The URL can be used to link to this page

Home My WebLink About02) Bid Bond THE AMERICAN INSTITUTE OF ARCHITECTS r , AlA Document A310 Bid Bond KNOW ALL MEN BY THESE PRESENTS, THAT WE . James H. Drew Corporation P. O. Box 68935, Indianapolis, IN 46268-0935 as Principal, hereinafter called the Principal, and Travelers Casualty and Surety Company of America 6081 E. 82nd Street, Suite 400, Indianapolis, IN 46250-1795 . . . I a corporation duly organized under the laws of the State of CT as Surety, hereinafter called the Surety, are held and firmly bound unto City of Jeffersonville, Indiana 501 E. Court Ave., Jeffersonville, IN 47130 as Obligee, hereinafter called the Obligee, in the sum of Five Percent of the bid amount Dollars ($ 5% ), for the payment of which sum well and truly to be made, the said Principal and the said Surety, bind ourselves, our heirs, executors, administrators, successors and assigns, jointly and severally, firmly by these presents. VVHEREAS, the Principal has submitted a bid for Veterans Parkway and Woehrle Road F"\ I i , NOW, THEREFORE, if the Obligee shall accept the bid of the Principal and the Principal shall enter into a Contract with the Obligee in accordance with the terms of such bid, and give such bond or bonds as may be specified in the bidding or Contract Documents with good and sufficient surety for the faithful performance of such Contract and for the prompt payment of labor and materials furnished in the prosecution thereof, or in the event of the failure of the Principal to enter such Contract and give such bond or bonds, if the principal shall pay to the Obligee the difference not to exceed the penalty hereof between the amount specified in said bid and such larger amount for which the Obligee may in good faith contract with another party to perform the Work covered by said bid, then this obligation shall be null and void, otherwise t<;> remain in full force and effect. Signed and sealed this 26th day of \\\\\\\\\\\\\Il1l WI/flfl/1.. ~~ tl SUR "q~ ) ........*.........,. a ~ .ff' _'-J iI"A, ...~ ~ ~ ~...~... $~~' Sf i;5 .'1 9. ~~ ~ ~ (:3 f HARTFORD. ~ -< i r::;. t.n . CONN ~ 0 ;;;:;; ~o::-~ . :..,.,i$ ~~\\~ ~.~~ ~ /\ . .. ~ ~ ~ ...., ..". ()).:if Robert Sherfick (Wi is '.! ~'~. "71/. "*...# 'I1/fI' ~\\~ l'/f/IIIlWiIl\\\\\\\\ . ("I April 2006 James H. Drew Cor oration (Principal) (Seal) V.P. 0 erations (Title) (Title) AlA DOCUMENT A310 . BID BOND. AlA. FEBRUARY 1970 ED. . THE AMERICAN INSTITUTE OF ARCHITECTS,'1735 N.Y. AVE., N.W., WASHINGTON, D.C. 20006 TRAVELERS CASUALTY ANP SURETY COMPANY OF AMERICA TRAVELERS CASUAL IT AND SURETY COMPANY FARMINGTON tASUAL TY COMPANY Hartford, Connecticut06183-9062 ('-\ i POWER OF ATTORNEY AND CERTIFICATE OF AUTHORITY OF' ATTO:RNEY(S)-IN-FACT KNOW ALL PERSONS BY THESE PRESENTS, THAT TRAVELERS CASUALTY AND SURETY COMPANY OF AMERICA, TRAVELERS CASUALTY AND SURETY COMPANY and FARMINGTON CASUALTY COMPANY, cOrPorations duly organized under the laws of the State or' Connecticut, and having their principal offices in the City of Hartford, County of Hartford, State of Connecticut, (hereinafter the "Companies") hath made, constituted and appointed, and do by these presents make, constitute and appoint: Timothy J. Taylor its true and lawful Attomey(s)-in-Fact, with full power and authority hereby conferred to sign, execute and acknowledge, at any place within the United States, the following surety bond: Surety Bond Number: Bid Bond Principal James H. Drew Corporation Obligee City of Jeffersonville, Indiana This appointment is made under and by authority of the following Standing Resolutions of said Companies, which Resolutions are now in full force and effect: VOTED: That the Chairman, the President, any Vice Chairman, any Executive Vice President, any Senior Vice President, any Vice President, any Second Vice President, the Treasurer, any Assistant Treasurer, the Corporate Secretary or any Assistant Secretary may appoint Attorneys-in-Fact and Agents to act for and on behalf of the