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CONDENSED BALANCE SHEETS December 31 (Dollars in thousands) Assets: Cash and due from banks $ 4,049 4,119 Investment in bank subsidiary 103,695 94,837 Other assets Total assets $ 108,375 99,581 Liabilities: Accrued expenses and other liabilities $ 1,253 Total liabilities 1,253 Stockholders' equity 107,690 98,328 Total liabilities and stockholders' equity $ 108,375 99,581 CONDENSED STATEMENTS OF EARNINGS Year ended December 31 (Dollars in thousands) Income: Dividends from bank subsidiary $ 3,638 8,574 Noninterest income Total income 4,500 8,920 Expense: Noninterest expense Total expense Earnings before income tax expense and equity in undistributed earnings of bank subsidiary 4,245 8,708 Income tax expense Earnings before equity in undistributed earnings of bank subsidiary 4,135 8,682 Equity in undistributed earnings of bank subsidiary 3,319 1,059 Net earnings $ 7,454 9,741 CONDENSED STATEMENTS OF CASH FLOWS Year ended December 31 (Dollars in thousands) Cash flows from operating activities: Net earnings $ 7,454 9,741 Adjustments to reconcile net earnings to net cash provided by operating activities: Net (increase) decrease in other assets (6) Net decrease in other liabilities (561) (215) Equity in undistributed earnings of bank subsidiary (3,319) (1,059) Net cash provided by operating activities 3,568 8,474 Cash flows from financing activities: Dividends paid (3,638) (3,575) Stock repurchases - (2,721) Net cash used in financing activities (3,638) (6,296) Net change in cash and cash equivalents (70) 2,178 Cash and cash equivalents at beginning of period 4,119 1,941 Cash and cash equivalents at end of period $ 4,049 4,119 ITEM 9. |
Under the regulations, a state member bank will be: ● well capitalized if it has a total risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital ratio of 8% or greater, a Common Equity Tier 1 capital ratio of 6.5% or greater, a leverage capital ratio of 5% or greater and is not subject to any written agreement, order, capital directive or prompt corrective action directive by a federal bank regulatory agency to maintain a specific capital level for any capital measure; ● “adequately capitalized” if it has a total risk-based capital ratio of 8% or greater, a Tier 1 risk-based capital ratio of 6% or greater, a Common Equity Tier 1 capital ratio of 4.5% or greater, and generally has a leverage capital ratio of 4% or greater; ● “undercapitalized” if it has a total risk-based capital ratio of less than 8%, a Tier 1 risk-based capital ratio of less than 6%, a Common Equity Tier 1 capital ratio of less than 4.5% or generally has a leverage capital ratio of less than 4%; ● “significantly undercapitalized” if it has a total risk-based capital ratio of less than 6%, a Tier 1 risk-based capital ratio of less than 4%, a Common Equity Tier 1 capital ratio of less than 3%, or a leverage capital ratio of less than 3%; or ● “critically undercapitalized” if its tangible equity is equal to or less than 2% to total assets. |
The following provisions of the 2018 Growth Act may be especially helpful to banks of our size as regulations adopted in 2019 became effective: ● “qualifying community banks,” defined as institutions with total consolidated assets of less than $10 billion, which meet a “community bank leverage ratio” of 8.00% to 10.00%, may be deemed to have satisfied applicable risk based capital requirements as well as the capital ratio requirements; ● section 13(h) of the BHC Act, or the “Volcker Rule,” is amended to exempt from the Volcker Rule, banks with total consolidated assets valued at less than $10 billion (“community banking organizations”), and trading assets and liabilities comprising not more than 5.00% of total assets; ● “reciprocal deposits” will not be considered “brokered deposits” for FDIC purposes, provided such deposits do not exceed the lesser of $5 billion or 20% of the bank’s total liabilities; and The Volcker Rule change may enable us to invest in certain collateralized loan obligations that are treated as “covered funds” prohibited to banking entities by the Volcker Rule. |
Operational risks and losses can result from internal and external fraud; gaps or weaknesses in our risk management or internal audit procedures; errors by employees or third parties, including our vendors, failure to document transactions properly or to obtain proper authorization; failure to comply with applicable regulatory requirements and conduct of business rules in the various jurisdictions where we do business or have customers; failures in the models we generate and rely on; equipment failures, including those caused by natural disasters or by electrical, telecommunications or other essential utility outages; business continuity and data security system failures, including those caused by computer viruses, cyberattacks, unforeseen problems encountered while implementing major new computer systems or, upgrades or patches to existing systems or inadequate access to data or poor response capabilities in light of such business continuity and data security system failures; or the inadequacy or failure of systems and controls, including those of our vendors or counterparties. |
Greenville, South Carolina March 6, 2020 AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Consolidated Balance Sheets See accompanying notes to consolidated financial statements AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Consolidated Statements of Earnings See accompanying notes to consolidated financial statements AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income See accompanying notes to consolidated financial statements AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Consolidated Statements of Stockholders’ Equity See accompanying notes to consolidated financial statements AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows See accompanying notes to consolidated financial statements AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business Auburn National Bancorporation, Inc. (the “Company”) is a bank holding company whose primary business is conducted by its wholly-owned subsidiary, AuburnBank (the “Bank”). |
In determining whether a loss is temporary, the Company considers all relevant information including: ● the length of time and the extent to which the fair value has been less than the amortized cost basis; ● adverse conditions specifically related to the security, an industry, or a geographic area (for example, changes in the financial condition of the issuer of the security, or in the case of an asset-backed debt security, in the financial condition of the underlying loan obligors, including changes in technology or the discontinuance of a segment of the business that may affect the future earnings potential of the issuer or underlying loan obligors of the security or changes in the quality of the credit enhancement); ● the historical and implied volatility of the fair value of the security; ● the payment structure of the debt security and the likelihood of the issuer being able to make payments that increase in the future; ● failure of the issuer of the security to make scheduled interest or principal payments; ● any changes to the rating of the security by a rating agency; and ● recoveries or additional declines in fair value subsequent to the balance sheet date. |
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) List of all Financial Statements The following consolidated financial statements and report of independent registered public accounting firm of the Company are included in this Annual Report on Form 10-K: Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of December 31, 2019 and 2018 Consolidated Statements of Earnings for the years ended December 31, 2019 and 2018 Consolidated Statements of Comprehensive Income for the years ended December 31, 2019 and 2018 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2019 and 2018 Consolidated Statements of Cash Flows for the years ended December 31, 2019 and 2018 Notes to the Consolidated Financial Statements * The certifications attached as exhibits 32.1 and 32.2 to this annual report on Form 10-K are “furnished” to the Securities and Exchange Commission pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed “filed” by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. |
Under the regulations, a state member bank will be: • well capitalized if it has a total risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital ratio of 8% or greater, a Common Equity Tier 1 capital ratio of 6.5% or greater, a leverage capital ratio of 5% or greater and is not subject to any written agreement, order, capital directive or prompt corrective action directive by a federal bank regulatory agency to maintain a specific capital level for any capital measure; • “adequately capitalized” if it has a total risk-based capital ratio of 8% or greater, a Tier 1 risk-based capital ratio of 6% or greater, a Common Equity Tier 1 capital ratio of 4.5% or greater, and generally has a leverage capital ratio of 4% or greater; • “undercapitalized” if it has a total risk-based capital ratio of less than 8%, a Tier 1 risk-based capital ratio of less than 6%, a Common Equity Tier 1 capital ratio of less than 4.5% or generally has a leverage capital ratio of less than 2%; • “significantly undercapitalized” if it has a total risk-based capital ratio of less than 6%, a Tier 1 risk-based capital ratio of less than 4%, a Common Equity Tier 1 capital ratio of less than 3%, or a leverage capital ratio of less than 3%; or • “critically undercapitalized” if its tangible equity is equal to or less than 2% to total assets. |
Operational risks and losses can result from internal and external fraud; gaps or weaknesses in our risk management or internal audit procedures; errors by employees or third parties; failure to document transactions properly or to obtain proper authorization; failure to comply with applicable regulatory requirements and conduct of business rules in the various jurisdictions where we do business or have customers; failures in the models we generate and rely on; equipment failures, including those caused by natural disasters or by electrical, telecommunications or other essential utility outages; business continuity and data security system failures, including those caused by computer viruses, cyberattacks, unforeseen problems encountered while implementing major new computer systems or, upgrades to existing systems or inadequate access to data or poor response capabilities in light of such business continuity and data security system failures; or the inadequacy or failure of systems and controls, including those of our suppliers or counterparties. |
Greenville, South Carolina March 12, 2019 AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Consolidated Balance Sheets See accompanying notes to consolidated financial statements AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Consolidated Statements of Earnings See accompanying notes to consolidated financial statements AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income See accompanying notes to consolidated financial statements AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Consolidated Statements of Stockholders’ Equity See accompanying notes to consolidated financial statements AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows See accompanying notes to consolidated financial statements AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business Auburn National Bancorporation, Inc. (the “Company”) is a bank holding company whose primary business is conducted by its wholly-owned subsidiary, AuburnBank (the “Bank”). |
In determining whether a loss is temporary, the Company considers all relevant information including: • the length of time and the extent to which the fair value has been less than the amortized cost basis; • adverse conditions specifically related to the security, an industry, or a geographic area (for example, changes in the financial condition of the issuer of the security, or in the case of an asset-backed debt security, in the financial condition of the underlying loan obligors, including changes in technology or the discontinuance of a segment of the business that may affect the future earnings potential of the issuer or underlying loan obligors of the security or changes in the quality of the credit enhancement); • the historical and implied volatility of the fair value of the security; • the payment structure of the debt security and the likelihood of the issuer being able to make payments that increase in the future; • failure of the issuer of the security to make scheduled interest or principal payments; • any changes to the rating of the security by a rating agency; and • recoveries or additional declines in fair value subsequent to the balance sheet date. |
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) List of all Financial Statements The following consolidated financial statements and report of independent registered public accounting firm of the Company are included in this Annual Report on Form 10-K: Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of December 31, 2018 and 2017 Consolidated Statements of Earnings for the years ended December 31, 2018 and 2017 Consolidated Statements of Comprehensive Income for the years ended December 31, 2018 and 2017 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2018 and 2017 Consolidated Statements of Cash Flows for the years ended December 31, 2018 and 2017 Notes to the Consolidated Financial Statements (b) Exhibits * The certifications attached as exhibits 32.1 and 32.2 to this annual report on Form 10-K are “furnished” to the Securities and Exchange Commission pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed “filed” by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. |
Under the regulations, a state member bank will be: • well capitalized if it has a total risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital ratio of 8% or greater, a Common Equity Tier 1 capital ratio of 6.5% or greater, a leverage capital ratio of 5% or greater and is not subject to any written agreement, order, capital directive or prompt corrective action directive by a federal bank regulatory agency to maintain a specific capital level for any capital measure; • “adequately capitalized” if it has a total risk-based capital ratio of 8% or greater, a Tier 1 risk-based capital ratio of 6% or greater, a Common Equity Tier 1 capital ratio of 4.5% or greater, and generally has a leverage capital ratio of 4% or greater; • “undercapitalized” if it has a total risk-based capital ratio of less than 8%, a Tier 1 risk-based capital ratio of less than 6%, a Common Equity Tier 1 capital ratio of less than 4.5% or generally has a leverage capital ratio of less than 2%; • “significantly undercapitalized” if it has a total risk-based capital ratio of less than 6%, a Tier 1 risk-based capital ratio of less than 4%, a Common Equity Tier 1 capital ratio of less than 3%, or a leverage capital ratio of less than 3%; or • “critically undercapitalized” if its tangible equity is equal to or less than 2% to total assets. |
