryforwards is limited to $12,180 per year.
7. COMMITMENTS
The Company routinely makes commitments to purchase and sell steel products up
to nine months in advance of anticipated deliveries. Outstanding firm purchase
commitments at September 25, 1999 aggregated $601,519. Negotiated firm sales
contracts aggregated $1,346,094 at September 25, 1999.
8. EQUITY METHOD INVESTMENT
On September 7, 1999, the Company entered into a license agreement with Road
Renovators, Inc., which gave the Company exclusive rights to manufacture, use,
lease and sell a patented road patching vehicle within the U.S. In exchange for
these rights, the Company agreed to grant Road Renovators, Inc. a 5% interest in
Road Renovators, LLC and execute a promissory note in favor of Road Renovators,
Inc. for $126,757. The promissory note will bear interest at 7% beginning one
year from the anniversary date of the first sale of a licensed product under the
agreement. The note is due in full on May 1, 2004. In addition, the Company will
pay royalties to Road Renovators, Inc. of 3.5% on sales of the patented product
from the date of the agreement until May 6, 2004, and 1% on sales of the
patented product from May 7, 2004 until May 6, 2009. Subsequent to signing the
license agreement, a new company, Road Renovators, LLC, was formed. On September
21, 1999, the Company assigned the licensing agreement and all rights and
responsibilities, including the note payable and royalty obligation, related to
the agreement, to Road Renovators, LLC in exchange for a 30% interest in Road
Renovators, LLC. This investment will be accounted for under the equity method
of accounting. The Company's historical cost basis and carrying value of the
investment at September 25, 1999 is $0.
F-15
<PAGE>
THE COEUR D'ALENES COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. RETIREMENT PLAN
The Company sponsors a qualified 401(k) and profit-sharing plan ("the Plan").
The Plan allows individual participants to make contributions to the Plan with
matching contributions by the Company to the extent of 50% of the employees'
contributions up to a maximum of 6% of annual salary per participant. Additional
discretionary contributions may be made by the Company based on net income.
Substantially all full-time employees are eligible to participate. Total Company
contributions to the Plan were $40,088 and $21,236 for fiscal 1999 and 1998.
10. EARNINGS PER COMMON SHARE
Earnings per common share is computed as follows:
<TABLE>
<CAPTION>
Year Ended September 25, 1999
---------------------------------------
Weighted Per-
Average Share
Income Shares Amount
----------- ------------ -----------
<S> <C> <C> <C>
BASIC EPS
Income available to common stockholders......... $ 141,910 5,348,213 $ 0.03
===========
EFFECT OF DILUTIVE SECURITIES
Convertible debentures(a)....................... 7,862 640,000
----------- ------------
DILUTED EPS
Income available to common stockholders plus
assumed conversions.......................... $ 149,772 5,988,213 $ 0.02
=========== ============ ===========
Year Ended September 26, 1998
---------------------------------------
Weighted Per-
Average Share
Income Shares Amount
----------- ------------ -----------
<S> <C> <C> <C>
BASIC EPS
Income available to common stockholders......... $ 251,026 5,352,815 $ 0.05
===========
EFFECT OF DILUTIVE SECURITIES
Convertible debentures(a)....................... 7,720 731,429
----------- ------------
DILUTED EPS
Income available to common stockholders plus
assumed conversions.......................... $ 258,746 6,084,244 $ 0.04
=========== ============ ===========
</TABLE>
a For purposes of diluted earnings per common share, convertible
debentures for fiscal 1999 and 1998 are assumed to be converted as of
the first day of the year. Such conversion negates the need to pay
interest on the debentures. The debentures were assumed to be converted
at their stated per share conversion rate at the beginning of each
fiscal year of $0.20 and $0.175 for fiscal 1999 and 1998. See also Note
4 concerning the convertible debentures.
F-16
<PAGE>
THE COEUR D'ALENES COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. SEGMENT INFORMATION
The Company's consolidated financial statements include certain reportable
segment information. These segments include The Coeur d'Alenes Company, the
parent company engaged in the processing and fabrication of finished metal
structures or products (or components thereof) in accordance with a customer's
specifications, and Stock Steel, a wholly owned subsidiary engaged in the
distribution and resale of stock metal materials purchased from mills with
further processing or other services, such as cutting, bending, burning, or
sawing stock metal materials to a customer's specifications (component parts) or
delivery to a customer's location. The Company evaluates the performance of
these segments based upon multiple variables including revenues and profit or
loss.
The segments' profit and loss components and schedule of assets are as follows:
<TABLE>
<CAPTION>
As of and For the Year Ended As of and For the Year Ended
September 25, 1999 September 26, 1998
---------------------------------------- ---------------------------------------
Fabrication Distribution Total Fabrication Distribution Total
----------- ------------ ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Segment profit (loss)..... $ (62,846) $ 264,976 $ 202,130 $ 163,172 $ 198,339 $ 361,511
External revenues ......... 1,476,072 10,771,541 12,247,613 2,330,577 12,037,484 14,368,061
Internal revenues ......... 33,696 290,239 323,935 31,027 244,130 275,157
Interest income ........... 1,897 38,367 40,264 4,710 32,125 36,835
Interest expense .......... 38,190 209,816 248,006 52,045 249,772 301,817
Depreciation expense ...... 39,038 190,963 230,001 50,000 169,040 219,040
Segment assets-gross ...... 1,335,400 6,319,549 7,654,949 1,928,285 6,016,235 7,944,520
Segment assets-net ........ 1,327,382 5,686,598 7,013,980 1,521,206 5,973,986 7,495,192
Capital expenditures ...... 42,745 174,894 217,639 54,890 190,275 245,165
=========== =========== =========== =========== =========== ===========
</TABLE>
Reconciliation of segment net income (loss), total assets and revenues is as
follows:
As of and For the Years Ended
----------------------------
September 25, September 26,
1999 1998
------------ ------------
PROFIT OR LOSS
Total profit or loss for reportable segments $ 202,130 $ 361,511
------------ ------------
Consolidated income before income tax expense $ 202,130 $ 361,511
============ ============
TOTAL ASSETS
Total assets for reportable segments ........ $ 7,654,949 $ 7,944,520
Elimination of intersegment assets .......... (640,969) (449,328)
------------ ------------
Total consolidated assets ................... $ 7,013,980 $ 7,495,192
============ ============
SEGMENT REVENUES
Total revenues for reportable segments ...... $ 12,571,548 $ 14,643,218
Elimination of intersegment revenues ........ (323,935) (275,157)
------------ ------------
Total consolidated revenues ................. $ 12,247,613 $ 14,368,061
============ ============
F-17
<PAGE>
THE COEUR D'ALENES COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Revenues from one customer of the fabrication and distribution segments
represented approximately $1.5 million, or 12%, of the Company's consolidated
revenues for the year ended September 25, 1999. No single customer accounted for
more than 10% of the Company's consolidated revenues during the year ended
September 26, 1998.
12. VALUATION AND QUALIFYING ACCOUNTS
Allowance for doubtful accounts activity was as follows:
Years Ended
-----------------------------------
September 25, September 26,
1999 1998
---------------- ---------------
Balance, beginning of year.............. $ 56,848 $ 53,306
Charged to expense...................... 12,000 12,400
Write-offs, net of recoveries........... (1,682) (8,858)
---------------- ---------------
Balance, end of year.................... $ 67,166 $ 56,848
================ ===============
F-18
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE COEUR D'ALENES COMPANY
Date: December 21, 1999 By: /s/ JIMMIE COULSON
-------------------------------------------
President, Chief Executive Officer
Director, (Principal Executive Officer)
Date: December 21, 1999 By: /s/ MARILYN A. SCHROEDER
-------------------------------------------
Treasurer and Director
(Principal Financial Officer and
Principal Accounting Officer)
Date: December 21, 1999 By: /s/ WENDELL J. SATRE
-------------------------------------------
Director
Date: December 21, 1999 By: /s/ ROBERT P. SHANEWISE, M.D.
