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 30, 2000
[ ] 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
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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 [ ]
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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: $12,699,921
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 2, 2000: 5,342,164
No documents incorporated by reference herein.
ITEM 1. DESCRIPTION OF BUSINESS.
(a) BUSINESS DEVELOPMENT.
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 in
any way.
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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) BUSINESS OF ISSUER.
Cd'A operates in and is based out of two connected 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, and 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 even 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 2000, one
customer amounted to 11% of total sales. In fiscal 1999, one customer
contributed business in the amount of 12% 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
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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.
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 a somewhat smaller working capital for work in process inventory as
well as finished goods on consignment to the end user.
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 and again at
the end of fiscal 2000, 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 deterioriate.
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
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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 Company feels that a total capital investment of $1,000,000 is reasonable
for the 35% ownership that will be held by outside investors. To date only
$145,000 has been raised. The LLC has an agreement with ARESCO, Inc. to
manufacture the equipment. Currently the LLC is not operating and Cd'A has no
contingent liability with respect to any debt incurred by the LLC.
Cd'A fabrication business had labor contracts with Ironworkers Local
#506 and Teamsters Local 582 which expired during 1995. In December 1996 the
employees who were members of the Ironworkers union elected to decertify and 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 64 total employees (53 in the steel service center
business and 11 in the fabrication business).
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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 could have been 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 $1,790,000 as of September 30,
2000.
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.
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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, 1998 through September 30, 2000 are set forth in
dollars per share below:
2000 1999
High - Low High - Low
July 1 - September 30 $.12 - $.12 $.16 - $.12
April 1 - June 30 $.25 - $.12 $.24 - $.16
January 1 - March 31 $.31 - $.12 $.28 - $.23
October 1 - December 31 $.12 - $.12 $.28 - $.28
The source of the above quotations is the Spokane over-the-counter
listing, and the above quotations reflect inter-dealer prices, without retail
mark-up, markdown or commission and may not necessarily represent actual
transactions. In addition, the lack of an established public trading market for
Cd'A Common Stock should be kept in mind in reviewing the above quotations. The
prices shown are reflective of limited transactions.
(b) HOLDERS. As of December 6, 2000, there were approximately 792 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.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
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.
FINANCIAL CONDITION
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 October 1, 2000 and ending September 29, 2001. 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 extend the lease for an additional five-year term
with a 3% per year escalation clause on the lease payments.
Sales and gross margins as a percent of sales are both likely to be
somewhat lower during the current fiscal year than the year just ended. Metal
prices at the mills are once again declining. Interest rates and the price of
electricity are having an adverse effect on the demand for our products. During
the first quarter of the current fiscal year the fabrication business will
experience good sales volume from work that had already been awarded prior to
the end of the fiscal year just ended. The bidding activity, however, has slowed
significantly. It is therefore questionable if the shop will be full for the
remainder of the year. The distribution business is currently facing declining
replacement costs on inventories and diminished demand from most of our customer
base. It will likely take several months to work the higher priced material out
of our inventory. In the short term it is possible that the Company will
experience operating losses. The Company does not have a problem with net
realizable values on inventory and expects to be able to sell all items
currently stocked for more than cost.
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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%.
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 was secured by a second lien on
the real estate. The remaining $128,000 of debentures were redeemed on October
31, 1999.
LIQUIDITY AND CAPITAL RESOURCES.
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 will make the final payments
on two new pieces of equipment, both of which were purchased during the year
just ended. A $500,000 equipment loan still has enough availability to cover the
payments. The loan will have interest only payments until February 2001 at which
time principal payments will begin with a 4-1/2 year amortization.
In fiscal 2000, the Company financed the business primarily with cash
flows from operating and financing activities. During the year ended September
30, 2000 cash increased by approximately $83,000. The Company's cash flows
provided by operating activities were approximately $368,000 in fiscal 2000 and
approximately $720,000 in fiscal 1999. Cash flows provided by operating
activities in fiscal 2000 were primarily impacted by net income of $155,000,
adjusted by depreciation of $247,000, an increase in accounts payable of
$325,000, and offset by increases in accounts receivable and inventories of
$200,000 and $216,000 respectively. 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 of $339,000 provided by financing activities during fiscal
2000 were the result of $382,000 new long-term borrowings, net advances of
$251,000 on the operating line of credit, payments on long-term debt and
debentures of 293,000. Cash flows used by investing activities of $632,000
represent additions to equipment. Likewise, cash flows used by investing
activities in fiscal 1999 of $217,000 were attributable to additions to property
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and equipment. Cash flows used by financing activities during fiscal 1999 of
$510,000 were 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.
Working capital at September 30, 2000 of approximately $2,065,000 is
very comparable to $2,105,000 as of September 25, 1999. Cd'A continues to be
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 2000, Cd'A has an operating line of credit in the amount
of $1,900,000 available through February 16, 2001. The interest rate is the
bank's prime rate. In the event that it was 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 February on
substantially the same terms and conditions as the current line.