Operational risks and losses can result from internal and external fraud; gaps or weaknesses in our risk management or internal audit procedures; errors by employees or third parties; failure to document transactions properly or to obtain proper authorization; failure to comply with applicable regulatory requirements and conduct of business rules in the various jurisdictions where we do business or have customers; failures in the models we generate and rely on; equipment failures, including those caused by natural disasters or by electrical, telecommunications or other essential utility outages; business continuity and data security system failures, including those caused by computer viruses, cyberattacks, unforeseen problems encountered while implementing major new computer systems or, upgrades to existing systems or inadequate access to data or poor response capabilities in light of such business continuity and data security system failures; or the inadequacy or failure of systems and controls, including those of our suppliers or counterparties. |
Greenville, South Carolina March 13, 2018 AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Consolidated Balance Sheets See accompanying notes to consolidated financial statements AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Consolidated Statements of Earnings See accompanying notes to consolidated financial statements AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income See accompanying notes to consolidated financial statements AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Consolidated Statements of Stockholders’ Equity See accompanying notes to consolidated financial statements AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows See accompanying notes to consolidated financial statements AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business Auburn National Bancorporation, Inc. (the “Company”) is a bank holding company whose primary business is conducted by its wholly-owned subsidiary, AuburnBank (the “Bank”). |
In determining whether a loss is temporary, the Company considers all relevant information including: • the length of time and the extent to which the fair value has been less than the amortized cost basis; • adverse conditions specifically related to the security, an industry, or a geographic area (for example, changes in the financial condition of the issuer of the security, or in the case of an asset-backed debt security, in the financial condition of the underlying loan obligors, including changes in technology or the discontinuance of a segment of the business that may affect the future earnings potential of the issuer or underlying loan obligors of the security or changes in the quality of the credit enhancement); • the historical and implied volatility of the fair value of the security; • the payment structure of the debt security and the likelihood of the issuer being able to make payments that increase in the future; • failure of the issuer of the security to make scheduled interest or principal payments; • any changes to the rating of the security by a rating agency; and • recoveries or additional declines in fair value subsequent to the balance sheet date. |
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) List of all Financial Statements The following consolidated financial statements and report of independent registered public accounting firm of the Company are included in this Annual Report on Form 10-K: Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of December 31, 2017 and 2016 Consolidated Statements of Earnings for the years ended December 31, 2017 and 2016 Consolidated Statements of Comprehensive Income for the years ended December 31, 2017 and 2016 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2017 and 2016 Consolidated Statements of Cash Flows for the years ended December 31, 2017 and 2016 Notes to the Consolidated Financial Statements (b) Exhibits * The certifications attached as exhibits 32.1 and 32.2 to this annual report on Form 10-K are “furnished” to the Securities and Exchange Commission pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed “filed” by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. |
Under the regulations, a state member bank will be: (i) well capitalized if it has a total risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital ratio of 8% or greater, a Common Equity Tier 1 capital ratio of 6.5% or greater, a leverage capital ratio of 5% or greater and is not subject to any written agreement, order, capital directive or prompt corrective action directive by a federal bank regulatory agency to maintain a specific capital level for any capital measure; (ii) “adequately capitalized” if it has a total risk-based capital ratio of 8% or greater, a Tier 1 risk-based capital ratio of 6% or greater, a Common Equity Tier 1 capital ratio of 4.5% or greater, and generally has a leverage capital ratio of 4% or greater; (iii) “undercapitalized” if it has a total risk-based capital ratio of less than 8%, a Tier 1 risk-based capital ratio of less than 6%, a Common Equity Tier 1 capital ratio of less than 4.5% or generally has a leverage capital ratio of less than 2%; (iv) “significantly undercapitalized” if it has a total risk-based capital ratio of less than 6%, a Tier 1 risk-based capital ratio of less than 4%, a Common Equity Tier 1 capital ratio of less than 3%, or a leverage capital ratio of less than 3%; or (v) “critically undercapitalized” if its tangible equity is equal to or less than 2% to total assets. |
/s/ Elliott Davis Decosimo, LLC Greenville, South Carolina March 3, 2017 AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Consolidated Balance Sheets See accompanying notes to consolidated financial statements AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Consolidated Statements of Earnings See accompanying notes to consolidated financial statements AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income See accompanying notes to consolidated financial statements AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Consolidated Statements of Stockholders’ Equity See accompanying notes to consolidated financial statements AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows See accompanying notes to consolidated financial statements AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business Auburn National Bancorporation, Inc. (the “Company”) is a bank holding company whose primary business is conducted by its wholly-owned subsidiary, AuburnBank (the “Bank”). |
In determining whether a loss is temporary, the Company considers all relevant information including: • the length of time and the extent to which the fair value has been less than the amortized cost basis; • adverse conditions specifically related to the security, an industry, or a geographic area (for example, changes in the financial condition of the issuer of the security, or in the case of an asset-backed debt security, in the financial condition of the underlying loan obligors, including changes in technology or the discontinuance of a segment of the business that may affect the future earnings potential of the issuer or underlying loan obligors of the security or changes in the quality of the credit enhancement); • the historical and implied volatility of the fair value of the security; • the payment structure of the debt security and the likelihood of the issuer being able to make payments that increase in the future; • failure of the issuer of the security to make scheduled interest or principal payments; • any changes to the rating of the security by a rating agency; and • recoveries or additional declines in fair value subsequent to the balance sheet date. |
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) List of all Financial Statements The following consolidated financial statements and report of independent registered public accounting firm of the Company are included in this Annual Report on Form 10-K: Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of December 31, 2016 and 2015 Consolidated Statements of Earnings for the years ended December 31, 2016 and 2015 Consolidated Statements of Comprehensive Income for the years ended December 31, 2016 and 2015 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2016 and 2015 Consolidated Statements of Cash Flows for the years ended December 31, 2016 and 2015 Notes to the Consolidated Financial Statements (b) Exhibits * The certifications attached as exhibits 32.1 and 32.2 to this annual report on Form 10-K are “furnished” to the Securities and Exchange Commission pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed “filed” by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. |
Under the regulations, a state member bank will be: (i) well capitalized if it has a total risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital ratio of 8% or greater, a Common Equity Tier 1 capital ratio of 6.5% or greater, a leverage capital ratio of 5% or greater and is not subject to any written agreement, order, capital directive or prompt corrective action directive by a federal bank regulatory agency to maintain a specific capital level for any capital measure; (ii) “adequately capitalized” if it has a total risk-based capital ratio of 8% or greater, a Tier 1 risk-based capital ratio of 6% or greater, a Common Equity Tier 1 capital ratio of 4.5% or greater, and generally has a leverage capital ratio of 4% or greater; (iii) “undercapitalized” if it has a total risk-based capital ratio of less than 8%, a Tier 1 risk-based capital ratio of less than 6%, a Common Equity Tier 1 capital ratio of less than 4.5% or generally has a leverage capital ratio of less than 2%; (iv) “significantly undercapitalized” if it has a total risk-based capital ratio of less than 6%, a Tier 1 risk-based capital ratio of less than 4%, a Common Equity Tier 1 capital ratio of less than 3%, or a leverage capital ratio of less than 3%; or (v) “critically undercapitalized” if its tangible equity is equal to or less than 2% to total assets. |
/s/ Elliott Davis Decosimo, LLC Memphis, Tennessee March 10, 2016 AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Consolidated Balance Sheets See accompanying notes to consolidated financial statements AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Consolidated Statements of Earnings See accompanying notes to consolidated financial statements AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income See accompanying notes to consolidated financial statements AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Consolidated Statements of Stockholders’ Equity See accompanying notes to consolidated financial statements AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows See accompanying notes to consolidated financial statements AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business Auburn National Bancorporation, Inc. (the “Company”) is a bank holding company whose primary business is conducted by its wholly-owned subsidiary, AuburnBank (the “Bank”). |
In determining whether a loss is temporary, the Company considers all relevant information including: • the length of time and the extent to which the fair value has been less than the amortized cost basis; • adverse conditions specifically related to the security, an industry, or a geographic area (for example, changes in the financial condition of the issuer of the security, or in the case of an asset-backed debt security, in the financial condition of the underlying loan obligors, including changes in technology or the discontinuance of a segment of the business that may affect the future earnings potential of the issuer or underlying loan obligors of the security or changes in the quality of the credit enhancement); • the historical and implied volatility of the fair value of the security; • the payment structure of the debt security and the likelihood of the issuer being able to make payments that increase in the future; • failure of the issuer of the security to make scheduled interest or principal payments; • any changes to the rating of the security by a rating agency; and • recoveries or additional declines in fair value subsequent to the balance sheet date. |
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) List of all Financial Statements The following consolidated financial statements and report of independent registered public accounting firm of the Company are included in this Annual Report on Form 10-K: Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of December 31, 2015 and 2014 Consolidated Statements of Earnings for the years ended December 31, 2015 and 2014 Consolidated Statements of Comprehensive Income for the years ended December 31, 2015 and 2014 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2015 and 2014 Consolidated Statements of Cash Flows for the years ended December 31, 2015 and 2014 Notes to the Consolidated Financial Statements (b) Exhibits * The certifications attached as exhibits 32.1 and 32.2 to this annual report on Form 10-K are “furnished” to the Securities and Exchange Commission pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed “filed” by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. |
Under the regulations, a state member bank will be: (i) well capitalized if it has a total risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital ratio of 6% or greater, a leverage capital ratio of 5% or greater and is not subject to any written agreement, order, capital directive or prompt corrective action directive by a federal bank regulatory agency to maintain a specific capital level for any capital measure; (ii) “adequately capitalized” if it has a total risk-based capital ratio of 8% or greater, a Tier 1 risk-based capital ratio of 4% or greater, and generally has a leverage capital ratio of 4% or greater; (iii) “undercapitalized” if it has a total risk-based capital ratio of less than 8%, a Tier 1 risk-based capital ratio of less than 4% or generally has a leverage capital ratio of less than 2%; (iv) “significantly undercapitalized” if it has a total risk-based capital ratio of less than 6%, a Tier 1 risk-based capital ratio of less than 3% or a leverage capital ratio of less than 3%; or (v) “critically undercapitalized” if its tangible equity is equal to or less than 2% to total assets. |