-------------------------------------------
Director
Date: December 21, 1999 By: /s/ LAWRENCE A. STANLEY
-------------------------------------------
Director
SEAFIRST BANK
BUSINESS LOAN AGREEMENT
PART B
1. PROMISSORY NOTE(s). All loans shall be evidenced by promissory notes in a
form and substance satisfactory to Bank.
2. CONDITIONS TO AVAILABILITY OF LOAN/LINE OF CREDIT. Before Bank is
obligated to disburse/make any advance, or at any time thereafter which
Bank deems necessary and appropriate, Bank must receive all of the
following, each of which must be in form and substance satisfactory to
Bank ("loan documents"):
2.1 Original, executed promissory note(s);
2.2 Original executed security agreement(s) and/or deed(s) of trust
covering the collateral described in Part A;
2.3 All collateral described in Part A in which Bank wishes to have
a possessory security interest;
2.4 Financing statement(s) executed by Borrower;
2.5 Such evidence that Bank may deem appropriate that the security
interests and liens in favor of Bank are valid, enforceable, and
prior to the rights and interests of others except those
consented to in writing by Bank;
2.6 The following guaranty(ies) in favor of the Bank:
______________________;
2.7 Subordination agreement(s) in favor of Bank executed by:
__________________;
2.8 Evidence that the execution, delivery, and performance by
Borrower of this Agreement and the execution, delivery, and
performance by Borrower and any corporate guarantor or corporate
subordinating creditor of any instrument or agreement required
under this Agreement, as appropriate, have been duly authorized;
2.9 Any other document which is deemed by the Bank to be required
from time to time to evidence loans or to effect the provisions
of this Agreement;
2.10 If requested by Bank, a written legal opinion expressed to Bank,
of counsel for Borrower as to the matters set forth in sections
3.1 and 3.2, and to the best of such counsel's knowledge after
reasonable investigation, the matters set forth in sections 3.3,
3.5, 3.6, 3.7, 3.9 and such other matters as the Bank may
reasonably request;
2.11 Pay or reimburse Bank for any out-of-pocket expenses expended in
making or administering the loans made hereunder including
without limitation attorney's fees (including allocated costs of
in-house counsel); and
<PAGE>
2.12 Other (describe):
___________________________________________________________
3. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Bank,
except as Borrower has disclosed to Bank in writing, as of the date of
this Agreement and hereafter so long as credit granted under this
Agreement is available and until full and final payment of all sums
outstanding under this Agreement and promissory notes that:
3.1 Borrower is duly organized and existing under the laws of the
state of its organization as a:
Sole
General Limited Proprietor-
[X] Corporation Partnership Partnership ship dba
LLC with Duration of ____________________________________
Borrower is properly licensed and in good standing in each state
in which Borrower is doing business and Borrower has qualified
under, and complied with, where required, the fictitious or
trade name statutes of each state in which Borrower is doing
business, and Borrower has obtained all necessary government
approvals for its business activities; the execution, delivery,
and performance of this Agreement and such notes and other
instruments required herein are within Borrower's powers, have
been duly authorized, and, as to Borrower and any guarantor, are
not in conflict with the terms of any charter, bylaw, or other
organization papers of Borrower, and this Agreement, such notes
and the loan documents are valid and enforceable according to
their terms;
<PAGE>
3.2 The execution, delivery, and performance of this Agreement, the
loan documents and any other instruments are not in conflict
with any law or any indenture, agreement or undertaking to which
Borrower is a party or by which Borrower is bound or affected;
3.3 Borrower has title to each of the properties and assets as
reflected in its financial statements (except such assets which
have been sold or otherwise disposed of in the ordinary course
of business), and no assets or revenues of the Borrower are
subject to any lien except as required or permitted by this
Agreement, disclosed in its financial statements or otherwise
previously disclosed to Bank in writing;
3.4 All financial information, statements as to ownership of
Borrower and all other statements submitted by Borrower to Bank,
whether previously or in the future, are and will be true and
correct in all material respects upon submission and are and
will be complete upon submission insofar as may be necessary to
give Bank a true and accurate knowledge of the subject matter
thereof;
3.5 Borrower has filed all tax returns and reports as required by
law to be filed and has paid all taxes and assessments
applicable to Borrower or to its properties which are presently
due and payable, except those being contested in good faith;
3.6 There are no proceedings, litigation or claims (including unpaid
taxes) against Borrower pending or, to the knowledge of the
Borrower, threatened, before any court or government agency, and
no other event has occurred which may have a material adverse
effect on Borrower's financial condition;
3.7 There is no event which is, or with notice or lapse of time, or
both, would be, an Event of Default (as defined in Section 7)
under this Agreement;
3.8 Borrower has developed and budgeted for a comprehensive program
to address the "Year 2000 problem" (that is, the inability of
computers, as well as embedded microchips in non-computing
devices, to perform properly date-sensitive functions with
respect to certain dates prior to and after December 31, 1999).
Borrower has implemented that program substantially in
accordance with its timetable and budget and [reasonably
anticipates that] it will substantially avoid the Year 2000
problem as to all computers, as well as embedded microchips in
non-computing devices, that are material to Borrower's business,
properties or operations. Borrower has developed feasible
contingency plans adequately to ensure uninterrupted and
unimpaired business operation in the event of failure of its own
or a third party's systems or equipment due to the Year 2000
problem, including those of vendors, customers, and suppliers,
as well as a general failure of or interruption in its
communications and delivery infrastructure.
<PAGE>
3.9 Borrower has exercised due diligence in inspecting Borrower's
properties for hazardous wastes and hazardous substances. Except
as otherwise previously disclosed and acknowledged to Bank in
writing: (a) during the period of Borrower's ownership of
Borrower's properties, there has been no use, generation,
manufacture, storage, treatment, disposal, release or threatened
release of any hazardous waste or hazardous substance by any
person in, on, under or about any of Borrower's properties; (b)
Borrower has no actual or constructive knowledge that there has
been any use, generation, manufacture, storage, treatment,
disposal, release or threatened release of any hazardous waste
or hazardous substance by any person in, on, under or about any
of Borrower's properties by any prior owner or occupant of any
of Borrower's properties; and (c) Borrower has no actual or
constructive notice of any actual or threatened litigation or
claims of any kind by any person relating to such matters. The
terms "hazardous waste(s)," hazardous substance(s)," "disposal,"
"release," and "threatened release" as used in this Agreement
shall have the same meanings as set forth in the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980,
as amended, 42 U.S.C. Section 9601, et. seq., the Superfund
Amendments and Reauthorization Act of 1986, as amended, Pub. L.
No. 99-499, the Hazardous Materials Transportation Act, as
amended, 49 U.S. C. Section 1801, et. seq., the Resource
Conservation and Recovery Act, as amended, 49 U.S.C. Section
6901, et seq., or other applicable state or federal laws, rules
or regulations adopted pursuant to any of the foregoing; and
3.10 Each chief place of business of Borrower, and the office or
offices where Borrower keeps its records concerning any of the
collateral, is located at: E. 3900 BROADWAY, SPOKANE, WA.