company and may give such appointee such authority as his or her certificate of authority may prescribe to sign w(th the Company's name and seal with the Company's seal bonds, recognizances, contracts of indemnity, and other writings obligatory in the nature of a bond, recognizance, or conditional undertaking, and any of said officers or the Board of Directors at any time may remove any such appointee and revoke the power given him or her. VOTED: That the Chairman, the President, any Vice Chairman, ariy Executive Vice President, any Senior Vice President or any Vice President may r }elegate all or any part of the foregoing authority to one or more officers or employees of this Company, provided that each such delegation is in .. ,$ting and a copy thereof is filed in the office of the Secretary. VOTED: That any bond, recognizance, contract of indemnity, or writing obligatory in the nature of a bond, recognizance, or conditional undertaking sl).all be valid and binding upon the Company when (a) signed by the President, any Vice Chairman, any Executive Vice President, any Senior Vice President or any Vice President, any Second Vice President, the Treasurer, any Assistant Treasurer, the Corporate Secretary or any Assistant Secretary and duly attested and sealed with the Company's seal by' a Secretary or Assistant Secretary, or (b) duly executed (under seal, if required) by oJ;le or more Attorneys-in-Fact and Agents pursuant to the power prescribed in his or her certificate or their certificates of authority or by one or more Company officers pursuant to a written delegation of authority. This Power of Attorney and Certificate of Authority is signed and sealed by facsimile (mechanical or printed) under and by authority of the following Standing Resolution voted by the Boards of Directors of TRAVELERS CASUALTY AND SURETY COMPANY OF AMERICA, TRAVELERS CASUALTY AND SURETY COMPANY and FARMINGTON CASUALTY COMPANY, which Resolution is now in fqU force and effect: VOTED: That the signature of each of the following officers: President, any Executive Vice President, any Senior Vice President, any Vice President, any Assistant Vice President, any Secretary, any Assistant Secretary, and the seal of the Company may be affixed by facsimile to any power of attorney or to any certificate relating thereto appointing Resident Vice Presidents, Resident Assistant Secretaries or Attorneys-in-F;;tct for purposes only of executing and attesting bonds and undertakings and other writings obligatory in the nature thereof, and any such power of attorney or certificate bearing such facsimile signature or facsimile seal shal\ be valid and binding upon the Company and any such power so executed and certified by such facsimile signature and facsimile seal shall be valid and binding upon the Company in the future with respect to any bond or undertaking to which it is attached. . rr ..1 (11-00 Standard) --r-----H 1 I j i/~i " I I " I 1 I I "I ~ 11~ "__I , I I I J " J I~i ,._..~. ! f ;: JAMES H. DREW CORPORA nON AND SUBSIDIARY Consolidated Financial Statements For the YearEnded August 31,2005 <.. i I l~- f , "-'='=-' - ] I , 1 ! 1 j , 1 I - I . I " 'J ~ -I~: '! : j .' J , J I . j I .J t~ . J · '1 JAMES H. DREW CORPORATION AND SUBSIDIARY TABLE OF CONTENTS Independent Auditors' Report on the Consolidated Financial Statements ...........Page 1 Consolidated Financial Statements Consolidated Balance Sbeet .................. ............. .................. .......................................... 2 Consolidated Statement of Operations and Retained Earnings ...................................... 3 Consolidated Statement of Cash Flows.. ....... ....... ....... ......... ......c................. .... .............. 4 Notes to Consolidated Financial Statements........ ................... .:.............. ............ ........... 5 " 3925 River Crossing Parkway, Third Floor Post Office Box 40368 Indianapolis, Indiana 46240-0368 Tel: 317.472.2200 - 800.469.7206 Fax: 317.208.1200 , " r\1 .