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 if 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 June, 2000 the
FASB also issued SFAS No. 138, "Accounting for certain Derivative Instruments -
an Amendment of SFAS 133" which includes provisions for certain commodity
contracts, interest rate hedges, foreign currency receivable and payables, and
intercompany foreign currency derivatives. SFAS 138 is effective concurrent to
the adoption date of SFAS No. 133. Adoption of these accounting principles is
not expected to have a material effect on the Company's financial statements.
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In December 1999, the United States Securities and Exchange Commission
issued Staff Accounting Bulletin NO. 101, "Revenue Recognition in Financial
Statements" ("SAB 101"). SAB 101 refined the criteria for determining when
revenue is considered recognizable and is effective no later than the first
fiscal quarter of the fiscal year beginning after December 15, 1999. Adoption of
this accounting principle is not expected to have a material effect on the
Company's financial statements.
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. Adoption of SOP 98-5 did not have a
material effect on the Company's financial statements.
On March 31, 2000, the FASB issued Interpretation No. 44, "Accounting
for Certain Transactions Involving Stock Compensation, an Interpretation of APB
opinion No. 25" ("FIN 44"). FIN 44 refines existing guidance on such issues as
defining employees, modifying stock option awards, share repurchase features of
option grants, defining a grant date and options issued in connection with a
business combination. FIN 44 became effective July 1, 2000. The adoption of this
accounting principle did not have a material affect on the Company's financial
statements.
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 30, September 25,
2000 1999
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Net Sales 100.00% 100.00%
Cost of Sales 71.23% 73.14%
Gross Profit 28.77% 26.86%
Selling, General &
Administrative Expense 25.49% 23.89%
Operating Income 3.28% 2.97%
Interest Income .25% .33%
Interest Expense (1.99%) (2.03%)
Other Income .26% .38%
Income Before Income Taxes 1.81% 1.65%
Income Tax Expense .59% .49%
Net Income 1.22% 1.16%
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FISCAL 2000 COMPARED TO FISCAL 1999.
Net sales increased 4% to $12,700,000 in fiscal 2000 from $12,248,000
in fiscal 1999. Fabrication sales increased 42% to $2,090,000 from $1,476,000
the prior year. The increase is primarily the result of more demand within the
same customer base that the Company served during the prior year. Sales for the
distribution business declined by approximately 2% to $10,610,000 from
$10,772,000 during the prior fiscal year. The decrease was due primarily to
diminished demand and increased price competition in most market segments. The
lower sales volume for the distribution business is expected to continue or
perhaps decline further during the current fiscal year. Fabrication sales will
likely be comparable to the prior year. The distribution business accounted for
84% of the consolidated sales during the fiscal year ended in September 2000 and
88% during the prior fiscal year. The fabrication business contributed the
remaining 16% in fiscal 2000 and 12% in fiscal 1999.
Cost of sales as a percentage of sales for fiscal 2000 at 71% compares
to 73% during the preceding fiscal year. The improvement was a combination of a
higher volume of fabrication sales and a slightly lower average cost for the
distribution business. Though the cost of sales expressed as a percent of sales
for the fabrication business actually increased to 70% from 69%, the cost is
still lower than the average consolidated percent. The distribution business
improved to 72% from 73% during the prior fiscal year.
Selling, general and administrative expenses increased 11% to
$3,237,000 during fiscal 2000 from $2,926,000 for the prior year. The increase
was primarily the result of increased labor costs. A labor shortage made it
difficult to attract skilled workers, and consequently the increased cost of
training, wages, taxes and benefits were reflected in 11% higher labor costs in
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fiscal 2000 compared to the prior year. Attracting and retaining qualified
employees remains a challenge in the current fiscal year.
Interest expense at $253,000 during the fiscal year ended September 30,
2000 was comparable to interest expense of $248,000 for the prior year.
Other income decreased to $34,000 for fiscal 2000 from $46,000 during
fiscal 1999. The decrease was due to lower returns from a retrospective-rating
plan in which the Company participates for Industrial Insurance coverage.
Income tax expense of $75,000 for fiscal 2000 compares to $60,000 for
fiscal 1999 and the effective tax rates were 33% and 30% respectively.
At September 30, 2000, the Company had a deferred long term tax
liability of $184,000 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 accruals and allowance for
bad debts. The deferred tax liability and asset for the prior fiscal year were
$156,000 and $65,000 respectively.
The various factors discussed above resulted in a net income for the
fiscal year ended September 30, 2000 of $155,000 compared to $142,000 for the
year ended September 25, 1999.
ISSUES, OUTLOOKS AND UNCERTAINTIES
Cd'A continues to make changes to the structure of its business as
changing market conditions dictate. Most recently, a new plasma burn table and
plate rolls have been added to the existing processing equipment. A branch
operation was opened in Wenatchee, WA during the fiscal year just ended. There
are no plans for increased capacity in either the form of new equipment or
additional facilities at this time.