4. AFFIRMATIVE COVENANTS. So long as credit granted under this Agreement is
available and until full and final payment of all sums outstanding under
this Agreement and promissory note(s) Borrower will:
4.1 Use the proceeds of the loans covered by this Agreement only in
connection with Borrower's business activities and exclusively
for the following purposes: _GENERAL CORPORATE PURPOSES;
<PAGE>
4.2 Maintain current assets in an amount at least equal to 1.50
times current liabilities, and not less than $1,500,000. Current
assets and current liabilities shall be determined in accordance
with generally accepted accounting principles and practices,
consistently applied;
4.3 Maintain a tangible net worth of at least $2,400,000 and not
permit Borrower's total indebtedness which is not subordinated
in a manner satisfactory to Bank to exceed 2.30 times Borrower's
tangible net worth. "Tangible net worth" means the excess of
total assets over total liabilities, excluding, however, from
the determination of total assets (a) all assets which should be
classified as intangible assets such as goodwill, patents,
trademarks, copyrights, franchises, and deferred charges
(including unamortized debt discount and research and
development costs), (b) treasury stock, (c) cash held in a
sinking or other similar fund established for the purpose of
redemption or other retirement of capital stock, (d) to the
extent not already deducted from total assets, reserves for
depreciation, depletion, obsolescence or amortization of
properties and other reserves or appropriations of retained
earnings which have been or should be established in connection
with the business conducted by the relevant corporation, and (e)
any revaluation or other write-up in book value of assets
subsequent to the fiscal year of such corporation last ended at
the date of this Agreement;
4.4 Upon request Borrower agrees to insure and to furnish Bank with
evidence of insurance covering the life of Borrower (if an
individual) or the lives of designated partners or officers of
Borrower (if a partnership or corporation) in the amounts stated
below. Borrower shall take such actions as are reasonably
requested by Bank, such as assigning the insurance policies to
Bank or naming Bank as beneficiary and obtaining the insurer's
acknowledgment thereof, to provide that in the event of the
death of any of the named insured as the policy proceeds will be
applied to payment of Borrower's obligations owing to Bank;
Name: N/A Amount: $
------------------- ---------------------
Name: N/A Amount: $
------------------- ---------------------
4.5 Promptly give written notice to Bank of: (a) all litigation and
claims made or threatened affecting Borrower where the amount is
$100,000 or more; (b) any substantial dispute which may exist
between Borrower and any governmental regulatory body or law
enforcement authority; (c) any Event of Default under this
Agreement or any other agreement with Bank or any other creditor
<PAGE>
or any event which become an Event of Default, and (d) any other
matter which has resulted or might result in a material adverse
change in Borrower's financial condition or operations;
4.6 Borrower shall as soon as available, but in any event within 120
days following the end of each Borrower's fiscal years and
within 45 days following the end of each QUARTER provide to
Bank, in a form satisfactory to Bank (including audited
statements if required at any time by Bank), such financial
statements and other information respecting the financial
condition and operations of Borrower as Bank may reasonably
request, INCLUDING "QUARTERLY COMPLIANCE CERTIFICATES", AS PER
THE ATTACHED, AND THE U.S. SECURITIES COMMISSION REPORT 10-K.
4.7 Borrower will maintain in effect insurance with responsible
insurance companies in such amounts and against such risks as is
customarily maintained by persons engaged in businesses similar
to that of Borrower and all policies covering property given as
security for the loans shall have loss payable clauses in favor
of Bank. Borrower agrees to deliver to Bank such evidence of
insurance as Bank may reasonably require and, within thirty (30)
days after notice from Bank, to obtain such additional insurance
with an insurer satisfactory to the Bank;
4.8 Borrower will pay all indebtedness taxes and other obligations
for which the Borrower is liable or to which its income or
property is subject before they shall become delinquent, except
any which is being contested by the Borrower in good faith;
4.9 Borrower will continue to conduct its business as presently
constituted, and will maintain and preserve all rights,
privileges and franchises now enjoyed, conduct Borrower's
business in an orderly, efficient and customary manner, keep all
Borrowers properties in good working order and condition, and
from time to time make all needed repairs, renewals or
replacements so that the efficiency of Borrower's properties
shall be fully maintained and preserved;
4.10 Borrower will maintain adequate books, accounts and records and
prepare all financial statements required hereunder in
accordance with generally accepted accounting principles and
practices consistently applied, and in compliance with the
regulations of any governmental regulatory body having
jurisdiction over Borrower or Borrower's business;
4.11 Borrower will permit representatives of Bank to examine and make
copies of the books and records of Borrower and to examine the
collateral of the Borrower at reasonable times;
4.12 Borrower will perform, on request of Bank, such acts as may be
necessary or advisable to perfect any lien or security interest
provided for herein or otherwise carry out the intent of this
Agreement;
<PAGE>
4.13 Borrower will comply with all applicable federal, state and
municipal laws, ordinances, rules and regulations relating to
its properties, charters, businesses and operations, including
compliance with all minimum funding and other requirements
related to any of Borrower's employee benefit plans;
4.14 Borrower will permit representatives of Bank to enter onto
Borrower's properties to inspect and test Borrower's properties
as Bank, in its sole discretion, may deem appropriate to
determine Borrower's compliance with section 5.8 of this
Agreement; provided however, that any such inspections and tests
shall be for Bank's sole benefit and shall not be construed to
create any responsibility or liability on the part of Bank to
Borrower or to any third party.
5. NEGATIVE COVENANTS. So long as credit granted under this Agreement is
available and until full and final payment of all sums outstanding under
this Agreement and promissory note(s):
5.1 Borrower will not, during any fiscal year, expend or incur in
the aggregate more than $ N/A for fixed assets, nor more than $
N/A for any single fixed asset whether or not payable that
fiscal year or later under any purchase agreement or lease;
5.2 Borrower will not, without the prior written consent of Bank,
purchase or lease under an agreement for acquisition, incur any
other indebtedness for borrowed money, mortgage, assign, or
otherwise encumber any of Borrower's assets, nor sell, transfer
or otherwise hypothecate any such assets except in the ordinary
course of business. Borrower shall not guaranty, endorse,
co-sign, or otherwise become liable upon the obligations of
others, except by the endorsement of negotiable instruments for
deposit or collection in the ordinary course of business. For
purposes of this paragraph, the sale or assignment of accounts
receivable, or the granting of a security interest therein,
shall be deemed the incurring of indebtedness for borrowed
money;
5.3 The total of salaries, withdrawals, or other forms of
compensation, whether paid in cash or otherwise, by Borrower
shall not exceed the following amounts for the persons
indicated, nor will amounts in excess of such limits be paid to
any other person:
Name: N/A Monthly/Yearly Amount: $ N/A
-------------- --------------
Name: N/A Monthly/Yearly Amount: $ N/A
-------------- --------------
<PAGE>
5.4 Borrower will not, without Bank's prior written consent, declare
any dividends on shares of its capital stock, or apply any of
its assets to the purchase, redemption or other retirement of
such shares, or otherwise amend its capital structure, EXCEPT AS
SHOWN IN EXHIBIT "A";
5.5 Borrower will not make any loan or advance to any person(s) or
purchase or otherwise acquire the capital stock, assets or
obligations of, or any interest in, any person, except:
a) commercial bank time deposits maturing within one year,
b) marketable general obligations of the United States or a
State, or marketable obligations fully guaranteed by the
United States,
c) short-term commercial paper with the highest rating of a
generally recognized rating service, and
d) other investments related to the Borrower's business
which, together with such other investments now
outstanding, do not in the aggregate exceed the sum of
$100,000 at any time;
5.6 Borrower will not liquidate or dissolve or enter into any
consolidation, merger, pool, joint venture, syndicate or other
combination, or sell, lease, or dispose of Borrower's business
assets as a whole or such as in the opinion of Bank constitute a
substantial portion of Borrower's business or assets;
5.7 Borrower will not engage in any business activities or
operations substantially different from or unrelated to present
business activities or operations; and/or
5.8 Borrower, and Borrower's tenants, contractors, agents or other
parties authorized to use any of Borrower's properties, will not
use, generate, manufacture, store, treat, dispose of, or release
any hazardous substance or hazardous waste in, on, under or
about any of Borrower's properties except as previously
disclosed to Bank in writing as provided in section 3.9; and any
such activity shall be conducted in compliance with all
applicable federal, state and local laws, regulations and
ordinances, including without limitation those described in
section 3.9.
