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Home My WebLink About21) Financial Statement of Pace Contractor's .r"\ (" ! Financial Statements PACE CONTRACTING, LLC Decemb~r 31, 2002 and 2001 {\ I II ~.. fe' i PACE CONTRACTING, LLC Table of Contents December 31, 2002 and 2001 Independent Auditor's Report......... ....... ............................. ............................... ........................................ 1 Financial Statements Balance Sheets .... ....... ............ .................... ......... .............. .................... ........ ................ ........................ 2 Statements of Operations and Members' Equity.................................................................................... 3 Statements of Cash Flows......... ......... ...................................... ......... ...... ..................... .......................... 4 Notes to Financial Statements.... .................... ........................................... .................................. ........... 5 Supplementary Information Schedules of Cost of Revenues Earned and General and Administrative Expense ........... ......... .... ....... .......... ....... .... ... ........ ... .... ..... .............. ....... 10 Schedule of Earnings from Contracts............................. ....... .......... ....... .............. ........ ...... .......... ... ..... 11 Schedule of Completed Contracts... ............. ................................................................. ....... ................ 12 Schedule of Contracts in Progress ........... .... ......... ..... .... ..... ......... ............................................. ........... 13 Carpenter, rMountjoy&!}ressler "'_";fJ,;'["lrfec} /.:J:).rJ/Jc' Ac.countsnts. ,,?nd ConE:~j/ta,nts INDEPENDENT AUDITOR'S REPORT To the Members Pace Contracting, LLC Jeffersonville, Indiana We have audited the balance sheets of Pace Contracting, LLC (a Limited Liability Company) as of December 31, 2002 and 2001, and the related statements of operations and members' equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amoJnts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. r' In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Pace Contracting, LLC as of December 31, 2002 and 2001, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplementary information, on pages 10 through 13, is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. c~/ 1l1_~ < Louisville, Kentucky February 4, 2003 r E~ ;~c. I s.r1\J i_cui3vWe :S02..,992'~2"7CO ~ ;-E:LC ,3~ i.3rSGsler) f)SC ;:.ran !G\:) rt, ~T~a:i PACE CONTRACTING, llC r BALANCE SHEETS December 31 2002 2001 ASSETS Current Assets Cash and cash equivalents $ 408,262 $ 627,043 Contract receivables 213,375 229,148 Contract receivables - related parties 19,150 126,307 Costs and estimated earnings in excess of billings on uncompleted contracts 144,220 87,205 Prepaid expenses 651 Total current assets 785,658 1,069,703 Property and Equipment, at cost leasehold improvements 4,065 4,065 Machinery and equipment 168,703 153,870 Vehicles 128,600 128,600 Office equipment 5,598 5,598 306,966 292,133 Less accumulated depreciation 152,163 95 A08 154,803 196,725 Other Assets Organization costs (net of amortization of $4,193 and $3,704 for 2002 and 2001, respectively 489 $ 940 ,461 $ 1.266,917 r> See accompanying independent auditor's report and notes to financial statements r-----, ! i\ r-"\ t LIABILITIES AND MEMBERS' EQUITY Current Liabilities Current maturities of long-term debt Current maturities of capital lease Line of credit Accounts payable Accounts payable - related parties Billings in excess of costs and estimated earnings on uncompleted contracts Accrued expenses Total current liabilities Long-Term Debt, less current maturities December 31 2002 2001 $ 24,621 $ 38,679 5,881 100,000 190,643 339,671 63,250 51,756 3,969 71,022 12.026 57,583 394,509 564,592 402,067 326,654 Members' Equity 143.885 $ 940461 375,671 $ 1 266917 - 2 - PACE CONTRACTING, LLC r., I STATEMENTS OF OPERATIONS AND MEMBERS' EQUITY I Year ended December 31 2002 2001 Contract Revenues Earned $ 3,042,847 $ 4,136,474 Cost of Revenues Earned 2,798,476 3,547,720 Gross profit 244,371 588,754 General and Administrative Expense 407,817 397,871 