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HomeMy WebLinkAboutAudited Financial Statement " f" I' i A udited Financial Statements J-\ Team Contracting, LLC , ' December 31, 2006 and 2005 I \ ~ r\ f\ f\ TEAM CONTRACTING, LLC. 14912 Railroad Street Memphis, Indiana FINANCIAL STATEMENTS December 31,2006 and 2005 CONTENTS Title Page INDEPENDENT A UDITOR'S REPORT .............. ................ ......................................... 3 BA LA NC E SI-.IEETS ................................. ............................................... ....................... 4- 5 ST A TEMENTS OF MEMBERS' EQUITy.................................................................... 6 Sl'A TEMENTS OF IN COME......... .................................................. ............. ................. 7-8 STATEMENTS OF CASH FLOWS ............................................................................... 9-10 ..~ .. . NOTES TO FINANCIAL STATEMENTS .......... ............. .............................................. 11-17 ~~flr IJ 'Ul..!~_._~1 MELHISER ENDRES TUCKER INDEPENDENT AUDITOR'S REPORT NORMAN L. MELHISER, CPA TOM R. TUCKER, CPA JnSEPH L. BROWN, CPA MARC d, MCCORMICK, CPA DOUGL.AS A. YORK, CPA TERRY L. GRAHAM, CPA W. ISSAC ORWICK, CPA ANITA M. ASHER, CPA RICHARD N. ROBINSON, CPA dUAN R. RODRIGUEZ, CPA EDWARD O. ENDRES, CPA ( 1 942 - 1 9971 CPA's', ""P.C. April 4, 2007 WWW.METCPA.COM Board of Directors TEAM CONTRACTING, LLC 14912 Railroad Street Memphis, Indiana-4714l We have audited the accompanying balance sheets of TEAM CONTRACTING, LLC as of December 31, 2006 and 2005, and the related statements of income, 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 audi.ts in. a.ccordance with audi.t....ing stan. dards generally accepted in the United . . I . States of America. Those. standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating tl1.e overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. The Company has not applied provisions of Financial AccouQ.ting Standards Board Interpretation No. 46R, Consolidation of Variable Interest Entities, which is a departure from generally accepted accounting principles. The financial statement impact of this departure has not been determined. In our opinion, except for the effects of not following the provisions of Consolidation of Variable Interest Entities as discussed in the preceding paragraph, the financial statements referred to in the first paragraph present fairly, in all material respects, the financial position of TEAM CONTRACTING, LLC as of December 31,2006 and 2005, 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. r\ MELHISER ENDRES TUCKER ~~T~ 301 EAST ELM STREET. NEW ALBANY, IN 47150. PHONE: 812-945-5236. FAX: 812-949-4095 - ~ . ~. -1 ... . .. .." ....r- ............... .JI'IJT___}~(f!ll ............~ - 699 HILL.VIEW DRIVE. CORYDON, IN 471' 12 . PI-IONE:'s 12-738-3'777 . FAX';"S 1"2>i38~138<i5 I I TEAM CO~TRACTING, LLC I . 14912 Railroad Street Memphis, Indiana I BALANCE SHEETS I December 31, 2006 2005 I I I I I I I I I ,I I I I {\ I See Notes to Financial Statements. -4- I $ - $ 504,610 906, ] 62 13,634 32,834 63,248 ] ,520,488 450,000 777,464 (504,6] 0) 722,854 2,243,342 o TEAM CQNTRACTING, LLC 14912 Railroad Street Memphis, Indiana BALANCE SHEETS LlABlLlT]ES CURRENT LlAB]LlT]ES ' Note Payable - Bank Current Portion of Long-Term Debt Accounts Payable Accrued Expenses Accrued Payroll Billings in Excess of Costs and Estimated Earnings on Uncompleted Contracts TOTAL CURRENT LlABILlTIES ~. LONG-TERM LIABILITIES Note Payable - Bank Installment Loans Less Current Portion of Long-Term Debt TOTAL LONG-TERM LlABILlT]ES TOTAL LlABlLlTIES MEMBERS' EOUITY Members' Equity December 31. 