6. WAIVER, RELEASE AND INDEMNIFICATION. Borrower hereby:
(a) releases and waives any claims against Bank for indemnity or
contribution in the event Borrower becomes liable for cleanup or other
costs under any of the applicable federal, state or local laws,
regulations or ordinances, including without limitation those described
<PAGE>
in section 3.9, and (b) agrees to indemnify and hold Bank harmless from
and against any and all claims, losses, liabilities, damages, penalties
and expenses which Bank may directly or indirectly sustain or suffer
resulting from a breach of (i) any of Borrower's representations and
warranties with respect to hazardous wastes and hazardous substances
contained in section 3.9, or (ii) section 5.8. The provisions of this
section 6 shall survive the full and final payment of all sums
outstanding under this Agreement and promissory notes and shall not be
affected by Bank's acquisition of any interest in any of the Borrower's
properties, whether by foreclosure or otherwise.
7. EVENTS OF DEFAULT. The occurrence of any of the following events ("Events
of Default") shall terminate any and all obligations on the part of Bank
to make or continue the loan and/or line of credit and, at the option of
Bank, shall make all sums of interest and principal outstanding under the
loan and/or line of credit immediately due and payable, without notice of
default, presentment or demand for payment, protest or notice of non
payment or dishonor, or other notices or demands of any kind or
character, all of which are waived by Borrower, and Bank may proceed with
collection of such obligations and enforcement and realization upon all
security which it may hold and to the enforcement of all rights hereunder
or at law:
7.1 The Borrower shall fail to pay when due any amount payable by it
hereunder on any loans or notes executed in connection herewith;
7.2 Borrower shall fail to comply with the provisions of any other
covenant, obligation or term of this Agreement for a period of
fifteen (15) days after the earlier of written notice thereof
shall have been given to the Borrower by Bank or Borrower or any
Guarantor has knowledge of an Event of Default or an event that
can become an Event of Default;
7.3 Borrower shall fail to pay when due any other obligation for
borrowed money, or to perform any term or covenant on its part
to be performed under any agreement relating to such obligation
or any such other debt shall be declared to be due and payable
and such failure shall continue after the applicable grace
period;
7.4 Any representation or warranty made by Borrower in this
Agreement or in any other statement to Bank shall prove to have
been false or misleading in any material respect when made, or
Borrower's representations regarding the "year 2000 problem"
shall cease to be true, whether or not true when made, and as a
<PAGE>
result Bank reasonably believes that Borrower's financial
condition or its ability to pay its debts as they come due will
thereby be materially impaired;
7.5 Borrower makes an assignment for the benefit of creditors, files
a petition in bankruptcy, is adjudicated insolvent or bankrupt,
petitions to any court for a receiver or trustee for Borrower or
any substantial part of its property, commences any proceeding
relating to the arrangement, readjustment, reorganization or
liquidation under any bankruptcy or similar laws, or if there is
commenced against Borrower any such proceedings which remain
undismissed for a period of thirty (30) days or, if Borrower by
any act indicates its consent or acquiescence in any such
proceeding or the appointment of any such trustee or receiver;
7.6 Any judgment attaches against Borrower or any of its properties
for an amount in excess of $100,000 which remains unpaid,
unstayed on appeal, unbonded, or undismissed for a period of
thirty (30) days;
7.7 Loss of any required government approvals, and/or any
governmental regulatory authority takes or institutes action
which, in the opinion of Bank, will adversely affect Borrower's
condition, operations or ability to repay the loan and/or line
of credit;
7.8 Failure of Bank to have a legal, valid and binding first lien
on, or a valid and enforceable prior perfected security interest
in, any property covered by any deed of trust or security
agreement required under this Agreement;
7.9 Borrower dies, becomes incompetent, or ceases to exist as a
going concern;
7.10 Occurrence of an extraordinary situation which gives Bank
reasonable grounds to believe that Borrower may not, or will be
unable to, perform its obligations under this or any other
agreement between Bank and Borrower; or
7.11 Any of the preceding events occur with respect to any guarantor
of credit under this Agreement, or such guarantor dies or
becomes incompetent, unless the obligations arising under the
guaranty and related agreements have been unconditionally
assumed by the guarantor's estate in a manner satisfactory to
Bank.
8. SUCCESSORS; WAIVERS. Notwithstanding the Events of Default above, this
Agreement shall be binding upon and inure to the benefit of Borrower and
Bank, their respective successors and assigns, except that Borrower may
not assign its rights hereunder. No consent or waiver under this
Agreement shall be effective unless in writing and signed by the Bank and
shall not waive or affect any other default, whether prior or subsequent
thereto, and whether of the same or different type. No delay or omission
<PAGE>
on the part of the Bank in exercising any right shall operate as a waiver
of such right or any other right.
9. ARBITRATION.
9.1 At the request of either Bank or Borrower any controversy or
claim between the Bank and Borrower, arising from or relating to
this Agreement or any loan document executed in connection with
this Agreement or arising from any alleged tort shall be settled
by arbitration in Seattle, Washington. The United States
Arbitration Act will apply to the arbitration proceedings which
will be administered by the American Arbitration Association
under its commercial rules of arbitration except that unless the
amount of the claim(s) being arbitrated exceeds $5,000,000 there
shall be only one arbitrator. Any controversy over whether an
issue is arbitrable shall be determined by the arbitrator(s).
Judgement upon the arbitration award may be entered in any court
having jurisdiction. The institution and maintenance of any
action for judicial relief or pursuit of a provisional or
ancillary remedy shall not constitute a waiver of the right of
either party, including plaintiff, to submit the controversy or
claim to arbitration if such action for judicial relief is
contested.
For purposes of the application of the statute of limitations
the filing of an arbitration as provided herein is the
equivalent of filing a lawsuit and the arbitrator(s) will have
the authority to decide whether any claim or controversy is
barred by the statute of limitations, and if so, to dismiss the
arbitration on that basis. The parties consent to the joinder in
the arbitration proceedings of any guarantor, hypothecator or
other party having an interest related to the claim or
controversy being arbitrated.
9.2 Notwithstanding the provisions of Section 9.1, no controversy or
claim shall be submitted to arbitration without the consent of
all parties if at the time of the proposed submission, such
controversy or claim arises from or relates to an obligation
secured by real property or by a marine vessel;
9.3 No provision of this Section 9 shall limit the right of the
Borrower or the Bank to exercise self-help remedies such as
setoff, foreclosure or sale of any collateral, or obtaining any
ancillary provisional or interim remedies from a court of
competent jurisdiction before, after or during the pendency of
any arbitration proceeding. The exercise of any such remedy does
<PAGE>
not waive the right of either party to request arbitration. At
Bank's option foreclosure under any deed of trust may be
accomplished by exercise of the power of sale under the deed of
trust or judicial foreclosure as a mortgage.
10. COLLECTION ACTIVITIES, LAWSUITS AND GOVERNING LAW. Borrower agrees to pay
Bank all of Bank's costs and expenses (including reasonable attorney's
fees and the allocated cost for in-house legal services incurred by
Bank), incurred in the documentation and administration of this Agreement
and the loans reflected herein. The nonprevailing party shall, upon
demand by the prevailing party, reimburse the prevailing party of all of
its costs, expenses and reasonable attorneys' fees (including the
allocated cost of in-house counsel) incurred in connection with any
controversy or claim between said parties relating to this Agreement or
any of the loan documents, or to an alleged tort arising out of the
transactions evidence by this agreement or any of the loan documents,
including those incurred in any action, bankruptcy proceeding,
arbitration or other alternative dispute resolution proceeding, or
appeal, or in the course of exercising any judicial or nonjudicial
remedies. If suit is instituted by Bank to enforce this Agreement or any
of the loan documents, Borrower consents to the personal jurisdiction of
the courts of the State of Washington and Federal Courts located in the
State of Washington. Borrower further consents to the venue of such suit
being lain in Seattle, Washington. This Agreement and any notes, security
agreements and other loan documents entered into pursuant to this
Agreement shall be construed in accordance with the laws of the State of
Washington.