~-~ ~ I www.somersetcpas.com SOMERSET , CPAs Independent Auditors' Report To'the Board of Directors . I '.. .. .' .;JAMES H. DREW CORPORATION AND SUBSIDIARY We have audited the consolidated balance sheet of JAMES H. DREW CORPORA T!ON AND SUBSIDIARY as of August 31, 2005, and the related consolidated statements of operations and retained earnings, and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on 6uraud~ ' We conducted our audit in accordance with auditing standards generally accepted in the Un,ited States and the Standards ofthe Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtailJ reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit include,s consid,eration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinions. Ah audit includes examining, on a test basis, evidence supporting the bmounts and disclosu.res in the consolidated financial statements. An audit also includes assessing the !accounting principles 'used and significant estimattis made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. ,In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of JAMES H. DREW CORPORATION AND SUBSIDIARY as of August 31, 2005, and the results of its consolidated operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the Uriited States of America. Indianapolis, Indiana ,October 19, 2005 State of Indiana County of Marion This instr. umen!lwas acknowledged Before me on jVOVt.Wl be-v'" C?~ ) ~S- By DOIIG-l4 sh4 MY? A10 1..) . ~~t:;;~~ Dou las Fahrnow, CPA Indiana License No. 9800524 r) JAMES H. DREW CORPORA TJON AND SUBSIDIARY Consolidated Balance Sheet August 31,2005 Assets Current Assets Cash $ ...-/359,121 Receivables Contracts, net (Note 3) 9,820,9-81 Amount due from parent company (Note 12) 2,786,961 Employee adVances (Note 3) . 10,352 Costs and estimated earnings in excess of billings (Note 4) 2,267,345 Inventories, net 4,059,018 Prepaid expenses 347,885 Deferred tax asset (Note 10) 237,784 Total Current Assets 19,889,447 Property and Equipment Machinery and equipment 2,683,536 Vehicles and trucks 2,459,158 ~ Furniture and fixtures 109,738 Leasehold improvements 5,696 Accumulated depreciation (4,191,647) ~ ~ Total Property and Equipment, net 1,066,481 Other Assets Deposits 16,000 Goodwill (Note 5) /' 151,565 Long term contracts receivable (Note 3) 600,000 Deferred tax asset (Note 10) 42,737 i! Total Other Assets 810,302 Total Assets $ 21,766,230 i '! ' J ' , --1 },--- , \ --1 \ : I ---, . \ I , I J . 1 I ~ 'l~' i \- i 'I 11 i ! I ,J I ,J 'J In u J r' Liabilities ~nd Stockholders' Equity Current Liabilities Capital lease obligation - current portion (Note 6) Accounts and retainages payable Billings in excess of costs and estimated earnings (Note 4) Accrued expenses and other current liabilities Total Current Liabilities Long-term Liabilities Capital lease obligations, less current maturities (Note 6) Total Liabilities Stockholders' Equity Common stock (Note 9) Additional paid-in capital Retained earnings Total Stockholqers' Equity Total Liabilities and Stockholders' Equity See accompanying notes to consolidated financial statements. 2 $ 50,243 3,412,091 2,066,083 945,674 6,474,091 54,175 6,528,266 50,000 661,498 14,526,466 15,237,964 $ 21,766,230 '1 ;;~ J '1 i I I "'] ! - ) ! I I , : 1 I , 1 I I :.J I I , , ,-'\ \ I '-\ ,J :1 ~ I I ~ LJ I :...1 . I I iJ 1 . .L~ ---',. . I ,._1 . '. JAMES H. DREW CORPORATION AND SUBSIDIARY Consolidated Statement of Operations and Retained Earnings For the Year Ended August 31~ 2005 Construction Revenue Direct Costs of Construction Gross Profit Administrative Expenses Income from Operations Other income (Expense) Gain on sale of equipment Interest income Interest expense Other income Total Other Income Income before Income Taxes - Income Tax Expense (Note 10) Net Income $ 46,669,691 42,721,227 3,948,464 3,613,778 334,686 17,350 307 (2,483) 4,641 19,815 354,501 (236,039) 118,462 14,408,004 $ 14,526,466 Retained Earnings, Beginning of Year Retained Earnings, End of Year See accompai!ying notes to consoHdated financial statements. 