2006 TOTAL LIABILITIES & MEMBERS' EQUITY $ ] ,73 ],604 3,974,946 $ r\ See Notes to financial Statements. -5-, 2005 ] 99,900 642,94] 674,090 76,640 33,96] 84,134 ],7] ],666 1,327,247 (642,941) 684,306 2,395,972 ],935,784 4,33],756 r\ TEAM. CONTRA. - CTING. , LLC .1.. . ] 49 1'2 Railroad Street Memphis, Indiana STATEMENTS OF MEMBERS' EQUITY BALANCE - December 30, 2004 $ 2,099,812 Net Income I (Loss) for the Year Ended December 3 I, 2005 (55,743) Members'Draws (224,679) Members' Contributions 116,394 BALANCE - December 3 1,2005 1,935,784 Net Income I (Loss) for the Year Ended December 31, 2006 (511,725) Members' Draws (143,867) Members' Contributions 451,412 BALANCE - December 3 1,2006 $ 1,731,604 See Notes to Financial Statements. -6- TEAM CQNTRACTING, LLC 14912 Railroad Street Memphis, Indiana STATEMENTS OF INCOME For the Year Ended December 31. 2006 2005 CONTRACT REVENUE $ 7,688,264 $ 7,158,582 DIRECT COSTS Labor 1.674,015 1,298,848 Payroll Taxes 146,507 114,269 Materials 2,465,339 1,744,580 Equipment Rental 290,069 132,658 Equipment Fuel, Oil, Grease 173,209 106,210 Mobilization 61,586 46,169 Equipment Repairs & Maintenance 49,700 4,889' Subcontract 1,109,996 1,539,051 Other 70,161 142,072 Outside Trucking 102,075 206,9] 5 r\ Depreciation 465,969 382,437 TOTAL DIRECT COSTS 6,608,626 5,718,098 GROSS PROFIT 1,079,638 ] ,440,484 OPERA TING EXPENSES Auto Expenses 75,760 74,787 Insurance 208,761 228,845 Employee Benefits 106,352 1]7,677 Legal and Accounting 34,]64 23,479 Office Supplies 26,2] 8 9,279 Advertising & Promotion 7,230 9,773 Bank Charges 1,216 1,037 Interest 79,762 64,300 Licenses & Permits 3,]30 6,]79 Postage and Freight 2,779 1,783 Depreciation 70,862 80,945 Repairs and Maintenance 82,406 21,390 Miscellaneous 40,574 69,105 r\ See Notes to Financial Statements. -7- TEAM CONTRACTING, LLC ] 49] 2 Railroad Street Memphis, Indiana STATEMENTS OF INCOME OPERA TING EXPENSES (Continued) Rent Supplies Radios/Pagers/Cellular Phones Utilities Meals and Entertainment Dues and Subscriptions Plan Fees and Deposits Wages Payroll Taxes TOTAL OPERATING EXPENSES r NET INCOME (LOSS) BEFORE OTHER INCOME OTHER INCOME Interest Income Other Income Gain on Sale of Assets TOTAL OTHER INCOME NET INCOME (LOSS) r For the Year Ended December 31, 2006 275,000 254 17,850 33,877 390 4,393 6,162 505,372 44,229 1,626,741 (547,103) 28,775 6,603 35.378 (511,725) $ 2005 313,735 21 15,329 12,419 3,678 4,976 4,173 425,380 37.423 1.525.713 (85,229) 7,448 2,638 19,400 $ See Notes .to Financial Statements. -8- 29.4 86 (55,743) (\ TEAM CONTRACTING, LLC 1491'2 Railroad Street Memphis, Indiana STATEMENTS OF CASH FLOWS t' See Notes to Financial Statements. -9- 536.831 463,382 ( 19,400) ( 134,552) (47,533) 171,290 (127,343) 232,072 257,913 ( 1,127) ], ]76 (20,886) (] 6,860) (63,007) 18,662 720,621 529,997 $ 208,896 $ 474,254 r TEAM CONTRACTING, LLC 14912 Railroad Street Memphis, Indiana STATEMENTS OF CASH FLOWS RECONCILIATION OF NET INCOME (LOSS) TONET CASlI PROVIDED BY OPERATING ACTIVITIES Net Income ( Loss) $ (' Adjustments to Reconcile Net Income (Loss) To Net Cash Provided by Operations: Depreciation Sa] eoI' Assets (Increase) Decrease in Receivables (Increase) Decrease in Costs and Estimated Earnings I n Excess of Billings on Uncompleted Contracts Increase (Decrease) in Accounts Payable Increase (Decrease) in Accrued Payroll Increase (Decrease) in Billings in Excess of Costs and Estimated Earnings on Uncompleted Contracts Increase (Decrease) in Accrued Expenses Net Adjustments NET CASH PROVIDED BY OPERATING ACTIVITIES For the Year Ended December 31. 2006 2005 (5]1,725) $ (55,743) (' See Notes to .F~nancial Statements. -10- r\ TEAM CONTRACTING, LLC ]4912 Railroad Street Memphis, Indiana NOTES TO FINANCIAL STATEMENTS December 31,2006 and 2005 NOTE A - GENERAL INFORMATION Nature of Operation The Company was organized as a limited liability company on June 27, 1995. The Company is engaged primarily in commercial construction for business and municipalities in Kentucky and Southern Indiana. Income Taxes The LLC with the consent of its members, has elected under the Internal Revenue Code to be taxed as a partnership. In lieu of partnership income taxes, the members are taxed individually on their proportionate share of the LLC's taxable income. Therefore, no liability or expense for federal income taxes has been included in the financial statements. r, NOTE B - SIGNIFICANT ACCOUNTING POLICIES Method of Accounting Profits on long-term projects