Birmingham, Alabama March 24, 2015 AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Consolidated Balance Sheets See accompanying notes to consolidated financial statements AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Consolidated Statements of Earnings See accompanying notes to consolidated financial statements AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income See accompanying notes to consolidated financial statements AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Consolidated Statements of Stockholders’ Equity See accompanying notes to consolidated financial statements AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows See accompanying notes to consolidated financial statements AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business Auburn National Bancorporation, Inc. (the “Company”) is a bank holding company whose primary business is conducted by its wholly-owned subsidiary, AuburnBank (the “Bank”). |
In determining whether a loss is temporary, the Company considers all relevant information including: • the length of time and the extent to which the fair value has been less than the amortized cost basis; • adverse conditions specifically related to the security, an industry, or a geographic area (for example, changes in the financial condition of the issuer of the security, or in the case of an asset-backed debt security, in the financial condition of the underlying loan obligors, including changes in technology or the discontinuance of a segment of the business that may affect the future earnings potential of the issuer or underlying loan obligors of the security or changes in the quality of the credit enhancement); • the historical and implied volatility of the fair value of the security; • the payment structure of the debt security and the likelihood of the issuer being able to make payments that increase in the future; • failure of the issuer of the security to make scheduled interest or principal payments; • any changes to the rating of the security by a rating agency; and • recoveries or additional declines in fair value subsequent to the balance sheet date. |
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) List of all Financial Statements The following consolidated financial statements and report of independent registered public accounting firm of the Company are included in this Annual Report on Form 10-K: Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of December 31, 2014 and 2013 Consolidated Statements of Earnings for the years ended December 31, 2014, 2013, and 2012 Consolidated Statements of Comprehensive Income for the years ended December 31, 2014, 2013, and 2012 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2014, 2013, and 2012 Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2013, and 2012 Notes to the Consolidated Financial Statements (b) Exhibits * The certifications attached as exhibits 32.1 and 32.2 to this annual report on Form 10-K are “furnished” to the Securities and Exchange Commission pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed “filed” by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. |
Under the regulations, a state member bank will be: (i) well capitalized if it has a total risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital ratio of 6% or greater, a leverage capital ratio of 5% or greater and is not subject to any written agreement, order, capital directive or prompt corrective action directive by a federal bank regulatory agency to maintain a specific capital level for any capital measure; (ii) “adequately capitalized” if it has a total risk-based capital ratio of 8% or greater, a Tier 1 risk-based capital ratio of 4% or greater, and generally has a leverage capital ratio of 4% or greater; (iii) “undercapitalized” if it has a total risk-based capital ratio of less than 8%, a Tier 1 risk-based capital ratio of less than 4% or generally has a leverage capital ratio of less than 2%; (iv) “significantly undercapitalized” if it has a total risk-based capital ratio of less than 6%, a Tier 1 risk-based capital ratio of less than 3% or a leverage capital ratio of less than 3%; or (v) “critically undercapitalized” if its tangible equity is equal to or less than 2% to total assets. |
Birmingham, Alabama March 24, 2014 AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Consolidated Balance Sheets See accompanying notes to consolidated financial statements AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Consolidated Statements of Earnings See accompanying notes to consolidated financial statements AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income See accompanying notes to consolidated financial statements AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Consolidated Statements of Stockholders’ Equity See accompanying notes to consolidated financial statements AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows See accompanying notes to consolidated financial statements AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business Auburn National Bancorporation, Inc. (the “Company”) is a bank holding company whose primary business is conducted by its wholly-owned subsidiary, AuburnBank (the “Bank”). |
In determining whether a loss is temporary, the Company considers all relevant information including: • the length of time and the extent to which the fair value has been less than the amortized cost basis; • adverse conditions specifically related to the security, an industry, or a geographic area (for example, changes in the financial condition of the issuer of the security, or in the case of an asset-backed debt security, in the financial condition of the underlying loan obligors, including changes in technology or the discontinuance of a segment of the business that may affect the future earnings potential of the issuer or underlying loan obligors of the security or changes in the quality of the credit enhancement); • the historical and implied volatility of the fair value of the security; • the payment structure of the debt security and the likelihood of the issuer being able to make payments that increase in the future; • failure of the issuer of the security to make scheduled interest or principal payments; • any changes to the rating of the security by a rating agency; and • recoveries or additional declines in fair value subsequent to the balance sheet date. |
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) List of all Financial Statements The following consolidated financial statements and report of independent registered public accounting firm of the Company are included in this Annual Report on Form 10-K: Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of December 31, 2013 and 2012 Consolidated Statements of Earnings for the years ended December 31, 2013, 2012, and 2011 Consolidated Statements of Comprehensive Income for the years ended December 31, 2013, 2012, and 2011 Consolidated Statements of Stockholders’ Equity and Comprehensive Income for the years ended December 31, 2013, 2012, and 2011 Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012, and 2011 Notes to the Consolidated Financial Statements (b) Exhibits * The certifications attached as exhibits 32.1 and 32.2 to this quarterly report on Form 10-K are “furnished” to the Securities and Exchange Commission pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed “filed” by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. |
Under the regulations, a state member bank will be: (i) well capitalized if it has a total risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital ratio of 6% or greater, a leverage capital ratio of 5% or greater and is not subject to any written agreement, order, capital directive or prompt corrective action directive by a federal bank regulatory agency to maintain a specific capital level for any capital measure; (ii) “adequately capitalized” if it has a total risk-based capital ratio of 8% or greater, a Tier 1 risk-based capital ratio of 4% or greater, and generally has a leverage capital ratio of 4% or greater; (iii) “undercapitalized” if it has a total risk-based capital ratio of less than 8%, a Tier 1 risk-based capital ratio of less than 4% or generally has a leverage capital ratio of less than 2%; (iv) “significantly undercapitalized” if it has a total risk-based capital ratio of less than 6%, a Tier 1 risk-based capital ratio of less than 3% or a leverage capital ratio of less than 3%; or (v) “critically undercapitalized” if its tangible equity is equal to or less than 2% to total assets. |
Birmingham, Alabama March 22, 2013 AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Consolidated Balance Sheets See accompanying notes to consolidated financial statements AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Consolidated Statements of Earnings See accompanying notes to consolidated financial statements AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income See accompanying notes to consolidated financial statements AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Consolidated Statements of Stockholders’ Equity See accompanying notes to consolidated financial statements AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows See accompanying notes to consolidated financial statements AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business Auburn National Bancorporation, Inc. (the “Company”) is a bank holding company whose primary business is conducted by its wholly-owned subsidiary, AuburnBank (the “Bank”). |
In determining whether a loss is temporary, the Company considers all relevant information including: • the length of time and the extent to which the fair value has been less than the amortized cost basis; • adverse conditions specifically related to the security, an industry, or a geographic area (for example, changes in the financial condition of the issuer of the security, or in the case of an asset-backed debt security, in the financial condition of the underlying loan obligors, including changes in technology or the discontinuance of a segment of the business that may affect the future earnings potential of the issuer or underlying loan obligors of the security or changes in the quality of the credit enhancement); • the historical and implied volatility of the fair value of the security; • the payment structure of the debt security and the likelihood of the issuer being able to make payments that increase in the future; • failure of the issuer of the security to make scheduled interest or principal payments; • any changes to the rating of the security by a rating agency; and • recoveries or additional declines in fair value subsequent to the balance sheet date. |
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) List of all Financial Statements The following consolidated financial statements and report of independent registered public accounting firm of the Company are included in this Annual Report on Form 10-K: Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of December 31, 2012 and 2011 Consolidated Statements of Earnings for the years ended December 31, 2012, 2011, and 2010 Consolidated Statements of Comprehensive Income for the years ended December 31, 2012, 2011, and 2010 Consolidated Statements of Stockholders’ Equity and Comprehensive Income for the years ended December 31, 2012, 2011, and 2010 Consolidated Statements of Cash Flows for the years ended December 31, 2012, 2011, and 2010 Notes to the Consolidated Financial Statements (b) Exhibits * The certifications attached as exhibits 32.1 and 32.2 to this quarterly report on Form 10-Q are “furnished” to the Securities and Exchange Commission pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed “filed” by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. |
Under the regulations, a state member bank will be: (i) well capitalized if it has a total risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital ratio of 6% or greater, a leverage capital ratio of 5% or greater and is not subject to any written agreement, order, capital directive or prompt corrective action directive by a federal bank regulatory agency to maintain a specific capital level for any capital measure; (ii) “adequately capitalized” if it has a total risk-based capital ratio of 8% or greater, a Tier 1 risk-based capital ratio of 4% or greater, and generally has a leverage capital ratio of 4% or greater; (iii) “undercapitalized” if it has a total risk-based capital ratio of less than 8%, a Tier 1 risk-based capital ratio of less than 4% or generally has a leverage capital ratio of less than 2%; (iv) “significantly undercapitalized” if it has a total risk-based capital ratio of less than 6%, a Tier 1 risk-based capital ratio of less than 3% or a leverage capital ratio of less than 3%; or (v) “critically undercapitalized” if its tangible equity is equal to or less than 2% to total assets. |
In determining whether a loss is temporary, the Company considers all relevant information including: • the length of time and the extent to which the fair value has been less than the amortized cost basis; • adverse conditions specifically related to the security, an industry, or a geographic area (for example, changes in the financial condition of the issuer of the security, or in the case of an asset-backed debt security, in the financial condition of the underlying loan obligors, including changes in technology or the discontinuance of a segment of the business that may affect the future earnings potential of the issuer or underlying loan obligors of the security or changes in the quality of the credit enhancement); • the historical and implied volatility of the fair value of the security; • the payment structure of the debt security and the likelihood of the issuer being able to make payments that increase in the future; • failure of the issuer of the security to make scheduled interest or principal payments; • any changes to the rating of the security by a rating agency; and • recoveries or additional declines in fair value subsequent to the balance sheet date. |
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) List of all Financial Statements The following consolidated financial statements and report of independent registered public accounting firm of the Company are included in this Annual Report on Form 10-K: Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of December 31, 2011 and 2010 Consolidated Statements of Earnings for the years ended December 31, 2011, 2010, and 2009 Consolidated Statements of Stockholders’ Equity and Comprehensive Income for the years ended December 31, 2011, 2010, and 2009 Consolidated Statements of Cash Flows for the years ended December 31, 2011, 2010, and 2009 Notes to the Consolidated Financial Statements (b) Exhibits * The certifications attached as exhibits 32.1 and 32.2 to this quarterly report on Form 10-Q are “furnished” to the Securities and Exchange Commission pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed “filed” by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. |