Income (loss) from operations (163,446) 190,883 Other Income (Expense) Interest income 6,874 9,659 Other income 408 25 Interest expense (4,919) (16,023) 2.363 (6,339) Net income (loss) (161,083) 184,544 Members' Equity, Beginning of Year 375,671 202,679 Distributions (70,703) (11 ,552) Members' Equity, End of Year $ 143 885 $ 375.671 f'" See accompanying independent auditor's report and notes to financial statements - 3 - r PACE CONTRACTING, LLC STATEMENTS OF CASH FLOWS Year ended December 31 2002 2001 Cash Flows From Operating Activities Net income (loss) $ (161,083) $ 184,544 Adjustments to reconcile net income (loss) to net cash Provided (used) by operating activities: Depreciation and amortization 57,243 45,252 Changes in assets and liabilities: Contract receivables 120,930 107,635 Costs and estimated earnings in excess of billings on uncompleted contracts (55,015) (64,290) Prepaid expenses (651) Accounts payable (137,534) (6,802) Billings in excess of costs and estimated earnings on uncompleted contracts (67,053) 39,949 Accrued expenses (45,557) 27,058 Net cash provided (used) by operating activities (288,720) 333,346 Cash Flows From Investing Activities r" Purchase of equipment (14,832) (115,454) Net cash used by investing activities (14,832) (115,454) Cash Flows From Financing Activities Proceeds from long-term debt 400,000 379,146 Payments on capital lease (5,881) (4,270) Principal payments on long-term debt (338,645) (641,588) Proceeds from line of credit 100,000 Distributions to members (70,703) (11 ,552) Net cash provided (used) by financing activities 84,771 (278,264 ) Net Decrease in Cash and Cash Equivalents (218,781) (60,372) Cash and Cash Equivalents, Beginning of Y~ar 627,043 687,415 Cash and Cash Equivalents, End of Year $ 408 262 $ 627.043 " See accompanying independent auditor's report and notes to financial statements -4- PACE CONTRACTING, LLC NOTES TO FINANCIAL STATEMENTS December 31, 2002 and 2001 NOTE A--SIGNIFICANT ACCOUNTING POLICIES Company's Activities: Pace Contracting, LLC (the Company), is engaged in the construction industry, primarily in the Louisville, Kentucky area. The work is performed under cost-plus-fee contracts and fixed price contracts. Revenue and Cost Recoqnition: The Company recognizes income from construction contracts under the percentage-of-completion method, measured by the percentage of cost incurred to date to estimated total cost for each contract. Management considers total cost to be the best available measure of progress on the contracts. Contract costs include all direct material and labor costs and other direct costs related to contract performance. Selling, general and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability may result in revisions to cost and income, which are recogni;zed in the period in which the revisions are determined. r The asset, "Costs and estimated earnings in 'excess of billings on uncompleted contracts," represents revenues recognized in excess of amounts billed. The liability, "Billings in excess of costs and estimated earnings on uncompleted contracts," represents billings in excess of revenues earned. I Statements of Cash Flows: For purposes of this statement, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Cash paid for interest for the years ended December 31, 2002 and 2001 is not materially different than the amount reported in the statements of operations. Capital lease obligations of $8,217 were incurred during 2001, when the Company entered into leases for new equipment. Contract Receivables: The Company considerS contract receivables to be fully collectible; accordingly, no allowance for doubtful accounts is required. It accounts become uncollectible, they will be charged to operations when that determination is made. Income Taxes: The Company has elected to be taxed under the provisions of the limited liability company (LLC). In lieu of corporate income taxes, the m$mbers of an LLC are taxed on their proportionate share of the Company's taxable income. Therefore, no provision or liability for federal and state income taxes has been included in these financial statements. Property and Equipment: The Company records the purchase of property and equipment at cost, and maintenance and repairs are expensed as