The Company is, however, always actively searching for opportunities in
both of these areas. Management believes that the distribution business will
likely experience lower sales volume in the immediate future as the market
conditions are not as favorable as in the recent past. Prices at the mill have
started to decline again and the higher interest and electricity rates are
likely to continue during the current fiscal year.
14
<PAGE>
The fabrication business continues to work to expand participation in
its niche market and the near term outlook for the fabrication business is good.
It is difficult to predict trends beyond the end of the calendar year as most of
the major fabrication customers are dependent on contracts for electricity,
which have not yet been completed.
The fabrication business added a Demag crane dealership to its line of
business during fiscal 1998. During fiscal 2000 the Company contracted to do a
limited amount of crane fabrication work. The manufacturer of the cranes
nationally is changing the marketing approach in reaction to the current market
conditions. Given the current business climate, this product line will probably
not experience any significant increase during the current year.
ITEM 7. CONSOLIDATED FINANCIAL STATEMENTS.
See the Consolidated Financial Statements beginning on page F-1.
INDEX TO FINANCIAL STATEMENTS
Audited Consolidated Financial Statements
Report of Independent Certified Public Accountants
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Summary of Significant Accounting Policies
Notes to Consolidated Financial Statements
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
(The balance of this page has been intentionally left blank)
15
<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.
Period Service
Name Age Position Commenced
Jimmie T.G. Coulson 67 Director, Jan. 1976
6203 S. Corkery Ext. Rd. President, Jan. 1982
Spokane, WA 99223 Chief Exec Off. Jan. 1982
Marilyn A. Schroeder 49 Director, Dec. 1991
N. 15406 Lloyd Lane Treasurer, Jan. 1982
Mead, WA 99021 Chief Fin Off. Jan. 1982
Vice-President Feb. 1998
Wendell J. Satre 82 Director Mar. 1989
2822 E Snowberry Lane
Spokane, WA 99223
Robert Shanewise, M.D. 78 Director Mar. 1989
921 W. Comstock Ct.
Spokane, WA 99203
Lawrence A. Stanley 72 Director Feb. 1997
311 W. 32nd Ave.
Spokane WA 99203
Lawrence A. Coulson 42 Vice-President Jan. 1990
5611 S. Corkery Road
Spokane WA 99223
Joel E. Simpson 43 Vice-President Aug.1995
1306 E. Sara Lane
Spokane WA 99223
16
<PAGE>
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 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 (currently operating as Avista Corp).
He also is a director and chairman of Output Technology Corporation, a
manufacturer of high speed printers, and a director of Aresco, Inc. and Key
Tronic Corporation where he served as acting president from August 1991 to March
1992.
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.;
Chairman of the Board of Avista Corporation, a Director of ARESCO, Inc., and
Output Technology Corporation, a manufacturer of high speed printers for
industry. He is past Chairman of the Association of Washington Businesses and
the Spokane Area Chamber of Commerce.
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 a 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. Lawrence is the son of Jimmie
Coulson.
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
17
<PAGE>
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.
18
<PAGE>
<TABLE>
<CAPTION>
ITEM 10. EXECUTIVE COMPENSATION.
Name & Principal Other Annual
Position Yr Salary* Compensation Bonus Total
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Jimmie Coulson 00 $ 120,735* 0 0 $ 120,735
President, CEO 99 $ 112,262* 0 0 $ 112,262
98 $ 109,197** 0 $ 7,200 $ 116,397
</TABLE>
* Based upon salaries paid or accrued during fiscal years ended September 30,
2000, September 25,1999 and September 26, 1998. 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 $3,364 in 2000 and $1,785 in 1998. The plan is qualified under Section 401
and 501 of the Internal Revenue Code of 1986. All employees are eligible to
participate after one year of service if they are 21 years of age or older and
meet the minimum hours worked requirement. The plan is funded by discretionary
contributions determined by the Cd'A Board of Directors and as of July 1, 1998,
by a 50% match to employee contributed funds to a maximum of 6% of salary. The
profit-sharing contributions are allocated to participants based on the
participant's salary as a percentage of total salaries of all participants.
Vesting occurs on an incremental basis between the third and seventh year of
service. No distributions were made to any executive officer during the last
three fiscal years except as required to refund any excess deferrals. During the
last three years the Company made no profit sharing contributions.
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 5,342,164
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.
19
<PAGE>
Amount and Percent
Nature of of Class
Title of Name and Address Beneficial
Class of Beneficial Owner Ownership
Common Stock Jimmie & Arlene Coulson
6302 S. Corkery Road
Spokane WA 99223 2,697,141 50.49
Common Stock Lawrence A. Coulson*
South 5711 Corkery Road
Spokane WA 99223 392,217 7.34
* Lawrence Coulson is the son of Jimmie Coulson
(b) SECURITY OWNERSHIP OF MANAGEMENT.