Under the regulations, a state member bank will be: (i) well capitalized if it has a total risk-based capital ratio of 10% or greater, a Tier 1 capital ratio of 6% or greater, a Tier 1 leverage capital ratio of 5% or greater and is not subject to any written agreement, order, capital directive or prompt corrective action directive by a federal bank regulatory agency to maintain a specific capital level for any capital measure; (ii) “adequately capitalized” if it has a total risk-based capital ratio of 8% or greater, a Tier 1 risk-based capital ratio of 4% or greater, and generally has a Tier 1 leverage capital ratio of 4% or greater; (iii) “undercapitalized” if it has a total risk-based capital ratio of less than 8%, a Tier 1 risk-based capital ratio of less than 4% or generally has a Tier 1 leverage capital ratio of less than 2%; (iv) “significantly undercapitalized” if it has a total risk-based capital ratio of less than 6%, a Tier 1 risk-based capital ratio of less than 3% or a Tier 1 leverage capital ratio of less than 3%; or (v) “critically undercapitalized” if its tangible equity is equal to or less than 2% to total assets. |
In determining whether a loss is temporary, the Company considers all relevant information including: • the length of time and the extent to which the fair value has been less than the amortized cost basis; • adverse conditions specifically related to the security, an industry, or a geographic area (for example, changes in the financial condition of the issuer of the security, or in the case of an asset-backed debt security, in the financial condition of the underlying loan obligors, including changes in technology or the discontinuance of a segment of the business that may affect the future earnings potential of the issuer or underlying loan obligors of the security or changes in the quality of the credit enhancement); • the historical and implied volatility of the fair value of the security; • the payment structure of the debt security and the likelihood of the issuer being able to make payments that increase in the future; • failure of the issuer of the security to make scheduled interest or principal payments; • any changes to the rating of the security by a rating agency; and • recoveries or additional declines in fair value subsequent to the balance sheet date. |
Under the regulations, a state member bank will be: (i) well capitalized if it has a Total Capital ratio of 10% or greater, a Tier 1 capital ratio of 6% or greater, a Tier 1 leverage ratio of 5% or greater and is not subject to any written agreement, order, capital directive or prompt corrective action directive by a federal bank regulatory agency to meet and maintain a specific capital level for any capital measure; (ii) adequately capitalized if it has a Total Capital ratio of 8% or greater, a Tier 1 capital ratio of 4% or greater, and a leverage ratio of 4% or greater (3% in certain circumstances); (iii) undercapitalized if it has a Total Capital ratio of less than 8%, a Tier 1 capital ratio of less than 4% (3% in certain circumstances); (iv) significantly undercapitalized if it has a Total Capital ratio of less than 6%, a Tier 1 capital ratio of less than 3% and a leverage ratio of less than 3%; or (v) critically undercapitalized if its tangible equity is equal to or less than 2% of average quarterly tangible assets. |
In determining whether a loss is temporary, the Company considers all relevant information including: • the length of time and the extent to which the fair value has been less than the amortized cost basis; • adverse conditions specifically related to the security, an industry, or a geographic area (for example, changes in the financial condition of the issuer of the security, or in the case of an asset-backed debt security, in the financial condition of the underlying loan obligors, including changes in technology or the discontinuance of a segment of the business that may affect the future earnings potential of the issuer or underlying loan obligors of the security or changes in the quality of the credit enhancement); • the historical and implied volatility of the fair value of the security; • the payment structure of the debt security and the likelihood of the issuer being able to make payments that increase in the future; • failure of the issuer of the security to make scheduled interest or principal payments; • any changes to the rating of the security by a rating agency; and • recoveries or additional declines in fair value subsequent to the balance sheet date. |
Under the regulations, a state member bank will be: (i) well capitalized if it has a Total Capital ratio of 10% or greater, a Tier 1 capital ratio of 6% or greater, a Tier 1 leverage ratio of 5% or greater and is not subject to any written agreement, order, capital directive or prompt corrective action directive by a federal bank regulatory agency to meet and maintain a specific capital level for any capital measure; (ii) adequately capitalized if it has a Total Capital ratio of 8% or greater, a Tier 1 capital ratio of 4% or greater, and a leverage ratio of 4% or greater (3% in certain circumstances); (iii) undercapitalized if it has a Total Capital ratio of less than 8%, a Tier 1 capital ratio of less than 4% (3% in certain circumstances); (iv) significantly undercapitalized if it has a Total Capital ratio of less than 6%, a Tier 1 capital ratio of less than 3% and a leverage ratio of less than 3%; or (v) critically undercapitalized if its tangible equity is equal to or less than 2% of average quarterly tangible assets. |
Under the regulations, a state member bank will be: (i) well capitalized if it has a Total Capital ratio of 10% or greater, a Tier 1 capital ratio of 6% or greater, a Tier 1 leverage ratio of 5% or greater and is not subject to any written agreement, order, capital directive or prompt corrective action directive by a federal bank regulatory agency to meet and maintain a specific capital level for any capital measure; (ii) adequately capitalized if it has a Total Capital ratio of 8% or greater, a Tier 1 capital ratio of 4% or greater, and a leverage ratio of 4% or greater (3% in certain circumstances); (iii) undercapitalized if it has a Total Capital ratio of less than 8%, a Tier 1 capital ratio of less than 4% (3% in certain circumstances); (iv) significantly undercapitalized if it has a Total Capital ratio of less than 6%, a Tier 1 capital ratio of less than 3% and a leverage ratio of less than 3%; or (v) critically undercapitalized if its tangible equity is equal to or less than 2% of average quarterly tangible assets. |
Under the regulations, a state member bank will be: (i) well capitalized if it has a Total Capital ratio of 10% or greater, a Tier 1 capital ratio of 6% or greater, a Tier 1 leverage ratio of 5% or greater and is not subject to any written agreement, order, capital directive or prompt corrective action directive by a federal bank regulatory agency to meet and maintain a specific capital level for any capital measure; (ii) adequately capitalized if it has a Total Capital ratio of 8% or greater, a Tier 1 capital ratio of 4% or greater, and a leverage ratio of 4% or greater (3% in certain circumstances); (iii) undercapitalized if it has a Total Capital ratio of less than 8%, a Tier 1 capital ratio of less than 4% (3% in certain circumstances); (iv) significantly undercapitalized if it has a Total Capital ratio of less than 6%, a Tier 1 capital ratio of less than 3% and a leverage ratio of less than 3%; or (v) critically undercapitalized if its tangible equity is equal to or less than 2% of average quarterly tangible assets. |
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) List of all Financial Statements The following consolidated financial statements and report of independent registered public accounting firm of the Company are included in this Annual Report on Form 10-K: Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of December 31, 2006 and 2005 Consolidated Statement of Earnings for the years ended December 31, 2006, 2005, and 2004 Consolidated Statements of Stockholders’ Equity and Comprehensive Income for the years ended December 31, 2006, 2005, and 2004 Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2005, and 2004 Notes to the Consolidated Financial Statements (b) Exhibits * Indicates management contracts and compensatory plans and arrangements (c) Financial Statement Schedules All financial statement schedules required pursuant to this item were either included in the financial information set forth in (a) above or are inapplicable and therefore have been omitted. |
(Continued) AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2006, 2005, and 2004 (12) Income Tax Expense Total income tax expense (benefit) for the years ended December 31, 2006, 2005, and 2004 was allocated as follows: For the years ended December 31, 2006, 2005, and 2004 the components of income tax expense from continuing operations were as follows: Total income tax expense differed from the amount computed by applying the statutory federal income tax rate of 34% to pretax earnings as follows: (Continued) AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2006, 2005, and 2004 The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2006 and 2005 are presented below: In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. |
(18) Supplemental Information Components of other noninterest income exceeding 1% of revenues for any of the years in the three-year period ended December 31, 2006, include: Components of other noninterest expense exceeding 1% of revenues for any of the years in the three-year period ended December 31, 2006, include: (Continued) AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2006, 2005, and 2004 (19) Parent Company Financial Information The condensed financial information for Auburn National Bancorporation, Inc. (Parent Company Only) is presented as follows: Parent Company Only Condensed Balance Sheets December 31, 2006 and 2005 (Continued) AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2006, 2005, and 2004 Parent Company Only Condensed Statements of Earnings Years ended December 31, 2006, 2005, and 2004 (Continued) AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2006, 2005, and 2004 Parent Company Only Condensed Statements of Cash Flows Years ended December 31, 2006, 2005, and 2004 (Continued) AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2006, 2005, and 2004 (20) Quarterly Financial Data (Unaudited) The supplemental quarterly financial data for the years ended December 31, 2006 and 2005 is summarized as follows: SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Auburn, State of Alabama, on the 30th day of March, 2007. |
Under the regulations, a state member bank will be: (i) well capitalized if it has a Total Capital ratio of 10% or greater, a Tier 1 capital ratio of 6% or greater, a Tier 1 leverage ratio of 5% or greater and is not subject to any written agreement, order, capital directive or prompt corrective action directive by a federal bank regulatory agency to meet and maintain a specific capital level for any capital measure; (ii) adequately capitalized if it has a Total Capital ratio of 8% or greater, a Tier 1 capital ratio of 4% or greater, and a leverage ratio of 4% or greater (3% in certain circumstances); (iii) undercapitalized if it has a Total Capital ratio of less than 8%, a Tier 1 capital ratio of less than 4% (3% in certain circumstances); (iv) significantly undercapitalized if it has a Total Capital ratio of less than 6%, a Tier 1 capital ratio of less than 3% and a leverage ratio of less than 3%; or (v) critically undercapitalized if its tangible equity is equal to or less than 2% of average quarterly tangible assets. |
AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements December 31, 2005, 2004, and 2003 (12) Income Tax Expense Total income tax expense (benefit) for the years ended December 31, 2005, 2004, and 2003 was allocated as follows: For the years ended December 31, 2005, 2004, and 2003 the components of income tax expense from continuing operations were as follows: Total income tax expense differed from the amount computed by applying the statutory federal income tax rate of 34% to pretax earnings as follows: AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements December 31, 2005, 2004, and 2003 The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2005 and 2004 are presented below: In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. |
(18) Supplemental Information Components of other noninterest income exceeding 1% of revenues for any of the years in the three-year period ended December 31, 2005, include: Components of other noninterest expense exceeding 1% of revenues for any of the years in the three-year period ended December 31, 2005, include: AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements December 31, 2005, 2004, and 2003 (19) Parent Company Financial Information The condensed financial information for Auburn National Bancorporation, Inc. (Parent Company Only) is presented as follows: Parent Company Only Condensed Balance Sheets December 31, 2005 and 2004 AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements December 31, 2005, 2004, and 2003 Parent Company Only Condensed Statements of Earnings Years ended December 31, 2005, 2004, and 2003 AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements December 31, 2005, 2004, and 2003 Parent Company Only Condensed Statements of Cash Flows Years ended December 31, 2005, 2004, and 2003 AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements December 31, 2005, 2004, and 2003 (20) Quarterly Financial Data (Unaudited) The supplemental quarterly financial data for the years ended December 31, 2005 and 2004 is summarized as follows: SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Auburn, State of Alabama, on the 30th day of March, 2006. |
Under the regulations, a state member bank will be (i) well capitalized if it has a Total Capital ratio of 10% or greater, a Tier 1 capital ratio of 6% or greater, a Tier 1 leverage ratio of 5% or greater and is not subject to any written agreement, order, capital directive or prompt corrective action directive by a federal bank regulatory agency to meet and maintain a specific capital level for any capital measure; (ii) adequately capitalized if it has a Total Capital ratio of 8% or greater, a Tier 1 capital ratio of 4% or greater, and a leverage ratio of 4% or greater (3% in certain circumstances); (iii) undercapitalized if it has a Total Capital ratio of less than 8%, a Tier 1 capital ratio of less than 4% (3% in certain circumstances); (iv) significantly undercapitalized if it has a Total Capital ratio of less than 6%, a Tier 1 capital ratio of less than 3% and a leverage ratio of less than 3% or (v) critically undercapitalized if its tangible equity is equal to or less than 2% of average quarterly tangible assets. |