incurred. Depreciation, computed on the straight-line and declining balance method, is based on the estimated useful lives of the assets, which range from five to thirty-nine years. ('. Use of Estimates: Preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could' differ from those reported. - 5 - PACE CONTRACTING, LLC r') NOTES TO FINANCIAL STATEMENTS--CON+1NUED i December 31, 2002 and 2001 NOTE B--CONTRACT RECEIVABLES Contract receivables consist of the following: Billed Completed contracts Contracts in progress Retainage December 31 2002 2001 $ 19,150 $ 137,126 205,585 186,690 7,790 31 ,639 $ 232,525 $ 355.455 NOTE C--COSTS AND ESTIMATED EARNIN~S ON UNCOMPLETED CONTRACTS r" Costs incurred on uncompleted contracts Estimated earnings December 31 2002 2001 $ 2,393,922 $ 781,394 168,953 95,557 2,562,875 876,951 2.422,624 860,768 $ 140,251 $ 16.183 Less billings to date Included in accompanying balance sheets under the following captions: Costs and estimated earnings in excess of billings on uncompleted contracts $ 144,220 $ 87,205 Billings in excess of costs and estimated earnings on uncompleted contracts (3,969) (71 ,022) $ 140.251 $ 16.183 r\ - 6 - PACE CONTRACTING, LLC NOTES TO FINANCIAL STATEMENTS--CONfINUED December 31,2002 and 2001 NOTE D--CONTRACT BACKLOG The following schedule shows a reconciliation of backlog representing signed contracts in existence at December 31, 2002: Balance, beginning of year New contracts and contract adjustments $ 2,078,980 2,109,557 Less: Contract revenue earned 4,188,537 3,042,847 Balance, end of year $ 1,145,690 From January 1, 2003 through February 4, 2003, the Company has entered into signed contracts with estimated revenues of approximately $1,689,000. NOTE E--NOTES PAYABLE AND LONG-TERM DEBT r.. "'., r 1 The Company has available a line-of-credit, secured by substantially all of the Company assets, in the amount of $200,000. The line bears interest at'the bank's prime rate plus .5% and expires April 2003. At December 31,2002, $100,000 was drawn onthe line of credit. No amount was drawn on the line at December 31,2001. Long-term debt consists of the following: December 31 2002 2001 Installment note payable to Ford Motor Credit Company, which bears interest at a fixed rate of 4.9%, payable in monthly installments of $595 through August 1, 2002. The note is collateralized by a vehicle. $ $ 4,648 Commercial note due US Bank; interest at 3.25% at December 31, 2001. Interest is payable monthly, with the principal balance to be paid December 31,2003. The line is secured by a certificate of deposit. 300,000 Commercial note due US Bank; interest at 3.24% at December 31, 2002. Interest is payable monthly, with the principal balance to be paid December 26, 2004. The line is secured by a certificate of deposit. 400,000 r~ Installment note payable to Ford Motor Credit Company, which bears interest at a fixed rate of 3.9%, payable in monthly installments of $664 through July 14, 2003. The note is collateralized by a vehicle. . 4,592 12,183 Continued - 7 - PACE CONTRACTING, LLC (""'> NOTES TO FINANCIAL STATEMENTS--CON+INUED December 31,2002 and 2001 NOTE E--NOTES PAYABLE AND LONG-TER~ DEBT--CONTINUED December 31 2002 2001 Interest free note payable to New Holland Credit, payable in monthly installments of $689 through November 2003. The loan is collateralized by equipment. 7,573 15,841 Interest free note payable to New Holland Credit, payable in monthly installments of $1,420 through April 30, 2002. The loan is collateralized by equipment. 5,682 Interest free note payable to Caterpilliar Financial, payable in monthly installments of $1,038 through March 31, 2004. The loan is collateralized by equipment. 