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HomeMy WebLinkAboutFinancial Statement ~. SMITH CONCRETE CONSTRUCTION, LLC FINANCIAL STATEMENTS (Reviewed) Year Ended December 31,2005 n r ~ ( 1"'"""". f {', "- . CONTENTS Page INDEPENDENT ACCOUNT ANTS' REVIEW REPORT 1 FINANCIAL STATEMENTS Balance sheet Statement of income Statement of members' equity Statement of cash flows Notes to financial statements 2 3 4 5 and 6 7-12 INDEPENDENT ACCOUNT ANTS' REVIEW REPORT ON THE SUPPLEMENTARY INFORMATION 13 SUPPLEMENTARY INFORMATION Schedule of contract revenues, costs and gross profits Schedule of contracts in process Schedule of general and administrative expenses 14 15 16 r". f Deming, Malone, Livesay & Ostroff Certified Public Accountants INDEPENDENT ACCOUNTANTS' REVIEW REPORT To the Members Smith Concrete Construction, LLC Hillview, Kentucky r\ , We have reviewed the accompanying balance sheet of Smith Concrete Construction, LLC as of December 31, 2005, and the related statements of income, members' equity and cash flows for the year then ended, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. All of the information included in these financial statements is the representation of the management of Smith Concrete Construction~ LLC. A review consists principally of inquiries of Company personnel and analytical procedures applied to financial data. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an OpInIOn. Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with generally accepted accounting principles. 06)Ao<~1 'h;~/~ J rP4~ Louisville, Kentucky February 7, 2006 r 9300 Shelbyville Road . Suite 1100 . Louisville, Kentucky 401222-5187 · Phone: (502) 426-9660 · Fax: (502) 425-0883 " {\ LIABILITIES AND MEMBERS' EQUITY CURRENT LIABILITIES Accounts payable Accrued expenses and other liabilities Line of credit Current maturities of long-term debt Current maturities of capital lease obligations Billings in excess of costs and estimated earnings on uncompleted contracts $ 76,325 214,932 40,414 47,066 22,654 158 401,549 Total current liabilities LONG-TERM DEBT, net of current maturities 255,363 OBLIGATIONS under capital leases 10,842 MEMBERS' EQUITY 728,100 TOT AL LIABILITIES AND MEMBERS' EQUITY $ 1,395,854 r-'\ r SMITH CONCRETE CONSTRUCTION, LLC STATEMENT OF INCOME Year Ended December 31, 2005 See Independent Accountants' Review Report See Notes to Financial Statements. 3 r F" f" SMITH CONCRETE CONSTRUCTION, LLC i STATEMENT OF MEMBERS' EQUITY Year Ended December 31, 2005 See Independent Accountants' Review Report Balance, beginning of year Net income Balance, end of year See Notes to Financial Statements. 4 $ 146,054 582,046 $ 728,100 o SMITH CONCRE~E CONSTRUCTION, LLC ST A TEMENT OF CASH FLOWS Year Ended December 31, 2005 See Independent Accountants' Review Report Cash flows from operating activities: Cash received from construction contracts Cash paid to suppliers and employees Interest received Interest paid Income taxes paid Net cash provided by operating activities Cash flows from investing activities: Payments for property and equipment Proceeds from sale of vehicles ~\ ~: , Net cash used in investing activities Cash flows from financing activities: Payments on related party notes, net Payments on line of credit, net Principal payments on long-term debt Proceeds from long-term borrowings Net cash provided by financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year r 5 $ 4,586,713 ( 4,300,906) 154 (36,973) (30,944) 218,044 (245,142) 21,460 (223,682) (5,535) (84,586) (57,592) 279,812 132,099 126,461 $ 126,461 SMITH CONCRETE CONSTRUCTION, LLC STATEMENT OF CASH FLOWS Year Ended December 31, 2005 See Independent Accountants' Review Report RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Net income $ 582,046 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 81,259 Gain on sale of assets (5,045) Decrease (increase) in: Accounts receivable (267,619) Costs and estimated earnings in excess of billings ~ on uncompleted contracts 35,879 Increase (decrease) in: Checks issued in excess of cash on deposit (12,808) Accounts payable (387,976) Accrued expenses and other liabilities 192,150 Billings in excess of costs and estimated earnings on uncompleted contracts 158 Total adjustments (364,002) Net cash provided by operating activities $ 218,044 Supplemental schedule of non-cash tansactions: During 2005, the company obtained equipment for $35,003 through a capital lease. See Notes to Financial Statements. {' 6 r\ f: ' Note 1. ,--, , \ t\ SMITH CONCRETE CONSTRUCTION, LLC NOTES TO FINANCIAL STATEMENTS See Independent Accountants' Review Report Nature of Operations and Significant Accounting Policies Nature of operations: The Company operates III the concrete construction industry, primarily III Kentucky. Significant accounting policies: Revenue and cost recognition: The Company recognizes income from fixed-price and modified fixed-price construction contracts on the percentage-of-completion method, measured by the percentage of cost incurred to date to estimated total cost for each contract. That