(Continued) AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements December 31, 2004, 2003, and 2002 (12) Income Tax Expense Total income tax expense for the years ended December 31, 2004, 2003, and 2002 was allocated as follows: For the years ended December 31, 2004, 2003, and 2002 the components of income tax expense from continuing operations were as follows: Total income tax expense differed from the amount computed by applying the statutory federal income tax rate of 34% to pretax earnings as follows: (Continued) AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements December 31, 2004, 2003, and 2002 The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2004 and 2003 are presented below: In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. |
(18) Supplemental Information Components of other noninterest income exceeding 1% of revenues for any of the years in the three-year period ended December 31, 2004, include: Components of other noninterest expense exceeding 1% of revenues for any of the years in the three-year period ended December 31, 2004, include: (Continued) AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements December 31, 2004, 2003, and 2002 (19) Parent Company Financial Information The condensed financial information for Auburn National Bancorporation, Inc. (Parent Company Only) is presented as follows: Parent Company Only Condensed Balance Sheets December 31, 2004 and 2003 (Continued) AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements December 31, 2004, 2003, and 2002 Parent Company Only Condensed Statements of Earnings Years ended December 31, 2004, 2003, and 2002 (Continued) AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements December 31, 2004, 2003, and 2002 Parent Company Only Condensed Statements of Cash Flows Years ended December 31, 2004, 2003, and 2002 (Continued) AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements December 31, 2004, 2003, and 2002 (20) Quarterly Financial Data (Unaudited) The supplemental quarterly financial data for the years ended December 31, 2004 and 2003 is summarized as follows: SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Auburn, State of Alabama, on the 30th day of March, 2005. |
Under the regulations, a state member bank will be (i) well capitalized if it has a Total Capital ratio of 10% or greater, a Tier 1 capital ratio of 6% or greater, a Tier 1 leverage ratio of 5% or greater and is not subject to any written agreement, order, capital directive, or prompt corrective action directive by a federal bank regulatory agency to meet and maintain a specific capital level for any capital measure, (ii) adequately capitalized if it has a Total Capital ratio of 8% or greater, a Tier 1 capital ratio of 4% or greater, and a leverage ratio of 4% or greater (3% in certain circumstances), (iii) undercapitalized if it has a Total Capital ratio of less than 8%, a Tier 1 capital ratio of less than 4% (3% in certain circumstances), (iv) significantly undercapitalized if it has a Total Capital ratio of less than 6%, a Tier 1 capital ratio of less than 3% and a leverage ratio of less than 3% or (v) critically undercapitalized if its tangible equity is equal to or less than 2% of average quarterly tangible assets. |
See “SUPERVISION AND REGULATION - DIVIDENDS” and “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CAPITAL RESOURCES.” Recent Sales of Unregistered Securities During the last three years, the Company has not sold any of its securities without registering them under the Securities Act, except on November 4, 2003: (1) the Company organized a Delaware statutory business trust (the “Trust”) called “Auburn National Bancorporation Capital Trust I,” which is governed by an Amended and Restated Trust Agreement between the Company, Wilmington Trust Company, as trustee (the “Trustee”), and three of the Company’s employees who are the administrators of the Trust; (2) the Company issued and sold to the Trust approximately $7.217 million in aggregate principal amount of its unsecured junior subordinated debentures, which were issued under a Junior Subordinated Indenture (note payable to trust) between the Company and the Trustee; (3) the Trust: (a) issued and sold $7.0 million of preferred capital securities with a liquidation amount of $50,000 per security to outside investors, and (b) issued and sold $217,000 of its common securities to the Company, making the Company the only holder of the Trust’s common securities, and (c) used the proceeds from these sales to purchase the junior subordinated debentures from the Company. |
(11) Income Tax Expense Total income tax expense for the years ended December 31, 2003, 2002, and 2001 was allocated as follows: (Continued) AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements December 31, 2003, 2002, and 2001 For the years ended December 31, 2003, 2002, and 2001 the components of income tax expense from continuing operations were as follows: Total income tax expense differed from the amount computed by applying the statutory federal income tax rate of 34% to pretax earnings as follows: (Continued) AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements December 31, 2003, 2002, and 2001 The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2003 and 2002 are presented below: In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. |
(17) Supplemental Information Components of other noninterest income exceeding 1% of revenues for any of the years in the three-year period ended December 31, 2003, include: Components of other noninterest expense exceeding 1% of revenues for any of the years in the three-year period ended December 31, 2003, include: (Continued) AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements December 31, 2003, 2002, and 2001 (18) Parent Company Financial Information The condensed financial information for Auburn National Bancorporation, Inc. (Parent Company Only) is presented as follows: Parent Company Only Condensed Balance Sheets December 31, 2003 and 2002 (Continued) AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements December 31, 2003, 2002, and 2001 Parent Company Only Condensed Statements of Earnings Years ended December 31, 2003, 2002, and 2001 (Continued) AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements December 31, 2003, 2002, and 2001 Parent Company Only Condensed Statements of Cash Flows Years ended December 31, 2003, 2002, and 2001 (Continued) AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements December 31, 2003, 2002, and 2001 (19) Quarterly Financial Data (Unaudited) The supplemental quarterly financial data for the years ended December 31, 2003 and 2002 is summarized as follows: SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Auburn, State of Alabama, on the 30th day of March, 2004. |
Under the regulations, a state member bank will be (i) well capitalized if it has a Total Capital ratio of 10% or greater, a Tier 1 capital ratio of 6% or greater, a Tier 1 leverage ratio of 5% or greater and is not subject to any written agreement, order, capital directive, or prompt corrective action directive by a federal bank regulatory agency to meet and maintain a specific capital level for any capital measure, (ii) adequately capitalized if it has a Total Capital ratio of 8% or greater, a Tier 1 capital ratio of 4% or greater, and a leverage ratio of 4% or greater (3% in certain circumstances), (iii) undercapitalized if it has a Total Capital ratio of less than 8%, a Tier 1 capital ratio of less than 4% (3% in certain circumstances), (iv) significantly undercapitalized if it has a Total Capital ratio of less than 6%, a Tier 1 capital ratio of less than 3% and a leverage ratio of less than 3% or (v) critically undercapitalized if its tangible equity is equal to or less than 2% of average quarterly tangible assets. |
(10) Income Tax Expense Total income tax expense for the years ended December 31, 2002, 2001, and 2000 was allocated as follows: (Continued) AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements December 31, 2002, 2001, and 2000 For the years ended December 31, 2002, 2001, and 2000 the components of income tax expense from continuing operations were as follows: Total income tax expense differed from the amount computed by applying the statutory federal income tax rate of 34% to pretax earnings as follows: (Continued) AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements December 31, 2002, 2001, and 2000 The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2002 and 2001 are presented below: In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. |
(16) Supplemental Information Components of other noninterest income exceeding 1% of revenues for any of the years in the three-year period ended December 31, 2002, include: Components of other noninterest expense exceeding 1% of revenues for any of the years in the three-year period ended December 31, 2002, include: (Continued) AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements December 31, 2002, 2001, and 2000 (17) Parent Company Financial Information The condensed financial information for Auburn National Bancorporation, Inc. (Parent Company Only) is presented as follows: Parent Company Only Condensed Balance Sheets December 31, 2002 and 2001 (Continued) AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements December 31, 2002, 2001, and 2000 Parent Company Only Condensed Statements of Earnings Years ended December 31, 2002, 2001, and 2000 (Continued) AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements December 31, 2002, 2001, and 2000 Parent Company Only Condensed Statements of Cash Flows Years ended December 31, 2002, 2001, and 2000 (Continued) (18) Quarterly Financial Data (Unaudited) The supplemental quarterly financial data for the years ended December 31, 2002 and 2001 is summarized as follows: (Continued) SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Auburn, State of Alabama, on the 28th day of March, 2003. |
We have adopted a Compensation Committee charter which outlines the Compensation Committee's primary duties which are to: • evaluate the performance of the Chief Executive Officer in light of our goals and objectives and determine the Chief Executive Officer's compensation based on this evaluation and such other factors as the Committee shall deem appropriate; • determine and approve all executive officer compensation; • approve the aggregate amounts and methodology for determination of all salary, bonus, and long-term incentive awards for all employees other than executive officers; • review and recommend equity-based compensation plans to the full Board of Directors and approve all grants and awards thereunder; • review and approve changes to our equity-based compensation plans other than those changes that require stockholder approval under the plans, the requirements of NASDAQ or any exchange on which our securities may be listed and/or any applicable law; • review and recommend to the full Board changes to our equity-based compensation plans that require stockholder approval under the plans, the requirements of NASDAQ or any exchange on which our securities may be listed and/or any applicable law; • review and approve changes in our retirement, health, welfare and other benefit programs that result in a material change in costs or the benefit levels provided; • administer our equity-based compensation plans; and • approve, as required by applicable law, the annual Committee report on executive compensation for inclusion in our proxy statement. |
We have adopted a Compensation Committee charter which outlines the Compensation Committee's primary duties which are to: • evaluate the performance of the Chief Executive Officer in light of our goals and objectives and determine the Chief Executive Officer's compensation based on this evaluation and such other factors as the Committee shall deem appropriate; • determine and approve all executive officer compensation; • approve the aggregate amounts and methodology for determination of all salary, bonus, and long-term incentive awards for all employees other than executive officers; • review and recommend equity-based compensation plans to the full Board of Directors and approve all grants and awards thereunder; • review and approve changes to our equity-based compensation plans other than those changes that require stockholder approval under the plans, the requirements of NASDAQ or any exchange on which our securities may be listed and/or any applicable law; • review and recommend to the full Board changes to our equity-based compensation plans that require stockholder approval under the plans, the requirements of NASDAQ or any exchange on which our securities may be listed and/or any applicable law; • review and approve changes in our retirement, health, welfare and other benefit programs that result in a material change in costs or the benefit levels provided; • administer our equity-based compensation plans; and • approve, as required by applicable law, the annual Committee report on executive compensation for inclusion in our proxy statement. |
We have adopted a Compensation Committee charter which outlines the Compensation Committee's primary duties which are to: • evaluate the performance of the Chief Executive Officer in light of our goals and objectives and determine the Chief Executive Officer's compensation based on this evaluation and such other factors as the Committee shall deem appropriate; • determine and approve all executive officer compensation; • approve the aggregate amounts and methodology for determination of all salary, bonus, and long-term incentive awards for all employees other than executive officers; • review and recommend equity-based compensation plans to the full Board of Directors and approve all grants and awards thereunder; • review and approve changes to our equity-based compensation plans other than those changes that require stockholder approval under the plans, the requirements of NASDAQ or any exchange on which our securities may be listed and/or any applicable law; • review and recommend to the full Board changes to our equity-based compensation plans that require stockholder approval under the plans, the requirements of NASDAQ or any exchange on which our securities may be listed and/or any applicable law; • review and approve changes in our retirement, health, welfare and other benefit programs that result in a material change in costs or the benefit levels provided; • administer our equity-based compensation plans; and • approve, as required by applicable law, the annual Committee report on executive compensation for inclusion in our proxy statement. |