The following table sets forth the beneficial ownership of Cd'A Common
Stock as of December 2, 2000 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 Percent
Nature of of Class
Title of Name and Address Beneficial
Class of Beneficial Owner Ownership
Common Stock Jimmie & Arlene Coulson
6302 S. Corkery Road
Spokane WA 99223 2,697,141** 50.49
Common Stock Lawrence A. Coulson
5711 S. Corkery Road
Spokane WA 99223 392,217** 7.34
Common Stock Marilyn A. Schroeder
N. 15406 Lloyd Lane
Mead WA 99021 248,581 4.65
20
<PAGE>
Common Stock Wendell J. Satre
2822 E Snowberry Lane
Spokane WA 99223 389 0*
Common Stock Joel E. Simpson
E. 1306 Sara Lane
Spokane WA 99223 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) 3,461,529 64.29
* Indicates less than 1% of outstanding shares of class.
** Includes 1/3 ownership (11,904 shares) of CINV, a family partnership with
35,714 shares
(c) CHANGES IN CONTROL.
Cd'A is not aware of any arrangements which may result in a change of
control of Cd'A.
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
21
<PAGE>
$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 was 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).
22
<PAGE>
PART IV
ITEM 13. EXHIBITS, SCHEDULES, AND REPORTS ON FORM 8-K.
(a) EXHIBITS
Exhibit Index
Page Exhibit Description of Exhibit
No. No.
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 03/24/97
(Cd'A)
** Seafirst Bank - Promissory Note dated 03/27/95 (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)
23
<PAGE>
** 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)
Inland Northwest Bank - Business Loan Agreement dated
6/16/00
Inland Northwest Bank - Change in Terms Agreement dated
9/28/00
Inland Northwest Bank - Change in Terms Agreement dated
11/7/00
Inland Northwest Bank - Promissory Note dated 6/16/00
Inland Northwest Bank - Commercial Security Agreement dated
3/27/00
Inland Northwest Bank - Promissory Note dated 6/16/00
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 10.3*
235 10.6** Adoption Agreement #003 401K Employee Profit Sharing Plan
dated 04/30/93
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 ended September 1994 through September 1999.
(b) REPORTS ON FORM 8-K.
None.
24
<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, thereto duly authorized
THE COEUR D'ALENES COMPANY
(Registrant)
Dated: December 18, 2000 By /s/ JIMMIE COULSON
---------------------------------------
Jimmie Coulson
President, Chief Executive Officer
Director, (Principal Executive Officer)
Dated: December 18, 2000 By /s/ MARILYN A. SCHROEDER
---------------------------------------
Marilyn A. Schroeder
Treasurer and Director,
Chief Financial Officer
(Authorized Officer and Principal
Accounting and Financial Officer)
Dated December 18, 2000 By /s/ WENDELL J. SATRE
---------------------------------------
Wendell J. Satre
Director
Dated December 18, 2000 By /s/ ROBERT P. SHANEWISE, M.D.
---------------------------------------
Robert P. Shanewise, M.D.
Director
Dated December 18, 2000 By /s/ LAWRENCE A. STANLEY
---------------------------------------
Lawrence A. Stanley
Director
25
<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-11
Notes to Consolidated Financial Statements..........................F-12 to F-19
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 30, 2000 and September 25, 1999,
and the related consolidated statements of income, changes in stockholders'
equity and cash flows for 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 30, 2000 and September 25,
1999, and the results of their operations and their cash flows for the years
then ended in conformity with generally accepted accounting principles.