3 --, I. I f j ~ '~'1 I , t- , ( ~" I ---, f ~ -J -'1 . f ! ': --1 i' I I : I , J ~ ,C\ ! : l , J : I ',.J "I ~ J . 1 :_..1 ..1 1 1,--.... ..... \ \ ..oJ I 1 JAMES H. DREW CORPORATION AND SUBSIDIARY Consolidated Statement of Cash Flows For the Yeq,r Ended August 31,2005 Cash Flows from Operating Activities Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization Gain on sale of equipment (Increase) decrease in certain operating assets: Contracts receivable Costs and estimated earnings in excess of billings Amount due from parent company Employees receivable . Inventory Prepaid expenses Deferred income taxes Other assets Increase (decrease) in certain operating liabilities: Accounts and retainages payable Accrued expenses and other current liabilities Billings in excess of costs and estimated ear!lings Net cash provided by operating activities Cash Flows from investing Activities Proceeds from sale of equipment Capital expenditures Net cash used in investing activities Cash Flows from Financing Activities Principal payments under capital lease obligations Net cash used in financing activities Net Increase in Cash and Cash Equivalents Cash and Gash Equivalents, Beginning of Year Cash and Cash Equivalents, End of Year Supplemental Cash Flow Disclosures Interest paid -See accompanying notes to consoHd?ted financial statemen~s. .4 $ 118,462 461,809 (17,350) (1,293,892) (392,180) (1,648,033) 19,815 2,345,863 (44,814) 168,363 34,114 769,153 (99,749) 153,834 575,395 17,350 (295,991 ) (278,641 ) (18,513) (18,513) 278,241 80,880 $ 359,121 $ 2,483 '[ I- j - 'J I t~ ! '""""",...- - -, t , 1 ! 1 .! , 1 I I ; j J , 1 ~ 1 :J r t'._ . \-, I , ) J - I , 1 I } , \ r , ! iJ , J . I " J(- I I I cl 1 I ,J JAMES H. DREW CORPORATION AND SUBSIDIARY Notes to Consolidated Financial Statements For the Year Ended August 31~2005 Note 1 - Nature of Operations and Summary of Significant Accounting Policies: Description of Business James H. Drew Corporation (the Company) was incorporated in 1947 in Indianapolis and maintains its principal offices at 8701 Zionsville Road, Indianapolis, Indiana. The Company also has offices in Sedalia, Missouri, and Knoxville, Tennessee. The Company is engaged primarily as a subcontractor to paving and bridge contractors to install highway safety systems such as traffic signals, signs, lighting, and guard rails in Midwestern states. The Company is a wholly owned subsidiary of Fortune Diversified Industries, Inc., ("the Parent"). Principles of Consolidation The consolidated financial statements include the financial statements of James H. Drew Corporation and its wholly owned subsidiary Tennessee Guardrail, Inc, (the Subsidiary). All significant intercompany balances and transactions have been eliminated in consolidation. Revenue and Cost Recognition Revenues from construction contracts are recognized on the percentage-of-completion method, measured by the percentage of costs incurred to date to estimated total costs for each contract. That method is used because management considers total costs to be the best available measure of progress on the contracts. Project costs include all direct labor, subcontract, and material costs and those indirect costs related to contract performance. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performances, job conditions, and estimated profitability may result in revisions to costs and income, which are recognized in the period in which the revisions are determined. The Company also performs service work under time-and-material contracts. Revenues from these contracts are recognized as labor and material costs are incurred. The asset, "Costs and estimated earnings in excess of billings", represents revenues recognized in excess of amounts billed. The liability, "Billings in excess of costs and estimated earnings", represents biliings in excess or revenues recognized. , Co"ntracts Receivable The Company carries its contract$ receivable at invoiced amounts less an allowance for doubtful accounts. On a periodic basis, the Company evaluates its contracts receivable and establishes an allowance for doubtful accounts, based on history of past write-offs and collections and current credit conditions'- Management has established an allowance for doubtful accounts of $364,921 as of August 31,2005. The Company's policy is not to accrue interest on past due trade receivables. . 