/s/ SingerLewak LLP Los Angeles, California September 8, 2015, except for the retrospective presentation of the one-for-six reverse stock split as to which the date is March 16, 2017 QUALSTAR CORPORATION AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (In thousands) See accompanying notes to the consolidated financial statements QUALSTAR CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (In thousands, except per share amounts) See accompanying notes to the consolidated financial statements QUALSTAR CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (In thousands) See accompanying notes to the consolidated financial statements QUALSTAR CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) See accompanying notes to the consolidated financial statements QUALSTAR CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Significant Accounting Policies Business Qualstar Corporation and Subsidiary (collectively, “Qualstar”, the “Company”, “we”, “us” or “our”), was incorporated in California in 1984. |
We have adopted a Compensation Committee charter which outlines the Compensation Committee's primary duties which are to: • evaluate the performance of the Chief Executive Officer in light of our goals and objectives and determine the Chief Executive Officer's compensation based on this evaluation and such other factors as the Committee shall deem appropriate; • determine and approve all executive officer compensation; • approve the aggregate amounts and methodology for determination of all salary, bonus, and long-term incentive awards for all employees other than executive officers; • review and recommend equity-based compensation plans to the full Board of Directors and approve all grants and awards thereunder; • review and approve changes to our equity-based compensation plans other than those changes that require stockholder approval under the plans, the requirements of NASDAQ or any exchange on which our securities may be listed and/or any applicable law; • review and recommend to the full Board changes to our equity-based compensation plans that require stockholder approval under the plans, the requirements of NASDAQ or any exchange on which our securities may be listed and/or any applicable law; • review and approve changes in our retirement, health, welfare and other benefit programs that result in a material change in costs or the benefit levels provided; • administer our equity-based compensation plans; and • approve, as required by applicable law, the annual Committee report on executive compensation for inclusion in our proxy statement. |
We have adopted a Compensation Committee charter which outlines the Compensation Committee's primary duties which are to: • evaluate the performance of the Chief Executive Officer in light of our goals and objectives and determine the Chief Executive Officer's compensation based on this evaluation and such other factors as the Committee shall deem appropriate; • determine and approve all executive officer compensation; • approve the aggregate amounts and methodology for determination of all salary, bonus, and long-term incentive awards for all employees other than executive officers; • review and recommend equity-based compensation plans to the full Board of Directors and approve all grants and awards thereunder; • review and approve changes to our equity-based compensation plans other than those changes that require stockholder approval under the plans, the requirements of NASDAQ or any exchange on which our securities may be listed and/or any applicable law; • review and recommend to the full Board changes to our equity-based compensation plans that require stockholder approval under the plans, the requirements of NASDAQ or any exchange on which our securities may be listed and/or any applicable law; • review and approve changes in our retirement, health, welfare and other benefit programs that result in a material change in costs or the benefit levels provided; • administer our equity-based compensation plans; and • approve, as required by applicable law, the annual Committee report on executive compensation for inclusion in our proxy statement. |
We have adopted a Compensation Committee charter which outlines the Compensation Committee's primary duties which are to: • evaluate the performance of the Chief Executive Officer in light of our goals and objectives and determine the Chief Executive Officer's compensation based on this evaluation and such other factors as the Committee shall deem appropriate; • determine and approve all executive officer compensation; • approve the aggregate amounts and methodology for determination of all salary, bonus, and long-term incentive awards for all employees other than executive officers; • review and recommend equity-based compensation plans to the full Board of Directors and approve all grants and awards thereunder; • review and approve changes to our equity-based compensation plans other than those changes that require stockholder approval under the plans, the requirements of NASDAQ or any exchange on which our securities may be listed and/or any applicable law; • review and recommend to the full Board changes to our equity-based compensation plans that require stockholder approval under the plans, the requirements of NASDAQ or any exchange on which our securities may be listed and/or any applicable law; • review and approve changes in our retirement, health, welfare and other benefit programs that result in a material change in costs or the benefit levels provided; • administer our equity-based compensation plans; and • approve, as required by applicable law, the annual Committee report on executive compensation for inclusion in our proxy statement. |
Our quarterly revenues and operating results have fluctuated in the past, and are likely to vary significantly in the future due to several factors, including: • general economic conditions affecting spending for information technology; • increased competition and pricing pressures; • reductions in the size, delays in the timing, or cancellation of significant customer orders; • shifts in product or distribution channel mix; • the timing of the introduction or enhancement of products by us, our original equipment manufacturer customers or our competitors; • expansions or reductions in our relationships with distributors, value added reseller or original equipment manufacturer customers; • financial difficulties affecting our distributors, value added reseller or original equipment manufacturer customers that render them unable to pay amounts owed to us; • market acceptance of new and enhanced versions of our products; • new product developments by storage device manufacturers, such as disk drives, that could render our products less cost effective or less competitive; • the rates of growth or decline in the data storage market and the various segments within it; • timing and levels of our operating expenses; • availability of key components and performance of key suppliers; and • emerging new technologies such as “cloud” computing which could change the nature of or need for tape libraries. |
The following tables summarize the contractual maturities of the Company’s fixed maturity securities and GSE collateralized mortgage obligations based on cash flows (in thousands): Note 3 - Inventories Inventories consist of the following: Note 4 - Property and Equipment The components of property and equipment are as follows: Note 5 - Accrued Payroll and Related Liabilities The components of accrued payroll and related liabilities are as follows: Note 6 - Other Accrued Liabilities The components of other liabilities are as follows: Note 7 - Income Taxes The (benefit from) provision for income taxes is comprised of the following: The following is a reconciliation of the statutory federal income tax rate to Qualstar’s effective income tax rate: The tax effect of temporary differences resulted in deferred income tax assets (liabilities) as follows: The Company records a valuation allowance against its net deferred income tax assets in accordance with ASC 740 “Income Taxes” when in management’s judgment, it is more likely than not that the deferred income tax assets will not be realized in the foreseeable future. |
Our quarterly revenues and operating results have fluctuated in the past, and are likely to vary significantly in the future due to several factors, including: • general economic conditions affecting spending for information technology; • increased competition and pricing pressures; • reductions in the size, delays in the timing, or cancellation of significant customer orders; • shifts in product or distribution channel mix; • the timing of the introduction or enhancement of products by us, our original equipment manufacturer customers or our competitors; • expansions or reductions in our relationships with value added reseller and original equipment manufacturer customers; • financial difficulties affecting our value added reseller or original equipment manufacturer customers that render them unable to pay amounts owed to us; • market acceptance of new and enhanced versions of our products; • new product developments by storage device manufacturers, such as disk drives, that could render our products less cost effective or less competitive; • the rates of growth or decline in the data storage market and the various segments within it; • timing and levels of our operating expenses; and • availability of key components and performance of key suppliers. |
The following tables summarize the contractual maturities of the Company’s fixed maturity securities and GSE collateralized mortgage obligations based on cash flows (in thousands): Note 3 - Inventories Inventories consist of the following: Note 4 - Property and Equipment The components of property and equipment are as follows: Note 5 - Accrued Payroll and Related Liabilities The components of accrued payroll and related liabilities are as follows: Note 6 - Other Accrued Liabilities The components of other liabilities are as follows: Note 7 - Income Taxes The provision for income taxes is comprised of the following: The following is a reconciliation of the statutory federal income tax rate to Qualstar’s effective income tax rate: The tax effect of temporary differences resulted in deferred income tax assets (liabilities) as follows: The Company records a valuation allowance against its net deferred income tax assets in accordance with ASC 740 “Income Taxes” when in management’s judgment, it is more likely than not that the deferred income tax assets will not be realized in the foreseeable future. |
Our quarterly revenues and operating results have fluctuated in the past, and are likely to vary significantly in the future due to several factors, including: • general economic conditions affecting spending for information technology; • increased competition and pricing pressures; • reductions in the size, delays in the timing, or cancellation of significant customer orders; • shifts in product or distribution channel mix; • the timing of the introduction or enhancement of products by us, our original equipment manufacturer customers or our competitors; Index • expansions or reductions in our relationships with value added reseller and original equipment manufacturer customers; • financial difficulties affecting our value added reseller or original equipment manufacturer customers that render them unable to pay amounts owed to us; • market acceptance of new and enhanced versions of our products; • new product developments by storage device manufacturers, such as disk drives, that could render our products less cost effective or less competitive; • the rates of growth or decline in the data storage market and the various segments within it; • timing and levels of our operating expenses; and • availability of key components and performance of key suppliers. |
Index The following tables summarize the contractual maturities of the Company’s fixed maturity securities and GSE collateralized mortgage obligations based on cash flows (in thousands): Note 3 - Inventories Inventories consist of the following: Note 4 - Property and Equipment The components of property and equipment are as follows: Note 5 - Accrued Payroll and Related Liabilties The components of accrued payroll and related liabilities are as follows: Index Note 6 - Other Accrued Liabilities The components of other liabilities are as follows: Note 7 - Income Taxes The provision for income taxes is comprised of the following: The following is a reconciliation of the statutory federal income tax rate to Qualstar’s effective income tax rate: The tax effect of temporary differences resulted in deferred income tax assets (liabilities) as follows: The Company placed a valuation allowance on net deferred tax assets during the fiscal years ended June 30, 2009, 2008 and 2007 based on the Company’s assessment regarding the realizability of such assets in future years. |
Our quarterly revenues and operating results have fluctuated in the past, and are likely to vary significantly in the future due to several factors, including: • general economic conditions affecting spending for information technology; • increased competition and pricing pressures; • reductions in the size, delays in the timing, or cancellation of significant customer orders; • shifts in product or distribution channel mix; • the timing of the introduction or enhancement of products by us, our original equipment manufacturer customers or our competitors; • expansions or reductions in our relationships with value added reseller and original equipment manufacturer customers; • financial difficulties affecting our value added reseller or original equipment manufacturer customers that render them unable to pay amounts owed to us; • market acceptance of new and enhanced versions of our products; • new product developments by storage device manufacturers, such as disk drives, that could render our products less cost effective or less competitive; Index • the rate of growth in the data storage market and the various segments within it; • timing and levels of our operating expenses; and • availability of key components and performance of key suppliers. |
Our international sales subject us to a number of risks, including: • political and economic instability may reduce demand for our products or our ability to market our products in foreign countries; • although we denominate our international sales in U.S. dollars, currency fluctuations could make our products unaffordable to foreign purchasers or more expensive compared to those of foreign manufacturers; • restrictions on the export or import of technology may reduce or eliminate our ability to sell in certain markets; • greater difficulty of administering business overseas may increase the costs of foreign sales and support; • foreign governments may impose tariffs, quotas and taxes on our products; • longer payment cycles typically associated with international sales and potential difficulties in collecting accounts receivable may reduce the profitability of foreign sales; and • our current determination not to seek ISO-9000 certification, a widely accepted method of establishing and certifying the quality of a manufacturer’s operations, may reduce sales. |