November 13, 2000
F-2
<PAGE>
<TABLE>
<CAPTION>
THE COEUR D'ALENES COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, September 25,
2000 1999
------------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents............................................... $ 115,532 $ 32,422
Accounts and notes receivable, less allowance of $63,786
and $67,166 for doubtful accounts (Notes 2 and 12) .................... 1,226,837 1,019,063
Inventories (Notes 1 and 2) ............................................. 2,680,550 2,464,247
Deferred tax asset (Note 6) ............................................. 65,000 65,000
Income taxes receivable ................................................. -- 21,305
------------- -------------
Total current assets ....................................................... 4,087,919 3,602,037
------------- -------------
Property and equipment (Notes 3 and 4):
Land .................................................................... 306,320 306,320
Building and leasehold improvements ..................................... 2,001,161 1,990,344
Machinery and equipment ................................................. 2,908,580 2,357,027
Vehicles ................................................................ 183,576 174,953
Office equipment ........................................................ 230,888 230,764
------------- -------------
5,630,525 5,059,408
Less accumulated depreciation ........................................... 1,908,938 1,715,242
------------- -------------
Net property and equipment ................................................. 3,721,587 3,344,166
------------- -------------
Other assets (Note 8) ...................................................... 82,223 67,777
------------- -------------
$ 7,891,729 $ 7,013,980
============= =============
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
THE COEUR D'ALENES COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, September 25,
2000 1999
------------- -------------
<S> <C> <C>
Current liabilities:
Short-term bank borrowings (Note 2)..................................... $ 618,890 $ 367,553
Accounts payable ........................................................ 865,536 540,154
Accrued expenses ........................................................ 328,119 297,271
Current maturities of long-term debt (Note 3) ........................... 210,733 164,241
Related party debt (Notes 4 and 10) ..................................... -- 128,000
------------- -------------
Total current liabilities .................................................. 2,023,278 1,497,219
Deferred tax liability (Note 6) ............................................ 184,000 156,000
Long-term debt, less current maturities (Note 3) ........................... 2,437,293 2,266,399
------------- -------------
Total liabilities .......................................................... 4,644,571 3,919,618
------------- -------------
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 5,342,164 and 5,345,419 ............................... 1,186,192 1,186,192
Retained earnings ...................................................... 2,071,776 1,917,230
------------- -------------
3,257,968 3,103,422
Less treasury stock, at cost; 15,209 and 11,954 shares ................. 10,810 9,060
------------- -------------
Total stockholders' equity ................................................. 3,247,158 3,094,362
------------- -------------
$ 7,891,729 $ 7,013,980
============= =============
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
THE COEUR D'ALENES COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Year Ended
September 30, September 25,
2000 1999
------------- -------------
<S> <C> <C>
Net sales .................................. $ 12,699,921 $ 12,247,613
Cost of sales .............................. 9,046,252 8,957,654
------------- -------------
Gross profit ............................... 3,653,669 3,289,959
Selling, general and administrative expenses 3,237,004 2,926,448
------------- -------------
Operating income ........................... 416,665 363,511
------------- -------------
Other income (expense):
Interest income ....................... 32,288 40,263
Interest expense ...................... (252,688) (248,006)
Other income .......................... 33,513 46,362
------------- -------------
Net other expense .......................... (186,887) (161,381)
------------- -------------
Income before income tax expense ........... 229,778 202,130
Income tax expense (Note 6) ................ 75,232 60,220
------------- -------------
Net income ................................. $ 154,546 $ 141,910
============= =============
Earnings per common share (Note 10):
Basic ................................. $ 0.03 $ 0.03
============= =============
Diluted ............................... $ 0.03 $ 0.02
============= =============
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
THE COEUR D'ALENES COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Common Stock Treasury Stock
-------------------------- -------------------------
Shares Retained Shares
Outstanding Amount Earnings Held Amount
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
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
Net income ................ -- -- 154,546 -- --
Treasury stock purchase ... (3,255) -- -- 3,255 1,750
----------- ----------- ----------- ----------- -----------
Balance, September 30, 2000 5,342,164 $ 1,186,192 $ 2,071,776 15,209 $ 10,810
=========== =========== =========== =========== ===========
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
THE COEUR D'ALENES COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
Year Ended
September 30, September 25,
2000 1999
------------- -------------
<S> <C> <C>
Operating activities:
Net income .......................................... $ 154,546 $ 141,910
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation .................................... 247,053 230,001
(Gain) loss on disposal of property and equipment (271) 265
Provision for doubtful accounts ................. 13,500 12,000
Deferred income taxes ........................... 28,000 27,000
Changes in assets and liabilities:
Receivables ................................ (199,969) 364,901
Inventories ................................ (216,303) 89,137
Other assets ............................... (14,446) 4,233
Accounts payable ........................... 325,382 (45,657)
Accrued expenses ........................... 30,848 (103,238)
------------- -------------
Net cash provided by operating activities ................ 368,340 720,552
------------- -------------
Investing activities:
Additions to property and equipment ................. (663,440) (217,639)
Proceeds from sale of fixed assets .................. 39,237 250
------------- -------------
Net cash used in investing activities .................... (624,203) (217,389)
------------- -------------
Financing activities:
Borrowings under line of credit agreements .......... 12,526,320 11,275,000
Repayments under line of credit agreements .......... (12,274,983) (11,750,273)
Principal repayments of long-term debt .............. (293,034) (110,244)
Borrowings of long-term debt ........................ 382,420 78,000
Purchase of treasury stock .......................... (1,750) (2,710)
------------- -------------
Net cash provided by (used in) financing activities ...... 338,973 (510,227)
------------- -------------
Net increase (decrease) in cash and cash equivalents ..... 83,110 (7,064)
Cash and cash equivalents, beginning of year ............. 32,422 39,486
------------- -------------
Cash and cash equivalents, end of year ................... $ 115,532 $ 32,422
============= =============
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for:
Interest ........................................ $ 256,573 $ 253,498
Income taxes .................................... $ 22,351 $ 74,267
</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. The Company's business activity
is primarily 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 2000 was a 53 week year and 1999 was a 52 week year.
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.