11. ADDITIONAL PROVISIONS. Borrower agrees to the additional provisions set
forth immediately following this Section 11 or on any "Exhibit A"
attached to and hereby incorporated into Agreement. This Agreement
supersedes all oral negotiations or agreements between Bank and Borrower
with respect to the subject matter hereof and constitutes the entire
understanding and Agreement of the matters set forth in this Agreement.
12. MISCELLANEOUS. If any provision of this Agreement is held to be invalid
or unenforceable, then (a) such provision shall be deemed modified if
possible, or if not possible, such provision shall be deemed stricken,
and (b) all other provisions shall remain in full force and effect.
12.1 If the imposition of or any change in any law, rule, or
regulation guideline or the interpretation or application of any
thereof by any court of administrative or governmental authority
(including any request or policy whether or not having the force
of law) shall impose or modify any taxes (except U.S. federal,
state or local income or franchise taxes imposed on Bank),
<PAGE>
reserve requirements, capital adequacy requirements or other
obligations which would: (a) increase the cost to Bank for
extending or maintaining any loans and/or line of credit to
which this Agreement relates, (b) reduce the amounts payable to
Bank under this Agreement, such notes and other instruments, or
(c) reduce the rate of return on Bank's capital as a consequence
of Bank's obligations with respect to any loan and/or line of
credit to which this Agreement relates, then Borrower agrees to
pay Bank such additional amounts as will compensate Bank
therefor, within five (5) days after Bank's written demand for
such payment, which demand shall be accompanied by an
explanation of such imposition or charge and a calculation in
reasonable detail of the additional amounts payable by Borrower,
which explanation and calculations shall be conclusive, absent
manifest error.
12.2 Bank may sell participations in or assign this loan in whole or
in part without notice to Borrower and Bank may provide
information regarding the Borrower and this Agreement to any
prospective participant or assignee. If a participation is sold
or the loan is assigned the purchaser will have the right of set
off against the Borrower and may enforce its interest in the
Loan irrespective of any claims or defenses the Borrower may
have against the Bank.
13. NOTICES. Any notices shall be given in writing to the opposite party's
signature below or as that party may otherwise specify in writing.
14. ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER
WASHINGTON LAW.
<PAGE>
This Business Loan Agreement (Parts A and B) executed by the parties on MARCH 1,
1999. Borrower acknowledges having read all of the provisions of this Agreement
and Borrower agrees to its terms.
Bank of America NT&SA, D.B.A, Seafirst Eastern Wholesale Team #1
-----------------------------------------------
(Branch/Office)
By: /s/ JAMES R. DEAN Title: Vice President
----------------------------- ------------------------------------
James R. Dean
Address: P.O. Box 1446 City, State, Zip Spokane, WA 99210
---------------------- -------------------------
Phone: (509) 353-1480 Fax: (509) 353-1492
---------------------- -------------------------------------
THE COEUR D'ALENES COMPANY
- --------------------------------------------------------------------------------
(Borrower Name)
By: Title:
---------------------- -----------------------------------
Address: P.O. Box 2610 City, State, Zip Spokane, WA 99220
---------------------- -------------------------
Phone: (509) 924-6363 Fax: (509) 924-6924
---------------------- -------------------------------------
UNION IRON WORKS, INC. OF SPOKANE, WASHINGTON
- --------------------------------------------------------------------------------
(Borrower Name)
By: Title:
---------------------- -----------------------------------
Address: P.O. Box 2610 City, State, Zip Spokane, WA 99220
---------------------- -------------------------
Phone: (509) 924-6363 Fax: (509) 924-6924
---------------------- -------------------------------------
EXHIBIT A
The following modifications are hereby made the incorporated into this
agreement:
PART B, SECTION 5.4, is hereby modified to read:
"Borrower will not, without Bank's prior written consent, declare any dividends
in excess of 10% of its annual net (after tax) profit on shares of its capital
stock ..."
PART B, SECTION 9.1 AND SECTION 10:
The venue in both sections is hereby modified to read "Spokane County,
Washington".
Initials ______
<PAGE>
THE COEUR D'ALENES COMPANY
QUARTERLY COMPLIANCE CERTIFICATE
AS OF _____________________, 19__
1. Minimum working capital of $1,500,000, measured quarterly.
Working Capital = $________ Met______ Not Met _____
2. Minimum Current Ratio of 1.50:1, measured quarterly.
Current Ratio = $________ Met______ Not Met _____
3. Maximum total indebtedness shall not exceed 2.30 times borrower's
tangible net worth, measured quarterly.
Debt/ TNW = $________ Met______ Not Met _____
4. Minimum tangible net worth shall be $2,400,000, measured quarterly.
Tangible Net Worth = $________ Met______ Not Met _____
These and other covenants and conditions of the Loan Agreement between Borrower
and Bank of America N.W., N.A., doing business as Seafirst Bank, dated March 1,
1999 have been reviewed and Borrower is in compliance with all covenants and
conditions as set forth in the agreement.
THE COEUR D'ALENES COMPANY
By: ____________________________________
Title: ____________________________________
Date: ____________________________________
SEAFIRST BANK
This Business Loan Agreement ("Agreement") is made between Bank of
America NT&SA doing business as Seafirst Bank ("Bank") and The Coeur
d'Alenes Co. and Union Iron Works, Inc. of Spokane * ("Borrower")
with respect to the following: * Washington
Part A
1. NON REVOLVING LINE / TERM LOAN #TBA. Subject to the terms of this
Agreement, Bank agrees to lend to Borrower as follows:
(a) Amount: $ 150,000 under a Non-Revolving Line, available through
expiration of August 1, 1999, at which time the outstanding principal
balance will be converted to a Term Loan, fully amortized over 60
months. Maturity date August 1, 2004.
(b) This loan must be closed by (date) _______________________
This loan matures on (date) _______________________
(c) Interest Rate:
[X] Bank's publicly announced Reference rate plus 0.5 percent of principal
per annum. "Reference Rate" means the rate of interest publicly announced from
time to time by Bank in San Francisco, California as its "Reference Rate." The
Reference Rate is set based on various factors, including Bank's costs and
desired return, general economic conditions, and other factors, and is used as a
reference point for pricing some loans. Bank may price loans to its customers
at, above, or below the Reference Rate. Any change in the Reference Rate shall
take effect at the opening of business on the day specified in the public
announcement of a change in the Reference Rate.
Borrower has the option, at expiration, of converting this to a fixed
rate loan at 2.50% per annum over the reserve- adjusted fixed rate index quoted
by Bank on the expiration date, rounded upward to the next highest one-eighth of
one percent (0.125%), so long as Borrower is not in default under the Loan
Documents.
1
<PAGE>
(d) Interest Rate Basis: All interest will be calculated at the per annum
interest rate based on a 360-day year and applied to the actual number
of days elapsed.
(e) Repayment: At the times and in amounts as set forth in note(s) required
under Part B Article 1 of this Agreement.
(f) Loan Fee: N/A payable on N/A. Loan fee is fully earned and
non-refundable upon execution of this Agreement.
(g) Other Fees (Identify):
____________________________________________
(h) Collateral: This term loan shall be secured by a security interest,
which is hereby granted, in favor of Bank on the following collateral:
Borrower's Equipment Also, collateral securing other loans with Bank may
secure this loan.