Our quarterly revenues and operating results have fluctuated in the past, and are likely to vary significantly in the future due to several factors, including: • general economic conditions affecting spending for information technology; • increased competition and pricing pressures; • reductions in the size, delays in the timing, or cancellation of significant customer orders; • shifts in product or distribution channel mix; • the timing of the introduction or enhancement of products by us, our original equipment manufacturer customers or our competitors; • expansions or reductions in our relationships with value added reseller and original equipment manufacturer customers; • financial difficulties affecting our value added reseller or original equipment manufacturer customers that render them unable to pay amounts owed to us; • market acceptance of new and enhanced versions of our products; • new product developments by storage device manufacturers, such as disk drives, that could render our products less cost effective or less competitive; • the rate of growth in the data storage market and the various segments within it; • timing and levels of our operating expenses; and • availability of key components and performance of key suppliers. |
For the fiscal year ended June 30, 2005, had employee stock option related compensation expense been determined based on the Black-Scholes method, the Company’s net loss and loss per share would have been increased to the pro forma amounts indicated below (in thousands, except per share amounts): In computing the pro forma compensation expense under SFAS 123, a weighted-average fair value of $1.27 for the 2005 stock option grants was estimated at the date of grant using the minimum value option pricing model before Qualstar’s initial public offering and the Black-Scholes model afterward with the following assumptions: Index Income Taxes Income taxes are accounted for using the liability method in accordance with SFAS 109, “Accounting for Income Taxes.” Under this method, deferred tax liabilities and assets are recognized for the expected future tax consequences of temporary differences between the financial statement and tax bases of assets and liabilities, and for the expected future tax benefit to be derived from tax credits and loss carryforwards. |
Our international sales subject us to a number of risks, including: • political and economic instability may reduce demand for our products or our ability to market our products in foreign countries; • although we denominate our international sales in U.S. dollars, currency fluctuations could make our products unaffordable to foreign purchasers or more expensive compared to those of foreign manufacturers; • restrictions on the export or import of technology may reduce or eliminate our ability to sell in certain markets; • greater difficulty of administering business overseas may increase the costs of foreign sales and support; • foreign governments may impose tariffs, quotas and taxes on our products; • longer payment cycles typically associated with international sales and potential difficulties in collecting accounts receivable may reduce the profitability of foreign sales; and • our current determination not to seek ISO-9000 certification, a widely accepted method of establishing and certifying the quality of a manufacturer’s operations, may reduce sales. |
Our quarterly revenues and operating results have fluctuated in the past, and are likely to vary significantly in the future due to several factors, including: • general economic conditions affecting spending for information technology; • increased competition and pricing pressures; • reductions in the size, delays in the timing, or cancellation of significant customer orders; • shifts in product or distribution channel mix; • the timing of the introduction or enhancement of products by us, our original equipment manufacturer customers or our competitors; • expansions or reductions in our relationships with value added reseller and original equipment manufacturer customers; • financial difficulties affecting our value added reseller or original equipment manufacturer customers that render them unable to pay amounts owed to us; • market acceptance of new and enhanced versions of our products; • new product developments by storage device manufacturers, such as disk drives, that could render our products less cost effective or less competitive; • the rate of growth in the data storage market and the various segments within it; • timing and levels of our operating expenses; and • availability of key components and performance of key suppliers. |
Our quarterly revenues and operating results have fluctuated in the past, and are likely to vary significantly in the future due to several factors, including: • general economic conditions affecting enterprise spending for information technology; • increased competition and pricing pressures; • reductions in the size, delays in the timing, or cancellation of significant customer orders; • fluctuations in product mix; • the timing of the introduction or enhancement of products by us, our original equipment manufacturer customers or our competitors; • expansions or reductions in our relationships with value added reseller and original equipment manufacturer customers; • financial difficulties affecting our value added reseller or original equipment manufacturer customers that render them unable to pay amounts owed to us; • new product developments by storage device manufacturers; • the rate of growth in the data storage market and the various segments within it; • timing and levels of our operating expenses; and • availability of tape media and key components and performance of key suppliers. |
Our international sales subject us to a number of risks, including: • political and economic instability may reduce demand for our products or our ability to market our products in foreign countries; • although we denominate our international sales in U.S. dollars, currency fluctuations could make our products unaffordable to foreign purchasers or more expensive compared to those of foreign manufacturers; • restrictions on the export or import of technology may reduce or eliminate our ability to sell in certain markets; • greater difficulty of administering business overseas may increase the costs of foreign sales and support; • foreign governments may impose tariffs, quotas and taxes on our products; • longer payment cycles typically associated with international sales and potential difficulties in collecting accounts receivable may reduce the profitability of foreign sales; and • our current determination not to seek ISO-9000 certification, a widely accepted method of establishing and certifying the quality of a manufacturer’s products, may reduce sales. |
Our foreign sales subject us to a number of risks, including: political and economic instability may reduce demand for our products or our ability to market our products in foreign countries; although we denominate our international sales in U.S. dollars, currency fluctuations could make our products unaffordable to foreign purchasers or more expensive compared to those of foreign manufacturers; restrictions on the export or import of technology may reduce or eliminate our ability to sell in certain markets; greater difficulty of administering business overseas may increase the costs of foreign sales and support; foreign governments may impose tariffs, quotas and taxes on our products; longer payment cycles typically associated with international sales and potential difficulties in collecting accounts receivable may reduce the profitability of foreign sales; and our current determination not to seek ISO-9000 certification, a widely accepted method of establishing and certifying the quality of a manufacturer’s products, may reduce sales. |
These risks include, for example: • increased labor expense to fulfill our customer promises; • pressure on traditional labor models to meet the evolving landscape of offerings and customer needs; • increased risk of errors or omissions in the fulfillment of services; • unpredictable extended warranty failure rates and related expenses; • employees in transit using company vehicles to visit customer locations and employees being present in customer homes, which may increase our scope of liability; • the potential for increased scope of liability relating to managed services offerings; • employees having access to customer devices, including the information held on those devices, which may increase our responsibility for the security of those devices and privacy of the data they hold; • the engagement of third parties to assist with some aspects of construction and installation, and the potential responsibility for the actions they undertake; • the risk that in-home services could be more adversely impacted by inclement weather, health and safety concerns, and catastrophic events; and • increased risk of non-compliance with new laws and regulations applicable to these services. |
Some of the most significant compliance and litigation risks we face include, but are not limited to: • the difficulty of complying with sometimes conflicting statutes and regulations in local, national or international jurisdictions; • the potential for unexpected costs related to compliance with new or existing environmental legislation or international agreements affecting energy, carbon emissions, electronics recycling and water or product materials; • the challenges of ensuring compliance with applicable product compliance laws and regulations with respect to both the products we sell and contract to manufacture, including laws and regulations related to product safety and product transport; • the financial, operational and business impact of new regulations governing data privacy and security, such as the California Consumer Privacy Act ("CCPA"); • the impact of other new or changing statutes and regulations, including, but not limited to, financial reform; National Labor Relations Board rule changes; healthcare reform; contracted worker labor laws; corporate governance matters; escheatment rules; rules governing pricing, content, distribution, copyright, mobile communications, electronic device certification or payment services; and/or other as yet unknown legislation that could affect how we operate and execute our strategies as well as alter our expense structure; • the impact of litigation trends, including class action lawsuits involving consumers and shareholders, and labor and employment matters; and • the impact of the general election on the development, or changes in, laws, regulations and policies. |
This arrangement exposes us to the following additional potential risks, which could have a material adverse effect on our operating results: • we have greater exposure and responsibility to consumers for warranty replacements and repairs as a result of exclusive brand product defects, and our recourse to contract manufacturers for such warranty liabilities may be limited in foreign jurisdictions; • we may be subject to regulatory compliance and/or product liability claims relating to personal injury, death or property damage caused by exclusive brand products, some of which may require us to take significant actions, such as product recalls; • we have experienced and are likely to continue to experience disruptions in manufacturing and logistics due to COVID-19, and we may experience disruptions in manufacturing or logistics in the future due to inconsistent and unanticipated order patterns, our inability to develop long-term relationships with key manufacturers, other diseases or pandemics or unforeseen natural disasters; • we may not be able to locate manufacturers that meet our internal standards, whether for new exclusive brand products or for migration of the manufacturing of products from an existing manufacturer; • we may be subject to a greater risk of inventory obsolescence as we do not generally have return to vendor rights; • we are subject to developing and often-changing labor and environmental laws for the manufacture of products in foreign countries, and we may be unable to conform to new rules or interpretations in a timely manner; • we may be subject to claims by technology or other intellectual property owners if we inadvertently infringe upon their patents or other intellectual property rights, or if we fail to pay royalties owed on our exclusive brand products; • our operations may be disrupted by trade disputes or excessive tariffs, including any future trade disputes or future phases of trade negotiations with China, and we may not be able to source alternatives quickly enough to avoid interruptions in product supply; • we may be unable to obtain or adequately protect patents and other intellectual property rights on our exclusive brand products or manufacturing processes; and • regulations regarding disclosure of efforts to identify the country of origin of “conflict minerals” in certain portions of our supply chain could increase the cost of doing business and, depending on the findings of our country of origin inquiry, could have an adverse effect on our reputation. |
Our internal control over financial reporting is designed under the supervision of our principal executive officer and principal financial officer, and effected by our Board, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, and includes those policies and procedures that: (1)pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and the dispositions of our assets; (2)provide reasonable assurance that our transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and that our receipts and expenditures are being made only in accordance with authorizations of our management and Board; and (3)provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. |
Deferred tax assets and liabilities were comprised of the following ($ in millions): Deferred taxes were presented as follows ($ in millions): At February 1, 2020, we had deferred tax assets for net operating loss carryforwards from international operations of $78 million, of which $73 million will expire in various years through 2037 and the remaining amounts have no expiration; acquired U.S. federal net operating loss carryforwards of $15 million, of which $11 million will expire in various years between 2023 and 2037 and the remaining amounts have no expiration; U.S. federal foreign tax credit carryforwards of $6 million, which expire between 2024 and 2030; U.S. federal capital loss carryforwards of $4 million, which expire between 2023 and 2025; state credit carryforwards of $8 million, which expire between 2022 and 2039; state net operating loss carryforwards of $6 million, which expire between 2021 and 2039; international credit carryforwards of $2 million, which have no expiration; and international capital loss carryforwards of $8 million, which have no expiration. |