ACCOUNTING FOR LONG-LIVED ASSETS
Management reviews the carrying value of its property, equipment, and other
long-lived assets on a regular basis. Reductions to the carrying value, if
necessary, are recorded to the extent the net book value of the asset exceeds
the estimate of future undiscounted cash flows from the related operation.
F-8
<PAGE>
THE COEUR D'ALENES COMPANY AND SUBSIDIARY
SUMMARY OF ACCOUNTING POLICIES
REVENUE AND COST RECOGNITION
Sales are recorded and customers are billed when products are shipped or
projects are completed in accordance with the related sales and shipping
contracts. Costs of orders and projects are recorded in the same accounting
period as related sales.
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
30, 2000 and September 25, 1999 for 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.
F-9
<PAGE>
THE COEUR D'ALENES COMPANY AND SUBSIDIARY
SUMMARY OF ACCOUNTING POLICIES
The fair value of the debt payable to related parties at September 25, 1999 was
approximately $128,000. The fair value of other debts approximate their carry
value as the stated rates reflect current market conditions.
RESEARCH AND DEVELOPMENT COSTS
Expenditures associated with research and development are expensed as incurred.
These costs amounted to $3,983 and $26,573 during the years ended September 30,
2000 and September 25, 1999, respectively.
CONCENTRATIONS OF CREDIT RISK
The financial instruments which potentially subject the Company to a
concentration of credit risk consist primarily of cash and cash equivalents,
accounts receivable, long-term debt, and accounts payable.
The Company borrows from and places its temporary cash investments with high
quality financial institutions and, by policy, limits its amount of credit
exposure to any one financial institution. At times, investments may exceed the
FDIC insurance limit.
The concentrations of credit risk with respect to trade receivables are, in
management's opinion, considered minimal due to the Company's diverse customer
base in terms of location and the types of products provided. The Company
routinely assesses the financial strength of its major customers before
extending credit in an effect to mitigate any risk of default.
The Company purchases most of its supplies and products for resale from a
limited number of vendors. Although the Company could be directly affected by a
weakness in the steel markets, it monitors the financial condition of its
significant vendors and believes alternative supply agreements could be found in
a timely manner. Management believes any risk of loss to be remote.
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 June 2000 the
FASB also issued SFAS No. 138, "Accounting for certain Derivative Instruments -
F-10
<PAGE>
THE COEUR D'ALENES COMPANY AND SUBSIDIARY
SUMMARY OF ACCOUNTING POLICIES
an Amendment of SFAS 133" which includes provisions for certain commodity
contracts, interest rate hedges, foreign currency receivable and payables, and
intercompany foreign currency derivatives. SFAS 138 is effective concurrent to
the adoption date of SFAS No. 133. Adoption of these accounting principles is
not expected to have a material effect on the Company's financial statements.
In December 1999, the United States Securities and Exchange Commission issued
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements"
("SAB 101"). SAB 101 refined the criteria for determining when revenue is
considered recognizable and is effective no later than the first fiscal quarter
of the fiscal year beginning after December 15, 1999. The application of SAB 101
guidance is not expected to have a material effect on the Company's financial
statements.
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. Adoption of SOP 98-5 did not have a material
effect on the Company's financial statements.
On March 31, 2000 the FASB issued Interpretation No. 44 "Accounting for Certain
Transactions Involving Stock Compensation, and Interpretation of APB opinion No.
25" ("FIN 44"). FIN 44 refines existing guidance on such issues as defining
employees, modifying stock option awards, share repurchase features of option
grants, defining a grant date and options issued in connection with a business
combination. FIN 44 became effective July 1, 2000. The adoption of FIN 44 did
not have a material effect on the Company's financial statements.
F-11
<PAGE>
THE COEUR D'ALENES COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. INVENTORIES
Inventories are summarized as follows:
September 30, September 25,
2000 1999
------------- -------------
Fabrication inventories:
Raw materials............................ $ 26,574 $ 27,372
Work-in-progress ........................ 579,622 401,899
------------- -------------
Inventories, at FIFO cost ............... 606,196 429,271
LIFO reserve ............................ (29,155) (15,018)
------------- -------------
Inventories, at LIFO cost ............... 577,041 414,253
Distribution inventories, at FIFO ........... 2,103,509 2,049,994
------------- -------------
Total inventories............................ $ 2,680,550 $ 2,464,247
============= =============
2. SHORT-TERM BANK BORROWINGS
The Company has a $1,900,000 bank credit line available for revolving credit
requirements which is subject to renewal on February 16, 2001. Interest is
charged at the lender's prime (9.50% at September 30, 2000). Outstanding
borrowings are collateralized by accounts receivable and inventories.
Short-term borrowing activity is summarized as follows:
<TABLE>
<CAPTION>
September 30, September 25,
2000 1999
------------- -------------
<S> <C> <C>
Balance outstanding at year-end .................. $ 618,890 $ 367,553
Weighted average interest rate at year-end ....... 9.50% 8.50%
Maximum amount outstanding at any month end ...... $ 676,555 $ 660,976
Average amount outstanding ....................... $ 366,092 $ 330,902
Weighted average interest rate during the year ... 9.14% 8.18%
</TABLE>
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.