2. LINE OF CREDIT # 18. Subject to the terms of this Agreement, Bank will
make loans to Borrower under a [X] revolving [ ] non-revolving line of
credit as follows:
(a) Total Amount Available: $ 1,850,000.00
Subject to the provisions of any accounts receivable and/or inventory
borrowing plan required herein; it is expressly understood that
collateral ineligible for borrowing purposes is determined solely by
Bank.
Subject to (describe):
____________________________________________
(b) Availability Period: March 1, 1999 through May 1, 2000. However, if
loans will be subject and/or new promissory notes executed after the
last date, such advances will be subject to the terms of this Agreement
until repaid in full unless a written statement signed by the Bank and
Borrower provides otherwise, or a replacement loan agreement is
executed. The making of such additional advances alone, however, does
not constitute a commitment by the Bank to make any further advances or
extend the availability period.
(c) Interest Rate:
[X] Bank's publicly announced Reference Rate plus 0.250 percent of the
principal per annum. "Reference Rate" means the rate of interest publicly
announced from time to time by Bank in San Francisco, California as its
"Reference Rate." The Reference Rate is set based on various factors including
2
<PAGE>
Bank's cost and desired return, general economic conditions, and other factors,
and is used as a reference point for pricing some loans. Bank may price loans to
its customers at, above, or below the Reference Rate. Any change in the
Reference Rate shall take effect at the opening of business on the day specified
in the public announcement of a change in the Reference Rate.
__________________________________________________________
(d) Interest Rate Basis: All interest will be calculated at the per annum
interest rate based on a 360-day year and applied to the actual number
of days elapsed.
(e) Repayment: At the times and in the amounts as set forth in note(s)
required under Part B Article 1 of this Agreement.
(f) Loan Fee: $1,0000.00 payable on closing.
(g) Fee on Unutilized Portion of Line: On N/A, and every N/A, thereafter,
Borrower shall pay a fee based upon the average daily unused portion of
the line of credit. This fee will be calculated as follows:
__________________________________________________
(i) Collateral. This line of credit shall be secured by a security interest,
which is hereby granted, in favor of Bank on the following collateral:
Borrower's Accounts Receivable and Inventory. Also, collateral securing other
loans with Bank may secure this loan.
3
LOAN MODIFICATION AGREEMENT
This agreement amends the Promissory Note dated April 14, 1998 ("Note")
and Business Loan Agreement dated March 1, 1999 ("Business Loan Agreement"),
each executed by The Coeur d'Alenes Company and Union Iron Works, Inc. of
Spokane Washington (together if more than one "Borrower") in favor of Bank of
America, N. A. dba Seafirst Bank ("Bank"), regarding a loan in the maximum
principal amount of $150,000 (the "Loan"). For mutual consideration, Borrower
and Bank agree to amend the above loan documents as follows:
1. CREDIT LIMIT. The maximum principal amount of Borrower's loan Is hereby
changed to $90,000.00, and Borrower's maximum liability for principal
under the Note is also changed to $90,000.00.
2. CONVERSION TO TERM. Bank's obligation to make advances to Borrower
under the Loan is hereby terminated. The Note is amended to provide
that the current outstanding principal balance of the Note shall be
repaid in principal and interest payments of $1,853.39 to be paid
monthly on the 1st day of each month, beginning September, 1999. The
maturity date of the Note is changed to August 1, 2004.
3. OTHER TERMS. Except as specifically amended by this agreement or any
prior amendment, all other terms, conditions, and definitions of the
Note, Business Loan Agreement, and all other security agreements,
guaranties, deeds of trust, mortgages, and other instruments or
agreements entered into with regard to the Loan shall remain in full
force and effect.
<PAGE>
This agreement is dated July 29, 1999.
Bank: Bank of America, N.A., dba Seafirst Bank
By: /s/ James R. Dean, Vice President
----------------------------------
Borrower: The Coeur d'Alenes Company and Union Iron Works, Inc.
of Spokane, WA
By: /s/ Marilyn Schroeder Treasurer, CFO
-------------------------------------
2
LOAN MODIFICATION
AGREEMENT
[GRAPHIC OMITTED] SEAFIRST BANK
MEMBER FDIC
- --------------------------------------------------------------------------------
This agreement amends the Promissory Note dated APRIL 14, 1998 ("Note")
executed by THE COEUR D'ALENES COMPANY AND UNION IRON WORKS, INC OF SPOKANE,
WASHINGTON ("Borrower") in favor of BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, DOING BUSINESS AS SEAFIRST BANK ("Bank"), regarding a loan in the
maximum principal amount of $1,850,000.00 (the "Loan"). For mutual
consideration, Borrower and Bank agree to amend the above loan documents as
follows:
1. MATURITY DATE. The maturity date of the Note is changed to MAY
1,2000. Bank's commitment to make advances to Borrower under its line of credit
is also extended to MAY 1,2000.
2. MODIFICATION FEE. Borrower shall pay to Bank a modification fee of
$1,000.00 upon execution of this Agreement.
3. OTHER TERMS. Except as specifically amended by this agreement or
any prior amendment, all other terms, conditions, and definitions of the Note
and all other security agreements, guaranties, deeds of trust, mortgages, and
other instruments or agreements entered into with regard to the Loan shall
remain in full force and effect.
DATED FEBRUARY 22, 1999.
Bank:
SEAFIRST BANK
By
------------------------------------------
Title
------------------------------------------
Borrower:
THE COEUR D'ALENES COMPANY AND UNION IRON
WORKS, INC OF SPOKANE,WASHINGTON
By:
------------------------------------------
THE COEUR D'ALENES COMPANY
By:
------------------------------------------
MARILYN SCHROEDER, TREASURER/CFO
By:
------------------------------------------
UNION IRON WORKS,INC OF SPOKANE,WASHINGTON
By:
------------------------------------------
MARILYN SCHROEDER, TREASURER/CFO
LOAN MODIFICATION AGREEMENT
(THE COEUR D'ALENES COMPANY UNION IRON WORKS, INC OF SPOKANE;
R/C No. 88245/COE053JS)
AFS No. 1701484046
COMMERCIAL LEASE
PARTIES
Lessor: Klaus Bradin/Sage Real Estate Services, Inc.
Lessee: The Coeur d'Alenes Company
AGREEMENT
OWNERSHIP
LESSOR IS THE OWNER OF DEVELOPED COMMERCIAL PROPERTY DESCRIBED HEREIN AND THE
lessee desires to lease said property for use as steel service center.
CONSIDERATION
In consideration of the mutual covenants contained herein, the parties agree as
follows:
PROPERTY
Lessor does hereby lease to Lessee the property located at 3024 GS Center Road,
Units A & B, County of Chelan, State of Washington, including all improvements
and appurtenances, more particularly described as Exhibit A, hereto and
incorporated herein by reference.
PURPOSE
Lessee shall use the premises for the purpose of conducting a steel service
center related business activities or any other business customarily engaged in
by the Lessee or Lessee's affiliated companies. Lessee shall comply with all
governmental regulations affecting the operation of the premises in this matter.
RESTRICTIONS ON USE
Lessee shall not conduct any activity that is unlawful, untrahazardous or that
would increase the premiums for liability insurance on the premises. Lessor
shall have the right to enter the premises any reasonable hour to inspect the
premises and make repairs, alterations or modifications as required or agreed
to.
TERM OF RENTAL
The term of this rental shall be for two (2) years, beginning on the 31st day of
September 2001.
<PAGE>
MONTHLY PAYMENTS
During the term of this lease, the rent shall be paid monthly. For the period
beginning the 1st day of October 1999 and ending the 31st day of September 2000,
the monthly rental payment shall be $1,600.00 payable in advance on the first
day of each month. Thereafter, the yearly rental shall be adjusted each year to
reflect a three percent (3%) increase over previous year according to the
following schedule:
RENTAL SCHEDULE
Year 1 $ 1,600.00 Per Month
Year 2 $ 1,648.00 Per Month
Total Lease Sum: $38,976.00
PLACE OF PAYMENT
All payments of rent shall be made at the following address:
Sage Real Estate Services, Inc.