14.523 26,979 Less current portion 426,688 24,621 365,333 38,679 r , Long-Term Debt $ 402 067 $ 326 654 Annual aggregate maturities of long-term debt as of December 31,2002, are as follows: Year ended December 31 Current 2004 $ 24,621 402,067 $ 426,688 NOTE F--DEFINED CONTRIBUTION RETIREMENT PLAN The Company and a related company maintain a retirement plan covering employees meeting certain eligibility requirements. Employees may contribute up to 15% of their compensation to the plan with the company matching a percentage of the amount contributed. Additional company contributions to the plan can be made at the discretion of the Board of Directors. Contributions of approximately $5,300 were made to the plan by the Company for 2002 ($5,600 for 2001). r"i - 8 - PACE CONTRACTING, LLC ("\ NOTES TO FINANCIAL STATEMENTS--CONTINUED December 31,2002 and 2001 NOTE G--RELATED PARTY TRANSACTION$ Louisville Paving Co., Inc., Commercial Pavers, Inc., and Material Transfer Co., Inc. are all wholly-owned subsidiaries of LPX Holding Corporation (53% majority member of Pace Contracting, LLC). The Company purchased services from these organizations amounting to approximately $345,000 and $235,000 for the years ended December 31, 2002 and 2001, respectively. Total contract billings to these organizations was approximately $258,000 and $1,738,00b for the years ended December 31, 2002 and 2001, respectively. The Company leases its building under a month to month operating lease from Charlton Company, an affiliate of LPX Holding Corporation, for $1,000 per month. Rent for the years ended December 31, 2002 and 2001, was $12,000. NOTE H--CONCENTRA TION OF CREDIT RISK Bank balances are insured by a U.S. Government agency, the Federal Deposit Insurance Corporation (FDIC), up to $100,000 for each bank with whiqh the Company has accounts. At December 31,2002 and 2001, the Company's uninsured cash balance totaled approximately $300,000 and $427,000, respectively. {\ (\ - 9 - r'\ , SUPPLEMENTARY INFORMATION " PACE CONTRACTING, LLC SCHEDULES OF COST OF REVENUES EAR1NED AND GENERAL ANDADMINISTRATIVE EXPENSE Year ended December 31 2002 2001 Cost of Revenues Earned Subcontracts $ 998,231 $ 1,816,514 Materials 671,267 780,838 Labor 621,877 588,286 Other indirect job costs 181,132 107,905 Equipment rental 155,951 139,754 Truck rental 117,007 62,821 Payroll taxes 53,011 51 ,602 $ 2.798.476 $ 3.547,720 General and Administrative Expense Management fees $ 106,231 $ 146,667 Depreciation and amortization 57,243 45,252 Repairs and maintenance 47,444 27,365 Employee benefits 39,620 29,096 Insurance 36,025 19,114 r., Office salaries 31,200 23,382 Gas and oil 23,644 22,059 Rent expense 12,000 12,000 Office supplies 6,733 7,787 Telephone 6,133 5,977 Legal and accounting 6,000 6,708 Mobile phones 5,724 7,490 Taxes and licenses 5,276 1,193 Retirement plan expense 5,274 5,647 Payroll taxes 5,047 8,155 Miscellaneous expense 4,593 17,371 Utilities 3,661 2,198 Dues and subscriptions 2,164 1,871 Meals and entertainment 1,382 1,321 Postage 1,382 881 Donations 734 734 Advertising 307 5,603 $ 407.817 $ 397.871 t'\ See accompanying independent auditor's report - 10 - ~ PACE CONTRACTING, LLC r, SCHEDULE OF EARNINGS FROM CONTRACTS , Year ended December 31,2002 Cost of Revenues Revenues Gross Earned Earned Profit Contracts completed during the year $ 734,590 $ 619.442 $115,148 Contracts in progress at year end 2,308,257 2,179,034 129,223 $ 3,042 847 $ 2 798,476 $ 244.371 f' r\ See accompanying independent auditor's report - 11 - PACE CO~,.)CTING, LLC SCHEDULE OF COMPLETED CONTRACTS Year ended December 31,2002 See accompanying independent auditor's report /) - 12 - ') " PACE Ct.pCTING, LLC SCHEDULE OF CONTRACTS IN PROGRESS ') ') ~ December 31,2002 Contract Total Contract From Inception to December 31 ,2002 At December 31 , 2002 For the year ended December 31 , 2002 Costs and Billings in Estimated Excess of Estimated Gross Estimated Earnings Costs and Gross Job Gross Profit Revenues Cost of Profit Billed to Cost to in Excess Estimated Revenues Cost of Profit Number Revenues (Loss) Earned Revenues (Loss) Date Complete of Billinqs Earnings Earned Revenues (Loss) 5079 $ 1,502,968 $ (30,617) $ 1,437,288 $ 1,466,544 $ (29,256) $ 1,356,983 $ 67,041 $ 80,305 $ $ 1,422,648 $ 1,453,244 $ (30,596) 5093 119,000 29,000 88,929 67,253 21,676 92,898 22,747 - 3,969 88,929 67,253 21,676 -- 5066 1,093,449 193,449 946,271 778,831 167,440 894,843 121,169 51,428 - 706,293 577,243 129,050 5091 650,000 65,000 88,010 79,218 8,792 77 ,900 505,782 10,110 - 88,010 79,218 8,792 5094 46,556 7,086 331 282 49 39,186 331 331 282 49 5096 296,592 37,432 - 2,046 1,794 252 257,366 2,046 - 2,046 1.794 252 i3.108.565 L3il1.35Q .$2562 825 $ 2 393 922 $....Jfi8.953 $.2A22.624 ;U.DJU9.3 lli4.220 ~3.969 $.2308 257 .$21]9.034 $....J29.223 See accompanying independent auditor's report - 13 -