These risks include, for example: • increased labor expense to fulfill our customer promises, which may be higher than the related revenue; • increased risk of errors or omissions in the fulfillment of services; • unpredictable extended warranty failure rates and related expenses; • employees in transit using company vehicles to visit customer locations and employees being present in customer homes, which may increase our scope of liability; • the potential for increased scope of liability relating to managed services offerings; • employees having access to customer devices, including the information held on those devices, which may increase our responsibility for the security of those devices and the data they hold; • the engagement of third parties to assist with some aspects of construction and installation, and the potential responsibility for the actions they withtake, and for compliance with building codes and related regulations; and • increased risk of non-compliance with new laws and regulations applicable to these services. |
• the impact of other new or changing statutes and regulations, including, but not limited to, financial reform; National Labor Relations Board rule changes; healthcare reform; corporate governance matters; escheatment rules; rules governing pricing, content, distribution, copyright, mobile communications, electronic device certification or payment services; and/or other as yet unknown legislation that could affect how we operate and execute our strategies as well as alter our expense structure; • the impact of the potential implementation of more restrictive trade policies, higher tariffs or the renegotiation of existing trade agreements in the U.S. or countries where we sell our products and services or procure products; • the impact of potential changes in U.S. or other countries' tax laws and regulations or evolving interpretations of existing laws, including additional guidance and legislation related to the Tax Cuts and Jobs Act; and • the impact of litigation trends, including class action lawsuits involving consumers and shareholders, and labor and employment matters. |
This arrangement exposes us to the following additional potential risks, which could have a material adverse effect on our operating results: • we have greater exposure and responsibility to consumers for warranty replacements and repairs as a result of exclusive brand product defects, and our recourse to contract manufacturers for such warranty liabilities may be limited in foreign jurisdictions; • we may be subject to regulatory compliance and/or product liability claims relating to personal injury, death or property damage caused by exclusive brand products, some of which may require us to take significant actions, such as product recalls; • we may experience disruptions in manufacturing or logistics due to inconsistent and unanticipated order patterns, our inability to develop long-term relationships with key manufacturers or unforeseen natural disasters; • we may not be able to locate manufacturers that meet our internal standards, whether for new exclusive brand products or for migration of the manufacturing of products from an existing manufacturer; • we may be subject to a greater risk of inventory obsolescence as we do not generally have return to vendor rights; • we are subject to developing and often-changing labor and environmental laws for the manufacture of products in foreign countries, and we may be unable to conform to new rules or interpretations in a timely manner; • we may be subject to claims by technology or other intellectual property owners if we inadvertently infringe upon their patents or other intellectual property rights, or if we fail to pay royalties owed on our exclusive brand products; • our operations may be disrupted by trade disputes or excessive tariffs and we may not be able to source alternatives quickly enough to avoid interruptions in product supply; • we may be unable to obtain or adequately protect patents and other intellectual property rights on our exclusive brand products or manufacturing processes; and • regulations regarding disclosure of efforts to identify the country of origin of “conflict minerals” in certain portions of our supply chain could increase the cost of doing business and, depending on the findings of our country of origin inquiry, could have an adverse effect on our reputation. |
Our internal control over financial reporting is designed under the supervision of our principal executive officer and principal financial officer, and effected by our Board, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, and includes those policies and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and the dispositions of our assets; (2) provide reasonable assurance that our transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and that our receipts and expenditures are being made only in accordance with authorizations of our management and Board; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. |
This arrangement exposes us to the following additional potential risks, which could have a material adverse effect on our operating results: • we have greater exposure and responsibility to consumers for warranty replacements and repairs as a result of exclusive brand product defects, and our recourse to contract manufacturers for such warranty liabilities may be limited in foreign jurisdictions; • we may be subject to regulatory compliance and/or product liability claims relating to personal injury, death or property damage caused by exclusive brand products, some of which may require us to take significant actions such as product recalls; • we may experience disruptions in manufacturing or logistics due to inconsistent and unanticipated order patterns, our inability to develop long-term relationships with key manufacturers or unforeseen natural disasters; • we may not be able to locate manufacturers that meet our internal standards, whether for new exclusive brand products or for migration of the manufacturing of products from an existing manufacturer; • we are subject to developing and often-changing labor and environmental laws for the manufacture of products in foreign countries, and we may be unable to conform to new rules or interpretations in a timely manner; • we may be subject to claims by technology or other intellectual property owners if we inadvertently infringe upon their patents or other intellectual property rights, or if we fail to pay royalties owed on our exclusive brand products; • we may be unable to obtain or adequately protect patents and other intellectual property rights on our exclusive brand products or manufacturing processes; and • regulations regarding disclosure of efforts to identify the country of origin of “conflict minerals” in certain portions of our supply chain could increase the cost of doing business and, depending on the findings of our country of origin inquiry, could have an adverse effect on our reputation. |
Some of the most significant compliance and litigation risks we face are: • the difficulty of complying with sometimes conflicting statutes and regulations in local, national or international jurisdictions; • the potential for unexpected costs related to compliance with new or existing environmental legislation or international agreements affecting energy, carbon emissions, electronics recycling and water or product materials; • ensuring compliance with applicable product compliance laws and regulations with respect to both the products we sell and contract to manufacture, including laws and regulations related to product safety and product transport; • the impact of new regulations governing data privacy and security, whether imposed as a result of increased cyber-security risks or otherwise; • the impact of other new or changing statutes and regulations, including, but not limited to, financial reform, National Labor Relations Board rule changes, health care reform, corporate governance matters, escheatment rules, rules governing pricing, content, distribution, copyright, mobile communications, electronic device certification or payment services, and/or other as yet unknown legislation, that could affect how we operate and execute our strategies as well as alter our expense structure; • the impact of the potential implementation of more restrictive trade policies, higher tariffs or the renegotiation of existing trade agreements in the U.S. or countries where we sell our products and services or procure products; • the impact of potential changes in U.S. or other countries' tax laws and regulations or evolving interpretations of existing laws, including additional guidance and legislation related to the Tax Cuts and Jobs Act; and • the impact of litigation trends, including class action lawsuits involving consumers and shareholders, and labor and employment matters. |
Our internal control over financial reporting is designed under the supervision of our principal executive officer and principal financial officer, and effected by our Board, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, and includes those policies and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and the dispositions of our assets; (2) provide reasonable assurance that our transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and that our receipts and expenditures are being made only in accordance with authorizations of our management and Board; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. |
This arrangement exposes us to the following additional potential risks, which could materially adversely affect our operating results: • we have greater exposure and responsibility to consumers for warranty replacements and repairs as a result of exclusive brand product defects, and our recourse to contract manufacturers for such warranty liabilities may be limited in foreign jurisdictions; • we may be subject to regulatory compliance and/or product liability claims relating to personal injury, death or property damage caused by exclusive brand products, some of which may require us to take significant actions such as product recalls; • we may experience disruptions in manufacturing or logistics due to inconsistent and unanticipated order patterns, our inability to develop long-term relationships with key manufacturers or unforeseen natural disasters; • we may not be able to locate manufacturers that meet our internal standards, whether for new exclusive brand products or for migration of the manufacturing of products from an existing manufacturer; • we are subject to developing and often-changing labor and environmental laws for the manufacture of products in foreign countries, and we may be unable to conform to new rules or interpretations in a timely manner; • we may be subject to claims by technology or other intellectual property owners if we inadvertently infringe upon their patents or other intellectual property rights, or if we fail to pay royalties owed on our exclusive brand products; • we may be unable to obtain or adequately protect patents and other intellectual property rights on our exclusive brand products or manufacturing processes; and • regulations regarding disclosure of efforts to identify the country of origin of “conflict minerals” in certain portions of our supply chain could increase the cost of doing business and, depending on the findings of our country of origin inquiry, could have an adverse effect on our reputation. |
Some of the most significant compliance and litigation risks we face are: • the difficulty of complying with sometimes conflicting statutes and regulations in local, national or international jurisdictions; • the potential for unexpected costs related to compliance with new or existing environmental legislation or international agreements affecting energy, carbon emissions, electronics recycling and water or product materials; • ensuring compliance with applicable product compliance laws and regulations with respect to both the products we sell and contract to manufacture, including laws and regulation related to product safety and product transport; • the impact of new regulations governing data privacy and security, whether imposed as a result of increased cyber-security risks or otherwise; • the impact of other new or changing statutes and regulations including, but not limited to, financial reform, National Labor Relations Board rule changes, health care reform, corporate governance matters, escheatment rules and/or other as yet unknown legislation, that could affect how we operate and execute our strategies as well as alter our expense structure; • the impact of the potential implementation of more restrictive trade policies or the renegotiation of existing trade agreements in the U.S. or countries where we sell our products and services or procure products; • the impact of potential changes in U.S. or other countries tax laws and regulations, including the imposition of the border adjustment tax on imported products as is currently being discussed by U.S. Congress that could increase the cost of the products we sell because a significant portion of the products we sell in the U.S. are sourced from outside of the country; and • the impact of litigation trends, including class action lawsuits involving consumers and shareholders, and labor and employment matters. |
We believe the total market for our product categories was down low-single digits in calendar 2016 and that our market share gains helped us offset the market decline; • We increased our Net Promoter Score by over 350 basis points; • We grew the Domestic segment online revenue with comparable sales of 20.8% in fiscal 2017; • The successful Canadian brand consolidation was the primary driver of operating income of $90 million in our International segment for fiscal 2017 compared to a loss of $210 million in fiscal 2016; • We continued to progress against our three-year target to reduce cost and optimize gross profit by $400 million and achieved $350 million cumulative savings by the end of fiscal 2017; these savings enable us to invest in customer experience improvements while maintaining near flat SG&A; • As for the third priority, fiscal 2017 was a year of exploration and experimentation, and we are continuing to test several concepts around the country that we believe have the potential to be compelling customer experiences; we expect to launch some of these concepts in fiscal 2018. |
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