P.O. Box 1781
Wenatchee WA 98807-1781
Or at such place as the Lessor may direct in writing.
LATE PAYMENT PENALTY
If payment is received later than ten (10) days after the payment of the rent is
due, there shall be a late payment penalty of twelve percent (12%) of the late
payment due.
UTILITIES
Lessor and Lessee shall furnish and pay for utilities as indicated below:
Electricity Lessee Water Lessor
Sewer Lessor Garbage (1) Lessor Common Dumpster
Cooling N/A Heating Lessee
Gas N/A Parking Lessor
Janitor Lessee Other N/A
(1) Lessee should have and pay for separate dumpster if common dumpster not
sufficient.
TAX OBLIGATIONS
Lessor shall pay all real property taxes and assessment levied on the premises
as described therein. Lessee shall be responsible for payment of all personal
property taxes levied on any supplies, equipment or fixtures used in connection
with Lessee's business operation.
<PAGE>
ASSIGNMENT
Lessee may not assign this lease or sublet the property without the prior
consent of Lessor, which consent shall not be unreasonably withheld. Lessor may
consider the financial worth, the liquidity of such worth and whether or not any
proposed subleases or assignees will conduct a business detrimental to the
building or neighborhood, or in direct competition with other tenants in the
building, in determining whether to consent to any proposed assignment or
sublease. Consent to any assignment or sublease shall not relieve Lessee from
primary liability on this lease, unless the Lessee receives a written release
from the Lessor relieving Lessee of any further responsibility.
CONDITION AND CARE OF PROPERTY
The Lessee accepts said property in its present condition and agrees to keep
said property in a good clean condition; to commit no waste thereon; to obey all
laws and ordinances affecting said property; to replace all glass broken or
cracked; to repair all damage to property, whether caused by intentional
vandalism or by negligence of Lessee, Lessee's agents or employees, Lessee's
invitees or any other person or cause.
STRUCTURAL CHANGES OR REMODELLING
Lessee shall not make any structural or remodeling changes without prior written
approval of Lessor. Lessee understands any improvements made shall not abate the
rent and shall be the property of Lessor at the termination of this lease,
unless otherwise agreed to in writing by Lessor. Lessee may install equipment,
light fixtures and trade fixtures and may remove such equipment and fixtures
provided that the Lessee repairs any damage caused by such removal.
MAINTENANCE AND REPAIR BY LESSOR
Lessor shall be responsible for maintaining the roof, the outside appearance of
the building, the structural integrity of the building, including but not
limited to subfloors, foundations, etc.; parking lots, concealed piping and
wiring, electrical panels and replacement of worn-out heating, plumbing or air
conditioning equipment which cannot be restored to normal use by repair;
PROVIDED, Lessee may make any repairs of an emergency nature to correct a
dangerous situation on the property without relieving the Lessor from any
liability or waiving any of Lessee's rights.
<PAGE>
MAINTENANCE AND REPAIR BY LESSEE
Lessee shall be responsible for all interior maintenance and repair, including
paint, carpet, washrooms, light fixtures, inside and outside doors, plate glass
and heating and air conditioning equipment provided for the sole use of Lessee.
INSURANCE
Lessee shall, at Lessee's expense, maintain on the contents a policy of standard
fire insurance with extended coverage in an amount equal to replacement value.
Lessee shall cause such insurance to name Lessor as an additional insured. All
proceeds of any such insurance shall be payable to Lessor. Lessee shall, at
Lessee's expense, maintain comprehensive liability insurance on the property in
an amount not less than One Million and No/100 Dollars ($1,000,000). Lessor
shall be an additional insured on such policy. Lessee shall deliver to Lessor a
copy of the policies and the declaration pages prior to entry on the property.
BANKRUPTCY
Lessor shall have the option on ten (10) days notice to Lessee to terminate this
lease in the event that Lessee files voluntary bankruptcy, is placed in
receivership or has involuntary bankruptcy proceeding instituted against him by
creditors.
DEFAULT AND FORFEITURE
Lessor shall, on default with respect to any of the provisions of this lease by
Lessee, provide Lessee with written notice of any breach of the rental terms or
conditions and Lessee shall have fifteen (15) days to either correct the
condition or commence corrective action if the condition cannot be corrected
within fifteen (15) days. If the condition cannot be corrected within fifteen
(15) days, Lessee shall have a reasonable time to complete the correction.
Lessor may elect to enforce the terms and conditions of this lease by any other
method available under the law, or Lessor may declare a forfeiture of the lease
by providing fifteen (15) days notice to the Lessee of Lessor's intent to do so.
<PAGE>
VACATING UPON TERMINATION
Upon the expiration of the term of this lease, or upon the termination of the
lease for any cause, Lessee will at once peacefully surrender and deliver up the
whole of the above-described property together with all improvements thereon to
the Lessor, Lessor's agents or assigns, unless Lessee shall have acquired the
right to remain through another written agreement or written extension of this
lease. Lessee will return the property in like condition as it was at the
beginning of the term, reasonable wear and tear excepted; PROVIDED, this clause
shall not be construed so as to require Lessor to rebuild. Reconstruction is
addressed in the paragraph, "DESTRUCTION OF PROPERTY".
HOLDING OVER
Lessee shall pay to Lessor, a monthly sum equal to the rent specified in
paragraph, "Monthly Payments", in the event that Lessee shall hold the property
after expiration or termination of this lease without authorization by Lessor.
Lessee shall acquire no additional rights, title or interest to the property by
holding the property after termination or expiration, and shall be subject to
legal action by Lessor to obtain the removal of the Lessee.
INDEMNITY
The Lessee agrees to save Lessor harmless for all damage to persons or property
while on the leased property during the term of the lease, resulting from or
connected with the Lessee's use of occupancy of the property or the use or
occupation thereof by the Lessee's invitees or licensees.
DESTRUCTION OF PROPERTY
In case of partial destruction or injury to said property by fire, the elements
or other casualty, the Lessor shall repair the same with reasonable dispatch
after notice of such destruction or injury. The rent shall be equitably abated
until completion of repairs. In the event the property is substantially or
totally destroyed by fire, the elements or other casualty, Lessor shall have the
option of deciding whether or not to rebuild. In the event the Lessor elects not
to rebuild, the rent shall be paid at the time of such destruction. This lease
shall cease and come to an end as of that date. In the event that Lessor elects
to rebuild, such reconstruction shall be promptly commenced and diligently
prosecuted. Rent shall be abated during such time as the property is not
tenantable for the purpose contemplated by this lease.
<PAGE>
CONCEMNATION OF PROPERTY
If part of the property shall be taken by any competent authority for any public
or quasi public use or purpose, the rent shall be equitably abated. If the whole
of the property shall be taken by any competent authority for any public or
quasi public use or purpose, the term of this lease shall end on the date when
the possession of the part so taken shall be required for such use or purpose.
All damages awarded for any taking shall belong to and be the property of the
Lessor, but nothing herein shall be construed as precluding Lessee from
asserting any claim Lessee may have against such public authority for the taking
of the property of Lessee, disruption or relocation of Lessee's business, and
any such damages shall belong to Lessee.
REMEDIES FOR LESSOR
Any and all remedies provided to Lessor for the enforcement of this lease are
cumulative and not exclusive, and Lessor shall be entitled to pursue either the
rights enumerated on this lessee or remedies authorized by law or both. Lessee
shall be liable for any costs or expenses incurred by Lessor in enforcing any
terms of this lease, or in pursuing any legal action for the enforcement of
Lessor's rights.