5 ~ .~ i i~ I " - 1 1-; , ! "'\ I .J ''1 f , '1 I :1 I. . 1 I ! :J. . 1 ,0, . ~, \--- j , \ . J .1 , 1 I, I ,.,.:t , 1 I J 1 :.J ) f- .. t \ } c.J \ ! .-[j JAMES H. DREW CORPORATION AND SUBSIDIARY Notes to Consolidated Financial Statements For the Year Ended August 31,2005 Note 1 - Nature of Operations and Summary of Significant Accounting Policies (Continued): Inventories Inventories are stated at the lower of cost or market Costs are determined under the first-in, first-out method (FIFO) method of accounting. Shipping and Handling Costs incurred for shipping and handling are included in the Company's consolidated financial statements as a component of costs of goods sold. Property, Equipment, and Depreciation Property and equipment are carried at cost and include expenditures for new additions and those which substantially increase the useful lives of existing assets. Depreciation is computed at various rates by use of the straight-line method and certain accelerated methods. Depreciable lives range from 3 to 10 years. Expenditures for normal repairs and maintenance are charged to operations as incurred. The cost of property or equipment retired or otherwise disposed of and the related accumulated deprecip.tion are removed from the accounts in the year of disposal with the resulting gain or loss reflected in earnings or in the cost of the replacement asset. The provision for depreciation amounted to $461,809 for the year ended August 31, 2005. Goodwill The Company has adopted Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets". With the adoption of SFAS No. 142, goodwiH with indeterminate lives are no longer amortized but,instead are assessed for impairment at least annually and more frequently as triggering events may occur. In making this assessment, managem,ent relies on a number of factors including operating results, business plans, economic projections, anticipated future cash flows, and transactions and market place data. Any impairment losses determined to exist are recorded in the period the determination is made. There are inherent uncertainties related to these factors and management's judgment in applying them to the analysis of any impairment Since management's judgment is involved in performing goodwill valuation analyses, there is risk that the carrying value of goodwill may be overstated or understated. 6 "-J, I I 'j !~ I \, ~~- 1 j '1 "j 1 I : 1 J - 1 1 ~ ,~ ~ _.~. ! \ , r , 1 .J : I :' } .1 , I .,J , l \ c,J : 1 . j~ '--f ; I i , 1 j ,~. J 1 .I _f,( , ' JAMES H. DREW CORPORATION AND SUBSIDIARY Notes to Consolidated Financial Statements For the Year Ended August 31" 2005 Note 1 - Nature of Operations and Summary of Significant Accounting Policies (Continued): Income Taxes Income taxes are provided for the tax effects of transactions reported in the consolidated financial statements and consist of taxes currently due plus deferred taxes. Deferred taxes are recognized for the differences between the basis of assets and liabilities for financial statement and income tax purposes. Those differences relate primarily to fixed assets (use of different depreciation methods and lives for financial statement and income tax purposes) negative goodwill applied to book basis of fixed assets and goodwill, long-term contracts (use of percentage-of-completion method for financial statement purposes and completed contract method for income tax purposes), and certain accrued expenses (use of accrual method for financial statement purposes and cash method for income tax purposes). The deferred tax assets and liabilities represent the