method is used because management considers total cost to be the best available measure of progress on the contracts. Because of inherent uncertainties in estimating costs, it is at least reasonably possible that the estimates used will change within the near term. Contract costs include all direct material and labor costs and those indirect 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 costs and income, which are recognized in the period in which the revisions are determined. Changes in estimated job profitability resulting from job performance, job conditions, contract penalty provisions, claims, change orders, and settlements are accounted for as changes in estimates in the current period. Accounts receivable: The Company considers all outstanding balances to be fully collectible; accordingly, no allowance for doubtful accounts has been established. If accounts become uncollectible, they will be charged to operations when that determination is made. Collections on accounts previously written off are included in other income as received. The Company follows the practice of filing liens on projects only if collection problems are encountered. Bad debts expense for the year ended December 31,2005 was $65,638. 7 .~ NOTES TO FINANCIAL STATEMENTS See Independent Accountants' Review Report Property and equipment: Property and equipment are recorded at cost. The Company's policy is to capitalize property and equipment purchases in excess of $500 that have estimated useful lives greater than one year. Maintenance and repairs are charged to expense as incurred. Depreciation is computed using the straight- line method over the following estimated useful lives of the respective assets: Machinery and equipment Vehicles Furniture and fixtures Computer and office equipment 5- 7 years 5 years 7 years 3-5 years Depreciation expense includes amortization of assets under capital leases. Depreciation expense for the year ended December 31, 2005 was $80,689. Loan costs: r-'. Amortization of organizational costs is calculated using the straight~line method over 5 years. Amortization expense for the year ended December 31, 2005 was $570. Income taxes: The Company is a "C" corporation under the Internal Revenue Code. A provision and liability for federal, state, and local income taxes has been made. The Company reports income for tax purposes using the percentage of completion method of accounting. Cash equivalents: The Company considers all highly liquid debt instruments with an original maturity of three months or less to be cash equivalents. r'. 8 .~ Note 2. f\ Note 3. NOTES TO FINANCIAL STATEMENTS See Independent Accountants' Review Report Use of estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Advertising costs: Advertising, promotion, and market development costs are expensed as incurred. Total advertising expense for the year ended December 31, 2005 was $9,082. Accounts Receivable A summary of accounts receivable at December 31 is as follows: Trade receivables Retainage Employee receivables $ 445,223 290,862 930 Total $ 737.015 Contracts in Progress Information with respect to the contracts in progress at December 31 follows: Costs incurred on uncompleted contracts Estimated earnings $ 746,764 394.107 1,140,871 1.092,340 Less billings to date $ 48.531 9 ~ , . Note 4. r Note 5. r, NOTES TO FINANCIAL STATEMENTS See Independent Accountants' Review Report The above amounts are included m the accompanymg balance sheet under the following captions: Costs and estimated earnings in excess of billings on uncompleted contracts Billings in excess of costs and estimated earnings on uncompleted contracts $48,689 (158) $48.531 Line of Credit The Company has a $250,000 line of credit with Fifth Third Bank with interest at the bank's prime interest rate plus 1% (7.75% at December 31, 2005). The principal is due in full at maturity on November 30, 2006. The line of credit is secured by substantially all assets of the Company and the personal guarantees of the Company's members. The outstanding balance at December 31, 2005 was $40,414. Long-Term Debt Note payable, Fifth Third Bank, payable in monthly installments of $1 ,500.00 through March 2012, including interest at 7.25% collateralized by a personal guarantee of a member. $114,457 Note payable, Fifth Third Bank, payable in monthly installments of $632.22 through October 2010, including interest at 7.50% collateralized by the equipment. 31,541 Note payable, Fifth Third Bank, payable in monthly installments of $374.45 through May 2011, including interest at 7.50% collateralized by the equipment. 20,432 Note payable, Fifth Third Bank, payable in monthly installments of $609.90 through September 2011, including interest at 7.25% collateralized by the equipment. 34,367 10 ~ r Note 6. ~ t ' NOTES TO FINANCIAL STATEMENTS See Independent Accountants' Review Report Note payable, Fifth Third Bank, payable in monthly installments of$707.19 through November 2010, including interest at 7.75% collateralized by the vehicle and personal guarantee of a member. 