are being recorded on the basis of the Company's estimates of the percentage of completion of individual projects. Under this method, the Company records that percentage of estimated total income on each project that incurred costs to date bear to estimated total costs, after giving effect to estimates of costs to complete based upon most recent information. This method does not alter the use of the basic accrual method as the over-allmethod of accounting. As the long-term projects extend over one or more years, revision in cost and profit estimates during the course of the work are reflected in the accounting period in which the facts requiring the revision become known. Profits on short-term commercial work are recorded upon the substantial completion of each project. The Company's records are maintained using the accrual method of accounting which recognizes revenue when earned, and costs when incurred, rather than when collected or paid. This method results in proper. matching of income and expenses to determine income or loss for a specific period of time. f\ 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 recognized. ., . - ] 1 - ~\ TEAM CONTRACT1NG,LLC 14912 Railroad Street Memphis, Indiana NOTES TO FINANCIAL STATEMENTS December 31, 2006 and 2005 NOTE B - SIGNIFICANT ACCOUNTING POLICIES (Continued) Fixed Assets Fixed asset costs are depreciated and amortized over the expected useful life of the individual asset as required by generally accepted accounting principles. The straight- line and accelerated methods are used in calculating depreciation. Disposa] of Fixed Assets The Company's policy with respect to retirements, sales and disposals of equipment is to remove the cost of the asset and the accumulated depreciation from the accounts. The resulting. gain or loss is reported on the Statement of Income under Other Income or Expense. r\ Trade-In Of Fixed Assets The Company's policy with respect to trade-ins of fixed assets is to remove the cost of the asset traded and the related accumulated depreciation from the accounts. The remaining basis of the asset traded-in is added to the cost of the asset acquired. No gain or Joss is recognized on trade-ins. Repair And Maintenance Expenditures are charged to operations as incurred for maintenance, repairs and renewals which do not materially extend the useful life of the prope11y. Cash Equivalents For purposes of the Statement of Cash Flows, the Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents. r Contracts Receivable Contracts receivable consist of outstanding billings due for the construction of various projects are based on contracted prices. The company has not provided an allowance for doubtful accounts based upon a review of outstanding receivables, historical collection information, and existing economic conditions. Normal contracts receivable are due 30 days after the issuance of the invoice. Contract retentions are due 30 days after completion of the project and acceptance by the owner. Receivab]es past due more than 120 days are considered delinquent. Delinquent receivables are written off based on individual credit evaluation and specific circumstances ofthe customer. The Company charges any uncollectible accounts directly to current operations. All accounts at December 31, 2006 and 2005 are thought to be collectible. - 12 - r, TEAM CONTRACTING, LLC 14912 Railroad Street Memphis, Indiana NOTES TO FINANCIAL STATEMENTS December 3 1,2006 and 2005 NOTE B - SIGNIFICANT ACCOUNTING POLICIES (Continued) Use of Estimates The preparation offinancial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Fair Value of Financial Instruments The fair value of the installment loan is estimated based on interest rates for the same or similar debt offered to the Company having the same or similar remaining maturities and collateral required. . r Advertising Advertising costs, which are principally included in operating expenses, are expensed as incurred. Advertising expense was $7,230 and $9,773 for the years ended December 31, 2006 and 2005, respectively. NOTE C - CONTRACTS RECEIVABLE Contracts Receivable consist of: December 31, 2006 2005 Amounts Billed For: Contracts Completed and In Progress Retainage $739,324 155,405 $608,359 148,838 Total $894.729 $757.197 r'. - 13 - r\ TEAM CONTRACTING, LLC 14912 Railroad Street Memphis, Indiana . NOTES TO FINANCIAL STATEMENTS December 31, 2006 and 2005 NOTE D - UNCOMPLETED CONTRACTS Costs, estimated earnings, and billings on uncompleted contracts are summarized as follows: Decem ber 31 , 2006 2005 Billings to Date $4,713,564 794,384 5,507,948 5,531,009 $ (23.061) $ 880,094 306,591 1,186,685 1,059,342 $ 127.343 Costs Incurred on Uncompleted Contracts Estimated Earnings to Date ~. ; Included in the accompanying balance sheet under the following captions are: December 31, 2006 2005 Costs and Estimated Earnings in Excess Of Billings on Uncompleted Contracts Billings in Excess of Costs and Estimated Earnings on Uncompleted Contracts $40.187 $211.477 $63.248 $ 84.134 NOTE E - DEPRECIATION Depreciation for financial statement purposes was computed using straight-line method. The MACRS system is used for income tax reporting. Because the entity is an LLC and taxed as a partnership, no adjustments have been made for the tax effect of these differences in depreciation methods. The Company's book and tax depreciation for the years ending December 31, are as follows: Book 2006 $536.831 2005 $463.382 Tax $532.350 $434.164 - 14 - TEAM CpNTRACTING, LLC 1491'2 Railroad Street Memphis, Indiana NOTES TO FINANCIAL STATEMENTS December 31, 2006 and 2005 NOTE F - CONCENTRATION OF CREDlT RISK The Company performs ongoing credit evaluations of its customers' financial condition and generally requires no collateral from its customers. The cash balances the Company maintains in individual banks exceeds the $ 100,000 maximum insurable by the Federal Deposit Insurance Corporation. The excess cash balances at December 31,2006 and 2005 are $1,037,245 and $1,109,675, respectively. NOTE G - RELATED PARTY TRANSACTIONS {'\ The Company leases its office and shop facilities from Team Properties, LLC which is a separate partnership with the same ownership percentage as Team Contracting, LLC. The lease was entered into on July 31, 1997, for the term of one year, and on a month to month basis thereafter. The monthly rental amount is $25,000. Total amounts paid to Team Properties, LLC for the years ending December 31,2006 and 2005 was $275,000 and $300,000, respectively. NOTE H - OPERATING LEASES The Company leases equipment from various vendors periodically. There are no formal leases for this equipment. The equipment is leased as needed. There were no outstanding due lease payments at December 3 J, 2006. (- - ] 5 - TEAM CONTRACTING, LLC 14912 Railroad Street Memphis, Indiana NOTES TO FINANCIAL STATEMENTS December '31, 2006 and 2005 - 16 - TEAM CONTRACTING, LLC 14912 Railroad Street Memphis; Indiana NOTES TO FINANCIAL STATEMENTS December 31, 2006 and 2005 NOTE I - INSTALLMENT LOANS (Continued) Maturities of long-term debt are as follows: Year Ended December 31. Amount 2007 2008 2009 $ 504,610 245,421 27,433 NOTE J - RETIREMENT PLAN r Effective January 1, 1997, the Company established the Team Contracting, LLC 401 (k) Salary Reduction Plan and Trust. Under this plan, eligible employees are permitted to make elective deferrals of 1 % up to 15% of their compensation. The Company has agreed to contribute a discretionary match of25% of each employee's elective deferral amount up to the first 5% of participants' compensation. Total employer contribution expense for the years ended December 31, 2006 and 2005 was $11,570 and $11,805, respectively. NOTE K - LINE OF CREDIT The Company has a revolving line of credit with a total limit of $1,000,000. The available line of credit is personally guaranteed by the members and secured by the assets ofthe Company. The interest rate is variable at the prime rate and the line has a maturity date of February 1, 2008. At December 31, 2006 and 2005, the Company had an outstanding balance of $450,000 and $199,900, respectively on this line of credit. r - 17 -