future tax consequences of those differences, which will either be '~axable or deductible when the assets and liabilities are recovered or settled. Deferred taxes are also recognized for any operating loss carryforwards, charitable contribu'tion carryforwards, and tax cre~it carryforwards that are available to offset future income taxes. Advertising The Company charges advertising coststo expense as incurred. Advertising expenses amounted to $3,685 for the year ended August 31, 2005. Cash Flows For purposes of the Statement of Cash Flows, the Company considers all highly liquid instruments that are purchased within three months or less of an instruments maturity date to be cash equivalents. . During the year ended August 31,2005, the Company acquired equipmentthrough a capital lease obligation of approximately $56,135. This is a noncash tra[lsaction. . Use of Estimates The preparation of consolidated financial statements in conformity with generaiiy accepted accounting principles of 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 7 " , 1 f\ i ~ - I ',---- I -'j I 1 - -1 j 1 "", I ! 'j ; I , 1 i · I , I I ; I LJ I I '(\ \.~,.. I , 1 , l " '-'I .I ; I I j ] .,1 J ) 1/- - --f 1 I , J " , JAMES H. DF{EW CORPORATION AND SUBSIDIARY Notes to Consolidated Financial Statements For the Year Ended August 31,2005 ., Note 1 - Nature of Operations and Summary of Significant Accounting Policies (Continued): Use of Estimates (Continued) Significant estimates used in preparing these consolidated financial statements include those assumed in computing profit percentages under the percentage-of-completion revenue recognition method. It is reasonably possible that the significant estimates used will change within the next year. Note 2 - Contingencies The Parent is liable to third parties for term debt in the original amount of $4,000,000 and a revolving line of credit of $5,000,000. Such debt is guaranteed by the Company and who is a contingently liable at August 31,2005. The debt is collateralized by substantially all the assets of the Company. Note 3 - Contracts Receivable Information with respect to contracts receivable is summarized as follows: Completed contracts Contracts in process Progress billings Retainages Other receivables Less allowance for uncollectible'accounts 8 $ 3,958,902 5,075,000 1,752,000 10,785,902 10,352 (364,921) $ 10,431,333 --1 1) I ,,-, ,..-~ i i ; . it 1 ..., ~ i ; I " : J ) I : ! : I , J ~l , l c( : ! : i I ~ j ; ~ ,I c \ i j i I ; r . I I I ..J \ J- f t . \ ; .1 L.1 . JAMES H. DREW CORPORATION AND SUBSIDIARY Notes to Consolidated Financial Statements For the Year Ended August 31,2005 Note 4 - Contracts in Process:' Information with respect to contracts in process is summarized as follows: Costs incurred Estimated earnings thereon Less applicable billings . Included in the accompanying balance sheets under the following captions: Costs and estimated earnings in excess of billings Billings in excess of costs and estimated earnings Note 5 - Goodwill: $ 25,106,262 5,139,000 30,245,262 (30,044,000) $ 201,262 $ 2,267,345 (2,066,083) $ 201,262 The Company has recorded goodvJiIl in the amount of $151,565 at August 31,2005. The Company determined, based on estimated future cash flows, no impairment of the remaining goodwill exists at August 31,2005. Note 6 - Capital Leases: Long-term leases relating to the financing of fixed assets are accounted for as installment purchases. The capital lease obligations reflect the present value offuture rental payments, discounted at the interest rate implicit in the. lease, and a corresponding amount is capitalized as the cost of the fixed assets. The fixed assets are being depreciated over periods ranging from five to ten years. The following is an analysis of fixed assets under capital lease at August 31,2005: Equipment Less allowances for depreciation 9 $ 132,435 (25,021) 107,414 $ t 't [_ i ~ ) ,..ff r ---1 ! , . 1 !I , ) f , r , I . \ ,:.. J J , 1 . 