35,285 Note payable, Americredit, payable in monthly installments of $700.14 through October 2009, including interest at 7.50% collateralized by the vehicle and personal guarantee of a member. 27,287 Note payable, BNSF Credit Union, payable in monthly installments of $558.00 through 2006, including interest at 8.57% collateralized by the vehicle and personal guarantee of a member. 4,117 Note payable, BNSF Credit Union, payable in monthly installments of$714.00 through 2011, including interest at 4.95% collateralized by the vehicle and personal guarantee of a member. 34,943 302,429 47,066 Less current maturities $255.363 The aggregate annual maturities oflong-term debt are as follows: Period ending September 30, 2006 2007 2008 2009 2010 Thereafter $ 47,066 45,360 48,760 50,382 44,021 66,840 $302.429 Major Customers For the year ended December 31, 2005, one customer generated more than 10% of the Company's contract revenue. This customer accounted for approximately $1,561,000 or 35% of total contract revenues earned. The total outstanding accounts receivable from this customer was $180,097 at December 31, 2005. 11 0. Note 7. ':1 Note 8. Note 9. NOTES TO FINANCIAL STATEMENTS See Independent Accountants' Review Report Obligations under Capital Leases The Company leases certain equipment under capital leases. The economic substance of the leases is that the Company is financing the acquisition of the equipment through the lease and, accordingly, the leases are recorded in the Company's assets and liabilities. Obligations under capital leases are collateralized by leased equipment, with a gross carrying amount of $61,288. Accumulated amortization related to leased equipment was $15,160 at December 31, 2005. Future minimum lease payments under these leases are as follows: Period ending December 31, 2006 2007 $24,482 11 .1 69 35,651 Less: Amount representing interest 2.155 $33.496 Present value of minimum lease payments Related Party Transactions The Company has a note receivable from a related party (RCA Properties, LLC - related through common ownership). As of December 31, 2005, the balance is $32,353. The note is non-interest bearing and payable on demand. The Company is also constructing a building for RCA Properties, LLC. The project (SCC Building) for approximately $300,000 was about sixty percent complete as of December 31, 2005. The Company has a note receivable from the owners. As of December 31,2005, the balance is $57,600. The note is non-interest bearing and payable on demand. Credit Risk The Company's bank account is insured by the Federal Deposit Insurance Corporation (FDIC) up to $100,000. At December 31, 2005, the Company had uninsured cash balances of approximately $136,000. 12 {"\ Deming, Malone,. Liv~say &; Ostroff Certified Public Accountants INDEPENDENT ACCOUNT ANTS' REVIEW REPORT ON THE SUPPLEMENTARY INFORMATION To the Members Smith Concrete Construction, LLC Hillview, Kentucky f\ Our report on our review of the basic financial statements of Smith Concrete Construction, LLC for the year ended December 31, 2005 appears on page 1. This review was made for the purpose of expressing limited assurance that there are no material modifications that should be made to the financial statements in order for them to be in conformity with accounting principles generally accepted in the United States of America. The information included on pages 14 through 16 is presented only for supplementary analysis purposes. Such information has been subjected to the inquiry and analytical procedures applied in the review of the basic financial statements and we are not aware of any material modifications that should be made thereto. 0<9~~, ~~/~4 t()4~ Louisville, Kentucky February 7, 2006 9300 Shelbyville Road . Suite 1100 . Louisville, Kentucky ~22-5187 · Phone: (502) 426-9660 · Fax: (502) 425-0883 n SMITH CONCRETE CONSTRUCTION, LLC SCHEDULE OF CONTRACT REVENUES, COSTS AND GROSS PROFITS Year Ended December 31, 2005 See Independent Accountants' Review Report on Supplementary Information Costs of Revenues Revenues Gross Earned Earned Profit Contracts completed during the year $ 3,713,461 $ 2,455,883 $ 1,257,578 Contracts in progress at end of the year 1,140,871 746,764 394,107 $ 4,854,332 $ 3,202,647 $ 1,651,685 14 fA <All , .".. r\ SMITH CONCRETE CONSTRUCTION, LLC SCHEDULE OF GENERAL AND ADMINISTRATIVE EXPENSES Year Ended December 31, 2005 See Independent Accountants' Review Report on Supplementary Information F": Salaries and wages I nsurance expense Legal and professional Bad debt expense Taxes - payroll Telephone expense Depreciation and amortization expense Travel expense Contributions Rent expense Uniforms Office supplies Advertising Bank charges Automobile expense Taxes - other Miscellaneous expense Shop supplies Utilities expense Meals and entertainment Dues and subscriptions Employee benefits Postage License and permits Repairs and maintenance $ 320,373 175,444 73,862 65,638 38,444 23,366 18,300 18,007 16,840 15,855 12,697 10,943 9,082 8,596 8,027 7,668 7,018 5,930 5,262 5,164 3,751 2,558 1,609 288 11 ~, r 16 $ 854,733