F-12
<PAGE>
THE COEUR D'ALENES COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 30, 2000 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 30, September 25,
2000 1999
------------- -------------
<S> <C> <C>
Note payable to a bank, monthly payments of $16,925 including
interest at 8.5%; due January 2007 along with a balloon
payment of $1,344,967, collateralized by property ............ $ 1,790,781 $ 1,839,399
Note payable to a bank, monthly payments of $10,655 including
interest at 10%; payments starting February 2001, maximum
equipment line borrowings of $500,000, due March 1, 2006,
collateralized by equipment .................................. 382,421 --
Note payable to a bank, monthly payments of $3,990 including
interest at 8.625%; due June 2005, collateralized by
equipment .................................................... 185,658 215,814
Note payable to a bank, monthly payments of $4,018 including
interest at 0.5% over the bank's prime rate (10.0% at
September 30, 2000); due September 2003, collateralized
by equipment ................................................. 123,768 161,143
Note payable to a bank, monthly payments of $1,853 at 0.5% over
the bank's prime rate (10.0% at September 30, 2000); due
August 2004, collateralized by equipment ..................... 74,358 90,000
Note payable to a bank, monthly payments of $3,203 including
interest at 8.75%; due September 2002, collateralized by
equipment .................................................... 70,466 101,139
</TABLE>
F-13
<PAGE>
THE COEUR D'ALENES COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, September 25,
2000 1999
------------- -------------
LID payable to City of Spokane, annual
principal payments of $2,572 plus interest
at 8.5%; due October 2008 .................. 20,574 23,145
------------- -------------
2,648,026 2,430,640
Less current maturities ....................... 210,733 164,241
------------- -------------
Long-term debt, less current maturities ....... $ 2,437,293 $ 2,266,399
============= =============
Scheduled long-term debt maturities as of September 25, 1999 are as follows:
YEAR ENDING AMOUNT
----------- ----------
September 29, 2001 .................................... $ 210,733
September 28, 2002 .................................... 257,322
September 27, 2003 .................................... 241,195
September 25, 2004 .................................... 214,873
September 24, 2005 .................................... 201,450
Thereafter ............................................ 1,522,453
----------
Total ................................................. $2,648,026
==========
4. DEBT TO RELATED PARTIES
At September 25, 1999, the Company owed $128,000 to related parties pursuant to
the terms of a convertible debenture agreement. The debentures required
semi-annual interest payments at 8.75% and were secured by the Company's land
and building. The entire amount of outstanding principal and interest was repaid
on October 31, 1999.
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 30, 2000,
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 29, 2001 .................................... $ 187,645
September 28, 2002 .................................... 135,794
September 27, 2003 .................................... 17,344
----------
Total ................................................. $ 340,783
==========
F-14
<PAGE>
THE COEUR D'ALENES COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Rental expense for all operating leases was $503,824 and $516,983 for the years
ended September 30, 2000 and September 25, 1999.
6. INCOME TAXES
Income tax expense consists of the following:
Year Ended
------------------------------
September 30, September 25,
2000 1999
------------- -------------
Federal:
Current .................................. $ 46,422 $ 32,626
Deferred ................................. 28,000 27,000
State - current .............................. 810 594
------------- -------------
Income tax expense ........................... $ 75,232 $ 60,220
============= =============
Major items causing the Company's effective tax rate to differ from the
statutory rates are as follows:
<TABLE>
<CAPTION>
September 30, 2000 September 25, 1999
---------------------- ----------------------
Amount Percent Amount Percent
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Income tax expense at statutory
rate .............................. $ 78,124 34.0% 68,724 34.0%
Graduated tax rate differences ....... (8,651) (3.8) (10,688) (5.3)
Other ................................ 5,759 2.5 2,184 1.1
-------- -------- -------- --------
Income tax expense ................... $ 75,232 32.7% 60,220 29.8%
======== ======== ======== ========
</TABLE>
Significant components of the Company's deferred tax assets and liabilities
consist of the following:
September 30, September 25,
2000 1999
------------- -------------
Current deferred tax assets:
Vacation accrual .......................... $ 41,000 $ 40,000
Allowance for doubtful accounts ........... 21,000 23,000
Other ..................................... 3,000 2,000
------------- -------------
Current deferred tax asset ................... $ 65,000 $ 65,000
============= =============
Non-current deferred tax assets (liabilities):
Net operating loss carryforwards .......... $ 123,000 $ 127,000
Depreciation .............................. (208,000) (184,000)
Other ..................................... (1,000) (1,000)
------------- -------------
Total non-current deferred tax liability ..... (86,000) (58,000)
Valuation allowance on assets ................ (98,000) (98,000
------------- -------------
Net non-current deferred tax liability ....... $ (184,000) $ (156,000)
============= =============
F-15
<PAGE>
THE COEUR D'ALENES COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A valuation allowance on the Company's non-current 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 30, 2000, the Company has available net operating loss
carryforwards of approximately $373,000 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 30, 2000 aggregated $530,013. Negotiated firm sales
contracts aggregated $2,324,392 at September 30, 2000.