1 I : i : 1 ~ , I, , i I _ 1 , I , I' I . ) I _ I , 1 ! ) ; 1 I I ,~J :..1 - l i I __1;-, f j ! " i , 1 1 --,1; JAMES H. DREW CORPORATION AND SUBSIDIARY Notes to Consolidated Financial Statements For the Year Ended August 31,2005 Note 6 - Capital Leases (Continued): Following is a schedule of future minimum lease payments due under the capital lease obligations together with the present value of net minimum lease payments as of August 31, 2005: Year Ending August 31, 2006 2007 2008 2009 2010 $ 50,243 37,262 15,566 1,347 o Total minimal lease payments 104,418 Less current portion (50,243) Long-term portion $ 54,175 Note 7 - Retirement Plan: The Company maintains a savings plan for its salaried employees, which is qualified under Section 401 (k) of the Internal Revenue Code (the Code). Under the provisions of the Plan, employees elect to defer a portion of their compensation subject to a'maximum limit determined by the Code. The Company, in accordance with the Plan, makes contributions to the plan based upon employee contributions. Company contributions to the Plan were $33,398 for the year ended August 31,2005. Note 8 - Union Employee Retirement Plan: The Company makes contributions to a pension fund that covers all union employees based on a contribution rate that is defined in the union contract. Contributions for pension, which were separately unidentifiable, and health and welfare amounted to $2,329,885, for the year ended August 31,2005, -- Note 9 - Common Stock: The Company has voting stock with equ~1 voting rights. All of the stock is no par value. The following summarizes the Company's shares of common stock as of August 31, 2005: Authorized Issued Outstanding 1,000 660 660 10 , .! ~' , . l .. ~ ,.' , 1 I t- . ~ , -, ; i ! "j l. , ! --I - I i "I , I ; I ; ! :.J) I ,.~ , . t l'~-~ 1 , } :..1 - I : r 't ! j : 1 ~. .J , I 1 . j J "1- ~- f : \ cJ JAMES H. DREW CORPORATION AND SUBSIDIARY Notes to Consolidated Financial Statements For the Year E'nded August 31,2005 Note 10 -Income Taxes: The Company is included in the Parent's consolidated federal income tax return. Under the tax aHocation method used by the Parent, the Company is charged an amount substantially equal to the income tax it would pay if it filed a separate return. lncom~ tax expense (benefit) consists of: Year ended Auqust 31,2005: Current Deferred Total U. S federal (benefit) $ 137,494 $ 30,869 $ 168,363 State and local (benefit) 67,676 0 67,676 $ 205,170 $ 30,869 $ 236,039 The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities at August 31, 2005, are presented below. Current deferred tax assets: Nondeductible accruals Inventory reserve Total current deferred tax assets Non-current deferred tax assets: Property and equipment, prindpally due to differences in depreciation and negative goodwill Total deferred tax assets _ Deferred tax liabilities Net deferred tax assets $ 177,744 60,040 237,784 42,737 280,521 O' $ 280,521 In assessing the reliability 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. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary aifferences become deductible. ,Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods which the deferred tax assets are deductible, management believes it is more likely than not the Company will realize the benefits of these deductible differences at August 31, 2005. The amount of the deferred tax asset considered realizable, however, could be reduced in the nearterm if estimates offuturetcixable income during the carryforward period are reduced. 