NOTICES
Any notice to other party to the other shall be in writing and shall be deemed
to be duly given if mailed by certified mail in a postpaid envelope addressed as
follows:
Lessor: Sage Real Estate Services, Inc.
P.O. Box 1781
Wenatchee WA 98807-1781
Lessee: The Coeur d'Alenes Company
Attn: Marilyn Schroeder
P.O. Box 2610
Spokane WA 99210-2610
INSPECTION
Lessor shall have the right, at all reasonable times during the business hours,
to enter and inspect the leased property, for inspecting, making such repairs or
additions as the Lessor may desire to be required to make, and showing the
building to any prospective purchaser or tenant.
<PAGE>
SIGNS
The Lessee will make no inscription, nor post, place nor in any manner
whatsoever display any sign, notice, picture, placard or poster or any
advertising matter whatever, anywhere in or about the leased property of said
building without first obtaining the Lessor's written consent thereto.
LESSEE'S ENVIRONMENTAL INDEMNIFICATION/HOLD HARMLESS
Lessee agrees that at the sole option of Lessor, the Lessee shall either
indemnify or shall defend and hold the Lessor and its officers, employees,
contractors and agents harmless from all costs or liabilities arising from any
environmental contamination or noncompliance with any applicable federal, state
or local environmental law, regulation or ordinance now or hereafter in force,
resulting from the operations of the Lessee, its agents, employees, contractors,
or invitees. This indemnification/hold harmless includes, without limitation,
all claims, judgments, damages (including natural resource damages), penalties,
fines and costs incurred in connection with any site investigation to determine
the presence or extent of any contamination, as well as the costs of any
cleanup, removal or remedial work, whether or not it is required by any
regulatory agency. Such costs shall include reasonable environmental consultant
and attorney fees. This indemnification/hold harmless clause shall survive the
expiration or earlier termination of this lease.
LESSEE'S COMPLIANCE WITH ENVIRONMENTAL LAWS
Lessee shall not use, or permit the premises to be used, in a manner that
violates any applicable federal, state or local law, regulation or ordinance now
or hereafter in force. This includes, but is not limited to, any law, regulation
or ordinance pertaining to air or water quality or emissions; the handling,
transportation, storage, treatment, usage or disposal of toxic or hazardous
substances; or any other environmental matters. Compliance shall be at the sole
cost and expense of Lessee, its agent, employees, contractors or invitees.
Lessee shall immediately notify the Lessor of any spills, releases or other
potential failures to comply with applicable environmental laws and regulations
and of any inspections, notices, orders, fines or communications originating
from environmental regulatory agencies. Lessor, its officers, employees,
<PAGE>
contractors, or agents, shall have the right, but not the duty, to inspect the
premises, including the Lessee's records pertaining to environmental compliance
with applicable environmental laws and regulations and this lease agreement. If
Lessee is found to be in violation of this lease agreement or any applicable
environmental law or regulation, or if environmental contamination is detected,
Lessee shall be responsible for all costs associated with such contamination or
noncompliance.
ATTORNEY'S FEES
In any action, not limited to court action, brought to enforce any covenant of
this agreement, or to declare a cancellation or termination, or to pursue any
other remedy on default as provided herein or provided by law, the prevailing
party shall be entitled to recover a reasonable sum for attorney's fees and all
other costs and expenses in connection with such action, which sum shall be
included in any judgment or decree entered. Venue in any such action shall be in
Chelan County, Washington.
RIGHT TO MORTGAGE
The Lessor may encumber the property by mortgage, securing such sum or sums and
upon such terms and conditions as the Lessor may desire, but any such mortgage
or mortgages so given shall be subject to the rights of the Lessee herein, and
shall not affect this lease.
SAVINGS CLAUSE
Nothing in this agreement shall be construed so as to require the commission any
act contrary to law, and whatever there is any conflict between any provision of
this agreement and any material statute, law, public regulation or ordinance,
the latter shall prevail, but in such event, the provisions of this agreement
affected shall be curtailed and limited only to the extent necessary to bring it
within legal requirements.
SUCCESSORS AND ASSIGNS
This lease shall be binding upon and inure to the benefit of the heirs,
representatives, successors and assigns of the parties hereto.
<PAGE>
AGENCY DISCLOSURE STATEMENT
At the signing of this lease, the leasing agent, Alan G. Geidler/Sage Real
Estate Services, Inc., represented the Lessor. Each party signing this lease
confirms the prior oral and/or written disclosure of agency was provided to
him/her in this transaction.
INTERPRETATION
When interpreting this lease, the singular may include the plural and the
masculine may include the feminine, or vice versa, where context so admits or
requires.
SEVERABILITY
The provisions hereof shall be deemed independent and severable, and the
invalidity or partial invalidity or unenforceability of any provision or portion
hereof shall not affect the validity or enforceability of any other provision
hereof.
CLEANING, SECURITY AND DAMAGE DEPOSIT
Lessee agrees to place a deposit in the amount of -0-.
ADDITIONAL TERMS AND CONDITIONS
See Exhibit B attached.
ENTIRE AGREEMENT
This lease contains the entire agreement between the parties hereto, and there
are no verbal or other agreements which modify or affect this lease except as
referenced herein.
DATED this 10th day of September 1999.
Lessor: SAGE REAL ESTATE SERVICES, INC.
By: Alan G. Beidler, CCIM, CPM
Lessee: THE COEUR D'ALENES COMPANY
By: Marilyn Schroeder, Treasurer
<PAGE>
EXHIBIT A
E:OCCUPIED D:OCCUPIED C:VACANT B:SUBJECT A:SPACE
G.S. CENTER ROAD
G.S.Center Lot #5
Binding Site Plan B-2
Parcel No. 23 20 21 420350
<PAGE>
EXHIBIT B
Lessor hereby grants Lessee a "first right of refusal" for leasing Space C in
the building. Lessee will have three (3) working days to exercise this "first
right of refusal".
Lessee may, with sixty (60) day written notice, terminate this lease after one
(1) year. If Lessee gives notice to terminate this lease after one (1) year,
Lessee must also pay to Lessor $2,000 for the tenant improvements done to space.
Lessee is responsible to pay the $2,000 to Lessor if they terminate this lease
anytime before two (2) full years of occupancy.
Lessor hereby gives Lessee an option to extend this lease for an additional five
(5) year term. Terms and conditions will remain the same with rent to be
increased three percent (3%) at the beginning of the first year of the five (5)
year term and increased three percent (3%) on the anniversary date of the five
(5) year term for each of the following four (4) years.
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<CIK> 0000861502
<NAME> THE COEUR D'ALENES Company
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<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> SEP-25-1999 SEP-26-1998
<PERIOD-START> SEP-26-1999 SEP-27-1998
<PERIOD-END> SEP-25-1999 SEP-26-1998
<EXCHANGE-RATE> 1 1
<CASH> 32,422 39,486
<SECURITIES> 0 0
<RECEIVABLES> 1,086,229 1,474,117
<ALLOWANCES> 67,166 56,848
<INVENTORY> 2,464,247 2,553,384
<CURRENT-ASSETS> 3,602,037 4,066,139
<PP&E> 5,059,408 4,896,087
<DEPRECIATION> 1,715,242 1,539,044
<TOTAL-ASSETS> 7,013,980 7,495,192
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0 0
0 0
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<SALES> 12,247,613 14,368,061
<TOTAL-REVENUES> 12,334,238 14,430,428
<CGS> 8,957,654 10,721,254
<TOTAL-COSTS> 11,944,322 13,877,585
<OTHER-EXPENSES> 308,226 412,302
<LOSS-PROVISION> 12,000 12,400
<INTEREST-EXPENSE> 248,006 301,817
<INCOME-PRETAX> 202,130 361,511
<INCOME-TAX> 60,220 110,485
<INCOME-CONTINUING> 202,130 361,511
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
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<NET-INCOME> 141,910 251,026
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