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 execute a promissory note in favor of Road
Renovators, Inc. for $126,757. In addition, the Company agreed to 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. The promissory note bears 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. 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. Road Renovators, Inc. received a 5% interest in Road
Renovators, LLC. In the 2000 fiscal year, there was only de minimus activity in
Road Renovators, LLC and currently there is no contingent liability to the
Company relating to this investment. This investment is accounted for under the
equity method of accounting. The Company's carrying value of the investment at
September 30, 2000 is $0.
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 $43,688 and $40,088 for fiscal 2000 and 1999.
F-16
<PAGE>
THE COEUR D'ALENES COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. EARNINGS PER COMMON SHARE
Earnings per common share is computed as follows:
Year Ended September 30, 2000
---------------------------------
Weighted Per-
Average Share
Income Shares Amount
========= ========= =========
BASIC EPS
Income available to common stockholders .... $ 154,546 5,344,193 $ 0.03
=========
EFFECT OF DILUTIVE SECURITIES
Convertible debentures .................... 820 63,827
--------- ---------
DILUTED EPS
Income available to common stockholders plus
assumed conversions ..................... $ 155,366 5,408,020 $ 0.03
========= ========= =========
Year Ended September 25, 1999
---------------------------------
Weighted Per-
Average Share
Income Shares Amount
========= ========= =========
BASIC EPS
Income available to common stockholders .... $ 141,910 5,348,213 $ 0.03
=========
EFFECT OF DILUTIVE SECURITIES
Convertible debentures ..................... 7,862 640,000
--------- ---------
DILUTED EPS
Income available to common stockholders plus
assumed conversions ..................... $ 149,772 5,988,213 $ 0.02
========= ========= =========
a For purposes of diluted earnings per common share, convertible debentures
for fiscal 1999 and 2000 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 for
fiscal 1999 and 2000. See also Note 4 concerning the convertible
debentures.
F-17
<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 30, 2000 September 25, 1999
------------------------------------------ -------------------------------------------
Fabrication Distribution Total Fabrication Distribution Total
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Segment profit (loss) .. $ 78,291 $ 151,487 $ 229,778 $ (62,846) $ 264,976 $ 202,130
External revenues ...... 2,090,394 10,609,527 12,699,921 1,476,072 10,771,541 12,247,613
Internal revenues ...... 28,406 449,000 477,406 33,696 290,239 323,935
Interest income ........ 1,824 30,464 32,288 1,896 38,367 40,263
Interest expense ....... 40,964 211,724 252,688 38,190 209,816 248,006
Depreciation expense ... 60,011 187,042 247,053 39,038 190,963 230,001
Segment assets-gross ... 1,922,105 6,973,659 8,895,764 1,335,400 6,319,549 7,654,949
Segment assets-net ..... 1,826,709 6,065,020 7,891,729 1,327,382 5,686,598 7,013,980
Capital expenditures ... 238,579 424,861 663,440 42,745 174,894 217,639
============ ============ ============ ============ ============ ============
</TABLE>
Reconciliation of segment net income (loss), total assets and revenues is as
follows:
As of and For the Year Ended
------------------------------
September 30, September 25,
2000 1999
------------- -------------
PROFIT OR LOSS
Total profit or loss for reportable segments $ 229,778 $ 202,130
------------- -------------
Consolidated income before income tax expense $ 229,778 $ 202,130
============= =============
TOTAL ASSETS
Total assets for reportable segments ........ $ 8,895,764 $ 7,654,949
Elimination of intersegment assets .......... (1,004,035) (640,969)
------------- -------------
Total consolidated assets ................... $ 7,891,729 $ 7,013,980
============= =============
SEGMENT REVENUES
Total revenues for reportable segments ...... $ 13,177,327 $ 12,571,548
Elimination of intersegment revenues ........ (477,406) (323,935)
------------- -------------
Total consolidated revenues ................. $ 12,699,921 $ 12,247,613
============= =============
F-18
<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 $1.3 million and $1.5 million, or 11% and 12%, of the
Company's consolidated revenues for the years ended September 30, 2000 and
September 25, 1999.
12. VALUATION AND QUALIFYING ACCOUNTS
Allowance for doubtful accounts activity was as follows:
Year Ended
------------------------------
September 30, September 25,
2000 1999
------------- -------------
Balance, beginning of year ...... $ 67,166 $ 56,848
Charged to expense .............. 13,500 12,000
Write-offs, net of recoveries ... (16,880) (1,682)
------------- -------------
Balance, end of year ............ $ 63,786 $ 67,166
============= =============
F-19