11 F- - -J I 1- - \ ! -\ I , I '-I - I I I 1 r - 1 I I ; ) I : j __r", ~ - \ I , \ ;J . \ : \ - ,,-'l ;1 , I 'I ,1 j J I \ _1' _,_ il p' I . ~ . " -- ~' JAMES H. DREW CORPORATION AND'SUBSIDIARY Notes to Consolidated Financial Statements For the Year Ended August 31,2005 Note 11 - Operating Lease Commitments: The Company leases various vehicles, machinery, and equipment under agreements, which expire on dates ranging from September 2005 through August 2009. Rent expense under these agreements amounted to $662,545 for the year ended August 31,2005. Future minimum commitments under these agreements are as follows at August 3'1, 2005: For the Years Ended: - 2006 2007 2008 $ 21,851 19,581 8,359 $ 49,791 Note 12 - Related Party Transactions: Office and Warehouse Leases The Company leases its Indianapolis, IN, Sedalia, MO, and Knoxville, TN offices and warehouse facilities from Fortune-Fisbeck Development, LLC, an entity related by common ownership. The original term of the lease expires in April 2009. In addition to base monthly rent, the agreement requires the Company to pay its proportionate share of real estate taxes, insurance, and common area maintenance expenses. Rental expense under this agreement amounted to $189,194 for the year ended August 31,2005. Included in other assets at August 31, 2005, is a rental deposit of $15,000. Future minimum commitments under this agreement are as follows at August 31, 2005: Year Endinq Auqust 31, 2006 2007 2008 2009- $ 187,256 192,876 -198,660 135,064 $ 713,856 Amount Due From Parent The amount due of $2,786,961 from Fortune Diversified Industries, Inc. at August 31,2005-, was due on demand, unsecured, and non-interest bearing. 12 i i f i' ~.l: i ~. ~ I . l : 'J I ,J , ! : 1. : l' " I I ..~, , f: -I , I 'i(' r, ; \ ; \ : I .' , ~I 1 .1 I I; 1 \i 1- -, t !,~ \J ~ .:J~. ,,~ JAMES H. DREW CORPORATION AND SUBSIDIARY Notes to Consolidated Financial Statements For the Year Ended August 31,2005 Note 12 - Related Party Transactions (Continued): Related Party Projects The Company performed contracts for Cornerstone Wireless Construction, Inc., an entity related by common ownership. The following summarizes the gross profit derived from the related party projects for the eight months ended August 31, 2005: Contracts revenues Contract costs Gross profit on related party projects $ 108,222 (98,159) $ 10,063 Included in Contracts Receivable at August 31,2005, is a receivable due from Cornerstone Wireless Construction, Inc., in the amount of $44,613 related to the related party projects. PEO Services The Company utilizes the services of Professional Staff Management, Inc. (PSM), a PEO (Professional Employer Organization) and a related entity through common ownership, for its human resources management, benefits management, payroll processing and payroll tax filing services: PSM is responsible for processing the payroll for the Company's non-union field employees, administrative employees, and management employees. PEO related expenses, including fees, payroll, benefits and payroll taxes, under this agreement amounted to $1,008,114, for the year ended August 31, 2005. Note 13 - Concentration of Credit Risk: The Company's financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents and contracts receivables. TQe Company places its cash and cash equivalents with high credit quality institutions. At times, such amounts may be in excess of the FDIC insured limit. The Company routinely assesses the financial strength of its customers and, as a consequence, believes that its contracts receivable credit risk exposure is limited. Note 14 - Business Concentration: The Company's revenues are substantially derived from installing highway safety systems such as traffic signals, signs, lighting, and guard rails. The Company has receivables from customers, substantially all of whom are located in Midwestern states. 13 . ~ , j t. ~ 1 I I, 1J , -I I ~":'.'!' J j , '1 j 1 ! l J \ ; j u ; j ,r, L \. ;' ! , , . 1 \ i' ,\ "I' i;,., " t ; I I J " J " .\ }~I :. ! ] .J f~ - -f J I i f -,< \... '( JAMES H. DREW CORPORATION AND SUBSIDIARY Notes to Consolidated Financial Statements For the Year Ended August 31, 2005 Note 15 - Labor Negotiations: The Company is a union contractor and has labor contracts with several unions. These contracts expire at various dates from May 2005 through April 2009. Note 16 - Backlog: The Company has a backlog of future construction contracts with estimated revenues of approximately $23,883,687, as of August 31,2005. 14